[Federal Register Volume 82, Number 81 (Friday, April 28, 2017)]
[Proposed Rules]
[Pages 19796-20231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07800]



[[Page 19795]]

Vol. 82

Friday,

No. 81

April 28, 2017

Part II





Department of Health and Human Services





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





Centers for Medicare & Medicaid Services





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





42 CFR Parts 405, 412, 413, et al.





Medicare Program; Hospital Inpatient Prospective Payment Systems for 
Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System and Proposed Policy Changes and Fiscal Year 2018 Rates; 
Quality Reporting Requirements for Specific Providers; Medicare and 
Medicaid Electronic Health Record (EHR) Incentive Program Requirements 
for Eligible Hospitals, Critical Access Hospitals, and Eligible 
Professionals; Provider-Based Status of Indian Health Service and 
Tribal Facilities and Organizations; Costs Reporting and Provider 
Requirements; Agreement Termination Notices; Proposed Rule

  Federal Register / Vol. 82 , No. 81 / Friday, April 28, 2017 / 
Proposed Rules  

[[Page 19796]]


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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, 414, 416, 486, 488, 489, and 495

[CMS-1677-P]
RIN 0938-AS98


Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System and Proposed Policy Changes and Fiscal Year 2018 Rates; 
Quality Reporting Requirements for Specific Providers; Medicare and 
Medicaid Electronic Health Record (EHR) Incentive Program Requirements 
for Eligible Hospitals, Critical Access Hospitals, and Eligible 
Professionals; Provider-Based Status of Indian Health Service and 
Tribal Facilities and Organizations; Costs Reporting and Provider 
Requirements; Agreement Termination Notices

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

ACTION: Proposed rule.

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

SUMMARY: We are proposing to revise the Medicare hospital inpatient 
prospective payment systems (IPPS) for operating and capital-related 
costs of acute care hospitals to implement changes arising from our 
continuing experience with these systems for FY 2018. Some of these 
proposed changes would implement certain statutory provisions contained 
in the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013, 
the Improving Medicare Post-Acute Care Transformation Act of 2014, the 
Medicare Access and CHIP Reauthorization Act of 2015, the 21st Century 
Cures Act, and other legislation. We also are making proposals relating 
to the provider-based status of Indian Health Service (IHS) and Tribal 
facilities and organizations and to the low-volume hospital payment 
adjustment for hospitals operated by the IHS or a Tribe. In addition, 
we are providing the proposed estimated market basket update that would 
apply to 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 2018. We are proposing to update the payment policies and 
the annual payment rates for the Medicare prospective payment system 
(PPS) for inpatient hospital services provided by long-term care 
hospitals (LTCHs) for FY 2018.
    In addition, we are proposing to establish new requirements or 
revise existing requirements for quality reporting by specific Medicare 
providers (acute care hospitals, PPS-exempt cancer hospitals, LTCHs, 
and inpatient psychiatric facilities). We also are proposing to 
establish new requirements or revise existing requirements for eligible 
professionals (EPs), eligible hospitals, and critical access hospitals 
(CAHs) participating in the Medicare and Medicaid Electronic Health 
Record (EHR) Incentive Programs. We are proposing to update policies 
relating to the Hospital Value-Based Purchasing (VBP) Program, the 
Hospital Readmissions Reduction Program, and the Hospital-Acquired 
Condition (HAC) Reduction Program.
    We also are proposing changes relating to transparency of 
accrediting organization survey reports and plans of correction of 
providers and suppliers; electronic signature and electronic submission 
of the Certification and Settlement Summary page of the Medicare cost 
reports; and clarification of provider disposal of assets.

DATES: Comment Period: To be assured consideration, comments must be 
received at one of the addresses provided in the ADDRESSES section, no 
later than 5 p.m. EDT on June 13, 2017.

ADDRESSES: In commenting, please refer to file code CMS-1677-P. 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-1677-P, P.O. Box 8011, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1677-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments 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: 
    Donald Thompson, (410) 786-4487, and Michele Hudson, (410) 786-
4487, Operating Prospective Payment, MS-DRGs, Wage Index, New Medical 
Service and Technology Add-On Payments, Hospital Geographic 
Reclassifications, Graduate Medical Education, Capital Prospective 
Payment, Excluded Hospitals, Sole Community Hospitals, Medicare 
Disproportionate Share Hospital (DSH) Payment Adjustment, Medicare-
Dependent Small Rural Hospital (MDH) Program, and Low-Volume Hospital 
Payment Adjustment Issues.
    Michele Hudson, (410) 786-4487, Mark Luxton, (410) 786-4530, and 
Emily Lipkin, (410) 786-3633, Long-Term Care Hospital Prospective 
Payment System and MS-LTC-DRG Relative Weights Issues.
    Mollie Knight, (410) 786-7948, and Bridget Dickensheets, (410) 786-
8670, Rebasing and Revising the Hospital Market Basket Issues.
    Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital 
Demonstration Program Issues.

[[Page 19797]]

    Jeris Smith, (410) 786-0110, Frontier Community Health Integration 
Project Demonstration Issues.
    Lein Han, (617) 879-0129, Hospital Readmissions Reduction Program--
Readmission Measures for Hospitals Issues.
    Delia Houseal, (410) 786-2724, Hospital Readmissions Reduction 
Program--Administration Issues.
    Elizabeth Bainger, (410) 786-0529, Hospital-Acquired Condition 
Reduction Program Issues.
    Joseph Clift, (410) 786-4165, Hospital-Acquired Condition Reduction 
Program--Measures Issues.
    Grace Im, (410) 786-0700 and James Poyer, (410) 786-2261, Hospital 
Inpatient Quality Reporting and Hospital Value-Based Purchasing--
Program Administration, Validation, and Reconsideration Issues.
    Reena Duseja, (410) 786-1999 and Cindy Tourison, (410) 786-1093, 
Hospital Inpatient Quality Reporting--Measures Issues Except Hospital 
Consumer Assessment of Healthcare Providers and Systems Issues; and 
Readmission Measures for Hospitals Issues.
    Kim Spaulding Bush, (410) 786-3232, Hospital Value-Based Purchasing 
Efficiency Measures Issues.
    Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality 
Reporting--Hospital Consumer Assessment of Healthcare Providers and 
Systems Measures Issues.
    James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality 
Reporting Issues.
    Mary Pratt, (410) 786-6867, Long-Term Care Hospital Quality Data 
Reporting Issues.
    Jeffrey Buck, (410) 786-0407 and Cindy Tourison (410) 786-1093, 
Inpatient Psychiatric Facilities Quality Data Reporting Issues.
    Lisa Marie Gomez, (410) 786-1175, EHR Incentive Program Clinical 
Quality Measure Related Issues.
    Kathleen Johnson, (410) 786-3295 and Steven Johnson (410) 786-3332, 
EHR Incentive Program Nonclinical Quality Measure Related Issues.
    Caecilia Blondiaux, (410), 786-2190, and Ariadne Saklas, (410) 786-
3322, Changes in Notice of Termination of Medicare Providers and 
Suppliers Issues.
    Monda Shaver, (410) 786-3410, and Patricia Chmielewski, (410) 786-
6899, Accrediting Organizations Survey Reporting Transparency Issues.
    Kellie Shannon, (410) 786-0416, Medicare Cost Reporting and 
Valuation of Assets Issues.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection, generally beginning approximately 3 weeks after publication 
of the rule, at the headquarters of the Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday 
through Friday of each week from 8:30 a.m. to 4:00 p.m. EST. To 
schedule an appointment to view public comments, phone 1-800-743-3951.

Electronic Access

    This Federal Register document is 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 generally will be available only through the 
Internet. The IPPS tables for this proposed 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 2018 IPPS Proposed 
Rule Home Page'' or ``Acute Inpatient--Files for Download''. The LTCH 
PPS tables for this FY 2018 proposed 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-1677-P. For further details on the 
contents of the tables referenced in this proposed rule, we refer 
readers to section VI. of the Addendum to this proposed rule.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS Web sites identified above should contact 
Michael Treitel at (410) 786-4552.

Acronyms

3M 3M Health Information System
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
ACoS American College of Surgeons
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
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
AO Accrediting Organizations
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 Centers for Disease Control and Prevention

[[Page 19798]]

CERT Comprehensive error rate testing
CDI Clostridium difficile [C. difficile] infection
CFR Code of Federal Regulations
CLABSI Central line-associated bloodstream infection
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law 
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
COPD Chronic obstructive pulmonary disease
CPI Consumer price index
CQL Clinical quality language
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 beam radiotherapy
ECE Extraordinary circumstances exemption
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
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
HF Heart failure
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
HWR Hospital-wide readmission
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
IMPACT Act Improving Medicare Post-Acute Care Transformation Act of 
2014, Public Law 113-185
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 [Hospital] Inpatient Quality Reporting
LAMCs Large area metropolitan counties
LDS Limited Data Set
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
MA Medicare Advantage
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
MOON Medicare Outpatient Observation Notice
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]
MUC Measure under consideration
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NHSN National Healthcare Safety Network
NOP Notice of Participation
NOTICE Act Notice of Observation Treatment and Implication for Care 
Eligibility Act, Public Law 114-42
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 Post-acute 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
PPR Potentially Preventable Readmissions
PPS Prospective payment system
PRA Paperwork Reduction Act
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities

[[Page 19799]]

PSF Provider-Specific File
PSI Patient safety indicator
PS&R Provider Statistical and Reimbursement [System]
PQRS Physician Quality Reporting System
PUF Public use file
QDM Quality data model
QIES ASAP Quality Improvement Evaluation System Assessment 
Submission and Processing
QIG Quality Improvement Group [CMS]
QIO Quality Improvement Organization
QM Quality measure
QPP Quality Payment Program
QRDA Quality Reporting Document Architecture
RFA Regulatory Flexibility Act, Public Law 96-354
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RIM Reference information model
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RSMR Risk-standard mortality rate
RSP Risk-standardized payment
RSSR 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
SIR Standardized infection ratio
SNF Skilled nursing facility
SNF QRP Skilled Nursing Facility Quality Reporting Program
SNF VBP Skilled Nursing Facility Value-Based Purchasing
SOCs Standard occupational classifications
SOM State Operations Manual
SRR Standardized risk ratio
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
UR Utilization review
VBP [Hospital] Value Based Purchasing [Program]
VTE Venous thromboembolism

Table of Contents

I. Executive Summary and Background
    A. Executive Summary
    1. Purpose and Legal Authority
    2. Summary of the Major Provisions
    3. Summary of Costs and Benefits
    B. Summary
    1. Acute Care Hospital Inpatient Prospective Payment System 
(IPPS)
    2. Hospitals and Hospital Units Excluded From the IPPS
    3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
    4. Critical Access Hospitals (CAHs)
    5. Payments for Graduate Medical Education (GME)
    C. Summary of Provisions of Recent Legislation Proposed To Be 
Implemented in This Proposed Rule
    1. The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-
240), the Medicare Access and CHIP Reauthorization Act (MACRA) of 
2015 (Pub. L. 114-10), and the 21st Century Cures Act (Pub. L. 114-
255)
    2. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)
    3. Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act) (Pub. L. 113-185)
    4. The Medicare Access and CHIP Reauthorization Act (MACRA) of 
2015 (Pub. L. 114-10)
    5. The 21st Century Cures Act (Pub. L. 114-255)
    D. Summary of the Provisions of This Proposed Rule
II. Proposed Changes to Medicare Severity Diagnosis-Related Group 
(MS-DRG) Classifications and Relative Weights
    A. Background
    B. MS-DRG Reclassifications
    C. Adoption of the MS-DRGs in FY 2008
    D. Proposed FY 2018 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. Recoupment or Repayment Adjustment Authorized by Section 631 
of the American Taxpayer Relief Act of 2012 (ATRA)
    3. Proposed Adjustment for FY 2018 Required Under Section 414 of 
Public Law 114-10 (MACRA) and Section 15005 of Public Law 114-255
    E. Refinement of the MS-DRG Relative Weight Calculation
    1. Background
    2. Discussion of Policy for FY 2018
    F. Proposed Changes to Specific MS-DRG Classifications
    1. Discussion of Changes to Coding System and Basis for Proposed 
FY 2018 MS-DRG Updates
    a. Conversion of MS-DRGs to the International Classification of 
Diseases, 10th Revision (ICD-10)
    b. Basis for FY 2018 Proposed MS-DRG Updates
    2. MDC 1 (Diseases and Disorders of the Nervous System)
    a. Functional Quadriplegia
    b. Responsive Neurostimulator (RNS(copyright)) System
    c. Precerebral Occlusion or Transient Ischemic Attack With 
Thrombolytic
    3. MDC 2 (Diseases and Disorders of the Eye: Swallowing Eye 
Drops (Tetrahydrozoline)
    4. MDC 5 (Diseases and Disorders of the Circulatory System)
    a. Percutaneous Cardiovascular Procedures and Insertion of a 
Radioactive Element
    b. Proposed Modification of the Titles for MS-DRG 246 
(Percutaneous Cardiovascular Procedures With Drug-eluting Stent With 
MCC or 4+ Vessels or Stents) and MS-DRG 248 (Percutaneous 
Cardiovascular Procedures With Non-Drug-Eluting Stent With MCC or 4+ 
Vessels or Stents)
    c. Transcatheter Aortic Valve Replacement (TAVR) and Left Atrial 
Appendage Closure (LAAC)
    d. Percutaneous Mitral Valve Replacement Procedures
    e. Percutaneous Tricuspid Valve Repair
    5. MDC 8 (Diseases and Disorders of the Musculoskeletal System 
and Connective Tissue)
    a. Total Ankle Replacement (TAR) Procedures
    b. Revision of Total Ankle Replacement (TAR) Procedures
    c. Magnetic Controlled Growth Rods (MAGEC[supreg] System)
    d. Combined Anterior/Posterior Spinal Fusion
    6. MDC 14 (Pregnancy, Childbirth and the Puerperium)
    a. Vaginal Delivery and Complicating Diagnoses
    b. MS-DRG 998 (Principal Diagnosis Invalid as Discharge 
Diagnosis)
    c. MS-DRG 782 (Other Antepartum Diagnoses Without Medical 
Complications)
    d. Shock During or Following Labor and Delivery
    7. MDC 15 (Newborns and Other Neonates With Conditions 
Originating in Perinatal Period): Observation and Evaluation of 
Newborn
    8. MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs): 
Complication Codes
    9. MDC 23 (Factors Influencing Health Status and Other Contacts 
With Health Services): Updates to MS-DRGs 945 and 946 
(Rehabilitation With CC/MCC and Without CC/MCC, Respectively)
    10. Proposed Changes to the Medicare Code Editor (MCE)
    a. Age Conflict Edit
    b. Sex Conflict Edit
    c. Non-Covered Procedure Edit
    d. Unacceptable Principal Diagnosis Edit
    e. Future Enhancement
    11. Proposed Changes to Surgical Hierarchies
    12. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2018
    a. Background of the CC List and the CC Exclusions List
    b. Proposed Additions and Deletions to the Diagnosis Code 
Severity Levels for FY 2018
    c. Principal Diagnosis Is Its Own CC or MCC
    d. Proposed CC Exclusions List for FY 2018
    13. Comprehensive Review of CC List for FY 2019
    14. Review of Procedure Codes in MS DRGs 981 Through 983; 984 
Through 986; and 987 Through 989

[[Page 19800]]

    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
    15. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding 
Systems
    16. Proposed Replaced Devices Offered Without Cost or With a 
Credit
    a. Background
    b. Proposed Changes for FY 2018
    17. Other Proposed Policy Changes: Other Operating Room (O.R.) 
and Non-O.R. Issues
    a. O.R. Procedures to Non-O.R. Procedures
    b. Revision of Neurostimulator Generator
    c. External Repair of Hymen
    d. Non-O.R. Procedures in MDC 17 (Myeloproliferative Diseases 
and Disorders Poorly Differentiated Neoplasms)
    G. Recalibration of the Proposed FY 2018 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
    H. Proposed Add-On Payments for New Services and Technologies 
for FY 2018
    1. Background
    2. Public Input Before Publication of a Notice of Proposed 
Rulemaking on Add-On Payments
    3. ICD-10-PCS Section ``X'' Codes for Certain New Medical 
Services and Technologies
    4. Proposal To Revise Reference to an ICD-9-CM Code in Sec.  
412.87(b)(2) of the Regulations
    5. Proposed FY 2018 Status of Technologies Approved for FY 2017 
Add-On Payments
    a. CardioMEMSTM HF (Heart Failure) Monitoring System
    b. Defitelio[supreg] (Defibrotide)
    c. GORE[supreg] EXCLUDER[supreg] Iliac Branch Endoprosthesis 
(IBE)
    d. Idarucizumab
    e. Lutonix[supreg] Drug Coated Balloon PTA Catheter and 
In.PACTTM AdmiralTM Paclitaxel Coated 
Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter
    f. MAGEC[supreg] Spinal Bracing and Distraction System 
(MAGEC[supreg] Spine)
    g. VistogardTM (Uridine Triacetate)
    h. Blinatumomab (BLINCYTOTM Trade Brand)
    6. FY 2018 Applications for New Technology Add-On Payments
    a. Bezlotoxumab (ZINPLAVATM)
    b. EDWARDS INTUITY EliteTM Valve System (INTUITY) and 
Liva Nova Perceval Valve (Perceval)
    c. Ustekinumab (Stelara[supreg])
    d. KTE-C19 (Axicabtagene Ciloleucel)
    e. VYXEOSTM (Cytarabine and Daunorubicin Liposome for 
Injection)
    f. GammaTileTM
III. Proposed Changes to the Hospital Wage Index for Acute Care 
Hospitals
    A. Background
    1. Legislative Authority
    2. Core-Based Statistical Areas (CBSAs) for the Proposed FY 2018 
Hospital Wage Index
    3. Codes for Constituent Counties in CBSAs
    B. Worksheet S-3 Wage Data for the Proposed FY 2018 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
    D. Method for Computing the Proposed FY 2018 Unadjusted Wage 
Index
    1. Proposed Methodology for FY 2018
    2. Clarification of Other Wage Related Costs in the Wage Index
    E. Proposed Occupational Mix Adjustment to the FY 2018 Wage 
Index
    1. Use of 2013 Occupational Mix Survey for the FY 2018 Wage 
Index
    2. Use of the 2016 Medicare Wage Index Occupational Mix Survey 
for the FY 2019 Wage Index
    3. Calculation of the Proposed Occupational Mix Adjustment for 
FY 2018
    F. Analysis and Implementation of the Proposed Occupational Mix 
Adjustment and the Proposed FY 2018 Occupational Mix Adjusted Wage 
Index
    G. Proposed Application of the Rural, Imputed, and Frontier 
Floors
    1. Proposed Rural Floor
    2. Proposed Expiration of the Imputed Floor Policy
    3. Proposed State Frontier Floor for FY 2018
    H. Proposed FY 2018 Wage Index Tables
    I. Revisions to the Wage Index Based on Hospital Redesignations 
and Reclassifications
    1. General Policies and Effects of Reclassification and 
Redesignation
    2. MGCRB Reclassification and Redesignation Issues for FY 2018
    a. FY 2018 Reclassification Requirements and Approvals
    b. Extension of PRA Information Collection Requirement Approval 
for MGCRB Applications
    c. Proposed Deadline for Submittal of Documentation of Sole 
Community Hospital (SCH) and Rural Referral Center (RRC) 
Classification Status to the MGCRB
    d. Clarification of Special Rules for SCHs and RRCs 
Reclassifying to Geographic Home Area
    3. Redesignations Under Section 1886(d)(8)(B) of the Act
    4. Proposed Changes to the 45-Day Notification Rules
    J. Proposed Out-Migration Adjustment Based on Commuting Patterns 
of Hospital Employees
    K. Reclassification From Urban to Rural Under Section 
1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103
    L. Clarification of Application Deadline for Rural Referral 
Center (RRC) Classification
    M. Proposed Process for Requests for Wage Index Data Corrections
    1. Process for Hospitals To Accept Wage Index Data Corrections
    2. Process for Wage Index Data Corrections by CMS After the 
January Public Use File (PUF)
    N. Proposed Labor Market Share for the Proposed FY 2018 Wage 
Index
IV. Proposed Rebasing and Revising of the Hospital Market Baskets 
for Acute Care Hospitals
    A. Background
    B. Rebasing and Revising the IPPS Market Basket
    1. Development of Cost Categories and Weights
    a. Use of Medicare Cost Report Data
    b. Final Major Cost Category Computation
    c. Derivation of the Detailed Cost Weights
    2. Selection of Proposed Price Proxies
    3. Labor-Related Share
    C. Market Basket for Certain Hospitals Presently Excluded From 
the IPPS
    D. Rebasing and Revising the Capital Input Price Index (CIPI)
V. Other Decisions and Proposed Changes to the IPPS for Operating 
System
    A. Proposed Changes to MS-DRGs Subject to Postacute Care 
Transfer and MS-DRG Special Payment Policies
    B. Proposed Changes in the Inpatient Hospital Updates for FY 
2018 (Sec.  412.64(d))
    1. Proposed FY 2018 Inpatient Hospital Update
    2. Proposed FY 2018 Puerto Rico Hospital Update
    C. Proposed Change to Volume Decrease Adjustment for Sole 
Community Hospitals (SCHs) and Medicare-Dependent, Small Rural 
Hospitals (MDHs) (Sec.  412.92)
    1. Background
    2. Proposed Changes to the Volume Decrease Adjustment 
Calculation Methodology for SCHs
    D. Rural Referral Centers (RRCs): Proposed Annual Updates to 
Case-Mix Index (CMI) and Discharge Criteria (Sec.  412.96)
    1. Case-Mix Index (CMI)
    2. Discharges
    E. Proposed Payment Adjustment for Low-Volume Hospitals (Sec.  
412.101)
    1. Expiration of Temporary Changes to Low-Volume Hospital 
Payment Policy
    2. Background
    3. Proposed Payment Adjustment for FY 2018 and Subsequent Fiscal 
Years
    4. Proposed Parallel Low-Volume Hospital Payment Adjustment 
Regarding Hospitals Operated by the Indian Health Service (IHS) or a 
Tribe
    F. Indirect Medical Education (IME) Payment Adjustment (Sec.  
412.105)
    G. Proposed Payment Adjustment for Medicare Disproportionate 
Share Hospitals (DSHs) for FY 2018 (Sec.  412.106)
    1. General Discussion
    2. Eligibility for Empirically Justified Medicare DSH Payments 
and Uncompensated Care Payments
    3. Empirically Justified Medicare DSH Payments
    4. Uncompensated Care Payments
    a. Proposed Calculation of Factor 1 for FY 2018
    b. Proposed Calculation of Factor 2 for FY 2018
    (1) Background

[[Page 19801]]

    (2) Proposed Methodology for Calculation of Factor 2 for FY 2018
    c. Calculation of Proposed Factor 3 for FY 2018
    (1) Background
    (2) Proposed Data Source for FY 2018
    (3) Proposed Time Period for Calculating Factor 3 for FY 2018, 
Including Methodology for Incorporating Worksheet S-10 Data
    (4) Methodological Considerations for Calculating Factor 3
    (5) Methodological Considerations for Incorporating Worksheet S-
10 Data
    H. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.  
412.108)
    1. Background for the MDH Program
    a. Expiration of the MDH Program
    I. Hospital Readmissions Reduction Program: Proposed Updates and 
Changes (Sec. Sec.  412.150 Through 412.154)
    1. Statutory Basis for the Hospital Readmissions Reduction 
Program
    2. Regulatory Background
    3. Maintenance of Technical Specifications for Quality Measures
    4. Proposed Policies for the Hospital Readmissions Reduction 
Program
    5. Proposed Applicable Period for FY 2018
    6. Proposed Calculation of Aggregate Payments for Excess 
Readmissions for FY 2018
    7. Background and Current Payment Adjustment Methodology
    a. Background
    b. Current Payment Adjustment Methodology
    8. Provisions for the Proposed Payment Adjustment Methodology 
for FY 2019: Proposed Methodology for Calculating the Proportion of 
Dual Eligible Patients
    a. Background
    b. Proposed Data Sources Used To Determine Dual Eligibility
    c. Proposed Data Period Used To Define Dual Eligibility
    9. Provision for the Proposed Payment Adjustment Methodology for 
FY 2019: Proposed Methodology for Assigning Hospitals to Peer Groups
    10. Provisions for the Proposed Payment Adjustment Methodology 
for FY 2019: Proposed Payment Adjustment Formula Calculation 
Methodology
    a. Background
    b. Proposals
    c. Analysis
    11. Accounting for Social Risk Factors in the Hospital 
Readmissions Reduction Program
    12. Extraordinary Circumstance Exception (ECE) Policy
    13. Timeline for Public Reporting of Excess Readmission Ratios 
on Hospital Compare for the FY 2018 Payment Determination
    J. Hospital Value-Based Purchasing (VBP) Program: Proposed 
Policy Changes
    1. Background
    a. Statutory Background and Overview of Past Program Years
    b. FY 2018 Program Year Payment Details
    2. Accounting for Social Risk Factors in the Hospital VBP 
Program
    3. Retention and Removal of Quality Measures for the FY 2019 
Program Year
    a. Retention of Previously Adopted Hospital VBP Program Measures
    b. Proposed Removal of the PSI 90 Measure
    c. Summary of Previously Adopted Measures and Proposed Measure 
for Removal for the FY 2019 and FY 2020 Program Years
    4. Proposed New Measures for the FY 2022 Program Year, FY 2023 
Program Year, and Subsequent Years
    a. Proposed New Measure for the FY 2022 Program Year and 
Subsequent Years: Hospital-Level, Risk-Standardized Payment 
Associated With a 30-Day Episode-of-Care for Pneumonia (PN Payment)
    b. Proposed New Measure for the FY 2023 Program Year and 
Subsequent Years: Patient Safety and Adverse Events (Composite) (NQF 
#0531)
    5. Previously Adopted and Proposed Baseline and Performance 
Periods
    a. Background
    b. Person and Community Engagement Domain
    c. Efficiency and Cost Reduction Domain
    d. Safety Domain
    e. Clinical Care Domain
    f. Summary of Previously Adopted and Proposed Baseline and 
Performance Periods for the FY 2019 Through FY 2023 Program Years
    6. Proposed Performance Standards for the Hospital VBP Program
    a. Background
    b. Previously Adopted and Proposed Performance Standards for the 
FY 2020 Program Year
    c. Previously Adopted Performance Standards for Certain Measures 
for the FY 2021 Program Year
    d. Previously Adopted and Proposed Performance Standards for 
Certain Measures for the FY 2022 Program Year
    e. Proposed Performance Standards for Certain Measures for the 
FY 2023 Program Year
    7. Scoring Methodology and Data Requirements for the FY 2019 
Program Year and Subsequent Years
    a. Proposed Domain Weighting for the FY 2020 Program Year and 
Subsequent Years for Hospitals That Receive a Score on All Domains
    b. Proposed Domain Weighting for the FY 2019 Program Year and 
Subsequent Years for Hospitals Receiving Scores on Fewer Than Four 
Domains
    c. Minimum Numbers of Cases for Hospital VBP Program Measures 
for the FY 2019 Program Year and Subsequent Years
    d. Weighting Measures Within the Efficiency and Cost Reduction 
Domain
    K. Proposed Changes to the Hospital-Acquired Condition (HAC) 
Reduction Program
    1. Background
    2. Implementation of the HAC Reduction Program for FY 2018
    3. Proposed Data Collection Time Periods for the FY 2020 HAC 
Reduction Program
    4. Request for Comments on Additional Measures for Potential 
Future Adoption
    5. Accounting for Social Risk Factors in the HAC Reduction 
Program
    6. Request for Comments on Inclusion on Disability and Medical 
Complexity for CDC NHSN Measures
    7. Maintenance of Technical Specifications for Quality Measures
    8. Extraordinary Circumstances Exception (ECE) Policy for the 
HAC Reduction Program
    L. Rural Community Hospital Demonstration Program
    1. Introduction
    2. Background
    3. Provisions of the 21st Century Cures Act (Pub. L. 114-255) 
and Proposals for Implementation
    a. Statutory Provisions
    b. Proposed Terms of Continuation for Previously Participating 
Hospitals
    c. Solicitation for Additional Participants
    4. Budget Neutrality
    a. Statutory Budget Neutrality Requirement
    b. Methodology Used in Previous Final Rules
    c. Proposed Budget Neutrality Methodology for Extension Period 
Authorized by the 21st Century Cures Act (Pub. L. 114-255)
    d. Alternative Budget Neutrality Approach
    e. Reconciling Actual and Estimated Costs of the Demonstration 
for Previous Years (2011, 2012, and 2013)
    M. Payments for Services in Inpatient and Outpatient Settings
    1. Adjustment to IPPS Rates Resulting From the 2-Midnight Policy 
for FY 2018
    2. Eliminating Inappropriate Medicare Payment Differentials for 
Similar Services in the Inpatient and Outpatient Settings
    N. Provider-Based Status of Indian Health Service and Tribal 
Facilities and Organizations
    O. Request for Information Regarding Physician-Owned Hospitals
VI. Proposed Changes to the IPPS for Capital-Related Costs
    A. Overview
    B. Additional Provisions
    1. Exception Payments
    2. New Hospitals
    3. Payments for Hospitals Located in Puerto Rico
    C. Proposed Annual Update for FY 2018
VII. Proposed Changes for Hospitals Excluded From the IPPS
    A. Proposed Rate-of-Increase in Payments To Excluded Hospitals 
for FY 2018
    B. Proposed Revisions to Hospital-Within-Hospital Regulations
    C. Critical Access Hospitals (CAHs)
    1. Background
    2. Frontier Community Health Integration Project (FCHIP) 
Demonstration
    3. Physician Certification Requirement for Payment of Inpatient 
CAH Services Under Medicare Part A
    a. Background
    b. Notice Regarding Changes to Instructions for the Review of 
the CAH 96-Hour Certification Requirement
VIII. Proposed Changes to the Long-Term Care Hospital Prospective 
Payment System (LTCH PPS) for FY 2018
    A. Background of the LTCH PPS
    1. Legislative and Regulatory Authority
    2. Criteria for Classification as an LTCH

[[Page 19802]]

    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. Proposed Medicare Severity Long-Term Care Diagnosis-Related 
Group (MS-LTC-DRG) Classifications and Relative Weights for FY 2018
    1. Background
    2. Patient Classifications Into MS-LTC-DRGs
    a. Background
    b. Proposed Changes to the MS-LTC-DRGs for FY 2018
    3. Development of the Proposed FY 2018 MS-LTC-DRG Relative 
Weights
    a. General Overview of the Development of the MS-LTC-DRG 
Relative Weights
    b. Development of the Proposed MS-LTC-DRG Relative Weights for 
FY 2018
    c. Data
    d. Hospital-Specific Relative Value (HSRV) Methodology
    e. Treatment of Severity Levels in Developing the MS-LTC-DRG 
Relative Weights
    f. Proposed Low-Volume MS-LTC-DRGs
    g. Steps for Determining the Proposed FY 2018 MS-LTC-DRG 
Relative Weights
    C. Proposed Changes to the LTCH PPS Payment Rates and Other 
Proposed Changes to the LTCH PPS for FY 2018
    1. Overview of Development of the LTCH PPS Standard Federal 
Payment Rates
    2. Proposed FY 2018 LTCH PPS Standard Federal Payment Rate 
Annual Market Basket Update
    a. Overview
    b. Proposed Annual Update to the LTCH PPS Standard Federal 
Payment Rate for FY 2018
    c. Proposed Adjustment to the LTCH PPS Standard Federal Payment 
Rate Under the Long-Term Care Hospital Quality Reporting Program 
(LTCH QRP)
    d. Proposed Annual Update Under the LTCH PPS for FY 2018
    D. Proposed Changes to the Short-Stay Outlier Adjustment Policy 
(Sec.  412.529)
    E. Temporary Exception to the Site Neutral Payment Rate for 
Certain Spinal Cord Specialty Hospitals
    F. Temporary Exception to the Site Neutral Payment Rate for 
Certain Discharges With Severe Wounds Form Certain LTCHs
    G. Moratorium and Proposed Regulatory Delay of the Full 
Implementation of the ``25-Percent'' Threshold Policy'' Adjustment 
(Sec.  412.538)
    H. Revision to Moratorium on Increasing Beds in Existing LTCH or 
LTCH Satellite Locations Under the 21st Century Cures Act (Pub. L. 
114-255) (Sec.  412.23)
    I. Proposed Changes to the Average Length of Stay Criterion 
Under the 21st Century Cures Act (Pub. L. 114-255)
    J. Change in Medicare Classification for Certain Hospitals 
(Sec.  412.23)
IX. Quality Data Reporting Requirements for Specific Providers and 
Suppliers
    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
    d. Accounting for Social Risk Factors in the Hospital IQR 
Program
    2. Retention of Previously Adopted Hospital IQR Program Measures 
for Subsequent Payment Determinations
    3. Removal and Suspension of Previously Adopted Hospital IQR 
Program Measures
    4. Previously Adopted Hospital IQR Program Measures for the FY 
2019 Payment Determination and Subsequent Years
    5. Considerations in Expanding and Updating of Quality Measures
    6. Refinements to Existing Measures in the Hospital IQR Program 
for the FY 2020 Payment Determination and Subsequent Years
    a. Refining Hospital Consumer Assessment of Healthcare Providers 
and Systems (HCAHPS) Survey (NQF #0166) for the FY 2020 Payment 
Determination and Subsequent Years
    b. Refinement of the Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Acute Ischemic Stroke 
Hospitalization Measure for the FY 2023 Payment Determination and 
Subsequent Years
    c. Summary of Previously Adopted Hospital IQR Program Measures 
for the FY 2020 Payment Determination and Subsequent Years
    7. Proposed Voluntary Hybrid Hospital-Wide Readmission Measure 
With Claims and Electronic Health Record Data (NQF #2879)
    a. Background
    b. Proposal for Voluntary Reporting of Electronic Health Record 
Data for the Hybrid HWR Measure (NQF #2879)
    c. Data Sources
    d. Outcome
    e. Cohort
    f. Inclusion and Exclusion Criteria
    g. Risk-Adjustment
    h. Calculating the Risk-Standardized Readmission Rate (RSRR)
    i. Data Submission and Reporting Requirements
    j. Confidential Hospital-Specific Reports
    8. Proposed Changes to Policies on Reporting of eCQMs
    a. Background
    b. Proposed Modifications to the eCQM Reporting Requirements for 
the Hospital IQR Program for the CY 2017 Reporting Period/FY 2019 
Payment Determination
    c. Proposed Modifications to the eCQM Reporting Requirements for 
the Hospital IQR Program for the CY 2018 Reporting Period/FY 2020 
Payment Determination
    9. Possible New Quality Measures and Measure Topics for Future 
Years
    a. Potential Inclusion of the Quality of Informed Consent 
Documents for Hospital-Performed, Elective Procedures Measure
    b. Potential Inclusion of Four End-of-Life (EOL) Measures for 
Cancer Patients
    c. Potential Inclusion of Two Nurse Staffing Measures
    d. Potential Inclusion of Additional Electronic Clinical Quality 
Measures (eCQMs) in the Hospital IQR and Medicare and Medicaid EHR 
Incentive Programs
    10. Form, Manner, and Timing of Quality Data Submission
    a. Background
    b. Procedural Requirements for the FY 2020 Payment Determination 
and Subsequent Years
    c. Data Submission Requirements for Chart-Abstracted Measures
    d. Proposed Changes to the Reporting and Submission Requirements 
for eCQMs
    e. Proposed Submission Form and Method for the Proposed 
Voluntary Hybrid Hospital-Wide Readmission Measure With Claims and 
Electronic Health Record Data (NQF #2879)
    f. Sampling and Case Thresholds for the FY 2020 Payment 
Determination and Subsequent Years
    g. HCAHPS Administration and Submission Requirements for the FY 
2020 Payment Determination and Subsequent Years
    h. Data Submission Requirements for Structural Measures for the 
FY 2020 Payment Determination and Subsequent Years
    i. Data Submission and Reporting Requirements for HAI Measures 
Reported via NHSN
    11. Proposed Modifications to the Validation of Hospital IQR 
Program Data
    a. Background
    b. Proposed Changes to the Existing Processes for Validation of 
Hospital IQR Program eCQM Data for the FY 2020 Payment Determination 
and Subsequent Years
    c. Proposed Modifications to the Educational Review Process for 
Chart-Abstracted Measures Validation
    12. Data Accuracy and Completeness Acknowledgement (DACA) 
Requirements for the FY 2020 Payment Determination and Subsequent 
Years
    13. Public Display Requirements for the FY 2020 Payment 
Determination and Subsequent Years
    a. Background
    b. Potential Options for Confidential and Public Reporting of 
Hospital IQR Measures Stratified by Patient Dual Eligibility Status
    14. Reconsideration and Appeal Procedures for the FY 2020 
Payment Determination and Subsequent Years
    15. Proposed Change to the Hospital IQR Program Extraordinary 
Circumstances Exceptions (ECE) Policy
    a. Background
    b. Proposals To Align the Hospital IQR Program ECE Policy With 
Other CMS Quality Programs
    B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
    1. Background
    2. Criteria for Removal and Retention of PCHQR Program Measures
    3. Retention and Proposed Removal of Previously Finalized 
Quality Measures for PCHs Beginning With the FY 2020 Program Year

[[Page 19803]]

    a. Background
    b. Proposed Removal of Measures From the PCHQR Program Beginning 
With the FY 2020 Program Year
    4. Proposed New Quality Measures Beginning With the FY 2020 
Program Year
    a. Considerations in the Selection of Quality Measures
    b. Proposed New Quality Measures Beginning With the FY 2020 
Program Year
    c. Summary of Previously Finalized and Newly Proposed PCHQR 
Program Measures for the FY 2020 Program Year and Subsequent Years
    5. Accounting for Social Risk Factors in the PCHQR Program
    6. Possible New Quality Measure Topics for Future Years
    a. Background
    b. Localized Prostate Cancer: Vitality; Localized Prostate 
Cancer: Urinary Incontinence; Localized Prostate Cancer: Urinary 
Frequency; Obstruction, and/or Irritation; Localized Prostate 
Cancer: Sexual Function; and Localized Prostate Cancer: Bowel 
Function
    c. 30-Day Unplanned Readmission for Cancer Patients
    7. Maintenance of Technical Specifications for Quality Measures
    8. Public Display Requirements
    a. Background
    b. Deferment of Public Display of Two Measures
    9. Form, Manner, and Timing of Data Submission
    a. Background
    b. Proposed Reporting Requirements for the Proposed New Measures
    10. Extraordinary Circumstances Exceptions (ECE) Policy Under 
the PCHQR Program
    a. Background
    b. Proposed Modification to the Exception Policy
    C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    1. Background and Statutory Authority
    2. General Considerations Used for Selection of Quality Measures 
for the LTCH QRP
    a. Background
    b. Accounting for Social Risk Factors in the LTCH QRP
    3. Proposed Collection of Standardized Patient Assessment Data 
Under the LTCH QRP
    a. Proposed Definition of Standardized Patient Assessment Data
    b. General Considerations Used for the Selection of Proposed 
Standardized Patient Assessment Data
    4. Policy for Retaining LTCH QRP Measures and Proposal to Apply 
That Policy to Standardized Patient Assessment Data
    5. Policy for Adopting Changes to LTCH QRP Measures and Proposal 
To Apply That Policy to Standardized Patient Assessment Data
    6. Quality Measures Previously Finalized for the LTCH QRP
    7. LTCH QRP Quality Measures Proposed Beginning With the FY 2020 
LTCH QRP
    a. Proposal To Replace the Current Pressure Ulcer Quality 
Measure, Entitled Percent of Residents or Patients With Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678), With a 
Modified Pressure Ulcer Measure, Entitled Changes in Skin Integrity 
Post-Acute Care: Pressure Ulcer/Injury
    b. Proposed Mechanical Ventilation Process Quality Measure: 
Compliance With Spontaneous Breathing Trial (SBT) by Day 2 of the 
LTCH Stay
    c. Proposed Mechanical Ventilation Outcome Quality Measure: 
Ventilator Liberation Rate
    8. Proposed Removal of the All-Cause Unplanned Readmission 
Measure for 30 Days Post-Discharge From LTCHs From the LTCH QRP
    9. LTCH QRP Quality Measures Under Consideration for Future 
Years
    a. LTCH QRP Quality Measures Under Consideration for Future 
Years
    b. IMPACT Act Measure--Possible Future Update to Measure 
Specifications
    c. IMPACT Act Implementation Update
    10. Proposed Standardized Patient Assessment Data Reporting for 
the LTCH QRP
    a. Proposed Standardized Patient Assessment Data Reporting for 
the FY 2019 LTCH QRP
    b. Proposed Standardized Patient Assessment Data Reporting 
Beginning With the FY 2020 LTCH QRP
    11. Proposals Relating to the Form, Manner, and Timing of Data 
Submission Under the LTCH QRP
    a. Proposed Start Date for Standardized Patient Assessment Data 
Reporting by New LTCHs
    b. Proposed Mechanism for Reporting Standardized Patient 
Assessment Data Beginning With the FY 2019 LTCH QRP
    c. Proposed Schedule for Reporting Standardized Patient 
Assessment Data Beginning With the FY 2019 LTCH QRP
    d. Proposed Schedule for Reporting the Proposed Quality Measures 
Beginning With the FY 2020 LTCH QRP
    e. Proposed Removal of Interrupted Stay Items From the LTCH CARE 
Data Set
    12. Proposed Changes to Previously Codified Participation 
Requirements Under the LTCH QRP
    13. Proposed Changes to Previously Codified Data Submission 
Requirements Under the LTCH QRP
    14. Proposed Changes to Previously Codified Exception and 
Extension Requirements Under the LTCH QRP
    15. Proposed Changes to Previously Codified Reconsiderations 
Requirements Under the LTCH QRP
    16. Proposal To Apply the LTCH QRP Data Completion Thresholds to 
the Submission of Standardized Patient Assessment Data Beginning 
With the FY 2019 LTCH QRP
    17. Proposals and Policies Regarding Public Display of Measure 
Data for the LTCH QRP
    18. Mechanism for Providing Feedback Reports to LTCHs
    D. Inpatient Psychiatric Facility Quality Reporting (IPFQR) 
Program
    1. Background
    a. Statutory Authority
    b. Covered Entities
    c. Considerations in Selecting Quality Measures
    2. Factors for Removal or Retention of IPFQR Program Measures
    a. Background
    b. Proposed Considerations in Removing or Retaining Measures
    3. Proposed New Quality Measure for the FY 2020 Payment 
Determination and Subsequent Years--Medication Continuation 
Following Inpatient Psychiatric Discharge
    a. Background
    b. Appropriateness for the IPFQR Program
    c. Measure Calculation
    d. Data Sources
    e. Public Comment
    4. Summary of Proposed and Previously Finalized Measures for the 
FY 2020 Payment Determinations and Subsequent Years
    5. Possible IPFQR Program Measures and Topics for Future 
Consideration
    6. Public Display and Review Requirements
    7. Form, Manner, and Timing of Quality Data Submission for the 
FY 2019 Payment Determination and Subsequent Years
    a. Procedural Requirements for FY 2019 Payment Determination and 
Subsequent Years
    b. Data Submission Requirements for the FY 2019 Payment 
Determination and Subsequent Years
    c. Reporting Requirements for the FY 2019 Payment Determination 
and Subsequent Years
    d. Population and Sampling
    e. Data Accuracy and Completeness Acknowledgement (DACA) 
Requirements
    8. Reconsideration and Appeals Procedures
    9. Extraordinary Circumstances Exceptions (ECE) for the IPFQR 
Program
    a. Background
    b. Proposed ECE Policy Modifications
    E. Clinical Quality Measurement for Eligible Hospitals and 
Critical Access Hospitals (CAHs) Participating in the EHR Incentive 
Programs
    1. Background
    2. Proposed Modifications to the CQM Reporting Requirements for 
the Medicare and Medicaid EHR Incentive Programs for CY 2017
    a. Background
    b. Proposed Changes to Policies Regarding Electronic Reporting 
of CQMs for CY 2017
    3. CQM Reporting for the Medicare and Medicaid EHR Incentive 
Programs in 2018
    a. Background
    b. CQM Reporting Period for the Medicare and Medicaid EHR 
Incentive Programs in CY 2018
    c. CQM Reporting Form and Method for the Medicare EHR Incentive 
Program in 2018
    F. Clinical Quality Measurement for Eligible Professionals (EPs) 
Participating in the Medicaid EHR Incentive Program in 2017

[[Page 19804]]

    1. Proposed Modifications to the CQM Reporting Period for EPs in 
2017
    2. Proposed Modifications to CQM Reporting Requirements for 
Medicaid EPs Under the Medicaid EHR Incentive Program
    G. Changes to the Medicare and Medicaid EHR Incentive Programs
    1. Proposed Revisions to the EHR Reporting Period in 2018
    2. Significant Hardship Exception for Decertified Certified EHR 
Technology (CEHRT) for EPs, Eligible Hospitals, and CAHs Seeking To 
Avoid the Medicare Payment Adjustment
    3. Ambulatory Surgical Center (ASC)-Based Eligible Professionals 
(EPs)
    4. Certification Requirements for 2018 X. Proposed Revisions of 
Medicare Cost Reporting and Provider Requirements
    A. Electronic Signature and Submission of the Certification and 
Settlement Summary Page of the Medicare Cost Report
    1. Background
    2. Proposed Changes Relating to Electronic Signature on the 
Certification and Settlement Summary Page of the Medicare Cost 
Report
    3. Proposed Changes Relating to Electronic Submission of the 
Certification and Settlement Summary Page of the Medicare Cost 
Report
    4. Clarifications Relating to the Items Required To Be Submitted 
by Providers With the Medicare Cost Report
    a. Settlement Summary and Certification Statement
    b. Removal of the Transition Period Language
    5. Proposed Revisions to 42 CFR 413.24(f)(4)(iv)
    B. Clarification of Limitations on the Valuation of Depreciable 
Assets Disposed of On or After December 1, 1997
XI. Proposed Changes Relating to Survey and Certification 
Requirements
    A. Proposed Revisions to the Application and Re-Application 
Procedures for National Accrediting Organizations (AOs), Provider 
and Supplier Conditions, and Posting of Survey Reports and 
Acceptable Plans of Corrections (PoCs)
    1. Background
    2. Proposed Regulation Changes
    B. Proposed Changes to Termination Public Notice Requirements 
for Certain Providers and Suppliers
    1. Background
    2. Basis for Proposed Changes
    3. Proposed Changes to Regulations
XII. MedPAC Recommendations
XIII. Other Required Information
    A. Publicly Available Data
    1. CMS Wage Data Public Use File
    2. CMS Occupational Mix Data Public Use File
    3. Provider Occupational Mix Adjustment Factors for Each 
Occupational Category Public Use File
    4. Other Wage Index Files
    5. FY 2018 IPPS SSA/FIPS CBSA State and County Crosswalk
    6. HCRIS Cost Report Data
    7. Provider-Specific File
    8. CMS Medicare Case-Mix Index File
    9. MS-DRG Relative Weights (Also Table 5--MS-DRGs)
    10. IPPS Payment Impact File
    11. AOR/BOR Table
    12. Prospective Payment System (PPS) Standardized File
    13. Hospital Readmissions Reductions Program Supplemental File
    14. Medicare Disproportionate Share Hospital (DSH) Supplemental 
File
    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 Proposed FY 
2018 Wage Index (Hospital Wage Index Occupational Mix Survey)
    4. Hospital Applications for Geographic Reclassifications by the 
MGCRB
    5. ICRs for Temporary Exception to the LTCH PPS Site Neutral 
Payment Rate for Certain Spinal Cord Specialty Hospitals
    6. ICRs for the Hospital Inpatient Quality Reporting (IQR) 
Program
    7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
    8. ICRs for Hospital Value-Based Purchasing (VBP) Program
    9. ICRs for the Long-Term Care Hospital Quality Reporting 
Program (LTCH QRP)
    10. ICRs for the Inpatient Psychiatric Facility Quality 
Reporting (IPFQR) Program
    11. ICRs for the Electronic Health Record (EHR) Incentive 
Programs and Meaningful Use
    12. ICRs Relating to Proposed Electronic Signature and 
Electronic Submission of the Certification and Settlement Summary 
Page of Medicare Cost Reports
    13. ICRs Relating to Survey and Certification Requirements
    C. Request for Information on CMS Flexibilities and Efficiencies
    D. Response to Public Comments
Regulation Text
Addendum--Proposed Schedule of Standardized Amounts, Update Factors, 
and Rate-of-Increase Percentages Effective With Cost Reporting 
Periods Beginning on or After October 1, 2017 and Payment Rates for 
LTCHs Effective With Discharges Occurring on or After October 1, 
2017
I. Summary and Background
II. Proposed Changes to the Prospective Payment Rates for Hospital 
Inpatient Operating Costs for Acute Care Hospitals for FY 2018
    A. Calculation of the Adjusted Standardized Amount
    B. Adjustments for Area Wage Levels and Cost-of-Living
    C. Calculation of the Prospective Payment Rates
III. Proposed Changes to Payment Rates for Acute Care Hospital 
Inpatient Capital-Related Costs for FY 2018
    A. Determination of Federal Hospital Inpatient Capital-Related 
Prospective Payment Rate Update
    B. Calculation of the Inpatient Capital-Related Prospective 
Payments for FY 2018
    C. Capital Input Price Index
IV. Proposed Changes to Payment Rates for Excluded Hospitals: 
Proposed Rate-of-Increase Percentages for FY 2018
V. Proposed Changes to the Payment Rates for the LTCH PPS for FY 
2018
    A. Proposed LTCH PPS Standard Federal Payment Rate for FY 2018
    B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS 
for FY 2018
    1. Background
    2. Geographic Classifications (Labor Market Areas) for the LTCH 
PPS Standard Federal Payment Rate
    3. Proposed Labor-Related Share for the LTCH PPS Standard 
Federal Payment Rate
    4. Proposed Wage Index for FY 2018 for the LTCH PPS Standard 
Federal Payment Rate
    5. Proposed Budget Neutrality Adjustment for Changes to the LTCH 
PPS Standard Federal Payment Rate Area Wage Level Adjustment
    C. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs 
Located in Alaska and Hawaii
    D. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO) 
Cases
    E. Update to the IPPS Comparable/Equivalent Amounts to Reflect 
the Statutory Changes to the IPPS DSH Payment Adjustment Methodology
    F. Computing the Proposed Adjusted LTCH PPS Federal Prospective 
Payments for FY 2018
VI. Tables Referenced in This Proposed Rule and Available Only 
Through the Internet on the CMS Web Site
Appendix A--Economic Analyses
I. Regulatory Impact Analysis
    A. Introduction
    B. Need
    C. Objectives of the IPPS
    D. Limitations of Our Analysis
    E. Hospitals Included in and Excluded From the IPPS
    F. Effects on Hospitals and Hospital Units Excluded From the 
IPPS
    G. Quantitative Effects of the Proposed Policy Changes Under the 
IPPS for Operating Costs
    1. Basis and Methodology of Estimates
    2. Analysis of Table I
    3. Impact Analysis of Table II
    H. Effects of Other Proposed Policy Changes
    1. Effects of Proposed Policy Relating to New Medical Service 
and Technology Add-On Payments
    2. Effects of Proposed Changes to MS-DRGs Subject to the 
Postacute Care Transfer Policy and the MS-DRG Special Payment Policy
    3. Effects of the Proposed Changes to the Volume Decrease 
Adjustment for Sole Community Hospitals (SCHs)
    4. Effects of Proposed Changes to Low-Volume Hospital Payment 
Adjustment Policy
    5. Effects of the Proposed Changes to Medicare DSH and 
Uncompensated Care Payments for FY 2018

[[Page 19805]]

    6. Effects of Proposed Reduction Under the Hospital Readmissions 
Reduction Program
    7. Effects of Proposed Changes Under the FY 2018 Hospital Value-
Based Purchasing (VBP) Program
    8. Effects of Proposed Changes to the HAC Reduction Program for 
FY 2018
    9. Effects of Implementation of the Additional 5-Year Expansion 
of the Rural Community Hospital Demonstration Program
    10. Effects of the Proposed Changes Relating to Provider-Based 
Status of Indian Health Service and Tribal Facilities and 
Organizations
    11. Effects of the Proposed Changes Relating to Hospital-Within-
Hospital Policy
    12. Effects of Continued Implementation of the Frontier 
Community Health Integration Project (FCHIP) Demonstration
    I. Effects of Proposed Changes in the Capital IPPS
    1. General Considerations
    2. Results
    J. Effects of Proposed Payment Rate Changes and Policy Changes 
Under the LTCH PPS
    1. Introduction and General Considerations
    2. Impact on Rural Hospitals
    3. Anticipated Effects of Proposed LTCH PPS Payment Rate Changes 
and Policy Changes
    4. Effect on the Medicare Program
    5. Effect on Medicare Beneficiaries
    K. Effects of Proposed Requirements for Hospital Inpatient 
Quality Reporting (IQR) Program
    L. Effects of Proposed Requirements for the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program
    M. Effects of Proposed Requirements for the Long-Term Care 
Hospital Quality Reporting Program (LTCH QRP)
    N. Effects of Proposed Updates to the Inpatient Psychiatric 
Facility Quality Reporting (IPFQR) Program
    O. Effects of Proposed Requirements Regarding the Electronic 
Health Record (EHR) Incentive Programs and Meaningful Use
    P. Effects of Proposed Electronic Signature and Electronic 
Submission of the Certification and Settlement Summary Page of 
Medicare Cost Reports
    Q. Effects of Proposed Changes Relating to Survey and 
Certification Requirements
    R. Effects of Clarification of Limitations on the Valuation of 
Depreciable Assets Disposed of on or After December 1, 1997
    S. Alternatives Considered
    T. Reducing Regulation and Controlling Regulatory Costs
    U. Overall Conclusion
    1. Acute Care Hospitals
    2. LTCHs
    V. Regulatory Review Costs
II. Accounting Statements and Tables
    A. Acute Care Hospitals
    B. LTCHs
III. Regulatory Flexibility Act (RFA) Analysis
IV. Impact on Small Rural Hospitals
V. Unfunded Mandate Reform Act (UMRA) Analysis
VI. Executive Order 13175
VII. Executive Order 12866
Appendix B: Recommendation of Update Factors for Operating Cost 
Rates of Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2018
    A. Proposed FY 2018 Inpatient Hospital Update
    B. Proposed Update for SCHs for FY 2018
    C. Proposed FY 2018 Puerto Rico Hospital Update
    D. Proposed Update for Hospitals Excluded From the IPPS
    E. Proposed Update for LTCHs for FY 2018
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and 
Updating Payments in Traditional Medicare

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    This proposed rule would make payment and policy changes under the 
Medicare inpatient prospective payment systems (IPPS) for operating and 
capital-related costs of acute care hospitals as well as for certain 
hospitals and hospital units excluded from the IPPS. We also are making 
proposals relating to the provider-based status of Indian Health 
Service (IHS) and Tribal facilities and organizations and to the IPPS 
low-volume hospital payment adjustment for hospitals operated by the 
IHS or a Tribe. In addition, it would make payment and policy changes 
for inpatient hospital services provided by long-term care hospitals 
(LTCHs) under the long-term care hospital prospective payment system 
(LTCH PPS). It also would make policy changes to programs associated 
with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs.
    We are proposing to establish new requirements or revising 
requirements for quality reporting by specific providers (acute care 
hospitals, PPS-exempt hospitals, LTCHs, and inpatient psychiatric 
facilities) that are participating in Medicare. We also are proposing 
to establish new requirements or revise existing requirements for 
eligible professionals (EPs), eligible hospitals, and CAHs 
participating in the Medicare and Medicaid EHR Incentive Programs. We 
are proposing to update policies relating to the Hospital Value-Based 
Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, 
and the Hospital-Acquired Condition (HAC) Reduction Program. We also 
are proposing changes related to the transparency of accrediting 
organization survey reports and plans of correction; to allow 
electronic signature and electronic submission of the Certification and 
Settlement Summary page of the Medicare cost reports; and to clarify 
provider reimbursement regulations relative to the sale or scrapping of 
depreciable assets on or after December 1, 1997.
    Under various statutory authorities, we are proposing to make 
changes to the Medicare IPPS, to the LTCH PPS, and to other related 
payment methodologies and programs for FY 2018 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; long-term care neoplastic disease 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). Religious nonmedical 
health care institutions (RNHCIs) are also excluded from the IPPS.
     Sections 123(a) and (c) of the BBRA (Pub. L. 106-113) and 
section 307(b)(1) of the BIPA (Pub. L. 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(a)(4) of the Act, which specifies that costs 
of approved

[[Page 19806]]

educational activities are excluded from the operating costs of 
inpatient hospital services. Hospitals with approved graduate medical 
education (GME) programs are paid for the direct costs of GME in 
accordance with section 1886(h) of the Act.
     Section 1886(b)(3)(B)(viii) of the Act, which requires the 
Secretary to reduce the applicable percentage increase that would 
otherwise apply to the standardized amount applicable to a subsection 
(d) hospital for discharges occurring in 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 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 and section 15002 of the 21st Century Cures Act, which 
establishes the ``Hospital Readmissions Reduction Program.'' Under the 
program, payments for discharges from an ``applicable hospital'' under 
section 1886(d) of the Act will be reduced to account for certain 
excess readmissions. Section 15002 of the 21st Century Cures Act 
requires the Secretary to compare cohorts of hospitals to each other in 
determining the extent of 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 (DSH) 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 DSH 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 who are 
uninsured (minus 0.2 percentage points for FY 2018 through FY 2019); 
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 Sustainable Growth Rate (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 1886(m)(6) of the Act, as amended by section 15009 
of the 21st Century Cures Act (Pub. L. 114-255), which provides for a 
temporary exception to the application of the site neutral payment rate 
under the LTCH PPS for certain spinal cord specialty hospitals for 
discharges in cost reporting periods beginning during FYs 2018 and 
2019.
     Section 1886(m)(6) of the Act, as amended by section 15010 
of the 21st Century Cures Act (Pub. L. 114-255), which provides for a 
temporary exception to the application of the site neutral payment rate 
under the LTCH PPS for certain LTCHs with certain discharges with 
severe wounds occurring in cost reporting periods beginning during FY 
2018.
     Section 1886(m)(5)(D)(iv) of the Act, as added by section 
1206 (c) of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 
2013 (Pub. L. 113-67), which provides for the establishment 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, 
Pub. L. 113-185), which imposes data reporting requirements for certain 
post-acute care providers, including LTCHs.
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. The FY 2014 through FY 2017 adjustments represented 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. Section 
414 of the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 
(Pub. L. 114-10) replaced the single positive adjustment we intended to 
make in FY 2018 with a 0.5 percent positive adjustment to the 
standardized amount of Medicare payments to acute care hospitals for 
FYs 2018 through 2023. The FY 2018 adjustment was subsequently adjusted 
to 0.4588 percent by section 15005 of the 21st Century Cures Act.
    For FY 2018, we are proposing to make the 0.4588 percent positive 
adjustment to the standardized amount as required by section 414 of 
Public Law 114-10, as amended by section 15005 of the 21st Century 
Cures Act.
b. Adjustment to IPPS Rates Resulting From 2-Midnight Policy
    In FY 2017, we made a permanent adjustment to the standardized 
amount, the hospital-specific payment rates, and the national capital 
Federal rate to prospectively remove the 0.2 percent reduction to the 
rates put in place in FY 2014 to offset the estimated increase in IPPS 
expenditures as a result of the 2-midnight policy. In addition, we made 
a temporary one-time prospective increase to the FY 2017 standardized 
amount, the hospital-specific payment rates, and the national capital 
Federal rate of 0.6 percent by including a temporary one-time factor of 
1.006 in the calculation of the standardized amount, the hospital-
specific payment rates, and the national capital Federal rate to 
address the effects of the 0.2 percent reduction to the rate for the 2-
midnight policy in effect for FYs 2014, 2015, and 2016.
    For FY 2018, we are including a factor of (1/1.006) in the 
calculation of the FY 2018 standardized amount, the hospital-specific 
payment rates, and the national capital Federal rate to remove the 
temporary one-time factor of 1.006, as established in the FY 2017 IPPS/
LTCH PPS final rule.

[[Page 19807]]

c. Reduction of Hospital Payments for Excess Readmissions
    We are proposing to make changes to policies for 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, as amended by section 10309 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 FY 2018 and 
subsequent years, the reduction is based on a hospital's risk-adjusted 
readmission rate during a 3-year period for acute myocardial infarction 
(AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary 
disease (COPD), total hip arthroplasty/total knee arthroplasty (THA/
TKA), and coronary artery bypass graft (CABG). In this proposed rule, 
we are proposing the following policies: (1) Specify applicable time 
period for FY 2018; (2) specify the calculation of aggregate payments 
for excess readmissions for FY 2018; (3) propose changes to the payment 
adjustment factor in accordance with the 21st Century Cures Act for FY 
2019; and (4) update the Extraordinary Circumstances Exception policy.
d. 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. In 
this proposed rule, we are proposing to remove one previously adopted 
measure, the PSI 90: Patient Safety for Selected Indicators measure, 
from the Hospital VBP Program beginning with the FY 2019 program year. 
We also are proposing to adopt one new measure, Hospital-Level, Risk-
Standardized Payment Associated with a 30-Day Episode of Care for 
Pneumonia, beginning with the FY 2022 program year, and to adopt a 
modified version of a previously adopted measure, Patient Safety and 
Adverse Events Composite (NQF #0531), beginning with the FY 2023 
program year. In addition, we are proposing two modifications to our 
domain scoring policies beginning with the FY 2019 program year, and 
further proposing a new weighting methodology for the Efficiency and 
Cost Reduction domain. We also are inviting public comment on the 
appropriateness of accounting for social risk factors in the Hospital 
VBP Program, including which social risk factors should be included; 
and how to account for these social risk factors in the Hospital VBP 
Program.
e. 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. 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. 
In this proposed rule, we are proposing the following policies: (1) 
Specifying the dates of the time period used to calculate hospital 
performance for the FY 2020 HAC Reduction Program; (2) requesting 
comments on additional measures for potential future adoption; (3) 
requesting comments on social risk factors; (4) requesting comments on 
accounting for disability and medical complexity in the CDC NHSN 
measures in Domain 2; and (5) updating the HAC Reduction Program's 
Extraordinary Circumstances Exception policy.
f. 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 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 the amount that 
otherwise would have been paid as Medicare DSH payments, is paid as 
additional payments after the amount is reduced for changes in the 
percentage of individuals that are uninsured. Each Medicare DSH will 
receive an additional payment based on its share of the total amount of 
uncompensated care for all Medicare DSHs for a given time period.
    In this proposed rule, we are proposing to update our estimates of 
the three factors used to determine uncompensated care payments for FY 
2018. The statute permits the use of a data source other than the CBO 
estimates to determine the percent change in the rate of uninsurance as 
part of the calculation of Factor 2 beginning in FY 2018. We are 
proposing to use uninsured estimates produced by CMS' Office of the 
Actuary (OACT) as part of the development of the National Health 
Expenditure Accounts (NHEA) in the calculation of Factor 2. We also are 
proposing to begin incorporating data from Worksheet S-10 in the 
calculation of hospitals' share of uncompensated care by combining data 
on uncompensated care costs from the Worksheet S-10 for FY 2014 with 
proxy data regarding a hospital's share of low-income insured days for 
FYs 2012 and 2013 to determine Factor 3 for FY 2018. The proposal to 
continue to use data from three cost reporting periods to calculate 
Factor 3 would have the effect of transitioning from the use of the 
proxy data on low-income insured days toward use of uncompensated care 
data from Worksheet S-10. As part of this proposal, we are proposing a 
definition of uncompensated care costs consisting of the sum of charity 
care and bad debt and a trim methodology to address anomalous charges. 
We also are proposing that, for Puerto Rico hospitals and Indian Health 
Service and Tribal hospitals, we would substitute data regarding low-
income insured days for FY 2013 for the Worksheet S-10 data from FY 
2014 cost reports.
    We are proposing to continue the policies that were finalized in FY 
2015 to address several specific issues concerning the process and data 
to be employed in determining hospitals' share of uncompensated care in 
the case of hospital mergers. We also are proposing to continue the 
policies finalized in FY 2017 concerning the methodology for 
calculating each hospital's relative share of uncompensated care, such 
as combining data from multiple cost reports beginning in the same 
fiscal year and averaging the sum of three individual Factor 3s by the 
number of cost reporting periods with data. In addition, we are 
proposing to annualize hospital cost reports that do not span 12 
months. We also are proposing to apply a scaling factor to each 
hospital's uncompensated care amount so that total uncompensated care 
payments will be consistent with the estimated amount available to make 
uncompensated care payments for FY 2018.

[[Page 19808]]

g. Proposed Changes to the LTCH PPS
    In this 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 2018; proposed changes to the payment 
methodology under the short-stay outlier (SSO) policy; proposals to 
implement several provisions of the 21st Century Cures Act; and a 
proposal to adopt a 1-year regulatory delay on the full implementation 
of the 25-percent threshold policy for discharges occurring in FY 2018 
(that is, for the fiscal year after expiration of the current statutory 
moratoria under the 21st Century Cures Act, which is set to expire 
September 30, 2017).
h. Hospital Inpatient Quality Reporting (IQR) Program
    Under section 1886(b)(3)(B)(viii) of the Act, subsection (d) 
hospitals are required to report data on measures selected by the 
Secretary for a fiscal year in order to receive the full annual 
percentage increase that would otherwise apply to the standardized 
amount applicable to discharges occurring in that fiscal year. In past 
years, we have established measures on which hospitals must report data 
and the process for submittal and validation of the data.
    In this proposed rule, we are proposing to make several changes. 
First, we are proposing to refine two previously adopted measures. 
Specifically, we are proposing to update the Hospital Consumer 
Assessment of Healthcare Providers and Systems (HCAHPS) Survey measure 
by replacing the three existing questions about Pain Management with 
three new questions that address Communication About Pain During the 
Hospital Stay, beginning with the FY 2020 payment determination. In 
addition, we are proposing to update the stroke mortality measure to 
include the use of NIH Stroke Scale claims data for risk adjustment, 
beginning with the FY 2023 payment determination.
    Second, we are proposing to adopt the Hospital-Wide All-Cause 
Unplanned Readmission Hybrid Measure as a voluntary measure for the CY 
2018 reporting period and note that we are considering proposing this 
measure as a required measure as early as the CY 2021 reporting period/
FY 2023 payment determination and requiring hospitals to submit the 
core clinical data elements and linking variables used in the measure 
as early as CY 2020 to support a dry run of the measure during which 
hospitals would receive a confidential preview of their results in 
2021.
    Third, we are proposing modifications of our previously finalized 
eCQM reporting requirements. For the CY 2017 reporting period/FY 2019 
payment determination, we are proposing that hospitals would be 
required to select and submit six of the available eCQMs included in 
the Hospital IQR Program measure set and provide two, self-selected, 
calendar year quarters of data. For the CY 2018 reporting period/FY 
2020 payment determination, we are proposing that hospitals would be 
required to select and submit six of the available eCQMs, and provide 
data for the first three calendar quarters (Q1-Q3). These modifications 
are being proposed in alignment with proposals for the Medicare and 
Medicaid EHR Incentive Programs, and would decrease the required number 
of eCQMs and quarters of reporting as compared with the previously 
finalized requirements in the FY 2017 IPPS/LTCH PPS final rule.
    Fourth, we are proposing modifications to the eCQM validation 
process if our proposals to modify the eCQM reporting requirements for 
the CY 2017 reporting period/FY 2019 payment determination and CY 2018 
reporting period/FY 2020 payment determination are finalized as 
proposed, whereby hospitals would be required to submit a reduced 
number of cases for eCQM data validation for the FY 2020 and FY 2021 
payment determinations. In addition, we are proposing policies related 
to the exclusion criteria for hospital selection and the data 
submission requirements for participating hospitals.
    Fifth, we are proposing to modify our educational review process 
for chart-abstracted measures for the FY 2020 payment determination and 
subsequent years, such that educational reviews would be offered 
quarterly for the first three quarters of validation. Hospitals would 
be allowed 30 calendar days following the date the results of 
validation are posted to request an educational review. Also, we are 
proposing that if an educational review demonstrates that the 
abstraction score calculated by CMS is incorrect, we would use the 
corrected quarterly score to compute the final confidence interval.
    Sixth, we are making proposals related to our Hospital IQR Program 
Extraordinary Circumstances Extension or Exemptions (ECE) policy, 
including a change to the name of the policy to Extraordinary 
Circumstances Exceptions policy.
    Finally, we are inviting public comment on accounting for social 
risk factors in the Hospital IQR Program, the confidential and 
potential future public reporting of clinical quality measure data 
stratified by patients' dual-eligible status, and the following 
clinical quality measures that we are considering for future inclusion 
in the Hospital IQR Program: (1) Quality of Informed Consent Documents 
for Hospital-Performed, Elective Procedures measure; (2) four End-of-
Life process and outcome measures for cancer patients; (3) two nurse 
staffing measures; and (4) eleven newly specified electronic clinical 
quality measures (eCQMs).
i. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    Section 1886(m)(5) of the Act requires LTCHs to report certain 
quality data to CMS in order to receive their full annual update under 
the LTCH PPS. In this proposed rule, we are proposing to adopt one new 
outcome measure related to pressure ulcers and two new measures (one 
process and one outcome) related to ventilator weaning. We also are 
proposing to define the standardized patient assessment data that LTCHs 
must report to comply with section 1886(m)(5)(F)(ii) of the Act, as 
well as the requirements for the reporting of these data. Finally, we 
are proposing to publicly report data on four assessment-based measures 
and three claims-based measures.
j. Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program
    For the Inpatient Psychiatric Facility Quality Reporting (IPFQR) 
Program, we are making several proposals. First, beginning with the FY 
2020 payment determination, we are proposing the Medication 
Continuation following Inpatient Psychiatric Discharge measure. Second, 
beginning with the FY 2019 payment determination (that is, for 
extraordinary circumstances occurring during CY 2018), we are proposing 
to update the IPFQR Program's extraordinary circumstances exception 
(ECE) policy by: (1) Allowing designated personnel to provide their 
contact information and sign the ECE request in lieu of the Chief 
Executive Officer (CEO); (2) allowing up to 90 days after the 
extraordinary circumstance to submit the request; and (3) stating that 
we will strive to respond to requests for ECEs within 90 days of 
receiving these requests. Third, we are proposing to change the annual 
data submission period from a specific date range to a 45-day period 
that begins at least 30 days following the end of the collection 
period. Fourth, we are proposing to align our deadline for submission 
of a Notice of Participation (NOP) or

[[Page 19809]]

program withdrawal with this proposed data submission timeframe. 
Finally, we are proposing factors by which we will evaluate measures 
for removal from the IPFQR Program. These factors align with those in 
use in other quality reporting programs.
3. Summary of Costs and Benefits
     Adjustment for MS-DRG Documentation and Coding Changes. 
Section 414 of the MACRA replaced the single positive adjustment we 
intended to make in FY 2018 once the recoupment required by section 631 
of the ATRA was complete with a 0.5 percent positive adjustment to the 
standardized amount of Medicare payments to acute care hospitals for 
FYs 2018 through 2023. The FY 2018 adjustment was subsequently adjusted 
to 0.4588 percent by section 15005 of the 21st Century Cures Act (Pub. 
L. 114-255). For FY 2018, we are proposing to make the 0.4588 percent 
positive adjustment to the standardized amount as required by these 
provisions.
     Adjustment to IPPS Payment Rates as a Result of the 2-
Midnight Policy. The removal of the adjustment to IPPS rates resulting 
from the 2-midnight policy will decrease IPPS payment rates by (1/
1.006) for FY 2018. The (1/1.006) is a one-time factor that will be 
applied to the standardized amount, the hospital-specific rates, and 
the national capital Federal rate for FY 2018 only.
     Medicare DSH Payment Adjustment and Additional Payment for 
Uncompensated Care. Under section 1886(r) of the Act (as added by 
section 3133 of the Affordable Care Act), DSH 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 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 remainder, equal to an estimate of 75 percent of what 
otherwise would have been paid as Medicare DSH payments, is 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 2018, we are proposing that the 75 percent of what otherwise 
would have been paid for Medicare DSH will be adjusted to approximately 
58.01 percent of the amount to reflect changes in the percentage of 
individuals that are uninsured and additional statutory adjustments. In 
other words, approximately 43.51 percent (the product of 75 percent and 
58.01 percent) of our estimate of Medicare DSH payments, prior to the 
application of section 3133 of the Affordable Care Act, would be 
available to make additional payments to hospitals for their relative 
share of the total amount of uncompensated care.
    We project that estimated Medicare DSH payments, and additional 
payments for uncompensated care made for FY 2018, will increase 
payments overall by approximately 0.8 percent as compared to the 
estimate of overall payments, including Medicare DSH payments and 
uncompensated care payments, that will be distributed in FY 2017. 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 calculated payment amount is not directly tied to a hospital's 
number of discharges.
     Proposed Changes to the Hospital Readmissions Reduction 
Program. For FY 2018 and subsequent years, the reduction is based on a 
hospital's risk-adjusted readmission rate during a 3-year period for 
acute myocardial infarction (AMI), heart failure (HF), pneumonia, 
chronic obstructive pulmonary disease (COPD), total hip arthroplasty/
total knee arthroplasty (THA/TKA), and coronary artery bypass graft 
(CABG). Overall, in this proposed rule, we estimate that 2,591 
hospitals would have their base operating DRG payments reduced by their 
determined proxy FY 2018 hospital-specific readmission adjustment. As a 
result, we estimate that the Hospital Readmissions Reduction Program 
would save approximately $564 million in FY 2018, an increase of 
approximately $27 million over the estimated FY 2017 savings.
     Value-Based Incentive Payments Under the Hospital VBP 
Program. We estimate that there would be no net financial impact to the 
Hospital VBP Program for the FY 2018 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 2018 program year 
and, therefore, the estimated amount available for value-based 
incentive payments for FY 2018 discharges is approximately $1.9 
billion.
     Proposed Changes to the HAC Reduction Program. A 
hospital's Total HAC score and its ranking in comparison to other 
hospitals in any given year depends on several different factors. Any 
significant impact due to the proposed HAC Reduction Program changes 
for FY 2018, including which hospitals will receive the adjustment, 
will depend on actual experience.
     Update to the LTCH PPS Payment Rates and Other Payment 
Factors. Based on the best available data for the 415 LTCHs in our 
database, we estimate that the proposed changes to the payment rates 
and factors that we are presenting in the preamble and Addendum of this 
proposed rule, which reflects the rolling end to the transition of the 
statutory application of the site neutral payment rate required by 
section 1886(m)(6)(A) of the Act, the proposed update to the LTCH PPS 
standard Federal payment rate for FY 2018, and estimated changes to the 
site neutral payment rate and high-cost outlier (HCO) payments would 
result in an estimated decrease in payments from FY 2017 of 
approximately $238 million.
     Proposed Changes to the 25-Percent Threshold Policy. In 
this proposed rule, we estimate our proposal to adopt a 1-year 
regulatory delay of the full implementation of the 25-percent threshold 
policy for discharges occurring in FY 2018 would increase payments to 
LTCHs in FY 2018 by $50 million.
     Proposed Changes to the Hospital Inpatient Quality 
Reporting (IQR) Program. Across 3,300 IPPS hospitals, we estimate that 
our policy proposals would result in the following changes to costs and 
benefits in the Hospital IQR Program compared to previously finalized 
requirements: (1) A cost reduction of $361,240 for the FY 2019 payment 
determination due to the proposed updates to the eCQM reporting 
requirements; (2) a total net cost reduction of $392,963 for the FY 
2020 payment determination due to the proposed updates to the eCQM 
reporting requirements, the proposed updates to the eCQM validation 
procedures, and the proposed voluntary reporting of the new Hybrid 
Hospital-Wide Readmission measure; and (3) a total cost reduction of 
$70,048 for the FY 2021 payment determination due to

[[Page 19810]]

the proposed updates to the eCQM validation procedures.
     Proposed Changes Related to the LTCH QRP. In this proposed 
rule, we are proposing one outcome measure related to pressure ulcers 
and two new measures (one process and one outcome) related to 
ventilator weaning. We also are proposing to specify the use of the 
standardized patient assessment data as required under section 
1899B(b)(1)(B) of the Act and policies regarding public display of 
measure data. Overall, the cost associated with the proposed changes to 
the LTCH QRP is estimated at an additional $3,187.15 per LTCH annually, 
or $1,357,726 for all LTCHs annually.
     Proposed Changes to the IPFQR Program. In this proposed 
rule, we are proposing to adopt one claims based measure, update our 
ECE process, change the specification of the data submission period, 
align the timeframe for submission of the NOP or program withdrawal 
with the data submission period, and establish criteria to evaluate 
measures for retention or removal. We do not believe that these 
policies will have any impact on the IPFQR program burden.

B. Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
    Section 1886(d) of the Social Security Act (the Act) sets forth a 
system of payment for the operating costs of acute care hospital 
inpatient stays under Medicare Part A (Hospital Insurance) based on 
prospectively set rates. Section 1886(g) of the Act requires the 
Secretary to use a prospective payment system (PPS) to pay for the 
capital-related costs of inpatient hospital services for these 
``subsection (d) hospitals.'' Under these PPSs, Medicare payment for 
hospital inpatient operating and capital-related costs is made at 
predetermined, specific rates for each hospital discharge. Discharges 
are classified according to a list of diagnosis-related groups (DRGs).
    The base payment rate is comprised of a standardized amount that is 
divided into a labor-related share and a nonlabor-related share. The 
labor-related share is adjusted by the wage index applicable to the 
area where the hospital is located. If the hospital is located in 
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the 
DRG relative weight.
    If the hospital treats a high percentage of certain low-income 
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the 
disproportionate share hospital (DSH) adjustment, provides for a 
percentage increase in Medicare payments to hospitals that qualify 
under either of two statutory formulas designed to identify hospitals 
that serve a disproportionate share of low-income patients. For 
qualifying hospitals, the amount of this adjustment varies based on the 
outcome of the statutory calculations. The Affordable Care Act revised 
the Medicare DSH payment methodology and provides for a new additional 
Medicare payment that considers the amount of uncompensated care 
beginning on October 1, 2013.
    If the hospital is training residents in an approved residency 
program(s), 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.
    Under current law, the Medicare-dependent, small rural hospital 
(MDH) program is effective 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, but before 
October 1, 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 not 
more than 100 beds, is not an SCH, and has a high percentage of 
Medicare discharges (not less than 60 percent of its inpatient days or 
discharges in its cost reporting year beginning in FY 1987 or in two of 
its three most recently settled Medicare cost reporting years).
    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: Inpatient rehabilitation facility (IRF) 
hospitals and units; long-term care hospitals (LTCHs); psychiatric 
hospitals and units; children's hospitals; cancer hospitals; long-term 
care neoplastic

[[Page 19811]]

disease hospitals (formerly LTCHs classified under section 
1886(d)(1)(B)(iv)(II) of the Act and redesignated by section 15008 of 
Pub. L. 114-255) 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). 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 IRF 
hospitals and units, LTCHs, and psychiatric hospitals and units 
(referred to as inpatient psychiatric facilities (IPFs)). (We note that 
the annual updates to the LTCH PPS are now included as part of the IPPS 
annual update document. Updates to the IRF PPS and IPF PPS are issued 
as separate documents.) Children's hospitals, cancer hospitals, 
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), and RNHCIs 
continue to be paid solely under a reasonable cost-based system subject 
to a rate-of-increase ceiling on inpatient operating costs.
    The existing regulations governing payments to excluded hospitals 
and hospital units are located in 42 CFR parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
    The Medicare prospective payment system (PPS) for LTCHs applies to 
hospitals described in section 1886(d)(1)(B)(iv) of the Act effective 
for cost reporting periods beginning on or after October 1, 2002. The 
LTCH PPS was established under the authority of sections 123 of the 
BBRA and section 307(b) of the BIPA (as codified under section 
1886(m)(1) of the Act). During the 5-year (optional) transition period, 
a LTCH's payment under the PPS was based on an increasing proportion of 
the LTCH Federal rate with a corresponding decreasing proportion based 
on reasonable cost principles. Effective for cost reporting periods 
beginning on or after October 1, 2006, all LTCHs are paid 100 percent 
of the Federal rate. Section 1206(a) of the Pathway for SGR Reform Act 
of 2013 (Pub. L. 113-67) established the site neutral payment rate 
under the LTCH PPS, which made the LTCH PPS a dual rate payment system 
beginning in FY 2016. 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 are paid for LTCH discharges at the 
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. Beginning October 1, 2009, we issue the 
annual updates to the LTCH PPS in the same documents that update the 
IPPS (73 FR 26797 through 26798).
4. Critical Access Hospitals (CAHs)
    Under sections 1814(l), 1820, and 1834(g) of the Act, payments made 
to critical access hospitals (CAHs) (that is, rural hospitals or 
facilities that meet certain statutory requirements) for inpatient and 
outpatient services are generally based on 101 percent of reasonable 
cost. Reasonable cost is determined under the provisions of section 
1861(v) 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 Proposed To Be 
Implemented in This Proposed Rule

1. The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240), 
the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 (Pub. 
L. 114-10), and the 21st Century Cures Act (Pub. L. 114-255)
    Section 631 of the American Taxpayer Relief Act of 2012 (ATRA) 
(Pub. L. 112-240) amended section 7(b)(1)(B) of Public Law 110-90 to 
require CMS to make a recoupment adjustment to the standardized amounts 
under section 1886(d) of the Act based upon the Secretary's estimates 
for discharges occurring from FYs 2014 through FY 2017 to fully offset 
$11 billion. Once the recoupment required under section 631 of the ATRA 
was completed, CMS had anticipated making a single positive adjustment 
in FY 2018 to offset the reductions required to recoup the $11 billion 
under section 631 of the ATRA. However, section 414 of the MACRA 
(enacted on April 16, 2015) replaced the single positive adjustment CMS 
intended to make in FY 2018 with a 0.5 percent positive adjustment for 
each of FYs 2018 through 2023. Section 15005 of the 21st Century Cures 
Act (Pub. L. 114-255, enacted December 13, 2016) further amended Public 
Law 110-90 to reduce the adjustment for FY 2018 from 0.5 percent point 
to 0.4588 percentage point.
2. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)
    The Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) introduced 
new payment rules in the LTCH PPS. Under section 1206 of this law, 
discharges in cost reporting periods beginning on or after October 1, 
2015 under the LTCH PPS will receive payment under a site neutral rate 
unless the discharge meets certain patient-specific criteria. In this 
proposed rule, we are continuing to provide clarifications to prior 
policy changes that implemented provisions under section 1206 of the 
Pathway for SGR Reform Act.
3. Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act) (Pub. L. 113-185)
    The Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act (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). In this proposed rule, we are proposing to continue 
to implement portions of section 1899B of the Act, as added by section 
2 of the IMPACT Act, 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.
4. The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 
114-10)
    Section 411(g) of the Medicare Access and CHIP Reauthorization Act 
of 2015 (MACRA, Pub. L. 114-10) sets the annual update under the LTCH 
PPS to 1.0 percent for FY 2018. In this proposed rule, consistent with 
this requirement, we are proposing to update

[[Page 19812]]

the LTCH standard Federal payment rate by 1.0 percent for FY 2018.
    The MACRA also extended the MDH program and changes to the payment 
adjustment for low-volume hospitals through FY 2017. In this proposed 
rule, we discuss the expiration of the MDH program and the expiration 
of the temporary changes to the low-volume hospital payment adjustment 
under current law.
5. The 21st Century Cures Act (Pub. L. 114-255)
    The 21st Century Cures Act (Pub. L. 114-255), enacted on December 
13, 2016, contains a number of provisions affecting payments under the 
LTCH PPS and the Hospital Readmissions Reduction Program and the 
Medicare EHR Incentive Program, which we are proposing to implement in 
this proposed rule:
     Section 4002(b)(1)(A) amended section 1848(a)(7)(B) of the 
Act to provide that the Secretary shall exempt an eligible professional 
from the application of the payment adjustment under section 
1848(a)(7)(A) of the Act with respect to a year, subject to annual 
renewal, if the Secretary determines that compliance with the 
requirement for being a meaningful EHR user is not possible because the 
certified EHR technology used by such eligible professional has been 
decertified under the Office of the National Coordinator for Health 
Information Technology's (ONC) Health IT Certification Program.
     Section 4002(b)(2) amended section 1886(b)(3)(B)(ix)(II) 
of the Act to provide that the Secretary shall exempt a hospital from 
the application of the payment adjustment under section 
1886(b)(3)(B)(ix)(I) with respect to a fiscal year, subject to annual 
renewal, if the Secretary determines that compliance with the 
requirement for being a meaningful EHR user is not possible because the 
certified EHR technology used by the hospital is decertified under 
ONC's Health IT Certification Program.
     Section 15002, which amended section 1886(q)(3) of the Act 
by adding subparagraphs (D) and (E), which requires the Secretary to 
develop a methodology for the calculating the excess readmissions 
adjustment factor for the Hospital Readmissions Reduction Program based 
on cohorts defined by the percentage of dual eligible patients (that 
is, patients who are eligible for both Medicare and full-benefit 
Medicaid coverage) cared for by a hospital. In this proposed rule, we 
are proposing to implement changes to the payment adjustment factor to 
assess penalties based on a hospital's performance relative to other 
hospitals treating a similar proportion of dual eligible patients.
     Section 15004(a), which further amended section 114(d)(7) 
of the MMSEA (as amended) by striking ``The moratorium under paragraph 
(1)(A)'' and inserting ``[a]ny moratorium under paragraph (1)'' and 
specified that such amendment shall take effect as if included in the 
enactment of section 112 of the PAMA. We are proposing to implement the 
exceptions to the current statutory moratorium, which is in effect 
through September 30, 2017, on increasing beds in an existing LTCH or 
an existing LTCH satellite as provided by Section 15004(a).
     Section 15004(b), which modifies high cost outlier 
payments to LTCH standard Federal rate cases beginning in FY 2018.
     Section 15006, which further amended section 114(c)(1)(A) 
of the MMSEA (as amended) by extending the moratorium on the full 
implementation of the 25-percent threshold policy through June 30, 
2016, and for discharges occurring on or after October 1, 2016 and 
before October 1, 2017. In this proposed rule, we are implementing the 
moratorium on the full implementation of the 25-percent threshold 
policy for discharges occurring on or after October 1, 2016, through 
September 30, 2017, as provided by section 15006.
     Section 15007, which amended section 1206(a)(3) of the 
Pathway for SGR Reform Act by extending the exclusion of Medicare 
Advantage plans' and site neutral payment rate discharges from the 
calculation of the average length-of-stay to all LTCHs, for discharges 
occurring in cost reporting periods beginning on or after October 1, 
2015.
     Section 15008, which provided for a change in Medicare 
classification for ``subclause (II)'' LTCHs by redesignating such 
hospitals from section 1886(d)(1)(B)(iv)(II) to section 
1886(d)(1)(B)(vi) of the Act. In this proposed rule, we are proposing 
to implement the reclassification of hospitals which had previously 
been classified as ``subclause (II)'' LTCHs as their own category of 
IPPS-excluded hospitals as provided by the provisions of section 15008.
     Section 15009 of Public Law 114-255, which added new 
subparagraph (F) to section 1886(m)(6) of the Act, providing for a 
temporary exception to the site neutral payment rate for certain spinal 
cord specialty hospitals for all discharges occurring during FYs 2018 
and 2019.
     Section 15010, which added a new subparagraph (G) to 
section 1886(m)(6) of the Act, to create a temporary exception to the 
site neutral payment rate for certain severe wound discharges from 
certain LTCHs during such LTCH's cost reporting period beginning during 
FY 2018.
    Public Law 114-255 also amended section 1886(q)(3) of the Act by 
adding subparagraphs (D) and (E), which requires the Secretary to 
develop a methodology for the Hospital Readmissions Reduction Program 
that accounts for the percentage of dual-eligible patients (that is, 
patients who are eligible for both Medicare and full-benefit Medicaid 
coverage) cared for by a hospital. In this proposed rule, we are 
proposing to implement changes to the payment adjustment factor to 
assess penalties based on a hospital's performance relative to other 
hospitals treating a similar proportion of dual-eligible patients.
     Section 16003 amended section 1848(a)(7)(D) of the Act to 
provide that no payment adjustment may be made under section 
1848(a)(7)(A) of the Act for 2017 and 2018 in the case of an eligible 
professional who furnishes substantially all of his or her covered 
professional services in an ambulatory surgical center (ASC). Section 
1848(a)(7)(D)(iii) of the Act provides that determinations of whether 
an eligible professional is ASC-based may be made based on the site of 
service as defined by the Secretary or an attestation, but shall be 
made without regard to any employment or billing arrangement between 
the eligible professional and any other supplier or provider of 
services. Section 1848(a)(7)(D)(iv) of the Act provides that the ASC-
based exception shall no longer apply as of the first year that begins 
more than 3 years after the date on which the Secretary determines, 
through notice-and-comment rulemaking, that certified EHR technology 
applicable to the ASC setting is available.

D. Summary of Provisions of This Proposed Rule

    In this proposed rule, we are setting forth proposed payment and 
policy changes to the Medicare IPPS for FY 2018 operating costs and for 
capital-related costs of acute care hospitals and certain hospitals and 
hospital units that are excluded from IPPS. In addition, we are setting 
forth proposed changes to the payment rates, factors, and other payment 
and policy-related changes to programs associated with payment rate 
policies under the LTCH PPS for FY 2018.

[[Page 19813]]

    Below is a summary of the major changes that we are proposing to 
make:
1. Proposed Changes to MS-DRG Classifications and Recalibrations of 
Relative Weights
    In section II. of the preamble of this proposed rule, we include--
     Proposed changes to MS-DRG classifications based on our 
yearly review for FY 2018.
     Proposed adjustment to the standardized amounts under 
section 1886(d) of the Act for FY 2018 in accordance with the 
amendments made to section 7(b)(1)(B) of Public Law 110-90 by section 
414 of the MACRA and section 15005 of the 21st Century Cures Act.
     Proposed recalibrations of the MS-DRG relative weights.
     A discussion of the FY 2018 status of new technologies 
approved for add-on payments for FY 2017 and a presentation of our 
evaluation and analysis of the FY 2018 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 this proposed rule, we are 
proposing to make revisions to the wage index for acute care hospitals 
and the annual update of the wage data. Specific issues addressed 
include, but are not limited to, the following:
     The proposed FY 2018 wage index update using wage data 
from cost reporting periods beginning in FY 2014.
     Clarification of other wage-related costs in the wage 
index.
     Calculation of the proposed occupational mix adjustment 
for FY 2018 based on the 2013 Occupational Mix Survey.
     Analysis and implementation of the proposed FY 2018 
occupational mix adjustment to the wage index for acute care hospitals.
     Proposed application of the rural floor and the frontier 
State floor and the proposed expiration of the imputed floor.
     Proposed revisions to the wage index for acute care 
hospitals based on hospital redesignations and reclassifications under 
sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.
     Proposal to require documentation of SCH and RRC 
classification status approvals to be submitted to the MGCRB by the 
first business day after January 1.
     Clarification of special rules for SCHs and RRCs 
reclassifying to geographic home areas.
     Proposed changes to the 45-day notification rule.
     The proposed adjustment to the wage index for acute care 
hospitals for FY 2018 based on commuting patterns of hospital employees 
who reside in a county and work in a different area with a higher wage 
index.
     Determination of the labor-related share for the proposed 
FY 2018 wage index.
3. Proposed Revising and Rebasing of Hospital Market Basket
    In section IV. of this proposed rule, we are proposing to revise 
and rebase the hospital market baskets for acute care hospitals and 
update the labor-related share.
4. Other Decisions and Proposed Changes to the IPPS for Operating Costs
    In section V. of the preamble of this proposed rule, we discuss 
proposed changes or clarifications of a number of the provisions of the 
regulations in 42 CFR parts 412 and 413, including the following:
     Proposed changes to MS-DRGs subject to the postacute care 
transfer policy.
     Proposed changes to the inpatient hospital update for FY 
2018.
     Proposed changes to the volume decrease adjustment for 
SCHs.
     Proposed updated national and regional case-mix values and 
discharges for purposes of determining RRC status.
     Expiration of the MDH program and the temporary changes to 
the payment adjustment for low-volume hospitals at the end of FY 2017.
     Proposed parallel low-volume hospital payment adjustment 
concerning hospitals operated by the Indian Health Service (IHS) or a 
Tribe.
     The statutorily required IME adjustment factor for FY 
2018.
     Proposed changes to the methodologies for determining 
Medicare DSH payments and the additional payments for uncompensated 
care.
     Discussion of expiration of the MDH program at the end of 
FY 2017 and our policy to allow MDHs to apply for SCH status in advance 
of the expiration of the MDH program and be paid as such under certain 
conditions.
     Proposed changes to the rules for payment adjustments 
under the Hospital Readmissions Reduction Program based on hospital 
readmission measures and the process for hospital review and correction 
of those rates for FY 2018.
     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 2018.
     Discussion of and proposals relating to the additional 5-
year extension of the Rural Community Hospital Demonstration Program.
     Proposals related to the provider-based status of IHS and 
Tribal facilities and organizations that would remove the regulatory 
date limitation that restricted the grandfathering provision to IHS or 
Tribal facilities and organizations furnishing services on or before 
April 7, 2000. We also are proposing to make a technical change to make 
the regulation text more consistent with our current rules that require 
these facilities to comply with all applicable Medicare conditions of 
participation that apply to the main provider.
5. Proposed FY 2018 Policy Governing the IPPS for Capital-Related Costs
    In section VI. of the preamble to this proposed rule, we discuss 
the proposed payment policy requirements for capital-related costs and 
capital payments to hospitals for FY 2018.
6. Proposed Changes to the Payment Rates for Certain Excluded 
Hospitals: Rate-of-Increase Percentages
    In section VII. of the preamble of this proposed rule, we discuss--
     Proposed changes to payments to certain excluded hospitals 
for FY 2018.
     Proposed policy changes relating to payments to hospitals-
within-hospitals.
     Proposed continued implementation of the Frontier 
Community Health Integration Project (FCHIP) Demonstration.
7. Proposed Changes to the LTCH PPS
    In section VIII. of the preamble of this 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 
2018.
     Proposed changes to the short-stay outlier (SSO) policy.
     Proposed 1-year regulatory delay of the full 
implementation of the 25-percent threshold policy for discharges 
occurring in FY 2018.
     Proposed changes to implement the temporary exception to 
the site neutral payment rate for certain spinal cord specialty 
hospitals and for certain discharges with severe wounds from certain 
LTCHs, as provided under sections 15009 and 15010 of Public Law 114-
255, respectively.

[[Page 19814]]

     Proposed change to the average length of stay criterion to 
implement section 15007 of Public Law 114-255.
     Proposed change in Medicare classification for certain 
hospitals to implement section 15008 of Public Law 114-255.
8. Proposed Changes Relating to Quality Data Reporting for Specific 
Providers and Suppliers
    In section IX. of the preamble of the proposed rule, we address--
     Proposed requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program.
     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 the requirements under the Inpatient 
Psychiatric Facility Quality Reporting (IPFQR) Program.
     Proposed changes to requirements pertaining to the 
clinical quality measurement of eligible hospitals and CAHs as well as 
EPs participating in the Medicare and Medicaid Electronic Health Record 
(EHR) Incentive Programs.
9. Proposed Changes Relating to Medicare Cost Reporting and Provider 
Requirements
    In section X. of the preamble of this proposed rule, we present our 
proposals to revise the regulations to allow providers to use an 
electronic signature to sign the Certification and Settlement Summary 
page of the Medicare cost report and submit this page electronically, 
and clarify the rules relating to the sale or scrapping of depreciable 
assets disposed of on or after December 1, 1997.
10. Proposed Changes Relating to Survey and Certification Requirements
    In section XI. of the preamble of this proposed rule, we present 
our proposals for allowing transparency in accrediting organization 
survey reports and plans of correction and for changing the requirement 
for providers to publish self-termination notices in newspapers.
11. Determining Prospective Payment Operating and Capital Rates and 
Rate-of-Increase Limits for Acute Care Hospitals
    In section V. of the Addendum to this proposed rule, we set forth 
proposed changes to the amounts and factors for determining the 
proposed FY 2018 prospective payment rates for operating costs and 
capital-related costs for acute care hospitals. We are proposing to 
establish the threshold amounts for outlier cases. In addition, we are 
addressing the update factors for determining the rate-of-increase 
limits for cost reporting periods beginning in FY 2018 for certain 
hospitals excluded from the IPPS.
12. Determining Prospective Payment Rates for LTCHs
    In the Addendum to this proposed rule, we set forth proposed 
changes to the amounts and factors for determining the proposed FY 2018 
LTCH PPS standard Federal payment rate and other factors used to 
determine LTCH PPS payments under both the LTCH PPS standard Federal 
payment rate and the site neutral payment rate in FY 2018. We are 
proposing to establish the adjustments for wage levels, the labor-
related share, the cost-of-living adjustment, and high-cost outliers, 
including the applicable fixed-loss amounts and the LTCH cost-to-charge 
ratios (CCRs) for both payment rates.
13. Impact Analysis
    In Appendix A of this proposed rule, we set forth an analysis of 
the impact that the proposed changes would have on affected acute care 
hospitals, CAHs, LTCHs, PCHs, and IPFs.
14. Recommendation of Update Factors for Operating Cost Rates of 
Payment for Hospital Inpatient Services
    In Appendix B of this proposed rule, as required by sections 
1886(e)(4) and (e)(5) of the Act, we are providing our recommendations 
of the appropriate percentage changes for FY 2018 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 LTCH PPS standard Federal payment rate and the site 
neutral payment rate for hospital inpatient services provided for LTCH 
PPS discharges.
15. 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 2017 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 address these recommendations in Appendix B of this proposed rule. 
For further information relating specifically to the MedPAC March 2017 
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's Web site at: http://www.medpac.gov.

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

A. Background

    Section 1886(d) of the Act specifies that the Secretary shall 
establish a classification system (referred to as diagnosis-related 
groups (DRGs)) for inpatient discharges and adjust payments under the 
IPPS based on appropriate weighting factors assigned to each DRG. 
Therefore, under the IPPS, Medicare pays for inpatient hospital 
services on a rate per discharge basis that varies according to the DRG 
to which a beneficiary's stay is assigned. The formula used to 
calculate payment for a specific case multiplies an individual 
hospital's payment rate per case by the weight of the DRG to which the 
case is assigned. Each DRG weight represents the average resources 
required to care for cases in that particular DRG, relative to the 
average resources used to treat cases in all DRGs.
    Section 1886(d)(4)(C) of the Act requires that the Secretary adjust 
the DRG classifications and relative weights at least annually to 
account for changes in resource consumption. 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) and the FYs 2011 through 2017 IPPS/LTCH PPS final 
rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR 
53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; and 81 FR 56787 through 
56872, respectively).

[[Page 19815]]

C. Adoption of the MS-DRGs in FY 2008

    For information on the adoption of the MS-DRGs in FY 2008, we refer 
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 
through 47189).

D. Proposed FY 2018 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 percentage 
points to the national standardized amount. We provided for phasing in 
this -4.8 percentage point adjustment over 3 years. Specifically, we 
established prospective documentation and coding adjustments of -1.2 
percentage points for FY 2008, -1.8 percentage points for FY 2009, and 
-1.8 percentage points 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 percentage point 
for FY 2008 and -0.9 percentage point for FY 2009.
    As discussed in prior year rulemaking, and most recently in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56780 through 56782), we 
implemented a series of adjustments required under sections 7(b)(1)(A) 
and 7(b)(1)(B) of Public Law 110-90, based on a retrospective review of 
FY 2008 and FY 2009 claims data. We completed these adjustments in FY 
2013, but indicated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53274 through 53275) that delaying full implementation 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, and that these overpayments could not be recovered.
2. 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 
represented 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 was 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 positive adjustment in 2018, once the necessary amount of 
overpayment was recovered. However, 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 percentage point positive 
adjustment for each of FYs 2018 through 2023. We stated in the FY 2016 
IPPS/LTCH PPS final rule (80 FR 49345) that we would address this MACRA 
provision in future rulemaking. However, section 15005 of the 21st 
Century Cures Act (Pub. L. 114-255), enacted on December 13, 2016, 
reduced the adjustment for FY 2018 from 0.5 percentage points to 0.4588 
percentage points. We are addressing these provisions of MACRA and the 
21st Century Cures Act in section II.D.3. of the preamble of this 
proposed rule.
    As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 
through 50517), our actuaries estimated that a -9.3 percentage point 
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 percentage 
point recoupment adjustment to the standardized amount in FY 2014. We 
estimated that if adjustments of approximately -0.8 percentage point 
were implemented in FYs 2014, 2015, 2016, and 2017, using standard 
inflation factors, the entire $11 billion would be accounted for by the 
end of the statutory 4-year timeline. As estimates of any future 
adjustments are subject to variations in total savings, we did not 
provide for specific adjustments for FYs 2015, 2016, or 2017 at that 
time.
    Consistent with the approach discussed in the FY 2014 rulemaking 
for recouping the $11 billion required by section 631 of the ATRA, in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49874) and the FY 2016 
IPPS/LTCH PPS final rule (80 FR 49345), we implemented additional -0.8 
percentage point recoupment adjustments to the standardized amount in 
FY 2015 and FY 2016, respectively. We estimated that these adjustments, 
combined with leaving the prior -0.8 percentage point adjustments in 
place, would recover up to $2 billion in FY 2015 and another $3 billion 
in FY 2016. When combined with the approximately $1 billion adjustment 
made in FY 2014, we estimated that approximately $5 to $6 billion would 
be left to recover under section 631 of the ATRA by the end of FY 2016.
    As indicated in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 
24966), due to lower than previously estimated inpatient spending, we 
determined that an adjustment of -0.8 percentage point in FY 2017 would 
not recoup the $11 billion under section 631 of the ATRA.

[[Page 19816]]

For the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785), based on the 
Midsession Review of the President's FY 2017 Budget, our actuaries 
estimated that, to the nearest tenth of a percentage point, the FY 2017 
documentation and coding adjustment factor that will recoup as closely 
as possible $11 billion from FY 2014 through FY 2017 without exceeding 
this amount is -1.5 percentage points. Based on those updated estimates 
by the Office of the Actuary using the Midsession Review of the 
President's FY 2017 Budget, we made a -1.5 percentage point adjustment 
for FY 2017 as the final adjustment required under section 631 of the 
ATRA. The estimates by our actuaries related to this finalized 
adjustment were included in a memorandum that we made publicly 
available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-OACT.html.
3. Proposed Adjustment for FY 2018 Required Under Section 414 of Public 
Law 114-10 (MACRA) and Section 15005 of Public Law 114-255
    As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785), 
once the recoupment required under section 631 of the ATRA was 
complete, we had anticipated making a single positive adjustment in FY 
2018 to offset the reductions required to recoup the $11 billion under 
section 631 of the ATRA. However, section 414 of the MACRA (which was 
enacted on April 16, 2015) replaced the single positive adjustment we 
intended to make in FY 2018 with a 0.5 percentage point positive 
adjustment for each of FYs 2018 through 2023. In the FY 2017 
rulemaking, we indicated that we would address the adjustments for FY 
2018 and later fiscal years in future rulemaking. As noted previously, 
section 15005 of the 21st Century Cures Act (Pub. L. 114-255), which 
was enacted on December 13, 2016, amended section 7(b)(1)(B) of the 
TMA, as amended by section 631 of the ATRA and section 414 of the 
MACRA, to reduce the adjustment for FY 2018 from a 0.5 percentage point 
to a 0.4588 percentage point. We believe the directive under section 
15005 of Public Law 114-255 is clear. Therefore, for FY 2018, we are 
proposing to implement the required +0.4588 percentage point adjustment 
to the standardized amount. This is a permanent adjustment to payment 
rates. While we are not proposing future adjustments required under 
section 414 of the MACRA and section 15005 of Public Law 114-255 at 
this time, we expect to propose positive 0.5 percentage point 
adjustments to the standardized amounts for FYs 2019 through 2023.

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background
    Beginning in FY 2007, we implemented relative weights for DRGs 
based on cost report data instead of charge information. We refer 
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed 
discussion of our final policy for calculating the cost-based DRG 
relative weights and to the FY 2008 IPPS final rule with comment period 
(72 FR 47199) for information on how we blended relative weights based 
on the CMS DRGs and MS-DRGs. We also refer readers to the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56785 through 56787) for a detailed 
discussion of the history of changes to the number of cost centers used 
in calculating the DRG relative weights. Since FY 2014, we calculate 
the IPPS MS-DRG relative weights using 19 CCRs, which now include 
distinct CCRs for implantable devices, MRIs, CT scans, and cardiac 
catheterization.
2. Discussion of Policy for FY 2018
    Consistent with our established policy, we calculated the proposed 
MS-DRG relative weights for FY 2018 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 proposed 19 CCRs and the proposed 
MS-DRG relative weights for FY 2018 is included in section II.G. of the 
preamble to this FY 2018 IPPS/LTCH PPS proposed rule. As we did with 
the FY 2017 IPPS/LTCH PPS final rule, for this proposed rule, we are 
providing the version of the HCRIS from which we calculated these 
proposed 19 CCRs 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 2018 IPPS Proposed 
Rule Home Page'' or ``Acute Inpatient Files for Download.''

F. Proposed Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for Proposed FY 
2018 MS-DRG Updates
a. Conversion of MS-DRGs to the International Classification of 
Diseases, 10th Revision (ICD-10)
    As of October 1, 2015, providers use the International 
Classification of Diseases, 10th Revision (ICD-10) coding system to 
report diagnoses and procedures for Medicare hospital inpatient 
services under the MS-DRG system instead of the ICD-9-CM coding system, 
which was used through September 30, 2015. 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. For a detailed discussion of the conversion of the MS-DRGs 
to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56787 through 56789).
b. Basis for FY 2018 Proposed MS-DRG Updates
    CMS has previously encouraged 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 
2018, comments and suggestions should have been submitted by December 
7, 2016. The comments that were submitted in a timely manner for FY 
2018 are discussed in this section of the preamble of this proposed 
rule. As CMS works with the public to examine the ICD-10 claims data 
used for updates to the ICD-10 MS-DRGs, we would like to examine areas 
where the MS-DRGs can be improved. This will require additional time 
for us to review requests from the public to make specific updates, 
analyze claims data, and consider any proposed updates. Given the need 
for more time to carefully evaluate requests and propose updates, we 
are changing the deadline to request updates to MS-DRGs to November 1 
of each year. This will provide an additional 5 weeks for the data 
analysis and review process. Interested parties should submit any 
comments and suggestions for FY 2019 by November 1, 2017, via the CMS 
MS-

[[Page 19817]]

DRG Classification Change Requests Mailbox located at: 
[email protected].
    Following are the changes that we are proposing to the MS-DRGs for 
FY 2018 in this FY 2018 IPPS/LTCH PPS proposed rule. We are inviting 
public comments on each of the MS-DRG classification proposed changes 
as well as our proposals to maintain certain existing MS-DRG 
classifications discussed in this proposed rule. In some cases, we are 
proposing changes to the MS-DRG classifications based on our analysis 
of claims data. In other cases, we are proposing to maintain the 
existing MS-DRG classification based on our analysis of claims data. 
For this FY 2018 proposed rule, our MS-DRG analysis was based on ICD-10 
claims data from the December 2016 update of the FY 2016 MedPAR file, 
which contains hospital bills received through September 30, 2016, for 
discharges occurring through September 30, 2016. In our discussion of 
the proposed MS-DRG reclassification changes, we referred to our 
analysis of claims data from the ``December 2016 update of the FY 2016 
MedPAR file''.
    As explained in previous rulemaking (76 FR 51487), in deciding 
whether to propose 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 represented 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 determine whether patients are clinically 
distinct or similar to other patients represented 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. Further, 
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)
a. Functional Quadriplegia
    We received a request to reassign cases identified by diagnosis 
code R53.2 (Functional quadriplegia) from MS-DRGs 052 and 053 (Spinal 
Disorders and Injuries with and without CC/MCC, respectively). The 
requestor stated that because functional quadriplegia does not involve 
any spinal injury or pathology, cases identified by the diagnosis code 
should not be assigned to MS-DRGs 052 and 053. However, the requestor 
did not suggest an alternative MS-DRG assignment.
    Section I.C.18.f. of the FY 2017 ICD-10-CM Official Coding 
Guidelines addresses the coding for the diagnosis of functional 
quadriplegia. Section I.C.18.f. states that functional quadriplegia 
(described by diagnosis code R53.2) is the lack of ability to use one's 
limbs or to ambulate due to extreme debility. The condition is not 
associated with neurologic deficit or injury, and diagnosis code R53.2 
should not be used to identify cases of neurologic quadriplegia. In 
addition, the Guidelines state that the diagnosis code should only be 
assigned if functional quadriplegia is specifically documented by a 
physician in the medical record, and the diagnosis of functional 
quadriplegia is not associated with a neurologic deficit or injury. A 
physician may document the diagnosis of functional quadriplegia as 
occurring with a variety of conditions.
    We examined claims data from the December 2016 update of the FY 
2016 MedPAR file on cases reporting diagnosis code R53.2 in MS-DRGs 052 
and 053. Our findings are shown in the table below.

                         Cases Reporting Functional Quadriplegia in MS-DRGs 052 and 053
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 052--All cases...........................................             865             5.4         $10,247
MS-DRG 052--Cases reporting diagnosis code R53.2................              63             4.9           6,420
MS-DRG 053--All cases...........................................             239             3.3           6,326
MS-DRG 053--Cases reporting diagnosis code R53.2................              16             3.3           2,318
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, for MS-DRG 052, there were a total of 
865 cases with an average length of stay of 5.4 days and average costs 
of $10,247. Of the 865 cases in MS-DRG 052, there were 63 cases that 
reported a principal diagnosis of functional quadriplegia, with an 
average length of stay of 4.9 days and average costs of $6,420. For MS-
DRG 053, there were a total of 239 cases, with an average length of 
stay of 3.3 days and average costs of $6,326. Of the 239 cases in MS-
DRG 053, there were 16 cases that reported a principal diagnosis of 
functional quadriplegia, with an average length of stay of 3.3 days and 
average costs of $2,318.
    To address the request to reassign cases reporting a diagnosis of 
functional quadriplegia to a different MS-DRG, we reviewed the data for 
a total of 79 cases (63 cases in MS-DRG 052 and 16 cases in MS-DRG 053) 
that reported a principal diagnosis of functional quadriplegia in MS-
DRGs 052 and 053. As shown in the table above, our data analysis 
demonstrates that the average costs for these 79 cases are lower than 
the average costs of all cases in MS-DRGs 052 and 053 ($6,420 compared 
to $10,247 for all cases in MS-DRG 052, and $2,318 compared to $6,326 
for all cases in MS-DRG 053), and the average

[[Page 19818]]

lengths of stay are shorter for cases reporting a diagnosis of 
functional quadriplegia in MS-DRG 052 (4.9 days compared to 5.4 days 
for all cases in MS-DRG 052), but equal for cases in MS-DRG 053 (3.3 
days for cases reporting a diagnosis of functional quadriplegia and for 
all cases).
    Our clinical advisors reviewed this issue and agreed that a 
diagnosis of functional quadriplegia does not involve a spinal disorder 
or injury, and may be associated with, or the result of, a variety of 
underlying conditions. Our clinical advisors also agreed that it is not 
clinically appropriate to include cases reporting a diagnosis of 
functional quadriplegia within MS-DRGs 052 and 053 because these cases 
do not involve a spinal disorder or injury. Therefore, given the fact 
that functional quadriplegia can be the result of a variety of other 
conditions, we reviewed the MS-DRGs in order to identify a more 
appropriate placement for cases reporting this diagnosis. Our clinical 
advisors recommended assigning cases representing a diagnosis of 
functional quadriplegia from MS-DRGs 052 and 053 to MS-DRGs 091, 092, 
and 093 (Other Disorders of Nervous System with MCC, with CC, and 
without CC/MCC, respectively). Within each MDC, there are MS-DRGs that 
describe a variety of other conditions that do not have the clinical 
characteristics of the more specific MS-DRGs. In this case, MS-DRGs 
091, 092, and 093 describe a variety of other disorders of the nervous 
system that are not clinically similar in characteristics to the 
disorders described by MS-DRGs 052 and 053. Our clinical advisors 
believe that MS-DRGs 091, 092, and 093 are more appropriate MS-DRG 
assignments for cases representing a diagnosis of functional 
quadriplegia.
    We examined claims data from the December 2016 update of the FY 
2016 MedPAR file on cases in MS-DRGs 091, 092, and 093. Our findings 
are shown in the table below.

                                       Cases in MS-DRGs 091, 092, and 093
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 091--All cases...........................................          12,607             5.6         $10,815
MS-DRG 092--All cases...........................................          19,392             3.9           6,706
MS-DRG 093--All cases...........................................           8,120             2.7           5,253
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, for MS-DRG 091, there were a total of 
12,607 cases, with an average length of stay of 5.6 days and average 
costs of $10,815. For MS-DRG 092, there were a total of 19,392 cases, 
with an average length of stay of 3.9 days and average costs of $6,706. 
For MS-DRG 093, there were a total of 8,120 cases, with an average 
length of stay of 2.7 days and average costs of $5,253. As stated 
earlier, of the 865 total cases in MS-DRG 052, there were 63 cases that 
reported a principal diagnosis of functional quadriplegia, with an 
average length of stay of 4.9 days and average costs of $6,420. Of the 
239 total cases in MS-DRG 053, there were 16 cases that reported a 
principal diagnosis of functional quadriplegia, with an average length 
of stay of 3.3 days and average costs of $2,318. The average lengths-
of-stay for cases reporting a diagnosis of functional quadriplegia in 
MS-DRGs 052 and 053 are similar to the average lengths of stay for 
cases found in MS-DRGs 091, 092 and 093 (4.9 days and 3.3 days for 
cases in MS-DRGs 052 and 053, respectively, compared to 5.6 days, 3.9 
days, and 2.7 days, respectively, for cases in MS-DRGs 091, 092, and 
093). The average costs for cases reporting a diagnosis of functional 
quadriplegia in MS-DRGs 052 and 053 are $6,420 and $2,318, 
respectively, compared to $10,815, $6,706, and $5,253 for all cases in 
MS-DRGs 091, 092, and 093. The average costs for cases reporting a 
diagnosis of functional quadriplegia in MS-DRG 053 are lower than the 
average costs for all cases in MS-DRG 093 without a CC or MCC ($2,318 
compared to $5,253, respectively). The average costs for cases 
reporting a diagnosis of functional quadriplegia in MS-DRG 052 are 
$6,420, which is lower than the average costs of $10,815 for all cases 
in MS-DRG 091, but close to the average costs of $6,706 for all cases 
in MS-DRG 092. While we acknowledge that the average costs for cases 
reporting a diagnosis of functional quadriplegia are lower than those 
cases within MS-DRGs 091, 092, and 093, as stated earlier, the average 
costs of cases reporting a diagnosis of functional quadriplegia also 
are lower than the average costs of all cases in MS-DRGs 052 and 053 
where these cases are currently assigned.
    Our clinical advisors reviewed the clinical issues as well as the 
claims data for MS-DRGs 052, 053, 091, 092, and 093. As a result of 
this review, they recommended that cases reporting a diagnosis of 
functional quadriplegia be reassigned from MS-DRGs 052 and 053 to MS-
DRGs 091, 092, and 093 because the current MS-DRG assignment is not 
clinically appropriate. Our clinical advisors stated that reassigning 
these cases to MS-DRGs 091, 092, and 093 is more appropriate because 
this set of MS-DRGs includes a variety of nervous system disorders that 
are not appropriately classified to more specific MS-DRGs within MDC 1. 
Therefore, we are proposing to reassign cases identified by diagnosis 
code R53.2 from MS-DRGs 052 and 053 to MS-DRGs 091, 092, and 093 for FY 
2018.
    We are inviting public comments on our proposal.
b. Responsive Neurostimulator (RNS(copyright)) System
    We received a request to modify the MS-DRG assignment for cases 
involving the use of the RNS(copyright) neurostimulator, a 
cranially implanted neurostimulator that is a treatment option for 
persons diagnosed with medically intractable epilepsy. Cases involving 
the use of the RNS(copyright) neurostimulator are assigned 
to MS-DRG 023 (Craniotomy with Major Device Implant or Acute Complex 
Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or 
Chemo Implant) and MS-DRG 024 (Craniotomy with Major Device Implant or 
Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX) 
without MCC).
    Cases involving the use of the RNS(copyright) 
neurostimulator generator and leads are captured within the 
descriptions of four ICD-10-PCS codes. ICD-10-PCS code 0NH00NZ 
(Insertion of neurostimulator generator into skull, open approach) 
captures the use of the neurostimulator generator, and the other three 
ICD-10-PCS codes, 00H00MZ (Insertion of neurostimulator lead into 
brain, open approach), 00H03MZ (Insertion of neurostimulator lead into 
brain, percutaneous approach), and 00H04MZ (Insertion of 
neurostimulator lead into brain, percutaneous endoscopic approach) 
describe the insertions of the leads, depending on the approach used. 
The combination of an ICD-10-PCS

[[Page 19819]]

code capturing the use of the generator and another ICD-10-PCS code 
describing the specific approach used to insert the leads would capture 
the performance of the entire procedure.
    The requestor stated that the RNS(copyright) 
neurostimulator received FDA pre-market approval on November 14, 2013, 
and is the first and only FDA-approved device used to provide 
responsive stimulation directly to the seizure onset zone in the brain. 
The RNS(copyright) neurostimulator includes a cranially 
implanted programmable neurostimulator connected to one or two depth 
and/or subdural cortical strip leads that are surgically placed in or 
on the brain at the seizure focus. The neurostimulator and leads are 
typically implanted during a single acute inpatient hospital procedure 
at a Comprehensive Epilepsy Center (CEC). The implanted neurostimulator 
continuously monitors brain electrical activity and is programmed by a 
physician to detect abnormal patterns of electrical activity that the 
physician believes may lead to seizures (epileptiform activity). In 
response to the detection of epileptiform activity, the device delivers 
brief, mild electrical pulses (responsive stimulation) to one or two 
epileptic foci. Detection and stimulation parameters are adjusted 
noninvasively by the physician to optimize control of epileptic 
seizures for each patient.
    As the neurostimulator monitors brain activity, electrocorticograms 
(ECoGs) recorded immediately before and after certain events are stored 
for later review by the physician. The physician reviews the stored 
recordings to see the detections and the effects of stimulation. The 
physician can reprogram the neurostimulator at an in-person office 
appointment to change detection and stimulation settings based on this 
information, as well as review the patient's seizures.
    The RNS(copyright) neurostimulator was approved for new 
technology add-on payments for FY 2015 and FY 2016, and new technology 
add-on payments were discontinued for FY 2017. The new technology add-
on payment application was discussed in the FY 2015 IPPS/LTCH PPS 
proposed and final rules (79 FR 28051 through 28054 and 79 FR 49946 
through 49950, respectively), the FY 2016 IPPS/LTCH PPS proposed and 
final rules (80 FR 24427 through 24448 and 80 FR 49442 through 49443, 
respectively), and the FY 2017 IPPS/LTCH PPS proposed and final rules 
(81 FR 25036 through 25037 and 81 FR 56882 through 56884, 
respectively).
    The requestor suggested the following three options for MS-DRG 
assignment updates for cases involving the RNS(copyright) 
neurostimulator:
     Create new MS-DRGs for cases involving the use of the 
RNS(copyright) neurostimulator. The requestor suggested MS-
DRG XXX (Cranially Implanted Neurostimulators with MCC) and MS-DRG XXX 
(Cranially Implanted Neurostimulators without MCC) as possible MS-DRG 
titles. The requestor acknowledged that the number of cases assigned to 
this MS-DRG would be low, but anticipated that the number of cases 
would increase in the future.
     Reassign cases involving the use of the 
RNS(copyright) neurostimulator to MS-DRGs 020 and 021 
(Intracranial Vascular Procedures with Principal Diagnosis of 
Hemorrhage with MCC, with CC, respectively) and update the MS-DRG logic 
and titles. The requestor asked CMS to reassign all cases involving the 
use of the RNS(copyright) neurostimulator that currently map 
to MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex CNS 
Principal Diagnosis with MCC or Chemo Implant) to MS-DRG 20, and change 
the title of MS-DRG 20 to ``Intracranial Vascular Procedures with 
Principal Diagnosis of Hemorrhage or Cranially Implanted 
Neurostimulator with MCC.'' In addition, the requestor asked CMS to 
reassign all cases involving the use of the RNS(copyright) 
neurostimulator that currently map to MS-DRG 024 (Craniotomy with Major 
Device Implant/Acute Complex CNS Principal Diagnosis without MCC) to 
MS-DRG 021, and change the title of MS-DRG 021 to ``Intracranial 
Vascular Procedures with Principal Diagnosis of Hemorrhage with CC or 
Cranially Implanted Neurostimulator without MCC''. The requestor 
believed that the majority of cases involving the use of the 
RNS(copyright) neurostimulator that map to MS-DRG 024 do not 
include a secondary diagnosis that is classified as a CC, and the 
average cost of cases involving the use of the 
RNS(copyright) neurostimulator without a CC is significantly 
higher than the average cost of all cases in MS-DRG 022 (Intracranial 
Vascular Procedures with Principal Diagnosis of Hemorrhage without CC/
MCC). Therefore, the requestor stated that it would not be adequate to 
assign cases involving the use of the RNS(copyright) 
neurostimulator without a CC to MS-DRG 022.
     Reassign cases involving the use of the 
RNS(copyright) neurostimulator to other higher paying MS-
DRGs that would provide adequate payment.
    The requestor stated that it had analyzed data from two sources, 
which demonstrated that the average cost of cases involving the use of 
the RNS(copyright) neurostimulator was higher than the 
average cost of all cases in MS-DRGs 023 and 024 (the current MS-DRGs 
for cases involving the use of the RNS(copyright) 
neurostimulator). The requestor indicated that the data used for its 
analysis was obtained from hospitals performing the procedure, as well 
as from the FY 2015 MedPAR file.
    The requestor also asked that CMS examine the cases representing 
cranially implanted neurostimulators and leads that were inserted for 
the treatment of epilepsy. The requestor pointed out that 
neurostimulators also are used in the treatment of movement disorders 
such as Parkinson's disease, essential tremor, or dystonia. The 
requestor asked that CMS identify those cases with a principal 
diagnosis of epilepsy, and identified the following ICD-10-CM codes 
that it believed were representative of potential epilepsy cases.

------------------------------------------------------------------------
      ICD-10-CM code                    ICD-10-CM code title
------------------------------------------------------------------------
G40.001...................  Localization-related (focal) (partial)
                             idiopathic epilepsy and epileptic syndromes
                             with seizures of localized onset, not
                             intractable, with status epilepticus.
G40.009...................  Localization-related (focal) (partial)
                             idiopathic epilepsy and epileptic syndromes
                             with seizures of localized onset, not
                             intractable, without status epilepticus.
G40.011...................  Localization-related (focal) (partial)
                             idiopathic epilepsy and epileptic syndromes
                             with seizures of localized onset,
                             intractable, with status epilepticus.
G40.019...................  Localization-related (focal) (partial)
                             idiopathic epilepsy and epileptic syndromes
                             with seizures of localized onset,
                             intractable, without status epilepticus.
G40.101...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with simple partial seizures, not
                             intractable, with status epilepticus.
G40.119...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with simple partial seizures,
                             intractable, without status epilepticus.

[[Page 19820]]

 
G40.201...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with complex partial seizures,
                             not intractable, with status epilepticus.
G40.209...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with complex partial seizures,
                             not intractable, without status
                             epilepticus.
G40.211...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with complex partial seizures,
                             intractable, with status epilepticus.
G40.219...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with complex partial seizures,
                             intractable, without status epilepticus.
G40.301...................  Generalized idiopathic epilepsy and
                             epileptic syndromes, not intractable, with
                             status epilepticus.
G40.309...................  Generalized idiopathic epilepsy and
                             epileptic syndromes, not intractable,
                             without status epilepticus.
G40.311...................  Generalized idiopathic epilepsy and
                             epileptic syndromes, intractable, with
                             status epilepticus.
G40.319...................  Generalized idiopathic epilepsy and
                             epileptic syndromes, intractable, without
                             status epilepticus.
G40.401...................  Other generalized epilepsy and epileptic
                             syndromes, not intractable, with status
                             epilepticus.
G40.409...................  Other generalized epilepsy and epileptic
                             syndromes, not intractable, without status
                             epilepticus.
G40.411...................  Other generalized epilepsy and epileptic
                             syndromes, intractable, with status
                             epilepticus.
G40.419...................  Other generalized epilepsy and epileptic
                             syndromes, intractable, without status
                             epilepticus.
G40.501...................  Epileptic seizures related to external
                             causes, not intractable, with status
                             epilepticus.
G40.509...................  Epileptic seizures related to external
                             causes, not intractable, without status
                             epilepticus.
G40.801...................  Other epilepsy, not intractable, with status
                             epilepticus.
G40.802...................  Other epilepsy, not intractable, without
                             status epilepticus.
G40.803...................  Other epilepsy, intractable, with status
                             epilepticus.
G40.804...................  Other epilepsy, intractable, without status
                             epilepticus.
G40.811...................  Lennox-Gastaut syndrome, not intractable,
                             with status epilepticus.
G40.812...................  Lennox-Gastaut syndrome, not intractable,
                             without status epilepticus.
G40.813...................  Lennox-Gastaut syndrome, intractable, with
                             status epilepticus.
G40.814...................  Lennox-Gastaut syndrome, intractable,
                             without status epilepticus.
G40.821...................  Epileptic spasms, not intractable, with
                             status epilepticus.
G40.822...................  Epileptic spasms, not intractable, without
                             status epilepticus.
G40.823...................  Epileptic spasms, intractable, with status
                             epilepticus.
G40.824...................  Epileptic spasms, intractable, without
                             status epilepticus.
G40.89....................  Other seizures.
G40.901...................  Epilepsy, unspecified, not intractable, with
                             status epilepticus.
G40.909...................  Epilepsy, unspecified, not intractable,
                             without status epilepticus.
G40.911...................  Epilepsy, unspecified, intractable, with
                             status epilepticus.
G40.919...................  Epilepsy, unspecified, intractable, without
                             status epilepticus.
------------------------------------------------------------------------

    MS-DRGs 023 and 024 contain a number of cases representing 
neurostimulator generator and lead code combinations that are captured 
under a list referred to as ``Major Device Implant.'' The 
neurostimulator generators on this list are inserted into the skull, as 
well as into the subcutaneous areas of the chest, back, or abdomen. The 
leads are all inserted into the brain. The RNS(copyright) 
neurostimulator generators are inserted into the skull and the leads 
are inserted into the brain. The following three ICD-10-PCS code 
combinations capture the use of the RNS(copyright) 
neurostimulator and leads that would determine an assignment of a case 
to MS-DRGs 023 and 024, as shown in the ``Major Device Implant'' list:
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H00MZ (Insertion of 
neurostimulator lead into brain, open approach);
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H03MZ (Insertion of 
neurostimulator lead into brain, percutaneous approach); and
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H04MZ (Insertion of 
neurostimulator lead into brain, percutaneous endoscopic approach).
    We examined claims data from the December 2016 update of the FY 
2016 MedPAR file for all cases representing the use of a 
neurostimulator in MS-DRGs 023 and 024 listed under the ``Major Device 
Implant'' list. As requested, we also examined the cases represented by 
the three neurostimulator code combinations, which capture the use of 
the RNS(copyright) neurostimulator that are a subset of the 
cases listed on the ``Major Device Implant'' list using the code 
combinations listed above, and that had a principal diagnosis of 
epilepsy from the list supplied by the requestor. The following tables 
show our findings for those cases in MS-DRGs 023 and 024 as well as 
findings for cases in MS-DRGs 020 and 021.

                                               MS-DRGs 023 and 024
                                             [Neurostimulator Cases]
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 023--All cases...........................................           6,723            10.9         $39,014
MS-DRG 023--Cases with neurostimulators (Major Device Implant                 21             6.7          48,821
 list cases)....................................................
MS-DRG 023--Cases with neurostimulator generators inserted into                7             8.0          63,365
 skull (includes cases involving the use of the RNS(copyright)
 neurostimulator) and cases with a principal diagnosis of
 epilepsy.......................................................
MS-DRG 024--All cases...........................................           2,275             5.5          27,574

[[Page 19821]]

 
MS-DRG 024--Cases with neurostimulators (Major Device Implant                394             2.1          31,669
 list cases)....................................................
MS-DRG 024--Cases with neurostimulator generators inserted into               54             4.3          51,041
 skull (includes cases involving the use of the RNS(copyright)
 neurostimulator) and cases with a principal diagnosis of
 epilepsy.......................................................
----------------------------------------------------------------------------------------------------------------


                                          Cases in MS-DRGs 020 and 021
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 020--All cases...........................................           1,372            16.7         $72,926
MS-DRG 021--All cases...........................................             336            13.5          54,385
----------------------------------------------------------------------------------------------------------------

    As shown by the table above, for MS-DRG 023, we identified a total 
of 6,723 cases, with an average length of stay of 10.9 days and average 
costs of $39,014. Of the 6,723 cases in MS-DRG 023, there were 21 cases 
representing the implantation of any type of neurostimulator generator 
with an average length of stay of 6.7 days, and average costs of 
$48,821. Of the 21 neurostimulator generator cases, there were 7 cases 
with the neurostimulator generators inserted into skull (including 
cases involving the use of the RNS(copyright) 
neurostimulator) and a principal diagnosis of epilepsy with an average 
length of stay of 8.0 days and average costs of $63,365. For MS-DRG 
024, we identified a total of 2,275 cases, with an average length of 
stay of 5.5 days and average costs of $27,574. Of the 2,275 cases in 
MS-DRG 024, there were 394 cases representing the implantation of any 
type of neurostimulator generator with an average length of stay of 2.1 
days and average costs of $31,669. Of the 394 neurostimulator generator 
cases, there were 54 cases with the neurostimulator generators inserted 
into skull (including cases involving the use of the 
RNS(copyright) neurostimulator) and a principal diagnosis of 
epilepsy with an average length of stay of 4.3 days and average costs 
of $51,041.
    There were only 61 cases involving the use of the 
RNS(copyright) neurostimulator with a principal diagnosis of 
epilepsy in MS-DRGs 023 and 024 (7 and 54, respectively). Our clinical 
advisors reviewed this issue, and agreed that this number of cases is 
too small on which to base a rationale for creating a new MS-DRG. 
Basing a new MS-DRG on such a small number of cases (61) could lead to 
distortion 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.
    We also examined the possibility of reassigning cases involving the 
use of the RNS(copyright) neurostimulator to MS-DRGs 020 and 
021. As the table above shows, for MS-DRG 020, there were a total of 
1,372 cases with an average length of stay of 16.7 days and average 
costs of $72,926. For MS-DRG 021, there were a total of 336 cases with 
an average length of stay of 13.5 days and average costs of $54,385. 
The cases in MS-DRG 023 with neurostimulator generators inserted into 
skull (including cases involving the use of the 
RNS(copyright) neurostimulator) and a principal diagnosis of 
epilepsy have average costs that are $9,561 lower than that for all 
cases in MS-DRG 020 ($63,365 compared to $72,926), and the average 
length of stay is 8.7 days shorter (8.0 days compared to 16.7 days). We 
do not believe these data support reassigning the cases in MS-DRG 023 
with neurostimulator generators inserted into the skull (including 
cases involving the use of the RNS(copyright) 
neurostimulator) and a principal diagnosis of epilepsy to MS-DRG 020. 
While the cases in MS-DRG 024 with neurostimulator generators inserted 
into the skull (including cases involving the use of the 
RNS(copyright) neurostimulator) and a principal diagnosis of 
epilepsy have average costs that are similar to the average costs of 
cases in MS-DRG 021 ($51,041 compared to $54,385), they have an average 
length of stay that is 9.2 days shorter (4.3 days compared to 13.5 
days). Our clinical advisors reviewed the clinical issues and the 
claims data, and did not support reassigning the cases with 
neurostimulator generators inserted into skull (including cases 
involving the use of the RNS(copyright) neurostimulator) and 
a principal diagnosis of epilepsy from MS-DRGs 023 and 024 to MS-DRGs 
020 and 021. Our clinical advisors pointed out that the cases in MS-
DRGs 020 and 021 have a principal diagnosis of a hemorrhage. The 
RNS(copyright) neurostimulator generators are not used to 
treat patients with diagnosis of a hemorrhage. Therefore, our clinical 
advisors stated that it was inappropriate to reassign cases 
representing a principal diagnosis of epilepsy to an MS-DRG that 
contains cases that represent the treatment of intracranial hemorrhage. 
They also stated that the differences in average length of stay and 
average costs support this recommendation.
    We then explored alternative MS-DRG assignments, as was requested. 
We noted that the 7 cases with the neurostimulator generators inserted 
into the skull (including cases involving the use of the 
RNS(copyright) neurostimulator) and a principal diagnosis of 
epilepsy had an average length of stay of 8.0 days and average costs of 
$63,365, as compared to the 6,723 cases in MS-DRG 023 that had an 
average length of stay of 10.9 days and average costs of $39,014. While 
these neurostimulator cases had average costs that were $24,351 higher 
than the average costs of all cases in MS-DRG 023, there were only a 
total of 7 cases. There may have been other factors contributing to the 
higher costs. We noted that the 54 cases with the neurostimulator 
generators inserted into skull (including cases involving the use of 
the RNS(copyright) neurostimulator) and a principal 
diagnosis of epilepsy in MS-DRG 024 had average costs of $51,041 and an 
average length of stay of 4.3 days, compared to average costs of 
$27,574 and average length of stay of 5.5 days for all cases in MS-DRG 
024. By reassigning all cases with the neurostimulator generators 
inserted into the skull (including cases involving the use of the 
RNS(copyright) neurostimulator) and a principal diagnosis of 
epilepsy to MS DRG 023, even if there is not a MCC

[[Page 19822]]

present, the cases would receive higher payment. The average costs of 
MS-DRG 023 were $39,014, compared to the average costs of $51,041 for 
the cases with the neurostimulator generators inserted into skull 
(including cases involving the use of the RNS(copyright) 
neurostimulator) and a principal diagnosis of epilepsy in MS-DRG 024. 
Our clinical advisors reviewed the clinical issues and the claims data, 
and supported the recommendation to reassign the cases with the 
neurostimulator generators inserted into skull (including cases 
involving the use of the RNS(copyright) neurostimulator) and 
a principal diagnosis of epilepsy to MS-DRG 023, even if there is not a 
MCC reported. Therefore, we are proposing to reassign all cases with a 
principal diagnosis of epilepsy from the epilepsy diagnosis list 
provided earlier, and one of the following ICD-10-PCS code combinations 
capturing cases with the neurostimulator generators inserted into the 
skull (including cases involving the use of the 
RNS(copyright) neurostimulator), to MS-DRG 023, even if 
there is no MCC reported:
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H00MZ (Insertion of 
neurostimulator lead into brain, open approach);
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H03MZ (Insertion of 
neurostimulator lead into brain, percutaneous approach); and
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H04MZ (Insertion of 
neurostimulator lead into brain, percutaneous endoscopic approach).
    We also are proposing to change the title of MS-DRG 023 from 
``Craniotomy with Major Device Implant or Acute Complex Central Nervous 
System (CNS) Principal Diagnosis (PDX) with MCC or Chemo Implant'' to 
``Craniotomy with Major Device Implant or Acute Complex Central Nervous 
System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant 
or Epilepsy with Neurostimulator'' to reflect the proposed 
modifications to MS-DRG assignments.
    We are inviting public comments on our proposals.
c. Precerebral Occlusion or Transient Ischemic Attack With Thrombolytic
    We received a request to add the ICD-10-CM diagnosis codes 
currently assigned to MS-DRGs 067 and 068 (Nonspecific CVA and 
Precerebral Occlusion without Infarction with MCC and without MCC, 
respectively) and the ICD-10-CM diagnosis codes currently assigned to 
MS-DRG 069 (Transient Ischemia) to the GROUPER logic for MS-DRGs 061, 
062, and 063 (Acute Ischemic Stroke with Use of Thrombolytic Agent with 
MCC, with CC, and without CC/MCC, respectively) when those conditions 
are sequenced as the principal diagnosis and reported with an ICD-10-
PCS procedure code describing use of a thrombolytic agent (for example, 
tPA).
    The ICD-10-CM diagnosis codes displayed in the table below identify 
the conditions that are assigned to MS-DRGs 067 and 068 when reported 
as a principal diagnosis.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
I65.01....................  Occlusion and stenosis of right vertebral
                             artery.
I65.02....................  Occlusion and stenosis of left vertebral
                             artery.
I65.03....................  Occlusion and stenosis of bilateral
                             vertebral arteries.
I65.09....................  Occlusion and stenosis of unspecified
                             vertebral artery.
I65.1.....................  Occlusion and stenosis of basilar artery.
I65.21....................  Occlusion and stenosis of right carotid
                             artery.
I65.22....................  Occlusion and stenosis of left carotid
                             artery.
I65.23....................  Occlusion and stenosis of bilateral carotid
                             arteries.
I65.29....................  Occlusion and stenosis of unspecified
                             carotid artery.
I65.8.....................  Occlusion and stenosis of other precerebral
                             arteries.
I65.9.....................  Occlusion and stenosis of unspecified
                             precerebral artery.
I66.01....................  Occlusion and stenosis of right middle
                             cerebral artery.
I66.02....................  Occlusion and stenosis of left middle
                             cerebral artery.
I66.03....................  Occlusion and stenosis of bilateral middle
                             cerebral arteries.
I66.09....................  Occlusion and stenosis of unspecified middle
                             cerebral artery.
I66.11....................  Occlusion and stenosis of right anterior
                             cerebral artery.
I66.12....................  Occlusion and stenosis of left anterior
                             cerebral artery.
I66.13....................  Occlusion and stenosis of bilateral anterior
                             cerebral arteries.
I66.19....................  Occlusion and stenosis of unspecified
                             anterior cerebral artery.
I66.21....................  Occlusion and stenosis of right posterior
                             cerebral artery.
I66.22....................  Occlusion and stenosis of left posterior
                             cerebral artery.
I66.23....................  Occlusion and stenosis of bilateral
                             posterior cerebral arteries.
I66.29....................  Occlusion and stenosis of unspecified
                             posterior cerebral artery.
I66.3.....................  Occlusion and stenosis of cerebellar
                             arteries.
I66.8.....................  Occlusion and stenosis of other cerebral
                             arteries.
I66.9.....................  Occlusion and stenosis of unspecified
                             cerebral artery.
------------------------------------------------------------------------

    The ICD-10-CM diagnosis codes displayed in the table below identify 
the conditions that are assigned to MS-DRG 069 when reported as a 
principal diagnosis.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
G45.0.....................  Vertebro-basilar artery syndrome.
G45.1.....................  Carotid artery syndrome (hemispheric).
G45.2.....................  Multiple and bilateral precerebral artery
                             syndromes.
G45.8.....................  Other transient cerebral ischemic attacks
                             and related syndromes.
G45.9.....................  Transient cerebral ischemic attack,
                             unspecified.

[[Page 19823]]

 
G46.0.....................  Middle cerebral artery syndrome.
G46.1.....................  Anterior cerebral artery syndrome.
G46.2.....................  Posterior cerebral artery syndrome.
I67.81....................  Acute cerebrovascular insufficiency.
I67.82....................  Cerebral ischemia.
I67.841...................  Reversible cerebrovascular vasoconstriction
                             syndrome.
I67.848...................  Other cerebrovascular vasospasm and
                             vasoconstriction.
I67.89....................  Other cerebrovascular disease.
------------------------------------------------------------------------

    The ICD-10-PCS procedure codes displayed in the table below 
describe use of a thrombolytic agent. These procedure codes are 
designated as non-O.R. procedure codes affecting the MS-DRG assignment 
for MS-DRGs 061, 062, and 063.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
3E03017...................  Introduction of other thrombolytic into
                             peripheral vein, open approach.
3E03317...................  Introduction of other thrombolytic into
                             peripheral vein, percutaneous approach.
3E04017...................  Introduction of other thrombolytic into
                             central vein, open approach.
3E04317...................  Introduction of other thrombolytic into
                             central vein, percutaneous approach.
3E05017...................  Introduction of other thrombolytic into
                             peripheral artery, open approach.
3E05317...................  Introduction of other thrombolytic into
                             peripheral artery, percutaneous approach.
3E06017...................  Introduction of other thrombolytic into
                             central artery, open approach.
3E06317...................  Introduction of other thrombolytic into
                             central artery, percutaneous approach.
3E08017...................  Introduction of other thrombolytic into
                             heart, open approach.
3E08317...................  Introduction of other thrombolytic into
                             heart, percutaneous approach.
------------------------------------------------------------------------

    At the onset of stroke symptoms, tPA must be given within 3 hours 
(or up to 4.5 hours for certain eligible patients) in an attempt to 
dissolve a clot and improve blood flow to the specific area affected in 
the brain. If, upon receiving the tPA, the stroke symptoms completely 
resolve within 24 hours and imaging studies (if performed) are 
negative, the patient has suffered what is clinically defined as a 
transient ischemic attack, not a stroke. According to the requestor, 
the current MS-DRG assignments do not account for this subset of 
patients who were successfully treated with tPA to prevent a stroke.
    In addition, the requestor expressed concerns regarding 
documentation and quality of the data. For example, the requestor noted 
that the terms ``stroke-in-evolution'' and ``aborted stroke'' may be 
documented as a ``workaround'' for a patient exhibiting symptoms of a 
stroke who receives tPA and, regardless of the outcome, would result in 
assignment to MS-DRG 061, 062, or 063. Therefore, in cases where the 
patient's stroke symptoms completely resolved upon receiving tPA and 
the patient clinically suffered a precerebral occlusion or transient 
ischemia, this documentation practice is incorrectly labeling these 
patients as having had a stroke and ultimately leading to inaccurate 
data.
    We analyzed claims data from the December 2016 update of the FY 
2016 MedPAR file for MS-DRGs 061, 062, and 063. Our findings are shown 
in the tables below.

                        MS-DRGs for Acute Ischemic Stroke With Use of Thrombolytic Agent
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 061--All cases...........................................           4,528             6.4         $20,270
MS-DRG 062--All cases...........................................           8,600             4.2          14,124
MS-DRG 063--All cases...........................................           1,859             3.0          11,898
----------------------------------------------------------------------------------------------------------------

    Our analysis also consisted of claims data for MS-DRGs 067 and 068 
when reported with a procedure code describing the use of tPA. As shown 
in the table below, the total number of cases reported in MS-DRG 067 
was 811, with an average length of stay of 4.8 days and average costs 
of $10,248. There were 9 cases in MS-DRG 067 with a precerebral 
occlusion receiving tPA, with an average length of stay of 5.2 days and 
average costs of $20,156. The total number of cases reported in MS-DRG 
068 was 3,809, with an average length of stay of 2.8 days and average 
costs of $6,555. There were 33 cases in MS-DRG 068 with a precerebral 
occlusion receiving tPA, with an average length of stay of 4.3 days and 
average costs of $13,814.

                        MS-DRGs for Precerebral Occlusion With Use of Thrombolytic Agent
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 067--All cases...........................................             811             4.8         $10,248
MS-DRG 067--Cases with tPA......................................               9             5.2          20,156
MS-DRG 068--All cases...........................................           3,809             2.8           6,555

[[Page 19824]]

 
MS-DRG 068--Cases with tPA......................................              33             4.3          13,814
----------------------------------------------------------------------------------------------------------------

    We recognize that while the volume of cases for patients with a 
diagnosis of precerebral occlusion receiving tPA in MS-DRGs 067 and 068 
is relatively low, the average length of stay is longer, and the 
average costs for this subset of patients is approximately twice the 
amount of the average costs in comparison to all cases in MS-DRGs 067 
and 068.
    We then analyzed claims data for cases in MS-DRG 069 when reported 
with a procedure code describing the use of tPA. As shown in the table 
below, the total number of cases reported in MS-DRG 069 was 50,633, 
with an average length of stay of 2.5 days and average costs of $5,518. 
There were 554 cases of transient ischemia receiving tPA, with an 
average length of stay of 3.2 days and average costs of $12,481.

                          MS-DRG for Transient Ischemia With Use of Thrombolytic Agent
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 069--All cases...........................................          50,633             2.5          $5,518
MS-DRG 069--Cases with tPA......................................             554             3.2          12,481
----------------------------------------------------------------------------------------------------------------

    Similar to the findings for MS-DRGs 067 and 068, the number of 
cases for transient ischemia receiving tPA in MS-DRG 069 was relatively 
low in comparison to all the cases in the MS-DRG, with a longer average 
length of stay and approximately twice the amount of average costs in 
comparison to all cases in MS-DRG 069.
    The results of analysis of the data and the advice of our clinical 
advisors support adding the ICD-10-CM diagnosis codes in MS-DRGs 067, 
068, and 069 to the list of principal diagnoses in MS-DRGs 061, 062, 
and 063 to better account for this subset of patients who were 
successfully treated with tPA to prevent a stroke, to identify the 
increasing use of thrombolytics at the onset of symptoms of a stroke, 
to further encourage appropriate physician documentation for a 
precerebral occlusion or transient ischemic attack when patients are 
treated with tPA, and to reflect more appropriate payment for the 
resources involved in evaluating and treating these patients. We 
believe this approach will improve accuracy of the data and assist in 
addressing the concern that facilities may be reporting incorrect 
diagnoses for this subset of patients.
    Therefore, for FY 2018, we are proposing to add the ICD-10-CM 
diagnosis codes listed earlier in this section that are currently 
assigned to MS-DRGs 067 and 068 and the ICD-10-CM diagnosis codes 
currently assigned to MS-DRG 069 to the GROUPER logic for MS-DRGs 061, 
062, and 063 when those conditions are sequenced as the principal 
diagnosis and reported with an ICD-10-PCS procedure code describing use 
of a thrombolytic agent (for example, tPA). We are inviting public 
comments on our proposal.
    We also are proposing to retitle MS-DRGs 061, 062, and 063 as 
``Ischemic Stroke, Precerebral Occlusion or Transient Ischemia with 
Thrombolytic Agent with MCC, with CC and without CC/MCC'', 
respectively, and to retitle MS-DRG 069 as ``Transient Ischemia without 
Thrombolytic''. We are inviting public comments on our proposals.
3. MDC 2 (Diseases and Disorders of the Eye: Swallowing Eye Drops 
(Tetrahydrozoline)
    We received a request to reassign the following ICD-10-CM diagnosis 
codes that capture swallowing eye drops from MS-DRGs 124 and 125 (Other 
Disorders of the Eye with and without MCC, respectively) to MS-DRGs 917 
and 918 (Poisoning and Toxic Effects of Drugs with and without MCC, 
respectively). The requestor described a case where a patient was 
treated following swallowing eye drops, specifically Tetrahydrozoline, 
which the provider considers to be a poisoning, not a disorder of the 
eye.
     T49.5X1A (Poisoning by ophthalmological drugs and 
preparations, accidental (unintentional), initial encounter);
     T49.5X2A (Poisoning by ophthalmological drugs and 
preparations, intentional self-harm, initial encounter);
     T49.5X3A (Poisoning by ophthalmological drugs and 
preparations, assault, initial encounter); and
     T49.5X4A (Poisoning by ophthalmological drugs and 
preparations, undetermined, initial encounter).
    We agree with the requestor that the four diagnosis codes describe 
a poisoning, not a disorder of the eye. We examined claims data for 
cases in MS-DRGs 124 and 125 from the December 2016 update of the FY 
2016 MedPAR file. Our findings are shown in the table below.

                                            MS-DRG 124 and 125 Cases
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 124--All cases...........................................             874             4.8          $8,826
MS-DRG 124--Cases reporting poisoning by ophthalmological drugs                1             2.0           3,007
 and preparations code..........................................
MS-DRG 125--All cases...........................................           3,205             3.3           5,565
MS-DRG 125--Cases reporting poisoning by ophthalmological drugs                1             2.0           1,446
 and preparations code..........................................
----------------------------------------------------------------------------------------------------------------


[[Page 19825]]

    As shown in the table above, there were only 2 cases of poisoning 
by ophthalmological drugs and preparations--1 case in MS-DRG 124 with 
an average length of stay of 2 days and average costs of $3,007 and 1 
case in MS-DRG 125 with an average length of stay of 2 days and average 
costs of $1,446. The case of poisoning by ophthalmological drugs and 
preparations in MS-DRG 124 had a shorter average length of stay than 
the average length of stay for all cases in MS-DRG 124 (2.0 days 
compared to 4.8 days) and lower average costs than the average costs 
for all cases in MS-DRG 124 ($3,007 compared to $8,826). The case of 
poisoning by ophthalmological drugs and preparations in MS-DRG 125 also 
had a shorter average length of stay than the average length of stay 
for all cases in MS-DRG 125 (2.0 days compared to 3.3 days) and lower 
average costs than the average costs for all cases in MS-DRG 125 
($1,446 compared to $5,565).
    We also examined claims data on cases reported in MS-DRGs 917 and 
918 from the December 2016 update of the FY 2016 MedPAR file. Our 
findings are shown in the table below.

                                            MS-DRGs 917 and 918 Cases
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 917--All cases...........................................          32,381             4.8          $9,882
MS-DRG 918--All cases...........................................          24,061             3.0           5,326
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, the 2 cases of poisoning by 
ophthalmological drugs and preparations also had shorter average 
lengths of stay than the average length of stay for all cases in MS-
DRGs 917 and 918 (2.0 days compared to 4.8 days in MS-DRG 917 and 2.0 
days compared to 3.0 days in MS-DRG 918). The average costs also were 
lower for the 2 cases of poisoning by ophthalmological drugs and 
preparations than the average costs for all cases in MS-DRGs 917 and 
918 ($3,007 compared to $9,882 for all cases in MS-DRG 917 and $1,446 
compared to $5,326 for all cases in MS-DRG 918). Therefore, cases with 
this type of poisoning had lower average lengths of stay and lower 
average costs than all other cases assigned to MS-DRGs 124 and 125 and 
cases in MS-DRGs 917 and 918 where poisonings are assigned.
    Because the codes clearly capture a poisoning and not an eye 
disorder, we believe that these codes are more appropriately assigned 
to MS-DRGs 917 and 918 where other poisonings are assigned. Our 
clinical advisors also reviewed this issue and agreed that the codes 
should be moved from MS-DRGs 124 and 125 to MS-DRGs 917 and 918 because 
they clearly capture a poisoning and not a disorder of the eye. Because 
MS-DRGs 917 and 918 contain cases with multiple types of poisonings, it 
is expected that some types of poisoning cases will have longer lengths 
of stay and greater average costs than other types of poisoning cases. 
Therefore, we are proposing to reassign the following ICD-10-CM 
diagnosis codes from MS-DRGs 124 and 125 to MS-DRGs 917 and 918 for FY 
2018: T49.5X1A; T49.5X2A; T49.5X3A; and T49.5X4A.
    We are inviting public comments on our proposal.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Percutaneous Cardiovascular Procedures and Insertion of a 
Radioactive Element
    Currently, under ICD-10-PCS, the logic for MS-DRG 246 (Percutaneous 
Cardiovascular Procedures with Drug-Eluting Stent with MCC or 4+ 
Vessels or Stents), MS-DRG 247 (Percutaneous Cardiovascular Procedures 
with Drug-Eluting Stent without MCC), MS-DRG 248 (Percutaneous 
Cardiovascular Procedures with Non-Drug-Eluting Stent with MCC or 4+ 
Vessels or Stents), and MS-DRG 249 (Percutaneous Cardiovascular 
Procedures with Non-Drug-Eluting Stent without MCC) includes six 
procedure codes that describe the insertion of a radioactive element. 
When any of these six procedure codes are reported without the 
reporting of a percutaneous cardiovascular procedure code, they are 
assigned to MS-DRG 264 (Other Circulatory System O.R. Procedures). The 
six specific procedure codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0WHC01Z...................  Insertion of radioactive element into
                             mediastinum, open approach.
0WHC31Z...................  Insertion of radioactive element into
                             mediastinum, percutaneous approach.
0WHC41Z...................  Insertion of radioactive element into
                             mediastinum, percutaneous endoscopic
                             approach.
0WHD01Z...................  Insertion of radioactive element into
                             pericardial cavity, open approach.
0WHD31Z...................  Insertion of radioactive element into
                             pericardial cavity, percutaneous approach.
0WHD41Z...................  Insertion of radioactive element into
                             pericardial cavity, percutaneous endoscopic
                             approach.
------------------------------------------------------------------------

    Unlike procedures involving the insertion of stents, none of the 
procedures described by the procedure codes listed above are performed 
in conjunction with a percutaneous cardiovascular procedure, and two of 
the six procedures described by these procedure codes (ICD-10-PCS codes 
0WHC01Z and 0WHD01Z) are not performed using a percutaneous approach, 
but rather describe an open approach to performing the specific 
procedure. Our clinical advisors agreed that these procedures should 
not be used to classify cases within MS-DRGs 246 through 249 because 
they are not performed in conjunction with a percutaneous 
cardiovascular procedure. Furthermore, the indications for the 
insertion of a radioactive element typically involve a diagnosis of 
cancer, whereas the indications for the insertion of a coronary artery 
stent typically involve a diagnosis of coronary artery disease.
    We conducted an analysis for the six procedures described by these 
procedure codes by reviewing the claims data for MS-DRGs 246 through 
249 from the December 2016 update of

[[Page 19826]]

the FY 2016 MedPAR file. We did not find any cases where any one of the 
six procedure codes listed above was reported. As noted earlier, when 
any of these six procedure codes are reported without the reporting of 
a percutaneous cardiovascular procedure code, the case is assigned to 
MS-DRG 264. Therefore, our clinical advisors also agreed that it would 
be more appropriate to remove these six procedure codes from MS-DRGs 
246 through 249, but maintain their current assignment in MS-DRG 264. 
Based on our analysis and the advice from our clinical advisors, for FY 
2018, we are proposing to remove ICD-10-PCS procedure codes 0WHC01Z, 
0WHC31Z, 0WHC41Z, 0WHD01Z, 0WHD31Z, and 0WHD41Z from MS-DRGs 246 
through 249, but maintain their current assignment in MS-DRG 264.
    We are inviting public comments on our proposal to remove the six 
procedure codes listed above from MS-DRGs 246 through 249. We also are 
inviting public comments on our proposal to maintain their current 
assignment in MS-DRG 264.
b. Proposed Modification of the Titles for MS-DRG 246 (Percutaneous 
Cardiovascular Procedures With Drug-Eluting Stent With MCC or 4+ 
Vessels or Stents) and MS-DRG 248 (Percutaneous Cardiovascular 
Procedures With Non-Drug-Eluting Stent with MCC or 4+ Vessels or 
Stents)
    We are proposing to revise the titles for MS-DRGs 246 (Percutaneous 
Cardiovascular Procedures with Drug-Eluting Stent with MCC or 4+ 
Vessels or Stents) and MS-DRG 248 (Percutaneous Cardiovascular 
Procedures with Non-Drug-Eluting Stent with MCC or 4+ Vessels or 
Stents) to better reflect the ICD-10-PCS terminology of ``arteries'' 
versus ``vessels'' as used in the procedure code titles within the 
classification. Specifically, we are proposing to revise the title of 
MS-DRG 246 to ``Percutaneous Cardiovascular Procedures with Drug-
Eluting Stent with MCC or 4+ Arteries or Stents''. We are proposing to 
revise the title of MS-DRG 248 to ``Percutaneous Cardiovascular 
Procedures with Non-Drug-Eluting Stent with MCC or 4+ Arteries or 
Stents''. We are inviting public comments on our proposals.
c. Transcatheter Aortic Valve Replacement (TAVR) and Left Atrial 
Appendage Closure (LAAC)
    We received a request to create new MS-DRGs for cases involving 
transcatheter aortic valve replacement (TAVR) and left atrial appendage 
closure (LAAC) procedures when performed in combination in the same 
operative episode. The requestor stated that there are both clinical 
and financial advantages for the patient when performing concomitant 
procedures. For example, the requestor indicated that the clinical 
advantages for the patient may include single exposure to anesthesia 
and a reduction in overall procedure time, while the financial 
advantages may include lower cost-sharing. The requestor further 
believed that a single hospitalization for these concomitant procedures 
could be cost-effective for various providers and payers.
    TAVR is indicated and approved as a treatment option for patients 
diagnosed with symptomatic aortic stenosis who are not surgical 
candidates for traditional open surgical techniques. Cases involving 
TAVR procedures are assigned to MS-DRGs 266 and 267 (Endovascular 
Cardiac Valve Replacement with MCC and without MCC, respectively), and 
are identified by the following ICD-10-PCS procedure codes shown in the 
table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
02RF37Z...................  Replacement of aortic valve with autologous
                             tissue substitute, percutaneous approach.
02RF38Z...................  Replacement of aortic valve with zooplastic
                             tissue, percutaneous approach.
02RF3JZ...................  Replacement of aortic valve with synthetic
                             substitute, percutaneous approach.
02RF3KZ...................  Replacement of aortic valve with
                             nonautologous tissue substitute,
                             percutaneous approach.
02RF37H...................  Replacement of aortic valve with autologous
                             tissue substitute, transapical,
                             percutaneous approach.
02RF38H...................  Replacement of aortic valve with zooplastic
                             tissue, transapical, percutaneous approach.
02RF3JH...................  Replacement of aortic valve with synthetic
                             substitute, transapical, percutaneous
                             approach.
02RF3KH...................  Replacement of aortic valve with
                             nonautologous tissue substitute,
                             transapical, percutaneous approach.
------------------------------------------------------------------------

    LAAC is indicated and approved as a treatment option for patients 
diagnosed with atrial fibrillation. Cases involving LAAC procedures are 
assigned to MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures 
with MCC and without MCC, respectively), and are identified by ICD-10-
PCS procedure code 02L73DK (Occlusion of left atrial appendage with 
intraluminal device, percutaneous approach).
    The requestor suggested that the structure of the possible new MS-
DRGs for TAVR procedures performed in combination with LAAC procedures 
could be modeled similar to the structure of MS-DRGs 266 and 267. While 
contemplating creation of the new MS-DRGs, the requestor asked CMS to 
also consider subdividing the possible new MS-DRGs into two severity 
levels and title them as follows:
     Suggested MS-DRG 26x (Endovascular Cardiac Valve 
Replacement with LAAC with MCC); and
     Suggested MS-DRG 26x (Endovascular Cardiac Valve 
Replacement with LAAC without MCC).
    We analyzed claims data from the December 2016 update of the FY 
2016 MedPAR file for MS-DRGs 266 and 267 and identified the cases 
reporting TAVR procedures with and without an LAAC procedure. As shown 
in the table below, the data findings show that the total number of 
cases reported in MS-DRG 266 was 9,949, with an average length of stay 
of 7.2 days and average costs of $56,762. There were 9,872 cases 
involving a TAVR procedure, with an average length of stay of 7.2 days 
and average costs of $56,628. There was only one case identified in MS-
DRG 266 where both a TAVR and an LAAC procedure were reported. This 
case had an average length of stay of 21.0 days and average costs of 
$60,226. For MS-DRG 267, the total number of cases found was 13,290, 
with an average length of stay of 3.5 days and average costs of 
$45,297. There were 13,245 cases involving a TAVR procedure, with an 
average length of stay of 3.5 days and average costs of $45,302. There 
were no cases identified in MS-DRG 267 where both a TAVR and an LAAC 
procedure were reported.

[[Page 19827]]



                                           MS-DRGs for TAVR Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 266--All cases...........................................           9,949             7.2         $56,762
MS-DRG 266--Cases with TAVR.....................................           9,872             7.2          56,628
MS-DRG 266--Cases TAVR and LAAC.................................               1            21.0          60,226
MS-DRG 267--All cases...........................................          13,290             3.5          45,297
MS-DRG 267--Cases with TAVR.....................................          13,245             3.5          45,302
MS-DRG 267--Cases TAVR and LAAC.................................               0               0               0
----------------------------------------------------------------------------------------------------------------

    We then analyzed claims data in MS-DRGs 273 and 274 for cases 
reporting an LAAC procedure. As shown in the table below, the data 
findings show that the total number of cases reported in MS-DRG 273 was 
6,541, with an average length of stay of 7.7 days and average costs of 
$26,042. There were 179 cases involving an LAAC procedure, with an 
average length of stay of 3.6 days and average costs of $30,131. For 
MS-DRG 274, the total number of cases found was 14,441, with an average 
length of stay of 3.0 days and average costs of $20,267. There were 
2,428 cases involving an LAAC procedure, with an average length of stay 
of 1.2 days and average costs of $26,213.

                                           MS-DRGs for LAAC Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 273--All cases...........................................           6,541             7.7         $26,042
MS-DRG 273--Cases with LAAC.....................................             179             3.6          30,131
MS-DRG 274--All cases...........................................          14,441             3.0          20,267
MS-DRG 274--Cases with LAAC.....................................           2,428             1.2          26,213
----------------------------------------------------------------------------------------------------------------

    The analysis of claims data for MS-DRGs 266, 267, 273, and 274 and 
input from our clinical advisors do not support creating new MS-DRGs 
for TAVR and LAAC procedures when performed in combination in the same 
operative episode. We found only one case in MS-DRG 266 where both a 
TAVR and an LAAC procedure were reported and the claims data for cases 
reporting an LAAC procedure in MS-DRGs 273 and 274 support their 
current assignment. Our clinical advisors agreed the current MS-DRG 
assignments are appropriate for each respective procedure.
    Therefore, we are not proposing to create new MS-DRGs for cases 
involving TAVR and LAAC procedures when performed in combination in the 
same operative episode. We are inviting public comments on our proposal 
to maintain the current MS-DRG structure for TAVR procedures in MS-DRGs 
266 and 267, as well as the current MS-DRG structure for LAAC 
procedures in MS-DRGs 273 and 274.
d. Percutaneous Mitral Valve Replacement Procedures
    We received a request to reassign four ICD-10-PCS procedure codes 
that describe percutaneous mitral valve replacement procedures from MS-
DRGs 216 through 221 (Cardiac Valve and Other Major Cardiothoracic 
Procedures with and without Cardiac Catheterization with MCC, with CC 
and without CC/MCC, respectively) to MS-DRGs 266 and 267 (Endovascular 
Cardiac Valve Replacement with MCC and without MCC, respectively). The 
requestor indicated that there are inconsistencies in the current 
GROUPER logic for endovascular cardiac valve replacement procedures. 
Specifically, the requestor stated that the procedure codes that 
describe both the percutaneous approach and the transapical, 
percutaneous approach for the aortic and pulmonary valves are included 
in MS-DRGs 266 and 267. However, for the mitral valve, the GROUPER 
logic only includes the procedure codes that describe the transapical, 
percutaneous approach.
    The requestor also stated that when MS-DRGs 266 and 267 were 
created, the intent was to include percutaneous replacement procedures 
for all cardiac valves. Therefore, the requestor recommended that CMS 
reassign the four ICD-10-PCS procedure codes shown in the table below 
that describe mitral valve replacement procedures, performed with the 
percutaneous approach from MS-DRGs 216 through 221 to MS-DRGs 266 and 
267 to more appropriately group these procedures within the MS-DRG 
structure.

 
------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
02RG37Z...................  Replacement of mitral valve with autologous
                             tissue substitute, percutaneous approach.
02RG38Z...................  Replacement of mitral valve with zooplastic
                             tissue, percutaneous approach.
02RG3JZ...................  Replacement of mitral valve with synthetic
                             substitute, percutaneous approach.
02RG3KZ...................  Replacement of mitral valve with
                             nonautologous tissue substitute,
                             percutaneous approach.
------------------------------------------------------------------------

    We agree with the requestor regarding the intent of the creation of 
MS-DRGs 266 and 267. As discussed in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 49890 through 49893), MS-DRGs 266 and 267 were created to 
uniquely classify the subset of high-risk cases representing patients 
who undergo a cardiac valve replacement procedure

[[Page 19828]]

performed by a percutaneous (endovascular) approach. As such, we agree 
that all cardiac valve replacement procedures should be grouped within 
the same MS-DRG. In FY 2015, under the ICD-9-CM classification, there 
was not a specific procedure code for a percutaneous mitral valve 
replacement procedure. Therefore, when we converted from the ICD-9 
based MS-DRGs to the ICD-10 MS-DRGs, there was not a code available 
from which to replicate. We refer the reader to the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 49890 through 49893) for a detailed discussion on 
the initial request to create new MS-DRGs for endovascular cardiac 
valve replacement procedures, as well as the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49354 through 49358) and the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 56787 through 56790) for a detailed discussion of the 
conversion to ICD-10 MS-DRGs, including our analysis of claims data and 
the need to accurately replicate the ICD-9-CM based MS-DRGs.
    The requestor also noted that a proposal was discussed at the 
September 13-14, 2016 ICD-10 Coordination and Maintenance Committee 
meeting involving the creation of procedure codes that describe 
percutaneous tricuspid valve replacement procedures and, if finalized, 
these new procedure codes would also be assigned to MS-DRGs 266 and 
267.
    As shown in the table below and in Table 6B.--New Procedure Codes, 
which is associated with this proposed rule and available via the 
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html, there are eight 
new procedure codes that describe tricuspid valve replacement 
procedures performed with percutaneous and transapical types of 
percutaneous approaches that will be effective October 1, 2017.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
02RJ37H...................  Replacement of tricuspid valve with
                             autologous tissue substitute, transapical,
                             percutaneous approach.
02RJ37Z...................  Replacement of tricuspid valve with
                             autologous tissue substitute, percutaneous
                             approach.
02RJ38H...................  Replacement of tricuspid valve with
                             zooplastic tissue, transapical,
                             percutaneous approach.
02RJ38Z...................  Replacement of tricuspid valve with
                             zooplastic tissue, percutaneous approach.
02RJ3JH...................  Replacement of tricuspid valve with
                             synthetic substitute, transapical,
                             percutaneous approach.
02RJ3JZ...................  Replacement of tricuspid valve with
                             synthetic substitute, percutaneous
                             approach.
02RJ3KH...................  Replacement of tricuspid valve with
                             nonautologous tissue substitute,
                             transapical, percutaneous approach.
02RJ3KZ...................  Replacement of tricuspid valve with
                             nonautologous tissue substitute,
                             percutaneous approach.
------------------------------------------------------------------------

    We agree with the requestor and believe that, in addition to the 
four procedure codes that describe the percutaneous mitral valve 
replacement procedures listed earlier in this section, the eight codes 
that describe percutaneous and transapical types of percutaneous 
tricuspid valve replacement procedures also should be grouped with the 
other endovascular cardiac valve replacement procedures. Therefore, we 
are proposing to reassign the four percutaneous mitral valve 
replacement procedures described by the procedure codes listed in the 
table above from MS-DRGs 216 through 221 to MS-DRGs 266 and 267. In 
addition, we are proposing to assign the eight new procedure codes 
(also listed in a separate table above) that describe percutaneous and 
transapical, percutaneous tricuspid valve replacement procedures to MS-
DRGs 266 and 267.
    We are inviting public comments on our proposals.
e. Percutaneous Tricuspid Valve Repair
    We received a request to reassign cases reporting ICD-10-PCS 
procedure code 02UJ3JZ (Supplement tricuspid valve with synthetic 
substitute, percutaneous approach) from MS-DRGs 216 through 221 
(Cardiac Valve and Other Major Cardiothoracic Procedures with and 
without Cardiac Catheterization with MCC, with CC and without CC/MCC, 
respectively) to MS-DRGs 228 and 229 (Other Cardiothoracic Procedures 
with MCC and without MCC, respectively). According to the requestor, 
reassigning cases involving these procedures would more appropriately 
align the cohesiveness with other clinically similar procedures, such 
as percutaneous mitral valve repair (for example, procedures involving 
the Mitraclip) described by procedure code 02UG3JZ (Supplement mitral 
valve with synthetic substitute, percutaneous approach), which are 
assigned to MS-DRGs 228 and 229.
    The requestor noted that the FORMA Tricuspid Transcatheter Repair 
System (herein after referred to as the FORMA system) is currently in 
clinical trials in the United States, Europe, and Canada, but has not 
received FDA approval. However, the FORMA system is presently available 
for compassionate use purposes. The FORMA system technology is 
indicated for use in the treatment of patients diagnosed with tricuspid 
regurgitation and occupies the regurgitant area of the affected valve, 
providing a surface for native leaflet coaptation. The requestor stated 
that the technology offers a viable alternative treatment using 
traditional tricuspid valve surgery. According to the requestor, the 
technology consists of a rail and a spacer, and the procedure to insert 
the device involves fluoroscopic imaging guidance.
    We analyzed claims data from the December 2016 update of the FY 
2016 MedPAR file for MS-DRGs 216 through 221 for cases reporting 
procedure code 02UJ3JZ (Supplement tricuspid valve with synthetic 
substitute, percutaneous approach). Our findings are shown in the 
following table.

                       MS-DRGs for Cardiac Valve and Other Major Cardiothoracic Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 216--All cases...........................................           9,139            14.4         $68,304
MS-DRG 216--Cases with percutaneous tricuspid valve repair......               1             5.0          14,954
MS-DRG 217--All cases...........................................           3,536             8.9          45,857
MS-DRG 217--Cases with percutaneous tricuspid valve repair......               1             3.0          16,234

[[Page 19829]]

 
MS-DRG 218--All cases...........................................             498             5.9          41,274
MS-DRG 218--Cases with percutaneous tricuspid valve repair......               0               0               0
MS-DRG 219--All cases...........................................          16,011            11.1          54,519
MS-DRG 219--Cases with percutaneous tricuspid valve repair......               6             9.0          58,075
MS-DRG 220--All cases...........................................          18,476             6.8          37,506
MS-DRG 220--Cases with percutaneous tricuspid valve repair......               1             5.0          90,155
MS-DRG 221--All cases...........................................           3,547             5.0          33,606
MS-DRG 221--Cases with percutaneous tricuspid valve repair......               0               0               0
----------------------------------------------------------------------------------------------------------------

    We also analyzed claims data for MS-DRGs 228 and 229. Our findings 
are shown in the following table below.

                                   MS-DRGs for Other Cardiothoracic Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 228--All cases...........................................           3,466             9.8         $47,435
MS-DRG 229--All cases...........................................           4,553             4.9          33,347
----------------------------------------------------------------------------------------------------------------

    The claims data show that there were very few cases reported for 
performing a percutaneous tricuspid valve repair procedure in MS-DRGs 
216 through 221. Of the 6 cases found in MS-DRG 219, with average costs 
of $58,075, the average cost of these cases aligned with the average 
cost of all cases in the MS-DRG assignment ($54,519). The data analysis 
and our clinical advisors do not support reassigning cases reporting 
procedure code 02UJ3JZ to MS-DRGs 228 and 229. The current MS-DRG 
assignment for percutaneous tricuspid valve repair procedures to MS-
DRGs 216 through 221 is clinically coherent with the other percutaneous 
procedures performed on the heart valves that are currently assigned to 
these MS-DRGs. Percutaneous repair of the aortic, pulmonary and 
tricuspid valves utilizing various tissue substitutes (autologous, 
nonautologous, zooplastic, and synthetic) are assigned to MS-DRGs 216 
through 221. The exception is the percutaneous mitral valve repair, 
which, as the requestor pointed out, is assigned to MS-DRGs 228 and 229 
as discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56809 
through 56813). Our clinical advisors also agreed that the limited 
number of cases reported in MS-DRGs 216 through 221 does not warrant 
reassignment.
    As a result of our review and the input from our clinical advisors, 
we are not proposing to reassign cases reporting procedure code 02UJ3JZ 
from MS-DRGs 216 through 221 to MS-DRGs 228 and 229.
    We are inviting public comments on our proposal to maintain the 
current MS-DRG assignment for cases reporting procedure code 02UJ3JZ.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue)
a. Total Ankle Replacement (TAR) Procedures
    For FY 2018, we again received two requests for the reassignment of 
total ankle replacement (TAR) procedures to a different MS-DRG. TAR 
procedures are currently assigned to MS-DRGs 469 and 470 (Major Joint 
Replacement or Reattachment of Lower Extremity with and without MCC, 
respectively). This topic was discussed previously in the FY 2015 IPPS/
LTCH PPS proposed and final rules (79 FR 28013 through 28015 and 79 FR 
49896 through 49899, respectively) and in the FY 2017 IPPS/LTCH PPS 
proposed and final rules (81 FR 24989 through 24990 and 81 FR 56814 
through 56816, respectively). For FY 2015 and FY 2017, we did not 
change the MS-DRG assignment for TAR procedures. The requestors 
indicated that TAR procedures are currently assigned to MS-DRGs 469 and 
470, to which total hip replacement and total knee replacement 
procedures also are assigned. The requestors stated that there are 
significant clinical and cost differences among these procedures, which 
results in underpayment for TAR procedures. The requestors asked CMS to 
examine claims data for the following six ICD-10-PCS codes within MS-
DRGs 469 and 470:
     0SRF0J9 (Replacement of right ankle joint with synthetic 
substitute, cemented, open approach);
     0SRF0JA (Replacement of right ankle joint with synthetic 
substitute, uncemented, open approach);
     0SRF0JZ (Replacement of right ankle joint with synthetic 
substitute, open approach);
     0SRG0J9 (Replacement of left ankle joint with synthetic 
substitute, cemented, open approach);
     0SRG0JA (Replacement of left ankle joint with synthetic 
substitute, uncemented, open approach); and
     0SRG0JZ (Replacement of left ankle joint with synthetic 
substitute, open approach).
    The requestors recommended that, if the claims data show a 
disparity in costs between TAR procedures and total hip and knee 
replacement procedures, the TAR procedures be reassigned to a more 
appropriate MS-DRG.
    The requestors also stated that total ankle replacement is a 
complicated surgery that involves the replacement of the damaged parts 
of the three bones that comprise the ankle joint, as compared to the 
two bones in hip and knee replacement procedures. Furthermore, as the 
smallest weight-bearing large joint in the body, the requestors stated 
that TAR procedures demand a complexity of implant device design, 
engineering, and manufacture to exacting functional specifications that 
is vastly different from that of total hip and knee replacement 
devices. One of the requestors stated that the ankle region typically 
has poorer circulation and thinner soft tissue coverage than the

[[Page 19830]]

hip and knee, leading to a higher risk of wound complications and 
infection that may be more challenging and expensive to treat. In 
addition, this requestor stated that the unique anatomical 
characteristics and function of the ankle joint require a specialized 
surgical skill set, operative technique, and level of operating room 
resource utilization that is vastly dissimilar from that of total hip 
and knee replacement procedures.
    We examined claims data from the December 2016 update of the FY 
2016 MedPAR file on reported cases of TAR procedures in MS-DRGs 469 and 
470. Our findings are shown in the table below.

                                       Total Ankle Replacements Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 469--All cases...........................................          25,778             6.7         $22,139
MS-DRG 469--Cases reporting TAR procedure codes.................              31             4.6          23,828
MS-DRG 470--All cases...........................................         461,553             2.7          14,751
MS-DRG 470--Cases reporting TAR procedure codes.................           2,114             1.9          20,862
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, for MS-DRG 469, there were a total of 
25,778 cases, with an average length of stay of 6.7 days and average 
costs of $22,139. Of the 25,778 cases in MS-DRG 469, there were 31 
cases reporting a TAR procedure, with an average length of stay of 4.6 
days and average costs of $23,828. For MS-DRG 470, there were a total 
of 461,553 cases, with an average length of stay of 2.7 days and 
average costs of $14,751. Of the 461,553 cases in MS-DRG 470, there 
were 2,114 cases reporting a TAR procedure, with an average length of 
stay of 1.9 days and average costs of $20,862. As mentioned earlier, 
there were only 31 TAR procedure cases in MS-DRG 469, and these cases 
had average costs of $1,689 higher than the average costs of all cases 
within MS-DRG 469. The relatively small number of cases may have been 
impacted by other factors. Several expensive cases could impact the 
average costs for a very small number of patients. We also note that 
the average length of stay for the TAR procedure cases was 4.6 days, as 
compared to 6.7 days for all cases within MS-DRG 469. The 2,114 TAR 
procedure cases in MS-DRG 470 had average costs that were $6,111 higher 
than the average costs of all cases in MS-DRG 470 ($20,862 compared to 
$14,751 for all cases). The data support reassigning all of the TAR 
procedures to MS-DRG 469, even when there is no MCC reported. While the 
average costs of the TAR procedures in MS-DRG 470 are lower than the 
average costs for all cases in MS-DRG 469 ($20,862 compared to 
$22,139), the average costs are much closer to the average costs of TAR 
procedure cases in MS-DRG 470.
    Our clinical advisors reviewed this clinical issue and the claims 
data, and agreed that it is clinically appropriate to reassign all of 
the TAR procedure cases from MS-DRG 470 to MS-DRG 469, even when there 
is no MCC reported. The claims data support the fact that these cases 
require more resources than other cases assigned to MS-DRG 470. 
Therefore, we are proposing to reassign the following TAR procedure 
codes from MS-DRG 470 to MS-DRG 469, even if there is no MCC reported: 
0SRF0J9; 0SRF0JA; 0SRF0JZ; 0SRG0J9; 0SRG0JA; and 0SRG0JZ for FY 2018.
    We are proposing to change the titles of MS-DRGs 469 and 470 to the 
following to reflect these proposed MS-DRG reassignments:
     Proposed retitle of MS-DRG 469: ``Major Hip and Knee Joint 
Replacement or Reattachment of Lower Extremity with MCC or Total Ankle 
Replacement''; and
     Proposed retitle of MS-DRG 470: ``Major Hip and Knee Joint 
Replacement or Reattachment of Lower Extremity without MCC.''
    We are inviting public comments on our proposals.
b. Revision of Total Ankle Replacement (TAR) Procedures
    We received two requests to modify the MS-DRG assignment for 
revision of total ankle replacement (TAR) procedures, which are 
assigned to MS-DRGs 515, 516, and 517 (Other Musculoskeletal System and 
Connective Tissue O.R. Procedures with MCC, with CC, and without CC/
MCC, respectively). This topic was discussed in the FY 2015 IPPS/LTCH 
PPS proposed and final rules (79 FR 28013 through 28015 and 79 FR 49896 
through 49899, respectively) and in the FY 2017 IPPS/LTCH PPS proposed 
and final rules (81 FR 24992 through 24993 and 81 FR 56819 through 
56820, respectively). For FY 2015 and FY 2017, we did not change the 
MS-DRG assignment for revision of TAR procedures.
    The requestors asked that CMS examine the following eight ICD-10-
PCS codes for revision of TAR procedures, which are assigned to MS-DRGs 
515, 516, and 517:
     0SWF0JZ (Revision of synthetic substitute in right ankle 
joint, open approach);
     0SWF3JZ (Revision of synthetic substitute in right ankle 
joint, percutaneous approach);
     0SWF4JZ (Revision of synthetic substitute in right ankle 
joint, percutaneous endoscopic approach);
     0SWFXJZ (Revision of synthetic substitute in right ankle 
joint, external approach);
     0SWG0JZ (Revision of synthetic substitute in left ankle 
joint, open approach);
     0SWG3JZ (Revision of synthetic substitute in left ankle 
joint, percutaneous approach);
     0SWG4JZ (Revision of synthetic substitute in left ankle 
joint, percutaneous endoscopic approach); and
     0SWGXJZ (Revision of synthetic substitute in left ankle 
joint, external approach).
    One requestor stated that these ICD-10-PCS codes more specifically 
identify the revision of TAR procedures than the prior ICD-9-CM codes. 
Specifically, ICD-9-CM code 81.59 (Revision of joint replacement of 
lower extremity, not elsewhere classified) was an unspecified code, 
which included toe and foot joint revision procedures in addition to 
revision of TAR procedures. The requestor stated that claims data 
reporting these ICD-10-PCS codes would allow CMS to better identify 
revisions of TAR procedures, and determine if the procedures are 
assigned to the appropriate MS-DRGs.
    One requestor suggested the following three options for MS-DRG 
assignments:
     Assign the ICD-10-PCS ankle revision procedure codes to 
MS-DRGs 466, 467, and 468 (Revision of Hip or Knee Replacement with 
MCC, with CC, and without CC/MCC, respectively), and rename MS-DRGs 
466, 467, and 468 as ``Revision of Hip, Knee or Ankle with MCC, with 
CC, and without CC/MCC'', respectively);

[[Page 19831]]

     Assign the ICD-10-PCS ankle revision procedure codes to 
MS-DRG 469 (Major Joint Replacement or Reattachment of Lower Extremity 
with MCC) to more appropriately recognize higher hospital procedure 
costs associated with revision of TAR procedures; or
     Establish a new MS-DRG for the assignment of revision of 
TAR procedures.
    The other requestor asked that CMS consider reassigning revision of 
TAR procedures to MS-DRGs that better address the cost-to-payment 
differential, such as MS-DRGs 466, 467, and 468.
    We examined claims data from the December 2016 update of the FY 
2016 MedPAR file on reported cases of revision of TAR procedures, as 
well as cases assigned to MS-DRGs 466, 467, 468, and MS-DRG 469. Our 
findings are shown in the tables below.

                                   Revisions of Joint Replacements Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 515--All cases...........................................           5,038             8.0         $20,562
MS-DRG 515--Cases reporting revision of total ankle replacement                0               0               0
 procedure codes................................................
MS-DRG 516--All cases...........................................          13,276             4.8          13,524
MS-DRG 516--Cases reporting revision of total ankle replacement                2             2.5          11,400
 procedure codes................................................
MS-DRG 517--All cases...........................................          13,330             2.8          10,003
MS-DRG 517--Cases reporting revision of total ankle replacement                4             1.5           7,423
 procedure codes................................................
----------------------------------------------------------------------------------------------------------------


                                     Cases in MS-DRGs 466, 467, 468, and 469
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 466--All cases...........................................           3,886             8.4         $33,720
MS-DRG 467--All cases...........................................          19,145             4.2          24,609
MS-DRG 468--All cases...........................................          16,529             2.7          20,208
MS-DRG 469--All cases...........................................          25,778             6.7          22,139
----------------------------------------------------------------------------------------------------------------

    As shown in the tables above, there were only 6 cases representing 
revisions of TAR procedures with no cases in MS-DRG 515, two cases in 
MS-DRG 516, and four cases in MS-DRG 517. The limited number of six 
cases does not justify the creation of a new MS-DRG for the assignment 
of revision of TAR procedures. Our data analysis demonstrates that the 
average length of stay for the revision of TAR procedures was lower 
than that for all cases in MS-DRG 516 (2.5 days compared to 4.8 days), 
and the average costs were lower ($11,400 compared to $13,524). The 
average length of stay for the revision of TAR procedures also was 
lower than that for all cases in MS-DRG 517 (1.5 days compared to 2.8 
days), and the average costs were lower ($7,423 compared to $10,003). 
The data do not support reassigning the cases from MS-DRGs 515, 516, 
and 517.
    Furthermore, the average length of stay and average costs of cases 
in MS-DRGs 466, 467, 468, and 469 are significantly higher than those 
for the revision of TAR procedures in MS-DRG 516 and 517. The average 
length of stay for all cases in MS-DRGs 466, 467, 468, and 469 is 8.4, 
4.2, 2.7, and 6.7 days, respectively, compared to the average length of 
stay of 2.5 and 1.5 days for cases representing revision of TAR 
procedures in MS-DRGs 516 and 517, respectively. The average costs for 
all cases in MS-DRGs 466, 467, 468, and 469 are $33,720, $24,609, 
$20,208, and $22,139, respectively, compared to the average costs of 
$11,400 and $7,423 for cases representing revision of TAR procedures in 
MS-DRGs 516 and 517, respectively. Therefore, the data do not support 
reassigning the cases to MS-DRGs 466, 467, 468, or 469.
    Our clinical advisors reviewed the clinical issue and the claims 
data and agreed that the revision of TAR procedures are appropriately 
assigned to MS-DRGs 515, 516, and 517, along with other procedures that 
describe revisions of joint replacements of the lower extremities, 
including the foot and toe. Our clinical advisors did not support 
reassigning these cases to MS-DRGs 466, 467, 468, or 469, or creating a 
new MS-DRG. Therefore, based on the findings of our analysis of claims 
data and the advice of our clinical advisors, we are proposing to 
maintain the current MS-DRG assignment for revision of TAR procedures 
within MS-DRGs 515, 516, and 517 for FY 2018.
    We are inviting public comments on our proposal.
c. Magnetic Controlled Growth Rods (MAGEC[supreg] System)
    We received a request to add six ICD-10-PCS procedure codes that 
describe the use of magnetically controlled growth rods for the 
treatment of early onset scoliosis (MAGEC[supreg] System) to MS-DRGs 
456, 457, and 458 (Spinal Fusion Except Cervical with Spinal Curvature 
or Malignancy or Infection or Extensive Fusions with MCC, with CC or 
without CC/MCC, respectively). The MAGEC[supreg] System was discussed 
in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25040 through 25042) 
and final rule (81 FR 56888 through 56891) as a new technology add-on 
payment application. The application was approved for FY 2017 new 
technology add-on payments, effective with discharges occurring on and 
after October 1, 2016. The request for new procedure codes to identify 
the MAGEC[supreg] System technology was discussed at the March 9-10, 
2016 ICD-10 Coordination and Maintenance Committee meeting. Six new 
procedure codes were approved, effective October 1, 2016, and were 
displayed in Table 6B.--New Procedure Codes associated with the FY 2017 
IPPS/LTCH PPS final rule (which is available via the Internet on the 
CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page.html. These 
six procedure codes are currently assigned to MS-DRGs 518, 519, and 520 
(Back and Neck Procedure Except Spinal Fusion with MCC or Disc Device/
Neurostimulator, with CC, or without CC/MCC, respectively) and are 
shown in the table below.

[[Page 19832]]



------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
XNS0032...................  Reposition of lumbar vertebra using
                             magnetically controlled growth rod(s), open
                             approach, new technology group 2.
XNS0432...................  Reposition of lumbar vertebra using
                             magnetically controlled growth rod(s),
                             percutaneous endoscopic approach, new
                             technology group 2.
XNS3032...................  Reposition of cervical vertebra using
                             magnetically controlled growth rod(s), open
                             approach, new technology group 2.
XNS3432...................  Reposition of cervical vertebra using
                             magnetically controlled growth rod(s),
                             percutaneous endoscopic approach, new
                             technology group 2.
XNS4032...................  Reposition of thoracic vertebra using
                             magnetically controlled growth rod(s), open
                             approach, new technology group 2.
XNS4432...................  Reposition of thoracic vertebra using
                             magnetically controlled growth rod(s),
                             percutaneous endoscopic approach, new
                             technology group 2.
------------------------------------------------------------------------

    According to the requestor, adding these six procedure codes will 
allow these cases to group to MS-DRGs that more accurately reflect the 
diagnosis of early onset scoliosis for which the MAGEC[supreg] System 
is indicated. In addition, the requestor stated that because this 
technology is utilized on a small subset of patients with approximately 
2,500 cases per year, adding these procedure codes to MS-DRGs 456, 457, 
and 458 would have little impact.
    Because these six procedure codes shown in the table above were 
effective as of October 1, 2016, there are no MedPAR claims data 
available to analyze. More importantly, we note that cases are assigned 
to MS-DRGs 456, 457, and 458 when an actual spinal fusion procedure is 
performed. Our clinical advisors agree that use of the MAGEC[supreg] 
System's magnetically controlled growth rods technology alone does not 
constitute a spinal fusion. Therefore, because there are no claims data 
available at this time and based on the advice of our clinical 
advisors, we are not proposing to add the six procedure codes to MS-
DRGs 456, 457, or 458. If a spinal fusion procedure is performed along 
with the procedure to insert the MAGEC[supreg] System's magnetically 
controlled growth rods, it would be appropriate to report that a spinal 
fusion was performed and the case would be assigned to one of the 
spinal fusion MS-DRGs.
    We are inviting public comments on our proposal to maintain the 
current GROUPER logic for cases assigned to MS-DRGs 456, 457, and 458 
and not add the six procedure codes describing the use of the 
MAGEC[supreg] System magnetically controlled growth rods. We also are 
inviting public comments on our proposal to maintain the assignment of 
the six procedure codes in MS-DRGs 518, 519, and 520.
d. Combined Anterior/Posterior Spinal Fusion
    It was brought to our attention that 7 of the 10 new ICD-10-PCS 
procedure codes describing fusion using a nanotextured surface 
interbody fusion device were not added to the appropriate GROUPER logic 
list for MS-DRGs 453, 454, and 455 (Combined Anterior/Posterior Spinal 
Fusion with MCC, with CC and without CC/MCC, respectively), effective 
October 1, 2016. The logic for MS-DRGs 453, 454, and 455 is comprised 
of two lists: An anterior spinal fusion list and a posterior spinal 
fusion list. Assignment to one of the combined spinal fusion MS-DRGs 
requires that a code from each list be reported.
    The seven new ICD-10-PCS procedure codes currently included in the 
posterior spinal fusion list for MS-DRGs 453, 454, and 455 are shown in 
the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
XRG6092...................  Fusion of thoracic vertebral joint using
                             nanotextured surface interbody fusion
                             device, open approach, new technology group
                             2.
XRG7092...................  Fusion of 2 to 7 thoracic vertebral joints
                             using nanotextured surface interbody fusion
                             device, open approach, new technology group
                             2.
XRG8092...................  Fusion of 8 or more thoracic vertebral
                             joints using nanotextured surface interbody
                             fusion device, open approach, new
                             technology group 2.
XRGA092...................  Fusion of thoracolumbar vertebral joint
                             using nanotextured surface interbody fusion
                             device, open approach, new technology group
                             2.
XRGB092...................  Fusion of lumbar vertebral joint using
                             nanotextured surface interbody fusion
                             device, open approach, new technology group
                             2.
XRGC092...................  Fusion of 2 or more lumbar vertebral joints
                             using nanotextured surface interbody fusion
                             device, open approach, new technology group
                             2.
XRGD092...................  Fusion of lumbosacral joint using
                             nanotextured surface interbody fusion
                             device, open approach, new technology group
                             2.
------------------------------------------------------------------------

    We note that the remaining three new procedure codes are accurately 
reflected in the anterior spinal fusion list; that is, ICD-10-PCS code 
XRG1092 (Fusion of cervical vertebral joint using nanotextured surface 
interbody fusion device, open approach, new technology group 2); ICD-
10-PCS code XRG2092 (Fusion of 2 or more cervical vertebral joints 
using nanotextured surface interbody fusion device, open approach, new 
technology group 2); and ICD-10-PCS code XRG4092 (Fusion of 
cervicothoracic vertebral joint using nanotextured surface interbody 
fusion device, open approach, new technology group 2).
    The seven procedure codes currently included in the posterior 
spinal fusion list describe an anterior spinal fusion by use of the 
interbody fusion device. In an interbody fusion, the anterior column of 
the spine is being fused. The results of our review of these procedure 
codes discussed below and the advice of our clinical advisors support 
moving the seven procedure codes from the posterior spinal fusion list 
to the anterior spinal fusion list in the GROUPER logic for MS-DRGs 
453, 454, and 455. This will improve clinical accuracy and allow 
appropriate assignment to these MS-DRGs when both an anterior and 
posterior spinal fusion is performed.
    During our review of the spinal fusion codes using a nanotextured 
surface interbody fusion device in MS-DRGs 453, 454, and 455, we 
identified 149 additional procedure codes that should be moved from the 
posterior spinal fusion list to the anterior spinal fusion

[[Page 19833]]

list. These codes describe spinal fusion of the anterior column with a 
posterior approach. As mentioned earlier, the logic for MS-DRGs 453, 
454, and 455 is dependent upon a code from the anterior spinal fusion 
list and a code from the posterior spinal fusion list. Spinal fusion 
codes involving the anterior column should be included on the anterior 
spinal fusion list only. We are proposing to move the 149 ICD-10-PCS 
procedure codes listed in Table 6P.3a. associated with this proposed 
rule (which is available via the Internet on the CMS Web site at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from the posterior spinal fusion list to 
the anterior spinal fusion list in MS-DRGs 453, 454, and 455.
    In addition, we also identified 33 ICD-10-PCS procedure codes in 
the posterior spinal fusion list in MS-DRGs 453, 454, and 455 that 
describe an interbody fusion device in the posterior column and, 
therefore, are not considered clinically valid spinal fusion 
procedures. These procedure codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0RG00A1...................  Fusion of occipital-cervical joint with
                             interbody fusion device, posterior
                             approach, posterior column, open approach.
0RG03A1...................  Fusion of occipital-cervical joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0RG04A1...................  Fusion of occipital-cervical joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0RG10A1...................  Fusion of cervical vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, open approach.
0RG13A1...................  Fusion of cervical vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0RG14A1...................  Fusion of cervical vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0RG20A1...................  Fusion of 2 or more cervical vertebral
                             joints with interbody fusion device,
                             posterior approach, posterior column, open
                             approach.
0RG23A1...................  Fusion of 2 or more cervical vertebral
                             joints with interbody fusion device,
                             posterior approach, posterior column,
                             percutaneous approach.
0RG24A1...................  Fusion of 2 or more cervical vertebral
                             joints with interbody fusion device,
                             posterior approach, posterior column,
                             percutaneous endoscopic approach.
0RG40A1...................  Fusion of cervicothoracic vertebral joint
                             with interbody fusion device, posterior
                             approach, posterior column, open approach.
0RG43A1...................  Fusion of cervicothoracic vertebral joint
                             with interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0RG44A1...................  Fusion of cervicothoracic vertebral joint
                             with interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0RG60A1...................  Fusion of thoracic vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, open approach.
0RG63A1...................  Fusion of thoracic vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0RG64A1...................  Fusion of thoracic vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0RG70A1...................  Fusion of 2 to 7 thoracic vertebral joints
                             with interbody fusion device, posterior
                             approach, posterior column, open approach.
0RG73A1...................  Fusion of 2 to 7 thoracic vertebral joints
                             with interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0RG74A1...................  Fusion of 2 to 7 thoracic vertebral joints
                             with interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0RG80A1...................  Fusion of 8 or more thoracic vertebral
                             joints with interbody fusion device,
                             posterior approach, posterior column, open
                             approach.
0RG83A1...................  Fusion of 8 or more thoracic vertebral
                             joints with interbody fusion device,
                             posterior approach, posterior column,
                             percutaneous approach.
0RG84A1...................  Fusion of 8 or more thoracic vertebral
                             joints with interbody fusion device,
                             posterior approach, posterior column,
                             percutaneous endoscopic approach.
0RGA0A1...................  Fusion of thoracolumbar vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, open approach.
0RGA3A1...................  Fusion of thoracolumbar vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0RGA4A1...................  Fusion of thoracolumbar vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0SG00A1...................  Fusion of lumbar vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, open approach.
0SG03A1...................  Fusion of lumbar vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0SG04A1...................  Fusion of lumbar vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0SG10A1...................  Fusion of 2 or more lumbar vertebral joints
                             with interbody fusion device, posterior
                             approach, posterior column, open approach.
0SG13A1...................  Fusion of 2 or more lumbar vertebral joints
                             with interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0SG14A1...................  Fusion of 2 or more lumbar vertebral joints
                             with interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0SG30A1...................  Fusion of lumbosacral joint with interbody
                             fusion device, posterior approach,
                             posterior column, open approach.
0SG33A1...................  Fusion of lumbosacral joint with interbody
                             fusion device, posterior approach,
                             posterior column, percutaneous approach.
0SG34A1...................  Fusion of lumbosacral joint with interbody
                             fusion device, posterior approach,
                             posterior column, percutaneous endoscopic
                             approach.
------------------------------------------------------------------------

    We are proposing to delete these 33 procedure codes from MS-DRGs 
453, 454, and 455 for FY 2018. We also note that some of the above 
listed codes also may be included in the logic for MS-DRGs 456, 457, 
and 458 (Spinal Fusion Except Cervical with Spinal Curvature or 
Malignancy or Infection or Extensive Fusions with MCC, with CC or 
without

[[Page 19834]]

CC/MCC, respectively), MS-DRGs 459 and 460 (Spinal Fusion Except 
Cervical with MCC and without MCC, respectively), and MS-DRGs 471, 472, 
and 473 (Cervical Spinal Fusion with MCC, with CC and without CC/MCC, 
respectively). Therefore, we are proposing to delete the 33 procedure 
codes from the logic for those spinal fusion MS-DRGs as well. In 
addition, we are proposing to delete the 33 procedure codes from the 
ICD-10-PCS classification as shown in Table 6D.--Invalid Procedure 
Codes associated with this proposed rule (which is available via the 
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
    In summary, we are inviting public comments on our proposal to move 
the seven procedure codes describing spinal fusion using a nanotextured 
surface interbody fusion device from the posterior spinal fusion list 
to the anterior spinal fusion list in the GROUPER logic for MS-DRGs 
453, 454, and 455. We also are inviting public comments on our proposal 
to move the 149 procedure codes describing spinal fusion of the 
anterior column with a posterior approach from the posterior spinal 
fusion list to the anterior spinal fusion list in the GROUPER logic for 
MS-DRGs 453, 454, and 455. In addition, we are inviting public comments 
on our proposal to delete the 33 procedure codes describing spinal 
fusion of the posterior column with an interbody fusion device from MS-
DRGs 453, 454, 455, 456, 457, 458, 459, 460, 471, 472, and 473, as well 
as from the ICD-10-PCS classification.
6. MDC 14 (Pregnancy, Childbirth and the Puerperium)
a. Vaginal Delivery and Complicating Diagnoses
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56854), we noted 
that the code list as displayed in the ICD-10 MS-DRG Version 33 
Definitions Manual for MS-DRG 774 (Vaginal Delivery with Complicating 
Diagnoses) required further analysis to clarify what constitutes a 
vaginal delivery to satisfy the ICD-10 MS-DRG logic. We stated our 
plans to conduct further analysis of the diagnosis code lists in MS-DRG 
774 for FY 2018.
    We believe that the Version 34 Definitions Manual and GROUPER logic 
for MS-DRG 774 continue to require additional analysis to determine how 
best to classify a vaginal delivery. For example, under MS-DRG 774, the 
Definitions Manual currently states that three conditions must be met, 
the first of which is a vaginal delivery. To satisfy this first 
condition, codes that describe conditions or circumstances from among 
three lists of codes must be reported. The first list is comprised of 
ICD-10-CM diagnosis codes that may be reported as a principal diagnosis 
or a secondary diagnosis. These diagnosis codes describe conditions in 
which it is assumed that a vaginal delivery has occurred. The second 
list of codes is a list of ICD-10-PCS procedure codes that also 
describe circumstances in which it is assumed that a vaginal delivery 
occurred. The third list of codes identifies diagnoses describing the 
outcome of the delivery. Therefore, if any code from one of those three 
lists is reported, the first condition (vaginal delivery) is considered 
to be met for assignment to MS-DRG 774.
    Our continued concern with the first list of ICD-10-CM diagnosis 
codes as currently displayed in the Definitions Manual under the first 
condition is that not all of the conditions necessarily reflect that a 
vaginal delivery occurred. Several of the diagnosis codes listed could 
also reflect that a cesarean delivery occurred. For example, ICD-10-CM 
diagnosis code O10.02 (Pre-existing essential hypertension complicating 
childbirth) does not specify that a vaginal delivery took place; yet it 
is included in the list of conditions that may be reported as a 
principal diagnosis or a secondary diagnosis in the GROUPER logic for a 
vaginal delivery. The reporting of this code also could be appropriate 
for a delivery that occurred by cesarean section.
    As noted earlier, the second list of codes for the first condition 
are comprised of ICD-10-PCS procedure codes. While we agree that the 
current list of procedure codes in MS-DRG 774 may appropriately 
describe that a vaginal delivery occurred, we also believe this list 
could be improved and warrants closer review.
    The third list of codes for the first condition in MS-DRG 774 
includes conditions describing the outcome of the delivery that would 
be reported as secondary diagnoses. Similar to concerns with the first 
list of codes, we believe the conditions do not necessarily reflect 
that a vaginal delivery occurred because they also can be reported on 
claims where a cesarean delivery occurred.
    For the second condition in MS-DRG 774 to be met, diagnosis codes 
that are identified as a complicating diagnosis from among two lists 
may be reported. The first list is comprised of ICD-10-CM diagnosis 
codes that may be reported as a principal or secondary diagnosis. The 
second list is comprised of ICD-10-CM diagnosis codes that may be 
reported as a secondary diagnosis. Currently, there is only one code 
listed under the secondary diagnosis list. We have concerns with these 
lists and what is classified as a complicating diagnosis when reviewing 
the code lists for this and other MS-DRGs that use that logic in MDC 
14.
    For the third condition in MS-DRG 774 to be met, a limited set of 
O.R. procedures, including both extensive and nonextensive procedures, 
are listed. We have concerns with this third condition as being needed 
to satisfy the logic for a vaginal delivery MS-DRG.
    In summary, the MS-DRG logic involving a vaginal delivery under MDC 
14 is technically complex as a result of the requirements that must be 
met to satisfy assignment to the affected MS-DRGs. Upon review and 
discussion, our clinical advisors recommended, and we agree, that we 
should solicit public comments on further refinement to the following 
four MS-DRGs related to vaginal delivery: MS-DRG 767 (Vaginal Delivery 
with Sterilization and/or D&C); MS-DRG 768 (Vaginal Delivery with O.R. 
Procedure Except Sterilization and/or D&C); MS-DRG 774 (Vaginal 
Delivery with Complicating Diagnosis); and MS-DRG 775 (Vaginal Delivery 
without Complicating Diagnosis).
    In addition, our clinical advisors agreed that we should solicit 
public comments on further refinement to the conditions defined as a 
complicating diagnosis in MS-DRG 774 and MS-DRG 781 (Other Antepartum 
Diagnoses with Medical Complications).
    Therefore, we are soliciting public comments on which diagnosis or 
procedure codes, or both, should be considered in the logic to identify 
a vaginal delivery and which diagnosis codes should be considered in 
the logic to identify a complicating diagnosis. As MS-DRGs 767, 768, 
774, 775, and 781 incorporate one or both aspects (vaginal delivery or 
complicating diagnosis), public comments that we receive from this 
solicitation will be helpful in determining what proposed revisions to 
the current logic should be made. We will review public comments 
received in response to this solicitation as we continue to evaluate 
these areas under MDC 14 and, if warranted, we would propose 
refinements for FY 2019. We are requesting that all comments be 
directed to the CMS MS-DRG Classification Change Request Mailbox 
located at: [email protected] by November 1, 2017.

[[Page 19835]]

b. MS-DRG 998 (Principal Diagnosis Invalid as Discharge Diagnosis)
    The logic for MS-DRG 998 (Principal Diagnosis Invalid as Discharge 
Diagnosis) currently includes a list of diagnoses that are considered 
inappropriate for reporting as a principal diagnosis on an inpatient 
hospital claim. In other words, these conditions would reasonably be 
expected not to necessitate an inpatient admission. Examples of these 
diagnosis codes include what are referred to as the ``Supervision of 
pregnancy'' codes, as well as pregnancy, maternal care and fetal 
related codes with an ``unspecified trimester''. We refer the reader to 
the ICD-10 Version 34 Definitions Manual which is available via the 
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for the 
complete list of diagnosis codes in MS-DRG 998 under MDC 14.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56840 through 
56841), there was discussion regarding the supervision of ``high-risk'' 
pregnancy codes, including elderly primigravida and multigravida 
specifically, with regard to removing them from the Unacceptable 
principal diagnosis edit code list in the Medicare Code Editor (MCE). 
After consultation with the staff at the CDC's NCHS, we learned that 
the FY 2017 ICD-10-CM Official Guidelines for Coding and Reporting were 
updated to explain appropriate coding for this set of codes. As a 
result, the codes describing supervision of high-risk pregnancy (and 
other supervision of pregnancy codes) remained on the Unacceptable 
principal diagnosis edit code list in the MCE. Therefore, the MCE code 
edit is consistent with the logic of MS-DRG 998 (Principal Diagnosis 
Invalid as Discharge Diagnosis) for these supervision of pregnancy 
codes.
    However, as a result of our review and consultation with our 
clinical advisors regarding the ``unspecified trimester'' codes in MS-
DRG 998, we have determined that there are more appropriate MS-DRG 
assignments for this set of codes. Although it may seem unlikely that a 
patient would be admitted and ultimately discharged or transferred 
without the caregiver or medical personnel having any further knowledge 
of the exact trimester, it is conceivable that a situation may present 
itself. For example, the pregnant patient may be from out of town or 
unable to communicate effectively. The fact that the specific trimester 
is not known or documented does not preclude the resources required to 
care for the patient with the particular diagnosis.
    Therefore, as shown in Table 6P.3b. associated with this proposed 
rule (which is available via the Internet on the CMS Web site at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html), we are proposing to remove the 314 ICD-
10-CM diagnosis codes identified with ``unspecified trimester'' from 
MS-DRG 998 and reassign them to the MS-DRGs in which their counterparts 
(first trimester, second trimester, or third trimester) are currently 
assigned as specified in Column C. This would enable more appropriate 
MS-DRG assignments and payment for these cases. We are inviting public 
comments on our proposal.
c. MS-DRG 782 (Other Antepartum Diagnoses Without Medical 
Complications)
    The following three ICD-10-CM diagnosis codes are currently on the 
principal diagnosis list for the MS-DRG 782 (Other Antepartum Diagnoses 
without Medical Complications) logic.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
O09.41....................  Supervision of pregnancy with grand
                             multiparity, first trimester.
O09.42....................  Supervision of pregnancy with grand
                             multiparity, second trimester.
O09.43....................  Supervision of pregnancy with grand
                             multiparity, third trimester.
------------------------------------------------------------------------

    It was brought to our attention that these codes also are included 
in the MCE Unacceptable principal diagnosis code edit list. As 
discussed earlier in section II.F.6.b. of the preamble of this proposed 
rule, the supervision of pregnancy codes are accurately reflected in 
the MCE code edit list for Unacceptable principal diagnosis. Therefore, 
it is not appropriate to include the three above listed codes in MS-DRG 
782.
    We are proposing to remove the three codes describing supervision 
of pregnancy from MS-DRG 782 and reassign them to MS-DRG 998 (Principal 
Diagnosis Invalid as Discharge Diagnosis) to reflect a more appropriate 
MS-DRG assignment. We are inviting public comments on our proposal.
d. Shock During or Following Labor and Delivery
    We received a request to review ICD-10-CM diagnosis code O75.1 
(Shock during or following labor and delivery), which is currently 
assigned to MS-DRG 774 (Vaginal Delivery with Complicating Diagnosis), 
MS-DRG 767 (Vaginal Delivery with Sterilization and/or D&C), and MS-DRG 
768 (Vaginal Delivery with O.R. Procedure Except Sterilization and/or 
D&C).
    The requestor provided an example of a patient that delivered at 
Hospital A and was transferred to Hospital B for specialized care 
related to the diagnosis of shock. The claim for Hospital B resulted in 
assignment to a delivery MS-DRG, despite the fact that a delivery did 
not occur during that hospitalization. The requestor noted that, by not 
reporting the diagnosis code for shock, the claim grouped to a 
postpartum MS-DRG and recommended that we evaluate the issue further.
    Our analysis initially involved reviewing the GROUPER logic for MS-
DRGs 774, 767 and 768. As discussed earlier in section II.F.14.a. of 
the preamble of this proposed rule, the GROUPER logic for 
classification and assignment to MS-DRG 774 requires that three 
conditions must be met, the first of which is a vaginal delivery. 
Similar GROUPER logic applies for assignment to MS-DRGs 767 and 768, 
except that only two conditions must be met, with the first condition 
being a vaginal delivery. For each of these three MS-DRGs, to satisfy 
the first condition, one code that describes a condition or 
circumstance from among the three separate lists of codes must be 
reported. The first list is comprised of ICD-10-CM diagnosis codes that 
may be reported as a principal or secondary diagnosis. These diagnosis 
codes describe conditions in which it is assumed that a vaginal 
delivery has occurred. Among this first list is ICD-10-CM diagnosis 
code O75.1, which is included in the GROUPER logic for MS-DRGs 774, 767 
and 768 (under the first condition--vaginal delivery). We refer readers 
to the ICD-10 MS-DRG Version 34 Definitions Manual located via the 
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-
Fee-for-Service-Payment/AcuteInpatient

[[Page 19836]]

PPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-
Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for 
documentation of the GROUPER logic associated with these MS-DRGs.
    In addition, in MS-DRG 774, to satisfy the second condition, 
diagnosis codes that are identified as a complicating diagnosis from 
among two lists may be reported. The first list is comprised of ICD-10-
CM diagnosis codes that may be reported as a principal or secondary 
diagnosis. The second list is comprised of ICD-10-CM diagnosis codes 
that may be reported as a secondary diagnosis. Currently, there is only 
one code listed under the secondary diagnosis list.
    Next, our analysis involved reviewing the GROUPER logic for 
assignment to post-partum MS-DRG 769 (Postpartum and Post Abortion 
Diagnoses with Major Procedure) and MS-DRG 776 (Postpartum and Post 
Abortion Diagnoses without O.R. Procedure). The GROUPER logic for these 
postpartum MS-DRGs requires that a principal diagnosis be reported from 
a list of several conditions, such as those following pregnancy, those 
complicating the puerperium, conditions that occurred during or 
following delivery and conditions associated with lactation disorders. 
For assignment to MS-DRG 769, the GROUPER logic also requires that a 
major procedure be reported in addition to a principal diagnosis from 
the list of conditions.
    As a result of our analysis, we agree with the requestor that ICD-
10-CM diagnosis code O75.1 should be added to the GROUPER logic for 
assignment to the postpartum MS-DRGs. This diagnosis code is consistent 
with other diagnosis codes structured within the GROUPER logic for 
assignment to MS-DRGs 769 and 776, and clearly represents a post-partum 
diagnosis with the terminology ``during or following labor and 
delivery'' in the title. We believe that adding this diagnosis code to 
the postpartum MS-DRGs will enable more appropriate MS-DRG assignment 
for cases where a delivery did not occur.
    Therefore, we are proposing the following:
     Removing ICD-10-CM diagnosis code O75.1 from the list of 
principal or secondary diagnosis under the first condition--vaginal 
delivery GROUPER logic in MS-DRGs 774, 767, and 768;
     Moving ICD-10-CM diagnosis code O75.1 from the list of 
principal or secondary diagnosis under the second condition--
complicating diagnosis for MS-DRG 774 to the secondary diagnosis list 
only; and
     Adding ICD-10-CM diagnosis code O75.1 to the principal 
diagnosis list GROUPER logic in MS-DRGs 769 and 776.
    We are inviting public comments on our proposals.
7. MDC 15 (Newborns and Other Neonates With Conditions Originating in 
Perinatal Period): Observation and Evaluation of Newborn
    We received a request to add the ICD-10-CM diagnosis codes 
describing observation and evaluation of newborns for suspected 
conditions that are ruled out to MS-DRG 795 (Normal Newborn). The 14 
diagnosis codes describing observation and evaluation of newborn for 
suspected conditions ruled out are displayed in the table below.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
Z05.0.....................  Observation and evaluation of newborn for
                             suspected cardiac condition ruled out.
Z05.1.....................  Observation and evaluation of newborn for
                             suspected infectious condition ruled out.
Z05.2.....................  Observation and evaluation of newborn for
                             suspected neurological condition ruled out.
Z05.3.....................  Observation and evaluation of newborn for
                             suspected respiratory condition ruled out.
Z05.41....................  Observation and evaluation of newborn for
                             suspected genetic condition ruled out.
Z05.42....................  Observation and evaluation of newborn for
                             suspected metabolic condition ruled out.
Z05.43....................  Observation and evaluation of newborn for
                             suspected immunologic condition ruled out.
Z05.5.....................  Observation and evaluation of newborn for
                             suspected gastrointestinal condition ruled
                             out.
Z05.6.....................  Observation and evaluation of newborn for
                             suspected genitourinary condition ruled
                             out.
Z05.71....................  Observation and evaluation of newborn for
                             suspected skin and subcutaneous tissue
                             condition ruled out.
Z05.72....................  Observation and evaluation of newborn for
                             suspected musculoskeletal condition ruled
                             out.
Z05.73....................  Observation and evaluation of newborn for
                             suspected connective tissue condition ruled
                             out.
Z05.8.....................  Observation and evaluation of newborn for
                             other specified suspected condition ruled
                             out.
Z05.9.....................  Observation and evaluation of newborn for
                             unspecified suspected condition ruled out.
------------------------------------------------------------------------

    The requestor expressed concern that currently when one of these 
ruled out codes is added to a newborn encounter with a principal 
diagnosis described by ICD-10-CM code Z38.00 (Single liveborn infant, 
delivered vaginally), the case is assigned to MS-DRG 794 (Neonate with 
Other Significant Problems). The requestor stated that this assignment 
appears to be in error and that the assignment should instead be to MS-
DRG 795 (Normal Newborn).
    We reviewed Section I.C.16.b. of the 2017 ICD-10-CM Official 
Guidelines for Coding and Reporting which includes the following 
instructions for the diagnosis codes listed in the table above:
     Assign a code from category Z05 (Observation and 
evaluation of newborns and infants for suspected conditions ruled out) 
to identify those instances when a healthy newborn is evaluated for a 
suspected condition that is determined after study not to be present. 
Do not use a code from category Z05 when the patient has identified 
signs or symptoms of a suspected problem; in such cases code the sign 
or symptom.
     A code from category Z05 may also be assigned as a 
principal or first-listed code for readmissions or encounters when the 
code from category Z38 code no longer applies. Codes from category Z05 
are for use only for healthy newborns and infants for which no 
condition after study is found to be present.
     A code from category Z05 is to be used as a secondary code 
after the code from category Z38, Liveborn infants according to place 
of birth and type of delivery.
    After review of the guidelines and discussion with our clinical 
advisors, we agree with the requestor that the assignment of these 
codes to MS-DRG 794 is not accurate because the assignment incorrectly 
labels the newborns as having a significant problem when the condition 
does not truly exist. We and our clinical advisors also agree that the 
above list of diagnosis codes should be added to MS-DRG 795. Therefore, 
we are proposing to add the 14 diagnosis codes describing observation 
and evaluation of newborns for suspected conditions that are ruled out 
listed in the table above to the GROUPER logic for MS-DRG 795. We are 
inviting public comments on our proposals.

[[Page 19837]]

8. MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs): 
Complication Codes
    We received a request to examine the ICD-10-CM diagnosis codes in 
the T85.8-series of codes that describe other specified complications 
of internal prosthetic devices, implants and grafts, not elsewhere 
classified and their respective MS-DRG assignments. According to the 
requestor, the 7th character values in this series of codes impact the 
MS-DRG assignment under MDC 21 (Injuries, Poisonings and Toxic Effects 
of Drugs) and MDC 23 (Factors Influencing Health Status & Other 
Contacts with Health Services) that have resulted in inconsistencies 
(that is, shifts) between the MS-DRG assignments under Version 33 and 
Version 34 of the ICD-10 MS-DRGs.
    Under ICD-10-CM, diagnosis codes in the range of S00 through T88 
require a 7th character value of ``A-'' initial encounter, ``D-'' 
subsequent encounter, or ``S-'' sequela to identify if the patient is 
undergoing active treatment for a condition. For complication codes, 
active treatment refers to treatment for the condition described by the 
code, even though it may be related to an earlier precipitating 
problem.
    The requestor suggested that the following list of diagnosis codes 
with the 7th character ``A'' (initial encounter) may have been 
inadvertently assigned to the GROUPER logic in the list of diagnoses 
(Assignment of Diagnosis Codes) under MDC 23 because when one of these 
diagnosis codes was reported with an O.R. procedure, the requestor 
found claims grouping to MS-DRG 939, 940, or 941 (O.R. Procedures with 
Diagnoses of Other Contact with Health Services with MCC, with CC and 
without CC/MCC, respectively) that had previously grouped to MDC 21 
under Version 33 of the ICD-10 MS-DRGs. The requestor also suggested 
these codes may have been inadvertently assigned to the GROUPER logic 
list of principal diagnoses for MS-DRGs 949 and 950 (Aftercare with CC/
MCC and without CC/MCC, respectively) under MDC 23 because it found 
claims that grouped to these MS-DRGs (949 and 950) when one of the 
following diagnosis codes was reported as a principal diagnosis that 
had previously grouped to MDC 21 under Version 33 of the ICD-10 MS-
DRGs.

------------------------------------------------------------------------
 ICD-10-CM diagnosis code                 Code description
------------------------------------------------------------------------
T85.818A..................  Embolism due to other internal prosthetic
                             devices, implants and grafts, initial
                             encounter.
T85.828A..................  Fibrosis due to other internal prosthetic
                             devices, implants and grafts, initial
                             encounter.
T85.838A..................  Hemorrhage due to other internal prosthetic
                             devices, implants and grafts, initial
                             encounter.
T85.848A..................  Pain due to other internal prosthetic
                             devices, implants and grafts, initial
                             encounter.
T85.858A..................  Stenosis due to other internal prosthetic
                             devices, implants and grafts, initial
                             encounter.
T85.868A..................  Thrombosis due to other internal prosthetic
                             devices, implants and grafts, initial
                             encounter.
T85.898A..................  Other specified complication of other
                             internal prosthetic devices, implants and
                             grafts, initial encounter.
------------------------------------------------------------------------

    The requestor believed that the above list of diagnosis codes with 
the 7th character ``A'' (initial encounter) would be more appropriately 
assigned under MDC 21 to MS-DRGs 919, 920, and 921 (Complications of 
Treatment with MCC, with CC and without CC/MCC, respectively), 
according to its review of the 2017 Official Coding Guidelines for use 
of the 7th character and assignment of other diagnoses of associated 
complications of care. The requestor also noted that these codes were 
new, effective October 1, 2016 (FY 2017), and the predecessor codes 
grouped to MS-DRGs 919, 920, and 921 in MDC 21 under Version 33 of the 
ICD-10 MS-DRGs in FY 2016.
    In addition, the requestor suggested that the following list of 
diagnosis codes with the 7th character ``D'' (subsequent encounter) may 
have been inadvertently assigned to the GROUPER logic list of principal 
diagnoses for MS-DRG 919, 920, or 921 in MDC 21. The requestor noted 
that these codes were new, effective October 1, 2016 (FY 2017), and the 
predecessor codes grouped to MS-DRGs 949 and 950 (Aftercare with CC/MCC 
and without CC/MCC, respectively) in MDC 23 under Version 33 of the 
ICD-10 MS-DRGs in FY 2016.

------------------------------------------------------------------------
 ICD-10-CM diagnosis code                 Code description
------------------------------------------------------------------------
T85.810D..................  Embolism due to nervous system prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.820D..................  Fibrosis due to nervous system prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.830D..................  Hemorrhage due to nervous system prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.840D..................  Pain due to nervous system prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.850D..................  Stenosis due to nervous system prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.860D..................  Thrombosis due to nervous system prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.890D..................  Other specified complication of nervous
                             system prosthetic devices, implants and
                             grafts, subsequent encounter.
------------------------------------------------------------------------

    The requestor also suggested that the following list of additional 
diagnosis codes with the 7th character ``D'' (subsequent encounter) may 
have been inadvertently assigned to the GROUPER logic list of principal 
diagnoses for MS-DRGs 922 and 923 (Other Injury, Poisoning and Toxic 
Effect with MCC and without MCC, respectively) also under MDC 21. The 
requestor noted these codes were also new, effective October 1, 2016 
(FY 2017) and that the predecessor codes grouped to MS-DRGs 949 and 950 
in MDC 23 under Version 33 of the ICD-10 MS-DRGs in FY 2016.

------------------------------------------------------------------------
 ICD-10-CM diagnosis code                 Code description
------------------------------------------------------------------------
T85.818D..................  Embolism due to other internal prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.828D..................  Fibrosis due to other internal prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.838D..................  Hemorrhage due to other internal prosthetic
                             devices, implants and grafts, subsequent
                             encounter.

[[Page 19838]]

 
T85.848D..................  Pain due to other internal prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.858D..................  Stenosis due to other internal prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.868D..................  Thrombosis due to other internal prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.898D..................  Other specified complication of other
                             internal prosthetic devices, implants and
                             grafts, subsequent encounter.
------------------------------------------------------------------------

    The requestor believed that the lists of diagnosis codes above with 
7th character ``D'' (subsequent encounter) would be more appropriately 
assigned to MS-DRGs 949 and 950 under MDC 23, according to its review 
of the 2017 Official Coding Guidelines for use of the 7th character and 
assignment of other diagnoses of associated complications of care.
    We ran test cases to determine if we could duplicate the 
requestor's findings with regard to the shifts in MS-DRG assignment 
between Version 33 and Version 34 of the ICD-10 MS-DRGs. Results of our 
review were consistent with the requestor's findings. We found that the 
T85.8-series of diagnosis codes with the 7th character of ``A'' 
(initial encounter) and 7th character of ``D'' (subsequent encounter) 
were inadvertently assigned to the incorrect MDC for Version 34 of the 
ICD-10 MS-DRGs, which led to inconsistencies (MS-DRG shifts) when 
compared to Version 33 of the ICD-10 MS-DRGs. Our analysis also 
included review of all of the diagnosis codes in the T85.8- series and 
their current MDC and MS-DRG assignments, as well as review of the 2017 
Official Coding Guidelines for use of the 7th character and assignment 
of other diagnoses of associated complications of care. Based on the 
results of our review, we agree with the requestor's findings.
    In addition, we identified the following list of diagnosis codes 
with the 7th character ``S'' (sequela) that appear to have been 
inadvertently assigned to MS-DRGs 949 and 950 in MDC 23 rather than MDC 
21 in MS-DRGs 922 and 923 (Other Injury, Poisoning and Toxic Effect 
with MCC and without MCC, respectively).

------------------------------------------------------------------------
 ICD-10-CM diagnosis code                 Code description
------------------------------------------------------------------------
T85.810S..................  Embolism due to nervous system prosthetic
                             devices, implants and grafts, sequela.
T85.820S..................  Fibrosis due to nervous system prosthetic
                             devices, implants and grafts, sequela.
T85.830S..................  Hemorrhage due to nervous system prosthetic
                             devices, implants and grafts, sequela.
T85.840S..................  Pain due to nervous system prosthetic
                             devices, implants and grafts, sequela.
T85.850S..................  Stenosis due to nervous system prosthetic
                             devices, implants and grafts, sequela.
T85.860S..................  Thrombosis due to nervous system prosthetic
                             devices, implants and grafts, sequela.
T85.890S..................  Other specified complication of nervous
                             system prosthetic devices, implants and
                             grafts, sequela.
------------------------------------------------------------------------

    We are inviting public comment on our proposals to (1) reassign the 
ICD-10-CM diagnosis codes with the 7th character ``A'' (initial 
encounter) from MS-DRGs 949 and 950 in MDC 23 to MS-DRGs 919, 920 and 
921 in MDC 21; (2) reassign the ICD-10-CM diagnosis codes with the 7th 
character ``D'' (subsequent encounter) from MS-DRGs 919, 920, 921, 922, 
and 923 in MDC 21 to MS-DRGs 949 and 950 in MDC 23; and (3) reassign 
the ICD-10-CM diagnosis codes with the 7th character ``S'' (sequela) 
from MS-DRGs 949 and 950 in MDC 23 to MS-DRGs 922 and 923 in MDC 21 for 
FY 2018. The table below displays the current Version 34 MDC and MS-DRG 
assignments and the proposed Version 35 MDC and MS-DRG assignments that 
we are seeking public comment on for the respective ICD-10-CM diagnosis 
codes.

----------------------------------------------------------------------------------------------------------------
                                                    Current V34   Current V34 MS-  Proposed V35    Proposed V35
       ICD-10-CM code          Code description         MDC             DRG             MDC           MS-DRG
----------------------------------------------------------------------------------------------------------------
T85.810D...................  Embolism due to                  21   919, 920, 921              23        949, 950
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.810S...................  Embolism due to                  23        949, 950              21        922, 923
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.818A...................  Embolism due to                  23        949, 950              21   919, 920, 921
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.818D...................  Embolism due to                  21        922, 923              23        949, 950
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.820D...................  Fibrosis due to                  21   919, 920, 921              23        949, 950
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.820S...................  Fibrosis due to                  23        949, 950              21        922, 923
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.828A...................  Fibrosis due to                  23        949, 950              21   919, 920, 921
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.828D...................  Fibrosis due to                  21        922, 923              23        949, 950
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.830D...................  Hemorrhage due to                21   919, 920, 921              23        949, 950
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.830S...................  Hemorrhage due to                23        949, 950              21        922, 923
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.838A...................  Hemorrhage due to                23        949, 950              21   919, 920, 921
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.

[[Page 19839]]

 
T85.838D...................  Hemorrhage due to                21        922, 923              23        949, 950
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.840D...................  Pain due to nervous              21   919, 920, 921              23        949, 950
                              system prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.840S...................  Pain due to nervous              23        949, 950              21        922, 923
                              system prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.848A...................  Pain due to other                23        949, 950              21   919, 920, 921
                              internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.848D...................  Pain due to other                21        922, 923              23        949, 950
                              internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.850D...................  Stenosis due to                  21   919, 920, 921              23        949, 950
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.850S...................  Stenosis due to                  23        949, 950              21        922, 923
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.858A...................  Stenosis due to                  23        949, 950              21   919, 920, 921
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.858D...................  Stenosis due to                  21        922, 923              23        949, 950
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.860D...................  Thrombosis due to                21   919, 920, 921              23        949, 950
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.860S...................  Thrombosis due to                23        949, 950              21        922, 923
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.868A...................  Thrombosis due to                23        949, 950              21   919, 920, 921
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.868D...................  Thrombosis due to                21        922, 923              23        949, 950
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.890D...................  Other specified                  21   919, 920, 921              23        949, 950
                              complication of
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.890S...................  Other specified                  23        949, 950              21        922, 923
                              complication of
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.898A...................  Other specified                  23        949, 950              21   919, 920, 921
                              complication of
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.898D...................  Other specified                  21        922, 923              23        949, 950
                              complication of
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
----------------------------------------------------------------------------------------------------------------

9. MDC 23 (Factors Influencing Health Status and Other Contacts With 
Health Services): Updates to MS-DRGs 945 and 946 (Rehabilitation With 
CC/MCC and Without CC/MCC, Respectively)
    In FY 2016, we received requests to modify the MS-DRG assignment 
for MS-DRGs 945 and 946 (Rehabilitation with CC/MCC and without CC/MCC, 
respectively). This issue was addressed in the FY 2017 IPPS/LTCH PPS 
proposed and final rules (81 FR 24998 through 25000 and 81 FR 56826 
through 56831). For FY 2017, we did not change the MS-DRG assignments 
for MS-DRGs 945 and 946.
    We did not receive a request to address this issue as part of this 
FY 2018 IPPS/LTCH PPS proposed rule or suggestions on how to update the 
MS-DRGs 945 and 946 logic. However, we did refer the FY 2016 requests 
for a new ICD-10-CM diagnosis code to the Centers for Disease Control 
and Prevention (CDC) for consideration at a future meeting of the ICD-
10 Coordination and Maintenance Committee. CDC has the lead on updating 
and maintaining ICD-10-CM codes. CDC did not address the issue at the 
September 13-14, 2016 ICD-10 Coordination and Maintenance Committee 
meeting. When the topic was not addressed at the September 13-14, 2016 
ICD-10 Coordination and Maintenance Committee meeting, we asked CDC to 
address the code request at the March 7-8, 2017 meeting of the ICD-10 
Coordination and Maintenance Committee. The topic was on the agenda for 
the March 7-8, 2017 ICD-10 Coordination and Maintenance Committee 
meeting. The deadline for providing comments on proposals considered at 
this meeting was April 7, 2017. Any new codes approved after this 
meeting which will be implemented on October 1, 2017 will be posted on 
the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html and on the CDC Web site at: http://www.cdc.gov/nchs/icd/icd10.html in June 2017. New codes also will be included in the FY 2018 
IPPS/LTCH PPS final rule.
    As addressed in the FY 2017 IPPS/LTCH PPS final rule, the ICD-9-CM 
MS-DRGs used ICD-9-CM codes reported as the principal diagnosis that 
clearly identified an encounter for rehabilitation services, such as 
diagnosis codes V57.89 (Care involving other specified rehabilitation 
procedure) and V57.9 (Care involving unspecified rehabilitation 
procedure), and these codes were not included in ICD-10-CM. Given this 
lack of ICD-10-CM codes to indicate that the reason for the encounter 
was for rehabilitation, the ICD-10 MS-DRG logic could not reflect the 
logic of the ICD-9-CM MS-DRGs. Commenters on the final rule recommended 
that CDC create new diagnosis codes for these concepts in ICD-10-CM so 
that the MS-DRG logic could be updated to more closely reflect that of 
the ICD-9-CM MS-DRGs.
    If new ICD-10-CM codes are created for encounter for rehabilitation 
services, we would address any updates to MS-DRGs 945 and 946 utilizing 
these new codes in future rulemaking. In the meantime, we welcome other 
specific recommendations on how to update MS-DRGs 945 and 946. We are 
sharing the following data on these MS-DRGs from the MedPAR file.

[[Page 19840]]



----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
               FY 2015 MS-DRGs with ICD-9-CM codes                     cases          of stay      Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 945......................................................           3,991            10.3          $8,242
MS-DRG 946......................................................           1,184             8.0           7,322
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
              FY 2016 MS-DRGs with ICD-10-CM codes                     cases          of stay      Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 945......................................................             671            10.8          $7,814
MS-DRG 946......................................................             157             7.3           7,672
----------------------------------------------------------------------------------------------------------------

    As shown by the tables above, there was a decrease of 3,320 MS-DRG 
945 cases (from 3,991 to 671) from FY 2015, when claims were submitted 
with ICD-9-CM codes, to FY 2016 when ICD-10 codes were submitted. There 
was a decrease of 1,027 MS-DRG 946 cases (from 1,184 to 157) from FY 
2015 to FY 2016. The average length of stay increased 0.5 days (from 
10.3 to 10.8 days) for MS-DRG 945 and decreased 0.7 days (from 8.0 to 
7.3 days) for MS-DRG 946. The average costs decreased by $428 (from 
$8,242 to $7,814) for MS-DRG 945 cases and increased by $350 (from 
$7,322 to $7,672) for MS-DRG 946 cases. The number of cases was 
significantly lower in FY 2016 compared to FY 2015. However, the 
difference in average length of stay and average costs did not show 
large changes.
    We also examined possible MS-DRGs where these cases may have been 
assigned in FY 2016 based on increases in the number of claims. Because 
there is not a diagnosis code that could be reported as a principal 
diagnosis, which would indicate if the admissions were for 
rehabilitation services, we are unable to determine if these were cases 
admitted for rehabilitation that moved from MS-DRGs 945 and 946 because 
of the lack of a code for encounter for rehabilitation, or if there was 
simply a change in the number of cases. The following tables show our 
findings for MS-DRG 056 (Degenerative Nervous System Disorders with 
MCC); MS-DRG 057 (Degenerative Nervous System Disorders without MCC); 
MS-DRG 079 (Hypertensive Encephalopathy without CC/MCC); MS DRG 083 
(Traumatic Stupor & Coma, Coma >1 Hour with CC); MS-DRG 084 (Traumatic 
Stupor & Coma, Coma >1 Hour without CC/MCC); MS-DRG 092 (Other 
Disorders of Nervous System with MCC); and MS-DRG 093 (Other Disorders 
of Nervous System without CC/MCC).

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
               FY 2015 MS-DRGs with ICD-9-CM codes                     cases          of stay      Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 056......................................................           9,548             7.3         $12,606
MS-DRG 057......................................................          25,652             5.1           7,918
MS-DRG 079......................................................             618             2.7           5,212
MS-DRG 083......................................................           2,516             4.3           9,446
MS-DRG 084......................................................           1,955             2.8           6,824
MS-DRG 092......................................................          12,643             5.7          11,158
MS-DRG 093......................................................           7,928             2.8           5,182
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
              FY 2016 MS-DRGs with ICD-10-CM codes                     cases          of stay      Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 056......................................................          10,817             7.6         $12,930
MS-DRG 057......................................................          28,336             5.3           7,902
MS-DRG 079......................................................           1,233             2.7           5,579
MS-DRG 083......................................................           4,058             6.2           9,134
MS-DRG 084......................................................           3,016             2.7           6,508
MS-DRG 092......................................................          19,392             3.9           6,706
MS-DRG 093......................................................           8,120             2.7           5,253
----------------------------------------------------------------------------------------------------------------

    As shown by the tables above, some of the MS-DRGs that show the 
largest increase in number of cases do not show significant changes in 
the average length of stay or average costs. For instance, MS-DRG 079 
cases doubled from FY 2015 to FY 2016 (from 618 to 1,233). However, the 
average length of stay did not change from 2.7 days and the average 
costs increased only $367 (from $5,212 to $5,579). MS-DRG 083 cases 
increased by 1,542 (from 2,516 to 4,058) with a 1.9 day increase in the 
average length of stay (from 4.3 to 6.2 days); however, the average 
costs decreased only $312 (from $9,446 to $9,134). There were large 
changes for MS-DRG 092 with cases increasing by 6,749 (from 12,643 to 
19,392), the average length of stay decreasing by 1.8 days (from 5.7 to 
3.9) and the average costs decreasing by $4,452 (from $11,158 to 
$6,706). Once again, it is not possible to determine if any changes are 
a result of the impact of not having a code for the encounter for 
rehabilitation services to report as a principal diagnosis, or if other 
factors such as changes in types of patient admissions were involved.
    Given the lack of a diagnosis code to capture the principal 
diagnosis of encounter for rehabilitation, we are unable to update MS-
DRG 945 or MS-DRG 946 to better identify those cases in which patients 
are admitted for rehabilitation services. If the CDC creates a new 
code, we will consider proposing updates to MS-DRGs 945 and 946 in the 
future.
    We are inviting public comments on our proposal not to update MS-
DRGs 945 and 946 for FY 2018.
10. Proposed Changes to the Medicare Code Editor (MCE)
    The Medicare Code Editor (MCE) is a software program that detects 
and reports errors in the coding of Medicare

[[Page 19841]]

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 the FY 2017 IPPS/LTCH PPS final rule (81 FR 56831 
through 56844), we made available the FY 2017 ICD-10 MCE Version 34 
manual file and an ICD-9-CM MCE Version 34.0A manual file (for analysis 
purposes only). The links to these MCE manual files, along with the 
links to purchase the mainframe and computer software for the MCE 
Version 34 (and ICD-10 MS-DRGs) are posted on the CMS Web site at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html through the FY 2017 IPPS Final Rule Home 
Page.
    For this FY 2018 IPPS/LTCH PPS proposed rule, below we address the 
MCE requests we received by the December 7, 2016 deadline. We also 
discuss the proposals we are making based on our internal review and 
analysis.
a. Age Conflict Edit
    In the MCE, the Age Conflict edit exists to detect inconsistencies 
between a patient's age and any diagnosis on the patient's record; for 
example, a 5-year-old patient with benign prostatic hypertrophy or a 
78-year-old patient coded with a delivery. In these cases, the 
diagnosis is clinically and virtually impossible for a patient of the 
stated age. Therefore, either the diagnosis or the age is presumed to 
be incorrect. Currently, in the MCE, the following four age diagnosis 
categories appear under the Age Conflict edit and are listed in the 
manual and written in the software program:
     Perinatal/Newborn--Age of 0 years only; a subset of 
diagnoses which will only occur during the perinatal or newborn period 
of age 0 (for example, tetanus neonatorum, health examination for 
newborn under 8 days old).
     Pediatric--Age is 0 to 17 years inclusive (for example, 
Reye's syndrome, routine child health examination).
     Maternity--Age range is 12 to 55 years inclusive (for 
example, diabetes in pregnancy, antepartum pulmonary complication).
     Adult--Age range is 15 to 124 years inclusive (for 
example, senile delirium, mature cataract).
    We received a request to provide clarification regarding the 
overlapping age ranges (0 to 17 years and 15 to 124 years) in the 
Pediatric and Adult categories under the Age Conflict edit. The 
requestor questioned which diagnosis code would be most appropriate to 
identify when a general or routine health examination is performed on 
patients who are within the age range of 15 to 17 years. The specific 
ICD-10-CM diagnosis codes that the requestor inquired about related to 
a child or to an adult encounter for a health examination are displayed 
in the table below.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
Z00.00....................  Encounter for general adult medical
                             examination without abnormal findings.
Z00.01....................  Encounter for general adult medical
                             examination with abnormal findings.
Z00.121...................  Encounter for routine child health
                             examination with abnormal findings.
Z00.129...................  Encounter for routine child health
                             examination without abnormal findings.
------------------------------------------------------------------------

    The age ranges defined within the Age Conflict edits were 
established with the implementation of the IPPS. The adult age range 
includes the minimum age of 15 years for those patients who are 
declared emancipated minors. We note that, historically, we have not 
provided coding advice in rulemaking with respect to policy. We 
collaborate with the American Hospital Association (AHA) through the 
Coding Clinic for ICD-10-CM and ICD-10-PCS to promote proper coding. We 
recommend that the requestor and other interested parties submit any 
questions pertaining to correct coding practices for this specific 
issue to the AHA.
(1) Perinatal/Newborn Diagnosis Category
    Under the ICD-10 MCE, the Perinatal/Newborn Diagnosis category 
under the Age Conflict edit considers the age of 0 years only; a subset 
of diagnoses which will only occur during the perinatal or newborn 
period of age 0 to be inclusive. This includes conditions that have 
their origin in the fetal or perinatal period (before birth through the 
first 28 days after birth) even if morbidity occurs later. For that 
reason, the diagnosis codes on this Age Conflict edit list would be 
expected to apply to conditions or disorders specific to that age group 
only.
    In the ICD-10-CM classification, there are two diagnosis codes that 
describe conditions as occurring during infancy and the neonatal period 
that are currently not on the Perinatal/Newborn Diagnosis category edit 
code list. We consulted with staff at the Centers for Disease Control's 
(CDC's) National Center for Health Statistics (NCHS) because NCHS has 
the lead responsibility for the ICD-10-CM diagnosis codes. The NCHS' 
staff confirmed that, although diagnosis codes D80.7 (Transient 
hypogammaglobulinemia of infancy) and diagnosis code E71.511 (Neonatal 
adrenoleukodystrophy) do occur during infancy and the neonatal period, 
both conditions can last beyond the 28-day timeframe which is used to 
define the perinatal/newborn period. These diagnosis codes are not 
intended to be restricted for assignment to newborn patients. 
Therefore, we are proposing to not add these two diagnosis codes to the 
Perinatal/Newborn Diagnosis category under the Age Conflict edit. We 
are inviting public comments on our proposal.
(2) Pediatric Diagnosis Category
    Under the ICD-10 MCE, the Pediatric diagnosis category under the 
Age Conflict edit considers the age range of 0 to 17 years inclusive. 
For that reason, the diagnosis codes on this Age Conflict edit list 
would be expected to apply to conditions or disorders specific to that 
age group only.
    The ICD-10-CM diagnosis code list for the Pediatric diagnosis 
category under the Age Conflict edit currently includes a diagnosis 
code pertaining to dandruff that is not intended to apply to pediatric 
patients only. We consulted with staff at the Centers for Disease 
Control's (CDC's) National Center for Health Statistics (NCHS) because 
NCHS has the lead responsibility for the ICD-10-CM diagnosis codes. The 
NCHS' staff confirmed that, although diagnosis code L21.0 (Seborrhea 
capitis) has an inclusion term of ``Cradle cap,'' the description of 
the diagnosis code is not intended to be restricted for assignment of 
pediatric patients. Therefore, we are proposing to remove diagnosis 
code L21.0 from the list of diagnosis codes for the Pediatric diagnosis 
category under the Age Conflict edit. We are inviting public comments 
on our proposal.

[[Page 19842]]

(3) Maternity Diagnoses
    Under the ICD-10 MCE, the Maternity diagnosis category under the 
Age Conflict edit considers the age range of 12 to 55 years inclusive. 
For that reason, the ICD-10-CM diagnosis codes on this Age Conflict 
edit list would be expected to apply to conditions or disorders 
specific to that age group only.
    As discussed in section II.F.12. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes lists the new ICD-10-CM diagnosis 
codes that have been approved to date, which will become effective with 
discharges occurring on and after October 1, 2017. Included on this 
list are a number of diagnosis codes associated with pregnancy and 
maternal care that we believe are appropriate to add to the list of 
diagnosis codes for the Maternity diagnoses category under the Age 
Conflict edit. We refer readers to Table 6P.1a. associated with this 
proposed rule (which is available via the Internet on the CMS Web site 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for a review of the ICD-10-CM diagnosis 
codes that we are proposing to add to the Age Conflict edit list. We 
are inviting public comments on our proposal.
b. Sex Conflict Edit
    In the MCE, the Sex Conflict edit detects inconsistencies between a 
patient's sex and any diagnosis or procedure on the patient's record; 
for example, a male patient with cervical cancer (diagnosis) or a 
female patient with a prostatectomy (procedure). In both instances, the 
indicated diagnosis or the procedure conflicts with the stated sex of 
the patient. Therefore, the patient's diagnosis, procedure, or sex is 
presumed to be incorrect.
(1) Diagnoses for Males Only Edit
    We received a request to review the following ICD-10-CM diagnosis 
codes pertaining to conditions associated with males for possible 
inclusion on the list of diagnosis codes for the Diagnoses for Males 
Only edit.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
B37.42....................  Candidal balanitis.
N35.011...................  Post-traumatic bulbous urethral stricture.
N35.012...................  Post-traumatic membranous urethral
                             stricture.
N35.013...................  Post-traumatic anterior urethral stricture.
N35.112...................  Postinfective bulbous urethral stricture,
                             not elsewhere classified.
N35.113...................  Postinfective membranous urethral stricture,
                             not elsewhere classified.
N35.114...................  Postinfective anterior urethral stricture,
                             not elsewhere classified.
N99.115...................  Postprocedural fossa navicularis urethral
                             stricture.
------------------------------------------------------------------------

    We agree with the requestor that diagnosis code B37.42 describes a 
condition that is applicable only to males. Balanitis is the 
inflammation of the glans (rounded head) of the penis. We also agree 
that the diagnosis codes listed above that align under subcategory 
N35.01 (Post-traumatic urethral stricture, male) and subcategory N35.11 
(Postinfection urethral stricture, not elsewhere classified, male) are 
appropriate to add to the list of diagnosis codes for the Diagnoses for 
Males Only edit because these diagnosis codes include specific 
terminology that is applicable only to males. Further, we agree that 
diagnosis code N99.115 is appropriate to add to the list of diagnosis 
codes for the Diagnoses for Males Only edit because subcategory N99.11 
(Postprocedural urethral stricture, male) includes specific terminology 
that is applicable to males only as well. Therefore, we are proposing 
to add the ICD-10-CM diagnosis codes listed in the table above to the 
list of diagnosis codes for the Diagnoses for Males Only edit.
    We also are proposing to remove ICD-10-CM diagnosis code Q64.0 
(Epispadias) from the list of diagnosis codes for the Diagnoses for 
Males Only edit because this rare, congenital condition involving the 
opening of the urethra can occur in both males and females.
    In addition, as discussed in section II.F.12. of the preamble of 
this proposed rule, Table 6A.--New Diagnosis Codes lists the new ICD-
10-CM diagnosis codes that have been approved to date, which will 
become effective with discharges occurring on and after October 1, 
2017. Included on this list are a number of diagnosis codes associated 
with male body parts that we believe are appropriate to add to the list 
of diagnosis codes for the Diagnoses for Males Only category under the 
Sex Conflict edit. We refer readers to Table 6P.1b. associated with 
this proposed rule (which is available via the Internet on the CMS Web 
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for a review of the ICD-10-CM diagnosis 
codes that we are proposing to add to the list of diagnosis codes for 
the Diagnoses for Males Only category.
    We are inviting public comments on our proposals.
(2) Diagnoses for Females Only
    We received a request to review the following ICD-10-CM diagnosis 
codes for possible removal from the list of diagnosis codes for the 
Diagnoses for Females Only edit.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
F52.6.....................  Dyspareunia not due to a substance or known
                             physiological condition.
J84.81....................  Lymphangioleiomyomatosis.
R97.1.....................  Elevated cancer antigen 125 [CA 125].
------------------------------------------------------------------------

    The requestor noted that, in the ICD-10-CM classification, the term 
``Dyspareunia'' (painful sexual intercourse) has specified codes for 
males and females located in the Alphabetic Index to Diseases for 
Reporting Physiological Dyspareunia. However, the indexing for 
diagnosis code F52.6 (Dyspareunia not due to a substance or known 
physiological condition) specifies that it is not due to a 
physiological condition and the entry is not gender specific. According 
to the requestor, while the condition is most often associated with 
female sexual dysfunction, there is a subset of males who also suffer 
from this condition.

[[Page 19843]]

    In addition, the requestor stated that diagnosis code J84.81 
(Lymphangioleiomyomatosis) describes a rare form of lung disease 
believed to occur more often in patients with tuberous sclerosis 
complex (TSC), a disorder due to genetic mutation. Although the 
condition is described as being exclusive to women, unique cases for 
men with TSC have also been reported.
    Lastly, the requestor indicated that diagnosis code R97.1 (Elevated 
cancer antigen 125 [CA 125]) describes the tumor marker that commonly 
identifies ovarian cancer cells in women. However, the requestor stated 
that high levels have also been demonstrated in men (and women) with 
lung cancer as well.
    We reviewed ICD-10-CM diagnosis codes F52.6, J84.81, and R97.1, and 
we agree with the requestor that Dyspareunia, not due to a 
physiological condition, can also occur in males. We also agree that 
the condition of Lymphangioleiomyomatosis and Elevated CA 125 levels 
can be found in males. Therefore, we are proposing to remove these 
three diagnosis codes from the list of diagnosis codes for the 
Diagnoses for Females Only edit. We are inviting public comments on our 
proposals.
    In addition, we are proposing to add new diagnosis code Z40.03 
(Encounter for prophylactic removal of fallopian tube(s)) to the list 
of diagnosis codes for the Diagnoses for Females Only edit. Currently, 
diagnosis code Z40.02 (Encounter for prophylactic removal of ovary) is 
on the edit's code list; therefore, inclusion of new diagnosis code 
Z40.03 would be consistent. We refer readers to Table 6A.--New 
Diagnosis Codes associated with this proposed rule (which is available 
via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for the 
list of new ICD-10-CM diagnosis codes finalized to date. We are 
inviting public comments on our proposal.
c. Non-Covered Procedure Edit: Gender Reassignment Surgery
    In the MCE, the Non-Covered Procedure edit identifies procedures 
for which Medicare does not provide payment. Payment is not provided 
due to specific criteria that are established in the National Coverage 
Determination (NCD) process. We refer readers to the Web site at: 
https://www.cms.gov/Medicare/Coverage/DeterminationProcess/howtorequestanNCD.html for additional information on this process. In 
addition, there are procedures that would normally not be paid by 
Medicare but, due to the presence of certain diagnoses, are paid.
    We issued instructions on June 27, 2014, as a one-time 
notification, Pub. 100-03, Transmittal 169, Change Request 8825, 
effective May 30, 2014, announcing to MACs the invalidation of National 
Coverage Determination (NCD) 140.3 for Transsexual Surgery. As a 
result, MACs determined coverage on a case-by-case basis. The 
transmittal is available via the Internet on the CMS Web site at: 
https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R169NCD.html?DLPage=1&DLEntries=10&DLFilter=Transsexual&DLSort=1&DLSortDir=ascending.
    It was brought to our attention that the ICD-10-PCS procedure codes 
shown in the table below are currently included on the list of 
procedure codes for the Non-Covered Procedure edit. As a result, when 
one of these procedure codes is reported on a claim, the edit for Non-
Covered Procedure is triggered and claims are not able to process 
correctly.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
0W4M070...................  Creation of vagina in male perineum with
                             autologous tissue substitute, open
                             approach.
0W4M0J0...................  Creation of vagina in male perineum with
                             synthetic substitute, open approach.
0W4M0K0...................  Creation of vagina in male perineum with
                             nonautologous tissue substitute, open
                             approach.
0W4M0Z0...................  Creation of vagina in male perineum, open
                             approach.
0W4N071...................  Creation of penis in female perineum with
                             autologous tissue substitute, open
                             approach.
0W4N0J1...................  Creation of penis in female perineum with
                             synthetic substitute, open approach.
0W4N0K1...................  Creation of penis in female perineum with
                             nonautologous tissue substitute, open
                             approach.
0W4N0Z1...................  Creation of penis in female perineum, open
                             approach.
------------------------------------------------------------------------

    Therefore, we are proposing to remove the ICD-10-PCS procedure 
codes included in the table above from the list of procedure codes for 
the Non-Covered Procedure edit to help resolve claims processing issues 
associated with the reporting of these procedure codes. We are inviting 
public comments on our proposal.
d. Unacceptable Principal Diagnosis Edit
    In the MCE, there are select codes that describe a circumstance 
that influences an individual's health status, but does not actually 
describe a current illness or injury. There also are codes that are not 
specific manifestations but may be due to an underlying cause. These 
codes are considered unacceptable as a principal diagnosis. In limited 
situations, there are a few codes on the MCE Unacceptable Principal 
Diagnosis edit code list that are considered ``acceptable'' when a 
specified secondary diagnosis is also coded and reported on the claim.
(1) Bacterial and Viral Infectious Agents (B95 Through B97)
    We examined ICD-10-CM diagnosis codes in Chapter 1 (Certain 
Infectious and Parasitic Diseases) of the Classification Manual that 
fall within the range of three code categories for ``Bacterial and 
Viral Infectious Agents'' (B95 through B97). The instructional note 
provided at this section states that these categories are provided for 
use as supplementary or additional codes to identify the infectious 
agent(s) in diseases classified elsewhere.
    We identified 45 ICD-10-CM diagnosis codes within the range of 
these code categories for ``Bacterial and Viral Infectious Agents'' 
(B95 through B97) that, as a result of the instructional note, are not 
appropriate to report as a principal diagnosis. We are proposing to add 
the 45 ICD-10-CM diagnosis codes shown in Table 6P.1c. associated with 
this proposed rule (which is available via the Internet on the CMS Web 
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable 
Principal Diagnosis edit. We are inviting public comments on our 
proposal.
(2) Mental Disorders Due to Known Physiological Conditions (F01 Through 
F09)
    We examined ICD-10-CM diagnosis codes in Chapter 5 (Mental and 
Behavioral Disorders) of the Classification Manual that fall within the 
range of nine code categories for ``Mental Disorders Due to Known

[[Page 19844]]

Physiological Conditions'' (F01 through F09). The instructional note 
provided at this section states that this block comprises a range of 
mental disorders grouped together on the basis of their having in 
common a demonstrable etiology in cerebral disease, brain injury, or 
other insult leading to cerebral dysfunction. The dysfunction may be 
primary, as in diseases, injuries, and insults that affect the brain 
directly and selectively; or secondary, as in systemic diseases and 
disorders that attack the brain only as one of the multiple organs or 
systems of the body that are involved.
    We identified 21 ICD-10-CM diagnosis codes that fall within the 
range of these code categories for ``Mental Disorders Due to Known 
Physiological Conditions'' (F01 through F09). Of these nine code 
categories, seven have a ``Code first the underlying physiological 
condition'' note. For example, at code category F01-Vascular dementia, 
the note reads, ``Code first the underlying physiological condition or 
sequelae of cerebrovascular disease.'' There are a total of 19 
diagnosis codes that fall under these 7 code categories with a ``Code 
first'' note and, therefore, are not appropriate to report as a 
principal diagnosis. Therefore, we are proposing to add the 19 ICD-10-
CM diagnosis codes shown in Table 6P.1d. associated with this proposed 
rule (which is available via the Internet on the CMS Web site at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable 
Principal Diagnosis edit. We are inviting public comments on our 
proposal.
(3) Other Obstetric Conditions, Not Elsewhere Classified (O94 Through 
O9A)
    We examined ICD-10-CM diagnosis codes in Chapter 15 (Pregnancy, 
Childbirth and the Puerperium) of the Classification Manual that fall 
within the range of four code categories for ``Other Obstetric 
Conditions, Not Elsewhere Classified'' (O94 through O9A). The 
instructional note provided at this section under category O94 states 
that ``this category is to be used to indicate conditions in O00 
through O77, O85 through O94 and O98 through O9A as the cause of late 
effects. The sequelae include conditions specified as such, or as late 
effects, which may occur at any time after the puerperium. Code first 
condition resulting from (sequela) of complication of pregnancy, 
childbirth, and the puerperium.''
    We identified one ICD-10-CM diagnosis code within the range of 
these code categories for ``Other Obstetric Conditions, Not Elsewhere 
Classified'' (O94 through O9A) that, as a result of the instructional 
note, is not appropriate to report as a principal diagnosis because 
that code identifies the cause of the late effect. This ICD-10-CM 
diagnosis code is O94 (Sequelae of complication of pregnancy, 
childbirth, and the puerperium). We are proposing to add ICD-10-CM 
diagnosis code O94 to the list of codes for the Unacceptable Principal 
Diagnosis edit. We are inviting public comments on our proposal.
(4) Symptoms and Signs Involving Cognition, Perception, Emotional State 
and Behavior (R40 Through R46)
    We examined ICD-10-CM diagnosis codes in Chapter 18 (Symptoms, 
Signs and Abnormal Findings) of the Classification Manual that fall 
within the range of code categories for ``Symptoms and Signs Involving 
Cognition, Perception, Emotional State and Behavior'' (R40 through 
R46), specifically under code category R40--Somnolence, stupor and 
coma. At subcategory R40.2--Coma, there is an instructional note, which 
states ``Code first any associated: Fracture of skull (S02.-); 
Intracranial injury (S06.-).''
    We identified 96 ICD-10-CM diagnosis codes under this subcategory 
that, as a result of the instructional note, are not appropriate to 
report as a principal diagnosis. We are proposing to add the 96 ICD-10-
CM diagnosis codes shown in Table 6P.1e. associated with this proposed 
rule (which is available via the Internet on the CMS Web site at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable 
Principal Diagnosis edit. We are inviting public comments on our 
proposal.
(5) General Symptoms and Signs (R50 Through R69)
    We examined ICD-10-CM diagnosis codes in Chapter 18 (Symptoms, 
Signs and Abnormal Findings) of the Classification Manual that fall 
within the range of code categories for ``General Symptoms and Signs'' 
(R50 through R69), specifically, at code category R65--Symptoms and 
signs associated with systemic inflammation and infection. There is an 
instructional note at subcategory R65.1--Systemic inflammatory response 
syndrome (SIRS) of non-infectious origin, which states ``Code first 
underlying condition, such as: Heatstroke (T67.0); Injury and trauma 
(S00-T88).'' There is also an instructional note at subcategory R65.2--
Severe sepsis, which states ``Code first underlying infection, such 
as:'' and provides a list of examples.
    We identified four ICD-10-CM diagnosis codes in these subcategories 
that, as a result of the instructional notes described above, are not 
appropriate to report as a principal diagnosis. These four ICD-10-CM 
codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
R65.10....................  Systemic inflammatory response syndrome
                             (SIRS) of non-infectious origin without
                             acute organ dysfunction.
R65.11....................  Systemic inflammatory response syndrome
                             (SIRS) of non-infectious origin with acute
                             organ dysfunction.
R65.20....................  Severe sepsis without septic shock.
R65.21....................  Severe sepsis with septic shock.
------------------------------------------------------------------------

    We are proposing to add the four ICD-10-CM diagnosis codes shown in 
the table above to the list of codes for the Unacceptable Principal 
Diagnosis edit. We are inviting public comments on our proposal.
(6) Poisoning by, Adverse Effects of, and Underdosing of Drugs, 
Medicaments and Biological Substances (T36 Through T50)
    We examined ICD-10-CM diagnosis codes in Chapter 19 (Injury and 
Poisoning) of the Classification Manual that fall within the range of 
code categories for ``Poisoning by, Adverse Effects of and Underdosing 
of Drugs, Medicaments and Biological Substances'' (T36 through T50). 
The instructional note provided at this section states ``Code first, 
for adverse effects, the nature of the adverse effect, such as:'' and 
provides a list of examples. In addition, the FY 2017 ICD-10-CM 
Official Guidelines for Coding and Reporting at Section I.C.19.e.5.c., 
state that ``Codes for underdosing should never be assigned as 
principal or first-listed codes.''

[[Page 19845]]

    We identified 996 ICD-10-CM diagnosis codes that, as a result of 
the instructional note for adverse effects and the guideline for 
reporting diagnosis codes for underdosing, are not appropriate to 
report as a principal diagnosis. We are proposing to add the 996 ICD-
10-CM diagnosis codes shown in Table 6P.1f. associated with this 
proposed rule (which is available via the Internet on the CMS Web site 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable 
Principal Diagnosis edit. We are inviting public comments on our 
proposal.
(7) Complications of Surgical and Medical Care, Not Elsewhere 
Classified (T80 Through T88)
    We examined ICD-10-CM diagnosis codes in Chapter 19 (Injury and 
Poisoning) of the Classification Manual that fall within the range of 
code categories for ``Complications of Surgical and Medical Care, Not 
Elsewhere Classified'' (T80 through T88), specifically, at code 
category T81--Complications of procedures, not elsewhere classified. 
There is an instructional note at subcategory T81.12x--Postprocedural 
septic shock, which states, ``Code first underlying infection.''
    We identified two ICD-10-CM diagnosis codes in this subcategory 
that, as a result of the instructional note, are not appropriate to 
report as a principal diagnosis. These two ICD-10-CM codes are shown in 
the table below.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
T81.12XD..................  Postprocedural septic shock, subsequent
                             encounter.
T81.12XS..................  Postprocedural septic shock, sequela.
------------------------------------------------------------------------

    We are proposing to add the two ICD-10-CM diagnosis codes shown in 
the table above to the list of codes for the Unacceptable Principal 
Diagnosis edit. We are inviting public comments on our proposal.
(8) Persons Encountering Health Services for Examinations (Z00 Through 
Z13)
    We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors 
Influencing Health Status) of the Classification Manual that fall 
within the range of code categories for ``Persons Encountering Health 
Services for Examinations'' (Z00 through Z13), specifically, at code 
category Z00--Encounter for general examination without complaint, 
suspected or reported diagnosis. The FY 2017 ICD-10-CM Official 
Guidelines for Coding and Reporting at Section I.C.21.c.16., state that 
the following ICD-10-CM Z-codes/categories may only be reported as the 
principal/first-listed diagnosis, except when there are multiple 
encounters on the same day and the medical records for the encounters 
are combined:
     Z00 (Encounter for general examination without complaint, 
suspected or reported diagnosis); except Z00.6 (Encounter for 
examination for normal comparison and control in clinical research 
program).
    Therefore, diagnosis code Z00.6 should not be reported as a 
principal/first-listed diagnosis. We are proposing to add ICD-10-CM 
diagnosis code Z00.6 to the list of codes for the Unacceptable 
Principal Diagnosis edit. We are inviting public comments on our 
proposal.
    To address a separate issue, we are proposing to remove the 
diagnosis codes under category Z05 (Encounter for observation and 
examination of newborn for suspected diseases and conditions ruled out) 
from the list of codes for the Unacceptable Principal Diagnosis edit. 
The FY 2017 ICD-10-CM Official Guidelines for Coding and Reporting at 
Section I.C.16.b. state the following:
     Assign a code from category Z05, Observation and 
evaluation of newborns and infants for suspected conditions ruled out, 
to identify those instances when a healthy newborn is evaluated for a 
suspected condition that is determined after study not to be present. 
Do not use a code from category Z05 when the patient has identified 
signs or symptoms of a suspected problem; in such cases code the sign 
or symptom.
     A code from category Z05 may also be assigned as a 
principal or first-listed code for readmissions or encounters when the 
code from category Z38 no longer applies. Codes from category Z05 are 
for use only for healthy newborns and infants for which no condition 
after study is found to be present.
     A code from category Z05 is to be used as a secondary code 
after the code from category Z38, Liveborn infants according to place 
of birth and type of delivery.
    Therefore, the ICD-10-CM diagnosis codes under category Z05 are 
allowed to be reported as a principal diagnosis. We are proposing to 
remove the 14 ICD-10-CM diagnosis codes shown in the table below from 
the list of codes for the Unacceptable Principal Diagnosis edit.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
Z05.0.....................  Observation and evaluation of newborn for
                             suspected cardiac condition ruled out.
Z05.1.....................  Observation and evaluation of newborn for
                             suspected infectious condition ruled out.
Z05.2.....................  Observation and evaluation of newborn for
                             suspected neurological condition ruled out.
Z05.3.....................  Observation and evaluation of newborn for
                             suspected respiratory condition ruled out.
Z05.41....................  Observation and evaluation of newborn for
                             suspected genetic condition ruled out.
Z05.42....................  Observation and evaluation of newborn for
                             suspected metabolic condition ruled out.
Z05.43....................  Observation and evaluation of newborn for
                             suspected immunologic condition ruled out.
Z05.5.....................  Observation and evaluation of newborn for
                             suspected gastrointestinal condition ruled
                             out.
Z05.6.....................  Observation and evaluation of newborn for
                             suspected genitourinary condition ruled
                             out.
Z05.71....................  Observation and evaluation of newborn for
                             suspected skin and subcutaneous tissue
                             condition ruled out.
Z05.72....................  Observation and evaluation of newborn for
                             suspected musculoskeletal condition ruled
                             out.
Z05.73....................  Observation and evaluation of newborn for
                             suspected connective tissue condition ruled
                             out.
Z05.8.....................  Observation and evaluation of newborn for
                             other specified suspected condition ruled
                             out.
Z05.9.....................  Observation and evaluation of newborn for
                             unspecified suspected condition ruled out.
------------------------------------------------------------------------


[[Page 19846]]

    We are inviting public comments on our proposal.
(9) Encounters for Other Specific Health Care (Z40 Through Z53)
    We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors 
Influencing Health Status) of the Classification Manual that fall 
within the range of code categories for ``Encounters for Other Specific 
Health Care'' (Z40 through Z53), specifically, at code category Z52--
Donors of organs and tissues. The FY 2017 ICD-10-CM Official Guidelines 
for Coding and Reporting at Section I.C.21.c.16. state that the 
following Z-codes/categories may only be reported as the principal/
first-listed diagnosis, except when there are multiple encounters on 
the same day and the medical records for the encounters are combined:
     Z52 (Donors of organs and tissues); except Z52.9 (Donor of 
unspecified organ or tissue).
    Therefore, ICD-10-CM diagnosis code Z52.9 should not be reported as 
a principal/first-listed diagnosis. We are proposing to add ICD-10-CM 
diagnosis code Z52.9 to the list of codes for the Unacceptable 
Principal Diagnosis edit. We are inviting public comments on our 
proposal.
(10) Persons Encountering Health Services in Other Circumstances (Z69 
Through Z76)
    We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors 
Influencing Health Status) of the Classification Manual that fall 
within the range of code categories for ``Persons Encountering Health 
Services in Other Circumstances'' (Z69 through Z76), specifically, at 
subcategory Z71.8--Other specified counseling. Consistent with ICD-10-
CM diagnosis codes Z71.81 (Spiritual or religious counseling) and 
Z71.89 (Other specified counseling), we are proposing to add new 
diagnosis code Z71.82 (Exercise counseling) to the list of codes for 
the Unacceptable Principal Diagnosis edit. We refer readers to Table 
6A.--New Diagnosis Codes associated with this proposed rule (which is 
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) 
for the list of new ICD-10-CM diagnosis codes finalized to date. We are 
inviting public comments on our proposal.
(11) Persons With Potential Health Hazards Related to Family and 
Personal History and Certain Conditions Influencing Health Status (Z77 
Through Z99)
    We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors 
Influencing Health Status) of the Classification Manual that fall 
within the range of code categories for ``Persons with Potential Health 
Hazards Related to Family and Personal History and Certain Conditions 
Influencing Health Status'' (Z77 through Z99), specifically, at code 
category Z91.8--Other specified personal risk factors, not elsewhere 
classified. Consistent with ICD-10-CM diagnosis codes Z91.81 (History 
of falling), Z91.82 (Personal history of military deployment), and 
Z91.89 (Other specified personal risk factors, not elsewhere 
classified), we are proposing to add new ICD-10-CM diagnosis codes 
Z91.841 (Risk for dental caries, low), Z91.842 (Risk for dental caries, 
moderate), Z91.843 (Risk for dental caries, high), and Z91.849 
(Unspecified risk for dental caries) to the list of codes for the 
Unacceptable Principal Diagnosis edit. We refer readers to Table 6A.--
New Diagnosis Codes associated with this proposed rule (which is 
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) 
for the list of new ICD-10-CM diagnosis codes finalized to date. We are 
inviting public comments on our proposal.
e. Future Enhancement
    Similar to our discussion in the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 56843 through 56844), with the implementation of ICD-10, it is 
clear that there are several new concepts in the classification. 
Looking ahead to the needs and uses of coded data as the data continue 
to evolve from the reporting, collection, processing, coverage, payment 
and analysis aspects, we believe the need to ensure the accuracy of the 
coded data becomes increasingly significant.
    The purpose of the MCE is to ensure that errors and inconsistencies 
in the coded data are recognized during Medicare claims processing. As 
we continue to evaluate the purpose and function of the MCE with 
respect to ICD-10, we encourage public input for future discussion. As 
we discussed in the FY 2017 IPPS/LTCH PPS final rule, we recognize a 
need to further examine the current list of edits and the definitions 
of those edits. We encourage public comments on whether there are 
additional concerns with the current edits, including specific edits or 
language that should be removed or revised, edits that should be 
combined, or new edits that should be added to assist in detecting 
errors or inaccuracies in the coded data.
11. Proposed 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 2018, 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

[[Page 19847]]

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 in this rule.
    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.
    We received a request to examine a case involving the principal 
procedure for excision of pituitary gland (ICD-10-PCS code 0GB00ZZ 
Excision of pituitary gland, open approach) with a secondary procedure 
for harvesting of a fat graft (ICD-10-PCS code 0JB80ZZ Excision of 
abdomen subcutaneous tissue and fascia, open approach) to treat a 
condition of pituitary adenoma (ICD-10-CM diagnosis code D35.2 (Benign 
neoplasm of pituitary gland)) and the resulting sella turcica defect. 
The requestor noted that when the procedure code for harvesting of the 
fat graft is reported on the claim, the case currently groups to MS-
DRGs 622, 623, and 624 (Skin Grafts and Wound Debridement for 
Endocrine, Nutritional, and Metabolic Disorders with MCC, with CC and 
without CC/MCC, respectively). However, when the procedure code for 
harvesting of the fat graft is not reported on the claim, the case 
groups to MS-DRGs 614 and 615 (Adrenal and Pituitary Procedures with 
CC/MCC and without CC/MCC, respectively), which appears to be a more 
appropriate assignment. The requester expressed concern regarding the 
procedure code for harvesting of the fat graft in the secondary 
position driving the MS-DRG assignment versus the principal procedure 
of the excision of pituitary gland.
    We analyzed the codes provided by the requestor in the GROUPER to 
determine if we could duplicate the requestor's findings. The findings 
from our analysis were consistent with the requestor's findings. Our 
clinical advisors reviewed this issue and agreed that it should be the 
procedure code for excision of the pituitary gland that is used to 
determine the MS-DRG assignment in this scenario and not the harvesting 
of the fat graft procedure code.
    Therefore, in this FY 2018 IPPS/LTCH PPS proposed rule, we are 
proposing to move MS-DRGs 614 and 615 above MS-DRGs 622, 623, and 624 
in the surgical hierarchy to enable more appropriate MS-DRG assignment 
for these types of cases.
    We are inviting public comments on our proposal.
12. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2018
a. Background of the CC List and the CC Exclusions List
    Under the IPPS MS-DRG classification system, we have developed a 
standard list of diagnoses that are considered CCs. Historically, we 
developed this list using physician panels that classified each 
diagnosis code based on whether the diagnosis, when present as a 
secondary condition, would be considered a substantial complication or 
comorbidity. A substantial complication or comorbidity was defined as a 
condition that, because of its presence with a specific principal 
diagnosis, would cause an increase in the length-of-stay by at least 1 
day in at least 75 percent of the patients. However, depending on the 
principal diagnosis of the patient, some diagnoses on the basic list of 
complications and comorbidities may be excluded if they are closely 
related to the principal diagnosis. In FY 2008, we evaluated each 
diagnosis code to determine its impact on resource use and to determine 
the most appropriate CC subclassification (non-CC, CC, or MCC) 
assignment. We refer readers to sections II.D.2. and 3. of the preamble 
of the FY 2008 IPPS final rule with comment period for a discussion of 
the refinement of CCs in relation to the MS-DRGs we adopted for FY 2008 
(72 FR 47152 through 47171).
b. Proposed Additions and Deletions to the Diagnosis Code Severity 
Levels for FY 2018
    The following tables identifying the proposed additions and 
deletions to the MCC severity levels list and the proposed additions 
and deletions to the CC severity levels list for FY 2018 are available 
via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.

Table 6I.1--Proposed Additions to the MCC List--FY 2018;
Table 6I.2--Proposed Deletions to the MCC List--FY 2018;
Table 6J.1--Proposed Additions to the CC List--FY 2018; and
Table 6J.2--Proposed Deletions to the CC List--FY 2018.

    We are inviting public comments on our proposed severity level 
designations for the diagnosis codes listed in Table 6I.1. and Table 
6J.1. We note that, for Table 6I.2. and Table 6J.2., the proposed 
deletions are a result of code expansions. Therefore, the diagnosis 
codes on these lists are no longer valid codes, effective FY 2018. For 
example, diagnosis code O00.10 (Tubal pregnancy without intrauterine 
pregnancy) is a current CC for FY 2017 under Version 34 of the ICD-10 
MS-DRGs. Effective FY 2018, under Version 35 of the ICD-10 MS-DRGs, 
this single code has been expanded into three diagnosis codes to 
include laterality (left/right) and an unspecified option with the 
addition of a sixth character. Therefore, diagnosis code O00.10 is 
included in Table 6J.2. for deletion from the CC list because it is no 
longer a valid code in FY 2018.
c. Principal Diagnosis Is Its Own CC or MCC
    CMS' initial goal in developing the ICD-10 MS-DRGs was to ensure 
that a patient case was assigned to the same MS-DRG, regardless of 
whether the patient record was to be coded in ICD-9-CM or ICD-10. When 
certain ICD-10-CM combination codes are reported as a principal 
diagnosis, it implies that a CC or MCC is present. This occurs as a 
result of evaluating the cluster of ICD-

[[Page 19848]]

9-CM codes that would have been coded on an ICD-9-CM record. If one of 
the ICD-9-CM codes in the cluster was 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.
    The ICD-10-CM diagnosis codes to which this logic applies are 
included in Appendix J of the ICD-10 MS-DRG Version 34 Definitions 
Manual (which is available via the Internet on the CMS Web site at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLfxsp0;Entries=10&DLSort=0&DLSortDir=ascending). 
Appendix J 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. Part 1 of Appendix J corresponds to Table 6L.--Principal Diagnosis 
Is Its Own MCC List, and Part 2 of Appendix J corresponds to Table 
6M.--Principal Diagnosis Is Its Own CC List.
    We received a request to add the ICD-10-CM diagnosis codes for 
acute myocardial infarction, decompensated heart failure and specified 
forms of shock, which are currently designated as a CC or an MCC when 
reported as a secondary diagnosis, to Table 6L.--Principal Diagnosis Is 
Its Own MCC List. According to the requestor, the addition of these 
codes to the list is necessary for bundled payment initiatives and so 
that facilities that accept these patients in transfer have resources 
to care for them.
    The purpose of the Principal Diagnosis Is Its Own CC or MCC Lists 
was to ensure consistent MS-DRG assignment between the ICD-9-CM and 
ICD-10 MS-DRGs due to the clusters and combination codes. There are a 
number of other ICD-10-CM combination codes that, due to their prior 
designation as a CC or an MCC when reported as a secondary diagnosis, 
are not on either of these lists. Having multiple lists for CC and MCC 
diagnoses when reported as a principal and/or secondary diagnosis may 
not provide an accurate representation of resource utilization for the 
MS-DRGs. As discussed in further detail below, we have plans to conduct 
a comprehensive review of the CC and MCC lists for FY 2019. We believe 
the results of that review will help to inform the future of these 
lists.
    Therefore, we are not proposing to add the ICD-10-CM diagnosis 
codes for acute myocardial infarction, decompensated heart failure and 
specified forms of shock to Table 6L.--Principal Diagnosis Is Its Own 
MCC List. In addition, we are not proposing any changes to Table 6L.--
Principal Diagnosis Is Its Own MCC List and Table 6M.--Principal 
Diagnosis Is Its Own CC List. We are inviting public comments on our 
proposal to maintain the existing lists of principal diagnosis codes in 
Tables 6L. and 6M for FY 2018.
d. Proposed CC Exclusions List for FY 2018
    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 previously indicated, 
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 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. We 
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 
through 50544) for detailed information regarding revisions that were 
made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.
    For FY 2018, we are proposing changes to the ICD-10 MS-DRGs Version 
35 CC Exclusion List. Therefore, we have developed Table 6G.1.--
Proposed Secondary Diagnosis Order Additions to the CC Exclusions 
List--FY 2018; Table 6G.2.--Proposed Principal Diagnosis Order 
Additions to the CC Exclusions List--FY 2018; Table 6H.1.--Proposed 
Secondary Diagnosis Order Deletions to the CC Exclusions List--FY 2018; 
and Table 6H.2.--Proposed Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2018. Each of these principal diagnosis codes for 
which there is a CC exclusion is shown in Table 6G.2. with an asterisk 
and the conditions that will not count as a CC are provided in an 
indented column immediately following the affected principal diagnosis. 
Beginning with discharges on or after October 1 of each year, the 
indented diagnoses are not recognized by the GROUPER as valid CCs for 
the asterisked principal diagnoses. Tables 6G. and 6H. associated with 
this proposed rule are available via the Internet on the CMS Web site 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    To identify new, revised and deleted diagnosis and procedure codes, 
for FY 2018, we have developed Table 6A.--New Diagnosis Codes, Table 
6B.--New Procedure Codes, Table 6C.--Invalid Diagnosis Codes, Table 
6D.--Invalid Procedure Codes, Table 6E.--Revised Diagnosis Code Titles, 
and Table 6F.--Revised Procedure Code Titles for this proposed rule.
    These tables are not published in the Addendum to this proposed 
rule but are available via the Internet on the CMS Web site at: 
(https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the 
Addendum to this proposed rule. As discussed in section II.F.15. of the 
preamble of this proposed rule, 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. We are inviting public comments on the MDC and 
MS-DRG assignments for the new

[[Page 19849]]

diagnosis and procedure codes as set forth in Table 6A.--New Diagnosis 
Codes and Table 6B.--New Procedure Codes. In addition, we are inviting 
public comments on the proposed severity level designations for the new 
diagnosis codes as set forth in Table 6A. and the proposed O.R. status 
for the new procedure codes as set forth in Table 6B.
13. Comprehensive Review of CC List for FY 2019
    In the FY 2008 IPPS final rule (72 FR 47153 through 47175), we 
discussed our efforts to better recognize severity of illness which 
began with a comprehensive review of the CC list and, ultimately, the 
implementation of the MS-DRGs. Similar to the analysis that was 
performed at that time, we are providing the public with notice of our 
plans to conduct a comprehensive review of the CC and MCC lists for FY 
2019.
    As a result of the time that has elapsed since that review and 
changes to how inpatient care is currently delivered, we plan to 
analyze if further refinements to these lists are warranted. For 
example, over the past several years, there has been a steady increase 
in the proportion of cases grouping to the MS-DRGs with an MCC severity 
level than had previously occurred. Our evaluation will assist in 
determining if the conditions designated as an MCC continue to 
represent significant increases in resource utilization that support 
the MCC designation.
    We currently utilize a statistical algorithm to determine the 
impact on resource use of each secondary diagnosis. Each diagnosis for 
which Medicare data are available is 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 costs for each subset of cases is compared to the expected 
costs for cases in that subset. The following format is used to 
evaluate each diagnosis:

----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
            Code    Diagnosis              Cnt1          C1            Cnt2         C2           Cnt3         C3
----------------------------------------------------------------------------------------------------------------

    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. The C1, C2, and C3 values are a measure of the ratio of 
average costs for patients with these conditions to the expected 
average costs across all cases. The C1 value reflects a patient with no 
other secondary diagnosis or with all other secondary diagnoses that 
are non-CCs. The C2 value reflects a patient with at least one other 
secondary diagnosis that is a CC but none that is an MCC. The C3 value 
reflects a patient with at least one other secondary diagnosis that is 
an MCC. A value close to 1.0 in the C1 field would suggest that the 
code produces the same expected value as a non-CC diagnosis. That is, 
average costs for the case are similar to the expected average costs 
for that subset and the diagnosis is not expected to increase resource 
usage. A higher value in the C1 (or C2 and C3) field suggests more 
resource usage is associated with the diagnosis and an increased 
likelihood that it is more like a CC or major CC than a non-CC. Thus, a 
value close to 2.0 suggests the condition is more like a CC than a non-
CC but not as significant in resource usage as an MCC. A value close to 
3.0 suggests the condition is expected to consume resources more 
similar to an MCC than a CC or non-CC. For example, a C1 value of 1.8 
for a secondary diagnosis 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 80 
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).
    We are inviting public comments regarding other possible ways we 
can incorporate meaningful indicators of clinical severity.
14. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through 
986; and 987 Through 989
    Each year, we review cases assigned to MS-DRGs 981, 982, and 983 
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, 
with CC, and without CC/MCC, respectively); MS-DRGs 984, 985, and 986 
(Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC, 
with CC, and without CC/MCC, respectively); and MS-DRGs 987, 988, and 
989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with 
MCC, with CC, and without CC/MCC, respectively) to determine whether it 
would be appropriate to change the procedures assigned among these MS-
DRGs. MS-DRGs 981 through 983, 984 through 986, and 987 through 989 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.
    Under the ICD-10 MS-DRGs Version 34, MS-DRGs 984 through 986 are 
assigned when one or more of the procedures described by ICD-10-PCS 
codes in Table 6P.2. that is associated with this FY 2018 proposed rule 
(which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) are performed and are unrelated to the 
principal diagnosis. 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.
    We refer the reader to the FY 2017 IPPS/LTCH PPS final rule (81 FR 
56847 through 56848) for a discussion of the movement and redesignation 
of procedure codes from MS-DRGs 984 through 986 related to the 
transition of the ICD-10 MS-DRGs.
    Our review of MedPAR claims data showed that there are no cases 
that merited movement or should logically be reassigned from ICD-10 MS-
DRGs 984 through 986 to any of the other MDCs for FY 2018. Therefore, 
for FY 2018, we are not proposing to change the procedures assigned 
among these MS-DRGs. We are inviting public comments on our proposal to 
maintain the current structure of these MS-DRGs.
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-DRGs 987 
Through 989 Into MDCs
    We annually conduct a review of procedures producing assignment to 
MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to 
Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) or MS-DRGs 987 through 989 (Nonextensive O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively) on the basis of volume, by procedure, to see if it would 
be appropriate to move procedure codes out of these MS-DRGs

[[Page 19850]]

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. 
Upon review of the claims data from the December 2016 update of the FY 
2016 MedPAR file, we did not find any cases that merited movement or 
that should logically be assigned to any of the other MDCs. Therefore, 
for FY 2018, we are not proposing to remove any procedures from MS-DRGs 
981 through 983 or MS-DRGs 987 through 989 into one of the surgical MS-
DRGs for the MDC into which the principal diagnosis is assigned. We are 
inviting public comments on our proposal to maintain the current 
structure of these MS-DRGs.
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984 
Through 986, and 987 Through 989
    We also review the list of ICD-10-PCS procedures that, when in 
combination with their principal diagnosis code, result in assignment 
to MS-DRGs 981 through 983, 984 through 986, or 987 through 989, to 
ascertain whether any of those procedures should be reassigned from one 
of those three groups of MS-DRGs to another of the three groups of 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.
    Based on the results of our review of the December 2016 update of 
the FY 2016 MedPAR file, we are proposing to reassign the procedure 
codes currently assigned to MS-DRGs 984 through 986 (Prostatic O.R. 
Procedure Unrelated to Principal Diagnosis with MCC, with CC and 
without CC/MCC, respectively) to MS-DRGs 987 through 989 (Non-extensive 
O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC and 
without CC/MCC, respectively). As shown in the table below, we found a 
total of 1,001 cases in MS-DRGs 984 through 986 with an average length-
of-stay of 7.5 days and average costs of $16,539. In MS-DRGs 987 
through 989, we found a total of 17,772 cases, with an average length 
of stay of 7.5 days and average costs of $16,193.

                                O.R. Procedures Unrelated to Principal Diagnosis
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 984, 985 and 986 (Prostatic O.R. Procedure Unrelated to            1,001             7.5         $16,539
 Principal Diagnosis with MCC, with CC, and without CC/MCC,
 respectively)..................................................
MS-DRGs 987, 988 and 989 (Non[dash]extensive O.R. Procedure               17,772             7.5          16,193
 Unrelated to Principal Diagnosis with MCC, with CC, and without
 CC/MCC, respectively)..........................................
----------------------------------------------------------------------------------------------------------------

    The claims data demonstrate that it is no longer necessary to 
maintain a separate set of MS-DRGs specifically for the prostatic O.R. 
procedures. The average length of stay of 7.5 days is identical in both 
sets of MS-DRGs and the average costs are very similar with a 
difference of only $346. Our clinical advisors reviewed the data and 
support movement of these 1,001 cases into the nonextensive O.R. 
procedures MS-DRGs. They noted that treatment practices have shifted 
since the inception of the prostatic O.R. procedures grouping and the 
average costs are in alignment.
    Therefore, for FY 2018, we are proposing to reassign the prostatic 
O.R. procedure codes from MS-DRGs 984 through 986 to MS-DRGs 987 
through 989 and to delete MS-DRGs 984, 985 and 986 because they would 
no longer be needed as a result of this proposed movement. We are 
inviting public comments on our proposals.
15. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
    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 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 and ICD-10-PCS 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://cms.hhs.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 previously mentioned 
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

[[Page 19851]]

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 2018 at a public meeting held on September 13-14, 
2016, and finalized the coding changes after consideration of comments 
received at the meetings and in writing by November 13, 2016.
    The Committee held its 2017 meeting on March 7-8, 2017. The 
deadline for submitting comments on these code proposals was April 7, 
2017. 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 2017 would be 
included in the October 1, 2017 update to ICD-10-CM/ICD-10-PCS. As 
discussed in earlier sections of the preamble of this proposed rule, 
there are new, revised, and deleted ICD-10-CM diagnosis codes and ICD-
10-PCS procedure codes that are captured in Table 6A.--New Diagnosis 
Codes, Table 6B.--New Procedure Codes, Table 6C.--Invalid Diagnosis 
Codes, Table 6D.--Invalid Procedure Codes, Table 6E.--Revised Diagnosis 
Code Titles, and Table 6F.--Revised Procedure Code Titles for this 
proposed rule, which are available 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 these tables, 
they are not published in the Addendum to this proposed rule. Rather, 
they are available via the Internet as discussed in section VI. of the 
Addendum to this proposed rule.
    Live Webcast recordings of the discussions of procedure codes at 
the Committee's September 13-14, 2016 meeting and March 7-8, 2017 
meeting can be obtained from the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/icd9ProviderDiagnosticCodes/03_meetings.asp. The minutes of the 
discussions of diagnosis codes at the September 13-14, 2016 meeting and 
March 7-8, 2017 meeting can be found at: http://www.cdc.gov/nchs/icd/icd10cm_maintenance.html. These Web sites also provide detailed 
information about the Committee, including information on requesting a 
new code, attending a Committee meeting, and timeline requirements and 
meeting dates.
    We encourage commenters to address suggestions on coding issues 
involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-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 Management, Hospital 
and Ambulatory Policy Group, Division of Acute Care, C4-08-06, 7500 
Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent by 
Email to: [email protected].
    In the September 7, 2001 final rule implementing the IPPS new 
technology add-on payments (66 FR 46906), we indicated we would attempt 
to include proposals for procedure codes that would describe new 
technology discussed and approved at the Spring meeting as part of the 
code revisions effective the following October.
    Section 503(a) of Public Law 108-173 included a requirement for 
updating diagnosis and procedure 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. 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 June 
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 requester at the Committee's public meeting. The request 
must identify the reason why a new code is needed in April for purposes 
of the new

[[Page 19852]]

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, 2017 implementation of a code at the 
September 13-14, 2016 Committee meeting. Therefore, there were no new 
codes implemented on April 1, 2017.
    ICD-9-CM addendum and code title information is published on the 
CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. 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/icd/icd10.htm. 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.
    The following chart shows the number of ICD-10-CM and ICD-10-PCS 
codes and code changes since FY 2016 when ICD-10 was implemented.

  Total Number of Codes and Changes in Total Number of Codes per Fiscal
                   Year ICD-10-CM and ICD-10-PCS Codes
------------------------------------------------------------------------
                     Fiscal year                       Number    Change
------------------------------------------------------------------------
FY 2016:
  ICD-10-CM.........................................    69,823  ........
  ICD-10-PCS........................................    71,974  ........
FY 2017:
  ICD-10-CM.........................................    71,486    +1,663
  ICD-10-PCS........................................    75,789    +3,815
FY 2018:
  ICD-10-CM.........................................    71,772      +286
  ICD-10-PCS........................................    78,299    +2,510
------------------------------------------------------------------------

    As mentioned previously, 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.
    At the September 12-13, 2016 and March 7-8, 2017 Committee 
meetings, we discussed any requests we had received for new ICD-10-CM 
diagnosis codes and ICD-10-PCS procedure codes that were to be 
implemented on October 1, 2017. We invited public comments on any code 
requests discussed at the September 12-13, 2016 and March 7-8, 2017 
Committee meetings for implementation as part of the October 1, 2017 
update. The deadline for commenting on code proposals discussed at the 
September 12-13, 2016 Committee meeting was November 13, 2016. The 
deadline for commenting on code proposals discussed at the March 7-8, 
2017 Committee meeting was April 7, 2017.
16. Proposed 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. At 
that time, we specified that we will reduce a hospital's IPPS payment 
for those MS-DRGs where the hospital received a credit for a replaced 
device equal to 50 percent or more of the cost of the device.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through 
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. Proposed Changes for FY 2018
    For FY 2018, we are not proposing to add any MS-DRGs to the policy 
for replaced devices offered without cost or with a credit. We are 
proposing to continue to include the existing MS-DRGs currently subject 
to the policy as displayed in the table below.

----------------------------------------------------------------------------------------------------------------
                    MDC                           MS-DRG                          MS-DRG title
----------------------------------------------------------------------------------------------------------------
Pre-MDC...................................                001  Heart Transplant or Implant of Heart Assist
                                                                System with MCC.
Pre-MDC...................................                002  Heart Transplant or Implant of Heart Assist
                                                                System without MCC.
1.........................................                023  Craniotomy with Major Device Implant/Acute
                                                                Complex CNS Principal Diagnosis with MCC or
                                                                Chemo Implant.
1.........................................                024  Craniotomy with Major Device Implant/Acute
                                                                Complex CNS Principal Diagnosis without MCC.
1.........................................                025  Craniotomy & Endovascular Intracranial Procedures
                                                                with MCC.
1.........................................                026  Craniotomy & Endovascular Intracranial Procedures
                                                                with CC.
1.........................................                027  Craniotomy & Endovascular Intracranial Procedures
                                                                without CC/MCC.
1.........................................                040  Peripheral, Cranial Nerve & Other Nervous System
                                                                Procedures with MCC.
1.........................................                041  Peripheral, Cranial Nerve & Other Nervous System
                                                                Procedures with CC or Peripheral
                                                                Neurostimulator.
1.........................................                042  Peripheral, Cranial Nerve & Other Nervous System
                                                                Procedures without CC/MCC.
3.........................................                129  Major Head & Neck Procedures with CC/MCC or Major
                                                                Device.
3.........................................                130  Major Head & Neck Procedures without CC/MCC.
5.........................................                215  Other Heart Assist System Implant.
5.........................................                216  Cardiac Valve & Other Major Cardiothoracic
                                                                Procedure with Cardiac Catheterization with MCC.
5.........................................                217  Cardiac Valve & Other Major Cardiothoracic
                                                                Procedure with Cardiac Catheterization with CC.
5.........................................                218  Cardiac Valve & Other Major Cardiothoracic
                                                                Procedure with Cardiac Catheterization without
                                                                CC/MCC.
5.........................................                219  Cardiac Valve & Other Major Cardiothoracic
                                                                Procedure without Cardiac Catheterization with
                                                                MCC.

[[Page 19853]]

 
5.........................................                220  Cardiac Valve & Other Major Cardiothoracic
                                                                Procedure without Cardiac Catheterization with
                                                                CC.
5.........................................                221  Cardiac Valve & Other Major Cardiothoracic
                                                                Procedure without Cardiac Catheterization
                                                                without CC/MCC.
5.........................................                222  Cardiac Defibrillator Implant with Cardiac
                                                                Catheterization with AMI/Heart Failure/Shock
                                                                with MCC.
5.........................................                223  Cardiac Defibrillator Implant with Cardiac
                                                                Catheterization with AMI/Heart Failure/Shock
                                                                without MCC.
5.........................................                224  Cardiac Defibrillator Implant with Cardiac
                                                                Catheterization without AMI/Heart Failure/Shock
                                                                with MCC.
5.........................................                225  Cardiac Defibrillator Implant with Cardiac
                                                                Catheterization without AMI/Heart Failure/Shock
                                                                without MCC.
5.........................................                226  Cardiac Defibrillator Implant without Cardiac
                                                                Catheterization with MCC.
5.........................................                227  Cardiac Defibrillator Implant without Cardiac
                                                                Catheterization without MCC.
5.........................................                242  Permanent Cardiac Pacemaker Implant with MCC.
5.........................................                243  Permanent Cardiac Pacemaker Implant with CC.
5.........................................                244  Permanent Cardiac Pacemaker Implant without CC/
                                                                MCC.
5.........................................                245  AICD Generator Procedures.
5.........................................                258  Cardiac Pacemaker Device Replacement with MCC.
5.........................................                259  Cardiac Pacemaker Device Replacement without MCC.
5.........................................                260  Cardiac Pacemaker Revision Except Device
                                                                Replacement with MCC.
5.........................................                261  Cardiac Pacemaker Revision Except Device
                                                                Replacement with CC.
5.........................................                262  Cardiac Pacemaker Revision Except Device
                                                                Replacement without CC/MCC.
5.........................................                265  AICD Lead Procedures.
5.........................................                266  Endovascular Cardiac Valve Replacement with MCC.
5.........................................                267  Endovascular Cardiac Valve Replacement without
                                                                MCC.
5.........................................                268  Aortic and Heart Assist Procedures Except
                                                                Pulsation Balloon with MCC.
5.........................................                269  Aortic and Heart Assist Procedures Except
                                                                Pulsation Balloon without MCC.
5.........................................                270  Other Major Cardiovascular Procedures with MCC.
5.........................................                271  Other Major Cardiovascular Procedures with CC.
5.........................................                272  Other Major Cardiovascular Procedures without CC/
                                                                MCC.
8.........................................                461  Bilateral or Multiple Major Joint Procedures Of
                                                                Lower Extremity with MCC.
8.........................................                462  Bilateral or Multiple Major Joint Procedures of
                                                                Lower Extremity without MCC.
8.........................................                466  Revision of Hip or Knee Replacement with MCC.
8.........................................                467  Revision of Hip or Knee Replacement with CC.
8.........................................                468  Revision of Hip or Knee Replacement without CC/
                                                                MCC.
8.........................................                469  Major Joint Replacement or Reattachment of Lower
                                                                Extremity with MCC.
8.........................................                470  Major Joint Replacement or Reattachment of Lower
                                                                Extremity without MCC.
----------------------------------------------------------------------------------------------------------------

    We are soliciting public comments on our proposal to continue to 
include the existing MS-DRGs currently subject to the policy for 
replaced devices offered without cost or with credit and to not add any 
additional MS-DRGs to the policy. We note that, as discussed in section 
II.F.2.b. and in section II.F.5.a. of the preamble of this proposed 
rule, we are proposing to revise the titles for MS-DRG 023 and MS-DRGs 
469 and 470. We refer readers to those discussions of the specific 
proposed MS-DRG titles. The final list of MS-DRGs subject to the 
payment policy for devices provided at no cost or with a credit for FY 
2018 will be listed in the FY 2018 IPPS/LTCH PPS final rule, as well as 
issued to providers through guidance and instructions in the form of a 
Change Request (CR).
17. Other Policy Changes: Other Operating Room (O.R.) and Non-O.R. 
Issues
a. O.R. Procedures to Non-O.R. Procedures
    For this FY 2018 IPPS/LTCH PPS proposed rule, we continued our 
efforts to address the recommendations for consideration that we 
received in response to some of the proposals set forth in the FY 2017 
IPPS/LTCH PPS proposed rule pertaining to changing the designation of 
ICD-10-PCS procedure codes from O.R. procedures to non-O.R. procedures. 
As we stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56871), we 
received requests and recommendations for over 800 procedure codes that 
we were not able to fully evaluate and finalize for FY 2017. We discuss 
these requests and recommendations below.
    We also are addressing separate requests that we received regarding 
changing the designation of specific ICD-10-PCS procedure codes. For 
each group summarized below, the detailed lists of procedure are shown 
in Tables 6P.4a. through 6P.4p. (Proposed ICD-10-CM and ICD-10-PCS Code 
Designations, MCE and MS-DRG Changes--FY 2018) associated with this 
proposed rule (which are available via the Internet on the CMS Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
(1) Percutaneous/Diagnostic Drainage
    One commenter identified 135 ICD-10-PCS procedure codes describing 
procedures involving percutaneous diagnostic and therapeutic drainage 
of central nervous system, vascular and other body sites that generally 
would not require the resources of an operating room and can be 
performed at the bedside. The list includes procedure codes that 
describe procedures involving drainage with or without placement of a 
drainage device. We agree with the commenter. Therefore, we are 
proposing that the 135 ICD-10-PCS procedure codes listed in Table 
6P.4a. associated with this 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/index.html) be designated as 
non-O.R. procedures. We are inviting public comments on our proposal.
(2) Percutaneous Insertion of Intraluminal or Monitoring Device
    One commenter identified 28 ICD-10-PCS procedure codes describing 
procedures involving the percutaneous insertion of intraluminal and 
monitoring devices into central nervous system and other cardiovascular 
body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. We agree with the 
commenter. Therefore, we are proposing that the 28 ICD-10-

[[Page 19854]]

PCS procedure codes listed in Table 6P.4b. associated with this 
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/index.html) be designated as non-O.R. procedures. We 
are inviting public comments on our proposal.
(3) Percutaneous Removal of Drainage, Infusion, Intraluminal or 
Monitoring Device
    One commenter identified 22 ICD-10-PCS procedure codes that 
describe procedures involving the percutaneous removal of drainage, 
infusion, intraluminal and monitoring devices from central nervous 
system and other vascular body parts that generally would not require 
the resources of an operating room and can be performed at the bedside. 
We agree with the commenter. Therefore, we are proposing that the 22 
ICD-10-PCS procedure codes listed in Table 6P.4c. associated with this 
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/index.html) be designated as non-O.R. procedures. We 
are inviting public comments on our proposal.
(4) External Removal of Cardiac or Neurostimulator Lead
    One commenter identified four ICD-10-PCS procedure codes that 
describe procedures involving the external removal of cardiac leads 
from the heart and neurostimulator leads from central nervous system 
body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. These four ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
00P6XMZ...................  Removal of neurostimulator lead from
                             cerebral ventricle, external approach.
00PEXMZ...................  Removal of neurostimulator lead from cranial
                             nerve, external approach.
01PYXMZ...................  Removal of neurostimulator lead from
                             peripheral nerve, external approach.
02PAXMZ...................  Removal of cardiac lead from heart, external
                             approach.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
four ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(5) Percutaneous Revision of Drainage, Infusion, Intraluminal or 
Monitoring Device
    One commenter identified 28 ICD-10-PCS procedure codes that 
describe procedures involving the percutaneous revision of drainage, 
infusion, intraluminal and monitoring devices for vascular and heart 
and great vessel body parts that generally would not require the 
resources of an operating room and can be performed at the bedside. We 
agree with the commenter. Therefore, we are proposing that the 28 ICD-
10-PCS procedure codes listed in Table 6P.4d. associated with this 
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/index.html) be designated as non-O.R. procedures. We 
are inviting public comments on our proposal.
(6) Percutaneous Destruction
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving the percutaneous destruction of retina 
body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. These two ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
085E3ZZ...................  Destruction of right retina, percutaneous
                             approach.
085F3ZZ...................  Destruction of left retina, percutaneous
                             approach.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
two ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(7) External/Diagnostic Drainage
    One commenter identified 20 ICD-10-PCS procedure codes that 
describe procedures involving external drainage for structures of the 
eye that generally would not require the resources of an operating room 
and can be performed at the bedside. We agree with the commenter. 
Therefore, we are proposing that the 20 ICD-10-PCS procedure codes 
listed in Table 6P.4e. associated with this 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/index.html) 
be designated as non-O.R. procedures. We are inviting public comments 
on our proposal.
(8) External Extirpation
    One commenter identified four ICD-10-PCS procedure codes that 
describe procedures involving external extirpation of matter from eye 
structures that generally would not require the resources of an 
operating room and can be performed at the bedside. These four ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
08C0XZZ...................  Extirpation of matter from right eye,
                             external approach.
08C1XZZ...................  Extirpation of matter from left eye,
                             external approach.
08CSXZZ...................  Extirpation of matter from right
                             conjunctiva, external approach.
08CTXZZ...................  Extirpation of matter from left conjunctiva,
                             external approach.
------------------------------------------------------------------------


[[Page 19855]]

    We agree with the commenter. Therefore, we are proposing that the 
four ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(9) External Removal of Radioactive Element or Synthetic Substitute
    One commenter identified three ICD-10-PCS procedure codes that 
describe procedures involving the external removal of radioactive or 
synthetic substitutes from the eye that generally would not require the 
resources of an operating room and can be performed at the bedside. 
These three ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
08P0X1Z...................  Removal of radioactive element from right
                             eye, external approach.
08P0XJZ...................  Removal of synthetic substitute from right
                             eye, external approach.
08P1XJZ...................  Removal of synthetic substitute from left
                             eye, external approach.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
three ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(10) Endoscopic/Transorifice Diagnostic Drainage
    One commenter identified eight ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) drainage of ear structures that generally would not 
require the resources of an operating room and can be performed at the 
bedside. These eight ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
09977ZX...................  Drainage of right tympanic membrane, via
                             natural or artificial opening, diagnostic.
09978ZX...................  Drainage of right tympanic membrane, via
                             natural or artificial opening endoscopic,
                             diagnostic.
09987ZX...................  Drainage of left tympanic membrane, via
                             natural or artificial opening, diagnostic.
09988ZX...................  Drainage of left tympanic membrane, via
                             natural or artificial opening endoscopic,
                             diagnostic.
099F7ZX...................  Drainage of right eustachian tube, via
                             natural or artificial opening, diagnostic.
099F8ZX...................  Drainage of right eustachian tube, via
                             natural or artificial opening endoscopic,
                             diagnostic.
099G7ZX...................  Drainage of left eustachian tube, via
                             natural or artificial opening, diagnostic.
099G8ZX...................  Drainage of left eustachian tube, via
                             natural or artificial opening endoscopic,
                             diagnostic.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
eight ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(11) External Release
    One commenter identified four ICD-10-PCS procedure codes that 
describe procedures involving the external release of ear structures 
that generally would not require the resources of an operating room and 
can be performed at the bedside. These four ICD-10-PCS codes are shown 
in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
09N0XZZ...................  Release right external ear, external
                             approach.
09N1XZZ...................  Release left external ear, external
                             approach.
09N3XZZ...................  Release right external auditory canal,
                             external approach.
09N4XZZ...................  Release left external auditory canal,
                             external approach.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
four ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(12) External Repair
    One commenter identified three ICD-10-PCS procedure codes that 
describe procedures involving the external repair of body parts that 
generally would not require the resources of an operating room and can 
be performed at the bedside. These three ICD-10-PCS codes are shown in 
the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
09QKXZZ...................  Repair nose, external approach.
0CQ4XZZ...................  Repair buccal mucosa, external approach.
0CQ7XZZ...................  Repair tongue, external approach.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
three ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(13) Endoscopic/Transorifice Destruction
    One commenter identified eight ICD-10-PCS procedure codes that 
describe procedures involving the endoscopic/transorifice destruction 
of respiratory system body parts that generally would not require the 
resources of an operating room and can be performed at the bedside. 
These eight ICD-10-PCS codes are shown in the table below.

[[Page 19856]]



------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0B538ZZ...................  Destruction of right main bronchus, via
                             natural or artificial opening endoscopic.
0B548ZZ...................  Destruction of right upper lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0B558ZZ...................  Destruction of right middle lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0B568ZZ...................  Destruction of right lower lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0B578ZZ...................  Destruction of left main bronchus, via
                             natural or artificial opening endoscopic.
0B588ZZ...................  Destruction of left upper lobe bronchus, via
                             natural or artificial opening endoscopic.
0B598ZZ...................  Destruction of lingula bronchus, via natural
                             or artificial opening endoscopic.
0B5B8ZZ...................  Destruction of left lower lobe bronchus, via
                             natural or artificial opening endoscopic.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
eight ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(14) Endoscopic/Transorifice Drainage
    One commenter identified 40 ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) drainage of respiratory system body parts that 
generally would not require the resources of an operating room and can 
be performed at the bedside. We agree with the commenter. Therefore, we 
are proposing that the 40 ICD-10-PCS procedure codes listed in Table 
6P.4f. associated with this 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/index.html) be designated as 
non-O.R. procedures. We are inviting public comments on our proposal.
(15) Endoscopic/Transorifice Extirpation
    One commenter identified nine ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice extirpation of 
matter from respiratory system body parts that generally would not 
require the resources of an operating room and can be performed at the 
bedside. These nine ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0BCC8ZZ...................  Extirpation of matter from right upper lung
                             lobe, via natural or artificial opening
                             endoscopic.
0BCD8ZZ...................  Extirpation of matter from right middle lung
                             lobe, via natural or artificial opening
                             endoscopic.
0BCF8ZZ...................  Extirpation of matter from right lower lung
                             lobe, via natural or artificial opening
                             endoscopic.
0BCG8ZZ...................  Extirpation of matter from left upper lung
                             lobe, via natural or artificial opening
                             endoscopic.
0BCH8ZZ...................  Extirpation of matter from lung lingula, via
                             natural or artificial opening endoscopic.
0BCJ8ZZ...................  Extirpation of matter from left lower lung
                             lobe, via natural or artificial opening
                             endoscopic.
0BCK8ZZ...................  Extirpation of matter from right lung, via
                             natural or artificial opening endoscopic.
0BCL8ZZ...................  Extirpation of matter from left lung, via
                             natural or artificial opening endoscopic.
0BCM8ZZ...................  Extirpation of matter from bilateral lungs,
                             via natural or artificial opening
                             endoscopic.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
nine ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(16) Endoscopic/Transorifice Fragmentation
    One commenter identified 16 ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice fragmentation of 
respiratory system body parts that generally would not require the 
resources of an operating room and can be performed at the bedside. 
These 16 ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0BF37ZZ...................  Fragmentation in right main bronchus, via
                             natural or artificial opening.
0BF38ZZ...................  Fragmentation in right main bronchus, via
                             natural or artificial opening endoscopic.
0BF47ZZ...................  Fragmentation in right upper lobe bronchus,
                             via natural or artificial opening.
0BF48ZZ...................  Fragmentation in right upper lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0BF57ZZ...................  Fragmentation in right middle lobe bronchus,
                             via natural or artificial opening.
0BF58ZZ...................  Fragmentation in right middle lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0BF67ZZ...................  Fragmentation in right lower lobe bronchus,
                             via natural or artificial opening.
0BF68ZZ...................  Fragmentation in right lower lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0BF77ZZ...................  Fragmentation in left main bronchus, via
                             natural or artificial opening.
0BF78ZZ...................  Fragmentation in left main bronchus, via
                             natural or artificial opening endoscopic.
0BF87ZZ...................  Fragmentation in left upper lobe bronchus,
                             via natural or artificial opening.
0BF88ZZ...................  Fragmentation in left upper lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0BF97ZZ...................  Fragmentation in lingula bronchus, via
                             natural or artificial opening.
0BF98ZZ...................  Fragmentation in lingula bronchus, via
                             natural or artificial opening endoscopic.
0BFB7ZZ...................  Fragmentation in left lower lobe bronchus,
                             via natural or artificial opening.
0BFB8ZZ...................  Fragmentation in left lower lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
------------------------------------------------------------------------


[[Page 19857]]

    We agree with the commenter. Therefore, we are proposing that the 
16 ICD-10-PCS procedure codes shown in the table above be designated as 
non-O.R. procedures. We are inviting public comments on our proposal.
(17) Endoscopic/Transorifice Insertion of Intraluminal Device
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving an endoscopic/transorifice (via natural 
or artificial opening) insertion of intraluminal devices into 
respiratory system body parts that generally would not require the 
resources of an operating room and can be performed at the bedside. 
These two ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0BH17DZ...................  Insertion of intraluminal device into
                             trachea, via natural or artificial opening.
0BH18DZ...................  Insertion of intraluminal device into
                             trachea, via natural or artificial opening
                             endoscopic.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
two ICD-10-PCS procedure codes shown in the table above be designated 
non-O.R. procedures. We are inviting public comments on our proposal.
(18) Endoscopic/Transorifice Removal of Radioactive Element
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving the endoscopic/transorifice removal of 
radioactive elements from respiratory system body parts that generally 
would not require the resources of an operating room and can be 
performed at the bedside. These two ICD-10-PCS codes are shown in the 
table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0BPK71Z...................  Removal of radioactive element from right
                             lung, via natural or artificial opening.
0BPK81Z...................  Removal of radioactive element from right
                             lung, via natural or artificial opening
                             endoscopic.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
two ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(19) Endoscopic/Transorifice Revision of Drainage, Infusion, 
Intraluminal or Monitoring Device
    One commenter identified 18 ICD-10-PCS procedure codes that 
describe procedures involving the revision of drainage, infusion, 
intraluminal, or monitoring devices from respiratory system body parts 
that generally would not require the resources of an operating room and 
can be performed at the bedside. We agree with the commenter. 
Therefore, we are proposing that the 18 ICD-10-PCS procedure codes 
listed in Table 6P.4g. associated with this 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/index.html) 
be designated as non-O.R. procedures. We are inviting public comments 
on our proposal.
(20) Endoscopic/Transorifice Excision
    One commenter identified one ICD-10-PCS procedure code that 
describes the procedure involving endoscopic/transorifice (via natural 
or artificial opening) excision of the digestive system body parts that 
generally would not require the resources of an operating room and can 
be performed at the bedside. This code is 0DBQ8ZZ (Excision of anus, 
via natural or artificial opening endoscopic. We agree with the 
commenter. Therefore, we are proposing that ICD-10-PCS procedure code 
0DBQ8ZZ be designated as a non-O.R. procedure. We are inviting public 
comments on our proposal.
(21) Endoscopic/Transorifice Insertion
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving the endoscopic/transorifice (via natural 
or artificial opening) insertion of intraluminal device into the 
stomach that generally would not require the resources of an operating 
room and can be performed at the bedside. These two ICD-10-PCS codes 
are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0DH67DZ...................  Insertion of intraluminal device into
                             stomach, via natural or artificial opening.
0DH68DZ...................  Insertion of intraluminal device into
                             stomach, via natural or artificial opening
                             endoscopic.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
two ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(22) Endoscopic/Transorifice Removal
    One commenter identified six ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) removal of feeding devices that generally would not 
require the resources of an operating room and can be performed at the 
bedside. These six ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0DP07UZ...................  Removal of feeding device from upper
                             intestinal tract, via natural or artificial
                             opening.
0DP08UZ...................  Removal of feeding device from upper
                             intestinal tract, via natural or artificial
                             opening endoscopic.
0DP67UZ...................  Removal of feeding device from stomach, via
                             natural or artificial opening.
0DP68UZ...................  Removal of feeding device from stomach, via
                             natural or artificial opening endoscopic.
0DPD7UZ...................  Removal of feeding device from lower
                             intestinal tract, via natural or artificial
                             opening

[[Page 19858]]

 
0DPD8UZ...................  Removal of feeding device from lower
                             intestinal tract, via natural or artificial
                             opening endoscopic.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
six ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(23) External Reposition
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving external reposition of gastrointestinal 
body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. These two ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0DS5XZZ...................  Reposition esophagus, external approach.
0DSQXZZ...................  Reposition anus, external approach.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
two ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(24) Endoscopic/Transorifice Drainage
    One commenter identified eight ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) drainage of hepatobiliary system and pancreatic 
body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. These eight ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0F9580Z...................  Drainage of right hepatic duct with drainage
                             device, via natural or artificial opening
                             endoscopic.
0F958ZZ...................  Drainage of right hepatic duct, via natural
                             or artificial opening endoscopic.
0F9680Z...................  Drainage of left hepatic duct with drainage
                             device, via natural or artificial opening
                             endoscopic.
0F968ZZ...................  Drainage of left hepatic duct, via natural
                             or artificial opening endoscopic.
0F9880Z...................  Drainage of cystic duct with drainage
                             device, via natural or artificial opening
                             endoscopic.
0F988ZZ...................  Drainage of cystic duct, via natural or
                             artificial opening endoscopic.
0F9D8ZZ...................  Drainage of pancreatic duct, via natural or
                             artificial opening endoscopic.
0F9F8ZZ...................  Drainage of accessory pancreatic duct, via
                             natural or artificial opening endoscopic.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
eight ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(25) Endoscopic/Transorifice Fragmentation
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) fragmentation of hepatobiliary system and 
pancreatic body parts that generally would not require the resources of 
an operating room and can be performed at the bedside. These two ICD-
10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0FFD8ZZ...................  Fragmentation in pancreatic duct, via
                             natural or artificial opening endoscopic.
0FFF8ZZ...................  Fragmentation in accessory pancreatic duct,
                             via natural or artificial opening
                             endoscopic.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
two ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(26) Percutaneous Alteration
    One commenter identified three ICD-10-PCS procedure codes that 
describe procedures involving percutaneous alteration of the breast 
that generally would not require the resources of an operating room and 
can be performed at the bedside. These three ICD-10-PCS codes are shown 
in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0H0T3JZ...................  Alteration of right breast with synthetic
                             substitute, percutaneous approach.
0H0U3JZ...................  Alteration of left breast with synthetic
                             substitute, percutaneous approach.
0H0V3JZ...................  Alteration of bilateral breast with
                             synthetic substitute, percutaneous
                             approach.
------------------------------------------------------------------------


[[Page 19859]]

    We agree with the commenter. Therefore, we are proposing that the 
three ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(27) External Division and Excision of Skin
    One commenter identified 41 ICD-10-PCS procedure codes that 
describe procedures involving external division and excision of the 
skin for body parts that generally would not require the resources of 
an operating room and can be performed at the bedside. We agree with 
the commenter. Therefore, we are proposing that the 41 ICD-10-PCS 
procedure codes listed in Table 6P.4h. associated with this 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/index.html) be designated as non-O.R. procedures. We 
are inviting public comments on our proposal.
(28) External Excision of Breast
    One commenter identified six ICD-10-PCS procedure codes that 
describe procedures involving external excision of the breast that they 
believed would generally not require the resources of an operating room 
and can be performed at the bedside. These six ICD-10-PCS codes are 
shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0HBTXZZ...................  Excision of right breast, external approach.
0HBUXZZ...................  Excision of left breast, external approach.
0HBVXZZ...................  Excision of bilateral breast, external
                             approach.
0HBWXZZ...................  Excision of right nipple, external approach.
0HBXXZZ...................  Excision of left nipple, external approach.
0HBYXZZ...................  Excision of supernumerary breast, external
                             approach.
------------------------------------------------------------------------

    We disagree with the commenter because these procedure codes 
describe various types of surgery performed on the breast or nipple 
(for example, partial mastectomy) that would typically involve the use 
of general anesthesia. Therefore, we are proposing that the six ICD-10-
PCS procedure codes shown in the table above remain designated as O.R. 
procedures. We are inviting public comments on our proposal.
(29) Percutaneous Supplement
    One commenter identified three ICD-10-PCS procedure codes that 
describe procedures involving percutaneous supplement of the breast 
with synthetic substitute that generally would not require the 
resources of an operating room and can be performed at the bedside. 
These three ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0HUT3JZ...................  Supplement right breast with synthetic
                             substitute, percutaneous approach.
0HUU3JZ...................  Supplement left breast with synthetic
                             substitute, percutaneous approach.
0HUV3JZ...................  Supplement bilateral breast with synthetic
                             substitute, percutaneous approach.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
three ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(30) Open Drainage
    One commenter identified 25 ICD-10-PCS procedure codes that 
describe procedures involving open drainage of subcutaneous tissue and 
fascia body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. The list includes 
procedure codes for drainage with or without placement of a drainage 
device. We agree with the commenter. Therefore, we are proposing that 
the 25 ICD-10-PCS procedure codes listed in Table 6P.4i. associated 
with this 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/index.html) be designated as non-O.R. 
procedures. We are inviting public comments on our proposal.
(31) Percutaneous Drainage
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving percutaneous drainage of subcutaneous 
tissue and fascia body parts that generally would not require the 
resources of an operating room and can be performed at the bedside. 
These two ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0J9J3ZZ...................  Drainage of right hand subcutaneous tissue
                             and fascia, percutaneous approach.
0J9K3ZZ...................  Drainage of left hand subcutaneous tissue
                             and fascia, percutaneous approach.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
two ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(32) Percutaneous Extraction
    One commenter identified 22 ICD-10-PCS procedure codes that 
describe procedures involving percutaneous extraction of subcutaneous 
tissue and fascia body parts that generally would not require the 
resources of an operating room and can be performed at the bedside. We 
agree with the commenter. Therefore, we are proposing that the 22 ICD-
10-PCS procedure codes listed in Table 6P.4j. associated with this 
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/index.html) be

[[Page 19860]]

designated as non-O.R. procedures. We are inviting public comments on 
our proposal.
(33) Open Extraction
    One commenter identified 22 ICD-10-PCS procedure codes that 
describe procedures involving open extraction of subcutaneous tissue 
and fascia body parts that the commenter believed would generally not 
require the resources of an operating room and can be performed at the 
bedside. We disagree with the commenter because these codes describe 
procedures that utilize an open approach and are being performed on the 
skin and subcutaneous tissue. Depending on the medical reason for the 
open extraction, the procedures may require an O.R. setting. Therefore, 
we are proposing that the 22 ICD-10-PCS procedure codes listed in Table 
6P.4k. associated with this 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/index.html) remain designated 
as O.R. procedures. We are inviting public comments on our proposal.
(34) Percutaneous and Open Repair
    One commenter identified 44 ICD-10-PCS procedure codes that 
describe procedures involving percutaneous and open repair of 
subcutaneous tissue and fascia body parts that generally would not 
require the resources of an operating room and can be performed at the 
bedside. We agree with the commenter. Therefore, we are proposing that 
the 44 ICD-10-PCS procedure codes listed in Table 6P.4l. associated 
with this 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/index.html) be designated as non-O.R. 
procedures. We are inviting public comments on our proposal.
(35) External Release
    One commenter identified 28 ICD-10-PCS procedure codes that 
describe procedures involving external release of bursa and ligament 
body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. We agree with the 
commenter. Therefore, we are proposing that the 28 ICD-10-PCS procedure 
codes listed in Table 6P.4m. associated with this 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/index.html) be designated as non-O.R. procedures. We 
are inviting public comments on our proposal.
(36) External Repair
    One commenter identified 135 ICD-10-PCS procedure codes that 
describe procedures involving external repair of various bones and 
joints. We believe that these procedures generally would not be 
performed in the operating room. We are proposing that the 135 ICD-10-
PCS procedure codes listed in Table 6P.4n. associated with this 
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/index.html) be designated as non-O.R. procedures. We 
are inviting public comments on our proposal.
(37) External Reposition
    One commenter identified 14 ICD-10-PCS procedure codes that 
describe procedures involving external reposition of various bones. 
These 14 ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0NS0XZZ...................  Reposition skull, external approach.
0NS1XZZ...................  Reposition right frontal bone, external
                             approach.
0NS2XZZ...................  Reposition left frontal bone, external
                             approach.
0NS3XZZ...................  Reposition right parietal bone, external
                             approach.
0NS4XZZ...................  Reposition left parietal bone, external
                             approach.
0NS5XZZ...................  Reposition right temporal bone, external
                             approach.
0NS6XZZ...................  Reposition left temporal bone, external
                             approach.
0NS7XZZ...................  Reposition right occipital bone, external
                             approach.
0NS8XZZ...................  Reposition left occipital bone, external
                             approach.
0PS3XZZ...................  Reposition cervical vertebra, external
                             approach.
0PS4XZZ...................  Reposition thoracic vertebra, external
                             approach.
0QS0XZZ...................  Reposition lumbar vertebra, external
                             approach.
0QS1XZZ...................  Reposition sacrum, external approach.
0QSSXZZ...................  Reposition coccyx, external approach.
------------------------------------------------------------------------

    We believe that these procedures generally would not be performed 
in the operating room. Therefore, we are proposing that the 14 ICD-10-
PCS procedure codes shown in the table above be designated as non-O.R. 
procedures. We are inviting public comments on our proposal.
(38) Endoscopic/Transorifice Dilation
    One commenter identified eight ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) dilation of urinary system body parts that 
generally would not require the resources of an operating room and can 
be performed at the bedside. These eight ICD-10-PCS codes are shown in 
the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0T767ZZ...................  Dilation of right ureter, via natural or
                             artificial opening.
0T768ZZ...................  Dilation of right ureter, via natural or
                             artificial opening endoscopic.
0T777ZZ...................  Dilation of left ureter, via natural or
                             artificial opening.
0T778ZZ...................  Dilation of left ureter, via natural or
                             artificial opening endoscopic.
0T7B7DZ...................  Dilation of bladder with intraluminal
                             device, via natural or artificial opening.
0T7B7ZZ...................  Dilation of bladder, via natural or
                             artificial opening.
0T7B8DZ...................  Dilation of bladder with intraluminal
                             device, via natural or artificial opening
                             endoscopic.

[[Page 19861]]

 
0T7B8ZZ...................  Dilation of bladder, via natural or
                             artificial opening endoscopic.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
eight ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(39) Endoscopic/Transorifice Excision
    One commenter identified three ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) excision of urinary system body parts that the 
commenter believed would generally not require the resources of an 
operating room and can be performed at the bedside. These three ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0TBD7ZZ...................  Excision of urethra, via natural or
                             artificial opening.
0TBD8ZZ...................  Excision of urethra, via natural or
                             artificial opening endoscopic.
0TBDXZZ...................  Excision of urethra, external approach.
------------------------------------------------------------------------

    We disagree with the commenter because, depending on the medical 
reason for the excision, the procedures may require an O.R. setting. 
Therefore, we are proposing that the three ICD-10-PCS procedure codes 
shown in the table above remain designated as O.R. procedures. We are 
inviting public comments on our proposal.
(40) External/Transorifice Repair
    One commenter identified three ICD-10-PCS procedure codes that 
describe procedures involving external and transorifice (via natural or 
artificial opening) repair of the vagina body part that generally would 
not require the resources of an operating room and can be performed at 
the bedside. These three ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0UQG7ZZ...................  Repair vagina, via natural or artificial
                             opening.
0UQGXZZ...................  Repair vagina, external approach.
0UQMXZZ...................  Repair vulva, external approach.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that these 
three ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(41) Percutaneous Transfusion
    One commenter identified 20 ICD-10-PCS procedure codes that 
describe procedures involving percutaneous transfusion of bone marrow 
and stem cells that generally would not require the resources of an 
operating room and can be performed at the bedside. We agree with the 
commenter. Therefore, we are proposing that the 20 ICD-10-PCS procedure 
codes listed in Table 6P.4o. associated with this 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/index.html) be designated as non-O.R. procedures. We 
are inviting public comments on our proposal.
(42) External/Percutaneous/Transorifice Introduction
    One commenter identified 51 ICD-10-PCS procedure codes that 
describe procedures involving external, percutaneous and transorifice 
(via natural or artificial opening) introduction of substances that 
generally would not require the resources of an operating room and can 
be performed at the bedside. We agree with the commenter. Therefore, we 
are proposing that the 51 ICD-10-PCS procedure codes listed in Table 
6P.4p. associated with this 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/index.html) be designated as 
non-O.R. procedures. We are inviting public comments on our proposal.
(43) Percutaneous/Diagnostic and Endoscopic/Transorifice Irrigation, 
Measurement and Monitoring
    One commenter identified 15 ICD-10-PCS procedure codes that 
describe procedures involving percutaneous/diagnostic and endoscopic/
transorifice (via natural or artificial opening) irrigation, 
measurement and monitoring of structures, pressures and flow that 
generally would not require the resources of an operating room and can 
be performed at the bedside. These 15 ICD-10-PCS codes are shown in the 
table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
3E1N38X...................  Irrigation of male reproductive using
                             irrigating substance, percutaneous
                             approach, diagnostic.
3E1N38Z...................  Irrigation of male reproductive using
                             irrigating substance, percutaneous
                             approach.
3E1N78X...................  Irrigation of male reproductive using
                             irrigating substance, via natural or
                             artificial opening, diagnostic.
3E1N78Z...................  Irrigation of male reproductive using
                             irrigating substance, via natural or
                             artificial opening.
3E1N88X...................  Irrigation of male reproductive using
                             irrigating substance, via natural or
                             artificial opening endoscopic, diagnostic.
3E1N88Z...................  Irrigation of male reproductive using
                             irrigating substance, via natural or
                             artificial opening endoscopic.
4A0635Z...................  Measurement of lymphatic flow, percutaneous
                             approach.
4A063BZ...................  Measurement of lymphatic pressure,
                             percutaneous approach.
4A0C35Z...................  Measurement of biliary flow, percutaneous
                             approach.

[[Page 19862]]

 
4A0C3BZ...................  Measurement of biliary pressure,
                             percutaneous approach.
4A0C75Z...................  Measurement of biliary flow, via natural or
                             artificial opening.
4A0C7BZ...................  Measurement of biliary pressure, via natural
                             or artificial opening.
4A0C85Z...................  Measurement of biliary flow, via natural or
                             artificial opening endoscopic.
4A1635Z...................  Monitoring of lymphatic flow, percutaneous
                             approach.
4A163BZ...................  Monitoring of lymphatic pressure,
                             percutaneous approach.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
15 ICD-10-PCS procedure codes shown in the table above be designated as 
non-O.R. procedures. We are inviting public comments on our proposal.
(44) Imaging
    One commenter identified six ICD-10-PCS procedure codes that 
describe procedures involving imaging with contrast of hepatobiliary 
system body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. These six ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
BF030ZZ...................  Plain radiography of gallbladder and bile
                             ducts using high osmolar contrast.
BF031ZZ...................  Plain radiography of gallbladder and bile
                             ducts using low osmolar contrast.
BF03YZZ...................  Plain radiography of gallbladder and bile
                             ducts using other contrast.
BF0C0ZZ...................  Plain radiography of hepatobiliary system,
                             all using high osmolar contrast.
BF0C1ZZ...................  Plain radiography of hepatobiliary system,
                             all using low osmolar contrast.
BF0CYZZ...................  Plain radiography of hepatobiliary system,
                             all using other contrast.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
six ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
(45) Prosthetics
    One commenter identified five ICD-10-PCS procedure codes that 
describe procedures involving the fitting and use of prosthetics and 
assistive devices that would not require the resources of an operating 
room. These five ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
F0DZ8ZZ...................  Prosthesis device fitting.
F0DZ9EZ...................  Assistive, adaptive, supportive or
                             protective devices device fitting using
                             orthosis.
F0DZ9FZ...................  Assistive, adaptive, supportive or
                             protective devices device fitting using
                             assistive, adaptive, supportive or
                             protective equipment.
F0DZ9UZ...................  Assistive, adaptive, supportive or
                             protective devices device fitting using
                             prosthesis.
F0DZ9ZZ...................  Assistive, adaptive, supportive or
                             protective devices device fitting.
------------------------------------------------------------------------

    We agree with the commenter. Therefore, we are proposing that the 
five ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
b. Revision of Neurostimulator Generator
    We received a request to review three ICD-10-PCS procedure codes 
that describe procedures for revision of a neurostimulator generator 
that are currently designated as O.R. procedures and assigned to MS-
DRGs 252, 253 and 254 (Other Vascular Procedures with MCC, with CC and 
without CC/MCC, respectively). The three codes are 0JWT0MZ (Revision of 
stimulator generator in trunk subcutaneous tissue and fascia, open 
approach), 0JWT3MZ (Revision of stimulator generator in trunk 
subcutaneous tissue and fascia, percutaneous approach), and 0JWTXMZ 
(Revision of stimulator generator in trunk subcutaneous tissue and 
fascia, external approach).
    The requester expressed concern with the MS-DRG assignments and 
noted that although these codes are used to report revision of a 
carotid sinus stimulator pulse generator and appropriately assigned to 
MS-DRGs 252, 253 and 254 in MDC 5 (Diseases and Disorders of the 
Circulatory System), they also are very frequently used for the 
revision of the more common (for example, gastric, intracranial, sacral 
and spinal) neurostimulator generators that would generally not require 
the resources of an operating room.
    The requestor also stated that the indication for revision of a 
neurostimulator generator is typically due to a complication, which 
would be reflected in a complication code such as ICD-10-CM diagnosis 
code T85.734A (Infection and inflammatory reaction due to implanted 
electronic neurostimulator, generator, initial encounter) or T85.890A 
(Other specified complication of nervous system prosthetic devices, 
implants and grafts, initial encounter). Because both of these 
diagnosis codes are assigned to MDC 1 (Diseases and Disorders of the 
Nervous System), when either code is reported in combination with one 
of the three procedure codes that describe revision of neurostimulator 
generator codes (currently assigned to MDC 5), the resulting MS-DRG 
assignment is to MS-DRGs 981, 982 and 983 (Extensive O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC and without CC/MCC, 
respectively).
    The requestor presented the following three options for 
consideration.
     Reclassify the ICD-10-PCS procedure codes from O.R. 
Procedures to non-O.R. procedures that affect MS-DRG assignment only in 
MDC 5. The requestor stated that, under this option, the procedure 
codes would continue to appropriately group to MDC 5 when representing 
cases involving carotid

[[Page 19863]]

sinus stimulators and the other types of neurostimulator cases would 
appropriately group to medical MS-DRGs.
     Add the ICD-10-PCS procedure codes to MDC 1, such as to 
MS-DRGs 040, 041 and 042 (Peripheral, Cranial Nerve and Other Nervous 
System Procedures with MCC, with CC or Peripheral Neurostimulator and 
without CC/MCC, respectively) under MDC 1. The requestor stated that 
this option would resolve the inconsistency between a revision of a 
carotid sinus stimulator generator being classified as an O.R. 
procedure, while the other comparable procedures involving a revision 
of a regular neurostimulator generator are not. The requestor also 
stated that this option would preclude cases being assigned to MS-DRGs 
981 through 983.
     Stop classifying the ICD-10-PCS procedure codes as O.R. 
procedures entirely. The requestor stated that, under this option, all 
cases would then group to medical MS-DRGs, regardless of the type of 
neurostimulator generator.
    We analyzed claims data for the three revision of neurostimulator 
generator procedure codes from the December 2016 update of the FY 2016 
MedPAR file and identified cases under MDC 1 (Diseases and Disorders of 
the Nervous System) in MS-DRGs 025, 026, and 027 (Craniotomy and 
Endovascular Intracranial Procedures with MCC, with CC and without CC/
MCC, respectively); MS-DRGs 029 and 030 (Spinal Procedures with CC or 
Neurostimulators and Spinal Procedures without CC/MCC), respectively); 
and MS-DRGs 041 and 042 (Peripheral, Cranial Nerve and Other Nervous 
System Procedures with CC or Peripheral Neurostimulator and without CC/
MCC, respectively). We also identified cases in MS-DRGs 982 and 983 
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with CC and 
without CC/MCC, respectively). Lastly, we identified cases under MDC 5 
(Diseases and Disorders of the Circulatory System) in MS-DRGs 252, 253 
and 254 (Other Vascular Procedures with MCC, with CC and without CC/
MCC, respectively). Our findings are shown in the table below.

                                MS-DRGs for Revision of Neurostimulator Generator
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 025--All cases...........................................          18,442             9.1         $29,984
MS-DRG 025--Cases with revision of neurostimulator generator....               1            12.0          73,716
MS-DRG 026--All cases...........................................           8,415             5.6          21,557
MS-DRG 026--Cases with revision of neurostimulator generator....               1             6.0           4,537
MS-DRG 027--All cases...........................................          10,089             2.9          17,320
MS-DRG 027--Cases with revision of neurostimulator generator....               4             1.8          13,906
MS-DRG 029--All cases...........................................           3,192             5.9          23,145
MS-DRG 029--Cases with revision of neurostimulator generator....               6             3.5          32,799
MS-DRG 030--All cases...........................................           1,933             2.9          14,901
MS-DRG 030--Cases with revision of neurostimulator generator....              11             2.2          18,294
MS-DRG 041--All cases...........................................           5,154             5.5          16,633
MS-DRG 041--Cases with revision of neurostimulator generator....               1             1.0          14,145
MS-DRG 042--All cases...........................................           2,099             3.2          13,725
MS-DRG 042--Cases with revision of neurostimulator generator....               2             2.0          28,587
MS-DRG 982--All cases...........................................          15,216             6.6          17,341
MS-DRG 982--Cases with revision of neurostimulator generator....              11             3.0          15,336
MS-DRG 983--All cases...........................................           3,508             3.2          11,627
MS-DRG 983--Cases with revision of neurostimulator generator....               9             4.2          19,951
MS-DRG 252--All cases...........................................          33,817             7.6          23,384
MS-DRG 252--Cases with revision of neurostimulator generator....               1             7.0          18,740
MS-DRG 253--All cases...........................................          27,456             5.5          18,519
MS-DRG 253--Cases with revision of neurostimulator generator....               7             2.4          19,078
MS-DRG 254--All cases...........................................          13,036             2.9          13,253
MS-DRG 254--Cases with revision of neurostimulator generator....               3             3.0          11,981
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, the overall volume of cases reporting 
revision of neurostimulator generator is low, with a total of only 57 
cases found across all of the MS-DRGs reviewed. The average length of 
stay for these cases reporting revision of neurostimulator generators 
is, in most cases, consistent with the average length of stay for all 
cases in the respective MS-DRG, with the majority having an average 
length of stay below the average length of stay of all cases in the 
respective MS-DRG. Finally, the average costs for cases reporting 
revision of neurostimulator generator reflect a wide range, with a low 
of $4,537 in MS-DRG 026 to a high of $73,716 in MS-DRG 025. It is clear 
that, for MS-DRG 025 where the average costs of all cases were $29,984 
and the average costs of the one case reporting revision of a 
neurostimulator generator was $73,716, this is an atypical case. It is 
also clear from the data that there were other procedures reported on 
the claims where a procedure code for a revision of a neurostimulator 
generator was assigned due to the various MS-DRG assignments.
    After review of the claims data and discussion with our clinical 
advisors, we agree with and support the requestor's first option--to 
reclassify the three ICD-10-PCS procedure codes for revision of 
neurostimulator generators from O.R. procedures to non-O.R. procedures 
that affect the assignment for MS-DRGs 252, 253 and 254 to account for 
the subset of patients undergoing revision of a carotid sinus 
neurostimulator generator specifically. In cases where one of the more 
common (for example, gastric, intracranial, sacral and spinal) 
neurostimulator generators are undergoing revision, in the absence of 
another O.R. procedure, these cases would group to a medical MS-DRG. We 
are inviting public comments on our proposal.
c. External Repair of Hymen
    We received a request to examine ICD-10-PCS procedure code 0UQKXZZ 
(Repair Hymen, External Approach). This procedure code is currently 
designated as an O.R. procedure in MS-DRGs 746 and 747 (Vagina, Cervix 
and Vulva Procedures with CC/MCC and without CC/MCC, respectively) 
under

[[Page 19864]]

MDC 13. The requestor provided examples and expressed concern that 
procedure code 0UQKXZZ was assigned to MS-DRG 987 (Non-Extensive O.R. 
Procedures Unrelated to Principal Diagnosis with MCC) when reported on 
a maternal delivery claim. The requestor noted that when a similar code 
was reported with an external approach (for example, procedure code 
0UQMXZZ (Repair vulva, external approach)), the case was appropriately 
assigned to MS-DRG 774 (Vaginal Delivery with Complicating Diagnosis). 
The requestor stated that the physician documentation was simply more 
specific to the location of the repair and this should not affect 
assignment to one of the MS-DRGs for vaginal delivery.
    We reviewed claims data involving the examples provided by the 
requestor involving ICD-10-PCS procedure code 0UQKXZZ (Repair hymen, 
external approach). Our clinical advisors agree with the requestor that 
reporting of this procedure code should not affect assignment to one of 
the MS-DRGs for vaginal delivery. As discussed earlier in section 
II.F.15.a. of the preamble of this proposed rule, we are proposing to 
change the designation for a number of procedure codes from O.R. 
procedures to non-O.R. procedures. Included in that proposal are ICD-
10-PCS procedure codes 0UQGXZZ (Repair vagina, external approach) and 
0UQMXZZ (Repair vulva, external approach). Consistent with the change 
in designation for these procedure codes, we also are proposing to 
designate ICD-10-PCS procedure code 0UQKXZZ (Repair hymen, external 
approach) as a non-O.R. procedure. The procedure by itself would 
generally not require the resources of an operating room. If the 
procedure is performed following a vaginal delivery, it is the vaginal 
delivery procedure code 10E0XZZ (Delivery of products of conception) 
that determines the MS-DRG assignment because this code is designated 
as a non-O.R. procedure affecting the MS-DRG.
    Therefore, we are proposing to change the designation of ICD-10-PCS 
procedure code 0UQKXZZ (Repair hymen, external approach) to a non-O.R. 
procedure. This redesignation will enable more appropriate MS-DRG 
assignment for these cases by eliminating erroneous assignment to MS-
DRGs 987 through 989. We are inviting public comments on our proposal.
d. Non-O.R. Procedures in MDC 17 (Myeloproliferative Diseases and 
Disorders, Poorly Differentiated Neoplasms)
    Under MDC 17 (Myeloproliferative Diseases and Disorders, Poorly 
Differentiated Neoplasms), there are 11 surgical MS-DRGs. Of these 11 
surgical MS-DRGs, there are 5 MS-DRGs containing GROUPER logic that 
includes ICD-10-PCS procedure codes designated as O.R. procedures as 
well as non-O.R. procedures that affect the MS-DRG. These five MS-DRGs 
are MS-DRGs 823, 824, and 825 (Lymphoma and Non-Acute Leukemia with 
Other O.R. Procedure with MCC, with CC and without CC/MCC, 
respectively) and MS-DRGs 829 and 830 (Myeloproliferative Disorders or 
Poorly Differentiated Neoplasms with Other O.R. Procedure with CC/MCC 
and without CC/MCC, respectively). We refer the reader to the ICD-10 
Version 34 MS-DRG Definitions Manual which is available via the 
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for the 
complete list of ICD-10-PCS procedure codes assigned to these five MS-
DRGs under MDC 17.
    We reviewed the list of 244 ICD-10-PCS non-O.R. procedure codes 
currently assigned to these 5 MS-DRGs. Of these 244 procedure codes, we 
determined that 55 of the procedure codes do not warrant being 
designated as non-O.R. procedures that affect these MS-DRGs because 
they describe procedures that would generally not require a greater 
intensity of resources for facilities to manage the cases included in 
the definition (logic) of these MS-DRGs. Therefore, we are proposing 
that the 55 ICD-10-PCS procedure codes listed in Table 6P.3c. 
associated with this 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/index.html) be removed from the logic 
for MS-DRGs 823, 824, 825, 829 and 830 as non-O.R. procedures affecting 
the MS-DRG. We also are proposing to revise the titles for these five 
MS-DRGs by deleting the reference to ``O.R.'' in the title. 
Specifically, we are proposing to revise the titles for MS-DRGs 823, 
824, and 825 to ``Lymphoma and Non-Acute Leukemia with Other Procedure 
with MCC, with CC and without CC/MCC'', respectively and we are 
proposing to revise the titles for MS-DRGs 829 and 830 to 
``Myeloproliferative Disorders or Poorly Differentiated Neoplasms with 
Other Procedure with CC/MCC and without CC/MCC'', respectively. We are 
inviting public comments on our proposals.
G. Recalibration of the Proposed FY 2018 MS-DRG Relative Weights
1. Data Sources for Developing the Proposed Relative Weights
    In developing the proposed FY 2018 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 2016 MedPAR data used in this proposed rule include 
discharges occurring on October 1, 2015, through September 30, 2016, 
based on bills received by CMS through December 31, 2016, 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 
2016 MedPAR file used in calculating the proposed relative weights 
includes data for approximately 9,607,103 Medicare discharges from IPPS 
providers. Discharges for Medicare beneficiaries enrolled in a Medicare 
Advantage managed care plan are excluded from this analysis. These 
discharges are excluded when the MedPAR ``GHO Paid'' indicator field on 
the claim record is equal to ``1'' or when the MedPAR DRG payment 
field, which represents the total payment for the claim, is equal to 
the MedPAR ``Indirect Medical Education (IME)'' payment field, 
indicating that the claim was an ``IME only'' claim submitted by a 
teaching hospital on behalf of a beneficiary enrolled in a Medicare 
Advantage managed care plan. In addition, the December 31, 2016 update 
of the FY 2016 MedPAR file complies with version 5010 of the X12 HIPAA 
Transaction and Code Set Standards, and includes a variable called 
``claim type.'' Claim type ``60'' indicates that the claim was an 
inpatient claim paid as fee-for-service. Claim types ``61,'' ``62,'' 
``63,'' and ``64'' relate to encounter claims, Medicare Advantage IME 
claims, and HMO no-pay claims. Therefore, the calculation of the 
proposed relative weights for FY 2018 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 proposed FY 2018 relative weights are 
based on the ICD-

[[Page 19865]]

10-CM diagnoses and ICD-10-PCS procedure codes from the FY 2016 MedPAR 
claims data, grouped through the ICD-10 version of the proposed FY 2018 
GROUPER (Version 35).
    The second data source used in the cost-based relative weighting 
methodology is the Medicare cost report data files from the HCRIS. 
Normally, we use the HCRIS dataset that is 3 years prior to the IPPS 
fiscal year. Specifically, we used cost report data from the December 
31, 2016 update of the FY 2015 HCRIS for calculating the proposed FY 
2018 cost-based relative weights.
2. Methodology for Calculation of the Proposed Relative Weights
    As we explain in section II.E.2. of the preamble of this proposed 
rule, we calculated the proposed FY 2018 relative weights based on 19 
CCRs, as we did for FY 2017. The methodology we are proposing to use to 
calculate the FY 2018 MS-DRG cost-based relative weights based on 
claims data in the FY 2016 MedPAR file and data from the FY 2015 
Medicare cost reports is as follows. We note that we have provided 
additional precision in our description of the methodology for FY 2018.
     To the extent possible, all the claims were regrouped 
using the proposed FY 2018 MS-DRG classifications discussed in sections 
II.B. and II.F. of the preamble of this proposed rule.
     The transplant cases that were used to establish the 
proposed 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 2016 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 $30.00 from the sum of 
the routine day charges, intensive care charges, pharmacy charges, 
implantable devices charges, supplies and 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 and blood products charges, anesthesia charges, cardiac 
catheterization charges, CT scan charges, and MRI charges were also 
deleted.
     At least 92.2 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.
    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 2018, we are are proposing to continue to 
include all applicable data from subsection (d) hospitals participating 
in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting 
calculations. We refer readers to the FY 2013 IPPS/LTCH PPS final rule 
for a complete discussion on our final policy for the treatment of 
hospitals participating in the BPCI initiative in our ratesetting 
process. For additional information on

[[Page 19866]]

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).
    The charges for each of the 19 cost groups for each claim were 
standardized to remove the effects of differences in proposed area wage 
levels, IME and DSH payments, and for hospitals located in Alaska and 
Hawaii, the applicable proposed 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 
proposed 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. Statistical outliers were then removed. 
These charges were then adjusted to cost by applying the proposed 
national average CCRs developed from the FY 2015 cost report data.
    The 19 cost centers that we used in the proposed relative weight 
calculation are shown in the following table. The table shows the lines 
on the cost report and the corresponding revenue codes that we used to 
create the proposed 19 national cost center CCRs. If stakeholders have 
comments about the groupings in this table, we may consider those 
comments as we finalize our policy.

 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Cost from HCRIS       Charges from HCRIS   Medicare charges from
                                                   Revenue codes                     (Worksheet C, Part 1,  (Worksheet C, Part 1,   HCRIS  (Worksheet D-
  Cost center group name (19     MedPAR charge     contained in    Cost report line    Column 5 and line    Column 6 & 7 and line     3, Column & line
            total)                   field         MedPAR charge      description    number) Form CMS-2552- number) Form CMS-2552- number) Form CMS-2552-
                                                       field                                   10                     10                     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      012X, 013X and
                                Room Charges.     016X-0''CCRs>>X.
                               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,       Medical Supplies  C_1_C5_71              C_1_C6_71              D3_HOS_C2_71
                                Supply Charges.   0272, 0273,       Charged to
                                                  0274, 0277,       Patients.
                                                  0279, and 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,       Implantable       C_1_C5_72              C_1_C6_72              D3_HOS_C2_72
                                                  0278, 0624.       Devices Charged
                                                                    to Patients.
                                                                                                            C_1_C7_72
Therapy Services.............  Physical Therapy  042X............  Physical Therapy  C_1_C5_66              C_1_C6_66              D3_HOS_C2_66
                                Charges.
                                                                                                            C_1_C7_66
                               Occupational      043X............  Occupational      C_1_C5_67              C_1_C6_67              D3_HOS_C2_67
                                Therapy Charges.                    Therapy.
                                                                                                            C_1_C7_67
                               Speech Pathology  044X and 047X...  Speech Pathology  C_1_C5_68              C_1_C6_68              D3_HOS_C2_68
                                Charges.
                                                                                                            C_1_C7_68
Inhalation Therapy...........  Inhalation        041X and 046X...  Respiratory       C_1_C5_65              C_1_C6_65              D3_HOS_C2_65
                                Therapy Charges.                    Therapy.
                                                                                                            C_1_C7_65
Operating Room...............  Operating Room    036X............  Operating Room..  C_1_C5_50              C_1_C6_50              D3_HOS_C2_50
                                Charges.
                                                                                                            C_1_C7_50
                                                 071X              Recovery Room     C_1_C5_51              C_1_C6_51              D3_HOS_C2_51
                                                                                                            C_1_C7_51
Labor & Delivery.............  Operating Room    072X              Delivery Room     C_1_C5_52              C_1_C6_52              D3_HOS_C2_52
                                Charges                             and Labor Room
                                                                                                            C_1_C7_52
Anesthesia...................  Anesthesia        037X              Anesthesiology    C_1_C5_53              C_1_C6_53              D3_HOS_C2_53
                                Charges
                                                                                                            C_1_C7_53
Cardiology...................  Cardiology        048X and 073X     Electrocardiolog  C_1_C5_69              C_1_C6_69              D3_HOS_C2_69
                                Charges                             y
                                                                                                            C_1_C7_69

[[Page 19867]]

 
Cardiac Catheterization......                    0481              Cardiac           C_1_C5_59              C_1_C6_59              D3_HOS_C2_59
                                                                    Catheterization
                                                                                                            C_1_C7_59
Laboratory...................  Laboratory        030X, 031X, and   Laboratory        C_1_C5_60              C_1_C6_60              D3_HOS_C2_60
                                Charges           075X
                                                                                                            C_1_C7_60
                                                                   PBP Clinic        C_1_C5_61              C_1_C6_61              D3_HOS_C2_61
                                                                    Laboratory
                                                                    Services
                                                                                                            C_1_C7_61
                                                 074X, 086X        Electroencephalo  C_1_C5_70              C_1_C6_70              D3_HOS_C2_70
                                                                    graphy
                                                                                                            C_1_C7_70
Radiology....................  Radiology         032X, 040X        Radiology--Diagn  C_1_C5_54              C_1_C6_54              D3_HOS_C2_54
                                Charges                             ostic
                                                                                                            C_1_C7_54
                                                 028x, 0331,       Radiology--Thera  C_1_C5_55              C_1_C6_55              D3_HOS_C2_55
                                                  0332, 0333,       peutic
                                                  0335, 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
                                                                                                            C_1_C7_62
                               Blood Storage/    039x              Blood Storing,    C_1_C5_63              C_1_C6_63              D3_HOS_C2_63
                                Processing                          Processing, &
                                                                    Transfusing
                                                                                                            C_1_C7_63
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          C_1_C5_75              C_1_C6_75              D3_HOS_C2_75
                                Service Charges                     Distinct 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      096X, 097X, and   Other Outpatient  C_1_C5_93              C_1_C6_93              D3_HOS_C2_93
                                Fees Charges      098X              Services
                                                                                                            C_1_C7_93
                               Ambulance         054X              Ambulance         C_1_C5_95              C_1_C6_95              D3_HOS_C2_95
                                Charges
                                                                                                            C_1_C7_95
                                                                   Rural Health      C_1_C5_88              C_1_C6_88              D3_HOS_C2_88
                                                                    Clinic
                                                                                                            C_1_C7_88
                                                                   FQHC              C_1_C5_89              C_1_C6_89              D3_HOS_C2_89
                                                                                                            C_1_C7_89
--------------------------------------------------------------------------------------------------------------------------------------------------------

3. Development of Proposed National Average CCRs
    We developed the proposed national average CCRs as follows:
    Using the FY 2015 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

[[Page 19868]]

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 proposed relative weight.
    The proposed FY 2018 cost-based relative weights were then 
normalized by a proposed adjustment factor of 1.736047 so that the 
average case weight after recalibration was equal to the average case 
weight before recalibration. The proposed 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 proposed 19 national average CCRs for FY 2018 are as follows:

------------------------------------------------------------------------
                          Group                                 CCR
------------------------------------------------------------------------
Routine Days............................................           0.449
Intensive Days..........................................           0.375
Drugs...................................................           0.197
Supplies & Equipment....................................           0.300
Implantable Devices.....................................           0.327
Therapy Services........................................           0.314
Laboratory..............................................           0.116
Operating Room..........................................           0.186
Cardiology..............................................           0.108
Cardiac Catheterization.................................           0.115
Radiology...............................................           0.149
MRIs....................................................           0.077
CT Scans................................................           0.037
Emergency Room..........................................           0.166
Blood and Blood Products................................           0.309
Other Services..........................................           0.352
Labor & Delivery........................................           0.363
Inhalation Therapy......................................           0.163
Anesthesia..............................................           0.080
------------------------------------------------------------------------

    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. We are proposing to use that same case 
threshold in recalibrating the MS-DRG relative weights for FY 2018. 
Using data from the FY 2016 MedPAR file, there were 10 MS-DRGs that 
contain fewer than 10 cases. For FY 2018, because we do not have 
sufficient MedPAR data to set accurate and stable cost relative weights 
for these low-volume MS-DRGs, we are proposing to compute proposed 
relative weights for the low-volume MS-DRGs by adjusting their final FY 
2017 relative weights by the percentage change in the average weight of 
the cases in other MS-DRGs. The crosswalk table is shown:

------------------------------------------------------------------------
Low[dash]volume MS-DRG       MS-DRG title         Crosswalk to MS-DRG
------------------------------------------------------------------------
016...................  Autologous bone        Final FY 2017 relative
                         marrow transplant w    weight (adjusted by
                         CC/MCC.                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
017...................  Autologous bone        Final FY 2017 relative
                         marrow transplant w/   weight (adjusted by
                         o CC/MCC.              percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
789...................  Neonates, Died or      Final FY 2017 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 or  Final FY 2017 relative
                         Respiratory Distress   weight (adjusted by
                         Syndrome, Neonate.     percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
791...................  Prematurity with       Final FY 2017 relative
                         Major Problems.        weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
792...................  Prematurity without    Final FY 2017 relative
                         Major Problems.        weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
793...................  Full-Term Neonate      Final FY 2017 relative
                         with Major Problems.   weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
794...................  Neonate with Other     Final FY 2017 relative
                         Significant Problems.  weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
795...................  Normal Newborn.......  Final FY 2017 relative
                                                weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
------------------------------------------------------------------------

    We are inviting public comments on our proposals.

H. Proposed Add-On Payments for New Services and Technologies for FY 
2018

1. Background
    Sections 1886(d)(5)(K) and (L) of the Act establish a process of 
identifying and ensuring adequate payment for new medical services and 
technologies (sometimes collectively referred to in this section as 
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the 
Act specifies that a medical service or technology will be considered 
new if it meets criteria established by the Secretary after notice and 
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act 
specifies that a new medical service or technology may be considered 
for new technology add-on payment if, based on the estimated costs 
incurred with respect to discharges involving such service or 
technology, the DRG prospective payment rate otherwise applicable to 
such discharges under this subsection is inadequate. We note that, 
beginning with discharges occurring in FY 2008, CMS transitioned from 
CMS-DRGs to MS-DRGs.
    The regulations at 42 CFR 412.87 implement these provisions and 
specify three criteria for a new medical service or technology to 
receive the additional payment: (1) The medical service or technology 
must be new; (2) the medical service or technology must be costly such 
that the DRG rate otherwise

[[Page 19869]]

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 or clearance, 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 or cleared by FDA and has been on the market for more than 
2 to 3 years. 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).
    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 discharges involving the new medical service or technology 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. 
Table 10 that was released with the FY 2017 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 2018. We 
refer readers to the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-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

[[Page 19870]]

(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 Medicare Administrative 
Contractors (MACs) (in the case of local coverage and payment 
decisions). The CTI supplements, rather than replaces, these processes 
by working to assure that all of these activities reflect the agency-
wide priority to promote high-quality, innovative care. At the same 
time, the CTI also works to streamline, accelerate, and improve 
coordination of these processes to ensure that they remain up to date 
as new issues arise. To achieve its goals, the CTI works to streamline 
and create a more transparent coding and payment process, improve the 
quality of medical decisions, and speed patient access to effective new 
treatments. It is also dedicated to supporting better decisions by 
patients and doctors in using Medicare-covered services through the 
promotion of better evidence development, which is critical for 
improving the quality of care for Medicare beneficiaries.
    To improve the understanding of CMS' processes for coverage, 
coding, and payment and how to access them, the CTI has developed an 
``Innovator's Guide'' to these processes. The intent is to consolidate 
this information, much of which is already available in a variety of 
CMS documents and in various places on the CMS Web site, in a user-
friendly format. This guide was published in 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 2019 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 2019, 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 2018 prior 
to publication of the FY 2018 IPPS/LTCH PPS proposed rule, we published 
a notice in the Federal Register on November 9, 2016 (81 FR 78814), and 
held a town hall meeting at the CMS Headquarters Office in Baltimore, 
MD, on February 14, 2017. In the announcement notice for the meeting, 
we stated that the opinions and presentations 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 2018 new medical service and technology add-on payment 
applications before the publication of the FY 2018 IPPS/LTCH PPS 
proposed rule.
    Approximately 66 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=9niqfxXe4oA&t=217s. We considered each applicant's presentation 
made at the town hall meeting, as well as written comments submitted on 
the applications that were received by the due date of February 24, 
2017, in our evaluation of the new technology add-on payment 
applications for FY 2018 in this proposed rule.
    In response to the published notice and the February 14, 2017 New 
Technology Town Hall meeting, we received written comments regarding 
the applications for FY 2018 new technology add-on payments. We note 
that we do not summarize comments that are unrelated to the 
``substantial clinical improvement'' criterion. As explained above and 
in the Federal Register notice announcing the New Technology Town Hall 
meeting (81 FR78814 through 78816), the purpose of the meeting was 
specifically to discuss the substantial clinical improvement criterion 
in regard to pending new technology add-on payment applications for FY 
2018. Therefore, we are not summarizing these comments in this proposed 
rule. We summarize below a general comment that does not relate to a 
specific application for FY 2018 new technology add-on payments. We 
also summarize comments regarding individual applications, or, if 
applicable, indicate that there were no comments received in section 
II.H.5. of the preamble of this proposed rule at the end of each 
discussion of the individual applications.

[[Page 19871]]

    Comment: One commenter recommended that CMS: (1) Prohibit local 
MACs from denying coverage and add-on payments for new medical services 
or technologies approved by the Secretary; and (2) broaden the criteria 
applied in making substantial clinical improvement determinations to 
require, in addition to existing criteria, that the Secretary consider 
whether the new technology or medical service meets one or more of the 
following criteria: (a) Results in a reduction of the length of a 
hospital stay; (b) improves patient quality of life; (c) creates long-
term clinical efficiencies in treatment; (d) addresses patient-centered 
objectives as defined by the Secretary; or (e) meets such other 
criteria as the Secretary may specify.
    Response: We appreciate the commenter's comments and will consider 
them in future rulemaking.
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and 
Technologies
    As discussed in the FY 2016 IPPS/LTCH final rule (80 FR 49434), the 
ICD-10-PCS includes a new section containing the new Section ``X'' 
codes, which began being used 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. We posted ICD-10-PCS Guidelines on the CMS 
Web site at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html, including guidelines for ICD-10-PCS Section ``X'' codes. 
We encourage providers to view the material provided on ICD-10-PCS 
Section ``X'' codes.
4. Proposal To Revise the Reference to an ICD-9-CM Code in Sec.  
412.87(b)(2) of the Regulations
    The existing regulations under Sec.  412.87(b)(2) state that a 
medical service or technology may be considered new within 2 or 3 years 
after the point at which data begin to become available reflecting the 
ICD-9-CM code assigned to the new service or technology (depending on 
when a new code is assigned and data on the new service or technology 
become available for DRG recalibration). After CMS has recalibrated the 
DRGs, based on available data, to reflect the costs of an otherwise new 
medical service or technology, the medical service or technology will 
no longer be considered ``new'' under the criterion of this section.
    As discussed in the FY 2016 IPPS/LTCH final rule (80 FR 49454), 
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 diagnoses), 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. The language in Sec.  412.87(b)(2) 
only references an ``ICD-9-CM code.'' Therefore, we are proposing to 
revise the regulations at Sec.  412.87(b)(2) to replace the term ``ICD-
9-CM code'' with the term ``inpatient hospital code,'' as defined in 
section 1886(d)(5)(K)(iii) of the Act. Section 1886(d)(5)(K)(iii) of 
the Act defines an ``inpatient hospital code'' as any code that is used 
with respect to inpatient hospital services for which payment may be 
made under this subsection of the Act and includes an alphanumeric code 
issued under the International Classification of Diseases, 9th 
Revision, Clinical Modification (``ICD-9-CM'') and its subsequent 
revisions. We are inviting public comments on our proposal.
5. Proposed FY 2018 Status of Technologies Approved for FY 2017 Add-On 
Payments
a. CardioMEMSTM HF (Heart Failure) Monitoring System
    CardioMEMS, Inc. submitted an application for new technology add-on 
payments 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 received FDA approval on May 28, 2014. After 
evaluation of the newness, costs, and substantial clinical improvement 
criteria for new technology add-on 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 
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). 
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. We refer the reader to the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 49937) for complete details on the 
CardioMEMSTM HF Monitoring System.

[[Page 19872]]

    Our policy is 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 inpatient hospital code assigned to 
the new service or technology. 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 onto the U.S. market 
occurs in the latter half of the fiscal year (70 FR 47362).
    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. The 3-year anniversary date of the entry of the 
CardioMEMSTM HF Monitoring System onto the U.S. market (May 
28, 2017) will occur prior to the beginning of FY 2018. Therefore, we 
are proposing to discontinue new technology add-on payments for this 
technology for FY 2018. We are inviting public comments on this 
proposal.
b. Defitelio[supreg] (Defibrotide)
    Jazz Pharmaceuticals submitted an application for new technology 
add-on payments for FY 2017 for defibrotide (Defitelio[supreg]), a 
treatment for patients diagnosed with hepatic veno-occlusive disease 
(VOD) with evidence of multiorgan dysfunction. VOD, also known as 
sinusoidal obstruction syndrome (SOS), is a potentially life-
threatening complication of hematopoietic stem cell transplantation 
(HSCT), with an incidence rate of 8 percent to 15 percent. Diagnoses of 
VOD range in severity from what has been classically defined as a 
disease limited to the liver (mild) and reversible, to a severe 
syndrome associated with multi-organ dysfunction or failure and death. 
Patients treated with HSCT who develop VOD with multi-organ failure 
face an immediate risk of death, with a mortality rate of more than 80 
percent when only supportive care is used. The applicant asserted that 
Defitelio[supreg] improves the survival rate of patients diagnosed with 
VOD with multi-organ failure by 23 percent.
    Defitelio[supreg] was granted Orphan Drug Designation for the 
treatment of VOD in 2003 and for the prevention of VOD in 2007. It has 
been available to patients as an investigational drug through an 
expanded access program since 2007. The applicant's New Drug 
Application (NDA) for Defitelio[supreg] received FDA approval on March 
30, 2016. The applicant confirmed that Defitelio[supreg] was not 
available on the U.S. market as of the FDA NDA approval date of March 
30, 2016. According to the applicant, commercial packaging could not be 
completed until the label for Defitelio[supreg] was finalized with FDA 
approval, and that commercial shipments of Defitelio[supreg] to 
hospitals and treatment centers began on April 4, 2016. Therefore, we 
agreed that, based on this information, the newness period for 
Defitelio[supreg] begins on April 4, 2016, the date of its first 
commercial availability.
    The applicant received unique ICD-10-PCS procedure codes to 
describe the use of Defitelio[supreg] that became effective October 1, 
2016. The approved procedure codes are XW03392 (Introduction of 
defibrotide sodium anticoagulant into peripheral vein, percutaneous 
approach) and XW04392 (Introduction of defibrotide sodium anticoagulant 
into central vein, percutaneous approach).
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for 
Defitelio[supreg] and consideration of the public comments we received 
in response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved 
Defitelio[supreg] for new technology add-on payments for FY 2017 (81 FR 
56906). With the new technology add-on payment application, the 
applicant estimated that the average Medicare beneficiary would require 
a dosage of 25 mg/kg/day for a minimum of 21 days of treatment. The 
recommended dose is 6.25 mg/kg given as a 2-hour intravenous infusion 
every 6 hours. Dosing should be based on a patient's baseline body 
weight, which is assumed to be 70 kg for an average adult patient. All 
vials contain 200 mg at a cost of $825 per vial. Therefore, we 
determined that cases involving the use of the Defitelio[supreg] 
technology would incur an average cost per case of $151,800 (70 kg 
adult x 25 mg/kg/day x 21 days = 36,750 mg per patient/200 mg vial = 
184 vials per patient x $825 per vial = $151,800). 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 amount for a case involving the 
use of Defitelio[supreg] is $75,900.
    Because the 3-year anniversary date of the entry of 
Defitelio[supreg] onto the U.S. market will occur after FY 2018 (April 
4, 2019), we are proposing to continue new technology add-on payments 
for this technology for FY 2018. The maximum payment for a case 
involving Defitelio[supreg] would remain at $75,900 for FY 2018. We are 
inviting public comments on our proposal to continue new technology 
add-on payments for Defitelio[supreg].
c. GORE[supreg] EXCLUDER[supreg] Iliac Branch Endoprosthesis (Gore IBE 
Device)
    W. L. Gore and Associates, Inc. submitted an application for new 
technology add-on payments for the GORE[supreg] EXCLUDER[supreg] Iliac 
Branch Endoprosthesis (GORE IBE device) for FY 2017. The device 
consists of two components: The Iliac Branch Component (IBC) and the 
Internal Iliac Component (IIC). The applicant indicated that each 
endoprosthesis is pre-mounted on a customized delivery and deployment 
system allowing for controlled endovascular delivery via bilateral 
femoral access. According to the applicant, the device is designed to 
be used in conjunction with the GORE[supreg] EXCLUDER[supreg] AAA 
Endoprosthesis for the treatment of patients requiring repair of common 
iliac or aortoiliac aneurysms. When deployed, the GORE IBE device 
excludes the common iliac aneurysm from systemic blood flow, while 
preserving blood flow in the external and internal iliac arteries.
    With regard to the newness criterion, the applicant received pre-
market FDA approval of the GORE IBE device on February 29, 2016. The 
applicant submitted a request for an unique ICD-10-PCS procedure code 
and was granted approval for the following procedure codes to describe 
to use of this technology: 04VC0EZ (Restriction of right common iliac 
artery with branched or fenestrated intraluminal device, one or two 
arteries, open approach); 04VC0FZ (Restriction of right common iliac 
artery with branched or fenestrated intraluminal device, three or more 
arteries, open approach); 04VC3EZ (Restriction of right common iliac 
artery with branched or fenestrated intraluminal device, one or two 
arteries, percutaneous approach); 04VC3FZ (Restriction of right common 
iliac artery with branched or fenestrated intraluminal device, three or 
more arteries, percutaneous approach); 04VC4EZ (Restriction of right 
common iliac artery with branched or fenestrated intraluminal device, 
one or two arteries, percutaneous approach); 04VC4FZ (Restriction of 
right common iliac artery with branched or fenestrated intraluminal 
device, three or more, arteries, percutaneous endoscopic, approach); 
04VD0EZ (Restriction of left

[[Page 19873]]

common iliac artery with branched or fenestrated intraluminal device, 
one or two arteries, open approach); 04VD0FZ (Restriction of left 
common iliac artery with branched or fenestrated, intraluminal device, 
three or more arteries, open approach); 04VD3EZ (Restriction of left 
common iliac artery with branched or fenestrated intraluminal device, 
one or two arteries, percutaneous approach); 04VD3FZ (Restriction of 
left common iliac artery with branched or fenestrated intraluminal 
device, three or more arteries, percutaneous approach); 04VD4EZ 
(Restriction of left common iliac artery with branched or fenestrated 
intraluminal device, one or two arteries, percutaneous endoscopic 
approach); and 04VD4FZ (Restriction of left common iliac artery with 
branched or fenestrated intraluminal device, three or more arteries, 
percutaneous endoscopic approach). These new ICD-10-PCS procedure codes 
became effective on October 1, 2016.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for the GORE 
IBE device and consideration of the public comments we received in 
response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved the 
GORE IBE device for new technology add-on payments for FY 2017 (81 FR 
56909). With the new technology add-on payment application, the 
applicant indicated that the total operating cost of the GORE IBE 
device is $10,500. 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 GORE IBE device is $5,250.
    With regard to the newness criterion for the GORE IBE device, we 
considered the beginning of the newness period to commence when the 
GORE IBE device received FDA approval on February 29, 2016. Because the 
3-year anniversary date of the entry of the GORE IBE device onto the 
U.S. market will occur after FY 2018 (February 28, 2019), we are 
proposing to continue new technology add-on payments for this 
technology for FY 2018. The maximum payment for a case involving the 
GORE IBE device would remain at $5,250 for FY 2018. We are inviting 
public comments on our proposal to continue new technology add-on 
payments for the GORE IBE device.
d. Praxbind[supreg] Idarucizumab
    Boehringer Ingelheim Pharmaceuticals, Inc. submitted an application 
for new technology add-on payments for FY 2017 for Praxbind[supreg] 
Idarucizumab (Idarucizumab), a product developed as an antidote to 
reverse the effects of PRADAXAR (Dabigatran), which is also 
manufactured by Boehringer Ingelheim Pharmaceuticals, Inc.
    Dabigatran is an oral direct thrombin inhibitor currently indicated 
to: (1) Reduce the risk of stroke and systemic embolism in patients who 
have been diagnosed with nonvalvular atrial fibrillation (NVAF); (2) 
treat deep venous thrombosis (DVT) and pulmonary embolism (PE) in 
patients who have been administered a parenteral anticoagulant for 5 to 
10 days; and (3) reduce the risk of recurrence of DVT and PE in 
patients who have been previously diagnosed with NVAF. Currently, 
unlike the anticoagulant Warfarin, there is no specific way to reverse 
the anticoagulant effect of Dabigatran in the event of a major bleeding 
episode. Idarucizumab is a humanized fragment antigen binding (Fab) 
molecule, which specifically binds to Dabigatran to deactivate the 
anticoagulant effect, thereby allowing thrombin to act in blood clot 
formation. The applicant stated that Idarucizumab represents a new 
pharmacologic approach to neutralizing the specific anticoagulant 
effect of Dabigatran in emergency situations.
    Idarucizumab was approved by the FDA on October 16, 2015. Based on 
the FDA indication for Idarucizumab, the product can be used in the 
treatment of patients who have been diagnosed with NVAF and 
administered Dabigatran to reverse life-threatening bleeding events, or 
who require emergency surgery or medical procedures and rapid reversal 
of the anticoagulant effects of Dabigatran is necessary and desired.
    The applicant received unique ICD-10-PCS procedure codes that 
became effective October 1, 2016, to describe the use of this 
technology. The approved procedure codes are XW03331 (Introduction of 
Idarucizumab, Dabigatran reversal agent into peripheral vein, 
percutaneous approach, New Technology Group 1) and XW04331 
(Introduction of Idarucizumab, Dabigatran reversal agent into central 
vein, percutaneous approach, New Technology Group 1).
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for 
Idarucizumab and consideration of the public comments we received in 
response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved 
Idarucizumab for new technology add-on payments for FY 2017 (81 FR 
56897). With the new technology add-on payment application, the 
applicant indicated that the total operating cost of Idarucizumab is 
$3,500. 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 a case involving Idarucizumab is $1,750.
    With regard to the newness criterion for Idarucizumab, we 
considered the beginning of the newness period to commence when 
Idarucizumab was approved by the FDA on October 16, 2015. Because the 
3-year anniversary date of the entry of Idarucizumab onto the U.S. 
market will occur after FY 2018 (October 15, 2018), we are proposing to 
continue new technology add-on payments for this technology for FY 
2018. The maximum payment for a case involving Idarucizumab would 
remain at $1,750 for FY 2018. We are inviting public comments on our 
proposal to continue new technology add-on payments for Idarucizumab.
e. Lutonix[supreg] Drug Coated Balloon 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 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.\1\

[[Page 19874]]

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).\2\
---------------------------------------------------------------------------

    \1\ 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.
    \2\ 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.
---------------------------------------------------------------------------

    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. In the FY 2016 IPPS/LTCH PPS final rule, we stated that 
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 evaluated both technologies as one application 
for new technology add-on payments under the IPPS. The applicants 
submitted separate cost and clinical data, and we reviewed and 
discussed each set of data separately. However, we made one 
determination regarding new technology add-on payments that applied 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 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 add-on payment 
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).
    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.
    In accordance with our policy, we stated in the FY 2016 IPPS\LTCH 
final rule (80 FR 49463) 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 that the 
beginning of the newness period will be October 10, 2014.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for the 
LUTONIX[supreg] and IN.PACTTM AdmiralTM 
technologies and consideration of the public comments we received in 
response to the FY 2016 IPPS/LTCH PPS proposed rule, we approved the 
LUTONIX[supreg] and IN.PACTTM AdmiralTM 
technologies for new technology add-on payments for FY 2016 (80 FR 
49469). Cases involving the LUTONIX[supreg] and IN.PACTTM 
AdmiralTM technologies that are eligible for new technology 
add-on payments are identified using one of the ICD-10-PCS procedure 
codes in the following table:

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

[[Page 19875]]

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

    As discussed in the FY 2016 IPPS/LTCH final rule (80 FR 49469), 
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 projected 
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 projected 
that approximately 26,000 cases will involve use of the 
IN.PACTTM AdmiralTM for FY 2016.
    For FY 2016, we based the new technology add-on payment for cases 
involving these technologies 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 the same ICD-10-PCS procedure 
code. As such, we stated that 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.
    With regard to the newness criterion for the LUTONIX[supreg] and 
IN.PACTTM AdmiralTM technologies, we considered 
the beginning of the newness period to commence when LUTONIX[supreg] 
gained entry onto the U.S. market on October 10, 2014. As discussed 
previously in this section, in general, we extend new technology add-on 
payments for an additional year only if the 3-year anniversary date of 
the product's entry onto the U.S. market occurs in the latter half of 
the upcoming fiscal year. Because the 3-year anniversary date of the 
entry of LUTONIX[supreg] onto the U.S. market (October 10, 2017) will 
occur in the first half of FY 2018, we are proposing to discontinue new 
technology add-on payments for both the LUTONIX[supreg] and 
IN.PACTTM AdmiralTM technologies for FY 2018. We 
are inviting public comments on this proposal.
f. MAGEC[supreg] Spinal Bracing and Distraction System (MAGEC[supreg] 
Spine)
    Ellipse Technologies, Inc. submitted an application for new 
technology add-on payments for FY 2017 for the MAGEC[supreg] Spine. 
According to the applicant, the MAGEC[supreg] Spine has been developed 
for use in the treatment of children diagnosed with severe spinal 
deformities, such as scoliosis. The system can be used in the treatment 
of skeletally immature patients less than 10 years of age who have been 
diagnosed with severe progressive spinal deformities associated with or 
at risk of Thoracic Insufficiency Syndrome (TIS).
    The MAGEC[supreg] Spine consists of a (spinal growth) rod that can 
be lengthened through the use of magnets that are controlled by an 
external remote controller (ERC). The rod(s) can be implanted into 
children as young as 2 years of age. According to the applicant, use of 
the MAGEC[supreg] Spine has proven to be successfully used in the 
treatment of patients diagnosed with scoliosis who have not been 
responsive to other treatments.
    The MAGEC[supreg] Spine initially received FDA clearance for use of 
the predicate device, which used a Harrington Rod on February 27, 2014. 
The applicant verified that, due to manufacturing delays, the 
MAGEC[supreg] Spine was not available for implant until April 1, 2014. 
Specifically, the complete MAGEC[supreg] Spine system was produced and 
available for shipment for the first implant on April 1, 2014. 
Therefore, the newness period for the MAGEC[supreg] Spine began on 
April 1, 2014. Subsequent FDA clearance was granted for use of the 
modified device, which uses a shorter 70 mm rod on September 18, 2014. 
After minor modification of the product, the MAGEC[supreg] Spine 
received FDA clearances on March 24, 2015, and May 29, 2015, 
respectively.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for the 
MAGEC[supreg] Spine and consideration of the public comments we 
received in response to the FY 2017 IPPS/LTCH PPS proposed rule, we 
approved the MAGEC[supreg] Spine for new technology add-on payments for 
FY 2017 (81 FR 56891). Cases involving the MAGEC[supreg] Spine that are 
eligible for new technology add-on payments are identified by ICD-10-
PCS procedure codes XNS0032 (Reposition of lumbar vertebra using 
magnetically controlled growth rod(s), open approach); XNS0432 
(Reposition of lumbar vertebra using magnetically controlled growth

[[Page 19876]]

rod(s), percutaneous endoscopic approach); XNS3032 (Reposition of 
cervical vertebra using magnetically controlled growth rod(s), open 
approach); XNS3432 (Reposition of cervical vertebra using magnetically 
controlled growth rod(s), percutaneous endoscopic approach); XNS4032 
(Reposition of thoracic vertebra using magnetically controlled growth 
rod(s), open approach); and XNS4432 (Reposition of thoracic vertebra 
using magnetically controlled growth rod(s).
    With the new technology add-on payment application, the applicant 
stated that the total operating cost of the MAGEC[supreg] Spine was 
$17,500 for a single rod and $35,000 for a dual rod. 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. The 
applicant noted that 20 percent of cases use a single rod, while 80 
percent of cases use a dual rod. As a result, the weighted average cost 
for a single and dual MAGEC[supreg] Spine is $31,500 (((0.2 * $17,500) 
+ (0.8 * $35,000))). 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 MAGEC[supreg] Spine is $15,750. We refer the reader 
to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56888) for complete 
details on the MAGEC[supreg] Spine.
    With regard to the newness criterion for the MAGEC[supreg] Spine, 
we considered the beginning of the newness period to commence when the 
MAGEC[supreg] Spine was produced and available for shipment for the 
first implant on April 1, 2014. As discussed previously in this 
section, in general, we extend new technology add-on payments for an 
additional year only if the 3-year anniversary date of the product's 
entry onto the U.S. market occurs in the latter half of the upcoming 
fiscal year. Because the 3-year anniversary date of the entry of the 
MAGEC[supreg] Spine onto the U.S. market (April 1, 2017) will occur 
prior to the beginning of FY 2018, we are proposing to discontinue new 
technology add-on payments for this technology for FY 2018. We are 
inviting public comments on this proposal.
g. Vistogard\TM\ (Uridine Triacetate)
    BTG International Inc., submitted an application for new technology 
add-on payments for the VistogardTM for FY 2017. 
VistogardTM was developed as an antidote to Fluorouracil 
toxicity.
    Chemotherapeutic agent 5-fluorouracil (5-FU) is used to treat 
specific solid tumors. It acts upon deoxyribonucleic acid (DNA) and 
ribonucleic acid (RNA) in the body, as uracil is a naturally occurring 
building block for genetic material. Fluorouracil is a fluorinated 
pyrimidine. As a chemotherapy agent, Fluorouracil is absorbed by cells 
and causes the cell to metabolize into byproducts that are toxic and 
used to destroy cancerous cells. According to the applicant, the 
byproducts fluorodoxyuridine monophosphate (F-dUMP) and floxuridine 
triphosphate (FUTP) are believed to do the following: (1) Reduce DNA 
synthesis; (2) lead to DNA fragmentation; and (3) disrupt RNA 
synthesis. Fluorouracil is used to treat a variety of solid tumors such 
as colorectal, head and neck, breast, and ovarian cancer. With 
different tumor treatments, different dosages, and different dosing 
schedules, there is a risk for toxicity in these patients. Patients may 
suffer from fluorouracil toxicity/death if 5-FU is delivered in slight 
excess or at faster infusion rates than prescribed. The cause of 
overdose can happen for a variety of reasons including: Pump 
malfunction, incorrect pump programming or miscalculated doses, and 
accidental or intentional ingestion.
    VistogardTM is an antidote to Fluorouracil toxicity and 
is a prodrug of uridine. Once the drug is metabolized into uridine, it 
competes with the toxic byproduct FUTP in binding to RNA, thereby 
reducing the impact FUTP has on cell death.
    The VistogardTM received FDA approval on December 11, 
2015. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56910), we stated 
that we agreed with the manufacturer that, due to the delay in 
availability, the date the newness period begins for 
VistogardTM is March 2, 2016, instead of December 11, 2015.
    The applicant noted that the VistogardTM is the first 
FDA-approved antidote used to reverse fluorouracil toxicity. The 
applicant received a unique ICD-10-PCS procedure code that became 
effective October 1, 2016, to describe the use of this technology. The 
approved procedure code is XW0DX82 (Introduction of Uridine Triacetate 
into Mouth and Pharynx, External Approach, New Technology Group 2).
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for 
VistogardTM and consideration of the public comments we 
received in response to the FY 2017 IPPS/LTCH PPS proposed rule, we 
approved VistogardTM for new technology add-on payments for 
FY 2017 (81 FR 56912). With the new technology add-on payment 
application, the applicant stated that the total operating cost of 
VistogardTM is $75,000. 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 a case involving VistogardTM 
is $37,500.
    As noted previously, with regard to the newness criterion for the 
VistogardTM, we considered the beginning of the newness 
period to commence on March 2, 2016. Because the 3-year anniversary 
date of the entry of the VistogardTM onto the U.S. market 
(March 2, 2019) will occur after FY 2018, we are proposing to continue 
new technology add-on payments for this technology for FY 2018. The 
maximum payment for a case involving the VistogardTM would 
remain at $37,500 for FY 2018. We are inviting public comments on our 
proposal to continue new technology add-on payments for the 
VistogardTM.
h. Blinatumomab (BLINCYTO[supreg])
    Amgen, Inc. submitted an application for new technology add-on 
payments for FY 2016 for Blinatumomab (BLINCYTO[supreg]), 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 BLINCYTO[supreg] 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.

[[Page 19877]]

Specifically, the BLINCYTO[supreg] 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 
BLINCYTO[supreg] technology is the first, and the only, bi-specific 
CD19-directed CD3 T-cell engager single-agent immunotherapy approved by 
the FDA.
    BLINCYTO[supreg] 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 is followed by 2 weeks without treatment prior to 
administering any further treatments. A course of treatment would 
consist 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 
BLINCYTO[supreg] 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 regard to the newness criterion, the BLINCYTO[supreg] 
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.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for 
BLINCYTO[supreg] and consideration of the public comments we received 
in response to the FY 2016 IPPS/LTCH PPS proposed rule, we approved 
BLINCYTO[supreg] for new technology add-on payments for FY 2016 (80 FR 
49449). Cases involving BLINCYTO[supreg] that are eligible for new 
technology add-on payments are identified using one of the following 
ICD-10-PCS procedure codes: XW03351 (Introduction of Blinatumomab 
antineoplastic immunotherapy into peripheral vein, percutaneous 
approach, New Technology Group 1), or XW04351 (Introduction of 
Blinatumomab antineoplastic immunotherapy into central vein, 
percutaneous approach, New Technology Group 1).
    As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49449), 
the applicant recommended that CMS consider and use the cost of the 
full 28-day inpatient treatment cycle as the expected length of 
treatment when determining the maximum new technology add-on payment 
for cases involving the BLINCYTO[supreg], rather than the average cost 
of lesser number of days used as other variables. For the reasons 
discussed, we disagreed with the applicant and established the maximum 
new technology add-on payment amount for a case involving the 
BLINCYTO[supreg] technology for FY 2016 using 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 treatment for an average length of 21.2 days, and 52 patients 
received cycle 2 treatment for an average length of 10.2 days. The 
weighted average of cycle 1 and cycle 2 treatment length is 17 days. We 
noted 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 noted that, if we included 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 stated that 
we believe setting the maximum new technology add-on payment amount for 
a case involving the BLINCYTO[supreg] technology for FY 2016 based on a 
17-day length of treatment cycle is representative of historical and 
current practice. We also stated that, for FY 2017, 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. However, 
we did not receive any new data from the applicant to evaluate for FY 
2017.
    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 determined that cases involving the use of the BLINCYTO[supreg] 
technology would incur an average cost per case of $54,035.69 (1 vial/
day x 17 days x $3,178.57/vial). 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 amount for a case involving the use of the BLINCYTO[supreg] 
is $27,017.85.
    With regard to the newness criterion for BLINCYTO[supreg], we 
consider the beginning of the newness period to commence when the 
product gained entry onto the U.S. market on December 17, 2014. As 
discussed previously in this section, in general, we extend new 
technology add-on payments for an additional year only if the 3-year 
anniversary date of the product's entry onto the U.S. market occurs in 
the latter half of the upcoming fiscal year. Because the 3-year 
anniversary date of the entry of the BLINCYTO[supreg] onto the U.S. 
market will occur in the first half of FY 2018 (December 17, 2017), we 
are proposing to discontinue new technology add-on payments for this 
technology for FY 2018. We are inviting public comments on this 
proposal.
6. FY 2018 Applications for New Technology Add-On Payments
    We received nine applications for new technology add-on payments 
for FY 2018. In accordance with the regulations under Sec.  412.87(c), 
applicants for new technology add-on payments must have received FDA 
approval or clearance by July 1 of the year prior to the beginning of 
the fiscal year that the application is being considered. Three 
applicants withdrew their applications prior to the issuance of this 
proposed rule. We are addressing the remaining six applications below.
a. Bezlotoxumab (ZINPLAVATM)
    Merck & Co., Inc. submitted an application for new technology add-
on payments for ZINPLAVATM for FY 2018. 
ZINPLAVATM is indicated for use in adult patients who are 
receiving antibacterial drug treatment for a diagnosis of Clostridium 
difficile infection (CDI) who are at high risk for CDI recurrence. 
ZINPLAVATM is not indicated for the treatment of the 
presenting episode of CDI and is not an antibacterial drug.
    Clostridium difficile (C-diff) is a disease-causing anaerobic, 
spore forming bacteria that can affect the gastrointestinal (GI) tract. 
Some people carry the C-diff bacterium in their intestines, but never 
develop symptoms

[[Page 19878]]

of an infection. The difference between asymptomatic colonization and 
pathogenicity is caused primarily by the production of an enterotoxin 
(Toxin A) and/or a cytotoxin (Toxin B). The presence of either or both 
toxins can lead to symptomatic CDI, which is defined as the acute onset 
of diarrhea with a documented infection with toxigenic C-diff, or the 
presence of either toxin A or B. The GI tract contains millions of 
bacteria, commonly referred to as ``normal flora'' or ``good 
bacteria,'' which play a role in protecting the body from infection. 
Antibiotics can kill these good bacteria and allow the C-diff bacteria 
to multiply and release toxins that damage the cells lining the 
intestinal wall, resulting in a CDI. CDI is a leading cause of 
hospital-associated gastrointestinal illnesses. Persons at increased 
risk for CDI include people who are treated with current or recent 
antibiotic use, people who have encountered current or recent 
hospitalization, people who are older than 65 years, immunocompromised 
patients, and people who have recently had a diagnosis of CDI. CDI 
symptoms include, but are not limited to, diarrhea, abdominal pain, and 
fever. CDI symptoms range in severity from mild (abdominal discomfort, 
loose stools) to severe (profuse, watery diarrhea, severe pain, and 
high fevers). Severe CDI can be life-threatening and, in rare cases, 
can cause bowel rupture, sepsis and organ failure. CDI is responsible 
for 14,000 deaths per year in the United States.
    C-diff produces two virulent, pro-inflammatory toxins, Toxin A and 
Toxin B, which target host colonocytes (that is, large intestine 
endothelial cells) by binding to endothelial cell surface receptors via 
combined repetitive oligopeptide (CROP) domains. These toxins cause the 
release of inflammatory cytokines leading to intestinal fluid secretion 
and intestinal inflammation. The applicant asserted that 
ZINPLAVATM targets Toxin B sites within the CROP domain 
rather than the C-diff organism itself. According to the applicant, by 
targeting C-diff Toxin B, ZINPLAVATM neutralizes Toxin B, 
prevents large intestine endothelial cell inflammation, symptoms 
associated with CDI, and reduces the recurrence of CDI. 
ZINPLAVATM binds to sites within the CROP domain, which 
prevents Toxin B from binding to the host cell, thereby preventing the 
inflammation and symptoms associated with CDI. ZINPLAVATM is 
used concomitantly with standard of care (SOC) antibiotics. Typical 
treatment of CDI includes antibiotic therapy using vancomycin, 
metronidazole, fidaxomicin, or other antibiotics. Alternative therapies 
include fecal microbiota transplant (FMT) and the use of probiotics.
    The primary goal of CDI treatment is resolving the infection. 
Antibacterial drug treatment remains the cornerstone of treatment of 
CDI. However, this treatment option alone may not be adequate for 
patients diagnosed with recurrent CDI. A major concern with respect to 
a CDI is that even when treatment with an antibacterial drug of a 
primary infection is successful, generally, 25 percent to 30 percent of 
patients experience a recurrence of the infection within days or weeks 
of the presenting episode's symptom resolution. The risk of recurrence 
increases to 65 percent with subsequent CDI episodes. Disease 
recurrence results from continued disruption of the intestinal 
microbiota by SOC CDI antibiotics (or use of other antibiotics used to 
treat non-gastrointestinal conditions), combined with persistence of 
resistant C-diff spores (relapse) or acquisition of new spores from the 
environment (reinfection).
    Antibacterial drug use may inhibit the intestinal microbiota from 
reestablishing itself, allowing C-diff spores potentially to germinate 
and colonize the intestines when the antibacterial drug is 
discontinued. If regrowth of C-diff overtakes the reestablishment of 
the intestinal microbiota, then spore germination and toxin production 
from vegetative C-diff may restart the cycle of CDI and the need for 
subsequent treatment. These challenges highlight the need for 
nonantibiotic therapies. ZINPLAVATM targets Toxin B rather 
than the C-diff bacteria itself. According to the applicant, unlike 
antibacterial drugs, ZINPLAVATM is a human monoclonal 
antibody and does not affect the microbiota. According to the 
applicant, ZINPLAVATM neutralizes C-diff Toxin B and reduces 
recurrence of CDI. ZINPLAVATM is given concomitantly during 
the course of SOC antibacterial treatment of a CDI.
    With respect to the newness criterion, ZINPLAVATM 
received FDA approval on October 21, 2016, for reduction of recurrence 
of CDI in patients receiving antibacterial drug treatment for CDI and 
who are at high risk of CDI recurrence. ZINPLAVATM is 
anticipated to be commercially available as of February 2017. We note 
that the applicant anticipates submitting a request for a unique ICD-
10-PCS code for the administration of ZINPLAVATM. Currently, 
there is a pending ICD-10-CM request to differentiate CDI recurrence. 
If approved, the codes will become effective on October 1, 2017 (FY 
2018).
    As discussed above, if a technology meets all three of the 
substantial similarity 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 regard to the first criterion, whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome, 
according to the applicant, ZINPLAVATM is a human monoclonal 
antibody with an innovative mechanism of action. The applicant asserted 
that ZINPLAVATM is a novel treatment, with a unique 
mechanism of action relative to SOC CDI antibiotics that target C-diff. 
The applicant explained that ZINPLAVATM is the first human 
monoclonal antibody that targets and neutralizes C. diff Toxin B 
because the technology specifically binds to and neutralizes C-diff 
Toxin B (which is an exotoxin that contributes to intestinal tissue 
damage and immune system effects that underlie the symptoms of CDI) and 
inhibits binding of the toxin to mammalian cells. The applicant further 
asserted that the administration of ZINPLAVATM, in addition 
to standard of care antibacterial drug treatment, reduces CDI 
recurrence by providing passive immunity against Toxin B resulting from 
persistent or newly acquired C-diff spores. According to the applicant, 
ZINPLAVATM is the only FDA-approved treatment indicated for 
reducing CDI recurrence as adjunctive therapy in adult patients who are 
receiving antibacterial drug treatment for CDI and who are at high risk 
for CDI recurrence.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant maintained that 
patients who may be eligible to receive treatment using 
ZINPLAVATM could be in an acute-care hospital setting for a 
wide variety of reasons and may develop a secondary CDI as a hospital-
acquired infection and, therefore, cases representing patients that may 
be eligible for treatment using the technology can map to a wide range 
of MS-DRGs. ZINPLAVATM is indicated for patients receiving 
SOC treatment for CDI and who are at a high risk for CDI recurrence. In 
order to identify the range of MS-DRGs for which cases representing 
patients that may be eligible for treatment using ZINPLAVATM 
may map to, the applicant identified all MS-DRGs containing cases that 
represent patients presenting with CDI as a primary or secondary 
diagnosis. The applicant used

[[Page 19879]]

FY 2015 MedPAR data to map the identified cases to 543 MS-DRGs, with 12 
MS-DRGs accounting for approximately 40 percent of all cases. The 
applicant segmented these cases based on age because patients 65 years 
and older are at higher risk for CDI recurrence. Based on the FY 2015 
MedPAR data, MS-DRG distribution was found to be similar, irrespective 
of CDI status (primary or secondary), for patients over 65 years of age 
and those under 65 years of age. The top 7 MS-DRGs across both age 
groups account for nearly 54 percent (over 65 years of age) and 49 
percent (under 65 years of age). The applicant further segmented these 
cases to determine if status of CDI as a primary or secondary diagnosis 
influenced MS-DRG mapping. Regardless of age, when CDI is the primary 
diagnosis, approximately 98 percent of patient cases map to the same 3 
MS-DRGs: MS-DRG 371 (Major Gastrointestinal Disorders and Peritoneal 
Infections with MCC); MS-DRG 372 (Major Gastrointestinal Disorders and 
Peritoneal Infections with CC); and MS-DRG 373 (Major Gastrointestinal 
Disorders and Peritoneal Infections without CC/MCC), respectively. 
Potential cases representing patients who may be eligible for treatment 
with ZINPLAVATM would be assigned to the same MS-DRGs as 
cases representing patients who receive SOC treatment for a diagnosis 
of CDI.
    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, according to the 
applicant, ZINPLAVATM is administered concomitantly or as 
adjunctive therapy with SOC antibacterial treatment for recurrent CDI. 
The applicant stated that ZINPLAVATM is indicated to reduce 
recurrence of CDI in adult patients at high risk of CDI recurrence who 
are receiving antibacterial drug treatment for CDI. According to the 
applicant, the addition of ZINPLAVATM to SOC antibacterial 
drug treatment reduces CDI recurrence by providing passive immunity 
against Toxin B resulting from persistent or newly acquired C-diff 
spores. ZINPLAVATM is used to treat the same or similar type 
of disease (recurrent CDI) and a similar patient population receiving 
SOC therapy for the treatment of recurrent CDI.
    Based on the applicant's statements presented above, because 
ZINPLAVATM has a unique mechanism of action, we do not 
believe that the technology is substantially similar to existing 
technologies and, therefore, meets the newness criterion. We are 
inviting public comments on whether ZINPLAVATM meets the 
newness criterion.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that the technology meets the cost 
criterion. In order to identify the range of MS-DRGs that cases 
representing potential patients who may be eligible for treatment using 
ZINPLAVATM may map to, the applicant identified all MS-DRGs 
for patients diagnosed with CDI as a primary or secondary diagnosis. 
Specifically, the applicant searched the FY 2015 MedPAR file for claims 
that included target patients over 65 years of age and identified cases 
reporting diagnoses of CDI by ICD-9-CM diagnosis code 008.45 
(Intestinal infection due to Clostridium difficile) as a primary or 
secondary diagnosis. This resulted in 139,135 cases across 543 MS-DRGs, 
with approximately 40 percent of all cases mapping to the following 12 
MS-DRGs: MS-DRG 177 (Respiratory Infections and Inflammations with 
MCC); MS-DRG 193 (Simple Pneumonia and Pleurisy with MCC); MS-DRG 
291(Heart Failure and Shock with MCC); MS-DRGs 371, 372, and 373 (Major 
Gastrointestinal Disorders and Peritoneal Infections with MCC, with CC, 
and without CC/MCC, respectively); MS-DRGs 682 and 683 (Renal Failure 
with MCC and with CC, respectively); MS-DRG 853 (Infectious and 
Parasitic Diseases with O.R. Procedure with MCC); MS-DRGs 870, 871, and 
872 (Septicemia or Severe Sepsis with Mechanical Ventilation >96 Hours, 
with MCC, and without MCC, respectively).
    Using the 139,135 identified cases, the average unstandardized 
case-weighted charge per case was $80,677. The applicant then 
standardized the charges. The applicant did not remove charges for the 
current treatment because, as discussed above, ZINPLAVATM 
will be used concomitantly with SOC antibacterial treatments for the 
treatment of CDI as an additive, or adjunctive treatment option, to 
reduce the recurrence of CDI infection. The applicant then applied the 
2-year inflation factor of 1.098446 from the FY 2017 IPPS/LTCH final 
rule (81 FR 57286) to inflate the charges from FY 2015 to FY 2017. The 
applicant noted that the anticipated price for ZINPLAVATM 
has yet to be determined; therefore, no charges for 
ZINPLAVATM were added in the analysis. Based on the FY 2017 
IPPS/LTCH PPS Table 10 thresholds, the average case-weighted threshold 
amount was $56,871. The inflated average case-weighted standardized 
charge per case was $78,929. Because the inflated average case-weighted 
standardized charge per case exceeds the average case-weighted 
threshold amount, the applicant maintained that the technology meets 
the cost criterion. The applicant noted that the inflated average case-
weighted standardized charge per case exceeds the average case-weighted 
threshold amount without the average per patient cost of the 
technology. As such, the applicant anticipated that the inclusion of 
the cost of ZINPLAVATM, at any price point, will further 
increase charges above the average case-weighted threshold amount. We 
are inviting public comments on whether ZINPLAVATM meets the 
cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that the addition of ZINPLAVATM to SOC 
antibacterial drug treatment reduces CDI recurrence because it provides 
passive immunity against Toxin B resulting from persistent or newly 
acquired C-diff spores.
    The applicant conducted two Phase III studies, MODIFY I and MODIFY 
II. The primary endpoint of the studies was recurrent CDI within 12 
weeks after completion of treatment with ZINPLAVATM. The 
first study design initially included actoxumab, an antitoxin A 
monoclonal antibody treatment arm that was later discontinued due to a 
high failure rate and increase in mortality compared to other treatment 
arms.\3\ Clinical data on ZINPLAVATM is provided exclusively 
from the FDA briefing document available on the FDA Web site at: http://www.fda.gov/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/Anti-InfectiveDrugsAdvisoryCommittee. Information is also provided in the 
package insert by the manufacturer, Merck & Company, Inc. The FDA 
briefing provided data on the safety and efficacy of 
ZINPLAVATM. The FDA considered sustained clinical responses 
defined as clinical cure of the initial CDI episode and the absence of 
CDI recurrence as an appropriate endpoint to assess the efficacy of 
ZINPLAVATM in the prevention of CDI recurrences.
---------------------------------------------------------------------------

    \3\ Wilcox MH et al. Bezlotoxumab for Prevention of Recurrent 
Clostridium difficile Infection. N Engl J Med. 2017 Jan 
26;376(4):305-317.
---------------------------------------------------------------------------

    In MODIFY I trial, the clinical cure rate of the presenting CDI 
episode was lower in the ZINPLAVATM arm as compared to the 
placebo arm, whereas in MODIFY II trial the clinical cure rate was 
lower in the placebo arm as compared to the ZINPLAVATM arm. 
Additional analyses showed that, by 3

[[Page 19880]]

weeks post study drug infusion, the clinical cure rates of the 
presenting CDI episode were similar between treatment arms.
    In MODIFY I, the rate of sustained clinical response was 
numerically in favor of ZINPLAVATM (60.1 percent) in 
comparison to placebo (55.2 percent) with an adjusted difference and 95 
percent CI of 4.8 percent (-2.1 percent; 11.7 percent). In MODIFY II, 
the proportion of subjects with sustained clinical response in the 
ZINPLAVATM arm (66.8 percent) was also higher than in the 
placebo arm (52.1 percent) with an adjusted difference of 14.6 percent 
and 95 percent CI (7.8 percent; 21.4 percent). The treatment did not 
significantly decrease mortality. Recurrence rates, including CDI-
related hospital readmission rates, reportedly were between 10 and 25 
percent. No clinically meaningful differences in the exposure of 
bezlotoxumab were found between patients 65 years of age and older and 
patients under 65 years of age.
    In the Phase III trials, the safety profile of 
ZINPLAVATM was similar overall to that of placebo. However, 
heart failure was reported more commonly in the two Phase III clinical 
trials of ZINPLAVATM-treated patients compared to placebo-
treated patients. These adverse reactions occurred primarily in 
patients with underlying congestive heart failure (CHF). In patients 
with a history of CHF, 12.7 percent (15/118) of ZINPLAVATM-
treated patients and 4.8 percent (5/104) of placebo-treated patients 
had the serious adverse reaction of heart failure during the 12-week 
study period. In addition, in patients with a history of CHF, there 
were more deaths in ZINPLAVATM-treated patients (19.5 
percent (23/118)) than in placebo-treated patients (12.5 percent (13/
104)) during the 12-week study period. We are concerned regarding the 
safety of ZINPLAVATM in patients diagnosed with CHF. In 
regard to safety, data from the MODIFY I and MODIFY II studies suggest 
few adverse events associated with ZINPLAVATM, with no 
significant differences in the number of serious adverse events, deaths 
or discontinuations of study drug that occurred between the 
ZINPLAVATM and the placebo groups. However, both the 
ZINPLAVATM and the ZINPLAVATM plus actoxumab 
treatment groups experienced more episodes of cardiac failure (defined 
as acute or chronic cardiac failure) then compared to the placebo group 
(2.2 percent versus 1 percent). We are unsure if the cardiac failure 
reported in the studies may be the result of a higher number of 
baseline patients with heart failure in the treatment arms or the 
result of an adverse effect to ZINPLAVATM. Therefore, we are 
concerned with regard to the adverse event of cardiac failure of 
ZINPLAVATM.
    We are inviting public comments on whether ZINPLAVATM 
meets the substantial clinical improvement criterion.
    We did not receive any written public comments in response to the 
New Technology Town Hall meeting notice regarding the application of 
ZINPLAVATM for new technology add-on payments.
    b. EDWARDS INTUITY EliteTM Valve System (INTUITY) and 
LivaNova Perceval Valve (Perceval)
    Two manufacturers, Edwards Lifesciences and LivaNova, submitted 
applications for new technology add-on payments for FY 2018 for the 
INTUITY EliteTM Valve System (INTUITY) and the Perceval 
Valve (Perceval), respectively. Both of these technologies are 
prosthetic aortic valves inserted using surgical aortic valve 
replacement (AVR). We note that, while Edwards Lifesciences submitted 
an application for new technology add-on payments for FY 2017 for the 
INTUITY valve, FDA approval was not received by July 1, 2016, and, 
therefore, the device was not eligible for consideration for new 
technology add-on payments for FY 2017.
    Aortic valvular disease is relatively common, primarily manifested 
by aortic stenosis. Most aortic stenosis is due to calcification of the 
valve, either on a normal tri-leaflet valve or on a congenitally 
bicuspid valve. The resistance to outflow of blood is progressive over 
time, and as the size of the aortic orifice narrows, the heart must 
generate increasingly elevated pressures to maintain blood flow. 
Symptoms such as angina, heart failure, and syncope eventually develop, 
and portend a very serious prognosis. There is no effective medical 
therapy for aortic stenosis, so the diseased valve must be replaced or, 
less commonly, repaired.
    The INTUITY valve incorporates the expansion feature of a catheter 
implanted valve, but is designed to be placed during cardiac surgery. 
The manufacturer explained that the INTUITY valve requires fewer 
stitches to hold the device in place because of the balloon expanded 
design and, therefore, can be inserted more quickly than a standard 
valve, and also facilitates minimally invasive cardiac surgery; that 
is, use of a smaller incision to allow faster recovery. The 
manufacturer of the INTUITY valve indicated that the device is 
comprised of: (1) A bovine pericardial aortic bioprosthetic valve; (2) 
a balloon expandable stainless steel frame; and (3) a textured sealing 
cloth. The manufacturer of the Perceval valve indicated that the 
Perceval valve device is comprised of: (1) Sizers used to determine the 
correct size of the prosthesis; (2) a dual holder used for positioning 
and deployment (available in two models, one for sternal approaches and 
one for MIS); (3) a ``smart clip'' to assist during assembly of the 
valve on the dual holder to prevent release during positioning; (4) a 
dual collapser used to evenly reduce the diameter of the prosthesis 
allowing it to mount onto the holder prior to implantation; (5) a dual 
collapser base used to allow proper positioning; and (6) a postdilation 
catheter used for in situ dilation of the prosthesis after implantation 
(available in two models, one for sternal approaches and one for MIS). 
According to both applicants, the INTUITY valve and the Perceval valve 
are the first sutureless, rapid deployment aortic valves that can be 
used for the treatment of patients who are candidates for surgical AVR. 
The applicants indicated that the two new device innovations facilitate 
MIS approaches through: (1) The device rapid deployment mechanisms; and 
(2) the design of the prosthetic valve that allows for markedly fewer 
to no sutures to securely fasten the prosthetic valve to the aortic 
orifice. The applicants explained that both of these aspects of their 
devices are credited with the reduction of operating time.
    As noted, according to both applicants, the INTUITY valve and the 
Perceval valve are the first sutureless, rapid deployment aortic valves 
that can be used for the treatment of patients who are candidates for 
surgical AVR. Because potential cases representing patients who are 
eligible for treatment using the INTUITY and the Perceval aortic valve 
devices would group to the same MS-DRGs, and we believe that these 
devices 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 these two devices are substantially similar to each other and 
that it is appropriate to evaluate both technologies as one application 
for new technology add-on payments under the IPPS.
    With respect to the newness criterion, the INTUITY valve received 
FDA approval on August 12, 2016, and was commercially available on the 
U.S. market on August 19, 2016. The Perceval valve received FDA 
approval

[[Page 19881]]

on January 8, 2016, and was commercially available on the U.S. market 
on February 29, 2016. We believe that, in accordance with our policy, 
it is appropriate to use the earliest market availability date 
submitted as the beginning of the newness period. Therefore, based on 
our policy, with regard to both devices, if the technologies are 
approved for new technology add-on payments, we believe that the 
beginning of the newness period would be February 29, 2016. In 
addition, both applicants indicated that ICD-10-PCS code X2RF032 
(Replacement of Aortic Valve using Zooplastic Tissue, Rapid Deployment 
Technique, Open Approach, New Technology Group 2) would identify 
procedures involving the use of the devices when surgically implanted.
    We previously stated that, because we believe these two devices are 
substantially similar to each other, we believe 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 intend to make 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 we believe that continuing 
our current practice of extending new technology add-on payments 
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 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 were 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 that it is appropriate to consider both sets of cost 
data and clinical data in making a determination and we do not believe 
that it is possible to choose one set of data over another set of data 
in an objective manner.
    As stated above, we believe that the INTUITY valve and the Perceval 
valve are substantially similar to each other for purposes of analyzing 
these two applications as one application. We also need to determine 
whether the INTUITY valve and the Perceval valve are substantially 
similar to existing technologies prior to their approval by the FDA and 
their release on the market. As discussed earlier, if a technology 
meets all three of the substantial similarity 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 for the INTUITY valve asserted that its unique design, 
which utilizes features that were not previously included in 
conventional aortic valves, constitutes a new mechanism of action. The 
deployment mechanism allows for rapid deployment. The expandable frame 
can reshape the native valve's orifice, creating a larger and more 
efficiently shaped effective orifice area. In addition, the expandable 
skirt allows for structural differentiation upon fixation of the valve 
requiring 3 permanent, guiding sutures rather than the 12 to 18 
permanent sutures used to fasten standard prosthetic aortic valves. The 
applicant for the Perceval valve described the Perceval valve's 
mechanism of action as including: (a) No permanent sutures; (b) a 
dedicated delivery system that increases the surgeon's visibility; (c) 
an enabler of minimally invasive approach; (d) a complexity reduction 
and reproducibility of the procedure; and (e) a unique device assembly 
and delivery systems.
    With respect to the second and third criteria, whether a product is 
assigned to the same or a different MS-DRG and 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 for 
the INTUITY valve indicated that the technology is used in the 
treatment of the same patient population and potential cases 
representing patients that may be eligible for treatment using the 
INTUITY valve would be assigned to the same MS-DRGs as cases involving 
the use of other prosthetic aortic valves (that is, MS-DRGs 216 
(Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac 
Catheterization with MCC), 217 (Cardiac Valve & Other Major 
Cardiothoracic Procedures with Cardiac Catheterization with CC), 218 
(Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac 
Catheterization without CC/MCC), 219 (Cardiac Valve & Other Major 
Cardiothoracic Procedures without Cardiac Catheterization with MCC), 
220 (Cardiac Valve & Other Major Cardiothoracic Procedures without 
Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major 
Cardiothoracic Procedures without Cardiac Catheterization without CC/
MCC). The applicant for the Perceval valve also indicated that the 
Perceval valve device is used in the treatment of the same patient 
population and potential cases representing patients that may be 
eligible for treatment using the technology would be assigned to the 
same MS-DRGs (MS-DRGs 216 through 221) as cases involving the use of 
other prosthetic aortic valves.
    After considering the materials included with both applications, we 
remain concerned as to whether the mechanism of action described by the 
applicants represents an improvement to an existing surgical technique 
and technology or a new technology. While the INTUITY and Perceval 
valves address some of the challenges posed by implantation of existing 
valves, including improving the visibility of the orifice and the 
physiological function of the valves, we do not believe that their 
mechanisms of action are fundamentally different from that of other 
aortic valves. As one of the applicants stated in its application, the 
goal of the prosthetic aortic valve is to mimic the native valve that 
it has replaced via the incorporation of three leaflets that open and 
close in response to pressure gradients developed during the cardiac 
cycle. We believe that the INTUITY and Perceval valves are the same or 
similar to other prosthetic aortic valves used to treat the same or 
similar diagnoses.
    We are inviting public comments on whether the mechanisms of action 
of the sutureless, rapid deployment of the INTUITY and Perceval valves 
differs from the mechanism of action of standard AVR valves and whether 
the technologies 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 19882]]

that their device meets the cost criterion. We summarize each analysis 
below.
    With regard to the cost criterion, the INTUITY valve's applicant 
researched the FY 2015 MedPAR claims data file to identify cases 
representing patients who may be potential recipients of treatment 
using the INTUITY valve. The applicant identified claims that reported 
an ICD-9-CM diagnosis code of 424.1 (Aortic valve disorder), in 
combination with an ICD-9-CM procedure code of 35.21 (Replacement of 
aortic valve with tissue) or 35.22 (Open and other replacement of 
aortic valve). The applicant also identified cases with or without a 
coronary artery bypass graft (CABG) using the ICD-9-CM procedure codes 
in the table below.

------------------------------------------------------------------------
       ICD-9-CM code                      Code description
------------------------------------------------------------------------
36.10.....................  Aortocoronary bypass for heart
                             revascularization, not otherwise specified.
36.11.....................  (Aorto)coronary bypass of one coronary
                             artery.
36.12.....................  (Aorto)coronary bypass of two coronary
                             arteries.
36.13.....................  (Aorto)coronary bypass of three coronary
                             arteries.
36.14.....................  (Aorto)coronary bypass of four or more
                             coronary arteries.
36.15.....................  Single internal mammary-coronary artery
                             bypass.
36.16.....................  Double internal mammary-coronary artery
                             bypass.
36.17.....................  Abdominal-coronary artery bypass.
------------------------------------------------------------------------

    The applicant identified a total of 25,173 cases that mapped to MS-
DRGs 216 through 221. Of these cases, the applicant identified 10,251 
CABG cases and 14,922 non-CABG cases. According to the applicant, 
patients that undergo a procedure without need of a concomitant CABG 
are more likely to receive treatment with the INTUITY valve than 
patients in need of a concomitant CABG. Therefore, the applicant 
weighted the non-CABG cases at 90 percent of total cases and the CABG 
cases at 10 percent of total cases under each of the six MS-DRGs. The 
final case count is a weighted average of 14,455 cases.
    The applicant calculated an average unstandardized charge per case 
of $192,506 for all cases. The applicant then removed 100 percent of 
the charges for pacemakers, investigational devices, and other implants 
that would not be required for patients receiving treatment using the 
INTUITY valve. The applicant standardized the charges and then applied 
an inflation factor of 1.098446, which is the 2-year inflation factor 
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57286), to update the 
charges from FY 2015 to FY 2017. The applicant calculated the average 
expected charge for the INTUITY valve based on the current list price 
of the device. Although the applicant submitted data related to the 
cost of the INTUITY valve, the applicant noted that the cost of the 
device is proprietary information. To add charges for the device, the 
applicant assumed a hospital mark-up of approximately 3.00 percent, 
based on the current average CCR for implantable devices (0.331) as 
reported in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56876). Based 
on the FY 2017 IPPS/LTCH PPS Table 10 thresholds, the average case-
weighted threshold amount was $170,321. The applicant computed an 
inflated average case-weighted standardized charge per case of 
$194,291, which is $23,970 above the average case-weighted threshold 
amount. Because the inflated average case-weighted standardized charge 
per case exceeds the average case-weighted threshold amount, the 
applicant maintained that the technology meets the cost criterion.
    We thank the applicant for the analysis above. However, we would 
like more information from the applicant regarding how it decided upon 
which cases to include in the sensitivity analysis, as well as further 
details about how and on what basis the applicant weighted CABG and 
non-CABG cases. We are inviting public comments on whether the INTUITY 
valve meets the cost criterion.
    With regard to the cost criterion in reference to the Perceval 
valve, the applicant conducted the following analysis. The applicant 
examined FY 2015 MedPAR claims data that included cases reporting an 
ICD-9 procedure code of 35.21 or 35.22, in combination with diagnosis 
code: 424.1. Noting that MS-DRGs 216 through 221 contained 97 percent 
of these cases, the applicant limited its analysis to these 6 MS-DRGs. 
The applicant identified 25,193 cases across these MS-DRGs, resulting 
in an average case-weighted unstandardized charge per case of $173,477. 
The applicant then standardized charges using FY 2015 standardization 
factors and applied an inflation factor of 1.089846 from the FY 2017 
IPPS/LTCH proposed rule (81 FR 25271). The applicant indicated that the 
technology meets the cost criterion by applying the inflation factor 
from the proposed rule and, therefore, would meet the cost criterion by 
applying the higher inflation factor from the final rule.
    Included in the average case-weighted standardized charge per case 
were charges for the current valve prosthesis. Therefore, the applicant 
removed all charges associated with revenue center 0278, and calculated 
the adjusted average case-weighted standardized charge per case by 
subtracting these charges from the standardized charge per case. The 
applicant then added the charge for the new technology by taking the 
anticipated hospital cost of the new technology and dividing it by the 
national average implantable devices CCR of 0.331. The applicant then 
added the charge for the new technology to the inflated average case-
weighted standardized charges per case to arrive at the final inflated 
average case-weighted standardized charge per case, which was then 
case-weighted based on the distribution of cases within the six MS-
DRGs. This resulted in an inflated average case-weighted standardized 
charge per case of $206,109. Using the FY 2017 IPPS Table 10 
thresholds, the average case-weighted threshold amount was $173,477. 
Because the inflated average case-weighted standardized charge per case 
exceeds the average case-weighted threshold amount, the applicant 
maintained that the technology meets the cost criterion. We are 
inviting public comments on whether the Perceval technology meets the 
cost criterion.
    With regard to substantial clinical improvement for the INTUITY 
valve, the applicant asserted that several aspects of the valve system 
represent a substantial clinical improvement over existing 
technologies. The applicant believed that the flexible deployment arm 
allows improved surgical access and visualization, making the surgery 
less challenging for the surgeon, improving the likelihood that the 
surgeon can use a minimally invasive approach. According to the 
applicant, the assembly of the device only allows the correct valve 
size to be fitted, which ensures that the valve does not slip or

[[Page 19883]]

migrate, which prevents paravalvular leaks and patient prosthetic 
mismatch. The applicant indicated that the device improves clinical 
outcomes for patients undergoing minimally invasive AVR and full-
sternotomy AVR. The applicant stated that the rapid deployment 
technology enables reduced operative time, specifically cross-clamp 
time, thereby reducing the period of myocardial ischemia. In addition, 
the applicant indicated that the device offers a reduction in operative 
time for full-sternotomy AVR. The applicant noted that clinical results 
document significant patient outcome and utilization improvements, 
including improved patient satisfaction, faster return to normal 
activity, decreased post-operative pain, reduced mortality and 
decreased complications, including need for reoperation due to 
bleeding, reduced recovery time, reduced length of stay (both ICU and 
overall), more access to minimally invasive surgery, and improved 
hemodynamics.
    The INTUITY valve has been tested clinically in several trials. In 
the TRITON trial (Kocher et al., 2013 \4\), 287 patients diagnosed with 
aortic stenosis underwent surgery in 1 of 6 European centers. The first 
149 patients received the first generation Model 8300A valve, and the 
next 138 patients received the second generation Model 8300AB. The 
average age of the patients was 75.7 years. Early, 30-day mortality was 
1.7 percent (5/287), the post-op valve gradient was low, and 75 percent 
of the patients improved functionally. A total of 4 valves were 
explanted in the final 30 days due to bleeding, and 3 were explanted 
later for paravalvular leak, endocarditis, and aortic root aneurysms. 
Follow-up extended to 3 years (mean 1.8 years).
---------------------------------------------------------------------------

    \4\ Kocher AA, Laufer G, Haverich A, et al. One-year outcomes of 
the surgical treatment of aortic stenosis with a next generation 
surgical aortic valve (TRITON) trial: A prospective multicenter 
study of rapid-deployment aortic valve replacement with the EDWARDS 
INTUITY valve system. J Thorac Cardiovasc Surg 2013;145:110-116.
---------------------------------------------------------------------------

    Implantation of the INTUITY valve using minimally invasive surgery 
was compared with conventional aortic valve replacement via full 
sternotomy in the CADENCE-MIS randomized trial (Borger et al., 2015 
\5\) of 100 patients treated in 1 of 5 centers in Germany. The authors 
found no significant difference in 30-day mortality, the need for 
pacemaker implantation, significant paravalvular regurgitation, and 
quality of life scores at 3 months. Aortic cross-clamp time was 
significantly reduced from 54.0 to 41.3 minutes (p < 0.0001), and 
cardiopulmonary bypass time was reduced from 74.4 to 68.8 minutes (p = 
0.21). Early clinical outcomes were similar: No significant differences 
in mortality, reoperation, or other clinical outcomes. The aortic valve 
gradient was significantly lower in the MIS group: 8.5 versus 10.3 
mmHg.
---------------------------------------------------------------------------

    \5\ Borger MA, Moustafine V, Conradi L, et al. A randomized 
multicenter trial of minimally invasive rapid deployment versus 
conventional full sternotomy aortic valve replacement. Ann Thorac 
Surg 2015; 99:17-25.
---------------------------------------------------------------------------

    The TRANSFORM trial (Barnhart et al. 2017 \6\) was a single-arm, 
non-randomized, multicenter trial, in which 839 patients underwent 
rapid deployment AVR surgery. The average age of the patients was 73.5 
years. The mean cross-clamp time and cardiopulmonary bypass times for 
full sternotomy were 49.3  26.9 min and 69.2  
34.7 min, respectively, and for MIS, 63.1  25.4 min and 
84.6  33.5 min, respectively. The authors compared these 
times to STS database comparators: For full sternotomy, 76.3 minutes 
and 104.2 minutes, respectively, and for MIS, 82.9 minutes and 111.4 
minutes, respectively. All cause early mortality was 0.8 percent, mean 
EOA at 1 year was 1.7 cm\2\; mean gradient, 10.3 mmHg; and moderate and 
severe PVL, 1.2 percent and 0.4 percent, respectively. The authors 
indicated that the INTUITY valve ``. . . may lead to a relative 
reduction in aortic cross-clamp time and cardiopulmonary bypass time'' 
and ``may confer benefits to patients, such as decreased mortality and 
morbidity.'' The authors noted the possibility of potential bias 
resulting from the level of experience of the study surgeons relative 
to typical cardiac surgeons. In addition, long-term follow-up is not 
available, and study comparators from the Society of Thoracic Surgeons 
(STS) database were not matched.
---------------------------------------------------------------------------

    \6\ Barnhart, G. A. et al. (2017). TRANSFORM (Multicenter 
Experience with Rapid Deployment Edwards INTUITY Valve System for 
Aortic Valve Replacement) US clinical trial: Performance of a rapid 
deployment aortic valve. The Journal of Thoracic and Cardiovascular 
Surgery, 153, 241-251.
---------------------------------------------------------------------------

    In the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25057), after 
reviewing the studies provided by the applicant with its application 
for FY 2017, we expressed some specific concerns. We indicated that we 
were concerned that the INTUITY valve does not have sufficient 
advantages over alternative surgically implanted valves to constitute a 
substantial clinical improvement. We noted that, while some of the 
studies included with the application demonstrate reduced aortic cross-
clamp time, conventional aortic valve replacement was used in the 
comparison group. Therefore, it is unclear whether the reduced aortic 
cross-clamp time is associated with the use of the INTUITY valve or as 
a result of the MIS surgery in general.
    In response to these concerns, the INTUITY valve's applicant stated 
that the INTUITY valve is associated with significant clinical benefits 
outside of the benefits achieved by use of an MIS approach. The 
applicant referenced the sub-study of the TRANSFORM trial, which 
compared the MISAVR with the INTUITY valve to MISAVR with a 
conventional valve, stating that the results indicated reduced cross-
clamp time and other benefits that are not simply a function of the MIS 
approach. The applicant also referenced trials that indicated that the 
INTUITY valve had excellent hemodynamic performance (Haverich et 
al.,\7\ Borger et al.,\8\ Barnhart et al.\9\), one of which found a 
significant improvement in functional status (Haverich et al.).
---------------------------------------------------------------------------

    \7\ Haverich, A, et al. (2014), Three-year hemodynamic 
performance, left ventricular mass regression, and prosthetic-
patient mismatch after rapid deployment aortic valve replacement in 
287 patients. J Thorac Cardiovasc Surg, 148(6), 2854-60.
    \8\ Borger MA, Moustafine V, Concadi L, et al. A randomized 
multicenter trial of minimally invasive rapid deployment versus 
conventional full sternotomy aortic valve replacement. Ann Thorac 
Surg 2015; 99:17-25.
    \9\ Barnhart, G.A. et al. (2017). TRANSFORM (Multicenter 
Experience with Rapid Deployment Edwards INTUITY Valve System for 
Aortic Valve Replacement) US clinical trial: Performance of a rapid 
deployment aortic valve. The Journal of Thoracic and Cardiovascular 
Surgery, 153, 241-251.
---------------------------------------------------------------------------

    After considering the studies provided by the INTUITY valve 
applicant, we are concerned about the possibility of potential bias 
resulting from the level of experience of the study surgeons relative 
to typical cardiac surgeons, as well as the lack of long-term follow-up 
in these studies.
    With regard to substantial clinical improvement for the Perceval 
valve, the applicant submitted several studies examining the Perceval 
valve. The following discussion summarizes some of these studies.
    Pollari and colleagues \10\ (2014) utilized a propensity score 
analysis to examine 82 matched pairs as part of a larger trial that 
included 566 patients treated with bioprosthetic aortic valve 
replacement, 166 of which received treatment using the Perceval 
sutureless valve and 400 of which received treatment using a stented 
valve. Aortic cross-clamp, cardiopulmonary bypass, and operation times 
were significantly shorter in the group that received treatment using 
the Perceval sutureless

[[Page 19884]]

valve. The Perceval sutureless group also had shorter ICU stays, 
hospital stays, and intubation times, and lower incidence of 
postoperative atrial fibrillation and respiratory insufficiency. The 
authors noted that, despite the promising preliminary results, longer 
follow-up is warranted before drawing definite conclusions.
---------------------------------------------------------------------------

    \10\ Pollari, F. (2014), Better short-term outcome by using 
sutureless valves: a propensity-matched score analysis, Ann Thorac 
Surg, 98; 611-6.
---------------------------------------------------------------------------

    In a nonrandomized trial of 100 patients in a German hospital, 
Santarpino and colleagues \11\ (2013) found that procedures completed 
using the Perceval valve were associated with significantly shorter 
cross-clamp and cardiopulmonary bypass times (40  13.8 and 
69  19.1 versus 66  20.4 and 105  
34.8) relative to conventional stented bioprosthetic valves, as well as 
less frequent use of blood transfusions, shorter ICU stays and shorter 
use of intubation. In contrast, Gilmanov and colleagues \12\ (2013) 
found that a MIS approach resulted in improved outcomes, albeit longer 
aortic cross-clamp times. A meta-analysis by Hurley and colleagues \13\ 
(2015) found reduced cross-clamp and cardiopulmonary bypass times, but 
found a significantly higher permanent pacemaker rate with the use of 
Perceval sutureless valves.
---------------------------------------------------------------------------

    \11\ Santarpino, G. et al. (2013), The Perceval S aortic valve 
has the potential of shortening surgical time: Does it also result 
in improved outcome?, Ann Thorac Surg, 96, 77-81.
    \12\ Gilmanov, D. (2013), Minimally invasive and conventional 
aortic valve replacement: a propensity score analysis, Ann Thorac 
Surg, 96, 837-843.
    \13\ Hurley et al, ``A Meta[hyphen]Analysis Examining 
Differences in Short[hyphen]Term Outcomes Between Sutureless and 
Conventional Aortic Valve Prostheses,'' Innovations 2015; 10:375-
382.
---------------------------------------------------------------------------

    A study conducted by Dalen and colleagues \14\ (2015) used 
propensity score matching to examine early post-operative outcomes and 
2-year survival between 171 pairs of patients who underwent 
ministernotomy using the Perceval device or a full sternotomy with 
stented prosthesis. There were no differences in 30-day mortality or 2-
year survival between the groups. The aortic cross-clamp time and 
cardiopulmonary bypass time were shorter, and there were fewer blood 
transfusions in the group that received treatment using the Perceval 
device. However, this group was also at higher risk for post-operative 
permanent pacemaker implantation.
---------------------------------------------------------------------------

    \14\ Dal[eacute]n, M. (2015), Aortic valve replacement through 
full sternotomy with a stented bioprosthesis versus minimally 
invasive sternotomy with a sutureless bioprosthesis, Eur J 
Cardiothorac Surg 2015; doi:10.1093/ejcts/ezv014.
---------------------------------------------------------------------------

    After reviewing the publications submitted by the applicant, we are 
concerned that the lack of randomization and blinded investigators may 
have influenced the outcomes in many of the studies provided. For 
example, in the discussion following Santarpino et al.'s 2013 study, 
one of the participants suggested that medical decision-making 
regarding ventilation times, ICU times, and blood transfusions may be 
affected by the knowledge of investigators as to which valve the 
patient received treatment using. Also, as indicated above with respect 
to the INTUITY valve, the experience of the surgeons in these studies 
may be confounding factors that may have influenced the length of 
surgical procedures and/or surgical outcomes.
    We are inviting public comments on whether rapid deployment valves, 
specifically the INTUITY and Perceval valves, meet the substantial 
clinical improvement criterion.
    We did not receive any written public comments regarding the 
INTUITY and Perceval valves in response to the New Technology Town Hall 
meeting notice.
c. Ustekinumab (Stelara[supreg])
    Janssen Biotech submitted an application for new technology add-on 
payments for the Stelara[supreg] induction therapy for FY 2018. 
Stelara[supreg] received FDA approval as an intravenous (IV) infusion 
treatment of Crohn's disease (CD) on September 23, 2016, which added a 
new indication for the use of Stelara[supreg] and route of 
administration for this monoclonal antibody. IV infusion of 
Stelara[supreg] is indicated for the treatment of adult patients (18 
years and older) diagnosed with moderately to severely active CD who 
have: (1) Failed or were intolerant to treatment using immunomodulators 
or corticosteroids, but never failed a tumor necrosis factor (TNF) 
blocker; or (2) failed or were intolerant to treatment using one or 
more TNF blockers. Stelara[supreg] for IV infusion has only one 
purpose, induction therapy. Stelara[supreg] must be administered 
intravenously by a health care professional in either an inpatient 
hospital setting or an outpatient hospital setting.
    Stelara[supreg] for IV infusion is packaged in single 130mg vials. 
Induction therapy consists of a single IV infusion dose using the 
following weight-based dosing regimen: Patients weighing less than (<) 
55kg are administered 260mg of Stelara[supreg] (2 vials); patients 
weighing more than (>) 55kg, but less than (<) 85kg are administered 
390mg of Stelara[supreg] (3 vials); and patients weighing more than (>) 
85kg are administered 520mg of Stelara[supreg] (4 vials). An average 
dose of Stelara[supreg] administered through IV infusion is 390mg (3 
vials). Maintenance doses of Stelara[supreg] are administered at 90mg, 
subcutaneously, at 8-week intervals and may occur in the outpatient 
hospital setting.
    CD is an inflammatory bowel disease of unknown etiology, 
characterized by transmural inflammation of the gastrointestinal (GI) 
tract. Symptoms of CD may include fatigue, prolonged diarrhea with or 
without bleeding, abdominal pain, weight loss and fever. CD can affect 
any part of the GI tract including the mouth, esophagus, stomach, small 
intestine, and large intestine.
    Conventional pharmacologic treatments of CD include antibiotics, 
mesalamines, corticosteroids, immunomodulators, tumor necrosis alpha 
(TNF[alpha]) inhibitors, and anti-integrin agents. Surgery may be 
necessary for some patients diagnosed with CD in which conventional 
therapies have failed. The applicant asserted that use of 
Stelara[supreg] offers an alternative to conventional pharmacologic 
treatments, and has been shown to be successful in the treatment of 
patients who have failed treatment using the conventional agents 
currently being used for a diagnosis of CD, including TNF[alpha] 
inhibitors.
    Although the precise cause of CD is unknown, the environment, 
genetics, and the patient's immune system are thought to play a role in 
this form of inflammatory bowel disease (IBD). Conventional 
pharmacologic therapy is directed against many different inflammatory 
mediators that produce inflammation and ultimately lead to 
gastrointestinal damage. The applicant asserted that it is of paramount 
importance to have a variety of pharmacologic agents that can address 
the proper inflammatory mediator for a particular patient. The 
applicant also asserted that, while the currently available anti-
inflammatory agents used in the treatment of a diagnosis of CD are 
excellent medications, these agents do not successfully treat all 
patients diagnosed with CD, nor do they reliably sustain disease 
remission once a response has been achieved. The applicant believed 
that the use of Stelara[supreg] offers an alternative to currently 
available treatment options.
    With regard to the newness criterion, Stelara[supreg] is not a 
newly formulated drug. Stelara[supreg], administered subcutaneously, 
received FDA approval in 2009 (September 25, 2009) for the treatment of 
moderate to severe plaque psoriasis and psoriatic arthritis in adults. 
Its IV use for the treatment of patients diagnosed with CD was approved 
by the FDA in 2016 (September 23, 2016). With regard to the new use of 
an existing technology, in the September 1, 2001 final rule (66 FR 
46915), we stated that if the new use of an existing technology was for 
treating patients not expected to

[[Page 19885]]

be assigned to the same MS-DRG as the patients receiving the existing 
technology, it may be considered for approval, but it must also meet 
the cost and substantial clinical improvement criteria in order to 
qualify for the new technology add-on payment. We do not believe that 
potential cases representing patients that may be eligible for 
treatment with the new use of the Stelara[supreg] for IV treatment of a 
diagnosis of CD would be assigned to the same MS-DRGs as cases treated 
using the prior indications.
    As discussed above, if a technology meets all three of the 
substantial similarity 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 regard to the first criterion, whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome, we 
are concerned that Stelara[supreg]'s mechanism of action does not 
appear to differ from the mechanism of action of other monoclonal 
antibodies, which also target unique gastrointestinal-selective 
cytokines. The applicant believed that the Stelara[supreg] uses a 
different mechanism of action than other medications currently 
available for the treatment of patients diagnosed with CD. However, we 
believe that the mechanism of action for the new use of the 
Stelara[supreg] may be similar to the mechanism of action of other 
cytokine-selective monoclonal antibodies that disrupt cytokine mediated 
signals crucial to the inflammatory process in patients diagnosed with 
CD.
    The applicant stated that the Stelara[supreg] is a human 
IgG1[kappa] monoclonal antibody that binds with specificity to the p40 
protein subunit, which is common to both the interleukin-12 (IL-12) and 
interleukin (IL-23) cytokines. IL-12 and IL-23 are naturally occurring 
cytokines that are involved in inflammatory and immune responses, such 
as natural killer cell activation and CD4+ T-cell differentiation and 
activation. In in vitro models, the Stelara[supreg] was shown to 
disrupt IL-12 and IL-23 mediated signaling and cytokine cascades by 
blocking the interaction of these cytokines with a shared cell-surface 
receptor chain, IL-12R[beta]1. The cytokines IL-12 and IL-23 have been 
implicated as important contributors to chronic inflammation. According 
to the applicant, IV induction therapy quickly achieves optimal blood 
levels of Stelara[supreg] so that blockade of IL-12 and IL-23 is most 
effective. This level of blockade is not achieved with subcutaneous 
administration.
    The applicant further stated that other available CD anti-
inflammatory or immune modulator therapies do not target the IL-12/IL-
23p40 substrate. Rather, these therapies may target other integrin 
pairs such as the alpha4- beta7 integrins. Therefore, the applicant 
believed that the Stelara[supreg] drug is not substantially similar to 
any other approved drug for the treatment of moderately to severely 
active CD. As previously noted, the applicant asserted that, while the 
currently available agents are excellent medications, these agents do 
not successfully treat all patients diagnosed with CD, nor do these 
agents reliably sustain remission once a clinical response has been 
achieved. According to the applicant, the new use of the 
Stelara[supreg] offers an alternative to currently available treatment 
options, and has been shown to be successful in the treatment of 
patients who have failed treatment with the conventional agents 
currently being used for a diagnosis of CD, including TNF blockers. We 
are concerned that the Stelara[supreg]'s mechanism of action is similar 
to that of other immune system suppressors used in the treatment of 
patients diagnosed with moderately to severely active CD because other 
cytokine-selective monoclonal antibodies also disrupt cytokine mediated 
signals crucial to the inflammatory process in patients diagnosed with 
CD.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant maintained that MS-
DRGs 386, 387, and 385 (Inflammatory Bowel Disease with CC, without CC/
MCC, and with MCC, respectively) and MS-DRGs 330, 329 and 331 (Major 
Small and Large Bowel Procedures with CC, without CC/MCC, and with MCC, 
respectively) are used to identify cases representing patients who may 
potentially be eligible for treatment using the Stelara[supreg]. The 
applicant researched claims data from the FY 2015 MedPAR file and found 
10,344 cases. About 85 percent of potentially eligible cases mapped to 
MS-DRGs for inflammatory bowel disease and most of the remainder of 
cases mapped to MS-DRGs for bowel surgery. We believe that potential 
cases involving Stelara[supreg] induction therapy may be assigned to 
the same MS-DRGs as cases representing patients who have been treated 
using currently available treatment options.
    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, according to the 
applicant, currently available pharmacologic treatments include 
antibiotics, mesalamines, corticosteroids, immunomodulators, tumor 
necrosis alfa (TNF[alpha]) inhibitors and anti-integrins. The applicant 
stated that the new use of the Stelara[supreg] for IV infusion is 
indicated for the treatment of adults (18 years and older) diagnosed 
with moderately to severely active CD who have: (1) Failed or were 
intolerant to treatment with immunomodulators or corticosteroids, but 
never failed treatment using a TNF blocker; or (2) failed or were 
intolerant to treatment with one or more TNF blockers. The applicant 
asserted that Stelara[supreg] for induction therapy is not 
substantially similar to other treatment options because it does not 
involve the treatment of the same or similar type of patient 
population. Patients who are eligible for treatment using the 
Stelara[supreg] induction therapy have failed other CD treatment 
modalities. The applicant believed that the subset of primary and 
secondary nonresponder patients to TNF inhibitor treatments is a 
patient population unresponsive to, or ineligible for, currently 
available treatments for diagnoses of moderate to severe CD. Based on 
the indications for the use of Stelara[supreg], there is a class of 
patients who failed, or were intolerant to, treatment using 
immunomodulators or corticosteroids, but never failed treatment using a 
TNF blocker. The applicant indicated that, for those patients who never 
failed treatment with a TNF blocker, this class of patients can be 
recognized as two separate patient populations: One population of 
patients who have never received treatment using a TNF blocker, or the 
other population of patients who have received and responded to 
treatment using a TNF blocker. We believe that, if the new use of the 
Stelara[supreg] has the same mechanism of action as other immune system 
suppressors such as TNF blockers, the patient population that did not 
receive treatment using a TNF blocker may not be a new patient 
population because those patients may be able to receive treatment 
using, and would successfully respond to treatment using, a TNF 
blocker. Moreover, if the mechanism of action is the same as other 
immune system suppressors, we believe that the new use of the 
Stelara[supreg] may be targeted at a new patient population in some 
circumstances and instances, but we are concerned that it may not be 
targeted at a new patient population in all circumstances and 
instances.

[[Page 19886]]

    We are inviting public comments on whether the Stelara[supreg] 
meets the newness criterion.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that Stelara[supreg] meets the cost 
criterion. The applicant searched claims from the FY 2015 MedPAR file 
for cases with a principal ICD-9-CM diagnosis of 555.x (Regional 
Enteritis), which are cases of a diagnosis of Crohn's Disease that may 
be eligible for treatment using Stelara[supreg].
    The applicant identified 10,344 cases that mapped to 35 MS-DRGs. 
Approximately 85 percent of cases mapped to the following Inflammatory 
Bowel MS-DRGs: MS-DRGs 385 (Inflammatory Bowel Disease with MCC), 386 
(Inflammatory Bowel Disease with CC), and 387 (Inflammatory Bowel 
Disease without CC/MCC). Similarly, 11 percent of the cases mapped to 
the following MS-DRGs for bowel surgery: MS-DRGs 329 (Major Small and 
Large Bowel Procedures with MCC), 330 (Major Small and Large Bowel 
Procedures with CC), and 331 (Major Small and Large Bowel Procedures 
without CC/MCC). The remaining cases (4 percent) represented all other 
digestive system disorders.
    Using the 10,344 identified cases, the average unstandardized case-
weighted charge per case was $39,935. The applicant then standardized 
the charges. The applicant did not remove charges for the current 
treatment because as discussed above Stelara[supreg] is indicated for 
use in patients who fail other treatments. The applicant then applied 
the 2-year inflation factor of 1.098446 from the FY 2017 IPPS/LTCH 
final rule (81 FR 57286) to inflate the charges from FY 2015 to FY 
2017. The applicant then added charges for the Stelara[supreg] 
technology. Specifically, the applicant assumed that hospitals would 
mark up Stelara[supreg] IV to the same extent that they currently mark-
up Stelara[supreg] SC (J3357, ustekinumab, 1 mg). The applicant used 
the actual hospital mark-up based on charges in the 2017 OPPS proposed 
rule file (OPPS claims incurred and paid in CY 2015). Based on the FY 
2017 IPPS/LTCH PPS Table 10 thresholds, the average case-weighted 
threshold amount was $55,023. The inflated average case-weighted 
standardized charge per case was $69,826. Because the inflated average 
case-weighted standardized charge per case exceeds the average case-
weighted threshold amount, the applicant maintained that the technology 
meets the cost criterion. We are inviting public comments whether 
Stelara[supreg] meets the cost criterion.
    With regard to the third criterion, whether a technology represents 
a substantial clinical improvement over existing technologies, 
according to the applicant, the new use of the Stelara[supreg] has been 
shown to produce clinical response and remission in patients diagnosed 
with moderate to severe CD who have failed treatment using conventional 
therapies, including antibiotics, mesalamine, corticosteroids, 
immunomodulators, and TNF[alpha] inhibitors. Stelara[supreg] has been 
commercially available on the U.S. market for the treatment of patients 
diagnosed with psoriasis (PsO) since 2009 and the treatment of patients 
diagnosed with psoriatic arthritis (PsA) since 2013, and the applicant 
has maintained a safety registry, which enrolled over 12,000 patients 
since 2007. According to the applicant, the drug has been extremely 
well-tolerated, and the safety profile in patients diagnosed with CD 
has been consistent with that experienced in cases representing 
patients diagnosed with PsO and PsA.
    The applicant presented the results of three pivotal trials 
involving over 1,300 patients diagnosed with moderate to severe CD. All 
three trials utilized a multicenter, double-blind, placebo controlled 
study design. There were two single-dose IV induction trials, which 
included patients who had failed treatment using one or more TNF[alpha] 
inhibitors (UNITI-1) (N= 741), and patients who had failed treatment 
using corticosteroids and/or immunomodulators (UNITI-2) (N =628). 
Responders to the single IV induction dose were then eligible to be 
enrolled in a maintenance trial (IM-UNITI) (N= 397), which began 8 
weeks after administration of the single IV induction dose. IM-UNITI 
patients were given subcutaneous Stelara[supreg] and were treated for 
44 weeks. Over half of the patients treated with 90mg of 
Stelara[supreg] every 12 weeks were able to achieve remission; a highly 
significant response compared to placebo, according to the applicant. 
The results of these trials have been published by the New England 
Journal of Medicine and the applicant provided the published 
studies.\15\ The published study supported the applicant's assertion 
that Stelara[supreg] single IV dose induces response and remission in 
patients diagnosed with moderately to severely active CD that is 
refractory to either TNF antagonists or conventional therapy. Of the 
patients in the IM-UNITI trial receiving subcutaneous Stelara[supreg] 
at 8 weeks or 12 weeks, 53.1 percent and 48 percent, respectively, were 
in remission at week 44 as compared with 35.9 percent of those patients 
receiving treatment using placebo.
---------------------------------------------------------------------------

    \15\ Feagan, W.J., et al. (2016) Ustekinumab as Induction and 
Maintenance Therapy for Crohn' Disease. The New England Journal of 
Medicine. 2016 Nov 17; 3745(20):1946-60.
---------------------------------------------------------------------------

    The applicant submitted published results of a multicenter, double-
blind, placebo controlled Phase III study of Stelara[supreg].\16\ We 
are concerned that the study did not effectively establish the need for 
Stelara[supreg] induction therapy. Also, the median age of patients in 
the study was 37 years, and we are concerned that the study did not 
include a significant amount of older patients.
---------------------------------------------------------------------------

    \16\ Ibid.
---------------------------------------------------------------------------

    We also are concerned that we do not have enough information to 
determine that the new use of the Stelara[supreg] is a substantial 
clinical improvement over existing technologies for the treatment of 
moderate to severe CD. We note that the UNITI-1, UNITI-2, and IMUNITI 
trials were completed to evaluate efficacy and safety of 
Stelara[supreg], not superiority of Stelara[supreg] to current 
conventional therapy. Our concerns are based on a lack of head-to-head 
trials comparing IV induction and maintenance Stelara[supreg] therapy 
with conventional therapy in patients diagnosed with moderate to severe 
CD that are also primary and secondary nonresponders to treatment using 
TNF alpha inhibitor \17\ therapy. We recognize the subset of primary 
and secondary nonresponder patients to
---------------------------------------------------------------------------

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

    TNF inhibitor treatments as a patient population unresponsive to, 
or ineligible for, currently available treatments for diagnoses of 
moderate to severe CD. However, we believe that this primary and 
secondary TNF alpha inhibitor non-responder patient population 
represents patients that experience a gap in treatment for diagnoses of 
moderate to severe CD. Specifically, we recognize the nonresponder 
patient population as described by Simon et al.\18\ as those patients 
who are TNF inhibitor immunogenicity failures, pharmacokinetic 
failures, and/or pharmacodynamics failures. We also note the supplement 
data in Feagan et al.'s publication \19\ summarized the primary and 
secondary nonresponders in UNITI-1. However, we are not clear how the 
inclusion of the TNF alpha

[[Page 19887]]

inhibitor intolerant patients with primary and secondary TNF alpha 
inhibitor failure patients impacts the final comparison of the placebo 
and treatment arms. In addition, we note that in the UNITI-1, UNITI-2, 
and IMUNITI studies all treatment arms were allowed to continue 
conventional treatments for diagnoses of CD throughout the study. We 
are concerned that it is difficult to determine whether the new use of 
the Stelara[supreg] represents a substantial clinical improvement over 
existing technologies with the concomitant use of other conventional CD 
medications throughout the duration of the UNITI-1, UNITI-2, and 
IMUNITI studies.
---------------------------------------------------------------------------

    \18\ Simon E.G., et al., (2016) Ustekinumab for the treatment of 
Crohn's disease: can it find its niche? Therapeutic Advances in 
Gastroenterology. 2016 Jan; 9(1):26-36.
    \19\ Feagan, W.J., et al. (2016) Ustekinumab as Induction and 
Maintenance Therapy for Crohn' Disease. The New England Journal of 
Medicine. 2016 Nov 17; 3745(20):1946-60.
---------------------------------------------------------------------------

    Also, as mentioned earlier, based on the indications for the use of 
the Stelara[supreg], there is a class of patients who failed, or were 
intolerant to, treatment with immunomodulators or corticosteroids, but 
never failed treatment using a TNF blocker. According to the applicant, 
for those patients who never failed treatment using a TNF blocker, this 
patient population can be recognized as two separate patient 
populations: one patient population representing patients who never 
received treatment using a TNF blocker, or the other patient population 
representing patients who received and responded to treatment using a 
TNF blocker. In the patient population that did not receive treatment 
using a TNF blocker, we are unsure if the new use of the 
Stelara[supreg] represents a substantial clinical improvement because 
it is possible that some patients will have a positive response to 
treatment using a TNF blocker and will not respond successfully to 
treatment using Stelara[supreg], or some patients may have a positive 
response to both treatment using a TNF blocker and using 
Stelara[supreg], or some patients may not respond to treatment using a 
TNF blocker, but will have a positive response to treatment using 
Stelara[supreg].
    We are inviting public comments on whether the Stelara[supreg] 
meets the substantial clinical improvement criterion.
    We did not receive any written public comments in response to the 
New Technology Town Hall meeting notice regarding the application of 
Stelara[supreg] for new technology add-on payments.
d. KTE-C19 (Axicabtagene Ciloleucel)
    Kite Pharma, Inc. submitted an application for new technology add-
on payments for KTE-C19 (axicabtagene ciloleucel) for FY 2018. The KTE-
C19 technology has not received FDA approval as of the time of the 
development of this proposed rule. KTE-C19 is an engineered autologous 
T-cell immunotherapy used for the treatment of adult patients with 
relapsed/refractory aggressive B-cell non-Hodgkin lymphoma (NHL) who 
are ineligible for autologous stem cell transplant (ASCT). KTE-C19 is a 
single intravenous infusion of T-cell immunotherapy.
    The applicant noted that KTE-C19 was granted Breakthrough Therapy 
Designation by the FDA on December 3, 2015, for the treatment of 
patients with refractory DLBCL, PMBCL, and TFL forms of aggressive B-
cell NHL. The applicant submitted a request for priority review by the 
FDA in December 2016. The applicant stated that, when approved by the 
FDA, KTE-C19 would represent the only FDA-approved treatment for adult 
patients with relapsed refractory aggressive B-cell NHL who are 
ineligible for ASCT. Currently, there are no ICD-10-CM/PCS codes that 
describe the administration and use of KTE-C19. The applicant has 
submitted an application for a unique ICD-10-PCS procedure code to 
uniquely identify KTE-C19. If approved, the code will be effective 
October 1, 2017 (FY 2018).
    According to the applicant, adult NHL represents by a heterogeneous 
group of B-cell malignancies with varying patterns of behavior and 
response to treatment. B-cell NHL can be classified as either 
aggressive, or indolent disease, with aggressive variants including 
diffuse large B-cell lymphoma (DLBCL); primary mediastinal large B cell 
lymphoma (PMBCL) and transformed follicular lymphoma (TFL). Within NHL, 
DLBCL is the most common subtype of NHL, accounting for approximately 
30 percent of patients with NHL, and survival without treatment is 
measured in months.20 21
---------------------------------------------------------------------------

    \20\ Food and Drug Administration. Available at: http://www.accessdata.fda.gov/scripts/opdlisting/oopd/.
    \21\ SEER Stat Fact Sheets--NHL. (2016). Available at: http://seer.cancer.gov/statfacts/html/nhl.html.
---------------------------------------------------------------------------

    The applicant stated that, since the 1970s, cyclophosphamide, 
doxorubicin, vincristine, and prednisone (CHOP) has been the mainstay 
of therapy with more intensive regimens failing to show improved 
overall survival. The applicant further stated that the approval in 
2006 of the anti-CD20 monoclonal antibody rituximab and its addition to 
the traditional CHOP regimen, R-CHOP, for patients with newly diagnosed 
aggressive NHL resulted in a dramatic improvement in NHL therapy. The 
combination of CHOP and R-CHOP is now first-line therapy for treatment 
of patients diagnosed with DLBCL with complete response rates upwards 
of 76 percent.\22\ Data from the Surveillance, Epidemiology and End 
Results (SEER) registries have reflected an observed increase of the 
median overall survival from 20 to 47 months over the last two decades. 
Despite the improved therapies, only 50 to 70 percent of newly 
diagnosed patients are cured by standard first-line therapy alone.\23\ 
Furthermore, relapsed or refractory (r/r) disease continues to carry a 
poor prognosis because only 50 percent of patients are eligible for 
more intensive second-line regimens, followed by high dose chemotherapy 
(HDT) and ASCT. Second-line chemotherapy regimens studied to date 
include rituximab, ifosfamide, carboplatin and etoposide (R-ICE) and 
rituximab, dexamethasone, cytarabine, and cisplatin (R-DHAP), followed 
by consolidative HDT/ASCT. Both regimens offer similar overall response 
rates (ORR) of 51 percent with 1 in 4 patients achieving long-term 
complete response (CR) at the expense of increased toxicity.\24\ Given 
the modest response to second line therapy and/or HDT/ASCT, the 
population of patients with the highest unmet need is those with 
chemorefractory disease, which include DLBCL, PMBCL and TFL. These 
patients are defined as either progressive disease (PD) as best 
response to chemotherapy, stable disease as best response following 4 
cycles of first-line or 2 cycles of later-line therapy, or relapse 
within 12 months of ASCT.25 26 Based on these definitions 
and available data from a multicenter retrospective study (SCHOLAR-1), 
chemorefractory disease treated with current and historical standards 
of care has consistently poor

[[Page 19888]]

outcomes with an ORR of 26 percent and median OS of 6.6 months.
---------------------------------------------------------------------------

    \22\ Coiffier B et al. (2002). CHOP chemotherapy plus rituximab 
compared with CHOP alone in elderly patients with diffuse large B-
cell lymphoma. N Eng. J Med 2002; 346(4): 235-242.
    \23\ Crump M, et al. (2016). Outcomes in refractory aggressive 
diffuse large B-cell lymphoma (DLBCL): results from the 
international SCHOLAR-1 study. Abstract 7516, poster and oral 
presentation at American Society of Clinical Oncology (ASCO) 
conference, June 2016
    \24\ Matasar M, et al. (2013). Ofatumumab in combination with 
ICE or DHAP chemotherapy in relapsed or refractory intermediate 
grade B-cell lymphoma. Blood. 25 July 2013. Vol 122, No 4.
    \25\ Crump M, et al. (2016). Outcomes in patients with 
refractory aggressive diffuse large B-cell lymphoma (DLBCL): results 
from the international scholar-1 study. Abstract and poster 
presented at Pan Pacific Lymphoma Conference (PPLC), July 2016
    \26\ Gisselbrecht C, et al. (2016). Results from SCHOLAR-1: 
Outcomes in patients with refractory aggressive diffuse large B-cell 
lymphoma (DLBCL). Oral presentation at European Hematology 
Association conference, July 2016
---------------------------------------------------------------------------

    According to the applicant, KTE-C19 is a different pathway to treat 
patients diagnosed with relapsed or refractory disease. KTE-C19 is 
supplied as a T-cell suspension for infusion. With KTE-C19 treatment, a 
patient's own T-cells are harvested and engineered ex vivo by 
retroviral transduction of a chimeric antigen receptor (CAR) construct 
encoding an anti-CD19 CD28/CD3-zeta. The anti-CD19 CAR T-cells are 
expanded and infused back into the patient. The new anti-CD19 CAR T-
cells can recognize and eliminate CD19 antigen expressing target cells, 
an antigen also expressed on the cell surface of B-cell lymphomas and 
leukemias. According to the applicant, prior to KTE-C19 immunotherapy, 
the patient would have received outpatient administration of a non-
myeloablative conditioning chemotherapy regimen consisting of 
cyclophosphamide 500 mg/m2 IV and fludarabine 30 mg/m2 IV for 3 days at 
days -5, -4, and -3 before the infusion of KTE-C19 at Day 0. The 
applicant noted that, if KTE-C19 infusion is delayed more than 2 weeks, 
readministration of the conditioning chemotherapy regimen may be 
required. Hospitalization is recommended for the infusion of KTE-C19.
    As discussed earlier, if a technology meets all three of the 
substantial similarity 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 regard to the first criterion, the applicant stated that KTE-
C19 does not use the same or similar mechanism of action to achieve a 
therapeutic outcome as any other drug or therapy assigned to the same 
or a different MS-DRG. The applicant further stated that KTE-C19 is the 
first engineered autologous cellular immunotherapy comprised of CAR T-
cells that recognizes CD19 express cancer cells and normal B-cells; 
therefore, the applicant believed that KTE-C19's mechanism of action is 
distinct and unique from any other cancer drug or biologic that is 
currently approved for use in the treatment of aggressive B-cell NHL, 
namely single-agent or combination chemotherapy regimens.
    With regard to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant noted that based on 
the 2014 and 2015 100 Percent Inpatient Standard Analytic files, cases 
potentially eligible for treatment using the KTE-C19 and representing 
the target patient population span 50 unique MS-DRGs and 73 percent of 
all of the cases within these 50 unique MS-DRGs that represent 
potentially eligible cases for treatment using KTE-C19 map to the 
following 4 MS-DRGs: MS-DRG 840 (Lymphoma & Non-Acute Leukemia with 
MCC); MS-DRG 841 (Lymphoma & Non-Acute Leukemia with CC); MS-DRG 846 
(Chemotherapy without Acute Leukemia as Secondary Diagnosis with MCC); 
and MS-DRG 847 (Chemotherapy without Acute Leukemia as Secondary 
Diagnosis with CC). The applicant stated that, with the assignment of 
the unique KTE-C19-specific ICD-10-PCS code, patient cases where KTE-
C19 is used will be distinguishable. However, patient cases where KTE-
C19 is used and patient cases that are treated for DLBCL map to the 
same MS-DRGs.
    With regard 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 
asserted that when approved by the FDA, KTE-C19 would represent the 
only FDA-approved treatment for adult patients diagnosed with relapsed 
or refractory aggressive B-cell NHL who are ineligible for ASCT. As a 
result, the applicant stated that KTE-C19 is not substantially similar 
to any existing technology and meets the newness criterion. CMS is 
concerned the CAR technology used in KTE-C19 may have a mechanism of 
action similar to that seen with the use of bispecific T cell engager 
(BiTE) technology.
    We are inviting public comments on whether KTE-C19 meets the 
substantial similarity criteria and the newness criterion.
    With respect to the cost criterion, the applicant provided an 
analysis to demonstrate that KTE-C19 meets the cost criterion. The 
applicant used the 2014 and 2015 100 Percent Inpatient Standard 
Analytic File (SAF) to assess the MS-DRGs that are most relevant to 
patients that may be potentially eligible for treatment using KTE-C19. 
The sample was restricted to patients discharged in FY 2015. The 
applicant searched for cases with an ICD-9-CM diagnosis code from the 
series of 200.7x (large cell lymphoma).
    The applicant sought to ensure that claims included in the cost 
criterion analysis reflected charges for treating patients diagnosed 
with DLBCL and, therefore, minimized the chance that charges were 
related to other conditions. Therefore, the applicant searched for 
cases with the following criteria:
     A primary diagnosis with a ICD-9-CM diagnosis code from 
the series of 200.7x (large cell lymphoma) to identify cases of DLBCL 
with or without chemotherapy; or
     A secondary diagnosis with a ICD-9-CM diagnosis code from 
the series of 200.7x (large cell lymphoma) combined with an ICD-9-CM 
diagnosis code of V58.11, or V58.12, or ICD-9-CM procedure code 99.25, 
99.28, 00.15 or 00.10 to identify cases of DLBCL that received 
chemotherapy during their hospitalization.
    The applicant excluded claims where the MS-DRG was missing, 
Medicare was not the primary payer, there were zero covered charges or 
zero covered days, or the provider was not in the FY 2017 IPPS/LTCH PPS 
Final Rule Impact File. Additionally, patients under age 18 were 
excluded to align with the proposed label that is being prepared for 
submission with the KTE-C19 Biologics License Application (BLA). After 
applying the trims above, the results showed 762 cases that mapped to 
50 MS-DRGs with 11 MS-DRGs containing more than 10 cases. The 11 MS-
DRGs contained a total of 702 cases.
    The applicant noted that MS-DRGs 840, 841, 846, and 847 accounted 
for 554 (73 percent) of the 762 cases in the cohort.
    Using the 702 identified cases, the average unstandardized case-
weighted charge per case was $71,725. The applicant then standardized 
the charges. The applicant noted that adult patients with relapsed/
refractory aggressive B-cell NHL who are ineligible for ASCT would 
generally not be receiving treatment with both chemotherapy and KTE-
C19. Therefore, all charges listed in the chemotherapy revenue centers 
(331, 332, and 335) were removed. The applicant then applied the 2-year 
inflation factor of 1.098446 from the FY 2017 IPPS/LTCH final rule (81 
FR 57286) to inflate the charges from FY 2015 to FY 2017. Based on the 
FY 2017 IPPS/LTCH PPS Table 10 thresholds, the average case-weighted 
threshold amount was $55,023. The inflated average case-weighted 
standardized charge per case was $69,826. Because the inflated average 
case-weighted standardized charge per case exceeds the average case-
weighted threshold amount, the applicant maintained that the technology 
meets the cost criterion. The applicant noted that it was not necessary 
to take into account the average per patient cost of the technology 
because the inflated average case-weighted standardized charge per case 
exceeds the average case-weighted threshold amount without the average 
per patient cost of the technology.
    The applicant provided the following three sensitivity analyses to 
further demonstrate that the technology meets

[[Page 19889]]

the cost criterion. The three sensitivity analyses consisted of: (1) 
cases representing patients identified with an ICD-9-CM diagnosis code 
200.7x (large cell lymphoma) and cases representing patients identified 
with a secondary DLBCL diagnosis who did not receive chemotherapy; (2) 
cases representing patients identified with a primary or secondary ICD-
9-CM diagnosis code from the series of 200.7x (large cell lymphoma) who 
received chemotherapy; and (3) cases representing patients under a 
broader ICD-9-CM diagnosis code range to capture other types of 
lymphoma. In all three of the sensitivity analyses, the inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount. We are inviting public comments on 
whether KTE-C19 meets the cost criterion.
    According to the applicant, KTE-C19 represents a substantial 
clinical improvement over existing technologies used in the treatment 
of patients with aggressive B-cell NHL. The applicant asserted that 
KTE-C19 can benefit the patient population with the highest unmet need, 
patients with refractory or relapsed disease after failure of first-
line or second-line therapy, and patients who have failed or are 
ineligible for ASCT. These patients otherwise have adverse outcomes as 
demonstrated by historical control data.
    Regarding clinical data for KTE-C19, the applicant stated that 
historical control data was the only ethical and feasible comparison 
information for these chemorefractory, aggressive NHL patients who have 
no other available treatment options and have a very short lifespan 
without therapy. According to the applicant, based on meta-analysis of 
outcomes in chemorefractory DLBCL, there are no curative options for 
aggressive B-cell NHL patients regardless of refractory subgroup, line 
of therapy, and disease stage with their median overall survival being 
6.6 months.
    The applicant provided clinical data from the pivotal Study 1 
(ZUMA-1, KTE-C19-101), Phase I and II. The applicant also provided 
supportive evidence from Study 2 (NCI 009-C-0082). Study 1 is a Phase 
I-II multicenter, open label study evaluating the safety and efficacy 
of the use of KTE-C19 in patients diagnosed with aggressive refractory 
NHL. The trial consists of two distinct phases designed as Phase I 
(n=7) and Phase II (n=92). Phase II is a multi-cohort open label study 
evaluating the efficacy of KTE-C19. Study 1 subjects were treated with 
cyclophosphamide and fludarabine conditioning chemotherapy, followed by 
a target dose of 2 x 10 anti-CD19 CAR T-cells per kg body weight. Study 
2 subjects were treated with cryopreserved autologous anti-CD19 CAR T 
cells, which were manufactured by a similar, but different process than 
that used for KTE-C19. The applicant noted that, as of the analysis 
cutoff date for the interim analysis, the results of Study 1 
demonstrated rapid and substantial improvement in objective, or overall 
response rate. The overall response rate was 79 percent (49 responders 
among 62 subjects), with 76 percent overall response rate in Cohort 1 
(39 responders among 51 subjects) and 91 percent in Cohort 2 (10 
responders among 11 subjects) versus historical control of 26 percent. 
According to the applicant, Study 1 overall response rates were 
consistent across all age groups, with those patients greater than 65 
years of age responding at the rates consistent with those under age 65 
years and consistent with earlier, positive results from Study 2. The 
applicant further stated that pre-specified criteria for demonstration 
of early efficacy were met and an independent safety monitoring board 
(DSMB) confirmed the efficacy results and found no additional safety 
signals.
    The applicant further stated that evidence of substantial 
improvement regarding the efficacy of KTE-C19 for the treatment of 
chemorefractory, aggressive B-cell NHL is supported by the complete 
response rates of KTE-C19 in Study 1 (52 percent) versus the historical 
control (8 percent). Additionally, the applicant noted that the results 
of Study 1 have demonstrated that treated patients experienced a rapid 
response to KTE-C19 with 52 percent showing complete response at 3 
months, and 41 percent at 1 month.
    As noted above, the applicant cited data results from Study 2, 
which is an ongoing Phase 1 safety and efficacy study in which anti-
CD19 CAR T-cells were manufactured using a process similar to, but 
different from, KTE-C19 to yield cryopreserved autologous anti-CD19 CAR 
T cells. From Study 2, a subset of 13 patients with a diagnosis of 
DLBCL/PMBCL was noted to be comparable to those treated in Study 1. The 
applicant noted that all patients were diagnosed with refractory DLBCL, 
received similar doses of conditioning chemotherapy, and were infused 
with the cryopreserved autologous anti-CD19 CAR T-cells (which have 
been shown to result in an immunotherapy comparable to KTE-C19). The 
applicant noted that the results from Study 2 demonstrated the 
following: (a) an overall response rate of 69 percent (9 responders 
among 13 patients) (95 percent CI 38.6, 90.9); (b) 47 percent of 
patients had complete response at month 3 (ongoing 6+ to 20+ months); 
and (c) complete response was observed as early as 1 month in 57 
percent of patients in Study 2. According to the applicant, further 
results will be reported in February 2017.
    The applicant also cited safety results from the pivotal Study 1, 
Phase II. According to the applicant, almost all patients in Study 1 
(95 percent) experienced Grade 3 or higher adverse events with onset on 
or after commencement of conditioning chemotherapy, including 
cytopenias (Grade 3 and 4 anemia, neutropenia, thrombocytopenia, and 
lymphopenia were 40 percent, 40 percent, 29 percent, and 5 percent 
respectively), and infection (Grade 3 or worse urinary tract infection, 
clostridium difficile colitis and lung infection were 5 percent, 5 
percent, and 6 percent respectively). All patients were treated 
according to standard of care. The clinical trial protocol stipulated 
that patients were infused with KTE-C19 in the hospital inpatient 
setting and were monitored in the inpatient setting for at least 7 days 
for early identification and treatment of KTE-C19 related toxicities, 
which primarily include cytokine release syndrome and neurotoxicities. 
The applicant stated that KTE-C19 is expected to be administered in the 
hospital inpatient setting to assure appropriate monitoring of patient 
adverse events. The applicant noted that the interim analysis of Study 
1 showed the following: length of stay following KTE-C19 infusion was a 
median of 15 days; cytokine release syndrome (Grade 3 or higher, 18 
percent) and neurotoxicity (Grade 3 or higher, 34 percent) were self-
limiting and generally reversible; two patients died from KTE-C19 
related adverse events (hemophagocytic lymphohistiocytosis and cardiac 
arrest in the setting of cytokine release syndrome). The medications 
most often used to treat KTE-C19 clinical trial complications included 
growth factors, blood products, anti-infectives, steroids, tocilizumab, 
and vasopressors. In the majority of patients (92 percent), the 
applicant noted that predominant toxicities associated with the use of 
KTE-C19, cytokine release syndrome and neurologic events, resolved by 
data cutoff. Median days to resolution of cytokine release syndrome 
complications post-KTE-C19 infusion was 9 days, with median days to 
resolution of KTE-C19-related

[[Page 19890]]

neurologic events post-KTE-C19 infusion of 18 days. According to the 
applicant, there were no clinically important differences in adverse 
event rates across age groups (younger than 65; 65 or older), including 
cytokine release syndrome and neurotoxicity, and KTE-C19-related 
adverse events in Study 1 were consistent with the earlier Study 2 
experience.
    The applicant further noted that by the cutoff date for the interim 
analysis of Study 1, among all KTE-C19 treated patients, 12 patients in 
Study 1, Phase II, including 10 from Cohort 1 and 2 from Cohort 2, 
died. Eight of these deaths were due to disease progression. One 
subject had disease progression after KTE-C19 treatment and 
subsequently had ASCT. After ASCT, the subject died due to sepsis. Two 
subjects (3 percent) died due to KTE-C19 related AEs (Grade 5 
hemophagocytic lymphohistiocytosis event and Grade 5 anoxic brain 
injury), and one died due to an AE deemed unrelated to KTE-C19 (Grade 5 
pulmonary embolism), without disease progression.
    We are concerned that there are no published results showing any 
survival benefit from the treatment. We also are concerned with the 
limited number of subjects (n=82) that were studied after infusion of 
KTE-C19 T-cell immunotherapy. Although the applicant references Study 
2, we are concerned that the applicant has included data on DLBCL/PMBCL 
patients that did not specifically receive KTE-C19. Additionally, we 
are concerned that Study 2 was based on 13 patients which can result in 
skewed outcomes due to a small patient population. Finally, we note 
that, for Study 1 and Study 2, the data on overall survival are not 
reported.
    We are inviting public comments on whether KTE-C19 meets the 
substantial clinical improvement criterion.
    Comment: The applicant stated that it has been notified by the 
United States Adopted Names Council (USAN Council) that the 
technology's name for KTE-C19 has been revised from ``axicabtagene 
ciloretroleucel'' to ``axicabtagene ciloleucel.'' In addition, the 
applicant requested that all references by CMS to the technology's name 
of KTE-C19 use this final naming convention of ``axicabtagene 
ciloleucel.''
    Response: We appreciate the applicant's updated information and 
have correlated the name of the technology throughout the discussion 
above.
e. VYXEOSTM (Cytarabine and Daunorubicin Liposome for 
Injection)
    Celator Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for VYXEOSTM for FY 2018. The 
proposed indication for the use of VYXEOSTM, which has not 
received FDA approval as of the time of the development of this 
proposed rule, is the treatment of adult patients diagnosed with acute 
myeloid leukemia (AML).
    AML is a type of cancer in which the bone marrow makes abnormal 
myeloblasts (immature bone marrow white blood cells), red blood cells, 
and platelets. If left untreated, AML progresses rapidly. Normally, the 
bone marrow makes blood stem cells that develop into mature blood cells 
over time. Stem cells have the potential to develop into many different 
cell types in the body. Stem cells can act as an internal repair 
system, dividing, essentially without limit, to replenish other cells. 
When a stem cell divides, each new cell has the potential to either 
remain a stem cell or become a specialized cell, such as a muscle cell, 
a red blood cell or a brain cell, etc. A blood stem cell may become a 
myeloid stem cell or a lymphoid stem cell. Lymphoid stem cells become 
white blood cells. A myeloid stem cell becomes one of three types of 
mature blood cells: (1) red blood cells that carry oxygen and other 
substances to body tissues; (2) white blood cells that fight infection; 
or (3) platelets that form blood clots and help to control bleeding. In 
patients diagnosed with AML, the myeloid stem cells usually become a 
type of myeloblast. The myeloblasts in patients diagnosed with AML are 
abnormal and do not become healthy white blood cells. Sometimes in 
patients diagnosed with AML, too many stem cells become abnormal red 
blood cells or platelets. These abnormal cells are called leukemia 
cells or blasts.
    AML is defined by the World Health Organization (WHO) as >20 
percent blasts in the bone marrow or blood. AML can also be diagnosed 
if the blasts are found to have a chromosome change that occurs only in 
a specific type of AML, even if the blast percentage does not reach 20 
percent. Leukemia cells can build up in the bone marrow and blood, 
resulting in less room for healthy white blood cells, red blood cells, 
and platelets. When this occurs, infection, anemia, or increased risk 
for bleeding may result. Leukemia cells can spread outside the blood to 
other parts of the body, including the central nervous system (CNS), 
skin, and gums.
    Treatment of AML diagnoses usually consists of two phases; 
remission induction and post-remission therapy. Phase one, remission 
induction, is aimed at eliminating as many myeloblasts as possible. The 
most common used remission induction regimens for AML diagnoses are the 
``7+3'' regimens using an antineoplastic and an anthracycline. 
Cytarabine and daunorubicin are two commonly used drugs for ``7+3'' 
remission induction therapy. Cytarabine is continuously administered 
intravenously over the course of 7 days, while daunorubicin is 
intermittently administered intravenously for the first 3 days. The 
``7+3'' regimen typically achieves a 70 to 80 percent complete 
remission (CR) rate in most patients under 60 years of age.
    High rates of CR are not generally seen in older patients for a 
number of reasons, such as different leukemia biology, much higher 
incidence of adverse cytogenetic abnormalities, higher rate of 
multidrug resistant leukemic cells, and comparatively lower patient 
performance status (the standard criteria for measuring how the disease 
impacts a patient's daily living abilities). Intensive induction 
therapy has worse outcomes in this patient population.\27\ The 
applicant asserted that many older adults diagnosed with AML have a 
poor performance status \28\ at presentation and multiple medical 
comorbidities that make the use of intensive induction therapy quite 
difficult or contraindicated altogether. Moreover, the CR rates of 
poor-risk patients diagnosed with AML are substantially higher in 
patients >60 years old; owing to a higher proportion of secondary AML, 
disease developing in the setting of a prior myeloid disorder, or prior 
cytotoxic chemotherapy. Therefore, less than half of older adults 
diagnosed with AML achieve CR with combination induction regimens.\29\
---------------------------------------------------------------------------

    \27\ Juliusson G, Lazarevic V, Horstedt AS, Hagberg O, Hoglund 
M. Acute myeloid leukemia in the real world: why population-based 
registries are needed. Blood. 2012 Apr 26; 119(17):3890-9.
    \28\ Stone RM, et al. (2004). Acute myeloid leukemia. Hematology 
Am Soc Hematol Educ Program. 2004:98-117.
    \29\ Appelbaum FR, Gundacker H, Head DR. ``Age and acute myeloid 
leukemia.'' Blood 2006; 107:3481-3485.
---------------------------------------------------------------------------

    The combination of cytarabine and an anthracycline, either as 
``7+3'' regimens or as part of a different regimen incorporating other 
cytotoxic agents, may be used as so-called ``salvage'' induction 
therapy in the treatment of adults diagnosed with AML who experience 
relapse in an attempt to

[[Page 19891]]

achieve CR. According to the applicant, while CR rates of success vary 
widely depending on underlying disease biology and host factors, there 
is a lower success rate overall in achievement of CR with ``7+3'' 
regimens compared to VYXEOSTM therapy. In addition, ``7+3'' 
regimens produce a CR rate of approximately 50 percent in younger adult 
patients who have relapsed, but were in CR for at least 1 year.\30\
---------------------------------------------------------------------------

    \30\ Kantarjian H, Rayandi F, O'Brien S et al. ``Intensive 
chemotherapy does not benefit most older patients (age 70 years and 
older) with acute myeloid leukemia.'' Blood 2010; 116(22):4422.
---------------------------------------------------------------------------

    VYXEOSTM is a nano-scale liposomal formulation 
containing a fixed combination of cytarabine and daunorubicin in a 5:1 
molar ratio. This formulation was developed by the applicant using a 
proprietary system known as CombiPlex. According to the applicant, 
CombiPlex addresses several fundamental shortcomings of conventional 
combination regimens, specifically the conventional ``7+3'' free drug 
dosing, as well as the challenges inherent in combination drug 
development, by identifying the most effective synergistic molar ratio 
of the drugs being combined in vitro, and fixing this ratio in a nano-
scale drug delivery complex to maintain the optimized combination after 
administration and ensuring exposure of this ratio to the tumor.
    Cytarabine and daunorubicin are co-encapsulated inside the 
VYXEOSTM liposome at a fixed ratiometrically, optimized 5:1 
cytarabine:daunorubicin molar ratio. According to the applicant, 
encapsulation maintains the synergistic ratios, reduces degradation, 
and minimizes the impact of drug transporters and the effect of known 
resistant mechanisms. The applicant stated that the 5:1 molar ratio has 
been shown, in vitro, to maximize synergistic antitumor activity across 
multiple leukemic and solid tumor cell lines, including AML, and in 
animal model studies to be optimally efficacious compared to other 
cytarabine:daunorubicin ratios. In addition, the applicant stated that 
in clinical studies, the use of VYXEOSTM has demonstrated 
consistently more efficacious results than the conventional ``7+3'' 
free drug dosing. VYXEOSTM is intended for intravenous 
administration after reconstitution with 19 mL sterile water for 
injection. VYXEOSTM is administered as a 90-minute 
intravenous infusion on days 1, 3, and 5 (induction therapy), as 
compared to the ``7+3'' free drug dosing, which consists of two 
individual drugs administered on different days, including 7 days of 
continuous infusion.
    With regard to the ``newness'' criterion, the applicant indicated 
that the rolling New Drug Application (NDA) submission to the FDA for 
VYXEOSTM began on September 30, 2016. The applicant stated 
that it intends to request Priority Review from the FDA. 
VYXEOSTM is currently available in the United States only on 
an investigational basis, under an Investigational New Drug (IND) 
designation. Breakthrough Therapy designation was granted on May 19, 
2016, for the treatment of adults diagnosed with therapy-related AML 
(t-AML) or AML with myelodysplasia-related changes (AML-MRC). Fast 
Track designation was granted by the FDA in January 2015 for the 
treatment of elderly patients diagnosed with secondary AML. Orphan Drug 
designation was granted by the FDA on August 22, 2008, for the 
treatment of acute AML. VYXEOSTM had not received pre-market 
(PMA) approval from the FDA at the time of development of this proposed 
rule. However, the applicant anticipates receiving approval from the 
FDA by July 1, 2017. The applicant also has submitted a request for a 
unique ICD-10-PCS code, beginning with FY 2018.
    As discussed earlier, if a technology meets all three of the 
substantial similarity 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 regard to the first criterion, whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome, the 
applicant asserted that VYXEOSTM does not use the same or 
similar mechanism of action to achieve a therapeutic outcome as any 
other drug assigned to the same or a different DRG. The applicant 
stated that no other AML treatment is designed, nor is able, to deliver 
a fixed, ratiometrically optimized and synergistic drug:drug ratio of 
5:1 cytarabine to daunorubicin, and selectively target and accumulate 
at the site of malignancy, while minimizing unwanted exposure, which 
the applicant based on the data results of preclinical and clinical 
studies of the use of VYXEOSTM. The applicant indicated that 
VYXEOSTM is a nano-scale liposomal formulation of a fixed 
combination of cytarabine and daunorubicin. Further, the applicant 
stated that the rationale for the development of VYXEOSTM is 
based on prolonged delivery of synergistic drug ratios utilizing the 
applicant's proprietary, ratiometric CombiPlex technology. According to 
the applicant, conventional ``7+3'' free drug dosing has no delivery 
complex, and these individual drugs are administered without regard to 
their ratio dependent interaction. According to the applicant, 
enzymatic inactivation and imbalanced drug efflux and transporter 
expression reduce drug levels in the cell. Decreased cytotoxicity leads 
to cell survival, emergence of drug resistant cells, and decreased 
overall survival.
    The applicant provided the results of clinical studies to 
demonstrate that the CombiPlex technology and the ratiometric dosing of 
VYXEOSTM represent a shift in anticancer agent delivery, 
whereby the fixed, optimized dosing provides less drug to achieve 
improved efficacy, while maintaining a favorable risk-benefit profile. 
The results of this ratiometric dosing approach are in contrast to the 
typical combination chemotherapy development that establishes the 
recommended dose of one agent and then adds subsequent drugs to the 
combination at increasing concentrations until the aggregate effects of 
toxicity are considered to be limiting (the ``7+3'' drug regimen). 
According to the applicant, this current approach to combination 
chemotherapy development assumes that maximum therapeutic activity will 
be achieved with maximum dose intensity for all drugs in the 
combination, and ignores the possibility that more subtle 
concentration-dependent drug interactions could result in frankly 
synergistic outcomes.
    The applicant maintained that, while VYXEOSTM contains 
no novel active agents, its innovative drug delivery mechanism appears 
to be a superior way to deliver the two active compounds in an effort 
to optimize their efficacy in killing leukemic blasts. However, we are 
concerned it is possible that VYXEOSTM may use a similar 
mechanism of action compared to current treatment because both the 
current treatment regimen and VYXEOSTM are used in the 
treatment of AML by intravenous administration of cytarabin and 
daunorubicin.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant maintained that based 
on the 2014 and 2015 100 Percent Inpatient Standard Analytic files, 
cases representing patients potentially eligible for treatment using 
VYXEOSTM and the target patient population span 134 unique 
MS-DRGs, and 78 percent of all of the cases within these 134 unique MS-
DRGs map to the following 4 MS-DRGs: 834 (Acute Leukemia Without Major 
O.R. Procedure With MCC), 837 (Chemotherapy With Acute Leukemia as SDX 
or With High Dose Chemotherapy

[[Page 19892]]

Agent with MCC), 838 (Chemotherapy With Acute Leukemia as SDX With CC 
or High Dose Chemotherapy Agent), and 839 (Chemotherapy With Acute 
Leukemia as SDX Without CC/MCC). We believe that these are the same MS-
DRGs that identify cases representing patients who are treated for AML.
    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 
asserted that VYXEOSTM is indicated for the use in patients 
diagnosed with high-risk AML. However, we believe that 
VYXEOSTM involves the treatment of the same patient 
population as other AML treatment therapies.
    We are inviting public comments on whether VYXEOSTM is 
substantially similar to existing technology, including whether the 
mechanism of action of VYXEOSTM differs from the mechanism 
of action of the current treatment regimen. We also are inviting public 
comments on whether VYXEOSTM meets the newness criterion.
    With regard to the cost criterion, the applicant conducted the 
following analysis. The applicant used the 2014 and 2015 100 Percent 
Inpatient Standard Analytic Files (SAFs) to assess the MS-DRGs assigned 
for hospitalizations most likely to represent patients that may be 
eligible for treatment with VYXEOSTM. The sample of claims 
was limited to discharges occurring in FY 2015 (that is, from October 
1, 2014 to September 30, 2015).
    The applicant identified patients as potential VYXEOSTM 
candidates by searching for cases indicating a diagnosis of AML. 
Specifically, the applicant searched for cases that met the following 
criteria:
     Had an ICD-9-CM diagnosis code of 205.00 (Acute myeloid 
leukemia, without mention of having achieved remission), or 205.02 
(Acute myeloid leukemia, in relapse); or
     The patient received chemotherapy during their hospital 
stay as indicated by the following principal/secondary ICD-9-CM 
diagnosis codes or ICD-9-CM procedure codes: V58.11 (Encounter for 
antineoplastic chemotherapy); V58.12 (Encounter for antineoplastic 
immunotherapy; 00.10 (Implantation of chemotherapeutic agent); 00.15 
(High-Dose infusion interleukin-2); 99.25 (Injection or Infusion of 
cancer chemotherapeutic substance); or 99.28 (Injection or infusion of 
biological response modifier as an antineoplastic agent); and
     Excluded cases that had a bone marrow transplant based on 
the following ICD-9-CM procedure codes: 41.00 (Bone marrow transplant, 
not otherwise specified); 41.01 (Autologous bone marrow transplant 
without purging); 41.02 (Allogeneic bone marrow transplant with 
purging); 41.03 (Allogeneic bone marrow transplant without purging); 
41.04 (Autologous hematopoietic stem cell transplant without purging); 
41.05 (Allogeneic hematopoietic stem cell transplant without purging); 
41.06 (Cord blood stem cell transplant); 41.07 (Autologous 
hematopoietic stem cell transplant with purging); 41.08 (Allogeneic 
hematopoietic stem cell transplant); and 41.09 (Autologous bone marrow 
transplant with purging).
    According to the applicant, the eligible cases span 134 unique MS-
DRGs, 14 of which contain more than 10 cases. The most common MS-DRGs 
are MS-DRGs 834, 837, 838, and 839. These 4 MS-DRGs account for 3,601 
(78 percent) of the 4,613 potential eligible cases.
    Using the 4,613 identified cases, the average unstandardized case-
weighted charge per case was $203,234. The applicant then standardized 
the charges. The applicant removed charges for the current treatment. 
The applicant then applied the 2-year inflation factor of 1.098446 from 
the FY 2017 IPPS/LTCH final rule (81 FR 57286) to inflate the charges 
from FY 2015 to FY 2017. Based on the FY 2017 IPPS/LTCH PPS Table 10 
thresholds, the average case-weighted threshold amount was $84,639. The 
inflated average case-weighted standardized charge per case was 
$178,392. Because the inflated average case-weighted standardized 
charge per case exceeds the average case-weighted threshold amount, the 
applicant maintained that the technology meets the cost criterion.
    The applicant noted that the average case-weighted standardized 
charge per case for the applicable MS-DRGs exceeds the average case-
weighted threshold amount without taking into account the average per 
patient cost of the technology to the hospital. Therefore, the analysis 
above did not include the cost of VYXEOSTM.
    As previously stated, according to the applicant, the potentially 
eligible cases used for the cost criterion analysis included patients 
diagnosed with AML who received chemotherapy during their hospital 
stay, but did not receive a bone marrow transplant. The applicant 
asserted that this patient cohort is inclusive of all likely potential 
patients that may be eligible for treatment using VYXEOSTM. 
The applicant conducted the same analysis, but excluded all pharmacy 
and IV therapy charges. Additionally, to test the sensitivity of cohort 
specification, the applicant conducted the following four additional 
sensitivity analyses that used alternative cohort definitions: (1) 
Included AML cases with ICD-9-CM diagnosis code 205.00 and 
chemotherapy; (2) included AML cases with ICD-9-CM diagnosis code 
205.02 and chemotherapy; (3) included cases with AML principal 
diagnosis and chemotherapy; and (4) included AML cases without 
requiring chemotherapy. In all of these analyses, the inflated average 
case-weighted standardized charge per case exceeded the average case-
weighted threshold amount. We are inviting public comments whether 
VYXEOSTM meets the cost criterion.
    With regard to substantial clinical improvement, according to the 
applicant, clinical data results have shown that the use of 
VYXEOSTM represents a substantial clinical improvement for 
the treatment of AML in newly diagnosed high-risk, older (60 years and 
older) patients, marked by statistically significant improvements in 
overall survival, event free survival and response rates, and in 
relapsed patients age 18 to 65 years of age, where a statistically 
significant improvement in overall survival was documented for the 
poor-risk subset of patients as defined by the European Prognostic 
Index. In both groups of patients, the applicant stated that there was 
significant improvement in survival for the high-risk patient group. 
The applicant provided the following specific clinical data results.
     The applicant stated the clinical data results show that 
treatment with VYXEOSTM in older patients (60 years of age 
and older) diagnosed with untreated, high-risk AML will result in 
superior survival rates, as compared to patients treated with 
conventional ``7+3'' free drug dosing. The applicant provided a summary 
of the pivotal Phase III Study 301 in which 309 patients were enrolled, 
with 153 patients randomized to the VYXEOSTM arm and 156 to 
the ``7+3'' free drug dosing arm. Among patients aged 60 to 69 years, 
there were 96 patients in the VYXEOSTM arm and 102 in the 
``7+3'' free drug dosing arm; for patients aged 70 to 75 years, there 
were 57 and 54 patients in each arm, respectively. The applicant noted 
that the data results from the Phase III Study 301 demonstrated that 
first-line treatment of patients diagnosed with high-risk AML in the 
VYXEOSTM arm resulted in substantially greater median 
overall survival of 9.56 months versus 5.95 months in the ``7+3'' free 
drug dosing arm (hazard ratio of 0.69; p =0.005).

[[Page 19893]]

     The applicant further asserted that high-risk, older 
patients (60 years of age and older) previously untreated for diagnoses 
of AML will have a lower risk of early death when treated with 
VYXEOSTM than those treated with the conventional ``7+3'' 
free drug dosing. The applicant cited Medeiros, et al. 2015,\31\ which 
reported a large observational study of Medicare beneficiaries and 
noted the following: The data result of the study showed that 50 to 60 
percent of elderly patients diagnosed with AML remain untreated 
following diagnosis; treated patients were more likely younger, male, 
and married, and less likely to have secondary diagnoses of AML, poor 
performance indicators, and poor comorbidity scores compared to 
untreated patients; and in multivariate survival analyses, treated 
patients exhibited a significant 33 percent lower risk of death 
compared to untreated patients.
---------------------------------------------------------------------------

    \31\ Medeiros B, et al. (2015). Big data analysis of treatment 
patterns and outcomes among elderly acute myeloid leukemia patients 
in the United States. Ann Hematol. 2015; 94(7): 1127-1138.
---------------------------------------------------------------------------

    Based on data from the Phase III Study 301,\32\ the applicant cited 
the following results: The rate of 60-day mortality was less in the 
VYXEOSTM arm (13.7 percent) versus the ``7+3'' free drug 
dosing arm (21.2 percent); the reduction in early mortality was due to 
fewer deaths from refractory AML (3.3 percent versus 11.3 percent), 
with very similar rates of 60-day mortality due to adverse events (10.4 
percent versus 9.9 percent); there were fewer deaths in the 
VYXEOSTM arm versus the ``7+3'' free drug dosing arm during 
the treatment phase (7.8 percent versus 11.3 percent); and there were 
fewer deaths in the VYXEOSTM arm during the follow-up phase 
than in the ``7+3'' free drug dosing arm (59.5 percent versus 71.5 
percent).
---------------------------------------------------------------------------

    \32\ Lancet J, et al. (2016). Final results of a Phase III 
randomized trial of VYXEOS (CPX-351) versus 7+3 in older patients 
with newly diagnosed, high-risk (secondary) AML. Abstract and oral 
presentation at American Society of Clinical Oncology (ASCO), June 
2016.
---------------------------------------------------------------------------

     The applicant asserted that high-risk, older patients (60 
years of age and older) previously untreated for a diagnosis of AML 
exhibited statistically significant improvements in response rates 
after treatment with VYXEOSTM versus treatment with the 
conventional ``7+3'' free drug chemotherapy dosing, suggesting that the 
use of VYXEOSTM is a superior pre-transplant induction 
treatment versus ``7+3'' free drug dosing. Restoration of normal 
hematopoiesis is the ultimate goal of any therapy for AML diagnoses. 
The first phase of treatment consists of induction chemotherapy, in 
which the goal is to ``empty'' the bone marrow of all hematopoietic 
elements (both benign and malignant), and to allow repopulation of the 
marrow with normal cells, thereby yielding remission. According to the 
applicant, post-induction response rates were significantly higher 
following the use of VYXEOSTM, which elicited a 47.7 percent 
total response rate and a 37.3 percent rate for CR, whereas the total 
response and CR rates for the ``7+3'' free drug dosing arm were 33.3 
percent and 25.6 percent, respectively. The CR + CRi rates for patients 
aged 60 to 69 years were 50.0 percent in the VYXEOSTM arm 
and 36.3 percent in the ``7+3'' free drug dosing arm, with an odds 
ratio of 1.76 (95 percent CI, 1.00-3.10). For patients aged 70 to 75, 
the rates of CR + CRi were 43.9 percent in the VYXEOSTM arm 
and 27.8 percent in the ``7+3'' free drug dosing arm.
     The applicant asserted that VYXEOSTM treatment 
will enable high-risk, older patients (60 years of age and older) to 
bridge to allogeneic transplant, and VYXEOSTM responding 
patients will have markedly better outcomes following transplant. The 
applicant stated that diagnoses of secondary AML are considered 
incurable with standard chemotherapy approaches and, as with other 
high-risk hematological malignancies, transplantation is a useful 
treatment alternative. The applicant further stated that autologous 
HSCT has limited effectiveness and at this time, only allogeneic HSCT 
with full intensity conditioning has been reported to produce long-term 
remissions. However, the applicant stated that the clinical study by 
Medeiros et al., 2015, reported that, while the use of allogeneic HSCT 
is considered a potential cure for AML, its use is limited in older 
patients because of significant baseline comorbidities and increased 
transplant-related morbidity and mortality. Patients in either arm of 
the Phase III Study 301 responding to induction with a CR or CR+CRi 
(n=125) were considered for allogeneic hematopoietic cell transplant 
(HCT) when possible. In total, 91 patients were transplanted: 52 (34 
percent) from the VYXEOSTM arm and 39 (25 percent) from the 
``7+3'' free drug dosing arm. Patient and AML characteristics were 
similar according to randomized arm, including percentage of patients 
in each arm that underwent transplant in CR+CRi status. However, the 
applicant noted that the VYXEOSTM arm contained a higher 
percentage of older patients (aged 70 or greater) who were transplanted 
(VYXEOSTM, 31 percent; ``7+3'' free drug dosing, 15 
percent).\33\
---------------------------------------------------------------------------

    \33\ Stone Hematology 2004; Gordon AACR 2016; NCI, cancer.gov.
---------------------------------------------------------------------------

    According to the applicant, patient outcome following transplant 
strongly favored patients in the VYXEOSTM arm. The Kaplan-
Meier analysis of the 91 transplanted patients landmarked at the time 
of HCT showed that patients in the VYXEOSTM arm had markedly 
better overall survival (hazard ratio 0.46; p=0.0046). The time-
dependent Adjustment Model (Cox proportional hazard ratio) was used to 
evaluate the contribution of VYXEOSTM to overall survival 
rate after adjustment for transplant and showed that 
VYXEOSTM remained a significant contributor, even after 
adjusting for transplant. The time-dependent Cox hazard ratio for 
overall survival rates in the VYXEOSTM arm versus the 
``7+3'' free drug dosing arm was 0.51 (95 percent CI, 0.35-0.75; 
P=.0007).
     The applicant asserted that VYXEOSTM treatment 
of previously untreated older patients (60 years of age and older) 
diagnosed with high-risk AML increases the response rate and improves 
survival compared to conventional ``7+3'' free drug dosing in patients 
diagnosed with FLT3 mutation. The applicant noted the following: 
approximately 20 to 30 percent of AML patients harbor some form of FLT3 
mutation, AML patients with a FLT3 mutation have a higher relapse rate 
and poorer prognosis than the overall population diagnosed with AML, 
and the most common type of mutation is internal tandem duplication 
(ITD) mutation localized to a membrane region of the receptor.
    The applicant cited Gordon et al., 2016,\34\ which reported on the 
significant anti-leukemic activity of VYXEOSTM in AML blasts 
exhibiting high-risk characteristics, including FLT3-ITD, that are 
typically associated with poor outcomes when treated with conventional 
``7+3'' free drug dosing. To determine whether the improved complete 
remission and overall survival rates of VYXEOSTM as compared 
to conventional ``7+3'' free drug dosing are attributable to liposome-
mediated altered drug PK or direct cellular interactions with specific 
AML blast samples, the authors evaluated cytotoxicity in 53 AML patient 
specimens. Cytotoxicity results were correlated with patient 
characteristics,

[[Page 19894]]

as well as VYXEOSTM cellular uptake and molecular phenotype 
status including FLT3-ITD, which is a predictor of poor patient 
outcomes to conventional ``7+3'' free drug dosing. The applicant stated 
that a notable result from this research was the observation that AML 
blasts exhibiting the FLT3-ITD phenotype exhibited some of the lowest 
IC50 (the 50 percent inhibitory concentration) values and, 
as a group, were five-fold more sensitive to VYXEOSTM than 
those with wild type FLT3. In addition, there was evidence that 
increased sensitivity to VYXEOSTM was associated with 
increased uptake of the drug-laden liposomes by the patient-derived AML 
blasts. The applicant noted that Gordon, et al. 2016, concluded taken 
together, the data are consistent with clinical observations where 
VYXEOSTM retains significant anti-leukemic activity in AML 
patients exhibiting high-risk characteristics. The applicant also noted 
that a sub analysis of Phase III Study 301 identified 22 patients 
diagnosed with FLT3 mutation in the VYXEOSTM arm and 20 in 
the ``7+3'' free drug dosing arm, which resulted in the following 
response rates of FLT3 mutated patients, which were higher with 
VYXEOSTM (15 of 22, 68.2 percent) versus ``7+3'' free drug 
dosing (5 of 20, 25.0 percent); and the Kaplan-Meier analysis of the 42 
FLT3 mutated patients showed that patients in the VYXEOSTM 
arm had a trend towards better overall survival rates (hazard ratio 
0.57; p=0.093).
---------------------------------------------------------------------------

    \34\ Gordon M, Tardi P, Lawrence MD et al. ``CPX-351 
cytotoxicity against fresh AML blasts increased for FLT3-ITD+ cells 
and correlates with drug uptake and clinical outcomes.'' Abstract 
287 and poster presented at AACR (American Association for Cancer 
Research). April 2016.
---------------------------------------------------------------------------

     The applicant asserted that younger patients (18 to 65 
years of age) with poor risk first relapse AML have shown higher 
response rates with VYXEOSTM versus conventional ``salvage'' 
chemotherapy. Overall, the applicant stated that the use of 
VYXEOSTM had an acceptable safety profile in this patient 
population based on 60-day mortality data. Study 205 \35\ was a 
randomized study comparing VYXEOSTM against the 
investigator's choice of first ``salvage'' chemotherapy in patients 
diagnosed with relapsed AML after a first remission lasting greater 
than 1 month (VYXEOSTM arm, n=81 and ``7+3'' free drug 
dosing arm, n=44; ages 18 to 65 year of age). Investigator's choice was 
almost always based on cytarabine + anthracycline, usually with the 
addition of one or two new agents. According to the applicant, 
VYXEOSTM demonstrated a higher rate of morphological 
leukemia clearance among all patients, 43.2 percent versus 40.0 
percent, and the advantage was most apparent in poor-risk patients, 
78.7 percent versus 44.4 percent, as defined by the European Prognostic 
Index (EPI). In the subset analysis of this EPI poor-risk patient 
subset, the applicant stated there was a significant improvement in 
survival rate (6.6 versus 4.2 months median, hazard ratio=0.55, p=0.02) 
and improved response rate (39.3 percent versus 27 percent). The 
applicant also noted the following: the safety profile for the use of 
VYXEOSTM was qualitatively similar to that of control 
``salvage'' therapy, with nearly identical 60-day mortality rates (14.8 
percent versus 15.9 percent); among VYXEOSTM treated 
patients, those with no history of prior HSCT (n=59) had higher 
response rates (54.2 percent versus 37.8 percent) and lower 60-day 
mortality (10.2 percent versus 16.2 percent); overall, the use of 
VYXEOSTM had acceptable safety based on 60-day mortality 
data, with somewhat higher frequency of neutropenia and 
thrombocytopenia-related grade 3-4 adverse events. Even though these 
patients are younger (18 to 65 years of age) than the population 
studied in Phase III Study 301 (60 years and older), Study 205 patients 
were at a later stage of disease and almost all had responded to first-
line therapy (cytarabine + anthracycline) and had relapsed. The 
applicant also cited Cortes, et al. 2015,\36\ which reported that 
patients diagnosed with first relapse AML have limited likelihood of 
response and short expected survival following ``salvage'' treatment 
with the results from literature showing that:
---------------------------------------------------------------------------

    \35\ Cortes J, et al. (2011). Significance of prior HSCT on the 
outcome of salvage therapy with CPX-351 or conventional chemotherapy 
among first relapse AML patients. Abstract and poster presented at 
ASH 2011.
    \36\ Cortes J, et al. (2015). Phase II, multicenter, randomized 
trial of CPX-351 (cytarabine:daunorubicin) liposome injection versus 
intensive salvage therapy in adults with first relapse AML. Cancer. 
January 2015, 234-42.
---------------------------------------------------------------------------

     Mitoxantrone, etoposide, and cytarabine induced response 
in 23 percent of patients, with median overall survival of only 2 
months.
     Modulation of deoxycitidine kinase by fludarabine led to 
the combination of fludarabine and cytarabine, resulting in a 36 
percent CR rate with median remission duration of 39 weeks.
     First salvage gemtuzumab ozogamicin induced CR+CRp (or 
CR+CRi) response in 30 percent of patients with CD33+ AML and, for 
patients with short first CR durations, appeared to be superior to 
cytarabine-based therapy.
    The applicant noted that Study 205 results showed the use of 
VYXEOSTM retained greater anti-leukemic efficacy in patients 
diagnosed with poor-risk first relapse AML, and produced higher 
morphological leukemia clearance rates (78.7 percent) compared to 
conventional ``salvage'' therapy (44 percent). The applicant further 
noted that, overall, the use of VYXEOSTM had acceptable 
safety profile in this patient population based on 60-day mortality 
data.
    Based on all of the data presented above, the applicant concluded 
that VYXEOSTM represents a substantial clinical improvement 
over existing technologies. However, we are concerned that, although 
there was an improvement in a number of outcomes in Phase III Study 
301, specifically overall survival rate, lower risk of early death, 
improved response rates, better outcomes following transplant, 
increased response rate and overall survival in patients diagnosed with 
FLT3 mutation, and higher response rates versus conventional 
``salvage'' chemotherapy in younger patients diagnosed with poor-risk 
first relapse, the improved outcomes may not be statistically 
significant. Furthermore, we are concerned that the overall improvement 
in survival from 5.95 months to 9.56 months may not represent a 
substantial clinical improvement. In addition, the rate of adverse 
events in both arms of Study 205, given the theoretical benefit of 
reduced toxicity with the liposomal formulation, was similar for both 
the VYXEOSTM and ``7+3'' free drug treatment groups. 
Therefore, we also are concerned that there is a similar rate of 
adverse events, such as febrile neutropenia (68 percent versus 71 
percent), pneumonia (20 percent versus 15 percent), and hypoxia (13 
percent versus 15 percent), with the use of VYXEOSTM as 
compared with the conventional ``7+3'' free drug regimen.
    We are inviting public comments on whether the VYXEOSTM 
meets the substantial clinical improvement criterion.
    Below we summarize and respond to comments submitted on 
VYXEOSTM during the open comment period in response to the 
New Technology Town Hall meeting notice.
    Comment: The applicant provided a written response regarding the 
definition of ``free drug'' as ``Unbound drug pharmacology;'' an active 
drug or other compound that is not bound to a carrier protein-for 
example, albumin or alpha[hyphen]1[hyphen]acid glycoprotein. The 
applicant explained that the term ``free[hyphen]drug dosing'' is used 
to describe the two different non[hyphen]encapsulated, separately 
administered drugs in the ``7+3'' free drug regimen (cytarabine and 
daunorubicin), each an unrestricted uniform aqueous solution of the 
drug in water for continuous administration of cytarabine and separate 
intravenous

[[Page 19895]]

administration of daunorubicin according to the ``7+3'' dosing 
schedule. The applicant then stated that the fixed molar drug ratio 
delivered by VYXEOSTM is not relevant to the conventional 
dosing of the two free drugs, cytarabine and daunorubicin. The 
applicant explained that the doses of cytarabine and daunorubicin used 
in the conventional ``7+3'' free drug dosing regimen were based on the 
maximum tolerated dose of the two agents, not on any concept related to 
a drug ratio that provides optimal synergy. Finally, the ratio of 
cytarabine and daunorubicin administered in free (non[hyphen]liposomal) 
form is irrelevant because the administered ratio cannot be maintained 
when these drugs are infused separately. This is because the drugs will 
be distributed and eliminated differentially and independently of one 
another and the ratio will change rapidly and continuously. 
Consequently, according to the applicant, the inability to control drug 
ratios following administration in conventional dosage forms likely 
results in exposure of tumor cells to antagonistic drug ratios with a 
corresponding loss of therapeutic activity.
    Response: We appreciate the applicant's comments. We will take 
these comments into consideration when deciding whether to approve new 
technology add-on payments for VYXEOSTM.
f. GammaTileTM
    Isoray Medical, Inc. & GammaTile, LLC submitted an application for 
new technology add-on payments for FY 2018 for the 
GammaTileTM. The GammaTileTM is a brachytherapy 
technology for use in the treatment of patients diagnosed with brain 
tumors using cesium-131 radioactive sources embedded in a collagen 
matrix. GammaTileTM is designed to provide adjuvant 
radiation therapy to eliminate remaining tumor cells in patients who 
required surgical resection of brain tumors. According to the 
applicant, the GammaTileTM is a new vehicle of delivery for 
and inclusive of cesium-131 brachytherapy sources embedded within the 
product. The applicant stated that the technology has been manufactured 
for use in the setting of a craniotomy resection site where there is a 
high chance of local recurrence of a CNS or dual-based tumor. The 
applicant asserted that the use of GammaTileTM provides a 
new, unique modality for treating patients who require radiation 
therapy to augment surgical resection of malignancies of the brain. By 
offsetting the radiation sources with a 3mm gap of a collagen matrix, 
the applicant asserted that the use of GammaTileTM resolves 
issues with ``hot'' and ``cold'' spots associated with brachytherapy, 
improves safety, and potentially offers a treatment option for patients 
with limited, or no other, available options. The 
GammaTileTM is biocompatible and bioabsorbable, and is left 
in the body permanently without need for future surgical removal. The 
applicant asserted that the commercial manufacturing of the product 
will significantly improve on the process of constructing customized 
implants with greater speed, efficiency, and accuracy than is currently 
available, and require less surgical expertise in placement of the 
radioactive sources, allowing a greater number of surgeons to utilize 
brachytherapy techniques in a wider variety of hospital settings.
    The applicant for GammaTileTM has applied for FDA 
approval and anticipated FDA approval by the spring of 2017. In its 
application, the applicant indicated that it anticipated that the 
product would be approved by the FDA for use in both the primary and 
salvage treatment of radiosensitive malignances of the brain. However, 
the applicant had not received FDA approval at the time of development 
of this proposed rule. In subsequent discussions with the applicant, 
the applicant indicated that it is only seeking FDA approval for use in 
the salvage treatment of recurrent radiosensitive malignances of the 
brain. The applicant submitted a request for a unique ICD-10-PCS code 
for the administration of GammaTileTM. If approved, the 
procedure codes will be effective October 1, 2017 (FY 2018).
    As discussed earlier, if a technology meets all three of the 
substantial similarity 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 regard to the first criterion, whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome, the 
applicant stated that when compared to treatment using external beam 
radiation therapy, GammaTileTM uses a new and unique 
mechanism of action to achieve a therapeutic outcome. The applicant 
explained that the GammaTileTM is fundamentally different in 
structure, function, and safety from all external beam radiation 
therapies, and delivers treatment through a different mechanism of 
action. In contrast to external beam radiation modalities, the 
applicant further explained that the GammaTileTM is a form 
of internal radiation termed brachytherapy. Brachytherapy treatments 
are performed using radiation sources positioned very close to the area 
requiring radiation treatment and only deliver radiation to the tissues 
that are immediately adjacent to the margin of the surgical resection. 
For this reason, brachytherapy is a current standard of care treatment 
for many non-central nervous system tumors, including breast, cervical, 
and prostate cancers.
    Due to the custom positioning of the radiological sources and the 
use of the cesium-131 isotope, the applicant noted that the 
GammaTileTM focuses therapeutic levels of radiation on an 
extremely small area of the brain. Unlike all external beam techniques, 
the applicant stated that this radiation does not pass externally 
inward through the skull and healthy areas of the brain to reach the 
targeted tissue and, therefore, may limit neurocognitive deficits seen 
with the use of external beam techniques. Because of the rapid 
reduction in radiation intensity that is characteristic of cesium-131, 
the applicant asserted that the GammaTileTM can target the 
margin of the excision with greater precision than any alternative 
treatment option, while sparing healthy brain tissue from unnecessary 
and potentially damaging radiation exposure.
    The applicant also stated that, when compared to other types of 
brain brachytherapy, GammaTileTM uses a new and unique 
mechanism of action to achieve a therapeutic outcome. The applicant 
explained that cancerous cells at the margins of a tumor resection 
cavity can also be irradiated with the placement of brachytherapy 
sources in the tumor cavity. However, the applicant asserted that the 
GammaTileTM is a pioneering form of brachytherapy for the 
treatment of brain tumors that uses the isotope cesium-131 embedded in 
a collagen implant that is customized to the geometry of the brain 
cavity. According to the applicant, use of cesium-131 and the custom 
distribution of seeds in a three-dimensional collagen device result in 
a unique and highly effective delivery of radiation therapy to brain 
tissue.
    With regard to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, GammaTileTM is a 
treatment option for patients diagnosed with brain tumors that progress 
locally after initial treatment with external beam radiation therapy, 
and cases representing patients that may be eligible for treatment 
involving this technology are assigned to the same MS-DRGs (MS-DRGs 25, 
26, and 27 (Craniotomy & Endovascular Intracranial Procedure with MCC, 
with CC, and without CC/MCC), respectively)

[[Page 19896]]

as other current treatment forms of brachytherapy and external beam 
radiation therapy.
    With regard to 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 
stated that the GammaTileTM offers a treatment option for a 
patient population with limited, or no other, available treatment 
options. The applicant explained that treatment options for patients 
diagnosed with brain tumors that progress locally after initial 
treatment with external beam radiation therapy are limited, and there 
is no current standard of care in this setting. According to the 
applicant, surgery alone for recurrent tumors may provide symptom 
relief, but does not remove all of the cancer cells. The applicant 
further stated that repeating external beam radiation therapy for 
adjuvant treatment is hampered by an increasing risk of brain injury 
because additional external beam radiation therapy will increase the 
total dose of radiation to brain tissue, as well as increase the total 
volume of irradiated brain tissue. Secondary treatment with external 
beam radiation therapy is often performed with a reduced and, 
therefore, less effective dose. The applicant asserted that 
brachytherapy with GammaTileTM may be the only effective 
treatment option for these patients.
    Based on the above, the applicant concluded that the 
GammaTileTM is not substantially similar to other existing 
technologies and meets the newness criterion. However, we are concerned 
that the mechanism of action for this device may be the same or similar 
to current forms of radiation or brachytherapy. Specifically, while the 
placement of the cesium-131 source (or any radioactive source) in a 
collagen matrix offset may constitute a new delivery vehicle, we are 
concerned that this sort of improvement in brachytherapy for use in the 
salvage treatment of radiosensitive malignances of the brain may not 
represent a new mechanism of action. We also have concerns as to 
whether GammaTileTM would represent the first approved use 
of offset radioactive material in brachytherapy for recurrent brain 
malignancies. The applicant cited studies that used a similar predicate 
device, but did not indicate whether these researchers or institutions 
are seeking separate FDA approval.
    We are inviting public comments on whether GammaTileTM 
meets the substantial similarity criteria and the newness criterion.
    With regard to the cost criterion, the applicant conducted the 
following analysis. The applicant worked with the Barrow Neurological 
Institute at St. Joseph's Hospital and Medical Center (St. Joseph's) to 
obtain actual claims for craniotomies using a prototype brain 
brachytherapy device of stranded cesium-131 seeds held in place with a 
collagen tile. The application found a total of 23 claims from FY 2001 
through FY 2016 data that used a cesium-131 brachytherapy predicate 
device. All 23 claims were assigned to MS-DRGs 25 through 27. Of the 23 
cases, 13 cases were assigned to MS-DRG 25, 4 cases were assigned to 
MS-DRG 26, and 6 cases were assigned to MS-DRG 27. Using hospital data, 
the applicant estimated and then subtracted all charges for the 
predicate device and all charges for ancillary services associated with 
the device delivery for each case. The applicant standardized the 
remaining charges for each case and inflated each case's charges by 
applying the FY 2017 IPPS/LTCH PPS final rule outlier charge inflation 
factor of 1.043957 by the age of each case (that is, the factor was 
applied to FY 2011 claims six times, to FY 2012 claims five times, 
etc.). The applicant then calculated the average inflated standardized 
charges for the cases assigned to MS-DRG 25 ($124,064), MS-DRG 26 
($131,677) and MS-DRG 27 ($90,615). The applicant then calculated an 
estimate for ancillary charges associated with placement of the 
GammaTileTM device, as well as standardized charges for the 
GammaTileTM device itself. The applicant determined it meets 
the cost criterion because the final average case-weighted standardized 
charge per case (including the charges associated with the 
GammaTileTM device) of $226,741 exceeds the average case-
weighted threshold amount of $95,783.
    We are concerned that the applicant submitted a small sample of 
cases to determine it meets the cost criterion. A small sample size may 
not be statistically significant to determine if the 
GammaTileTM meets the cost criterion. We also note that, 
while the applicant has attributed reduced operating room times as a 
significant benefit to the GammaTileTM, a reduction in the 
associated costs does not appear to be reflected in its calculations. 
We are inviting public comments on whether the GammaTileTM 
meets the cost criterion.
    With regard to substantial clinical improvement, the applicant 
stated that the GammaTileTM offers a treatment option for a 
patient population unresponsive to, or ineligible for, currently 
available treatments and significantly improves clinical outcomes when 
compared to currently available treatment options. The applicant 
explained that therapeutic options for patients diagnosed with large or 
recurrent brain metastases are limited. However, according to the 
applicant, the GammaTileTM provides a treatment option for 
patients diagnosed with radiosensitive recurrent brain tumors that are 
not eligible for treatment with any other currently available treatment 
option. Specifically, the applicant stated that GammaTileTM 
may provide the only radiation treatment option for patients diagnosed 
with tumors located close to sensitive vital brain sites (for example, 
brain stem); patients diagnosed with recurrent brain tumors may not be 
eligible for additional treatment involving the use of external beam 
radiation therapy. There is a lifetime limit for the amount of 
radiation therapy a specific area of the body can receive. Patients 
whose previous treatment includes external beam radiation therapy may 
be precluded from receiving high doses of radiation associated with 
subsequent external beam radiation therapy, and the 
GammaTileTM can also be used to treat tumors that are too 
large for treatment with external beam radiation therapy. These large 
tumors are not eligible for treatment with external beam radiation 
therapy because the radiation dose to healthy brain tissue would be too 
high.
    The applicant described how the GammaTileTM improves 
clinical outcomes compared to existing treatment options, including 
external beam radiation therapy and other forms of brain brachytherapy. 
To demonstrate that the GammaTileTM represents a substantial 
clinical improvement over existing technologies, the applicant 
submitted data from three abstracts, with one associated paper 
demonstrating feasibility or superior progression-free survival 
compared to the patient's own historical control rate.
    In a presentation at the Society for Neuro-Oncology in November 
2014 (Dardis, Christopher; Surgery and permanent intraoperative 
brachytherapy improves time to progression of recurrent intracranial 
neoplasms), the outcomes of 20 patients diagnosed with 27 tumors 
covering a variety of histological types treated with the 
GammaTileTM prototype were presented. The applicant noted 
the following with regard to the patients: (1) All tumors were 
intracranial, supratentorial masses and included low and high-grade 
meningiomas, metastases from various primary cancers, high-grade 
gliomas, and others;

[[Page 19897]]

(2) all treated masses were recurrent following treatment with surgery 
and/or radiation and the group averaged two prior craniotomies and two 
prior courses of external beam radiation treatment; and (3) following 
surgical excision, prototype GammaTilesTM were placed in the 
resection cavity to deliver a dose of 60 Gray to a depth of 5 mm of 
tissue; and all patients had previously experienced re-growth of their 
tumors at the site of treatment and the local control rate of patients 
entering the study was 0 percent.
    With regard to outcomes, the applicant stated that, after their 
initial treatment, patients had a median progression-free survival time 
of 5.8 months; post treatment with prototype GammaTilesTM, 
at the time of this analysis, only one patient had progressed at the 
treatment site, for a local control rate of 96 percent; and median 
progression-free survival time, a measure of how long a patient lives 
without recurrence of the treated tumor, has not been reached (as this 
value can only be calculated when more than 50 percent of treated 
patients have failed the prescribed treatment).
    A second set of outcomes on prototype GammaTilesTM was 
presented at the Society for Neuro-Oncology Conference on Meningioma in 
June 2016 (Brachman, David; Surgery and permanent intraoperative 
brachytherapy improves time to progress of recurrent intracranial 
neoplasms). This study enrolled 16 patients with 20 recurrent grade 2 
or 3 meningiomas, who had undergone prior surgical excision external 
beam radiation therapy. These patients underwent surgical excision of 
the tumor, followed by adjuvant radiation therapy with prototype 
GammaTilesTM. The applicant noted the following outcomes: 
(1) Of the 20 treated tumors, 19 showed no evidence of radiographic 
progression at last follow-up, yielding a local control rate of 95 
percent; two of the 20 patients exhibited radiation necrosis (one 
symptomatic, one asymptomatic); and (2) the median time to failure from 
the prior treatment with external beam radiation therapy was 10.3 
months and after treatment with prototype GammaTilesTM only 
one patient failed at 18.2 months. Therefore, the median time to same 
site failure after prototype GammaTileTM treatment has not 
yet been reached (average follow up of 16.7 months, range 1-37 months).
    A third prospective study was accepted for presentation at the 
November 2016 Society for Neuro-Oncology annual meeting (Youssef, Emad; 
Cs131 implants for salvage therapy of recurrent high grade gliomas). In 
this study, 13 patients diagnosed with recurrent high-grade gliomas (9 
with glioblastoma and 4 with grade 3 astrocytoma) were treated in an 
identical manner to the cases described above. Previously, all patients 
had failed the international standard treatment for high-grade glioma, 
a combination of surgery, radiation therapy, and chemotherapy referred 
to as the ``Stupp regimen.'' For the prior therapy, the median time to 
failure was 9.2 months (range 1-40 months). After therapy with a 
prototype GammaTileTM, the applicant noted the following: 
(1) The median time to same site local failure has not been reached and 
one failure was seen at 18 months (local control 92 percent); and (2) 
with a median follow-up time of 8.1 months (range 1-23 months) one 
symptomatic patient (8 percent) and two asymptomatic patients (15 
percent) had radiation-related MRI changes. However, no patients 
required re-operation for radiation necrosis or wound breakdown.
    The applicant asserted that, when considered in total, the data 
reported in these three studies support the conclusion that a 
significant therapeutic effect results from the addition of 
GammaTileTM radiation therapy to the site of surgical 
removal. According to the applicant, the fact that these patients had 
failed prior best available treatments (aggressive surgical and 
adjuvant radiation management) presents the unusual scenario of a 
salvage therapy outperforming the current standard-of-care. The 
applicant noted that follow-up data continues to accrue on these 
patients. The applicant further noted that, although these reported 
experiences with the GammaTileTM are as a salvage therapy in 
patients who currently have no standard treatment options, it is 
anticipated GammaTileTM will also be used as first-line 
therapy due to these promising results.
    The applicant stated that the use of GammaTileTM reduces 
rates of mortality compared to alternative treatment options. The 
applicant explained that clinical studies on GammaTileTM 
have shown improved local control of tumor recurrence. According to the 
applicant, the results of these studies showed local control rates of 
92 percent to 96 percent for tumor sites that had local control rates 
of 0 percent from previous treatment. The applicant noted that these 
studies also have not reached median progression-free survival time 
with follow-up times ranging from 1 to 37 months. Previous treatment at 
these same sites resulted in median progression-free survival times of 
5.8 to 10.3 months.
    The applicant further stated that the use of GammaTileTM 
reduces rates of radiation necrosis compared to alternative treatment 
options. The applicant explained that the rate of symptomatic radiation 
necrosis in the GammaTileTM clinical studies of 5 to 8 
percent is substantially lower than the 26 percent to 57 percent rate 
of symptomatic radiation necrosis requiring re-operation historically 
associated with brain brachytherapy, and lower than the rates reported 
for initial treatment of similar tumors with modern external beam and 
stereotactic radiation techniques. The applicant indicated that this is 
consistent with the customized and ideal distribution of radiation 
therapy provided by GammaTileTM.
    The applicant also asserted that the use of GammaTileTM 
reduces the need for re-operation compared to alternative treatment 
options. The applicant explained that patients receiving a craniotomy, 
followed by external beam radiation therapy or brachytherapy, could 
require re-operation in the following three scenarios:
     Tumor recurrence at the excision site could require 
additional surgical removal;
     Symptomatic radiation necrosis could require excision of 
the affected tissue; and
     Certain forms of brain brachytherapy require the removal 
of brachytherapy sources after a given period of time.
    However, according to the applicant, because of the high local 
control rates, low rates of symptomatic radiation necrosis, and short 
half-life of cesium-131, GammaTileTM will reduce the need 
for re-operation compared to external beam radiation therapy and other 
forms of brain brachytherapy.
    Additionally, the applicant stated that the use of 
GammaTileTM reduces the need for additional hospital visits 
and procedures compared to alternative treatment options. The applicant 
noted that the GammaTileTM is placed during surgery, and 
does not require any additional visits or procedures. The applicant 
contrasted this improvement with external beam radiation therapy, which 
is often delivered in multiple fractions that must be administered over 
multiple days. The applicant provided an example where WBRT is 
delivered over 2 to 3 weeks, while the placement of 
GammaTileTM occurs during the craniotomy and does not add 
any time to a patient's recovery.
    The applicant further stated that the GammaTileTM's high 
local control rates and low rates of symptomatic radiation necrosis 
will reduce the need for

[[Page 19898]]

additional hospital visits and procedures, and provides a more rapid 
initiation and complement of the treatment compared to alternative 
treatment options.
    Based on consideration of all of the data presented above, the 
applicant believed that the use of GammaTileTM represents a 
substantial clinical improvement over existing technologies. The 
studies were limited to patients diagnosed with recurrent tumors after 
previous surgical rescission. As previously discussed, the applicant 
explained that it is seeking FDA approval for the use of the 
GammaTileTM in the treatment of recurrent malignancies.
    We are inviting public comments on whether GammaTileTM 
meets the substantial clinical improvement criterion.
    We did not receive any written public comments in response to the 
New Technology Town Hall meeting notice regarding the application of 
GammaTileTM for new technology add-on payments.

III. Proposed 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 proposed FY 2018 hospital wage index based 
on the statistical areas appears under sections III.A.2. and G. of the 
preamble of this proposed rule.
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index annually and to base the update on a survey of wages and 
wage-related costs of short-term, acute care hospitals. (CMS collects 
these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-
3, Parts II, III, and IV. The OMB control number for approved 
collection of this information is 0938-0050.) This provision also 
requires that any updates or adjustments to the wage index be made in a 
manner that ensures that aggregate payments to hospitals are not 
affected by the change in the wage index. The proposed adjustment for 
FY 2018 is discussed in section II.B. of the Addendum to this proposed 
rule.
    As discussed in section III.J. of the preamble of this proposed 
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 proposed budget neutrality adjustment for FY 2018 is discussed in 
section II.A.4.b. of the Addendum to this proposed rule.
    Section 1886(d)(3)(E) of the Act also provides for the collection 
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in 
order to construct an occupational mix adjustment to the wage index. A 
discussion of the occupational mix adjustment that we are proposing to 
apply to the FY 2018 wage index, appears under sections III.E.3. and F. 
of the preamble of this proposed rule.
2. Core-Based Statistical Areas (CBSAs) for the Proposed FY 2018 
Hospital Wage Index
    The wage index is calculated and assigned to hospitals on the basis 
of the labor market area in which the hospital is located. Under 
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we 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 based 
on the 2010 Census, and provided guidance on the use of the 
delineations of these statistical areas using standards published on 
June 28, 2010 in the Federal Register (75 FR 37246 through 37252). 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 OMB 
labor market area delineations beginning with the FY 2015 wage index.
    Generally, OMB issues major revisions to statistical areas every 10 
years, based on the results of the decennial census. However, OMB 
occasionally issues minor updates and revisions to statistical areas in 
the years between the decennial censuses through OMB Bulletins. On July 
15, 2015, OMB issued OMB Bulletin No. 15-01, which provides updates to 
and supersedes OMB Bulletin No. 13-01 that was issued on February 28, 
2013. The attachment to OMB Bulletin No. 15-01 provides detailed 
information on the update to statistical areas since February 28, 2013. 
The updates provided in OMB Bulletin No. 15-01 are based on the 
application of the 2010 Standards for Delineating Metropolitan and 
Micropolitan Statistical Areas to Census Bureau population estimates 
for July 1, 2012 and July 1, 2013. In the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 56913), we adopted the updates set forth in OMB Bulletin 
No. 15-01 effective October 1, 2016, beginning with the FY 2017 wage 
index. For a complete discussion of the adoption of the updates set 
forth in OMB Bulletin No. 15-01, we refer readers to the FY 2017 IPPS/
LTCH PPS final rule.
    For FY 2018, we are continuing to use the OMB delineations that we 
adopted beginning with FY 2015 to calculate the area wage indexes, with 
updates as reflected in OMB Bulletin No. 15-01 specified in the FY 2017 
IPPS/LTCH PPS final rule.
3. Codes for Constituent Counties in CBSAs
    CBSAs are made up of one or more constituent counties. Each CBSA 
and constituent county has its own unique identifying codes. There are 
two different lists of codes associated with counties: Social Security 
Administration (SSA) codes and Federal Information Processing Standard 
(FIPS) codes. Historically, CMS has listed and used SSA and FIPS county 
codes to identify and crosswalk counties to CBSA codes for purposes of 
the hospital wage index. We have learned that SSA county codes are no 
longer being maintained and updated. However, the FIPS codes continue 
to be maintained by the U.S. Census Bureau. The Census Bureau's most 
current statistical area information is derived from ongoing census 
data received since 2010; the most recent data are from 2015. For the 
purposes of crosswalking counties to CBSAs, we are proposing to 
discontinue the use of SSA county codes and begin using only the FIPS 
county codes.

[[Page 19899]]

    The Census Bureau maintains a complete list of changes to counties 
or county equivalent entities on the Web site at: https://www.census.gov/geo/reference/county-changes.html. In our proposed 
transition to using only FIPS codes for counties for the hospital wage 
index, we are proposing to update the FIPS codes used for crosswalking 
counties to CBSAs for the hospital wage index to incorporate changes to 
the counties or county equivalent entities included in the Census 
Bureau's most recent list. Based on information included in the Census 
Bureau's Web site, since 2010, the Census Bureau has made the following 
updates to the FIPS codes for counties or county equivalent entities:
     Petersburg Borough, AK (FIPS State County Code 02-195), 
CBSA 02, was created from part of former Petersburg Census Area (02-
195) and part of Hoonah-Angoon Census Area (02-105). The CBSA code 
remains 02.
     The name of La Salle Parish, LA (FIPS State County Code 
22-059), CBSA 14, is now LaSalle Parish, LA (FIPS State County Code 22-
059). The CBSA code remains as 14.
     The name of Shannon County, SD (FIPS State County Code 46-
113), CBSA 43, is now Oglala Lakota County, SD (FIPS State County Code 
46-102). The CBSA code remains as 43.
    We believe that it is important to use the latest counties or 
county equivalent entities in order to properly crosswalk hospitals 
from a county to a CBSA for purposes of the hospital wage index used 
under the IPPS. In addition, we believe that using the latest FIPS 
codes will allow us to maintain a more accurate and up-to-date payment 
system that reflects the reality of population shifts and labor market 
conditions. Therefore, we are proposing to implement these FIPS code 
updates, effective October 1, 2017, beginning with the FY 2018 wage 
indexes. We are proposing to use these update changes to calculate area 
wage indexes in a manner that is generally consistent with the CBSA-
based methodologies finalized in the FY 2005 IPPS final rule and the FY 
2015 IPPS/LTCH PPS final rule. We note that while the county update 
changes listed earlier changed the county names, the CBSAs to which 
these counties map did not change from the prior counties. Therefore, 
there is no impact or change to hospitals in these counties; they 
continue to be considered rural for the hospital wage index under these 
changes. For FY 2018, Tables 2 and 3 associated with this proposed rule 
and the County to CBSA Crosswalk File and Urban CBSAs and Constituent 
Counties for Acute Care Hospitals File posted on the CMS Web site 
reflect these county changes. We are inviting public comments on our 
proposals.

B. Worksheet S-3 Wage Data for the Proposed FY 2018 Wage Index

    The proposed FY 2018 wage index values are based on the data 
collected from the Medicare cost reports submitted by hospitals for 
cost reporting periods beginning in FY 2014 (the FY 2017 wage indexes 
were based on data from cost reporting periods beginning during FY 
2013).
1. Included Categories of Costs
    The proposed FY 2018 wage index includes all of 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 include 
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 47317)); 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 2017, the 
proposed wage index for FY 2018 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 proposed FY 2018 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 proposed FY 2018 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, 2013, and before October 1, 2014. For wage index purposes, we refer 
to cost reports during this period as the ``FY 2014 cost report,'' the 
``FY 2014 wage data,'' or the ``FY 2014 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 
proposed FY 2018 wage index includes FY 2014 data submitted to us as of 
February 10, 2017. 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 2018 wage index, we 
identified and excluded 51 providers with aberrant data that should not 
be included in the wage index, although if data elements for some of 
these providers are corrected, we intend to include data from those 
providers in the final FY 2018 wage index. We also adjusted certain 
aberrant 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 housekeeping and dietary services, we 
imputed estimates, in accordance with policies established in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). We 
instructed MACs to complete their data verification of questionable 
data elements and to transmit any changes to

[[Page 19900]]

the wage data no later than March 24, 2017. The revised data will be 
reflected in the FY 2018 IPPS/LTCH PPS final rule.
    In constructing the proposed FY 2018 wage index, we included the 
wage data for facilities that were IPPS hospitals in FY 2014, 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 believed 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 this 
proposed rule, we removed 7 hospitals that converted to CAH status on 
or after January 22, 2016, the cut-off date for CAH exclusion from the 
FY 2017 wage index, and through and including January 23, 2017, the 
cut-off date for CAH exclusion from the FY 2018 wage index. After 
excluding CAHs and hospitals with aberrant data, we calculated the 
proposed wage index using the Worksheet S-3, Part II and III wage data 
of 3,325 hospitals.
    For the proposed FY 2018 wage index, we allotted the wages and 
hours data for a multicampus hospital among the different labor market 
areas where its campuses are located in the same manner that we 
allotted such hospitals' data in the FY 2017 wage index (81 FR 56915). 
Table 2, which contains the proposed FY 2018 wage index associated with 
proposed rule (available via the Internet on the CMS Web site), 
includes separate wage data for the campuses of 9 multicampus 
hospitals.
D. Method for Computing the Proposed FY 2018 Unadjusted Wage Index
1. Proposed Methodology for FY 2018
    The method used to compute the proposed FY 2018 wage index without 
an occupational mix adjustment follows the same methodology that we 
used to compute the proposed wage indexes without an occupational mix 
adjustment since FY 2012 (76 FR 51591 through 51593).
    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, 2013, through April 15, 
2015, for private industry hospital workers from the BLS' Compensation 
and Working Conditions. We have consistently used the ECI as the data 
source for our wages and salaries and other price proxies in the IPPS 
market basket, and we are not proposing any changes to the usage of the 
ECI for FY 2018. 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
------------------------------------------------------------------------
                                                              Adjustment
               After                         Before             factor
------------------------------------------------------------------------
10/14/2013.........................  11/15/2013............      1.02310
11/14/2013.........................  12/15/2013............      1.02155
12/14/2013.........................  01/15/2014............      1.02004
01/14/2014.........................  02/15/2014............      1.01866
02/14/2014.........................  03/15/2014............      1.01740
03/14/2014.........................  04/15/2014............      1.01615
04/14/2014.........................  05/15/2014............      1.01482
05/14/2014.........................  06/15/2014............      1.01339
06/14/2014.........................  07/15/2014............      1.01193
07/14/2014.........................  08/15/2014............      1.01048
08/14/2014.........................  09/15/2014............      1.00905
09/14/2014.........................  10/15/2014............      1.00761
10/14/2014.........................  11/15/2014............      1.00614
11/14/2014.........................  12/15/2014............      1.00463
12/14/2014.........................  01/15/2015............      1.00309
01/14/2015.........................  02/15/2015............      1.00155
02/14/2015.........................  03/15/2015............      1.00000
03/14/2015.........................  04/15/2015............      0.99845
------------------------------------------------------------------------

    For example, the midpoint of a cost reporting period beginning 
January 1, 2014, and ending December 31, 2014, is June 30, 2014. An 
adjustment factor of 1.01193 would be applied to the wages of a 
hospital with such a cost reporting period.
    Using the data as previously described, the proposed FY 2018 
national average hourly wage (unadjusted for occupational mix) is 
$42.0043.
    Previously, we also would provide a Puerto Rico overall average 
hourly wage. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56915), prior to January 1, 2016, Puerto Rico hospitals were paid 
based on 75 percent of the national standardized amount and 25 percent 
of the Puerto Rico-specific standardized amount. As a result, we 
calculated a Puerto Rico-specific wage index that was applied to the 
labor share of the Puerto Rico-specific standardized amount. Section 
601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) 
amended section 1886(d)(9)(E) of the Act to specify that the payment 
calculation with respect to operating costs of inpatient hospital 
services of a subsection (d) Puerto Rico hospital for inpatient 
hospital discharges on or after January 1, 2016, shall use 100 percent 
of the national standardized amount. As we stated in the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56915 through 56916), because Puerto Rico 
hospitals are no longer paid with a Puerto Rico-specific standardized 
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act, 
as amended by section 601 of the Consolidated Appropriations Act, 2016, 
there is no longer a need to calculate a Puerto Rico-specific average 
hourly wage and wage index. Hospitals in Puerto Rico are now paid 100 
percent of the national standardized amount and, therefore, are subject 
to the national average hourly wage (unadjusted for occupational mix) 
(which is $42.0043 for this FY 2018 proposed rule) and the national 
wage index, which is applied to the national labor share of the 
national standardized amount. For FY 2018, we are not proposing a 
Puerto Rico-specific overall average hourly wage or wage index.
2. Clarification of Other Wage Related Costs in the Wage Index
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index based on a survey of hospitals' costs that are 
attributable to wages and wage-related costs. In the September 1, 1994 
IPPS final rule (59 FR 45356), we developed a list of ``core'' wage-
related costs that hospitals may report on Worksheet S-3, Part II of 
the Medicare hospital cost report in order to include those costs in 
the wage index. Core wage-related costs include categories of 
retirement cost, plan administrative costs, health and insurance costs, 
taxes, and other specified costs such as tuition reimbursement. In 
addition to these categories of core wage-related costs, we allow 
hospitals to report wage-related costs other than those on the core 
list if the other wage-related costs meet certain criteria. The 
criteria for including other wage-related costs in the wage index are 
discussed in the September 1, 1994 IPPS final rule (59 FR 45357) and 
also are listed in the Provider Reimbursement Manual (PRM), Part II, 
Chapter 40, Sections 4005.2 through 4005.4), Line 18 of the Medicare 
cost report (Form CMS-2552-10, OMB control number 0938-0050). 
Specifically, ``other'' wage-related costs are allowable for the wage 
index if the cost for employees whose services are paid under the IPPS 
exceeds 1 percent of the total adjusted salaries net of

[[Page 19901]]

excluded area salaries, is a fringe benefit as defined by the IRS and 
has been reported to the IRS (as income to the employees or 
contractors), is not being furnished for the convenience of the 
provider, and is not listed on Worksheet S-3, Part IV.
    We note that other wage-related costs are not to include benefits 
already included in Line 1 salaries on Worksheet S-3, Part II (refer to 
the cost report instructions for Worksheet S-3, Part II, Line 18, which 
state, `` `Other' wage-related costs do not include wage-related costs 
reported on line 1 of this worksheet.''). We also note that the 1-
percent test is conducted by dividing each individual category of the 
other wage-related cost (that is, the numerator) by the sum of the 
following lines on the Medicare hospital cost report (Form CMS-2552-
10): Worksheet S-3, Part II, Lines 11, 12, 13, and 14, Column 4, and 
Worksheet S-3, Part III, Line 3, Column 4 (that is, the denominator). 
The other wage-related costs associated with contract labor and home 
office/related organization personnel are included in the numerator 
because these other wage-related costs are allowed in the wage index 
(in addition to other wage related costs for direct employees), 
assuming the requirements for inclusion in the wage index are met. For 
example, if a hospital is trying to include a parking garage as an 
other-wage related cost that is reported on the W-2 or 1099 form, when 
running the 1-percent test, include in the numerator all the parking 
garage other wage-related cost for direct salary employees, contracted 
employees, and home office employees and divide by the sum of Worksheet 
S-3, Part II, Lines 11, 12, 13, and 14, Column 4, and Worksheet S-3, 
Part III, Line 3, Column 4. For the category of parking other wage-
related costs, the 1-percent test would be run only one time, inclusive 
of other wage related costs for employee salaries, contracted 
employees, and home office employees. We intend to clarify the hospital 
cost report instructions to reflect that contract labor and home 
office/related organization salaries should be added to the subtotal of 
salaries on Worksheet S-3, Part III, Line 3, Column 4 (Line 3 is the 
difference of net salaries minus excluded area salaries) for purposes 
of performing the 1-percent test. If a hospital has more than one other 
wage-related cost, the 1-percent must be conducted separately for each 
other wage-related cost (for example, parking and cafeteria separately; 
do not sum all the different types of other wage-related costs together 
and then run the 1-percent test). If the 1-percent test is met for a 
particular type of other wage-related costs, and the other criteria 
listed earlier are met as well, the other wage-related cost may be 
reported on Worksheet S-3, Part II, Line 18 of the hospital cost 
report.
    We originally allowed for the inclusion of wage-related costs other 
than those on the core list because we were concerned that individual 
hospitals might incur unusually large wage-related costs that are not 
reflected on the core list but that may represent a significant wage-
related cost. However, we are reconsidering allowing other wage-related 
costs to be included in the wage index because recent internal reviews 
of the FY 2018 wage data show that only a small minority of hospitals 
are reporting other wage-related costs that meet the 1-percent test 
described earlier. In the calculation of the proposed FY 2018 wage 
index, for each hospital reporting other wage-related costs on Line 18 
of Worksheet S-3, we performed the 1-percent test. We then made 
internal edits removing other wage-related costs on Line 18 where 
hospitals reported data that failed to meet the mathematical 
requirement that other wage-related costs must exceed 1 percent of 
total adjusted salaries net of excluded area salaries. After this 
review, only approximately 80 hospitals of approximately 3,320 
hospitals had other wage-related costs on Line 18 meeting the 1-percent 
test. We believe that such a limited number of hospitals nationally 
reporting and meeting the 1-percent test may indicate that other wage-
related costs might not constitute an appropriate part of a relative 
measure of wage costs in a particular labor market area, a longstanding 
tenet of the wage index. In other words, while other wage-related costs 
may represent costs that may have an impact on an individual hospital's 
average hourly wage, we do not believe that costs reported by only a 
very small minority of hospitals accurately reflect the economic 
conditions of the labor market areas in which those hospitals are 
located. Therefore, it is possible that inclusion of other wage-related 
costs in the wage index in such a limited manner may distort the 
average hourly wage of a particular labor market area so that its wage 
index does not accurately represent that labor market area's current 
wages relative to national wages.
    Furthermore, the open-ended nature of the types of other wage-
related costs that may be included on Line 18 of Worksheet S-3, in 
contrast to the concrete list of core wage-related costs, may hinder 
consistent and proper reporting of fringe benefits. Our internal review 
indicates widely divergent types of costs that hospitals are reporting 
as other wage-related costs on Line 18. We are concerned that 
inconsistent reporting of other wage-related costs on Line 18 further 
compromises the accuracy of the wage index as a representation of the 
relative average hourly wage for each labor market area. Our intent in 
creating a core list of wage-related costs in the September 1, 1994 
IPPS final rule was to promote consistent reporting of fringe benefits, 
and we are increasingly concerned that inconsistent reporting of wage-
related costs on Line 18 of Worksheet S-3 undermines this effort. 
Specifically, we expressed in the September 1, 1994 IPPS final rule 
that since we began including fringe benefits in the wage index, we 
have been concerned with the inconsistent reporting of fringe benefits, 
whether because of a lack of provider proficiency in identifying fringe 
benefit costs or varying interpretations across fiscal intermediaries 
of the definition for fringe benefits in PRM-I, Section 2144.1 (59 FR 
45356).
    We believe that the limited and inconsistent use of Line 18 of 
Worksheet S-3 for reporting wage-related costs other than the core list 
might indicate that including other wage-related costs in the wage 
index compromises the accuracy of the wage index as a relative measure 
of wages in a given labor market area. Therefore, we are seeking public 
comments on whether we should, in future rulemaking, propose to only 
include the wage-related costs on the core list in the calculation of 
the wage index and not to include any other wage-related costs in the 
calculation of the wage index.
    Meanwhile, in this FY 2018 IPPS/LTCH PPS proposed rule, we are 
clarifying that, under our current policy, an other wage-related cost 
(which we define as the value of a benefit) must be a fringe benefit as 
described by the IRS (refer to IRS Publication 15-B) and must be 
reported to the IRS on employees' or contractors' W-2 or 1099 forms as 
taxable income in order to be considered an other wage-related cost on 
Line 18 of Worksheet S-3 and for the wage index. That is, other wage-
related costs that are not reported to the IRS on employees' or 
contractors' W-2 or 1099 forms as taxable income, even if not required 
to be reported to the IRS according to IRS requirements, will not be 
included in the wage index. This is consistent with current cost report 
instructions for Line 18 of Worksheet S-3, Part II of the Medicare cost 
report, Form 2552-10, which state that, to be considered an allowable 
other wage-related costs, the cost ``has been

[[Page 19902]]

reported to the IRS.'' We will apply this policy to the process for 
calculating the wage index for FY 2019, including the FY 2019 desk 
reviews beginning in September 2017.
    We believe this clarification is necessary because some hospitals 
have incorrectly interpreted prior manual and existing preamble 
language to mean that a cost could be considered an other wage-related 
cost if the provider's reporting (or not reporting) of the cost was in 
accordance with IRS requirements, rather than if the cost was actually 
reported on an employee's or contractor's W-2 or 1099 form as taxable 
income. We believe that such an interpretation of our policy would 
require an analysis of whether the reporting or not reporting of the 
cost to the IRS was done properly in accordance with IRS regulations 
and guidance in order to allow the cost as an other wage-related cost. 
We believe that the determinations regarding the proper or improper 
reporting of certain other wage-related costs to the IRS for the 
purpose of inclusion in the Medicare wage index are impractical for CMS 
and the MACs because we do not have the expertise and fluency in IRS 
regulations and tax law sufficient to perform such technical reviews of 
hospital wage-related costs. In contrast, our current policy of 
including an amount as an other wage-related cost for wage index 
purposes only if the amount was actually reported to the IRS on 
employees' or contractors' W-2 or 1099 forms as taxable income is a 
straightforward policy that we believe provides clarity to all involved 
parties. The brightline test of allowing an other wage-related cost to 
be included in the wage index only if it has been reported on an 
employee's or contractor's W-2 or 1099 form as taxable income helps 
ensure consistent treatment of other wage-related costs for all 
hospitals. Considering the variety of types of costs that may be 
included on Line 18 of Worksheet S-3 of the cost report for other wage-
related costs (assuming the 1-percent test is met and other criteria 
are met), we believe that a straightforward policy that is simple for 
hospitals and CMS to apply is particularly important.
    In addition, we believe the policy we are clarifying in this 
proposed rule, that an other wage-related cost can be included in the 
wage index only if it was reported to the IRS as taxable income on the 
employee's or contractor's W-2 or 1099, is consistent with CMS' 
longstanding position that a fringe benefit is not furnished for the 
convenience of the employer or otherwise excludable from income as a 
fringe benefit (such as a working condition fringe) and that 
inappropriate types of costs may not be included in the wage index. In 
response to a comment when we finalized the criteria for other wage-
related costs in the September 1, 1994 IPPS final rule (59 FR 45359), 
we stated that ``items such as the unrecovered cost of employee meals, 
tuition reimbursement, and auto allowances will only be allowed as a 
wage-related cost for purposes of the wage index if properly reported 
to the IRS on an employee's W-2 form as a fringe benefit.'' (We note 
that the September, 1 1994 IPPS final rule does not mention the 1099 
form for contractors, as contract labor was not allowed at that time in 
the wage index. Consistent with our treatment of costs for contract 
labor similar to that of employees for the wage index, we are 
clarifying that the requirement that a cost be reported to the IRS to 
be allowed as a wage-related cost for the wage index also applies to 
contract labor, which must be reported on the contractor's 1099 to be 
allowed as a wage-related cost for the wage index.) We believe that 
requiring other wage-related costs to be reported on employees' or 
contractors' W-2 or 1099 forms to be allowable for Line 18 of Worksheet 
S-3 of the Medicare cost report is consistent with the requirement that 
the cost is not being furnished for the convenience of the employer. A 
cost reported on an employee's or contractor's W-2 or 1099 form as 
taxable income is clearly a wage-related cost that is provided solely 
for the benefit of the employee. We believe that the requirement that 
other wage-related costs be a benefit to the employee also guarantees 
that administrative costs such as overhead and capitalized costs are 
excluded from other wage-related costs in the wage index.
    Therefore, for the reasons discussed above, we are clarifying that 
a cost must be a fringe benefit as described by the IRS and must be 
reported to the IRS on employees' or contractors' W-2 or 1099 forms as 
taxable income in order to be considered an other wage-related cost on 
Line 18 of Worksheet S-3 and for the wage index. In addition, as 
discussed earlier, we are seeking public comments on whether we should 
consider in future rulemaking removing other wage-related costs from 
the wage index.
    Because some hospitals have incorrectly interpreted prior manual 
and existing preamble language, as stated earlier, we are restating the 
criteria from the September 1, 1994 IPPS final rule (59 FR 45357) for 
allowing other wage-related costs for the wage index, with 
clarifications. The criteria follow below, and we intend to update the 
manual with these clarifications:
    Other Wage-Related Costs. A hospital may be able to report a wage-
related cost (defined as the value of the benefit) that does not appear 
on the core list if it meets all of the following criteria:
     The wage-related cost is provided at a significant 
financial cost to the employer. To meet this test, the individual wage-
related cost must be greater than 1 percent of total salaries after the 
direct excluded salaries are removed (the sum of Worksheet S-3, Part 
II, Lines 11, 12, 13, 14, column 4, and Worksheet S-3, Part III, Line 
3, Column 4).
     The wage-related cost is a fringe benefit as described by 
the IRS and is reported to the IRS on an employee's or contractor's W-2 
or 1099 form as taxable income.
     The wage-related cost is not furnished for the convenience 
of the provider or otherwise excludable from income as a fringe benefit 
(such as a working condition fringe).
    We note that those wage-related costs reported as salaries on Line 
1 (for example, loan forgiveness and sick pay accruals) should not be 
included as other wage-related costs on Line 18.

E. Proposed Occupational Mix Adjustment to the FY 2018 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. Use of 2013 Occupational Mix Survey for the FY 2018 Wage Index
    Section 304(c) of the Consolidated Appropriations Act, 2001 (Pub. 
L. 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

[[Page 19903]]

Medicare program. We collected data in 2013 to compute the occupational 
mix adjustment for the FY 2016, FY 2017, and FY 2018 wage indexes. A 
new measurement of occupational mix is required for FY 2019.
    The 2013 survey included the same data elements and definitions as 
the previous 2010 survey and provided 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). We 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: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html. 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: https://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.
2. Use of the 2016 Medicare Wage Index Occupational Mix Survey for the 
FY 2019 Wage Index
    As stated earlier, a new measurement of occupational mix is 
required for FY 2019. The FY 2019 occupational mix adjustment will be 
based on a new calendar year (CY) 2016 survey. The CY 2016 survey (CMS 
Form CMS-10079) received OMB approval on September 27, 2016. The final 
CY 2016 Occupational Mix Survey Hospital Reporting Form is available on 
the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/2016-Occupational-Mix-Survey-Hospital-Reporting-Form-CMS-10079-for-the-Wage-Index-Beginning-FY-2019.html. Hospitals are required to submit their 
completed 2016 surveys to their MACs by July 3, 2017. The preliminary, 
unaudited CY 2016 survey data will be posted on the CMS Web site in 
mid-July 2017. As with the Worksheet S-3, Parts II and III cost report 
wage data, as part of the FY 2019 desk review process, the MACs will 
revise or verify data elements in hospitals' occupational mix surveys 
that result in certain edit failures.
3. Calculation of the Proposed Occupational Mix Adjustment for FY 2018
    For FY 2018, we are proposing to calculate the occupational mix 
adjustment factor using the same methodology that we have used since 
the FY 2012 wage index (76 FR 51582 through 51586) and to apply the 
occupational mix adjustment to 100 percent of the FY 2018 wage index. 
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 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 2018 wage index. For the proposed FY 2018 wage index, we are 
using the Worksheet S-3, Parts II and III wage data of 3,325 hospitals, 
and we are using the occupational mix surveys of 3,128 hospitals for 
which we also have Worksheet S-3 wage data, which represented a 
``response'' rate of 94 percent (3,128/3,325). For the proposed FY 2018 
wage index, we are applying 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). As a result 
of applying this methodology, the proposed FY 2018 occupational mix 
adjusted national average hourly wage is $41.9599.

F. Analysis and Implementation of the Proposed Occupational Mix 
Adjustment and the Proposed FY 2018 Occupational Mix Adjusted Wage 
Index

    As discussed in section III.E. of the preamble of this proposed 
rule, for FY 2018, we are proposing to apply the occupational mix 
adjustment to 100 percent of the FY 2018 wage index. We calculated the 
proposed 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 2017 wage index results in a 
proposed national average hourly wage of $41.9599.
    The proposed FY 2018 national average hourly wages for each 
occupational mix nursing subcategory as calculated in Step 2 of the 
occupational mix calculation are as follows:

------------------------------------------------------------------------
                                                              Average
          Occupational mix  nursing subcategory             hourly wage
------------------------------------------------------------------------
National RN.............................................    $38.84760578
National LPN and Surgical Technician....................     22.72715122
National Nurse Aide, Orderly, and Attendant.............     15.94890269
National Medical Assistant..............................     17.97139786
National Nurse Category.................................     32.84544016
------------------------------------------------------------------------

    The proposed national average hourly wage for the entire nurse 
category as computed in Step 5 of the occupational mix calculation is 
$32.84544016. Hospitals with a nurse category average hourly wage (as 
calculated in Step 4) of greater than the national nurse category 
average hourly wage receive an occupational mix adjustment factor (as 
calculated in Step 6) of less than 1.0. Hospitals with a nurse category 
average hourly wage (as calculated in Step 4) of less than the national 
nurse category average hourly wage receive an occupational mix 
adjustment factor (as calculated in Step 6) of greater than 1.0.
    Based on the 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 42.6 percent, 
and the national percentage of hospital employees in the all other 
occupations category is 57.4 percent. At the CBSA level, the percentage 
of hospital employees in the nurse category ranged from a low of 25.7 
percent in one CBSA to a high of 73.5 percent in another CBSA.
    We compared the FY 2018 proposed occupational mix adjusted wage 
indexes for each CBSA to the unadjusted wage indexes for each CBSA. As 
a result of applying the proposed occupational mix adjustment to the 
wage data, the proposed wage index values for 223 (54.7 percent) urban 
areas and 23 (48.9 percent) rural areas would increase. The proposed 
wage index values for 108 (26.5 percent) urban areas would increase by 
greater than or equal to 1 percent but less than 5 percent, and the 
proposed wage index values for 6 (1.5 percent) urban areas would 
increase by 5 percent or more. The proposed wage index values for 10 
(21.3 percent) rural areas would increase by greater than or equal to 1 
percent but less than 5

[[Page 19904]]

percent, and no rural areas' proposed wage index values would increase 
by 5 percent or more. However, the proposed wage index values for 184 
(45.1 percent) urban areas and 24 (51.1 percent) rural areas would 
decrease. The proposed wage index values for 85 (20.8 percent) urban 
areas would decrease by greater than or equal to 1 percent but less 
than 5 percent, and no urban areas' final wage index value would 
decrease by 5 percent or more. The proposed wage index values of 8 
(17.0 percent) rural areas would decrease by greater than or equal to 1 
percent and less than 5 percent, and no rural areas' final wage index 
values would decrease by 5 percent or more. The largest proposed 
positive impacts would be 17.4 percent for an urban area and 2.9 
percent for a rural area. The largest proposed negative impacts would 
be 4.9 percent for an urban area and 2.3 percent for a rural area. One 
urban area's proposed wage index, but no rural area wage indexes, would 
remain unchanged by application of the occupational mix adjustment. 
These results indicate that a larger percentage of urban areas (54.7 
percent) would benefit from the occupational mix adjustment than would 
rural areas (48.9 percent).

G. Proposed Application of the Rural, Imputed, and Frontier Floors

1. Proposed Rural Floor
    Section 4410(a) of Public Law 105-33 provides that, for discharges 
on or after October 1, 1997, the area wage index applicable to any 
hospital that is located in an urban area of a State may not be less 
than the area wage index applicable to hospitals located in rural areas 
in that State. This provision is referred to as the ``rural floor''. 
Section 3141 of Public Law 111-148 also requires that a national budget 
neutrality adjustment be applied in implementing the rural floor. Based 
on the proposed FY 2018 wage index associated with this proposed rule 
(which is available via the Internet on the CMS Web site), we estimated 
that 366 hospitals would receive an increase in their FY 2018 proposed 
wage index due to the application of the rural floor.
2. Proposed Expiration of the Imputed Floor Policy
    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 seven times, 
the last of which was adopted in the FY 2017 IPPS/LTCH PPS final rule 
and is set to expire on September 30, 2017. (We refer readers to 
further discussions of the imputed floor in the FY 2014, FY 2015, FY 
2016, and FY 2017 IPPS/LTCH PPS final rules (78 FR 50589 through 50590, 
79 FR 49969 through 49970, 80 FR 49497 through 49498, and 81 FR 56921 
through 56922, 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 proposed 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 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 postreclassified 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 that final rule, we revised the 
regulations at Sec.  412.64(h)(4) and (h)(4)(vi) to reflect the 1-year 
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

[[Page 19905]]

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.
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49497 through 
49498), for FY 2016, we extended the imputed floor policy (under both 
the original methodology and the alternative methodology) for 1 
additional year, through September 30, 2016. In that final rule, we 
revised the regulations at Sec.  412.64(h)(4) and (h)(4)(vi) to reflect 
this additional 1-year extension.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56921 through 
56922), for FY 2017, we extended the imputed floor policy (under both 
the original methodology and the alternative methodology) for 1 
additional year, through September 30, 2017. In that final rule, we 
revised the regulations at Sec.  412.64(h)(4) and (h)(4)(vi) to reflect 
this additional 1-year extension.
    The imputed floor is set to expire effective October 1, 2017, and 
we are not proposing to extend the imputed floor policy. In the FY 2005 
IPPS final rule (69 FR 49110), we adopted the imputed floor policy for 
all-urban States under the authority of section 1886(d)(3)(E) of the 
Act, which gives the Secretary broad authority 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 for area differences in hospital wage levels 
by a factor (established by the Secretary). However, we have expressed 
reservations about establishment of an imputed floor, considering that 
the imputed rural floor methodology creates a disadvantage in the 
application of the wage index to hospitals in States with rural 
hospitals but no urban hospitals receiving the rural floor (72 FR 24786 
and 72 FR 47322). As we discussed in the FY 2008 IPPS final rule (72 FR 
47322), the application of the rural and imputed floors requires 
transfer of payments from hospitals in States with rural hospitals but 
where the rural floor is not applied to hospitals in States where the 
rural or imputed floor is applied. For this reason, in this proposed 
rule, we are proposing not to apply an imputed floor to wage index 
calculations and payments for hospitals in all-urban States for FY 2018 
and subsequent years. That is, hospitals in New Jersey, Delaware, and 
Rhode Island (and in any other all-urban State) would receive a wage 
index that is calculated without applying an imputed floor for FY 2018 
and subsequent years. Therefore, only States containing both rural 
areas and hospitals located in such areas (including any hospital 
reclassified as rural under the provisions of Sec.  412.103 of the 
regulations) would benefit from the rural floor, in accordance with 
section 4410 of Public Law 105-33. In addition, we would no longer 
include the imputed floor as a factor in the national budget neutrality 
adjustment. Therefore, the proposed wage index and impact tables 
associated with this FY 2018 IPPS/LTCH PPS proposed rule (which are 
available via the Internet on the CMS Web site) do not reflect the 
imputed floor policy, and there is no proposed national budget 
neutrality adjustment for the imputed floor for FY 2018. We are 
inviting public comments on our proposal not to extend the imputed 
floor for FY 2018 and subsequent years.
3. Proposed State Frontier Floor for FY 2018
    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 the 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).) Fifty-two hospitals 
would receive the frontier floor value of 1.0000 for their FY 2018 wage 
index in this proposed rule. These hospitals are located in Montana, 
Nevada, North Dakota, South Dakota, and Wyoming. We are not proposing 
any changes to the frontier floor policy for FY 2018. The areas 
affected by the proposed rural and frontier floor policies for the 
proposed FY 2018 wage index are identified in Table 2 associated with 
this proposed rule, which is available via the Internet on the CMS Web 
site.

H. Proposed FY 2018 Wage Index Tables

    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49498 and 49807 
through 49808), we finalized a proposal to streamline and consolidate 
the wage index tables associated with the IPPS proposed and final rules 
for FY 2016 and subsequent fiscal years. Prior to FY 2016, the wage 
index tables had consisted of 12 tables (Tables 2, 3A, 3B, 4A, 4B, 4C, 
4D, 4E, 4F, 4J, 9A, and 9C) that were made available via the Internet 
on the CMS Web site. Effective beginning FY 2016, with the exception of 
Table 4E, we streamlined and consolidated 11 tables (Tables 2, 3A, 3B, 
4A, 4B, 4C, 4D, 4F, 4J, 9A, and 9C) into 2 tables (Tables 2 and 3). We 
refer readers to section VI. of the Addendum to this proposed rule for 
a discussion of the proposed wage index tables for FY 2018.

I. 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 Medicare Geographic 
Classification Review Board (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 (usually by September 1). Generally, hospitals must be 
proximate to the labor market area to which they are seeking 
reclassification and must demonstrate characteristics similar to 
hospitals located in that area. The MGCRB issues its decisions by the 
end of February for reclassifications that become effective for the 
following fiscal year (beginning October 1). The regulations applicable 
to reclassifications by the MGCRB are located in 42 CFR 412.230 through 
412.280. (We refer readers to a discussion in the FY 2002 IPPS final 
rule (66 FR 39874 and 39875) regarding how the MGCRB defines mileage 
for purposes of the proximity requirements.) The general policies for 
reclassifications and redesignations and the policies for the effects 
of hospitals' reclassifications and redesignations on the wage index 
are 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.
    On April 21, 2016, we published an interim final rule with comment 
period (IFC) in the Federal Register (81 FR 23428 through 23438) that 
included provisions amending our regulations to allow hospitals 
nationwide to have simultaneous Sec.  412.103 and MGCRB 
reclassifications. For reclassifications effective beginning FY 2018, a 
hospital may acquire rural status under Sec.  412.103 and subsequently 
apply for a reclassification under the MGCRB using distance and average 
hourly wage criteria designated for rural hospitals. In

[[Page 19906]]

addition, we provided that a hospital that has an active MGCRB 
reclassification and is then approved for redesignation under Sec.  
412.103 will not lose its MGCRB reclassification; such a hospital 
receives a reclassified urban wage index during the years of its active 
MGCRB reclassification and is still considered rural under section 
1886(d) of the Act and for other purposes.
    We discussed that when there is both a Sec.  412.103 redesignation 
and an MGCRB reclassification, the MGCRB reclassification controls for 
wage index calculation and payment purposes. We exclude hospitals with 
Sec.  412.103 redesignations from the calculation of the reclassified 
rural wage index if they also have an active MGCRB reclassification to 
another area. That is, if an application for urban reclassification 
through the MGCRB is approved, and is not withdrawn or terminated by 
the hospital within the established timelines, we consider the 
hospital's geographic CBSA and the urban CBSA to which the hospital is 
reclassified under the MGCRB for the wage index calculation. We refer 
readers to the April 21, 2016 IFC (81 FR 23428 through 23438) and the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 56922 through 56930) for a full 
discussion of the effect of simultaneous reclassifications under both 
the Sec.  412.103 and the MGCRB processes on wage index calculations.
2. MGCRB Reclassification and Redesignation Issues for FY 2018
a. FY 2018 Reclassification Requirements and Approvals
    As previously stated, under section 1886(d)(10) of the Act, the 
MGCRB considers applications by hospitals for geographic 
reclassification for purposes of payment under the IPPS. The specific 
procedures and rules that apply to the geographic reclassification 
process are outlined in regulations under 42 CFR 412.230 through 
412.280.
    At the time this proposed rule was constructed, the MGCRB had 
completed its review of FY 2018 reclassification requests. Based on 
such reviews, there are 375 hospitals approved for wage index 
reclassifications by the MGCRB starting in FY 2018. Because MGCRB wage 
index reclassifications are effective for 3 years, for FY 2018, 
hospitals reclassified beginning in FY 2016 or FY 2017 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 257 hospitals approved for wage index reclassifications in 
FY 2016 that will continue for FY 2018, and 274 hospitals approved for 
wage index reclassifications in FY 2017 that will continue for FY 2018. 
Of all the hospitals approved for reclassification for FY 2016, FY 
2017, and FY 2018, based upon the review at the time of this proposed 
rule, 906 hospitals are in a MGCRB reclassification status for FY 2018.
    Under the regulations at 42 CFR 412.273, hospitals that have been 
reclassified by the MGCRB are permitted to withdraw their applications 
if the request for withdrawal is received by the MGCRB within 45 days 
of the publication of CMS' annual notice of proposed rulemaking 
concerning changes to the inpatient hospital prospective payment system 
and proposed payment rates for the fiscal year for which the 
application has been filed. (We note that in section III.I.4. of the 
preamble of this proposed rule, we are proposing to revise the above 
described regulation text to specify that written notice to the MGCRB 
must be provided within 45 days from the date of public display of the 
proposed rule at the Office of the Federal Register. If finalized, that 
proposal would be effective beginning with the FY 2019 IPPS/LTCH PPS 
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 Sec.  
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 2018 will be incorporated 
into the wage index values published in the FY 2018 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.
    Applications for FY 2019 reclassifications are due to the MGCRB by 
September 1, 2017 (the first working day of September 2017). We note 
that this is also the deadline for canceling a previous wage index 
reclassification, withdrawal, or termination under 42 CFR 412.273(d). 
Applications and other information about MGCRB reclassifications may be 
obtained, beginning in mid-July 2017, via the Internet on the CMS Web 
site at: https://www.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.
    Under previous regulations at 42 CFR 412.256(a)(1), applications 
for reclassification were required to be mailed or delivered to the 
MGCRB, with a copy to CMS, and were not allowed to be submitted through 
the facsimile (FAX) process or by other electronic means. Because we 
believed this previous policy was outdated and overly restrictive and 
to promote ease of application for FY 2018 and subsequent years, in the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 56928), we revised this policy 
to require applications and supporting documentation to be submitted 
via the method prescribed in instructions by the MGCRB, with an 
electronic copy to CMS. We revised Sec.  412.256(a)(1) to specify that 
an application must be submitted to the MGCRB according to the method 
prescribed by the MGCRB, with an electronic copy of the application 
sent to CMS. We specified that CMS copies should be sent via email to 
[email protected].
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56928), we 
reiterated that MGCRB application requirements will be published 
separately from the rulemaking process, and paper applications will 
likely still be required. The MGCRB makes all initial determinations 
for geographic reclassification requests, but CMS requests copies of 
all applications to assist in verifying a reclassification status 
during the wage index development process. We stated that we believed 
that requiring electronic versions would better aid CMS in this 
process, and would reduce the overall burden upon hospitals.
b. Extension of PRA Information Collection Requirement Approval for 
MGCRB Applications
    As stated earlier, 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

[[Page 19907]]

procedures and rules that apply to the geographic reclassification 
process are outlined in the regulations under 42 CFR 412.230 through 
412.280. The current information collection requirements for the MGCRB 
procedures and criteria and supporting regulations in 42 CFR 412.256 
subject to the Paperwork Reduction Act provisions are currently 
approved under OMB Control Number 0938-0573 and expired on February 28, 
2017. An extension of the currently approved collection is required in 
time for applications due to the MGCRB September 1, 2017 for FY 2019 
reclassifications. As discussed in section XIII.B. of the preamble of 
this proposed rule, a request for an extension of the current 
information collection requirements for the MGCRB procedures and 
criteria and supporting regulations is currently awaiting approval by 
OMB and can be accessed at: https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201612-0938-023.
c. Proposed Deadline for Submittal of Documentation of Sole Community 
Hospital (SCH) and Rural Referral Center (RRC) Classification Status to 
the MGCRB
    The regulations at 42 CFR 412.230(a)(3), consistent with section 
1886(d)(10)(D)(i)(III) of the Act, set special rules for sole community 
hospitals (SCHs) and rural referral centers (RRCs) that are 
reclassifying under the MGCRB. Specifically, a hospital that is an RRC 
or an SCH, or both, does not have to demonstrate a close proximity to 
the area to which it seeks redesignation. If a hospital that is an RRC 
or an SCH, or both, qualifies for urban redesignation, it is 
redesignated to the urban area that is closest to the hospital. If the 
hospital is closer to another rural area than to any urban area, it may 
seek redesignation to either the closest rural or the closest urban 
area.
    In addition, section 1886(d)(10)(D)(iii) of the Act, as implemented 
in the regulations at Sec.  412.230(d)(3)(i), provides an exception to 
certain wage comparison criteria for RRCs and former RRCs reclassifying 
under the MGCRB. Under Sec.  412.230(d)(3)(i), if a hospital was ever 
an RRC, it does not have to demonstrate that it meets the average 
hourly wage criterion at Sec.  412.230(d)(1)(iii), which would require 
that the hospital's average hourly wage be at least 106 percent for 
rural hospitals and at least 108 percent for urban hospitals of the 
average hourly wage of all other hospitals in the area in which the 
hospital is located. Rather, as codified at Sec.  412.230(d)(3)(ii), 
consistent with our authority under section 1886(d)(10)(D)(i) of the 
Act, if a hospital was ever an RRC, it is required to meet only the 
criterion for rural hospitals at Sec.  412.230(d)(1)(iv), which 
requires that the hospital's average hourly wage is equal to at least 
82 percent of the average hourly wage of hospitals in the area to which 
it seeks redesignation. The regulations at Sec.  412.96 set forth the 
criteria that a hospital must meet in order to qualify as an RRC.
    For a hospital to use the special rules at Sec.  412.230(a)(3) for 
SCHs and RRCs, the existing regulation at Sec.  412.230(a)(3) requires 
that the hospital be an active SCH or an RRC as of the date of the 
MGCRB's review. In addition, for a hospital to use the RRC exceptions 
at Sec.  412.230(d)(3), a hospital must either be an RRC at the time of 
the MGCRB's review or have previously been classified as an RRC in the 
past. In other words, under the existing regulations, if a hospital is 
approved by CMS as an SCH or an RRC but the approval is not yet 
effective at the time of the MGCRB's review, the hospital's status as 
an SCH or an RRC would not be considered in the MGCRB's decision, 
unless the hospital was a former RRC, in which case it would be able to 
use the RRC exceptions at Sec.  412.230(d)(3).
    The MGCRB currently accepts supporting documentation of SCH and RRC 
classification (the CMS approval letter) up until the date of MGCRB's 
review, which varies annually. A hospital may apply at any time for 
classification as an SCH, and the classification is effective 30 days 
after the date of CMS' written notification of approval, in accordance 
with Sec.  412.92. Considering that the MGCRB usually meets in early 
February, hospitals typically seek to obtain SCH approval letters no 
later than early January (30 days prior to the date of MGCRB review) 
for the SCH status to be effective as of the date of the MGCRB's 
review. However, consistent with section 1886(d)(5)(C)(i) of the Act, a 
hospital must submit its application for RRC status during the quarter 
before the first quarter of the hospital's cost reporting period, to be 
effective at the beginning of the next cost reporting period. The 
existing regulation at Sec.  412.230(a)(3), combined with the statutory 
timeframe for RRC classification, require that a hospital's cost 
reporting period as an RRC begin on or before the date of the MGCRB's 
review in order to be considered an RRC by the MGCRB for purposes of 
the special rules under Sec.  412.230(a)(3). Similarly, in order to use 
the RRC exceptions under Sec.  412.230(d)(3), a hospital's RRC status 
must be effective on the date of the MGCRB's review, or (unlike Sec.  
412.230(a)(3)) the hospital must have had RRC status in the past. For 
example, a hospital with a cost reporting period beginning in March 
would obtain RRC approval, in accordance with the statutory timeframe, 
during the December through February quarter (potentially before the 
MGCRB's decision), but would not be considered an RRC by the MGCRB 
because the approval would not be effective until the next cost 
reporting period begins in March, after the MGCRB's decision (unless, 
for purposes of Sec.  412.230(d)(3), the hospital had previously been 
classified as an RRC in the past).
    The current practice of accepting SCH and RRC approvals up until 
the date of MGCRB review does not ensure adequate time for the MGCRB to 
include SCH and RRC approvals in its review. We note that many 
hospitals now obtain SCH or RRC status based on a Sec.  412.103 
reclassification in order to reclassify using the special rules and 
exceptions under the MGCRB following the April 21, 2016 IFC (81 FR 
23428), which revised the regulations to allow hospitals nationwide to 
reclassify based on acquired rural status. We believe that the 
additional volume of SCH and RRC approvals submitted to the MGCRB 
increases the need for an earlier deadline for documentation of SCH and 
RRC classifications to be submitted to the MGCRB for purposes of the 
special rules at Sec.  412.230(a)(3) and the exception for RRCs at 
Sec.  412.230(d)(3). In addition, because the date of the MGCRB's 
review varies annually, we believe hospitals would benefit from the 
certainty of a set date by which documentation of RRC or SCH status 
must be submitted in order to have that status considered by the MGCRB 
under 412.230(a)(3) and Sec.  412.230(d)(3).
    Therefore, to ensure sufficient time for the MGCRB to include SCH 
and RRC status approvals in its review and increase clarity for 
hospitals, while allowing as much time and flexibility as possible for 
hospitals applying for RRC status to be considered RRCs by the MGCRB, 
we are proposing to revise the regulations at Sec.  412.230(a)(3) and 
Sec.  412.230(d)(3). We are proposing to revise the regulations at 
Sec.  412.230(a)(3) in two ways. First, we are proposing to establish a 
deadline of the first business day after January 1 for hospitals to 
submit to the MGCRB documentation of SCH or RRC status approval (the 
CMS approval letter) in order to take advantage of the special rules 
under Sec.  412.230(a)(3) when reclassifying under the MGCRB. We 
believe that this date of the first business day after January 1 would 
provide sufficient time for the MGCRB to consider documentation of

[[Page 19908]]

SCH or RRC status approval in its review, without negatively affecting 
hospitals seeking to obtain SCH or RRC status, as explained below. 
Second, we are proposing to revise Sec.  412.230(a)(3) to require 
hospitals to submit documentation of SCH or RRC status approval (the 
CMS approval letter) by the deadline above, rather than to have SCH or 
RRC classification that is effective as of the date of MGCRB review, in 
order to use the special rules for SCHs and RRCs under Sec.  
412.230(a)(3). Likewise, we are proposing to revise the regulations at 
Sec.  412.230(d)(3) so that a hospital qualifies for these RRC 
exceptions if it was ever approved as a RRC. In other words, the 
exceptions at Sec.  412.230(d)(3) would continue to apply to hospitals 
that were ever classified as RRCs, but consistent with our authority 
under section 1886(d)(10)(D)(i) of the Act to publish guidelines to be 
utilized by the MGCRB, we would also extend these exceptions to 
hospitals that were ever approved as RRCs. Similar to Sec.  
412.230(a)(3), we also are proposing to establish a deadline of the 
first business day after January 1 for hospitals to submit 
documentation of RRC status approval (the CMS approval letter) in order 
to take advantage of the exception under Sec.  412.230(d)(3) when 
reclassifying under the MGCRB. These proposed revisions would more 
appropriately allow the MGCRB to prepare for its review and would allow 
hospitals obtaining SCH or RRC status approval as late as the first 
business day after January 1 to have these classifications considered 
by the MGCRB under Sec.  412.230(a)(3) and (d)(3), irrespective of the 
effective date of these classifications. These proposals would not 
substantially affect hospitals seeking SCH classification for purposes 
of reclassifying under the MGCRB because a hospital must obtain SCH 
status approval by early January under the existing regulation in order 
to have that classification effective 30 days later by the time the 
Board usually meets in early February. For hospitals seeking RRC 
classification for purposes of reclassifying under the MGCRB, however, 
the proposed deadline of no later than the first business day after 
January 1, in concert with our proposal to accept documentation of 
approval (the CMS approval letter) instead of requiring the hospital to 
be an active RRC at the time of the MGCRB review in order to take 
advantage of the special rules and exceptions under Sec.  412.230(a)(3) 
and (d)(3), is beneficial. The proposed revisions to the regulations at 
Sec.  412.230(a)(3) and (d)(3) accommodate more hospitals with various 
cost reporting year ends by allowing hospitals with cost reporting 
periods beginning soon after the MGCRB's decision to have RRC status 
approvals included in the MGCRB's review. Under the proposals, the 
MGCRB would consider an RRC status approval obtained as late as the 
first business day after January 1 instead of requiring the RRC 
classification to be effective by the time the Board meets, which has 
been in February in past years. For example, a hospital with a cost 
reporting period beginning as late as March, which could apply for RRC 
status approval in accordance with the statutory timeframe starting in 
December, would be considered an RRC by the MGCRB if it submits 
documentation of approval of RRC status no later than the first 
business day after January 1, even though the approval would not be 
effective until after the MGCRB's decision.
    For the reasons discussed above, consistent with our authority 
under section 1886(d)(10)(D)(i) of the Act to publish guidelines to be 
utilized by the MGCRB, we are proposing to revise the regulations at 
Sec.  412.230(a)(3) to specify that, to be redesignated under the 
special rules in that paragraph, the hospital must submit documentation 
of the approval of SCH or RRC status to the MGCRB no later than the 
first business day after January 1. In addition, we are proposing 
conforming revisions to paragraphs (a)(3)(i) and (ii) of Sec.  412.230 
to reflect that these paragraphs apply to hospitals with SCH and RRC 
approval as specified above (and not only effective status). 
Specifically, we are proposing to revise Sec.  412.230(a)(3)(i) to 
specify that a hospital that is approved as an RRC or SCH, or both, 
does not have to demonstrate a close proximity to the area to which it 
seeks redesignation; and to revise Sec.  412.230(a)(3)(ii) to specify 
that this paragraph applies if a hospital that is approved as an RRC or 
SCH, or both, qualifies for urban redesignation. We note that we are 
proposing additional revisions to Sec.  412.230(a)(3)(ii) as discussed 
in section III.I.2.d. of the preamble of this proposed rule.
    In addition, for the reasons discussed above, consistent with our 
authority under section 1886(d)(10)(D)(i) of the Act to publish 
guidelines to be utilized by the MGCRB, we are proposing to revise the 
regulations at Sec.  412.230(d)(3). Specifically, we are proposing to 
add introductory language to Sec.  412.230(d)(3) to specify that for 
the exceptions in this paragraph to apply, the hospital must submit 
documentation of the approval of RRC status (current or past) to the 
MGCRB no later than the first business day after January 1. In 
addition, we are proposing to revise Sec.  412.230(d)(3)(i) to specify 
that if a hospital was ever approved as an RRC, it does not have to 
demonstrate that it meets the average hourly wage criterion set forth 
in Sec.  412.230(d)(1)(iii); and to revise Sec.  412.230(d)(3)(ii) to 
specify that if a hospital was ever approved as an RRC, it is required 
to meet only the criterion that applies to rural hospitals under Sec.  
412.230(d)(1)(iv), regardless of its actual location in an urban or 
rural area.
    We are inviting public comments on these proposals.
d. Clarification of Special Rules for SCHs and RRCs Reclassifying to 
Geographic Home Area
    Following issuance of the April 21, 2016 IFC (81 FR 23428), 
hospitals may simultaneously be redesignated as rural under Sec.  
412.103 and reclassified under the MGCRB. An urban hospital seeking 
benefits of rural status, such as rural payments for disproportionate 
share hospitals (DSH) and eligibility for the 340B Drug Pricing Program 
administered by HRSA, without the associated rural wage index may be 
redesignated as rural under Sec.  412.103 (if it meets the applicable 
requirements) and also reclassify under the MGCRB to an urban area 
(again, if it meets the applicable requirements). As discussed earlier 
and in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56922 through 
56927), a hospital with simultaneous Sec.  412.103 redesignation and 
MGCRB reclassification receives the wage index of the CBSA to which it 
is reclassified under the MGCRB while still maintaining Sec.  412.103 
reclassified rural status for other purposes.
    Hospitals that are redesignated under Sec.  412.103 may seek MGCRB 
reclassification to their geographic home area. Such hospitals 
automatically meet the criteria for proximity, but must still 
demonstrate that they meet the wage comparison requirements using the 
criteria for rural hospitals at Sec.  412.230(d). Specifically, a 
hospital with a Sec.  412.103 redesignation seeking reclassification 
under the MGCRB must demonstrate that its average hourly wage is at 
least 106 percent of the average hourly wage of all other hospitals in 
the area in which the hospital is located in accordance with Sec.  
412.230(d)(1)(iii), and the hospital's average hourly wage is equal to 
at least 82 percent of the average hourly wage of hospitals in the area 
to which it seeks redesignation, in accordance with Sec.  
412.230(d)(1)(iv). In this case, both the area in which the hospital is 
located and

[[Page 19909]]

the area to which it seeks redesignation are the geographic home area.
    If a hospital with a Sec.  412.103 rural redesignation also has SCH 
or RRC status based on its acquired rural status, the hospital may use 
the exception at Sec.  412.230(d)(3) for RRCs seeking reclassification 
under the MGCRB and the special reclassification rules at Sec.  
412.230(a)(3) for SCHs and RRCs. Specifically, under Sec.  
412.230(d)(3)(ii), an RRC or former RRC must only demonstrate that its 
average hourly wage is equal to at least 82 percent of the average 
hourly wage of hospitals in the area to which it seeks redesignation. 
In other words, a hospital with RRC status based on a Sec.  412.103 
rural redesignation that is seeking additional reclassification under 
the MGCRB to its geographic home area must only demonstrate that its 
average hourly wage is equal to at least 82 percent of the average 
hourly wage of hospitals in its geographic home area. The proximity 
requirement is waived under Sec.  412.230(a)(3) for SCHs and RRCs, and 
SCHs and RRCs are redesignated to the urban area that is closest to the 
hospital (or if the hospital is closer to another rural area than to 
any urban area, it may seek redesignation to either the closest rural 
area or the closest urban area).
    The existing regulation at Sec.  412.230(a)(3)(ii) states that if 
an SCH or RRC qualifies for urban redesignation, it is redesignated to 
the urban area that is closest to the hospital. As currently worded, we 
believe it is unclear how this provision would apply to a hospital with 
a Sec.  412.103 rural redesignation and SCH or RRC status. If the urban 
area that is closest to the hospital is interpreted to mean the 
hospital's geographic home area, a hospital with a Sec.  412.103 rural 
redesignation and SCH or RRC status would not be able to reclassify to 
any closest area outside of the hospital's geographic home area, but 
would only be allowed to reclassify to the geographic home area. 
Alternatively, if the urban area that is closest to the hospital is 
interpreted to mean the closest urban area to the hospital's geographic 
home area, the hospital would seem to be precluded from reclassifying 
under the MGCRB to its geographic home area. In other words, under the 
existing language of this regulation, the urban area that is closest to 
the hospital can either be interpreted to mean the hospital's 
geographic home area, or the closest area outside of the hospital's 
geographic home area.
    We believe it would be appropriate to revise Sec.  
412.230(a)(3)(ii) to clarify that it allows for redesignation to either 
the hospital's geographic home area or to the closest area outside of 
the hospital's geographic home area. Prior to the April 21, 2016 
interim final rule with comment period (IFC) (81 FR 23428), it was not 
possible for a hospital with Sec.  412.103 rural redesignation to seek 
reclassification to its geographic home area or to the closest area 
outside its geographic home area under the MGCRB because dual 
reclassification under Sec.  412.103 and under the MGCRB was not 
permitted. However, the IFC allowed dual Sec.  412.103 and MGCRB 
reclassifications, so a hospital may now reclassify to a rural area 
under Sec.  412.103 and then reclassify back to its geographic home 
area or another area under the MGCRB for wage index purposes (if it 
meets all criteria). Thus, depending on the circumstances, a hospital 
may seek to reclassify to either its geographic home area or the 
closest area outside of its geographic home area.
    Therefore, we are proposing to revise the regulations at Sec.  
412.230(a)(3)(ii) to clarify that a hospital with a Sec.  412.103 rural 
redesignation and SCH or RRC approval may reclassify under the MGCRB to 
its geographic home area or to the closest area outside of its 
geographic home area. Specifically, we are proposing to revise Sec.  
412.230(a)(3)(ii) to state that if a hospital that is approved as an 
RRC or an SCH, or both, qualifies for urban redesignation, it is 
redesignated to the urban area that is closest to the hospital or to 
the hospital's geographic home area. If the hospital is closer to 
another rural area than to any urban area, it may seek redesignation to 
either the closest rural or the closest urban area.
3. Redesignations Under Section 1886(d)(8)(B) of the Act
    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 effective for the 
fiscal year in which the hospital receives the out-migration 
adjustment. In addition, we adopted a minor procedural change that 
would allow a Lugar hospital that qualifies for and accepts the out-
migration adjustment (through written notification to CMS within 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. (We note that, in section III.I.4. of the 
preamble of this proposed rule, we are proposing to revise this policy 
to require a Lugar hospital that qualifies for and accepts the out-
migration adjustment, or that no longer wishes to accept the out-
migration adjustment and instead elects to return to its deemed urban 
status, to notify CMS within 45 days from the date of public display of 
the proposed rule at the Office of the Federal Register.) 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. In the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 56930), we again clarified that such a request to 
waive Lugar status, received within 45 days of the publication of the 
proposed rule, is valid for the full 3-year period for which the 
hospital's out-migration adjustment is effective. We further clarified 
that if a hospital wishes to reinstate its urban status for any fiscal 
year within this 3-year period, it must send a request to CMS within 45 
days of publication of the proposed rule for that particular fiscal 
year. We indicated that such reinstatement requests may be sent 
electronically to [email protected]. We wish to further clarify 
that both requests to waive and to reinstate ``Lugar'' status may be 
sent to this mailbox. To ensure proper accounting, we request hospitals 
to include their CCN, and either ``waive Lugar'' or ``reinstate 
Lugar'', in the subject line of these requests.
4. Proposed Changes to the 45-Day Notification Rules
    Certain Medicare regulations specify that hospitals have 45 days 
from the publication of the annual proposed rule for the hospital 
inpatient prospective payment system to inform CMS or the MGCRB of 
certain requested reclassification/redesignation and out-migration 
adjustment changes relating to the development of the hospital wage 
index. Specifically, 42 CFR 412.64(i)(3)(iii), which provides for 
adjusting the wage index to account for commuting patterns of hospital 
workers, and 42 CFR 412.211(f)(3)(iii), which provides for the same 
adjustment for hospitals in Puerto Rico, state that a hospital may 
waive the application of this wage index adjustment by notifying CMS in 
writing within 45 days after the publication of the annual notice of 
proposed rulemaking for the hospital inpatient prospective payment 
system. The regulations at Sec.  412.273(c) concerning withdrawing an 
MGCRB application, terminating an approved 3-year reclassification, or 
canceling a previous withdrawal or termination, also state 
(specifically Sec.  412.273(c)(1)(ii)

[[Page 19910]]

and (2)) that a request for withdrawal or termination must be received 
by the MGCRB within 45 days of publication of CMS' annual notice of 
proposed rulemaking concerning changes to the inpatient hospital 
prospective payment system and proposed payment rates. Similarly, the 
policy outlined in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 
through 51600) allows a Lugar hospital that qualifies for and accepts 
the out-migration adjustment, or that no longer wishes to accept the 
out-migration adjustment and instead elects to return to its deemed 
urban status to notify CMS within 45 days from the publication of the 
proposed rule.
    We are proposing to revise the above described regulation text and 
policies as follows to specify that written notification to CMS or the 
MGCRB (as applicable) must be provided within 45 days from the date of 
public display of the annual proposed rule for the hospital inpatient 
prospective payment system at the Office of the Federal Register. We 
believe that the public has access to the necessary information from 
the date of public display of the proposed rule at the Office of the 
Federal Register and on its Web site in order to make the decisions at 
issue. Specifically, we are proposing to revise the regulations at 
Sec.  412.64(i)(3)(iii) and Sec.  412.211(f)(3)(iii) to provide that a 
hospital may waive the application of the wage index adjustment by 
notifying CMS within 45 days of the date of public display of the 
annual notice of proposed rulemaking for the hospital inpatient 
prospective payment system at the Office of the Federal Register. In 
addition, we are proposing to revise the regulations at Sec.  
412.273(c)(1)(ii) and (c)(2) to provide that a request for withdrawal 
or termination of an MGCRB reclassification must be received by the 
MGCRB within 45 days of the date of public display at the Office of the 
Federal Register of the annual notice of proposed rulemaking concerning 
changes to the inpatient hospital prospective payment system and 
proposed payment rates for the fiscal year for which the application 
has been filed (in the case of a withdrawal under Sec.  
412.273(c)(1)(ii)), or for the fiscal year for which the termination is 
to apply (under Sec.  412.273(c)(2)). We also are proposing to revise 
our policy outlined in the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51599 through 51600) (as described above) to require a Lugar hospital 
that qualifies for and accepts the out-migration adjustment, or that no 
longer wishes to accept the out-migration adjustment and instead elects 
to return to its deemed urban status to notify CMS within 45 days from 
the date of public display of the proposed rule at the Office of the 
Federal Register. We are inviting public comments on these proposals.

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

    In accordance with section 1886(d)(13) of the Act, as added by 
section 505 of Pub. L. 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.
    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. 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 that were 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 developed from the 2010 Census data beginning with FY 2016.
    To determine the out-migration adjustments and applicable counties 
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. As we discussed in the FY 2016 and FY 2017 
IPPS/LTCH PPS final rules (80 FR 49501 and 81 FR 56930, respectively), 
the same policies, procedures, and computation that were used for the 
FY 2012 out-migration adjustment were applicable for FY 2016 and FY 
2017, and we are proposing to use them again for FY 2018. We have 
applied the same policies, procedures, and computations since FY 2012, 
and we believe they continue to be appropriate for FY 2018. We refer 
readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49500 through 
49502) for a full explanation of the revised data source.
    For FY 2018, until such time that CMS finalizes out-migration 
adjustments based on the next Census, the out-migration adjustment 
continues to be based on the data derived from the custom tabulation of 
the ACS utilizing 2008 through 2012 (5-Year) Microdata. For FY 2018, we 
are not proposing any changes to the methodology or data source that we 
used for FY 2016 (81 FR 25071). (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 associated with 
this proposed rule (which is available via the Internet on the CMS Web 
site) includes the proposed out-migration adjustments for the FY 2018 
wage index.

K. Reclassification From Urban to Rural Under Section 1886(d)(8)(E) of 
the Act, Implemented at 42 CFR 412.103

    Under section 1886(d)(8)(E) of the Act, a qualifying prospective 
payment hospital located in an urban area may apply for rural status 
for payment purposes separate from reclassification through the MGCRB. 
Specifically, section 1886(d)(8)(E) of the Act provides that, not later 
than 60 days after the receipt of an application (in a form and manner 
determined by the Secretary) from a subsection (d) hospital that 
satisfies certain criteria, the Secretary shall treat the hospital as 
being located in the rural area (as defined in paragraph (2)(D)) of the 
State in which the hospital is located. We refer readers to the 
regulations at 42 CFR 412.103 for the general criteria and application 
requirements for a subsection (d) hospital to reclassify from urban to 
rural status in accordance with section 1886(d)(8)(E) of the Act. The 
FY 2012 IPPS/LTCH PPS final rule (76 FR 51595 through 51596) includes 
our policies

[[Page 19911]]

regarding the effect of wage data from reclassified or redesignated 
hospitals.
    Hospitals must meet the criteria to be reclassified from urban to 
rural status under Sec.  412.103, as well as fulfill the requirements 
for the application process. There may be one or more reasons that a 
hospital applies for the urban to rural reclassification, and the 
timeframe that a hospital submits an application is often dependent on 
those reason(s). Because the wage index is part of the methodology for 
determining the prospective payments to hospitals for each fiscal year, 
we believe there should be a definitive timeframe within which a 
hospital should apply for rural status in order for the 
reclassification to be reflected in the next Federal fiscal year's wage 
data used for setting payment rates.
    Therefore, after notice of proposed rulemaking and consideration of 
public comments, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931 
through 56932), we revised Sec.  412.103(b) by adding paragraph (6) to 
specify that, in order for a hospital to be treated as rural in the 
wage index and budget neutrality calculations under Sec.  
412.64(e)(1)(ii), (e)(2), (e)(4), and (h) for payment rates for the 
next Federal fiscal year, the hospital's filing date must be no later 
than 70 days prior to the second Monday in June of the current Federal 
fiscal year and the application must be approved by the CMS Regional 
Office in accordance with the requirements of Sec.  412.103. We refer 
readers to the FY 2017 IPPS/LTCH PPS final rule for a full discussion 
of this policy. We clarified that the lock-in date does not affect the 
timing of payment changes occurring at the hospital-specific level as a 
result of reclassification from urban to rural under Sec.  412.103. 
This lock-in date also does not change the current regulation that 
allows hospitals that qualify under Sec.  412.103(a) to request, at any 
time during a cost reporting period, to reclassify from urban to rural. 
A hospital's rural status and claims payment reflecting its rural 
status continue to be effective on the filing date of its 
reclassification application, which is the date the CMS Regional Office 
receives the application, in accordance with Sec.  412.103(d). The 
hospital's IPPS claims will be paid reflecting its rural status on the 
filing date (the effective date) of the reclassification, regardless of 
when the hospital applies.

L. Clarification of Application Deadline for Rural Referral Center 
(RRC) Classification

    Section 1886(d)(5)(C)(i) of the Act, implemented at 42 CFR 412.96, 
provides for the classification and special treatment of rural referral 
centers (RRCs). The regulations at Sec.  412.96 set forth the criteria 
that a hospital must meet in order to qualify as an RRC. Under Sec.  
412.96(b)(1)(ii), a hospital may qualify as an RRC if it is located in 
a rural area and has 275 or more beds during its most recently 
completed cost reporting period. The hospital also can obtain RRC 
status by showing that at least 50 percent of its Medicare patients are 
referred from other hospitals or from physicians not on the staff of 
the hospital, and at least 60 percent of the hospital's Medicare 
patients live more than 25 miles from the hospital, and at least 60 
percent of all the services that the hospital furnishes to Medicare 
beneficiaries are furnished to beneficiaries who live more than 25 
miles from the hospital (Sec.  412.96(b)(2)), or by showing that the 
hospital meets the alternative criteria at Sec.  412.96(c). We refer 
readers to 42 CFR 412.96 for a full description of the criteria for 
classification as an RRC.
    Consistent with section 1886(d)(5)(C)(i) of the Act, the hospital 
must submit its application for RRC status during the last quarter of 
the hospital's cost reporting period, to be effective with the 
beginning of the next cost reporting period. Specifically, section 
1886(d)(5)(C)(i) of the Act provides that an appeal allowed under this 
paragraph must be submitted to the Secretary (in such form and manner 
as the Secretary may prescribe) during the quarter before the first 
quarter of the hospital's cost reporting period (or, in the case of a 
cost reporting period beginning during October 1984, during the first 
quarter of that period), and the Secretary must make a final 
determination with respect to such appeal within 60 days after the date 
the appeal was submitted. Any payment adjustments necessitated by a 
reclassification based upon the appeal will be effective at the 
beginning of such cost reporting period. Therefore, in this proposed 
rule, we are clarifying that applications for RRC status must be 
submitted during this timeframe. That is, applications for RRC status 
must be submitted during the last quarter of the cost reporting period 
before the first quarter of a hospital's cost reporting year. If 
approved, the RRC status is effective with the beginning of the 
hospital's cost reporting period occurring after the last quarter of 
the cost reporting period in which the hospital submits an application.
    We also are clarifying in this proposed rule that, while RRC 
applications must be submitted only within the timeframe described 
above, applications for urban-to-rural reclassification under Sec.  
412.103 may be submitted at any time for the hospital to be approved 
for rural reclassification. This includes hospitals seeking rural 
reclassification under Sec.  412.103(a)(3), which states that a 
hospital meets criteria for urban-to-rural reclassification if the 
hospital would qualify as a RRC as set forth in Sec.  412.96, or as an 
SCH as set forth in Sec.  412.92, if the hospital were located in a 
rural area. A hospital seeking RRC status based on a rural 
reclassification under Sec.  412.103, including Sec.  412.103(a)(3), 
must still submit an application for RRC status during the last quarter 
of its cost reporting year before the next cost reporting period in 
accordance with section 1886(d)(5)(C)(i) of the Act. While the Sec.  
412.103 rural redesignation would be effective as of the date of filing 
the application, in accordance with Sec.  412.103(d), the RRC status 
would be effective beginning with the hospital's cost reporting period 
occurring after the last quarter of the cost reporting period in which 
the hospital submits an application.
    Because a hospital may only apply for RRC status during the last 
quarter of its cost reporting year in accordance with section 
1886(d)(5)(C)(i) of the Act, hospitals seeking RRC status, in order to 
reclassify through the MGCRB using the special rules for SCHs and RRCs 
at Sec.  412.230(a)(3) and the exceptions at Sec.  412.230(d)(3) for 
RRCs, may be disadvantaged due to their cost reporting year end. As 
discussed in section III.I.2. of the preamble of this proposed rule, we 
are proposing to revise the regulations at Sec.  412.230(a)(3) and 
(d)(3) to allow hospitals to submit documentation of the approval of 
SCH or RRC status (as applicable) to the MGCRB no later than the first 
business day after January 1. We believe our proposal to accept 
documentation of approval of RRC classification, instead of requiring 
that the hospital be classified as a RRC at the time of Board review, 
would accommodate more hospitals with various cost reporting period 
endings. We refer readers to section III.I.2. of the preamble of this 
proposed rule for further discussion of this proposal.

M. Process for Wage Index Data Corrections

1. Process for Hospitals To Request Wage Index Data Corrections
    The preliminary, unaudited Worksheet S-3 wage data files for the 
proposed FY 2018 wage index were made available on May 16, 2016, and 
the preliminary CY 2013 occupational

[[Page 19912]]

mix data files on May 16, 2016, through the Internet on the CMS Web 
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html.
    On January 30, 2017, we posted a public use file (PUF) at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html containing FY 2018 wage index data available as of January 
29, 2017. This PUF contains a tab with the Worksheet S-3 wage data 
(which includes Worksheet S-3, Parts II and III wage data from cost 
reporting periods beginning on or after October l, 2013 through 
September 30, 2014; that is, FY 2014 wage data), a tab with the 
occupational mix data (which includes data from the CY 2013 
occupational mix survey, Form CMS-10079), a tab containing the 
Worksheet S-3 wage data of hospitals deleted from the January 30, 2017 
wage data PUF, and a tab containing the CY 2013 occupational mix data 
(if any) of the hospitals deleted from the January 30, 2017 wage data 
PUF. In a memorandum dated January 27, 2017, we instructed all MACs to 
inform the IPPS hospitals that they service of the availability of the 
January 30, 2017 wage index data PUFs, and the process and timeframe 
for requesting revisions in accordance with the FY 2018 Wage Index 
Timetable.
    In the interest of meeting the data needs of the public, beginning 
with the proposed FY 2009 wage index, we post an additional PUF 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 May 16, 2016, we instructed all MACs to 
inform the IPPS hospitals that they service of the availability of the 
wage index data files and the process and timeframe for requesting 
revisions. 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 16, 2016 wage data files and May 16, 2016 occupational mix data 
files, the hospital had to submit corrections along with complete, 
detailed supporting documentation to its MAC by September 2, 2016. 
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 letters sent to them by their MACs.
    November 4, 2016 was the date by when MACs notified State hospital 
associations regarding hospitals that failed to respond to issues 
raised during the desk reviews. The MACs notified the hospitals by mid-
January 2017 of any changes to the wage index data as a result of the 
desk reviews and the resolution of the hospitals' revision requests. 
The MACs also submitted the revised data to CMS by January 20, 2017. 
CMS published the wage index PUFs that included hospitals' revised wage 
index data on January 30, 2017. Hospitals had until February 17, 2017, 
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 March 24, 2017. Under our 
current policy, the deadline for a hospital to request CMS intervention 
in cases where a hospital disagreed with a MAC's policy interpretation 
was April 5, 2017. Beginning next year (that is, April 2018 for wage 
data revisions for the FY 2019 wage index), we are proposing to require 
that a hospital that seeks to challenge the MAC's handling of wage data 
on any basis (including a policy, factual, or any other dispute) must 
request CMS to intervene by the date in April that is specified as the 
deadline for hospitals to appeal MAC determinations and request CMS' 
intervention in cases where the hospital disagrees with the MAC's 
determination (the wage index timetable would be updated to reflect the 
specified date). We note that, as we did for the FY 2017 wage index, 
for the FY 2018 wage index, in accordance with the FY 2018 wage index 
timeline posted on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html, the April appeals have to be 
sent via mail and email. We refer readers to the wage index timeline 
for complete details.
    Hospitals are given the opportunity to examine Table 2, which is 
listed in section VI. of the Addendum to this proposed rule and 
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html. Table 2 contains each 
hospital's proposed adjusted average hourly wage used to construct the 
wage index values for the past 3 years, including the FY 2014 data used 
to construct the proposed FY 2018 wage index. We note 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 early 
February 2017.
    We plan to post the final wage index data PUFs in late April 2017 
on the Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html. The April 2017 PUFs are 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 previously described (revisions submitted to CMS 
by the MACs by March 24, 2017).
    After the release of the April 2017 wage index data PUFs, changes 
to the wage and occupational mix data can 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 March 24, 2017.
     Requests for correction of errors that were not, but could 
have been, identified during the hospital's review of the January 30, 
2017 wage index PUFs.
     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 April 2017 final wage index data PUFs, a 
hospital believes that its wage or occupational

[[Page 19913]]

mix data were incorrect due to a MAC or CMS error in the entry or 
tabulation of the final data, the hospital is given the opportunity to 
notify both its MAC and CMS regarding why the hospital believes an 
error exists and provide all supporting information, including relevant 
dates (for example, when it first became aware of the error). The 
hospital is required to send its request to CMS and to the MAC no later 
than May 30, 2017. Similar to the April appeals, beginning with the FY 
2015 wage index, in accordance with the FY 2018 wage index timeline 
posted on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html, the May appeals must 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 May 30, 2017) will be incorporated into the 
final FY 2018 wage index, which will be effective October 1, 2017.
    We created the processes previously described to resolve all 
substantive wage index data correction disputes before we finalize the 
wage and occupational mix data for the FY 2018 payment rates. 
Accordingly, hospitals that do not meet the procedural deadlines set 
forth above will not be afforded a later opportunity to submit wage 
index data corrections or to dispute the MAC's decision with respect to 
requested changes. Specifically, our policy is that hospitals that do 
not meet the procedural deadlines set forth above (requiring requests 
to MACs by the specified date in February and, where such requests are 
unsuccessful, requests for intervention by CMS by the specified date in 
April) 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 
earlier provides hospitals with sufficient opportunity to bring errors 
in their wage and occupational mix data to the MAC's attention. 
Moreover, because hospitals have access to the final wage index data 
PUFs by late April 2017, they have 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 2018 wage index by August 
2017, and the implementation of the FY 2018 wage index on October 1, 
2017. 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 May 30, 
2017, 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 May 
deadline for making corrections to the wage data for the following 
fiscal year's wage index (for example, May 30, 2017 for the FY 2018 
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 May 30, 2017 deadline for the 
FY 2018 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 May 30, 2017 deadline for the FY 2018 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.
2. Process for Data Corrections by CMS After the January Public Use 
File (PUF)
    The process set forth with the wage index timeline discussed in 
section III.M.1. of the preamble of this proposed rule allows hospitals 
to request corrections to their wage index data within prescribed 
timeframes. In addition to hospitals' opportunity to request 
corrections of wage index data errors or MACs' mishandling of data, CMS 
has the authority under section 1886(d)(3)(E) of the Act to make 
corrections to hospital wage index and occupational mix data in order 
to ensure the accuracy of the wage index. As we explained in the FY 
2016 IPPS/LTCH PPS final rule (80 FR 49490 through 49491) and the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56914), 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 areas of 
the hospital compared to the national average hospital wage level. We 
believe that, under section 1886(d)(3)(E) of the Act, we have 
discretion to make

[[Page 19914]]

corrections to hospitals' data to help ensure that the costs 
attributable to wages and wage-related costs in fact accurately reflect 
the relative hospital wage level in the hospitals' geographic areas.
    We have an established multistep, 15-month process for the review 
and correction of the hospital wage data that is used to create the 
IPPS wage index for the upcoming fiscal year. 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. 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, if 
necessary, hospitals provide additional documentation, adjustments, or 
corrections to the data. This ongoing communication with hospitals 
about their wage data may result in the discovery by CMS of additional 
items that were reported incorrectly or other data errors, even after 
the posting of the January PUF, and throughout the remainder of the 
wage index development process. In addition, the fact that CMS analyzes 
the data from a regional and even national level, unlike the review 
performed by the MACs that review a limited subset of hospitals, can 
facilitate additional editing of the data that may not be readily 
apparent to the MACs. In these occasional instances, an error may be of 
sufficient magnitude that the wage index of an entire CBSA is affected. 
Accordingly, CMS uses its authority to ensure that the wage index 
accurately reflects the relative hospital wage level in the geographic 
area of the hospital compared to the national average hospital wage 
level, by continuing to make corrections to hospital wage data upon 
discovering incorrect wage data, distinct from instances in which 
hospitals request data revisions.
    We note that CMS corrects errors to hospital wage data as 
appropriate, regardless of whether that correction will raise or lower 
a hospital's average hourly wage. For example, as discussed in section 
III.D.2. of the preamble of this proposed rule, in the calculation of 
the proposed FY 2018 wage index, upon discovering that hospitals 
reported other wage-related costs on Line 18 of Worksheet S-3, despite 
those other wage-related costs failing to meet the requirement that 
other wage related costs must exceed 1 percent of total adjusted 
salaries net of excluded area salaries, CMS made internal edits to 
remove those other wage-related costs from Line 18. Conversely, if CMS 
discovers after conclusion of the desk review, for example, that a MAC 
inadvertently failed to incorporate positive adjustments resulting from 
a prior year's wage index appeal to a hospital's wage related costs 
such as pension, CMS would correct that data error and the hospital's 
average hourly wage would likely increase as a result.
    While we maintain CMS' authority to conduct additional review and 
make resulting corrections at any time during the wage index 
development process, we are proposing a process for hospitals to 
request further review of a correction made by CMS starting with the FY 
2019 wage index. In order to allow opportunity for input from hospitals 
concerning corrections made by CMS after the posting of the January 
PUF, we are proposing a process similar to the existing process in 
which hospitals may request corrections to wage index data displayed in 
the January PUF. Instances where CMS makes a correction to a hospital's 
data after the January PUF based on a different understanding than the 
hospital about certain reported costs, for example, could potentially 
be resolved using this proposed process before the final wage index is 
calculated. We believe this proposed process and timeline (as descrbed 
above) would bring additional transparency to instances where CMS makes 
data corrections after the January PUF, and would provide opportunities 
for hospitals to request further review of CMS changes in time for the 
most accurate data to be reflected in the final wage index 
calculations.
    Effective beginning with the FY 2019 wage index development cycle, 
we are proposing to use existing appeal deadlines (in place for 
hospitals to appeal determinations made by the MAC during the desk 
review process) for hospitals to dispute corrections made by CMS after 
posting of the January PUF that do not arise from a hospital request 
for a wage data revision. Starting with the April appeal deadline, 
hospitals would use the soonest approaching appeal deadline to dispute 
any adjustments made by CMS. However, if a hospital was notified of an 
adjustment within 14 days of an appeal deadline, the hospital would 
have until the next appeal deadline to dispute any adjustments. We 
believe this would give hospitals sufficient time to prepare an appeal 
of adjustments made by CMS after the January PUF. Specifically, for any 
adjustments made by CMS between the date the January PUF is posted and 
at least 14 calendar days before the April appeals deadline, we are 
proposing that hospitals would have until the April appeals deadline 
(which, for example, is April 5 in the FY 2018 Wage Index Timetable) to 
dispute the adjustments. For any adjustments made by CMS between 13 
calendar days before the April appeals deadline and 14 calendar days 
before the May appeals deadline, we are proposing that hospitals would 
have until the May appeals deadline (which, for example, is May 30 in 
the FY 2018 Wage Index Timetable) to dispute the adjustments. In cases 
where hospitals disagree with CMS adjustments of which they were 
notified 13 calendar days before the May appeals deadline or later, the 
hospitals could appeal to the PRRB with no need for further review by 
CMS before such appeal.
    We are using dates from the FY 2018 Wage Index Timetable in the 
following example (we reiterate that this appeals process would be 
effective beginning with the FY 2019 wage index cycle, but for 
illustrative purposes, we are using dates from the FY 2018 Wage Index 
Timetable, the most recently published wage index timetable): A 
hospital that is notified by the MAC or CMS of an adjustment to its 
wage data after the release of the January 30, 2017 PUF could use the 
April 5, 2017 appeals deadline to dispute the adjustment. If the 
hospital is notified of an adjustment by CMS or the MAC to its wage 
data after March 22, 2017 (that is, less than 14 days prior to the 
April 5 appeals deadline), it could use the May 30, 2017 appeals 
deadline to dispute the adjustment. If the hospital is first notified 
about the adjustment after May 16, 2017 (that is, less than 14 days 
prior to the May 30 deadline), and disagrees with the adjustment, the 
hospital could appeal directly to the PRRB.
    As with the existing process for requesting wage data corrections, 
we are proposing that a hospital disputing an adjustment made by CMS 
after the posting of the January PUF would be required to request a 
correction by the first applicable deadline. For example, if a hospital 
was notified on March 20 of an adjustment to its data by CMS and does 
not appeal by April 5, the hospital would not be able to appeal by May 
30 or bring the case before the PRRB. That is, hospitals that did not 
meet the procedural deadlines set forth above would not be afforded a 
later opportunity to submit wage index data corrections or to dispute 
CMS' decision with respect to requested changes. As with the existing 
process for hospitals to request wage data corrections, our policy is 
that hospitals that do not meet the procedural deadlines set forth 
earlier would not be permitted to challenge later, before the PRRB, the 
failure of CMS to make a requested data revision.

[[Page 19915]]

    In summary, under the statute, CMS has discretion to make 
corrections and revisions to hospitals' wage data throughout the 
multistep wage index development process, and we are proposing a 
pathway for hospitals to request additional review of corrections to 
their wage data made by CMS. Beginning with the development of the FY 
2019 wage index, we are proposing a process whereby CMS could continue 
to correct data after the posting of the January PUF, while allowing 
hospitals to appeal changes made by CMS using existing deadlines from 
the process for hospitals to request wage data corrections. As with the 
existing process, a hospital would be required to appeal by the first 
applicable deadline, if relevant, to maintain the right to appeal to 
the PRRB to dispute a correction to its wage data made by CMS.
    We are inviting public comments on our proposals.

N. Proposed Labor Market Share for the Proposed FY 2018 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 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, FY 2015, FY 2016, and FY 2017 of 69.6 
percent. In addition, in FY 2014, we implemented this revised and 
rebased labor-related share in a budget neutral manner (78 FR 51016). 
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.
    For FY 2018, as described in section IV. of the preamble of this 
proposed rule, we are proposing to rebase and revise the IPPS market 
basket reflecting 2014 data. We also are proposing to recalculate the 
labor-related share for discharges occurring on or after October 1, 
2017 using the proposed 2014-based IPPS market basket. As discussed in 
Appendix A of this proposed rule, we are proposing this revised and 
rebased labor-related share in a budget neutral manner. However, 
consistent with section 1886(d)(3)(E) of the Act, we 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. We include a cost category in the labor-related share if the 
costs are labor intensive and vary with the local labor market. As 
described in section IV. of the preamble of this proposed rule, we are 
proposing to include in the labor-related share the national average 
proportion of operating costs that are attributable to Wages and 
Salaries, Employee Benefits, Professional Fees: Labor-Related, 
Administrative and Facilities Support Services, Installation, 
Maintenance, and Repair Services, and All Other: Labor-Related Services 
as measured in the proposed 2014-based IPPS market basket. Therefore, 
for FY 2018, we are proposing to use a labor-related share of 68.3 
percent for discharges occurring on or after October 1, 2017.
    Prior to January 1, 2016, Puerto Rico hospitals were paid based on 
75 percent of the national standardized amount and 25 percent of the 
Puerto Rico-specific standardized amount. As a result, we applied the 
Puerto Rico-specific labor-related share percentage and nonlabor-
related share percentage to the Puerto Rico-specific standardized 
amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. 
L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that 
the payment calculation with respect to operating costs of inpatient 
hospital services of a subsection (d) Puerto Rico hospital for 
inpatient hospital discharges on or after January 1, 2016, shall use 
100 percent of the national standardized amount. Because Puerto Rico 
hospitals are no longer paid with a Puerto Rico-specific standardized 
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as 
amended by section 601 of the Consolidated Appropriations Act, 2016, 
there is no longer a need for us to calculate a Puerto Rico-specific 
labor-related share percentage and nonlabor-related share percentage 
for application to the Puerto Rico-specific standardized amount. 
Hospitals in Puerto Rico are now paid 100 percent of the national 
standardized amount and, therefore, are subject to the national labor-
related share and nonlabor-related share percentages that are applied 
to the national standardized amount. Accordingly, for FY 2018, we are 
not proposing a Puerto Rico-specific labor-related share percentage or 
a nonlabor-related share percentage.
    Tables 1A and 1B, which are published in section VI. of the 
Addendum to this FY 2018 IPPS/LTCH PPS proposed rule and available via 
the Internet on the CMS Web site, reflect the proposed national labor-
related share, which is also applicable to Puerto Rico hospitals. For 
FY 2018, for all IPPS hospitals (including Puerto Rico hospitals) whose 
wage indexes are less than or equal to 1.0000, we are proposing to 
apply the wage index to a labor-related share of 62 percent of the 
national standardized amount. For all hospitals (including Puerto Rico 
hospitals) whose wage indexes are greater than 1.0000, for FY 2018, we 
are proposing to apply the wage index to a proposed labor-related share 
of 68.3 percent of the national standardized amount.

[[Page 19916]]

IV. Proposed Rebasing and Revising of the Hospital Market Baskets for 
Acute Care Hospitals

A. Background

    Effective for cost reporting periods beginning on or after July 1, 
1979, we developed and adopted a hospital input price index (that is, 
the hospital market basket for operating costs). Although ``market 
basket'' technically describes the mix of goods and services used in 
providing hospital care, this term is also commonly used to denote the 
input price index (that is, cost category weights and price proxies 
combined) derived from that market basket. Accordingly, the term 
``market basket'' as used in this document refers to the hospital input 
price index.
    The percentage change in the market basket reflects the average 
change in the price of goods and services hospitals purchase in order 
to provide inpatient care. We first used the market basket to adjust 
hospital cost limits by an amount that reflected the average increase 
in the prices of the goods and services used to provide hospital 
inpatient care. This approach linked the increase in the cost limits to 
the efficient utilization of resources.
    Since the inception of the IPPS, the projected change in the 
hospital market basket has been the integral component of the update 
factor by which the prospective payment rates are updated every year. 
An explanation of the hospital market basket used to develop the 
prospective payment rates was published in the Federal Register on 
September 1, 1983 (48 FR 39764). We also refer readers to the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50596) in which we discussed the most 
recent previous rebasing of the hospital input price index.
    The hospital market basket is a fixed-weight, Laspeyres-type price 
index. A Laspeyres-type price index measures the change in price, over 
time, of the same mix of goods and services purchased in the base 
period. Any changes in the quantity or mix of goods and services (that 
is, intensity) purchased over time are not measured.
    The index itself is constructed in three steps. First, a base 
period is selected (in this proposed rule, we are proposing to use 2014 
as the base period) and total base period expenditures are estimated 
for a set of mutually exclusive and exhaustive spending categories, 
with the proportion of total costs that each category represents being 
calculated. These proportions are called ``cost weights'' or 
``expenditure weights.'' Second, each expenditure category is matched 
to an appropriate price or wage variable, referred to as a ``price 
proxy.'' In almost every instance, these price proxies are derived from 
publicly available statistical series that are published on a 
consistent schedule (preferably at least on a quarterly basis). 
Finally, the expenditure weight for each cost category is multiplied by 
the level of its respective price proxy. The sum of these products 
(that is, the expenditure weights multiplied by their price index 
levels) for all cost categories yields the composite index level of the 
market basket in a given period. Repeating this step for other periods 
produces a series of market basket levels over time. Dividing an index 
level for a given period by an index level for an earlier period 
produces a rate of growth in the input price index over that timeframe.
    As noted above, the market basket is described as a fixed-weight 
index because it represents the change in price over time of a constant 
mix (quantity and intensity) of goods and services needed to provide 
hospital services. The effects on total expenditures resulting from 
changes in the mix of goods and services purchased subsequent to the 
base period are not measured. For example, a hospital hiring more 
nurses to accommodate the needs of patients would increase the volume 
of goods and services purchased by the hospital, but would not be 
factored into the price change measured by a fixed-weight hospital 
market basket. Only when the index is rebased would changes in the 
quantity and intensity be captured, with those changes being reflected 
in the cost weights. Therefore, we rebase the market basket 
periodically so that the cost weights reflect recent changes in the mix 
of goods and services that hospitals purchase (hospital inputs) to 
furnish inpatient care between base periods.
    We last rebased the hospital market basket cost weights effective 
for FY 2014 (78 FR 50596), with FY 2010 data used as the base period 
for the construction of the market basket cost weights. For this FY 
2018 IPPS/LTCH PPS proposed rule, we are proposing to rebase the cost 
structure for the IPPS hospital index from FY 2010 to 2014, as 
discussed below.

B. Rebasing and Revising the IPPS Market Basket

    The terms ``rebasing'' and ``revising,'' while often used 
interchangeably, actually denote different activities. ``Rebasing'' 
means moving the base year for the structure of costs of an input price 
index (for example, in this proposed rule, we are proposing to shift 
the base year cost structure for the IPPS hospital index from FY 2010 
to 2014). We note that we are no longer referring to the market basket 
as a ``FY 2014-based'' market basket and instead refer to the proposed 
market basket as simply ``2014-based''. We are proposing this change in 
naming convention for the market basket because the base year cost 
weight data for the proposed market basket does not reflect only fiscal 
year data. For example, the proposed 2014-based IPPS market basket uses 
Medicare cost report data and other government data that reflect 2014 
fiscal year, 2014 calendar year, and 2014 State fiscal year expenses to 
determine the base year cost weights. Given that it is based on a mix 
of classifications of 2014 data, we are proposing to refer to the 
market basket as ``2014-based'' instead of ``FY 2014-based'' or ``CY 
2014-based''.
    ``Revising'' means changing data sources or price proxies used in 
the input price index. As published in the FY 2006 IPPS final rule (70 
FR 47387), in accordance with section 404 of Public Law 108-173, CMS 
determined a new frequency for rebasing the hospital market basket. We 
established a rebasing frequency of every 4 years and, therefore, for 
the FY 2018 IPPS update, we are proposing to rebase and revise the IPPS 
market basket from FY 2010 to 2014. We are inviting public comments on 
our proposed methodology.
1. Development of Cost Categories and Weights
a. Use of Medicare Cost Report Data
    The major source of expenditure data for developing the proposed 
rebased and revised hospital market basket cost weights is the 2014 
Medicare cost reports. These 2014 Medicare cost reports are for cost 
reporting periods beginning on and after October 1, 2013 and before 
October 1, 2014. We note that while these dates appear to reflect 
fiscal year data, in order to be classified as a ``2014 cost report,'' 
a hospital's cost reporting period must begin between these dates. For 
example, we found that of the 2014 Medicare cost reports for IPPS 
hospitals, approximately 40 percent of the reports had a begin date on 
January 1, 2014, approximately 30 percent had a begin date on July 1, 
2014, and approximately 18 percent had a begin date on October 1, 2013. 
For this reason, we are defining the base year of the market basket as 
``2014-based'' instead of ``FY 2014-based''. We are proposing to use 
2014 as the base year because we believe that the 2014 Medicare cost 
reports represent the most recent, complete set of Medicare cost report 
data available to develop cost weights for IPPS hospitals. As was done

[[Page 19917]]

in previous rebasings, these cost reports are from IPPS hospitals only 
(hospitals excluded from the IPPS and CAHs are not included) and are 
based on IPPS Medicare-allowable operating costs. IPPS Medicare-
allowable operating costs are costs that are eligible to be paid under 
the IPPS. For example, the IPPS market basket excludes home health 
agency (HHA) costs as these costs would be paid under the HHA PPS and, 
therefore, these costs are not IPPS Medicare-allowable costs.
    We are proposing to derive costs for eight major expenditures or 
cost categories for the 2014-based IPPS market basket from the CMS 
Medicare cost reports (Form 2552-10, OMB Control Number 0938-0050): 
Wages and Salaries, Employee Benefits, Contract Labor, Pharmaceuticals, 
Professional Liability Insurance (Malpractice), Blood and Blood 
Products, Home Office Contract Labor, and a residual ``All Other'' 
category. The residual ``All Other'' category reflects all remaining 
costs that are not captured in the other seven cost categories. We are 
proposing that, for the 2014-based IPPS market basket, we obtain costs 
for one additional major cost category from the Medicare cost reports 
compared to the FY 2010-based IPPS market basket--Home Office Contract 
Labor Costs. We describe below the detailed methodology for obtaining 
costs for each of the seven cost categories directly determined from 
the Medicare cost reports.
(1) Wages and Salaries Costs
    To derive wages and salaries costs for the Medicare allowable cost 
centers, we are proposing to first calculate total unadjusted wages and 
salaries costs as reported on Worksheet S-3, part II. We are then 
proposing to remove the wages and salaries attributable to non-Medicare 
allowable cost centers (that is, excluded areas) as well as a portion 
of overhead wages and salaries attributable to these excluded areas. 
Specifically, wages and salaries costs are equal to total wages and 
salaries as reported on Worksheet S-3, Part II, Column 4, Line 1, less 
excluded area wages and salaries (reported on Worksheet S-3, Part II, 
Column 4, Lines 3 and 5 through 10) and less overhead wages and 
salaries attributable to the excluded areas.
    Overhead wages and salaries are attributable to the entire IPPS 
facility. Therefore, we are proposing to only include the proportion 
attributable to the Medicare allowable cost centers. We are proposing 
to estimate the proportion of overhead wages and salaries that are not 
attributable to Medicare allowable costs centers (that is, excluded 
areas) by multiplying the ratio of excluded area wages and salaries (as 
defined earlier) to total wages and salaries (Worksheet S-3, part II, 
Column 4, Line 1) by total overhead wages and salaries (Worksheet A, 
Column 1, Lines 4 through 18). A similar methodology was used to derive 
wages and salaries costs in the FY 2010-based IPPS market basket.
(2) Employee Benefits Costs
    We are proposing to derive employee benefits costs using a similar 
methodology as the wages and salaries costs; that is, reflecting 
employee benefits costs attributable to the Medicare allowable cost 
centers. First, we calculate total unadjusted employee benefits costs 
as the sum of Worksheet S-3, Part II, Column 4, Lines 17, 18, 20, and 
22. We then exclude those employee benefits attributable to the 
overhead wages and salaries for the non-Medicare allowable cost centers 
(that is, excluded areas). Employee benefits attributable to the non-
Medicare allowable cost centers are derived by multiplying the ratio of 
total employee benefits (equal to the sum of Worksheet S-3, Part II, 
Column 4, Lines 17 through 25) to total wages and salaries (Worksheet 
S-3, Part II, Column 4, Line 1) by excluded overhead wages and salaries 
(as derived above for wages and salaries costs). A similar methodology 
was used in the FY 2010-based IPPS market basket.
(3) Contract Labor Costs
    Contract labor costs are primarily associated with direct patient 
care services. Contract labor costs for services such as accounting, 
billing, and legal are estimated using other government data sources as 
described below. We are proposing to derive contract labor costs for 
the 2014-based IPPS market basket as the sum of Worksheet S-3, Part II, 
Column 4, Lines 11, 13 and 15. A similar methodology was used in the FY 
2010-based IPPS market basket.
(4) Professional Liability Insurance Costs
    We are proposing that professional liability insurance (PLI) costs 
(often referred to as malpractice costs) be equal to premiums, paid 
losses, and self-insurance costs reported on Worksheet S-2, Part I, 
Columns 1 through 3, Line 118.01. A similar methodology was used for 
the FY 2010-based IPPS market basket.
(5) Pharmaceuticals Costs
    We are proposing to calculate pharmaceuticals costs using nonsalary 
costs reported for the Pharmacy cost center (Worksheet A, Column 2, 
Line 15) and Drugs Charged to Patients cost center (Worksheet A, Column 
2, Line 73) less estimated employee benefits attributable to these two 
cost centers. We are proposing to estimate these employee benefits 
costs by multiplying the ratio of total employee benefits (equal to the 
sum of Worksheet S-3, Part II, Column 4, Lines 17 through 25) to total 
wages and salaries (Worksheet S-3, Part II, Column 4, Line 1) by total 
wages and salaries costs for the Pharmacy and Drugs Charged to Patients 
cost centers (equal to the sum of Worksheet A, Column 1, Lines 15 and 
73). A similar methodology was used for the FY 2010-based IPPS market 
basket.
(6) Blood and Blood Products Costs
    We are proposing to calculate blood and blood products costs using 
nonsalary costs reported for the Whole Blood & Packed Red Blood Cells 
cost center (Worksheet A, Column 2, Line 62) and the Blood Storing, 
Processing, & Transfusing cost center (Worksheet A, Column 2, Line 63) 
less estimated employee benefits attributable to these two cost 
centers. We estimate these employee benefits costs by multiplying the 
ratio of total employee benefits (equal to the sum of Worksheet S-3, 
Part II, Column 4, Lines 17 through 25) to total wages and salaries 
(Worksheet S-3, Part II, Column 4, Line 1) by total wages and salaries 
for the Whole Blood & Packed Red Blood Cells and Blood Storing, 
Processing, & Transfusing cost centers (equal to the sum of Worksheet 
A, Column 1, Lines 62 and 63). A similar methodology was used for the 
FY 2010-based IPPS market basket.
(7) Home Office Contract Labor Costs
    We are proposing to determine home office contract labor costs 
using data reported on Worksheet S-3, Part II, Column 4, line 14. 
Specifically, we are proposing to determine the Medicare allowable 
portion of these costs by multiplying them by the ratio of total 
Medicare allowable operating costs (as defined below in section 
IV.B.1.b. of the preamble to this proposed rule) to total operating 
costs (calculated as Worksheet B, Part I, Column 26, Line 202, less 
Worksheet B, Part I, Column 0, Lines 1 through 3). Home office contract 
labor costs in the FY 2010-based IPPS market basket were calculated 
using the U.S. Census Bureau's Bureau of Economic Analysis (BEA) 
Benchmark Input-Output (I-O) data, as described below in section 
IV.B.1.c. of the preamble to this proposed rule.

[[Page 19918]]

b. Final Major Cost Category Computation
    After we derived costs for the seven major cost categories for each 
provider using the Medicare cost report data as previously described, 
we address data outliers using the following steps. First, we divide 
the costs for each of the seven categories by total Medicare allowable 
operating costs calculated for the provider to obtain cost weights for 
each PPS hospital. We are proposing that total Medicare allowable 
operating costs are equal to noncapital costs (Worksheet B, part I, 
Column 26 less Worksheet B, part II, Column 26) that are attributable 
to the Medicare allowable cost centers of the hospital. Medicare 
allowable cost centers are Lines 30 through 35, 50, 51, 53 through 60, 
62 through 76, 90, 91, 92.01 and 93.
    We then remove those providers whose derived cost weights fall in 
the top and bottom five percent of provider-specific cost weights to 
ensure the removal of outliers. After the outliers have been removed, 
we sum the costs for each category across all remaining providers. We 
then divide this by the sum of total Medicare allowable operating costs 
across all remaining providers to obtain a cost weight for the proposed 
2014-based IPPS market basket for the given category. Finally, we 
calculate the residual ``All Other'' cost weight that reflects all 
remaining costs that are not captured in the seven cost categories 
listed.
    Table IV-01 below shows the major cost categories and their 
respective cost weights as derived from the Medicare cost reports for 
this proposed rule.

  Table IV-01--Major Cost Categories as Derived From the Medicare Cost
                                 Reports
------------------------------------------------------------------------
          Major cost categories               FY 2010      Proposed 2014
------------------------------------------------------------------------
Wages and Salaries......................            45.8            42.1
Employee Benefits.......................            12.7            12.0
Contract Labor..........................             1.8             1.8
Professional Liability Insurance                     1.3             1.2
 (Malpractice)..........................
Pharmaceuticals.........................             5.4             5.9
Blood and Blood Products................             1.1             0.8
Home Office Contract Labor *............  ..............             4.2
``All Other'' Residual..................            31.9            32.0
------------------------------------------------------------------------
* Home office contract labor costs were included in the ``All Other''
  residual cost weight of the FY 2010-based IPPS market basket.

    From FY 2010 to 2014, the Wages and Salaries and Employee Benefits 
cost weights as calculated directly from the Medicare cost reports 
decreased by approximately 3.7 and 0.7 percentage points, respectively, 
while the Contract Labor cost weight was unchanged. The decrease in the 
Wages and Salaries cost weight occurred among most cost centers and in 
aggregate for the General Service (overhead), Inpatient Routine 
Service, Ancillary Service, and Outpatient Service cost centers.
    As we did for the FY 2010-based IPPS market basket (78 FR 50597), 
we are proposing to allocate contract labor costs to the Wages and 
Salaries and Employee Benefits cost weights based on their relative 
proportions for employed labor under the assumption that contract labor 
costs are comprised of both wages and salaries and employee benefits. 
The contract labor allocation proportion for wages and salaries is 
equal to the Wages and Salaries cost weight as a percent of the sum of 
the Wages and Salaries cost weight and the Employee Benefits cost 
weight. Using the 2014 Medicare cost report data, this percentage is 78 
percent. Therefore, we are proposing to allocate approximately 78 
percent of the Contract Labor cost weight to the Wages and Salaries 
cost weight and 22 percent to the Employee Benefits cost weight. The FY 
2010-based IPPS market basket also allocated 78 percent of the Contract 
Labor cost weight to the Wages and Salaries cost weight.
    Table IV-02 below shows the Wages and Salaries and Employee 
Benefits cost weights after contract labor allocation for the FY 2010-
based IPPS market basket and the proposed 2014-based IPPS market 
basket.

Table IV-02--Wages and Salaries and Employee Benefits Cost Weights After
                        Contract Labor Allocation
------------------------------------------------------------------------
                                           FY 2010-based  Proposed 2014-
          Major cost categories             IPPS market     based IPPS
                                              basket       market basket
------------------------------------------------------------------------
Wages and Salaries......................            47.2            43.4
Employee Benefits.......................            13.1            12.4
------------------------------------------------------------------------

c. Derivation of the Detailed Cost Weights
    To further divide the ``All Other'' residual cost weight estimated 
from the 2014 Medicare cost report data into more detailed cost 
categories, we are proposing to use the 2007 Benchmark I-O ``Use 
Tables/Before Redefinitions/Purchaser Value'' for NAICS 622000, 
Hospitals, published by the BEA. These data are publicly available at 
the following Web site: http://www.bea.gov/industry/io_annual.htm. The 
BEA Benchmark I-O data are generally scheduled for publication every 5 
years on a lagged basis, with the most recent data available for 2007. 
The 2007 Benchmark I-O data are derived from the 2007 Economic Census 
and are the building blocks for BEA's economic accounts. Therefore, 
they represent the most comprehensive and complete set of data on the 
economic processes or mechanisms by which output is produced and 
distributed.\37\ BEA also produces Annual I-O estimates. However, while 
based on a similar methodology, these estimates reflect less 
comprehensive and less detailed data sources and are subject to 
revision when benchmark data become available. Instead of using the 
less detailed Annual I-O data, we are proposing to

[[Page 19919]]

inflate the detailed 2007 Benchmark I-O data forward to 2014 by 
applying the annual price changes from the respective price proxies to 
the appropriate market basket cost categories that are obtained from 
the 2007 Benchmark I-O data. In our calculations for this proposed 
rule, we repeated this practice for each year. We then calculated the 
cost shares that each cost category represents of the 2007 data 
inflated to 2014. These resulting 2014 cost shares were applied to the 
``All Other'' residual cost weight to obtain the detailed cost weights 
for the proposed 2014-based IPPS market basket. For example, the cost 
for Food: Direct Purchases represents 7.3 percent of the sum of the 
``All Other'' 2007 Benchmark I-O Hospital Expenditures inflated to 
2014. Therefore, the Food: Direct Purchases cost weight represents 7.3 
percent of the proposed 2014-based IPPS market basket's ``All Other'' 
cost category (32.0 percent), yielding a Food: Direct Purchases 
proposed cost weight of 2.3 percent in the proposed 2014-based IPPS 
market basket (0.073 x 32.0 percent = 2.3 percent). For the FY 2010-
based IPPS market basket (78 FR 50597), we used the same methodology 
utilizing the 2002 Benchmark I-O data (aged to FY 2010).
---------------------------------------------------------------------------

    \37\ http://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
---------------------------------------------------------------------------

    Using this methodology, we are proposing to derive 18 detailed cost 
categories from the proposed 2014-based IPPS market basket residual 
cost weight (32.0 percent). These categories are: (1) Fuel: Oil and 
Gas; (2) Electricity; (3) Water and Sewerage; (4) Food: Direct 
Purchases; (5) Food: Contract Services; (6) Chemicals; (7) Medical 
Instruments; (8) Rubber and Plastics; (9) Paper and Printing Products; 
(10) Miscellaneous Products; (11) Professional Fees: Labor-Related; 
(12) Administrative and Facilities Support Services; (13) Installation, 
Maintenance, and Repair Services; (14) All Other: Labor-Related 
Services; (15) Professional Fees: Nonlabor-Related; (16) Financial 
Services; (17) Telephone Services; and (18) All Other: Nonlabor-Related 
Services.
    Similar to the 2013-based LTCH market basket, the proposed 2014-
based IPPS market basket does not include separate cost categories for 
Apparel, Machinery and Equipment, and Postage. Due to the small weights 
associated with these detailed categories and relatively stable price 
growth in the applicable price proxy, we believe that consolidating 
these smaller cost category weights with other cost categories in the 
proposed market basket that experience similar price increases 
eliminates unnecessary complexity to the market basket without having a 
material impact on the total market basket increase. Therefore, we are 
proposing to include Apparel and Machinery and Equipment in the 
Miscellaneous Products cost category and Postage in the All-Other: 
Nonlabor-Related Services cost category. We note that the machinery and 
equipment expenses are for equipment that is paid for in a given year 
and not depreciated over the asset's useful life. Depreciation expenses 
for movable equipment are reflected in the proposed 2014-based Capital 
Input Price Index (described in section IV.D. of the preamble of this 
proposed rule). For the proposed 2014-based IPPS market basket, we also 
are proposing to include a separate cost category for Installation, 
Maintenance, and Repair Services in order to proxy these costs by a 
price index that better reflects the price changes of labor associated 
with maintenance-related services.
2. Selection of Proposed Price Proxies
    After computing the proposed 2014 cost weights for the IPPS market 
basket, it was necessary to select appropriate wage and price proxies 
to reflect the rate of price change for each expenditure category. With 
the exception of the proxy for professional liability insurance (PLI), 
all the proxies we are proposing are based on Bureau of Labor 
Statistics (BLS) data and are grouped into one of the following BLS 
categories:
     Producer Price Indexes--Producer Price Indexes (PPIs) 
measure price changes for goods sold in markets other than the retail 
market. PPIs are preferable price proxies for goods and services that 
hospitals purchase as inputs because PPIs better reflect the actual 
price changes encountered by hospitals. For example, we are proposing 
to use a PPI for prescription drugs, rather than the Consumer Price 
Index (CPI) for prescription drugs, because hospitals generally 
purchase drugs directly from a wholesaler. The PPIs that we are 
proposing to use measure price changes at the final stage of 
production.
     Consumer Price Indexes--Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by the 
typical consumer. Because they may not represent the price faced by a 
producer, we are proposing to use CPIs only if an appropriate PPI is 
not available, or if the expenditures are more like those faced by 
retail consumers in general rather than by purchasers of goods at the 
wholesale level. For example, the CPI for food purchased away from home 
is proposed to be used as a proxy for contracted food services.
     Employment Cost Indexes--Employment Cost Indexes (ECIs) 
measure the rate of change in employee wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. Appropriately, they are not affected by shifts in 
employment mix.
    We evaluated the price proxies using the criteria of reliability, 
timeliness, availability, and relevance. Reliability indicates that the 
index is based on valid statistical methods and has low sampling 
variability. Timeliness implies that the proxy is published regularly, 
preferably at least once a quarter. Availability means that the proxy 
is publicly available. Finally, relevance means that the proxy is 
applicable and representative of the cost category weight to which it 
is applied. We believe the proposed PPIs, CPIs, and ECIs selected meet 
these criteria.
    Below we present a detailed explanation of the price proxies that 
we are proposing for each cost category weight. We note that many of 
the proxies that we are proposing to use for the 2014-based IPPS market 
basket are the same as those used for the FY 2010-based IPPS market 
basket.
(1) Wages and Salaries
    We are proposing to use the ECI for Wages and Salaries for All 
Civilian Workers in Hospitals (BLS series code CIU1026220000000I) to 
measure the price growth of this cost category. This is the same price 
proxy used in the FY 2010-based IPPS market basket.
(2) Employee Benefits
    We are proposing to use the ECI for Total Benefits for All Civilian 
Workers in Hospitals to measure the price growth of this cost category. 
This ECI is calculated using the ECI for Total Compensation for All 
Civilian Workers in Hospitals (BLS series code CIU1016220000000I) and 
the relative importance of wages and salaries within total 
compensation. This is the same price proxy used in the FY 2010-based 
IPPS market basket.
(3) Fuel: Oil and Gas
    We are proposing to change the proxy used for the Fuel: Oil and Gas 
cost category. The FY 2010-based IPPS market basket uses the PPI 
Industry for Petroleum Refineries (BLS series code PCU32411-32411-) to 
proxy these expenses.
    For the proposed 2014-based IPPS market basket, we are proposing to 
use a blend of the PPI Industry for Petroleum Refineries (BLS series 
code

[[Page 19920]]

PCU32411-32411-) and the PPI Commodity for Natural Gas (BLS series code 
WPU0531). Our analysis of the BEA 2007 Benchmark I-O data (use table 
before redefinitions, purchaser's value for NAICS 622000 [Hospitals]) 
shows that petroleum refineries expenses account for approximately 70 
percent and Natural Gas expenses account for approximately 30 percent 
of the Fuel: Oil and Gas expenses. Therefore, we are proposing a 
blended proxy of 70 percent of the PPI Industry for Petroleum 
Refineries (BLS series code PCU32411-32411-) and 30 percent of the PPI 
Commodity for Natural Gas (BLS series code WPU0531). We believe that 
these two price proxies are the most technically appropriate indices 
available to measure the price growth of the Fuel: Oil and Gas cost 
category in the proposed 2014-based IPPS market basket.
(4) Electricity
    We are proposing to use the PPI Commodity for Commercial Electric 
Power (BLS series code WPU0542) to measure the price growth of this 
cost category. This is the same price proxy used in the FY 2010-based 
IPPS market basket.
(5) Water and Sewerage
    We are proposing to use the CPI for Water and Sewerage Maintenance 
(All Urban Consumers) (BLS series code CUUR0000SEHG01) to measure the 
price growth of this cost category. This is the same price proxy used 
in the FY 2010-based IPPS market basket.
(6) Professional Liability Insurance
    We are proposing to proxy price changes in hospital professional 
liability insurance premiums (PLI) using percentage changes as 
estimated by the CMS Hospital Professional Liability Index. To generate 
these estimates, we collected commercial insurance premiums for a fixed 
level of coverage while holding nonprice factors constant (such as a 
change in the level of coverage). This is the same price proxy used in 
the FY 2010-based IPPS market basket.
(7) Pharmaceuticals
    We are proposing to use the PPI Commodity for Pharmaceuticals for 
Human Use, Prescription (BLS series code WPUSI07003) to measure the 
price growth of this cost category. This is the same price proxy used 
in the FY 2010-based IPPS market basket.
(8) Food: Direct Purchases
    We are proposing to use the PPI Commodity for Processed Foods and 
Feeds (BLS series code WPU02) to measure the price growth of this cost 
category. This is the same price proxy used in the FY 2010-based IPPS 
market basket.
(9) Food: Contract Services
    We are proposing to use the CPI for Food Away From Home (All Urban 
Consumers) (BLS series code CUUR0000SEFV) to measure the price growth 
of this cost category. This is the same price proxy used in the FY 
2010-based IPPS market basket.
(10) Chemicals
    We are proposing to continue to use a four-part blended index 
composed of the PPI Industry for Industrial Gas Manufacturing (BLS 
series code PCU325120325120P), the PPI Industry for Other Basic 
Inorganic Chemical Manufacturing (BLS series code PCU32518-32518-), the 
PPI Industry for Other Basic Organic Chemical Manufacturing (BLS series 
code PCU32519-32519-), and the PPI Industry for Soap and Cleaning 
Compound Manufacturing (BLS series code PCU32561-32561-). We are 
proposing to update the blended weights using 2007 Benchmark I-O data, 
which we also are proposing to use for the proposed 2014-based IPPS 
market basket. The FY 2010-based IPPS market basket included the same 
blended chemical price proxy, but used the 2002 Benchmark I-O data to 
determine the weights of the blended chemical price index. The 2007 
Benchmark I-O data has a higher weight for organic chemical products 
and a lower weight for the other chemical products compared to the 2002 
Benchmark I-O data.
    Table IV-03 below shows the proposed weights for each of the four 
PPIs used to create the blended index compared to those used for the FY 
2010-based IPPS market basket.

                                      Table IV-03--Blended Chemical Weights
----------------------------------------------------------------------------------------------------------------
                                                                   FY 2010-based  Proposed 2014-
                              Name                                 IPPS weights     based IPPS         NAICS
                                                                        (%)         weights (%)
----------------------------------------------------------------------------------------------------------------
PPI for Industrial Gas Manufacturing............................              35              32          325120
PPI for Other Basic Inorganic Chemical Manufacturing............              25              17          325180
PPI for Other Basic Organic Chemical Manufacturing..............              30              45          325190
PPI for Soap and Cleaning Compound Manufacturing................              10               6          325610
----------------------------------------------------------------------------------------------------------------

(11) Blood and Blood Products
    We are proposing to use the PPI Industry for Blood and Organ Banks 
(BLS series code PCU621991621991) to measure the price growth of this 
cost category. This is the same price proxy used in the FY 2010-based 
IPPS market basket.
(12) Medical Instruments
    We are proposing to use a blended price proxy for the Medical 
Instruments cost category. The 2007 Benchmark Input-Output data shows 
an approximate 50/50 split between Surgical and Medical Instruments and 
Medical and Surgical Appliances and Supplies for this cost category. 
Therefore, we are proposing a blend composed of 50 percent of the PPI 
Commodity for Surgical and Medical Instruments (BLS series code 
WPU1562) and 50 percent of the PPI Commodity for Medical and Surgical 
Appliances and Supplies (BLS series code WPU1563). The FY 2010-based 
IPPS market basket used the single, higher level PPI Commodity for 
Medical, Surgical, and Personal Aid Devices (BLS series code WPU156). 
We believe that the proposed price proxy better reflects the mix of 
expenses for this cost category as obtained from the 2007 Benchmark I-O 
data.
(13) Rubber and Plastics
    We are proposing to use the PPI Commodity for Rubber and Plastic 
Products (BLS series code WPU07) to measure the price growth of this 
cost category. This is the same price proxy used in the FY 2010-based 
IPPS market basket.

[[Page 19921]]

(14) Paper and Printing Products
    We are proposing to use the PPI Commodity for Converted Paper and 
Paperboard Products (BLS series code WPU0915) to measure the price 
growth of this cost category. This is the same price proxy used in the 
FY 2010-based IPPS market basket.
(15) Miscellaneous Products
    We are proposing to use the PPI Commodity for Finished Goods Less 
Food and Energy (BLS series code WPUFD4131) to measure the price growth 
of this cost category. This is the same price proxy used in the FY 
2010-based IPPS market basket.
(16) Professional Fees: Labor-Related
    We are proposing to use the ECI for Total Compensation for Private 
Industry Workers in Professional and Related (BLS series code 
CIU2010000120000I) to measure the price growth of this category. It 
includes occupations such as legal, accounting, and engineering 
services. This is the same price proxy used in the FY 2010-based IPPS 
market basket.
(17) Administrative and Facilities Support Services
    We are proposing to use the ECI for Total Compensation for Private 
Industry Workers in Office and Administrative Support (BLS series code 
CIU2010000220000I) to measure the price growth of this category. This 
is the same price proxy used in the FY 2010-based IPPS market basket.
(18) Installation, Maintenance, and Repair Services
    We are proposing to use the ECI for Total Compensation for All 
Civilian Workers in Installation, Maintenance, and Repair (BLS series 
code CIU1010000430000I) to measure the price growth of this new cost 
category. Previously these costs were included in the All Other: Labor-
Related Services category and were proxied by the ECI for Total 
Compensation for Private Industry Workers in Service Occupations (BLS 
series code CIU2010000300000I). We believe that this index better 
reflects the price changes of labor associated with maintenance-related 
services and its incorporation represents a technical improvement to 
the market basket.
(19) All Other: Labor-Related Services
    We are proposing to use the ECI for Total Compensation for Private 
Industry Workers in Service Occupations (BLS series code 
CIU2010000300000I) to measure the price growth of this cost category. 
This is the same price proxy used in the FY 2010-based IPPS market 
basket.
(20) Professional Fees: Nonlabor-Related
    We are proposing to use the ECI for Total Compensation for Private 
Industry Workers in Professional and Related (BLS series code 
CIU2010000120000I) to measure the price growth of this category. This 
is the same price proxy that we are proposing to use for the 
Professional Fees: Labor-Related cost category and the same price proxy 
used in the FY 2010-based IPPS market basket.
(21) Financial Services
    We are proposing to use the ECI for Total Compensation for Private 
Industry Workers in Financial Activities (BLS series code 
CIU201520A000000I) to measure the price growth of this cost category. 
This is the same price proxy used in the FY 2010-based IPPS market 
basket.
(22) Telephone Services
    We are proposing to use the CPI for Telephone Services (BLS series 
code CUUR0000SEED) to measure the price growth of this cost category. 
This is the same price proxy used in the FY 2010-based IPPS market 
basket.
(23) All Other: Nonlabor-Related Services
    We are proposing to use the CPI for All Items Less Food and Energy 
(BLS series code CUUR0000SA0L1E) to measure the price growth of this 
cost category. We believe that using the CPI for All Items Less Food 
and Energy avoids double counting of changes in food and energy prices 
as they are already captured elsewhere in the market basket. This is 
the same price proxy used in the FY 2010-based IPPS market basket.
    Table IV-04 below sets forth the proposed 2014-based IPPS market 
basket, including the cost categories and their respective weights and 
price proxies. For comparison purposes, the corresponding FY 2010-based 
IPPS market basket cost weights also are listed.

Table IV-04--Proposed 2014-Based IPPS Market Basket Cost Categories, Cost Weights, and Price Proxies Compared to
                                  FY 2010-Based IPPS Market Basket Cost Weights
----------------------------------------------------------------------------------------------------------------
                                                      FY            Proposed
                                               2010[dash]based  2014[dash]based
               Cost categories                   IPPS market      IPPS market    Proposed 2014-based IPPS market
                                                 basket cost      basket cost          basket price proxies
                                                   weights          weights
----------------------------------------------------------------------------------------------------------------
1. Compensation..............................             60.3             55.8  ...............................
    A. Wages and Salaries \1\................             47.2             43.4  ECI for Wages and Salaries for
                                                                                  All Civilian Workers in
                                                                                  Hospitals.
    B. Employee Benefits \1\.................             13.1             12.4  ECI for Total Benefits for All
                                                                                  Civilian Workers in Hospitals.
2. Utilities.................................              2.2              2.5  ...............................
    A. Fuel: Oil and Gas.....................              0.4              1.3  Blend of PPIs for Petroleum
                                                                                  Refineries and Natural Gas.
    B. Electricity...........................              1.7              1.0  PPI Commodity for Commercial
                                                                                  Electric Power.
    C. Water and Sewerage....................              0.1              0.1  CPI for Water and Sewerage
                                                                                  Maintenance (All Urban
                                                                                  Consumers).
3. Professional Liability Insurance..........              1.3              1.2  CMS Hospital Professional
                                                                                  Liability Insurance Premium
                                                                                  Index.
4. All Other.................................             36.1             40.5  ...............................
    A. All Other Products....................             19.5             17.4  ...............................
        (1.) Pharmaceuticals.................              5.4              5.9  PPI Commodity for
                                                                                  Pharmaceuticals for Human Use,
                                                                                  Prescription.
        (2.) Food: Direct Purchases..........              4.2              2.3  PPI Commodity for Processed
                                                                                  Foods and Feeds.

[[Page 19922]]

 
        (3.) Food: Contract Services.........              0.6              1.3  CPI for Food Away From Home
                                                                                  (All Urban Consumers).
        (4.) Chemicals.......................              1.5              0.9  Blend of Chemical PPIs.
        (5.) Blood and Blood Products........              1.1              0.8  PPI Industry for Blood and
                                                                                  Organ Banks.
        (6.) Medical Instruments.............              2.6              2.9  Blend of PPI for Surgical and
                                                                                  Medical Instruments and PPI
                                                                                  for Medical and Surgical
                                                                                  Appliances and Supplies.
        (7.) Rubber and Plastics.............              1.6              0.8  PPI Commodity for Rubber and
                                                                                  Plastic Products.
        (8.) Paper and Printing Products.....              1.5              1.5  PPI Commodity for Converted
                                                                                  Paper and Paperboard Products.
        (9.) Miscellaneous Products \2\......              1.0              1.1  PPI Commodity for Finished
                                                                                  Goods less Food and Energy.
    B. Labor-Related Services................              9.2             12.5  ...............................
        (1.) Professional Fees: Labor-Related              5.5              6.8  ECI for Total Compensation for
                                                                                  Private Industry Workers in
                                                                                  Professional and Related.
        (2.) Administrative and Facilities                 0.6              1.0  ECI for Total Compensation for
         Support Services.                                                        Private Industry Workers in
                                                                                  Office and Administrative
                                                                                  Support.
        (3.) Installation, Maintenance and     ...............              2.4  ECI for Total Compensation for
         Repair Services.                                                         Civilian Workers in
                                                                                  Installation, Maintenance, and
                                                                                  Repair.
        (4.) All Other: Labor-Related                      3.1              2.3  ECI for Total Compensation for
         Services.                                                                Private Industry Workers in
                                                                                  Service Occupations.
    C. Nonlabor-Related Services.............              7.4             10.7  ...............................
        (1.) Professional Fees: Nonlabor-                  3.7              5.1  ECI for Total Compensation for
         Related.                                                                 Private Industry Workers in
                                                                                  Professional and Related.
        (2.) Financial Services..............              1.2              3.0  ECI for Total Compensation for
                                                                                  Private Industry Workers in
                                                                                  Financial Activities.
        (3.) Telephone Services..............              0.6              0.8  CPI for Telephone Services.
        (4.) All Other: Nonlabor-Related                   1.9              1.7  CPI for All Items less Food and
         Services \3\.                                                            Energy.
                                              ------------------
            Total............................            100.0            100.0
----------------------------------------------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying
  one decimal and therefore, the detail may not add to the total due to rounding.
\1\ Contract labor is distributed to wages and salaries and employee benefits based on the share of total
  compensation that each category represents.
\2\ The FY 2010-based IPPS market basket Miscellaneous Products cost category also includes Apparel and
  Machinery and Equipment cost categories. These costs were not broken out separately in the 2014-based IPPS
  market basket.
\3\ The FY 2010-based IPPS market basket All Other: Nonlabor-Related Services cost category also includes the
  Postage cost category. These costs were not broken-out separately in the 2014-based IPPS market basket.

    Table IV-05 below compares both the historical and forecasted 
percent changes in the FY 2010-based IPPS market basket and the 
proposed 2014-based IPPS market basket. The forecasted growth rates in 
Table IV-05 are based on IHS Global Insight, Inc.'s (IGI) fourth 
quarter 2016 forecast with historical data through third quarter 2016.

    Table IV-05.--FY 2010-Based and Proposed 2014-Based IPPS Hospital
         Operating Index Percent Change, FY 2013 Through FY 2020
------------------------------------------------------------------------
                                           FY 2010-based  Proposed 2014-
                                            IPPS market     based IPPS
            Fiscal Year (FY)              basket percent   market basket
                                              change      percent change
------------------------------------------------------------------------
Historical data:
    FY 2013.............................             2.0             2.0
    FY 2014.............................             1.8             1.8
    FY 2015.............................             1.8             1.6
    FY 2016.............................             1.7             1.7
    Average FYs 2013-2016...............             1.8             1.8
Forecast:
    FY 2017.............................             2.6             2.7
    FY 2018.............................             2.9             2.9
    FY 2019.............................             3.0             3.0
    FY 2020.............................             3.0             3.0

[[Page 19923]]

 
    Average FYs 2017-2020...............             2.9             2.9
------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 4th Quarter 2016 forecast.

    There is no difference between the average percent change in the FY 
2010-based and the proposed 2014-based IPPS market basket over the FY 
2013 through FY 2016 time period. For FY 2018, the increase is 2.9 
percent for both the FY 2010-based and proposed 2014-based IPPS market 
baskets.
3. Labor-Related Share
    Under section 1886(d)(3)(E) of the Act, the Secretary estimates 
from time to time the proportion of payments that are labor-related. 
Section 1886(d)(3)(E) of the Act states that the Secretary shall adjust 
the proportion, (as estimated by the Secretary from time to time) of 
hospitals' costs which are attributable to wages and wage-related 
costs, of the DRG prospective payment rates. We refer to the proportion 
of hospitals' costs that are attributable to wages and wage-related 
costs as the ``labor-related share.''
    The labor-related share is used to determine the proportion of the 
national PPS base payment rate to which the area wage index is applied. 
We include a cost category in the labor-related share if the costs are 
labor intensive and vary with the local labor market. For the FY 2018 
IPPS/LTCH PPS proposed rule, we are proposing to include in the labor-
related share the national average proportion of operating costs that 
are attributable to the following cost categories in the proposed 2014-
based IPPS market basket: Wages and Salaries, Employee Benefits, 
Professional Fees: Labor-Related, Administrative and Facilities Support 
Services, Installation, Maintenance, and Repair Services, and All 
Other: Labor-Related Services, as we did in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50594). As noted in section IV.B.1.c. of the preamble 
of this proposed rule, for the proposed 2014-based IPPS market basket, 
we are proposing the creation of a separate cost category for 
Installation, Maintenance, and Repair Services. These expenses were 
previously included in the All Other: Labor-Related Services cost 
category in the FY 2010-based IPPS market basket, along with other 
services, including, but not limited to, janitorial, waste management, 
security, and dry cleaning/laundry services. Because these services 
tend to be labor-intensive and are mostly performed at the facility 
(and, therefore, unlikely to be purchased in the national market), we 
continue to believe that they meet our definition of labor-related 
services.
    Similar to the FY 2010-based IPPS market basket, we are proposing 
that the Professional Fees: Labor-Related cost category includes 
expenses associated with advertising and a proportion of legal 
services, accounting and auditing, engineering, management consulting, 
and management of companies and enterprises expenses. As was done in 
the FY 2010-based IPPS market basket rebasing, we are proposing to 
determine the proportion of legal, accounting and auditing, 
engineering, and management consulting services that meet our 
definition of labor-related services based on a survey of hospitals 
conducted by CMS in 2008. We notified the public of our intent to 
conduct this survey on December 9, 2005 (70 FR 73250) and received no 
comments (71 FR 8588).
    A discussion of the composition of the survey and 
poststratification can be found in the FY 2010 IPPS/LTCH PPS final rule 
(74 FR 43850 through 43856). Based on the weighted results of the 
survey, we determined that hospitals purchase, on average, the 
following portions of contracted professional services outside of their 
local labor market:
     34 percent of accounting and auditing services;
     30 percent of engineering services;
     33 percent of legal services; and
     42 percent of management consulting services.
    We are proposing to apply each of these percentages to its 
respective Benchmark I-O cost category underlying the professional fees 
cost category. This is the methodology that we used to separate the FY 
2010-based IPPS market basket professional fees cost category into 
Professional Fees: Labor-Related and Professional Fees: Nonlabor-
Related cost categories. We are proposing to use the same methodology 
and survey results to separate the professional fees costs for the 
2014-based IPPS market basket into Professional Fees: Labor-Related and 
Professional Fees: Nonlabor-Related cost categories. We believe these 
survey results are appropriate to use for the 2014-based IPPS market 
basket as they empirically determine the proportion of contracted 
professional services purchased by the industry that is attributable to 
local firms and the proportion that is purchased from national firms.
    In the proposed 2014-based IPPS market basket, nonmedical 
professional fees that were subject to allocation based on these survey 
results represent 4.9 percent of total operating costs (and are limited 
to those fees related to Accounting & Auditing, Legal, Engineering, and 
Management Consulting services). Based on our survey results, we are 
proposing to apportion 3.1 percentage points of the 4.9 percentage 
point figure into the Professional Fees: Labor-Related share cost 
category and designating the remaining 1.8 percentage point into the 
Professional Fees: Nonlabor-Related cost category.
    In addition to the professional services listed earlier, we also 
classify a proportion of the home office expenses into the Professional 
Fees: Labor-Related cost category as was done in the previous rebasing. 
For the FY 2010-based IPPS market basket, we obtained home office 
expenses from the Benchmark I-O data for the NAICS 55 industry 
(Management of Companies and Enterprises). As stated in section 
IV.B.1.a. of the preamble to this proposed rule, for the 2014-based 
IPPS market basket, we are proposing to obtain these data from the 
Medicare cost reports. We believe that many of the home office costs 
are labor-intensive and vary with the local labor market. However, data 
indicate that not all IPPS hospitals with home offices have home 
offices located in their local labor market. Therefore, we are 
proposing to include in the labor-related share only a proportion of 
the home office expenses based on the methodology described below.

[[Page 19924]]

    For the FY 2010-based IPPS market basket, we used data primarily 
from the Medicare cost reports and a CMS database of Home Office 
Medicare Records (HOMER) (a database that provides city and state 
information (addresses) for home offices). We determined the proportion 
of costs that should be allocated to the labor-related share based on 
the percent of hospital home office compensation as reported in 
Worksheet S-3, Part II. Using this methodology, we determined that 62 
percent of hospitals' home office compensation costs were for home 
offices located in their respective local labor markets (defined as the 
same Metropolitan Statistical Area (MSA)). Therefore, we classified 62 
percent of these costs into the Professional Fees: Labor-Related 
Services cost category and the remaining 38 percent into the 
Professional Fees: Nonlabor-Related Services cost category for the FY 
2010-based IPPS market basket. For a detailed discussion of this 
analysis, we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 
FR 50601).
    For the proposed 2014-based IPPS market basket, we conducted a 
similar analysis of home office data. For consistency, we believe that 
it is important for our analysis on home office data to be conducted on 
the same IPPS hospitals used to derive the proposed 2014-based IPPS 
market basket cost weights. The Medicare cost report requires a 
hospital to report information regarding their home office provider. 
Approximately 64 percent of IPPS hospitals reported some type of home 
office information on their Medicare cost report for 2014 (for example, 
city, State, and zip code). Using the data reported on the Medicare 
cost report, we compared the location of the hospital with the location 
of the hospital's home office. We then determined the proportion of 
costs that should be allocated to the labor-related share based on the 
percent of total hospital home office compensation costs for those 
hospitals that had home offices located in their respective local labor 
markets--defined as being in the same MSA. We determined a hospital's 
and home office's MSAs using their zip code information from the 
Medicare cost report.
    Similar to the FY 2010-based IPPS market basket, we determined the 
proportion of costs that should be allocated to the labor-related share 
based on the percent of hospital home office compensation as reported 
in Worksheet S-3, Part II. Using this methodology, we determined that 
60 percent of hospitals' home office compensation costs were for home 
offices located in their respective local labor markets. Therefore, we 
are proposing to allocate 60 percent of home office expenses to the 
labor-related share.
    In the proposed 2014-based IPPS market basket, home office expenses 
that were subject to allocation based on the home office allocation 
methodology represent 4.2 percent of total operating costs. Based on 
the results of the home office analysis discussed above, we are 
apportioning 2.5 percentage points of the 4.2 percentage points figure 
into the Professional Fees: Labor-Related cost category and designating 
the remaining 1.7 percentage points into the Professional Fees: 
Nonlabor-Related cost category. In summary, based on the two 
allocations mentioned above, we apportioned 5.6 percentage points of 
the professional fees and home office cost weights into the 
Professional Fees: Labor-Related cost category. This amount is added to 
the portion of professional fees that we already identified as labor-
related using the I-O data such as contracted advertising and marketing 
costs (approximately 1.2 percentage point of total operating costs) 
resulting in a Professional Fees: Labor-Related cost weight of 6.8 
percent.
    Below is a table comparing the proposed 2014-based labor-related 
share and the FY 2010-based labor-related share. As discussed in 
section IV.B.1.b. of the preamble of this proposed rule, the Wages and 
Salaries and Employee Benefits cost weights reflect contract labor 
costs.

  Table IV-06--Comparision of the FY 2010-Based Labor-Related Share and
               the Proposed 2014-Based Labor-Related Share
------------------------------------------------------------------------
                                           FY 2010-based  Proposed 2014-
                                            IPPS market     based IPPS
                                            basket cost    market basket
                                              weights      cost weights
------------------------------------------------------------------------
Wages and Salaries......................            47.2            43.4
Employee Benefits.......................            13.1            12.4
Professional Fees: Labor-Related........             5.5             6.8
Administrative and Facilities Support                0.6             1.0
 Services...............................
Installation, Maintenance, and Repair     ..............             2.4
 Services\1\............................
All Other: Labor-Related Services.......             3.1             2.3
                                         -------------------------------
    Total Labor-Related Share...........            69.6            68.3
------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
\1\ Installation, Maintenance, and Repair Services costs were previously
  included in the All Other: Labor-Related Services cost category of the
  FY 2010-based IPPS market basket.

    Using the cost category weights from the proposed 2014-based IPPS 
market basket, we calculated a labor-related share of 68.3 percent, 
approximately 1.3 percentage points lower than the current labor-
related share of 69.6 percent. Therefore, we are proposing to use a 
labor-related share of 68.3 percent for discharges occurring on or 
after October 1, 2017. We continue to believe, as we have stated in the 
past, that these operating cost categories are related to, influenced 
by, or vary with the local markets. Therefore, our definition of the 
labor-related share continues to be consistent with section 1886(d)(3) 
of the Act. We note that section 403 of Pub. L. 108-173 amended 
sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act to provide that 
the Secretary must employ 62 percent as the labor-related share unless 
62 percent would result in lower payments to a hospital than would 
otherwise be made.

C. Market Basket for Certain Hospitals Presently Excluded From the IPPS

    In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43857), we 
adopted the use of the FY 2006-based IPPS operating market basket 
percentage

[[Page 19925]]

increase to update the target amounts for children's hospitals, PPS-
excluded cancer hospitals and religious nonmedical health care 
institutions (RNHCIs). Children's hospitals and PPS-excluded cancer 
hospitals and RNHCIs are still reimbursed solely under the reasonable 
cost-based system, subject to the rate-of-increase limits. Under these 
limits, an annual target amount (expressed in terms of the inpatient 
operating cost per discharge) is set for each hospital based on the 
hospital's own historical cost experience trended forward by the 
applicable rate-of-increase percentages.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50603), under the 
broad authority in sections 1886(b)(3)(A) and (B), 1886(b)(3)(E), and 
1871 of the Act and section 4454 of the BBA, consistent with our use of 
the IPPS operating market basket percentage increase to update target 
amounts, we adopted the use of the FY 2010-based IPPS operating market 
basket percentage increase to update the target amounts for children's 
hospitals, PPS-excluded cancer hospitals, and RNHCIs that are paid on 
the basis of reasonable cost subject to the rate-of-increase limits 
under Sec.  413.40. In addition, as discussed in the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50156 through 50157), 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 FY 2010-based IPPS operating market 
basket to update the target amounts for short-term acute care 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). These hospitals also are 
paid on the basis of reasonable cost, subject to the rate-of-increase 
limits under Sec.  413.40.
    Due to the small number of children's and cancer hospitals and 
RNHCIs and hospitals located outside the 50 States, the District of 
Columbia, and Puerto Rico and because these facilities provide limited 
Medicare cost report data, we are unable to create a separate market 
basket specifically for these facilities. Due to the limited cost 
report data available, we believe that the proposed 2014-based IPPS 
operating market basket most closely represents the cost structure of 
children's hospitals, PPS-excluded cancer hospitals, RNHCIs, and 
hospitals located outside the 50 States, the District of Columbia, and 
Puerto Rico. We believe this is appropriate as the IPPS operating 
market basket would reflect the input price growth for providing 
inpatient hospital services (similar to the services provided by the 
above excluded facilities) based on the specific mix of goods and 
services required. Therefore, we are proposing to use the 2014-based 
IPPS market basket percentage increase to update the target amounts for 
children's hospitals, PPS-excluded cancer hospitals, RNHCIs, and 
hospitals located outside the 50 States, the District of Columbia, and 
Puerto Rico that are paid on the basis of reasonable cost subject to 
the rate-of-increase limits under Sec.  413.40. We believe it is the 
best available measure of the average increase in the prices of the 
goods and services purchased by children's hospitals, the cancer 
hospitals, RNHCIs, and hospitals located outside the 50 States, the 
District of Columbia, and Puerto Rico in order to provide care.

D. Rebasing and Revising the Capital Input Price Index (CIPI)

    The CIPI was originally described in the FY 1993 IPPS final rule 
(57 FR 40016). There have been subsequent discussions of the CIPI 
presented in the IPPS proposed and final rules. The FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50603 through 50607) described the most recent 
rebasing and revision of the CIPI to a FY 2010 base year, which 
reflected the capital cost structure of IPPS hospitals available at 
that time.
    For the FY 2018 IPPS update, we are proposing to rebase and revise 
the CIPI to a 2014 base year to reflect a more current structure of 
capital costs for IPPS hospitals. This proposed 2014-based CIPI was 
derived using 2014 cost reports for IPPS hospitals, which includes 
providers whose cost reporting period began on or after October 1, 
2013, and prior to September 30, 2014. While we proposed and finalized 
the title of the current CIPI in the FY 2014 IPPS/LTCH proposed and 
final rules as ``FY 2010-based CIPI'', for the proposed CIPI, we are 
now proposing to simply refer to the proposed CIPI as ``2014-based 
CIPI'' (dropping the reference to FY). As discussed in section IV.B. of 
the preamble of this proposed rule, for the 2014-based IPPS operating 
market basket, we are proposing this change in naming convention for 
the market basket because the base year cost weight data for the 
proposed market basket do not reflect only fiscal year data. Similarly, 
the proposed 2014-based CIPI uses Medicare cost report data and other 
government data that reflect 2014 fiscal year, 2014 calendar year, and 
2014 State fiscal year expenses to determine the base year cost weights 
and vintage weights. Given that it is based on a mix of classifications 
of 2014 data, we are proposing to refer to the CIPI as ``2014-based'' 
instead of ``FY 2014-based'' or ``CY 2014-based''. However, the methods 
and data used to derive each of these CIPI are similar. As with the FY 
2010-based index, we are proposing to develop two sets of weights to 
derive the proposed 2014-based CIPI. The first set of weights 
identifies the proportion of hospital capital expenditures attributable 
to each expenditure category, while the second set of weights is a set 
of relative vintage weights for depreciation and interest. The set of 
vintage weights is used to identify the proportion of capital 
expenditures within a cost category that is attributable to each year 
over the useful life of the capital assets in that category. A more 
thorough discussion of vintage weights is provided later in this 
section.
    Using 2014 Medicare cost reports, we are able to group capital 
costs into the following categories: Depreciation, Interest, Lease, and 
Other. For each of these categories, we are proposing to determine what 
proportion of total capital costs the category represents using the 
data reported by IPPS hospitals on Worksheet A-7, which is the same 
methodology used for the FY 2010-based CIPI. As shown in the left 
column of Table IV-07, in 2014 depreciation expenses accounted for 66.4 
percent of total capital costs, interest expenses accounted for 16.3 
percent, leasing expenses accounted for 11.8 percent, and other capital 
expenses accounted for 5.5 percent.
    We also are proposing to allocate lease costs across each of the 
remaining capital cost categories as was done in the FY 2010-based 
CIPI. This would result in three primary capital cost categories in the 
proposed 2014-based CIPI: Depreciation, Interest, and Other. Lease 
costs are unique in that they are not broken out as a separate cost 
category in the proposed 2014-based CIPI. Rather, we are proposing to 
proportionally distribute leasing costs among the cost categories of 
Depreciation, Interest, and Other, reflecting the assumption that the 
underlying cost structure of leases is similar to that of capital costs 
in general. As was done for the FY 2010-based CIPI, we are proposing to 
assume that 10 percent of the lease costs as a proportion of total 
capital costs represents overhead and to assign those costs to the 
Other capital cost category accordingly. Therefore, we are assuming 
that approximately 1.2 percent (11.8 percent x 0.1) of total capital 
costs represent lease costs attributable to overhead, and we are 
proposing to add this 1.2 percent to the 5.5 percent Other cost 
category weight. We are then proposing to distribute the remaining 
lease costs

[[Page 19926]]

(10.6 percent, or 11.8 percent-1.2 percent) proportionally across the 
three cost categories (Depreciation, Interest, and Other) based on the 
proportion that these categories comprise of the sum of the 
Depreciation, Interest, and Other cost categories (excluding lease 
expenses). For example, the Other cost category represented 6.3 percent 
of all three cost categories (Depreciation, Interest, and Other) prior 
to any lease expenses being allocated. This 6.3 percent is applied to 
the 10.6 percent of remaining lease expenses so that another 0.7 
percent of lease expenses as a percent of total capital costs is 
allocated to the Other cost category. Therefore, the resulting proposed 
Other cost weight is 7.4 percent (5.5 percent + 1.2 percent + 0.7 
percent). This is the same methodology used for the FY 2010-based CIPI. 
The resulting cost weights of the proposed allocation of lease expenses 
are shown in the right column of Table IV-07.

               Table IV-07--Proposed Allocation of Lease Expenses for the Proposed 2014-Based CIPI
----------------------------------------------------------------------------------------------------------------
                                                                  Proposed cost shares     Proposed cost shares
                                                                 obtained from medicare    after allocation of
                        Cost categories                          cost reports (percent   lease expenses (percent
                                                                of total capital costs)  of total capital costs)
----------------------------------------------------------------------------------------------------------------
Depreciation..................................................                     66.4                     74.4
Interest......................................................                     16.3                     18.2
Lease.........................................................                     11.8  .......................
Other.........................................................                      5.5                      7.4
----------------------------------------------------------------------------------------------------------------

    Finally, we are proposing to further divide the Depreciation and 
Interest cost categories. We are proposing to separate the Depreciation 
cost category into the following two categories: (1) Building and Fixed 
Equipment and (2) Movable Equipment. We also are proposing to separate 
the Interest cost category into the following two categories: (1) 
Government/Nonprofit; and (2) For-profit.
    To disaggregate the depreciation cost weight, we needed to 
determine the percent of total depreciation costs for IPPS hospitals 
(after the allocation of lease costs) that are attributable to building 
and fixed equipment, which we hereafter refer to as the ``fixed 
percentage.'' Based on Worksheet A-7 data from the 2014 IPPS Medicare 
cost reports, we have determined that depreciation costs for building 
and fixed equipment account for approximately 49 percent of total 
depreciation costs, while depreciation costs for movable equipment 
account for approximately 51 percent of total depreciation costs. As 
was done for the FY 2010-based CIPI, we are proposing to apply this 
fixed percentage to the depreciation cost weight (after leasing costs 
are included) to derive a Depreciation cost weight attributable to 
Building and Fixed Equipment and a Depreciation cost weight 
attributable to Movable Equipment.
    To disaggregate the interest cost weight, we needed to determine 
the percent of total interest costs for IPPS hospitals that are 
attributable to government and nonprofit facilities, which we hereafter 
refer to as the ``nonprofit percentage,'' because interest price 
pressures tend to differ between nonprofit and for-profit facilities. 
We are proposing to use interest costs data from Worksheet A-7 of the 
2014 Medicare cost reports for IPPS hospitals, which is the same 
methodology used for the FY 2010-based CIPI. The nonprofit percentage 
determined using this method is 86 percent. Table IV-08 provides a 
comparison of the FY 2010-based CIPI cost weights and the proposed 
2014-based CIPI cost weights.
    After the capital cost category weights were computed, it was 
necessary to select appropriate price proxies to reflect the rate-of-
increase for each expenditure category. We are proposing to apply the 
same price proxies as were used in the FY 2010-based CIPI, which are 
listed below and provided in Table IV-08. We also are proposing to 
continue to vintage weight the capital price proxies for Depreciation 
and Interest to capture the long-term consumption of capital. This 
vintage weighting method is the same method that was used for the FY 
2010-based CIPI and is described below.
    We are proposing to continue to proxy the: Depreciation--Building 
and Fixed Equipment cost category by the BEA Chained Price Index for 
Private Fixed Investment in Structures, Nonresidential, Hospitals and 
Special Care (BEA Table 5.4.4. Price Indexes for Private Fixed 
Investment in Structures by Type). As stated in the FY 2010 IPPS/LTCH 
final rule (74 FR 43860), for the FY 2006-based CIPI we finalized the 
use of this index to measure the price growth of this cost category. 
This BEA index is intended to capture prices for construction of 
facilities such as hospitals, nursing homes, hospices, and 
rehabilitation centers. For the Depreciation--Movable Equipment cost 
category, we are proposing to continue to measure the price growth 
using the PPI Commodity for Machinery and Equipment (BLS series code 
WPU11). This price index reflects price inflation associated with a 
variety of machinery and equipment that would be utilized by hospitals 
including but not limited to communication equipment, computers, and 
medical equipment. For the Nonprofit Interest and For-profit Interest 
cost categories, we are proposing to continue to measure the price 
growth using the average yield on domestic municipal bonds (Bond Buyer 
20-bond index) and the average yield on Moody's Aaa bonds (Federal 
Reserve), respectively. As stated above, we are proposing two proxies 
because interest price pressures tend to differ between nonprofit and 
for-profit facilities. For the Other capital cost category (including 
insurances, taxes, and other capital-related costs), we are proposing 
to continue to measure the price growth using the CPI for Rent of 
Primary Residence (All Urban Consumers) (BLS series code CUUS0000SEHA), 
which would reflect the price growth of these costs. We believe that 
these price proxies continue to be the most appropriate proxies for 
IPPS capital costs that meet our selection criteria of relevance, 
timeliness, availability, and reliability.

[[Page 19927]]



    Table IV-08--Proposed 2014-Based CIPI Cost Weights and Price Proxies With FY 2010-Based CIPI Cost Weights
                                            Included for Comparision
----------------------------------------------------------------------------------------------------------------
                                              FY 2010 cost    Proposed 2014
              Cost categories                   weights        cost weights          Proposed price proxy
----------------------------------------------------------------------------------------------------------------
Total.....................................            100.0            100.0  ..................................
    Depreciation..........................             74.0             74.4  ..................................
        Building and Fixed Equipment......             36.2             36.7  BEA's Chained Price Index for
                                                                               Private Fixed Investment in
                                                                               Structures, Nonresidential,
                                                                               Hospitals and Special Care.
        Movable Equipment.................             37.9             37.7  PPI Commodity for Machinery and
                                                                               Equipment.
    Interest..............................             19.2             18.2  ..................................
        Government/Nonprofit..............             17.1             15.7  Average Yield on Domestic
                                                                               Municipal Bonds (Bond Buyer 20-
                                                                               Bond Index).
        For-Profit........................              2.1              2.5  Average Yield on Moody's Aaa
                                                                               Bonds.
Other.....................................              6.8              7.4  CPI for Rent of Primary Residence.
----------------------------------------------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying
  one decimal and therefore, the detail may not add to the total due to rounding.

    Because capital is acquired and paid for over time, capital 
expenses in any given year are determined by both past and present 
purchases of physical and financial capital. The proposed vintage-
weighted 2014-based CIPI is intended to capture the long-term 
consumption of capital, using vintage weights for depreciation 
(physical capital) and interest (financial capital). These vintage 
weights reflect the proportion of capital purchases attributable to 
each year of the expected life of building and fixed equipment, movable 
equipment, and interest. We are proposing to use vintage weights to 
compute vintage-weighted price changes associated with depreciation and 
interest expenses.
    Vintage weights are an integral part of the CIPI. Capital costs are 
inherently complicated and are determined by complex capital purchasing 
decisions, over time, based on such factors as interest rates and debt 
financing. In addition, capital is depreciated over time instead of 
being consumed in the same period it is purchased. By accounting for 
the vintage nature of capital, we are able to provide an accurate and 
stable annual measure of price changes. Annual nonvintage price changes 
for capital are unstable due to the volatility of interest rate changes 
and, therefore, do not reflect the actual annual price changes for IPPS 
capital costs. The CIPI reflects the underlying stability of the 
capital acquisition process.
    To calculate the vintage weights for depreciation and interest 
expenses, we first needed a time series of capital purchases for 
building and fixed equipment and movable equipment. We found no single 
source that provides an appropriate time series of capital purchases by 
hospitals for all of the above components of capital purchases. The 
early Medicare cost reports did not have sufficient capital data to 
meet this need. Data we obtained from the American Hospital Association 
(AHA) did not include annual capital purchases. However, we were able 
to obtain data on total expenses back to 1963 from the AHA. 
Consequently, we are proposing to use data from the AHA Panel Survey 
and the AHA Annual Survey to obtain a time series of total expenses for 
hospitals. We then are proposing to use data from the AHA Panel Survey 
supplemented with the ratio of depreciation to total hospital expenses 
obtained from the Medicare cost reports to derive a trend of annual 
depreciation expenses for 1963 through 2014. We are proposing to 
separate these depreciation expenses into annual amounts of building 
and fixed equipment depreciation and movable equipment depreciation as 
determined earlier. From these annual depreciation amounts, we derived 
annual end-of-year book values for building and fixed equipment and 
movable equipment using the expected life for each type of asset 
category. We used the AHA data and similar methodology to derive the FY 
2010-based IPPS capital market basket (78 FR 50604).
    To continue to calculate the vintage weights for depreciation and 
interest expenses, we also needed to account for the expected lives for 
building and fixed equipment, movable equipment, and interest for the 
proposed 2014-based CIPI. We are proposing to calculate the expected 
lives using Medicare cost report data. The expected life of any asset 
can be determined by dividing the value of the asset (excluding fully 
depreciated assets) by its current year depreciation amount. This 
calculation yields the estimated expected life of an asset if the rates 
of depreciation were to continue at current year levels, assuming 
straight-line depreciation. Using this proposed method, we determined 
the average expected life of building and fixed equipment to be equal 
to 27 years, and the average expected life of movable equipment to be 
equal to 12 years. For the expected life of interest, we believe that 
vintage weights for interest should represent the average expected life 
of building and fixed equipment because, based on previous research 
described in the FY 1997 IPPS final rule (61 FR 46198), the expected 
life of hospital debt instruments and the expected life of buildings 
and fixed equipment are similar. We note that the FY 2010-based CIPI 
was based on an expected average life of building and fixed equipment 
of 26 years and an expected average life of movable equipment of 12 
years.
    Multiplying these expected lives by the annual depreciation amounts 
results in annual year-end asset costs for building and fixed equipment 
and movable equipment. We then calculated a time series, beginning in 
1964, of annual capital purchases by subtracting the previous year's 
asset costs from the current year's asset costs.
    For the building and fixed equipment and movable equipment vintage 
weights, we are proposing to use the real annual capital-related 
purchase amounts for each asset type to capture the actual amount of 
the physical acquisition, net of the effect of price inflation. These 
real annual capital-related purchase amounts are produced by deflating 
the nominal annual purchase amount by the associated price proxy as 
provided earlier in this proposed rule. For the interest vintage 
weights, we are proposing to use the total nominal annual capital-
related purchase amounts to capture the value of the debt instrument 
(including, but not limited to, mortgages and bonds). Using these 
capital purchases time series specific to each asset type, we are 
proposing to calculate the vintage weights for building and fixed

[[Page 19928]]

equipment, for movable equipment, and for interest.
    The vintage weights for each asset type are deemed to represent the 
average purchase pattern of the asset over its expected life (in the 
case of building and fixed equipment and interest, 27 years, and in the 
case of movable equipment, 12 years). For each asset type, we are 
proposing to use the time series of annual capital purchases amounts 
available from 2014 back to 1964. These data allow us to derive twenty-
five 27-year periods of capital purchases for building and fixed 
equipment and interest, and forty 12-year periods of capital purchases 
for movable equipment. For each 27-year period for building and fixed 
equipment and interest, or 12-year period for movable equipment, we are 
proposing to calculate annual vintage weights by dividing the capital-
related purchase amount in any given year by the total amount of 
purchases over the entire 27-year or 12-year period. This calculation 
was done for each year in the 27-year or 12-year period and for each of 
the periods for which we have data. We then calculated the average 
vintage weight for a given year of the expected life by taking the 
average of these vintage weights across the multiple periods of data.
    The vintage weights for the proposed 2014-based CIPI and the FY 
2010-based CIPI are presented in Table IV-09 below.

                                      Table IV-09--Proposed 2014-Based CIPI and FY 2010-Based CIPI Vintage Weights
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Building and fixed equipment          Movable equipment                   Interest
                                                         -----------------------------------------------------------------------------------------------
                        Year \1\                          Proposed 2014-   FY 2010-based  Proposed 2014-   FY 2010-based  Proposed 2014-   FY 2010-based
                                                          based 27 years     26 years     based 12 years     12 years     based 27 years     26 years
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................           0.024           0.023           0.062           0.064           0.012           0.012
2.......................................................           0.025           0.024           0.064           0.068           0.014           0.013
3.......................................................           0.027           0.026           0.070           0.071           0.015           0.015
4.......................................................           0.028           0.028           0.074           0.073           0.017           0.017
5.......................................................           0.030           0.029           0.078           0.076           0.019           0.018
6.......................................................           0.031           0.031           0.082           0.078           0.021           0.021
7.......................................................           0.033           0.032           0.086           0.084           0.023           0.023
8.......................................................           0.034           0.034           0.088           0.088           0.025           0.025
9.......................................................           0.035           0.036           0.092           0.092           0.027           0.028
10......................................................           0.036           0.038           0.097           0.098           0.029           0.030
11......................................................           0.037           0.040           0.102           0.103           0.030           0.033
12......................................................           0.039           0.041           0.105           0.106           0.033           0.036
13......................................................           0.040           0.042  ..............  ..............           0.035           0.038
14......................................................           0.040           0.042  ..............  ..............           0.037           0.040
15......................................................           0.039           0.043  ..............  ..............           0.037           0.043
16......................................................           0.039           0.044  ..............  ..............           0.040           0.045
17......................................................           0.040           0.044  ..............  ..............           0.041           0.047
18......................................................           0.042           0.044  ..............  ..............           0.045           0.048
19......................................................           0.042           0.044  ..............  ..............           0.048           0.051
20......................................................           0.042           0.044  ..............  ..............           0.050           0.052
21......................................................           0.043           0.045  ..............  ..............           0.052           0.056
22......................................................           0.043           0.045  ..............  ..............           0.054           0.057
23......................................................           0.042           0.045  ..............  ..............           0.055           0.060
24......................................................           0.042           0.046  ..............  ..............           0.057           0.062
25......................................................           0.043           0.045  ..............  ..............           0.059           0.064
26......................................................           0.043           0.045  ..............  ..............           0.061           0.066
27......................................................           0.043  ..............  ..............  ..............           0.062  ..............
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................           1.000           1.000           1.000           1.000           1.000           1.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers may not add to total due to rounding.
\1\ Vintage weight in the last year (for example, year 27 for the proposed 2014-based CIPI) is applied to the most recent data point and prior vintage
  weights are applied going back in time. For example, year 27 vintage weight would be applied to the 2018q3 fixed price proxy level, year 26 vintage
  weight would be applied to the 2017q3 fixed price proxy level, etc.

    The process of creating vintage-weighted price proxies requires 
applying the vintage weights to the price proxy index where the last 
applied vintage weight in Table IV-09 is applied to the most recent 
data point. We have provided on the CMS Web site an example of how the 
vintage weighting price proxies are calculated, using example vintage 
weights and example price indices. The example can be found under the 
following CMS Web site link: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html in the zip file 
titled ``Weight Calculations as described in the IPPS FY 2010 Proposed 
Rule.''
    Table IV-10 below compares both the historical and forecasted 
percent changes in the FY 2010-based CIPI and the proposed 2014-based 
CIPI.

[[Page 19929]]



Table IV-10--Comparison of FY 2010-Based and Proposed 2014-Based Capital
       Input Price Index, Percent Change, FY 2013 Through FY 2020
------------------------------------------------------------------------
                                          CIPI, FY 2010-  Proposed CIPI,
               Fiscal year                     based        2014-based
------------------------------------------------------------------------
Historical Data:
    FY 2013.............................             1.1             1.0
    FY 2014.............................             1.2             1.2
    FY 2015.............................             1.2             1.1
    FY 2016.............................             1.1             1.0
    Average FYs 2013-2016...............             1.2             1.1
Forecast:
    FY 2017.............................             1.1             1.0
    FY 2018.............................             1.3             1.2
    FY 2019.............................             1.5             1.4
    FY 2020.............................             1.5             1.5
    Average FYs 2017-2020...............             1.4             1.3
------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 4th quarter 2016 forecast.

    IHS Global Insight, Inc. forecasts a 1.2 percent increase in the 
proposed 2014-based CIPI for FY 2018, as shown in Table IV-10. The 
underlying vintage-weighted price increases for depreciation (including 
building and fixed equipment and movable equipment) and interest 
(including government/nonprofit and for-profit) based on the proposed 
2014-based CIPI are included in Table IV-11.

 Table IV-11--Proposed 2014-Based Capital Input Price Index Percent Changes, Total and Depreciation and Interest
                                        Components--FYs 2013 Through 2020
----------------------------------------------------------------------------------------------------------------
                           Fiscal year                                 Total       Depreciation      Interest
----------------------------------------------------------------------------------------------------------------
Historical Data:                                                  ..............  ..............  ..............
    FY 2013.....................................................             1.0             1.7            -2.5
    FY 2014.....................................................             1.2             1.8            -1.8
    FY 2015.....................................................             1.1             1.8            -2.7
    FY 2016.....................................................             1.0             1.7            -3.0
Forecast:                                                         ..............  ..............  ..............
    FY 2017.....................................................             1.0             1.6            -2.7
    FY 2018.....................................................             1.2             1.6            -1.6
    FY 2019.....................................................             1.4             1.6            -0.6
    FY 2020.....................................................             1.5             1.6             0.1
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 4th quarter 2016 forecast.

    Rebasing the CIPI from FY 2010 to 2014 decreased the percent change 
in the forecasted update for FY 2018 by 0.1 percentage point, from 1.3 
percent to 1.2 percent, as shown in Table IV-10. The lower FY 2018 
update is primarily due to a change in the vintage weights for the 
proposed 2014-based CIPI, which includes updating the asset purchase 
data through 2014 and changing the building and fixed equipment and 
interest asset lives from 26 years to 27 years. This lower update is 
only partially offset by the change in the base year weights, which 
produce a faster increase due to more weight being given to the 
Depreciation cost category and less weight being given to the Interest 
cost category. As shown in Table IV-11, for FY 2018, vintage-weighted 
price growth is projected to be positive for the Depreciation cost 
category and negative for Interest cost category.

V. Other Decisions and Proposed Changes to the IPPS for Operating 
System

A. Proposed Changes to MS-DRGs Subject to the Postacute Care Transfer 
and MS-DRG Special Payment Policies (Sec.  412.4)

1. Background
    Existing regulations at 42 CFR 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.

[[Page 19930]]

    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. The statute directs us to identify MS-DRGs based on a 
high volume of discharges to postacute care facilities and a 
disproportionate use of postacute care services. As discussed in the FY 
2006 IPPS final rule (70 FR 47416), we determined that the 55th 
percentile is an appropriate level at which to establish these 
thresholds. In that same final rule (70 FR 47419), we stated that we 
will not revise the list of DRGs subject to the postacute care transfer 
policy annually unless we are making a change to a specific MS-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. Proposed Changes for FY 2018
    Based on our annual review of MS-DRGs, we have identified three MS-
DRGs that we are proposing to be included on the list of MS-DRGs 
subject to the special payment transfer policy. As we discuss in 
section II.F. of the preamble of this proposed rule, in response to 
public comments and based on our analysis of FY 2016 MedPAR claims 
data, we are proposing to make changes to MS-DRGs, effective for FY 
2018.
    As discussed in section II.F.14.b. of the preamble of this proposed 
rule, we are proposing to delete MS-DRGs 984, 985, and 986 (Prostatic 
O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC and 
without CC/MCC, respectively) and reassign the procedure codes 
currently assigned to these three MS-DRGs to MS-DRGs 987, 988, and 989 
(Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with 
MCC, with CC and without CC/MCC, respectively).
    In light of these proposed changes to the MS-DRGs for FY 2018, 
according to the regulations under Sec.  412.4(d), we evaluated 
proposed revised MS-DRGs 987, 988, and 989 (which would contain the 
proposed reassigned procedures from MS-DRGs 984, 985, and 986) against 
the general postacute care transfer policy criteria using the FY 2016 
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 procedure or diagnosis codes that would 
result in material changes to an MS-DRG. MS-DRGs 987, 988, and 989 are 
currently subject to the postacute care transfer policy. As a result of 
our review, the proposed revised MS-DRGs 987, 988, and 989 continue to 
qualify to be included on the list of MS-DRGs that are subject to the 
postacute care transfer policy. We are not proposing to change the 
postacute care transfer policy status for MS-DRGs 987, 988, and 989.

                         List of Proposed Revised MS-DRGs Subject To Review of Postacute Care Transfer Policy Status for FY 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              Percent of
                                                                                                              short-stay
                                                                            Postacute care                  postacute care
                                                                               transfers      Short-stay     transfers to      Postacute care transfer
  Proposed revised MS-DRG             MS-DRG title            Total cases        (55th      postacute care     all cases            policy status
                                                                              percentile:      transfers         (55th
                                                                                1,419)                        percentile:
                                                                                                               8.01068%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
987........................  Non-Extensive O.R. Procedure            8,131           4,210           1,355        16.66462  YES.
                              Unrelated to Principal
                              Diagnosis with MCC.
988........................  Non-Extensive O.R. Procedure            8,239           3,416             706         8.56900  YES.
                              Unrelated to Principal
                              Diagnosis with CC.
989........................  Non-Extensive O.R. Procedure            2,216           * 499              47       * 2.12094  ** YES.
                              Unrelated to Principal
                              Diagnosis without MCC/CC.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* 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.

    We also have determined that proposed revised MS-DRGs 987, 988, and 
989 would meet the criteria for the MS-DRG special payment methodology. 
MS-DRGs 987, 988, and 989 are not currently listed as being subject to 
the special payment policy. Therefore, we are proposing that these 
three proposed revised MS-DRGs would be subject to

[[Page 19931]]

the MS-DRG special payment methodology, effective FY 2018.

         List of Proposed Revised MS-DRGs Subject To Review of Special Payment Policy Status for FY 2018
----------------------------------------------------------------------------------------------------------------
                                                                             50 Percent of
                                                                Average         average
 Proposed  revised        MS-DRG title      Geometric mean  charges of  1-    charges for      Special payment
       MS-DRG                               length of stay        day          all cases        policy status
                                                              discharges     within MS-DRG
----------------------------------------------------------------------------------------------------------------
987................  Non-Extensive O.R.                8.1         $36,526         $53,449  * YES.
                      Procedure Unrelated
                      to Principal
                      Diagnosis with MCC.
988................  Non-Extensive O.R.                8.6          35,629          29,119  YES.
                      Procedure Unrelated
                      to Principal
                      Diagnosis with CC.
989................  Non-Extensive O.R.                2.2               0               0  * YES.
                      Procedure Unrelated
                      to Principal
                      Diagnosis without
                      MCC/CC.
----------------------------------------------------------------------------------------------------------------
* 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 proposed postacute care transfer policy status and special 
payment policy status of these MS-DRGs are reflected in Table 5 
associated with this proposed rule, which is listed in section VI. of 
the Addendum to this proposed rule and available via the Internet on 
the CMS Web site.

B. Proposed Changes in the Inpatient Hospital Update for FY 2018 (Sec.  
412.64(d))

1. Proposed FY 2018 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 hospital 
operating costs by a factor called the ``applicable percentage 
increase.'' For FY 2018, we are setting the applicable percentage 
increase by applying the adjustments listed in this section in the same 
sequence as we did for FY 2017. 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--
    (a) 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;
    (b) A reduction of 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;
    (c) An adjustment based on changes in economy-wide productivity 
(the multifactor productivity (MFP) adjustment); and
    (d) An additional reduction of 0.75 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 2018 adjustment of 0.75 
percentage point may result in the applicable percentage increase being 
less than zero.
    We note that, in compliance with section 404 of the MMA, in this 
proposed rule, we are proposing to replace the FY 2010-based IPPS 
operating and capital market baskets with the revised and rebased 2014-
based IPPS operating and capital market baskets for FY 2018.
    We are proposing to base the proposed FY 2018 market basket update 
used to determine the applicable percentage increase for the IPPS on 
IHS Global Insight, Inc.'s (IGI's) fourth quarter 2016 forecast of the 
proposed 2014-based IPPS market basket rate-of-increase with historical 
data through third quarter 2016, which is estimated to be 2.9 percent. 
We are proposing that if more recent data subsequently become 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 2018 market basket update and the MFP adjustment in the final rule.
    For FY 2018, 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 standardized amount as 
specified in the table that appears later in this section.
    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 we discussed in the FY 2016 IPPS/LTCH 
PPS final rule (80 FR 49509), beginning with the FY 2016 rulemaking 
cycle, the MFP adjustment is calculated using the revised series 
developed by IGI to proxy the aggregate capital inputs. Specifically, 
in order to generate a forecast of MFP, IGI forecasts BLS aggregate 
capital inputs using a

[[Page 19932]]

regression model. A complete description of the MFP projection 
methodology is available on the CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. As discussed in 
the FY 2016 IPPS/LTCH PPS final rule, if IGI makes changes to the MFP 
methodology, we will announce them on our Web site rather than in the 
annual rulemaking.
    For FY 2018, we are proposing an MFP adjustment of 0.4 percentage 
point. Similar to the market basket update, for the proposed rule, we 
used IGI's fourth quarter 2016 forecast of the MFP adjustment with 
historical data through third quarter 2016 to compute the proposed MFP 
adjustment. We are proposing that if more recent data subsequently 
become available, we would use such data, if appropriate, to determine 
the FY 2018 market basket update and MFP adjustment for the final rule.
    Based on these data, for this proposed rule, we have determined 
four proposed applicable percentage increases to the standardized 
amount for FY 2018, as specified in the following table:

                          Proposed FY 2018 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 2018                         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
----------------------------------------------------------------------------------------------------------------
Proposed Market Basket Rate-of-Increase.........             2.9             2.9             2.9             2.9
Proposed Adjustment for Failure to Submit                    0.0             0.0          -0.725          -0.725
 Quality Data under Section 1886(b)(3)(B)(viii)
 of the Act.....................................
Proposed Adjustment for Failure to be a                      0.0          -2.175             0.0          -2.175
 Meaningful EHR User under Section
 1886(b)(3)(B)(ix) of the Act...................
Proposed MFP Adjustment under Section                       -0.4            -0.4            -0.4            -0.4
 1886(b)(3)(B)(xi) of the Act...................
Statutory Adjustment under Section                         -0.75           -0.75           -0.75           -0.75
 1886(b)(3)(B)(xii) of the Act..................
Proposed Applicable Percentage Increase Applied             1.75          -0.425           1.025           -1.15
 to Standardized Amount.........................
----------------------------------------------------------------------------------------------------------------

    We are proposing to revise the existing regulations at 42 CFR 
412.64(d) to reflect the current law for the FY 2018 update. 
Specifically, in accordance with section 1886(b)(3)(B) of the Act, we 
are proposing to revise paragraph (vii) of Sec.  412.64(d)(1) to 
include the applicable percentage increase to the FY 2018 operating 
standardized amount as the percentage increase in the market basket 
index, subject to the reductions specified under Sec.  412.64(d)(2) for 
a hospital that does not submit quality data and Sec.  412.64(d)(3) for 
a hospital that is not a meaningful EHR user, less an MFP adjustment 
and less an additional reduction of 0.75 percentage point.
    Section 1886(b)(3)(B)(iv) of the Act provides that the applicable 
percentage increase to the hospital-specific rates for SCHs equals the 
applicable percentage increase set forth in section 1886(b)(3)(B)(i) of 
the Act (that is, the same update factor as for all other hospitals 
subject to the IPPS). Therefore, the update to the hospital-specific 
rates for SCHs 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.
    As discussed in section V.H. of the preamble of this proposed 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). Therefore, under current law, the MDH 
program will expire at the end of FY 2017.
    For FY 2018, we are proposing the following updates to the 
hospital-specific rates applicable to SCHs: A proposed update of 1.75 
percent for a hospital that submits quality data and is a meaningful 
EHR user; a proposed update of 1.025 percent for a hospital that fails 
to submit quality data and is a meaningful EHR user; a proposed update 
of -0.425 percent for a hospital that submits quality data and is not a 
meaningful EHR user; and a proposed update of -1.15 percent for a 
hospital that fails to submit quality data and is not a meaningful EHR 
user. As mentioned previously, for this FY 2018 proposed rule, we are 
using IGI's fourth quarter 2016 forecast of the proposed 2014-based 
IPPS market basket update with historical data through third quarter 
2016. Similarly, we are using IGI's fourth quarter 2016 forecast of the 
MFP adjustment. We are proposing that if more recent data subsequently 
become available (for example, a more recent estimate of the market 
basket increase and the MFP adjustment), we would use such data, if 
appropriate, to determine the update in the final rule.
2. Proposed FY 2018 Puerto Rico Hospital Update
    As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56937 
through 56938), prior to January 1, 2016, Puerto Rico hospitals were 
paid based on 75 percent of the national standardized amount and 25 
percent of the Puerto Rico-specific standardized amount. Section 601 of 
Public Law 114-113 amended section 1886(d)(9)(E) of the Act to specify 
that the payment calculation with respect to operating costs of 
inpatient hospital services of a subsection (d) Puerto Rico hospital 
for inpatient hospital discharges on or after January 1, 2016, shall 
use 100 percent of the national standardized amount. Because Puerto 
Rico hospitals are no longer paid with a Puerto Rico-specific 
standardized amount under the amendments to section 1886(d)(9)(E) of 
the Act, there is no longer a need for us to propose an update to the 
Puerto Rico standardized amount. Hospitals in Puerto Rico are now paid 
100 percent of the national standardized amount and, therefore, are 
subject to the same update to the national standardized amount 
discussed under section V.B.1. of the preamble of this proposed rule. 
Accordingly, for FY 2018, we are proposing an applicable percentage 
increase of 1.75 to the standardized amount for hospitals located in 
Puerto Rico.
    We note that section 1886(b)(3)(B)(viii) of the Act, which 
specifies the adjustment to the

[[Page 19933]]

applicable percentage increase for ``subsection (d)'' hospitals that do 
not submit quality data under the rules established by the Secretary, 
is not applicable to hospitals located in Puerto Rico.
    In addition, section 602 of Public Law 114-113 amended section 
1886(n)(6)(B) of the Act to specify that Puerto Rico hospitals are 
eligible for incentive payments for the meaningful use of certified EHR 
technology, effective beginning FY 2016, and also to apply the 
adjustments to the applicable percentage increase under section 
1886(b)(3)(B)(ix) of the Act to Puerto Rico hospitals that are not 
meaningful EHR users, effective FY 2022. Accordingly, because the 
provisions of section 1886(b)(3)(B)(ix) of the Act are not applicable 
to hospitals located in Puerto Rico until FY 2022, the adjustments 
under this provision are not applicable for FY 2018.

C. Proposed Change to Volume Decrease Adjustment for Sole Community 
Hospitals (SCHs) and Medicare-Dependent, Small Rural Hospitals (MDHs) 
(Sec.  412.92)

1. Background
    Sections 1886(d)(5)(D) and (d)(5)(G) of the Act provide special 
payment protections under the IPPS to sole community hospitals (SCHs) 
and Medicare-dependent, small rural hospitals (MDHs), respectively. 
Section 1886(d)(5)(D)(iii) of the Act defines an SCH in part as a 
hospital that the Secretary determines 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 inpatient hospital services reasonably available to Medicare 
beneficiaries. The regulations at 42 CFR 412.92 set forth the criteria 
that a hospital must meet to be classified as a SCH. For more 
information on SCHs, we refer readers to the FY 2009 IPPS/LTCH PPS 
final rule (74 FR 43894 through 43897).
    Section 1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital 
that is located in a rural area, has not more than 100 beds, is not an 
SCH, and has a high percentage of Medicare discharges (that is, not 
less than 60 percent of its inpatient days or discharges during the 
cost reporting period beginning in FY 1987 or two of the three most 
recently audited cost reporting periods for which the Secretary has a 
settled cost report were attributable to inpatients entitled to 
benefits under Part A). The regulations at 42 CFR 412.108 set forth the 
criteria that a hospital must meet to be classified as an MDH. The MDH 
program is not authorized by statute beyond September 30, 2017. 
Therefore, beginning October 1, 2017, all hospitals that previously 
qualified for MDH status under section 1886(d)(5)(G) of the Act will no 
longer have MDH status and will be paid based on the IPPS Federal rate. 
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).
2. Proposed Changes to the Volume Decrease Adjustment Calculation 
Methodology for SCHs
    Section 1886(d)(5)(D)(ii) and section 1886(d)(5)(G)(iii) of the Act 
require that the Secretary adjust the payments made to an SCH and MDH, 
respectively, as may be necessary to fully compensate the hospital for 
the fixed costs it incurs in providing inpatient hospital services, 
including the reasonable cost of maintaining necessary core staff and 
services, when it experiences a decrease of more than 5 percent in its 
total number of inpatient discharges due to circumstances beyond its 
control. These adjustments are known as ``volume decrease 
adjustments.''
    The regulations governing volume decrease adjustments are found at 
Sec.  412.92(e) for SCHs and Sec.  412.108(d) for MDHs. As noted 
earlier, the MDH program is set to expire as of October 1, 2017. As 
such, we are not proposing specific amendments to the regulations at 
Sec.  412.108(d) for MDHs. However, we are proposing that if the MDH 
program ends up being extended by law, similar to how it was extended 
by section 205 of the MACRA (Pub. L. 114-10) and prior legislation, the 
following proposed changes to the volume decrease adjustment 
methodology and the proposed amendment to Sec.  412.92(e)(3) for SCHs 
would also be made to the parallel requirements for MDHs under Sec.  
412.108(d)(3).
    To qualify for a volume decrease adjustment, the SCH must: (a) 
Submit documentation demonstrating the size of the decrease in 
discharges and the resulting effect on per discharge costs; and (b) 
show that the decrease is due to circumstances beyond the hospital's 
control. If an SCH demonstrates to the MAC's satisfaction that it has 
suffered a qualifying decrease in total inpatient discharges, the MAC 
determines the appropriate amount, if any, due to the SCH as an 
adjustment.
    As we have noted in the PRM and in adjudications rendered by the 
PRRB and the CMS Administrator, under the current methodology, the MAC 
determines a volume decrease adjustment amount not to exceed the cap 
calculated as the difference between the lesser of (1) the hospital's 
current year's Medicare inpatient operating costs or (2) its prior 
year's Medicare inpatient operating costs multiplied by the appropriate 
IPPS update factor and the hospital's total MS-DRG revenue for 
inpatient operating costs (including outlier payments, DSH payments, 
and IME payments). In determining the volume decrease adjustment 
amount, the MAC considers the individual hospital's needs and 
circumstances, including the reasonable cost of maintaining necessary 
core staff and services in view of minimum staffing requirements 
imposed by State agencies; the hospital's fixed costs (including 
whether any semi-fixed costs are to be considered fixed) other than 
those costs paid on a reasonable cost basis; and the length of time the 
hospital has experienced a decrease in utilization.
    We have set forth interpretive guidance regarding volume decrease 
adjustments in the preambles to various rules and in Section 2810.1 of 
the Provider Reimbursement Manual, Part 1 (PRM-1). The adjustment also 
has been the subject of a series of adjudications, rendered by the PRRB 
and the CMS Administrator. For example, we refer readers to Greenwood 
County Hospital Eureka, Kansas, v. Blue Cross Blue Shield Association/
Blue Cross Blue Shield of Kansas, 2006 WL 3050893 (PRRB, August 29, 
2006); Unity Healthcare Muscatine, Iowa v. Blue Cross Blue Shield 
Association/Wisconsin Physicians Service, 2014 WL 5450066 (CMS 
Administrator September 4, 2014); Lakes Regional Healthcare Spirit 
Lake, Iowa v. Blue Cross Blue Shield Association/Wisconsin Physicians 
Service, 2014 WL 5450078 (CMS Administrator September 4, 2014); and 
Fairbanks Memorial Hospital v. Wisconsin Physician Services/BlueCross 
BlueShield Association, 2015 WL 5852432 (CMS Administrator, August 5, 
2015). In those adjudications, the PRRB and the CMS Administrator have 
recognized that: (1) The volume decrease adjustment is intended to 
compensate qualifying SCHs for their fixed costs only, and that 
variable costs are to be excluded from the adjustment; and (2) an SCH's 
volume decrease adjustment should be reduced to reflect the 
compensation of fixed costs that has already been made through MS-DRG 
payments.
    However, some hospitals have recently expressed concerns regarding 
the exact calculations that the MACs use when determining the volume 
decrease

[[Page 19934]]

adjustment. The issue also has been addressed in some recent decisions 
of the PRRB. Under the current calculation methodology, the MACs 
calculate the volume decrease adjustment by subtracting the hospital's 
total MS-DRG revenue for inpatient operating costs, including outlier 
payments and IME and DSH payments in the cost reporting period in which 
the volume decrease occurred, from fixed costs in the cost reporting 
period in which the volume decrease occurred, minus any adjustment for 
excess staff. If the result of that calculation is greater than zero 
and less than the cap, the hospital receives that amount in a lump-sum 
payment. If the result of that calculation is zero or less than zero, 
the hospital does not receive a volume decrease payment adjustment.
    Under the IPPS, MS-DRG payments are not based on an individual 
hospital's actual costs in a given cost reporting period. However, the 
main issue raised by the PRRB and individual hospitals is that, under 
the current calculation methodology, if the hospital's total MS-DRG 
revenue for treating Medicare beneficiaries for which it incurs 
inpatient operating costs (consisting of fixed, semi-fixed, and 
variable costs) exceeds the hospital's fixed costs, the calculation by 
the MACs results in no volume decrease adjustment for the hospital. In 
some recent decisions, the PRRB has indicated that it believes it would 
be more appropriate for the MACs to adjust the hospital's total MS-DRG 
revenue from Medicare by looking at the ratio of a hospital's fixed 
costs to its total costs (as determined by the MAC) and applying that 
ratio as a proxy for the share of the hospital's MS-DRG payments that 
it assumes are attributable (or allocable) to fixed costs, and then 
comparing that estimate of the fixed portion of MS-DRG payments to the 
hospital's fixed costs. In this way, the calculation would compare 
estimated Medicare revenue for fixed costs to the hospital's fixed 
costs when determining the volume decrease adjustment.
    We continue to believe that our current approach in calculating 
volume decrease adjustments is reasonable and consistent with the 
statute. Nevertheless, we understand why hospitals might take the view 
that CMS should make an effort, in some way, to ascertain whether a 
portion of MS-DRG payments can be allocated or attributed to fixed 
costs in order to fulfill the statutory mandate to ``fully compensate'' 
a qualifying SCH for its fixed costs.
    Accordingly, after considering these views, we are proposing to 
prospectively change how the MACs calculate the volume decrease 
adjustments and require that the MACs compare estimated Medicare 
revenue for fixed costs to the hospital's fixed costs to remove any 
conceivable possibility that a hospital that qualifies for the volume 
decrease adjustment could ever be less than fully compensated for fixed 
costs as a result of the application of the adjustment. We are 
proposing that, in order to estimate the fixed portion of the Medicare 
revenue, the MACs would apply the ratio of the hospital's fixed costs 
to total costs in the cost reporting period when it experienced the 
volume decrease to the hospital's total Medicare revenue in that same 
cost reporting period. We are proposing to revise the regulations at 42 
CFR 412.92(e)(3) to reflect our proposed change in the MAC's 
calculation of the volume decrease adjustment that would apply 
prospectively to cost reporting periods beginning on or after October 
1, 2017, and to reflect that the language requiring that the volume 
decrease adjustment amount not exceed the difference between the 
hospital's Medicare inpatient operating costs and the hospital's total 
DRG revenue for inpatient operating costs would only apply to cost 
reporting periods beginning before October 1, 2017, but not to 
subsequent cost reporting periods. Under the proposed methodology, if a 
hospital's total MS-DRG payment is less than its total Medicare 
inpatient operating costs, the sum of any resulting volume decrease 
adjustment payment and its MS-DRG payment would never exceed its total 
Medicare inpatient operating costs due to the fact that the fixed cost 
percentage is applied to the MS-DRG payment in calculating the volume 
decrease adjustment amount. By taking the ratio derived from the subset 
of fixed costs to total costs and applying that same ratio to the MS-
DRG payment, we ensure that the sum of a hospital's IPPS payment and 
its volume decrease adjustment payment would never exceed its total 
Medicare inpatient operating costs, thus negating the need for a cap 
calculation. Thus, the proposed methodology renders the current volume 
decrease adjustment cap calculation obsolete. Conversely, if a 
hospital's total MS-DRG payment is greater than its total Medicare 
inpatient operating costs, calculating a volume decrease adjustment 
using the proposed methodology would result in a negative payment 
amount, which would yield a volume decrease adjustment payment of zero. 
Finally, if a hospital's total MS-DRG payment is equal to its total 
Medicare inpatient operating costs, calculating a volume decrease 
adjustment using the proposed methodology would also yield a volume 
decrease adjustment payment of zero. Furthermore, we believe that 
because a hospital could not foresee a decrease in its volume from one 
year to the next and would therefore not plan for a volume decrease 
adjustment, the volume decrease adjustment payment should therefore not 
be limited to a cap that is based on the previous year's costs. For 
these reasons, we are proposing to remove the cap calculation from the 
volume decrease adjustment calculation methodology in future periods.
    We are proposing that these proposed changes in the MAC's 
calculation of the volume decrease adjustment would be prospective, 
effective for cost reporting periods beginning on or after October 1, 
2017. If these proposed changes are adopted, we also intend to update 
Section 2810.1 of the PRM-1 to reflect the changes in the calculation 
of the volume decrease adjustment by the MAC. For volume decrease 
adjustments for earlier cost reporting periods, the current calculation 
methodology will continue. In addition, we are not proposing to change 
any part of the methodology, criteria, rules, or presumptions we 
consider and apply in determining whether to classify a given cost as 
fixed, semi-fixed, or variable for purposes of the volume decrease 
adjustment.
    The following example illustrates the calculation of the volume 
decrease adjustment by the MAC under our proposed change.
    Example: In its cost reporting period beginning October 1, 2017, 
Hospital A has total Medicare inpatient operating costs equaling 
$1,600,000 and total MS-DRG revenue (including outlier payments, IME 
and DSH) of $1,400,000. The MAC determines that the hospital qualifies 
for a volume decrease adjustment for this cost reporting period. The 
MAC classifies $1,360,000 of Hospital A's costs as fixed and $240,000 
as variable. Hospital A's fixed cost ratio is therefore .85 = 
$1,360,000/$1,600,000. The MAC applies this ratio to the total MS-DRG 
revenue of $1,400,000 to estimate the hospital's fixed MS-DRG revenue 
to be $1,190,000. The volume decrease adjustment payment is then 
calculated by comparing the fixed MS-DRG revenue of $1,190,000 to the 
fixed costs of $1,360,000, resulting in a volume decrease adjustment 
payment of $170,000 ($1,360,000 minus $1,190,000).

[[Page 19935]]

    Under the current methodology used by the MACs, Hospital A would 
receive no volume decrease adjustment payment because its total MS-DRG 
revenue from Medicare of $1,400,000 exceeded the hospital's fixed costs 
of $1,360,000. Furthermore, under the current methodology, but not 
under our proposed methodology, it is possible that a hospital would 
still receive no volume decrease adjustment payment even if its fixed 
costs exceeded its total MS-DRG revenue if those fixed costs exceeded 
the previous year's costs updated for inflation.
    We also are proposing changes to an adjustment that might be made 
to a hospital's staffing costs in calculating the volume decrease 
adjustment. The statute and regulations and the PRM imply, and we have 
expressly indicated in prior rulemaking, most recently in the FY 2006 
rulemaking, our belief that not all staff costs can necessarily be 
considered fixed costs (71 FR 48056 through 48060). Therefore, we 
currently require a hospital, when applying for a volume decrease 
adjustment, to demonstrate that it appropriately adjusted the number of 
staff in inpatient areas of the hospital based on the decrease in the 
number of inpatient days but not beyond minimum levels as required by 
State or local laws. If a hospital does not appropriately adjust its 
number of staff, the cost of maintaining those staff members is 
deducted from the total volume decrease adjustment payment. In 
reviewing the volume decrease adjustment calculation, we have also 
weighed the administrative burden on the hospital of making this 
demonstration to CMS, as compared to an assumption that it is likely 
that a hospital would, in its normal course of business, adjust its 
staffing levels as revenue declines. In the absence of evidence to 
contrary, we believe that a hospital would adjust its staffing levels 
as revenue declines rather than maintain those staffing levels for the 
sole purpose of potentially having those staffing costs eventually 
reflected in a Medicare volume decrease adjustment payment that the 
hospital may or may not qualify for when it files its cost report. 
Therefore, we are proposing to modify the volume decrease adjustment 
process to no longer require that a hospital explicitly demonstrate 
that it appropriately adjusted the number of staff in inpatient areas 
of the hospital based on the decrease in the number of inpatient days 
and to no longer require the MAC to adjust the volume decrease 
adjustment payment amount for excess staffing. We are proposing that 
these changes would be effective for cost reporting periods beginning 
on or after October 1, 2017.
    In summary, we are proposing to prospectively require that the MACs 
compare Medicare revenue allocable to fixed costs from the cost 
reporting period when the hospital experienced the volume decrease to 
the hospital's fixed costs from that same cost reporting period when 
calculating a volume decrease adjustment and that the cap will no 
longer be applied to the volume decrease adjustment calculation 
methodology. We are proposing to revise the regulations at Sec.  
412.92(e)(3) to reflect our proposed changes. We also are proposing to 
prospectively modify the volume decrease adjustment process to no 
longer require that a hospital explicitly demonstrate that it 
appropriately adjusted the number of staff in inpatient areas of the 
hospital based on the decrease in the number of inpatient days and to 
no longer require the MAC to adjust the volume decrease adjustment 
payment amount for excess staffing. We are proposing that these changes 
be effective for cost reporting periods beginning on or after October 
1, 2017. As we noted earlier, we are proposing that if the MDH program 
ends up being extended by law, similar to how it was extended by 
section 205 of the MACRA (Pub. L. 114-10) and prior legislation, these 
proposed changes to the volume decrease adjustment methodology and the 
proposed amendment to Sec.  412.92(e)(3) for SCHs would also be made to 
the parallel requirements for MDHs under Sec.  412.108(d)(3).

D. Rural Referral Centers (RRCs): Proposed Annual Updates to Case-Mix 
Index and Discharge Criteria (Sec.  412.98)

    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), we reinstated RRC status for all hospitals that lost that 
status due to triennial review or MGCRB reclassification. However, we 
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

[[Page 19936]]

rates for purposes of determining RRC status. The methodology we used 
to determine the national and regional CMI values is set forth in the 
regulations at Sec.  412.96(c)(1)(ii). The proposed national median CMI 
value for FY 2018 is based on the CMI values of all urban hospitals 
nationwide, and the proposed regional median CMI values for FY 2018 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 proposed values are based on 
discharges occurring during FY 2016 (October 1, 2015 through September 
30, 2016), and include bills posted to CMS' records through December 
2016.
    In this proposed rule, we are proposing that, in addition to 
meeting other criteria, if rural hospitals with fewer than 275 beds are 
to qualify for initial RRC status for cost reporting periods beginning 
on or after October 1, 2017, they must have a CMI value for FY 2016 
that is at least--
     1.6635 (national--all urban); or
     The median CMI value (not transfer-adjusted) for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec.  413.75) calculated by CMS for the census region in 
which the hospital is located.
    The proposed median CMI values by region are set forth in the 
following table.

------------------------------------------------------------------------
                                                          Case-mix index
                         Region                                value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).................          1.4186
2. Middle Atlantic (PA, NJ, NY).........................          1.5126
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)..          1.5393
4. East North Central (IL, IN, MI, OH, WI)..............          1.5921
5. East South Central (AL, KY, MS, TN)..................          1.5179
6. West North Central (IA, KS, MN, MO, NE, ND, SD)......          1.6346
7. West South Central (AR, LA, OK, TX)..................          1.6949
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............          1.7614
9. Pacific (AK, CA, HI, OR, WA).........................          1.6466
------------------------------------------------------------------------

    We intend to update these proposed CMI values in the FY 2018 final 
rule to reflect the updated FY 2016 MedPAR file, which will contain 
data from additional bills received through March 2017.
    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 this proposed rule, 
for FY 2018, we are proposing to update the regional standards based on 
discharges for urban hospitals' cost reporting periods that began 
during FY 2015 (that is, October 1, 2014 through September 30, 2015), 
which are the latest cost report data available at the time this 
proposed rule was developed. Therefore, we are proposing that, in 
addition to meeting other criteria, a hospital, if it is to qualify for 
initial RRC status for cost reporting periods beginning on or after 
October 1, 2017, must have, as the number of discharges for its cost 
reporting period that began during FY 2015, at least--
     5,000 (3,000 for an osteopathic hospital); or
     The median number of discharges for urban hospitals in the 
census region in which the hospital is located as reflected in the 
following table.

------------------------------------------------------------------------
                                                             Number of
                         Region                             discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).................           7,991
2. Middle Atlantic (PA, NJ, NY).........................          10,268
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)..          10,503
4. East North Central (IL, IN, MI, OH, WI)..............           8,202
5. East South Central (AL, KY, MS, TN)..................           8,697
6. West North Central (IA, KS, MN, MO, NE, ND, SD)......           7,532
7. West South Central (AR, LA, OK, TX)..................           5,189
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............           8,887
9. Pacific (AK, CA, HI, OR, WA).........................           8,856
------------------------------------------------------------------------

    We intend to update these numbers in the FY 2018 final rule based 
on the latest available cost report data.
    We note that the median number of discharges for hospitals in each 
census region is greater than the national standard of 5,000 
discharges. Therefore, under this proposed rule, 5,000 discharges is 
the minimum criterion for all hospitals, except for osteopathic 
hospitals for which the minimum criterion is 3,000 discharges.

E. Proposed Payment Adjustment for Low-Volume Hospitals (Sec.  412.101)

1. Expiration of Temporary Changes to Low-Volume Hospital Payment 
Policy
    Under section 1886(d)(12) of the Act, as amended, most recently by 
section 204 of the Medicare Access and CHIP Reauthorization Act of 2015 
(MACRA), Public Law 114-10, 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. Beginning with FY 2018, the preexisting low-volume hospital 
payment adjustment and qualifying criteria, as implemented

[[Page 19937]]

in FY 2005 and discussed later in this section, will resume. We discuss 
the proposed payment policies for FY 2018 in section V.E.3. of the 
preamble of this proposed rule.
2. Background
    Section 1886(d)(12) of the Act, as added by section 406(a) of 
Public Law 108-173, provides for a payment adjustment to account for 
the higher costs per discharge for low-volume hospitals under the IPPS, 
effective beginning FY 2005. Sections 3125 and 10314 of the Affordable 
Care Act amended section 1886(d)(12) of the Act by modifying the 
definition of a low-volume hospital and the methodology for calculating 
the payment adjustment for low-volume hospitals, effective only for 
discharges occurring during FYs 2011 and 2012. 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 
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. The 
temporary changes to the low-volume hospital qualifying criteria and 
the payment adjustment originally provided by the Affordable Care Act 
were extended by subsequent legislation, most recently through FY 2017 
by section 204 of the MACRA. (We refer readers to the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 56941 through 59943) for a detailed summary of 
the applicable legislation.) Under current law, beginning with FY 2018, 
the preexisting low-volume hospital qualifying criteria and payment 
adjustment, as implemented in FY 2005 and described in this section, 
will resume. The regulations implementing the low-volume hospital 
adjustment provided by section 1886(d)(12) of the Act are located at 42 
CFR 412.101.
    The additional payment adjustment to a low-volume hospital provided 
for under section 1886(d)(12) of the Act is in addition to any payment 
calculated under this section. Therefore, the additional payment 
adjustment is based on the per discharge amount paid to the qualifying 
hospital under section 1886 of the Act. In other words, the low-volume 
add-on payment amount is based on total per discharge payments made 
under section 1886 of the Act, including capital, DSH, IME, and 
outliers. For hospitals paid based on the hospital-specific rate, the 
low-volume add-on payment amount is based on either the Federal rate or 
the hospital-specific rate, whichever results in a greater operating 
IPPS payment.
    Section 1886(d)(12)(C)(i) of the Act defines a low-volume hospital, 
for fiscal years other than FYs 2011 through 2017, as a subsection (d) 
hospital (as defined in paragraph (1)(B)) that the Secretary determines 
is located more than 25 road miles from another subsection (d) hospital 
and that has less than 800 discharges during the fiscal year. Section 
1886(d)(12)(C)(ii) of the Act further stipulates that the term 
``discharge'' means an inpatient acute care discharge of an individual, 
regardless of whether the individual is entitled to benefits under 
Medicare Part A. Therefore, for fiscal years other than FYs 2011 
through 2017, the term ``discharge'' refers to total discharges, 
regardless of payer (that is, not only Medicare discharges). 
Furthermore, section 1886(d)(12)(B) of the Act requires, for discharges 
occurring in FYs 2005 through 2010 and FY 2018 and subsequent years, 
that the Secretary determine an applicable percentage increase for 
these low-volume hospitals based on the ``empirical relationship'' 
between the standardized cost-per-case for such hospitals and the total 
number of discharges of such hospitals and the amount of the additional 
incremental costs (if any) that are associated with such number of 
discharges. The statute thus mandates that the Secretary develop an 
empirically justifiable adjustment based on the relationship between 
costs and discharges for these low-volume hospitals. Section 
1886(d)(12)(B)(iii) of the Act limits the applicable percentage 
increase adjustment to no more than 25 percent.
    Based on an analysis we conducted for the FY 2005 IPPS final rule 
(69 FR 49099 through 49102), a 25-percent low-volume adjustment to all 
qualifying hospitals with less than 200 discharges was found to be most 
consistent with the statutory requirement to provide relief to low-
volume hospitals where there is empirical evidence that higher 
incremental costs are associated with low numbers of total discharges. 
In the FY 2006 IPPS final rule (70 FR 47432 through 47434), we stated 
that multivariate analyses supported the existing low-volume adjustment 
implemented in FY 2005.
3. Proposed Payment Adjustment for FY 2018 and Subsequent Fiscal Years
    In accordance with section 1886(d)(12) of the Act, beginning with 
FY 2018, the low-volume hospital definition and payment adjustment 
methodology will revert back to the statutory requirements that were in 
effect prior to the amendments made by the Affordable Care Act and 
extended by subsequent legislation. Therefore, effective for FY 2018 
and subsequent years, in order to qualify as a low-volume hospital, a 
subsection (d) hospital must be more than 25 road miles from another 
subsection (d) hospital and have less than 200 discharges (that is, 
less than 200 discharges total, including both Medicare and non-
Medicare discharges) during the fiscal year. As discussed earlier, the 
statute specifies that a low-volume hospital must have less than 800 
discharges during the fiscal year. However, as required by section 
1886(d)(12)(B)(i) of the Act and as discussed earlier, the Secretary 
has developed an empirically justifiable payment adjustment based on 
the relationship, for IPPS hospitals with less than 800 discharges, 
between the additional incremental costs (if any) that are associated 
with a particular number of discharges. Based on an analysis we 
conducted for the FY 2005 IPPS final rule (69 FR 49099 through 49102), 
a 25-percent low-volume adjustment to all qualifying hospitals with 
less than 200 discharges was found to be most consistent with the 
statutory requirement to provide relief for low-volume hospitals where 
there is empirical evidence that higher incremental costs are 
associated with low numbers of total discharges. (Under the policy we 
established in that same final rule, hospitals with between 200 and 799 
discharges do not receive a low-volume hospital adjustment.)
    As described earlier, for FYs 2005 through 2010 and FY 2018 and 
subsequent years, the discharge determination is made based on the 
hospital's number of total discharges, that is, Medicare and non-
Medicare discharges. The hospital's most recently submitted cost report 
is used to determine if the hospital meets the discharge criterion to 
receive the low-volume payment adjustment in the current year (Sec.  
412.101(b)(2)(i)). We use cost report data to determine if a hospital 
meets the discharge criterion because this is the best available data 
source that includes information on

[[Page 19938]]

both Medicare and non-Medicare discharges. We note that, for FYs 2011 
through 2017, we used the most recently available MedPAR data to 
determine the hospital's Medicare discharges because only Medicare 
discharges were used to determine if a hospital met the discharge 
criterion for those years.
    For FY 2018 and for subsequent fiscal years, in addition to a 
discharge criterion, the eligibility for the low-volume payment 
adjustment is also dependent upon the hospital meeting the mileage 
criterion specified at Sec.  412.101(b)(2)(i). Specifically, to meet 
the mileage criterion to qualify for the low-volume payment adjustment 
for FY 2018 and subsequent fiscal years, a hospital must be located 
more than 25 road miles from the nearest subsection (d) hospital. We 
define, at Sec.  412.101(a), the term ``road miles'' to mean ``miles'' 
as defined at Sec.  412.92(c)(1) (75 FR 50238 through 50275 and 50414).
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 
and 50414) and subsequent rulemaking, most recently in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 56942 through 56943), we discussed the 
process for requesting and obtaining the low-volume hospital payment 
adjustment. In order to qualify for the low-volume hospital payment 
adjustment, a hospital must provide to its MAC sufficient evidence to 
document that it meets the discharge and distance requirements. The MAC 
will determine, based on the most recent data available, if the 
hospital qualifies as a low-volume hospital, so that the hospital will 
know in advance whether or not it will receive a payment adjustment. 
The MAC and CMS may review available data, in addition to the data the 
hospital submits with its request for low-volume hospital status, in 
order to determine whether or not the hospital meets the qualifying 
criteria.
    In order to receive a low-volume hospital payment adjustment under 
Sec.  412.101, a hospital must notify and provide documentation to its 
MAC that it meets the mileage criterion. The use of a Web-based mapping 
tool as part of documenting that the hospital meets the mileage 
criterion for low-volume hospitals is acceptable. The MAC will 
determine if the information submitted by the hospital, such as the 
name and street address of the nearest hospitals, location on a map, 
and distance (in road miles, as defined in the regulations at Sec.  
412.101(a)) from the hospital requesting low-volume hospital status, is 
sufficient to document that it meets the mileage criterion. If not, the 
MAC will follow up with the hospital to obtain additional necessary 
information to determine whether or not the hospital meets the low-
volume mileage criterion. In addition, the MAC will refer to the 
hospital's most recently submitted cost report to determine whether or 
not the hospital meets the discharge criterion. A hospital should refer 
to its most recently submitted cost report for total discharges 
(Medicare and non-Medicare) in order to decide whether or not to apply 
for low-volume hospital status for a particular fiscal year. A hospital 
must continue to meet the qualifying criteria at Sec.  412.101(b)(2)(i) 
as a low-volume hospital (that is, the discharge criterion and the 
mileage criterion) in order to receive the payment adjustment in that 
year; that is, low-volume hospital status is not based on a ``one-
time'' qualification (75 FR 50238 through 50275).
    In order to be a low-volume hospital in FY 2018 and subsequent 
fiscal years, in accordance with our previously established procedure, 
a hospital must make a written request for low-volume hospital status 
that is received by its MAC by September 1 immediately preceding the 
start of the Federal fiscal year for which the hospital is applying for 
low-volume hospital status in order for the 25-percent, low-volume, 
add-on payment adjustment to be applied to payments for its discharges 
for the fiscal year beginning on or after October 1 immediately 
following the request (that is, the start of the Federal fiscal year). 
For a hospital whose request for low-volume hospital status is received 
after September 1, if the MAC determines the hospital meets the 
criteria to qualify as a low-volume hospital, the MAC will apply the 
25-percent, low-volume, add-on payment adjustment to determine payment 
for the hospital's discharges for the fiscal year, effective 
prospectively within 30 days of the date of the MAC's low-volume status 
determination.
    Specifically, for FY 2018, a hospital must make a written request 
for low-volume hospital status that is received by its MAC no later 
than September 1, 2017, in order for the 25-percent, low-volume, add-on 
payment adjustment to be applied to payments for its discharges 
beginning on or after October 1, 2017 (through September 30, 2018). 
Under this procedure, a hospital that qualified for the low-volume 
hospital payment adjustment for FY 2017 may continue to receive a low-
volume hospital payment adjustment for FY 2018 without reapplying if it 
meets both the discharge criterion and the mileage criterion applicable 
for FY 2018. As in previous years, we are proposing that such a 
hospital must send written verification that is received by its MAC no 
later than September 1, 2017, stating that it meets the mileage 
criterion applicable for FY 2018. For FY 2018, we are further proposing 
that this written verification must also state, based upon the most 
recently submitted cost report, that the hospital meets the discharge 
criterion applicable for FY 2018 (that is, less than 200 discharges 
total, including both Medicare and non-Medicare discharges). If a 
hospital's request for low-volume hospital status for FY 2018 is 
received after September 1, 2017, and if the MAC determines the 
hospital meets the criteria to qualify as a low-volume hospital, the 
MAC will apply the 25-percent, low-volume, add-on payment adjustment to 
determine the payment for the hospital's FY 2018 discharges, effective 
prospectively within 30 days of the date of the MAC's low-volume 
hospital status determination. We note that this process mirrors our 
established application process but is updated to ensure that providers 
currently receiving the low-volume hospital payment adjustment verify 
that they meet both the mileage criterion and the discharge criterion 
applicable for FY 2018 to continue receiving the adjustment for FY 
2018. For additional information on our established application process 
for the low-volume hospital payment adjustment, we refer readers to the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 56942 through 56943).
    In the FY 2016 IPPS interim final rule with comment period (80 FR 
49594 through 49597 and 49767), we made conforming changes to the 
regulations at 42 CFR 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 in accordance with section 204 of 
the MACRA. Under these revisions, beginning with FY 2018, consistent 
with current law, the low-volume hospital qualifying criteria and 
payment adjustment methodology will return to the criteria and 
methodology that were in effect prior to the amendments made by the 
Affordable Care Act (that is, the low-volume hospital payment policy in 
effect for FYs 2005 through 2010). Therefore, no further revisions to 
the policy or to the regulations at Sec.  412.101 are required to 
conform them to the statutory requirement that the low-volume hospital 
policy in effect prior to the Affordable Care Act will again be in 
effect for FY 2018 and subsequent years.
    For this reason, we are not proposing specific amendments to the 
regulations at Sec.  412.101 to reflect the expiration of the temporary 
changes to the low-volume hospital payment adjustment policy originally 
provided for by the

[[Page 19939]]

Affordable Care Act. However, we are proposing that if these temporary 
changes to the low-volume hospital payment policy were to be extended 
by law, similar to extensions provided 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 the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), 
Public Law 114-10, we would make conforming changes to the regulations 
at Sec.  412.101(b) through (d), as appropriate, to reflect any such 
extension.
    These conforming changes would only be made if the temporary 
changes to the low-volume hospital payment adjustment policy were to be 
extended by statute beyond the current expiration date of September 30, 
2017. If these temporary changes were to be extended by statute, for FY 
2018, consistent with our historical policy and our implementation of 
the prior extensions, qualifying low-volume hospitals and their payment 
adjustment would be determined using the most recently available 
Medicare discharge data available at the time of the final rule, which 
we expect would be from the March 2017 update of the FY 2016 MedPAR 
file. Consistent with past practice, if these temporary changes were to 
be extended for FY 2018 before the development of the final rule, we 
would list the subsection (d) hospitals with fewer than 1,600 Medicare 
discharges based on the claims data from the March 2017 update of the 
FY 2016 MedPAR file and their potential low-volume hospital payment 
adjustment for FY 2018 in Table 14 listed in the Addendum of the final 
rule. In such an event, hospitals would still submit requests or 
verification to the MAC, as outlined earlier, but updated as needed to 
reflect the applicable discharge and mileage criteria in accordance 
with any such extension for FY 2018.
4. Proposed Parallel Low-Volume Hospital Payment Adjustment Regarding 
Hospitals Operated by the Indian Health Services (IHS) or a Tribe
    As previously stated, section 1886(d)(12)(C) of the Act and our 
regulations at 42 CFR 412.101(b)(2) require that, in order to qualify 
for the low-volume hospital payment adjustment, a hospital must be 
located more than a specified number of miles from the nearest 
subsection (d) hospital (referred to as the mileage criterion). Section 
1886(d)(1)(B) of the Act defines a ``subsection (d) hospital'' as a 
hospital located in one of the 50 States or District of Columbia, other 
than the specified excluded types of hospitals. As stated in prior 
rulemaking (for example, 79 FR 50153), CMS considers IHS and Tribal 
hospitals to be subsection (d) hospitals. However, given the unique 
nature of IHS and Tribal hospitals and the populations they serve, as 
discussed below, we believe it would be appropriate to provide 
additional flexibility in determining eligibility for the low-volume 
hospital payment adjustment for IHS and non-IHS hospitals and Tribal 
hospitals that are located less than the specified mileage from one 
another. Specifically, we are proposing that, for an IHS or Tribal 
hospital, only its proximity to other IHS or Tribal hospitals would be 
used to determine if the mileage criterion is met. Similarly, for a 
non-IHS hospital, only its proximity to other non-IHS hospitals would 
be used to determine if the mileage criterion is met.
    Except for emergencies and a few other limited special cases, those 
individuals who are not members of a Federally recognized Tribe are not 
eligible for treatment at IHS or Tribal hospitals. Therefore, such a 
hospital is not a valid option for the general Medicare population, 
including local residents who are not members of a Federally recognized 
Tribe or not otherwise eligible for IHS services. Therefore, we believe 
it would be appropriate to not consider IHS and Tribal hospitals when 
evaluating whether a non-IHS hospital meets the mileage criterion.
    Likewise, we believe it would be appropriate to not consider non-
IHS hospitals when evaluating whether an IHS or Tribal hospital meet 
the mileage criterion. The principal mission of the IHS is the 
provision of health care to American Indians and Alaska Natives 
throughout the United States. In carrying out that mission, IHS 
operates under two primary authorizing statutes. The first statute, the 
Snyder Act, authorizes IHS to expend such moneys as Congress may 
determine from time to time appropriate for the conservation of the 
health of American Indians or Alaska Natives. We refer readers to 25 
U.S.C. 13 (providing that the Bureau of Indian Affairs (BIA) will 
expend funds as appropriated for, among other things, the conservation 
of health of American Indians and Alaska Natives); and 42 U.S.C. 
2001(a) (transferring the responsibility for American Indian and Alaska 
Native health care from BIA to HHS). The second statute, the Indian 
Health Care Improvement Act (IHCIA), established IHS as an agency 
within the Public Health Service of HHS and provides authority for 
numerous programs to address particular health initiatives for American 
Indians and Alaska Natives, such as alcohol and substance abuse and 
diabetes (25 U.S.C. 1601 et seq.).
    IHS and Tribal hospitals are charged with addressing the health of 
American Indians and Alaska Natives and are uniquely situated to 
provide services to this population. For this reason, we believe it 
would be appropriate to not consider the non-IHS hospitals when 
evaluating whether an IHS or Tribal hospital meets the mileage 
criterion.
    Because IHS and Tribal hospitals are subsection (d) hospitals, we 
are proposing to use our authority under section 1886(d)(5)(I)(i) of 
the Act to provide an adjustment equal to the applicable low-volume 
adjustment provided for under section 1886(d)(12) of the Act for an IHS 
or Tribal hospital whose sole disqualifier for the low-volume hospital 
adjustment is its proximity to a non-IHS hospital, and for a non-IHS 
hospital whose sole disqualifier is its proximity to an IHS or Tribal 
hospital. Such an adjustment would provide that, practically speaking, 
an IHS or Tribal hospital would be able to receive a low-volume 
hospital adjustment based on its distance to the nearest IHS or Tribal 
hospital, and a non-IHS hospital would be able to qualify to receive a 
low-volume hospital adjustment based on its distance to the nearest 
non-IHS hospital. We believe it is appropriate to apply this authority 
here, given the unique characteristics of IHS and Tribal hospitals, as 
discussed above. To implement this proposed adjustment, we are 
proposing to revise 42 CFR 412.101 by adding paragraph (e) to provide 
that, for discharges occurring in FY 2018 and subsequent years, only 
the distance between IHS or Tribal hospitals would be considered when 
assessing whether an IHS or Tribal hospital meets the mileage criterion 
under Sec.  412.101(b)(2). Similarly, only the distance between non-IHS 
hospitals would be considered when assessing whether a non-IHS hospital 
meets the mileage criterion under Sec.  412.101(b)(2).

F. Indirect Medical Education (IME) Payment Adjustment Factor for FY 
2018 (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

[[Page 19940]]

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 
2018, the formula multiplier is 1.35. We estimate that application of 
this formula multiplier for the FY 2018 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.

G. Proposed Payment Adjustment for Medicare Disproportionate Share 
Hospitals (DSHs) for FY 2018 (Sec.  412.106)

1. General Discussion
    Section 1886(d)(5)(F) of the Act provides for additional Medicare 
payments to subsection (d) hospitals that serve a significantly 
disproportionate number of low-income patients. The Act specifies two 
methods by which a hospital may qualify for the Medicare 
disproportionate share hospital (DSH) adjustment. Under the first 
method, hospitals that are located in an urban area and have 100 or 
more beds may receive a Medicare DSH payment adjustment if the hospital 
can demonstrate that, during its cost reporting period, more than 30 
percent of its net inpatient care revenues are derived from State and 
local government payments for care furnished to needy patients with low 
incomes. This method is commonly referred to as the ``Pickle method.'' 
The second method for qualifying for the DSH payment adjustment, which 
is the most common, is based on a complex statutory formula under which 
the DSH payment adjustment is based on the hospital's geographic 
designation, the number of beds in the hospital, and the level of the 
hospital's disproportionate patient percentage (DPP). A hospital's DPP 
is the sum of two fractions: The ``Medicare fraction'' and the 
``Medicaid fraction.'' The Medicare fraction (also known as the ``SSI 
fraction'' or ``SSI ratio'') is computed by dividing the number of the 
hospital's inpatient days that are furnished to patients who were 
entitled to both Medicare Part A and Supplemental Security Income (SSI) 
benefits by the hospital's total number of patient days furnished to 
patients entitled to benefits under Medicare Part A. The Medicaid 
fraction is computed by dividing the hospital's number of inpatient 
days furnished to patients who, for such days, were eligible for 
Medicaid, but were not entitled to benefits under Medicare Part A, by 
the hospital's total number of inpatient days in the same period.
    Because the DSH payment adjustment is part of the IPPS, the 
statutory references to ``days'' in section 1886(d)(5)(F) of the Act 
have been interpreted to 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).
    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 
section 1886(r) to the Act that modifies the methodology for computing 
the Medicare DSH payment adjustment. (For purposes of this proposed 
rule, we refer to these provisions collectively as section 3133 of the 
Affordable Care Act.) 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 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 DSH 
payments 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 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 MedPAC in its March 2007 Report to 
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 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 were 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 the percent 
of individuals who were 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 FYs 2015 through 2017. For FYs 
2014 through 2017, the baseline for the estimate of the change in 
uninsurance is fixed by the

[[Page 19941]]

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 fiscal 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 
were 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 were 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.
    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 
are available which are 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 the 
applicable 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 Medicare 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.
2. 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 will 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), 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-specific 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

[[Page 19942]]

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. 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. Because MDHs are paid 
based on the IPPS Federal rate, for FY 2017, MDHs continue to be 
eligible to receive empirically justified Medicare DSH payments and 
uncompensated care payments if their DPP is at least 15 percent. We 
apply the same process to determine MDHs' eligibility for empirically 
justified Medicare DSH and uncompensated care payments, as we do for 
all other IPPS hospitals, through September 30, 2017. We note that 
there has not been legislation at the time of development of this 
proposed rule that would extend the MDH program beyond September 30, 
2017. However, if the MDH program were to be extended beyond its 
current expiration date, similar to how it was extended under MACRA, 
MDHs would continue to be 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. Accordingly, if the MDH program were to 
be extended beyond its current expiration date of September 30, 2017, 
we would 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 would 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 would 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 would 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.
    These policies for MDHs would only apply in FY 2018 if the MDH 
program is extended by statute, beyond its current expiration date of 
September 30, 2017.
     IPPS hospitals that have elected to participate in the 
Bundled Payments for Care Improvement initiative and IPPS hospitals 
that are participating in the mandatory Comprehensive Care for Joint 
Replacement Model, the Episde Payment Models, or the Cardiac 
Rehabilitation Incentive Payment Model 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 are not eligible to receive empirically justified 
Medicare DSH payments and uncompensated care payments under section 
1886(r) of the Act because they are not paid under the IPPS (78 FR 
50625 and 79 FR 50008). The Rural Community Hospital Demonstration 
Program was originally authorized for a 5-year period by section 410A 
of the Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA) (Pub. L. 108-173), and extended for another 5-year period 
by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 114-
255). The period of performance for this 5-year extension period ended 
December 31, 2016. Section 15003 of the 21st Century Cures Act (Pub. L. 
114-255), enacted December 13, 2016, again amended section 410A of 
Public Law 108-173 to require a 10-year extension period (in place of 
the 5-year extension required by the Affordable Care Act), to begin on 
the date immediately following the last day of the initial 5-year 
period. Section 15003 also requires that, no later than 120 days after 
enactment of Public Law 114-255, the Secretary issue a solicitation to 
select additional hospitals to participate in the demonstration program 
for the second 5 years of the 10-year extension period so long as the 
maximum number of 30 hospitals stipulated by the Affordable Care Act is 
not exceeded. (We refer readers to section V.L. of the preamble of this 
proposed rule for a full discussion of the provisions of section 15003 
of Public Law 114-255 and our proposals for implementation.) As of the 
time of development of this proposed rule, the entire set of hospitals 
that will participate in the second 5 years of the extension period is 
unknown. However, we intend to apply a similar payment methodology 
during the remainder of the extension period. As a result, we expect 
that hospitals participating in the demonstration will not receive 
empirically justified DSH payments, and that they will be excluded from 
receiving interim and final uncompensated care payments for FY 2018 and 
subsequent fiscal years for the duration of the second 5 years of the 
extension period.
3. 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 Medicare 
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.
4. Uncompensated Care Payments
    As we 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

[[Page 19943]]

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 FYs 2014 through 2017, and our proposed policies for FY 
2018.
a. Proposed Calculation of Factor 1 for FY 2018
    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 this factor is equal to the difference between (1) 
the aggregate amount of payments that would be made to subsection (d) 
hospitals under section 1886(d)(5)(F) of the Act if section 1886(r) of 
the Act did not apply for such fiscal year (as estimated by the 
Secretary); and (2) 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 payments 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 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 2017, in this FY 2018 IPPS/LTCH PPS proposed rule, 
in order to determine Factor 1 in the uncompensated care payment 
formula for FY 2018, we are proposing 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) of determining Factor 1 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 1886(r)(1) of the Act. These estimates will not be revised or 
updated after we know the final Medicare DSH payments for FY 2018.
    Therefore, in order to determine the two elements of proposed 
Factor 1 for FY 2018 (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), for this 
proposed rule, we used the most recently available projections of 
Medicare DSH payments for the 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 proposed Factor 1 and modeling the 
impact of this FY 2018 IPPS/LTCH PPS proposed rule, we used the Office 
of the Actuary's January 2017 Medicare DSH estimates, which are based 
on data from the December 2016 update of the Medicare Hospital Cost 
Report Information System (HCRIS) and the FY 2017 IPPS/LTCH PPS final 
rule IPPS Impact file, published in conjunction with the publication of 
the FY 2017 IPPS/LTCH PPS final rule. Because SCHs that are projected 
to be paid under their hospital-specific rate are excluded from the 
application of section 1886(r) of the Act, these hospitals also were 
excluded from the January 2017 Medicare DSH estimates. Furthermore, 
because section 1886(r) of the Act specifies that the uncompensated 
care payment is in addition to the empirically justified Medicare DSH 
payment (25 percent of DSH payments that would be made without regard 
to section 1886(r) of the Act), Maryland hospitals participating in the 
Maryland All-Payer Model that do not receive DSH payments were also 
excluded from the Office of the Actuary's January 2017 Medicare DSH 
estimates. Hospitals that had been participating in the Rural Community 
Hospital Demonstration Program through December 31, 2016 were included 
in these estimates. (As discussed earlier, the Affordable Care Act 
authorized a 5-year extension period for the demonstration, which ended 
December 31, 2016.) The demonstration was extended for an additional 5 
years by section 15003 of Public Law 114-255. Although the hospitals 
that will participate in the second 5 years of the extension period had 
not been determined at the time of development of this proposed rule, 
we intend to apply a similar payment methodology during the second 5 
years of the extension period as for the earlier periods of the 
demonstration. Therefore, hospitals participating in the demonstration 
would not be eligible to receive DSH payments. If the hospitals 
participating in the second 5 years of the extension period are known 
prior to the development of the Medicare DSH estimates for the FY 2018 
final rule, these hospitals would be excluded from the Office of the 
Actuary's final Medicare DSH estimates for FY 2018.
    For this proposed rule, using the data sources discussed above, the 
Office of the Actuary used the most recently submitted Medicare cost 
report data to identify Medicare DSH payments and the most recent 
Medicare DSH payment adjustments and applied inflation updates and 
assumptions for future changes in utilization and case-mix to estimate 
Medicare DSH payments for the upcoming fiscal year. The January 2017 
Office of the Actuary estimate for Medicare DSH payments for FY 2018, 
without regard to the application of section 1886(r)(1) of the Act, is 
approximately $16.003 billion. This estimate excludes Maryland 
hospitals participating in the Maryland All-Payer Model and SCHs paid 
under their hospital-specific payment rate. Therefore, based on the 
January 2017 estimate, the estimate for empirically justified Medicare 
DSH payments for FY 2018, with the application of section 1886(r)(1) of 
the Act, is approximately $4.001 billion (or 25 percent of the total 
amount of estimated Medicare DSH payments for FY 2018). 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 this 
proposed rule, we are proposing that Factor 1 for

[[Page 19944]]

FY 2018 is $12,001,915,095.04, which is equal to 75 percent of the 
total amount of estimated Medicare DSH payments for FY 2018 
($16,002,553,460.05 minus $4,000,638,365.01).
    The Office of the Actuary's estimates for FY 2018 for this proposed 
rule began with a baseline of $12.405 billion in Medicare DSH 
expenditures for FY 2014. The following table shows the factors applied 
to update this baseline through the current estimate for FY 2018:

                          Factors Applied for FY 2015 Through FY 2018 To Estimate Medicare DSH Expenditures Using 2014 Baseline
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                           Estimated DSH
                           FY                                 Update         Discharge       Case-mix          Other           Total        payment (in
                                                                                                                                            billions) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
2015....................................................           1.014          1.0068           1.005          1.0493        1.076581         $13.355
2016....................................................           1.009          0.9757           1.027          1.0689        1.080724          14.433
2017....................................................          1.0015          1.0058           1.005          1.0535        1.066506          15.393
2018....................................................        1.022088          1.0188           1.005          0.9934        1.039603          16.003
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounded.

    In this table, the discharge column shows the increase in the 
number of Medicare fee-for-service (FFS) inpatient hospital discharges. 
The figures for FY 2015 are based on Medicare claims data that have 
been adjusted by a completion factor. The discharge figure for FY 2016 
is based on preliminary data for 2016. The discharge figures for FYs 
2017 and 2018 are assumptions based on recent trends recovering back to 
the long-term trend and assumptions related to how many beneficiaries 
will be enrolled in Medicare Advantage (MA) plans. The case-mix column 
shows the increase in case-mix for IPPS hospitals. The case-mix figures 
for FY 2015 are based on actual data adjusted by a completion factor. 
The FY 2016 increase is based on preliminary data adjusted by a 
completion factor. The FYs 2017 and 2018 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, and various adjustments to the payment rates that have been 
included over the years but are not reflected in the other columns 
(such as the change 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. In the past, commenters have 
contended that the ``Other'' column understates the effect of the 
Medicaid expansion. The factor for Medicaid expansion was developed 
using public information and statements for each State regarding its 
intent to implement the expansion. Based on this information, it is 
assumed that 50 percent of all individual who were potentially newly 
eligible Medicaid enrollees in 2016 resided in States that had elected 
to expand Medicaid eligibility and, for 2017 and thereafter, that 55 
percent of such individuals would reside in expansion States. In the 
future, these assumptions may change based on actual participation by 
States. For a discussion of general issues regarding Medicaid 
projections, we refer readers to the 2016 Actuarial Report on the 
Financial Outlook for Medicaid (https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2016.pdf). We note that, in developing their estimates of 
the effect of Medicaid expansion on Medicare DSH expenditures, our 
actuaries have assumed that the new Medicaid enrollees are healthier 
than the average Medicaid recipient and, therefore, use fewer hospital 
services.
    The table below shows the factors that are included in the 
``Update'' column of the above table:

----------------------------------------------------------------------------------------------------------------
                                                    Affordable
                                   Market basket     Care Act       Multifactor    Documentation   Total update
               FY                   percentage        payment      productivity     and coding      percentage
                                                    reductions      adjustment
----------------------------------------------------------------------------------------------------------------
2015............................             2.9            -0.2            -0.5            -0.8             1.4
2016............................             2.4            -0.2            -0.5            -0.8             0.9
2017............................             2.7           -0.75            -0.3            -1.5            0.15
2018............................             2.9           -0.75            -0.4          0.4588          2.2088
----------------------------------------------------------------------------------------------------------------
Note: All numbers are based on FY 2018 President's Budget projections.

    We are inviting public comments on our proposed calculation of 
Factor 1 for FY 2018.
b. Proposed Calculation of Factor 2 for FY 2018
(1) Background
    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 (1) who were 
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 (2) 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 19945]]

individuals under 65 without insurance in 2013 must be the percent of 
such individuals who were 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: 
https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/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). 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 most recent period for which data 
are available with the percent of individuals who were uninsured in 
2013, in the FY 2014 IPPS/LTCH PPS final rule, 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, our estimate of the uninsurance 
percentage for 2013 was 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 (as so 
calculated). In the FY 2014, FY 2015, FY 2016, and FY 2017 IPPS/LTCH 
PPS final rules (78 FR 50634, 79 FR 50014, 80 FR 49522, and 81 FR 
56952, respectively), we used the same data source, 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). 
Therefore, for the FY 2017 IPPS/LTCH PPS final rule (81 FR 56952), we 
used the most recently available estimate of the uninsurance rate, 
which was based on the CBO's March 2016 estimates of the effects of the 
Affordable Care Act on health insurance coverage (which are available 
at https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/51385-HealthInsuranceBaseline.pdf). The CBO's March 2016 
estimate of individuals under the age of 65 with insurance in CY 2016 
was 90 percent. Therefore, the CBO's most recent estimate of the rate 
of uninsurance in CY 2016 was 10 percent (that is, 100 percent minus 90 
percent). The CBO's March 2016 estimate of individuals under the age of 
65 with insurance in CY 2017 was also 90 percent. Therefore, the CBO's 
most recent estimate of the rate of uninsurance in CY 2017 available 
for the FY 2017 final rule was also 10 percent (that is, 100 percent 
minus 90 percent).
    The calculation of the final Factor 2 for FY 2017, employing a 
weighted average of the CBO projections for CY 2016 and CY 2017, was as 
follows:
     CY 2016 rate of insurance coverage (March 2016 CBO 
estimate): 90 percent.
     CY 2017 rate of insurance coverage (March 2016 CBO 
estimate): 90 percent.
     FY 2016 rate of insurance coverage: (90 percent * .25) + 
(90 percent * .75) = 90 percent.
     Percent of individuals without insurance for 2013 (March 
2010 CBO estimate): 18 percent.
     Percent of individuals without insurance for FY 2017 
(weighted average): 10 percent.

1-((0.10-0.18)/0.18) = 1-0.4444 = 0.5555 (55.56 
percent)
0.5556 (55.56 percent)-.002 (0.2 percentage points for FY 2017 under 
section 1886(r)(2)(B)(i) of the Act) = 0.5536 or 55.36 percent
0.5536 = Factor 2

    Therefore, the final Factor 2 for FY 2017 was 55.36 percent.
    The FY 2017 final uncompensated care amount was: $10,797,476,782.62 
x 0.5536 = $5,977,483,146.86.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
FY 2017 uncompensated care total available...........  $5,977,483,146.86
------------------------------------------------------------------------

(2) Proposed Methodology for Calculation of Factor 2 for FY 2018
    Section 1886(r)(2)(B)(ii) of the Act permits the use of a data 
source other than the CBO estimates to determine the percent change in 
the rate of uninsurance beginning in FY 2018. In addition, for FY 2018 
and subsequent years, the statute does not require that the estimate of 
the percent of individuals who are uninsured be limited to individuals 
who are under 65. Specifically, the statute states that, for FY 2018 
and subsequent fiscal 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 were 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 were 
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. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56952), we 
indicated that we planned to address changes to the methodology for 
determining Factor 2 and the viability of potential alternative data 
sources in the FY 2018 IPPS/LTCH PPS proposed rule.
    In our analysis of a potential data source for the rate of 
uninsurance for purposes of computing Factor 2 in FY 2018, we 
considered the following: (a)

[[Page 19946]]

The extent to which the source accounted for the full U.S. population; 
(b) the extent to which the source comprehensively accounted for both 
public and private health insurance coverage in deriving its estimates 
of the number of uninsured; (c) the extent to which the source utilized 
data from the Census Bureau; (d) the timeliness of the estimates; (e) 
the continuity of the estimates over time; (f) the accuracy of the 
estimates; and (g) the availability of projections (including the 
availability of projections using an established estimation methodology 
that would allow for calculation of the rate of uninsurance for the 
applicable Federal fiscal year). These considerations are consistent 
with the statutory requirement that this estimate be based on data from 
the Census Bureau or other sources the Secretary determines appropriate 
and help to ensure the data source will provide reasonable estimates 
for the rate of uninsurance that are available in conjunction with the 
IPPS rulemaking cycle.
    We have determined that the source that, on balance, best meets all 
of these considerations is the uninsured estimates produced by CMS' 
Office of the Actuary (OACT) as part of the development of the National 
Health Expenditure Accounts (NHEA). The NHEA represents the 
government's official estimates of economic activity (spending) within 
the health sector. The information contained in the NHEA has been used 
to study numerous topics related to the health care sector, including, 
but not limited to, changes in the amount and cost of health services 
purchased and the payers or programs that provide or purchase these 
services; the economic causal factors at work in the health sector; the 
impact of policy changes, including major health reform; and 
comparisons to other countries' health spending. Of relevance to the 
determination of Factor 2 is that the comprehensive and integrated 
structure of the NHEA creates an ideal tool for evaluating changes to 
the health care system, such as the mix of the insured and uninsured 
because this mix is integral to the well-established NHEA methodology. 
Below we describe some aspects of the methodology used to develop the 
NHEA that we believe are particularly relevant in estimating the 
percent change in the rate of uninsurance for FY 2018. A full 
description of the methodology used to develop the NHEA is available on 
the CMS Web site at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/DSM-15.pdf.
    The NHEA estimates of U.S. population reflect the Census Bureau's 
definition of the resident-based population, which includes all people 
who usually reside in the 50 States or the District of Columbia, but 
excludes residents living in Puerto Rico and areas under U.S. 
sovereignty, members of the U.S. Armed Forces overseas, and U.S. 
citizens whose usual place of residence is outside of the United 
States, plus a small (typically less than 0.2 percent of population) 
adjustment to reflect Census undercounts. In past years, the estimates 
for Factor 2 were made using the CBO's uninsured population estimates 
for the under 65 population. For FY 2018 and subsequent years, the 
statute does not restrict the estimate to the measurement of the 
percent of individuals under the age of 65 who are uninsured. 
Accordingly, we believe it is appropriate to use an estimate that 
reflects the rate of uninsurance in the United States across all age 
groups. In addition, we continue to believe that a resident-based 
population estimate more fully reflects the levels of uninsurance in 
the United States that influence uncompensated care for hospitals than 
an estimate that reflects only legal residents. The NHEA estimates of 
uninsurance are for the total U.S. population (all ages) and not by 
specific age cohort, such as the population under the age of 65.
    The NHEA includes comprehensive enrollment estimates for total 
private health insurance (PHI) (including direct and employer-sponsored 
plans), Medicare, Medicaid, the Children's Health Insurance Program 
(CHIP), and other public programs, and estimates of the number of 
individuals who are uninsured. Estimates of total PHI enrollment are 
available for 1960 through 2015, estimates of Medicaid, Medicare, and 
CHIP enrollment are available for the length of the respective 
programs, and all other estimates (including the more detailed 
estimates of direct-purchased and employer-sponsored insurance) are 
available for 1987 through 2015. The NHEA data are publicly available 
on the CMS Web site at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html.
    In order to compute Factor 2, the first metric that is needed is 
the proportion of the total U.S. population that was uninsured in 2013. 
In developing the estimates for the NHEA, OACT's methodology included 
using the number of uninsured individuals for 1987 through 2009 based 
on the enhanced Current Population Survey (CPS) from the State Health 
Access Data Assistance Center (SHADAC). The CPS, sponsored jointly by 
the U.S. Census Bureau and the U.S. Bureau of Labor Statistics (BLS), 
is the primary source of labor force statistics for the population of 
the United States. (We refer readers to the Web site at: http://www.census.gov/programs-surveys/cps.html.) The enhanced CPS, available 
from SHADAC (available at http://datacenter.shadac.org) accounts for 
changes in the CPS methodology over time. OACT further adjusts the 
enhanced CPS for an estimated undercount of Medicaid enrollees (a 
population that is often not fully captured in surveys that include 
Medicaid enrollees due to a perceived stigma associated with being 
enrolled in the Medicaid program or confusion about the source of their 
health insurance).
    To estimate the number of uninsured individuals for 2010 through 
2014, OACT extrapolates from the 2009 CPS data using data from the 
National Health Interview Survey (NHIS). The NHIS is one of the major 
data collection programs of the National Center for Health Statistics 
(NCHS), which is part of the Centers for Disease Control and Prevention 
(CDC). The U.S. Census Bureau is the data collection agent for the 
NHIS. The NHIS results have been instrumental over the years in 
providing data to track health status, health care access, and progress 
toward achieving national health objectives. For further information 
regarding the NHIS, we refer readers to the CDC Web site at: https://www.cdc.gov/nchs/nhis/index.htm. For 2015, the estimate of the rate of 
uninsurance in the NHEA matches with the estimate from the NHIS.
    The next metrics needed to compute Factor 2 are projections of the 
rate of uninsurance in both calendar years 2017 and 2018. On an annual 
basis, the OACT projects enrollment and spending trends for the coming 
10-year period. Those projections (currently for years 2016 through 
2025) use the latest NHEA historical data, which presently run through 
2015. The NHEA projection methodology accounts for expected changes in 
enrollment across all of the categories of insurance coverage 
previously listed. The sources for projected growth rates in enrollment 
for Medicare, Medicaid, and CHIP include the latest Medicare Trustees 
Report, the Medicaid Actuarial Report, or other updated estimates as 
produced by the OACT. Projected rates of growth in enrollment for 
private health insurance and the uninsured are based largely on

[[Page 19947]]

OACT's econometric models, which rely on the set of macroeconomic 
assumptions underlying the latest Medicare Trustees Report. Greater 
detail can be found in OACT's report titled ``Projections of National 
Health Expenditure: Methodology and Model Specification,'' which is 
available on the CMS Web site at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
    The use of data from the NHEA to estimate the rate of uninsurance 
is consistent with the statute and meets the criteria we have 
identified for determining the appropriate data source. Section 
1886(r)(2)(B)(ii) of the Act instructs the Secretary to estimate the 
rate of uninsurance for purposes of Factor 2 based on data from the 
Census Bureau or other sources the Secretary determines appropriate. 
The NHEA utilizes data from the Census Bureau; the estimates are 
available in time for the IPPS rulemaking cycle; the estimates are 
produced by OACT on an annual basis and are expected to continue to be 
produced for the foreseeable future; and projections are available for 
calendar year time periods that span the upcoming fiscal year. 
Timeliness and continuity are important considerations because of our 
need to be able to update this estimate annually. Accuracy is also a 
very important consideration and, all things being equal, we would 
choose the most accurate data source that sufficiently meets our other 
criteria.
    Using these data sources and the methodologies described above, 
OACT estimates that the uninsured rate for the historical, baseline 
year of 2013 was 14 percent and for CYs 2017 and 2018 is 8.3 percent 
and 8.1 percent respectively. As required by section 1886(r)(2)(B)(ii) 
of the Act, the Chief Actuary of CMS has certified these estimates.
    As with the CBO estimates on which we based Factor 2 in prior 
fiscal years, the NHEA estimates are for a calendar year. In the 
rulemaking for FY 2014, many commenters noted that the uncompensated 
care payments are made on fiscal year and not a calendar year basis and 
requested that CMS normalize the CBO estimate to reflect a fiscal year 
basis. Specifically, commenters requested that CMS calculate a weighted 
average of the CBO estimate for October through December 2013 and the 
CBO estimate for January through September 2014 when determining Factor 
2 for FY 2014. We agreed with the commenters that normalizing the 
estimate to cover FY 2014 rather than CY 2014 would more accurately 
reflect the rate of uninsurance that hospitals would experience during 
the FY 2014 payment year. Accordingly, we estimated the rate of 
uninsurance for FY 2014 by calculating a weighted average of the CBO 
estimates for CY 2013 and CY 2014 (78 FR 50633). We have continued this 
weighted average approach in each fiscal year since FY 2014.
    We continue to believe that, in order to estimate the rate of 
uninsurance during a fiscal year more accurately, Factor 2 should 
reflect the estimated rate of uninsurance that hospitals will 
experience during the fiscal year, rather than the rate of uninsurance 
during only one of the calendar years that the fiscal year spans. 
However, we have concerns about the future potential for the uninsured 
rate to vary nonuniformly in the 2 calendar years that the fiscal year 
spans (for example, due to changes in the economy or changes in 
legislation). Nevertheless, for FY 2018, because OACT's current 
estimates of the percent of individuals without insurance in CY 2017 
and CY 2018 are relatively close, we do not believe this is a 
significant policy issue and are proposing to continue with the 
weighted average approach used in past fiscal years in order to 
estimate the rate of uninsurance for FY 2018.
    The calculation of the proposed Factor 2 for FY 2018 using a 
weighted average of OACT's projections for CY 2017 and CY 2018 is as 
follows:
     Percent of individuals without insurance for CY 2013: 14 
percent.
     Percent of individuals without insurance for CY 2017: 8.3 
percent.
     Percent of individuals without insurance for CY 2018: 8.1 
percent.
     Percent of individuals without insurance for FY 2018 (0.25 
times 0.083) + (0.75 times 0.081): 8.15 percent
1-[verbar]((0.0815-0.14)/0.14)[verbar] = 1-0.4179 = 0.5821 (58.21 
percent)
0.5821 (58.21 percent)-.002 (0.2 percentage points for FY 2018 under 
section 1886(r)(2)(B)(ii) of the Act) = 0.5801 or 58.01 percent
0.5801 = Factor 2

    Therefore, the proposed Factor 2 for FY 2018 is 58.01 percent.
    The proposed FY 2018 uncompensated care amount is: 
$12,001,915,095.04 x 0.5801 = $6,962,310,946.63.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Proposed FY 2018 uncompensated care total available..  $6,962,310,946.63
------------------------------------------------------------------------

    We are inviting public comments on our proposed methodology for 
calculation of Factor 2 for FY 2018.
c. Calculation of Proposed Factor 3 for FY 2018
(1) Background
    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 (1) 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 (2) 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 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

[[Page 19948]]

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 Worksheet S-10 
and the completeness of these data, we did not propose to use data from 
Worksheet S-10 to determine Factor 3 for FY 2014, the first year this 
provision was in effect, or for FY 2015, 2016, or 2017. When we first 
discussed using Worksheet S-10 to allocate hospitals' shares of 
uncompensated care costs in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50638), we explained why we believed that it was premature to use 
uncompensated care costs reported on Worksheet S-10 for FY 2014. 
Specifically, at that time, the most recent available cost reports 
would have been from FYs 2010 and 2011, which were submitted on or 
after May 1, 2010, when the new Worksheet S-10 went into effect. We 
believed that concerns about the standardization and completeness of 
the Worksheet S-10 data could be more acute for data collected in the 
first year of the Worksheet's use (78 FR 50635). In addition, we 
believed that it would be most appropriate to use data elements that 
have been historically publicly available, subject to audit, and used 
for payment purposes (or that the public understands will be used for 
payment purposes) to determine the amount of uncompensated care for 
purposes of Factor 3 (78 FR 50635). At the time we issued the FY 2014 
IPPS/LTCH PPS final rule, we did not believe that the available data 
regarding uncompensated care from Worksheet S-10 met these criteria 
and, therefore, we believed they were not reliable enough to use for 
determining FY 2014 uncompensated care payments. Accordingly, for FY 
2014, we concluded that utilization of insured low-income patients 
would be a better proxy for the costs of hospitals in treating the 
uninsured. For FYs 2015, 2016, and 2017, the cost reports used for 
calculating uncompensated care payments (that is, FYs 2011, 2012, and 
2013) were also submitted prior to the time that hospitals were on 
notice that Worksheet S-10 could be the data source for calculating 
uncompensated care payments. Therefore, we believed it was also 
appropriate to use proxy data to calculate Factor 3 for these years.
    We stated in the preamble of the FY 2017 IPPS/LTCH PPS proposed 
rule that we believed that, for FY 2018, many of the above concerns 
would no longer be relevant. That is, hospitals were on notice as of FY 
2014 that Worksheet S-10 could eventually become the data source for 
CMS to calculate uncompensated care payments. Furthermore, hospitals' 
cost reports from FY 2014 had been publicly available for some time, 
and CMS had analyses of Worksheet S-10 conducted both internally and by 
stakeholders demonstrating that Worksheet S-10 accuracy had improved 
over time. Specifically, as discussed in the FY 2017 IPPS/LTCH PPS 
proposed rule (81 FR 25090), MedPAC has provided analyses that found 
that current Worksheet S-10 data are a better proxy for predicting 
audited uncompensated care costs than Medicaid/Medicare SSI days, and 
that the data on Worksheet S-10 would improve over time as the data are 
actually used to make payments. CMS has also undertaken an extensive 
analysis of the Worksheet S-10 data, benchmarking it against the data 
on uncompensated care costs reported to the Internal Revenue Service 
(IRS) on Form 990 by not-for-profit hospitals. (This analysis, 
performed by Dobson DaVanzo & Associates, LLC, under contract to CMS, 
was included in a report entitled ``Improvements to Medicare 
Disproportionate Share Hospital (DSH) Payments Report: Benchmarking S-
10 Data Using IRS Form 990 Data and Worksheet S-10 Trend Analyses,'' 
which is available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html 
under the Downloads section.) The analysis determined a strong and 
converging correlation between the amounts for Factor 3 derived using 
the IRS Form 990 and Worksheet S-10 data suggesting that Worksheet S-10 
uncompensated care data are becoming more stable over time. Given these 
results and in light of the fact that hospitals have been on notice 
since the FY 2014 rulemaking that CMS intended eventually to use 
Worksheet S-10 as the data source for calculating uncompensated care 
payments, we believed it would be appropriate to propose to begin 
incorporating Worksheet S-10 data for purposes of calculating Factor 3 
starting in FY 2018. In section IV.F.4.d. of the preamble of the FY 
2017 IPPS/LTCH PPS proposed rule (81 FR 25090 through 25094), we 
proposed a methodology and timeline for incorporating Worksheet S-10 
data in the calculation of Factor 3 beginning in FY 2018 and invited 
public comments on that proposal.
    While some commenters, including MedPAC, were supportive of the 
proposal, many other commenters expressed concerns about a perceived 
lack of clarity in the Worksheet S-10 instructions and their belief in 
the necessity of a strict audit mechanism to capture aberrant 
uncompensated care costs reported on Worksheet S-10. Many commenters 
also cited the report from Dobson DaVanzo, which concluded that 
hospitals are doing a better job of reporting their uncompensated care 
data on Worksheet S-10 than they did a few years ago. However, these 
commenters disagreed with CMS about the significance of this 
observation. One commenter stated that even if it is true in the 
aggregate that hospitals are reporting data more accurately on 
Worksheet S-10, the zero-sum nature of the calculation of uncompensated 
care payments is such that the remaining inaccuracy and lack of 
uniformity in the data reported can have a very large impact on 
hospitals. The commenter asserted that if hospitals, for whatever 
reason, over-report their uncompensated care, they benefit financially 
from doing so, while those that do not aggressively report suffer 
financial harm. The commenter concluded that, for this reason, the 
possibility that some hospitals are generally ``doing better'' with 
reporting data is not good enough. All hospitals must do better, and 
until they do, the commenter believed that data from Worksheet S-10 are 
not accurate enough for public policymaking purposes. Other commenters 
asserted that the Dobson/DaVanzo study did not illustrate or even 
evaluate whether data from Worksheet S-10 are a reasonable proxy for 
the costs hospitals incur in providing care to the uninsured. These 
commenters pointed to their own analyses, which indicated that the most 
notable aberrations in Worksheet S-10 data reporting occur among public 
hospitals, which do not file a Form 990 and are therefore missing from 
the Dobson/DaVanzo analysis.
    On balance, after considering all of the comments, we elected not 
to finalize our proposal to begin to incorporate Worksheet S-10 into 
the calculation of Factor 3 for FY 2018 in the FY 2017 IPPS/LTCH PPS 
final rule. We stated that we were postponing the decision regarding 
when to begin incorporating

[[Page 19949]]

data from Worksheet S-10 and proceeding with certain additional quality 
control and data improvement measures to the Worksheet S-10 
instructions as commenters had requested. We indicated that we would 
consider further whether the current Worksheet S-10 data or a proxy 
should be used to calculate Factor 3 for FY 2018 and subsequent fiscal 
years. We also expressed our intention to explore whether there is an 
appropriate proxy for uncompensated care that could be used to 
calculate Factor 3 until we determine that data from the revised 
Worksheet S-10 can be used for this purpose. We stated that we would 
undertake notice-and-comment rulemaking to address the issue of the 
appropriate data to use to determine Factor 3 for FY 2018 and 
subsequent years.
(2) Proposed Data Sources for FY 2018
    Since the publication of the FY 2017 final rule and as part of our 
ongoing quality control and data improvement measures for Worksheet S-
10, we have updated the benchmarking analysis described in the report 
``Improvements to Medicare Disproportionate Share Hospital (DSH) 
Payments Report: Benchmarking S-10 Data Using IRS Form 990 Data and 
Worksheet S-10 Trend Analyses'' posted with the FY 2017 IPPS/LTCH PPS 
proposed rule. As discussed in the FY 2017 IPPS/LTCH PPS proposed rule, 
the purpose of this analysis was to determine if Worksheet S-10 
uncompensated care data are becoming more stable over time (81 FR 
25090). In the report issued in conjunction with the FY 2017 
rulemaking, we conducted an analysis of 2010, 2011, and 2012 Worksheet 
S-10 data and IRS Form 990 data from the same years. Using IRS Form 990 
data for tax years 2010, 2011, and 2012 (the latest available years at 
that time) as a benchmark, we compared key variables derived from 
Worksheet S-10 and IRS Form 990 data, such as charity care and bad 
debt. The analysis was completed using data from hospitals that had 
completed both Worksheet S-10 and IRS Form 990 across all study years, 
yielding a sample of 788 not-for-profit hospitals (representing 668 
unique Taxpayer Identification Numbers). Because Factor 3 is used to 
determine the Medicare uncompensated care payment amount for each 
hospital, we calculated the amounts for Factor 3 for the matched 
hospitals using charity care and bad debt, and compared the Factor 3 
distributions calculated using data from IRS Form 990 and Worksheet S-
10. Key findings indicated that the amounts for Factor 3 derived using 
the IRS Form 990 and Worksheet S-10 data were highly correlated. In 
addition, the correlation coefficient between the amounts for Factor 3 
calculated from the IRS Form 990 and Worksheet S-10 had increased over 
time, from 0.71 in 2010 to 0.77 in 2011 and 0.80 in 2012, demonstrating 
an increasing convergence between the data sources.
    In the updated analysis performed for this year's rulemaking, we 
again compared Worksheet S-10 and IRS Form 990 data and assessed the 
correlation in Factor 3s derived from each of the data sources. We 
conducted an analysis of 2011, 2012, and 2013 Worksheet S-10 data and 
IRS Form 990 data from the same years. (The previous analysis used data 
from 2010 to 2012.) Using IRS Form 990 data for tax years 2011, 2012, 
and 2013 (again, the latest available years) as a benchmark, we 
utilized the same methodology as was used in the previous analysis, 
which yielded a sample of 1,061 not-for-profit hospitals (representing 
918 unique Taxpayer Identification Numbers) and found that the amounts 
for Factor 3 derived using the IRS Form 990 and Worksheet S-10 data 
continue to be highly correlated and that, within the larger sample in 
the updated analysis, this correlation continues to increase over time, 
from 0.80 in 2011 to 0.85 in 2013. (The highest correlation found in 
the earlier analysis performed for the FY 2017 rulemaking was 0.80.)
    The fact that this most recent analysis, which was performed after 
the issuance of the FY 2017 IPPS/LTCH PPS final rule, continues to 
demonstrate a high correlation between the amounts for Factor 3 derived 
using the IRS 990 data and the Worksheet S-10 data and that this 
correlation continues to increase over time leads us to believe that we 
have reached a tipping point with respect to the use of the Worksheet 
S-10 data. Specifically, we can no longer conclude that alternative 
data are available for FY 2014 that are a better proxy for the costs of 
subsection (d) hospitals for treating individuals who are uninsured 
than the data on uncompensated care costs reported on the Worksheet S-
10. However, we continue to believe that it is appropriate to use low-
income insured days as a proxy for uncompensated care costs for years 
prior to FY 2014. Hospitals did not have notice that the Worksheet S-10 
data from these years might be used for purposes of computing 
uncompensated care payments and, as a result, may not have fully 
appreciated the importance of reporting their uncompensated care costs 
as completely and accurately as possible.
    We found further evidence for this tipping point when we examined 
changes to the FY 2014 Worksheet S-10 data submitted by hospitals since 
the publication of the FY 2017 IPPS/LTCH PPS final rule. In the FY 2017 
IPPS/LTCH PPS final rule, as part of our ongoing quality control and 
data improvement measures for the Worksheet S-10, we referred readers 
to Change Request 9648, Transmittal 1681, titled ``The Supplemental 
Security Income (SSI)/Medicare Beneficiary Data for Fiscal Year 2014 
for Inpatient Prospective Payment System (IPPS) Hospitals, Inpatient 
Rehabilitation Facilities (IRFs), and Long Term Care Hospitals 
(LTCH),'' issued on July 15, 2016 (available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R1681OTN.pdf). 
In this transmittal, as part of the process for ensuring complete 
submission of Worksheet S-10 by all eligible DSH hospitals, we 
instructed MACs to accept amended Worksheets S-10 for FY 2014 cost 
reports submitted by hospitals (or initial submissions of Worksheet S-
10 if none had been submitted previously) and to upload them to the 
Health Care Provider Cost Report Information System (HCRIS) in a timely 
manner. The transmittal stated that, for revisions to be considered, 
hospitals were required to submit their amended FY 2014 cost report 
containing the revised Worksheet S-10 (or a completed Worksheet S-10 if 
no data were included on the previously submitted cost report) to the 
MAC no later than September 30, 2016.
    We have examined hospitals' FY 2014 cost reports to see if the 
Worksheet S-10 data on those cost reports have changed as a result of 
the opportunity for hospitals to submit revised Worksheet S-10 data for 
FY 2014. Specifically, we compared hospitals' FY 2014 Worksheet S-10 
data as they existed in the first quarter of CY 2016 with data from the 
fourth quarter of CY 2016. We found that the FY 2014 Worksheet S-10 
data had changed over that time period for approximately one quarter of 
hospitals that receive uncompensated care payments. The fact that the 
Worksheet S-10 data changed for such a significant number of hospitals 
following a review of the cost report data they originally submitted 
and that the revised Worksheet S-10 information is available to be used 
in determining uncompensated care costs contributes to our belief that 
we can no longer conclude that alternative data are available that are 
a better proxy than the Worksheet S-10 data for the costs of

[[Page 19950]]

subsection (d) hospitals for treating individuals who are uninsured.
    Commenters have also provided equity arguments with respect to the 
relationship between uncompensated care payments and the expansion of 
Medicaid in certain States under the authority provided by the 
Affordable Care Act. The commenters have made a twofold argument. 
First, they have argued that hospitals in States that did not expand 
Medicaid treat a higher number of uninsured patients compared to 
hospitals in States that did expand Medicaid and, as a result, provide 
more uncompensated care. However, since the implementation of the new 
DSH payment methodology under section 3133 of the Affordable Care Act 
in FY 2014, these hospitals have experienced reductions in the payments 
for uncompensated care due to the national decline in the uninsured 
rate driven in large part by Medicaid expansions in other States. 
Second, they have argued that hospitals in non-expansion States will be 
penalized a second time when Medicaid utilization is used as part of 
the basis for determining Factor 3 because their Medicaid utilization 
has not grown as much relative to hospitals in expansion States. We 
note that, while CMS has not yet used data affected by Medicaid 
expansion when determining Factor 3, commenters are concerned that they 
will be penalized in future calculations when these data are used.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we 
recognized that, in using Medicaid days as part of the proxy for 
uncompensated care, 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. Because the earliest 
Medicaid expansions under the Affordable Care Act began in 2014, the 
2011, 2012, and 2013 Medicaid days data used to determine Factor 3 for 
FY 2017 are the most recent available data on Medicaid utilization that 
do not reflect the effects of these Medicaid expansions. Accordingly, 
if we were to use only low-income insured days to estimate 
uncompensated care in FY 2018, we would need to hold the time period of 
these data constant and use data on Medicaid days from 2011, 2012, and 
2013 in order to avoid the risk of any redistributive effects arising 
from the decision to expand Medicaid in certain States. As a result, we 
would be using older data that may provide a less accurate proxy for 
the level of uncompensated care being furnished by hospitals in FY 
2018, contributing to our growing concerns regarding the continued use 
of low-income insured days as a proxy for uncompensated care costs in 
FY 2018.
    We also note that when weighing the new information that has become 
available to us regarding the Worksheet S-10 and the low-income days 
proxy since the FY 2018 rulemaking, we are not considering these 
developments in isolation, but rather in the context of the information 
that we previously considered as part our discussions of the Worksheet 
S-10 data in prior rulemaking. Part of this background is provided by 
the 2007 MedPAC analysis of data from the Government Accountability 
Office (GAO) and the American Hospital Association (AHA), which 
suggests that Medicaid days and low income Medicare days are not a good 
proxy for uncompensated care costs (80 FR 49525). Additional analyses 
performed by MedPAC showed that the correlation between audited 
uncompensated care data from 2009 and the data from the FY 2011 
Worksheet S-10 was over 0.80, as compared to a correlation of 
approximately 0.50 between the audited uncompensated care data and 2011 
Medicare SSI and Medicaid days. Based on this analysis, MedPAC 
concluded that use of Worksheet S-10 data was already better than using 
Medicare SSI and Medicaid days as a proxy for uncompensated care costs, 
and that the data on Worksheet S-10 would improve over time as the data 
are actually used to make payments (81 FR 25090). Furthermore, MedPAC 
in the past has raised concerns about the low-income days proxy we have 
used historically because it is an inpatient measure and much of the 
uncompensated care provided by certain hospitals, including rural 
hospitals, occurs in the emergency room or other outpatient areas. In 
its comments on the FY 2017 proposed rule, MedPAC again recommended we 
start using the Worksheet S-10 data with a phase-in (81 FR 56962).
    In summary, when weighing the new information that has become 
available to us since the FY 2017 rulemaking in conjunction with the 
information regarding Worksheet S-10 data and the low-income days proxy 
that we have analyzed as part of our consideration of this issue in 
prior rulemaking, we can no longer conclude that alternative data to 
the Worksheet S-10 are available for FY 2014 that are a better proxy 
for the costs of subsection (d) hospitals for treating individuals who 
are uninsured. We discuss below our proposed methodology for how we 
would begin to incorporate Worksheet S-10 data for FY 2014 into the 
calculation of Factor 3 of the uncompensated care payment methodology.
(3) Proposed Time Period for Calculating Factor 3 for FY 2018, 
Including Methodology for Incorporating Worksheet S-10 Data
    Section 1886(r)(2)(C) of the Act not only governs the selection of 
the data to be used in calculating Factor 3, but 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 2017 IPPS/LTCH PPS final rule, in order to mitigate undue 
fluctuations in the amount of uncompensated care payments to hospitals 
from year to year and smooth over anomalies between cost reporting 
periods, we finalized a policy of calculating a hospital's share of 
uncompensated care based an average of data derived from three cost 
reporting periods instead of one cost reporting period. As explained in 
the preamble to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56957 
through 56959), instead of determining Factor 3 using Medicaid days 
from a single cost reporting period and the most recent available data 
on Medicare SSI utilization, as we did in FY 2014, FY 2015, and FY 
2016, we used Medicaid days from three cost reporting periods (FYs 
2011, 2012, and 2013) and SSI days from the three most

[[Page 19951]]

recent available years of SSI utilization data (FYs 2012, 2013, and 
2014) to compute Factor 3 for FY 2017. We continued to extract Medicaid 
days data from the most recent update of HCRIS, which for FY 2017 was 
the March 2016 update. Furthermore, instead of determining a single 
Factor 3 as we have done since the first year of the uncompensated care 
payment in FY 2014, we calculated an individual Factor 3 for each of 
the three cost reporting periods, which we then averaged by the number 
of cost reporting years with data to compute the final Factor 3 for a 
hospital. Under this policy, if a hospital had merged, we would combine 
data from both hospitals for the cost reporting periods in which the 
merger was not reflected in the surviving hospital's cost report data 
to compute Factor 3 for the surviving hospital. Moreover, to further 
reduce undue fluctuations in a hospital's uncompensated care payments, 
if a hospital filed multiple cost reports beginning in the same fiscal 
year, we combined data from the multiple cost reports so that a 
hospital could have a Factor 3 calculated using more than one cost 
report within a cost reporting period. We codified these changes for FY 
2017 by amending the regulations at Sec.  412.106(g)(1)(iii)(C).
    For FY 2018, we are proposing to continue to use the methodology 
finalized in FY 2017 and to compute Factor 3 using an average of data 
from three cost reporting periods instead of one cost reporting period. 
Consistent with the methodology used to calculate Factor 3 for FY 2017, 
we are proposing to advance the time period of the data used in the 
calculation of Factor 3 forward by one year and using data from FY 
2012, FY 2013, and FY 2014 cost reports. For the reasons we described 
earlier, we believe it would not be appropriate to use Worksheet S-10 
data for periods prior to FY 2014. Rather, for cost reporting periods 
prior to FY 2014, we believe it would be appropriate to continue to use 
low-income insured days. Accordingly, with a time period that includes 
three cost reporting years consisting of FY 2014, FY 2013, and FY 2012, 
we are proposing to use Worksheet S-10 data for the FY 2014 cost 
reporting period and the low-income insured day proxy data for the two 
earlier cost reporting periods. In order to perform this calculation, 
we will draw three sets of data (2 years of Medicaid utilization data 
and 1 year of Worksheet S-10 data) from the most recent available HCRIS 
extract, which for FY 2018 is the December 2016 update of HCRIS for the 
proposed rule and the March 2017 update of HCRIS for the final rule. 
Accordingly, for FY 2018, in addition to the Worksheet S-10 data for FY 
2014, we are proposing to use Medicaid days from FY 2012 and FY 2013 
cost reports and FY 2014 and FY 2015 SSI ratios. We also would continue 
to use FY 2012 cost report data submitted to CMS by IHS and Tribal 
hospitals to determine Medicaid days for those hospitals. (We note that 
cost report data from IHS and Tribal hospitals are included in HCRIS 
beginning in FY 2013 and are no longer submitted separately.) We also 
are proposing 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 as well as the policies 
finalized in the FY 2017 IPPS/LTCH PPS final rule concerning multiple 
cost reports beginning in the same fiscal year (81 FR 56957).
    We believe this approach, if we were to propose to continue it for 
FY 2019 and FY 2020, would have the effect of transitioning the 
incorporation of data from Worksheet S-10 into the calculation of 
Factor 3. Starting with one year of Worksheet S-10 data in FY 2018, an 
additional year of Worksheet S-10 data would be incorporated into the 
calculation of Factor 3 in FY 2019, and the use of low-income insured 
days would be phased out by FY 2020.
    In addition, we acknowledge the concerns regarding IHS/Tribal 
hospitals and subsection (d) Puerto Rico hospitals that some commenters 
expressed in response to the FY 2017 proposal to begin using Worksheet 
S-10 data to determine Factor 3 in FY 2018. According to some of these 
commenters, the use of data from Worksheet S-10 to calculate 
uncompensated care may jeopardize all of the IHS/Tribal hospitals' 
uncompensated care payments due to their the unique funding structure. 
With respect to Puerto Rico, other commenters asserted that the use of 
Worksheet S-10 data may not be appropriate given the historical 
treatment of subsection (d) Puerto Rico hospitals under the statutory 
provisions governing payments under Medicaid and Medicare Part A and 
its impact on the reporting of uncompensated care payments by these 
hospitals. After consideration of the concerns, we believe that the 
uncompensated care data reported by Puerto Rico and IHS/Tribal 
hospitals needs to be further examined and should not be used for FY 
2018. For the reasons described earlier related to the impact of the 
Medicaid expansion beginning in FY 2014, we also do not believe it 
would be appropriate to calculate a Factor 3 for these hospitals using 
FY 2014 low-income insured days. Because we do not believe it is 
appropriate to use the FY 2014 uncompensated care data for these 
hospitals and we also do not believe it is appropriate to use the FY 
2014 low-income insured days, we believe that the best proxy for the 
costs of Puerto Rico and IHS/Tribal hospitals for treating the 
uninsured is the low income-insured days data for FY 2012 and FY 2013. 
Accordingly, we are proposing for these hospitals that when we compute 
the individual Factor 3s for each of the three cost reporting periods 
that are used to determine Factor 3, rather than computing a Factor 3 
using Worksheet S-10 data from the hospital's FY 2014 cost report, we 
would substitute the Factor 3 calculated using the hospital's FY 2013 
low-income insured days. That is, in order to determine the Factor 3 
for FY 2018, we would calculate an average of three individual Factor 
3s using the Factor 3 calculated using FY 2013 cost report data twice 
and the Factor 3 calculated using FY 2012 cost report data once. We 
believe it is appropriate to double-weight the Factor 3 calculated 
using FY 2013 data as it reflects the most recent available information 
regarding the hospital's low-income insured days before any expansion 
of Medicaid. We note that as we are not making any proposals with 
respect to the calculation of Factor 3 for FY 2019 at this time, we 
will reexamine the use of the Worksheet S-10 data for Puerto Rico and 
IHS/Tribal hospitals as part of the FY 2019 rulemaking. In addition, we 
are proposing to continue to use a proxy for SSI days consisting of 14 
percent of a hospital's Medicaid days for Puerto Rico hospitals, as 
finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56953 through 
56956).
    Therefore, for FY 2018, we are proposing to compute Factor 3 for 
each hospital by--
     Step 1: Calculating Factor 3 using the low-income insured 
days proxy based on FY 2012 cost report data and the FY 2014 SSI ratio;
     Step 2: Calculating Factor 3 using the insured low-income 
days proxy based on FY 2013 cost report data and the FY 2015 SSI ratio;
     Step 3: Calculating Factor 3 based on the FY 2014 
Worksheet S-10 data (or using the Factor 3 calculated in Step 2 for 
Puerto Rico and IHS/Tribal hospitals); and
     Step 4: Averaging the Factor 3 values from Steps 1, 2, and 
3; that is, adding the Factor 3 values from FY 2012, FY 2013, and FY 
2014 for each

[[Page 19952]]

hospital, and dividing that amount by the number of cost reporting 
periods with data to compute an average Factor 3.
    We are inviting public comments on our proposed methodology for 
calculating Factor 3 for FY 2018.
    We note that if this proposed methodology is adopted for FY 2018, 
we would expect to propose to use a similar methodology for calculating 
Factor 3 for subsequent years, meaning that for FY 2019 we would expect 
to incorporate data from the FY 2015 Worksheet S-10 into the 
methodology and drop the FY 2012 low-income insured day proxy data. 
However, we are not making any proposals with respect to the 
calculation of Factor 3 for FY 2019 at this time.
    For new hospitals that do not have data for any of the three cost 
reporting periods used in the proposed Factor 3 calculation, we will 
continue to apply the new hospital policy finalized in the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50643). That is, the hospital will 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 2018 cost report, the hospital will also 
receive an uncompensated care payment calculated using a Factor 3, 
where the numerator is the uncompensated care costs reported on 
Worksheet S-10 of the hospital's FY 2018 cost report, and the 
denominator is the sum of uncompensated care costs reported on 
Worksheet S-10 of all DSH eligible hospitals' FY 2014 cost reports as 
prospectively determined during rulemaking. We note that, given the 
selected time period of the data used to calculate Factor 3, any 
hospitals with a CCN established after October 1, 2014 would be 
considered new and subject to this policy.
    As we have done for every proposed and final rule beginning in FY 
2014, in conjunction with both the FY 2018 IPPS/LTCH PPS proposed rule 
and final rule, we will publish on the CMS Web site a table listing 
Factor 3 for all hospitals that we estimate would receive empirically 
justified Medicare DSH payments in FY 2018 (that is, those hospitals 
that 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 Medicare DSH payment in the event that they receive an 
empirically justified Medicare DSH payment for the fiscal year as 
determined at cost report settlement. We note that, as of this proposed 
rule, the FY 2015 SSI ratios are not yet available. Accordingly, for 
modeling purposes, we computed Factor 3 using the most recent available 
data regarding SSI days from the FY 2013 and FY 2014 SSI ratios. 
However, we expect that the FY 2015 SSI ratios will be available to 
calculate Factor 3 for the FY 2018 IPPS/LTCH PPS final rule.
    We also will publish a supplemental data file containing 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 this FY 2018 IPPS/LTCH PPS proposed rule to review 
the table and supplemental data file published on the CMS Web site in 
conjunction with the proposed rule and to notify CMS in writing of any 
inaccuracies. Comments can be submitted to the CMS inbox at 
[email protected]. We will address these comments as 
appropriate in the table and the supplemental data file that we publish 
on the CMS Web site in conjunction with the publication of the FY 2018 
IPPS/LTCH PPS final rule. After the publication of the FY 2018 IPPS/
LTCH PPS final rule, hospitals will have until August 31, 2017, to 
review and submit comments on the accuracy of the table and 
supplemental data file published in conjunction with the final rule. 
Comments may be submitted to the CMS inbox at 
[email protected] through August 31, 2017, and any changes to 
Factor 3 will be posted on the CMS Web site prior to October 1, 2017.
(4) Methodological Considerations for Calculating Factor 3
     Annualizing short cost reports. As we explained 
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56957 through 56959), we 
believe that for hospitals that file multiple cost reports beginning in 
the same year, combining the data from these cost reports has the 
benefit of supplementing the data of hospitals that filed cost reports 
that are less than 12 months, such that the basis of their 
uncompensated care payments and those of hospitals that filed full-year 
12-month cost reports would be more equitable. In response to our 
original proposal in the FY 2017 IPPS/LTCH PPS proposed rule to combine 
data from multiple cost reports, many hospitals stated that while they 
were appreciative of CMS' efforts to provide a more equitable playing 
field for hospitals that filed short cost reports, they believed that 
expanding the time period of the data used to calculate Factor 3 as 
well as combining data across multiple cost reports would not remedy 
the fact that some hospitals are still disadvantaged by having less 
than 36 months of data in their Factor 3 calculation (81 FR 56959). 
Other commenters opposed the use of multiple cost reporting periods if 
it would result in a hospital having more than 12 months of data in the 
Factor 3 calculation for a year, and recommended that CMS prorate the 
data to a 12-month period. Similarly, other commenters recommended that 
CMS annualize cost report data for any cost reporting period that is 
less than 12 months. In the FY 2017 IPPS/LTCH PPS final rule, we 
acknowledged that, although we had not made any proposal in the FY 2017 
IPPS/LTCH PPS proposed rule to annualize the cost reports used to 
calculate Factor 3, the situations presented by commenters, including 
both long and short cost reporting periods, pose unique challenges in 
the context of estimating Factor 3. We stated that we intended to 
consider the issue further and might address the issue in future 
rulemaking.
    For this FY 2018 IPPS/LTCH PPS proposed rule, taking into 
consideration the feedback from hospitals that have been disadvantaged 
in the Factor 3 calculation due to cost reports that do not span a full 
year, we are proposing to annualize Medicaid data if a hospital's cost 
report does not equal 12 months of data. We are not proposing to 
annualize SSI days because we do not obtain these data from hospital 
cost reports in HCRIS. Rather, we obtain these data from the latest 
available SSI ratios posted on the Medicare DSH homepage (https://
www.cms.gov/medicare/medicare-fee-for-service-payment/
acuteinpatientpps/dsh.html), which are aggregated at the hospital level 
and do not have the information needed to determine if the data should 
be annualized.
    Under this proposal, if the time between the start date of a 
hospital's cost reporting year and the end date of its cost reporting 
year is less than 12 months, we would annualize the Medicaid days so 
that the hospital has 12 months of data included in its Factor 3 
calculation. Conversely, if the time between the aforementioned start 
date and the end date is greater than 12 months, we would annualize the 
Medicaid days to achieve 12 months of Medicaid days data. If a hospital 
files more than one cost report beginning in the same fiscal year, we 
would first combine the data across the multiple cost reports before 
determining the difference between the start date and the end date to 
see if annualization is needed.

[[Page 19953]]

    To annualize the Medicaid days for a long or short cost reporting 
year, we would divide the length of a full year (365 or 366 calendar 
days, as applicable) by the length of the cost reporting year (the 
number of calendar days in the cost reporting year) and then multiply 
the quotient by the number of Medicaid days in the cost reporting year.
    For instance, a cost reporting year that is 285 calendar days long 
with 1,200 Medicaid days would be annualized as follows: (365/285) * 
1,200 = 1,537 days.
    A cost reporting year that is 385 calendar days long with 1,200 
Medicaid days would be annualized using the same formula: (365/385) * 
1,200 = 1,137 days.
    Likewise, because long and short cost reporting periods pose the 
same challenges in the context of estimating Factor 3 using hospital 
uncompensated care costs, we are proposing to annualize the 
uncompensated care cost data reported on Worksheet S-10 for cost 
reports that do not equal 12 months of data, by dividing the length of 
a full year (365 or 366 calendar days, as applicable) by the length of 
the cost reporting year (number of calendar days in the cost reporting 
year) and then multiplying the quotient by the total reported 
uncompensated care costs for the cost reporting year.
    For instance, a cost reporting year that is 285 calendar days long 
reporting $10,500,000 in uncompensated care costs would be annualized 
as follows:

(365/285) * $10,500,000 = $13,447,368.

    A cost reporting year that is 385 calendar days long reporting 
$10,500,000 in uncompensated care costs would be annualized using the 
same formula:

(365/385) * $10,500,000 = $9,954,545.

    If a hospital files more than one cost report beginning in the same 
fiscal year, we would first combine the data across the multiple cost 
reports before determining the length of the cost reporting year to see 
if annualization is needed.
    We are inviting public comment on our proposal to annualize the 
cost reports used to calculate Factor 3 for FY 2018. In addition, as 
noted earlier, our proposal to continue calculating a hospital's share 
of uncompensated care payments using a time period that includes three 
cost reporting years is also designed to mitigate undue fluctuations in 
the amount of uncompensated care payments to hospitals from year to 
year and smooth over anomalies between cost reporting periods. Given 
that our proposal to annualize the costs reports used to calculate the 
Factor 3 for FY 2018 would also mitigate fluctuations in the amount of 
uncompensated care payments from year to year, we also are seeking 
public comment on the degree to which the use of three cost reporting 
years would still be necessary if we were to adopt our proposal to 
annualize the cost reports used to calculate Factor 3, or if instead 
the use of a single cost reporting year or two cost reporting years 
would be appropriate. In order to facilitate public comments, we intend 
to post on our Web site a data file containing information similar to 
the information provided in section I.H.5., ``Effects of the Proposed 
Changes to Medicare DSH and Uncompensated Care Payments for FY 2018'' 
of Appendix A of this proposed rule. However, instead of reflecting our 
proposed approach of calculating Factor 3 using a time period that 
includes three cost reporting years, it would reflect an alternative 
approach of calculating Factor 3 using only the most recent year (FY 
2014) of our proposed 3-year average. In all other respects, the 
calculation of Factor 3 would remain the same.
     Scaling Factor. Under the methodology adopted in 
the FY 2017 IPPS/LTCH PPS final rule and that we are proposing to apply 
in FY 2018, if the hospital does not have data for one or more of the 
three cost reporting periods, we will compute Factor 3 for the periods 
available and average those. In other words, we will divide the sum of 
the individual Factor 3s by the number of cost reporting periods with 
data so as not to disadvantage hospitals that are missing data for one 
or more cost reporting periods. Following the publication of the FY 
2017 IPPS/LTCH PPS final rule, several hospitals noted that this aspect 
of the methodology resulted in the Factor 3 values of DSH eligible 
hospitals in Table 18 and the Medicare DSH Supplemental Data File 
adding up to slightly greater than one, which resulted in total 
uncompensated care payments somewhat exceeding the estimate published 
in the FY 2017 final rule. Specifically, for hospitals that have fewer 
than 3 cost reporting years with data, dividing the individual Factor 
3s by the number of cost reporting years with data (that is, 2 cost 
reporting years or 1 cost reporting year) results in a higher average 
Factor 3 than if the individual Factor 3s were divided by the number of 
cost reporting years, regardless of whether or not there is data (that 
is, 3 cost reporting years). For example, a hospital with no data for 
FY 2011 and a Factor 3 of 0.000051762 for FY 2012 and 0.000049852 for 
FY 2013 would have an average Factor 3 of 0.000050807 if averaged by 2 
but an average Factor 3 of only 0.000033871 if averaged by 3. After 
reviewing the data in Table 18 and the Medicare DSH Supplemental Data 
File, which were published in conjunction with the FY 2017 IPPS/LTCH 
PPS final rule, we concluded that the hospitals' observations are 
correct and that an adjustment is needed so that total uncompensated 
care payments do not exceed the estimate published in section 
V.G.4.b.(2) of the preamble of this proposed rule.
    Accordingly, to address the effects of averaging Factor 3s 
calculated for three separate fiscal years, we are proposing to apply a 
scaling factor to the Factor 3 values of all DSH eligible hospitals so 
that total uncompensated care payments are consistent with the 
estimated amount available to make uncompensated care payments for FY 
2018. Under this proposal, we would first compute the Factor 3 and 
uncompensated care payments for all hospitals that we anticipate 
qualifying for Medicare DSH payments in FY 2018. We would then divide 1 
(the expected sum of all eligible hospitals' Factor 3) by the actual 
sum of all eligible hospitals' Factor 3 values and multiply the 
quotient by each hospital's total uncompensated care payment to obtain 
scaled uncompensated care payment amounts whose sum is consistent with 
the estimate of the total amount available to make uncompensated care 
payments in section V.G.4.b.(2) of the preamble of this proposed rule. 
The hospital-specific uncompensated care amount would then be divided 
by a 3-year claims average to obtain the amount of the interim 
uncompensated care payment the hospital will receive for each claim. As 
an illustration of the calculation of the scaling factor, applying this 
proposal to the FY 2017 uncompensated care payments would have resulted 
in a scaling factor of 0.9992 (1/1.0008). We note that the FY 2017 
uncompensated care payments as calculated for the FY 2017 IPPS final 
rule exceeded the estimated amount by approximately $5 million due to 
the lack of a scaling factor.
    We are inviting public comments on our proposal to apply a scaling 
factor to all hospitals' Factor 3 values for FY 2018.
(5) Methodological Considerations for Incorporating Worksheet S-10 Data
     Definition of uncompensated care. In the FY 2014 
IPPS/LTCH PPS rulemaking, we considered three potential definitions of 
uncompensated care: Charity care; charity care + bad debt; and charity 
care + bad debt +

[[Page 19954]]

Medicaid shortfalls. As we explained in the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50634), we considered proposing to define the amount of 
uncompensated care for a hospital as the uncompensated care costs of 
that hospital and considered potential data sources for those costs. We 
examined the literature on uncompensated care and the concepts of 
uncompensated care used in various public and private programs, and 
considered input from stakeholders and public comments in various 
forums, including the national provider call that we held in January 
2013. Our review of the information from these sources indicated that 
there is some variation in how different States, provider 
organizations, and Federal programs define ``uncompensated care.'' 
However, a common theme of almost all these definitions is that they 
include both ``charity care'' and ``bad debt'' as components of 
``uncompensated care.'' Therefore, a definition that incorporates the 
most commonly used factors within uncompensated care as reported by 
stakeholders would include charity care costs and bad debt costs. 
Worksheet S-10 employs the definition of charity care plus non-Medicare 
bad debt. Specifically:
Cost of Charity Care (Line 23)
+ Cost of non-Medicare bad debt expanse (Line 29)
Cost of non-Medicare uncompensated care (Line 30)

Where:

 Cost of charity care = Cost of initial obligation of 
patients approved for charity care (line 21) minus partial payment 
by patients approved for charity care (line 22).
 Cost of non-Medicare bad debt expense = Cost to charge 
ratio (line 1) times non-Medicare and nonreimbursable bad debt 
expense (line 28).

    In the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25092), we 
proposed to adopt a definition of uncompensated care costs that 
included charity care and non-Medicare bad debt. We explained that we 
believe there are compelling arguments for excluding Medicaid 
shortfalls from the definition of uncompensated care, including the 
fact that several government agencies and key stakeholders do not 
consider Medicaid shortfalls in their definition of uncompensated care 
and that excluding Medicaid shortfalls from the uncompensated care 
definition allows Medicare uncompensated care payments to target 
hospitals that have a disproportionate share of uncompensated care for 
patients with no insurance coverage. Although we did not finalize the 
proposed definition of uncompensated care costs as part of the FY 2017 
rulemaking, we continue to believe a definition that incorporates the 
most commonly used factors within uncompensated care as reported by 
stakeholders would include charity care costs and non-Medicare bad debt 
costs, which correlates to Line 30 of Worksheet S-10. Therefore, we are 
again proposing that, for purposes of calculating Factor 3 and 
uncompensated care costs beginning in FY 2018, ``uncompensated care'' 
would be defined as the amount on line 30 of Worksheet S-10, which is 
the cost of charity care (Line 23) and the cost of non-Medicare bad 
debt (Line 29). We are inviting public comments on this proposal.
     Trims to apply to CCRs on Line 1 of Worksheet S-
10. As we noted in the FY 2017 IPPS/LTCH proposed and final rules (81 
FR 25093; 81 FR 56971), commenters have suggested that uncompensated 
care costs reported on Worksheet S-10 should be audited due to 
extremely high values consistently reported by some hospitals. In 
response to these comments, we have reviewed the Worksheet S-10 data 
and identified approximately 10 to 20 hospitals that have anomalous 
uncompensated care costs. We note that many of these hospitals are 
public hospitals, which can have charging practices that are distinct 
from other hospital types. We believe that, just as we apply trims to 
hospitals' CCRs to eliminate anomalies when calculating outlier 
payments for extraordinarily high cost cases (Sec.  412.84(h)(3)(ii)), 
it is appropriate to apply statistical trims to the CCRs on Worksheet 
S-10, Line 1 that are considered anomalies. Specifically, Sec.  
412.84(h)(3)(ii) states that the Medicare contractor may use a 
statewide CCR for hospitals whose operating or capital CCR is in excess 
of 3 standard deviations above the corresponding national geometric 
mean (that is, the CCR ``ceiling''). This mean is recalculated annually 
by CMS and published in the proposed and final IPPS rules each year. To 
control for data anomalies, in the FY 2017 rulemaking, we considered 
approaches that would trim hospitals' CCRs to ensure reasonable CCRs 
are used to convert charges to costs for purposes of determining 
uncompensated care costs.
    After considering the comments received in response to the FY 2017 
IPPS/LTCH PPS proposed rule, which were discussed in the FY 2017 IPPS/
LTCH final rule (81 FR 56971 through 56973), for FY 2018, we are 
proposing the following alternative methodology for trimming CCRs:
    Step 1: Remove Maryland hospitals. In addition, we will remove all-
inclusive rate providers, as they have charge structures that differ 
from other IPPS hospitals, and providers that did not report a CCR on 
Worksheet S-10, Line 1, and assign them the statewide average CCR in 
step 5 below.
    Step 2: For hospitals with multiple cost reports included in the 
2014 HCRIS data, (a) combine the amounts from Worksheet C, Part I, Line 
202, Column 3 from each cost report to calculate total costs, (b) 
combine the amounts from Worksheet C, Part I, Line 202, Column 8 from 
each cost report to calculate total charges, and (c) divide the total 
costs by the total charges to arrive at a recalculated CCR.
    Step 3: Calculate a CCR ``ceiling'' using the CCRs reported on 
Worksheet S-10, Line 1, from all IPPS hospitals that were not removed 
in Step 1 (including non-DSH eligible hospitals), or the recalculated 
CCR described in Step 2. The ceiling is calculated as 3 standard 
deviations above the national geometric mean CCR. This approach is 
consistent with our calculation of the CCR ceiling used for high-cost 
outliers. Remove all hospitals that exceed the ceiling so that these 
aberrant CCRs do not skew the calculation of the statewide average CCR. 
Based on the information currently available to us, this trim would 
remove 9 hospitals that have CCRs above the calculated ceiling of 
0.937.
    Step 4: Using the CCRs for the remaining hospitals in Step 3, 
determine the urban and rural statewide average CCRs using Line 1 of 
Worksheet S-10 for hospitals within each State (including non-DSH 
eligible hospitals), weighted by the sum of total inpatient discharges 
and outpatient visits from Worksheet S-3, Part I, Line 14, Column 14.
    Step 5: Assign the appropriate statewide average CCR (urban or 
rural) calculated in Step 4 to all hospitals with a CCR greater than 3 
standard deviations above the corresponding national geometric mean 
(that is, the CCR ``ceiling''), as well as to all-inclusive rate 
providers, and providers that did not report a CCR on Worksheet S-10, 
Line 1. The statewide average CCR would therefore be applied to 140 
hospitals, of which 14 did not report a CCR on Worksheet S-10, Line 1, 
9 had a CCR that exceeded the calculated ceiling of 0.937, and 117 are 
all-inclusive rate providers.
    After applying the applicable trims to a hospital's CCR as 
appropriate, we are proposing to calculate a hospital's uncompensated 
care costs as being

[[Page 19955]]

equal to Line 30, which is the sum of Line 23 and Line 29, as follows:

    Hospital Uncompensated Care Costs = Line 30 (Line 23 + Line 29), 
which is equal to--

[(Line 1 CCR (as adjusted, if applicable) x charity care line 20)-
(Payments received for charity care Line 22)]

+

[(Line 1 CCR (as adjusted, if applicable) x Non-Medicare and non-
reimbursable Bad Debt Line 28)].

    We are inviting public comments on our proposed trim methodology 
for FY 2018.
     Cost report revisions and Worksheet S-10 audits. 
While not directly relevant to our proposal to use FY 2014 Worksheet S-
10 data beginning in FY 2018, we note that as part of our ongoing 
quality control and data improvement measures to continue to improve 
the Worksheet S-10 data over time, we have made revisions to the cost 
report instructions and developed an audit process.
    With respect to the cost reporting instructions, on November 18, 
2016, we issued Transmittal 10 which updated the instructions for Form 
2552-10. Specifically, we updated the instructions in Section 4012 of 
Chapter 40 of the Provider Reimbursement Manual, Part II. The 
instructions clarify the reporting of charges for charity care. 
Transmittal 10 can be downloaded from the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2016-Transmittals-Items/R10P240.html.
    With respect to the audit process, in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 56964), we stated that we intended to provide 
standardized instructions to the MACs to guide them in determining when 
and how often a hospital's Worksheet S-10 should be reviewed. We 
indicated that we would not make the MACs' review protocol public as 
all CMS desk review and audit protocols are confidential and are for 
CMS and MAC use only. The instructions for the MACs are still under 
development and will be provided to the MACs as soon as possible. We 
refer readers to the FY 2017 IPPS/LTCH PPS final rule for a complete 
discussion concerning the issues that we are considering in developing 
the instructions that will be provided to the MACs. We expect that cost 
reports beginning in FY 2017 will be the first cost reports for which 
the Worksheet S-10 data will be subject to a desk review. We do not 
anticipate making any further modifications to the Worksheet S-10 
instructions at this time so that hospitals can begin to review and 
conform to the current instructions in Transmittal 10. Predictability 
is an important part of the process for reporting data on Worksheet S-
10. As a result, we believe it is reasonable to wait until the 
Worksheet S-10 data have been submitted, the audits have been 
performed, and the data are available for review before we consider 
making any further revisions to the Worksheet S-10 instructions.

H. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.  
412.108)

1. Background for the 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).) As discussed in section V.B.1. 
of the preamble of this proposed rule, the MDH program provisions at 
section 1886(d)(5)(G) of the Act will expire at the end of FY 2017. 
Beginning with discharges occurring on or after October 1, 2017, all 
hospitals that previously qualified for MDH status will be paid based 
on the Federal rate.
    Since the extension of the MDH program through FY 2012 provided by 
section 3124 of the Affordable Care Act, the MDH program had been 
extended by subsequent legislation as follows: 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). 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). 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). Section 205 of the 
MACRA (Pub. L. 114-10) extended the MDH program through 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); the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50022 through 50024); the August 2015 interim final rule 
with comment period (80 FR 49596); and the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 57054 through 57057).
b. Expiration of the MDH Program
    Because section 205 of the MACRA extended the MDH program through 
FY 2017 only, beginning October 1, 2017, the MDH program will no longer 
be in effect. Because the MDH program is not authorized by statute 
beyond September 30, 2017, beginning October 1, 2017, all hospitals 
that previously qualified for MDH status under section 1886(d)(5)(G) of 
the Act will no longer have MDH status and will be paid based on the 
IPPS Federal rate.
    When the MDH program was set to expire at the end of FY 2012, in 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405), we 
revised our sole community hospital (SCH) policies to allow MDHs to 
apply for SCH status in advance of the expiration of the MDH program 
and be paid as such under certain conditions. We codified these changes 
in the regulations at Sec.  412.92(b)(2)(i) and (b)(2)(v). 
Specifically, the existing regulations at Sec.  412.92(b)(2)(i) and 
(b)(2)(v) allow for an effective date of an approval of SCH status that 
is the day following the expiration date of the MDH program. We note 
that these same conditions apply to MDHs that intend to apply for SCH 
status with the expiration of the MDH program on September 30, 2017. 
Therefore, in order for an MDH to receive SCH status effective October 
1, 2017, the MDH must apply for SCH status at least 30 days before the 
expiration of the MDH program; that is, the MDH must apply for SCH 
status by September 1, 2017. The MDH also must request that, if 
approved as an SCH, the SCH status be effective with the expiration of 
the MDH program; that is, the MDH must request that the SCH status, if 
approved, be effective October 1, 2017, immediately after its MDH 
status expires with the expiration of the MDH program on September 30, 
2017. We emphasize that an MDH that applies for SCH status in 
anticipation of the expiration of the MDH program would not qualify for 
the October 1, 2017 effective date for SCH status if it does not apply 
by the September 1, 2017 deadline. If the MDH does not apply by the 
September 1, 2017 deadline, the hospital would instead be subject to 
the usual effective date for SCH classification; that is, 30 days after 
the date of CMS' written notification of approval as specified at Sec.  
412.92(b)(2)(i).
    We note that the regulations governing the MDH program are found

[[Page 19956]]

at Sec.  412.108 and the MDH program is also cited in the general 
payment rules in the regulations at Sec.  412.90. As stated earlier, 
under current law, the MDH program will expire at the end of FY 2017, 
which is already reflected in Sec.  412.108. As such, we are not 
proposing specific amendments to the regulations at Sec.  412.108 to 
reflect the expiration of the MDH program. However, it has come to our 
attention that, with the various extensions of the MDH program as noted 
earlier, we neglected to make conforming changes to the regulation text 
at Sec.  412.90. Therefore, we are proposing to revise the general 
payment rules under Sec.  412.90 to reflect the expiration of the MDH 
program. However, we are proposing that if the MDH program were to be 
extended by law, similar to how it was extended through FY 2013, by the 
ATRA (Pub. L. 112-240); through March 31, 2014, by the Pathway for SGR 
Reform Act of 2013 (Pub. L. 113-167); through March 31, 2015, by the 
PAMA (Pub. L. 113-93); and most recently through FY 2017, by the MACRA 
(Pub. L. 114-10), we would make conforming changes to the regulations 
governing the MDH program at Sec.  412.108(a)(1) and (c)(2)(iii) and 
the general payment rules at Sec.  412.90(j) to reflect such an 
extension of the MDH program. These conforming changes would only be 
made if the MDH program were to be extended by statute beyond September 
30, 2017.

I. Hospital Readmissions Reduction Program: Proposed Updates and 
Changes (Sec. Sec.  412.150 Through 412.154)

1. Statutory Basis for the Hospital Readmissions Reduction Program
    Section 3025 of the Affordable Care Act, as amended by section 
10309 of the Affordable Care Act, added section 1886(q) to the Act, 
which establishes the ``Hospital Readmissions Reduction Program'' 
effective for discharges from ``applicable hospitals'' beginning on or 
after October 1, 2012. Under the Hospital Readmissions Reduction 
Program, payments to applicable hospitals may be reduced to account for 
certain excess readmissions. We refer readers to section IV.E.1. of the 
FY 2016 IPPS/LTCH PPS final rule (80 FR 49530 through 49531) for a 
detailed discussion and additional information on of the statutory 
history of the Hospital Readmissions Reduction Program.
    On December 13, 2016, the 21st Century Cures Act (Pub. L. 114-255) 
was enacted. Section 15002 of that law added subparagraphs (D) and (E) 
to section 1886(q)(3) of the Act, which directs the Secretary to assign 
hospitals to peer groups, develop a methodology that allows for 
separate comparisons for hospitals within these groups, and allows for 
changes in the risk adjustment methodology. The 21st Century Cures Act 
also directs the Medicare Payment Advisory Commission (MedPAC) to 
conduct a review of overall hospital readmissions and whether such 
readmissions are related to any changes in outpatient and emergency 
services furnished. A report on the study is required to be submitted 
in the MedPAC's report to Congress no later than June 2018.
    Specifically, section 1886(q)(3)(D) of the Act directs the 
Secretary to develop a transitional methodology that accounts for the 
percentage of full-benefit dual eligible patients treated by a hospital 
to determine a hospital's payment adjustment factor. Section 
1886(q)(3)(D)(i) of the Act sets forth the requirement that the 
Secretary assign hospitals to groups and apply a methodology ``that 
allows for separate comparison of hospitals within each such group.'' 
This applies to discharges that occur during and after FY 2019 and 
before the application of section 1886(q)(3)(E)(i) of the Act, which 
allows the Secretary to take into account the recommendations in the 
reports required by the IMPACT Act (Pub. L. 113-185) related to risk 
adjustment and social risk factors. The first of two reports required 
in the IMPACT Act was released in December of 2016 (available at: 
https://aspe.hhs.gov/system/files/pdf/253971/ASPESESRTCfull.pdf), and 
the second report is required to be completed by October 2019.
    The hospital groups in section 1886(q)(3)(D)(ii) of the Act are 
described as being ``based on their overall proportion, of the 
inpatients who are entitled to, or enrolled for, benefits under 
Medicare Part A and who are full-benefit dual eligible individuals (as 
defined in section 1935(c)(6) [of the Act]).'' The Secretary is further 
required to consult with MedPAC when defining groups and may consider 
analysis done by MedPAC in preparation for its June 2013 report 
submitted to Congress. Section 1886(q)(3)(D)(iii) of the Act prevents 
the imposition of additional reporting requirements in order to carry 
out subparagraph (D). Section 1886(q)(3)(D)(iv) of the Act requires 
that the estimated total amount of reductions in payments using the 
methodology should equal the estimated total amount of reductions in 
payments if subparagraph (D) did not apply.
    Section 1886(q)(3)(E) of the Act outlines the considerations the 
Secretary may take into account with respect to the risk adjustment 
methodology. Section 1886(q)(3)(E)(i) of the Act allows the Secretary 
to take into account studies conducted and recommendations made by the 
Secretary under section 2(d)(1) of the IMPACT Act in the application of 
risk adjustment methodologies. This does not preclude the consideration 
of the use of groupings of hospitals. The Secretary is also allowed 
under section 1886(q)(3)(E)(ii) of the Act to consider the use of ``V'' 
or other ICD-related codes for removal of a readmission with respect to 
discharges occurring after FY 2018. Section 1886(q)(3)(E)(iii) of the 
Act outlines the considerations the Secretary may make in the removal 
of certain readmissions. For discharges occurring after FY 2018, the 
Secretary may consider the removal as a readmission of an admission 
that is classified within one or more of the following: Transplants; 
end-stage renal disease; burns, trauma; psychosis; or substance abuse.
2. Regulatory Background
    We refer readers to the following past final rules for detailed 
discussions of the regulatory background and descriptions of the 
current policies for the Hospital Readmissions Reduction Program: The 
FY 2012 IPPS/LTCH PPS final rule (76 FR 51660 through 51676); the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53374 through 53401); the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50649 through 50676); the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50024 through 50048); the FY 2016 IPPS/LTCH 
PPS final rule (80 FR 49530 through 49543); and the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 56973 through 56979). These policies describe the 
general framework for the implementation of the Hospital Readmissions 
Reduction Program, including: (1) The selection of and measures for the 
applicable conditions; (2) the calculation of the excess readmission 
ratio, which is used, in part, to calculate the readmissions adjustment 
factor; (3) the current calculation of the hospital readmission payment 
adjustment factor, specifically addressing the base operating DRG 
payment amount, aggregate payments for excess readmissions, and 
aggregate payments for all discharges; (4) the opportunity for 
hospitals to review and submit corrections using a process similar to 
what is currently used for posting results on Hospital Compare; (5) the 
adoption of an extraordinary circumstances exception policy to address 
hospitals that experience a disaster or other extraordinary 
circumstance; (6) the clarification that the public reporting of excess

[[Page 19957]]

readmission ratios will be posted on an annual basis to the Hospital 
Compare Web site as soon as is feasible following the preview period; 
and (7) the specification that the definition of ``applicable 
hospital'' does not include hospitals and hospital units excluded from 
the IPPS, such as LTCHs, cancer hospitals, children's hospitals, IRFs, 
IPFs, CAHs, and hospitals in Puerto Rico.
    We also have codified certain requirements of the Hospital 
Readmissions Reduction Program at 42 CFR 412.152 through 412.154.
3. 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.
4. Proposed Policies for the Hospital Readmissions Reduction Program
    In this proposed rule, we are proposing the following policies for 
the Hospital Readmissions Reduction Program: (1) The applicable time 
period for FY 2018; (2) the calculation of aggregate payments for 
excess readmissions for FY 2018; (3) changes to the payment adjustment 
factor in accordance with section 15002 of the 21st Century Cures Act 
for FY 2019; and (4) updates to the Extraordinary Circumstance 
Exception policy beginning in FY 2018 as related to extraordinary 
circumstances that occur on or after October 1, 2017. These proposals 
are described in more detail below.
5. Proposed Applicable Period for FY 2018
    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 is 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.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56974 through 
56975), for FY 2017, consistent with the definition specified at Sec.  
412.152, we established an ``applicable period'' for the Hospital 
Readmissions Reduction Program to be the 3-year period from July 1, 
2012 through June 30, 2015. In other words, the excess readmissions 
ratios and the payment adjustment (including aggregate payments for 
excess readmissions and aggregate payments for all discharges) for FY 
2017 are calculated using data from the 3-year time period of July 1, 
2012 through June 30, 2015.
    In this proposed rule, for FY 2018, consistent with the definition 
specified at Sec.  412.152, we are proposing that the ``applicable 
period'' for the Hospital Readmissions Reduction Program would be the 
3-year period from July 1, 2013 through June 30, 2016. In other words, 
we are proposing that the excess readmissions ratios and the payment 
adjustment (including aggregate payments for excess readmissions and 
aggregate payments for all discharges) for FY 2018 would be calculated 
using data from the 3-year time period of July 1, 2013 through June 30, 
2016.
    We are inviting public comment on this proposal.
6. Proposed Calculation of Aggregate Payments for Excess Readmissions 
for FY 2018
    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. For a detailed discussion on 
the methodology for the calculation of aggregate payments for excess 
readmissions, we refer readers to the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53387 through 53397). We also have codified the definition of 
``aggregate payments for excess readmissions'' and ``aggregate payments 
for all discharges,'' as well as a current methodology for calculating 
the numerator of the ratio (aggregate payments for excess readmissions) 
and the denominator of the ratio (aggregate payments for all 
discharges) at 42 CFR 412.152 through 412.154.
    The Hospital Readmissions Reduction Program currently includes the 
following six applicable conditions: Acute myocardial infarction (AMI); 
heart failure (HF); pneumonia (PN); total hip arthroplasty/total knee 
arthroplasty (THA/TKA); chronic obstructive pulmonary disease (COPD); 
and Coronary Artery Bypass Graft (CABG) Surgery.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56975 through 
56977), we adopted the methodology to include CABG in the calculation 
of the readmissions payment adjustment for FY 2017. Specifically, we 
discussed how the addition of CABG applicable conditions would be 
included in the calculation of the aggregate payments for excess 
readmissions (the numerator of the readmissions payment adjustment). We 
note that this policy did not alter our established methodology for 
calculating aggregate payments for all discharges (that is, the 
denominator of the ratio).
    When calculating the numerator (aggregate payments for excess 
readmissions), we determine the base operating DRG payments for the 
applicable period. To determine 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.
    For FY 2018, we are proposing to use MedPAR claims with discharge 
dates that are on or after July 1, 2013, and no later than June 30, 
2016, consistent with our historical use of a 3-year applicable period. 
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.
    In this proposed rule, for FY 2018, we are proposing to determine 
aggregate payments for excess readmissions and

[[Page 19958]]

aggregate payments for all discharges using data from MedPAR claims 
with discharge dates that are on or after July 1, 2013, and no later 
than June 30, 2016. However, we note that, for the purpose of modeling 
the proposed FY 2018 readmissions payment adjustment factors for this 
proposed rule, we used excess readmissions ratios for applicable 
hospitals from the FY 2017 Hospital Readmissions Reduction Program 
applicable period. For the FY 2018 IPPS/LTCH PPS final rule, applicable 
hospitals will have had the opportunity to review and correct data from 
the proposed FY 2018 applicable period of July 1, 2013 to June 30, 
2016, before they are made public under our policy regarding the 
preview and reporting of hospital-specific information, which we 
discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 
53401).
    In this proposed rule, for FY 2018, we are proposing to use MedPAR 
data from July 1, 2013 through June 30, 2016. Specifically, for this 
proposed rule, we are using the following MedPAR files:
     March 2014 update of the FY 2013 MedPAR file to identify 
claims within FY 2013 with discharges dates that are on or after July 
1, 2013;
     March 2015 update of the FY 2014 MedPAR file to identify 
claims within FY 2014;
     March 2016 update of the FY 2015 MedPAR file to identify 
claims within FY 2015;
     December 2016 update of the FY 2016 MedPAR file to 
identify claims within FY 2016 with discharge dates no later than June 
30, 2016.
    For the final rule, we are proposing to use the same MedPAR files 
as listed above for claims within FY 2013, FY 2014 and FY 2015, and for 
claims within FY 2016, we are proposing to use the March 2017 update of 
the FY 2016 MedPAR file.
    For a discussion of how we identified the applicable conditions to 
calculate the aggregate payments for excess readmissions for FY 2017, 
we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56975 
through 56977).
    Under our current methodology, in identifying the applicable 
conditions to calculate the aggregate payments for excess readmissions, 
we apply the same exclusions to the claims in the MedPAR file as are 
applied in the measure methodology for each of the applicable 
conditions. In this proposed rule, for FY 2018, we are proposing to 
continue to apply the same exclusions to the claims in the MedPAR file 
as we applied for FY 2017 for the AMI, HF, PN, THA/TKA, CABG and COPD 
applicable conditions. We refer readers to the FY 2016 IPPS/LTCH PPS 
and FY 2017 IPPS/LTCH PPS final rules (80 FR 49539; 81 FR 56976) for a 
list of these exclusions. Updates to these exclusions will be posted on 
the QualityNet Web site at: http://www.QualityNet.org > Hospital-
Inpatient > Claims-Based Measures > Readmission Measures > Measure 
Methodology.
    Furthermore, under our current methodology we only identify 
Medicare fee-for-service (FFS) claims that meet the criteria described 
above for each applicable condition to calculate the aggregate payments 
for excess readmissions (that is, claims paid for under Medicare Part 
C, Medicare Advantage, are not included in this calculation). This 
policy is 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 2018, we are proposing to continue to exclude 
admissions for patients enrolled in Medicare Advantage as identified in 
the Medicare Enrollment Database.
    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). As described above, the proposed 3-
year applicable period for FY 2018 of July 1, 2013 through June 30, 
2016 includes discharges occurring in four Federal FYs (FY 2013, FY 
2014, FY 2015, and FY 2016). Diagnoses and procedure codes for 
discharges occurring prior to October 1, 2015 were reported under the 
ICD-9-CM code set. Effective with discharges occurring on or after 
October 1, 2015 (FY 2016), diagnoses and procedure codes are reported 
under the ICD-10-CM and ICD-10-PCS code sets. Thus, for the proposed FY 
2018 applicable period, the discharge diagnoses for each applicable 
condition would be based on a list of specific ICD-9-CM or ICD-10-CM 
and ICD-10-PCS code sets, as applicable, for that condition.
    In this proposed rule, to identify the discharges for each 
applicable condition for FY 2018 to calculate the aggregate payments 
for excess readmissions for an individual hospital, we are proposing to 
identify each applicable condition, using, for FY 2013, FY 2014 and FY 
2015, the appropriate ICD-9-CM codes, and for FY 2016, the appropriate 
ICD-10-CM and ICD-10-PCS code sets. This proposal is consistent with 
our established policy for identifying the discharges for each 
applicable condition to calculate the aggregate payments for excess 
readmissions (76 FR 51673 through 51676). The ICD-9-CM codes for the 
AMI, HF, PN, THA/TKA, COPD, and CABG applicable conditions can be found 
on the QualityNet Web site at: http://www.QualityNet.org > Hospital-
Inpatient > Claims-Based Measures > Readmission Measures > Measure 
Methodology. For a complete list of the ICD-9-CM codes we are proposing 
to use to identify the applicable conditions, we refer readers to the 
following tables of the measure methodology reports on the QualityNet 
Web site:
     2016 Measure Updates: AMI, HF, Pneumonia, COPD, Stroke 
Readmission (AMI-Version 8.0, HF-Version 8.0, Pneumonia-Version 8.0, 
COPD-Version 4.0, and Stroke-Version 4.0: 2016 Condition-Specific 
Readmission Measures Updates and Specifications Report)--
    ++ Table D.1.1--ICD-9-CM Codes for AMI Cohort (page 79).
    ++ Table D.2.1--ICD-9-CM Codes for COPD Cohort (page 83).
    ++ Table D.3.1--ICD-9-CM Codes for Inclusion in HF Cohort (page 
89).
    ++ Table D.4.1--ICD-9-CM Codes for Pneumonia Cohort (page 94).
     2016 Measure Updates: THA/TKA and CABG Readmission (THA 
and/or TKA-Version 4.0, CABG-Version 2.0: 2016 Procedure-Specific 
Readmission Measures Updates and Specifications Report)--
    ++ Table D.1.1--ICD-9-CM Codes Used to Identify Eligible CABG 
Procedures (page 49).
    ++ Table D.2.1--ICD-9-CM Codes Used to Identify Eligible THA/TKA 
Procedures (page 58).
    A detailed list of the condition-specific and procedure-specific 
reports detailing the ICD-10-CM and ICD-10-PCS code sets we are 
proposing to use to identify the applicable conditions for the period 
from October 1, 2015 to June 30, 2016 is not yet publicly available. 
However, we anticipate the 2017 AMI, HF, Pneumonia, COPD, Stroke, THA/
TKA, and CABG Readmission Measures Updates and Specifications Report, 
will be available by mid-April and can be accessed at: http://www.QualityNet.org > Hospital-Inpatient > Claims-Based Measures > 
Readmission Measures > Measure Methodology. We are currently making a 
list of the ICD-10-CM and ICD-10-PCS code sets used to identify the 
applicable conditions for this proposed rule, titled ICD-10-CM Codes 
for Inclusion in the Hospital Readmissions Reduction Program Applicable 
Conditions for FY 2018 Proposed Rule, available on the Hospital 
Readmissions Reduction Program page on the CMS Web site at: https://

[[Page 19959]]

www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/Readmissions-Reduction-Program.html.
    In summary, for FY 2018, we are proposing to calculate aggregate 
payments for excess readmissions, using MedPAR claims from July 1, 2013 
through June 30, 2016, to identify applicable conditions based on the 
same ICD-9-CM codes or ICD-10-CM and ICD-10-PCS code sets, as 
applicable, used to identify the conditions for the readmissions 
measures, and to apply the proposed exclusions for the types of 
admissions (as previously discussed). We are not proposing any changes 
to our existing methodology for calculating ``aggregate payments for 
excess readmissions'' for each hospital (the numerator of the ratio). 
Specifically, to calculate aggregate payments for excess readmissions 
for each hospital, we are proposing 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, THA/TKA, and CABG) 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 
six applicable conditions, we are proposing to sum the base operating 
DRG payments amounts by each condition, resulting in six summed 
amounts, one amount for each of the six applicable conditions. We are 
proposing 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 are proposing 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 six 
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 are not proposing any changes to our existing methodology 
to calculate ``aggregate payments for all discharges'' (the denominator 
of the ratio).
    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 and the floor adjustment factor is 
codified at Sec.  412.154(c)(2) of the regulations. Section 
1886(q)(3)(C) of the Act specifies the floor adjustment factor at 0.97 
for FY 2015 and subsequent fiscal years.
    Consistent with section 1886(q)(3) of the Act, codified at Sec.  
412.154(c)(2), for FY 2018, the adjustment factor is either the greater 
of the ratio or the floor adjustment factor of 0.97. Under our 
established policy, the ratio is rounded to the fourth decimal place. 
In other words, for FY 2018, a hospital subject to the Hospital 
Readmissions Reduction Program would have an adjustment factor that is 
between 1.0 (no reduction) and 0.9700 (greatest possible reduction).
    We are inviting public comment on these proposals.
7. Background and Current Payment Adjustment Methodology
a. Background
    As described above, section 1886(q)(3)(D) of the Act requires the 
Secretary to group hospitals and apply a methodology that allows for 
separate comparisons of hospitals within groups in determining a 
hospital's adjustment factor for payments applied to discharges 
beginning in FY 2019.
b. Current Payment Adjustment Methodology
    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 at that time addressed the calculation of the 
hospital readmissions payment adjustment factor. 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.
    Consistent with section 1886(q)(3)(C) of the Act, codified at Sec.  
412.154(c)(2), for FY 2015 and subsequent years, the adjustment factor 
is either the greater of the ratio or the floor adjustment factor of 
0.9700. In other words, a hospital subject to the Hospital Readmissions 
Reduction Program will have an adjustment factor that is between 1.0000 
(no reduction) and 0.9700 (greatest possible reduction). Under our 
established policy, the ratio is rounded to the fourth decimal place.
8. Provisions for the Proposed Payment Adjustment Methodology for FY 
2019: Proposed Methodology for Calculating the Proportion of Dual 
Eligible Patients
a. Background
    As described above, section 1886(q)(3)(D) of the Act requires the 
Secretary to group hospitals and apply a methodology that allows for 
separate comparisons of hospitals within groups in determining a 
hospital's adjustment factor for payments of discharges beginning in FY 
2019. Furthermore, section 1886(q)(3)(D)(ii) of the Act directs the 
Secretary to define groups of hospitals, based on their overall 
proportion, of the inpatients who are entitled to, or enrolled for, 
benefits under part A, and who are full-benefit dual eligible 
individuals (as defined in section 1935(c)(6) of the Act).\38\ Under 
these statutory requirements, hospitals are grouped based on the 
proportion or ratio of full-benefit dual eligible patients (numerator) 
to the hospital's Medicare inpatient stays (denominator). The Act 
specifies that in defining groups, the Secretary shall consult the 
MedPAC and may consider the analysis done by MedPAC in preparing the 
portion of its

[[Page 19960]]

report submitted to Congress in June 2013 relating to readmissions.
---------------------------------------------------------------------------

    \38\ Section 1935(c)(6)(A) of the Act defines ``full-benefit 
dual eligible individual'' as, for a State for a month, an 
individual who--(i) has coverage for the month for covered part D 
drugs under a prescription drug plan under part D of title XVIII, or 
under an MA-PD plan under part C of such title; and (ii) is 
determined eligible by the State for medical assistance for full 
benefits under this title for such month under section 
1902(a)(10)(A) or 1902(a)(10)(C) [of the Act], by reason of section 
1902(f) [of the Act], or under any other category of eligibility for 
medical assistance for full benefits under this title, as determined 
by the Secretary.
---------------------------------------------------------------------------

b. Proposed Data Sources Used To Determine Dual Eligibility
    In this proposed rule, we are proposing to identify full-benefit 
dual status (numerator) using dual eligibility status data where the 
original data source is the State Medicare Modernization Act (MMA) file 
of dual eligibility which States submit to CMS monthly. The State MMA 
file is considered the most current and most accurate source of data 
for identifying dual eligible beneficiaries since it is also used for 
operational purposes related to the administration of Part D benefits. 
Under our proposal, an individual would be counted as a full-benefit 
dual patient if the beneficiary was identified as full-benefit dual 
status in the State MMA files for the month he/she was discharged from 
the hospital.
    We are inviting public comment on this proposal.
    For this proposed rule, we considered two alternative definitions 
of total number of Medicare patients (denominator) that could be used 
to calculate each hospital's proportion of dual eligible patients. We 
are proposing to define the proportion of full-benefit dual eligible 
beneficiaries as the proportion of dual eligible patients among all 
Medicare FFS and Medicare Advantage stays. This is our preferred 
approach because using the proportion of dual eligible patients 
calculated among all Medicare FFS and managed care patients more 
accurately represents the proportion of dual eligible patients served 
by the hospital, particularly for hospitals in States with high managed 
care penetration rates. For example, Hospital A located in Arizona has 
a high managed care penetration rate. When stratified based on the 
proportion of dual eligibles, calculated among Medicare FFS and managed 
care patients, Hospital A was assigned to the top quintile of 
proportion of dual eligibles and its payment adjustment calculated 
based on its ERR relative to the threshold for the top quintile. When 
stratified based on the proportion of dual eligible among only Medicare 
FFS patients, Hospital A was assigned to the second quintile and its 
payment adjustment calculated relative to the threshold of the second 
quintile. Its classification when managed care patients are included 
more accurately identifies the social risk of the patients Hospital A 
serves, compared to its classification if only the FFS population is 
included.
    However, because the Hospital Readmissions Reduction Program 
payment adjustment is only applied to Medicare FFS payments, and is 
based on excess readmissions among Medicare FFS patients only, we are 
including an alternative to define the proportion of full-benefit dual 
eligible beneficiaries as only Medicare FFS stays. Under both 
approaches, we are proposing to use the MedPAR files, the same data 
source used to calculate the payment adjustment factors, to identify 
total hospital stays as this is the best available claims data that is 
readily publicly available. However, in developing our proposal, we 
also considered using other data sources such as the CMS integrated 
data repository (IDR), which may incorporate managed care claims more 
consistently to calculate total hospital stays, but it is currently not 
readily available to the public. We are inviting stakeholder input on 
the most appropriate data source to identify total hospital stays and 
whether such stays should include all Medicare FFS and Medicare 
Advantage stays or only Medicare FFS stays.
    We are inviting public comment on our preferred proposals and 
alternative considerations.
c. Proposed Data Period Used To Define Dual Eligibility
    Consistent with the requirement of the statute, we are proposing to 
group or stratify hospitals based on the proportion of full-benefit 
dual eligible patients determined under the proposals discussed above 
and are proposing to define the proportion of full-benefit dual 
eligible beneficiaries as the number of dual eligible patients 
discharged during the 3-year applicable period under the Hospital 
Readmissions Reduction Program. For this proposed rule, we considered 
two alternatives for the data period used to define dual eligibility, a 
3-year period corresponding to the performance period, and a 1-year 
period, which would be calculated over the most recent year for which 
complete data is available.
    While both data periods would include the most recently available 
data to define dual eligibility, our proposal to use a 3-year period 
accounts for the influence of social risk factors on the excess 
readmissions ratio (ERR) because the proportion of dual eligible 
patients is measured over the full period when they influenced the 
likelihood of excess readmissions. However, the most recent 1-year 
period would capture the most recent population served by the hospital 
and may enable a more accurate stratification to calibrate the impact 
of payment adjustments to the proportion of dual eligible patients that 
the hospital currently serves.
    We are inviting public comment on our preferred proposal and 
alternative considerations.
9. Provisions for the Proposed Payment Adjustment Methodology for FY 
2019: Proposed Methodology for Assigning Hospitals to Peer Groups
    For this proposed rule, we considered three alternative 
methodologies for assigning hospitals to peer groups. For the reasons 
discussed below, our preferred approach is to stratify hospitals into 
quintiles (five peer groups). However, we are also seeking public 
comment on stratifying hospitals into two and 10 peer groups.
    To understand the impact on payment adjustments of stratifying 
hospitals into different number of peer groups, we conducted an 
analysis that estimated payment adjustments when stratifying hospitals 
into two, five (quintiles), or 10 (deciles) peer groups. Two and 10 
peer groups were considered to align with previous research conducted 
by MedPAC and ASPE that assessed impacts from stratifying hospitals 
into two or 10 groups. MedPAC's analysis stratified hospitals into 10 
peer groups when setting the target rate used to compare hospital 
performance. ASPE's analysis stratified hospitals into two and 10 peer 
groups to calculate payment adjustments. Our analysis showed that using 
five peer groups allows for more precisely defined peer groups than is 
possible with a grouping of two, while ensuring that the number of 
hospitals is sufficient to represent a peer group, even for measures, 
like CABG, in which only a minority of hospitals are subject to a 
payment adjustment.
    We note, as the number of groupings increase, hospitals became more 
similar within their peer groups with respect to proportion of dual 
eligible patients in their patient population. Hence, payment 
adjustments are more closely related to the proportion of dual 
eligibles, and to the possible influence on the likelihood of 
readmission resulting from small variations in patient populations. We 
also observed that increasing the number of peer groups also increases 
the likelihood that hospitals with similar exposure to dual eligible 
patients will be compared to different thresholds in the payment 
adjustment formula. Deciles cover a narrow range of dual eligible 
patient proportions in each peer group, so small differences in 
proportion are likely to result in differences in peer group assignment 
and corresponding comparison thresholds used in the payment adjustment 
formula. This

[[Page 19961]]

problem is compounded by the small number of hospitals in deciles. When 
the number of hospitals is small, peer group thresholds or 
distributions and the resulting payment adjustments are less 
predictable.
    Stratifying hospitals into two peer groups is a simpler method and 
reduces the likelihood that similar hospitals are assigned different 
payment adjustments. However, this approach yields peer groups with a 
more heterogeneous mix of hospitals assigned to each group and weakens 
the relationship between the payment adjustment and the hospital's 
patient population. When the impact on payments of different peer group 
definitions was tested using the various methods of incorporating 
stratification into the payment formula, we found a substantial 
reduction in penalties (measured as the share of payment adjustments as 
a percentage of total payments) to safety-net hospitals, defined as 
hospitals in the highest quintile for disproportionate share (DSH) 
payments, from stratification into quintiles compared to stratification 
into two groups. Furthermore, our analysis found a similar impact on 
the share of total payments borne as payment adjustments by safety-net 
hospitals from stratifying hospitals into quintiles and deciles, 
suggesting that the benefit to safety-net hospitals from increasing the 
number of strata would be small. For example, using the preferred 
modified payment formula, proposed below, across the current set of six 
conditions, we found that for safety-net hospitals, payment adjustment 
as a proportion of total payments decreased from a baseline of 0.64 
percent to 0.59 percent with two groups, 0.55 percent with quintiles 
and 0.54 percent with deciles.
    Based on the analysis described above, we are proposing to stratify 
hospitals into quintiles (five peer groups) because it creates peer 
groups that accurately reflect the relationship between the proportion 
of dual eligibles in the hospital's population without the disadvantage 
of establishing a larger number of peer groups.
    We are inviting public comment on our preferred proposal and 
alternative considerations.
10. Provisions for the Proposed Payment Adjustment Methodology for FY 
2019: Proposed Payment Adjustment Formula Calculation Methodology
a. Background
    As described above, section 1886(q)(3)(D)(iv) of the Act requires 
the Secretary to design the methodology to implement this subparagraph 
so that the estimated total amount of Medicare savings under this 
subsection (stratified methodology) equals the estimated total amount 
of Medicare savings that would otherwise occur under this subsection 
(current methodology) if this subparagraph did not apply (that is, 
maintain budget neutrality).
    We analyzed several modifications of the payment adjustment formula 
to assess payment reductions based on a hospital's performance compared 
to performance of other hospitals in its peer group. The current 
readmissions payment adjustment can be written as
[GRAPHIC] [TIFF OMITTED] TP28AP17.000

where dx is AMI, HF, pneumonia, COPD, THA/TKA or CABG. In our analyses, 
we modified the payment adjustment formula by replacing the current 
threshold ERR of 1.0000 with a peer group specific threshold.
---------------------------------------------------------------------------

    \39\ ``Payment'' refers to the base operating DRG payment.
---------------------------------------------------------------------------

    In adopting a methodology for achieving budget neutrality, our 
priority is to adopt a simplified and well-known metric that allows us 
to be more transparent in our methodology and reduces the penalty on 
safety-net hospitals, while not disproportionality increasing the 
penalty to non-safety-net hospitals. In developing policy options to 
implement the budget neutrality requirement, we analyzed the following 
alternatives to evaluate the financial impacts:
     Using the median ERR for the hospital's peer group in 
place of 1.0000 in the payment adjustment formula and applying a 
uniform modifier to maintain budget neutrality;
     Using the mean ERR for the hospital's peer group in place 
of 1.0000 in the payment adjustment formula and applying a uniform 
modifier to maintain budget neutrality;
     Using the ``budget neutralizing'' ERR for each peer group 
in place of 1.0000 in the payment adjustment formula. The budget 
neutralizing ERR is defined as the ERR corresponding to the percentile 
(for example, 52nd) of the peer group distributions that would maintain 
budget neutrality for each peer group; and
     Using a standardized ERR for each individual hospital's 
ERR in place of the hospital's current calculated ERR and applying a 
uniform modifier to maintain budget neutrality. Each hospital's ERR is 
transformed to create a distribution of ERRs within each stratum with 
the same mean and standard deviation as the original mean and standard 
deviation across all hospitals.
b. Proposals
    In this proposed rule, we are discussing four alternative budget 
neutral methodologies for calculating the payment adjustment factor. 
Our preferred approach is assessing performance compared to the peer 
group median ERR, rather than the current threshold of 1.0000, and 
scaling hospital payment adjustments by a neutrality modifier. However, 
we are seeking public comment on three additional approaches--using the 
mean ERR plus a neutrality modifier, a budget neutralizing ERR, and a 
standardized ERR plus a neutrality modifier.
(1) Median ERR Plus a Neutrality Modifier
    In this proposed rule, our preferred approach is using the median 
ERR plus a neutrality modifier. We would use the median ERR for the 
hospital's peer group in place of 1.0000, which is the approximate mean 
and median of the baseline distribution, in the current payment 
adjustment formula. The payment adjustment formula would then be:
[GRAPHIC] [TIFF OMITTED] TP28AP17.001


[[Page 19962]]


    The payment reduction (1-P) resulting from use of the median ERR 
for the peer group is scaled by a neutrality modifier (NMM) 
to achieve budget neutrality. To calculate the neutrality modifier, we 
estimate total Medicare savings across all hospitals under the current 
method and under the proposed stratified method, in the absence of a 
modifier. We then calculate a multiplicative factor that, when applied 
to each hospital's adjustment calculated using the stratified method, 
would equate total Medicare savings from that method to total Medicare 
savings under the current method. Total Medicare savings and the 
neutrality modifier will be calculated using the same payment data. 
These data will consist of the most recently available full year of 
MedPAR data. For example, if the payment reduction for a hospital (1-P) 
equals 0.00748 when using the median threshold, then under the median 
plus neutrality modifier method it would equal NM*0.00748 = 0.9545 * 
0.00748 = 0.00714, where the neutrality modifier was equal to 0.9545. 
Thus, the hospital's payment adjustment factor (P) would equal 0.9925 
(1-0.00748) in the absence of the neutrality modifier, and 0.9929 (1-
0.00714) when the modifier is added.
(2) Mean ERR Plus a Neutrality Modifier
    We also analyzed the use of the mean ERR plus a neutrality modifier 
to calculate the readmissions adjustment factor. Just like the median 
ERR plus neutrality modifier approach mentioned above, the mean ERR for 
the hospital's peer group would be used in place of 1.0000 in the 
payment adjustment formula. The payment adjustment formula would then 
be:
[GRAPHIC] [TIFF OMITTED] TP28AP17.002

(3) Budget Neutralizing ERR
    We also analyzed using a budget neutralizing ERR in which penalties 
are assessed based on the difference between the hospital's ERR and the 
budget neutralizing ERR. The payment adjustment formula would be:
[GRAPHIC] [TIFF OMITTED] TP28AP17.003

(4) Standardized ERR Plus a Neutrality Modifier
    We also analyzed using a standardized ERR in which penalties are 
assessed by determining the mean and standard deviation of the ERRs 
across all hospitals. The payment adjustment formula would be 
calculated by dividing hospitals into strata based on a hospital's 
proportion of dual eligible patients. The current ERRs would then be 
transformed to create a new standardized distribution of ERRs within 
each stratum with the same mean and standard deviation as the original 
mean and standard deviation across all hospitals.
[GRAPHIC] [TIFF OMITTED] TP28AP17.004

where Sp(dx) and [mu]p(dx) are the standard deviation and mean of the 
current ERR distribution for a condition (dx), and Sp(dx) and [mu]p(dx) 
are the standard deviation and mean of the peer group ERR distribution 
for that dx. The standardized ERRs has a mean of 1 and a standard 
deviation equal to the standard deviation of ERRs across all hospitals 
in the peer group for that condition. The standardized ERRs are 
compared to 1.0000 in the payment adjustment formula to determine 
excess readmissions. The payment reduction (1-P) resulting from use of 
the standardized ERR is then scaled by a neutrality modifier 
(NMS) to achieve budget neutrality.
c. Analysis
    As mentioned above, in adopting a methodology for achieving budget 
neutrality, our priority is to adopt a simplified and well-known metric 
that allows us to be more transparent in our methodology and reduces 
the penalty on safety-net hospitals, while not disproportionality 
increasing the penalty to non-safety-net hospitals. To assess the 
expected impact on hospital payment adjustments resulting from the 
changes to the formula, we simulated hospitals' readmission adjustment 
factors under different stratified thresholds. Readmissions adjustment 
factors were calculated using total base operating DRG payment amounts 
for each hospital as well as total base DRG payment amounts for each of 
the six measure cohorts (AMI, HF, pneumonia, COPD, CABG, THA/TKA) 
included in the FY 2018 program. We used DRG payment information for 
the period July 1, 2012 through June 30, 2015. Furthermore, to estimate 
the dollar amount of the penalty and the share of payments the penalty 
represents, we used total base operating DRG payments among Medicare 
FFS claims from the FY 2015 MedPAR data file.
    All four methods support the agency's efforts to reduce the payment 
adjustment for safety-net hospitals. We are proposing to use the median 
ERR plus a neutrality modifier because it creates a standard where a 
hospital's ERR is subject to payment reduction when a hospital's 
performance as measured by the ERR is worse than that of half the other 
hospitals in its peer group. The median ERR plus neutrality modifier is 
preferred to the mean ERR plus neutrality modifier because the median 
represents a consistent standard (that is, 50th percentile) for the 
hospital's rank within its peer group, while the rank corresponding to 
the mean changes between years, cohorts and peer groups. The median ERR 
plus neutrality modifier substantially reduces the penalty as a share 
of total payments (from 0.64 percent to 0.55 percent with quintile peer 
groups) and penalty per discharge (from $157 to $135) for safety-net 
hospitals while not disproportionately increasing the payment reduction 
amount for non-safety-net hospitals (from 0.61 percent

[[Page 19963]]

to 0.63 percent as share of total payments). The median ERR plus 
neutrality modifier is also preferred because it achieves more precise 
budget neutrality than the budget neutralizing ERR. Below we show the 
estimated total Medicare savings under the current and stratified 
methodology used to assess budget neutrality.

----------------------------------------------------------------------------------------------------------------
                                                                                                    Percentage
                                                                                    Difference      difference
                                                                Estimated total       between         between
                            Method                              medicare savings  stratified and  stratified and
                                                                                      current         current
                                                                                    methodology     methodology
----------------------------------------------------------------------------------------------------------------
Current methodology..........................................       $532,948,318             N/A             N/A
Mean plus neutrality modifier (neutrality modifier=1.0135            532,949,006            $688           <0.00
 when using quintiles).......................................
Median plus neutrality modifier (neutrality modifier=0.9546          532,946,272        ($2,046)           <0.00
 when using quintiles).......................................
Budget neutralizing ERR......................................        533,199,304         250,985            0.05
Standardized ERR plus neutrality modifier (neutrality                532,948,288           ($30)           <0.00
 modifier=0.9710 when using quintiles).......................
----------------------------------------------------------------------------------------------------------------
Source: FY 2017 Hospital Readmissions Reduction Program Final Rule Results. Results are based on July 1, 2012,
  through June 30, 2015, discharges among subsection (d) and Maryland hospitals only. Although data from all
  subsection (d) and Maryland hospitals are used in calculations of each hospital's Excess Readmission Ratio
  (ERR), this table does not include results for Maryland hospitals. Hospital Characteristics are based on the
  FY 2017 final rule Impact File. Hospitals are stratified into quintiles based on the proportion of dual-
  eligible beneficiaries among Medicare fee-for-service and managed care patients discharged between July 1,
  2012, through June 30, 2015.

    When we analyzed the other options, we found that the mean 
threshold permits a higher standard to be set if hospitals in the peer 
group have performance well above the midpoint but not far below, or a 
lower standard if hospitals are more likely to have very high rates. In 
our testing, the mean plus modifier resulted in lower penalties for 
safety-net hospitals (0.52 percent as a share of total payments 
compared to 0.55 percent for the median plus modifier). However, our 
preferred approach of the median is based on the judgment that the 
standard reflected by the threshold should not be affected by hospitals 
with unusually strong or weak performance in the peer group. Like the 
median, the budget neutralizing ERR threshold approach imposes a 
consistent rank-based standard across peer groups. However, this method 
is not preferred since it is more complex, less intuitive and results 
in greater divergence between total payment adjustments under the 
stratified and current methodologies than approaches using a neutrality 
modifier (differing from the current methodology by approximately 0.05 
percent of total payments when simulated with quintile peer groups). 
The median uses the original distribution of hospital ERR estimates, 
based on their relationship to a national standard, and represents the 
most precise possible measures of their performance under that 
standard. Using a standardized ERR within each peer group compares a 
hospital's performance to other hospitals in the peer group. In 
contrast, using the mean or median threshold adjusts penalties based on 
a hospital's relative performance within the peer group, but the 
performance indicator of the ERR retains the comparison to the mean 
performance of all hospitals across all peer groups. However, comparing 
the ERR to the mean or median for each peer group is a more 
straightforward methodology than re-standardizing ERRs. The median is 
preferred to the standardized ERR because, as with the budget 
neutralizing ERR, the median is less complex and more intuitive. Using 
a less complex and well-known metric, will create a more transparent 
methodology since it will be easier for hospitals and other 
stakeholders to replicate the calculation of the median ERRs.
    The impact of the proposed changes to the payment adjustment 
formula for the budget neutral considered methods, by peer group 
options, for safety-net and non-safety-net hospitals is shown in the 
table below. The table includes three penalty metrics: Average payment 
reduction, total Medicare savings, and share of payment adjustments as 
a percentage of total payments. The average payment reduction shows the 
average reduction in Medicare DRG payments for safety-net and non-
safety-net hospitals. The total Medicare savings column shows the total 
estimated penalties borne by safety-net and non-safety-net hospitals 
under each approach. Since the payment reduction is applied to 
hospitals' base DRG payments, hospitals with more discharges will 
contribute a larger amount of Medicare savings to the group total of 
Medicare savings. Furthermore, since there are fewer safety-net than 
non-safety-net hospitals, as safety-net is defined as hospitals in the 
top quintile of DSH patient percentage, the total Medicare savings for 
non-safety-net hospitals are inherently much larger than for safety-net 
hospitals. Therefore, to compare the financial impact of the program on 
hospitals in each group we calculated the payment adjustment as a 
proportion of DRG payments. Using this metric allows comparison across 
the different methodologies where the total base operating DRG payments 
are different between different groups of hospitals and is a more 
accurate indication of the financial impact on the group. For example, 
under the current methodology, the payment adjustment as a proportion 
of all DRG payments among safety-net hospitals is 0.64 percent.

[[Page 19964]]



Comparison of Penalty Metrics by Threshold Methods and Peer Group Options for All Hospitals, Safety-Net, and Non-
                                              Safety-Net Hospitals
----------------------------------------------------------------------------------------------------------------
                                                                                                      Payment
                                                                   Average                         adjustment as
                                                                   payment       Total Medicare    a proportion
   Stratification approach and payment formula methodology     reduction  (1-       savings         of all DRG
                                                                   P) \a\                            payments
                                                                  (percent)                          (percent)
----------------------------------------------------------------------------------------------------------------
Current methodology:
    Safety-net hospitals.....................................            0.62       $109,142,525            0.64
    Non-safety-net hospitals.................................            0.61        423,805,793            0.61
----------------------------------------------------------------------------------------------------------------
            Approach 1: Two equal peer groups based on the proportion of dual-eligible beneficiaries
----------------------------------------------------------------------------------------------------------------
Median plus neutrality modifier (neutrality modifier =
 0.9558):
    Safety-net hospitals.....................................            0.56        100,205,115            0.59
    Non-safety-net hospitals.................................            0.61        432,741,958            0.62
Mean plus neutrality modifier (neutrality modifier = 1.0191):
    Safety-net hospitals.....................................            0.54         97,837,278            0.57
    Non-safety-net hospitals.................................            0.61        435,112,491            0.63
Budget neutralizing ERR:
    Safety-net hospitals.....................................            0.55         98,208,670            0.58
    Non-safety-net hospitals.................................            0.61        435,216,961            0.63
Standardized ERR plus neutrality modifier (neutrality
 modifier = 0.9796):
    Safety-net hospitals.....................................            0.55         98,468,430            0.58
    Non-safety-net hospitals.................................            0.61        434,478,852            0.63
----------------------------------------------------------------------------------------------------------------
                  Approach 2: Quintiles based on the proportion of dual-eligible beneficiaries
----------------------------------------------------------------------------------------------------------------
Median plus neutrality modifier (neutrality modifier =
 0.9546):
    Safety-net hospitals.....................................            0.52         93,878,536            0.55
    Non-safety-net hospitals.................................            0.62        439,067,736            0.63
Mean plus neutrality modifier (neutrality modifier = 1.0135):
    Safety-net hospitals.....................................            0.49         89,182,424            0.52
    Non-safety-net hospitals.................................            0.62        443,766,582            0.64
Budget neutralizing ERR:
    Safety-net hospitals.....................................            0.49         88,510,157            0.52
    Non-safety-net hospitals.................................            0.62        444,689,147            0.64
Standardized ERR plus neutrality modifier (neutrality
 modifier = 0.9710):
    Safety-net hospitals.....................................            0.50         91,686,964            0.54
    Non-safety-net hospitals.................................            0.62        441,261,324            0.64
----------------------------------------------------------------------------------------------------------------
                   Approach 3: Deciles based on the proportion of dual-eligible beneficiaries
----------------------------------------------------------------------------------------------------------------
Median plus neutrality modifier (neutrality modifier =
 0.9555):
    Safety-net hospitals.....................................            0.51         91,881,047            0.54
    Non-safety-net hospitals.................................            0.62        441,068,999            0.64
Mean plus neutrality modifier (neutrality modifier = 1.0148):
    Safety-net hospitals.....................................            0.48         87,289,962            0.51
    Non-safety-net hospitals.................................            0.62        445,653,065            0.64
Budget neutralizing ERR:
    Safety-net hospitals.....................................            0.47         86,671,374            0.51
    Non-safety-net hospitals.................................            0.62        446,299,280            0.64
Standardized ERR plus neutrality modifier (neutrality
 modifier = 0.9713):
    Safety-net hospitals.....................................            0.49         90,058,433            0.53
    Non-safety-net hospitals.................................            0.62        442,888,696            0.64
----------------------------------------------------------------------------------------------------------------
Notes: Results based on July 1, 2012 through June 30, 2015 discharges among subsection (d) and Maryland
  hospitals only. Although data from all subsection (d) and Maryland hospitals are used in calculations of each
  hospital's ERR, this table does not include results for Maryland hospitals. Hospitals are stratified based on
  the proportion of duals calculated among Medicare FFS and managed care patients for the FY 2017 performance
  period. Safety-net hospitals are defined as hospitals in the top quintile of DSH patient percentage. DSH
  patient percentage was calculated among all hospitals with a positive DSH value (including hospitals not
  eligible for DSH payments). a. The payment reduction shows what percentage of DRG payments hospitals will lose
  as a result of the program. This is slightly different than the adjustment factor that CMS applies, which is 1
  minus the number reported here (that is, ranges from 0.97 to 1).
b. Total Medicare savings is estimated by multiplying the payment reduction by total base operating DRG payments
  from July 1, 2014 through June 30, 2015.
c. The group share of payment adjustments as a percentage of all DRG payments is calculated as the sum of total
  Medicare savings for the group of hospitals (that is, safety-net hospitals or non-safety-net hospitals)
  divided by total base operating DRG payments from July 1, 2014 through June 30, 2015 for the group of
  hospitals.

    Our analysis also assesses the impact of the proposed changes to 
the payment adjustment formula on additional groups of hospitals. 
Variation in the impact of the proposed changes by hospital 
characteristics on the share of payment adjustments as a percentage of 
all DRG payments for the FY 2019 Hospital Readmissions Reduction 
Program, is shown in the table below. The table is based on results 
when hospitals are stratified into quintiles

[[Page 19965]]

based on the proportion of dual eligible beneficiaries among Medicare 
FFS and managed care patients discharged between July 1, 2012, through 
June 30, 2015, our preferred approaches. The table shows the average 
share of payment adjustments as a percentage of all DRG payments for 
each group of hospitals. The group average is calculated as the sum of 
penalties for all hospitals with that characteristic over the sum of 
all DRG payments for those hospitals between July 1, 2014 and June 30, 
2015. For example, under the current methodology, the average share of 
payment adjustments as a percentage of all DRG payments for urban 
hospitals is 0.61 percent. This means that total penalties for all 
urban hospitals is 0.61 percent of total payments for urban hospitals 
(that is the ratio of total penalties to total DRG payments is 0.61 
percent). This metric allows us to compare the financial impact of the 
different methods for assessing penalties between hospitals with 
different number of beds even though larger hospitals tend to generate 
higher total Medicare savings since their payment reduction is applied 
to more DRG payments. Measuring the financial impact on hospitals as a 
proportion of total DRG payments allows us to account for differences 
in the amount of DRG payments for hospitals when comparing the 
financial impact of the program on different groups of hospitals, and 
allows comparison across the different methodologies between groups of 
hospitals with different numbers of eligible hospitals.

 Average Share of Payment Adjustments as a Percentage of All DRG Payments for Considered Approaches for the Hospital Readmissions Reduction Program, by
                                                                 Hospital Characteristic
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                           Standardized
                                                                                            Median Plus      Mean plus                       ERR plus
                                                                                            neutrality      neutrality                      neutrality
                                                             Number of        Current        modifier        modifier         Budget         modifier
                Hospital characteristics                  hospitals with    methodology     (neutrality     (neutrality    neutralizing     (neutrality
                                                          characteristic     (percent)      modifier =      modifier =    ERR  (percent)    modifier =
                                                                                              0.9546)         1.0135)                         0.9710)
                                                                                             (percent)       (percent)                       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Hospitals...........................................           3,096            0.62            0.62            0.62            0.62            0.62
Geographic Location:
    Urban...............................................           2,304            0.61            0.62            0.62            0.62            0.62
    Rural...............................................             792            0.65            0.62            0.60            0.60            0.60
Bed size:
    1-99 beds...........................................           1,113            0.57            0.57            0.56            0.56            0.57
    100-199 beds........................................             886            0.70            0.70            0.70            0.70            0.70
    200-299 beds........................................             453            0.65            0.66            0.66            0.66            0.66
    300-399 beds........................................             278            0.64            0.63            0.63            0.63            0.63
    400-499.............................................             155            0.53            0.54            0.54            0.54            0.54
    500 or more beds....................................             211            0.57            0.57            0.57            0.57            0.56
By DSH Payment Eligibility:
    Not eligible........................................             474            0.55            0.61            0.65            0.64            0.64
    DSH payment eligible................................           2,622            0.63            0.62            0.61            0.61            0.61
By Teaching Status:
    Non-teaching........................................           2,076            0.66            0.67            0.67            0.67            0.67
    Teaching............................................           1,020            0.59            0.58            0.58            0.58            0.58
    Fewer than 100 residents............................             772            0.59            0.60            0.60            0.61            0.60
    100 or more residents...............................             248            0.57            0.55            0.54            0.54            0.55
By Type of Ownership:
    Government..........................................             490            0.54            0.53            0.53            0.53            0.53
    Proprietary.........................................             779            0.79            0.79            0.80            0.80            0.79
    Voluntary...........................................           1,827            0.59            0.59            0.59            0.59            0.59
DSH patient percentage:
    1st.................................................             547            0.54            0.60            0.63            0.63            0.63
    2nd.................................................             635            0.66            0.71            0.72            0.72            0.72
    3rd.................................................             646            0.60            0.61            0.62            0.62            0.61
    4th.................................................             642            0.61            0.60            0.59            0.59            0.59
    5th.................................................             626            0.64            0.55            0.52            0.52            0.54
MCR Percent:
    0-24................................................             410            0.42            0.40            0.39            0.39            0.39
    25-49...............................................           2,081            0.63            0.63            0.63            0.63            0.63
    50 and over.........................................             590            0.72            0.73            0.74            0.74            0.74
Region:
    New England.........................................             130            0.68            0.64            0.63            0.63            0.64
    Middle Atlantic.....................................             354            0.86            0.83            0.83            0.83            0.83
    South Atlantic......................................             512            0.74            0.76            0.78            0.78            0.77
    East North Central..................................             482            0.63            0.63            0.63            0.63            0.63
    East South Central..................................             290            0.76            0.79            0.80            0.80            0.79
    West North Central..................................             252            0.39            0.41            0.41            0.41            0.41
    West South Central..................................             487            0.46            0.48            0.48            0.48            0.47
    Mountain............................................             223            0.36            0.39            0.40            0.40            0.39

[[Page 19966]]

 
    Pacific.............................................             366            0.42            0.37            0.34            0.34            0.36
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: FY 2017 Hospital Readmissions Reduction Program Final Rule Results. Results are based on July 1, 2012, through June 30, 2015, discharges among
  subsection (d) and Maryland hospitals only. Although data from all subsection (d) and Maryland hospitals are used in calculations of each hospital's
  Excess Readmission Ratio (ERR), this table does not include results for Maryland hospitals. This table only includes results for hospitals who are
  eligible for a penalty under the program on the basis of having at least 25 eligible discharges for at least one measure. Hospital Characteristics are
  based on the FY 2017 final rule Impact File. There were 15 hospitals that did not have MCR percentages in the FY 2017 final rule Impact File. To
  calculate the payment adjustment as a proportion of total base operating DRG payments, this analysis used MedPAR data to calculate the total base
  operating DRG payments from July 1, 2014 through June 30, 2015. The group average share of payment adjustments as a percentage of all DRG payments is
  calculated as the sum of all Medicare savings for the group of hospitals divided by total base operating DRG payments for all hospitals in that group.

    We are inviting public comment on our preferred proposal and 
alternative considerations.
11. Accounting for Social Risk Factors in the Hospital Readmissions 
Reduction Program
    We understand that social risk factors such as income, education, 
race and ethnicity, employment, disability, community resources, and 
social support (certain factors of which are also sometimes referred to 
as socioeconomic status (SES) factors or socio-demographic status (SDS) 
factors) play a major role in health. One of our core objectives is to 
improve beneficiary outcomes, including reducing health disparities, 
and we want to ensure that all beneficiaries, including those with 
social risk factors, receive high quality care. In addition, we seek to 
ensure that the quality of care furnished by providers and suppliers is 
assessed as fairly as possible under our programs while ensuring that 
beneficiaries have adequate access to excellent care.
    We have been reviewing reports prepared by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) \40\ and the 
National Academies of Sciences, Engineering, and Medicine on the issue 
of accounting for social risk factors in CMS' value-based purchasing 
and quality reporting programs, and considering options on how to 
address the issue in these programs. On December 21, 2016, ASPE 
submitted a report to Congress on a study it was required to conduct 
under section 2(d) of the Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014. The study analyzed the effects of 
certain social risk factors in Medicare beneficiaries on quality 
measures and measures of resource use used in one or more of nine 
Medicare value-based purchasing programs, including the Hospital 
Readmissions Reduction Program.\41\ The report also included 
considerations for strategies to account for social risk factors in 
these programs. In a January 10, 2017 report released by the National 
Academies of Sciences, Engineering, and Medicine, that body provided 
various potential methods for measuring and accounting for social risk 
factors, including stratified public reporting.\42\
---------------------------------------------------------------------------

    \40\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \41\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \42\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press.
---------------------------------------------------------------------------

    As noted in the FY 2017 IPPS/LTCH PPS final rule, the NQF has 
undertaken a 2-year trial period in which certain new measures, 
measures undergoing maintenance review, and measures endorsed with the 
condition that they enter the trial period can be assessed to determine 
whether risk adjustment for selected social risk factors is appropriate 
for these measures. This trial entails temporarily allowing inclusion 
of social risk factors in the risk-adjustment approach for these 
measures. At the conclusion of the trial, NQF will issue 
recommendations on the future inclusion of social risk factors in risk 
adjustment for these quality measures, and we will closely review its 
findings.
    As we continue to consider the analyses and recommendations from 
these reports and await the results of the NQF trial on risk adjustment 
for quality measures, we are continuing to work with stakeholders in 
this process. As we have previously communicated, we are concerned 
about holding providers to different standards for the outcomes of 
their patients with social risk factors because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes 
for disadvantaged populations. Keeping this concern in mind, while we 
sought input on this topic previously, we continue to seek public 
comment on whether we should account for social risk factors in the 
Hospital Readmissions Reduction Program and, if so, what method or 
combination of methods would be most appropriate for accounting for 
social risk factors. Examples of methods include: confidential 
reporting of stratified measure rates to providers; public reporting of 
stratified measure rates; risk adjustment of a particular measure as 
appropriate based on data and evidence; developing readmission measures 
or statistical approaches that are suitable for the reporting of 
performance on readmissions; providing financial incentives for 
achievement of low readmission rates for beneficiaries with social risk 
factors; and using a hospital-wide readmissions measure. While we 
consider whether and to what extent we currently have statutory 
authority to implement one or more of the above-described methods, we 
are seeking comments on whether any of these methods should be 
considered, and if so, which of these methods or combination of methods 
would best account for social risk factors in the Hospital Readmissions 
Reduction Program.
    In addition, we are also seeking public comment on which social 
risk factors might be most appropriate for stratifying measure scores 
and/or potential risk adjustment of a particular

[[Page 19967]]

measure. Examples of social risk factors include, but are not limited 
to, dual eligibility/low-income subsidy, race and ethnicity, and 
geographic area of residence. We are seeking comments on which of these 
factors, including current data sources where this information would be 
available, could be used alone or in combination, and whether other 
data should be collected to better capture the effects of social risk. 
We will take commenters' input into consideration as we continue to 
assess the appropriateness and feasibility of accounting for social 
risk factors in the Hospital Readmissions Reduction Program. We note 
that any such changes would be proposed through future notice-and-
comment rulemaking.
    We look forward to working with stakeholders as we consider the 
issue of accounting for social risk factors and reducing health 
disparities in CMS programs. Of note, implementing any of the above 
methods would be taken into consideration in the context of how this 
and other CMS programs operate (for example, data submission methods, 
availability of data, statistical considerations relating to 
reliability of data calculations, among others), so we also welcome 
comment on operational considerations. CMS is committed to ensuring 
that its beneficiaries have access to and receive excellent care, and 
that the quality of care furnished by providers and suppliers is 
assessed fairly in CMS programs.
12. Extraordinary Circumstance Exception (ECE) Policy
    Many of our quality reporting and value-based purchasing programs 
share a common process for requesting an exception from program 
reporting due to an extraordinary circumstance not within a provider's 
control. The Hospital IQR, Hospital OQR, IPFQR, Ambulatory Surgical 
Center Quality Reporting (ASCQR), PCHQR Programs, as well as the HAC 
Reduction Program, and the Hospital Readmissions Reduction Program, 
share common processes for ECE requests. In reviewing the policies for 
these programs, we recognized that there are five areas in which these 
programs have variance regarding ECE requests. These are: (1) Allowing 
the facilities or hospitals to submit a form signed by the facility's 
or hospital's CEO versus CEO or designated personnel; (2) requiring the 
form be submitted within 30 days following the date that the 
extraordinary circumstance occurred versus within 90 days following the 
date the extraordinary circumstance occurred; (3) inconsistency 
regarding specification of a timeline for us to provide our formal 
response notifying the facility or hospital of our decision; (4) 
inconsistency regarding specification of our authority to grant ECEs 
due to CMS data system issues; and (5) referring to the program as 
``extraordinary extensions/exemptions'' versus as ``extraordinary 
circumstances exceptions.'' We believe addressing these five areas, as 
appropriate, can improve administrative efficiencies for affected 
facilities or hospitals.
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49542 through 
49543), we adopted an ECE policy for the Hospital Readmissions 
Reduction Program beginning in FY 2016. This policy was similar to the 
ECE 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 42 CFR 412.140(c)(2) to refer to ``extension or 
exemption'' instead of the former ``extension or waiver'').
    We are proposing to update these policies by: (1) Allowing the 
facility to submit a form signed by the facility's CEO or designated 
personnel; (2) clarifying that we will strive to provide our formal 
response notifying the facility of our decision within 90 days of 
receipt of the facility's request; and (3) allowing CMS to have the 
authority to grant ECEs due to CMS data system issues which affect data 
submission. These proposed policies generally align with policies in 
the Hospital IQR Program (76 FR 51651 through 51652), (78 FR 50836 
through 50837) and (81 FR 57181 through 57182), Hospital OQR Program 
(77 FR 68489 and 81 FR 79795), as well as other quality reporting 
programs. We are proposing that these policies would apply beginning in 
FY 2018 as related to extraordinary circumstances that occur on or 
after October 1, 2017.
    We note that there may be circumstances in which it is not feasible 
for a facility's CEO to sign the ECE request form. In these 
circumstances, we believe that facilities affected by such 
circumstances should be able to submit ECE forms regardless of the 
CEO's availability to sign. This proposed change would allow hospitals 
to designate an appropriate, non-CEO, contact at its discretion. This 
individual would be responsible for the submission, and would be the 
one signing the form. Therefore, we are proposing to accept ECE forms 
which have been signed by designated personnel.
    We also believe that it is important for facilities to receive 
timely feedback regarding the status of ECE requests. We strive to 
complete our review of each ECE request as quickly as possible. 
However, we recognize that the number of requests we receive, and the 
complexity of the information provided impacts the actual timeframe to 
make ECE determinations. To improve transparency of our process, we 
believe it is appropriate to clarify that we will strive to complete 
our review of each request within 90 days of receipt.
    Although we do not anticipate this situation will happen on a 
regular basis, there may be times where CMS experiences issues with its 
data systems that directly affects facilities' abilities to submit 
data. In these cases, we believe it would be inequitable to require 
facilities to report. Therefore, we are proposing to allow CMS to grant 
ECEs to facilities if we determine that a systemic problem with one of 
our data collection systems directly affected the ability of the 
facilities to submit data. If we make the determination to grant ECEs, 
we are proposing to communicate this decision through routine 
communication channels.
    We are inviting public comment on these proposed modifications to 
the Extraordinary Circumstance Exception policy.
13. Timeline for Public Reporting of Excess Readmission Ratios on 
Hospital Compare for the FY 2018 Payment Determination
    Section 1886(q)(6) of the Act requires the Secretary to make 
information available to the public regarding readmission rates of each 
subsection (d) hospital under the program, and states that such 
information shall be posted on the Hospital Compare Internet Web site 
in an easily understandable format. Accordingly, in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53401), we indicated that public reporting 
for excess readmission ratios could be available on the Hospital 
Compare Web site as early as mid-October. In the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 56978 through 56979), we clarified that public 
reporting of excess readmission ratios will be posted on an annual 
basis to the Hospital Compare Web site as soon as is feasible following 
the review period. This may occur as early as October, but it could 
occur later for a particular year in order to streamline reporting and 
align with other hospital quality reporting and performance programs.

[[Page 19968]]

J. Hospital Value-Based Purchasing (VBP) Program: Proposed Policy 
Changes

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 (FY) 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 (78 FR 75120 through 75121); 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50048 through 50087); the 
FY 2016 IPPS/LTCH PPS final rule with comment period (80 FR 49544 
through 49570); the FY 2017 IPPS/LTCH PPS final rule (81 FR 56979 
through 57011); and the CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79855 through 79862).
    We also have codified certain requirements for the Hospital VBP 
Program at 42 CFR 412.160 through 412.167.
b. FY 2018 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 2018 program year is 2.00 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 2018 is approximately $1.9 billion, based on 
the December 2016 update of the FY 2016 MedPAR file. We intend to 
update this estimate for the FY 2018 IPPS/LTCH PPS final rule using the 
March 2017 update of the FY 2016 MedPAR file.
    As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53573 
through 53576), 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). 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 2018, on a per-claim 
basis. We are publishing proxy value-based incentive payment adjustment 
factors in Table 16 associated with this proposed rule (which is 
available via the Internet on the CMS Web site). The proxy factors are 
based on the TPS from the FY 2017 program year. These FY 2017 
performance scores are the most recently available performance scores 
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 3.0692781725. This 
slope, along with the estimated amount available for value-based 
incentive payments, is also published in Table 16.
    We intend to update this table as Table 16A in the final rule 
(which will be available on the CMS Web site) to reflect changes based 
on the March 2017 update to the FY 2016 MedPAR file. We also intend 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 2018 will continue to be based on historic FY 2017 program year TPSs 
because hospitals will not have been given the opportunity to review 
and correct their actual TPSs for the FY 2018 program year until after 
the FY 2018 IPPS/LTCH PPS final rule is published.
    After hospitals have been given an opportunity to review and 
correct their actual TPSs for FY 2018, 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 2018 program 
year. We expect Table 16B will be posted on the CMS Web site in the 
fall of 2017.
2. Accounting for Social Risk Factors in the Hospital VBP Program
    We understand that social risk factors such as income, education, 
race and ethnicity, employment, disability, community resources, and 
social support (certain factors of which are also sometimes referred to 
as socioeconomic status (SES) factors or socio-demographic status (SDS) 
factors) play a major role in health. One of our core objectives is to 
improve beneficiary outcomes, including reducing health disparities, 
and we want to ensure that all beneficiaries, including those with 
social risk factors, receive high quality care. In addition, we seek to 
ensure that the quality of care furnished by providers and suppliers is 
assessed as fairly as possible under our programs while ensuring that 
beneficiaries have adequate access to excellent care.
    We have been reviewing reports prepared by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) \43\ and the 
National Academies of Sciences, Engineering, and Medicine on the issue 
of accounting for social risk factors in CMS' value-based purchasing 
and quality reporting programs, and considering options on how to 
address the issue in these programs. On December 21, 2016, ASPE 
submitted a Report to Congress on a study it was required to conduct 
under section 2(d) of the Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014. The study analyzed the effects of 
certain social risk factors in Medicare beneficiaries on quality 
measures and measures of resource use used in one or more of nine 
Medicare value-based purchasing programs, including the Hospital VBP 
Program.\44\ The report also included considerations for strategies to 
account for social risk factors in these programs. In a January 10, 
2017 report released by the National Academies of Sciences, 
Engineering, and Medicine, that body provided various potential methods 
for measuring and accounting for social risk factors, including 
stratified public reporting.\45\
---------------------------------------------------------------------------

    \43\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \44\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \45\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press.

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

[[Page 19969]]

    In the ASPE report noted above, there is an analysis of and focus 
on the Medicare Spending Per Beneficiary (MSPB) measure, which was 
adopted by the Hospital VBP Program beginning with the FY 2015 program 
year.\46\ We note that the MSPB measure is currently undergoing 
endorsement review for NQF, as part of the 2-year socioeconomic trial 
period described below.\47\ ASPE's December 2016 Report to Congress did 
not include an analysis of the effect of social risk factors on 
hospital performance on any condition-specific payment measures that 
are currently adopted for the Hospital VBP Program beginning with the 
FY 2021 program year (Hospital-Level, Risk-Standardized Payment 
Associated with a 30-Day Episode-of-Care for Acute Myocardial 
Infarction (AMI Payment) measure and Hospital-Level, Risk-Standardized 
Payment Associated with a 30-Day Episode-of-Care for Heart Failure (HF 
Payment) measure) (81 FR 56986 through 56990 and 81 FR 56990 through 
56992, respectively). We look forward to ASPE's continued analyses in 
this area, such as the role of frailty and disability in explaining 
variation in hospital episode spending among Medicare beneficiaries.
---------------------------------------------------------------------------

    \46\ Office of the Assistant Secretary for Planning and 
Evaluation. 2016. Report to Congress: Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs; 
Chapter 7: The Hospital Value-Based Purchasing Program (p. 141-176). 
Available at: https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \47\ Medicare Spending Per Beneficiary (MSPB)--Hospital. See 
Section 2b.4.5 in National Quality Forum--Measure Testing. Accessed 
2/21/17 from: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=83458.
---------------------------------------------------------------------------

    As noted in the FY 2017 IPPS/LTCH PPS final rule, the NQF has 
undertaken a 2-year trial period in which certain new measures, 
measures undergoing maintenance review, and measures endorsed with the 
condition that they enter the trial period can be assessed to determine 
whether risk adjustment for selected social risk factors is appropriate 
for these measures. This trial entails temporarily allowing inclusion 
of social risk factors in the risk-adjustment approach for these 
measures. At the conclusion of the trial, NQF will issue 
recommendations on the future inclusion of social risk factors in risk 
adjustment for these quality measures, and we will closely review its 
findings.
    We note that the AMI Payment and HF Payment measures adopted in the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 56987 through 56990 and 81 FR 
56990 through 56992, respectively), as well as the Hospital-Level, 
Risk-Standardized Payment Associated with a 30-Day Episode-of-Care for 
Pneumonia (PN Payment) measure (prior to the expansion of the measure 
cohort), recently underwent successful NQF re-endorsement following 
enrollment in the NQF's trial. Based on its review of these measures 
during the trial, the NQF re-endorsed these measures without 
modifications to their risk adjustment methodologies for social risk 
factors. We are proposing to adopt the PN Payment measure beginning 
with the FY 2022 program year for the Hospital VBP Program (we refer 
readers to section V.J.4.a. of the preamble of this proposed rule), and 
we intend to submit the measure with the proposed expanded measure 
cohort for NQF review during the measure's next re-endorsement review.
    As we continue to consider the analyses and recommendations from 
these reports and await the results of the NQF trial on risk adjustment 
for quality measures, we are continuing to work with stakeholders in 
this process. As we have previously communicated, we are concerned 
about holding providers to different standards for the outcomes of 
their patients with social risk factors because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes 
for disadvantaged populations. Keeping this concern in mind, while we 
sought input on this topic previously, we continue to seek public 
comment on whether we should account for social risk factors in the 
Hospital VBP Program, and if so, what method or combination of methods 
would be most appropriate for accounting for social risk factors. 
Examples of methods include: adjustment of the payment adjustment 
methodology under the Hospital VBP Program; adjustment of provider 
performance scores (for instance, stratifying providers based on the 
proportion of their patients who are dual eligible); confidential 
reporting of stratified measure rates to providers; public reporting of 
stratified measure rates; risk adjustment of a particular measure as 
appropriate based on data and evidence; and redesigning payment 
incentives (for instance, rewarding improvement for providers caring 
for patients with social risk factors or incentivizing providers to 
achieve health equity).
    We note that in section V.I.9. of the preamble of this rule, we 
discuss considerations for stratifying hospitals into peer groups for 
purposes of assessing payment adjustments under the Hospital 
Readmissions Reduction Program, as required under the 21st Century 
Cures Act. We refer readers to that section for a detailed discussion 
of these alternatives; while this discussion and corresponding proposal 
are specific to the Hospital Readmissions Reduction Program, they 
reflect the level of analysis we would undertake when evaluating 
methods and combinations of methods for accounting for social risk 
factors in CMS' other value-based purchasing programs, such as the 
Hospital VBP Program. While we consider whether and to what extent we 
currently have statutory authority to implement one or more of the 
above-described methods, we are seeking comments on whether any of 
these methods should be considered, and if so, which of these methods 
or combination of methods would best account for social risk factors in 
the Hospital VBP Program.
    In addition, we are also seeking public comment on which social 
risk factors might be most appropriate for stratifying measure scores 
and/or potential risk adjustment of a particular measure. Examples of 
social risk factors include, but are not limited to, dual eligibility/
low-income subsidy, race and ethnicity, and geographic area of 
residence. We are seeking comments on which of these factors, including 
current data sources where this information would be available, could 
be used alone or in combination, and whether other data should be 
collected to better capture the effects of social risk. We will take 
commenters' input into consideration as we continue to assess the 
appropriateness and feasibility of accounting for social risk factors 
in the Hospital VBP Program. We note that any such changes would be 
proposed through future notice-and-comment rulemaking.
    We look forward to working with stakeholders as we consider the 
issue of accounting for social risk factors and reducing health 
disparities in CMS programs. Of note, implementing any of the above 
methods would be taken into consideration in the context of how this 
and other CMS programs operate (for example, data submission methods, 
availability of data, statistical considerations relating to 
reliability of data calculations, among others), we also welcome 
comment on operational considerations. CMS is committed to ensuring 
that its beneficiaries have access to and receive excellent care, and 
that the quality of care furnished by providers and suppliers is 
assessed fairly in CMS programs.

[[Page 19970]]

3. Retention and Removal of Quality Measures for the FY 2019 Program 
Year
a. Retention of Previously Adopted Hospital VBP Program Measures
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592), we finalized 
a policy to retain measures from prior program years for each 
successive program year, unless otherwise proposed and finalized. We 
are not proposing any changes to this policy.
b. Proposed Removal of the PSI 90 Measure
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56979 through 
56981), we finalized our proposal to shorten the performance period for 
the current \48\ PSI 90 measure for the FY 2018 program year due to 
concerns associated with combining measure performance data that use 
both ICD-9 and ICD-10 data in calculating performance scores under the 
measure. In that final rule, we explained our system requires an ICD-10 
risk-adjusted version of the AHRQ PSI software \49\ in order to 
calculate scores using ICD-10 codes, and AHRQ needs a full year of 
nationally representative ICD-10 coded data before it can complete 
development of risk-adjusted models based on a national reference 
population for this software. This means the AHRQ PSI software will not 
be available for us to calculate scores until late CY 2017. More 
importantly, we noted an ICD-10 version of the current PSI 90 measure 
is not being developed (81 FR 56980), nor will ICD-10 AHRQ QI software 
be available to calculate performance scores for the FY 2019 program 
year (81 FR 56981). As a result, we will not be able to calculate 
performance scores for the current PSI 90 measure for the FY 2019 
program year because these scores would include ICD-10 data. Based on 
these concerns, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56981), 
we signaled our intent to propose to remove the current PSI 90 measure 
from the Hospital VBP Program beginning with the FY 2019 program year. 
We are now proposing in this FY 2018 IPPS/LTCH PPS proposed rule to 
remove the current PSI 90 measure from the Hospital VBP Program 
beginning with the FY 2019 program year.
---------------------------------------------------------------------------

    \48\ The ``current'' PSI 90 measure refers to the version of the 
PSI 90 measure previously finalized for use in the Hospital VBP 
Program in the FY 2013 IPPS/LTCH PPS final rule (78 FR 50694).
    \49\ The AHRQ QI Software is the software used to calculate PSIs 
and the composite measure. More information is available at: http://www.qualityindicators.ahrq.gov/Downloads/Resources/Publications/2015/Empirical_Methods_2015.pdf.
---------------------------------------------------------------------------

    We are inviting public comment on this proposal. We also refer 
readers to section V.J.4.b. of the preamble of this proposed rule where 
we are proposing to adopt the modified version of the PSI 90 measure 
for the Hospital VBP Program beginning with the FY 2023 program year.
c. Summary of Previously Adopted Measures and Proposed Measure for 
Removal for the FY 2019 and FY 2020 Program Years
    In summary, for the FY 2019 and FY 2020 program years, we have 
finalized the following measure set and are proposing to remove the 
current PSI 90 measure, as indicated:

 Previously Adopted Measures and Proposed Measure for Removal for the FY
                     2019 and FY 2020 Program Years
------------------------------------------------------------------------
        Measure short name           Domain/measure name       NQF #
------------------------------------------------------------------------
                 Person and Community Engagement Domain*
------------------------------------------------------------------------
HCAHPS............................  Hospital Consumer        0166 (0228)
                                     Assessment of
                                     Healthcare
                                     Providers and
                                     Systems (HCAHPS) **
                                     (including Care
                                     Transition Measure).
------------------------------------------------------------------------
                          Clinical Care Domain
------------------------------------------------------------------------
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
                                     (RSMR) Following
                                     Pneumonia
                                     Hospitalization.
THA/TKA...........................  Hospital-Level Risk-            1550
                                     Standardized
                                     Complication Rate
                                     (RSCR) Following
                                     Elective Primary
                                     Total Hip
                                     Arthroplasty (THA)
                                     and/or Total Knee
                                     Arthroplasty (TKA).
------------------------------------------------------------------------
                              Safety Domain
------------------------------------------------------------------------
CAUTI.............................  National Healthcare             0138
                                     Safety Network
                                     (NHSN)
                                     Catheter[dash]Assoc
                                     iated Urinary Tract
                                     Infection (CAUTI)
                                     Outcome Measure.
CLABSI............................  National Healthcare             0139
                                     Safety Network
                                     (NHSN) Central
                                     Line[dash]Associate
                                     d Bloodstream
                                     Infection (CLABSI)
                                     Outcome Measure.
Colon and Abdominal Hysterectomy    American College of             0753
 SSI.                                Surgeons--Centers
                                     for Disease Control
                                     and Prevention (ACS-
                                     CDC) Harmonized
                                     Procedure Specific
                                     Surgical Site
                                     Infection (SSI)
                                     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[dash]wide
                                     Inpatient Hospital-
                                     onset Clostridium
                                     difficile Infection
                                     (CDI) Outcome
                                     Measure.
PSI 90 ***........................  Patient Safety for              0531
                                     Selected Indicators
                                     (Composite Measure).
PC-01.............................  Elective Delivery...            0469
------------------------------------------------------------------------

[[Page 19971]]

 
                  Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB..............................  Payment-Standardized            2158
                                     Medicare Spending
                                     Per Beneficiary
                                     (MSPB).
------------------------------------------------------------------------
* In section IV.H.3.b. of the preamble of the FY 2017 IPPS/LTCH PPS
  final rule (81 FR 56984), we renamed this domain from Patient- and
  Caregiver-Centered Experience of Care/Care Coordination domain to
  Person and Community Engagement domain beginning with the FY 2019
  program year.
** In section XIX.B.3. of the preamble of the CY 2017 OPPS/ASC final
  rule with comment period (81 FR 79855 through 79862), we finalized the
  removal of the Pain Management dimension from the Hospital VBP Program
  beginning with the FY 2018 program year.
*** Proposed for removal beginning with the FY 2019 program year as
  discussed in section V.J.3.b. of the preamble of this proposed rule.

4. Proposed New Measures for the FY 2022 Program Year, FY 2023 Program 
Year, and Subsequent Years
    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 current CMS Quality Strategy, 
available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html.
    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.
a. Proposed New Measure for the FY 2022 Program Year and Subsequent 
Years: Hospital-Level, Risk-Standardized Payment Associated With a 30-
Day Episode-of-Care for Pneumonia (PN Payment)
(1) Measure Proposal
    Hospital-Level, Risk-Standardized Payment Associated with a 30-Day 
Episode-of-Care for Pneumonia (PN Payment) is a measure assessing 
hospital risk-standardized payment associated with a 30-day episode-of-
care for pneumonia. We adopted this measure in the Hospital IQR Program 
in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50227 through 50231), 
and we adopted an updated version of the measure, with an expanded 
cohort and modified risk-adjustment model, in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57125 through 57128). For purposes of describing this 
measure, the ``cohort'' is the set of hospitalizations, or ``index 
admissions,'' that meet all of the measure's inclusion and exclusion 
criteria and, thus, are used to calculate the total payments Medicare 
makes on behalf of these Medicare beneficiaries for a 30-day episode-
of-care. The cohort for the expanded version of the PN Payment measure 
includes Medicare FFS patients aged 65 or older with: (1) A principal 
hospital discharge diagnosis of pneumonia, including not only viral or 
bacterial pneumonia but also aspiration pneumonia; or (2) a principal 
discharge diagnosis of sepsis (but not severe sepsis) with a secondary 
diagnosis of pneumonia (including viral or bacterial pneumonia and 
aspiration pneumonia) coded as present on admission. The measure 
calculates payments for these patients over a 30-day episode-of-care, 
beginning with the index admission, using administrative claims data. 
In general, the measure uses the same approach to risk-adjustment as 
30-day outcome measures previously adopted for the Hospital VBP 
Program, including the 30-day PN mortality measure, MORT-30-PN. Initial 
measure data collected under the Hospital IQR Program for the expanded 
PN Payment cohort and modified risk-adjustment model will be posted on 
Hospital Compare in July 2017, and the full measure specifications are 
available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Promoting high-value care is an essential part of our mission to 
provide better health care for individuals, better health for 
populations, and lower costs for health care. Our aim is 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. Pneumonia is one of the 
leading causes of hospitalization for Americans aged 65 and over, and 
pneumonia patients incur roughly $10 billion in aggregate health care 
costs.\50\ There is evidence of variation in payments at hospitals for 
pneumonia patients in the proposed PN Payment measure; median 30-day 
risk-standardized payment among Medicare FFS patients aged 65 or older 
hospitalized for pneumonia was $15,988 and ranged from $9,193 to 
$26,546 for the July 2011 through June 2014 reporting period in the 
Hospital IQR Program.\51\ This variation in payment suggests there is 
opportunity for improvement. We believe it is important to adopt the PN 
Payment measure for the Hospital VBP Program because variation in 
payment may reflect differences in care decision-making and resource 
utilization (for example, treatment, supplies, or services) for 
patients with pneumonia both during hospitalization and immediately 
post-discharge. The PN Payment measure specifically addresses the NQS 
priority and CMS Quality Strategy goal to make quality care more 
affordable.
---------------------------------------------------------------------------

    \50\ Lindenauer PK, Lagu T, Shieh M, Pekow PS, Rothberg MB. 
Association of diagnostic coding with trends in hospitalizations and 
mortality of patients with pneumonia, 2003-2009. JAMA. 
2012;307(13):1405-1413.
    \51\ 2016 Reevaluation and Re-Specifications Report of the 
Hospital-Level 30-Day Risk-Standardized Pneumonia Payment Measure. 
AMI, HF, PN Payment Updates (zip file). Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    We recognize high or low payments to hospitals are difficult to 
interpret in isolation. Some high payment hospitals may produce better 
clinical outcomes when compared with low payment hospitals, while other 
high payment hospitals may not produce better outcomes. For this 
reason, payment measure results viewed in isolation are not necessarily 
an indication of quality. However, by viewing such information along 
with quality measure results, consumers, payers, and providers would be 
able to better assess the value of care. In order to incentivize 
innovation that promotes high-quality care at high value, it is 
important to examine measures of payment and patient outcomes 
concurrently. The proposed PN Payment measure is intended to be paired 
with the MORT-30-PN measure in the Hospital VBP Program,\52\ thereby

[[Page 19972]]

directly linking payment to quality by the alignment of comparable 
populations and risk-adjustment methodologies to facilitate the 
assessment of efficiency and value of care. We believe adopting the PN 
Payment measure will create stronger incentives for appropriately 
reducing practice pattern variation to achieve the aim of lowering the 
cost of care and creating better coordinated care for Medicare 
beneficiaries.
---------------------------------------------------------------------------

    \52\ The Hospital VBP Program first adopted the MORT-30-PN 
measure for the FY 2014 program year in the Hospital Inpatient 
Value-Based Purchasing Program final rule (76 FR 26497 through 
26511). We subsequently expanded the measure cohort beginning with 
the FY 2021 program year in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56994 through 56996).
---------------------------------------------------------------------------

    We are proposing to adopt the PN Payment measure beginning with the 
FY 2022 program year. The PN Payment measure would be added to the 
Efficiency and Cost Reduction domain. The proposed measure fulfills all 
of the statutory requirements for the Hospital VBP Program based on our 
adoption of the measure in the Hospital IQR Program, and our 
anticipated posting of measure data for the refined PN Payment measure, 
with the expanded cohort and modified risk-adjustment model, on 
Hospital Compare beginning July 2017, which would be at least one year 
before the beginning of the proposed performance period of August 1, 
2018. We refer readers to sections V.J.5.c.(3) through V.J.5.c.(5) of 
the preamble of this proposed rule where we are proposing baseline 
periods and performance periods for this measure if adopted for the 
Hospital VBP Program.
    The proposed PN Payment measure (MUC15-378) was reviewed by the MAP 
in December 2015 and did not receive support for adoption into the 
Hospital VBP Program.\53\ The result of the MAP vote was 31 percent 
support, 15 percent conditional support, and 54 percent do not support. 
The MAP's decision of ``do not support'' for the proposed PN Payment 
measure was based on concerns that the measure may overlap with and 
thereby double count services that are already captured in the MSPB 
measure. In addition, some MAP members expressed a desire to have more 
experience with the measure in the Hospital IQR Program to understand 
whether there may be unintended consequences or a need to adjust for 
social risk factors. We note some MAP members expressed support for the 
proposed PN Payment measure and other condition-specific payment 
measures, expressing that the increased granularity provided by 
condition-specific payment measures will provide valuable feedback to 
hospitals for targeted improvement.
---------------------------------------------------------------------------

    \53\ ``2016 Spreadsheet of Final Recommendations to HHS and 
CMS'' available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367 and ``Process and Approach for 
MAP Pre-Rulemaking Deliberations'' found at: http://www.qualityforum.org/Publications/2016/02/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations.aspx.
---------------------------------------------------------------------------

    With respect to MAP stakeholder concerns that treatment- or 
condition-specific payment measures may overlap and double count 
services, we note that the proposed PN Payment measure addresses a 
topic of critical importance to quality improvement in the inpatient 
hospital setting. As discussed above, we selected the PN Payment 
measure because we believe it is appropriate to provide stronger 
incentives for hospitals to provide high-value and efficient care, 
especially for a high-volume condition such as pneumonia. We 
acknowledge that hospitals that do not perform well on the PN Payment 
measure may also perform poorly on the MSPB measure and potentially 
receive a lower incentive payment, depending upon their performance on 
other measures. However, because admissions for pneumonia make up only 
a part of all admissions included in the MSPB measure, a hospital's 
results on the MSPB measure may not be the same as their result on the 
PN Payment measure. In other words, a hospital's results for one 
measure are not deterministic of its results of the other, so we cannot 
state conclusively that if a hospital performs well (or poorly) on one 
measure, that they will also perform well (or poorly) on the second 
measure. Hospitals would perform differently on the MSPB and PN Payment 
measures because these measures evaluate performance on different 
metrics. For example, some hospitals with poorer results on the MSPB 
measure may have better results on the PN Payment measure allowing them 
to improve their overall score. In addition, the overlap between the 
MSPB and PN Payment measures may result in some hospitals receiving an 
increased benefit by performing well on both measures. Furthermore, if 
a hospital does not perform as well on the MSPB measure relative to 
other hospitals but performs very well with respect to its pneumonia 
patients on the proposed PN Payment measure, that hospital would have 
the opportunity to earn a higher score in the Efficiency and Cost 
Reduction domain.
    Regarding MAP stakeholder concerns for the need to adjust for 
social risk factors, we note the proposed PN Payment measure already 
incorporates a risk-adjustment methodology that accounts for age and 
comorbidities. We understand the important role social risk factors 
play in the care of patients, routinely monitor the impact of social 
risk factors on hospitals' results on our measures, and will continue 
to do so. In addition, as discussed in section V.J.3. of the preamble 
of this proposed rule, the original PN Payment measure using the 
previous measure cohort (Hospital-level, risk-standardized payment 
associated with a 30-day episode-of-care for pneumonia (NQF #2579)), as 
well as the AMI Payment and HF Payment measures adopted in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 56987 through 56990 and 81 FR 56990 
through 56992, respectively), which use the same measurement 
methodology as the proposed PN Payment measure, recently underwent 
successful NQF re-endorsement following enrollment in the NQF's trial. 
The NQF re-endorsed these measures without requesting modifications to 
their risk adjustment methodologies for adjustment by social risk 
factors. The proposed PN Payment measure includes an updated risk-
adjustment model that accounts for patient comorbidities, and we intend 
to submit to NQF that risk adjustment model as part of the overall 
proposed PN Payment measure specifications during the next Cost and 
Resource Use project.
    As noted above, some MAP members expressed support for the proposed 
PN Payment measure and other condition-specific payment measures, 
agreeing the increased granularity provided by condition-specific 
payment measures will provide valuable feedback to hospitals for 
targeted improvement. In addition, a NQF-commissioned white paper also 
supports the position that cost or payment measures should be 
interpreted in the context of quality measures and that measures which 
link cost and quality are the preferred method of assessing hospital 
efficiency.\54\ The PN Payment measure, which directly pairs with the 
MORT-30-PN measure in the Hospital VBP Program, follows this 
recommended approach. Based on our analysis of the issues surrounding 
condition-specific payment measures, we believe the benefits of 
adopting the PN Payment measure outweigh any potential risks; however, 
we also remain committed to monitoring for unintended consequences.
---------------------------------------------------------------------------

    \54\ Ryan AM, Tompkins CP. Efficiency and Value in Healthcare: 
Linking Cost and Quality Measures. Washington, DC: NQF; 2014.
---------------------------------------------------------------------------

    We are inviting public comment on this proposal.
(2) Proposed Scoring Methodology for the PN Payment Measure
    We are proposing to calculate the PN Payment measure using the same

[[Page 19973]]

methodology we use to score the MSPB measure and, as finalized in the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 56992 through 56993), the AMI 
Payment and HF Payment measures so that all measures in the Efficiency 
and Cost Reduction domain are scored in the same manner. We note for 
these measures that lower values represent better performance.
    For achievement points, we are proposing to calculate a spending 
ratio of PN spending for each hospital to the median PN spending across 
all hospitals during the performance period. We would then use each 
hospital's PN spending ratio to calculate between 0 and 10 achievement 
points. We are proposing to set the achievement threshold at the median 
PN spending ratio across all hospitals during the performance period. 
Because lower values represent better performance under the proposed PN 
Payment measure, we are proposing to set the benchmark at the mean of 
the lowest decile of the PN spending ratios during the performance 
period. Therefore, if a hospital's individual PN spending ratio falls 
above the achievement threshold, the hospital would score 0 achievement 
points on the measure. If a hospital's individual PN spending ratio 
falls at or below the benchmark, the hospital would score the maximum 
10 achievement points on the measure. If a hospital's individual PN 
spending ratio falls at or below the achievement threshold but above 
the benchmark, the hospital would score between 1 and 9 points 
according to the following formula:

[9 * ((achievement threshold-Hospital's performance period ratio)/
(achievement threshold-benchmark))] + 0.5

    For improvement points, we are proposing to calculate a spending 
ratio of PN spending for each hospital to the median PN spending across 
all hospitals during the performance period. We would then use each 
hospital's PN spending ratio to calculate between 0 and 9 improvement 
points by comparing each hospital's ratio to its own performance during 
the baseline period. Again, because lower values represent better 
performance under the proposed PN Payment measure, we are proposing to 
set the benchmark as the mean of the lowest decile of PN spending 
ratios across all hospitals. Therefore, if a hospital's PN spending 
ratio is equal to or higher than its baseline period ratio, the 
hospital would score 0 improvement points on the measure. If a 
hospital's score on the measure during the performance period is less 
than its baseline period score but above the benchmark, the hospital 
would receive a score of 0 to 9 according to the following formula:

[10 * ((Hospital baseline period ratio-Hospital performance period 
ratio)/(Hospital baseline period ratio-benchmark))]-0.5

    We note that if a hospital scores at or below the benchmark on the 
achievement scoring methodology, that hospital will receive the maximum 
10 points for this measure. As a result, the hospital would not receive 
an improvement score for this measure.
    For more information about the proposed scoring methodology for the 
proposed PN Payment measure, we refer readers to section IV.B.3.b. of 
the preamble of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51654 
through 51656) where we discuss the MSPB measure's identical scoring 
methodology in detail.
    We are inviting public comment on the proposed scoring methodology 
for the proposed PN Payment measure.
b. Proposed New Measure for the FY 2023 Program Year and Subsequent 
Years: Patient Safety and Adverse Events (Composite) (NQF #0531)
    The current PSI 90 measure previously adopted for the Hospital VBP 
Program underwent NQF maintenance review and re-endorsement in 2015, 
leading to several substantive measure changes.\55\ Due to statutory 
requirements in the Hospital VBP Program,\56\ we were unable to adopt 
the newly re-endorsed version of the PSI 90 measure in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 56981), but stated our intent to 
propose to adopt the modified version of the PSI 90 measure in future 
rulemaking. In section V.J.3.b. of the preamble of this proposed rule, 
we are proposing to remove the current PSI 90 measure from the Hospital 
VBP Program beginning with the FY 2019 program year due to the 
operational constraints associated with calculating measure scores for 
the current measure for FY 2019 and subsequent years. Because of the 
priority of improving patient safety and reducing adverse events during 
inpatient stays, and with substantive refinements made to the measure 
in response to feedback as further described below, we are now 
proposing to adopt a modified version of the current PSI 90 measure, 
entitled Patient Safety and Adverse Events (Composite) (NQF #0531), for 
the Hospital VBP Program for the FY 2023 program year and subsequent 
years.
---------------------------------------------------------------------------

    \55\ National Quality Forum QPS Measure Description for 
``Patient Safety for Selected Indicators (modified version of PSI 
90) (Composite Measure)'' found at: https://www.qualityforum.org/QPS/MeasureDetails.aspx?standardID=321&print=0&entityTypeID=3; and 
PSI 90 Fact Sheet found at: http://www.qualityindicators.ahrq.gov/News/PSI90_Factsheet_FAQ_v2.pdf (we note that this fact sheet is 
written from an all-payer perspective, and is therefore not limited 
to the measure as used in the Medicare FFS population).
    \56\ First, section 1886(o)(2)(A) of the Act requires the 
Hospital VBP Program to select measures that have been specified for 
the Hospital IQR Program. Second, section 1886(o)(2)(C)(i) of the 
Act requires the Hospital VBP Program to refrain from beginning the 
performance period for a new measure until data on the measure have 
been posted on Hospital Compare for at least one year. Finally, 
section 1886(o)(3)(C) of the Act requires that the Hospital VBP 
Program establish performance standards for each measure not later 
than 60 days prior to the beginning of the performance period.
---------------------------------------------------------------------------

    The Hospital IQR Program adopted this measure in the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57128 through 57133),\57\ beginning with the 
FY 2018 payment determination, and we intend to publicly report initial 
measure data on the measure on Hospital Compare on or around July 2017. 
The full measure specifications are available at: https://www.qualityindicators.ahrq.gov/Modules/PSI_TechSpec_ICD09_v60.aspx.
---------------------------------------------------------------------------

    \57\ We note that the HAC Reduction Program also adopted this 
measure in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57013 through 
57030).
---------------------------------------------------------------------------

    The Patient Safety and Adverse Events (Composite) measure is a 
weighted average of the reliability-adjusted, indirectly standardized, 
observed-to-expected ratios for the following 10 individual PSI 
component indicators
     PSI 03 Pressure Ulcer Rate;
     PSI 06 Iatrogenic Pneumothorax Rate;
     PSI 08 In-Hospital Fall with Hip Fracture Rate; \58\
---------------------------------------------------------------------------

    \58\ Previously titled ``Postoperative Hip Fracture'' prior to 
v6.0.
---------------------------------------------------------------------------

     PSI 09 Perioperative Hemorrhage or Hematoma Rate;*
     PSI 10 Postoperative Acute Kidney Injury Requiring 
Dialysis Rate;* \59\
---------------------------------------------------------------------------

    \59\ Previously titled ``Postoperative Physiologic and Metabolic 
Derangement'' prior to v6.0.
---------------------------------------------------------------------------

     PSI 11 Postoperative Respiratory Failure Rate; *
     PSI 12 Perioperative Pulmonary Embolism (PE) or Deep Vein 
Thrombosis (DVT) Rate;
     PSI 13 Postoperative Sepsis Rate;
     PSI 14 Postoperative Wound Dehiscence Rate; and
     PSI 15 Unrecognized Abdominopelvic Accidental Puncture/
Laceration Rate.60 61
---------------------------------------------------------------------------

    \60\ Previously titled ``Accidental Puncture or Laceration 
Rate'' prior to v6.0.
    \61\ Available at: http://www.qualityforum.org/QPS/0531.

(* Denotes new component for the Patient Safety and Adverse Events 
(Composite) measure)

[[Page 19974]]

    The Patient Safety and Adverse Events (Composite) measure no longer 
includes PSI 07 Central Venous Catheter-Related Blood Stream Infection 
Rate, because of potential overlap with the CLABSI measure (NQF #0139), 
which has been included in the Hospital VBP Program since the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53597 through 53598).
    The measure is calculated using administrative claims data. Like 
the previously adopted PSI 90 measure, under the Patient Safety and 
Adverse Events (Composite) measure, the predicted value for each case 
is computed using a Generalized Estimating Equation hierarchical 
modeling approach that adjusts for demographic and clinical 
characteristics. The expected rate for each of the indicators is 
computed as the sum of the predicted value for each case divided by the 
number of cases for the unit of analysis of interest (that is, the 
hospital). The risk-adjusted rate for each of the indicators is 
computed using indirect standardization as the observed rate divided by 
the expected rate, multiplied by the reference population rate.\62\
---------------------------------------------------------------------------

    \62\ For more information regarding the Patient Safety and 
Adverse Events (Composite) measure's risk adjustment methodology, we 
refer readers to: http://www.qualityindicators.ahrq.gov/Downloads/Resources/Publications/2015/Empirical_Methods_2015.pdf.
---------------------------------------------------------------------------

    As stated above, the previously adopted eight-indicator version of 
the PSI 90 measure underwent an extended NQF maintenance re-endorsement 
in the 2014 NQF Patient Safety Committee due to concerns with the 
underlying component indicators and their composite weights. In its 
final report, the NQF Patient Safety Committee deferred their final 
decision for the PSI 90 measure until the following measure evaluation 
cycle.\63\ Following this report, AHRQ worked to address many of the 
NQF stakeholders' concerns about the PSI 90 measure, and subsequently 
completed NQF maintenance re-review and received re-endorsement on 
December 10, 2015. As a result of this process, the current PSI 90 
measure's NQF maintenance re-endorsement led to several changes to the 
measure, specifically: A change to the measure name; the addition of 
three indicators; the removal of one indicator; the re-specification of 
two indicators; and a revision to the weighting of component 
indicators.\64\ For more information on the proposed Patient Safety and 
Adverse Events (Composite) measure and component indicators, we refer 
readers to the Quality Indicators Empirical Methods available at: 
www.qualityindicators.ahrq.gov.
---------------------------------------------------------------------------

    \63\ National Quality Forum. NQF-Endorsed Measures for Patient 
Safety, Final Report. Available at: http://www.qualityforum.org/Publications/2015/01/NQF-Endorsed_Measures_for_Patient_Safety,_Final_Report.aspx.
    \64\ National Quality Forum QPS Measure Description for 
``Patient Safety for Selected Indicators (modified version of PSI 
90) (Composite Measure)'' found at: https://www.qualityforum.org/QPS/MeasureDetails.aspx?standardID=321&print=0&entityTypeID=3.
---------------------------------------------------------------------------

    We continue to believe the PSI 90 measure is an important measure 
of patient safety, addressing the NQS priority and CMS Quality Strategy 
goal to make care safer, and that these modifications help broaden and 
strengthen the measure. We expect inclusion of the Patient Safety and 
Adverse Events (Composite) measure in the Hospital VBP Program will 
encourage improvement in patient safety over the long-term for all 
hospitals. Conditions such as central line-associated blood stream 
infections, catheter-associated urinary tract infections, pressure 
ulcers, and other complications or conditions that arise after a 
patient was admitted to the hospital for the treatment of another 
condition are often preventable, and cost Medicare and the private 
sector billions of dollars each year and take a significant toll on 
patients and families. In most cases, hospitals can prevent these 
conditions when they follow protocols, procedures, and evidence-based 
guidelines. We anticipate the Patient Safety and Adverse Events 
(Composite) measure will provide actionable information and specific 
direction for prevention of patient safety events, because hospitals 
can track and monitor individual PSI rates and develop targeted 
improvements to patient safety using this measure data.\65\
---------------------------------------------------------------------------

    \65\ For further guidance on PSI monitoring and strategies for 
applying quality improvements to PSI data, we refer readers to the 
Toolkit for Using the AHRQ quality indicators available at: http://www.ahrq.gov/professionals/systems/hospital/qitoolkit/index.html.
---------------------------------------------------------------------------

    We are proposing to adopt the Patient Safety and Adverse Events 
(Composite) measure for the Hospital VBP Program beginning with the FY 
2023 program year because we believe the measure would continue to 
create strong incentives for hospitals to ensure that patients are not 
harmed by the medical care they receive, which is a critical 
consideration in quality improvement. We also are proposing that the 
measure would be added to the Safety domain, like the previously 
adopted PSI 90 measure that we are proposing to remove in section 
V.J.3.b. of the preamble of this proposed rule. The Patient Safety and 
Adverse Events (Composite) measure fulfills all statutory requirements 
for the Hospital VBP Program based on our adoption of that measure in 
the Hospital IQR Program and the anticipated posting of measure data on 
Hospital Compare at least 1 year prior to the start of the proposed 
measure performance period. The Patient Safety and Adverse Events 
(Composite) measure (MUC15-604) was included on the ``List of Measures 
Under Consideration for December 1, 2015'' \66\ and received support 
from the MAP, which noted the importance of safety measures for the 
Hospital VBP Program.\67\ Therefore, we are proposing to add the 
Patient Safety and Adverse Events (Composite) measure to the Safety 
domain for the FY 2023 program year and subsequent years.
---------------------------------------------------------------------------

    \66\ ``List of Measures Under Consideration for December 1, 
2015.'' Available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367.
    \67\ National Quality Forum, Measure Applications Partnership, 
``MAP 2016 Considerations for Implementing Measures in Federal 
Programs: Hospitals'' Final Report, (February 2016). Available at: 
http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_Hospitals.aspx.
---------------------------------------------------------------------------

    We are inviting public comment on this proposal.
5. Previously Adopted and Proposed Baseline and Performance Periods
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 
2016 IPPS/LTCH PPS final rule (80 FR 49561 through 49562) for the 
baseline and performance periods for the Clinical Care, Person and 
Community Engagement, Safety, and Efficiency and Cost Reduction domains 
that we have adopted for the FY 2018 program year. We refer readers to 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 56998 through 57003) for 
additional baseline and performance periods that we have adopted for 
the FY 2018, FY 2019, FY 2020, FY 2021 and FY 2022 program years. 
Although in past rulemaking we have proposed and adopted a new baseline 
and performance period for each program year for each measure in each 
final rule, in the FY 2017 IPPS/LTCH PPS final rule, we finalized a 
schedule for all future baseline and performance periods.
b. Person and Community Engagement Domain
    Since the FY 2015 program year, we have adopted a 12-month baseline

[[Page 19975]]

period and 12-month performance period for measures in the Person and 
Community Engagement domain (previously referred to as the Patient- and 
Caregiver-Centered Experience of Care/Care Coordination domain) (77 FR 
53598; 78 FR 50692; 79 FR 50072; 80 FR 49561). In the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 56998), we finalized our proposal to adopt a 12-
month performance period for the Person and Community Engagement domain 
that runs on the calendar year two years prior to the applicable 
program year and a 12-month baseline period that runs on the calendar 
year four years prior to the applicable program year, for the FY 2019 
program year and subsequent years.
    We are not proposing any changes to these policies.
c. Efficiency and Cost Reduction Domain
(1) MSPB Measure
    Since the FY 2016 program year, we have adopted a 12-month baseline 
period and 12-month performance period for the MSPB measure in the 
Efficiency and Cost Reduction domain (78 FR 50692; 79 FR 50072; 80 FR 
49562). In the FY 2017 IPPS/LTCH PPS final rule, we finalized our 
proposal to adopt a 12-month performance period for the MSPB measure 
that runs on the calendar year two years prior to the applicable 
program year and a 12-month baseline period that runs on the calendar 
year four years prior to the applicable program year for the FY 2019 
program year and subsequent years (81 FR 56998).
    We are not proposing any changes to these policies.
(2) AMI Payment and HF Payment Measures
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56999), we adopted a 
24-month performance period and a 36-month baseline period for the AMI 
Payment and HF Payment measures for the FY 2021 program year. We did so 
in order to adopt the measures as early as feasible into the Hospital 
VBP Program, and stated our belief that using a 24-month performance 
period rather than a 36-month performance period for the first program 
year of these measures would still enable us to accurately assess the 
quality of care provided by hospitals and would not substantially 
change a hospital's performance on the measure (81 FR 56998 through 
56999). We are not proposing any changes to the length of these 
performance or baseline periods for the FY 2021 program year.
    In the FY 2017 IPPS/LTCH PPS final rule, we also adopted a 36-month 
performance period and 36-month baseline period for the AMI Payment and 
HF Payment measures for the FY 2022 program year (81 FR 57000). We are 
not proposing any changes to the length of these performance or 
baseline periods for the FY 2022 program year.
    For the FY 2023 program year and subsequent years, we conclude it 
would be appropriate to use a 36-month performance period and 36-month 
baseline period for the AMI Payment and HF Payment measures as we have 
adopted for the FY 2022 program year. Therefore, for the FY 2023 
program year and subsequent years, we are proposing to adopt a 36-month 
performance period that runs from July 1st five years prior to the 
applicable fiscal program year to June 30th two years prior to the 
applicable fiscal program year. We also are proposing to adopt a 36-
month baseline period that runs from July 1, 10 years prior to the 
applicable fiscal program year, to June 30, 7 years prior to the 
applicable fiscal program year.
    We are inviting public comment on these proposals.
(3) Proposed PN Payment Measure in the FY 2022 Program Year
    As discussed in section V.J.4.a. of the preamble of this proposed 
rule, we are proposing to adopt the PN Payment measure beginning with 
the FY 2022 program year. In order to adopt this measure as early as 
feasible into the Hospital VBP Program, we are proposing to adopt a 36-
month baseline period and a 23-month performance period. We are 
proposing to adopt a 23-month performance period because we anticipate 
that the refined measure will not be posted on Hospital Compare for one 
year until July 2017. Therefore, for the FY 2022 program year, we are 
proposing to adopt a 23-month performance period that runs from August 
1, 2018 to June 30, 2020 and a baseline period that runs from July 1, 
2013 to June 30, 2016.
    We believe that using a 23-month performance period for the 
proposed PN Payment measure, rather than a 36-month performance period, 
in the FY 2022 program year would accurately assess the quality of care 
provided by hospitals and would not substantially change hospitals' 
performance on the measure. To determine the viability of using a 23-
month performance period to calculate the proposed PN Payment measure's 
scores, we compared the measure score reliability for a 24-month and 
36-month performance period. We calculated the Intraclass Correlation 
Coefficient (ICC) to determine the extent to which assessment of a 
hospital using different but randomly selected subsets of patients 
produces similar measures of hospital performance.\68\ We calculated 
the risk-standardized payment (RSP) using a random split-sample of a 
36-month performance period (we used July 1, 2013 through June 30, 
2016) and a random split-sample of a 24-month performance period (we 
used July 1, 2013 through June 30, 2015).
---------------------------------------------------------------------------

    \68\ Shrout P, Fleiss J. Intraclass Correlations: Uses in 
Assessing Rater Reliability. Psychol. Bull. Mar 1979;86(2):420-428.
---------------------------------------------------------------------------

    For both the 36-month and 24-month performance period, we obtained 
two RSPs for each hospital, using an entirely distinct set of patients 
from the same time period. If the RSPs for both the 36-month and 24-
month performance periods agree, we can demonstrate that the measure 
assesses the quality of the hospital rather than the types of patients 
treated. To calculate agreement between these measure subsets, we 
calculated the ICC (2,1) \69\ for both the 36-month and 24-month 
performance periods.
---------------------------------------------------------------------------

    \69\ Shrout P, Fleiss J. Intraclass Correlations: Uses in 
Assessing Rater Reliability. Psychol. Bull. Mar 1979;86(2):420-428.
---------------------------------------------------------------------------

    For the proposed PN Payment measure, there were 1,170,762 index 
admissions and 3,242 hospitals that met the minimum case threshold for 
reporting a measure result (at least 25 cases) in the 36-month 
performance period. There were 787,817 index admissions and 3,218 
hospitals that met the minimum case threshold for reporting a measure 
result in the 24-month performance period.
    For the 36-month performance period, the ICC for the two 
independent assessments of each hospital was 0.868. For the 24-month 
performance period, the ICC for the two independent assessments of each 
hospital was 0.834. Therefore, the data subsets showcase 
``substantial'' agreement of hospital performance, and we can 
demonstrate that, even with a shortened performance period, the 
proposed PN Payment measure assesses the quality of care provided at a 
hospital rather than the types of patients that these hospitals 
treat.\70\
---------------------------------------------------------------------------

    \70\ Landis J, Joch G. The Measurement of Observer Agreement for 
Categorical Data. Biometrics. Mar 1997;33(1):159-174.
---------------------------------------------------------------------------

    To assess whether using fewer than 36 months of data change the 
performance in the same hospital, we compared the percent change in a 
hospital's predicted/expected (P/E) ratio using 24 months of data. For 
hospitals that met the minimum case threshold in the 24-month 
performance period, the median percent change was 0.11 percent (with an 
interquartile range of -1.5 percent to 0.07 percent). These results 
suggest minimal difference in same-hospital

[[Page 19976]]

performance when using a 24-month measurement period. Based on these 
analyses, we are confident that using a 23-month performance period 
will result in reliable measure scores because our analysis 
demonstrates strong reliability at 24 months and we believe the change 
in available data due to a one month difference in the performance 
period is insufficient to substantially impact the measure's 
reliability.
    In summary, based on the analysis described above, we are confident 
that using a 23-month performance period, rather than 36-month 
performance period, for the initial performance period for this measure 
would accurately assess the quality of care provided by that hospital 
and would not substantially change the hospital's performance on that 
measure.
    We are inviting public comment on these proposals.
(4) Proposed PN Payment Measure in the FY 2023 Program Year
    We have stated in past rules that we would strive to adopt 36-month 
performance periods and baseline periods when possible to accommodate 
the time needed to process measure data and to ensure that we collect 
enough measure data for reliable performance scoring for all mortality 
measures (78 FR 50074; 79 FR 50057; and 80 FR 49588). While we cannot 
adopt a 36-month performance period for the FY 2023 program year 
because we anticipate that the refined measure will not be posted on 
Hospital Compare for 1 year until July 2017, we could lengthen the PN 
Payment measure performance period from 23 months to 35 months. As 
demonstrated above, our analysis of the proposed PN Payment measure 
indicates that the measure would produce reliable measure scores using 
24 months of data as well as 36 months of data. As such, we are 
confident they will also be reliable when calculated using 35 months of 
data for the performance period for the FY 2023 program year. 
Therefore, for the FY 2023 program year, we are proposing to adopt a 
35-month performance period that runs from August 1, 2018 to June 30, 
2021 and a 36-month baseline period that runs from July 1, 2013 to June 
30, 2016.
    We are inviting public comment on these proposals.
(5) Proposed PN Payment Measure in the FY 2024 Program Year and 
Subsequent Years
    For the FY 2024 program year and subsequent years, we believe it 
would be appropriate to use a 36-month performance period and 36-month 
baseline period for the PN Payment measure. Therefore, for the FY 2024 
program year and subsequent years, we are proposing to adopt a 36-month 
baseline period and a 36-month performance period for the proposed PN 
Payment measure. Specifically, we are proposing to adopt a 36-month 
performance period that runs from July 1, 5 years prior to the 
applicable fiscal program year, to June 30, 2 years prior to the 
applicable fiscal program year and a 36-month baseline period that runs 
from July 1, 10 years prior to the applicable fiscal program year, to 
June 30, 7 years prior to the applicable fiscal program year.
    We are inviting public comment on these proposals.
d. Safety Domain
(1) Previously Adopted Measures in the Safety Domain
    Since the FY 2016 program year, we have adopted a 12-month baseline 
period and 12-month performance period for all measures in the Safety 
domain, with the exception of the PSI 90 measure (78 FR 50692; 79 FR 
50071; 80 FR 49562). In the FY 2017 IPPS/LTCH PPS final rule, we 
finalized our proposal to adopt a performance period for all measures 
in the Safety domain--with the exception of the PSI 90 measure, as 
discussed in more detail below--that runs on the calendar year 2 years 
prior to the applicable program year and a baseline period that runs on 
the calendar year 4 years prior to the applicable program year for the 
FY 2019 program year and subsequent program years (81 FR 57000).
    We are not proposing any changes to these policies.
(2) Proposed Patient Safety and Adverse Events (Composite) Measure in 
the FY 2023 Program Year
    As discussed above in section V.J.3.b. of the preamble of this 
proposed rule, we are proposing to remove the currently adopted PSI 90 
measure beginning with the FY 2019 program year, and in section 
V.J.4.b. of the preamble of this proposed rule, we are proposing to 
adopt the Patient Safety and Adverse Events (Composite) measure 
beginning with the FY 2023 program year. In order to adopt the Patient 
Safety and Adverse Events (Composite) measure as early as feasible into 
the Hospital VBP Program, we are proposing to adopt a 21-month baseline 
period and 24-month performance period for the measure for the FY 2023 
program year. Specifically, we are proposing to adopt a performance 
period that runs from July 1, 2019 to June 30, 2021, and a baseline 
period that runs from October 1, 2015 to June 30, 2017. The 21-month 
baseline period would only apply to the FY 2023 program year and would 
only use ICD-10 data.
    Prior to deciding to propose an abbreviated baseline period for the 
FY 2023 program year, we took several factors into consideration, 
including the recommendations of the measure steward, the feasibility 
of using a combination of ICD-9 and ICD-10 data without the 
availability of the appropriate measure software, minimizing provider 
burden, program implementation timelines, and the reliability of using 
a shortened baseline period. We believe using a 21-month baseline 
period for the Patient Safety and Adverse Events (Composite) measure 
for the FY 2023 program year best serves the need to provide important 
information on hospital patient safety and adverse events by allowing 
sufficient time to process the claims data and calculate measure 
scores, while minimizing reporting burden and program disruption. We 
also believe that measure scores would continue to be reliable for the 
above proposed baseline period because the NQF, which re-endorsed the 
modified version of the measure that we are now proposing, found it to 
be reliable using 12 months of data.\71\
---------------------------------------------------------------------------

    \71\ ``Patient Safety 2015 Final Report'' is available at: 
http://www.qualityforum.org/Publications/2016/02/Patient_Safety_2015_Final_Report.aspx.
---------------------------------------------------------------------------

    We are inviting public comment on these proposals.
(3) Proposed Patient Safety and Adverse Events (Composite) Measure in 
the FY 2024 Program Year and Subsequent Years
    For the FY 2024 program year and subsequent years, we are proposing 
to lengthen the Patient Safety and Adverse Events (Composite) measure 
baseline period to 24 months and continue to adopt a 24-month 
performance period because we believe the measure is most reliable with 
a 24-month baseline period. For the FY 2024 program year, the baseline 
period would run from July 1, 2016 to June 30, 2018. Therefore, we are 
proposing to adopt a performance period that runs from July 1, 4 years 
prior to the applicable fiscal program year, to June 30, 2 years prior 
to the applicable fiscal program year, and a baseline period that runs 
from July 1, 8 years prior to the applicable program year, to June 30, 
6 years prior to the applicable program year.
    We are inviting public comment on these proposals.

[[Page 19977]]

e. Clinical Care Domain
(1) Previously Adopted Measures in the Clinical Care Domain
    For the FY 2019, FY 2020, and FY 2021 program years, we adopted a 
36-month baseline period and 36-month performance period for measures 
in the Clinical Care domain (78 FR 50692 through 50694; 79 FR 50073; 80 
FR 49563).\72\ In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57000), 
we finalized our proposal to adopt a 36-month performance period and 
36-month baseline period for the FY 2022 program year for each of the 
previously finalized measures in the Clinical Care domain--that is, the 
MORT-30-AMI, MORT-30-HF, MORT-30-COPD, THA/TKA, and MORT-30-CABG 
measures. We are now proposing to adopt a 36-month performance period 
and 36-month baseline period for these measures for the FY 2023 program 
year and subsequent years.
---------------------------------------------------------------------------

    \72\ The THA/TKA measure was added for the FY 2019 program year 
with a 36-month baseline period and a 24-month performance period 
(79 FR 50072), but we have since adopted 36-month baseline and 
performance periods for the FY 2021 program year (80 FR 49563). We 
intend to continue having 36-month baseline periods and 36-month 
performance periods in the future for all measures in the Clinical 
Care domain.
---------------------------------------------------------------------------

    Specifically, for the mortality measures (MORT-30-AMI, MORT-30-HF, 
MORT-30-COPD, and MORT-30-CABG), the performance period would run for 
36 months from July 1, 5 years prior to the applicable fiscal program 
year, to June 30, 2 years prior to the applicable fiscal program year, 
and the baseline period would run for 36 months from July 1, 10 years 
prior to the applicable fiscal program year, to June 30, 7 years prior 
to the applicable fiscal program year. For the THA/TKA measure, the 
performance period would run for 36 months from April 1, 5 years prior 
to the applicable fiscal program year, to March 31, 2 years prior to 
the applicable fiscal program year, and the baseline period would run 
for 36 months from April 1, 10 years prior to the applicable fiscal 
program year, to March 31, 7 years prior to the applicable fiscal 
program year.
    We are inviting public comment on these proposals.
(2) MORT-30-PN (Updated Cohort) Measure
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57001), we adopted a 
22-month performance period for the MORT-30-PN (updated cohort) measure 
and a 36-month baseline period for the FY 2021 program year. In the 
same final rule, we adopted a 34-month performance period and 36-month 
baseline period for the MORT-30-PN (updated cohort) measure for the FY 
2022 program year. We are not proposing any changes to the length of 
these performance or baseline periods for the FY 2021 and FY 2022 
program years.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57001), we also 
stated our intent to lengthen the MORT-30-PN (updated cohort) measure 
performance period to a full 36-month performance period beginning in 
July, instead of September. Therefore, we are now proposing to adopt a 
36-month performance period that would run from July 1, 5 years prior 
to the applicable fiscal program year, to June 30, 2 years prior to the 
applicable fiscal program year, and a 36-month baseline period that 
would run from July 1, 10 years prior to the applicable fiscal program 
year, to June 30, 7 years prior to the applicable fiscal program year 
for the MORT-30-PN (updated cohort) measure for the FY 2023 program 
year and subsequent years.
    We are inviting public comment on these proposals.
f. Summary of Previously Adopted and Proposed Baseline and Performance 
Periods for the FY 2019 through FY 2023 Program Years
    The tables below summarize the baseline and performance periods 
that we have previously adopted and are proposing to adopt in this 
proposed rule.

   Previously Adopted Baseline and Performance Periods for the FY 2019
                              Program Year
------------------------------------------------------------------------
             Domain                 Baseline period   Performance period
------------------------------------------------------------------------
Person and Community Engagement:
     HCAHPS Survey......   January     January
                                   1, 2015-December    1, 2017-December
                                   31, 2015.           31, 2017.
Clinical Care:
     Mortality (MORT-30-
     AMI, MORT-30-HF, MORT-30-
     PN).
     THA/TKA............   July 1,     July 1,
                                   2009-June 30,       2014-June 30,
                                   2012.               2017.
                                   July 1,     January
                                   2010-June 30,       1, 2015-June 30,
                                   2013.               2017.
Safety: *
     PC-01 and NHSN        January     January
     measures (CAUTI, CLABSI,      1, 2015-December    1, 2017-December
     SSI, CDI, MRSA).              31, 2015.           31, 2017.
Efficiency and Cost Reduction:
     MSPB...............   January     January
                                   1, 2015-December    1, 2017-December
                                   31, 2015.           31, 2017.
------------------------------------------------------------------------
* As discussed in section V.J.3.b. of the preamble of this proposed
  rule, we are proposing to remove the current PSI 90 measure beginning
  with the FY 2019 program year. As a result, the previously finalized
  performance and baseline periods for this measure are not included in
  this table.


   Previously Adopted Baseline and Performance Periods for the FY 2020
                              Program Year
------------------------------------------------------------------------
             Domain                 Baseline period   Performance period
------------------------------------------------------------------------
Person and Community Engagement:
     HCAHPS Survey......   January     January
                                   1, 2016-December    1, 2018-December
                                   31, 2016.           31, 2018.
Clinical Care:
     Mortality (MORT-30-   July 1,     July 1,
     AMI, MORT-30-HF, MORT-30-     2010-June 30,       2015-June 30,
     PN).                          2013.               2018.
     THA/TKA............   July 1,     July 1,
                                   2010-June 30,       2015-June 30,
                                   2013.               2018.
Safety: *
     PC-01 and NHSN        January     January
     measures (CAUTI, CLABSI,      1, 2016-December    1, 2018-December
     SSI, CDI, MRSA).              31, 2016.           31, 2018.

[[Page 19978]]

 
Efficiency and Cost Reduction:
     MSPB...............   January     January
                                   1, 2016-December    1, 2018-December
                                   31, 2016.           31, 2018.
------------------------------------------------------------------------
* As discussed in section V.J.3.b. of the preamble of this proposed
  rule, we are proposing to remove the current PSI 90 measure beginning
  with the FY 2019 program year. As a result, the previously finalized
  performance and baseline periods for this measure are not included in
  this table.


   Previously Adopted Baseline and Performance Periods for the FY 2021
                              Program Year
------------------------------------------------------------------------
             Domain                 Baseline period   Performance period
------------------------------------------------------------------------
Person and Community Engagement:
     HCAHPS Survey......   January     January
                                   1, 2017-December    1, 2019-December
                                   31, 2017.           31, 2019.
Clinical Care:
     Mortality (MORT-30-   July 1,     July 1,
     AMI, MORT-30-HF, MORT-30-     2011-June 30,       2016-June 30,
     COPD).                        2014.               2019.
     MORT-30-PN (updated   July 1,     September
     cohort).                      2012-June 30,       1, 2017-June 30,
                                   2015.               2019.
     THA/TKA............   April 1,    April 1,
                                   2011-March 31,      2016-March 31,
                                   2014.               2019.
Safety: *
     PC-01 and NHSN        January     January
     measures (CAUTI, CLABSI,      1, 2017-December    1, 2019-December
     SSI, CDI, MRSA).              31, 2017.           31, 2019.
Efficiency and Cost Reduction:
     MSPB...............   January     January
                                   1, 2017-December    1, 2019-December
                                   31, 2017.           31, 2019.
     Payment (AMI          July 1,     July 1,
     Payment and HF Payment).      2012-June 30,       2017-June 30,
                                   2015.               2019.
------------------------------------------------------------------------
* As discussed in section V.J.3.b. of the preamble of this proposed
  rule, we are proposing to remove the current PSI 90 measure beginning
  with the FY 2019 program year. As a result, the previously finalized
  performance and baseline periods for this measure are not included in
  this table.


Previously Adopted and Proposed Baseline and Performance Periods for the
                          FY 2022 Program Year
------------------------------------------------------------------------
             Domain                 Baseline period   Performance period
------------------------------------------------------------------------
Person and Community Engagement:
     HCAHPS Survey......   January     January
                                   1, 2018-December    1, 2020-December
                                   31, 2018.           31, 2020.
Clinical Care:
     Mortality (MORT-30-   July 1,     July 1,
     AMI, MORT-30-HF, MORT-30-     2012-June 30,       2017-June 30,
     COPD, MORT-30-CABG).          2015.               2020.
     MORT-30-PN (updated   July 1,     September
     cohort).                      2012-June 30,       1, 2017-June 30,
                                   2015.               2020.
     THA/TKA............   April 1,    April 1,
                                   2012-March 31,      2017-March 31,
                                   2015.               2020.
Safety: *
     PC-01 and NHSN        January     January
     measures (CAUTI, CLABSI,      1, 2018-December    1, 2020-December
     SSI, CDI, MRSA).              31, 2018.           31, 2020.
Efficiency and Cost Reduction:
     MSPB...............   January     January
                                   1, 2018-December    1, 2020-December
                                   31, 2018.           31, 2020.
     Payment (AMI          July 1,     July 1,
     Payment, HF Payment).         2012-June 30,       2017-June 30,
                                   2015.               2020.
     PN Payment **......   July 1,     August 1,
                                   2013-June 30,       2018-June 30,
                                   2016.               2020.
------------------------------------------------------------------------
* As discussed in section V.J.3.b. of the preamble of this proposed
  rule, we are proposing to remove the current PSI 90 measure beginning
  with the FY 2019 program year. As a result, the previously finalized
  performance and baseline periods for this measure are not included in
  this table.
** As discussed in section V.J.4.a. of the preamble of this proposed
  rule, we are proposing to adopt the PN Payment measure beginning with
  the FY 2022 program year.


Previously Adopted and Proposed Baseline and Performance Periods for the
                          FY 2023 Program Year
------------------------------------------------------------------------
             Domain                 Baseline period   Performance period
------------------------------------------------------------------------
Person and Community Engagement:
     HCAHPS Survey......   January     January
                                   1, 2019-December    1, 2021-December
                                   31, 2019.           31, 2021.
Clinical Care:
     Mortality (MORT-30-   July 1,     July 1,
     AMI, MORT-30-HF, MORT-30-     2013-June 30,       2018-June 30,
     COPD, MORT-30-CABG, MORT-30-  2016.               2021.
     PN (updated cohort).
     THA/TKA............   April 1,    April 1,
                                   2013-March 31,      2018-March 31,
                                   2016.               2021.
Safety:
     PC-01 and NHSN        January     January
     measures (CAUTI, CLABSI,      1, 2019-December    1, 2021-December
     SSI, CDI, MRSA).              31, 2019.           31, 2021.
     Patient Safety and    October     July 1,
     Adverse Events (Composite)    1, 2015-June 30,    2019-June 30,
     *.                            2017.               2021.
Efficiency and Cost Reduction:

[[Page 19979]]

 
     MSPB...............   January     January
                                   1, 2019-December    1, 2021-December
                                   31, 2019.           31, 2021.
     Payment (AMI          July 1,     July 1,
     Payment, HF Payment).         2013-June 30,       2018-June 30,
                                   2016.               2021.
     PN Payment **......   July 1,     August 1,
                                   2013-June 30,       2018-June 30,
                                   2016.               2021.
------------------------------------------------------------------------
* As discussed in section V.J.4.b. of the preamble of this proposed
  rule, we are proposing to adopt the Patient Safety and Adverse Events
  (Composite) measure beginning with the FY 2023 program year.
** As discussed in section V.J.4.a. of the preamble of this proposed
  rule, we are proposing to adopt the PN Payment measure beginning with
  the FY 2022 program year.

6. Proposed 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 no 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.
    We refer readers to the FY 2013, FY 2014, and FY 2015 IPPS/LTCH PPS 
final rules (77 FR 53604 through 53605; 78 FR 50694 through 50698; and 
79 FR 50077 through 50079, respectively) for a more detailed discussion 
of the general scoring methodology used in the Hospital VBP Program.
    We note that the performance standards for the following measures 
are calculated with lower values representing better performance:
     The NHSN measures (the CLABSI, CAUTI, CDI, Colon and the 
Abdominal Hysterectomy SSI, and MRSA Bacteremia measures);
     The THA/TKA measure;
     The PC-01 measure;
     The MSPB measure;
     The HF and AMI Payment measures;
     The proposed PN Payment measure; and
     The proposed Patient Safety and Adverse Events (Composite) 
measure.
    This distinction is made in contrast to other measures for which 
higher values indicate better performance.\73\ As discussed further in 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50684), the performance 
standards for the Colon and Abdominal Hysterectomy SSI measure are 
computed separately for each procedure stratum, and we 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.
---------------------------------------------------------------------------

    \73\ We note that the mortality measures in the Hospital VBP 
Program use survival rates rather than mortality rates; as a result, 
higher values indicate better performance on these measures.
---------------------------------------------------------------------------

b. Previously Adopted and Proposed Performance Standards for the FY 
2020 Program Year
    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 are proposing 
to adopt additional performance standards for the FY 2020 program year. 
We note that the numerical values for the performance standards 
displayed in this proposed rule, below, represented estimates based on 
the most recently available data, and we intend to update the numerical 
values in the FY 2018 IPPS/LTCH PPS final rule. We note further that 
the MSPB measure's performance standards are based on performance 
period data; therefore, we are unable to provide numerical equivalents 
for the standards at this time. These previously adopted and newly 
proposed performance standards for the measures in the FY 2020 program 
year are set out in the tables below.

 Previously Adopted and Proposed Performance Standards for the FY 2020 Program Year: Safety, Clinical Care, and
                                     Efficiency and Cost Reduction Domains 
----------------------------------------------------------------------------------------------------------------
        Measure short name                  Achievement threshold                        Benchmark
----------------------------------------------------------------------------------------------------------------
                                              Safety Domain [diams]
----------------------------------------------------------------------------------------------------------------
CAUTI *[dagger]..................  0.806.................................  0.000.
CLABSI *[dagger].................  0.797.................................  0.000.
CDI *[dagger]....................  0.876.................................  0.090.
MRSA Bacteremia *[dagger]........  0.794.................................  0.000.
Colon and Abdominal Hysterectomy    0.784........................   0.000.
 SSI *[dagger].                     0.775........................   0.000.
PC-01 *..........................  0.005952..............................  0.000000.
----------------------------------------------------------------------------------------------------------------
                                              Clinical Care Domain
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI .........  0.853715..............................  0.875869.

[[Page 19980]]

 
MORT-30-HF ..........  0.881090..............................  0.906068.
MORT-30-PN ..........  0.882266..............................  0.909532.
THA/TKA *............  0.032229..............................  0.023178.
----------------------------------------------------------------------------------------------------------------
                                      Efficiency and Cost Reduction Domain
----------------------------------------------------------------------------------------------------------------
MSPB *...............  Median Medicare Spending Per            Mean of the lowest decile Medicare
                                    Beneficiary ratio across all            Spending Per Beneficiary ratios
                                    hospitals during the performance        across all hospitals during the
                                    period.                                 performance period.
----------------------------------------------------------------------------------------------------------------
 As discussed in section V.J.3.b. of the preamble of this proposed rule, we are proposing to remove the current
  PSI 90 measure beginning with the FY 2019 program year. As a result, the previously finalized performance
  standards for this measure are not included in this table.
[diams] The performance standards displayed in this table for the Safety domain measures were calculated using
  one quarter (Q4) CY 2015 data and three quarters (Q1, Q2, and Q3) CY 2016 data. We will update this table's
  performance standards using four quarters of CY 2016 data in the final rule.
[dagger] In section III.F.2.e. of preamble of the FY 2016 IPPS/LTCH PPS final rule (80 FR 49544 thorough 49555),
  we finalized our proposal to use the CDC's new standard population data to calculate performance standards for
  the NHSN measures beginning with the FY 2019 program year. We refer readers to that final rule for additional
  information regarding the NHSN measures' standard population data. In addition, we note that a technical
  update was released for these measures for the FY 2019 program year in order to ensure that hospitals have the
  correct performance standards for the applicable performance period.
* Lower values represent better performance.
 Previously adopted performance standards.

    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 
79857), we discussed how the removal of the Pain Management dimension 
of the HCAHPS Survey, beginning with the FY 2018 program year, affects 
the scoring of the Person and Community Engagement domain. The eight 
dimensions of the HCAHPS measure are calculated to generate the HCAHPS 
Base Score. For each of the eight dimensions, Achievement Points (0-10 
points) and Improvement Points (0-9 points) are calculated, the larger 
of which is then summed across the eight dimensions to create the 
HCAHPS Base Score (0-80 points). Each of the eight dimensions is of 
equal weight, thus the HCAHPS Base Score ranges from 0 to 80 points. 
HCAHPS Consistency Points are then calculated, which range from 0 to 20 
points. The Consistency Points take into consideration the scores of 
all eight Person and Community Engagement dimensions; as noted above, 
the Pain Management dimension is not included in the scoring of this 
Domain. The final element of the scoring formula is the summation of 
the HCAHPS Base Score and the HCAHPS Consistency Points, which results 
in the Person and Community Engagement Domain score that ranges from 0 
to 100 points.

   Proposed Performance Standards for the FY 2020 Program Year: Person and Community Engagement Domain *
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                     HCAHPS survey dimension                           Floor         threshold       Benchmark
                                                                     (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Communication with Nurses.......................................           49.26           78.99           87.17
Communication with Doctors......................................           46.91           80.31           88.56
Responsiveness of Hospital Staff................................           35.92           65.16           80.05
Communication about Medicines...................................           23.44           63.41           73.94
Hospital Cleanliness & Quietness................................           37.21           65.81           79.29
Discharge Information...........................................           65.60           87.36           92.04
Care Transition.................................................           21.20           51.12           62.56
Overall Rating of Hospital......................................           35.46           71.35           85.01
----------------------------------------------------------------------------------------------------------------
* We renamed this domain from Patient- and Caregiver-Centered Experience of Care/Care Coordination domain to
  Person and Community Engagement domain beginning with the FY 2019 program year, as discussed in the FY 2017
  IPPS/LTCH PPS final rule (81 FR 56984).
 The performance standards displayed in this table were calculated using one quarter (Q4) CY 2015
  data and three quarters (Q1, Q2, and Q3) CY 2016 data. We will update this table's performance standards using
  four quarters of CY 2016 data in the final rule.

    We are inviting public comments on these proposed performance 
standards for the FY 2020 program year.
c. Previously Adopted Performance Standards for Certain Measures for 
the FY 2021 Program Year
    As discussed above, we have adopted certain measures for the 
Clinical Care and Efficiency and Cost Reduction domains 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 2016 IPPS/LTCH PPS final rule (80 FR 49567), we 
adopted performance standards for the FY 2021 program year for the 
Clinical Care domain measures (THA/TKA, MORT-30-HF, MORT-30-AMI, and 
MORT-30-COPD). In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57008), 
we adopted performance standards for the MORT-30-PN (updated cohort) 
measure (81 FR 57008) and the AMI Payment and HF Payment measures for 
the FY 2021 program year. We note that the performance standards for 
the MSPB, AMI Payment, and HF Payment measures are based on performance

[[Page 19981]]

period data; therefore, we are unable to provide numerical equivalents 
for the standards at this time. The previously adopted performance 
standards for these measures are set out in the table below.

                      Previously Adopted Performance Standards for the FY 2021 Program Year
----------------------------------------------------------------------------------------------------------------
        Measure short name                  Achievement threshold                        Benchmark
----------------------------------------------------------------------------------------------------------------
                                              Clinical Care Domain
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI .........  0.860355..............................  0.879714.
MORT-30-HF ..........  0.883803..............................  0.906144.
MORT-30-PN (updated cohort)        0.836122..............................  0.870506.
 [dagger].
MORT-30-COPD ........  0.923253..............................  0.938664.
THA/TKA *............  0.031157..............................  0.022418.
----------------------------------------------------------------------------------------------------------------
                                      Efficiency and Cost Reduction Domain
----------------------------------------------------------------------------------------------------------------
MSPB *...............  Median Medicare Spending Per            Mean of the lowest decile Medicare
                                    Beneficiary ratio across all            Spending Per Beneficiary ratios
                                    hospitals during the performance        across all hospitals during the
                                    period.                                 performance period.
AMI Payment *........  Median Hospital-Level, Risk-            Mean of the lowest decile Hospital-
                                    Standardized Payment Associated with    Level, Risk-Standardized Payment
                                    a 30-Day Episode-of-Care across all     Associated with a 30-Day Episode-of-
                                    hospitals during the performance        Care across all hospitals during the
                                    period.                                 performance period.
HF Payment *.........  Median Hospital-Level, Risk-            Mean of the lowest decile Hospital-
                                    Standardized Payment Associated with    Level, Risk-Standardized Payment
                                    a 30-Day Episode-of-Care across all     Associated with a 30-Day Episode-of-
                                    hospitals during the performance        Care across all hospitals during the
                                    period.                                 performance period.
----------------------------------------------------------------------------------------------------------------
 Previously adopted performance standards.
* Lower values represent better performance.
[dagger] After publication of the FY 2017 IPPS/LTCH PPS final rule, we determined there was a display error in
  the performance standards for this measure. We have since undertaken a technical update for these performance
  standards in order to ensure that hospitals have the correct performance standards for the applicable
  performance period. The corrected performance standards are displayed here.

d. Previously Adopted and Proposed Performance Standards for Certain 
Measures for the FY 2022 Program Year
    As discussed above, we have adopted certain measures for the 
Clinical Care and Efficiency and Cost Reduction domains 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 2017 IPPS/LTCH PPS final rule (81 FR 57009), we 
adopted performance standards for the FY 2022 program year for the 
Clinical Care domain measures (THA/TKA, MORT-30-HF, MORT-30-AMI, MORT-
30-PN (updated cohort), MORT-30-COPD, and MORT-30-CABG) and the 
Efficiency and Cost Reduction domain measures (AMI Payment and HF 
Payment). In section V.J.4.a. of the preamble of this proposed rule, we 
are proposing to add one measure, the PN Payment measure, beginning 
with the FY 2022 program year. We note that the performance standards 
for the MSPB, AMI Payment, HF Payment, and PN Payment measures are 
based on performance period data; therefore, we are unable to provide 
numerical equivalents for the standards at this time. The previously 
adopted and newly proposed performance standards for these measures are 
set out in the table below.

               Previously Adopted and Proposed Performance Standards for the FY 2022 Program Year
----------------------------------------------------------------------------------------------------------------
        Measure short name                  Achievement threshold                        Benchmark
----------------------------------------------------------------------------------------------------------------
                                              Clinical Care Domain
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI .........  0.861793..............................  0.881305.
MORT-30-HF ..........  0.879869..............................  0.903608.
MORT-30-PN (updated cohort) .
MORT-30-COPD ........  0.920058..............................  0.936962.
MORT-30-CABG [dagger]  0.968210..............................  0.979000.
THA/TKA *............  0.029833..............................  0.021493.
----------------------------------------------------------------------------------------------------------------

[[Page 19982]]

 
                                      Efficiency and Cost Reduction Domain
----------------------------------------------------------------------------------------------------------------
MSPB *...............  Median Medicare Spending Per            Mean of the lowest decile Medicare
                                    Beneficiary ratio across all            Spending Per Beneficiary ratios
                                    hospitals during the performance        across all hospitals during the
                                    period.                                 performance period.
AMI Payment *........  Median Hospital-Level, Risk-            Mean of the lowest decile Hospital-
                                    Standardized Payment Associated with    Level, Risk-Standardized Payment
                                    a 30[dash]Day Episode-of-Care across    Associated with a 30-Day Episode-of-
                                    all hospitals during the performance    Care across all hospitals during the
                                    period.                                 performance period.
HF Payment *.........  Median Hospital-Level, Risk-            Mean of the lowest decile Hospital-
                                    Standardized Payment Associated with    Level, Risk-Standardized Payment
                                    a 30[dash]Day Episode-of-Care across    Associated with a 30-Day Episode-of-
                                    all hospitals during the performance    Care across all hospitals during the
                                    period.                                 performance period.
PN Payment *....................  Median Hospital-Level, Risk-            Mean of the lowest decile Hospital-
                                    Standardized Payment Associated with    Level, Risk-Standardized Payment
                                    a 30-Day Episode-of-Care across all     Associated with a 30-Day Episode-of-
                                    hospitals during the performance        Care across all hospitals during the
                                    period.                                 performance period.
----------------------------------------------------------------------------------------------------------------
 Previously adopted performance standards.
[dagger] After publication of the FY 2017 IPPS/LTCH PPS final rule, we determined there was a display error in
  the performance standards for this measure. Specifically, the Achievement Threshold and Benchmark values,
  while accurate, were presented in the wrong categories. We have corrected this issue in the table above, and
  the correct performance standards are displayed here.
* Lower values represent better performance.
 Scored the same as the MSPB, AMI Payment, and HF Payment measures, as discussed in section V.J.4.a.(2) of the
  preamble of this proposed rule.

    We are inviting public comment on the proposed PN Payment measure 
performance standards for the FY 2022 program year.
e. Proposed Performance Standards for Certain Measures for the FY 2023 
Program Year
    As discussed above, we have adopted certain measures for the 
Clinical Care and Efficiency and Cost Reduction domains for future 
program years in order to ensure that we can adopt baseline and 
performance periods of sufficient length for performance scoring 
purposes. We are proposing the following performance standards for the 
FY 2023 program year for the Clinical Care domain measures (THA/TKA, 
MORT-30-AMI, MORT-30-HF, MORT-30-PN (updated cohort), MORT-30-COPD, and 
MORT-30-CABG) and for the Efficiency and Cost Reduction domain measures 
(MSPB, AMI Payment, HF Payment, and the proposed PN Payment measure). 
Although we are proposing to adopt the Patient Safety and Adverse 
Events (Composite) measure beginning with the FY 2023 program year, we 
do not currently have data available to calculate the performance 
standards; we therefore intend to propose the FY 2023 performance 
standards for this measure in next year's rulemaking. We note that the 
performance standards for the MSPB, AMI Payment, HF Payment, and PN 
Payment measures are based on performance period data; therefore, we 
are unable to provide numerical equivalents for the standards at this 
time. These newly proposed performance standards for these measures are 
set out in the table below.

                           Proposed Performance Standards for the FY 2023 Program Year
----------------------------------------------------------------------------------------------------------------
        Measure short name                  Achievement threshold                        Benchmark
----------------------------------------------------------------------------------------------------------------
                                              Clinical Care Domain
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI......................  0.866548..............................  0.885499.
MORT-30-HF.......................  0.881939..............................  0.906798.
MORT-30-PN (updated cohort)......  0.840138..............................  0.871741.
MORT-30-COPD.....................  0.919769..............................  0.936349.
MORT-30-CABG.....................  0.968747..............................  0.979620.
THA/TKA *........................  0.027428..............................  0.019779.
----------------------------------------------------------------------------------------------------------------

[[Page 19983]]

 
                                      Efficiency and Cost Reduction Domain
----------------------------------------------------------------------------------------------------------------
MSPB *...........................  Median Medicare Spending Per            Mean of the lowest decile Medicare
                                    Beneficiary ratio across all            Spending Per Beneficiary ratios
                                    hospitals during the performance        across all hospitals during the
                                    period.                                 performance period.
AMI Payment *...................  Median Hospital-Level, Risk-            Mean of the lowest decile Hospital-
                                    Standardized Payment Associated with    Level, Risk-Standardized Payment
                                    a 30-Day Episode-of-Care across all     Associated with a 30-Day Episode-of-
                                    hospitals during the performance        Care across all hospitals during the
                                    period.                                 performance period.
HF Payment *....................  Median Hospital-Level, Risk-            Mean of the lowest decile Hospital-
                                    Standardized Payment Associated with    Level, Risk-Standardized Payment
                                    a 30-Day Episode-of-Care across all     Associated with a 30-Day Episode-of-
                                    hospitals during the performance        Care across all hospitals during the
                                    period.                                 performance period.
PN Payment *....................  Median Hospital-Level, Risk-            Mean of the lowest decile Hospital-
                                    Standardized Payment Associated with    Level, Risk-Standardized Payment
                                    a 30-Day Episode-of-Care across all     Associated with a 30-Day Episode-of-
                                    hospitals during the performance        Care across all hospitals during the
                                    period.                                 performance period.
----------------------------------------------------------------------------------------------------------------
* Lower values represent better performance.
 Scored the same as the MSPB, AMI Payment, and HF Payment measures, as discussed in section V.J.4.a.(2) of the
  preamble of this proposed rule.

    We are inviting public comments on these proposed performance 
standards for the FY 2023 program year.
7. Scoring Methodology and Data Requirements for the FY 2019 Program 
Year and Subsequent Years
a. Proposed Domain Weighting for the FY 2020 Program Year and 
Subsequent Years for Hospitals That Receive a Score on All Domains
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49568 through 
49570), we adopted equal weight of 25 percent for each of the 4 domains 
in the FY 2018 program year for hospitals that receive a score in all 
domains. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57009 through 
57010), for the FY 2019 program year, we retained this domain 
weighting. We are not proposing any changes to the domain weights for 
the FY 2018 and FY 2019 program years.
    For the FY 2020 program year and subsequent years, we are proposing 
to retain this same domain weighting for hospitals receiving a score on 
all four domains. The previously adopted and newly proposed domain 
weighting is summarized in the table below.

  Domain Weights for the FY 2019 Program Year and Subsequent Years for
               Hospitals Receiving a Score on All Domains
------------------------------------------------------------------------
                                                                Weight
                           Domain                              (percent)
------------------------------------------------------------------------
Safety......................................................          25
Clinical Care...............................................          25
Efficiency and Cost Reduction...............................          25
Person and Community Engagement *...........................          25
------------------------------------------------------------------------
* We renamed this domain from Patient- and Caregiver-Centered Experience
  of Care/Care Coordination domain to Person and Community Engagement
  domain beginning with the FY 2019 program year, as discussed in
  section IV.H.3.b. of the FY 2017 IPPS/LTCH PPS final rule (81 FR
  56984).

    We are inviting public comment on this proposal.
b. Proposed Domain Weighting for the FY 2019 Program Year and 
Subsequent Years for Hospitals Receiving Scores on Fewer Than Four 
Domains
    For the FY 2017 program year and subsequent years, we adopted a 
policy that hospitals must receive domain scores on at least three of 
four quality domains in order to receive a TPS, and hospitals with 
sufficient data on only three domains will have their TPSs 
proportionately reweighted (79 FR 50084 through 50085). We are not 
proposing any changes to these domain weights for the FY 2019 program 
year or subsequent years.
    For a hospital to receive a TPS for the FY 2019 program year and 
subsequent years:
     Hospitals must report a minimum number of 100 completed 
HCAHPS surveys for a hospital to receive a Person and Community 
Engagement domain score.
     Hospitals must receive a minimum of one measure score 
within the Efficiency and Cost Reduction domain.
     Hospitals must receive a minimum of two measure scores 
within the Clinical Care domain.
     Hospitals must receive a minimum of two measure scores 
within the Safety domain.
    We are proposing two changes to our domain scoring policies for the 
FY 2019 program year and subsequent years. We are proposing to change 
the minimum number of measures scores a hospital must receive to 
receive a score on the Safety domain from three measures to two 
measures. Second, we are proposing that hospitals must receive a 
minimum of one measure score within the Efficiency and Cost Reduction 
domain to receive a domain score rather than requiring that hospitals 
meet the

[[Page 19984]]

requirements to receive a MSPB measure score.
    The proposed change to the Safety domain minimum number of measure 
scores is based on our proposal to remove the current PSI 90 measure 
from the Hospital VBP Program beginning with the FY 2019 program year. 
Based on our analyses, removing this measure but maintaining the 
requirement that a hospital receive three measure scores in order to 
receive a Safety Domain score would have a significant impact on the 
number of hospitals eligible to receive a Safety domain score. 
Therefore, in order to include the greatest number of hospitals in the 
Hospital VBP Program possible while ensuring the need for TPSs to be 
sufficiently reliable, we are proposing to reduce the minimum number of 
required measure scores within the Safety domain from three measures to 
two.
    In addition, we note that we are not proposing to reduce the number 
of measures a hospital must receive a score on in order to receive an 
Efficiency and Cost Reduction domain score. Under the current program 
requirements (79 FR 50086), a hospital must be eligible to receive a 
score on the MSPB measure in order to receive a score for this domain. 
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56987 through 56990 and 
81 FR 56990 through 56992), we adopted two condition-specific payment 
measures, the AMI Payment and HF Payment measures, beginning with the 
FY 2021 program year, and in section V.J.4.a. of the preamble of this 
proposed rule we are proposing to adopt one additional condition-
specific payment measure, the PN Payment measure. We are therefore 
proposing to require that hospitals must be eligible to receive a score 
on at least one measure within the Efficiency and Cost Reduction 
domain, rather than on the MSPB measure specifically, to reflect this 
expansion of the domain's measure set.
    We believe these proposed changes reflect the evolution of the 
Hospital VBP Program measure set, and we continue to believe that these 
requirements appropriately balance 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.
    We are inviting public comment on these proposals.
c. Minimum Numbers of Cases for Hospital VBP Program Measures for the 
FY 2019 Program Year and Subsequent Years
(1) Background
    Section 1886(o)(1)(C)(ii)(IV) of the Act requires the Secretary to 
exclude for the fiscal year hospitals that do not report a minimum 
number (as determined by the Secretary) of cases for the measures that 
apply to the hospital for the performance period for the fiscal year. 
Under section 1886(o)(1)(C)(iii) of the Act, in determining the minimum 
number of reported cases for a given measure, the Secretary must 
conduct an independent analysis of what minimum numbers would be 
appropriate. For additional discussion of the previously finalized 
minimum numbers of cases for measures under the Hospital VBP Program, 
we refer readers to the Hospital Inpatient VBP Program final rule (76 
FR 26527 through 26531); the CY 2012 OPPS/ASC final rule (76 FR 74532 
through 74534); the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 
through 53609); the FY 2015 IPPS/LTCH PPS final rule (79 FR 50085); the 
FY 2016 IPPS/LTCH PPS final rule (80 FR 49570); and the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57011).
(2) Person and Community Engagement Domain
    In the Hospital Inpatient VBP Program final rule (76 FR 26527 
through 26531), we adopted a minimum number of 100 completed HCAHPS 
Surveys for a hospital to receive a score on the HCAHPS measure.
    We are not proposing any changes to this policy.
(3) Clinical Care Domain
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74532 
through 74534), we adopted a minimum number of 10 cases for the MORT-
30-AMI, MORT-30-HF, and MORT-30-PN measures beginning with the FY 2014 
program year. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 
through 53609), we adopted a new minimum number of 25 cases for the 
MORT-30-AMI, MORT-30-HF, and MORT-30-PN measures for the FY 2015 
program year. We adopted the same 25-case minimum for the MORT-30-COPD 
measure in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49570), and for 
the MORT-30-CABG, MORT-30-PN (updated cohort), and THA/TKA measures in 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 57011).
    We are not proposing any changes to these policies.
(4) Safety Domain
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 
53609), we adopted a minimum of one predicted infection for NHSN-based 
surveillance measures (that is, the CAUTI, CLABSI, CDI, MRSA, and SSI 
measures) based on CDC's minimum case criteria. In the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50085), we adopted this case minimum for the 
NHSN-based surveillance measures FY 2016 Hospital VBP Program and 
subsequent years. In the FY 2012 IPPS/LTCH PPS final rule (76 FR 
26530), we adopted a minimum of 10 cases for the PC-01 measure.\74\
---------------------------------------------------------------------------

    \74\ We note that the PC-01 measure was previously included in 
the Clinical Care--Process domain. In the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49553 through 49554), we re-categorized this 
measure as a Safety domain measure beginning with the FY 2018 
program year.
---------------------------------------------------------------------------

    Beginning with the FY 2023 program year, we are proposing that 
hospitals must report a minimum of three eligible cases on any one 
underlying indicator during the baseline period in order to receive an 
improvement score and three eligible cases on any one underlying 
indicator during performance period in order to receive an achievement 
score on the Patient Safety and Adverse Events (Composite) measure. For 
the purposes of the Patient Safety and Adverse Events (Composite) 
measure, a case is ``eligible'' for a given indicator if it meets the 
criterion for inclusion in the indicator measure population. This 
minimum number of cases is based on AHRQ's methodology for scoring 
performance on the Patient Safety and Adverse Events (Composite) 
measure. We note that these proposed minimum data requirements for the 
Patient Safety and Adverse Events (Composite) measure are the same as 
those previously finalized for the current PSI 90 measure.
    We are inviting public comment on our proposal regarding the 
minimum number of cases for the Patient Safety and Adverse Events 
(Composite) measure.
(5) Efficiency and Cost Reduction Domain
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53609 through 
53610), we adopted a minimum of 25 cases in order to receive a score 
for the MSPB measure. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50085 through 50086), we retained the same MSPB measure case minimum 
for the FY 2016 program year and subsequent years.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56987 through 56990 
and 81 FR 56990 through 56992, respectively),

[[Page 19985]]

we adopted the AMI Payment and HF Payment measures in the Efficiency 
and Cost Reduction domain for the FY 2021 program year and subsequent 
years. In section V.J.4.a. of the preamble of this proposed rule, we 
are proposing to adopt the PN Payment measure in the Efficiency and 
Cost Reduction domain for the FY 2022 program year and subsequent 
years. For these condition-specific payment measures (namely, the AMI 
Payment and HF Payment measures, as well as the proposed PN Payment 
measure, if finalized), we are proposing that hospitals must report a 
minimum number of 25 cases per measure in order to receive a measure 
score for the FY 2021 program year, FY 2022 program year, and 
subsequent years. We believe this minimum number of cases is 
appropriate because it balances our interest in allowing the maximum 
possible number of hospitals the opportunity to receive a score on the 
measure and maintaining sufficiently reliable scores. As we noted in 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 56992), we expect this case 
minimum will ensure that each hospital's payment measure rate is 
sufficiently reliable to generate a score that meaningfully 
distinguishes hospital performance on the measures. In addition, the 
statistical model that CMS uses to calculate the payment measures 
allows for the inclusion of hospitals with relatively few cases by 
taking into account the uncertainty associated with sample size.
    We are inviting public comment on our proposal regarding the 
minimum number of cases for the AMI, HF, and PN Payment measures.
(6) Summary of Previously Adopted and Proposed Minimum Numbers of Cases 
for the FY 2019 Program Year and Subsequent Years
    These previously adopted and newly proposed minimum numbers of 
cases for these measures are set forth in the table below.

Previously Adopted and Proposed Minimum Case Number Requirements for the
                FY 2019 Program Year and Subsequent Years
------------------------------------------------------------------------
      Measure short name                Minimum number of cases
------------------------------------------------------------------------
                 Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS.......................  Hospitals must report a minimum number of
                                100 completed HCAHPS surveys.
------------------------------------------------------------------------
                          Clinical Care Domain
------------------------------------------------------------------------
MORT-30-AMI..................  Hospitals must report a minimum number of
                                25 cases.
MORT-30-HF...................  Hospitals must report a minimum number of
                                25 cases.
MORT-30-PN (updated cohort)..  Hospitals must report a minimum number of
                                25 cases.
MORT-30-COPD.................  Hospitals must report a minimum number of
                                25 cases.
MORT-30-CABG.................  Hospitals must report a minimum number of
                                25 cases.
THA/TKA......................  Hospitals must report a minimum number of
                                25 cases.
------------------------------------------------------------------------
                              Safety Domain
------------------------------------------------------------------------
CAUTI........................  Hospitals have a minimum of 1.000
                                predicted infections as calculated by
                                the CDC.
CLABSI.......................  Hospitals have a minimum of 1.000
                                predicted infections as calculated by
                                the CDC.
Colon and Abdominal            Hospitals have a minimum of 1.000
 Hysterectomy SSI.              predicted infections as calculated by
                                the CDC.
MRSA Bacteremia..............  Hospitals have a minimum of 1.000
                                predicted infections as calculated by
                                the CDC.
CDI..........................  Hospitals have a minimum of 1.000
                                predicted infections as calculated by
                                the CDC.
Patient Safety and Adverse     Hospitals must report a minimum of three
 Events (Composite) .          eligible cases on any one underlying
                                indicator.
PC-01........................  Hospitals must report a minimum of 10
                                cases.
------------------------------------------------------------------------
                  Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB.........................  Hospitals must report a minimum number of
                                25 cases.
AMI Payment..................  Hospitals must report a minimum number of
                                25 cases.
HF Payment...................  Hospitals must report a minimum number of
                                25 cases.
PN Payment *.................  Hospitals must report a minimum number of
                                25 cases.
------------------------------------------------------------------------
 As discussed in section V.J.3.b. of the preamble of this proposed
  rule, we are proposing to remove the current PSI 90 measure beginning
  with the FY 2019 program year. As discussed in section V.J.4.b. of the
  preamble of this proposed rule, we are proposing to adopt the Patient
  Safety and Adverse Events (Composite) measure beginning with the FY
  2023 program year.
* As discussed in section V.J.4.a. of the preamble of this proposed
  rule, we are proposing to adopt the PN Payment measure beginning with
  the FY 2022 program year.

d. Weighting Measures Within the Efficiency and Cost Reduction Domain
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51618 through 
51627), we adopted the MSPB measure for the Hospital VBP Program 
beginning with the FY 2015 program year. MSPB is the only cost measure 
in the Hospital VBP Program through the FY 2020 program year; as a 
result, hospitals' Efficiency and Cost Reduction domain scores are 
currently based solely on their MSPB measure scores. In the FY 2017 
IPPS/LTCH PPS final rule, we adopted two condition-specific cost 
measures, the AMI Payment and HF Payment measures, beginning with the 
FY 2021 program year (81 FR 56987 through 56990 and 81 FR 56990 through 
56992, respectively). In addition, as discussed in section V.J.4.a. of 
the preamble of this proposed rule, we are proposing to adopt an 
additional condition-specific cost measure, the PN Payment measure, 
beginning with the FY 2022 program year. Based on this evolution of the 
Hospital VBP Program measure set, we believe it is appropriate to 
address measure score weighting within the Efficiency and Cost 
Reduction domain.
    In determining how to weight measures in the Efficiency and Cost 
Reduction domain, we took into consideration hospitals' experience with 
the measures and the measures' ability to incentivize greater 
coordination among hospitals, physicians, and providers of post-acute 
care services to optimize the value of care they provide

[[Page 19986]]

to Medicare beneficiaries. Therefore, we are proposing to weight the 
measures within the Efficiency and Cost Reduction domain such that the 
MSPB measure comprises 50 percent of a hospital's domain score and the 
other condition-specific payment measures, weighed equally, comprise 
the remaining 50 percent of a hospital's domain score, beginning with 
the FY 2021 program year and for subsequent years. We further are 
proposing that:
     If a hospital meets the case minimum to receive a score on 
the MSPB measure but does not meet the minimum number of cases for any 
other measures in the Efficiency and Cost Reduction domain, its domain 
score will be based solely on its MSPB score;
     If a hospital does not meet the case minimum to receive a 
score on the MSPB measure but meets the minimum number of cases for any 
other measure or measures within the Efficiency and Cost Reduction 
domain, its domain score will be based on its scores on the other 
payment measures, weighted equally (that is, the MSPB measure's weight 
will be redistributed equally among the Efficiency and Cost Reduction 
domain measures for which the hospital is eligible receive a score); 
and
     If a hospital meets the case minimum to receive a score on 
the MSPB measure and one or more other measures within the Efficiency 
and Cost Reduction domain, but not all measures within this domain, the 
hospital's MSPB measure score will comprise 50 percent of its domain 
score and the remaining 50 percent will be divided equally among the 
measures for which the hospital is eligible to receive a score.
    Under our proposed weighting scheme, a hospital's MSPB measure 
score could constitute between 12.5 percent and 25 percent of the 
hospital's TPS. We believe the proposed weighting is appropriate 
because the MSPB measure is an overall spending measure and is 
therefore more broadly applicable than the condition-specific payment 
measures. In addition, hospitals have the most familiarity with this 
measure because it has been in the program the longest. We also 
considered proposing to weight all measures within the Efficiency and 
Cost Reduction domain equally. However, we determined this weighting 
may not reflect the broader applicability of the MSPB measure and its 
importance in ensuring that hospitals monitor the overall costs of care 
they provide to a larger subset of Medicare beneficiaries during an 
inpatient hospitalization and are involved in the coordination of 
beneficiaries' care immediately prior to hospitalization and post-
discharge.
    We are inviting public comment on these proposals.

K. Proposed 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. For a detailed discussion of the statutory basis 
of the HAC Reduction Program, we refer readers to section V.I.2. of the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50708 through 50709). For a 
further description of our previously finalized policies for the HAC 
Reduction Program, we refer readers to the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50707 through 50729), the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50087 through 50104), the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49570 through 49581), and the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57011 through 57026). 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 process 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 also have codified certain requirements of the HAC Reduction 
Program at 42 CFR 412.170 through 412.172.
2. Implementation of the HAC Reduction Program for FY 2018
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized 
the following Centers for Disease Control and Prevention (CDC) National 
Healthcare Safety Network (NHSN) measures for Domain 2 for use in the 
FY 2015 program and subsequent years: CLABSI, CAUTI, Colon and 
Abdominal Hysterectomy SSI, MRSA Bacteremia, and CDI. In the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57020), we finalized the use of the 
Patient Safety and Adverse Events Composite (PSI 90) measures for use 
in the FY 2018 program and subsequent years for Domain 1. These 
previously finalized measures are shown in the table below.

               HAC Reduction Program Measures for FY 2018
------------------------------------------------------------------------
            Short name                  Measure name           NQF #
------------------------------------------------------------------------
                                Domain 1
------------------------------------------------------------------------
PSI 90............................  Patient Safety and              0531
                                     Adverse Events
                                     Composite.
------------------------------------------------------------------------
                                Domain 2
------------------------------------------------------------------------
CAUTI.............................  NHSN Catheter-                  0138
                                     associated Urinary
                                     Tract Infection
                                     (CAUTI) Outcome
                                     Measure.
CDI...............................  NHSN Facility-wide              1717
                                     Inpatient Hospital-
                                     onset Clostridium
                                     difficile Infection
                                     (CDI) Outcome
                                     Measure.
CLABSI............................  NHSN Central Line-              0139
                                     Associated
                                     Bloodstream
                                     Infection (CLABSI)
                                     Outcome Measure.
Colon and Abdominal Hysterectomy    American College of             0753
 SSI.                                Surgeons--Centers
                                     for Disease Control
                                     and Prevention (ACS-
                                     CDC) Harmonized
                                     Procedure Specific
                                     Surgical Site
                                     Infection (SSI)
                                     Outcome Measure.
MRSA Bacteremia...................  NHSN Facility-wide              1716
                                     Inpatient Hospital-
                                     onset Methicillin-
                                     resistant
                                     Staphylococcus
                                     aureus (MRSA)
                                     Bacteremia Outcome
                                     Measure.
------------------------------------------------------------------------

    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57022), we finalized 
a 15-month performance period from July 1, 2014 through September 30, 
2015, for the Domain 1 measure (PSI 90 Patient Safety and Adverse 
Events Composite) and a 24-month performance period from January 1, 
2015 through December 31, 2016 (CYs 2015 and 2016) for

[[Page 19987]]

Domain 2 measures (CLABSI, CAUTI, Colon and Abdominal Hysterectomy SSI, 
MRSA Bacteremia, and CDI) for the FY 2018 HAC Reduction Program. We 
anticipate we will be able to provide hospitals with their confidential 
hospital-specific reports and discharge level information used in the 
calculation of their FY 2018 Total HAC Score in late summer 2017 via 
the QualityNet Secure Portal.\75\ In order to access their hospital-
specific reports, hospitals must register for a QualityNet Secure 
Portal account. We did not make any changes to the review and 
correction policies for FY 2017. 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.
---------------------------------------------------------------------------

    \75\ Available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetBasic&cid=1228773343598.
---------------------------------------------------------------------------

    In this proposed rule, for the HAC Reduction Program, we are: (1) 
Proposing to specify the dates of the time period used to calculate 
hospital performance for the FY 2020 HAC Reduction Program; (2) 
requesting comments on additional measures for potential future 
adoption; (3) requesting comments on social risk factors; (4) 
requesting comments on accounting for disability and medical complexity 
in the CDC NHSN measures in Domain 2; and (5) proposing to update the 
Extraordinary Circumstance Exception policy beginning in FY 2018 as 
related to extraordinary circumstances that occur on or after October 
1, 2017. These proposals are described in more detail below.
3. Proposed Data Collection Time Periods for the FY 2020 HAC Reduction 
Program
    Section 1886(p)(4) of the Act gives the Secretary the statutory 
authority to determine the ``applicable period'' during which data are 
collected for the HAC Reduction Program. In the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50717), we finalized and codified at 42 CFR 412.170 
that we would use a 2-year time period of performance data to calculate 
the Total HAC Score. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57020), we finalized a truncated data collection period for Domain 1, 
shorter than the previous 2-year data collection period for calculating 
the Total HAC Score for the FY 2018 and FY 2019 HAC Reduction Programs, 
in order to accommodate the transition to the ICD-10 classification 
system. We also changed the definition of ``applicable period,'' in 42 
CFR 412.170, to reflect this change.
    For the FY 2020 program, we are proposing to return to a two-year 
time period for the calculation of HAC Reduction Program measure 
results. We believe that using 2 years of data for both domains 
balances the needs of the program and allows for sufficient time to 
process the claims data and calculate the measure results. The 2-year 
time period allows time to complete the complex calculation process for 
the measures, to perform comprehensive quality assurance to enhance the 
accuracy of measure results, and to disseminate confidential reports on 
hospital-level results to individual hospitals. For the Domain 1 
measure (Patient Safety and Adverse Events Composite), we are proposing 
to use the 24-month period from July 1, 2016 through June 30, 2018. The 
claims for all Medicare Fee-for-Service beneficiaries discharged during 
this period would be included in the calculations of measure results 
for Domain 1 for the FY 2020 program. For the CDC NHSN measures in 
Domain 2 (CLABSI, CAUTI, Colon and Abdominal Hysterectomy SSI, MRSA 
Bacteremia, and CDI), we are proposing to use data from CYs 2017 and 
2018, that is January 1, 2017--December 31, 2018, for the FY 2020 
program.
4. Request for Comments on Additional Measures for Potential Future 
Adoption
    In the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25123), we 
welcomed public comment and suggestions for additional HAC Reduction 
Program measures. We believe that our continued efforts to reduce HACs 
are vital to improving patients' quality of care and reducing 
complications and mortality, while simultaneously decreasing costs. The 
reduction of HACs is an important marker of quality of care and has a 
positive impact on both patient outcomes and cost of care. Our goal for 
the HAC Reduction Program is to heighten the awareness of HACs and 
reduce the number of incidences that occur.
    As part of our ongoing efforts to evaluate and strengthen the HAC 
Reduction Program, we are conducting a review of patient safety 
measures to include in Domain 1. We seek to adopt outcomes-focused 
patient-safety measures that focus on topic areas including but not 
limited to: Falls with injury, adverse drug events (ADEs), glycemic 
events and ventilator associated events (VAEs). NQF identified these as 
gap areas for the HAC Reduction Program.\76\
---------------------------------------------------------------------------

    \76\ The National Quality Forum. NQF: MAP hospital Workgroup--
materials. October 18, 2016 http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75369.
---------------------------------------------------------------------------

    We note that falls are frequent in the inpatient setting. An 
estimated 700,000 to 1 million inpatients fall each year in U.S. 
hospitals.\77\ These falls can result in further health care 
complications for patients, and add costs by increasing the need for 
expensive imaging, like head computed-tomography scans.\78\ Risk 
assessment is the primary tool for preventing falls \79\ and research 
has indicated that inpatient fall prevention programs with patient 
education components are effective in reducing fall rates.\80\
---------------------------------------------------------------------------

    \77\ Sonnad, S. S., S. Mascioli, J. Cunningham, and J. Goldsack. 
``Do Patients Accurately Perceive their Fall Risk?'' Nursing, vol. 
44, no. 11, 2014, pp. 58-62.
    \78\ Fields, J., T. Alturkistani, N. Kumar, A. Kanuri, D. N. 
Salem, S. Munn, and D. Blazey-Martin. ``Prevalence and cost of 
imaging in inpatient falls: the rising cost of falling.'' 
ClinicoEconomics and Outcomes Research, vol. 7, 2015, pp. 281-286.
    \79\ Callis, N. ``Falls Prevention: Identification of Predictive 
Fall Risk Factors.'' Applied Nursing Research, vol. 29, 2016, pp. 
53-58.
    \80\ Lee, D.A., E. Pritchard, F. McDermott, and T. P. Haines. 
``Falls Prevention Education for Older Adults during and After 
Hospitalization: A Systematic Review and Meta-Analysis.'' Health 
Education Journal, vol. 73, no. 5, 2014, pp. 530-544.
---------------------------------------------------------------------------

    ADEs are a frequent and preventable occurrence among hospital 
inpatients. They pose serious threats to patient safety and can result 
in prolonged hospitalization, increased morbidity and higher health 
care costs.\81\
---------------------------------------------------------------------------

    \81\ Martins, A. C., F. Giordani, and S. Rozenfeld. ``Adverse 
Drug Events among Adult Inpatients: A Meta-Analysis of Observational 
Studies.'' Journal of Clinical Pharmacy and Therapeutics, vol. 39, 
no. 6, 2014, pp. 609-620.
---------------------------------------------------------------------------

    Glycemic events, a common occurrence among inpatients, are 
associated with a greater risk of negative health outcomes.\82\ Many 
guidelines exist to support glycemic control in hospitalized patients. 
The most common guideline recommendations include documenting diabetes 
diagnosis, obtaining a hemoglobin A1C on admission, use of the ``basal-
bolus'' method for insulin delivery, discontinuation of noninsulin 
agents for non-ICU patients with type 2 diabetes, and use of 
standardized order sets.\83\
---------------------------------------------------------------------------

    \82\ Kilpatrick, C. R., M. B. Elliott, E. Pratt, S. J. Schafers, 
M. C. Blackburn, K. Heard, J. B. Mcgill, M. Thoelke, and G. S. 
Tobin. ``Prevention of Inpatient Hypoglycemia with a Real-Time 
Informatics Alert.'' Journal of Hospital Medicine, vol. 9, no. 10, 
2014, pp. 621-626.
    \83\ Maynard, G., K. Kulasa, P. Ramos, D. Childers, B. Clay, M. 
Sebasky, E. Fink, A. Field, M. Renvall, P. S. Juang, C. Choe, D. 
Pearson, B. Serences, and S. Lohnes. ``Impact of a hypoglycemia 
reduction bundle and a systems approach to inpatient glycemic 
management.'' Endocrine Practice, vol. 21, no. 4, 2015, pp. 355-367.

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

[[Page 19988]]

    Mechanically ventilated patients are at greater risk for VAEs, 
which can result in morbidity and death.\84\ VAEs include ventilator 
associated pneumonia (VAP) and preventable adverse events, such as 
pulmonary edema and acute respiratory distress syndrome. VAP continues 
to rank among the most common HACs and effective prevention strategies 
for VAP include early removal of invasive devices and strict infection 
control and prevention efforts should target these high-risk 
groups.\85\
---------------------------------------------------------------------------

    \84\ Resetar, E., K. M. McMullen, A. J. Russo, J. A. Doherty, K. 
A. Gase, and K. F. Woeltje. Development, ``Implementation and Use of 
Electronic Surveillance for Ventilator Associated Events (VAE) in 
Adults.'' AMIA Annual Symposium Proceedings, 2014, pp. 1010-1017.
    \85\ Mendoza, C., and S. Patel. ``Antimicrobial Therapy for 
Hospital-Acquired Pneumonia.'' U.S. Pharmacist, vol. 41, no. 7, 
2016, pp. HS11-15.
---------------------------------------------------------------------------

    Our overarching purpose is to support the National Quality 
Strategy's three-part aim of better health care for individuals, better 
health for populations, and lower costs for health care.\86\ To the 
extent practicable, HAC Reduction Program measures should be nationally 
endorsed by a multi-stakeholder organization. Measures should be 
aligned with best practices among other payers and the needs of the end 
users of the measures. Measures should take into account widely 
accepted criteria established in medical literature.
---------------------------------------------------------------------------

    \86\ About the National Quality Strategy, https://www.ahrq.gov/workingforquality/about.htm#aims.
---------------------------------------------------------------------------

    We welcome public comments and suggestions on these measure areas, 
as well as additional outcome-based patient-safety measures that will 
help achieve the program goals.
5. Accounting for Social Risk Factors in the HAC Reduction Program
    We understand that social risk factors such as income, education, 
race and ethnicity, employment, disability, community resources, and 
social support (certain factors of which are also sometimes referred to 
as socioeconomic status (SES) factors or socio-demographic status (SDS) 
factors) play a major role in health. One of our core objectives is to 
improve beneficiary outcomes, including reducing health disparities, 
and we want to ensure that all beneficiaries, including those with 
social risk factors, receive high quality care. In addition, we seek to 
ensure that the quality of care furnished by providers and suppliers is 
assessed as fairly as possible under our programs while ensuring that 
beneficiaries have adequate access to excellent care.
    We have been reviewing reports prepared by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) \87\ and the 
National Academies of Sciences, Engineering, and Medicine on the issue 
of accounting for social risk factors in CMS' value-based purchasing 
and quality reporting programs, and considering options on how to 
address the issue in these programs. On December 21, 2016, ASPE 
submitted a report to Congress on a study it was required to conduct 
under section 2(d) of the Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014. The study analyzed the effects of 
certain social risk factors in Medicare beneficiaries on quality 
measures and measures of resource use used in one or more of nine 
Medicare value-based purchasing programs, including the HAC Reduction 
Program.\88\ The report also included considerations for strategies to 
account for social risk factors in these programs. In a January 10, 
2017 report released by the National Academies of Sciences, 
Engineering, and Medicine, that body provided various potential methods 
for measuring and accounting for social risk factors, including 
stratified public reporting.\89\
---------------------------------------------------------------------------

    \87\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \88\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \89\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press.
---------------------------------------------------------------------------

    As noted in the FY 2017 IPPS/LTCH PPS final rule, the NQF has 
undertaken a 2-year trial period in which certain new measures, 
measures undergoing maintenance review, and measures endorsed with the 
condition that they enter the trial period can be assessed to determine 
whether risk adjustment for selected social risk factors is appropriate 
for these measures. This trial entails temporarily allowing inclusion 
of social risk factors in the risk-adjustment approach for these 
measures. At the conclusion of the trial, NQF will issue 
recommendations on the future inclusion of social risk factors in risk 
adjustment for these quality measures, and we will closely review its 
findings.
    We note that measures in the HAC Reduction Program, generally, 
represent never events,\90\ and are often preventable conditions like 
central line associated bloodstream infections, catheter associated 
urinary tract infections, and other complications or conditions that 
arise after a patient was admitted to the hospital for the treatment of 
another condition. We believe these events should not be influenced by 
social risk factors; instead, they are risk-adjusted for factors listed 
in specifications for the AHRQ and CDC. Currently, risk factors such as 
the patient's age, gender, comorbidities, and complications are 
considered in the calculation of the measure rates so that they account 
for the clinical differences in the patients served by hospitals. Our 
measures continually undergo maintenance to determine the need for 
updated specifications, and to monitor for trends and any relevant 
risk-adjustment changes needed for the measures. We remind readers 
that, beginning for payments made in FY 2018, we adopted the modified 
PSI 90: Patient Safety and Adverse Events Composite (NQF #0531); the 
composite was revised to reflect the relative importance and harm 
associated with each component indicator, and to provide a more 
reliable and valid signal of patient safety events (81 FR 57020). We 
also adopted a continuous scoring approach in the HAC Reduction Program 
that brings our scoring domains into alignment each other, essentially 
eliminates ties in Total HAC Scores, reduces effects on outliers, and 
enhances the ability to distinguish among hospitals of varying quality 
(81 FR 57025).
---------------------------------------------------------------------------

    \90\ The term ``Never Event'' was first introduced in 2001 by 
Ken Kizer, MD, former CEO of the National Quality Forum (NQF), in 
reference to particularly shocking medical errors (such as wrong-
site surgery) that should never occur. Over time, the list has been 
expanded to signify adverse events that are unambiguous (clearly 
identifiable and measurable), serious (resulting in death or 
significant disability), and usually preventable. The NQF initially 
defined 27 such events in 2002. The list has been revised since 
then, most recently in 2011, and now consists of 29 events grouped 
into 6 categories: surgical, product or device, patient protection, 
care management, environmental, radiologic, and criminal. Never 
Events, https://psnet.ahrq.gov/primers/primer/3/never-events, 
accessed on February 22, 2017.
---------------------------------------------------------------------------

    As we continue to consider the analyses and recommendations from 
these reports and await the results of the NQF trial on risk adjustment 
for quality measures, we are continuing to work with stakeholders in 
this process. As we have previously communicated, we are concerned 
about holding providers to different standards for the outcomes of 
their patients with social risk factors because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes 
for disadvantaged populations. Keeping this concern in mind, while we 
sought input on this topic previously, we

[[Page 19989]]

continue to seek public comment on whether we should account for social 
risk factors in the HAC Reduction Program, and if so, what method or 
combination of methods would be most appropriate for accounting for 
social risk factors. Examples of methods include: Adjustment of the 
payment adjustment methodology under the HAC Reduction Program; 
adjustment of provider performance scores (for instance, stratifying 
providers based on the proportion of their patients who are dual 
eligible); confidential reporting of stratified measure rates to 
providers; public reporting of stratified measure rates; risk 
adjustment of a particular measure as appropriate based on data and 
evidence; and redesigning payment incentives (for instance, rewarding 
improvement for providers caring for patients with social risk factors 
or incentivizing providers to achieve health equity).
    We note that in section V.I.9. of the preamble of this proposed 
rule, we discuss considerations for stratifying hospitals into peer 
groups for purposes of assessing payment adjustments under the Hospital 
Readmissions Reduction Program, as required under the 21st Century 
Cures Act. We refer readers to that section for a detailed discussion 
of these alternatives; while this discussion and corresponding proposal 
are specific to the Hospital Readmissions Reduction Program, they 
reflect the level of analysis we would undertake when evaluating 
methods and combinations of methods for accounting for social risk 
factors in CMS' other value-based purchasing programs, such as the HAC 
Reduction Program. While we consider whether and to what extent we 
currently have statutory authority to implement one or more of the 
above-described methods, we are seeking comments on whether any of 
these methods should be considered, and if so, which of these methods 
or combination of methods would best account for social risk factors in 
the HAC Reduction Program.
    In addition, we are also seeking public comment on which social 
risk factors might be most appropriate for stratifying measure scores 
and/or potential risk adjustment of a particular measure. Examples of 
social risk factors include, but are not limited to, dual eligibility/
low-income subsidy, race and ethnicity, and geographic area of 
residence. We are seeking comments on which of these factors, including 
current data sources where this information would be available, could 
be used alone or in combination, and whether other data should be 
collected to better capture the effects of social risk. We will take 
commenters' input into consideration as we continue to assess the 
appropriateness and feasibility of accounting for social risk factors 
in the HAC Reduction Program. We note that any such changes would be 
proposed through future notice-and-comment rulemaking.
    We look forward to working with stakeholders as we consider the 
issue of accounting for social risk factors and reducing health 
disparities in CMS programs. Of note, implementing any of the above 
methods would be taken into consideration in the context of how this 
and other CMS programs operate (for example, data submission methods, 
availability of data, statistical considerations relating to 
reliability of data calculations, among others), so we also welcome 
comment on operational considerations. CMS is committed to ensuring 
that its beneficiaries have access to and receive excellent care, and 
that the quality of care furnished by providers and suppliers is 
assessed fairly in CMS programs.
6. Request for Comments on Inclusion of Disability and Medical 
Complexity for CDC NHSN Measures
    The intent of the HAC Reduction Program is to encourage all 
hospitals to reduce the incidence of HACs. We continue to believe 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 account for the different patient 
populations that hospitals service, target important quality 
improvement areas. In its IMPACT Act report,\91\ ASPE suggested payment 
strategies to improve the HAC Reduction Program. ASPE noted that it is 
well-proven that higher levels of medical risk are associated with a 
higher risk for many (although not all) patient safety events, 
particularly infections.\92\ For example, diabetes is associated with 
roughly 70 percent higher odds of surgical site infections and 
diabetes, pulmonary disease, renal failure, and exposure to nursing 
homes are associated with a higher risk of MRSA.\93\ Many of the same 
medical factors also confer a higher risk of C. diff. infection, as 
well as CAUTI and CLABSI.\94\
---------------------------------------------------------------------------

    \91\ ASPE, ``Report to Congress: Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs.'' 21 
Dec 2016. Available at: https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \92\ Ibid. 102.
    \93\ Ibid. 102.
    \94\ Ibid. 102.
---------------------------------------------------------------------------

    ASPE suggested that patient-level clinical data from the CDC 
healthcare-associated infection (HAI) measures should be examined and 
considered for additional risk adjustment.\95\ ASPE also noted that the 
clinical risk-adjustment of the patient safety and hospital-acquired 
infection measures should be improved to ensure the measures adequately 
adjust for differences in patients' clinical risk, so that fair 
comparisons for hospital accountability and performance assessment can 
be made to hold providers to the same fair standard.\96\ ASPE 
recommended additional analyses for measure developers such as AHRQ and 
CDC to determine whether adjusting key components of the patient safety 
or HAI measures (for example frailty, functional limitations, prior 
hospitalizations or nursing home residence, or other markers of immune 
system deficiencies or unmeasured medical complexity) may better 
account for susceptibility to infection and patient safety events.\97\
---------------------------------------------------------------------------

    \95\ Ibid. 135.
    \96\ Ibid. 136.
    \97\ Ibid. 136.
---------------------------------------------------------------------------

    Based on ASPE's analysis and considerations, we are requesting 
stakeholder feedback on risk-adjusting the CDC NHSN measures for 
disability or medical complexity. Although we are not proposing any 
specific changes to the measures at this time, we will consider all 
comments as a guide to potential future action.
7. Maintenance of Technical Specifications for Quality Measures
    Technical specifications for Patient Safety and Adverse Events 
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. 
We are not proposing any changes to this policy at this time.

[[Page 19990]]

8. Extraordinary Circumstance Exception (ECE) Policy for the HAC 
Reduction Program
    Many of our quality reporting and value-based purchasing programs 
share a common process for requesting an exception from program 
reporting due to an extraordinary circumstance not within a provider's 
control. The Hospital IQR, Hospital OQR, IPFQR, ASCQR, and PCHQR 
Programs, as well as the Hospital Readmissions Reduction Program, share 
common processes for Extraordinary Circumstance Exception (ECE) 
requests. In reviewing the policies for these programs, we recognized 
that there are five areas in which these programs have variance 
regarding ECE requests. These are: (1) Allowing the facilities or 
hospitals to submit a form signed by the facility's or hospital's CEO 
versus CEO or designated personnel; (2) requiring the form be submitted 
within 30 days following the date that the extraordinary circumstance 
occurred versus within 90 days following the date the extraordinary 
circumstance occurred; (3) inconsistency regarding specification of a 
timeline for us to provide our formal response notifying the facility 
or hospital of our decision; (4) inconsistency regarding specification 
of our authority to grant ECEs due to CMS data system issues; and (5) 
referring to the program as ``extraordinary extensions/exemptions'' 
versus as ``extraordinary circumstances exceptions.'' We believe 
addressing these five areas, as appropriate, can improve administrative 
efficiencies for affected facilities or hospitals.
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49579 through 
49581), we adopted an ECE policy for the HAC Reduction Program 
beginning in FY 2016. This policy was similar to the ECE 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 
42 CFR 412.140(c)(2) to refer to ``extension or exemption'' instead of 
the former ``extension or waiver''). In section IX.A.15. of the 
preamble of this proposed rule, we are proposing to amend the Hospital 
IQR Program regulations at 42 CFR 412.140(c)(2) to refer to 
``extraordinary circumstances exceptions'' and we will continue to use 
this nomenclature for the HAC Reduction Program.
    We are proposing to modify the ECE policy for the HAC Reduction 
Program by: (1) Allowing the facility to submit a form signed by the 
facility's CEO or designated personnel; (2) specifying that we will 
strive to provide our formal response notifying the facility of our 
decision within 90 days of receipt of the facility's request; and (3) 
specifying that CMS may grant ECEs due to CMS data system issues which 
affect data submission. These proposed modifications generally align 
with policies in the Hospital IQR Program (76 FR 51651 through 51652; 
78 FR 50836 through 50837; and 81 FR 57181 through 57182), the Hospital 
OQR Program (77 FR 68489 and 81 FR 79795), as well as other quality 
reporting programs. We are proposing that these modifications would 
apply beginning in FY 2018 as related to extraordinary circumstances 
that occur on or after October 1, 2017.
    We note that there may be circumstances in which it is not feasible 
for a facility's CEO to sign the ECE request form. In these 
circumstances, we believe that facilities affected by such 
circumstances should be able to submit ECE forms regardless of the 
CEO's availability to sign. Therefore, the first proposed modification 
would allow any hospital to designate an appropriate, non-CEO, contact 
at its discretion. This individual would be responsible for the 
submission, and would be the one signing the form. We would accept ECE 
forms which have been signed by designated personnel.
    We also believe that it is important for facilities to receive 
timely feedback regarding the status of ECE requests. We strive to 
complete our review of each ECE request as quickly as possible. 
However, we recognize that the number of requests we receive, and the 
complexity of the information provided impacts the actual timeframe to 
make ECE determinations. To improve transparency of our process, we 
believe it is appropriate to clarify that we will strive to provide our 
response within 90 days of receipt.
    Although we do not anticipate this situation will happen on a 
regular basis, there may be times where CMS experiences issues with its 
data systems that directly affects facilities' abilities to submit 
data. In these cases, we believe it would be inequitable to require 
facilities to report. Therefore, we are proposing to allow CMS to grant 
ECEs to facilities if we determine that a systemic problem with one of 
our data collection systems directly affected the ability of the 
facilities to submit data. If we make the determination to grant ECEs, 
we are proposing to communicate this decision through routine 
communication channels.
    We are inviting public comment on these proposed modifications to 
the HAC Reduction Program's ECE policy.

L. Rural Community Hospital Demonstration Program

1. Introduction
    The Rural Community Hospital Demonstration was originally 
authorized for a 5-year period by section 410A of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) 
(Pub. L. 108-173), and extended for another 5-year period by sections 
3123 and 10313 of the Affordable Care Act (Pub. L. 111-148). 
Subsequently, section 15003 of the 21st Century Cures Act (Pub. L. 114-
255), enacted December 13, 2016, amended section 410A of Public Law 
108-173 to require a 10-year extension period (in place of the 5-year 
extension required by the Affordable Care Act, as further discussed 
below). Section 15003 also requires that no later than 120 days after 
enactment of Public Law 114-255 the Secretary issue a solicitation for 
applications to select additional hospitals to participate in the 
demonstration program for the second 5 years of the 10-year extension 
period so long as the maximum number of 30 hospitals stipulated by the 
Affordable Care Act is not exceeded. In this proposed rule, we provide 
a summary of the previous legislative provisions and their 
implementation; a description of the provisions of section 15003 of 
Public Law 114-255 and our proposals for implementation; and our 
proposals for budget neutrality, including a discussion of the budget 
neutrality methodology used in previous final rules, the proposed 
budget neutrality methodology for the extension period authorized by 
section 15003 of Public Law 114-255, and the proposed reconciliation of 
actual and estimated costs of the demonstration for previous years 
(2011, 2012, and 2013).
2. 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--

[[Page 19991]]

     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 demonstration program and converted to CAH status. 
This left 9 hospitals participating at that time. In 2008, we announced 
a solicitation for up to 6 additional hospitals to participate in the 
demonstration program. Four additional hospitals were selected to 
participate under this solicitation. These 4 additional hospitals began 
under the demonstration payment methodology with the hospitals' 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. 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 7 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 was 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-year period. Further, the Affordable Care 
Act required, in the case of a rural community hospital participating 
in the demonstration program as of the last day of the initial 5-year 
period, the Secretary to provide for the continued participation of 
such rural community hospital in the demonstration program during the 
5-year extension period, unless the hospital made an election to 
discontinue participation.
    In addition, the Affordable Care Act required 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. 
Further, the Secretary was required to use the same criteria and data 
that the Secretary used to determine the States for purposes of the 
initial 5-year period. The Affordable Care Act also allowed 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). The 20 States 
with the lowest population density that were eligible for the 
demonstration program were: 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). Sixteen new hospitals began participation in the 
demonstration with the first cost reporting period beginning on or 
after April 1, 2011.
    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, which left 22 
hospitals participating in the demonstration, effective July 1, 2013, 
all of which continued their participation through December 2014. 
Starting from that date and extending through the end of FY 2015, the 7 
``originally participating'' hospitals, that is, hospitals that were 
selected in either 2004 or 2008, ended on a rolling basis their 
scheduled 5-year periods of performance authorized by the Affordable 
Care Act (referred to hereafter as ``Cohort 1'' hospitals). Likewise, 
the participation period for the 14 hospitals that entered the 
demonstration following the mandate of the Affordable Care Act and that 
were still participating (referred to as ``Cohort 2'' hospitals) ended 
their scheduled periods of performance on a rolling basis according to 
the end dates of the hospitals' cost report periods, respectively, from 
April 30, 2016 through December 31, 2016. (One hospital among the 
Cohort 2 hospitals closed in October 2015.)
3. Provisions of the 21st Century Cures Act (Pub. L. 114-255) and 
Proposals for Implementation
a. Statutory Provisions
    As stated earlier, section 15003 of Public Law 114-255 further 
amended section 410A of Public Law 108-173 to require the Secretary to 
conduct the Rural Community Hospital Demonstration for a 10-year 
extension period (in place of the 5-year extension period required by 
the Affordable Care Act), beginning on the date immediately following 
the last day of the initial 5-year period under section 410A(a)(5) of 
Public Law 108-173. Thus, the Secretary is required to conduct the 
demonstration for an additional 5-year period. Specifically, section 
15003 of Public Law 114-255 amended section 410A(g)(4) of Public Law 
108-173 to require that, for hospitals participating in the 
demonstration as of the last day of the initial 5-year period, the 
Secretary shall provide for continued participation of such rural 
community hospitals in the demonstration during the 10-year extension 
period, unless the hospital makes an election, in such form and manner 
as the Secretary may specify, to discontinue participation. In 
addition, section 15003 of Public Law 114-255 amended section 
410A(g)(4)(B) (and thereby (b)(1)(A)) of Public Law 108-173) to provide 
that in calculating the amount of payment under the demonstration 
program to the rural community hospital for covered inpatient hospital 
services furnished by the hospital during each 5-year period of such 10 
year extension period, the amount of payment (for the first cost 
reporting period) is the reasonable costs of providing such services 
for discharges occurring in the first cost reporting period beginning 
on or after the first day of each applicable 5-year

[[Page 19992]]

period in the 10-year extension period. Furthermore, section 15003 of 
Public Law 114-255 added subsection (g)(5) to section 410A of Public 
Law 108-173 to require that, during the second 5 years of the 10-year 
extension period, the Secretary shall apply the provisions of section 
410A(g)(4) of Public Law 108-173 to rural community hospitals that are 
not described in subsection (g)(4) but that were participating in the 
demonstration as of December 30, 2014, in a similar manner as such 
provisions apply to hospitals described in subsection (g)(4). We 
interpret this as providing for participation in and payment under the 
demonstration during the second 5 years of the 10 year extension period 
for hospitals that are not described in section 410A(g)(4) of Public 
Law 108-173 (as amended) but that were participating in the 
demonstration as of December 30, 2014, in a similar manner as such 
extension and payment applies to hospitals described in section 
410A(g)(4) of Public Law 108-173 (as amended), unless a hospital makes 
an election, in such form and manner as the Secretary may specify, to 
discontinue participation.
    In addition, section 15003 of Public Law 114-255 amended section 
410A of Public Law 108-173 to add paragraph (g)(6)(A) which requires 
that, no later than 120 days after enactment of paragraph (g)(6), the 
Secretary shall issue a solicitation for applications to select 
additional rural community hospitals located in any State to 
participate in the demonstration program for the second 5 years of the 
10-year extension period, without exceeding the maximum number of 
hospitals (that is, 30) permitted under section 410A(g)(3) of Public 
Law 108-173 (which was added by the Affordable Care Act). Section 15003 
also amended section 410A of Public Law 108-173 to add paragraph 
(g)(6)(B) which provides that, in determining which hospitals 
submitting an application pursuant to this solicitation are to be 
selected for participation in the demonstration, the Secretary shall 
give priority to rural community hospitals located in one of the 20 
States with the lowest population densities, as determined using the 
2015 Statistical Abstract of the United States. In addition, in 
determining which among the hospitals submitting an application 
pursuant to this solicitation are to be selected for participation in 
the demonstration, section 410A(g)(6)(B) specifies that the Secretary 
may consider closures of hospitals located in rural areas in the State 
in which an applicant hospital is located during the 5-year period 
immediately preceding the date of enactment of section 410A(g)(6) of 
Public Law 108-173, as well as the population density of the State in 
which the rural community hospital is located.
b. Proposed Terms of Continuation for Previously Participating 
Hospitals
    As discussed earlier, section 15003 of Public Law 114-255 (the 21st 
Century Cures Act) amended section 410A of Public Law 108-173 to 
provide for a 10-year extension of the demonstration (in place of the 
5-year extension required by the Affordable Care Act) beginning on the 
date immediately following the last day of the initial 5-year period 
under section 410A(a)(5) of Public Law 108-173. Thus, section 15003 of 
Public Law 114-255 requires an additional 5-year extension of the 
demonstration beyond the extension required by the Affordable Care Act. 
Given the timing of the enactment of Public Law 114-255, for most of 
the previously participating hospitals, there is a gap between the end 
date of each hospital's participation in the first 5-year extension 
period and enactment of Public Law 114-255 on December 13, 2016. For 
these hospitals, this gap is for a period of between 2 to 23 months. 
Section 15003 of Public Law 114-255 does not address how the second 5 
years of the 10-year extension is to be implemented in the event of a 
gap between the end of the first 5 years of the 10-year extension 
period for a participating hospital and the enactment of Public Law 
114-255 authorizing the second 5 years of the 10-year extension period. 
Given this gap and the lack of specific direction in the statute 
regarding how to implement the extension in this situation for these 
previously participating hospitals, and the mandate under section 15003 
of Public Law 114-255 to issue a solicitation for additional 
participants for the second 5-years of the 10 year extension, we 
considered how to implement the second 5 years of the 10-year extension 
period. For the reasons discussed below, we believe that it would be 
reasonable and consistent with the statute to implement the second 5 
years of the 10-year extension period in a way that recognizes a gap in 
participation for the previously participating hospitals between the 
end of the first 5 years and the start of the second 5 years of the 
extension period, and that provides for alignment of the periods of 
performance under the extension among all participating hospitals. 
Thus, for each previously participating hospital that decides to 
participate in the second 5 years of the 10-year extension period, we 
are proposing that the start date for the period of performance under 
the second 5-year extension period would be the start of the first cost 
reporting period on or after October 1, 2017 following upon the 
announcement of the selection of the additional hospitals for the 
demonstration. In this manner, we are proposing to align the periods of 
performance for the previously participating hospitals that decide to 
participate in the second 5-year extension period with the periods of 
performance for the additional hospitals authorized by section 15003 of 
Public Law 114-255. An additional reason for our proposal that the 
second 5-year period of performance start no earlier than October 1, 
2017 for any of the hospitals (previously participating or newly 
selected) is to align the start of the periods of performance with FY 
2018 for purposes of estimating the costs of the demonstration and thus 
determining the budget neutrality offset amount for the demonstration 
(discussed later in this section) for FY 2018. (The FY 2018 IPPS/LTCH 
PPS final rule is effective October 1, 2017.)
    We believe the approach we are proposing above is consistent with 
section 410A of Public Law 108-173, as amended by Public Law 114-255. 
As discussed earlier, the statutory language does not specifically 
address how the 10-year extension period is to be implemented in the 
event of a gap between the end of the first 5-year extension of the 
demonstration for a participating hospital and the enactment of Public 
Law 114-255 authorizing the second 5-year extension of the 
demonstration. Furthermore, we believe that the payment methodology set 
forth in section 410A(b)(1)(A) and (g)(4) of Public Law 108-173, as 
amended by section 15003 of Public Law 114-255, contemplates that the 
first 5 years and the second 5 years of the 10-year extension period be 
treated as separate periods, in that, as discussed above, it provides 
for payment of reasonable costs for discharges occurring in the first 
cost reporting period beginning on or after the first day of ``each 
applicable 5-year period in the 10-year extension period.'' We believe 
that our proposed approach, which provides for a gap in participation 
between the end of the first 5 years and the start of the second 5 
years of the 10-year extension period, is reasonable, given that most 
of the hospitals that participated in the first 5-year extension under 
the Affordable Care Act had already ended their participation under the 
demonstration when Public Law 114-255 was enacted, and that all 
hospitals now have been

[[Page 19993]]

paid under other payment methodologies outside the demonstration for a 
significant period of time (anywhere from 3 months to more than 2 years 
as of the publication of this proposed rule).
    In addition, we note that certain types of administrative actions 
are generally required in order to implement a demonstration program 
that administers Medicare payment according to a methodology that 
differs from the methodology that would otherwise apply under the 
statute. These include development of participation agreements, 
formulating direction to MACs, and the procurement of audit and 
evaluation contracts. We believe that implementing the second 5-year 
extension for each participating hospital beginning with the start of 
its first cost reporting period on or after October 1, 2017, following 
upon the announcement of the selection of the additional hospitals for 
the demonstration, gives us the time necessary to implement such 
administrative actions.
    Furthermore, we believe that it is reasonable and preferable to 
provide, to the extent possible, for alignment of the periods of 
participation of the previously participating hospitals with any newly 
selected hospitals during the second 5 years of the 10-year extension 
period. Under our proposed implementation approach, all previously 
participating hospitals would begin their periods of performance under 
the 5-year extension in FY 2018 on the same basis as the newly selected 
hospitals (the start of the first cost reporting period beginning on or 
after October 1, 2017, following upon the announcement of the selection 
of the new hospitals). We believe that aligning the participation 
periods for all hospitals in this manner would be more conducive to 
testing the feasibility and advisability of the payment methodology 
required by section 410A of Public Law 108-173 because, for all 
hospitals, the demonstration payment methodology would be applicable 
and its effect evaluated for similar time periods. In addition, we 
believe our proposed approach would allow for streamlined and 
administratively feasible budget neutrality calculations for the second 
5-year extension period because the costs of the demonstration would be 
estimated for periods of performance beginning in the same fiscal year.
    We are inviting public comments on the proposed approach discussed 
above for implementing the second 5-year period of the 10-year 
extension required under section 15003 of Public Law 114-255 for the 
previously participating hospitals. In addition, we are inviting public 
comments on alternative approaches under the statute for implementing 
the extension, particularly with respect to the commencement of the 
second 5-year period of the extension for previously participating 
hospitals.
    One potential alternative approach that we considered is for each 
previously participating hospital to begin the second 5 years of the 
10-year extension period and the cost-based payment methodology under 
section 410A of Public Law 108-173 (as amended by section 15003 of Pub. 
L. 114-255), on the date immediately after the date the period of 
performance under the first 5-year extension period ended. For example, 
for a hospital whose 5-year period of performance authorized by the 
Affordable Care Act ended June 30, 2015, the extension period under 
section 15003 of Public Law 114-255 would be effective July 1, 2015, 
and it would extend through June 30, 2020. Likewise, for a hospital 
whose 5-year period of performance ended June 30, 2016, the extension 
period under section 15003 of Public Law 114-255 would be effective 
July 1, 2016, and it would extend through June 30, 2021. The 
methodology we considered for calculating the budget neutrality offset 
amount under this alternative approach is described in section V.L.4.d. 
of the preamble of this proposed rule. Although we believe that this 
alternative approach would also be consistent with the language of 
section 410A of Public Law 108-173 (as amended) and, unlike the 
proposed approach, would not provide for a gap in the reasonable cost 
payment methodology between the end of the first and start of the 
second 5-year periods of the 10-year extension period, for the reasons 
discussed below, we believe that our proposed approach outlined above 
would be more appropriate. First, we note that applying the extension 
in this alternative manner would result in hospitals being paid under 
the cost-based payment methodology provided for under section 410A of 
Public Law 108-173 (as amended) for a period of time during which the 
hospitals were not actively participating in the demonstration. We 
believe that it would be more appropriate to conduct both the 
implementation and evaluation of the demonstration for a period of time 
for which the hospitals have actively agreed to participate.
    Furthermore, we note that applying the demonstration payment 
methodology starting at the end of each previously participating 
hospital's participation in the first 5-year extension period under the 
Affordable Care Act (as far back as cost reporting years beginning in 
FY 2015), in addition to implementing a new selection of hospitals, is 
likely to create a situation whereby the periods of participation for 
demonstration hospitals under the new extension period would be 
starting across 4 different fiscal years, because hospitals could have 
periods of performance that start as early as January 1, 2015, and as 
late as July 1, 2018. We believe that such a structure for the 
demonstration would not be as conducive to the goal of testing the 
feasibility and advisability of the cost-based payment methodology 
under section 410A of Public Law 108-173, as amended. Implementing a 
payment methodology that is different from that which would otherwise 
apply under the statute requires coordination among MACs and audit, 
quality monitoring, and evaluation contractors. Administering the 
second 5-year extension period so that the extension begins over a span 
of time to include several years would add substantial complexity to 
these contractual arrangements. In addition, methodologies for 
evaluating the effects of a payment methodology enacted under a 
demonstration program often involve examination of the experience of 
nonparticipating providers. Conducting such an analysis over different 
time periods might reduce the usefulness of such an evaluation approach 
because metrics assessed in relation to participating hospitals and 
nonparticipating hospitals, respectively, would not apply to uniform 
time periods.
    Nevertheless, we are seeking public comments on this alternative 
approach to implementing the extension to the demonstration under 
section 15003 of Public Law 114-255 and the corresponding alternative 
budget neutrality calculation described in section V.L.4.d. of the 
preamble of this proposed rule.
c. Solicitation for Additional Participants
    As required under section 15003 of Public Law 114-255, we will 
issue a solicitation for additional hospitals to participate in the 
demonstration. We expect that this solicitation will be released in 
April 2017, and eligible hospitals will have 30 days to submit 
applications. Among other things, the solicitation will ask hospitals 
to describe challenges experienced with the current method of Medicare 
payment, the impact of rural hospital closures within the State or 
surrounding

[[Page 19994]]

area, and a strategy for financial viability and improving the health 
care of the population.
    Section 15003 of Public Law 114-255 provides that, in determining 
which rural community hospitals that submitted an application pursuant 
to the solicitation under subparagraph (A) to select for participation 
in the demonstration program, the Secretary shall give priority to 
rural community hospitals located in one of the 20 States with the 
lowest population densities (as determined by the Secretary using the 
2015 Statistical Abstract of the United States). We note that the U.S. 
Census Bureau ceased publishing the Statistical Abstract of the United 
States in 2011, and that in the years since then, ProQuest, LLC, a 
private vendor, has produced a volume intended to serve the same 
function as a comprehensive collection of national statistics, 
compiling data from different sources including published reports from 
the Census Bureau. Thus, we are using ProQuest Statistical Abstract of 
the United States, 2015 in determining which States to give priority in 
selecting additional participants for the demonstration. We believe 
that in the absence of a volume produced by the Census Bureau, using 
this compendium is consistent with the intent of the statute, and is 
appropriate for the purpose of designating States to which priority is 
to be given under section 410A(g)(6)(B)(i) of Public Law 108-173.
    We note that the table in this compendium presenting information on 
State population density includes separate sets of statistics for 2010 
and 2013. Both of the data sources are available on the Census Bureau 
Web site. The source for the 2010 statistics is ``2010 Census Briefs, 
Population Distribution and Change: 2000 to 2010, March 2011'' (http://www.census.gov/prod/cen2010/briefs/c2010br-01.pdf); the source for 2013 
is ``Annual Estimates of the Population for the United States, Regions, 
States, and Puerto Rico: April 1, 2010 to July 1, 2013'' (http://www.census.gov/popest/data/state/totals/2013/index.html). Consistent 
with our policy for the previous solicitations, we are choosing the 
more recent data source to identify the 20 States to which priority is 
to be given. These States are: Alaska, Arizona, Arkansas, Colorado, 
Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New 
Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, Vermont, 
and Wyoming.
    We note that section 410A(g)(6)(B)(ii)(II) of Public Law 108-173 as 
added by section 15003 of Public Law 114-255 also states that, in 
selecting additional participants, the Secretary may consider the 
population density of the State in which the rural community hospital 
is located. As a result, we will consider the population density of the 
State in which the hospital is located. We believe that this 
consideration is reasonable given that the demonstration may have 
differing effects for health care services and populations depending on 
State population density. In addition, as permitted by section 
410A(g)(6)(B)(ii)(I) of Public Law 108-173, in selecting additional 
participants under this solicitation, we will consider the impact of 
closures of hospitals located in rural areas in the State in which the 
hospital is located during the 5-year period immediately preceding the 
date of enactment of this paragraph. We believe that this consideration 
is reasonable, given the possibility that enhanced Medicare payment 
through the demonstration may increase access to health care services 
for populations thus affected by hospital closures.
    Our goal is to finalize this selection by June 2017, in time to 
include in the FY 2018 IPPS final rule an estimate of the costs of the 
demonstration during FY 2018 and the resulting budget neutrality offset 
amount for these newly participating hospitals (referred to as ``Cohort 
3'' hospitals), as well as for those hospitals among the previously 
participating hospitals that decide to participate in the extension 
period (Cohorts 1 and 2 hospitals). Upon announcing the selection of 
new participants, we will confirm the start dates for the periods of 
performance for these newly selected hospitals. In accordance with our 
proposed implementation approach discussed in section V.L.3.b. of the 
preamble of this proposed rule, if the selection is announced by June 
2017, we expect that we would determine the periods of performance for 
all of the participating hospitals to begin with the first cost 
reporting period on or after October 1, 2017, and we would include an 
estimate of the costs for the demonstration for FY 2018 for Cohorts 1, 
2, and 3 hospitals in the FY 2018 final rule. As previously discussed, 
under our proposal, the periods of performance for the hospitals 
(Cohorts 1, 2, and 3) would not start earlier than October 1, 2017.
    If final selection of the Cohort 3 hospitals does not occur by June 
2017, under our proposed approach, we would not be able to include an 
estimate of the costs of the demonstration or an estimate of the budget 
neutrality offset amount for FY 2018 for either these Cohort 3 
hospitals or the previously participating Cohorts 1 and 2 hospitals in 
the FY 2018 IPPS final rule. Considering that periods of performance 
for the Cohorts 1 and 2 hospitals would not be determined until after 
the selection of the Cohort 3 hospitals, we would not know precisely 
when the periods of performance would begin for the Cohorts 1 and 2 
hospitals, or to what extent they would overlap with the 12 months in 
FY 2018 until the Cohort 3 hospitals are selected. Therefore, if the 
announcement of the final selection of the Cohort 3 hospitals does not 
occur by June 2017, we would not be able to include an estimate of the 
demonstration costs or budget neutrality offset amount for FY 2018 for 
the Cohorts 1 and 2 hospitals in the FY 2018 IPPS final rule. As a 
result, if the announcement of the final selection of the Cohort 3 
hospitals does not occur by June 2017, we would specify the dates on 
which all participating hospitals would start in the second 5 years of 
the 10-year extension period at the time the selection is announced in 
accordance with our proposal. We are proposing that if the selection of 
the Cohort 3 hospitals is not announced in June 2017, we would include 
the estimated costs of the demonstration for all participating 
hospitals for FY 2018 in the budget neutrality offset amount to be 
calculated in the FY 2019 IPPS/LTCH PPS proposed and final rules.
    According to our proposal, regardless of whether the final 
selection of the Cohort 3 hospitals occurs by June 2017, no period of 
performance in the second 5 years of the 10-year extension period for 
any of the hospitals (Cohorts 1, 2, and 3) would start earlier than 
October 1, 2017. Our goal is, to the greatest extent possible, to align 
the start of the periods of performance with FY 2018 for purposes of 
estimating the costs of the demonstration and thus determining the 
budget neutrality offset amount for FY 2018. (We refer readers to 
section V.L.4. of the preamble of this proposed rule for our proposed 
calculation methodology for the budget neutrality offset amount for FY 
2018.)
4. Budget Neutrality
a. Statutory Budget Neutrality Requirement
    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. This 
requirement is commonly referred to as ``budget neutrality.'' 
Generally, when

[[Page 19995]]

we implement a demonstration program on a budget neutral basis, the 
demonstration program is budget neutral on 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--that is, cost-based payments to participating small rural 
hospitals are likely to increase Medicare outlays without producing any 
offsetting reduction in Medicare expenditures elsewhere. In addition, a 
rural community hospital's participation in this demonstration program 
would be unlikely to yield benefits to the participants if budget 
neutrality were to be implemented by reducing other payments for these 
same hospitals. Therefore, in the 12 IPPS final rules spanning the 
period from FY 2005 through FY 2016, we 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. (In the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57034), we described a different methodology which we specify 
below.) As we discussed in the FYs 2005 through 2017 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, 77 FR 50145; 
80 FR 49585; and 81 FR 57034, respectively), we believe that the 
language of the statutory budget neutrality requirements permits the 
agency to implement the budget neutrality provision in this manner.
b. Methodology Used in Previous Final Rules
    We generally incorporated two components into the budget neutrality 
offset amounts identified in the final IPPS rules in previous years. 
First, we estimated the costs of the demonstration for the upcoming 
fiscal year, generally determined from historical, ``as submitted'' 
cost reports for the hospitals participating in that year. Update 
factors representing nationwide trends in cost and volume increases 
were incorporated into these estimates, as specified in the methodology 
described in the final rule for each fiscal year. Second, as finalized 
cost reports became available, we determined the amount by which the 
actual costs of the demonstration for an earlier, given year differed 
from the estimated costs for the demonstration set forth in the final 
IPPS rule for the corresponding fiscal year, and we incorporated that 
amount into the budget neutrality offset amount for the upcoming fiscal 
year. If the actual costs for the demonstration for the earlier fiscal 
year exceeded the estimated costs of the demonstration identified in 
the final rule for that year, this difference was added to the 
estimated costs of the demonstration for the upcoming fiscal year when 
determining the budget neutrality adjustment for the upcoming fiscal 
year. Conversely, if the estimated costs of the demonstration set forth 
in the final rule for a prior fiscal year exceeded the actual costs of 
the demonstration for that year, this difference was subtracted from 
the estimated cost of the demonstration for the upcoming fiscal year 
when determining the budget neutrality adjustment for the upcoming 
fiscal year. (We note that we have calculated this difference for FYs 
2005 through 2010 between the actual costs of the demonstration as 
determined from finalized cost reports once available, and estimated 
costs of the demonstration as identified in the applicable IPPS final 
rules for these years.)
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57036), we finalized 
a different methodology as compared to previous years for analyzing the 
costs attributable to the demonstration for FY 2017. We noted in the FY 
2017 IPPS/LTCH PPS final rule that, in accordance with the extension 
mandated by the Affordable Care Act, the demonstration would have 
substantially phased out by the beginning of FY 2017. In addition to 
the 7 originally participating hospitals (Cohort 1 hospitals) having 
ended their scheduled period of performance in the 5-year extension 
period prior to the start of FY 2016, we noted that the participation 
periods for the 14 hospitals that entered the demonstration following 
the extension mandated by the Affordable Care Act (Cohort 2 hospitals) 
that were still participating were to 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 noted earlier, 1 
hospital among the Cohort 2 hospitals closed in October 2015.) Of these 
14 hospitals, 10 ended participation on or before September 30, 2016, 
leaving 4 hospitals participating for the last 3 months of CY 2016 
(that is, the first 3 months of FY 2017). We stated that, given the 
small number of participating hospitals and the limited time of 
participation for such hospitals during FY 2017, a revised methodology 
was appropriate for determining the costs of the demonstration during 
this period. We noted that, for the 4 hospitals that would end their 
participation in the demonstration effective December 31, 2016, the 
financial experience of the last 3 months of the calendar year (that 
is, the first 3 months of FY 2017) would be included in the finalized 
cost reports for FY 2016. We stated that examining the finalized cost 
reports for FY 2016 for these hospitals would lead to a more accurate 
and administratively feasible calculation of budget neutrality for the 
demonstration in FY 2017 than conducting an estimate of the costs of 
the demonstration for this 3-month period based on ``as submitted cost 
reports'' (as would occur according to the budget neutrality 
methodology used prior to the FY 2017 IPPS/LTCH PPS final rule).
    Thus, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57037), we 
finalized the proposal to forego the process of estimating the costs 
attributable to the demonstration for FY 2017, and to instead calculate 
the costs of the demonstration and the resulting budget neutrality 
adjustment factor for the demonstration for FY 2017 once the finalized 
cost reports for cost reporting periods beginning in FY 2016 become 
available.
c. Proposed Budget Neutrality Methodology for Extension Period 
Authorized by the 21st Century Cures Act (Pub. L. 114-255)
    For the implementation approach that we are proposing in section 
V.L.3.b. of the preamble of this proposed rule, we are proposing that a 
budget neutrality offset methodology similar to previous years (prior 
to FY 2017) would be applied to the periods of performance under the 
second 5 years of the 10-year

[[Page 19996]]

extension period authorized by section 15003 of Public Law 114-255. 
With the potential exception of the demonstration costs for FY 2018 as 
discussed below, for the periods of performance under the second 5 
years of the 10-year extension period, an estimate of the costs of the 
demonstration, generally determined from historical, ``as submitted'' 
cost reports for the participating hospitals and the appropriate update 
factors, would be incorporated into a budget neutrality offset amount 
to be applied to the national IPPS rates for the upcoming fiscal year. 
We would implement this adjustment through the corresponding proposed 
and final IPPS rules. In addition, we would include as a second 
component to the budget neutrality offset amount, the amount by which 
the actual costs of the demonstration for an earlier, given year (as 
determined from finalized cost reports when available) differed from 
the estimated costs for the demonstration set forth in the final IPPS 
rule for the corresponding fiscal year.
    Regarding demonstration costs specifically for FY 2018, as 
described earlier, we are proposing that if the selection of additional 
hospitals pursuant to section 410A(g)(6) of Public Law 108-173 (as 
added by section 15003 of Pub. L. 114-255) is announced by June 2017, 
we would include in the FY 2018 IPPS/LTCH PPS final rule an estimate of 
the costs of the demonstration for FY 2018 and the resulting estimated 
budget neutrality offset amount for the newly selected hospitals 
(Cohort 3 hospitals) and for the previously participating hospitals 
(Cohorts 1 and 2 hospitals). As discussed earlier, if the final 
selection of the additional hospitals does not occur by June 2017, we 
would not be able to include an estimate of the costs of the 
demonstration for any participating hospitals or an estimated budget 
neutrality adjustment for FY 2018 in the FY 2018 IPPS/LTCH PPS final 
rule. In that situation, we are proposing to include the estimated 
costs of the demonstration for FY 2018 for all participating hospitals 
(Cohorts 1, 2 and 3 hospitals) in the budget neutrality offset 
adjustment in the FY 2019 IPPS/LTCH PPS proposed and final rules. The 
budget neutrality offset adjustment for the FY 2019 IPPS/LTCH PPS 
proposed and final rules would also include the estimated costs of the 
demonstration for FY 2019 for all participating hospitals based on 
historical, ``as submitted'' cost reports and the appropriate update 
factors.
    As described earlier, if the selection of the newly participating 
hospitals authorized by section 410A(g)(6) of Public Law 108-173 (as 
added by section 15003 of Pub. L. 114-255) is announced by June 2017, 
we are proposing that the periods of performance under the second 5 
years of the 10-year extension period for each of the participating 
hospitals (Cohorts 1, 2, and 3) would start with the hospital's first 
cost report year on or after October 1, 2017. Thus, the start dates for 
the periods of performance for the entire set of participating 
hospitals would occur during FY 2018.
    If the selection of the new hospitals is announced by June 2017, 
under our proposed implementation approach as described in section 
V.L.3.b. of the preamble of this proposed rule, we would continue to 
use the general methodology finalized in previous final rules (prior to 
FY 2017) to calculate the estimated budget neutrality adjustment factor 
to be applied to the FY 2018 national IPPS rates. (We note that the 
same general methodology would be used if the announcement of the 
selection of additional hospitals does not occur by June 2017, and thus 
the budget neutrality offset amount reflecting the costs of the 
demonstration for hospitals participating in FY 2018 would be applied 
to the national IPPS rates for FY 2019.)
    Consistent with the approach adopted in the FY 2016 IPPS/LTCH PPS 
final rule, we are proposing a specific calculation to account for the 
fact that the periods of performance for the participating hospitals 
would start at different points of time during FY 2018. That is, we are 
proposing to prorate estimated reasonable cost amounts and amounts that 
would be paid without the demonstration for FY 2018 according to the 
fraction of the number of months that the hospital would be 
participating out of the 12 months within FY 2018. For example, if a 
hospital would be starting this second 5-year period of the 10-year 
extension period on January 1, 2018, we would multiply the estimated 
cost and payment amounts, derived as described below, by a factor of 
0.75. (In this discussion of how the overall calculations are 
conducted, this factor is referred to as ``the hospital-specific 
prorating factor''.) Our proposed methodology for calculating the 
budget neutrality offset amount proceeds in several steps, as set forth 
below:
    Step 1: For each of the participating hospitals, we are proposing 
to identify the reasonable cost amount calculated under the reasonable 
cost methodology for covered inpatient hospital services, as indicated 
on the ``as submitted'' cost report for the most recent cost reporting 
period available. (We expect that for most of the hospitals these ``as 
submitted'' cost reports will be those with cost report period end 
dates in CY 2015. In the solicitation for additional participants, we 
will be requesting applicants to submit cost report information from 
the most recent year available. For the selected additional hospitals 
(that is, Cohort 3), we would be using the submitted information for 
the calculation of the budget neutrality offset amount for FY 2018.) We 
believe the most recent available cost reports to be an accurate 
predictor of the costs of the demonstration in FY 2018 because they 
would give us a recent picture of the participating hospitals' costs.
    Because section 410A of Public Law 108-173 stipulates swing-bed 
services are to be included among the covered inpatient hospital 
services for which the demonstration payment methodology applies, we 
are proposing to include the cost of these services, as reported on the 
cost reports for the hospitals that provide swing-bed services, in 
estimating the total reasonable cost amount for covered inpatient 
hospital services under the demonstration. Similar to what is stated 
above, we are proposing to use the most recently available ``as 
submitted'' cost reports for this calculation.
    For each hospital, we are proposing to sum the two above-referenced 
amounts, and then multiply this sum by the hospital-specific prorating 
factor (described above), to obtain an unadjusted hospital-specific 
amount, calculated for each hospital prior to applying adjustments for 
increases in cost or volume, as described below. (In the discussion 
below, we refer to this amount as the ``unadjusted hospital-specific 
amount''.) We are proposing to sum these unadjusted hospital-specific 
amounts for all participating hospitals to obtain an unadjusted total 
estimated reasonable cost amount for covered inpatient hospital 
services (for all participating hospitals) to which update factors 
representing increases in costs and volume would be applied.
    Accordingly, we are proposing to multiply this sum (that is, the 
unadjusted total estimated reasonable cost amount for covered inpatient 
hospital services for all participating hospitals) by the FY 2016, FY 
2017, and final FY 2018 IPPS market basket percentage increases, which 
are formulated by the CMS Office of the Actuary. We are proposing to 
use the market basket percentage increases for these particular years 
because we expect that most of the ``as submitted'' cost reports that 
would be used in determining the unadjusted hospital-specific amounts 
will end in FY 2015. If a majority of these ``as submitted''

[[Page 19997]]

cost reports end in FY 2016, we would apply only the FY 2017 and final 
FY 2018 market basket percentage increases. We recognize that applying 
the set of FY 2016, FY 2017, and FY 2018 market basket percentage 
increases to a sum that may include information from ``as submitted'' 
cost reports ending in FY 2016 (or, conversely, applying these update 
factors for FY 2017 and FY 2018 to a sum that may include information 
from ``as submitted'' cost reports ending in FY 2015) might appear to 
lessen the precision of the estimate. However, we believe that the 
potential margin of error in estimating the total costs for the 
demonstration hospitals inherent in using a uniform set of update 
factors is justifiable for purposes of streamlining and applying a 
consistent calculation method for all participating hospitals. In 
addition, we note that, as in previous years, we are proposing to 
reconcile the actual costs of the demonstration as determined from 
finalized cost reports when available with the estimate of the costs of 
the demonstration in FY 2018 as included in the budget neutrality 
offset amount, which would ultimately address any potential error in 
estimating the costs of the demonstration for FY 2018, thereby 
enhancing the accuracy of the calculation.
    In this proposed rule, the current estimate of the FY 2018 IPPS 
market basket percentage increase provided by the CMS Office of the 
Actuary is specified in section V.B.1. of the preamble of this proposed 
rule. We also are proposing to then multiply the product of the 
unadjusted general total estimated reasonable cost amount for all 
participating hospitals and the market basket percentage increases 
applicable to the years involved by a 3-percent annual volume 
adjustment for each of FYs 2016 through 2018 (or only FYs 2017 and 
2018, in accordance with the discussion above). The result would be the 
general total estimated FY 2018 reasonable cost amount for covered 
inpatient hospital services for all participating hospitals.
    We are proposing to apply the IPPS market basket percentage 
increases applicable for FYs 2016 through 2018 (or FYs 2017 and 2018, 
in accordance with the discussion above) to the applicable general 
total reasonable cost amount described above to model the estimated FY 
2018 reasonable cost amount under the demonstration. We are proposing 
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 for the years involved. The 3-percent annual volume 
adjustment was stipulated by the CMS Office of the Actuary and is being 
proposed because it is intended to accurately reflect the tendency of 
hospitals' inpatient caseloads to increase. We acknowledge the 
possibility that inpatient caseloads for small hospitals may fluctuate, 
and thus are proposing to incorporate into the estimate of 
demonstration costs a factor to allow for a potential increase in 
inpatient hospital services.
    Step 2: For each of the participating hospitals, we are proposing 
to identify the general estimated amount that would otherwise be paid 
in FY 2018 under applicable Medicare payment methodologies for covered 
inpatient hospital services (as indicated on the same set of ``as 
submitted'' cost reports as in Step 1) if the demonstration was not 
implemented. Similarly, as in Step 1, for the hospitals that provide 
swing-bed services, we are proposing to identify the estimated amount 
that generally would otherwise be paid for these services (using the 
same ``as submitted'' cost reports as in Step 1) and include it in 
estimating the total FY 2018 general amount that would otherwise be 
paid for covered inpatient hospital services without the demonstration. 
Similar to Step 1, we are proposing to multiply this sum for each 
participating hospital by the hospital-specific prorating factor. We 
are then proposing to add together the resulting amounts for all 
participating hospitals to obtain an estimate of the amount that would 
otherwise be paid for covered inpatient hospital services for all 
participating hospitals without the demonstration, to which update 
factors representing increases in costs and volume would be applied.
    Accordingly, we are proposing to then multiply this amount by the 
FYs 2016 through 2018 (or only FYs 2017 and 2018, in accordance with 
the discussion above) IPPS applicable percentage increases, depending 
on whether the majority of the ``as submitted'' cost reports end in FY 
2015 or FY 2016, as discussed in Step 1. This methodology differs from 
Step 1, in which we are proposing to apply the market basket percentage 
increases to the sum of the hospitals' applicable general total 
estimated reasonable cost amount for covered inpatient hospital 
services. We believe that the IPPS applicable percentage increases are 
appropriate factors to update the estimated amounts that generally 
would 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. Most of the hospitals participating in the 
demonstration would be paid under the IPPS payment methodology if they 
were not in the demonstration. Then, for the same reasons discussed in 
Step 1, we are proposing to multiply the product of the applicable 
estimated total payments that generally would otherwise be made without 
the demonstration and the IPPS applicable percentage increases 
applicable to the years involved by the 3-percent annual volume 
adjustment for each of FYs 2016 through 2018 (or FYs 2017 and 2018, in 
accordance with the discussion above). The result would be the general 
total estimated payment amount that would otherwise be paid without the 
demonstration for FY 2018 to participating hospitals for covered 
inpatient hospital services.
    Step 3: We are proposing 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 2018 if the demonstration were not 
implemented) from the amount derived in Step 1 (representing the sum of 
the estimated reasonable cost amounts that generally would be paid 
under the demonstration to all participating hospitals for covered 
inpatient hospital services for FY 2018). We are proposing that the 
resulting difference would be the estimated amount of the costs of the 
demonstration for FY 2018, which would be incorporated into an 
adjustment to the national IPPS rates.
    Similar to previous years, in order to meet the budget neutrality 
requirement in section 410A(c)(2) of Public Law 108-173, we are 
proposing that when finalized cost reports for each of the second 5 
years of the 10-year extension period become available, we would 
determine the difference between the actual costs of the demonstration 
as determined from these finalized cost reports and the estimated cost 
indicated in the corresponding fiscal year IPPS final rule, and include 
that difference either as a positive or negative adjustment in the 
upcoming year's final rule.
    Specifically for FY 2018, when the finalized cost reports beginning 
in FY 2018 are available, we would determine the difference between the 
actual costs of the demonstration as determined from these finalized 
cost reports and the estimated cost indicated in the FY 2018 (or FY 
2019, as discussed above) IPPS/LTCH PPS final rule, and include that 
difference either as a positive or

[[Page 19998]]

negative adjustment in the applicable year's final rule.
    Thus, in keeping with the methodologies used in previous final 
rules, we would continue to use a methodology for calculating the 
budget neutrality offset amount for the second 5-years of the 10-year 
extension period consisting of two components: (1) The estimated 
demonstration costs in the upcoming fiscal year (as described above); 
and (2) the 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) differed from 
the budget neutrality offset amount finalized in the corresponding 
year's IPPS final rule.
    We are inviting public comments on the budget neutrality 
calculation methodology proposed above. In addition, we are inviting 
comments on other approaches that would be consistent with section 
410A(c)(2) of Public Law 108-173, and that would provide a reasonable 
determination of budget neutrality for the demonstration.
d. Alternative Budget Neutrality Approach Considered
    In section V.L.3.b. of the preamble of this proposed rule, we 
described an alternative approach that we considered for implementing 
the extension of the demonstration pursuant to section 15003 of Public 
Law 114-255, and we invited public comments on this alternative 
approach. Under this alternative approach, for each previously 
participating hospital that decides to participate in the second 5 
years of the 10-year extension period, the cost-based payment 
methodology under section 410A of Public Law 108-173 (as amended by 
section 15003 of Pub. L. 114-255) would begin on the date immediately 
following the end date of its period of performance for the first 5-
year extension period.
    Under this alternative approach that we considered, depending on 
which among the Cohorts 1 and 2 hospitals choose to participate in this 
second 5-year extension period, the demonstration's cost-based payment 
methodology would be applied to dates as far back as January 1, 2015 
and as late as January 1, 2017. This would require reconciling the 
reasonable costs associated with furnishing Medicare covered inpatient 
hospital services as reported on cost reports with the amounts already 
paid under the other Medicare payment methodologies applied since the 
end of their periods of performance for the first 5-year extension. 
Under this alternative approach, any additional amounts associated with 
the cost-based payment methodology for this period would need to be 
paid to the hospitals.
    Although we considered this alternative implementation approach and 
budget neutrality methodology, for the reasons discussed in section 
V.L.3.b. of the preamble to this proposed rule, we are instead 
proposing the implementation approach (according to which the periods 
of performance for previously participating hospitals for the second 5-
year extension period would begin with the hospital's first cost 
reporting period on or after October 1, 2017, following the 
announcement of the selection of additional hospitals) and budget 
neutrality methodology described in sections V.L.3.b. and V.L.4.c. of 
the preamble of this proposed rule. Nevertheless, we are inviting 
public comments on the budget neutrality methodology that we describe 
below for the alternative approach.
    In general, the methodology that we considered for calculating a 
budget neutrality offset under this alternative approach would involve 
the following steps:
     To reflect the costs of the demonstration for fiscal years 
before FY 2018, for the previously participating hospitals (Cohorts 1 
and 2) that decide to participate in the 5-year extension period 
authorized by section 15003 of Public Law 114-255, when finalized cost 
reports become available, we would determine the actual costs of the 
demonstration for cost report periods beginning on the day after the 
last day of the hospitals' periods of performance in the first 5-year 
extension period and extending through the last day of the cost report 
periods ending in FY 2018 (or FY 2017 for hospitals with an October 1 
cost report start date, as explained below), and incorporate these 
amounts in the budget neutrality offset amount to be included in a 
future IPPS final rule. Thus, we would determine the actual costs for 
the previously participating hospitals for the period prior to the 
start of FY 2018. Similar to our proposed approach for implementation 
and budget neutrality, as described in sections V.L.3.b. and V.L.4.c. 
of the preamble of this proposed rule, under the alternative 
methodology we considered, we would seek to begin our estimation of the 
costs of the demonstration for all hospitals in the same fiscal year 
(that is, in FY 2018, with each hospital's first cost reporting period 
beginning on or after October 1, 2017). (The methodology for estimating 
the costs for FY 2018 for this alternative implementation approach that 
we considered is described below.)
    Thus, under the alternative approach we considered, for a Cohort 1 
hospital whose period of performance in the first extension period 
ended June 30, 2015, we would determine the actual costs of the 
demonstration for the cost reporting periods from July 1, 2015 through 
June 30, 2016, from July 1, 2016 through June 30, 2017, and from July 
1, 2017 through June 30, 2018. For a Cohort 2 hospital whose period of 
performance in the first extension period ended June 30, 2016, under 
this alternative approach that we considered, we would determine the 
actual costs of the demonstration for the cost reporting periods from 
July 1, 2016 through June 30, 2017, and from July 1, 2017 through June 
30, 2018. We note that for both of these Cohorts 1 and 2 hospitals, 
this last cost report period would encompass services occurring since 
the enactment of Public Law 114-255, which authorizes the second 
extension period. However, we believe that applying a uniform method 
for determining costs across a cost report year would be more 
reasonable from the standpoint of operational feasibility and 
consistent application of cost determination principles. (We note that, 
for hospitals (either Cohort 1 or 2) with an October 1 start date, the 
estimation of costs for FY 2018 would apply for the period starting 
October 1, 2017, that is, the first day of FY 2018. Therefore, for 
these hospitals, we would determine actual costs from finalized cost 
reports when available for the period starting from the day after the 
last day of the period of performance under the first 5-year extension 
period and concluding with the last day of FY 2017.) For all hospitals, 
under this alternative approach that we considered, we would 
incorporate these amounts into a single amount to be included in the 
calculation of the budget neutrality offset amount to the national IPPS 
rates in a future final rule after such finalized cost reports become 
available.
     To reflect the costs of the demonstration for the upcoming 
fiscal year (that is, FY 2018) for Cohorts 1 and 2 hospitals that have 
decided to participate in the second 5-years of the 10-year extension 
period, we would estimate the costs of the demonstration for FY 2018, 
based on historical ``as submitted'' cost reports, applying prorating 
factors and updates as appropriate, as described below. Similar to the 
proposed methodology described in section V.L.4.c. of the preamble of 
this proposed rule for estimating the costs of the demonstration for FY 
2018, the alternative methodology we considered for estimating the 
costs of

[[Page 19999]]

the demonstration for FY 2018 would follow 3 steps:
    Step 1: We would determine the total estimated reasonable cost 
amount for covered inpatient hospital services (as indicated on the 
``as submitted'' cost reports for the most recent cost reporting period 
available) for all participating hospitals for FY 2018 calculated under 
the demonstration's reasonable cost-based payment methodology. These 
calculations would be identical to those described for our proposed 
methodology in section V.L.4.c. of the preamble of this proposed rule, 
with the exception that the formulation of the ``hospital-specific 
prorating factor,'' to be applied to each participating hospital's 
reasonable cost amounts as derived from its most recently available 
``as submitted'' cost report, would be different. Under this 
alternative methodology that we considered, for hospitals with a cost 
report start date other than October 1, the hospital-specific prorating 
factor would be the ratio of the number of months between the end of 
the cost reporting period ending in FY 2018, on the basis of which 
actual costs are determined (as described above), and the end of the 
fiscal year, out of the total number of months in the fiscal year. 
Therefore, for a hospital (either Cohort 1 or 2) for which the end of 
the period on which we would determine actual costs (that is, the end 
date of the hospital's cost report year) would be June 30, 2018, there 
would be 3 months remaining in FY 2018, and the hospital-specific 
prorating factor would be .25. (Hospitals with an October 1 cost report 
start date would participate in the demonstration for the full 12 
months of FY 2018 and thus would have a hospital-specific prorating 
factor of 1.0.) We would then follow the same calculations as in our 
proposed budget neutrality calculation described in section V.L.4.c. of 
the preamble of this proposed rule, including application of the same 
update factors to reflect increases in cost and volume.
    Step 2: We would estimate the amount that would otherwise be paid 
for Medicare covered inpatient hospital services to all participating 
hospitals in FY 2018 without the demonstration. These calculations 
would be identical to those described for our proposed methodology in 
section V.L.4.c. of the preamble of this proposed rule, except for the 
difference that the hospital-specific prorating factor, to be applied 
to the estimated amount that the hospital would be paid without the 
demonstration, as derived from its most recently available ``as 
submitted'' cost report, would be formulated in the same manner as 
described in Step 1 above under the alternative methodology.
    Step 3: We would then subtract the amount derived in Step 2 
(representing the estimated amount that would otherwise be paid to the 
participating hospitals for covered inpatient hospital services for FY 
2018 if the demonstration were not implemented) from the amount derived 
in Step 1 (representing the estimated reasonable cost amounts that 
generally would be paid under the demonstration to all participating 
hospitals for covered inpatient hospital services for FY 2018). The 
resulting difference would be the estimated amount of the costs of the 
demonstration for FY 2018, which would be incorporated into an 
adjustment to the national IPPS rates.
     For the Cohort 3 hospitals, we would follow the identical 
methodology for estimating the costs of the demonstration for FY 2018 
as described for the proposed budget neutrality methodology under the 
proposed implementation approach. Similar to the description above for 
the proposed approach, if the selection of additional participants 
under the solicitation authorized by Public Law 114-255 is announced by 
June 2017, we would be able to incorporate the estimates of the costs 
of the demonstration for the Cohort 3 hospitals for FY 2018 within a 
budget neutrality offset adjustment to be included in the FY 2018 IPPS/
LTCH PPS final rule. However, we note that if this selection is not 
announced by that time, we would not be able to include the estimates 
of the costs of the demonstration for FY 2018 for the Cohort 3 
hospitals in the budget neutrality offset adjustment for FY 2018, and 
similar to our proposed methodology in that situation, we would 
incorporate this estimate in the budget neutrality offset adjustment in 
the FY 2019 IPPS/LTCH PPS final rule. The budget neutrality offset 
adjustment for the FY 2019 IPPS proposed and final rules would also 
include the estimated costs of the demonstration for FY 2019 for these 
Cohort 3 hospitals based on historical, ``as submitted'' cost reports 
and the appropriate update factors.
     Consistent with our approach in previous final rules, when 
the finalized cost reports for cost reporting periods beginning in FY 
2018 are available, we would determine the difference between the 
actual costs of the demonstration as determined from these finalized 
cost reports and the estimated cost indicated in the FY 2018 IPPS/LTCH 
PPS final rule (or the FY 2019 IPPS/LTCH PPS final rule, as explained 
above), and include that difference either as a positive or negative 
adjustment in the upcoming year's final rule.
     For future years, we would continue to incorporate the 
estimated costs of the demonstration for all participating hospitals 
for the upcoming fiscal year in the budget neutrality offset adjustment 
in the IPPS final rule of the corresponding fiscal year. For these 
hospitals, we also would determine the actual costs of the 
demonstration when finalized cost reports become available, and include 
the difference between the estimated and actual costs of the 
demonstration in the calculation of the budget neutrality offset amount 
to the national IPPS rates in the final rule for a future year.
    We note that, under the alternative approach we considered, 
although we would not be able to include an estimate of the costs of 
the demonstration for FY 2018 Cohort 3 hospitals in the budget 
neutrality offset adjustment in the FY 2018 final rule if we were not 
able to announce the selection of additional hospitals by June 2017, we 
would do so for the Cohorts 1 and 2 hospitals. However, we note the 
overall complexity of the methodology for budget neutrality under this 
alternative implementation methodology, involving various differing 
methods for either determining or estimating the costs of the 
demonstration over several different fiscal years, potentially to be 
applied to budget neutrality offset adjustment amounts for IPPS final 
rules for different fiscal years. We believe our proposed 
implementation approach and budget neutrality calculation (described in 
sections V.L.3.b. and V.L.4.c. of the preamble of this proposed rule) 
are more reasonable and appropriate for the reasons discussed 
previously, and because of the complexity inherent in meeting the 
budget neutrality requirement, and the administrative burden involved 
in tracking payments and associated calculations over multiple years 
under the alternative methodology.
    Nevertheless, we are inviting public comments on the alternative 
budget neutrality calculation methodology we considered, as discussed 
above.
e. Reconciling Actual and Estimated Costs of the Demonstration for 
Previous Years (2011, 2012, and 2013)
    As described earlier, we have calculated the difference for FYs 
2005 through 2010 between the actual costs of the demonstration, as 
determined from finalized cost reports once available, and estimated 
costs of the demonstration as identified in the applicable IPPS final 
rules for these years. In the FY 2017 IPPS/LTCH PPS

[[Page 20000]]

final rule (81 FR 57037), we finalized a proposal 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 was scheduled 
to end December 31, 2016. In that final rule, we stated that we 
believed it would be appropriate to conduct this analysis for FYs 2011 
through 2016 at one time, when all of the finalized cost reports for 
cost reporting periods beginning in FYs 2011 through 2016 are 
available. We stated that such an aggregate analysis encompassing the 
cost experience through the end of the period of performance of the 
demonstration would represent an administratively streamlined method, 
allowing for the determination of any appropriate adjustment to the 
IPPS rates and obviating the need for multiple, fiscal year-specific 
calculations and regulatory actions. Given the general lag of 3 years 
in finalizing cost reports, we stated that we expected any such 
analysis would be conducted in FY 2020.
    With the extension of the demonstration for another 5-year period, 
as authorized by section 15003 of Public Law 114-255, we are proposing 
to modify the plan outlined in the FY 2017 IPPS/LTCH PPS final rule, 
and instead return to the general procedure in previous final rules; 
that is, as finalized cost reports become available, to determine the 
amount by which the actual costs of the demonstration for an earlier, 
given year differ from the estimated costs for the demonstration set 
forth in the IPPS final rule for the corresponding fiscal year, and 
then incorporate that amount into the budget neutrality offset amount 
for an upcoming fiscal year. If the actual costs of the demonstration 
for the earlier fiscal year exceed the estimated costs of the 
demonstration identified in the final rule for that year, this 
difference would be added to the estimated costs of the demonstration 
for the upcoming fiscal year when determining the budget neutrality 
adjustment for the final rule. Conversely, if the estimated costs of 
the demonstration set forth in the final rule for a prior fiscal year 
exceed the actual costs of the demonstration for that year, this 
difference would be subtracted from the estimated cost of the 
demonstration for the upcoming fiscal year when determining the budget 
neutrality adjustment for an upcoming fiscal year. However, given that 
this adjustment for specific years could be positive or negative, we 
are proposing to combine this reconciliation for multiple prior years 
into one adjustment to be applied to the budget neutrality offset 
amount for a single fiscal year, thus lessening the possibility of both 
positive and negative adjustments to be applied in consecutive years, 
and enhancing administrative feasibility. Specifically, we are 
proposing that when finalized cost reports for FYs 2011, 2012, and 2013 
are available, we would include this difference for these years in the 
budget neutrality offset adjustment to be applied to the national IPPS 
rates in a future final rule. We expect that this would occur in FY 
2019. We also are proposing that when finalized cost reports for FYs 
2014 through 2016 are available, we would include the difference 
between the actual costs as reflected on these cost reports and the 
amounts included in the budget neutrality offset amounts for these 
fiscal years in a future final rule. We plan to provide an update in a 
future final rule regarding the year that we would expect that this 
analysis would occur.
    We are inviting public comments on this proposal.

M. Payment for Services in Inpatient and Outpatient Hospital Settings

1. Adjustment to IPPS Rates Resulting From 2-Midnight Policy for FY 
2018
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50906 through 
50954), we adopted the 2-midnight policy, effective for dates of 
admission on or after October 1, 2013. As discussed in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57058 through 57060), under the 2-
midnight policy, an inpatient admission is generally appropriate for 
Medicare Part A payment if the physician (or other qualified 
practitioner) admits the patient as an inpatient based upon the 
reasonable expectation that the patient will need hospital care that 
crosses at least 2 midnights. In assessing the expected duration of 
necessary care, the physician (or other qualified practitioner) may 
take into account outpatient hospital care received prior to inpatient 
admission. If the patient is expected to need less than 2 midnights of 
care in the hospital, the services furnished should generally be billed 
as outpatient services. We note that revisions were made to this policy 
in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70545). 
Our actuaries estimated that the 2-midnight policy would increase 
expenditures by approximately $220 million in FY 2014 due to an 
expected net increase in inpatient encounters. We used our authority 
under section 1886(d)(5)(I)(i) of the Act to make a reduction of 0.2 
percent to the standardized amount, the Puerto Rico standardized 
amount, and the hospital-specific payment rates, and we used our 
authority under section 1886(g) of the Act to make a reduction of 0.2 
percent to the national capital Federal rate and the Puerto Rico-
specific capital rate, in order to offset this estimated $220 million 
in additional IPPS expenditures in FY 2014.
    For the reasons outlined in the FY 2017 IPPS/LTCH PPS proposed and 
final rules (81 FR 25136 through 25138 and 81 FR 57058 through 57060), 
we used our authority under sections 1886(d)(5)(I)(i) and 1886(g) of 
the Act to prospectively remove, beginning in FY 2017, the 0.2 percent 
reduction to the rates put in place beginning in FY 2014. The 0.2 
percent reduction was implemented by including a factor of 0.998 in the 
calculation of the FY 2014 standardized amount, hospital-specific 
payment rates, and the national capital Federal rate, permanently 
reducing the rates for FY 2014 and future years until the 0.998 is 
removed. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57281 and 
57294), we permanently removed the 0.998 reduction beginning in FY 2017 
by including a factor of (1/0.998) in the calculation of the FY 2017 
standardized amount, the hospital-specific payment rates, and the 
national capital Federal rate.
    We also stated in the FY 2017 IPPS/LTCH PPS proposed and final 
rules that, for the reasons outlined in those rules, we believe it 
would be appropriate to use our authority under sections 
1886(d)(5)(I)(i) and 1886(g) of the Act to temporarily increase the 
rates, only for FY 2017, to address the effect of the 0.2 percent 
reduction to the rates in effect for FY 2014, the 0.2 percent reduction 
to the rates in effect for FY 2015 (recall the 0.998 factor included in 
the calculation of the FY 2014 rates permanently reduced the rates for 
FY 2014 and future years until it is removed), and the 0.2 percent 
reduction to the rates in effect for FY 2016. We stated that we believe 
the most transparent, expedient, and administratively feasible method 
to accomplish this was a temporary one-time prospective increase to the 
FY 2017 rates of 0.6 percent (= 0.2 percent + 0.2 percent + 0.2 
percent). Specifically, we finalized our proposal to include a factor 
of 1.006 in the calculation of the standardized amount, the hospital-
specific payment rates, and the national capital Federal rate in FY 
2017 and then to remove this temporary one-time prospective increase by 
including a factor of (1/1.006) in the calculation of the rates for FY 
2018. We stated that while we generally did not believe it is 
appropriate in a prospective

[[Page 20001]]

system to retrospectively adjust rates, we took this action in the 
specific context of this unique situation.
    In summary, for the reasons described in the FY 2017 IPPS/LTCH PPS 
proposed and final rules, we finalized our proposal to include a 
permanent factor of (1/0.998) and a temporary one-time factor of 
(1.006) in the calculation of the FY 2017 standardized amount, 
hospital-specific payment rates, and national capital Federal rate and 
to include a factor of (1/1.006) in the calculation of the FY 2018 
standardized amount, hospital-specific payment rates, and national 
capital Federal rate to remove the temporary one-time factor of 1.006.
    In this FY 2018 IPPS/LTCH PPS proposed rule, we are including a 
factor of (1/1.006) in the calculation of the FY 2018 standardized 
amount, hospital-specific payment rates, and national capital Federal 
rate to remove the temporary one-time factor of 1.006, as explained in 
detail in section II. of the Addendum to this proposed rule.
    We note that, in the FY 2017 IPPS/LTCH PPS final rule, in our 
response to public comments, we recognized that for closed, converted, 
or new hospitals, our prospective method generally may have had a 
differential positive or negative impact compared to hospitals that 
were IPPS hospitals for all of the FY 2014 through FY 2017 time period. 
We stated that we generally believe that, given the prospective nature 
of our method and our goal to adopt a transparent, expedient, and 
administratively feasible approach, these differential impacts would be 
an appropriate consequence. However, after consideration of the public 
comments received, we agreed that we should provide a process to 
address the situation of closed or converted hospitals. Due to the 
small number of hospitals impacted, we stated that we will address 
closed and converted hospitals as part of the cost report settlement 
process. We stated that these hospitals should identify themselves to 
their MACs so that the appropriate cost report adjustment can be 
applied.
2. Eliminating Inappropriate Medicare Payment Differentials for Similar 
Services in the Inpatient and Outpatient Settings
    CMS is committed to eliminating inappropriate Medicare payment 
differentials for similar services in the inpatient and outpatient 
settings in order to execute our responsibility to taxpayers to 
prudently pay for high quality care. As MedPAC has previously noted, 
``The high profitability of one-day stays under the inpatient 
prospective payment system (IPPS) and the generally lower payment rates 
for similar care under the outpatient prospective payment system (OPPS) 
have heightened concern about the appropriateness of inpatient one-day 
stays'' (Medicare and the Health Care Delivery System Report to 
Congress, June 2015).
    In the past, CMS has requested public comment on potential payment 
policy options to address the issue of payment differentials between 
services provided in the inpatient and outpatient settings. However, 
our most recent solicitation occurred in the CY 2016 OPPS/ASC final 
rulemaking (80 FR 70549). Since that time, both hospitals and CMS have 
had the opportunity to gain experience under the various policy changes 
that have occurred with respect to short inpatient hospital stays. In 
this context, we believe it is an appropriate time to seek public 
comment on transparent ways to identify and eliminate inappropriate 
payment differentials for similar services provided in the inpatient 
and outpatient settings.

N. Provider-Based Status of Indian Health Service and Tribal Facilities 
and Organizations

    Since the beginning of the Medicare program, some providers, which 
we refer to as ``main providers,'' have functioned as a single entity 
while owning and operating multiple departments, locations, and 
facilities. We have maintained that having clear criteria for provider-
based status is important because a provider-based status designation 
can result in additional Medicare payments under the OPPS for services 
provided at the provider-based facility, as well as increased 
beneficiary coinsurance liability for Medicare beneficiaries.
    The Medicare criteria for provider-based status are set forth in 
our regulations at 42 CFR 413.65. In the April 7, 2000 OPPS final rule 
(65 FR 18507), CMS (then HCFA), responded to several commenters who 
were concerned that the implementation of the proposed provider-based 
regulations would have the effect of denying Medicare participation as 
provider-based entities to a number of Indian Health Service (IHS) 
facilities that were being operated by Indian Tribes under the auspices 
of the Indian Self-Determination and Education Assistance Act (Pub. L. 
93-638). Other commenters were concerned that the regulations would 
jeopardize statutorily authorized contracting and compacting 
relationships and would severely restrict a number of IHS and Tribal 
clinics from receiving payments for outpatient services. The IHS itself 
strongly recommended that the proposed regulations not apply to IHS and 
the Tribal health system. In response to these concerns, we stated in 
that final rule (68 FR 18507): ``We recognize that the provision of 
health services to members of Federally recognized Tribes is based on a 
special and legally recognized relationship between Indian Tribes and 
the United States Government. To address this relationship, the IHS has 
developed an integrated system to provide care that has its foundation 
in IHS hospitals. Because of these special circumstances, not present 
in the case of private, non-Federal facilities and organizations that 
serve patients generally, we agree that it would not be appropriate to 
apply the provider-based criteria to IHS facilities or organizations or 
to most tribal facilities or organizations.''
    In the April 7, 2000 OPPS final rule (65 FR 18507), we finalized a 
policy at Sec.  413.65(m) of our regulations under which facilities and 
organizations operated by the IHS or Tribes would be considered to be 
``departments of hospitals operated by the IHS or Tribes,'' and thereby 
grandfathered from application of the provider-based rules, if on or 
before April 7, 2000, they furnished only services that were billed as 
if they had been furnished by a department of a hospital operated by 
the IHS or a Tribe and they are: (1) owned and operated by the IHS; (2) 
owned by the Tribe but leased from the Tribe by the IHS under the 
Indian Self-Determination and Education Assistance Act in accordance 
with applicable regulations and policies of the IHS in consultation 
with Tribes; or (3) owned by the IHS but leased and operated by the 
Tribe under the Indian Self-Determination and Education Assistance Act 
in accordance with applicable regulations and policies of the IHS in 
consultation with Tribes.
    In order to qualify for grandfathering under Sec.  413.65(m), we 
required that the services be furnished by the facility or organization 
on or before April 7, 2000 because of our concern that, without such a 
date limitation, this provision would create an incentive for IHS or 
Tribal hospitals to establish new outpatient departments that were not 
sufficiently integrated with the main provider to support payment under 
the OPPS for the services that they furnished. Our intent was to 
implement a policy that both addressed a primary concern (that is, the 
rapid growth of off-campus provider-based clinics) that necessitated 
the provider-based regulations and recognized longstanding and complex 
IHS and Tribal

[[Page 20002]]

arrangements. Since we finalized the policy at Sec.  413.65(m), we have 
issued guidance on circumstances that would and would not result in a 
facility or organization losing its grandfathered status. In 
particular, we recognized the special relationship between Tribes and 
the IHS under the Self-Determination and Education Assistance Act and 
stated that changes in the status of a hospital or a facility from IHS 
to Tribal operation, or vice versa, or the realignment of a facility 
from one IHS or Tribal hospital to another IHS or Tribal hospital, 
would not be a basis for losing such a grandfathered status, so long as 
the resulting configuration is one that would have qualified for 
grandfathering under Sec.  413.65(m) had it been in effect on April 7, 
2000.
    In the years since we implemented Sec.  413.65(m) and issued the 
guidance described earlier, we have considered whether it remains 
necessary to require that facilities and organizations be furnishing 
the services on or before April 7, 2000 in order to qualify for 
grandfathering. We have concluded that it does not because IHS policies 
and procedures (for example, as specified in the Indian Health Manual 
available on the IHS Web site at: https://ihs.gov/aboutihs/indianhealthmanual/) regarding the planning, operation, and funding of 
such facilities and organizations are resulting in appropriate Medicare 
payments to them. Therefore, after further consideration of the 
position CMS has set out in prior guidance, the special and legally 
recognized relationship between Indian Tribes and the U.S. Government, 
as well as current IHS policies and procedures, we are proposing to 
remove the date limitation in Sec.  413.65(m) that restricted the 
grandfathering provision to IHS or Tribal facilities and organizations 
furnishing services on or before April 7, 2000.
    We also are proposing to make a technical change to the billing 
reference in Sec.  413.65(m) by replacing ``were billed'' with ``are 
billed using the CCN of the main provider and with the consent of the 
main provider.'' We believe this proposed change will make the 
regulation text more consistent with our current rules that require 
these facilities to comply with all applicable Medicare conditions of 
participation that apply to the main provider. We are not proposing to 
otherwise change the requirement that the only services furnished at 
the facility or organization must be hospital outpatient services, or 
to change the other requirements for grandfathering in paragraphs 
(m)(1) through (3) of Sec.  413.65. Therefore, under our proposal, a 
facility or organization operated by the IHS or a Tribe will be 
considered to be a department of a hospital operated by the IHS or a 
Tribe if it furnishes only hospital outpatient services that are billed 
using the CMS Certification Number (CCN) of the main provider with the 
consent of the main provider, and it also meets one of the conditions 
in Sec.  413.65(m)(1) through (3).
    We welcome public comments on our proposals.

O. Request for Information Regarding Physician-Owned Hospitals

    We are seeking public comments on the appropriate role of 
physician-owned hospitals in the delivery system. We are also seeking 
public comments on how the current scope of and restrictions on 
physician-owned hospitals affects healthcare delivery. In particular, 
we are interested in comments on the impact on Medicare beneficiaries.

VI. Proposed 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. We initially implemented the IPPS for 
capital-related costs in the FY 1992 IPPS final rule (56 FR 43358). In 
that final rule, we established a 10-year transition period to change 
the payment methodology for Medicare hospital inpatient capital-related 
costs from a reasonable cost-based payment methodology to a prospective 
payment methodology (based fully on the Federal rate).
    FY 2001 was the last year of the 10-year transition period that was 
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 the regulations at 42 CFR 
412.312. 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 42 CFR 412.348 provide for certain exception 
payments under the capital IPPS. The regular exception payments 
provided under 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, the regulations at 42 CFR 412.300(b) define 
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.

[[Page 20003]]

3. Payments for Hospitals Located in Puerto Rico
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57061), we revised 
the regulations at 42 CFR 412.374 relating to the calculation of 
capital IPPS payments to hospitals located in Puerto Rico beginning in 
FY 2017 to parallel the change in the statutory calculation of 
operating IPPS payments to hospitals located in Puerto Rico, for 
discharges occurring on or after January 1, 2016, made by section 601 
of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113). Section 
601 of Public Law 114-113 increased the applicable Federal percentage 
of the operating IPPS payment for hospitals located in Puerto Rico from 
75 percent to 100 percent and decreased the applicable Puerto Rico 
percentage of the operating IPPS payments for hospitals located in 
Puerto Rico from 25 percent to zero percent, applicable to discharges 
occurring on or after January 1, 2016. As such, under revised Sec.  
412.374, for discharges occurring on or after October 1, 2016, capital 
IPPS payments to hospitals located in Puerto Rico are based on 100 
percent of the capital Federal rate.

C. Proposed Annual Update for FY 2018

    The proposed annual update to the national capital Federal rate, as 
provided for at Sec.  412.308(c), for FY 2018 is discussed in section 
III. of the Addendum to this proposed rule.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50906 through 
50954), we adopted the 2-midnight policy effective for dates of 
admission on or after October 1, 2013, under which an inpatient 
admission is generally appropriate for Medicare Part A payment if the 
physician (or other qualified practitioner) admits the patient as an 
inpatient based upon the reasonable expectation that the patient will 
need hospital care that crosses at least 2 midnights. At that time, our 
actuaries estimated that the 2-midnight policy would increase 
expenditures by approximately $220 million in FY 2014 due to an 
expected net increase in inpatient encounters. Using our authority 
under section 1886(g) of the Act, and consistent with the approach 
taken for the operating IPPS standardized amount, the Puerto Rico-
specific standardized amount and the hospital-specific payment rates, 
we made a reduction of 0.2 percent (an adjustment factor of 0.998) to 
the national capital Federal rate and the Puerto Rico-specific capital 
rate to offset the estimated increase in capital IPPS expenditures 
associated with the projected increase in inpatient encounters that was 
expected to result from the new inpatient admission guidelines (78 FR 
50746 through 50747). (As explained in section V.B.3. of the FY 2017 
IPPS/LTCH PPS final rule, we discontinued use of the Puerto Rico 
capital rate in the calculation of capital IPPS payments to hospitals 
located in Puerto Rico beginning in FY 2017.)
    For the reasons discussed in the FY 2017 IPPS/LTCH PPS proposed and 
final rules (81 FR 25136 through 25138 and 57058 through 57060) and 
consistent with our approach for the operating IPPS rates, we used our 
authority under section 1886(g) of the Act to permanently remove the 
0.2 percent reduction to the national capital Federal rate beginning in 
FY 2017. Specifically, we made an adjustment of (1/0.998) to the 
national capital Federal rate to remove the 0.2 percent reduction, 
consistent with the adjustment to the operating IPPS standardized 
amount and the hospital-specific payment rates.
    In addition, consistent with our approach for the operating IPPS 
standardized amount and hospital-specific payment rates, and for the 
reasons discussed in the FY 2017 IPPS/LTCH PPS proposed and final 
rules, we finalized our proposal to use our authority under section 
1886(g) of the Act to adjust the FY 2017 national capital Federal rate 
to address the effects of the 0.2 percent reduction to the national 
capital Federal rates in effect for FY 2014, FY 2015, and FY 2016 by 
making a one-time prospective adjustment of 1.006 in FY 2017 to the 
national capital Federal rate and, for FY 2018, to remove the effects 
of this one-time prospective adjustment through an adjustment of (1/
1.006) to the national capital Federal rate. Therefore, consistent with 
our finalized policy, for FY 2018, we are including a factor of (1/
1.006) in the calculation of the FY 2018 operating IPPS standardized 
amount, the hospital-specific payment rates, and the national capital 
Federal rate to remove the temporary one-time factor of 1.006. (For 
additional details, we refer readers to section IV.P. of the preamble 
of the FY 2017 IPPS/LTCH PPS final rule (81 FR 57058 through 57060 and 
57062 through 57063) and to section V.M. of the preamble of this 
proposed rule.)
    In section II.D. of the preamble of this proposed rule, we present 
a discussion of the MS-DRG documentation and coding adjustment, 
including previously finalized policies and historical adjustments, as 
well as the adjustment to the standardized amount under section 1886(d) 
of the Act that we are proposing for FY 2018 in accordance with the 
amendments made to section 7(b)(1)(B) of Public Law 110-90 by section 
414 of the MACRA and section 15005 of the 21st Century Cures Act. 
Because these provisions require us to make an adjustment only to the 
operating IPPS standardized amount, we are not proposing a similar 
adjustment to the national capital Federal rate (or to the hospital-
specific rates).

VII. Proposed Changes for Hospitals Excluded From the IPPS

A. Proposed Rate-of-Increase in Payments To Excluded Hospitals for FY 
2018

    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 reimbursement for total inpatient operating costs for a 
hospital's cost reporting period. In accordance with Sec.  403.752(a) 
of the regulations, religious nonmedical health care institutions 
(RNHCIs) also are subject to the rate-of-increase limits established 
under Sec.  413.40 of the regulations discussed previously.
    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. In the FYs 2014 and 2015 IPPS/LTCH PPS final rules 
(78 FR 50747 through 50748 and 79 FR 50156 through 50157, 
respectively), we adopted a policy of using the percentage increase in 
the FY

[[Page 20004]]

2010-based IPPS operating market basket to update the target amounts 
for FY 2014 and subsequent fiscal years 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. However, as discussed in section IV. of the preamble of 
this proposed rule, we are proposing to revise and rebase the IPPS 
operating market basket to a 2014 base year. Therefore, we are 
proposing to use the percentage increase in the 2014-based IPPS 
operating market basket to update the target amounts for children's 
hospitals, the 11 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 2018 and subsequent fiscal 
years. Accordingly, for FY 2018, 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 would be the FY 2018 percentage increase in the 2014-based IPPS 
operating market basket. Based on IHS Global Insight, Inc.'s 2016 
fourth quarter forecast, for this proposed rule, we estimate that the 
2014-based IPPS operating market basket update for FY 2018 would be 2.9 
percent (that is, the estimate of the market basket rate-of-increase). 
We are proposing that if more recent data become available for the 
final rule, we would use them to calculate the IPPS operating market 
basket update for FY 2018.
    In addition, as discussed in section VIII.J. of the preamble of 
this proposed rule, as originally enacted section 1886(d)(1)(B)(iv) of 
the Act established an IPPS-excluded category of hospitals that 
experience extended average inpatient length-of-stays, which are known 
as LTCHs under the Medicare program. Historically, section 
1886(d)(1)(B)(iv) of the Act consisted of two subclauses (I) and (II) 
(that is, sections 1886(d)(1)(B)(iv)(I) and (d)(1)(B)(iv)(II) of the 
Act), and the two categories of hospitals were generally referred to as 
``subclause (I)'' and ``subclause (II)'' LTCHs. Section 15008 of the 
21st Century Cures Act (Pub. L. 114-255) amended section 1886(d)(1)(B) 
of the Act by redesignating the ``subclause (II) LTCH'' provision in 
section 1886(d)(1)(B)(iv)(II) of the Act to section 1886(d)(1)(B)(vi) 
of the Act. In addition, subsection (b) of section 15008 of Public Law 
114-255 specifies that, for cost reporting periods beginning on or 
after January 1, 2015, hospitals classified under section 
1886(d)(1)(B)(vi) of the Act are not subject to section 1886(m) of the 
Act, which sets forth the LTCH PPS. Section 15008(c) further specifies 
that, for cost reporting periods beginning on or after January 1, 2015, 
payment for inpatient operating costs for such hospitals is to be made 
as described in 42 CFR 412.526(c)(3), and payment for capital costs is 
to be made as described in 42 CFR 412.526(c)(4). In order to implement 
these requirements, we are proposing to amend Sec.  412.23 to codify 
the redesignation of such hospitals from section 1886(d)(1)(B)(iv)(II) 
of the Act to new section 1886(d)(1)(B)(vi) of the Act (which we are 
now referring to as ``long-term care neoplastic disease hospitals'') 
and the statutory payment requirements for inpatient operating and 
capital costs. (For additional information on ``subclause (II)'' LTCHs, 
including the statutory criteria and the establishment of the payment 
adjustment under Sec.  412.526, and our proposed changes to Sec.  
412.23 to implement the provisions of section 15008 of Public Law 114-
255, we refer readers to section VIII.J. of the preamble of this 
proposed rule.)
    Under the redesignation of subclause (II) LTCHs to long-term care 
neoplastic disease hospitals provided by section 15008 of Public Law 
114-255 (described above), the statute specifies that payment for 
inpatient operating costs shall continue to be made on a reasonable 
cost basis in the manner provided in Sec.  412.526(c)(3) of the 
regulations. Section 412.526(c)(3) provides that the hospital's 
Medicare allowable net inpatient operating costs for that period are 
paid on a reasonable cost basis, subject to that hospital's ceiling, as 
determined under Sec.  412.526(c)(1), for that period. Under section 
412.526(c)(1), for each cost reporting period, the ceiling was 
determined by multiplying the updated target amount, as defined in 
Sec.  412.526(c)(2), for that period by the number of Medicare 
discharges paid during that period. Section 412.526(c)(2)(i) describes 
the method for determining the target amount for cost reporting periods 
beginning during FY 2015. Section 412.526(c)(2)(ii) specifies that, for 
cost reporting periods beginning during fiscal years after FY 2015, the 
target amount 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).
    For FY 2018, in accordance with proposed Sec.  412.23(j)(2) and 
existing Sec.  412.526(c)(2)(ii) of the regulations, we are proposing 
that, for cost reporting periods beginning during FY 2018, the update 
to the target amount for long-term care neoplastic disease hospitals 
(that is, hospitals described under proposed Sec.  412.23(j)) would be 
the applicable annual rate-of-increase percentage specified in Sec.  
413.40(c)(3) for FY 2018, which would be equal to the percentage 
increase projected by the hospital market basket index, which, in this 
proposed rule, is estimated to be the percentage increase in the 
proposed 2014-based IPPS operating market basket (that is, the estimate 
of the market basket rate-of-increase). Accordingly, for this proposed 
rule, the proposed update to a long-term care neoplastic disease 
hospital's target amount for FY 2018 is 2.9 percent, which is based on 
IHS Global Insight, Inc.'s 2016 fourth quarter forecast. Furthermore, 
we are proposing that if more recent data become available for the 
final rule, we would use that updated data to calculate the IPPS 
operating market basket update for FY 2018.

B. Proposed Changes to Hospital-Within-Hospital Regulations

    On September 1, 1994, we published regulations governing hospitals-
within-hospitals (HwHs) to address inappropriate Medicare payments to 
LTCHs that were effectively units of other hospitals (59 FR 45330). 
There was concern that the LTCH HwH model was being used by some acute 
care hospitals paid under the IPPS as a way of inappropriately 
receiving higher payments for a subset of their cases. Moreover, we 
stated that the IPPS-exclusion of long-term care ``units'' may be 
inconsistent with the statutory scheme, which does not provide for the 
exclusion from the IPPS of long-term care units.
    Therefore, we codified the HwH regulations at 42 CFR 412.23 
(currently at Sec.  412.22(e)) for an LTCH HwH that is co-located with 
another hospital. A co-located hospital is a hospital that occupies 
space in a building also used by another hospital or in one or more 
separate buildings located on the same campus as buildings used by 
another hospital. The regulations at Sec.  412.22(e) required that, to 
be excluded from the IPPS, long-term care HwHs must have a separate 
governing body, a chief medical officer, medical staff, and a chief 
executive officer from that of the hospital with which it is co-
located. In addition, the long-term care HwH must have met either of 
the following two criteria: The HwH must perform certain specified 
basic hospital functions on its

[[Page 20005]]

own and not receive them from the host hospital or a third entity that 
controls both hospitals; or the HwH must receive at least 75 percent of 
its inpatients from sources other than the co-located hospital. A third 
option was added to the regulations on September 1, 1995 (60 FR 45778) 
that allowed long-term care HwHs to demonstrate their separateness by 
showing that the cost of the services that the hospital obtains under 
contracts or other agreements with the co-located hospital or a third 
entity that controls both hospitals is no more than 15 percent of the 
hospital's total inpatient operating cost. In 1997, we extended 
application of the HwH regulations at Sec.  412.22 to all 
classifications of IPPS-excluded hospitals. Therefore, effective for 
cost reporting periods beginning on or after October 1, 1997, 
psychiatric, rehabilitation, cancer, and children's hospitals that are 
co-located with another hospital also are generally required to meet 
the ``separateness'' criteria at Sec.  412.22(e). In addition, a 
``grandfathering'' provision (that is, hospitals that were IPPS-
excluded HwHs before October 1, 1995 are not required to comply with 
the separateness and control regulations so long as they continue to 
operate under the same terms and conditions) was added to the 
regulations at Sec.  412.22(f). We later modified the grandfathering 
provision to allow for a grandfathered hospital to make specified 
changes (for example increasing the number of beds) during particular 
timeframes, which vary depending on the change the hospital had made. 
Below we discuss our FY 2018 proposals to make several changes to our 
HwH regulations.
    In this proposed rule, we are proposing to revise our HwH 
regulations so that the separateness and control requirements would 
only apply to IPPS-excluded HwHs that are co-located with IPPS 
hospitals. Under this proposal, any hospital that occupies a building 
also used by another hospital, or in one or more separate buildings 
located on the same campus as buildings used by another hospital would 
remain, by definition, an HwH. However, the separateness and control 
requirements for IPPS-excluded HwHs would apply only when the IPPS-
excluded hospital is co-located with an IPPS hospital. This proposal is 
premised on the belief that the policy concerns that underlie our 
existing HwH regulations (that is, inappropriate patient shifting and 
hospitals acting as illegal de facto units) are sufficiently moderated 
in situations where IPPS-excluded hospitals are co-located with each 
other but not IPPS hospitals, in large part due to the payment system 
changes that have occurred over the intervening years for IPPS-excluded 
hospitals. For example, LTCHs, inpatient rehabilitation facilities 
(IRFs) and inpatient psychiatric facilities (IPFs) are no longer paid 
on a reasonable cost-basis as was the case when HwH regulations were 
adopted. Currently, LTCHs, IRFs, and IPFs are each paid under their own 
respective PPS, and those payment systems include policies based on the 
types of patients they admit for treatment. For example, to be 
classified for payment under Medicare's IRF PPS, at least 60 percent of 
a facility's total inpatient population must require inpatient 
hospital-level treatment for one or more of 13 conditions listed in 42 
CFR 412.29(b)(2), and recent statutory changes require that specified 
patient-level criteria be met for LTCH discharges to be paid based on 
the standard Federal payment rate under the LTCH PPS. For these 
reasons, we are proposing to revise our HwH regulations so that the 
separateness and control requirements would only apply to IPPS-excluded 
HwHs that are co-located with IPPS hospitals; we are proposing to 
revise the introductory language of Sec.  412.22(e) to reflect this 
proposed change. That is, the introductory language of Sec.  412.22(e) 
would state that, beginning on or after October 1, 2017, an HwH that is 
excluded from the IPPS that occupies space in a building also used by 
an IPPS hospital, or in one or more separate buildings located on the 
same campus as buildings used by an IPPS hospital, must meet the 
criteria specified in Sec.  412.22 (e)(1) through (e)(3) in order to be 
excluded from the IPPS. While we are not proposing changes to our HwH 
regulations for co-located IPPS and IPPS-excluded hospitals, we are 
seeking public comments on the issue of whether the separateness and 
control requirements are still necessary for IPPS-excluded HwHs that 
are co-located with IPPS hospitals, which we would consider for 
potential future rulemaking.
    In this proposed rule, we also are proposing to revise the 
requirements at Sec.  412.22(e)(1)(v), which outlines performance of 
basic hospital functions, to make them effective for fiscal years prior 
to FY 2018. We believe that the requirements in paragraph (e)(1)(v)(A) 
are generally duplicative of CMS' interpretative guidance that relate 
to a number of hospital conditions of participation (CoPs) that are in 
the regulations (for example, 42 CFR 482.21 through 482.27, 482.30, 
482.42, 482.43, and 482.45). As such, we are proposing to remove the 
overlap between the HwH regulations and the CoP Interpretative Guidance 
from the regulations by sunsetting the requirements in paragraph 
(e)(1)(v)(A) of Sec.  412.22. (The COP Interpretive Guidance for 
hospitals can be found in Appendix A of the State Operations Manual 
(CMS Pub. 100-07).) In addition, we are proposing to remove the 
requirements in paragraph (e)(1)(v)(B) of Sec.  412.22 because we 
believe these payment requirements could be interpreted to conflict 
with the requirements under the hospital CoPs, which do not provide for 
a minimum cost threshold regarding the services the HwH obtains from 
the hospital with which it is occupying space. We do not believe that 
this proposed revision would result in a practical change to how HwHs 
are currently operated because the performance of basic hospital 
functions requirements at Sec.  412.22(e)(1)(v) are currently addressed 
under CMS' Interpretative Guidance for the hospital CoPs. In addition, 
we do not believe, at this time, that there are payment policy concerns 
that would justify imposition of regulatory requirements on the 
performance of basic hospital functions for HwHs that are more 
stringent than what is addressed under the Interpretative Guidance for 
the hospital CoPs.
    We welcome public comment on these proposals.

C. Critical Access Hospitals (CAHs)

1. Background
    Section 1820 of the Act provides for the establishment of Medicare 
Rural Hospital Flexibility Programs (MRHFPs), under which individual 
States may designate certain facilities as critical access hospitals 
(CAHs). Facilities that are so designated and meet the CAH conditions 
of participation under 42 CFR part 485, subpart F, will be certified as 
CAHs by CMS. Regulations governing payments to CAHs for services to 
Medicare beneficiaries are located in 42 CFR part 413.
2. Frontier Community Health Integration Project (FCHIP) Demonstration
    Section 123 of the Medicare Improvements for Patients and Providers 
Act of 2008 (Pub. L. 110-275), as amended by section 3126 of the 
Affordable Care Act, authorizes a demonstration project to allow 
eligible entities to develop and test new models for the delivery of 
health care services in eligible counties in order to improve access to 
and better integrate the delivery of acute care, extended care

[[Page 20006]]

and other health care services to Medicare beneficiaries. The 
demonstration is titled ``Demonstration Project on Community Health 
Integration Models in Certain Rural Counties,'' and is commonly known 
as the Frontier Community Health Integration Project (FCHIP) 
demonstration.
    The authorizing statute states the eligibility criteria for 
entities to be able to participate in the demonstration. An eligible 
entity, as defined in section 123(d)(1)(B) of Public Law 110-275, as 
amended, is an MRHFP grantee under section 1820(g) of the Act (that is, 
a CAH); and is located in a State in which at least 65 percent of the 
counties in the State are counties that have 6 or less residents per 
square mile.
    The authorizing statute stipulates several other requirements for 
the demonstration. Section 123(d)(2)(B) of Public Law 110-275, as 
amended, limits participation in the demonstration to eligible entities 
in not more than 4 States. Section 123(f)(1) of Public Law 110-275 
requires the demonstration project to be conducted for a 3-year period. 
In addition, section 123(g)(1)(B) of Public Law 110-275 requires that 
the demonstration be budget neutral. Specifically, this provision 
states that in conducting the demonstration project, the Secretary 
shall ensure that the aggregate payments made by the Secretary do not 
exceed the amount which the Secretary estimates would have been paid if 
the demonstration project under the section were not implemented. 
Furthermore, section 123(i) of Public Law 110-275 states that the 
Secretary may waive such requirements of titles XVIII and XIX of the 
Act as may be necessary and appropriate for the purpose of carrying out 
the demonstration project, thus allowing the waiver of Medicare payment 
rules encompassed in the demonstration.
    In January 2014, CMS released a request for applications (RFA) for 
the FCHIP demonstration. Using 2013 data from the U.S. Census Bureau, 
CMS identified Alaska, Montana, Nevada, North Dakota, and Wyoming as 
meeting the statutory eligibility requirement for participation in the 
demonstration. The RFA solicited CAHs in these five States to 
participate in the demonstration, stating that participation would be 
limited to CAHs in four of the States. To apply, CAHs were required to 
meet the eligibility requirements in the authorizing legislation, and, 
in addition, to describe a proposal to enhance health-related services 
that would complement those currently provided by the CAH and better 
serve the community's needs. In addition, in the RFA, CMS interpreted 
the eligible entity definition in the statute as meaning a CAH that 
receives funding through the MHRFP. The RFA identified four 
interventions, under which specific waivers of Medicare payment rules 
would allow for enhanced payment for telehealth, skilled nursing 
facility/nursing facility beds, ambulance services, and home health 
services, respectively. These waivers were formulated with the goal of 
increasing access to care with no net increase in costs.
    Ten CAHs were selected for participation in the demonstration, 
which started on August 1, 2016. These CAHs are located in Montana, 
Nevada and North Dakota, and they are participating in three of the 
four interventions identified in the FY 2017 IPPS/LTCH PPS final rule. 
Eight CAHs are participating in the telehealth intervention, three CAHs 
are participating in the skilled nursing facility/nursing facility bed 
intervention, and two CAHs are participating in the ambulance services 
intervention. Each CAH is allowed to participate in more than one of 
the interventions. None of the selected CAHs are participants in the 
home health intervention, which was the fourth intervention proposed in 
the RFA.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57064 through 
57065), we finalized a policy to address the budget neutrality 
requirement for the demonstration. As explained in the FY 2017 IPPS/
LTCH PPS final rule, we based our selection of CAHs for participation 
with the goal of maintaining the budget neutrality of the demonstration 
on its own terms (that is, the demonstration will produce savings from 
reduced transfers and admissions to other health care providers, thus 
offsetting any increase in payments resulting from the demonstration). 
However, because of the small size of this demonstration and 
uncertainty associated with projected Medicare utilization and costs, 
we adopted a contingency plan to ensure that the budget neutrality 
requirement in section 123 of Public Law 110-275 is met. If analysis of 
claims data for Medicare beneficiaries receiving services at each of 
the participating CAHs, as well as from other data sources, including 
cost reports for these CAHs, shows that increases in Medicare payments 
under the demonstration during the 3-year period are not sufficiently 
offset by reductions elsewhere, we will recoup the additional 
expenditures attributable to the demonstration through a reduction in 
payments to all CAHs nationwide. Because of the small scale of the 
demonstration, we indicated that we did not believe it would be 
feasible to implement budget neutrality by reducing payments to only 
the participating CAHs. Therefore, in the event that this demonstration 
is found to result in aggregate payments in excess of the amount that 
would have been paid if this demonstration were not implemented, we 
will comply with the budget neutrality requirement by reducing payments 
to all CAHs, not just those participating in the demonstration. We 
stated that we believe it is appropriate to make any payment reductions 
across all CAHs because the FCHIP demonstration is specifically 
designed to test innovations that affect delivery of services by the 
CAH provider category. We explained our belief that the language of the 
statutory budget neutrality requirement at section 123(g)(1)(B) of 
Public Law 110-275 permits the agency to implement the budget 
neutrality provision in this manner. The statutory language merely 
refers to ensuring that aggregate payments made by the Secretary do not 
exceed the amount which the Secretary estimates would have been paid if 
the demonstration project was not implemented, and does not identify 
the range across which aggregate payments must be held equal.
    Based on actuarial analysis using cost report settlements for FYs 
2013 and 2014, the demonstration is projected to satisfy the budget 
neutrality requirement and likely yield a total net savings. For the FY 
2017 IPPS/LTCH PPS final rule, we estimated that the total impact of 
the payment recoupment would be no greater than 0.03 percent of CAHs' 
total Medicare payments within one fiscal year (that is, Medicare Part 
A and Part B). The final budget neutrality estimates for the FCHIP 
demonstration will be based on the demonstration period, which is 
August 1, 2016 through July 31, 2019.
    The demonstration is projected to impact payments to participating 
CAHs under both Medicare Part A and Part B. As stated in the FY 2017 
IPPS/LTCH PPS final rule, in the event the demonstration is found not 
to have been budget neutral, any excess costs will be recouped over a 
period of 3 cost reporting years, beginning in CY 2020. The 3-year 
period for recoupment will allow for a reasonable timeframe for the 
payment reduction and to minimize any impact on CAHs' operations. 
Therefore, because any reduction to CAH payments in order to recoup 
excess costs under the demonstration will not begin until CY 2020, this 
policy will have no

[[Page 20007]]

impact for any national payment system for FY 2018.
3. Physician Certification Requirement for Payment of Inpatient CAH 
Services Under Medicare Part A
a. Background
    For inpatient CAH services to be payable under Medicare Part A, 
section 1814(a)(8) of the Act requires that a physician certify that 
the individual may reasonably be expected to be discharged or 
transferred to a hospital within 96 hours after admission to the CAH. 
The regulations implementing this statutory requirement are located at 
42 CFR 424.15.
    We most recently addressed the 96-hour certification requirement in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50163 through 50165). In 
that rule, we finalized a policy regarding the timing of this physician 
certification requirement. We revised the regulations such that all 
physician certification requirements must be completed, signed, and 
documented in the medical record no later than 1 day before the date on 
which the claim for payment for the inpatient CAH service is submitted. 
This policy change was effective October 1, 2014. Prior to that 
revision, our policy, which was in effect during FY 2014, had been that 
the certification began with the order for inpatient admission and was 
required to be completed, signed, and documented in the medical record 
prior to discharge.
    In addition to this change regarding the timing of the 96-hour 
certification requirement, we also provided a general review of this 
certification requirement in the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50165). We stated that because the statutory requirement at section 
1814(a)(8) of the Act is based on an expectation, if a physician 
certifies, in good faith, that an individual may reasonably be expected 
to be discharged or transferred to a hospital within 96 hours after 
admission to the CAH and then something unforeseen occurs that causes 
the individual to stay longer at the CAH, Medicare will pay for the 
costs of treating that patient and there would not be a problem with 
regard to the CAH designation as long as that individual's stay does 
not cause the CAH to exceed its 96-hour annual average CoP requirement 
under 42 CFR 485.620(b) (which we note is separate and distinct from 
the 96-hour physician certification requirement). However, if a 
physician cannot in good faith certify that an individual may 
reasonably be expected to be discharged or transferred within 96 hours 
after admission to the CAH, the CAH will not receive Medicare Part A 
payment for any portion of that individual's inpatient stay (79 FR 
50165). We further noted that time as an outpatient at the CAH is not 
included in applying the 96-hour requirement, nor does time in a CAH 
swing bed, which is being used to provide skilled nursing services, 
count towards the 96-hour requirement. The clock for the 96 hours only 
begins once the individual is admitted to the CAH as an inpatient.
b. Notice Regarding Changes to Instructions for the Review of the CAH 
96-Hour Certification Requirement
    Based on feedback from stakeholders, we have reviewed the CAH 96-
hour certification requirement to determine if there are ways to reduce 
its burden on providers. The requirement is statutory and cannot be 
modified through regulation. However, we do have discretion to 
determine how CMS will prioritize monitoring and enforcement of the 
policy. In order to minimize the burden of documentation submission 
requirements for CAHs with respect to the 96-hour certification 
requirement, in this proposed rule, we are providing notice that CMS 
will direct Quality Improvement Organizations (QIOs), Medicare 
Administrative Contractors (MACs), the Supplemental Medical Review 
Contractor (SMRC), and Recovery Audit Contractors (RACs) to make the 
CAH 96-hour certification requirement a low priority for medical record 
reviews conducted on or after October 1, 2017. This means that, absent 
concerns of probable fraud, waste, or abuse with respect to the 96-hour 
certification requirement, these contractors will not conduct medical 
record reviews. Reviews by other entities, including, but not limited 
to, Zone Program Integrity Contractors (ZPICs), the Office of Inspector 
General, and the Department of Justice will continue as appropriate. 
Quality reviews and automated reviews (for example, those reviews that 
do not involve medical records) will also continue as appropriate.
    In the past, RACs have never performed medical record reviews for 
CAH claims, and we will not approve medical record review of CAHs for 
only the 96-hour certification requirement. We are providing notice 
that, beginning October 1, 2017, CMS will direct the QIOs, MACs, and 
the SMRC to make medical record review of CAHs for only the 96-hour 
certification requirement a low priority. QIOs and MACs may continue to 
conduct medical record review of CAH claims for the purposes of 
verifying compliance with other requirements, such as beneficiary 
complaints, quality of care reviews, higher weighted DRG reviews, 
readmission reviews, and the requirement that procedures be medically 
necessary.
    Under the revised instructions to contractors, CAHs will not 
receive any medical record requests from MACs, RACs, QIO, or SMRCs 
related to the 96-hour certification unless CMS or its contractors find 
evidence of gaming or a failure to comply with CMS' provider screening 
and revalidation requirements or if medical review is needed for other 
issues. If this occurs, the MACs, RACs, QIO, or SMRCs could also review 
the 96-hour certification requirement. In addition, if data analysis or 
other information indicates that possible fraud exists, CAHs may also 
receive medical record requests for the 96-hour certification 
requirement.

VIII. Proposed Changes to the Long-Term Care Hospital Prospective 
Payment System (LTCH PPS) for FY 2018

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 originally defined 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 provided an alternative 
definition of LTCHs: specifically, a hospital that first received 
payment under section 1886(d) of the Act in 1986 and had an average 
inpatient length of stay (as determined by the Secretary of Health and 
Human Services (the Secretary)) of greater than 20 days and had 80 
percent or more of its annual Medicare inpatient discharges with a 
principal diagnosis that reflected a finding of neoplastic disease in 
the 12-month cost reporting period ending in FY 1997. However, as 
discussed below, section 15008 of the 21st Century Cures

[[Page 20008]]

Act (Pub. L. 114-255) amended section 1886 of the Act to exclude former 
``subclause II'' LTCHs from payment under the LTCH PPS and created a 
new category of IPPS-excluded hospitals (long-term Care neoplastic 
disease hospitals) for hospitals that were formally classified as 
``subclause (II)'' LTCHs.
    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 of the preamble of 
this proposed 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).
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 
49623), we implemented the provisions of the Pathway for Sustainable 
Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which mandated 
the application of the ``site neutral'' payment rate under the LTCH PPS 
for discharges that do not meet the statutory criteria for exclusion 
beginning in FY 2016. For cost reporting periods beginning on or after 
October 1, 2015, discharges that do not meet certain statutory criteria 
for exclusion are paid based on the site neutral payment rate. 
Discharges that do meet the statutory criteria continue to receive 
payment based on the LTCH PPS standard Federal payment rate. For more 
information on the statutory requirements of the Pathway for SGR Reform 
Act of 2013, we refer readers to the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49601 through 49623).
    Section 231 of Consolidated Appropriations Act, 2016 (Pub. L. 114-
113) amended section 1886(m)(6) of the Act by revising subparagraph 
(A)(i) and adding new subparagraph (E), which established a temporary 
exception to the site neutral payment rate for certain severe wound 
care discharges occurring prior to January 1, 2017, from LTCHs 
identified by the amendment made by section 4417(a) of the Balanced 
Budget Act of 1997 that are located in a rural area (as defined in 
section 1886(d)(2)(D) of the Act) or treated as being so located in 
accordance with section 1886(d)(8)(E) of the Act.
    We implemented the provisions of section 231 of Public Law 114-113, 
and amended our regulations at 42 CFR 412.522 to reflect those 
policies, in an interim final rule with comment period (IFC) that 
appeared in the Federal Register on April 21, 2016 (81 FR 23428 through 
23438). In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57068), we 
finalized the provisions of the April 21, 2016 IFC and made limited 
modifications of those policies set forth in the April 21, 2016 IFC by 
revising the definitions of a ``wound with morbid obesity'' and an 
``infected wound,'' and adding additional ICD-10 diagnosis codes to our 
list of such codes to identify cases that meet the established 
definition of a ``severe wound'' for the six severe wound categories 
other than the categories of a ``wound with morbid obesity'' and an 
``infected wound.'' The provisions implementing section 231 of Public 
Law 114-113 were effective for LTCH discharges from qualifying LTCHs 
for discharges on or after April 21, 2016, through December 31, 2016. 
For a full discussion of these provisions, we refer readers to the 
April 21, 2016 IFC (81 FR 23428) and the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 57068 through 57075).
    The 21st Century Cures Act (``the Cures Act'') (Pub. L. 114-255) 
contains several provisions that affect the LTCH PPS. Section 15004 of 
Public Law 114-255 contains provisions that change the moratorium on 
increasing the number of beds in existing LTCHs and LTCH satellite 
facilities. We discuss our implementation of the provisions of section 
15004 in section VIII.H. of the preamble of this proposed rule. The 
provisions of section 15004 also included a change to the payment 
methodology for high-cost outlier payments made to LTCHs. We discuss 
our proposals related to high-cost

[[Page 20009]]

outlier payments in section V.D. of the Addendum of this proposed rule. 
The provisions of section 15006 of Public Law 114-255 extended various 
moratoria on the implementation of the 25-percent payment adjustment 
threshold policy. We discuss our proposals related to the provisions of 
section 15006 in section VIII.G. of the preamble of this proposed rule. 
The provisions of section 15007 of Public Law 114-255 revised the 
requirements of the average length-of-stay criterion for LTCH 
classification. We discuss our proposals related to the provisions of 
section 15007 in section VIII.I. of the preamble of this proposed rule. 
The provisions of section 15008 of Public Law 114-255 changed the 
classification of certain hospitals. We discuss our proposals related 
to the provisions of section 15008 in section VIII.J. of the preamble 
of this proposed rule. The provisions of section 15009 of Public Law 
114-255 contain a temporary exception to the site neutral payment rate 
for certain spinal cord hospitals. We discuss our proposals related to 
the provisions of section 15009 in section VIII.E. of the preamble of 
this proposed rule. The provisions of section 15010 of Public Law 114-
255 contain a temporary exception to the site neural payment rate for 
certain wound care discharges from certain LTCHs. We discuss our 
proposals related to the provisions of section 15010 in section VIII.F. 
of the preamble of this proposed rule. In addition, we are proposing to 
amend 42 CFR 412.500 to include Public Law 114-255 as one of the bases 
and scope of subpart O of part 412.
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) 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, existing 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 (referred to as ``subclause (II)'' LTCHs). Under our proposed 
changes to Sec.  412.23(e)(2)(ii) of the regulations to implement the 
provisions of section 15008 of Public Law 114-255, we are proposing to 
add a sunset date to subclause (II) LTCHs (which have become a new 
category of IPPS-excluded hospitals known as long-term care neoplastic 
disease hospitals). Long-term care neoplastic disease hospitals are 
discussed in greater detail in section VIII.J. of the preamble of this 
proposed rule. In addition, in section VIII.I. of the preamble of this 
proposed rule, we discuss the proposed changes to the calculation of 
the greater than 25-day average length-of-stay requirement provided by 
the provisions of section 15008 of Pub. L. 114-255.)
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), 
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), or section 
3201 of the Patient Protection and Affordable Care Act (Pub. L. 111-148 
(42 U.S.C. 1315a).
     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 the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49623), we amended our regulations to expressly limit the 
charges that may be imposed on beneficiaries whose discharges are paid 
at the site neutral payment rate under the LTCH PPS.
    In section VII.G. of the preamble of the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57102), we also amended the existing regulations 
relating to the limitation on charges to expressly address beneficiary 
charges for LTCH services provided by subclause (II) LTCHs as part of 
our refinement of the payment adjustment for subclause II LTCHs under 
Sec.  412.526. We also amended the regulations under Sec.  412.507 to 
clarify our existing policy that blended payments made to an LTCH 
during its transitional period (that is, payment for discharges 
occurring in cost reporting periods beginning in FY 2016 or 2017) are 
considered to be site neutral payment rate payments.
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 generally 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 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

[[Page 20010]]

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 (health IT) 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 health IT products, including 
electronic health record (EHR) technology certified under the ONC 
Health IT Certification Program (https://www.healthit.gov/policy-researchers-implementers/about-onc-health-it-certification-program) 
developed to support secure, interoperable, health information 
exchange. 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 enable the reporting of electronically specified clinical 
quality measures (eCQMs) (as described elsewhere in this proposed 
rule). In 2015, ONC released a document entitled ``Connecting Health 
and Care for the Nation: A Shared Nationwide Interoperability Roadmap'' 
(available at: https://www.healthit.gov/sites/default/files/hie-interoperability/nationwide-interoperability-roadmap-final-version-1.0.pdf). In the near term, the Roadmap focuses on actions that will 
enable individuals and providers across the care continuum to send, 
receive, find, and use a common set of electronic clinical information 
at the nationwide level by the end of 2017. The Roadmap's goals also 
align with the Improving Medicare Post-Acute Care Transformation Act of 
2014 (Pub. L. 113-185) (IMPACT Act), which requires assessment data to 
be standardized and interoperable to allow for exchange of the data. 
Moreover, the vision described in the Roadmap significantly expands the 
types of electronic health information, information sources, and 
information users well beyond clinical information derived from EHRs. 
The Roadmap identifies four critical pathways that health IT 
stakeholders should focus on now in order to create a foundation for 
long-term success: (1) Improve technical standards and implementation 
guidance for priority data domains and associated elements; (2) rapidly 
shift and align Federal, State, and commercial payment policies from 
fee-for-service to value-based models to stimulate the demand for 
interoperability; (3) clarify and align Federal and State privacy and 
security requirements that enable interoperability; and (4) align and 
promote the use of consistent policies and business practices that 
support interoperability and address those that impede 
interoperability, in coordination with stakeholders.
    In support of the goals of the Roadmap, ONC released the 2017 
Interoperability Standards Advisory (ISA) (available at: https://www.healthit.gov/standards-advisory), a coordinated catalog of 
standards and implementation specifications developed and used to meet 
specific interoperability needs. The ISA is intended to serve as an 
industry resource to further the use of interoperable electronic health 
information exchange.

B. Proposed Medicare Severity Long-Term Care Diagnosis-Related Group 
(MS-LTC-DRG) Classifications and Relative Weights for FY 2018

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 757 MS-DRG 
groupings. For FY 2018, there would be 754 MS-DRG groupings based on 
the proposed changes discussed in section II.F. of the preamble of this 
FY 2018 IPPS/LTCH PPS proposed 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.
    In this section of the proposed rule, we provide a general summary 
of our existing methodology for determining the proposed FY 2018 MS-
LTC-DRG relative weights under the LTCH PPS.

[[Page 20011]]

    In this proposed rule, in general, for FY 2018, we are proposing to 
continue to use our existing methodology to determine the proposed MS-
LTC-DRG relative weights (as discussed in greater detail in section 
VIII.B.3. of the preamble of this proposed rule). As we established 
when we implemented the dual rate LTCH PPS payment structure codified 
under Sec.  412.522, which began in FY 2016, we are again proposing 
that the annual recalibration of the MS-LTC-DRG relative weights would 
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 had been in effect at the time of 
discharge when claims data from time periods before the dual rate LTCH 
PPS payment structure applies are 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 
(80 FR 49624). That is, under our current methodology, our MS-LTC-DRG 
relative weight calculations would not use data from cases paid at the 
site neutral payment rate under Sec.  412.522(c)(1) or data from cases 
that would have been paid at the site neutral payment rate if the dual 
rate LTCH PPS payment structure had been in effect at the time of that 
discharge. 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 later in greater detail in section VIII.B.3.c. of the 
preamble of this proposed rule). In addition, for FY 2018, we are 
proposing to continue 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 VIII.B.3.c. of 
the preamble of this proposed rule.
    Furthermore, for FY 2018, in using data from applicable LTCH cases 
to establish MS-LTC-DRG relative weights, we are proposing to 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 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 VIII.B.3.g. of 
the preamble of this proposed 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 previously 
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-10-PCS 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 0JBH3ZX)) 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 that varies based on the 
MS-LTC-DRG to which a beneficiary's discharge 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 using version ASC X12 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 the 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, ASC 
X12N/005010X233A1 for the health care claims or equivalent encounter 
information transaction (45 CFR 162.1102(c)).
    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 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, 
both of which were required to be implemented October 1, 2015 (45 CFR 
162.1002(c)(2) and (3)). For additional information on the 
implementation of the ICD-10 coding system, we refer readers to section 
II.F.1. of the FY 2017 IPPS/LTCH PPS final rule (81 FR 56787 through 
56790) and section II.F.1. of the preamble of

[[Page 20012]]

this proposed 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 explanation (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 MAC 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 MAC 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. Proposed Changes to the MS-LTC-DRGs for FY 2018
    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 proposing to update the MS-LTC-DRG classifications 
effective October 1, 2017, through September 30, 2018 (FY 2018), 
consistent with the proposed changes to specific MS-DRG classifications 
presented in section II.F. of the preamble of this proposed rule. 
Accordingly, the proposed MS-LTC-DRGs for FY 2018 presented in this 
proposed rule are the same as the proposed MS-DRGs that are being 
proposed for use under the IPPS for FY 2018. In addition, because the 
proposed MS-LTC-DRGs for FY 2018 are the same as the proposed MS-DRGs 
for FY 2018, the other proposed changes that affect MS-DRG (and by 
extension MS-LTC-DRG) assignments under proposed GROUPER Version 35 as 
discussed in section II.F. of the preamble of this proposed rule, 
including the proposed changes to the MCE software and the ICD-10-CM/
PCS coding system, also would be applicable under the LTCH PPS for FY 
2018.
3. Development of the Proposed FY 2018 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 rate by the applicable relative weight in 
determining payment to LTCHs for each case. In order to make these 
annual adjustments under the dual rate LTCH PPS payment structure, 
beginning with FY 2016, we recalibrate the MS-LTC-DRG relative 
weighting factors annually using data from applicable LTCH cases (80 FR 
49614 through 49617). Under this policy, the resulting MS-LTC-DRG 
relative weights would continue to be used to adjust the LTCH PPS 
standard Federal payment rate when calculating the payment for LTCH PPS 
standard Federal payment rate cases.
    The established methodology to develop the MS-LTC-DRG relative 
weights is generally 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). However, there have been 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, along with the change made in 
conjunction with the implementation of the dual rate LTCH PPS payment 
structure beginning in FY 2016 to use LTCH claims data from only LTCH 
PPS standard Federal payment rate cases (or LTCH PPS cases that would 
have qualified for payment under the LTCH PPS standard Federal payment 
rate if the dual rate LTCH PPS payment structure had been in effect at 
the time of the discharge). (For details on the 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).) For details on the 
change in our historical methodology to use LTCH claims data only from 
LTCH PPS standard Federal payment rate cases (or cases that would have 
qualified for such payment had the LTCH PPS dual payment rate structure 
been in effect at the time) to determine the MS-LTC-DRG relative 
weights, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49614 through 49617). 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 an MS-LTC-DRG with a 
relative weight of 2 would, on average, cost twice as much to treat as 
cases in an MS-LTC-DRG with a relative weight of 1.

[[Page 20013]]

b. Development of the Proposed MS-LTC-DRG Relative Weights for FY 2018
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57078 through 
57079), we presented our policies for the development of the MS-LTC-DRG 
relative weights for FY 2017.
    In this FY 2018 IPPS/LTCH PPS proposed rule, we are proposing to 
continue to use our current methodology to determine the proposed MS-
LTC-DRG relative weights for FY 2018, including the continued 
application of established policies related to: The hospital-specific 
relative value methodology, the treatment of severity levels in the 
proposed MS-LTC-DRGs, proposed low-volume and no-volume MS-LTC-DRGs, 
proposed adjustments for nonmonotonicity, the steps for calculating the 
proposed MS-LTC-DRG relative weights with a proposed budget neutrality 
factor, and only using data from applicable LTCH cases (which includes 
our policy of only using cases that would meet the criteria for 
exclusion from the site neutral payment rate (or, for discharges 
occurring prior to the implementation of the dual rate LTCH PPS payment 
structure, would have met the criteria for exclusion had those criteria 
been in effect at the time of the discharge)).
    In this section, we present our proposed application of our 
existing methodology for determining the proposed MS-LTC-DRG relative 
weights for FY 2018, and we discuss the effects of our proposals 
concerning the data used to determine the proposed FY 2018 MS-LTC-DRG 
relative weights on the various components of our existing methodology 
in the discussion that follows.
c. Data
    For this proposed rule, consistent with our proposals regarding the 
calculation of the proposed MS-LTC-DRG relative weights for FY 2018, we 
obtained total charges from FY 2016 Medicare LTCH claims data from the 
December 2016 update of the FY 2016 MedPAR file, which are the best 
available data at this time, and we are proposing to use proposed 
Version 35 of the GROUPER to classify LTCH cases. Consistent with our 
historical practice, we are proposing that if more recent data become 
available, we would use those data and the finalized Version 35 of the 
GROUPER in establishing the FY 2018 MS-LTC-DRG relative weights in the 
final rule. To calculate the proposed FY 2018 MS-LTC-DRG relative 
weights under the dual rate LTCH PPS payment structure, we are 
proposing to continue to use applicable LTCH data, which includes our 
policy of only using cases that meet the criteria for exclusion from 
the site neutral payment rate (or would have met the criteria had they 
been in effect at the time of the discharge) (80 FR 49624). 
Specifically, we began by first evaluating the LTCH claims data in the 
December 2016 update of the FY 2016 MedPAR file to determine which LTCH 
cases would meet the criteria for exclusion from the site neutral 
payment rate under Sec.  412.522(b) had the dual rate LTCH PPS payment 
structure been in effect at the time of discharge. (We note that while 
the dual rate LTCH PPS payment structure began to be phased in during 
FY 2016, due to the statutory requirement that individual LTCHs begin 
to receive payment under the dual rate LTCH PPS payment structure based 
on their individual cost reporting periods, there are LTCH discharges 
that occurred in FY 2016 that would not have been paid under that 
structure.) We identified the FY 2016 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 identify LTCH cases that do not have a 
principal diagnosis relating to a psychiatric diagnosis or to 
rehabilitation; 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; 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. Claims data from the 
FY 2016 MedPAR file that reported ICD-10-PCS procedure code 5A1955Z 
were used to identify cases involving at least 96 hours of ventilator 
services in accordance with the ventilator criterion. We note that, for 
purposes of developing the proposed FY 2018 MS-LTC-DRG relative weights 
using our current methodology, we did not make any proposals regarding 
the identification of cases that would have been excluded from the site 
neutral payment rate under the statutory provisions that provided for 
temporary exception from the site neutral payment rate under the LTCH 
PPS for certain severe wound care discharges from certain LTCHs or for 
certain spinal cord specialty hospitals provided by sections 15009 and 
15010 of Pub. L. 114-255, respectively, had our implementation of that 
law and the dual rate LTCH PPS payment structure been in effect at the 
time of the discharge. At this time, it is uncertain how many LTCHs and 
how many cases in the claims data we are using for this proposed rule 
would have met the criteria to be excluded from the site neutral 
payment rate under those exceptions (had the dual rate LTCH PPS payment 
structure been in effect at the time of the discharge). Therefore, for 
the remainder of this section, when we refer to LTCH claims only from 
cases that meet the criteria for exclusion from the site neutral 
payment rate (or would have met the criteria had the applicable 
statutes been in effect at the time of the discharge), such data do not 
include any discharges that would have been paid based on the LTCH PPS 
standard Federal payment rate under the provisions of sections 15009 
and 15010 of Pub. L. 114-255, had the exception been in effect at the 
time of the discharge.
    Furthermore, consistent with our historical methodology, we are 
excluding any claims in the resulting data set that were submitted by 
LTCHs that are all-inclusive rate providers and LTCHs that are paid in 
accordance with demonstration projects authorized under section 402(a) 
of Pub. L. 90-248 or section 222(a) of Pub. L. 92-603. In addition, 
consistent with our historical practice and our proposals, we are 
excluding any Medicare Advantage (Part C) claims in the resulting data. 
Such claims were identified 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 proposed MS-LTC-DRG relative weights for FY 2018.
    In summary, in general, we identified the claims data used in the 
development of the proposed FY 2018 MS-LTC-DRG relative weights in this 
proposed rule, as we are proposing, by trimming claims data that would 
have been paid the site neutral rate had the dual payment rate 
structure been in effect (except for discharges which would have been 
excluded from the site neutral payment under the temporary exception 
for certain severe wound care discharges from certain LTCHs and under 
the temporary exception for certain spinal cord specialty hospitals), 
as well as the claims data of 9 all-inclusive rate providers reported 
in the December 2016 update of the FY 2016 MedPAR file and any Medicare 
Advantage claims data. (We note that there were no data from any LTCHs 
that are paid in accordance with a demonstration project reported in 
the December 2016

[[Page 20014]]

update of the FY 2016 MedPAR file. However, had there been we would 
trim the claims data from those LTCHs as well, in accordance with our 
established policy.) We are proposing to use the remaining data (that 
is, the applicable LTCH data) to calculate the proposed relative 
weights for FY 2018.
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, in this FY 2017 IPPS/LTCH PPS 
proposed rule, we are proposing to continue to use a hospital-specific 
relative value (HSRV) methodology to calculate the proposed MS-LTC-DRG 
relative weights for FY 2018. We believe that this method removes this 
hospital-specific source of bias in measuring LTCH average charges (67 
FR 55985). Specifically, under this methodology, we are proposing to 
reduce 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 an 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 2018, we are 
continuing to standardize 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 VIII.B.3.g. (Step 3) of the 
preamble of this proposed 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 is 
multiplied by that LTCH's case-mix index to determine the standardized 
charge for the case.
    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 an 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. By standardizing charges in this manner, we count 
charges for a Medicare patient at an LTCH with high average charges as 
less resource intensive than they would be at an LTCH with low average 
charges. For example, a $10,000 charge for a case at an 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 an 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.
e. Treatment of Severity Levels in Developing the Proposed 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 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 later in this section of the proposed rule) 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 2018, 
we are proposing to continue to use applicable LTCH cases to establish 
the same volume-based categories to calculate the FY 2018 MS-LTC-DRG 
relative weights.
    In determining the proposed FY 2018 MS-LTC-DRG relative weights, 
when necessary, as is our longstanding practice, we are proposing to 
make adjustments to account for nonmonotonicity, as discussed in 
greater detail later in Step 6 of section VIII.B.3.g. of the preamble 
of this proposed 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. Proposed Low-Volume MS-LTC-DRGs
    In order to account for proposed MS-LTC-DRGs with low-volume (that 
is, with fewer than 25 applicable LTCH cases), consistent with our 
existing methodology, we are proposing to continue to employ the 
quintile methodology for proposed low-volume MS-LTC-DRGs, such that we 
group the proposed ``low-volume MS-LTC-DRGs'' (that is, proposed MS-
LTC-DRGs that contain between 1 and 24 applicable LTCH cases into one 
of five categories (quintiles) based on average charges (67 FR 55984 
through 55995; 72 FR 47283 through 47288; and 81 FR 25148)). In cases 
where the initial assignment of a proposed low-volume MS-LTC-DRG to a 
quintile results in nonmonotonicity within a base-DRG, we are proposing 
to make adjustments to the resulting low-volume proposed MS-LTC-DRGs to 
preserve monotonicity, as discussed in detail in section VIII.B.3.g. 
(Step 6) of the preamble of this proposed rule.
    In this proposed rule, based on the best available data (that is, 
the December 2016 update of the FY 2016 MedPAR files), we identified 
261 proposed MS-LTC-DRGs that contained between 1 and 24 applicable 
LTCH cases. This list of proposed MS-LTC-DRGs was then divided into one 
of the proposed 5 low-volume quintiles, each containing at least 52 
proposed MS-LTC-DRGs (261/5 = 52 with a remainder of 1). We assigned 
the proposed low-volume MS-LTC-DRGs to specific proposed low-volume 
quintiles by sorting the proposed low-volume MS-LTC-DRGs in ascending 
order by average charge in accordance with our established methodology. 
Based on the

[[Page 20015]]

data available for the proposed rule, the number of proposed MS-LTC-
DRGs with less than 25 applicable LTCH cases was not evenly divisible 
by 5 and, therefore, we are proposing to employ our historical 
methodology for determining which of the proposed low-volume quintiles 
contain the additional proposed low-volume MS-LTC-DRG. Therefore, we 
are proposing to use our historical methodology for determining which 
of the low-volume quintiles should contain the additional proposed low-
volume MS-LTC-DRG. Specifically for this proposed rule, after 
organizing the proposed MS-LTC-DRGs by ascending order by average 
charge, we would assign the first 52 (1st through 52nd) of proposed 
low-volume MS-LTC-DRGs (with the lowest average charge) into Quintile 
1. The 52 proposed MS-LTC-DRGs with the highest average charge cases 
would be assigned into Quintile 5. Because the average charge of the 
105th proposed low-volume MS-LTC-DRG in the sorted list was closer to 
the average charge of the 104th proposed low-volume MS-LTC-DRG 
(assigned to Quintile 2) than to the average charge of the 106th 
proposed low-volume MS-LTC-DRG (assigned to Quintile 3), we assigned it 
to Quintile 2 (such that Quintile 2 contains 53 proposed low-volume MS-
LTC-DRGs before any adjustments for nonmonotonicity, as discussed 
below). This results in 4 of the 5 proposed low-volume quintiles 
containing 52 proposed MS-LTC-DRGs (Quintiles 1, 3, 4, and 5) and 1 
proposed low-volume quintile containing 53 proposed MS-LTC-DRGs 
(Quintile 2). Table 13A, listed in section VI. of the Addendum to this 
proposed rule and available via the Internet, lists the composition of 
the proposed low-volume quintiles for MS-LTC-DRGs for FY 2018.
    In order to determine the proposed FY 2018 relative weights for the 
proposed low-volume MS-LTC-DRGs, consistent with our historical 
practice, we are proposing to use the five low-volume quintiles 
described previously. We determined a proposed relative weight and 
(geometric) average length of stay for each of the five proposed low-
volume quintiles using the proposed methodology described in section 
VIII.B.3.g. of the preamble of this proposed rule. We are proposing to 
assign the same proposed relative weight and average length of stay to 
each of the proposed 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 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 result in appropriate payment for LTCH cases grouped to 
proposed low-volume MS-LTC-DRGs and do not result in an unintended 
financial incentive for LTCHs to inappropriately admit these types of 
cases.
g. Steps for Determining the Proposed FY 2018 MS-LTC-DRG Relative 
Weights
    In this proposed rule, we are proposing to continue to use our 
current methodology to determine the proposed FY 2018 MS-LTC-DRG 
relative weights.
    In summary, to determine the proposed FY 2018 MS-LTC-DRG relative 
weights, we are proposing to group applicable LTCH cases to the 
appropriate proposed MS-LTC-DRG, while taking into account the proposed 
low-volume quintiles (as described above) and cross-walked proposed no-
volume MS-LTC-DRGs (as described later in this section). After 
establishing the appropriate proposed MS-LTC-DRG (or proposed low-
volume quintile), we are proposing to calculate the FY 2018 relative 
weights by first removing cases with a length of stay of 7 days or less 
and statistical outliers (Steps 1 and 2 below). Next, we are proposing 
to adjust the number of applicable LTCH cases in each proposed MS-LTC-
DRG (or proposed 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), 
which are the SSO-adjusted applicable LTCH cases and corresponding 
charges (step 3 below), we are proposing to calculate proposed 
``relative adjusted weights'' for each proposed MS-LTC-DRG (or proposed 
low-volume quintile) using the HSRV method.
    Step 1--Remove cases with a length of stay of 7 days or less.
    The first step in our proposed calculation of the proposed FY 2018 
MS-LTC-DRG relative weights 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 an LTCH 
because these stays do not fully receive or benefit from treatment that 
is typical in an LTCH stay, and full resources are often not used in 
the earlier stages of admission to an LTCH. If we were to include stays 
of 7 days or less in the computation of the FY 2018 MS-LTC-DRG relative 
weights, the value of many proposed 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 an LTCH by including data from these very short stays. Therefore, 
consistent with our existing relative weight methodology, in 
determining the proposed FY 2018 MS-LTC-DRG relative weights, we are 
proposing to remove LTCH cases with a length of stay of 7 days or less 
from applicable LTCH cases. (For additional information on what is 
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 proposed calculation of the proposed FY 2018 
MS-LTC-DRG relative weights 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, we are proposing to 
continue 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 proposed 
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 proposed relative weights 
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 is removed in this step of the proposed 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 equal to 8 days. In this proposed 
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 proposed calculation of the proposed FY 
2018 MS-LTC-DRG relative weights, consistent with our historical 
approach, we are proposing to adjust each LTCH's charges per discharge 
for those

[[Page 20016]]

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 are proposing to make 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 proposed FY 2018 MS-LTC-DRG relative weights would 
lower the proposed FY 2018 MS-LTC-DRG relative weight for affected MS-
LTC-DRGs because the relatively lower charges of the SSO cases would 
bring down the average charge for all cases within a MS-LTC-DRG. This 
would result in an ``underpayment'' for non-SSO cases and an 
``overpayment'' for SSO cases. Therefore, we are proposing to continue 
to adjust for SSO cases under Sec.  412.529 in this manner because it 
would result 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 proposed FY 2018 MS-LTC-DRG relative weights 
on an iterative basis.
    Consistent with our historical relative weight methodology, we are 
proposing to calculate the proposed FY 2018 MS-LTC-DRG relative weights 
using the HSRV methodology, which is an iterative process. First, for 
each SSO-adjusted trimmed applicable LTCH case, we calculate 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 is then multiplied by the LTCH's 
case-mix index to produce an adjusted hospital-specific relative charge 
value for the case. We used an initial case-mix index value of 1.0 for 
each LTCH.
    For each proposed MS-LTC-DRG, we calculated the proposed FY 2018 
relative weight by dividing the SSO-adjusted average of the hospital-
specific relative charge values for applicable LTCH cases for the 
proposed MS-LTC-DRG (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 proposed 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 proposed 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 previous) are then multiplied by the 
hospital-specific case-mix indexes. The hospital-specific case-mix 
adjusted relative charge values are then used to calculate a new set of 
proposed MS-LTC-DRG relative weights across all LTCHs. This iterative 
process continued until there was convergence between the relative 
weights produced at adjacent steps, for example, when the maximum 
difference was less than 0.0001.
    Step 5--Determine a proposed FY 2018 relative weight for MS-LTC-
DRGs with no applicable LTCH cases.
    Using the trimmed applicable LTCH cases, consistent with our 
historical methodology, we identified the proposed MS-LTC-DRGs for 
which there were no claims in the December 2016 update of the FY 2016 
MedPAR file and, therefore, for which no charge data was available for 
these proposed MS-LTC-DRGs. Because patients with a number of the 
diagnoses under these proposed MS-LTC-DRGs may be treated at LTCHs, 
consistent with our historical methodology, we are generally proposing 
to assign a proposed relative weight to each of the proposed no-volume 
MS-LTC-DRGs based on clinical similarity and relative costliness (with 
the exception of ``transplant'' proposed MS-LTC-DRGs, ``error'' 
proposed MS-LTC-DRGs, and proposed 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 later in this section of this proposed 
rule). (For additional information on this step of the proposed 
relative weight methodology, we refer readers to 67 FR 55991 and 74 FR 
43959 through 43960.)
    We are proposing to cross-walk each proposed no-volume MS-LTC-DRG 
to another proposed MS-LTC-DRG for which we calculated a proposed 
relative weight (determined in accordance with the methodology 
described above). Then, the ``no-volume'' proposed MS-LTC-DRG was 
assigned the same proposed relative weight (and average length of stay) 
of the proposed MS-LTC-DRG to which it was cross-walked (as described 
in greater detail in this section of this proposed rule).
    Of the 754 proposed MS-LTC-DRGs for FY 2018, we identified 351 MS-
LTC-DRGs for which there are no trimmed applicable LTCH cases (the 
number identified includes 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). We are proposing to assign 
proposed relative weights to each of the 351 no-volume proposed MS-LTC-
DRGs that contained trimmed applicable LTCH cases based on clinical 
similarity and relative costliness to 1 of the remaining 403 (754-351 = 
403) proposed MS-LTC-DRGs for which we calculated proposed relative 
weights based on the trimmed applicable LTCH cases in the FY 2016 
MedPAR file data using the steps described previously. (For the 
remainder of this discussion, we refer to the ``cross-walked'' proposed 
MS-LTC-DRGs as the proposed MS-LTC-DRGs to which we cross-walked 1 of 
the 351 ``no volume'' proposed MS-LTC-DRGs.) Then, we are generally 
proposing to assign the 351 no-volume proposed MS-LTC-DRGs the proposed 
relative weight of the cross-walked proposed MS-LTC-DRG. (As explained 
below in Step 6, when necessary, we made adjustments to account for 
nonmonotonicity.)
    We cross-walked the no-volume proposed MS-LTC-DRG to a proposed MS-
LTC-DRG for which we calculated proposed relative weights based on the 
December 2016 update of the FY 2016 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. (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 2017, 
the relative weights assigned

[[Page 20017]]

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 proposed relative weight of the cross-walked 
proposed MS-LTC-DRG as the proposed relative weight for the no-volume 
proposed MS-LTC-DRG such that both of these proposed MS-LTC-DRGs (that 
is, the no-volume proposed MS-LTC-DRG and the cross-walked proposed MS-
LTC-DRG) have the same proposed relative weight (and average length of 
stay) for FY 2018. We note that, if the proposed cross-walked MS-LTC-
DRG had 25 applicable LTCH cases or more, its proposed relative weight 
(calculated using the methodology described in Steps 1 through 4 above) 
is assigned to the no-volume proposed MS-LTC-DRG as well. Similarly, if 
the proposed MS-LTC-DRG to which the no-volume proposed MS-LTC-DRG was 
cross-walked had 24 or less cases and, therefore, is designated to 1 of 
the proposed low-volume quintiles for purposes of determining the 
proposed relative weights, we assigned the proposed relative weight of 
the applicable proposed low-volume quintile to the no-volume proposed 
MS-LTC-DRG such that both of these proposed MS-LTC-DRGs (that is, the 
no-volume proposed MS-LTC-DRG and the cross-walked proposed MS-LTC-DRG) 
have the same proposed relative weight for FY 2018. (As we noted 
previously, in the infrequent case where nonmonotonicity involving a 
no-volume proposed MS-LTC-DRG resulted, additional adjustments as 
described in Step 6 are required in order to maintain monotonically 
increasing proposed relative weights.)
    For this proposed rule, a list of the no-volume proposed MS-LTC-
DRGs and the proposed MS-LTC-DRGs to which each was cross-walked (that 
is, the proposed cross-walked MS-LTC-DRGs) for FY 2018 is shown in 
Table 13B, which is listed in section VI. of the Addendum to this 
proposed rule and is available via the Internet on the CMS Web site.
    To illustrate this methodology for determining the proposed 
relative weights for the proposed FY 2018 MS-LTC-DRGs with no 
applicable LTCH cases, we are providing the following example, which 
refers to the no-volume proposed MS-LTC-DRGs crosswalk information for 
FY 2018 provided in Table 13B.
    Example: There were no trimmed applicable LTCH cases in the FY 2016 
MedPAR file that we are proposing to use for this proposed rule for 
proposed MS-LTC-DRG 061 (Acute Ischemic Stroke with Use of Thrombolytic 
Agent with MCC). We determined that proposed MS-LTC-DRG 070 
(Nonspecific Cerebrovascular Disorders with MCC) is similar clinically 
and based on resource use to proposed MS-LTC-DRG 061. Therefore, we 
assigned the same proposed relative weight (and average length of stay) 
of proposed MS-LTC-DRG 70 of 0.8890 for FY 2018 to proposed MS-LTC-DRG 
061 (we refer readers to Table 11, which is listed in section VI. of 
the Addendum to this proposed 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. Consistent with our historical practice, we are proposing to 
use the most recent available claims data to identify the trimmed 
applicable LTCH cases from which we determined the proposed relative 
weights in this proposed rule.
    For FY 2018, consistent with our historical relative weight 
methodology, we are proposing to establish 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 001); Heart Transplant or 
Implant of Heart Assist System without MCC (MS-LTC-DRG 002); Liver 
Transplant with MCC or Intestinal Transplant (MS-LTC-DRG 005); Liver 
Transplant without MCC (MS-LTC-DRG 006); Lung Transplant (MS-LTC-DRG 
007); Simultaneous Pancreas/Kidney Transplant (MS-LTC-DRG 008); 
Pancreas Transplant (MS-LTC-DRG 010); and Kidney Transplant (MS-LTC-DRG 
652). This is because Medicare only covers 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 proposed 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, we are 
proposing to establish 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 this proposed rule, consistent with our practice in FYs 2016 and 
2017, we are proposing to establish a proposed relative weight for FY 
2018 equal to the respective FY 2015 relative weight of the MS-LTC-DRGs 
for the following ``psychiatric or rehabilitation'' proposed MS-LTC-
DRGs: proposed MS-LTC-DRG 876 (O.R. Procedure with Principal Diagnoses 
of Mental Illness); proposed MS-LTC-DRG 880 (Acute Adjustment Reaction 
& Psychosocial Dysfunction); proposed MS-LTC-DRG 881 (Depressive 
Neuroses); proposed MS-LTC-DRG 882 (Neuroses Except Depressive); 
proposed MS-LTC-DRG 883 (Disorders of Personality & Impulse Control); 
proposed MS-LTC-DRG 884 (Organic Disturbances & Mental Retardation); 
proposed MS-LTC-DRG 885 (Psychoses); proposed MS-LTC-DRG 886 
(Behavioral & Developmental Disorders); proposed MS-LTC-DRG 887 (Other 
Mental Disorder Diagnoses); proposed MS-LTC-DRG 894 (Alcohol/Drug Abuse 
or Dependence, Left Ama); proposed MS-LTC-DRG 895 (Alcohol/Drug Abuse 
or Dependence, with Rehabilitation Therapy); proposed MS-LTC-DRG 896 
(Alcohol/Drug Abuse or Dependence, without Rehabilitation Therapy with 
MCC); proposed MS-LTC-DRG 897 (Alcohol/Drug Abuse or Dependence, 
without Rehabilitation Therapy without MCC); proposed MS-LTC-DRG 945 
(Rehabilitation with CC/MCC); and proposed MS-LTC-DRG 946 
(Rehabilitation without CC/MCC). As we discussed when we implemented 
the dual rate LTCH PPS payment structure, LTCH discharges that are 
grouped to these 15 ``psychiatric and rehabilitation'' proposed MS-LTC-
DRGs do not meet the criteria for exclusion from the site neutral 
payment rate. As such, under the criterion for a principal diagnosis 
relating to a psychiatric diagnosis or to rehabilitation, there are no 
applicable LTCH cases to use in calculating a proposed relative weight 
for the ``psychiatric and rehabilitation'' proposed MS-LTC-DRGs. In 
other words, any LTCH PPS discharges grouped to any of the 15 
``psychiatric and rehabilitation'' proposed MS-LTC-DRGs would always be 
paid at the site neutral payment rate, and, therefore, those proposed 
MS-LTC-DRGs would never include any LTCH cases that meet the criteria 
for exclusion from the site

[[Page 20018]]

neutral payment rate. However, section 1886(m)(6)(B) of the Act 
establishes a transitional payment method for cases that would 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 for site neutral payment rate cases, for 
LTCH discharges occurring in cost reporting periods beginning on or 
after October 1, 2016, and on or before September 30, 2017, site 
neutral payment rate cases are 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'' 
proposed MS-LTC-DRGs in FY 2018, we assigned a proposed relative weight 
to these proposed MS-LTC-DRGs for FY 2018 that is the same as the FY 
2015 relative weight (which is also the same as the FY 2016 relative 
weight). We believe that using the respective FY 2015 relative weight 
for each of the ``psychiatric or rehabilitation'' proposed MS-LTC-DRGs 
results in appropriate payments for LTCH cases that are paid at the 
site neutral payment rate under the transition policy provided by the 
statute because there are no clinically similar proposed MS-LTC-DRGs 
for which we were able to determine proposed relative weights based on 
applicable LTCH cases in the FY 2016 MedPAR file data using the steps 
described above. Furthermore, we believe that it would be 
administratively burdensome and introduce unnecessary complexity to the 
proposed MS-LTC-DRG relative weight calculation to use the LTCH 
discharges in the MedPAR file data to calculate a proposed relative 
weight for those 15 ``psychiatric and rehabilitation'' proposed 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 49631 through 49632).
    In summary, for FY 2018, we are proposing to establish a proposed 
relative weight (and average length of stay thresholds) equal to the 
respective FY 2015 relative weight of the proposed MS-LTC-DRGs for the 
15 ``psychiatric or rehabilitation'' proposed MS-LTC-DRGs listed 
previously (that is, proposed 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 proposed rule and is 
available via the Internet on the CMS Web site, reflects this proposed 
policy.
    Step 6--Adjust the proposed FY 2018 MS-LTC-DRG relative weights to 
account for nonmonotonically increasing relative weights.
    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 may 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 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 
would 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 proposed FY 2018 MS-LTC-DRG 
relative weights, consistent with our historical methodology, we are 
proposing to continue to combine 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 proposed FY 2018 MS-
LTC-DRG relative weights in this proposed rule by applying this 
methodology are denoted in Table 11, which is listed in section VI. of 
the Addendum to this proposed rule and is available via the Internet on 
the CMS Web site.
    Step 7--Calculate the proposed FY 2018 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). To achieve the budget neutrality requirement at 
Sec.  412.517(b), under our established methodology, 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 proposing to update the MS-LTC-DRG classifications 
and relative weights for FY 2018 based on the most recent available 
LTCH data for applicable LTCH cases, and continue to apply a budget 
neutrality adjustment in

[[Page 20019]]

determining the proposed FY 2018 MS-LTC-DRG relative weights.
    In this FY 2018 IPPS/LTCH PPS proposed rule, to ensure budget 
neutrality in the update to the MS-LTC-DRG classifications and relative 
weights under Sec.  412.517(b), we are proposing to continue to use our 
established two-step budget neutrality methodology.
    To calculate the proposed normalization factor for FY 2018, we 
grouped applicable LTCH cases using the proposed FY 2018 Version 35 
GROUPER, and the recalibrated proposed FY 2018 MS-LTC-DRG relative 
weights to calculate the average case-mix index (CMI); we grouped the 
same applicable LTCH cases using the FY 2017 GROUPER Version 34 and MS-
LTC-DRG relative weights and calculated the average CMI; and computed 
the ratio by dividing the average CMI for FY 2017 by the average CMI 
proposed for FY 2018. That ratio is the proposed normalization factor. 
Because the calculation of the proposed normalization factor involves 
the proposed relative weights for the proposed MS-LTC-DRGs that 
contained applicable LTCH cases to calculate the average CMIs, any low-
volume proposed MS-LTC-DRGs are included in the calculation (and the 
proposed MS-LTC-DRGs with no applicable LTCH cases are not included in 
the calculation).
    To calculate the proposed budget neutrality adjustment factor, we 
simulated estimated total FY 2018 LTCH PPS standard Federal payment 
rate payments for applicable LTCH cases using the proposed FY 2018 
normalized relative weights and proposed GROUPER Version 35; simulated 
estimated total FY 2017 LTCH PPS standard Federal payment rate payments 
for applicable LTCH cases using the FY 2017 MS-LTC-DRG relative weights 
and the FY 2017 GROUPER Version 34; and calculated the ratio of these 
estimated total payments by dividing the simulated estimated total LTCH 
PPS standard Federal payment rate payments for FY 2017 by the simulated 
estimated total LTCH PPS standard Federal payment rate payments for FY 
2018. The resulting ratio is the proposed budget neutrality adjustment 
factor. The calculation of the proposed budget neutrality factor 
involves the proposed relative weights for the LTCH cases used in the 
payment simulation, which includes any cases grouped to low-volume 
proposed MS-LTC-DRGs or to proposed MS-LTC-DRGs with no applicable LTCH 
cases, and generally does not include payments for cases grouped to a 
proposed MS-LTC-DRG with no applicable LTCH cases. (Occasionally, a few 
LTCH cases (that is, those with a covered length of stay of 7 days or 
less, which are removed from the proposed relative weight calculation 
in step 2) that are grouped to a proposed MS-LTC-DRG with no applicable 
LTCH cases are included in the payment simulations used to calculate 
the proposed budget neutrality factor. However, the number and payment 
amount of such cases have a negligible impact on the proposed budget 
neutrality factor calculation).
    In this proposed rule, to ensure budget neutrality in the update to 
the MS-LTC-DRG classifications and relative weights under Sec.  
412.517(b), we are proposing to continue to use our established two-
step budget neutrality methodology. Therefore, in this proposed rule, 
in the first step of our proposed MS-LTC-DRG budget neutrality 
methodology, for FY 2018, we are proposing to calculate and apply a 
proposed normalization factor to the recalibrated proposed relative 
weights (the result of Steps 1 through 6 discussed previously) to 
ensure that estimated payments are not affected by changes in the 
composition of case types or the proposed changes to the classification 
system. That is, the proposed normalization adjustment is intended to 
ensure that the recalibration of the proposed MS-LTC-DRG relative 
weights (that is, the process itself) neither increases nor decreases 
the average case-mix index.
    To calculate the proposed normalization factor for FY 2018 (the 
first step of our proposed budget neutrality methodology), we used the 
following three steps: (1.a.) used the most recent available applicable 
LTCH cases from the most recent available data (that is, LTCH 
discharges from the FY 2016 MedPAR file) and grouped them using the 
proposed FY 2018 GROUPER (that is, proposed Version 35 for FY 2018) and 
the recalibrated proposed FY 2018 MS-LTC-DRG relative weights 
(determined in Steps 1 through 6 above) to calculate the average case-
mix index; (1.b.) grouped the same applicable LTCH cases (as are used 
in Step 1.a.) using the FY 2017 GROUPER (Version 34) and FY 2017 MS-
LTC-DRG relative weights and calculated the average case-mix index; and 
(1.c.) computed the ratio of these average case-mix indexes by dividing 
the average CMI for FY 2017 (determined in Step 1.b.) by the average 
case-mix index for FY 2018 (determined in Step 1.a.). As a result, in 
determining the proposed MS-LTC-DRG relative weights for FY 2018, each 
recalibrated proposed MS-LTC-DRG relative weight is multiplied by the 
proposed normalization factor of 1.28875 (determined in Step 1.c.) in 
the first step of the proposed budget neutrality methodology, which 
produced ``normalized relative weights.''
    In the second step of our proposed MS-LTC-DRG budget neutrality 
methodology, we calculate a second proposed budget neutrality factor 
consisting of the ratio of estimated aggregate FY 2018 LTCH PPS 
standard Federal payment rate payments for applicable LTCH cases (the 
sum of all calculations under Step 1.a. mentioned previously) after 
reclassification and recalibration to estimated aggregate payments for 
FY 2018 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. mentioned previously).
    That is, for this proposed rule, for FY 2018, under the second step 
of the proposed budget neutrality methodology, we are proposing to 
determine the proposed budget neutrality adjustment factor using the 
following three steps: (2.a.) simulated estimated total FY 2018 LTCH 
PPS standard Federal payment rate payments for applicable LTCH cases 
using the proposed normalized relative weights for FY 2018 and proposed 
GROUPER Version 35 (as described above); (2.b.) simulated estimated 
total FY 2017 LTCH PPS standard Federal payment rate payments for 
applicable LTCH cases using the FY 2017 GROUPER (Version 34) and the FY 
2017 MS-LTC-DRG relative weights in Table 11 of the FY 2017 IPPS/LTCH 
PPS final rule available on the Internet, as described in section VI. 
of the Addendum of that final rule; and (2.c.) 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 proposed 
FY 2018 MS-LTC-DRG relative weights, each normalized proposed relative 
weight is then multiplied by a budget neutrality factor of 0.9866449 
(the value determined in Step 2.c.) in the second step of the proposed 
budget neutrality methodology to achieve the budget neutrality 
requirement at Sec.  412.517(b).
    Accordingly, in determining the proposed FY 2018 MS-LTC-DRG 
relative weights in this proposed rule, consistent with our existing 
methodology, we are proposing to apply a normalization factor of 
1.28875 and a budget neutrality factor of 0.9866449. Table 11, which is 
listed in section VI. of the Addendum to this proposed rule and is 
available via the Internet on the CMS Web site, lists the proposed MS-

[[Page 20020]]

LTC-DRGs and their respective proposed relative weights, geometric mean 
length of stay, and five-sixths of the geometric mean length of stay 
(used to identify SSO cases under Sec.  412.529(a)) for FY 2018.

C. Proposed Changes to the LTCH PPS Payment Rates and Other Proposed 
Changes to the LTCH PPS for FY 2018

1. Overview of Development of the LTCH PPS Standard Federal Payment 
Rates
    The basic methodology for determining LTCH PPS standard Federal 
payment rates is currently set forth at 42 CFR 412.515 through 412.536. 
In this section, we discuss the factors that we are proposing to use to 
update the LTCH PPS standard Federal payment rate for FY 2018, that is, 
effective for LTCH discharges occurring on or after October 1, 2017 
through September 30, 2018. Under the dual rate LTCH PPS payment 
structure required by statute, beginning with discharges in cost 
reporting periods beginning in FY 2016, only LTCH discharges that meet 
the criteria for exclusion from the site neutral payment rate are 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 the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through 
49623).)
    Prior to the implementation of the dual payment rate system in FY 
2016, all LTCHs were paid similarly to those now exempt from the site 
neutral payment rate. That legacy payment rate was called the standard 
Federal rate. For details on the development of the initial standard 
Federal rate for FY 2003, we refer readers to the August 30, 2002 LTCH 
PPS final rule (67 FR 56027 through 56037). For subsequent updates to 
the standard Federal rate (FYs 2003 through 2015)/LTCH PPS standard 
Federal payment rate (FY 2016 through present) 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); FY 2015 IPPS/LTCH PPS final rule (79 
FR 50176 through 50180); FY 2016 IPPS/LTCH PPS final rule (80 FR 49634 
through 49637); and FY 2017 IPPS/LTCH PPS final rule (81 FR 57296 
through 57310).
    In this FY 2018 IPPS/LTCH PPS proposed rule, we present our 
proposals related to the proposed annual update to the LTCH PPS 
standard Federal payment rate for FY 2018, which include certain 
statutory requirements as discussed below.
    The application of the proposed update to the LTCH PPS standard 
Federal payment rate for FY 2018 is presented in section V.A. of the 
Addendum to this proposed rule. The components of the proposed annual 
update to the LTCH PPS standard Federal payment rate for FY 2018 are 
discussed below, including the statutory reduction to the annual update 
for LTCHs that fail to submit quality reporting data for FY 2018 as 
required by the statute (as discussed in section VIII.C.2.c. of the 
preamble of this proposed rule). In addition, we are proposing to make 
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 2018 on estimated aggregate LTCH PPS payments, in 
accordance with Sec.  412.523(d)(4) (as discussed in section V.B. of 
the Addendum to this proposed rule), a proposed budget neutrality 
adjustment stemming from our proposed change to the SSO payment 
methodology (as discussed in VIII.D. of the preamble of this proposed 
rule).
2. Proposed FY 2018 LTCH PPS Standard Federal Payment Rate Annual 
Market Basket Update
a. Overview
    Historically, the Medicare program has used a market basket to 
account for input 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. We 
adopted the 2013-based LTCH-specific market basket for use under the 
LTCH PPS beginning in FY 2017 (81 FR 57101 through 57102). 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 53476), and for a complete discussion 
of the LTCH market basket and a description of the methodologies used 
to determine the operating and capital-related portions of the 2013-
based LTCH market basket, we refer readers to section VII.D. of the 
preamble of the FY 2017 IPPS/LTCH PPS proposed and final rules.
    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 VIII.C.2.b. of the preamble of this proposed 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. Proposed Annual Update to the LTCH PPS Standard Federal Payment Rate 
for FY 2018
    Section 1886(m)(3)(A) of the Act, provides that beginning in FY 
2010, any annual update to the LTCH PPS standard Federal payment rate 
is reduced by the adjustments specified in clauses (i) and (ii) of 
subparagraph (A). Clause (i) of section 1886(m)(3)(A) provides for a 
reduction, for FY 2012 and each subsequent rate year, by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act (that is, ``the multifactor productivity (MFP) adjustment''). 
Clause (ii) of section 1886(m)(3)(A) provides for a reduction, for each 
of FYs 2010 through 2019, by the ``other adjustment'' described in 
section 1886(m)(4)(F) of the Act.
    Section 411(e) of the Medicare Access and CHIP Reauthorization Act 
(MACRA) (Pub. L. 114-10), enacted on April 16, 2015, amended section 
1886(m)(3) of

[[Page 20021]]

the Act by amending subparagraph (A) to be ``subject to subparagraph 
(C)'' and by adding new subparagraph (C), which specifies an additional 
special rule for FY 2018. Specifically, section 1886(m)(3)(C) of the 
Act states for FY 2018, the annual update under subparagraph (A) for 
the fiscal year, after application of clauses (i) and (ii) of 
subparagraph (A), shall be 1 percent. That is, the annual update for FY 
2018, after applications of the reductions for the MFP adjustment 
(under clause (i) of section 1886(m)(3)(A)) and the ``other 
adjustment'' (under clause (ii) of section 1886(m)(3)(A)) is 1 percent.
    Historically, CMS has used an estimated market basket increase to 
update the LTCH PPS. Under the authority of section 123 of the BBRA as 
amended by section 307(b) of the BIPA, we adopted a newly created 2013-
based LTCH-specific market basket for use under the LTCH PPS beginning 
in FY 2017. The 2013-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 2013-based LTCH-specific market 
basket, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57101 through 57102). For FYs 2010 through 2017, the estimated market 
basket update under the LTCH PPS was reduced by the MFP adjustment and 
``other adjustment'' as applicable. However, as described above, 
section 411(e) of the MACRA subsequently amended section 1886(m)(3)(A) 
of the Act so that, after the adjustments above, the FY 2018 annual 
update is set at 1 percent.
c. Proposed Adjustment 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). 
Failure to report quality data under the LTCH QRP for FY 2014 and 
subsequent fiscal years results in a 2.0 percentage point reduction in 
the annual update as 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 subsequent fiscal 
years 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 proposed annual update 
to the LTCH PPS standard Federal payment rate for FY 2018 in section 
VIII.C.2.c. of the preamble of this proposed rule. (For additional 
information on the history of the LTCH QRP, including the statutory 
authority and the selected measures, we refer readers to section 
VIII.C.2.c. of the preamble of this proposed rule.)
d. Proposed Annual Update Under the LTCH PPS for FY 2018
    Consistent with the amendments to section 1886(m)(3)(C) of the Act 
provided by section 411 of the MACRA, we are proposing an update to the 
LTCH PPS standard Federal payment rate of 1 percent for FY 2018.
    For FY 2018, section 1886(m)(5) of the Act requires that, for LTCHs 
that do not submit quality reporting data as required under the LTCH 
QRP, 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. For LTCHs 
that fail to submit quality reporting data under the LTCH QRP, under 
Sec.  412.523(c)(3)(xiv) in conjunction with Sec.  412.523(c)(4), we 
are proposing to further reduce the proposed 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. As such, the proposed 
update to the LTCH PPS standard Federal payment rate for FY 2018 for 
LTCHs that fail to submit quality reporting data under the LTCH QRP 
will be the proposed 1-percent annual rate increase for FY 2018 reduced 
by 2.0 percentage points. For this proposed rule, we are proposing to 
establish a proposed annual update to the LTCH PPS standard Federal 
payment rate of -1 percent (that is, 1 percent minus 2.0 percentage 
points) for FY 2018 for LTCHs that fail to submit quality reporting 
data as required under the LTCH QRP. As provided in Sec.  
412.523(c)(4)(iii) and as noted above, 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. (We note that, consistent with historical practice, in 
determining the proposed FY 2018 LTCH PPS standard Federal payment 
rate, we are also applying a proposed area wage level budget neutrality 
factor in accordance with Sec.  412.523(d)(4) (as discussed in section 
V.B. of the Addendum to this proposed rule) and a proposed budget 
neutrality adjustment stemming from our proposed change to the SSO 
payment methodology (as discussed in VIII.D. of the preamble of this 
proposed rule).
    Absent the special provisions for FY 2018 required by section 
1886(m)(3)(C) of the Act, we note the proposed annual market basket 
update would have been based on the FY 2018 full market basket increase 
of 2.8 percent (based on IGI's fourth quarter 2016 forecast of the 
2013-based LTCH market basket) reduced by the proposed FY 2018 MFP 
adjustment of 0.4 percentage point (also based on IGI's fourth quarter 
2016 forecast). Following application of the productivity adjustment, 
the adjusted proposed market basket update of 2.4 percent (2.8 percent 
minus 0.4 percentage point) would have then been further reduced by 
0.75 percentage point, as required by sections 1886(m)(3)(A)(ii) and 
1886(m)(4)(F) of the Act. This would have resulted in a proposed annual 
market basket update under to the LTCH PPS standard Federal payment 
rate for FY 2018 of 1.65 percent (that is, 2.8 percent, less the 
proposed MFP adjustment of 0.4 percentage point, and less the 0.75 
percentage point required under section

[[Page 20022]]

1886(m)(4)(F) of the Act). (For additional information on the 
application of the MFP adjustment and ``other adjustment'' in 
developing the annual market based update under our historical 
approach, refer to the FY 2017 IPPS/LTCH PPS final rule (81 FR 57296 
through 57310).)

D. Proposed Changes to the Short-Stay Outlier Adjustment Policy (Sec.  
412.529)

    In the FY 2003 LTCH PPS final rule (67 FR 55954) that implemented 
the LTCH PPS, under Sec.  412.529, we established a special payment 
policy for short-stay outlier (SSO) cases; that is, cases with a 
covered length of stay that is less than or equal to five-sixths of the 
geometric average length of stay for each LTC-DRG. When we established 
the SSO policy, we explained that a short-stay outlier case may occur 
when a beneficiary receives less than the full course of treatment at 
the LTCH before being discharged (67 FR 55995). Also, in the FY 2003 
LTCH PPS final rule, we stated that when we first described the policy 
in the proposed rule, we based the proposed policy on the belief that 
many of these patients could have been treated more appropriately in an 
acute hospital subject to the acute care hospital inpatient prospective 
payment system (67 FR 55995). Therefore, under the LTCH PPS, we 
implemented a special payment adjustment for SSO cases. Under the 
original SSO policy, for LTCH PPS discharges with a covered length of 
stay of up to and including five-sixths the geometric average length of 
stay for the LTC-DRG, we adjusted the per discharge payment amount 
under the LTCH PPS as the least of 120 percent of the estimated cost of 
the case, 120 percent of the LTC-DRG specific per diem amount 
multiplied by the covered length of stay of that discharge, or the full 
LTC-DRG payment amount (67 FR 55995 through 56000).
    As noted previously, generally LTCHs are defined by statute as 
having an average length of stay of greater than 25 days. In the FY 
2003 LTCH PPS final rule, we stated that we believed that the SSO 
payment adjustment results in more appropriate payments because these 
SSO cases most likely did not receive a full course of treatment at a 
LTCH level in such a short period of time, and the full LTC-DRG payment 
would generally not be appropriate. Payment-to-cost ratio analyses at 
that time indicated that if LTCHs received a full LTC-DRG payment for 
those cases, they would have been significantly ``overpaid'' for the 
resources they actually expended in treating those patients (67 FR 
55995 through 56000). Furthermore, in establishing the SSO policy, we 
stated that we believed that providing a reduced payment for SSO cases 
would discourage hospitals from admitting these patients. We also 
believed that the policy did not severely penalize providers that, in 
good faith, had admitted a patient and provided some services before 
realizing that the beneficiary could receive more appropriate treatment 
at another site of care. As we further explained in the FY 2003 LTCH 
PPS final rule, establishing a SSO payment adjustment for these types 
of cases addresses the incentives inherent in a discharge-based PPS for 
LTCHs for treating patients with a short length of stay (67 FR 55995 
through 56000). We have made several changes to our SSO policy since it 
was first introduced. For a full discussion of those historic changes, 
we refer readers to the RY 2008 LTCH PPS final rule (72 FR 26904 
through 26919).
    During our FY 2016 and FY 2017 IPPS/LTCH PPS rulemaking cycles, we 
received public comments that we determined were outside the scope of 
the FY 2016 and FY 2017 proposed rules that expressed concern with our 
existing SSO policy. Commenters stated that our SSO payment adjustment 
appears to result in an incentive to improperly hold patients beyond 
the SSO threshold (five-sixths the geometric average length of stay for 
the MS-LTC-DRG). Specifically, as SSO cases are paid the ``lesser of'' 
various payment options, while non-SSO cases are paid the full MS-LTC-
DRG payment, there is an economic incentive to hold a patient beyond 
the SSO threshold in order to increase (and in some cases dramatically 
increase) the LTCH PPS payment for that case. In its comment in 
response to the FY 2016 IPPS/LTCH PPS proposed rule, MedPAC stated that 
its analysis of LTCH discharge patterns have shown that LTCHs respond 
to that incentive. Analyses of lengths-of-stay by MS-LTC-DRG have 
consistently shown that the frequency of discharges rises sharply 
immediately after the SSO threshold is met. This pattern holds true 
across MS-LTC-DRGs and for every category of LTCHs. We believe that 
these analyses strongly suggest that LTCHs' discharge decisions are 
influenced at least as much by this financial incentive as by clinical 
considerations. Our own analysis of LTCH claims data showed similar 
findings.
    In light of these concerns, in this proposed rule, we are proposing 
to address this financial incentive and discourage such delay in the 
discharge of LTCH patients by proposing to revise our SSO policy. We 
note that, under the dual rate LTCH PPS payment structure, our existing 
SSO policy only applies to the LTCH PPS standard Federal payment rate. 
Accordingly, the proposed changes to our SSO policy presented in this 
section would only apply to LTCH PPS standard Federal payment rate 
cases (or, for cost reporting periods beginning before October 1, 2017, 
the LTCH PPS standard Federal payment rate portion of the blended rate 
payment under Sec.  412.522(c)(3)(ii)).
    Under our proposed policy, the SSO definition would remain 
unchanged, but the current payment adjustment options would be replaced 
with a single graduated per diem payment adjustment calculated using a 
blended payment rate that, as the length of stay increases, consists of 
a decreasing portion of the payment amount paid at the IPPS per diem 
amount (referred to as the ``IPPS comparable amount'') and an 
increasing portion paid at 120 percent of the MS-LTC-DRG per diem 
payment amount (referred to as the ``LTCH PPS per diem amount''), with 
a maximum payment amount set at the full LTCH PPS standard Federal 
payment rate. Specifically, beginning with discharges occurring on or 
after October 1, 2017, we are proposing to pay SSO cases solely on the 
``blended'' option in the current SSO payment adjustment formula 
described at Sec.  412.529(c)(2)(iv); that is, a SSO case would be paid 
based on a blend of the IPPS comparable amount (determined under Sec.  
412.529(d)(4)(i)) and the MS-LTC-DRG per diem amount (determined under 
Sec.  412.529(d)(1) in conjunction with Sec.  412.503).
    Under this blended payment method at existing Sec.  
412.529(c)(2)(iv), as the length of stay of a SSO case increases, the 
percentage of the per diem payment amounts based on the full MS-LTC-DRG 
standard Federal payment rate would increase, and the percentage of the 
payment based on the IPPS comparable amount would decrease. This 
blended per diem payment rate adjustment would result in paying LTCH 
cases with a very short length of stay more like an IPPS case, and LTCH 
cases with relatively longer lengths-of-stay more like a non-short-stay 
LTCH PPS standard Federal payment rate case. Therefore, as the length 
of stay of a LTCH PPS standard Federal payment rate case increases, the 
treatment resources and costs associated with the stay are more 
comparable with typical LTCH PPS standard Federal payment rate payments 
and less comparable to payments for the same stay at an acute care 
hospital under the IPPS.
    If adopted, this policy would result in payment amounts becoming 
more commensurate with the LTCH PPS

[[Page 20023]]

standard Federal payment rate as the case begins to resemble a more 
characteristic LTCH PPS standard Federal payment rate case. We believe 
that, by paying SSO cases on this basis, we would reduce, if not 
eliminate, the payment ``cliffs'' (or payment differentials) inherent 
in our current payment methodology, as well as the financial incentives 
that appear to have resulted in potentially improper delays in patient 
discharges other than solely for medical reasons. In addition, we 
believe that this proposed per diem ``blended'' approach would provide 
an appropriate balance between the 1-day marginal payment and the 1-day 
marginal incurred cost.
    Under this proposal, we are proposing to codify the change to the 
SSO policy described above by revising Sec.  412.529 of the regulation. 
Specifically, we are proposing to add paragraph (c)(4) to provide that, 
for discharges occurring on or after October 1, 2017, SSO cases will be 
paid according to the blended payment option at existing Sec.  
412.529(c)(2)(iv) and corresponding changes to Sec.  412.529(c)(3) by 
sunsetting the previous SSO payment formula as of October 1, 2017.
    The goal of this proposed revision to the SSO policy is to remove 
the incentive to delay patient discharges for payment reasons. In 
assessing the potential impact of this proposed policy change, we found 
two different impacts on Medicare LTCH spending: One would increase 
spending while the other would decrease spending.
    First, we expect this proposed SSO payment adjustment methodology 
would result in increased payments to SSO cases. Based on data and FY 
2018 payment estimates used for this proposed rule, we estimate that, 
under this proposal, Medicare payments to SSO cases would increase 
approximately 30 percent, or approximately $145 million (without taking 
into account any assumptions on changes to LTCHs' discharge practices). 
These increased payments for SSO cases would produce a somewhat 
substantial increase in aggregate Medicare spending for LTCH PPS 
standard Federal payment rate cases (that is, an approximate 4.6-
percent increase to current projected LTCH PPS standard Federal payment 
rate case payments).
    At the same time, without the economic incentive to delay discharge 
until the SSO threshold is met, under our proposal, we expect LTCHs 
would discharge some patients sooner, even while the length of stay of 
the patient is still within the SSO period. Therefore, in the absence 
of the proposed policy, these cases would not have previously been SSO 
cases. We believe the proposed policy would result in some reduction in 
Medicare spending due to an expected decrease in Medicare payments for 
LTCH PPS standard Federal payment rate cases that, under the current 
SSO policy, were not receiving the SSO payment adjustment (because 
discharges were delayed until the SSO threshold was met).
    However, while we expect this behavior change by LTCHs would reduce 
Medicare expenditures, we do not believe that the decrease in 
expenditures from fewer delayed discharge cases would offset the 
estimated increase in expenditures under the proposed SSO payment 
adjustment methodology. As such, we project that this proposed change 
to the payment formula for SSOs would result in a net increase in 
aggregate Medicare LTCH payments compared to aggregate Medicare 
payments under the current methodology.
    The goal of the proposed policy is to remove the incentive to delay 
patient discharges for payment reasons, not to increase aggregate 
Medicare LTCH PPS payments. Therefore, we believe the appropriate 
policy approach is to propose to implement this proposed change to the 
SSO payment methodology on a budget neutral basis; that is, to 
implement the proposed SSO payment adjustment methodology by adjusting 
the LTCH PPS standard Federal payment rate so that our projection of 
aggregate FY 2018 payments for LTCH PPS standard Federal payment rate 
cases made under our proposed SSO payment adjustment methodology would 
be equal to our projection of aggregate FY 2018 payments paid for LTCH 
PPS standard Federal payment rate cases under our existing SSO payment 
adjustment methodology.
    We further note that, based on most recent claims data, we believe 
the effects of a budget neutral approach would primarily occur within 
each LTCH and, therefore, result in minimal redistribution between 
different LTCHs. Specifically, FY 2015 claims data show that nearly all 
LTCHs treated at least one SSO case, and those that did not treat any 
SSO cases, on average, had very few LTCH PPS standard Federal payment 
rate cases. In addition, for over 90 percent of all LTCHs, at least 20 
percent of their LTCH PPS standard Federal payment rate cases were SSO 
cases. Therefore, we expect that, for most LTCHs, the increase in 
payments for their SSO cases under this proposed change to the SSO 
payment methodology would generally offset any SSO budget neutrality-
related decrease in payment to their non-SSO LTCH PPS standard Federal 
payment rate cases.
    In implementing the proposed SSO payment methodology, we are 
proposing to use a budget neutrality adjustment to offset the projected 
net increase in Medicare spending, which accounts for both the 
estimated decrease in Medicare payments resulting from LTCHs no longer 
holding patients until the SSO threshold is met and the larger 
estimated increase in spending to SSO cases described earlier. We 
believe that our proposal to incorporate a projection of the expected 
decrease in spending resulting from behavior change to not hold 
patients beyond the SSO threshold appropriately reflects the net impact 
of the proposed change. Further, this lessens the impact of any budget 
neutrality adjustment estimated without accounting for these expected 
behavioral changes--in other words, if the budget neutrality adjustment 
only adjusted for the increased payments to SSO cases.
    To do so, we are proposing to amend Sec.  412.523 by adding a new 
paragraph (d)(5), which would specify that the LTCH PPS standard 
Federal payment rate will be adjusted by a one-time, permanent factor 
that accounts for the projected change in estimated aggregate payments 
to LTCH PPS standard Federal payment rate cases in FY 2018 due to the 
change in the payment methodology for SSO cases described at Sec.  
412.529(c)(4). (As noted earlier, this budget neutrality adjustment 
would only affect the LTCH PPS standard Federal payment rate.) This 
factor would ensure that the proposed change to the SSO payment 
methodology in FY 2018 does not affect aggregate LTCH PPS payments; 
that is, this proposed policy change is budget neutral. Specifically, 
we are proposing to use the following methodology to determine the 
proposed budget neutrality factor that would be applied to the proposed 
FY 2018 LTCH PPS standard Federal payment rate using the 2016 LTCH 
standard Federal payment rate payment cases used for this proposed 
rule. These estimates are based upon the most recently available data 
(for example, the December 2016 update of the FY 2016 MedPAR file), and 
consistent with historical practice, if more recent data become 
available, we are proposing to use such data for the final rule.
     Step 1--Simulate estimated aggregate FY 2018 LTCH PPS 
standard Federal payment rate payments using the existing SSO payment 
methodology at Sec.  412.529(c)(3). (For the remainder of this 
discussion, we refer to this amount as ``estimated FY 2018 payments 
under the existing SSO payment

[[Page 20024]]

methodology''.) Under this step, our estimated FY 2018 payments under 
the existing SSO payment methodology is $3.177 billion.
     Step 2--Simulate estimated aggregate FY 2018 LTCH PPS 
standard Federal payment rate payments using the proposed SSO payment 
methodology at proposed Sec.  412.529(c)(4), after accounting for 
expected changes in LTCHs' discharge behavior (as discussed earlier), 
which is determined as follows in Step 2a through Step 2d. (A 
discussion and supporting details for the assumptions for expected 
changes in LTCHs' discharge behavior used in this step are provided 
after Step 2c. For the remainder of this discussion, we refer to this 
amount as the ``estimated FY 2018 payments under the proposed SSO 
payment methodology''.)
     Step 2a--Simulate estimated aggregate FY 2018 LTCH PPS 
standard Federal payment rate payments under the proposed SSO payment 
methodology without accounting for expected changes in LTCHs' discharge 
behavior. (For the remainder of this discussion, we refer to this 
amount as the ``estimated unadjusted FY 2018 payments under the 
proposed SSO payment methodology.'' We note that this estimate is 
comprised of estimated unadjusted FY 2018 payments under the proposed 
SSO payment methodology for non-SSO cases and for SSO cases.) This 
estimate represents the proposed change in the SSO payment methodology 
alone in the absence of any behavioral assumptions. We note that, in 
addition to estimated unadjusted FY 2018 payments under the proposed 
SSO payment methodology for SSO cases, this estimate includes estimated 
unadjusted FY 2018 payments under the proposed SSO payment methodology 
for non-SSO cases (which are the same as the estimated FY 2018 payments 
under the existing SSO payment methodology in Step 1 for non-SSO cases 
because there would be no change in which cases would be subject to an 
SSO payment adjustment under our proposal). Based on data used for this 
proposed rule (which is described in section I.J.1. of the Regulatory 
Impact Analysis in Appendix A to this proposed rule), we estimate that, 
in the absence of any behavioral assumptions, under our SSO policy 
proposal, FY 2018 Medicare payments to SSO cases would increase 
approximately 4.6 percent, or approximately $145 million. This amount 
reflects the first of the two different impacts on Medicare LTCH 
spending that we would expect under the proposed change to the SSO 
policy (as discussed earlier), which would, without incorporating the 
second impact discussed above, increase Medicare spending under the 
LTCH PPS to $3.322 billion.
     Step 2b--Determine the estimated amount of aggregate FY 
2018 LTCH PPS standard Federal payment rate payments that would reflect 
the projected decrease in non-SSO cases under the proposed changes to 
the SSO policy. Under this step, we use the estimated unadjusted FY 
2018 payments under the proposed SSO payment methodology for non-SSO 
cases (simulated in Step 2a) and our actuarial projection (described in 
detail below) of a 10-percent decrease in non-SSO cases under the 
proposed change to the SSO policy. Therefore, under this step, we would 
subtract an amount equal to 10 percent of our estimated unadjusted FY 
2018 payments under the proposed SSO payment methodology for non-SSO 
cases from the amount determined in Step 2a. (In other words, after 
applying Step 2b, under our actuarial assumptions, estimated FY 2018 
unadjusted payments under the proposed SSO payment methodology for non-
SSO cases are projected to be 90 percent of the corresponding estimate 
for such cases from Step 2a to reflect the expected decrease in non-SSO 
cases under the proposed changes to the SSO policy.) Based on data used 
for this proposed rule, we estimate that 10 percent of our estimated 
unadjusted FY 2018 payments under the proposed SSO payment methodology 
for non-SSO cases is approximately $272 million. (In Step 2d below, 
this estimated $272 million is subtracted from our estimated FY 2018 
unadjusted payments under the proposed SSO payment methodology to 
account for the projected decrease in non-SSO cases under the proposed 
changes to the SSO policy.)
     Step 2c--Determine the estimated amount of aggregate FY 
2018 LTCH PPS standard Federal payment rate payments that reflect the 
projected increase in SSO cases under the proposed changes to the SSO 
policy. Under our actuarial assumptions (used in Step 2b above and 
described in detail below), we project SSO cases under the proposed 
change to the SSO policy to increase at the same level as the projected 
decrease in non-SSO cases (that is, by 10 percent of the non-SSO 
cases). That is, under the proposed change to the SSO policy, our 
actuaries estimate that there would be a 10-percent shift in LTCH cases 
from non-SSO cases to SSO cases and, therefore, we project a resulting 
aggregate increase in payments to SSO cases. (In Step 2d below, this 
estimated increase is added to our estimated FY 2018 unadjusted 
payments under the proposed SSO payment methodology to account for the 
projected increase in SSO cases under the proposed changes to the SSO 
policy.)
    To incorporate our actuarial estimate of this case shifting in our 
estimated FY 2018 payments under the proposed SSO payment methodology, 
we again determined the estimated unadjusted FY 2018 payments for all 
non-SSO cases but now paid as if all such cases were SSO cases under 
our proposed SSO policy. (For readability, we use the term ``aggregate 
SSO comparable amount'' below to refer to this amount.) In other words, 
we estimate payments for non-SSO cases as if all factors of each case 
remained the same, but the length of stay decreased to less than the 
SSO threshold. (The basis for the decrease in the length of stay is 
discussed in greater detail below.) This 10 percent of the ``aggregate 
SSO comparable amount'' represents our estimate of the aggregate 
increase in SSO payments under our proposed SSO policy for those cases 
that are expected to shift to SSO cases from non-SSO cases because we 
are projecting that 10 percent of non-SSO cases would become SSO cases 
as a result of our proposal.
    Therefore, under this step, we would add an amount equal to 10 
percent of the ``aggregate SSO comparable amount'' to the amount 
determined in Step 2a. (In other words, under our actuarial assumptions 
and after applying Step 2c, our estimated unadjusted FY 2018 payments 
under the proposed SSO payment methodology would be increased to 
reflect the expected increase in SSO cases.)
    To estimate proposed SSO payments based on non-SSO cases under this 
step, because our proposed payment adjustment for SSO cases depends on 
the length of stay, these estimated payments depend on where, relative 
to the SSO threshold, the shifts from non-SSO cases to SSO cases occur. 
As we discuss in greater detail below, our actuaries estimate the 
majority of the increase in SSO cases resulting from this proposed 
policy would occur within 1 to 3 days prior to the SSO threshold. As 
such, we based our estimated payment amount in this step on our 
actuarial assumption (discussed in greater detail below) that the 
length of stay shifts would occur only between 1 and 3 days prior to 
the SSO threshold. We then performed three payment simulations to 
estimate proposed SSO payments if all of the non-SSO cases would have a 
length of stay of 1 day, 2 days, and 3 days prior to the SSO threshold. 
To determine the estimated SSO payments for the non-SSO cases,

[[Page 20025]]

we took an average of those three aggregate estimates: payments where 
non-SSO cases moved 1 day prior to the SSO threshold; payments where 
non-SSO cases moved 2 days prior to the SSO threshold; and payments 
where non-SSO cases moved 3 days prior to the SSO threshold. This 
amount is the ``aggregate SSO comparable amount'' described above. Then 
we took 10 percent of the ``aggregate SSO comparable amount'' as the 
estimated increase in aggregate SSO payments expected to result from 
the expected increase in SSO cases under our proposal.
    Based on data used for this proposed rule, using the calculation 
described above, we estimate that 10 percent of the ``aggregate SSO 
comparable amount'' is approximately $229 million. (In Step 2d below, 
this estimated $229 million is added to our estimated FY 2018 
unadjusted payments under the proposed SSO payment methodology to 
account for the projected increase in SSO cases under the proposed 
changes to the SSO policy.)
    Step 2d--Adjust the original estimated unadjusted FY 2018 payments 
under the proposed SSO payment methodology ($272 million from Step 2a) 
to account for the projected decrease in non-SSO cases under the 
proposed changes to the SSO policy (by subtracting the amount 
determined in Step 2b) and for the projected increase in SSO cases 
under the proposed changes to the SSO policy (by adding the $229 
million from Step 2c). The resulting amount is the estimated FY 2018 
payments under the proposed SSO payment methodology (which is used in 
Step 3 below). As such, we estimate FY 2018 payments under the proposed 
SSO payment methodology is $3.279 billion (that is, $3.322 billion from 
Step 2a minus the $272 million from Step 2b plus the $229 million from 
Step 2c.) Therefore, we estimate that our proposed change to the SSO 
payment methodology would result in an increase in payments of 
approximately $102 million (that is, the $3.177 billion as calculated 
in Step 1 minus the $3.279 billion as calculated here in Step 2).
    Actuarial Assumptions for Shifts in Cases Used under Steps 2b and 
2c: Our actuarial assumptions for LTCHs' discharge behavior under our 
proposed SSO policy were estimated based on a comparative analysis of 
distributions of LTCH discharges relative to the SSO thresholds in FY 
2003 and FY 2015 using data from FY 2002 (the year before the LTCH PPS 
was implemented and the final year prior to a SSO payment adjustment) 
to LTCH discharges in FY 2015 (the most recent complete year of data 
available at the time the comparative analysis was performed in 
preparation for this proposed rule). (We note that, for FY 2002, 
because there was no applicable SSO threshold, we used the SSO 
thresholds from FY 2003 (LTC-DRG Version 23) based on the billed LTC-
DRG (LTC-DRG Version 22) on the FY 2002 claim.)
    The FY 2002 distribution shows a nearly continuous distribution of 
LTCH discharges relative to what would become the SSO threshold in FY 
2003, and approximate symmetry before and after the SSO threshold. In 
other words, for FY 2002, the distribution of discharges just after 
what would become the FY 2003 threshold looks similar to the 
distribution of discharges just before that threshold, and there is a 
corresponding similarity between discharges well after and well before 
what would become the SSO threshold.
    While the FY 2015 distribution of LTCH discharges relative to the 
SSO threshold shows the same symmetry among discharges well before and 
well after the threshold, there are significantly fewer discharges just 
before the SSO threshold and significantly more discharges just after 
the SSO threshold (instead of a symmetry among discharges just before 
and just after the SSO threshold). For FY 2015, this lack of symmetry 
is concentrated in the 3 days leading up to the SSO threshold. (We note 
that, in our analysis of LTCH discharge patterns relative to the 
applicable SSO threshold, we found similar patterns for FYs 2003 
through 2014 as those observed for FY 2015, as well as for FY 2016 LTCH 
discharges.)
    In particular, the FY 2015 LTCH discharges have, as a proportion of 
total FY 2015 LTCH discharges, approximately 20 percent more discharges 
occurring just after the SSO threshold when compared to FY 2002 
discharges. However, due to other substantial changes in Medicare 
payments to LTCHs, including the introduction of the LTCH PPS in FY 
2003, we do not believe the entire 20-percent shift in discharges is 
attributable to only the introduction and subsequent revisions to the 
LTCH PPS SSO payment adjustment. Moreover, this shift is not uniform 
across all SSO discharges because the majority of shifting past the SSO 
threshold occurs within 3 days of the SSO threshold. Based on this, our 
actuaries estimate that the elimination of the payment cliff would 
result in a 10-percent reduction in non-SSO cases, resulting in an 
increase in SSO cases by 10 percent of our non-SSO cases. For these 
non-SSO cases that shift, our actuaries estimate the discharges to 
occur within 3 days prior to the SSO threshold based on the analysis of 
LTCH discharge patterns relative to the applicable SSO threshold 
described earlier.
    As stated above, the net result of the amounts determined in Steps 
2b and 2c of an approximately $43 million decrease (approximately -$272 
million from Step 2b plus approximately $229 million from Step 2c) 
reflects the second of the two different impacts on Medicare LTCH 
spending we would expect under the proposed change to the SSO policy 
(as discussed earlier), which would decrease Medicare spending under 
the LTCH PPS.
     Step 3--Calculate the ratio of the estimated aggregate FY 
2018 LTCH PPS standard Federal payment rate payments under the existing 
and proposed SSO policies to determine the adjustment factor that would 
need to be applied to the proposed FY 2018 LTCH PPS standard Federal 
payment rate to achieve budget neutrality (that is, where the estimated 
aggregate payments calculated in Step 2 are estimated to be equal to 
the estimated aggregate payments calculated in Step 1). This ratio is 
calculated by dividing the estimated FY 2018 payments under the 
existing SSO payment methodology ($3.177 billion as calculated in Step 
1) by the estimated FY 2018 payments under the proposed SSO payment 
methodology ($3.279 billion as calculated in Step 2). We note that, 
under this step, an iterative process is used to determine the 
adjustment factor that would need to be applied to the proposed FY 2018 
LTCH PPS standard Federal payment rate to achieve budget neutrality 
because the portion of estimated FY 2018 payments under the proposed 
SSO payment methodology that is not based on LTCH PPS standard Federal 
payment rate (that is, the IPPS comparable amount portion under the 
proposed SSO payment methodology) is not affected by the application of 
this budget neutrality factor.
    We also note that, under this step, the proposed budget neutrality 
factor for the proposed change in the SSO payment methodology is 
applied to the proposed FY 2018 LTCH PPS standard Federal payment rate 
after the application of the proposed FY 2018 annual update and the 
proposed FY 2018 area wage level adjustment budget neutrality factor 
(discussed in section V. of the Addendum to this proposed rule).
    Based on the claims data used for this proposed rule, we estimate 
that our proposed change to the SSO payment methodology would result in 
an increase in payments of approximately $102 million (that is, the 
$3.177 billion

[[Page 20026]]

as calculated in Step 1 minus the $3.279 billion as calculated in Step 
2) which reflects the approximate $43 million decrease that accounts 
for our actuarial assumptions for expected changes in LTCHs' discharge 
behavior under the proposed changes to the SSO policy). For this 
proposed rule, using the steps in the proposed methodology described 
earlier, we have determined a proposed budget neutrality factor for the 
proposed change to the SSO payment methodology of 0.9672. (We are 
proposing, consistent with historical practice, that if more recent 
data become available and if finalized, we would use such data to 
determine a budget neutrality factor for the proposed change to the SSO 
payment methodology in the final rule.) Accordingly, in section V.A. of 
the Addendum to this proposed rule, to determine the proposed FY 2018 
LTCH PPS standard Federal payment rate, we are proposing to apply a 
one-time, permanent budget neutrality factor of 0.9672 for the proposed 
change in the SSO payment methodology. The proposed FY 2018 LTCH PPS 
standard Federal payment rate shown in Table 1E in section VI. of the 
Addendum to this proposed rule reflects this proposed adjustment.

E. Temporary Exception to the Site Neutral Payment Rate for Certain 
Spinal Cord Specialty Hospitals

    Section 15009 of Public Law 114-255 added new subparagraph (F) to 
section 1886(m)(6) of the Act, which provides for a temporary exception 
to the site neutral payment rate for certain spinal cord specialty 
hospitals. Under this provision, discharges occurring in cost reporting 
periods beginning during FY 2018 and FY 2019 for LTCHs that meet the 
specified statutory criteria are excepted from the site neutral payment 
rate (that is, all discharges from such LTCHs during this period would 
be paid at the LTCH PPS standard Federal payment rate). Clauses (i) 
through (iii) of section 1886(m)(6)(F) of the Act state that, in order 
for an LTCH to qualify for this temporary exception, the LTCH must: (1) 
Have been a not-for-profit LTCH on June 1, 2014, as determined by cost 
report data; (2) of the discharges in calendar year 2013 from the LTCH 
for which payment was made under the LTCH PPS, at least 50 percent were 
classified under MS-LTC-DRGs 28, 29, 52, 57, 551, 573, and 963; and (3) 
have discharged inpatients (including both individuals entitled to, or 
enrolled for, Medicare Part A benefits and individuals not so entitled 
or enrolled) during FY 2014 who had been admitted from at least 20 of 
the 50 States, determined by the States of residency of such inpatients 
and based on such data submitted by the hospital to the Secretary as 
the Secretary may require. The statute further provides authority for 
the Secretary to implement the third criterion (set forth at section 
1886(m)(6)(F)(iii) of the Act and referred to as the ``significant out-
of-state admissions criterion'') by program instruction or otherwise, 
and exempts the policy initiatives from any information collection 
requirements under the Paperwork Reduction Act (Chapter 35 of Title 44 
of the United States Code). Given this express authority, we plan to 
provide further details regarding the implementation of the significant 
out-of-state admissions criterion through subregulatory guidance. 
However, in this proposed rule, we are proposing to codify the 
requirements of the temporary exception to the site neutral payment 
rate for certain spinal cord specialty hospitals specified under 
section 1886(m)(6)(F) of the Act, as added by section 15009 of Public 
Law 114-255. Specifically, we are proposing to codify the requirements 
of this provision at new Sec.  412.522(b)(4), by providing for an 
exception from the site neutral payment rate for discharges occurring 
in cost reporting periods beginning during FYs 2018 and 2019 for LTCHs 
that meet the specified statutory criteria. We are seeking public 
comments on this proposal. Based on information currently available, we 
believe that two hospitals may qualify for this exception.

F. Temporary Exception to the Site Neutral Payment Rate for Certain 
Discharges With Severe Wounds From Certain LTCHs

    Section 15010 of Public Law 114-255 added a new subparagraph (G) to 
section 1886(m)(6) of the Act, which creates a temporary exception to 
the site neutral payment rate for certain severe wound discharges from 
certain LTCHs during such LTCHs' cost reporting periods beginning 
during FY 2018 (that is, for cost reporting period beginning on or 
after October 1, 2017 and on or before September 30, 2018). Under the 
provisions of section 15010 of Public Law 114-255, in order for an 
LTCH's discharge to be excluded from the site neutral payment rate 
under this exception during its FY 2018 cost reporting period, the 
discharge must be: (1) From an LTCH ``identified by the last sentence 
of subsection (d)(1)(B)'' of the Act; (2) classified under MS-LTC-DRG 
602, 603, 539, or 540; and (3) with respect to an individual treated by 
an LTCH, for a severe wound. The statute defines a ``severe wound,'' 
for the purposes of the exception, as ``a wound which is a stage 3 
wound, stage 4 wound, unstageable wound, non-healing surgical wound, or 
fistula as identified in the claim from the long-term care hospital.'' 
The statute further defines a ``wound'' as ``an injury involving 
division of tissue or rupture of the integument or mucous membrane with 
exposure to the external environment.''
    Much of this language is identical or substantially similar to the 
language for the previous temporary exception for discharges for the 
treatment of severe wounds provided for under the amendments made by 
section 231 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-
113), except for three key differences. First, the previous temporary 
exception for severe wound discharges applied to LTCHs that are 
grandfathered hospitals-within-hospitals (HwHs) (that is, hospitals 
that are described under Sec.  412.23(e)(2)(i) that meet the criteria 
of Sec.  412.22(f)) and are located in a rural area or treated as rural 
(Sec.  412.522(b)(2)(ii)(B)), while the new temporary exception for 
severe wound discharges only requires that LTCHs are grandfathered HwHs 
(and does not require the LTCH to also be located in a rural area or 
treated as rural). Second, under this new temporary exception for 
severe wound discharges, the definition of a ``severe wound'' includes 
only five of the eight categories (stage 3 wound, stage 4 wound, 
unstageable wound, non-healing surgical wound, and fistula) included in 
the definition of a ``severe wound'' under the original temporary 
exception for severe wound discharges (and does not include the 
categories of infected wound, osteomyelitis, and wound with morbid 
obesity). Finally, this new temporary exception for severe wound 
discharges is limited to discharges that meet the definition of a 
severe wound and are grouped to certain specified MS-LTC-DRGs, while 
the previous temporary exception for severe wound discharges only 
required the discharge to meet the definition of a severe wound (and 
did not include the requirement for the discharge to also be grouped to 
certain specified MS-LTC-DRGs). Additional details of the new temporary 
exception for payment for severe wound discharges provided by Public 
Law 114-255, including further discussion of the likenesses to and 
differences from the original temporary exception for payment for 
severe wound discharges provided by Public Law 114-113 are discussed 
below.
    We implemented the original temporary exception for payment for 
discharges for the treatment of severe wounds that was provided by the

[[Page 20027]]

amendments made by section 231 of Public Law 114-113 in an interim 
final rule with comment period (IFC) that appeared in the Federal 
Register on April 21, 2016 (81 FR 23428 through 23438) (referred to as 
the ``April 21, 2016 IFC'') and finalized concurrently in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57070). Therefore, to the extent 
applicable, we are implementing this provision in an identical manner 
to our implementation of the amendments made by section 231 of the 
Consolidated Appropriations Act, which is codified in the LTCH PPS 
regulations at Sec.  412.522(b)(2). Specifically, Sec.  
412.522(b)(2)(ii)(B)(1) refers to LTCHs ``identified by the last 
sentence of subsection (d)(1)(B)'' of the Act as LTCHs ``[d]escribed in 
Sec.  412.23(e)(2)(i) and meets the criteria of Sec.  412.22(f).'' We 
are proposing to codify the requirements of this ``new'' temporary 
exception for severe wounds at new Sec.  412.522(b)(3), by providing 
for an exception for discharges meeting the statutory criteria that 
occur in a cost reporting period that begins during FY 2018 for LTCHs 
described in Sec.  412.23(e)(2)(i) and meets the criteria of Sec.  
412.22(f).
    Clauses (ii) and (iii) of section 1886(m)(6)(G) of the Act, 
respectively, as added by section 15010 of Public Law 114-255, includes 
definitions of ``severe wound'' and ``wound'' for purposes of this 
``new'' temporary exception for discharges for the treatment of severe 
wounds. We are proposing to incorporate the definitions of ``wound'' 
and ``severe wound'' at Sec.  412.522(b)(3)(i) as they are defined in 
the statute. We note that the definition of a ``wound'' in section 
15010 is nearly identical to CMS' definition of ``wound'' at existing 
Sec.  412.522(b)(2)(i). We further note that the definition of a 
``severe wound'' is nearly identical to the definition used in section 
231 of Public Law 114-113 with the exception that three categories 
included in the latter (that is, infected wound, osteomyelitis, and 
wound with morbid obesity) are not included in the definition set forth 
in section 15010 of Public Law 114-255. The five remaining categories 
of stage 3 wound, stage 4 wound, unstageable wound, non-healing 
surgical wound, and fistula are identified by the list of ICD-10-CM 
codes posted to the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/download.html 
under the ``Severe Wound Diagnosis Codes by Category for Implementation 
of Section 231 of Public Law 114-113'' download file. For more 
information on our interpretation of these terms, we refer readers to 
the April 21, 2016 IFC (81 FR 23428 through 23438) and the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57070). Therefore, this information on 
how CMS interpreted the meanings of these categories of a ``severe 
wound'' for Public Law 114-113 was available at the time Public Law 
114-255 was enacted. As such, we are implementing the ``new'' temporary 
exception for discharges for the treatment of severe wounds provided 
for by section 15010 using the same list of ICD-10-CM codes to identify 
the five categories of severe wounds enumerated in that section of 
Public Law 114-255. In addition, as provided by section 
1886(m)(6)(G)(i)(III) of the Act as added by section 15010 of Public 
Law 114-255, we are proposing at new Sec.  412.522(b)(3)(ii) that the 
patient must be treated for a severe wound that meets the statutory 
definition of a ``severe wound'' at proposed Sec.  412.522(b)(3)(i) in 
order for the LTCH discharge to meet this ``new'' temporary exception 
for discharges for the treatment of severe wounds.
    We believe that the requirement under the ``new'' temporary 
exception for discharges for the treatment of severe wounds set forth 
under section 1886(m)(6)(G)(i)(II) of the Act as added by section 15010 
of Public Law 114-255 for an LTCH discharge be classified under MS-LTC-
DRG 602, 603, 539, or 540 is self-implementing. Accordingly, we are 
proposing to codify this requirement at new Sec.  412.522(b)(3)(ii)(C) 
by listing the applicable MS-LTC-DRGs.
    Section 1886(m)(6)(G)(i)(I) of the Act, as added by section 15010 
of Public Law 114-255, specifies that, for purposes of this ``new'' 
temporary exception for discharges for the treatment of severe wounds, 
the LTCH discharge must be from an LTCH ``identified by the last 
sentence of subsection (d)(1)(B)''. The phrase ``identified by the last 
sentence of subsection (d)(1)(B) [of the Act]'' is equivalent to the 
phrase ``identified by the amendment made by section 4417(a) of the 
Balanced Budget Act of 1997'' used in section 231 of Public Law 114-
113, because the amendment made by section 4417(a) of the Balanced 
Budget Act of 1997 added the last sentence of subsection (d)(1)(B) to 
the Act. As discussed in the April 21, 2016 IFC (81 FR 23428), the 
phrase ``identified by the amendment made by section 4417(a) of the 
Balanced Budget Act of 1997'' (which as previously discussed is 
equivalent to ``identified by the last sentence of subsection (d)(1)(B) 
of the Act'') has been interpreted by CMS to mean hospitals-within-
hospitals (HwHs) that were participating in Medicare, but excluded from 
the hospital IPPS on or before September 30, 1995 (that is, hospitals 
which are described under Sec.  412.23(e)(2)(i)) that meet the criteria 
of Sec.  412.22(f) (81 FR 23430 through 23432). As further discussed in 
the April 21, 2016 IFC, Sec.  412.22(f) generally requires that, in 
order to have grandfathered status, an HwH must continue to operate 
under the same terms and conditions, including, but not limited to, the 
number of beds. A limited exception to this general policy allowed 
eligible hospitals to increase the number of beds between October 1, 
1995, and September 30, 2003, without loss of their grandfathered 
status. A second exception allows grandfathered HwHs to increase square 
footage or decrease the number of beds for cost reporting periods 
beginning on or after October 1, 2006, while still retaining 
grandfathered status. Because this phrase had already been interpreted 
in this manner, the April 21, 2016 IFC adopted the same meaning of the 
phrase for purposes of implementing section 231 of Public Law 114-113. 
For additional information on hospitals ``identified by the amendment 
made by section 4417(a) of the Balanced Budget Act of 1997,'' we refer 
readers to the April 21, 2016 IFC (81 FR 23431 through 23432). 
Therefore, for the purposes of the new temporary exception for LTCH 
discharges for the treatment of severe wounds, ``identified by the last 
sentence of subsection (d)(1)(B) of the Act'' means HwHs that were 
participating in Medicare, but excluded from the hospital IPPS on or 
before September 30, 1995 (that is, hospitals which are described under 
Sec.  412.23(e)(2)(i)) that meet the criteria of Sec.  412.22(f). We 
finalized this policy without modification in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57069). Because we have already finalized our 
interpretation of this phrase, we believe that the requirement at 
section 1886(m)(6)(G)(i)(I) of the Act is self-implementing. 
Accordingly, we are proposing to codify this requirement at new Sec.  
412.522(b)(3)(ii)(B). LTCHs that believe they meet the requirements to 
be a grandfathered HwH should contact their MACs. MACs will verify that 
the LTCH meets these requirements.

G. Moratorium and Proposed Regulatory Delay of the Full Implementation 
of the ``25-Percent Threshold Policy'' Adjustment (Sec.  412.538)

    The ``25-percent threshold policy'' is a per discharge payment 
adjustment in the LTCH PPS that is applied to payments for Medicare 
patient discharges from an LTCH when the number of such patients 
originating from any single referring hospital is in

[[Page 20028]]

excess of the applicable threshold for a given cost reporting period 
(such threshold is generally set at 25 percent, with exceptions for 
rural and urban single or MSA-dominant hospitals). If an LTCH exceeds 
the applicable threshold during a cost reporting period, payment for 
the discharge that puts the LTCH over its threshold and all discharges 
subsequent to that discharge in the cost reporting period from the 
referring hospital are adjusted at cost report settlement (discharges 
not in excess of the threshold are unaffected by the 25-percent 
threshold policy). The 25-percent threshold policy was originally 
established in the FY 2005 IPPS final rule for LTCH HwHs and satellites 
(69 FR 49191 through 49214). We later expanded the 25-percent threshold 
policy in the RY 2008 LTCH PPS final rule to include all LTCHs and LTCH 
satellite facilities (72 FR 26919 through 26944). Several laws have 
mandated delayed implementation of the policy, including, most 
recently, section 1206 of the Pathway for Sustainable Growth Rate (SGR) 
Reform Act (Pub. L. 113-67). Section 1206(b)(1)(B) provides a permanent 
exemption from the application of the 25-percent threshold policy for 
LTCHs identified by the amendment made by section 4417(a) of the 
Balanced Budget Act of 1997 (Pub. L. 105-33). As explained more fully 
in section VIII.H. of the preamble of this proposed rule, LTCHs 
``identified by the amendment made by section 4417(a) of the Balanced 
Budget Act of 1997'' are HwHs that were participating in Medicare, but 
excluded from the hospital IPPS on or before September 30, 1995 (that 
is, hospitals which are described under Sec.  412.23(e)(2)(i)) that 
meet the criteria of Sec.  412.22(f). LTCHs that believe they meet the 
requirements to be a grandfathered HwH should contact their MACs. MACs 
will verify that the LTCH meets these requirements. Section 
1206(b)(1)(A) of Public Law 113-67 extended prior moratoria on the full 
implementation of the 25-percent threshold policy until cost reporting 
periods beginning on or after either July 1, 2016 (for LTCHs subject to 
42 CFR 412.534) or October 1, 2016 (for LTCHs subject to 42 CFR 
412.536). For more details on the various laws that delayed the full 
implementation of the 25-percent threshold policy, we refer readers to 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50356 through 50357). In 
the FY 2017 IPPS/LTCH PPS final rule, we consolidated the 25-percent 
threshold policy by sunsetting Sec. Sec.  412.534 and 412.536 and 
establishing provisions under new section Sec.  412.538.
    Section 15006 of Public Law 114-255 further amended section 
114(c)(1)(A) of the MMSEA (as amended) by striking ``for a 9-year 
period'' and inserting ``through June 30, 2016, and for discharges 
occurring on or after October 1, 2016 and before October 1, 2017'', 
which provides for an extension of the moratorium on the full 
implementation of the 25-percent threshold policy. In addition, section 
15006(b) of Public Law 114-255 further amended section 114(c)(2) of the 
MMSEA (as amended) by inserting ``or any similar provision,'' after 
``Regulations,'' in subparagraphs (A) and (B). (We note that the 
functional result of the extension of the moratorium under section 
15006(a) of Public Law 114-255 only extends to discharges on or after 
October 1, 2016 and before October 1, 2017.)
    To implement the provisions of section 15006 of Public Law 114-255, 
we are proposing to make conforming amendments to the regulations that 
currently govern the application of the 25-percent threshold policy. 
Section 114(c)(1) of the MMSEA, from its inception, precluded CMS from 
implementing either Sec. Sec.  412.534 or 412.536 (as applicable), as 
well as any similar provision to hospitals described in the provision 
of the MMSEA. Section 15006 of Public Law 114-255 amended section 
114(c)(2) of the MMSEA by adding the words ``or any similar 
provisions'' to both (A) and (B). Section 412.538 of the regulations is 
a similar provision to the provisions of both Sec. Sec.  412.534 and 
412.536 (we adopted the payment policy under Sec.  412.538 to create a 
consolidated and streamlined 25-percent threshold policy to replace the 
policies under Sec. Sec.  412.534 and 412.536, which were sunset). 
Therefore, in order to implement the moratorium on the implementation 
of the 25-percent threshold policy provided under section 15006 of 
Public Law 114-255, we are proposing to amend Sec.  412.538 to account 
for these statutory changes. We note that, similar to the July 1, 2012 
through September 30, 2012 ``gap'' period discussed in the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53484 through 53486), this extension of 
the moratorium on the full application of the 25-percent threshold 
policy results in a ``gap'' period where LTCHs are required to comply 
with the fully-implemented 25-percent threshold policy for their cost 
reporting periods beginning on or after July 1, 2016, and before 
October 1, 2016, for any discharges occurring on or before September 
30, 2016. For the same reasons discussed in the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53485 through 53486), although those LTCHs with cost 
reporting periods beginning on or after July 1 and before October 1 
2016 are ``technically'' subject to the 25-percent threshold policy 
until October 1, 2016, we believe that very few, if any, LTCHs will 
actually receive a payment adjustment because these LTCHs would rarely, 
if ever, admit more than 25 percent of their discharges from any one 
referring hospital during the limited period of 1 to 3 months 
(depending on the LTCH's cost reporting beginning date) that the 25-
percent threshold policy was technically in effect.)
    In addition, we are proposing to adopt a 1-year regulatory 
moratorium on the implementation of the 25-percent threshold policy; 
that is, we are proposing to impose a regulatory moratorium on our 
implementation of Sec.  412.538 until October 1, 2018. This proposal is 
made in response to the further statutory delays and our continued 
consideration of public comments received in response to our proposal 
to consolidate and streamline the 25-percent threshold policy in the FY 
2017 IPPS/LTCH PPS proposed rule. In response to that proposed rule, 
several commenters stated that the new site neutral payment rate would 
alleviate the policy concerns underlying the 25-percent threshold 
policy. As we stated in more detail in our response to those comments 
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57106), we are not 
convinced that this is the case.
    However, given this additional statutory moratorium, we believe 
that it is appropriate at this time to propose to establish a 
regulatory moratorium on the implementation of the 25-percent threshold 
policy until we can examine data under the application of the site 
neutral payment rate to further evaluate, when more data are available, 
whether the policy is in fact still necessary. While we are not 
convinced that the application of the site neutral payment rate removes 
the need for the 25-percent threshold policy, we believe that 
evaluating the impact of the application of the site neutral payment 
rate on LTCH admission practices would be premature at this time. The 
statute provides that the site neutral payment rate be phased-in, 
effective with LTCH cost reporting periods beginning on or after 
October 1, 2015 and before October 1, 2017 (that is, LTCH cost 
reporting periods beginning in FYs 2016 and 2017). LTCH claims data for 
discharges that occurred in FY 2016 is currently the best available 
data, and given that phase-in of the site neutral payment rate is based 
on LTCHs' cost reporting period start dates, many LTCH discharges that 
occurred during FY 2016

[[Page 20029]]

were not yet subject to the site neutral payment rate because they 
occurred in a LTCH cost reporting period that had begun prior to 
October 1, 2016. Consequently, at this time we only have a partial year 
of LTCH claims data under the period where the site neural payment rate 
was in effect, which may not be fully reflective of any changes in LTCH 
admission practices under the new dual rate LTCH PPS. Proposing an 
additional regulatory moratorium on the 25-percent threshold policy 
through FY 2018 would allow CMS the opportunity to do an analysis of 
LTCH admission practices under the new dual payment rate LTCH PPS based 
on more complete data and would avoid creating any additional confusion 
by having the 25-percent threshold policy become effective for a period 
of time when future analysis of LTCH claims data may indicate the 
policy concerns underlying the 25-percent threshold policy have been 
moderated.
    Therefore, in this proposed rule, we are proposing to revise the 
effective date of Sec.  412.538 so that the 25-percent threshold policy 
would apply to discharges occurring on or after October 1, 2018. 
Further, we are proposing that if, in response to public comments, we 
do not finalize this proposed additional 1-year regulatory moratorium, 
we would revise Sec.  412.538 so that the 25-percent threshold policy 
would apply to discharges occurring on or after October 1, 2017, 
consistent with the provisions of section 15006 of Public Law 114-255. 
We are seeking public comments on our proposals.

H. Revision to Moratorium on Increasing Beds in Existing LTCH or LTCH 
Satellite Locations Under the 21st Century Cures Act (Pub. L. 114-255) 
(Sec.  412.23)

    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, effective April 1, 2014 through September 30, 2017, by 
amending section 114(d)(1) of the MMSEA (as amended). In addition, the 
statute also provided an exception under the ``new'' moratorium under 
section 114(d)(7) of the MMSEA (as amended) to establish a new LTCH or 
LTCH satellite facility during the period between April 1, 2014, and 
September 30, 2017, if a hospital or entity meets criteria, which 
mirror the expired provisions of section 114(d)(2)(A). 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).
    Section 15004(a) of Public Law 114-255 further amended section 
114(d)(7) of the MMSEA (as amended) by striking ``The moratorium under 
paragraph (1)(A)'' and inserting ``[a]ny moratorium under paragraph 
(1)'' and specified that such amendment shall take effect as if 
included in the enactment of section 112 of the PAMA. Under this 
amendment, all existing LTCHs or LTCH satellite locations are no longer 
subject to a moratorium on an increase in LTCH beds set forth in 
paragraph (1)(B) if they meet certain criteria. In order to implement 
this statutory change, we are proposing to amend Sec.  412.23(e)(7) by 
revising paragraph (e)(7)(iii) to specify that the moratorium on 
increasing the number of beds in existing LTCHs and existing LTCH 
satellites does not apply if one or more or the exceptions described in 
Sec.  412.23(e)(6)(ii) is met in accordance with the provisions of 
section 15004(a) of Public Law 114-255. (We note that section 15004(b) 
of Public Law 114-255 provides for a modification to LTCH high-cost 
outlier payments. Our proposals to implement this provision are 
discussed in section V.D. of the Addendum to this proposed rule.) We 
are seeking public comments on this proposal.

I. Proposed Change to the Average Length of Stay Criterion Under the 
21st Century Cures Act (Pub. L. 114-255)

    Under the requirements at sections 1886(d)(1)(B)(iv)(I) and 
1861(ccc) of the Act, in order for a hospital to be classified as an 
LTCH, the hospital had to maintain an average length of stay of greater 
than 25 days as calculated by the Secretary. Section 1206(a)(3) of the 
Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) excluded Medicare 
Advantage plans' and site neutral payment rate discharges from this 
calculation for hospitals that were classified as LTCHs as of December 
10, 2013. We implemented this provision in the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49638). Section 15007 of Public Law 114-255 amended 
section 1206(a)(3) of the Pathway for SGR Reform Act by extending the 
exclusion of Medicare Advantage plans' and site neutral payment rate 
discharges from the calculation of the average length of stay to all 
LTCHs, for discharges occurring in cost reporting periods beginning on 
or after October 1, 2015. In order to implement this provision, we are 
proposing to remove the final sentence of our regulations at 42 CFR 
412.23(e)(2)(vi), which included site neutral payment rate and Medicare 
Advantage discharges in the calculation of the average length of stay 
for LTCHs which were classified as such after December 10, 2013. We are 
seeking public comments on our proposal.

J. Change in Medicare Classification for Certain Hospitals (Sec.  
412.23)

    When enacted, section 1886(d)(1)(B)(iv) of the Act established a 
category of hospitals that experience extended average inpatient length 
of stays, which are known as LTCHs under the Medicare program. Clause 
(iv) of section 1886(d)(1)(B) consisted of two subclauses (I) and (II) 
(that is, section 1886(d)(1)(B)(iv)(I) and section 
1886(d)(1)(B)(iv)(II) of the Act) which corresponded to two categories 
of hospitals that were generally referred to as ``subclause (I)'' and 
``subclause (II)'' LTCHs. ``Subclause (I)'' LTCHs were required to have 
an average inpatient length of stay that is greater than 25 days. 
``Subclause (II)'' LTCHs were only required to have an average 
inpatient length of stay of greater than 20 days. The ``subclause 
(II)'' LTCH definition further limited the classification of a 
``subclause (II)'' LTCH by including the requirement that the LTCH must 
have been first excluded from the IPPS in CY 1986, and treated a 
Medicare inpatient population in which 80 percent of the discharges in 
the 12-month reporting period ending in Federal FY 1997 had a principal 
diagnosis that reflected a finding of neoplastic disease as defined in 
subsection (f)(1)(iv) section 1886 of the Act. This statutory 
requirement was implemented under 42 CFR 412.23(e)(2)(ii).
    As part of our FY 2015 IPPS/LTCH PPS rulemaking cycle, under the 
authority provided by section 1206(d)(2) of the Pathway to SGR Reform 
Act (Pub. L. 113-67), we adopted an adjustment to the LTCH PPS payment 
for LTCHs classified under section 1886(d)(1)(B)(iv)(II) of the Act 
(``subclause (II)'' LTCHs). Under this payment adjustment, ``subclause 
(II)'' LTCHs receive payment under the LTCH PPS that is generally 
equivalent to an amount determined under the reasonable cost-based 
payment rules for both operating and capital-related costs under 42 CFR 
part 413 (that is, an amount generally equivalent to an amount 
determined under the TEFRA payment system methodology). This payment 
adjustment for ``subclause (II)'' LTCHs is specified at Sec.  412.526. 
For more information on this payment adjustment, we refer readers to 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50193 through 50197). As 
initially adopted, the ``TEFRA-like'' reasonable

[[Page 20030]]

cost-based payment adjustment for ``subclause (II)'' LTCHs did not 
incorporate the limitation on charges to Medicare beneficiaries 
policies under the TEFRA payment system. In the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57109 through 57110), we amended the regulations at 
Sec.  412.507 relating to the limitation on charges to address 
beneficiary charges for LTCH services provided by ``subclause (II)'' 
LTCHs as part of our refinement of the payment adjustment for 
``subclause II'' LTCHs under Sec.  412.526. Under this refinement, 
``subclause (II)'' LTCHs are treated the same as IPPS-excluded 
hospitals paid under the TEFRA payment system for purposes of the 
limitation on charges to beneficiaries and related billing 
requirements.
    Section 15008 of Public Law 114-225 provides for a change in 
Medicare classification for ``subclause (II)'' LTCH by redesignating 
such hospitals from section 1886(d)(1)(B)(iv)(II) to section 
1886(d)(1)(B)(vi) of the Act. In addition, subsection (b) of section 
15008 specifies that, for cost reporting periods beginning on or after 
January 1, 2015, such hospitals classified under section 
1886(d)(1)(B)(vi) of the Act are not subject to section 1886(m) of the 
Act, which sets forth the LTCH PPS. Section 15008 further specifies 
that, for cost reporting periods beginning on or after January 1, 2015, 
payment for inpatient operating costs is to be made as described in 42 
CFR 412.526(c)(3), including any subsequent modifications, and payment 
for capital costs is to be made as described in 42 CFR 412.526(c)(4) as 
in effect on January 1, 2015. (We note that there have been no 
revisions to the regulations at 42 CFR 512.526, including Sec.  
412.526(c)(3) and Sec.  412.526(c)(4), since January 1, 2015.)
    In order to implement these requirements, we are proposing to 
revise Sec.  412.23(e)(2)(ii) so that the definition in that paragraph 
would apply to hospitals in cost reporting periods beginning on or 
after August 5, 1997 and on or before December 31, 2014. In addition, 
we are proposing to add a new paragraph (j) to Sec.  412.23 that would 
establish a new classification of IPPS-excluded hospital (``long-term 
care neoplastic disease hospitals'') that would identify hospitals 
classified under new section 1886(d)(1)(B)(vi) of the Act. Proposed new 
paragraph (j) would further specify in paragraph (j)(2) that payment 
for inpatient operating costs for these hospitals is made as described 
in Sec.  412.526(c)(3) and payment for capital costs for these 
hospitals is made as described in Sec.  412.526(c)(4). (We note that we 
are not proposing to make changes to Subpart O by removing references 
to ``subclause (II) LTCHs'' due to the proposed sunset date we are 
adding to Sec.  412.23(e)(2)(ii).) We are seeking public comments on 
our proposal.

IX. 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 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, care coordination, and 
improving patient outcomes (including patient experiences with care).
    We have implemented quality reporting programs for multiple care 
settings, including, for example:
     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);
     Prospective Payment System (PPS)-exempt cancer hospitals 
under the PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program;
     Long-term care hospitals under the Long-Term Care Hospital 
Quality Reporting Program (LTCH QRP) (also referred to as the LTCHQR 
Program);
     Inpatient psychiatric facilities under the Inpatient 
Psychiatric Facilities Quality Reporting (IPFQR) 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));
     Ambulatory surgical centers under the Ambulatory Surgical 
Center Quality Reporting (ASCQR) Program;
     Inpatient rehabilitation facilities under the Inpatient 
Rehabilitation Facility Quality Reporting Program (IRF QRP);
     Care furnished by physicians and other eligible 
professionals under the Physician Quality Reporting System (PQRS). We 
note that beginning in CY 2018 PQRS will be replaced by the Quality 
Payment Program (QPP);
     Skilled nursing facilities under the Skilled Nursing 
Facility Quality Reporting Program (SNF QRP);
     Home health agencies under the Home Health Quality 
Reporting Program (HH QRP); and
     Hospices under the Hospice Quality Reporting Program 
(HQRP).
    We have also implemented programs which link payment to performance 
including: The Hospital Readmissions Reduction Program; the Hospital 
Value-Based Purchasing (VBP) Program (described further below); the 
Hospital-Acquired Condition (HAC) Reduction Program; the End-Stage 
Renal Disease Quality Incentive Program (ESRD QIP); and the Quality 
Payment Program.
    In implementing the Hospital IQR Program and other quality 
reporting programs, we have focused on measures which 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 the reporting burden on providers will 
be reduced. As appropriate, we will consider the adoption of clinical 
quality measures with electronic specifications so the electronic 
collection of performance information is a seamless component of care 
delivery. Establishing such a system will require interoperability 
between electronic health records (EHR) 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 which 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 
hospitals will have decreased burden as they are 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 FY 2013 Hospital Inpatient VBP 
Program final rule (76 FR 26490 through 26547); the FY 2014 the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50676 through 50707); the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50048 through 50087); the FY

[[Page 20031]]

2016 IPPS/LTCH PPS final rule (80 FR 49544 through 49570); the FY 2017 
IPPS/LTCH PPS final rule (81 FR 56979 through 57011); and the CY 2017 
OPPS/ASC final rule (81 FR 79855 through 79862). Under the Hospital VBP 
Program, performance standards are set and applied to a performance 
period for the applicable FY. Hospitals receive value based incentive 
payments based on these performance standards. The measures under the 
Hospital VBP Program must be selected from current 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 adopted and reported under the Hospital IQR Program, 
these two programs are linked. 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 HAC Reduction Program, authorized by section 
1886(p) of the 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 (scoring performance on each 
measure on the greater of improvement or achievement), while the HAC 
Reduction Program creates a payment adjustment resulting in payment 
reductions for hospitals with scores in the lowest performing quartile 
based on their rates of HACs.
    In the preamble of this proposed rule, we are proposing changes to 
the following Medicare quality reporting systems:
     In section IX.A., the Hospital IQR Program.
     In section IX.B., the PCHQR Program.
     In section IX.C., the LTCH QRP.
     In section IX.D., the IPFQR Program.
    In addition, in section IX.E. of the preamble of this proposed 
rule, we are proposing changes to the Medicare and Medicaid EHR 
Incentive Programs for eligible hospitals and critical access hospitals 
(CAHs).

A. Hospital Inpatient Quality Reporting (IQR) Program

1. Background
a. History of the Hospital IQR Program
    We seek to promote higher quality and more efficient health care 
for Medicare beneficiaries. This effort is supported by the adoption of 
widely-agreed upon quality measures. We have worked with relevant 
stakeholders to define measures of quality in almost every setting and 
currently measure some aspect of care for almost all Medicare 
beneficiaries. These measures assess structural aspects of care, 
clinical processes, patient experiences with care, and outcomes. We 
have implemented quality measure reporting programs for multiple 
settings of care. To measure the quality of hospital inpatient 
services, we implemented the Hospital Inpatient Quality Reporting (IQR) 
Program, previously referred to as the Hospital Quality Data for Annual 
Payment Update (RHQDAPU) Program. We refer readers to the FY 2010 IPPS/
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), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49660 
through 49692), and the FY 2017 IPPS/LTCH PPS final rule (81 FR 57148 
through 57150) for the measures we have adopted for the Hospital IQR 
Program measure set through the FY 2019 payment determination and 
subsequent years.
b. Maintenance of Technical Specifications for Quality Measures
    The technical specifications for chart-abstracted clinical process 
of care measures used in the Hospital IQR Program, or links to Web 
sites hosting technical specifications, are contained in the CMS/The 
Joint Commission (TJC) Specifications Manual for National Hospital 
Inpatient 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 chart-abstracted clinical process of care 
measures.
    The technical specifications for electronic clinical quality 
measures (eCQMs) used in the Hospital IQR Program are contained in the 
CMS Annual Update for Hospital Quality Reporting Programs (Annual 
Update). This Annual Update is posted on the eCQI Resource Center Web 
site at: https://ecqi.healthit.gov/. We generally update the measure 
specifications on an annual basis through the Annual Update, which 
includes code updates, logic corrections, alignment with current 
clinical guidelines, and additional guidance for hospitals and EHR 
vendors to use in order to collect and submit data on eCQMs from 
hospital EHRs.
    In addition, 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 a subregulatory process to make nonsubstantive updates to 
measures used for the Hospital IQR Program.
    We recognize that some changes made to 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. We refer readers 
to the FY 2017 IPPS/LTCH PPS final rule (81 FR 57111) for additional 
discussion of the maintenance of technical specifications for quality 
measures for the Hospital IQR Program. We also refer readers to the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50202 through 50203) for 
additional details on the measure maintenance process.
    In this proposed rule, we are not proposing any changes to our 
policies on the measures maintenance process, including the maintenance 
of nonsubstantive updates to measures used 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. Our current

[[Page 20032]]

policy is to report 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/hospitalcompare after a 30-day preview period (78 
FR50776 through 50778).
    Information is available to the public on the Hospital Compare Web 
site. Hospital Compare is an interactive web tool that assists 
beneficiaries by providing information on hospital quality of care to 
those who need to select a hospital. The Hospital IQR Program currently 
includes process of care measures, risk-adjusted outcome measures, the 
HCAHPS patient experience-of-care survey measure, structural measures, 
Emergency Department throughput measures, patient safety and adverse 
event measures, immunization measures, hospital-acquired infection 
measures, and payment measures, all of which are featured on the 
Hospital Compare Web site. For more information on measures reported to 
Hospital Compare, we refer readers to the Web site at: http://www.medicare.gov/hospitalcompare.
    Other information that may not be as relevant to or easily 
understood by beneficiaries and information for which there are 
unresolved display issues or design considerations are not reported on 
Hospital Compare and may be made available on other CMS Web sites, such 
as https://data.medicare.gov.
    In this proposed rule, we are not proposing any changes to these 
policies.
d. Accounting for Social Risk Factors in the Hospital IQR Program
    We understand that social risk factors such as income, education, 
race and ethnicity, employment, disability, community resources, and 
social support (certain factors of which are also sometimes referred to 
as socioeconomic status (SES) factors or socio-demographic status (SDS) 
factors) play a major role in health. One of our core objectives is to 
improve beneficiary outcomes including reducing health disparities, and 
we want to ensure that all beneficiaries, including those with social 
risk factors, receive high quality care. In addition, we seek to ensure 
that the quality of care furnished by providers and suppliers is 
assessed as fairly as possible under our programs while ensuring that 
beneficiaries have adequate access to excellent care.
    We have been reviewing reports prepared by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) \98\ and the 
National Academies of Sciences, Engineering, and Medicine on the issue 
of measuring and accounting for social risk factors in CMS' value-based 
purchasing and quality reporting programs, and considering options on 
how to address the issue in these programs. On December 21, 2016, ASPE 
submitted a Report to Congress on a study it was required to conduct 
under section 2(d) of the Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014. The study analyzed the effects of 
certain social risk factors of Medicare beneficiaries on quality 
measures and measures of resource use used in one or more of nine 
Medicare value-based purchasing programs.\99\ The report also included 
considerations for strategies to account for social risk factors in 
these programs. In a January 10, 2017 report released by the National 
Academies of Sciences, Engineering, and Medicine, that body provided 
various potential methods for measuring and accounting for social risk 
factors, including stratified public reporting.\100\
---------------------------------------------------------------------------

    \98\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \99\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \100\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press.
---------------------------------------------------------------------------

    As noted in the FY 2017 IPPS/LTCH PPS final rule, the NQF has 
undertaken a 2-year trial period in which new measures, measures 
undergoing maintenance review, and measures endorsed with the condition 
that they enter the trial period can be assessed to determine whether 
risk adjustment for selected social risk factors is appropriate for 
these measures. This trial entails temporarily allowing inclusion of 
social risk factors in the risk-adjustment approach for these measures. 
At the conclusion of the trial, NQF will issue recommendations on the 
future inclusion of social risk factors in risk adjustment for these 
quality measures, and we will closely review its findings.
    As we continue to consider the analyses and recommendations from 
these reports and await the results of the NQF trial on risk adjustment 
for quality measures, we are continuing to work with stakeholders in 
this process. As we have previously communicated, we are concerned 
about holding providers to different standards for the outcomes of 
their patients with social risk factors because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes 
for disadvantaged populations. Keeping this concern in mind, while we 
sought input on this topic previously, we continue to seek public 
comment on whether we should account for social risk factors in the 
Hospital IQR Program, and if so, what method or combination of methods 
would be most appropriate for accounting for social risk factors. 
Examples of methods include: Confidential reporting to providers of 
measure rates stratified by social risk factors; public reporting of 
stratified measure rates; and potential risk adjustment of a particular 
measure as appropriate based on data and evidence.
    In addition, we are also seeking public comment on which social 
risk factors might be most appropriate for reporting stratified measure 
scores and/or potential risk adjustment of a particular measure. 
Examples of social risk factors include, but are not limited to, dual 
eligibility/low-income subsidy, race and ethnicity, and geographic area 
of residence. We are seeking comments on which of these factors, 
including current data sources where this information would be 
available, could be used alone or in combination, and whether other 
data should be collected to better capture the effects of social risk. 
We will take commenters' input into consideration as we continue to 
assess the appropriateness and feasibility of accounting for social 
risk factors in the Hospital IQR Program. We note that any such changes 
would be proposed through future notice-and-comment rulemaking.
    We refer readers to section IX.A.13. of the preamble of this 
proposed rule, where we discuss the potential future confidential 
reporting of stratified measure data for the Hospital 30-day, All-
Cause, Risk-Standardized Readmission Rate Following Pneumonia 
Hospitalization (NQF #0506) and the Hospital 30-day, All-Cause, Risk 
Standardized Mortality Rate (RSMR) for Pneumonia measures. Our goal is 
to provide examples from several domains for the same issue 
(pneumonia). We want the reader to understand the approaches from as 
many perspectives as possible. In addition we are seeking comments on 
options for publicly displaying stratified rates using social risk 
factors as well as which other social risk factors besides dual 
eligibility should be used.
    We look forward to working with stakeholders as we consider the 
issue of accounting for social risk factors and reducing health 
disparities in CMS programs. Of note, implementing any of the above 
methods would be taken into consideration in the context of how this 
and other CMS programs operate (for example, data submission methods,

[[Page 20033]]

availability of data, statistical considerations relating to 
reliability of data calculations, among others), so we also welcome 
comment on operational considerations. CMS is committed to ensuring 
that its beneficiaries have access to and receive excellent care, and 
that the quality of care furnished by providers and suppliers is 
assessed fairly in CMS programs.
2. Retention of 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. 
Pursuant to this policy, when we adopt measures for the Hospital IQR 
Program beginning with a particular payment determination, we 
automatically re-adopt these measures for all subsequent payment 
determinations unless we propose to remove, suspend, or replace the 
measures. In this proposed rule, we are not proposing any changes to 
this policy.
3. Removal and Suspension of Previously Adopted Hospital IQR Program 
Measures
    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 refer readers to the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49641 through 49643) for more information on the additional 
factors we consider in removing quality measures and the factors we 
consider in order to retain measures. We note in the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50203 through 50204), we clarified the criteria 
for determining when a measure is ``topped-out.'' In this proposed 
rule, we are not proposing any changes to these policies.
    We refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57112 through 57120) for the list of 15 measures finalized for removal 
for the FY 2019 payment determination and subsequent years. In this FY 
2018 IPPS/LTCH PPS proposed rule, we are not proposing any measures for 
removal.
4. Previously Adopted Hospital IQR Program Measures for the FY 2019 
Payment Determination and Subsequent Years
    The Hospital IQR Program has previously finalized 62 measures for 
the FY 2019 payment determination and subsequent years as outlined in 
the table below:

 Hospital IQR Program Measures for the FY 2019 Payment Determination and
                            Subsequent Years
------------------------------------------------------------------------
          Short name                  Measure name             NQF #
------------------------------------------------------------------------
                Healthcare-Associated Infection Measures
------------------------------------------------------------------------
CAUTI........................  National Healthcare                  0138
                                Safety Network (NHSN)
                                Catheter-associated
                                Urinary Tract Infection
                                (CAUTI) Outcome Measure.
CDI..........................  National Healthcare                  1717
                                Safety Network (NHSN)
                                Facility-wide Inpatient
                                Hospital-onset
                                Clostridium difficile
                                Infection (CDI) Outcome
                                Measure.
CLABSI.......................  National Healthcare                  0139
                                Safety Network (NHSN)
                                Central Line-Associated
                                Bloodstream Infection
                                (CLABSI) Outcome Measure.
Colon and Abdominal            American College of                  0753
 Hysterectomy SSI.              Surgeons--Centers for
                                Disease Control and
                                Prevention (ACS-CDC)
                                Harmonized Procedure
                                Specific Surgical Site
                                Infection (SSI) Outcome
                                Measure.
HCP..........................  Influenza Vaccination                0431
                                Coverage Among
                                Healthcare Personnel.
MRSA Bacteremia..............  National Healthcare                  1716
                                Safety Network (NHSN)
                                Facility-wide Inpatient
                                Hospital-onset
                                Methicillin-resistant
                                Staphylococcus aureus
                                (MRSA) Bacteremia
                                Outcome Measure.
------------------------------------------------------------------------
                  Claims-Based Patient Safety Measures
------------------------------------------------------------------------
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 04.......................  Death Rate among Surgical            0351
                                Inpatients with Serious
                                Treatable Complications.
PSI 90.......................  Patient Safety for                   0531
                                Selected Indicators
                                Composite Measure,
                                Modified PSI 90 (Updated
                                Title: Patient Safety
                                and Adverse Events
                                Composite).
------------------------------------------------------------------------
                 Claims-Based Mortality Outcome Measures
------------------------------------------------------------------------
MORT-30-AMI..................  Hospital 30-Day, All-                0230
                                Cause, Risk-Standardized
                                Mortality Rate (RSMR)
                                Following Acute
                                Myocardial Infarction
                                (AMI) Hospitalization.
MORT-30-CABG.................  Hospital 30-Day, All-                2558
                                Cause, Risk-Standardized
                                Mortality Rate (RSMR)
                                Following Coronary
                                Artery Bypass Graft
                                (CABG) Surgery.
MORT-30-COPD.................  Hospital 30-Day, All-                1893
                                Cause, Risk-Standardized
                                Mortality Rate (RSMR)
                                Following Chronic
                                Obstructive Pulmonary
                                Disease (COPD)
                                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.
MORT-30-STK..................  Hospital 30-Day, All-                 N/A
                                Cause, Risk-Standardized
                                Mortality Rate Following
                                Acute Ischemic Stroke.
------------------------------------------------------------------------
               Claims-Based Coordination of Care Measures
------------------------------------------------------------------------
READM-30-AMI.................  Hospital 30-Day All-Cause            0505
                                Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Acute
                                Myocardial Infarction
                                (AMI) Hospitalization.
READM-30-CABG................  Hospital 30-Day, All-                2515
                                Cause, Unplanned, Risk-
                                Standardized Readmission
                                Rate (RSRR) Following
                                Coronary Artery Bypass
                                Graft (CABG) Surgery.

[[Page 20034]]

 
READM-30-COPD................  Hospital 30-Day, All-                1891
                                Cause, Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Chronic
                                Obstructive Pulmonary
                                Disease (COPD)
                                Hospitalization.
READM-30-HF..................  Hospital 30-Day, All-                0330
                                Cause, Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Heart Failure
                                (HF) Hospitalization.
READM-30-HWR.................  Hospital-Wide All-Cause              1789
                                Unplanned Readmission
                                Measure (HWR).
READM-30-PN..................  Hospital 30-Day, All-                0506
                                Cause, Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Pneumonia
                                Hospitalization.
READM-30-STK.................  30-Day Risk Standardized              N/A
                                Readmission Rate
                                Following Stroke
                                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).
AMI Excess Days..............  Excess Days in Acute Care            2881
                                after Hospitalization
                                for Acute Myocardial
                                Infarction.
HF Excess Days...............  Excess Days in Acute Care            2880
                                after Hospitalization
                                for Heart Failure.
PN Excess Days...............  Excess Days in Acute Care            2882
                                after Hospitalization
                                for Pneumonia.
------------------------------------------------------------------------
                      Claims-Based Payment Measures
------------------------------------------------------------------------
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.
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.
MSPB.........................  Payment-Standardized                 2158
                                Medicare Spending Per
                                Beneficiary (MSPB).
Cellulitis Payment...........  Cellulitis Clinical                   N/A
                                Episode-Based Payment
                                Measure.
GI Payment...................  Gastrointestinal                      N/A
                                Hemorrhage Clinical
                                Episode-Based Payment
                                Measure.
Kidney/UTI Payment...........  Kidney/Urinary Tract                  N/A
                                Infection Clinical
                                Episode-Based Payment
                                Measure.
AA Payment...................  Aortic Aneurysm Procedure             N/A
                                Clinical Episode-Based
                                Payment Measure.
Chole and CDE Payment........  Cholecystectomy and                   N/A
                                Common Duct Exploration
                                Clinical Episode-Based
                                Payment Measure.
SFusion Payment..............  Spinal Fusion Clinical                N/A
                                Episode-Based Payment
                                Measure.
------------------------------------------------------------------------
           Chart-Abstracted Clinical Process of Care Measures
------------------------------------------------------------------------
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
Sepsis.......................  Severe Sepsis and Septic             0500
                                Shock: Management Bundle
                                (Composite Measure).
VTE-6........................  Incidence of Potentially                +
                                Preventable Venous
                                Thromboembolism.
------------------------------------------------------------------------
    EHR-Based Clinical Process of Care Measures (that is, Electronic
                   Clinical Quality Measures (eCQMs))
------------------------------------------------------------------------
AMI-8a.......................  Primary PCI Received                    +
                                Within 90 Minutes of
                                Hospital Arrival.
CAC-3........................  Home Management Plan of                 +
                                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.
PC-01*.......................  Elective Delivery........            0469
PC-05........................  Exclusive Breast Milk                0480
                                Feeding.
STK-02.......................  Discharged on                        0435
                                Antithrombotic Therapy.
STK-03.......................  Anticoagulation Therapy              0436
                                for Atrial Fibrillation/
                                Flutter.
STK-05.......................  Antithrombotic Therapy by            0438
                                the End of Hospital Day
                                Two.
STK-06.......................  Discharged on Statin                 0439
                                Medication.
STK-08.......................  Stroke Education.........               +
STK-10.......................  Assessed for                         0441
                                Rehabilitation.
VTE-1........................  Venous Thromboembolism               0371
                                Prophylaxis.
VTE-2........................  Intensive Care Unit                  0372
                                Venous Thromboembolism
                                Prophylaxis.
------------------------------------------------------------------------
               Patient Experience of Care Survey Measures
------------------------------------------------------------------------
HCAHPS.......................  Hospital Consumer                    0166
                                Assessment of Healthcare
                                Providers and Systems.
                               (including Care                    (0228)
                                Transition Measure
                                (CTM[dash]3)).
------------------------------------------------------------------------
                   Structural Patient Safety Measures
------------------------------------------------------------------------
Patient Safety Culture.......  Hospital Survey on                    N/A
                                Patient Safety Culture.
Safe Surgery Checklist.......  Safe Surgery Checklist                N/A
                                Use.
------------------------------------------------------------------------
* Measure listed twice, as both chart-abstracted and electronic clinical
  quality measure.
+ NQF endorsement has been removed.


[[Page 20035]]

5. Considerations in Expanding and Updating Quality Measures
    We 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 measures under the Hospital IQR Program. In 
this proposed rule, we are not proposing any changes to these policies.
6. Refinements to Existing Measures in the Hospital IQR Program for the 
FY 2020 Payment Determination and Subsequent Years
    In this proposed rule, we are proposing refinements to two 
measures. First, we are proposing refinements to the Hospital Consumer 
Assessment of Healthcare Providers and Systems (HCAHPS) Survey (NQF 
#0166) measure for the FY 2020 payment determination and subsequent 
years. Second, we are proposing refinements to the Stroke 30-Day 
Mortality Rate (MORT-30-STK) measure for the FY 2023 payment 
determination and subsequent years. We discuss these refinements in 
more detail below.
a. Refining the Hospital Consumer Assessment of Healthcare Providers 
and Systems (HCAHPS) Survey (NQF #0166) Measure for the FY 2020 Payment 
Determination and Subsequent Years
    For the FY 2020 payment determination and subsequent years, we are 
proposing to refine the existing Hospital Consumer Assessment of 
Healthcare Providers and Systems (HCAHPS) Survey by refining the 
current Pain Management questions (HCAHPS Q12, Q13, and Q14) to focus 
on the hospital's communications with patients about the patients' pain 
during the hospital stay. In accord with this new focus, we are 
proposing to update the name of the composite measure from ``Pain 
Management'' to ``Communication About Pain.''
(1) Background
    The HCAHPS Survey (NQF #0166) was adopted in the Reporting Hospital 
Quality Data Annual Payment Update Program in the CY 2007 OPPS/ASC 
final rule (71 FR 68201), beginning with the FY 2008 payment 
determination and for subsequent years. This Survey includes three Pain 
Management questions, Q12, Q13 and Q14. In the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53513 through 53516), we added the Care Transition 
Measure (CTM-3) (NQF #0228) to the existing HCAHPS Survey, NQF #0166. 
The HCAHPS Survey, combining both NQF #0166 for the original survey and 
NQF #0228 for the Care Transition Measure adopted into The HCAHPS 
Survey in 2013, is the first national, standardized, publicly reported 
survey of patients' experience of hospital care. The HCAHPS Survey asks 
discharged patients 32 questions about their recent hospital stay. 
Survey results have been publicly reported on the Hospital Compare Web 
site since 2008. 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 previously-adopted HCAHPS requirements. 
We also refer hospitals and HCAHPS Survey vendors to 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.
    The HCAHPS Survey (OMB control number 0938-0981) is administered to 
a random sample of adult patients who receive medical, surgical, or 
maternity care between 48 hours and 6 weeks (42 calendar days) after 
discharge and is not restricted to Medicare beneficiaries. Hospitals 
must survey patients throughout each month of the year. The HCAHPS 
Survey is available in official English, Spanish, Chinese, Russian, 
Vietnamese, and Portuguese versions. The HCAHPS Survey and its 
protocols for sampling, data collection and coding, and file submission 
can be found in the current HCAHPS Quality Assurance Guidelines, which 
is available on the official HCAHPS Web site at: http://www.hcahpsonline.org/qaguidelines.aspx. AHRQ carried out a rigorous, 
scientific process to develop and test the HCAHPS instrument. This 
process entailed multiple steps, including: a public call for measures; 
literature reviews; cognitive interviews, consumer focus groups; 
multiple opportunities for additional stakeholder input; a 3-State 
pilot test; small-scale field tests; and notice and comment 
rulemaking.\101\ We refer readers to the CY 2007 OPPS final rule (71 FR 
68201) for a more in-depth discussion about this process. The HCAHPS 
Survey was endorsed by the NQF on August 5, 2005 (#0166).
---------------------------------------------------------------------------

    \101\ ``Development, Implementation, and Public Reporting of the 
HCAHPS Survey.'' L.A. Giordano, M.N. Elliott, E. Goldstein, W.G. 
Lehrman and P.A. Spencer. Medical Care Research and Review, 67 (1): 
27-37. 2010.
---------------------------------------------------------------------------

    The Pain Management questions currently included in the HCAHPS 
Survey are as follows:

[[Page 20036]]

[GRAPHIC] [TIFF OMITTED] TP28AP17.005

    In the CY 2017 OPPS/ASC final rule with comment period in the 
context of the Hospital VBP Program (81 FR 79856), we stated that we 
received feedback that some stakeholders are concerned about the Pain 
Management dimension questions being used in a program where there is 
any link between scoring well on the questions and higher hospital 
payments (81 FR 79856). The Pain Management dimension used in the 
Hospital VBP Program is identical in composition to the Pain Management 
measure used in the Hospital IQR Program, questions Q12, Q13 and Q14 
with one difference: The HCAHPS dimension score in the Hospital VBP 
program is based on the percentage of patients who chose the most 
positive response option (``top-box'' response). For more information 
about the Hospital VBP Program scoring methodology, we refer readers to 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 57006).
    Some stakeholders believed that the linkage of the Pain Management 
dimension questions to the Hospital VBP Program payment incentives 
created pressure on hospital staff to prescribe more opioids in order 
to achieve higher scores on this dimension (81 FR 79856). We stated 
that we continue to believe that pain control is an appropriate part of 
routine patient care that hospitals should manage and is an important 
concern for patients, their families, and their caregivers (81 FR 
79856). Further, we stated that it is important to note that the HCAHPS 
Survey does not specify any particular type of pain control method (81 
FR 79856). We added that appropriate pain management includes 
communication with patients about pain-related issues, setting 
expectations about pain, shared decision-making, and proper 
prescription practices (81 FR 79856). Furthermore, we stated that 
although we were not aware of any scientific studies that support an 
association between scores on the Pain Management dimension questions 
and opioid prescribing practices, we were developing alternative 
questions for the Pain Management dimension in order to remove any 
potential ambiguity in the HCAHPS Survey. We noted that we believe that 
removing the Pain Management dimension from the Hospital VBP Program 
scoring calculations would address potential confusion about the 
appropriate use of the Pain Management dimension, and provide us with 
an opportunity to further refine the pain management questions used in 
the HCAHPS Survey (81 FR 79859).
    In the same final rule, we stated we would follow our standard 
survey development processes, which included drafting alternative 
questions, cognitive interviews and focus group evaluation, field 
testing, statistical analysis, stakeholder input, the Paperwork 
Reduction Act, and NQF endorsement (81 FR 79856).
    In that final rule, numerous commenters supported the development 
of modified questions regarding pain management for the HCAHPS Survey 
and some commenters expressed particular support for modified pain 
management questions that focused on effective communication with 
patients about pain management-related issues (81 FR 79859 through 
79860).

[[Page 20037]]

Specifically, a number of commenters recommended modified pain 
management questions focused on shared decision-making, discussion of 
treatment options, including non-opioid pain management therapies, 
patient understanding of pain management options, and patient 
engagement in their care (81 FR 79860).
    Therefore, for the FY 2020 payment determination and subsequent 
years, we are proposing to update and refine the existing HCAHPS Survey 
questions (HCAHPS Q12, Q13, and Q14) to focus more directly on 
communication with patients about their pain during the hospital stay. 
These proposed revised questions will be used to form the composite 
measure ``Communication about Pain.'' The ``Communication about Pain'' 
composite measure would be a part of the HCAHPS Survey and would be 
publicly reported in the Hospital IQR Program. More information about 
the revised questions/composite measure is included below.
    In compliance with section 1890A(a)(2) of the Act, measures 
proposed for the Hospital IQR Program were included in a publicly 
available document: ``List of Measures under Consideration for December 
1, 2016'' available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityMeasures/Downloads/Measures-under-Consideration-List-for-2016.pdf.
    The Measure Applications Partnership (MAP), a multi-stakeholder 
group convened by the NQF, reviews the measures under consideration for 
the Hospital IQR Program, among other Federal programs, and provides 
input on those measures to the Secretary. The MAP's 2017 
recommendations for quality measures under consideration are captured 
in the following documents: ``2016-2017 Process and Approach for MAP 
Pre Rulemaking Deliberations'' available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=84455 and ``2016-2017 Spreadsheet 
of Final Recommendations to HHS and CMS'' available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=84452. We considered the input and 
recommendations provided by the MAP.
    The Communication About Pain (MUC16-263) composite measure was 
reviewed by the MAP in December 2016. The MAP recommended that this 
composite measure be refined and resubmitted prior to rulemaking. The 
MAP emphasized the need to include non-pharmacological options used to 
treat pain. The MAP recommended that the testing results demonstrate 
reliability and validity for the Hospital IQR Program. The MAP also 
recommended that the measure be submitted to NQF for review and 
endorsement.\102\
---------------------------------------------------------------------------

    \102\ ``2016-2017 Spreadsheet of Final Recommendations to HHS 
and CMS'' available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=84452.
---------------------------------------------------------------------------

    We plan to resubmit the ``Communication About Pain'' composite 
measure to the MAP at the next opportunity. As we discuss in more 
detail below, the Communication About Pain composite measure underwent 
field testing in 2016. Results were not yet available for the MAP's 
review in December 2016, but are now complete and will be posted on the 
official HCAHPS On-Line Web site, www.HCAHPSonline.org. We believe the 
measure is now fully developed and tested and we intend to provide 
feedback to the MAP Hospital Workgroup for review of testing results.
    In early 2016, we empirically tested as part of the field test the 
reliability and validity of the Communication About Pain questions in a 
large-scale experiment that involved patients from 50 hospitals across 
the nation. Our analyses suggest the Communication About Pain composite 
measure, which includes two substantive items regarding how often staff 
talked about pain and how often staff discussed how to treat pain while 
in the hospital (Q13 and Q14), as well as a screener item (Q12), have 
strong reliability (evidence that scores for hospitals are precisely 
measured) and validity (evidence that the measure does measure the 
intended construct of patient experience).\103\ These properties of the 
individual questions used in the proposed Communication About Pain 
composite measure are as good as or better than the current Pain 
Management questions. The new questions are not subject to floor or 
ceiling effects (which would occur if almost all responses were in the 
lowest or highest response category), have excellent hospital-level 
reliability (here 0.88 or higher, where 0.70 or higher is the 
conventional standard) at recommended sample sizes, are not redundant 
with other current questions, are related in a predictable manner with 
the standard patient-mix characteristics, positively correlate with the 
two HCAHPS questions that assess overall patient experience (rating and 
recommendation) with the hospital, providing evidence of validity and 
do not vary systematically by survey mode, patient race/ethnicity, or 
hospital characteristics after adjusting for patient mix. They also 
have higher internal consistency as a composite measure (Cronbach's 
alpha = 0.81), with 0.70 or higher being the conventional standard, 
providing further evidence of reliability.\104\
---------------------------------------------------------------------------

    \103\ Judd, C. M., & McClelland, G.H. (1998). Measurement. In D. 
T. Gilbert, S. T. Fiske, & G. Lindzey (Eds.), The handbook of social 
psychology (4th ed., Vol. 1, pp. 180-232). New York: McGraw-Hill.
    \104\ Cronbach, L.J. (1984). Essentials of psychological testing 
(4th ed.). New York: Harper.
---------------------------------------------------------------------------

    As stated above, the MAP recommended the proposed Communication 
About Pain composite measure be submitted to the NQF for review and 
endorsement once testing has been completed.\105\ The proposed 
Communication About Pain composite measure is not yet NQF endorsed; 
however, we intend to submit the measure to the NQF for endorsement 
when the Person and Family Centered Care Project has a call for 
measures.
---------------------------------------------------------------------------

    \105\ ``2017 Considerations for Implementing Measures 
Hospitals--Final Report,'' available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    Whenever feasible, we adopt measures that are NQF-endorsed, but 
note sometimes there are important areas of clinical concern for which 
NQF endorsed measures do not exist. Section 1886(b)(3)(B)(IX)(bb) of 
the Act provides that in the case of a specified area or medical topic 
determined appropriate by the Secretary for which a feasible and 
practical measure has not been endorsed by the entity with a contract 
under section 1890(a) of the Act, the Secretary may specify a measure 
that is not so endorsed as long as due consideration is given to 
measures that have been endorsed or adopted by a consensus organization 
identified by the Secretary. (The NQF currently holds this contract.) 
We considered other existing measures which have been endorsed by the 
NQF and other consensus organizations, but we were unable to identify 
any NQF-endorsed (or other consensus organization endorsed) measures 
that were feasible and practical.
    While we consider MAP recommendations and NQF endorsement status as 
part of our decision-making process for which measures to include in 
the Hospital IQR Program, we believe it is important to adopt this 
proposed Communication About Pain composite measure because 
communicating with patients about their pain is an integral part of 
delivering high quality, person-centered care.\106\ In developing the 
proposed

[[Page 20038]]

Communication About Pain composite measure, we followed our standard 
survey development processes,\107\ which included drafting alternative 
questions, cognitive interviews, focus group evaluation, field testing, 
statistical analysis, and stakeholder input. We believe the 
Communication About Pain composite measure has been sufficiently 
tested, demonstrating high levels of reliability and validity, as noted 
above.
---------------------------------------------------------------------------

    \106\ ``A Special Contribution from the Centers for Medicare and 
Medicaid Services: Valuing Patient Experience While Addressing the 
Prescription Opioid Epidemic.'' L. Tefera, W.G. Lehrman, E.G. 
Goldstein and S. Agrawal. Annals of Emergency Medicine. 2016. 
Published online, 7-19-16. http://www.annemergmed.com/article/S0196-0644(16)30367-5/fulltext.
    \107\ ``Development, Implementation, and Public Reporting of the 
HCAHPS Survey.'' L.A. Giordano, M.N. Elliott, E. Goldstein, W.G. 
Lehrman and P.A. Spencer. Medical Care Research and Review, 67 (1): 
27-37. 2010.
---------------------------------------------------------------------------

    Further, we have consistently received feedback from some 
stakeholders expressing concern that the current Pain Management 
questions encourage overprescribing of opioids as discussed in the CY 
2017 OPPS/ASC final rule with comment period (81 FR 79856). As a 
result, we believe it is important to refine the existing Pain 
Management measure. We note that if our proposal to revise the current 
Pain Management measure questions with those in the proposed 
Communication About Pain composite measure is not finalized, we would 
continue to use the Pain Management questions as previously finalized.
    The Communication About Pain composite measure is discussed below. 
We are proposing to revise the current Pain Management questions (Q12, 
Q13, and Q14) in the HCAHPS Survey for the FY 2020 payment 
determination and subsequent years by adopting the Communication About 
Pain composite measure in the HCAHPS Survey beginning with the FY 2020 
payment determination, which would be applicable to surveys 
administered to patients beginning with January 1, 2018 discharges and 
for subsequent years.
    In compliance with section 1886(b)(3)(B)(viii)(VII) of the Act, we 
calculate and publicly report HCAHPS measures from four consecutive 
quarters of data. From that point and forward, the oldest quarter of 
data is rolled off, the newest quarter is rolled on, and the measure 
scores are calculated for this unique set of four quarters and are 
publicly reported on Hospital Compare and available for payment 
determination. Data submitted for the current Pain Management measure 
in CY 2017 for the FY 2019 payment determination will be publicly 
reported on Hospital Compare in October 2018. If our proposal to revise 
the HCAHPS Pain Management measure with the HCAHPS Communication About 
Pain composite measure is finalized, we would begin to use the new Pain 
Management items on the HCAHPS Survey in January of 2018. Once we have 
collected four consecutive quarters of the HCAHPS Communication About 
Pain composite measure questions, we will create scores for the 
Communication About Pain composite measure.
    We will be unable to report or use for payment determination either 
the original or new Pain Management measure unless and until we have 
collected 4 quarters of data for the measure. The CY 2017 reporting 
period/2019 payment determination will be the last period for which we 
have four quarters of the original Pain Management measure data which, 
as stated above, will be publicly reported on Hospital Compare in 
October 2018. We will be unable to publicly report either the original 
or new Communication About Pain composite measure on Hospital Compare 
in December 2018, April 2019, or July 2019 because there will be fewer 
than 4 quarters of data for both the original and the new measure. The 
CY 2018 reporting period/FY 2020 payment determination will be the 
first period for which we have four quarters of the new Communication 
About Pain composite measure. Therefore, the Communication About Pain 
composite measure would be publicly reported for the first time on 
Hospital Compare in October 2019. From this point forward, the new 
Communication About Pain composite measure could be used for payment 
determinations.
(2) Overview of Measure
    The refined questions that comprise the proposed Communication 
About Pain composite measure closely mirror the structure and style of 
the existing Pain Management questions; however, the new questions 
address how providers communicate with patients about pain while 
removing any ambiguities in the wording or intent of the questions. 
This refinement is consistent with the HCAHPS Survey's original design, 
development, and NQF endorsement (NQF #0166). Further, we designed the 
Communication About Pain composite measure to be consistent and 
compatible with existing HCAHPS questions and HCAHPS sampling and 
survey administration protocols. The three Communication About Pain 
composite measure questions are as follows:

[[Page 20039]]

[GRAPHIC] [TIFF OMITTED] TP28AP17.006

    As stated above, in light of the ongoing opioid epidemic, we 
believe it is important the Communication About Pain composite measure 
is abundantly clear in its focus on communication about pain between 
providers and their patients and be applicable to all patients who 
experienced pain during their hospital stay.
(3) Data Collection
    The revised Communication About Pain composite measure questions 
would be administered and data collected in exactly the same manner as 
the current Pain Management measure questions; there would be no 
changes to HCAHPS patient eligibility or exclusion criteria. Detailed 
information on HCAHPS data collection protocols can be found in the 
current HCAHPS Quality Assurance Guidelines, located at: http://www.hcahpsonline.org/qaguidelines.aspx. We reiterate that other than 
the revision of the HCAHPS Pain Management questions, the HCAHPS Survey 
and its administration and data collection protocols would be 
unchanged. The survey adjustment and patient-mix adjustment for the new 
Communication About Pain composite measure would be made available on 
the official HCAHPS On-Line Web site at: http://www.hcahpsonline.org/modeadjustment.aspx.
(4) Public Reporting
    The scoring of the new Communication About Pain composite measure 
would be the same as the current Pain Management measure. Detailed 
information on how the measure would be scored for purposes of public 
reporting can be found on the HCAHPS Web site at: http://www.hcahpsonline.org/Files/Calculation%20of%20HCAHPS%20Scores.pdf.
    We are inviting public comment on our proposal to revise the 
current Pain Management questions (Q12, Q13, and Q14) in the HCAHPS 
Survey for the FY 2020 payment determination and subsequent years by 
adopting the proposed Communication About Pain composite measure in the 
HCAHPS Survey beginning with the FY 2020 payment determination and 
subsequent years, which would be applicable to surveys administered to 
patients beginning with January 1, 2018 discharges and for subsequent 
years as discussed above.
b. Refinement of the Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate (RSMR) Following Acute Ischemic Stroke Hospitalization 
Measure for the FY 2023 Payment Determination and Subsequent Years
(1) Background
    For the FY 2023 payment determination and subsequent years, we are 
proposing a refinement of the CMS Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Acute Ischemic Stroke 
Hospitalization Measure (hereafter referred to as the Stroke 30-Day

[[Page 20040]]

Mortality Rate measure) by changing the measure's risk adjustment to 
include stroke severity (Stroke 30-Day Mortality Rate with the refined 
risk adjustment) obtained from International Classification of Disease, 
Tenth Edition Clinical Modifier (ICD-10-CM) codes in the administrative 
claims. The current Stroke 30-Day Mortality Rate measure was finalized 
in the Hospital IQR Program in the FY 2014 IPPS/LTCH PPS final rule (78 
FR 50798). The previously adopted measure includes 42 risk variables, 
but does not include an assessment of stroke severity because, 
previously, it has not been available in claims data and was not 
routinely performed by all providers. For more details on the measure 
as currently adopted and implemented, we refer readers to its 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.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57161), we 
considered potential inclusion of the National Institutes of Health 
(NIH) Stroke Scale for the Hospital 30-Day Mortality Following Acute 
Ischemic Stroke Hospitalization measure beginning as early as the FY 
2022 payment determination. Commenters generally supported the 
inclusion of the NIH Stroke Scale score in the Stroke 30-Day Mortality 
Rate measure for future inclusion in the Hospital IQR Program. We refer 
readers to FY 2017 IPPS/LTCH PPS final rule (81 FR 57161 through 57163) 
for a complete discussion of the considered potential measure, public 
comments, and our responses.
    Initial assessment of stroke severity, such as the NIH Stroke Scale 
score, is one of the strongest predictors of mortality in ischemic 
stroke patients,108 109 110 and is part of the national 
guidelines on stroke care.\111\
---------------------------------------------------------------------------

    \108\ Fonarow GC, Saver JL, Smith EE, et al. Relationship of 
national institutes of health stroke scale to 30-day mortality in 
medicare beneficiaries with acute ischemic stroke. J Am Heart Assoc. 
Feb 2012;1(1):42-50.
    \109\ Nedeltchev K, Renz N, Karameshev A, et al. Predictors of 
early mortality after acute ischemic stroke. Swiss Medical Weekly. 
2010;140(17-18):254-259.
    \110\ Smith EE, Shobha N, Dai D, et al. Risk score for in-
hospital ischemic stroke mortality derived and validated within the 
Get With the Guidelines-Stroke Program. Circulation. Oct 12 
2010;122(15):149615041496-1504.
    \111\ Jauch EC, Saver JL, Adams HP, Jr., et al. Guidelines for 
the early management of patients with acute ischemic stroke: a 
guideline for healthcare professionals from the American Heart 
Association/American Stroke Association. Stroke. Mar 2013;44(3):870-
947.
---------------------------------------------------------------------------

    This measure refinement was developed in collaboration with the 
American Heart Association (AHA) and American Stroke Association (ASA). 
We are seeking to update the current measure to include an assessment 
of stroke severity, because it has become feasible to do so due to both 
the increased use of the NIH Stroke Scale related to the AHA/ASA 
guidelines that recommend administering the NIH Stroke Scale on all 
stroke patients, as well as due to the recent ability to obtain the 
scores through claims data by incorporation into ICD-10. The proposed 
refinement would create a more parsimonious risk model by reducing the 
total number of risk adjustment variables from 42 to 20 and includes 
the NIH Stroke Scale \112\ in the risk-adjustment model as a measure of 
stroke severity. These refinements result in a modestly higher c-
statistic compared with the risk-adjustment model in the current Stroke 
30-Day Mortality Rate, which means that the updated measure model 
better differentiates the risk of mortality among patients.
---------------------------------------------------------------------------

    \112\ NIH Stroke Scale. Available at: http://www.nihstrokescale.org/.
---------------------------------------------------------------------------

    Mortality following stroke is an important adverse outcome which 
can be measured reliably and objectively and is influenced by both the 
severity of the stroke as well as the quality of care provided to 
patients during their initial hospitalization; therefore, mortality is 
an appropriate measure of quality of care following stroke 
hospitalization.113 114 Specifically, post-stroke mortality 
rates have been shown to be influenced by critical aspects of care such 
as response to complications, speediness of delivery of care, 
organization of care, and appropriate 
imaging.115 116 117 118
---------------------------------------------------------------------------

    \113\ Weir NU, Sandercock PA, Lewis SC, Signorini DF, Warlow CP. 
Variations between countries in outcome after stroke in the 
International Stroke Trial (IST). Stroke. Jun 2001;32(6):1370-1377.
    \114\ DesHarnais SI, Chesney JD, Wroblewski RT, Fleming ST, 
McMahon LF, Jr. The Risk-Adjusted Mortality Index. A new measure of 
hospital performance. Med Care. Dec 1988;26(12):1129-1148.
    \115\ Hong KS, Kang DW, Koo JS, et al. Impact of neurological 
and medical complications on 3-month outcomes in acute ischaemic 
stroke. European journal of neurology: the official journal of the 
European Federation of Neurological Societies. Dec 2008;15(12):1324-
1331.
    \116\ Lingsma HF, Dippel DW, Hoeks SE., et al. Variation between 
hospitals in patient outcome after stroke is only partly explained 
by differences in quality of care: results from the Netherlands 
Stroke Survey. [Reprint in Ned Tijdschr Geneeskd. 2008 Sep 
27;152(39):2126-32; PMID: 18856030]. Journal of Neurology, 
Neurosurgery & Psychiatry. 2008;79(8):888-894.
    \117\ Reeves MJ, Smith E, Fonarow G, Hernandez A, Pan W, Schwamm 
LH. Off-hour admission and in- hospital stroke case fatality in the 
get with the guidelines-stroke program. Stroke. Feb 2009;40(2):569-
576.
    \118\ Smith MA, Liou JI, Frytak JR, Finch MD. 30-day survival 
and rehospitalization for stroke patients according to physician 
specialty. Cerebrovascular diseases (Basel, Switzerland). 
2006;22(1):21-26.
---------------------------------------------------------------------------

    We are proposing a refinement to the Stroke 30-Day Mortality Rate 
for several reasons. First, the proposed, refined measure would allow 
for more rigorous risk adjustment by incorporating the NIH Stroke 
Scale, discussed in more detail below, as an assessment of stroke 
severity.\119\ Second, the inclusion of the NIH Stroke Scale is aligned 
with and supportive of clinical guidelines, as use of the NIH Stroke 
Scale to assess stroke severity when patients first present with acute 
ischemic stroke is Class I recommended in the AHA and ASA 
guidelines.\120\
---------------------------------------------------------------------------

    \119\ NIH Stroke Scale. Available at: http://www.nihstrokescale.org/.
    \120\ Jauch EC, Saver JL, Adams HP, Jr., et al. Guidelines for 
the early management of patients with acute ischemic stroke: a 
guideline for healthcare professionals from the American Heart 
Association/American Stroke Association. Stroke. Mar 2013;44(3):870-
947.
---------------------------------------------------------------------------

    Third, in October 2016, the ICD-10-CM codes for the NIH Stroke 
Scale were implemented. As of that date, hospitals can record the NIH 
Stroke Scale as a representation of stroke severity in Medicare claims 
by using ICD-10-CM codes, and we can use this information as a variable 
in the risk-adjustment model for the refined Stroke 30-Day Mortality 
Rate measure and other claims-based measures with minimal data 
collection burden for hospitals.\121\
---------------------------------------------------------------------------

    \121\ ICD-10-CM Official Guidelines for Coding and Reporting. 
Available at: https://www.cdc.gov/nchs/data/icd/10cmguidelines_2017_final.pdf.
---------------------------------------------------------------------------

    Fourth, clinicians and stakeholders, including AHA, ASA, and other 
professional organizations, highlight the importance of including an 
assessment of stroke severity in risk-adjustment models of stroke 
mortality.\122\ In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50798 
through 50802), commenters emphasized that the medical literature and 
their own experience suggest that stroke severity is the dominant 
predictor of mortality in stroke patients; individuals and 
organizations expressed concern that the measure might be misleading, 
limited, or inaccurate without adjustment for stroke severity, and four 
comments suggested risk

[[Page 20041]]

adjusting using the NIH Stroke Scale or a similar index (78 FR 50800).
---------------------------------------------------------------------------

    \122\ Jauch EC, Saver JL, Adams HP, Jr., et al. Guidelines for 
the early management of patients with acute ischemic stroke: a 
guideline for healthcare professionals from the American Heart 
Association/American Stroke Association. Stroke. Mar 2013;44(3):870-
947.
---------------------------------------------------------------------------

    Members of the Technical Expert Panel convened by the measure 
developer also suggested risk-adjusting for stroke severity. In 
addition, during the 2012 Neurology Endorsement Maintenance Consensus 
Development Project, the NQF Neurology Steering Committee specifically 
identified the lack of the NIH Stroke Scale score in the risk-
adjustment model as a concern (78 FR 50800). Therefore, the refined 
Stroke 30-Day Mortality Rate is responsive to public comments from a 
broad array of stakeholder groups, including clinical societies and 
clinical experts, and to feedback received from the Technical Expert 
Panel convened by the measure developer (81 FR 57162).
    Fifth, in addition to a modestly higher c-statistic, which 
evaluates the measure's ability to differentiate between patients at 
different risk of mortality following an acute ischemic stroke, the 
refined Stroke 30-Day Mortality Rate includes a more parsimonious risk 
model than the stroke mortality measure as previously adopted and 
specified, with a total of 20 risk adjustment variables including the 
NIH Stroke Scale, compared to the current use of 42 risk adjustment 
variables.
    In compliance with section 1890A(a)(2) of the Act, the Stroke 30-
Day Mortality Rate (MUC15-294) with the refined risk adjustment (using 
the NIH Stroke Scale) was included on a publicly available document 
entitled ``List of Measures under Consideration for December 1, 2015'' 
(available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367. Select ``2015 Measures Under 
Consideration List.''). The MAP reviewed and conditionally supported 
the Stroke 30-Day Mortality Rate (MUC15-294) with the refined risk 
adjustment pending NQF review and endorsement, and asked that we 
consider a phased approach in regards to implementation, to avoid 
multiple versions of the same measure.\123\ The MAP also noted that 
outcomes other than mortality may be more meaningful for stroke 
patients and to consider cognitive or functional outcomes such as 
impaired capacity. We considered the input and recommendations provided 
by the MAP and note that the NIH Stroke Scale incorporates cognitive 
functions in assessing severity.
---------------------------------------------------------------------------

    \123\ 2016 Spreadsheet of Final Recommendations to HHS & CMS 
Available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367.
---------------------------------------------------------------------------

    To avoid implementing multiple versions of the same measure, we 
intend for the Hospital IQR Program FY 2023 payment determination 
measure set either to include the 30-day stroke mortality measure as 
currently implemented or this modified version that includes the NIH 
stroke severity scale in the measures risk-adjustment model.
    The Stroke 30-Day Mortality Rate with the refined risk adjustment 
was submitted to NQF for endorsement in the neurology project on 
January 15, 2016, and did not obtain endorsement. NQF endorsement was 
not granted primarily due to the inability to test the validity of NIH 
Stroke Scale data elements derived from Medicare claims prior to 
implementation of the new ICD-10-CM codes in October 2016.\124\ The NQF 
Consensus Standards Advisory Committee (CSAC) supported the concern of 
the NQF committee regarding our inability to test the measure using 
ICD-10-CM codes since the codes were not implemented until October 
2016. While we provided risk-standardized mortality rates using data 
from Medicare administrative claims and data from the Get with the 
Guidelines-Stroke Registry, the Committee noted that we could not 
validate the National Institutes of Health Stroke Scale (NIH Stroke 
Scale) against ICD-10-CM codes at the time the measure was considered 
for endorsement. The CSAC also acknowledged that the primary reason for 
upholding the Committee's decision was based on the lack of testing 
using ICD-10-CM codes. This measure went through the same rigorous 
development process as the other publicly reported outcomes measures 
and involved extensive input by stakeholders and clinical experts. It 
follows the same scientific approach to evaluate hospital performance 
as other Hospital IQR Program outcome measures.
---------------------------------------------------------------------------

    \124\ The memo regarding the CSAC's decision is available at: 
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=83217.
---------------------------------------------------------------------------

    When the NQF committee considered the scientific acceptability of 
the Stroke 30-Day Mortality Rate measure, 19 of 22 members voted that 
the measure met the NQF's evidence criterion, 19 members voted that the 
measure met the high or moderate standard for the Performance Gap, 18 
members voted that the measure met high or moderate standard for 
reliability, 19 members voted that the measure met the high or moderate 
standard for feasibility, and 18 members voted that the measure met the 
moderate standard for Use and Usability.\125\ We tested and validated 
the measure using NIH Stroke Scale data derived from medical record 
review done by the Get With The Guidelines (GWTG)-Stroke registry data 
supplied by AHA/ASA. The NQF committee ultimately determined that the 
validity testing was not sufficient for endorsement.\126\
---------------------------------------------------------------------------

    \125\ The memo regarding the CSAC's decision is available at: 
http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=83217.
    \126\ Schwartz J, Wang Y, et al. Hospital 30-Day, All-Cause, 
Risk-Standardized Mortality Rate (RSMR) Following Acute Ischemic 
Stroke Hospitalization with Claims-Based Risk Adjustment for Stroke 
Severity Technical Report. 2016.
---------------------------------------------------------------------------

    However, we believe that the inclusion of the NIH Stroke Scale 
score in the measure's risk-adjustment model improves upon the Stroke 
30-Day Mortality Rate measure which is currently publicly reported on 
Hospital Compare and has been implemented in the Hospital IQR Program 
since FY 2016 (78 FR 50802). This is supported by the improved risk-
adjustment model performance. For example, the c-statistic, which is a 
measure of the ability to discriminate between patients at low and high 
risk of mortality following ischemic stroke, associated with the new, 
modified risk-adjustment model was 0.81 in the measure development 
sample,\127\ compared with a c-statistic of 0.75 in the most recent 
measurement period for the Stroke 30-Day Mortality Rate measure that is 
currently implemented in the Hospital IQR Program.\128\
---------------------------------------------------------------------------

    \127\ Schwartz J, Wang Y, et al. Hospital 30-Day, All-Cause, 
Risk-Standardized Mortality Rate (RSMR) Following Acute Ischemic 
Stroke Hospitalization with Claims-Based Risk Adjustment for Stroke 
Severity Technical Report. 2016.
    \128\ 2017 Condition-Specific Mortality Measures Updates and 
Specifications Report. Available at: www.qualitynet.org  
Hospitals-Inpatient  Claims-Based Measures  
Mortality Measures  Measure Methodology.
---------------------------------------------------------------------------

    The new refined Stroke 30-Day Mortality Rate measure also has 
increased face validity which is supported by the comments received 
from stakeholders. For example, we received comments that the more 
rigorous risk adjustment facilitated by the NIH Stroke Scale would help 
ensure that the measure accurately risk adjusts for different hospital 
populations without unfairly penalizing high-performance providers, and 
that the NIH Stroke Scale is well validated, highly reliable, widely 
used, and a strong predictor of mortality and short- and long-term 
functional outcomes. However, we were not able to test the ICD-10 CM 
codes for NIH Stroke Scale score in claims during measure development 
because those codes were

[[Page 20042]]

not available for hospitals to use in their claims until October 2016. 
Therefore, we are proposing this measure now to inform hospitals that 
they should begin to include the NIH stroke severity scale codes in the 
claims they submit for patients with a discharge diagnosis of ischemic 
stroke. Once hospitals have submitted these data, it will be possible 
for us to examine the completeness of these data in reevaluation of the 
new refined Stroke 30-Day Mortality Rate measure before the proposed 
measure dry run and before the proposed implementation in the Hospital 
IQR Program. Once that testing is complete we will submit the retested 
measure to the NQF for endorsement prior to implementation.
    Section 1886(b)(3)(B)(IX)(bb) of the Act provides that in the case 
of a specified area or medical topic determined appropriate by the 
Secretary for which a feasible and practical measure has not been 
endorsed by the entity with a contract under section 1890(a) of the 
Act, the Secretary may specify a measure that is not so endorsed as 
long as due consideration is given to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary. 
Although the proposed measure and the existing Stroke 30-Day mortality 
measure are not currently NQF-endorsed, we considered other available 
measures which have been endorsed or adopted by the NQF, and were 
unable to identify any other NQF-endorsed measures that assess stroke 
mortality with a standard period of follow-up. We also are not aware of 
any other 30-day stroke mortality measures that have been endorsed or 
adopted by a consensus organization.
    However, we are proposing this measure now because we believe that 
the modifications to the measure's risk-adjustment model represent a 
substantial improvement over the Stroke 30-Day Mortality Rate measure 
that is currently publicly reported and implemented in the Hospital IQR 
Program and which does not include an assessment of stroke severity in 
the risk-adjustment model. In addition, by announcing our intention to 
include the Refined 30-Day Stroke Mortality Rate measure in the 
Hospital IQR Program in advance of implementation for FY 2023 payment 
determination and subsequent years, and by describing the proposed 
additional testing, dry run, and our intent to re-submit the measure to 
NQF once the NIH Stroke Scale data become available in claims, we are 
providing information that hospitals require to plan and begin to alter 
clinical workflows and billing processes in order to capture the NIH 
Stroke Scale score and include it in Medicare claims. Further, this 
notice will allow hospitals to complete collecting NIH Stroke Scale 
data over the three-year time period needed for measure calculation and 
implementation prior to any payment adjustment. The measure, as 
refined, is described in more detail below.
(2) Overview of Refined Measure
    The measure cohort is aligned with the currently adopted Stroke 30-
Day Mortality Rate measure. In addition, the data sources (Medicare 
Fee-For-Service (FFS) claims), three-year reporting period, inclusion 
and exclusion criteria, as well as the assessment of the outcome of 
mortality (assessed using Medicare enrollment data) would all align 
with the currently adopted measure (78 FR 50798). Only the measures' 
risk-adjustment models differ, as described in detail below. For the 
new refined Stroke 30-Day Mortality Rate measure, we are proposing that 
the first measurement period would include discharges between July 1, 
2018 and June 30, 2021 for public reporting in FY 2022 and for the FY 
2023 payment determination.
(3) Risk Adjustment
    The Stroke 30-Day Mortality Rate measure that is currently adopted 
in the Hospital IQR Program adjusts for differences in patients' level 
of risk for death in one hospital relative to patients receiving care 
in another hospital but not for stroke severity. For details about the 
risk-adjustment model for the currently adopted measure, we refer 
readers to the Technical Report (78 FR 50798).\129\
---------------------------------------------------------------------------

    \129\ Bernheim S WC, Want Y, et al. Hospital 30-Day Mortality 
Following Acute Ischemic Stroke Hospitalization Measure Methodology 
Report. 2010.
---------------------------------------------------------------------------

    However, in developing the proposed, refined Stroke 30-Day 
Mortality Rate measure, we re-selected risk variables, resulting in a 
final model with 20 risk-adjustment variables, including the NIH Stroke 
Scale risk variable as an assessment of stroke severity. The NIH Stroke 
Scale is a 15-item neurologic examination stroke scale used to provide 
a quantitative measure of stroke-related neurologic deficit. The NIH 
Stroke Scale evaluates the effect of acute ischemic stroke on a 
patient's level of consciousness, language, neglect, visual-field loss, 
extra-ocular movement, motor strength, ataxia (the loss of full control 
of bodily movements), dysarthria (difficult or unclear articulation of 
speech), and sensory loss. The NIH Stroke Scale was designed to be a 
simple, valid, and reliable assessment tool that can be administered at 
the bedside consistently by neurologists, physicians, nurses, or 
therapists, and is Class I recommended in the AHA/ASA guidelines.\130\ 
The NIH Stroke Scale is a publicly available standardized tool, the 
results of which should be assessed by a clinician when first examining 
a patient presenting to the hospital with a stroke and then documented 
in the patient's medical record. Once this information has been 
documented by a clinician, it can then be recorded in the claim for 
that hospital admission using ICD-10-CM codes through the hospital's 
normal coding practices.
---------------------------------------------------------------------------

    \130\ Jauch EC, Saver JL, Adams HP, Jr., et al. Guidelines for 
the early management of patients with acute ischemic stroke: a 
guideline for healthcare professionals from the American Heart 
Association/American Stroke Association. Stroke. Mar 2013;44(3):870-
947.
---------------------------------------------------------------------------

    We sought to develop a risk-adjustment model that included the NIH 
Stroke Scale variable and other key variables which we believe are 
clinically relevant and demonstrate a strong statistical association 
with 30-day mortality. To select candidate variables, we considered 
those 42 risk-adjustment variables in the currently adopted measure, 
plus the NIH Stroke Scale as candidate variables. We then performed a 
bootstrapping simulation method for variable selection. This 
bootstrapping simulation method is a means of creating multiple samples 
to determine which risk variables are most important to include in a 
model. We selected the best model using the logistic regression model 
with the stepwise selection method based on 1,000 bootstrapping samples 
for each copy of the multiple imputed (MI) data. Variable selection 
rate for all the variables selected into the best model was calculated 
for each copy of the MI data, and variables were included into the 
final model if the minimum variable selection rate among the 5 copies 
of MI was 90 percent or more. This method resulted in 20 risk-
adjustment variables that were included more than 90 percent of the 
time for all the copies of the imputed data were retained in the final 
model, including the NIH Stroke Scale. For more details on the risk-
adjustment variable selection process, 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.
    Refining the risk adjustment model of the Stroke 30-Day Mortality 
Rate created

[[Page 20043]]

a modestly higher c-statistic with fewer risk variables, meaning that 
the proposed, refined measure's risk-adjustment model better 
distinguishes among patients with a low risk and high risk of mortality 
following ischemic stroke compared with the Stroke 30-Day Mortality 
Rate measure that is currently implemented in the Hospital IQR Program. 
Including the NIH Stroke Scale in the risk-adjustment model allows the 
measure to more accurately account for patients' status upon arrival at 
the hospital, which is responsive to clinical guidelines and feedback 
from the medical community and other stakeholders, as discussed above.
    In order to use the NIH Stroke Scale data in the proposed, refined 
Stroke 30-Day Mortality Rate measure, many hospitals that have not 
routinely captured these data on patients with ischemic stroke will 
need to implement new workflows to ensure that their clinicians measure 
and record stroke severity. In addition, hospital coders will need to 
include the appropriate ICD-10 code for the clinician's documented NIH 
Stroke Scale score in the Medicare claim. By proposing this measure, we 
are providing hospitals the information and advanced notice that they 
would be required to submit this information in their Medicare claims 
for this proposed, refined Stroke 30-Day Mortality Rate measure.
(4) Effect of ICD-10
    New ICD-10 codes for the NIH Stroke Scale were implemented on 
October 1, 2016; these codes were included so that hospitals could 
characterize the severity of their patients' strokes using a rigorously 
validated and standardized approach and include that information in 
claims and for quality measurement purposes.\131\ However, because 
there were previously no ICD-9 or ICD-10 CM codes for the NIH Stroke 
Scale scores, hospitals have not previously included this information 
on claims they submit to CMS. In order to have information on the 
severity of patients' ischemic stroke included in the calculation 
Stroke 30-Day Mortality Rate, some hospitals that do not currently 
capture or record the NIH Stroke Scale would have to create workflows 
and processes to do this. This additional work, however, is consistent 
with current clinical guidelines for the care of ischemic stroke 
patients, and are consistent with the standard of care. Implementation 
of the proposed, refined Stroke 30-Day Mortality Rate with the refined 
risk adjustment would require hospitals to document in the medical 
record the first NIH Stroke Scale on every eligible patient who is 
admitted for treatment of acute ischemic stroke and provide that 
information among the ICD-10-CM code recorded on the claim. The new 
ICD-10-CM code representing the NIH Stroke Scale will be included in 
the risk adjustment model for the Stroke 30-Day Mortality Rate measure.
---------------------------------------------------------------------------

    \131\ ICD-10-CM Official Guidelines for Coding and Reporting. 
Available at: https://www.cdc.gov/nchs/data/icd/10cmguidelines_2017_final.pdf.
---------------------------------------------------------------------------

    Because many hospitals would have to create new clinical workflows 
to assess and document the NIH Stroke Scale in patients' medical 
records as well as include the appropriate ICD-10 CM code for the 
documented NIH Stroke Scale score in the claim they submit, we would 
provide hospitals with dry-run results of this proposed, refined 
measure in their confidential hospital-specific feedback reports prior 
to implementation of the proposed, refined measure for the FY 2023 
payment determination. For example, we anticipate using claims data, 
which would include ICD-10 CM codes for the NIH Stroke Scale, for 
discharges occurring between October 1, 2017 through June 1, 2020, to 
calculate measure results for the dry-run anticipated in CY 2021. The 
data in the confidential hospital-specific feedback reports would not 
be publicly reported.
    We are inviting public comment on our proposal to adopt a 
refinement of the Stroke 30-Day Mortality Rate in the Hospital IQR 
Program for the FY 2023 payment determination and subsequent years as 
discussed above.
c. Summary of Previously Adopted Hospital IQR Program Measures for the 
FY 2020 Payment Determination and Subsequent Years
    The table below outlines the Hospital IQR Program measure set 
(including previously adopted measures and proposed refinements from 
this proposed rule) for the FY 2020 payment determination and 
subsequent years. The proposed, refined measures, as discussed above, 
are denoted with a superscript as defined in the legend below the 
table.

Previously Adopted Hospital IQR Program Measures for the FY 2020 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
          Short name                  Measure name             NQF #
------------------------------------------------------------------------
                Healthcare-Associated Infection Measures
------------------------------------------------------------------------
CAUTI........................  National Healthcare                  0138
                                Safety Network (NHSN)
                                Catheter-associated
                                Urinary Tract Infection
                                (CAUTI) Outcome Measure.
CDI..........................  National Healthcare                  1717
                                Safety Network (NHSN)
                                Facility-wide Inpatient
                                Hospital-onset
                                Clostridium difficile
                                Infection (CDI) Outcome
                                Measure.
CLABSI.......................  National Healthcare                  0139
                                Safety Network (NHSN)
                                Central Line-Associated
                                Bloodstream Infection
                                (CLABSI) Outcome Measure.
Colon and Abdominal            American College of                  0753
 Hysterectomy SSI.              Surgeons--Centers for
                                Disease Control and
                                Prevention (ACS-CDC)
                                Harmonized Procedure
                                Specific Surgical Site
                                Infection (SSI) Outcome
                                Measure.
HCP..........................  Influenza Vaccination                0431
                                Coverage Among
                                Healthcare Personnel.
MRSA Bacteremia..............  National Healthcare                  1716
                                Safety Network (NHSN)
                                Facility-wide Inpatient
                                Hospital-onset
                                Methicillin-resistant
                                Staphylococcus aureus
                                (MRSA) Bacteremia
                                Outcome Measure.
------------------------------------------------------------------------
                  Claims-Based Patient Safety Measures
------------------------------------------------------------------------
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 04.......................  Death Rate among Surgical            0351
                                Inpatients with Serious
                                Treatable Complications.

[[Page 20044]]

 
PSI 90.......................  Patient Safety for                   0531
                                Selected Indicators
                                Composite Measure,
                                Modified PSI 90 (Updated
                                Title: Patient Safety
                                and Adverse Events
                                Composite).
------------------------------------------------------------------------
                 Claims-Based Mortality Outcome Measures
------------------------------------------------------------------------
MORT-30-AMI..................  Hospital 30-Day, All-                0230
                                Cause, Risk-Standardized
                                Mortality Rate (RSMR)
                                Following Acute
                                Myocardial Infarction
                                (AMI) Hospitalization.
MORT-30-CABG.................  Hospital 30-Day, All-                2558
                                Cause, Risk-Standardized
                                Mortality Rate (RSMR)
                                Following Coronary
                                Artery Bypass Graft
                                (CABG) Surgery.
MORT-30-COPD.................  Hospital 30-Day, All-                1893
                                Cause, Risk-Standardized
                                Mortality Rate (RSMR)
                                Following Chronic
                                Obstructive Pulmonary
                                Disease (COPD)
                                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.
MORT-30-STK..................  Hospital 30-Day, All-                 N/A
                                Cause, Risk-Standardized
                                Mortality Rate Following
                                Acute Ischemic Stroke
                                ***.
------------------------------------------------------------------------
               Claims-Based Coordination of Care Measures
------------------------------------------------------------------------
READM-30-AMI.................  Hospital 30-Day All-Cause            0505
                                Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Acute
                                Myocardial Infarction
                                (AMI) Hospitalization.
READM-30-CABG................  Hospital 30-Day, All-                2515
                                Cause, Unplanned, Risk-
                                Standardized Readmission
                                Rate (RSRR) Following
                                Coronary Artery Bypass
                                Graft (CABG) Surgery.
READM-30-COPD................  Hospital 30-Day, All-                1891
                                Cause, Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Chronic
                                Obstructive Pulmonary
                                Disease (COPD)
                                Hospitalization.
READM-30-HF..................  Hospital 30-Day, All-                0330
                                Cause, Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Heart Failure
                                (HF) Hospitalization.
READM-30-HWR.................  Hospital-Wide All-Cause              1789
                                Unplanned Readmission
                                Measure (HWR).
READM-30-PN..................  Hospital 30-Day, All-                0506
                                Cause, Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Pneumonia
                                Hospitalization.
READM-30-STK.................  30-Day Risk Standardized              N/A
                                Readmission Rate
                                Following Stroke
                                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).
AMI Excess Days..............  Excess Days in Acute Care            2881
                                after Hospitalization
                                for Acute Myocardial
                                Infarction.
HF Excess Days...............  Excess Days in Acute Care            2880
                                after Hospitalization
                                for Heart Failure.
PN Excess Days...............  Excess Days in Acute Care            2882
                                after Hospitalization
                                for Pneumonia.
------------------------------------------------------------------------
                      Claims-Based Payment Measures
------------------------------------------------------------------------
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.
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.
MSPB.........................  Payment-Standardized                 2158
                                Medicare Spending Per
                                Beneficiary (MSPB).
Cellulitis Payment...........  Cellulitis Clinical                   N/A
                                Episode-Based Payment
                                Measure.
GI Payment...................  Gastrointestinal                      N/A
                                Hemorrhage Clinical
                                Episode-Based Payment
                                Measure.
Kidney/UTI Payment...........  Kidney/Urinary Tract                  N/A
                                Infection Clinical
                                Episode-Based Payment
                                Measure.
AA Payment...................  Aortic Aneurysm Procedure             N/A
                                Clinical Episode-Based
                                Payment Measure.
Chole and CDE Payment........  Cholecystectomy and                   N/A
                                Common Duct Exploration
                                Clinical Episode-Based
                                Payment Measure.
SFusion Payment..............  Spinal Fusion Clinical                N/A
                                Episode-Based Payment
                                Measure.
------------------------------------------------------------------------
           Chart-Abstracted Clinical Process of Care Measures
------------------------------------------------------------------------
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
Sepsis.......................  Severe Sepsis and Septic             0500
                                Shock: Management Bundle
                                (Composite Measure).
VTE-6........................  Incidence of Potentially              \+\
                                Preventable Venous
                                Thromboembolism.
------------------------------------------------------------------------
    EHR-Based Clinical Process of Care Measures (that is, Electronic
                   Clinical Quality Measures (eCQMs))
------------------------------------------------------------------------
AMI-8a.......................  Primary PCI Received                  \+\
                                Within 90 Minutes of
                                Hospital Arrival.
CAC-3........................  Home Management Plan of               \+\
                                Care Document Given to
                                Patient/Caregiver.

[[Page 20045]]

 
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.
PC-01 *......................  Elective Delivery........            0469
PC-05........................  Exclusive Breast Milk                0480
                                Feeding.
STK-02.......................  Discharged on                        0435
                                Antithrombotic Therapy.
STK-03.......................  Anticoagulation Therapy              0436
                                for Atrial Fibrillation/
                                Flutter.
STK-05.......................  Antithrombotic Therapy by            0438
                                the End of Hospital Day
                                Two.
STK-06.......................  Discharged on Statin                 0439
                                Medication.
STK-08.......................  Stroke Education.........             \+\
STK-10.......................  Assessed for                         0441
                                Rehabilitation.
VTE-1........................  Venous Thromboembolism               0371
                                Prophylaxis.
VTE-2........................  Intensive Care Unit                  0372
                                Venous Thromboembolism
                                Prophylaxis.
------------------------------------------------------------------------
               Patient Experience of Care Survey Measures
------------------------------------------------------------------------
HCAHPS.......................  Hospital Consumer                    0166
                                Assessment of Healthcare          (0228)
                                Providers and Systems **.
                               (including Care
                                Transition Measure
                                (CTM[dash]3) and
                                Communication About Pain
                                composite measure).
------------------------------------------------------------------------
                   Structural Patient Safety Measures
------------------------------------------------------------------------
Patient Safety Culture.......  Hospital Survey on                    N/A
                                Patient Safety Culture.
Safe Surgery Checklist.......  Safe Surgery Checklist                N/A
                                Use.
------------------------------------------------------------------------
* Measure listed twice, as both chart-abstracted and electronic clinical
  quality measure.
** Proposed measure refinement of the HCAHPS measure's Pain Management
  questions for the FY 2020 payment determination and for subsequent
  years, as described in section IX.A.6.a. of the preamble of this
  proposed rule.
*** Proposed measure refinement of the Hospital 30-Day, All-Cause, Risk-
  Standardized Mortality Rate Following Acute Ischemic Stroke, for the
  FY 2023 payment determination and for subsequent years, as described
  in section IX.A.6.b. of the preamble of this proposed rule.
\+\ NQF endorsement has been removed.

7. Proposed Voluntary Hybrid Hospital-Wide Readmission Measure With 
Claims and Electronic Health Record Data (NQF #2879)
a. Background
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49698), we stated 
that we are considering the use of a set of core clinical data elements 
extracted from hospital EHRs for each hospitalized Medicare FFS 
beneficiary over the age of 65 years. The core clinical data elements 
are data which are routinely collected on hospitalized adults, 
extraction from hospital EHRs is feasible, and can be utilized as part 
of specific quality outcome measures. One way in which we envisioned 
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. For more detail about core clinical data elements, we refer 
readers to our discussion in the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49698 through 49704). In addition, we note an important 
distinguishing factor about core clinical data elements and the hybrid 
measures: hybrid measure results must be calculated by CMS to determine 
hospitals' risk-adjusted rates relative to national rates used in 
public reporting. With a hybrid measure, hospitals can submit data 
extracted from the EHR, and we can perform the measure calculations. 
This was the approach that was finalized for the calculation of the 
Hybrid Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
(RSMR) Following Acute Myocardial Infarction (NQF #2473), which was 
incorporated into the Advancing Care Coordination Through Episode 
Payment Models as a voluntary measure for patients admitted for AMI in 
the AMI Model (82 FR 354 through 356).
    In the FY 2016 IPPS/LTCH PPS final rule, we stated that we 
developed two hybrid measures: (1) Hospital 30-Day Risk-Standardized 
Acute Myocardial Infarction (AMI) Mortality eMeasure (NQF #2473) (now 
called the Hybrid Hospital 30-Day All Cause Risk-Standardized Mortality 
Rate Following Acute Myocardial Infarction (AMI) (NQF #2473)); and (2) 
a hybrid hospital-wide 30-day readmission measure now called the Hybrid 
Hospital-Wide Readmission Measure with Claims and Electronic Health 
Record Data (NQF #2879). Although the Hybrid Hospital-Wide Readmission 
Measure with Claims and Electronic Health Record Data (NQF #2879) 
(hereinafter referred to as Hybrid HWR measure) had not been endorsed 
when the MAP considered the measure, it encouraged further development 
(80 FR 49698),\132\ and the measure has since been endorsed by the NQF.
---------------------------------------------------------------------------

    \132\ National Quality Forum. Measure Application Partnership, 
MAP Hospital Programmatic Deliverable--Final Report. Available at: 
http://www.qualityforum.org/Publications/2015/02/MAP_Hospital_Programmatic_Deliverable_-_Final_Report.aspx. Accessed 
on March 10, 2017.
---------------------------------------------------------------------------

    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49702), commenters 
noted either outright or conditional support for the development of 
hybrid measures, and for the collection of additional administrative 
linkage variables to merge data from EHRs with claims. A few commenters 
noted collection of the core clinical data elements would not impose 
additional burden on hospitals (80 FR 49702). A few commenters 
recommended the hybrid measures should go through NQF review or be 
endorsed by NQF prior to inclusion in a quality reporting program, 
which we have done, as the Hybrid HWR measure was endorsed by NQF on 
December 9, 2016. Other commenters recommended that before we require 
the submission of the core clinical data elements, we should conduct 
further testing and analysis to ensure the accuracy and completeness of 
the data being submitted; specifically, one commenter suggested a 
testing period (80 FR 49703). We conducted further testing,

[[Page 20046]]

which is further described below. We refer readers to the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49702 through 49704) for a full discussion 
of all public comments and our responses related to core clinical data 
elements.
    Since the FY 2016 IPPS/LTCH PPS final rule, in keeping with our 
goal to move toward greater use of data from EHRs for quality 
measurement, and in response to stakeholder feedback to include 
clinical data in outcome measures (80 FR 49702 through 49703), we have 
further developed the proposed voluntary Hybrid HWR measure. This 
measure would incorporate a combination of claims data and EHR data 
submitted by hospitals, and because of these combined data sources, it 
is referred to as a hybrid measure. The Hybrid HWR measure cohort and 
outcome are identical to those in the Hospital-Wide All-Cause Unplanned 
Readmission measure (NQF #1789), which was adopted into the Hospital 
IQR Program for the FY 2015 payment determination and subsequent years 
(77 FR 53521).
    The Hybrid HWR measure was presented on the List of Measures under 
Consideration for December 1, 2014. The MAP encouraged further 
development of the Hybrid HWR measure in December 2014.\133\ The Hybrid 
HWR measure (NQF #2879) was endorsed by NQF on December 9, 2016. This 
measure aligns with the National Quality Strategy (NQS) priorities of 
making care safer by reducing harm caused in the delivery of care and 
promoting effective communication and coordination of care.
---------------------------------------------------------------------------

    \133\ National Quality Forum. Measure Application Partnership, 
MAP Hospital Programmatic Deliverable--Final Report. Available at: 
http://www.qualityforum.org/Publications/2015/02/MAP_Hospital_Programmatic_Deliverable_-_Final_Report.aspx. Accessed 
on March 10, 2017.
---------------------------------------------------------------------------

    Measure development followed the same scientific approach and 
rigorous process as other Hospital IQR Program outcome measures. To 
align the core clinical data elements with other measures that utilize 
EHR data, we developed and tested a Measure Authoring Tool and 
identified value sets for extraction of the core clinical data 
elements. As stated in the FY 2016 IPPS/LTCH PPS final rule, the core 
clinical data elements use existing value sets where possible in an 
effort to harmonize with other measures and reporting requirements and 
we completed testing of the electronic specifications for the core 
clinical data elements used in the Hybrid HWR measure (80 FR 49703). 
The electronic specifications were tested in four separate health 
systems that used three separate EHR systems. During Hybrid HWR measure 
development and testing we demonstrated that the core clinical data 
elements were feasibly extracted from hospital EHRs for nearly all 
adult patients admitted. We also demonstrated that the use of the core 
clinical data elements to risk-adjust the Hybrid HWR measure improves 
the discrimination of the measure, or the ability to distinguish 
patients with a low risk of readmission from those at high risk of 
readmission, as assessed by the c-statistic.134 135 136 In 
addition, inclusion of clinical information from patient EHRs is 
responsive to stakeholders who find it preferable to use clinical 
information that is available to the clinical care team at the time 
treatment is rendered to account for patients' severity of illness 
rather than relying solely on data from claims (80 FR 49702). The 
Hybrid HWR measure is now fully developed and tested and NQF-endorsed 
(NQF #2879).
---------------------------------------------------------------------------

    \134\ 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.
    \135\ 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.
    \136\ 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.
---------------------------------------------------------------------------

b. Proposal for Voluntary Reporting of Electronic Health Record Data 
for the Hybrid HWR Measure (NQF #2879)
    In accordance with, and to the extent permitted by, the HIPAA 
Privacy Rule and other applicable law, we are proposing the Hybrid HWR 
measure as a voluntary measure for the reporting of data on discharges 
over a 6-month period in the first two quarters of CY 2018 (January 1, 
2018 through June 30, 2018). A hospital's annual payment determination 
would not be affected by this voluntary measure. As we stated when we 
adopted the Hospital-Wide All-Cause Unplanned Readmission measure (NQF 
#1789) that is currently used in the Hospital IQR Program, a hospital's 
readmission rate is affected by complex and critical aspects of care 
such as communication between providers or between providers and 
patients; prevention of, and response to, complications; patient 
safety; and coordinated transitions to the outpatient environment, such 
that a hospital-wide, all-condition readmission measure could portray a 
broader sense of the quality of care in hospitals and promote hospital 
quality improvement (77 FR 53522). We believe this would also be the 
case with using the Hybrid HWR measure (NQF #2879) that is being 
proposed for voluntary data collection in this proposed rule.
    Hospitals that voluntarily submit data for this measure would 
receive confidential hospital-specific reports that detail submission 
results from the performance reporting period, as well as the Hybrid 
HWR measure results assessed from merged files created by our merging 
of the EHR data elements submitted by each participating hospital with 
claims data from the same set of index admission. We note that in this 
proposal we are only seeking to collect data for the Hybrid HWR measure 
that are in accordance with the measure's electronic specifications, 
available on the CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. Hospitals that volunteer to submit data would 
also increase their familiarity with submitting data for hybrid quality 
measures from their EHR systems. Participating hospitals would receive 
information and instruction on the use of the electronic specifications 
for this measure, would have an opportunity to test extraction and 
submission of data to CMS, and would receive reports from CMS, 
downloadable from QualityNet, with details on the success of their 
submission, such as the completeness and accuracy of the data. This 
would allow us to refine this measure if necessary to provide 
meaningful information on outcomes for hospitalizations for Medicare 
FFS beneficiaries with the intent to propose this as a required measure 
in future rulemaking. For example, we would consider feedback from 
hospitals when making refinements to improve the utility of the measure 
specifications. In addition, we would examine the completeness and 
accuracy of the data received to determine its adequacy for calculation 
of the measure's risk adjustment model and measure results.
    EHR data or measure results for this proposed voluntary Hybrid HWR 
measure would not be publicly reported. However, if we propose to 
require mandatory reporting of the Hybrid HWR measure in future 
rulemaking, such a proposal would include public reporting of the 
measure results. Consistent with estimates for previous voluntary 
measure reporting, such as the Hospital IQR Program eCQM voluntary 
reporting (79 FR 50346), we

[[Page 20047]]

believe up to approximately 100 hospitals would voluntarily submit data 
for the Hybrid HWR measure. Details about the measure and our proposal 
for voluntary reporting certain data elements for this measure are 
discussed below.
c. Data Sources
    We are proposing to use two sources of data for the calculation of 
the proposed voluntary Hybrid HWR measure: Medicare Part A claims and 
core clinical data elements for Medicare FFS beneficiaries who are 65 
years or older, comprising the measure cohort. Claims data would be 
used to identify index admissions included in the measure cohort, to 
create a risk-adjustment model, and to assess the 30-day unplanned 
readmission outcome. This data would be merged with core clinical data 
elements from each participant hospital's EHRs collected at 
presentation (discussed in more detail below) and used for risk-
adjustment of patients' severity of illness (for Medicare Fee-For-
Service beneficiaries who are 65 years or older), in addition to data 
from claims. Medicare enrollment data, from the Medicare Enrollment 
Database, are used to confirm Medicare enrollment for at least 30 days 
post hospital discharge for the unplanned readmission outcome 
assessment.
    For this proposed voluntary Hybrid HWR measure, in accordance with, 
and to the extent permitted by, the HIPAA Privacy Rule and other 
applicable law, the EHR data submission process would align as much as 
possible with existing electronic Clinical Quality Measure (eCQM) 
standards and data reporting procedures for hospitals, as further 
discussed below. The electronic specifications for the proposed 
voluntary Hybrid HWR measure, which include the electronic 
specifications for extraction of the core clinical data elements from 
hospital EHRs (the Measure Authoring Tool output and value sets) for 
all included data elements, are available on the CMS Web site at: 
http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
d. Outcome
    As stated above, the proposed voluntary Hybrid HWR measure outcome 
is aligned with the currently adopted, publicly reported, Hospital-Wide 
All-Cause Unplanned Readmission measure (NQF #1789), which was adopted 
into the Hospital IQR Program for the FY 2015 payment determination and 
subsequent years (77 FR 53521 through 53528). The proposed voluntary 
Hybrid HWR measure outcome assesses unplanned readmissions for any 
cause within 30 days of discharge from the index admission. It does not 
consider planned readmissions as part of the readmission outcome and 
identifies them by using the CMS Planned Readmission Algorithm, which 
is a set of criteria for classifying readmissions as planned using 
Medicare claims, and is currently used in the previously adopted, 
Hospital-Wide All-Cause Unplanned Readmission measure (77 FR 
53521).\137\ This algorithm identifies admissions that are typically 
planned and may occur within 30 days of discharge from the 
hospital.\138\ The algorithm was most recently refined in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50211 through 50216) for the previously 
adopted, claims-based measure. That same algorithm is used for this 
proposed voluntary Hybrid HWR measure.\139\ 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.
---------------------------------------------------------------------------

    \137\ 2017 All-Cause Hospital-Wide Measure Updates and 
Specifications Report. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \138\ Ibid.
    \139\ Hybrid Hospital-Wide Readmission Measure with Electronic 
Health Record Extracted Risk Factors (Version 1.1). Available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

e. Cohort
    As noted above, the proposed voluntary Hybrid HWR measure cohort is 
aligned with the currently adopted, Hospital-Wide All-Cause Unplanned 
Readmission measure.\140\ The measure cohort consists of Medicare FFS 
beneficiaries, aged 65 years or older, discharged from non-Federal 
acute care hospitals. Hospitals would only submit data for this cohort, 
and the measure would only be calculated for this cohort. The proposed 
voluntary Hybrid HWR measure includes admissions for nearly all 
Medicare FFS beneficiaries over the age of 65 years who are discharged 
alive from acute care non-federal hospitals. However, during measure 
calculation, a small number of these admissions are excluded under the 
measure specifications. Excluded admissions include those for principal 
discharge diagnoses indicating some psychiatric disorders. These 
exclusions are only a small proportion of all index admissions and are 
identified during the measure calculation process.
---------------------------------------------------------------------------

    \140\ 2017 All-Cause Hospital-Wide Measure Updates and 
Specifications Report. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

f. Inclusion and Exclusion Criteria
    The proposed voluntary Hybrid HWR measure inclusion and exclusion 
criteria are also aligned with the currently adopted Hospital-Wide All-
Cause Unplanned Readmission measure.\141\ For both measures, the index 
admission is the hospitalization to which the readmission outcome is 
attributed. Both the claims-based, Hospital-Wide All-Cause Unplanned 
Readmission measure and the proposed voluntary Hybrid HWR measure 
include the following index admissions for patients:
---------------------------------------------------------------------------

    \141\ 2017 All-Cause Hospital-Wide Measure Updates and 
Specifications Report. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

     Enrolled in Medicare FFS Part A for the 12 months prior to 
the date of admission and during the index admission.
     Aged 65 or older.
     Discharged alive from a non-Federal acute care hospital.
     Not transferred to another acute care facility.
    This measure excludes the following index admissions for patients:
     Admitted to prospective payment system (PPS)-exempt cancer 
hospitals.
     Without at least 30 days of post-discharge enrollment in 
Medicare FFS.
     Discharged against medical advice.
     Admitted for primary psychiatric diagnoses.
     Admitted for rehabilitation.
     Admitted for medical treatment of cancer.
    For both measures, each index admission is assigned to one of five 
mutually exclusive specialty cohort groups: Medicine; surgery/
gynecology; cardiorespiratory; cardiovascular; and neurology. The 
cohorts reflect how care for patients is organized within hospitals. To 
assign admissions to cohorts, admissions are first screened for the 
presence of an eligible Agency for Healthcare Research and Quality 
(AHRQ) Clinical Classifications Software (CCS) \142\ surgical procedure 
category. Admissions with an eligible surgical procedure category are 
assigned

[[Page 20048]]

to the surgical cohort, regardless of the principal discharge diagnosis 
code of the admission. All remaining admissions are assigned to cohorts 
based on the AHRQ CCS diagnosis category of the principal discharge 
diagnosis.
---------------------------------------------------------------------------

    \142\ Clinical Classifications Software (CCS) for ICD-9-CM Fact 
Sheet. Accessed at: https://www.hcup-us.ahrq.gov/toolssoftware/ccs/ccsfactsheet.jsp.
---------------------------------------------------------------------------

g. Risk-Adjustment
    The proposed voluntary Hybrid HWR measure adjusts both for case mix 
differences (clinical status of the patient, accounted for by adjusting 
for age and comorbidities, and the core clinical data elements from 
patients' EHRs) and service-mix differences (the types of conditions 
and procedures cared for and procedures conducted by the hospital, 
accounted for by adjusting for the discharge condition category). 
Patient comorbidities are based on the index admission, the admission 
included in the measure cohort, and a full year of prior history. The 
core clinical data elements are derived from information captured in 
the EHR during the index admission only, and are listed below.

------------------------------------------------------------------------
                                                         Time window for
         Data elements           Units of measurement    first captured
                                                             values
------------------------------------------------------------------------
Heart Rate....................  Beats per minute......               0-2
Systolic Blood Pressure.......  mmHg..................               0-2
Respiratory Rate..............  Breath per minute.....               0-2
Temperature...................  Degrees Fahrenheit....               0-2
Oxygen Saturation.............  Percent...............               0-2
Weight........................  Pounds................              0-24
Hematocrit....................  % red blood cells.....              0-24
White Blood Cell Count........  Cells/mL..............              0-24
Potassium.....................  mEq/L.................              0-24
Sodium........................  mEq/L.................              0-24
Bicarbonate...................  mmol/L................              0-24
Creatinine....................  mg/dL.................              0-24
Glucose.......................  mg/dL.................              0-24
------------------------------------------------------------------------

    The risk-adjustment variables included in the development and 
testing of the proposed voluntary Hybrid HWR measure are derived from 
both claims and clinical EHR data. The variables are: (1) 13 core 
clinical data elements derived from hospital EHRs; (2) the Clinical 
Classification Software (CCS) categories for the principal discharge 
diagnosis associated with each index admission derived from ICD-10 
codes in administrative claims data; and (3) comorbid conditions of 
each patient identified from inpatient claims in the 12 months prior to 
and including the index admission derived from ICD-10 codes and grouped 
into the CMS condition categories (CC).
    All 13 core clinical data elements were shown to be statistically 
significant predictors of readmission in one or more risk-adjustment 
models of the five specialty cohort groups used to calculate the 
proposed voluntary Hybrid HWR measure.\143\ The proposed voluntary 
Hybrid HWR measure specialty cohort groups are further defined in 
section IX.A.7.e. of the preamble of this proposed rule, below. The 
testing results demonstrate that the core clinical data elements 
enhanced the discrimination (assessed using the c-statistic) when used 
in combination with administrative claims data.\144\ For additional 
details regarding the risk-adjustment model, we refer readers to the 
proposed voluntary Hybrid HWR Measure technical report, which is posted 
on the CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    \143\ 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.
    \144\ 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 this measure was developed using claims coded in ICD-
9. However, we have identified and tested ICD-10 specifications for all 
information used in the measure derived from Medicare claims for both 
the claims-based, Hospital-Wide All-Cause Unplanned Readmission measure 
and for the proposed voluntary Hybrid HWR Measure. The ICD-10 
specifications are identical for both measures. Only the use of the 
core clinical data elements in the risk-adjustment models differ 
between the two measures. Those data elements are not affected by ICD-
10 implementation. For additional details regarding the measure 
specifications that accommodate ICD-10-coded claims, we refer readers 
to the 2017 All-Cause Hospital-Wide Measure Updates and Specifications 
Report, which is posted on the CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
h. Calculating the Risk-Standardized Readmission Rate (RSRR)
    The methods used for calculation of the proposed voluntary Hybrid 
HWR measure align with the methods used to calculate the currently 
adopted, Hospital-Wide All-Cause Unplanned Readmission measure. Index 
admissions are assigned to one of five mutually exclusive specialty 
cohort groups consisting of related conditions or procedures. The five 
specialty cohort groups are: Surgery/gynecology; general medicine; 
cardiorespiratory; cardiovascular; and neurology. For each specialty 
cohort group, the standardized readmission ratio (SRR) is calculated as 
the ratio of the number of ``predicted'' readmissions to the number of 
``expected'' readmissions at a given hospital. For each hospital, the 
numerator of the ratio is the number of readmissions within 30 days 
predicted based on the hospital's performance with its observed case 
mix and service mix, and the denominator is the number of readmissions 
expected based on the nation's performance with that hospital's case 
mix and service mix. This approach is analogous to a ratio of 
``observed'' to ``expected'' used in other types of statistical 
analyses.
    The specialty cohort SRRs are then pooled for each hospital using a 
volume-weighted geometric mean to create a hospital-wide composite SRR.

[[Page 20049]]

The composite SRR is multiplied by the national observed readmission 
rate to produce the RSRR. For additional details regarding the measure 
specifications to calculate the RSRR, we refer readers to the 2017 All-
Cause Hospital-Wide Measure Updates and Specifications Report, which is 
posted on the CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
i. Data Submission and Reporting Requirements
    We are proposing that hospitals use QRDA I files for each Medicare 
Fee-For-Service beneficiary who is 65 years and older. Submission of 
data using QRDA I files is the current EHR data and measure reporting 
standard adopted for electronic clinical quality measures (eCQMs) 
implemented in the Hospital IQR Program. This same standard would be 
used for reporting the core clinical data elements to the CMS data 
receiving system. We refer readers to the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49706) where we have previously discussed QRDA I standards 
for use in the Hospital IQR Program. We also refer readers to section 
IX.A.10.e. of the preamble of this proposed rule for additional 
proposals related to data submission and reporting requirements for the 
Hybrid HWR measure.
    We also are proposing to use the following criteria to determine if 
a hospital has successfully submitted voluntary Hybrid HWR measure 
data:
     Submission of only the first-captured values, which are 
data collected routinely on each Medicare FFS beneficiary who is 65 
years or older upon presentation to the hospital, for each of the 13 
core clinical data elements used in risk adjustment to assess the 
patient's severity of illness.
     Hospitals would be expected to successfully submit data 
values from hospital EHRs for vital signs (heart rate, respiratory 
rate, temperature, systolic blood pressure, oxygen saturation, weight), 
and six linking variables required to merge with the CMS claims data 
(CCN, HIC Number or Medicare Beneficiary Identifier, date of birth, 
sex, admission date, and discharge date). When we tested the electronic 
specifications for extraction of the core clinical data elements in 
hospital systems, we also tested the use of these linking variables to 
merge data from claims and from hospitals' EHRs from several health 
systems, and achieved match rates over 90 percent accounting for 
missing or erroneous data. In order to calculate results for the Hybrid 
HWR measure, hospitals would need to submit these data on more than 95 
percent of on all Medicare FFS patients who are 65 years and older 
discharged from the hospital.
     Participating hospitals would be requested to submit 
values for laboratory test results (hematocrit, white blood cell count, 
sodium, potassium, bicarbonate, creatinine, and glucose) for Medicare 
FFS beneficiaries, 65 years or older, included in the measure cohort. 
In order to calculate measure results for the Hybrid HWR measure, 
hospitals would need to submit these data elements on more than 80 
percent of these beneficiaries. However, for the proposed voluntary 
measure for the CY 2018 reporting period (January 1, 2018 through June 
30, 2018) we would request the data elements on at least 50 percent of 
these patients discharged over the same time period. Data reporting to 
the CMS data receiving system would occur in the fall of 2018.
     The measurement period would include discharges occurring 
over a 6-month period in the first two quarters of CY 2018 (January 1, 
2018 through June 30, 2018). However, for hospitals that choose to 
report this measure, we would request submission of these data elements 
on at least 50 percent of these patients. As we noted above, in our 
proposal for voluntary data collection of the Hybrid HWR measure, we 
are only seeking to collect data for this measure on applicable 
Medicare FFS beneficiaries in accordance with the measure's electronic 
specifications, available on the CMS Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
j. Confidential Hospital-Specific Reports
    Hospitals that voluntarily submit data for this measure would 
receive confidential hospital-specific reports that detail submission 
results from the reporting period, including detailed information about 
the completeness and accuracy of the EHR data they submit, as well as 
the Hybrid HWR measure results assessed from merged files created by 
our merging of the EHR data elements submitted by each participating 
hospital with claims data from the same set of index admission. We 
would calculate and provide each participating hospital with their 
risk-standardized readmission rate for the voluntary Hybrid HWR 
measure. This would provide each hospital with an indication of their 
performance relative to the other hospitals that participate in the 
voluntary measure. In addition, we would create a hospital-specific 
report for each participating hospital which would include detailed 
information about their Medicare FFS beneficiaries who are 65 and older 
who had an unplanned readmission within 30 days of hospital discharge, 
including the patients' clinical risk factors from claims and EHR data. 
This information would allow hospitals to identify the factors that 
increase patients' risk of readmission and would inform quality 
improvement strategies to reduce unplanned readmissions. In addition, 
the reports would include the match rate between the hospital's 
submitted EHR data and corresponding claims data, as well as the 
proportion of patient data submitted relative to all qualifying 
admissions for each of the 13 core clinical data elements.
    We note that we are considering proposing the Hybrid HWR (NQF 
#2879) measure as a required measure as early as the CY 2021 reporting 
period/FY 2023 payment determination and requiring hospitals to submit 
the core clinical data elements and linking variables used in the 
measure as early as CY 2020 to support a dry run of the measure during 
which hospitals would receive a confidential preview of their results 
in 2021. We would propose to require reporting on this measure in 
future rulemaking after we collect and analyze information from 
voluntary reporting.
    We are inviting public comment on our proposal to adopt the Hybrid 
HWR measure (NQF #2879) for the Hospital IQR Program as a voluntary 
measure for the CY 2018 reporting period as described above.
8. Proposed Changes to Policies on Reporting of eCQMs
a. Background
    For a discussion of our previously finalized eCQMs and policies, we 
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50807 
through 50810; 50811 through 50819), the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50241 through 50253; 50256 through 50259; and 50273 through 
50276), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49692 through 
49698; and 49704 through 49709), and the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 57150 through 57161; and 57169 through 57172). In the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57172), we finalized that 
hospitals must submit eCQM data by the end of two months following the 
close of the calendar year for the CY 2017 reporting period/FY 2019 
payment determination and subsequent years.
    In this proposed rule, we are proposing two modifications to our

[[Page 20050]]

finalized eCQM reporting policies for the CY 2017 reporting period/FY 
2019 payment determination and the CY 2018 reporting period/FY 2020 
payment determination. Specifically, we are proposing to: (1) Decrease 
the number of eCQMs for which hospitals must submit data; and (2) 
decrease the number of calendar quarters for which hospitals are 
required to submit data, as further detailed below. These proposals are 
made in conjunction with our proposals discussed in sections IX.E.2.b. 
of the preamble of this proposed rule to align requirements for the 
Hospital IQR Program and the Medicare and Medicaid EHR Incentive 
Programs for hospitals and CAHs.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57150 through 
57159), we finalized a policy to require hospitals to submit one full 
calendar year of data (consisting of four quarterly data reporting 
periods) for 8 self-selected eCQMs out of the available eCQMs for both 
the CY 2017 reporting period/FY 2019 payment determination and the CY 
2018 reporting period/FY 2020 payment determination.
    Since the conclusion of the public comment period for the FY 2017 
IPPS/LTCH PPS final rule, we have continued to receive frequent 
feedback (via email, webinar questions, help desk questions, and 
conference call discussions) from hospitals and EHR vendors about 
ongoing challenges of implementing eCQM reporting. A summary of the 
main concerns identified by these data submitters were as follows:
     The timing of the transition to a new EHR system during 
2017 (or system upgrades or new EHR vendor) affects hospitals' ability 
to report on an increased number of measures in a timely manner;
     There is a need for at least one year between new EHR 
requirements due to the varying 6- to 24-month cycles needed for 
vendors to code new measures, test and institute measure updates, train 
hospital staff, and rollout other upgraded features;
     Hospitals have had difficulty identifying applicable 
measures that reflect their patient population, given the reduction in 
the number of available eCQMs (from 28 to 15) for CY 2017 reporting; 
and
     Hospitals have had challenges with data mapping (aligning 
the information available in an electronic health record (EHR), 
particularly if the information is not located in a structured field 
(for example, PDF attachment, free text section) to the required fields 
in a QRDA Category I (QRDA I) file), and workflow (the process of 
extrapolating the pertinent patient data from an EHR, transferring that 
data to a QRDA I file, and submission of the QRDA I file to CMS) 
because hospitals still need to collect CY 2017 data while still 
reporting CY 2016 data.
    In response to these issues, we are proposing to modify the eCQM 
reporting requirements for both the CY 2017 reporting period/FY 2019 
payment determination and the CY 2018 reporting period/FY 2020 payment 
determination as discussed in more detail below.
b. Proposed Modifications to the eCQM Reporting Requirements for the 
Hospital IQR Program for the CY 2017 Reporting Period/FY 2019 Payment 
Determination
    For the CY 2017 reporting period/FY 2019 payment determination, we 
are proposing to modify our policies to require hospitals to: (1) 
report on at least six of the available eCQMs, instead of eight as 
previously finalized, and (2) submit two self-selected quarters of 
data, instead of one full calendar year of data as previously 
finalized. We believe that reducing the number of eCQMs required to be 
reported from eight to six and reducing the quarters of data to be 
reported from four quarters to any two quarters will ease the burden on 
data submitters, allowing them to shift resources to support system 
upgrades, data mapping, and staff training related to eCQMs. We also 
believe that the reduction in the number of required eCQMs will lessen 
the burden of identifying measures to report on and vendor coding of 
new measures; under the modified policy, hospitals will only be 
required to identify two additional measures between CY 2016 and CY 
2017, as opposed to four additional measures. Further, successful 
reporting in CY 2016 should streamline CY 2017 reporting because 
hospitals can re-use the same measures submitted to satisfy the CY 2016 
reporting requirements.
    Although the publication of the FY 2018 IPPS/LTCH PPS final rule 
will not occur until on or about August 1, 2017, the data submission 
deadline for the CY 2017 reporting period/FY 2019 payment determination 
is not until February 28, 2018, giving hospitals ample time to adjust 
to these proposed modified policies. Any hospital that was prepared to 
submit one full calendar year of data for eight eCQMs in accordance 
with the previously finalized CY 2017 reporting requirements should be 
able to submit two self-selected quarters of data for six eCQMs in 
accordance with the proposed modifications to the CY 2017 reporting 
requirements. Reducing the number of data reporting periods to two 
quarters, rather than four, and allowing hospitals to select which two 
quarters of CY 2017 to report also will offer greater reporting 
flexibility and allow hospitals and their vendors more time to plan for 
reporting and to account for and schedule hospital-specific scenarios, 
such as EHR upgrades or system transitions. We believe these modified 
reporting requirements directly address stakeholder concerns while 
remaining consistent with our goal to incrementally transition to 
electronic reporting (80 FR 49694).
    We note that we are making similar proposals in the EHR Incentive 
Program and refer readers to section IX.E.2.b. of the preamble of this 
proposed rule. Our proposals to modify the CY 2017 reporting period 
eCQM requirements in the Hospital IQR Program would continue to be 
fully aligned with the requirements of the CQM electronic reporting 
option in the Medicare EHR Incentive Program for eligible hospitals and 
CAHs to reduce confusion and reporting burden. In addition, we are not 
proposing any changes to the February 28, 2018 submission deadline for 
CY 2017 reporting (81 FR 57172) to ensure that APU determinations for 
FY 2019 are not affected and to maintain the established alignment with 
the Medicare EHR Incentive Program's submission deadline (81 FR 57255).
    We are inviting public comment on our proposals to modify the eCQM 
reporting requirements for the CY 2017 reporting period/FY 2019 payment 
determination for the Hospital IQR Program as described above.
c. Proposed Modifications to the eCQM Reporting Requirements for the 
Hospital IQR Program for the CY 2018 Reporting Period/FY 2020 Payment 
Determination
    As stated above, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57150 through 57159), we finalized a policy requiring submission of 8 
self-selected eCQMs out of the available eCQMs in the Hospital IQR 
Program for both the CY 2017 reporting period/FY 2019 payment 
determination and CY 2018 reporting period/FY 2020 payment 
determination. In addition for the CY 2018 reporting period/FY 2020 
payment determination, hospitals are required to submit the data by 
February 28, 2019 (the end of two months following the close of the 
calendar year, as set out in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57172)). For the same reasons as discussed above, we are proposing 
similar modifications for the CY 2018 reporting period/FY 2020 payment 
determination. Specifically, we are proposing to require hospitals to 
report on at least six of the available eCQMs for the CY 2018 reporting 
period/FY 2020 payment determination, instead of

[[Page 20051]]

eight as previously finalized. These six eCQMs may be the same or a 
different set of six eCQMs a hospital reports for the CY 2017 reporting 
period. In addition, we are proposing to decrease the number of 
required reporting periods, from four quarters as previously finalized, 
to the first three quarters of the CY 2018 reporting period (that is, 
Q1, Q2, and Q3 of CY 2018). We note that this differs from our proposal 
for the CY 2017 reporting period as discussed above, which would only 
require two self-selected quarters of data.
    In crafting this proposal, we considered several alternatives. 
Specifically, we considered aligning the CY 2018 reporting period 
requirements with the proposed CY 2017 reporting period requirements, 
such that hospitals would report on at least six of the available eCQMs 
and submit two self-selected quarters of data for both years. We also 
considered retaining the reporting requirements finalized in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57150 through 57159), such that 
hospitals would submit one full calendar year of data for 8 self-
selected eCQMs for the CY 2018 reporting period/FY 2020 payment 
determination. Ultimately, we believe that our proposals as stated 
above balance our goal to progressively shift towards electronic 
reporting of quality measure data with hospitals' concerns of the 
burden this increase may cause. In addition, hospitals will have had 
several years to report data electronically for the Hospital IQR and 
Medicare and Medicaid EHR Incentive Programs. Therefore, we believe 
that hospitals will be better prepared to submit an additional quarter 
of data for the CY 2018 reporting period compared to the number of 
quarterly reporting periods we are proposing for the CY 2017 reporting 
period. We also believe that hospitals will be better prepared to 
submit additional eCQMs in the future, since hospitals will have had a 
sufficient number of cycles of eCQM reporting.
    Our proposals for the CY 2018 reporting period/FY 2020 payment 
determination are being made in conjunction with proposals discussed in 
section IX.E.3. of the preamble of this proposed rule that fully align 
requirements for the Hospital IQR Program with the requirements for the 
CQM electronic reporting option in the Medicare EHR Incentive Program 
for eligible hospitals and CAHs. We note that the deadline for 
submission would be the same as previously finalized, two months 
following the end of the reporting period calendar year, specifically 
February 28, 2019 (81 FR 57172).
    We are inviting public comment on our proposals to modify the CY 
2018 reporting period/FY 2020 payment determination eCQM reporting 
requirements for the Hospital IQR Program as described above.
    The proposed modifications to the CY 2017 reporting period/FY 2019 
payment determination and CY 2018 reporting period/FY 2020 payment 
determination requirements, if finalized as proposed, would also have 
implications for eCQM validation in the Hospital IQR Program. 
Validation of eCQM data under the Hospital IQR Program is set to begin 
using CY 2017 reported data as finalized in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57153 through 57181). We refer readers to section 
IX.A.11. of the preamble of this proposed rule where we discuss our 
proposal to modify those requirements in order to align the eCQM 
validation process with these proposals.
9. Possible New Quality Measures and Measure Topics for Future Years
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53510 through 
53512), we outlined considerations to guide us in selecting new quality 
measures to adopt into the Hospital IQR Program. Specifically, we seek 
to adopt measures for the Hospital IQR Program that would: (1) Promote 
better, safer, more efficient care; (2) expand the pool of measures to 
include measures that aim to improve patient safety; (3) support the 
NQS' three-part aim of better health care for individuals, better 
health for populations, and lower costs for health care by creating 
transparency around the quality of care at inpatient hospitals to 
support patient decision-making and quality improvement; (4) collect 
data in a manner that balances the need for information related to the 
full spectrum of quality performance and the need to minimize the 
burden of data collection and reporting; (5) weigh the relevance and 
utility of the measures compared to the burden on hospitals in 
submitting data under the Hospital IQR Program; (6) to the extent 
practicable, consider measures that have been nationally endorsed by a 
multi-stakeholder organization, developed with the input of providers, 
purchasers/payers, and other stakeholders, and aligned with best 
practices among other payers and the needs of the end users of the 
measures; (7) 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, give due consideration to 
measures that have been endorsed or adopted by a consensus organization 
identified by the Secretary; (8) give priority to measures that assess 
performance on conditions that result in the greatest mortality and 
morbidity in the Medicare population, are high volume and high cost for 
the Medicare program, and for which wide cost and treatment variations 
in the Medicare population have been reported across populations or 
geographic areas despite established clinical guidelines; (9) focus on 
selecting measures that will also meet the Hospital VBP Program measure 
inclusion criteria and advance the goals of the Hospital VBP Program by 
targeting hospitals' ability to improve patient care and patient 
outcomes; and (10) align with the HHS Strategic Plan and Initiatives 
\145\ and the CMS Strategic Plan.\146\
---------------------------------------------------------------------------

    \145\ HHS Strategic Plan, available at: https://www.hhs.gov/about/strategic-plan/.
    \146\ CMS Strategy: The Road Forward 2013-2017, available at: 
https://www.cms.gov/About-CMS/Agency-Information/CMS-Strategy/Downloads/CMS-Strategy.pdf.
---------------------------------------------------------------------------

    In keeping with these considerations, we are inviting public 
comment on the potential future inclusion of the following seven 
measures in the Hospital IQR Program (one measure related to the 
quality of informed consent documents, four measures that evaluate end-
of-life processes and outcomes for cancer patients, and two measures 
that evaluate nursing skill mix):
     Quality of Informed Consent Documents for Hospital-
Performed, Elective Procedures measure;
     Proportion of Patients Who Died from Cancer Receiving 
Chemotherapy in the Last 14 Days of Life measure (NQF #0210);
     Proportion of Patients Who Died from Cancer Not Admitted 
to Hospice measure (NQF #0215);
     Proportion of Patients Who Died from Cancer Admitted to 
the ICU in the Last 30 Days of Life measure (NQF #0213);
     Proportion of Patients Who Died from Cancer Admitted to 
Hospice for Less Than Three Days measure (NQF #0216);
     Skill Mix (Registered Nurse [RN], Licensed Vocational/
Practical Nurse [LVN/LPN], Unlicensed Assistive Personnel [UAP], and 
contract) (Nursing Skill Mix) Measure (NQF #0204); and
     Nursing Hours per Patient Day Measure (NQF #0205).
    We also are considering newly specified eCQMs for possible 
inclusion in future years of the Hospital IQR and Medicare and Medicaid 
EHR Incentive Programs. These measures are listed and these topics are 
further discussed below.

[[Page 20052]]

     Safe Use of Opioids--Concurrent Prescribing;
     Completion of a Malnutrition Screening within 24 Hours of 
Admission;
     Completion of a Nutrition Assessment for Patients 
Identified as At-Risk for Malnutrition within 24 Hours of a 
Malnutrition Screening;
     Nutrition Care Plan for Patients Identified as 
Malnourished after a Completed Nutrition Assessment;
     Appropriate Documentation of a Malnutrition Diagnosis;
     Tobacco Use Screening (TOB-1);
     Tobacco Use Treatment Provided or Offered (TOB-2)/Tobacco 
Use Treatment (TOB-2a);
     Tobacco Use Treatment Provided or Offered at Discharge 
(TOB-3)/Tobacco Use Treatment at Discharge (TOB-3a);
     Alcohol Use Screening (SUB-1);
     Alcohol Use Brief Intervention Provided or Offered (SUB-
2)/Alcohol Use Brief Intervention (SUB-2a); and
     Alcohol & Other Drug Use Disorder Treatment Provided or 
Offered at Discharge (SUB-3)/Alcohol & Other Drug Use Disorder 
Treatment at Discharge (SUB-3a).
a. Potential Inclusion of the Quality of Informed Consent Documents for 
Hospital-Performed, Elective Procedures Measure
(1) Background
    The process and documentation of informed consent for surgical 
procedures is an ethical obligation and legal mandate intended to 
uphold patient autonomy. It is also a standard part of clinical 
practice performed prior to most procedures and therapies with material 
risks. This process provides information to patients about the 
associated risks and benefits, alternative treatment options, and what 
to expect during and after the procedure. As described in the 
literature and reported by patients, comprehensive informed consent 
documents can improve patient comprehension and satisfaction, and 
support patients in making decisions that are aligned with their 
expectations, preferences, and 
goals.147 148 149 150 151 152 153
---------------------------------------------------------------------------

    \147\ Arnold SV, Decker C, Ahmad H, et al. Converting the 
informed consent from a perfunctory process to an evidence-based 
foundation for patient decision making. Circ Cardiovasc Qual 
Outcomes. 2008;1(1):21-28.
    \148\ Zuckerman MJ, Shen B, Harrison ME, et al. Informed consent 
for GI endoscopy. Gastrointestinal endoscopy. 2007;66(2):213-218.
    \149\ Wu HW, Nishimi RY, Page-Lopez CM, Kizer KW. Improving 
Patient Safety Through Informed Consent for Patients with Limited 
Health Literacy. An implementation report. National Quality Forum; 
2005. Available at: http://www.qualityforum.org/Publications/2005/09/Improving_Patient_Safety_Through_Informed_Consent_for_Patients_with_Limited_Health_Literacy.aspx. Accessed: July 5, 2016.
    \150\ Schenker Y, Fernandez A, Sudore R, Schillinger D. 
Interventions to improve patient comprehension in informed consent 
for medical and surgical procedures: a systematic review. Medical 
decision making: an international journal of the Society for Medical 
Decision Making. 2011;31(1):151-173.
    \151\ Tait AR, Voepel-Lewis T, Malviya S, Philipson SJ. 
Improving the readability and processability of a pediatric informed 
consent document: effects on parents' understanding. Archives of 
pediatrics & adolescent medicine. 2005;159(4):347-352.
    \152\ Kinnersley P, Phillips K, Savage K, et al. Interventions 
to promote informed consent for patients undergoing surgical and 
other invasive healthcare procedures. The Cochrane database of 
systematic reviews. 2013;7:Cd009445.
    \153\ Lorenzen B, Melby CE, Earles B. Using principles of health 
literacy to enhance the informed consent process. AORN journal. 
2008;88(1):23-29.
---------------------------------------------------------------------------

    Despite their importance, and our regulations in the Conditions for 
Participation Guidelines,\154\ informed consent documents are 
frequently generic, lack information that is relevant to the procedure, 
and include illegible, hand-written information. Moreover, patients are 
often given and asked to sign the informed consent document minutes 
before the start of a procedure when they are most vulnerable and least 
likely to ask questions.
---------------------------------------------------------------------------

    \154\ Sec.  482.24, Sec.  482.51, Sec.  482.90, Sec.  482.98, 
Sec.  482.102.
---------------------------------------------------------------------------

    Therefore, we developed the Measure of Quality of Informed Consent 
Documents for Hospital-Performed, Elective Procedures (hereinafter 
referred to as, Quality of Informed Consent Documents measure). This 
measure was developed in conjunction with feedback from patients and 
patient advocates convened by the measure developers, all of whom 
affirmed that the measure captured the most salient elements of 
informed consent documents, and represented a minimum, though 
significant, standard all hospitals should meet. We recognize the 
Quality of Informed Consent Documents measure does not capture all 
aspects of the informed consent process or all aspects of quality 
related to patient engagement in shared decision making. However, we 
view the Quality of Informed Consent Documents measure as a critical 
first step to incentivize hospitals to improve the informed consent 
process and to ensure patients receive basic information in a written 
format which is understandable, legible and presented with sufficient 
time allowed for questions and deliberation. The members of the patient 
workgroup involved in measure development also agreed with this 
determination and supported the measure.
    We are considering including the Quality of Informed Consent 
Documents measure in the Hospital IQR Program in future rulemaking.
(2) Overview of Measure
    Improving the quality of informed consent documents is fundamental 
step for advancing patient-centered decision 
making.155 156 157 158 159 160 The written quality of 
informed consent documents is a critical component of the informed 
consent process, and hospitals have a role in ensuring their patients 
have the information they need in a readable form and with time to 
consider their options. We expect the Quality of Informed Consent 
Documents measure will help to pave the way for future measures which 
evaluate other components of the informed consent process, including 
shared decision-making.
---------------------------------------------------------------------------

    \155\ Spatz ES, Krumholz HM, Moulton BW. The new era of informed 
consent: Getting to a reasonable-patient standard through shared 
decision making. JAMA. 2016;315(19):2063-2064.
    \156\ Kinnersley P, Phillips K, Savage K, et al. Interventions 
to promote informed consent for patients undergoing surgical and 
other invasive healthcare procedures. The Cochrane database of 
systematic reviews. 2013;7:Cd009445.
    \157\ Robb WJ, Carroll C, Kuo C. Orthopaedic Surgical Consent: 
The First Step in Safety. American Academy of Orthopaedic Surgeons 
(AAOS) Now. 2015;9(9).
    \158\ Arnold SV, Decker C, Ahmad H, et al. Converting the 
informed consent from a perfunctory process to an evidence-based 
foundation for patient decision making. Circ Cardiovasc Qual 
Outcomes. 2008;1(1):21-28.
    \159\ The Joint Commission. Quick Safety: An advisory on safety 
and quality issues. Informed consent: More than getting a signature. 
February 2016. Available at: https://www.jointcommission.org/assets/1/23/Quick_Safety_Issue_Twenty-One_February_2016.pdf. Accessed: July 
5, 2016.
    \160\ Krumholz HM. Informed consent to promote patient-centered 
care. JAMA. 2010;303(12):1190-1191.
---------------------------------------------------------------------------

    The measure focuses on the quality of informed consent documents 
for elective procedures. Further, with a focus on ensuring that each 
person and family is engaged as partners in their care, this measure 
addresses the NQS priority of promoting effective communication and 
coordination of care. Elective procedures were chosen as the focus of 
the measure because all elective procedures have informed consent 
documents as standard practice. In addition, we believe patients 
undergoing elective, rather than emergent surgery, will benefit from a 
measure aimed at optimizing communications about the risk, benefits, 
and purpose of the procedure because there are typically reasonable 
alternatives to elective procedures and different patients may choose 
different options depending on their preferences,

[[Page 20053]]

values, and goals. Further, elective procedures usually allow ample 
decision time and do not require expedited explanations and decisions 
due to life threatening situations.
    The measure would require hospitals to evaluate a sample of their 
informed consent documents from elective procedures performed among 
Medicare FFS patients aged 18 years and older hospitalized at acute 
care hospitals. The measure uses administrative claims to select a 
stratified random sample of elective procedures across specialties that 
are performed in hospitals. The informed consent documents associated 
with these procedures are reviewed and abstracted by trained personnel 
using a validated Abstraction Tool. Abstractors are trained using 
standard instructions, videos, and test documents with audit review we 
have developed. For additional information about the training materials 
and procedures, see the measure methodology report on our Web site 
available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. 
After completing this training, we estimate the abstraction time is 
approximately four minutes per document and the interrater reliability 
is high. The tool captures 10 items which are fundamental to informed 
consent document quality. Documents are scored on a scale of 0 to 20, 
with 20 representing better quality. Document scores are then 
aggregated to calculate hospital-level performance on the measure. The 
measure is not risk adjusted because patient characteristics should not 
impact informed consent document quality. We are inviting public 
comment on how the measure would be reported and implemented.
    We developed the Quality of Informed Consent Documents measure in 8 
hospitals, and demonstrated the measure to be valid, reliable, feasible 
and of minimal hospital burden. We then tested the measure among a 
sample of 25 additional hospitals, which also showed feasibility and 
low burden on hospitals. In both the development and testing samples, 
we observed overall low performance on the measure, with intra-hospital 
and inter-hospital variation in the quality of consent documents. The 
Quality of Informed Consent Documents measure aligns with our goal to 
increase opportunities for shared decision making with patients and the 
NQS priorities of: (1) Ensuring person- and family-centered care; and 
(2) promoting effective communication and coordination of care. For 
details on development and testing, we refer readers to the measure 
methodology report on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(3) Data Sources
    The measure uses two sources of data to calculate the Quality of 
Informed Consent Documents measure: Medicare Part A administrative 
claims, specified below, to generate a random sample of qualified 
elective procedures performed at each hospital; and a sample of each 
hospital's informed consent documents and the first page of the 
procedure/operative report for those elective procedures. Basing the 
sample selection on administrative data to identify medical records of 
elective procedures ensures a diversity of informed consent documents 
on a range of procedures will be reviewed, and minimizes selection 
bias.
(4) Outcome
    The outcome for the Quality of Informed Consent Documents measure 
is a quality score which is calculated by aggregating the scores for 
individual informed consent documents from each hospital assessed with 
the Abstraction Tool. The items selected for inclusion in the 
Abstraction Tool were important to patients, supported by evidence in 
the literature and published standards and guidelines, applicable to 
the cohort of elective procedures, easily abstracted from medical 
records without undue burden on patients and hospitals, and feasibly 
and reliably measured. These elements are also meaningful components of 
informed consent document quality from the patient perspective. 
Further, we received consistent feedback from all participating 
hospitals during testing of this measure that this information was 
useful for hospitals' efforts to improve their informed consent 
documents and processes by identifying important gaps in existing 
documentation. Quality scores on each informed consent document will be 
aggregated to derive a hospital-level performance score.
    The measure outcome does not overlap with our current regulations 
holding hospitals accountable for informed consent pursuant to our 
Conditions of Participation or The Joint Commission 2009 Requirements 
Related to the Provision of Culturally Competent Patient-Centered Care 
Hospital Accreditation Program (HAP),\161\ and fully aligns with State 
laws within the few States which have more specified informed consent 
rules. Current Conditions of Participation regulations focus on whether 
informed consent occurred and emphasize informed consent documents 
should include the name of the hospital, procedure, and practitioner 
performing the procedure along with a statement certifying the 
procedure, anticipated benefits, material risks, and alternative 
treatment options were explained to the patient or the patient's legal 
representative.\162\ The Joint Commission offers additional guidance 
for best practices.\163\ However, there are no regulations to ensure 
hospitals provide patients with adequate written information about the 
procedure. We believe the use of this measure would supplement and 
augment existing standards by incentivizing hospitals to provide a 
minimum set of critical information about an elective procedure to the 
patient within a reasonable time before the patient undergoes the 
procedure and to enable the patient to receive and process the 
information prior to signing and providing informed consent.
---------------------------------------------------------------------------

    \161\ The Joint Commission. Quick Safety: An advisory on safety 
and quality issues. Informed consent: More than getting a signature. 
February 2016. Available at: https://www.jointcommission.org/assets/1/23/Quick_Safety_Issue_Twenty-One_February_2016.pdf. Accessed: July 
5, 2016.
    \162\ Department of Health & Human Services. Centers for 
Medicare & Medicaid Services (CMS). CMS Manual System. Regulations 
and Interpretive Guidelines for Hospitals--Condition of 
Participation: Medical Record Services. Sections 482.13(b), 
482.24(b), 482.51(b)(2). 2008. Available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/R37SOMA.pdf. Accessed: July 5, 2016.
    \163\ https://www.jointcommission.org/assets/1/23/Quick_Safety_Issue_Twenty-One_February_2016.pdf.
---------------------------------------------------------------------------

(5) Cohort
    The cohort for the Quality of Informed Consent Documents measure 
includes informed consent documents for a randomly selected sample of 
qualifying elective surgical procedures performed within non-federal 
acute care hospitals performed on Medicare FFS beneficiaries, aged 18 
years and over who are enrolled in Part A at the time of the procedure. 
The list of qualifying elective procedures includes procedures for 
which informed consent is standard practice. The list of qualifying 
procedures is broad, capturing 10 specialties and various levels of 
invasiveness. For example, electively-performed knee replacements and 
coronary artery bypass surgeries are both included. For more 
information about the list of qualifying procedures, we refer readers 
to the measure methodology report on our Web site available at: http://
www.cms.gov/

[[Page 20054]]

Medicare/Quality-Initiatives-Patient-Assessment-Instruments/
HospitalQualityInits/Measure-Methodology.html.
(6) Inclusion and Exclusion Criteria
    Qualifying electively-performed procedures were identified using 
the AHRQ Clinical Classification Software (CCS) codes \164\ from the 
list of potentially planned procedures and the list of acute discharge 
diagnosis AHRQ CCS codes in the CMS Planned Readmission Algorithm. The 
Planned Readmission Algorithm used for existing CMS readmission 
measures was refined in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50211 through 50216). A complete description of the CMS Planned 
Readmission Algorithm, which includes lists of potentially planned 
procedures and acute discharge diagnoses, can be found on the CMS Web 
site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    \164\ Clinical Classifications Software (CCS) for ICD-9-CM Fact 
Sheet. Accessed at: https://www.hcup-us.ahrq.gov/toolssoftware/ccs/ccsfactsheet.jsp.
---------------------------------------------------------------------------

    The CMS Planned Readmission Algorithm identifies a list of 
potentially planned procedures and a list of acute discharge diagnosis 
codes. Admissions that have a potentially planned procedure without an 
acute discharge diagnosis code are considered planned according to the 
CMS Planned Readmission Algorithm. The Quality of Informed Consent 
Documents measure does not use the Planned Readmission Algorithm to 
identify planned versus unplanned readmissions. The measure builds upon 
the established approach of the Planned Readmission Algorithm to 
identify only electively-performed procedures because planned 
procedures are also commonly electively-performed. We used clinical 
expert review to further narrow the list of potentially planned 
procedures from the Planned Readmission Algorithm to those which are 
consistently elective-performed and likely to have informed consent 
obtained prior to every procedure.
    The measure excludes highly specialized procedures, such as organ 
transplantation because they typically use unique informed consent 
processes; non-invasive radiographic diagnostic tests because informed 
consent standards may be different than standards for invasive 
procedures and surgeries; and procedures that are conducted over 
several encounters since informed consent is likely only conducted 
prior to the first procedure. For more information about the list of 
qualifying procedures and excluded procedures, we refer readers to the 
measure methodology report on our Web site available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(7) Abstraction Tool
    The Abstraction Tool is an instrument used to evaluate the quality 
of a hospitals' informed consent documents based on a score of 0-20; a 
higher score indicates better quality. The Abstraction Tool is a 
checklist evaluating the presence of the following items in the consent 
document: A description of the procedure; how the procedure will be 
performed; the rationale for why the procedure will be performed; and 
the risks, benefits, and alternatives to the procedure. The Abstraction 
Tool also includes an item to assess whether patients received the 
document at least one calendar day in advance of the procedure date. 
Inclusion of the timing item ensures informed consent documents are not 
shared for the first time with patients on the day of the procedure. 
The abstraction tool provides an option for hospitals to note if a 
patient chose to opt out of signing their informed consent document 24 
or more hours before surgery, enabling full credit to be given to the 
hospital for this item in that scenario. In addition, the tool gives 
credit for sharing the document prior to the day of the procedure, even 
if the patient does not sign the document until the day of the 
procedure. These aspects were raised with the patient and patient 
advocate workgroup and deemed to be more flexible to a range of 
scenarios and contexts, and therefore more patient-sensitive. To assess 
the reliability of the Abstraction Tool, we examined the inter-rater 
reliability (the degree of agreement among abstractors) of each item on 
the Abstraction Tool as well as the document scores produced by the 
Abstraction Tool for 80 of the 800 documents tested from the pilot 
project hospitals. For additional information about testing refer to 
our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Abstractors enter responses for each item evaluated in each 
informed consent document. We would provide comprehensive standardized 
training materials including an instruction manual with guidance and 
examples of what meets criteria for each item in the Abstraction Tool, 
a training video, and sample test documents. This process has 
previously been piloted and found to be effective and efficient. For 
more information about the Abstraction Tool and instructions manual, we 
refer readers to our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(8) Calculating the Measure Score
    The measure will be calculated by aggregating the scores of the 
sample of hospitals' informed consent documents, as assessed using the 
Abstraction Tool. Based on input from stakeholders during the measure 
development stage, including the Technical Expert Panel convened by the 
measure developer, and feedback from patients and patient advocates, we 
are considering reporting the proportion of a hospital's sampled 
informed consent documents that achieve a pre-specified threshold 
score. For example, the proportion of a hospital's sampled informed 
consent documents which meet a minimum, patient-centered standard. We 
are considering setting the threshold score at 10 (out of 20 total 
points), and increasing the threshold over time. The stakeholders we 
sought input from during the measure development process agreed with 
incrementally increasing the threshold score over time. This would 
establish an initial target that hospitals could feasibly meet in a 
short period of time, and allow for further informed consent 
improvement. Ultimately, we envision this measure would either evolve 
to include additional components or could complement a measure of 
shared decision making when an appropriate measure becomes available 
for potential use in the Hospital IQR Program.
    Using this scoring approach, performance scores among the 25 
hospitals in the testing sample were poor. The median hospital level 
score, based on evaluation of 100 informed consent documents, ranged 
from 0 (95 percent CI: 0-5) to 12 (95 percent CI: 10-12) out of a total 
of 20 points. The proportion of documents achieving a threshold score 
of at least 10 (out of 20 points) per hospital, ranged from 0 percent 
to 70 percent, demonstrating that the quality of informed consent 
documents varies both within and between hospitals.
(9) Implementation
    We are considering two implementation approaches. One approach 
implements the measure in a

[[Page 20055]]

centralized fashion where hospitals send their sample of informed 
consent documents directly to CMS or to an entity contracted by us for 
central abstraction and measure score calculation. Another approach is 
local; hospitals abstract their own informed consent documents and 
transmit the abstraction results to CMS for measure calculation.
    During measure development, we worked closely with hospitals to 
evaluate the burden associated with each approach. The greatest burden 
was associated with copying and electronically sending informed consent 
documents, making centralized abstraction a more burdensome option for 
hospitals. Using a brief formal training process and materials to 
prepare abstractors, we found hospital abstractors can reliably 
abstract documents at a rate of 15-20 documents per hour or 3-4 minutes 
per document. The final sample size required for measure reporting has 
not been determined but will not exceed 100 documents and may be 
substantially fewer than 100 documents per hospital.
    Implementation would entail identifying a hospital's elective 
procedures which meet eligibility for the Quality of Informed Consent 
Documents measure using administrative claims data. We would then 
provide hospitals with a list of procedures and encounter dates 
selected from a hospital's eligible elective procedures, along with the 
HIC number and date of birth of the patient who had the procedure in 
order to identify the medical record, the qualifying procedure, and the 
corresponding informed consent document and operative report. Hospitals 
would then locally evaluate the informed consent documents for these 
procedures using the Abstraction Tool and transmit the results of the 
abstraction through a secure data file transfer or similar process, 
such as the QualityNet Secure Portal or the External File Online Tool. 
We would then calculate and report the results as the proportion of a 
hospital's sampled informed consent documents achieving the threshold 
score of 10 out of 20. Hospitals could submit data on the prior year's 
informed consent documents on an annual basis or more frequently, such 
as quarterly or every six months, allowing for more rapid cycle 
improvements in measure performance. If we were to pursue a local 
abstraction approach, we would also consider expanding the data 
validation process in the Hospital IQR Program to ensure that 
hospitals' abstraction work was accurate, requiring hospitals to submit 
select informed consent documents to us or an entity contracted by us 
via a secure mechanism for review and validation.
    The Quality of Informed Consent Documents for Hospital-Performed, 
Elective Procedures (MUC16-262) measure is included in a publicly 
available document entitled ``2016-2017 Spreadsheet of Final 
Recommendations to HHS and CMS,'' which is available on the NQF Web 
site.\165\ The MAP did not support this measure, indicating concern 
about the lack of evidence that implementation will affect hospital 
practices and the complexity of existing guidelines, regulations and 
State laws related to informed consent. Further, the MAP noted that 
this measure captures the quality of informed consent documents rather 
than the quality of communication between patients and their 
providers.\166\ However, the MAP noted that this measure concept is 
critical for shared decision making, and recommended that future 
measures on informed consent be patient-centered. In addition, the MAP 
noted that this measure should demonstrate reliability and validity, at 
the facility level, in the hospital setting, prior to being suitable 
for inclusion in the Hospital IQR Program measure set. Lastly, the MAP 
recommended that the measure be submitted to NQF for review and 
endorsement.\167\
---------------------------------------------------------------------------

    \165\ ``2016-2017 Spreadsheet of Final Recommendations to HHS 
and CMS, available at: http://www.qualityforum.org/map/.
    \166\ ``2017 Considerations for Implementing Measures 
Hospitals--Final Report,'' available at: http://www.qualityforum.org/map/.
    \167\ Ibid.
---------------------------------------------------------------------------

    We are inviting public comment on multiple aspects of the measure. 
Specifically, we are seeking public comment on the potential scoring 
approach described above, reporting the proportion of a hospital's 
sampled informed consent documents, and setting a threshold score of 10 
out of 20. In addition, we are seeking input on how the measure should 
be implemented, either through local abstraction where hospitals 
provide us with the results of their own abstraction work or by 
transmitting informed consent documents to us for centralized 
abstraction. We also are seeking public comment on the frequency of 
measure reporting for this measure, whether annually, quarterly or at 
some other interval. More frequent reporting updates would require 
hospitals to abstract documents and submit the results more often than 
less frequent reporting. Finally, we are seeking input on a potential 
validation process for the Quality of Informed Consent Documents 
measure.
b. Potential Inclusion of Four End-of-Life (EOL) Measures for Cancer 
Patients
(1) Background
    The quality of palliative and end-of-life care has been identified 
as a measurement gap in the Hospital IQR Program.\168\ End-of-life care 
may be defined as ``comprehensive care that addresses medical, 
emotional, spiritual, and social needs during the last stages of a 
person's terminal illness.'' \169\ While end-of-life care may include 
palliative care, palliative care is generally defined as multi-faceted, 
holistic care that anticipates, prevents, and alleviates 
suffering.\170\ Both palliative and end-of-life care can be provided 
when a patient is receiving hospice services, but it is not necessary 
for a patient to be admitted to hospice to receive such care. Hospitals 
are encouraged to counsel patients about palliative and end-of-life 
care; however, the National Academy of Medicine (NAM) of the National 
Academies has noted that ``too few patients and families receive this 
help [palliative and end-of life care] in a timely manner,'' \171\ 
despite evidence that this care improves patient quality of life. In 
the same report, the NAM proposed a number of core components of 
quality palliative and end-of-life care. These proposals included 
offering a referral to hospice if a patient ``has a prognosis of 6 
months or less'' and regular revision of a patient's care plan to 
address the patient's changing needs, as well as the changing needs of 
the patient's caregivers.\172\ The four palliative and end-of-life 
measures described below seek to improve the quality of care for cancer 
patients.
---------------------------------------------------------------------------

    \168\ National Quality Forum, Final Report. Palliative and End-
of-Life Care 2015-2016, available at: http://www.qualityforum.org/Palliative_and_End-of-Life_Care_Project_2015-2016.aspx.
    \169\ Ibid.
    \170\ Ibid.
    \171\ Committee on Approaching Death: Addressing Key End of Life 
Issues, Institute of Medicine: Dying in America: Improving Quality 
and Honoring Individual Preferences Near the End of Life. Washington 
DC, National Academies Press, 2015.
    \172\ Ibid.
---------------------------------------------------------------------------

(2) Overview of Measures
    All four of these end-of-life measures seek to assess the quality 
of end-of-life care for patients who died of cancer in order to improve 
the quality of end-of-life care for future cancer patients. As such, 
the four palliative and end-of-life measures all address the NQS 
priority of communication and care coordination. The Proportion of 
Patients Who Died from Cancer Receiving Chemotherapy in the Last 14 
Days of Life (EOL-Chemo) (NQF #0210) measure evaluates the

[[Page 20056]]

proportion of patients who died from cancer who received chemotherapy 
in the last 14 days of life. This measure was finalized for CY 2017 for 
the Merit Based Incentive Payment Program (MIPS) (81 FR 77672). The 
Proportion of Patients Who Died from Cancer Not Admitted to Hospice 
(EOL-Hospice) (NQF #0215) measure assesses the proportion of patients 
who died from cancer who were not admitted to hospice and evaluates 
whether or not patients were admitted to hospice. The Proportion of 
Patients Who Died from Cancer Admitted to Hospice for Less Than Three 
Days (EOL-3DH) (NQF #0216) measure evaluates whether patients who were 
admitted to hospice were admitted to hospice late in the course of 
their illness, defined as within three days of their death. The 
Proportion of Patients Who Died from Cancer Admitted to the ICU in the 
Last 30 Days of Life (EOL-ICU) (NQF #0213) measure assesses whether 
cancer patients were admitted to the ICU in the last 30 days of their 
lives.
    These measures were reviewed by the MAP in December of 2016 for the 
PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program (MUC16-
271, MUC16-273, MUC16-274, and MUC16-275).\173\ The MAP Hospital 
Workgroup supported the inclusion of these measures in the PCHQR 
Program. Specifically, the MAP stressed the importance of end-of-life 
care as an area of cancer care that needs improvement and noted that 
these measures could help improve the patient and caregiver experience. 
The MAP also noted these measures could help encourage the use of 
hospice care and help avoid aggressive treatment in the last days of 
life, as unnecessary treatment at the end of life has been found to 
negatively impact a person's quality of life.\174\ We note that prior 
to implementation in the Hospital IQR Program, these measures would 
require a subsequent review from the MAP to assess appropriateness for 
programmatic inclusion.
---------------------------------------------------------------------------

    \173\ 2016-2017 Spreadsheet of Final Recommendations to HHS and 
CMS, Available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367.
    \174\ ``2017 Considerations for Implementing Measures Hospitals-
Final Report,'' available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    We believe that these measures would be suitable for the Hospital 
IQR Program because they provide insight on the quality of end-of-life 
care for cancer patients provided in inpatient settings other than at 
PPS-exempt cancer hospitals. Currently, the Hospital IQR Program 
measure set does not contain any measure that assesses end-of-life 
care. As such, the future inclusion of these measures could promote the 
expansion of the Hospital IQR Program measure set to include a more 
robust set of measures that evaluate end-of-life care and address the 
NQS priority of improving person and family engagement. In addition, 
because these measures are specific to cancer patients, future 
inclusion would promote programmatic alignment between the Hospital IQR 
and PCHQR Programs should these measures be finalized as proposed in 
section IX.B.4.b.of the preamble of this proposed rule for inclusion in 
the PCHQR Program.
    Additional information on these measures is available at: http://www.qualityforum.org/Publications/2016/12/Palliative_and_End-of-Life_Care_2015-2016.aspx.
    We are inviting public comment on the possible future inclusion of 
one or more of these end-of-life measures in the Hospital IQR Program.
c. Potential Inclusion of Two Nurse Staffing Measures
(1) Background
    Nursing care is a core service of hospitals, and accordingly, 
hospital nurse staffing practices are increasingly recognized as a tool 
to improve the quality and value of care.\175\ Studies have shown there 
is a link between nurse staffing and care quality and patient outcomes. 
For example, the AHRQ conducted a systematic review and meta-analysis 
examining the relationship between nurse staffing and patient outcomes. 
The review of 96 studies, published between 1990 and 2006, found that 
increased nurse staffing is associated with a reduction in hospital-
related mortality and adverse patient events, such as respiratory 
failure, cardiac arrest, and hospital-acquired conditions.\176\ A 
review of studies examining the impact of nurse staffing on hospital 
costs and patient length of stay found that an increased level of 
registered nurse (RN) staffing may result in reduced patient length of 
stay and hospital costs.\177\ Further, more recent literature has 
demonstrated that nursing skill mix (licensure level) and increased RN 
nursing hours are associated with decreased rates of patient falls, 
pressure ulcers, urinary tract infections, and bloodstream 
infections.178 179 180
---------------------------------------------------------------------------

    \175\ Institute of Medicine. (2011). The future of nursing: 
Leading change, advancing health. Washington, DC: National Academies 
Press.
    \176\ Kane, R. L., Shamliyan, T. A., Mueller, C., Duval, S., & 
Wilt, T. J. (2007). The association of registered nurse staffing 
levels and patient outcomes: systematic review and meta-analysis. 
Medical Care, 45(12), 1195-1204.
    \177\ Thungiaroenjul, P., Cummings, G.G., Embleton, A. (2007). 
The impact of nurse staffing on hospital costs and patient length of 
stay: A systematic review. Nursing Economics, 25(5).
    \178\ Tzeng, H.-M., Titler, M. G., Ronis, D. L., & Yin, C.-Y. 
(2012). The contribution of staff call light response time to fall 
and injurious fall rates: an exploratory study in four US hospitals 
using archived hospital data. BMC Health Services Research, 12, 84. 
Available at: http://doi.org/10.1186/1472-6963-12-84.
    \179\ Esparza, S. J., Zoller, J. S., White, A. W., & Highfield, 
M. E. F. (2012). Nurse staffing and skill mix patterns: Are there 
differences in outcomes? Journal of Healthcare Risk Management: The 
Journal of the American Society for Healthcare Risk Management, 
31(3), 14-23. Availab le at: http://doi.org/10.1002/jhrm.20092.
    \180\ Yang, P.-H., Hung, C.-H., Chen, Y.-M., Hu, C.-Y., & Shieh, 
S.-L. (2012). The impact of different nursing skill mix models on 
patient outcomes in a respiratory care center. Worldviews on 
Evidence-Based Nursing/Sigma Theta Tau International, Honor Society 
of Nursing, 9(4), 227-233. Available at: http://doi.org/10.1111/j.1741-6787.2012.00246.x.
---------------------------------------------------------------------------

    We believe there is an opportunity for hospitals to develop nurse 
staffing strategies to improve quality and the value of care. The 
inclusion of nurse staffing measures in the Hospital IQR Program would 
allow hospitals to assess how their nurse staffing and skill mix 
compare to similar hospitals and State and national levels, as well as 
encourage hospitals to develop optimal nurse staffing plans that meet 
the needs of their patients and improve quality of care. Because of the 
important role of nursing in providing high value care, we are seeking 
public comment on including two nurse staffing measures in the Hospital 
IQR Program: (1) Skill Mix (Registered Nurse [RN], Licensed Vocational/
Practical Nurse [LVN/LPN], Unlicensed Assistive Personnel [UAP], and 
Contract) (Nursing Skill Mix) Measure (NQF #0204); and (2) Nursing 
Hours per Patient Day Measure (NQF #0205).
    These two measures (Skill Mix (Registered Nurse [RN], Licensed 
Vocational/Practical Nurse [LVN/LPN], Unlicensed Assistive Personnel 
[UAP], and Contract) (Nursing Skill Mix) Measure (NQF #0204) (MUCE0204) 
and Nursing Hours per Patient Day Measure (NQF #0205) (MUCEO205)), are 
included in a publicly available document entitled ``Spreadsheet of MAP 
2015 Final Recommendations,'' which is available on the NQF Web 
site.\181\ These measures address the NQS priority of effective 
prevention and treatment, and were reviewed by the MAP in 2014. The MAP 
noted the need for resolution of data issues, specifically that 
hospitals participating in the National Database of Nursing Quality 
Indicators[supreg] (NDNQI[supreg]) program can have

[[Page 20057]]

their data directly shared with CMS while those that do not currently 
participate in that program have the opportunity to send their data 
directly to CMS. In addition, the MAP noted that, at the time, there 
was no gold standard for these measures, and thus it is difficult to 
access relative performance on these measures.\182\ The final 
recommendation from that review was to conditionally support the 
inclusion of these measures, contingent upon review and endorsement 
from the NQF. We note that these measures initially obtained NQF 
endorsement on August 5, 2009, and after subsequent review by NQF for 
aggregation at the hospital level, the measures retained their 
endorsement as of December 10, 2015.\183\ Further, we note that 
approximately half of hospitals are already reporting this information 
to the NDNQI[supreg],\184\ founded by the American Nurses Association 
(ANA).\185\ NDNQI[supreg] data are not publicly reported.
---------------------------------------------------------------------------

    \181\ Spreadsheet of MAP 2015 Final Recommendations, available 
at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367.
    \182\ MAP 2014-2015 Preliminary Recommendations, available at: 
http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367.
    \183\ NQF Measures Database, ``Quality Positioning System,'' 
available at: http://www.qualityforum.org/QPS/204 and http://www.qualityforum.org/QPS/0205.
    \184\ NDNQI[supreg] database is one of the nation's largest 
repositories of data on nurse-sensitive quality and safety measure. 
Approximately 2000 hospitals participate in the program.
    \185\ Press Ganey Nursing Quality (NDNQI), available at: http://www.pressganey.com/solutions/clinical-quality/nursing-quality.
---------------------------------------------------------------------------

(2) Skill Mix (Registered Nurse [RN], Licensed Vocational/Practical 
Nurse [LVN/LPN], Unlicensed Assistive Personnel [UAP], and Contract) 
(Nursing Skill Mix) Measure (NQF #0204)
(a) Overview of Measure
    The NQF-endorsed Nursing Skill Mix measure assesses the percentage 
of productive nursing care hours worked by nursing staff with direct 
patient care responsibilities for each nursing licensure category (RN, 
LPN/LVN, and UAP) and staff employment status (contract/agency versus 
employee), by eligible hospital unit. The intent of this measure is to 
enable hospitals to track and assess their nursing skill mix, given 
that research demonstrates a relationship between skill mix and certain 
quality outcomes.\186\
---------------------------------------------------------------------------

    \186\ Kane, R. L., Shamliyan, T. A., Mueller, C., Duval, S., & 
Wilt, T. J. (2007). The association of registered nurse staffing 
levels and patient outcomes: systematic review and meta-analysis. 
Medical Care, 45(12), 1195-1204.
---------------------------------------------------------------------------

    The measure focuses on the structure of care quality and includes 
the skill mix for adult and pediatric medical-surgical hospital units. 
Medical-surgical hospital units include hospitals areas for the 
evaluation of patients with medical and/or surgical conditions. 
Eligible adult and pediatric medical-surgical units can be mapped to 
the CDC's National Healthcare Safety Network (NHSN) Healthcare Service 
locations codes as defined in the NHSN Patient Safety Component 
Manual.\187\ Additional unit types, such as adult and pediatric 
critical-care, step-down, medical, and surgical units could be 
included, but at this time, we believe that limiting the measure to 
adult and pediatric medical-surgical units would allow hospitals to 
become accustomed to collecting and reporting staffing data while also 
providing important staffing information to consumers. However, we are 
seeking public comment on how many inpatient units to include and which 
units should be prioritized.
---------------------------------------------------------------------------

    \187\ NHSN Patient Safety Component Manual https://www.cdc.gov/nhsn/about-nhsn/index.html [under ``Related Links''].
---------------------------------------------------------------------------

    Productive nursing care hours are defined as the hours worked by 
nursing staff (RN, LPN/LVN, and UAP) with direct patient care 
responsibilities, including unbudgeted overtime or scheduled hours. 
Direct patient care responsibilities are nursing activities performed 
by unit-based staff in the presence of the patients and activities that 
occur away from the patient that are patient related, such as the 
following:
     Medication administration.
     Nursing treatments.
     Nursing rounds.
     Admission, transfer, and discharge activities.
     Patient education.
     Patient communication.
     Coordination of patient care.
     Documentation time.
     Treatment planning.
     Patient screening and assessment.
    Unlicensed assistive personnel (UAP) are defined as individuals 
trained to function in an assistive role to nursing in the provision of 
patient care, as delegated by and under the supervision of a registered 
nurse. UAPs include nursing assistants, patient care technicians/
assistants, and graduate nurses not yet licensed who have completed 
orientations.
    The measure includes: All nursing staff employed by the hospital; 
temporary staff who are not employed by the hospital (contract or 
agency); and float staff who are hospital employees temporarily 
assigned to provide direct patient care on an eligible unit other than 
their usual unit of employment.
(b) Data Source
    Data collection for this structural measure would occur quarterly 
for each eligible unit from January 1 through December 31 of each 
calendar year, with data submission occurring 4.5 months after the end 
of each reporting quarter. An eligible unit must be open, with patients 
present, at least one month during the reporting period to be included. 
These data would be collected via a web-based tool available on the 
QualityNet Web site.
(c) Measure Calculation
    For staff with direct patient care responsibilities, the measure 
assesses the percentage of total productive nursing hours worked by 
either employee or contract RNs, LPN/LVNs, and UAPs, as well as at the 
percentage of total productive nursing hours worked for contract or 
agency staff. Accordingly, four rates (percentages) are determined for 
each eligible hospital unit, one for each type of nursing staff, and 
one for contract and agency nursing staff. The four separate rates are 
as follows: (1) RN hours--Productive nursing care hours worked by RNs 
(employee and contract) with direct patient care responsibilities for 
each eligible inpatient unit/the total number of productive hours 
worked by employee or contract nursing staff with direct patient care 
responsibilities (RN, LPN/LVN, and UAP) for each eligible inpatient 
unit; (2) LPN/LVN hours--Productive nursing care hours worked by LPNs/
LVNs (employee and contract) with direct patient care responsibilities 
for each eligible inpatient unit/the total number of productive hours 
worked by employee or contract nursing staff with direct patient care 
responsibilities (RN, LPN/LVN, and UAP) for each eligible inpatient 
unit; (3) UAP hours--Productive nursing care hours worked by UAP 
(employee and contract) with direct patient care responsibilities for 
each eligible inpatient unit/the total number of productive hours 
worked by employee or contract nursing staff with direct patient care 
responsibilities (RN, LPN/LVN, and UAP) for each eligible inpatient 
unit; and (4) Contract or agency hours--Productive nursing care hours 
worked by contract or agency staff nursing staff (RN, LPN/LVN, and UAP) 
with direct patient care responsibilities for each eligible inpatient 
unit/the total number of productive hours worked by employee or 
contract nursing staff with direct patient care responsibilities (RN, 
LPN/LVN, and UAP) for each eligible inpatient unit. The data collected 
and the rates calculated are aggregate nursing care hours worked by 
each licensure category, by unit type. Hospital rates are weighted for 
patient volume (patient days) to account for differences in unit sizes.

[[Page 20058]]

(d) Cohort
    Employee, contract, or agency RNs, LPN/LVNs, and UAPs with direct 
patient care responsibilities are included in the numerator and 
denominator statements. The measure numerator and denominator include 
nursing staff assigned to the eligible unit who have direct patient 
care responsibilities for greater than 50 percent of their shift who 
are counted in an eligible unit's staffing matrix, are replaced if they 
call in sick, and whose work hours are charged to the unit's cost 
center. The measure numerator and denominator exclude the following: 
Nursing staff with no direct patient care responsibilities whose 
primary responsibility is administrative in nature; specialty teams 
(for example, wound care), patient educators, or case managers who are 
not assigned to a specific unit; unit clerks, monitor technicians, and 
secretaries with no direct patient care responsibilities; sitters not 
providing routine UAP activities; therapy assistants; student nurses 
fulfilling educational requirements; and nursing staff undergoing 
orientation who are not included in the eligible units staffing matrix. 
For more information regarding the Nursing Skill Mix measure, we refer 
readers to the NQF measure information page available at: http://www.qualityforum.org/QPS/0204.
    We are inviting public comment on the future inclusion of the Skill 
Mix (Registered Nurse [RN], Licensed Vocational/Practical Nurse [LVN/
LPN], Unlicensed Assistive Personnel [UAP], and Contract) (Nursing 
Skill Mix) measure for the Hospital IQR Program. Specifically, we are 
seeking public comments on narrowing the number of hospital units 
included in the measures' calculation, which units we should consider 
for inclusion, and the burden of data collection on hospitals.
(3) Nursing Hours per Patient Day Measure (NQF #0205)
(a) Overview of Measure
    The NQF-endorsed Nursing Hours per Patient Day measure assesses the 
number of productive hours worked by both RNs and all nursing staff 
(RN, LPN/LVN, and UAP) with direct patient care responsibilities per 
patient day, by eligible hospital inpatient unit. The intent of this 
measure is to enable hospitals to track and assess the ratio of hours 
worked by nursing staff per patient day, given that research 
demonstrates a relationship between increased nursing hours and certain 
quality outcomes.
    The measure focuses on the structure of care quality and includes 
Nursing Hours per Patient Day for eligible adult and pediatric medical-
surgical inpatient hospital units. Medical-surgical hospital units 
include hospitals areas for the evaluation of patients with medical 
and/or surgical conditions. Eligible adult and pediatric medical-
surgical units can be mapped to the CDC's National Healthcare Safety 
Network (NHSN) Healthcare Service locations codes as defined in the 
NHSN Patient Safety Component Manual. Similar to the Nursing Skill Mix 
Measure, additional unit types, such as adult and pediatric critical-
care, step-down, medical, and surgical units could be included, but at 
this time, we believe that limiting the measure to adult and pediatric 
medical-surgical units would allow hospitals to become accustomed to 
collecting and reporting staffing data while also providing important 
staffing information to consumers. However, we are seeking comment on 
how many inpatient units to include and which units should be 
prioritized.
    Productive hours are defined as the hours worked by nursing staff 
(RN, LPN/LVN, and UAP) with direct patient care responsibilities, 
including overtime, not budgeted, or scheduled hours. Direct patient 
care responsibilities are nursing activities performed by unit-based 
staff in the presence of the patients and activities that occur away 
from the patient that are patient related, such as the following:

 Medication administration
 Nursing treatments
 Nursing rounds
 Admission, transfer, and discharge activities
 Patient education
 Patient communication
 Coordination of patient care
 Documentation time
 Treatment planning
 Patient screening and assessment

    UAP are individuals trained to function in an assistive role to 
nursing staff in the provision of patient care, as delegated by and 
under the supervision of a registered nurse. UAPs include nursing 
assistants, patient care technicians/assistants, and graduate nurses 
not yet licensed who have completed orientations.
    The measure includes all nursing staff employed by the hospital; 
temporary staff who are not employed by the hospital (contract or 
agency); and float staff who are hospital employees temporarily 
assigned to provide direct patient care on an eligible unit other than 
their usual unit of employment.
(b) Data Source
    Data collection for this structural measure for hospitals occur 
quarterly, for each eligible unit, from January 1 through December 31 
of each calendar year, with data submission occurring 4.5 months after 
the end of each reporting quarter. These data would be collected via a 
web-based tool available on the QualityNet Web site.
(c) Measure Calculation
    For staff with direct patient care responsibilities, the measure 
assesses the number of productive hours per patient day worked by both 
RNs and by total nursing staff (RNs, LPN/LVNs, and UAPs). Accordingly, 
two rates are determined for each eligible hospital unit. The two 
separate rates are as follows: (1) RN hours per patient day--Total 
number of productive hours worked by RN nursing staff (contract and 
employee) with direct patient care responsibilities for each eligible 
inpatient unit/total number of patient days for each eligible inpatient 
unit; and (2) Total nursing care hours per patient day--Total number of 
productive hours worked by RN, LPN/LVN, and UAP nursing staff (contract 
and employee) with direct patient care responsibilities for each 
eligible inpatient unit/total number of patient days for each eligible 
inpatient unit. Patient days must be from the same unit in which 
nursing care hours are reported. The data collected and the rates 
calculated are aggregate nursing hours per patient day, by unit type. 
Hospital rates are weighted for patient volume (patient days) to 
account for differences in unit sizes.
(d) Cohort
    RNs, LPN/LVNs, and UAPs with direct patient care responsibilities 
are included in the numerator and denominator statement. The measure 
numerator includes nursing staff assigned to the eligible inpatient 
unit who have direct patient care responsibilities for greater than 50 
percent of their shift, who are counted in an eligible unit's staffing 
matrix, are replaced if they call in sick, and work hours are charted 
to the unit's cost center. The numerator excludes the following: 
Nursing staff with no direct patient care responsibilities whose 
primary responsibility is administrative in nature; specialty teams 
(for example, wound care), patient educators, or case managers who are 
not assigned to a specific unit; unit clerks, monitor technicians, and 
secretaries with no direct patient care responsibilities; sitters not 
providing routine UAP activities; therapy assistants; student

[[Page 20059]]

nurses fulfilling educational requirements; and nursing staff 
undergoing orientation who are not included in the eligible units 
staffing matrix. The measure denominator excludes patient days from 
ineligible units. For more information regarding the Nursing Hours Per 
Day measure, we refer readers to the National Quality Forum measure 
information page available at: http://www.qualityforum.org/QPS/0205.
    We are inviting public comment on the possible future inclusion of 
the Nursing Hours per Patient Day measure for the Hospital IQR Program. 
Specifically, we are seeking comments on narrowing the number of 
hospital units included in the measures' calculation, which units we 
should consider for inclusion, and the burden of data collection on 
hospitals.
d. Potential Inclusion of Additional Electronic Clinical Quality 
Measures (eCQMs) in the Hospital IQR and Medicare and Medicaid EHR 
Incentive Programs
    As we previously indicated in the FY 2013 IPPS/LTCH PPS final rule, 
EHR technology continues to evolve and additional infrastructure is 
being put in place to afford us the capacity to accept enhanced 
electronic reporting of many of the clinical chart-abstracted measures 
that are currently part of the Hospital IQR Program (77 FR 53534). We 
continue to believe that electronic reporting of quality measure data 
derived from the EHR will, in the long run, reduce the burden on 
hospitals to collect and submit data for the Hospital IQR Program.
    In keeping with this goal, we are soliciting feedback on the 
potential inclusion of additional eCQMs in the Hospital IQR and 
Medicare and Medicaid EHR Incentive Programs. These measures assess 
opioid prescribing practices, malnutrition, tobacco use, and substance 
use among the adult, inpatient population. As we continue to make 
strides with electronic reporting, we want to ensure that we provide 
hospitals with a robust selection of eCQMs. As we state in section 
IX.A.8. of the preamble of this proposed rule, hospitals have expressed 
concerns with identifying applicable measures that reflect their 
patient population; thus, we believe that the addition of new eCQMs in 
the future will offer more clinically relevant eCQMs with meaningful 
data that help drive quality improvement.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57116 through 
57120), we removed 13 eCQMs from the Hospital IQR Program measure set, 
beginning with the CY 2017 reporting period/FY 2019 payment 
determination, in order to enable hospitals to focus on a smaller, more 
specific subset of eCQMs. In that same rule, we indicated that we are 
considering behavioral health measures for inclusion in the Hospital 
IQR Program to address an important gap in understanding the quality of 
care given to inpatient psychiatric patients treated in the acute care 
hospital setting rather than a distinct psychiatric unit or IPF (81 FR 
57166 through 51767). The future inclusion of measures assessing opioid 
prescribing practices, tobacco use, and substance use will help to 
inform how we can improve the quality of care in these clinical 
domains, and help to fill this identified gap area. The table below 
lists the eCQMs being considered for future inclusion in the Hospital 
IQR and Medicare and Medicaid EHR Incentive Programs and for which we 
are seeking public feedback.

Electronic Clinical Quality Measures (eCQMs) for Future Consideration in
    the Hospital IQR and Medicare and Medicaid EHR Incentive Programs
------------------------------------------------------------------------
                      Measure name                             NQF #
------------------------------------------------------------------------
Safe Use of Opioids--Concurrent Prescribing.............             N/A
Completion of a Malnutrition Screening within 24 Hours               N/A
 of Admission...........................................
Completion of a Nutrition Assessment for Patients                    N/A
 Identified as At-Risk for Malnutrition within 24 Hours
 of a Malnutrition Screening............................
Nutrition Care Plan for Patients Identified as                       N/A
 Malnourished after a Completed Nutrition Assessment....
Appropriate Documentation of a Malnutrition Diagnosis...             N/A
Tobacco Use Screening (TOB-1)...........................             N/A
Tobacco Use Treatment Provided or Offered (TOB-2)/                   N/A
 Tobacco Use Treatment (TOB-2a).........................
Tobacco Use Treatment Provided or Offered at Discharge               N/A
 (TOB-3)/Tobacco Use Treatment at Discharge (TOB-3a)....
Alcohol Use Screening (SUB-1)...........................             N/A
Alcohol Use Brief Intervention Provided or Offered (SUB-             N/A
 2)/Alcohol Use Brief Intervention (SUB-2a).............
Alcohol & Other Drug Use Disorder Treatment Provided or              N/A
 Offered at Discharge (SUB-3)/Alcohol & Other Drug Use
 Disorder Treatment at Discharge (SUB-3a)...............
------------------------------------------------------------------------

(1) Safe Use of Opioids-Concurrent Prescribing Measure
(a) Background
    Unintended opioid overdose fatalities have reached epidemic 
proportions in the last 20 years and are a major public health concern 
in the United States.\188\ Reducing the number of unintended opioid 
overdoses has become a priority for numerous HHS agencies. Concurrent 
prescriptions of opioids or opioids and benzodiazepines put patients at 
greater risk of unintended opioid overdose due to increased risk of 
respiratory depression.189 190 Despite this risk, studies of 
multiple claims and prescription databases have shown that between 5 to 
15 percent of patients receive concurrent opioid prescriptions, and 5 
to 20 percent of patients receive concurrent opioid and benzodiazepine 
prescriptions across various settings.191 192 193 In 
addition, an analysis

[[Page 20060]]

of more than 1 million hospital admissions in the United States found 
that over 43 percent of all patients with nonsurgical admissions were 
exposed to multiple opioids during their hospitalization.\194\
---------------------------------------------------------------------------

    \188\ Rudd, R., Aleshire, N., Zibbell, J., et al. ``Increases in 
Drug and Opioid Overdose Deaths--United States, 2000-2014.'' MMWR, 
Jan 2016. 64(50);1378-82 http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6450a3.htm.
    \189\ Dowell, D., Haegerich, T., Chou, R. ``CDC Guideline for 
Prescribing Opioids for Chronic Pain--United States, 2016.'' MMWR 
Recomm Rep 2016;65. Available at: http://www.cdc.gov/media/dpk/2016/dpk-opioid-prescription-guidelines.html.
    \190\ Jena, A., et al. ``Opioid prescribing by multiple 
providers in Medicare: retrospective observational study of 
insurance claims,'' BMJ 2014; 348:g1393 doi: 10.1136/bmj.g1393. 
Available at: http://www.bmj.com/content/348/bmj.g1393.
    \191\ Liu, Y., Logan, J., Paulozzi, L., et al. ``Potential 
Misuse and Inappropriate Prescription Practices Involving Opioid 
Analgesics.'' Am J Manag Care. 2013 Aug;19(8):648-65. Available at: 
http://www.ajmc.com/journals/issue/2013/2013-1-vol19-n8/Potential-Misuse-and-Inappropriate-Prescription-Practices-Involving-Opioid-Analgesics/ Analgesics/.
    \192\ Mack, K., Zhang, K., et al. ``Prescription Practices 
involving Opioid Analgesics among Americans with Medicaid, 2010,'' J 
Health Care Poor Underserved. 2015 Feb; 26(1): 182-198. Available 
at: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4365785/.
    \193\ Park, T., et al. ``Benzodiazepine Prescribing Patterns and 
Deaths from Drug Overdose among US Veterans Receiving Opioid 
Analgesics: Case-cohort Study,'' BMJ 2015; 350:h2698. Available at: 
http://www.bmj.com/content/350/bmj.h2698.
    \194\ Herzig, S., Rothberg, M., Cheung, M., et al. ``Opioid 
utilization and opioid-related adverse events in nonsurgical 
patients in US hospitals.'' Nov 2013. DOI: 10.1002/jhm.2102. 
Available at: http://onlinelibrary.wiley.com/doi/10.1002/jhm.2102/abstract.
---------------------------------------------------------------------------

(b) Overview of Measure
    The Safe Use of Opioids--Concurrent Prescribing (MUC16-167) measure 
assesses patients (excluding cancer patients or patients receiving 
palliative care), ages 18 years and older with active, concurrent 
prescriptions for opioids, or opioids and benzodiazepines, at 
discharge.\195\ This measure addresses the following NQS priorities: 
(1) Making care safer by reducing harm caused in the delivery of care; 
(2) promoting effective communication and coordination of care; and (3) 
promoting the most effective prevention and treatment practices for the 
leading causes of mortality, starting with cardiovascular disease.
---------------------------------------------------------------------------

    \195\ 2016 Measures Under Consideration List (PDF), available 
at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367.
---------------------------------------------------------------------------

    This measure was reviewed by the MAP in December 2016 and received 
the recommendation to refine and resubmit for consideration for 
programmatic inclusion. MAP stakeholders acknowledged the significant 
health risks associated with concurrent prescribing of opioids, and 
opioids and benzodiazepines, but expressed concern with the measure 
specifications, indicating the need for a stronger evidence base for 
clinical guidelines and refinement of the measure exclusions to reduce 
the risk of unintended consequences.\196\
---------------------------------------------------------------------------

    \196\ ``2017 Considerations for Implementing Measures Hospitals-
Final Report,'' available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    Additional information on this measure can be found in the 2016 
Measures Under Consideration Spreadsheet, available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367
    We are inviting public comment on the possible future inclusion of 
this opioid prescribing measure in the Hospital IQR Program.
(2) Malnutrition Measures
(a) Background
    Malnutrition is associated with many adverse outcomes including 
depression of the immune system, impaired wound healing, muscle 
wasting, and increased mortality.197 198 Patients who are 
malnourished during a hospital stay have an increased risk of 
complications, readmissions, and length of stay. In addition, evidence 
demonstrates an association between malnutrition risk and increased 
inpatient costs. One study found that patients identified with 
undernutrition risk and high undernutrition risk experience increased 
costs by 28.8 percent and 21.1 percent, respectively, when compared to 
non-malnourished patients.\199\ Malnutrition risk screening, using a 
validated screening tool, can be useful in predicting certain patient 
outcomes including length of stay, mortality, and post-operative 
complications.\200\ Nutrition assessments for patients identified as 
at-risk for malnutrition have been associated with improved patient 
outcomes including less weight loss, reduced length of stay, improved 
muscle function, better nutritional intake, and fewer 
readmissions.\201\ Further, there is evidence of a performance gap with 
regard to nutrition screening and assessment. A national survey of 
hospital-based professionals in the United States focused on nutrition 
screening and assessment practices demonstrated that out of 1,777 
unique respondents, only 36.7 percent reported completing nutrition 
screening at admission and 50.8 percent reported doing so within 24 
hours.\202\ Thus, there is an opportunity for hospitals to improve 
nutrition screening and assessment.
---------------------------------------------------------------------------

    \197\ Corkins MR, Guenter P, Dimaria-ghalili RA, et al. 
Malnutrition diagnoses in hospitalized patients: United States, 
2010. JPEN J Parenter Enteral Nutr. 2014;38(2):186-95.
    \198\ Barker LA, Gout BS, Crowe TC. Hospital malnutrition: 
prevalence, identification and impact on patients and the healthcare 
system. Int J Environ Res Public Health. 2011;8(2):514-27.
    \199\ Guerra RS, Sousa AS, Fonseca I, et al. Comparative 
analysis of undernutrition screening and diagnostic tools as 
predictors of hospitalization costs. J Hum Nutr Diet. 
2016;29(2):165-73.
    \200\ Mueller C, Compher C & Druyan ME and the American Society 
for Parenteral and Enteral Nutrition (A.S.P.E.N.) Board of 
Directors. A.S.P.E.N. Clinical Guidelines: Nutrition Screening, 
Assessment, and Intervention in Adults. J Parenter Enteral Nutr. 
2011;35: 16-24.
    \201\ Mueller C, Compher C & Druyan ME and the American Society 
for Parenteral and Enteral Nutrition (A.S.P.E.N.) Board of 
Directors. A.S.P.E.N. Clinical Guidelines: Nutrition Screening, 
Assessment, and Intervention in Adults. J Parenter Enteral Nutr. 
2011;35: 16-24.
    \202\ Patel V, Romano M, Corkins MR, et al. Nutrition Screening 
and Assessment in Hospitalized Patients: A Survey of Current 
Practice in the United States. Nutr Clin Pract. 2014;29(4):483-490.
---------------------------------------------------------------------------

(b) Overview of Measures
    The malnutrition measure set consists of the following four 
measures:
     Completion of a Malnutrition Screening within 24 Hours of 
Admission (MUC16-294);
     Completion of a Nutrition Assessment for Patients 
Identified as At-Risk for Malnutrition within 24 Hours of a 
Malnutrition Screening (MUC16-296);
     Appropriate Documentation of a Malnutrition Diagnosis 
(MUC16-344); and
     Nutrition Care Plan for Patients Identified as 
Malnourished after a Completed Nutrition Assessment (MUC16-372).
    These malnutrition measures are new eCQMs that collectively 
evaluate the quality of care rendered to adult patients that are 
identified as malnourished. These measures address the NQS priorities 
of: (1) Making care safer by reducing harm caused in the delivery of 
care; and (2) promoting effective communication and coordination of 
care. The Completion of a Malnutrition Screening within 24 Hours of 
Admission measure (MUC16-294) assesses whether patients age 18 years or 
older are screened for malnutrition within 24 hours of admission to the 
hospital. The Completion of a Nutrition Assessment for Patients 
Identified as At-Risk for Malnutrition measure (MUC16-296) assesses 
whether patients age 65 years or older, who screen positive for being 
at-risk for malnutrition, have a nutrition assessment documented in the 
medical record within 24 hours of the most recent malnutrition 
screening. The Appropriate Documentation of a Malnutrition Diagnosis 
measure (MUC16-344) assesses whether patients age 65 years and older, 
who are found to be malnourished on the nutrition assessment, have 
adequate documentation of a malnutrition diagnosis in their medical 
record. This measure is important because there is often a disconnect 
between screening for malnutrition and documentation of a diagnosis of 
malnutrition, which is necessary for appropriate follow-up after 
hospital discharge. Data analyzed from the Healthcare Cost and 
Utilization Project (HCUP), a nationally-representative data set 
describing U.S. hospital discharges, indicated that approximately 3.2 
percent of hospital discharges in 2010 included malnutrition as a 
diagnosis. However, this same research article notes that the 
prevalence of a malnutrition diagnosis may be significantly higher as 
past

[[Page 20061]]

researchers, using validated screening tools, indicate a significantly 
higher prevalence of undiagnosed malnutrition in the hospital, ranging 
from 33 to 54 percent.\203\ Lastly, the Nutrition Care Plan for 
Patients Identified as Malnourished after a Completed Nutrition 
Assessment measure (MUC16-372) assesses whether patients age 65 years 
and older, who are found to be malnourished on a completed nutrition 
assessment, have a nutrition care plan documented in their medical 
record.
---------------------------------------------------------------------------

    \203\ Corkins, M.R., Guenter, P., DiMaria-Ghalili, R.A., Jensen, 
G.L., Malone, A., Miller, S., Patel, V., Plogsted, S. and Resnick, 
H.E., 2014. Malnutrition diagnoses in hospitalized patients: United 
States, 2010. Journal of Parenteral and Enteral Nutrition, 38(2), 
pp.186-195.
---------------------------------------------------------------------------

    These measures were reviewed by the MAP in December 2016 and 
received mixed support. The Nutrition Care Plan for Patients Identified 
as Malnourished after a Completed Nutrition Assessment (MUC16-372), 
Completion of a Malnutrition Screening within 24 Hours of Admission 
(MUC16-294), and Completion of a Nutrition Assessment for Patients 
Identified as At-Risk for Malnutrition within 24 Hours of a 
Malnutrition Screening (MUC16-296) measures were recommended to be 
refined and resubmitted for consideration for programmatic inclusion. 
For these three measures, the MAP encouraged providing more evidence to 
prove clinical importance and recommended that the exclusions continue 
to be tested for validity.\204\ The Appropriate Documentation of a 
Malnutrition Diagnosis measure (MUC16-344) was not supported because 
there was concern that there was insufficient evidence to support the 
link between documenting a malnutrition diagnosis and improved patient 
outcomes.
---------------------------------------------------------------------------

    \204\ ``2017 Considerations for Implementing Measures Hospitals-
Final Report,'' available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    The MAP concluded that completing a malnutrition assessment 
provided the most potential value to the measure set and quality of 
care. The MAP also encouraged the measure developer to test the 
individual malnutrition measures as a composite in an effort to balance 
the number of measures in the Hospital IQR Program with the need to 
fill the measure gap addressing malnutrition.\205\ We note that we 
received written support (formal letters addressed to CMS) of these 
measures from other stakeholders who noted that addressing malnutrition 
among beneficiaries is an important clinical issue.
---------------------------------------------------------------------------

    \205\ Ibid.
---------------------------------------------------------------------------

    Additional information on these measures is available at: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=80741.
    We are inviting public comment on the possible future inclusion of 
one or more of these malnutrition measures in the Hospital IQR Program. 
In addition, we are inviting public comment on the possible future 
inclusion of a composite measure comprised of all or a subset of these 
individual malnutrition measures in the Hospital IQR Program.
(3) Tobacco Use Measures
(a) Background
    Tobacco use is the single greatest cause of disease in the United 
States today and accounts for more than 480,000 deaths each year.\206\ 
Tobacco use creates a heavy cost to society as well as to individuals. 
Smoking is a known cause of multiple cancers, heart disease, stroke, 
complications of pregnancy, chronic obstructive pulmonary disease, 
other respiratory problems, poorer wound healing, and many other 
diseases.\207\ Smoking-attributable health care expenditures are 
estimated to cost at least $130 billion per year in direct medical 
expenses for adults and over $150 billion in lost productivity.\208\ 
There is strong and consistent evidence that tobacco dependence 
interventions, if delivered in a timely and effective manner, 
significantly reduce the user's risk of suffering from tobacco-related 
disease and improve outcomes for those already suffering from a 
tobacco-related disease.209 210 211 212 Effective, evidence-
based tobacco dependence interventions have been clearly identified and 
include brief clinician advice, individual, group, or telephone 
counseling, and use of FDA-approved medications. Tobacco cessation 
treatments are clinically effective and extremely cost-effective 
relative to other commonly used disease prevention interventions and 
medical treatments.\213\
---------------------------------------------------------------------------

    \206\ Centers for Disease Control and Prevention. Current 
Cigarette Smoking Among Adults--United States, 2005-2013. Morbidity 
and Mortality Weekly Report (MMWR) 2014. 63(47); 1108-1112. 
Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6347a4.htm?s_cid=mm6347a4.
    \207\ U.S. Department of Health and Human Services. The health 
consequences of smoking--50 years of progress: a report of the 
Surgeon General. Atlanta, GA: U.S. Department of Health and Human 
Services, CDC; 2014. Available at: http://www.surgeongeneral.gov/library/reports/50-years-of-progress/full-report.pdf.
    \208\ Ibid.
    \209\ U.S. Department of Health and Human Services. Reducing 
tobacco use: a report of the Surgeon General. Atlanta, GA, U.S. 
Department of Health and Human Services, Centers for Disease Control 
and Prevention, National Center for Chronic Disease Prevention and 
Health Promotion, Office on Smoking and Health, 2000.
    \210\ Baumeister SE., Schumann A, Meyer C, et al. Effects of 
smoking cessation on health care use: is elevated risk of 
hospitalization among former smokers attributable to smoking-related 
morbidity? Drug Alcohol Depend. 2007 May 11;88(2-3):197-203. Epub 
2006 Nov 21.
    \211\ Lightwood JM. The economics of smoking and cardiovascular 
disease. Prog Cardiovasc Dis. 2003 Jul-Aug;46(1):39-78.
    \212\ Rigotti, et al. Interventions for smoking cessation in 
hospitalized patients. Cochrane Database of Systematic Reviews. 
2012. Available from: http://onlinelibrary.wiley.com/doi/10.1002/14651858.CD001837.pub3/abstract.
    \213\ Ibid.
---------------------------------------------------------------------------

    Performance on the chart-abstracted versions of these measures, as 
reported by The Joint Commission, yields that the Tobacco Use Screening 
(TOB-1) measure had a screening rate of 98.15 percent, based on a 
reporting period of July 2015-June 2016.\214\ TOB-1 is necessary to 
operationalize Tobacco Use Treatment Provided or Offered (TOB-2)/
Tobacco Use Treatment (TOB-2a) and Tobacco Use Treatment Provided or 
Offered at Discharge (TOB-3)/Tobacco Use Treatment at Discharge (TOB-
3a) measures. The goal of TOB-1 is to achieve 100 percent screening so 
that all tobacco users are consistently identified and offered 
appropriate interventions, which are evaluated by TOB-2/2a and TOB-3/
3a. As noted in the table \215\ below, the performance rates for the 
chart-abstracted versions of TOB-2/2a and TOB-3/3a measures suggest 
that there is an opportunity for hospitals to improve tobacco use 
treatment during the hospital stay and at discharge.
---------------------------------------------------------------------------

    \214\ Joint Commission Quality Check Data, available at: https://www.qualitycheck.org/. (Data download.)
    \215\ Joint Commission Quality Check Data available at: https://www.qualitycheck.org/.

       Tobacco Use Measures Screening Results July 2015-June 2016
------------------------------------------------------------------------
                                                              Screening
                        Measure name                           rate (%)
------------------------------------------------------------------------
Tobacco Use Treatment Provided or Offered (TOB-2)..........        66.41
Tobacco Use Treatment (TOB-2a).............................        32.97
Tobacco Use Treatment Provided or Offered at Discharge (TOB-       46.20
 3)........................................................
Tobacco Use Treatment at Discharge (TOB-3a)................        10.71
------------------------------------------------------------------------

(b) Overview of Measures
    The tobacco use measure set consists of the following three 
measures:
     Tobacco Use Screening (TOB-1) (MUC16-50);

[[Page 20062]]

     Tobacco Use Treatment Provided or Offered (TOB-2)/Tobacco 
Use Treatment (TOB-2a) (MUC16-51); and
     Tobacco Use Treatment Provided or Offered at Discharge 
(TOB-3)/Tobacco Use Treatment at Discharge (TOB-3a) (MUC16-52).
    The TOB measures are eCQMs that assess tobacco use screening and 
treatment for patients age 18 years or older during the hospital stay 
and at discharge. We note that these measures were derived from the 
chart-abstracted versions in use by The Joint Commission. The Joint 
Commission has been using the chart-abstracted versions of these 
measures for voluntary reporting since January 1, 2012.\216\ In 
addition, the chart-abstracted versions of these measures (TOB-1, TOB-
2/TOB-2a, and TOB-3/TOB-3a) are also part of the IPFQR Program measure 
set (81 FR 57246). These measures address the NQS priority of promoting 
the most effective prevention and treatment practices for the leading 
causes of mortality.
---------------------------------------------------------------------------

    \216\ The Joint Commission, Substance Use Measures overview, 
available at: https://www.jointcommission.org/core_measure_sets.aspx.
---------------------------------------------------------------------------

    TOB-1 assesses the proportion of hospitalized patients who are 
screened, or refuse screening, within the three days prior to admission 
through 1 day after admission, for tobacco use during the 30 days prior 
to the screening. TOB-2 assesses the proportion of patients who are 
light tobacco users who received or refused practical counseling to 
quit within 3 days prior to or anytime during admission. TOB-2 also 
assesses the proportion of heavy tobacco users who received or refused 
practical counseling to quit and received, had a medical reason not to 
receive, or refused FDA-approved cessation medications within 3 days 
prior to or anytime during admission. The subset measure TOB-2a only 
assesses light tobacco users who received practical counseling to quit 
within 3 days prior to or anytime during admission, and heavy tobacco 
users who received practical counseling to quit and received, or had a 
medical reason not to receive, FDA-approved cessation medications 
within 3 days prior to or anytime during admission. TOB-3 assesses the 
proportion of patients who are light tobacco users who were referred to 
or refused counseling within 3 days prior to admission through 1 day 
after discharge. TOB-3 also assesses the proportions of heavy tobacco 
users who were referred to or refused evidence-based counseling and 
received, had a medical reason not to receive, or refused a 
prescription for FDA-approved cessation medication upon discharge. The 
subset measure TOB-3a assesses light tobacco users who were referred to 
counseling within 3 days prior to admission through one day after 
discharge, and heavy tobacco users who were referred to evidence-based 
counseling and received, or had a medical reason not to receive, a 
prescription for FDA-approved cessation medication upon discharge.
    We note that we previously solicited comments on the future 
inclusion of electronically-specified versions of the tobacco use 
measures TOB-1, TOB-2/2a and TOB-3/3a, previously referred to as TAM-1, 
TAM-2, and TAM-3, respectively, in the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53535). Commenters equally supported and opposed the future 
inclusion of the tobacco use measures in the Hospital IQR Program. 
Commenters highlighted the importance of high validation rates such as 
95 percent, across the electronic data capture method and manual chart-
abstraction (77 FR 53535). We note that at the time we sought public 
comments on these measure concepts related to tobacco use, 
electronically-specified measures were not yet developed.
    In the most recent MAP deliberations in December 2016, only the 
Tobacco Use Screening (TOB-1) eCQM (MUC16-50) was reviewed. The TOB-2/
TOB-2a (MUC16-51) and TOB-3/TOB-3a (MUC16-52) eCQMs were on the 
December 2016 MUC List, but were not submitted for MAP review because 
they were still undergoing field testing. We anticipate that these 
measures should be ready for review by the MAP in the winter of CY 
2017.
    The TOB-1 eCQM was recommended to be refined and resubmitted for 
consideration for programmatic inclusion.\217\ The MAP indicated that 
the measure should be tested to ensure that it returns accurate, 
reliable results. In addition, the MAP Hospital Workgroup noted that it 
will be important to carefully assess feasibility and burden of data 
collection.\218\ As previously stated, the chart-abstracted versions of 
the Tobacco Use Screening measures (TOB-1, TOB-2/TOB-2a, and TOB-3/TOB-
3a) are part of the IPFQR Program measure set (81 FR 57246); thus, 
future inclusion of the eCQM versions of these measures in the Hospital 
IQR Program measure set would promote programmatic alignment across 
these quality reporting programs.
---------------------------------------------------------------------------

    \217\2016-2017 Spreadsheet of Final Recommendations to HHS and 
CMS, available at: http://www.qualityforum.org/map/.
    \218\ Ibid.
---------------------------------------------------------------------------

    Additional information on the chart-abstracted version of these 
measures is available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228775749207.
    We are inviting public comment on the possible future inclusion of 
one or more of the eCQM versions of these tobacco use measures (TOB-1, 
TOB-2/2a and TOB-3/3a) in the Hospital IQR Program. In addition, we are 
inviting public comment on the possible future inclusion of a composite 
measure comprised of all or a subset of these individual tobacco use 
measures in the Hospital IQR Program.
(4) Substance Use Measures
(a) Background
    Excessive alcohol consumption and drug misuse or abuse have a 
significant impact on the health of the U.S. population.\219\ Excessive 
alcohol consumption is a leading cause of preventable death and 
disability resulting in approximately 88,000 deaths per year with an 
estimated economic cost of $249 billion, including $28 billion (2010 
dollars) in direct health care costs.\220\ In 2015, approximately 20.8 
million individuals were classified as having a substance use disorder. 
Of those individuals with substance use disorders, 13.1 million had an 
alcohol use disorder, 5.1 million had an illicit drug use disorder, and 
2.7 million had an alcohol and illicit drug use disorder.\221\ 
Excessive alcohol consumption and substance use disorders can increase 
the risk of preventable injury, worsen existing chronic diseases, such 
as mental illness, and lead to the development of diseases, such as 
heart disease, cancer, and liver

[[Page 20063]]

disease.\222\ Studies show the majority of individuals who consume 
alcohol excessively do not meet the clinical criteria for diagnosis of 
a substance use disorder; yet evidence demonstrates screening and brief 
interventions, especially prior to the onset of a substance use 
disorder, can improve health and reduce costs.\223\ Similar benefits 
have been observed for individuals with substance use disorders who are 
identified and referred to treatment.224 225 The table below 
provides performance rates based on the July 2015-June 2016 reporting 
period for the chart-abstracted versions of these measures, as reported 
by The Joint Commission.\226\ The results show that there is an 
opportunity for hospitals to improve substance use screening, brief 
intervention, and treatment.
---------------------------------------------------------------------------

    \219\ Excessive alcohol consumption includes binge drinking, 
heavy drinking, and any drinking by pregnant women or people younger 
than age 21. Definitions are available from the Centers for Disease 
Control and Prevention at: https://www.cdc.gov/alcohol/fact-sheets/alcohol-use.htm.
    \220\ Centers for Disease Control and Prevention Alcohol and 
Public Health: Alcohol-Related Disease Impact available at: https://nccd.cdc.gov/DPH_ARDI/Default/Report.aspx?T=AAM&P=f6d7eda7-036e-4553-9968-9b17ffad620e&R=d7a9b303-48e9-4440-bf47-070a4827e1fd&M=8E1C5233-5640-4EE8-9247-1ECA7DA325B9&F=&D= ; Sacks 
JJ, Gonzales KR, Bouchery EE, Tomedi LE, Brewer RD. 2010 national 
and state costs of excessive alcohol consumption. American journal 
of preventive medicine. 2015 Nov 30;49(5): e73-9.; Stahre M, Roeber 
J, Kanny D, Brewer RD, Zhang X. Contribution of Excessive Alcohol 
Consumption to Deaths and Years of Potential Life Lost in the United 
States. Prev Chronic Dis 2014;11:130293. DOI: http://dx.doi.org/10.5888/pcd11.130293.
    \221\ Substance Abuse and Mental Health Services Administration 
(SAMHSA) Key Substance Use and Mental Health Indicators in the 
United States: Results from the 2015 National Survey on Drug Use and 
Health available at: https://www.samhsa.gov/data/sites/default/files/NSDUH-FFR1-2015/NSDUH-FFR1-2015/NSDUH-FFR1-2015.pdf.
    \222\ Excessive alcohol consumption includes binge drinking. 
heavy drinking, and any drinking by pregnant women or people younger 
than age 21. Definitions are available from the Centers for Disease 
Control and Prevention at: https://www.cdc.gov/alcohol/fact-sheets/alcohol-use.htm.
    \223\ Esser MB, Hedden SL, Kanny D, Brewer RD, Gfroerer JC, 
Naimi TS. Prevalence of Alcohol Dependence Among US Adult Drinkers, 
2009-2011. Prev Chronic Dis 2014;11:140329. DOI: http://dx.doi.org/10.5888/pcd11.140329; American Psychiatric Association. (1994). 
Diagnostic and statistical manual of mental disorders (DSM-IV) (4th 
ed.). Washington, DC.
    \224\ Maciosek MV, Coffield AB, Edwards NM, Flottemesch TJ, 
Goodman MJ, Solberg LI. Priorities among effective clinical 
preventive services results of a systematic review and analysis. Am 
J Prev Med Jul 2006;31(1):52-61.
    \225\ Saitz R, Palfai TP, Cheng DM, Horton NJ, Freedner N, Dukes 
K, et al. Brief intervention for medical inpatients with unhealthy 
alcohol use: a randomized, controlled trial. Ann Intern Med. 2007; 
146:167-76.
    \226\ Joint Commission Quality Check Data, available at: https://www.qualitycheck.org/. (Data download.)

      Substance Use Measures Screening Results July 2015-June 2016
------------------------------------------------------------------------
                                                              Screening
                        Measure name                           rate (%)
------------------------------------------------------------------------
Alcohol Use Screening (SUB-1)..............................        85.30
Alcohol Use Brief Intervention Provided or Offered (SUB-2).        62.68
Alcohol Use Brief Intervention (SUB-2a)....................        57.43
Alcohol & Other Drug Use Disorder Treatment Provided or            65.46
 Offered at Discharge (SUB-3)..............................
Alcohol & Other Drug Use Disorder Treatment at Discharge           54.27
 (SUB-3a)..................................................
------------------------------------------------------------------------

(b) Overview of Measures
    The substance use measure set consists of the following three 
measures:
     Alcohol Use Screening (SUB-1) (MUC16-179);
     Alcohol Use Brief Intervention Provided or Offered (SUB-
2)/Alcohol Use Brief Intervention (SUB-2a) (MUC16-178); and
     Alcohol & Other Drug Use Disorder Treatment Provided or 
Offered at Discharge (SUB-3)/Alcohol & Other Drug Use Disorder 
Treatment at Discharge (SUB-3a) (MUC16-180).
    The SUB-1, SUB-2/2a and SUB-3/3a measures address the NQS priority 
of promoting the most effective prevention and treatment practices for 
the leading causes of mortality. These measures are intended to be used 
as part of a linked set. Specifically, the SUB-2/2a and SUB-3/3a 
measures will ensure hospitals are not only screening patients for 
excessive alcohol use, but also offering evidence-based interventions 
to improve the quality of care for patients with excessive alcohol use 
or other use disorders. The SUB-1 Alcohol Use Screening measure 
assesses whether hospital patients 18 years of age and older are 
screened for alcohol use using a validated screening questionnaire for 
excessive drinking during their inpatient stay. A validated screening 
questionnaire is defined as an instrument that has been 
psychometrically tested for reliability (the ability of the instrument 
to produce consistent results), validity (the ability of the instrument 
to produce true results), and sensitivity (the probability of correctly 
identifying a patient with the condition).
    As previously noted, these measures are intended to be implemented 
as a set. As such, it would be necessary to adopt the SUB-1 measure in 
order to implement the other two measures. The SUB-2/2a measure 
assesses whether hospital patients age 18 years of age or older who 
screened positive for excessive alcohol use or an alcohol use disorder 
receive or refuse a brief intervention during the hospital stay (SUB-
2). Subset measure SUB-2a includes only those patients who receive a 
brief intervention. A brief intervention is defined as a single session 
or multiple sessions conducted by a qualified healthcare professional 
or trained peer support person, which includes motivational discussion 
focused on increasing patient insight and awareness regarding alcohol 
use and motivating behavioral change. The SUB-3/3a measures assess 
whether hospitals patients 18 years of age or older with a substance 
use disorder (alcohol or drug) receive or refuse at discharge a 
medication prescription for treatment or receive or refuse a referral 
for substance use disorder treatment (SUB-3). Subset measure SUB-3a 
includes only those patients who receive a medication prescription or 
treatment referral at discharge.
    The chart-abstracted versions of these three measures, not the eCQM 
versions, were added to the MUC List in the summer of 2016,\227\ and 
reviewed by the MAP in December 2016 as discussed in the MAP Pre-
Rulemaking Report and Spreadsheet entitled ``2016-2017 Spreadsheet of 
Final Recommendations to HHS and CMS.'' \228\ The MAP recommended that 
the SUB-1 measure (MUC16-179) be refined and resubmitted. The MAP noted 
that the measure encourages hospitals to screen patients for excessive 
alcohol use and can prevent life-threatening alcohol withdrawal 
syndrome, but recommended that the measure be paired with an 
appropriate intervention and follow-up measure. The MAP did not support 
the SUB-2/2a measure (MUC16-178) for adoption into the Hospital IQR 
Program. Proponents of the SUB-2/2a measure supported the incorporation 
of behavioral health measures into the Hospital IQR Program and noted 
that hospitalization is a prime opportunity to discuss harmful 
substance use because patients may be more amenable to a brief 
intervention during a hospital stay. Other stakeholders acknowledged 
the significant health impact of screening and brief intervention for 
substance use, but cited the burden of chart-abstracted data collection 
and encouraged the continued development of an electronic measure. MAP 
stakeholders also expressed concern the use of the measure in the 
hospital inpatient setting, rather than a primary care setting, was not 
strongly linked to improved patient outcomes. The MAP also did not 
support SUB-3/3a (MUC16-180) due to similar concerns as identified with 
the SUB-2/2a measure regarding the measure's link to improved 
outcomes.\229\
---------------------------------------------------------------------------

    \227\ 2016 Measures Under Consideration Spreadsheet, available 
at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367.
    \228\2016-2017 Spreadsheet of Final Recommendations to HHS and 
CMS, available at: http://www.qualityforum.org/map/.
    \229\ ``2017 Considerations for Implementing Measures 
Hospitals--Final Report,'' available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    With respect to MAP stakeholder concerns regarding the evidence 
supporting the use of the measures in the inpatient setting, we note 
such supporting evidence, including the evidence of the 
generalizability of studies to the acute inpatient setting, was 
included as part of the endorsement

[[Page 20064]]

process and these measures received NQF endorsement. Sufficient 
evidence exists linking the measures to improved patient outcomes 
230 231 in the inpatient setting.\232\ In addition, in light 
of the significant health impact of harmful substance use, and its 
associated healthcare costs, we believe the benefits of collecting 
these measure data from hospitals and publicly reporting the 
information outweigh the burden, and address a critical topic impacting 
a patient's quality of care and health outcomes.
---------------------------------------------------------------------------

    \230\ Kaner EF, Dickinson HO, Beyer FR, Campbell F, Schlesinger 
C, Heather N, Saunders JB, Burnand B, Pienaar ED. Effectiveness of 
brief alcohol interventions in primary care populations. Cochrane 
Database of Systematic Reviews 2007, Issue 2. Art. No.: CD004148. 
DOI: 10.1002/14651858.CD004148.pub3.
    \231\ Whitlock EP, Polen MA, Green CA, Orleans CT, Klein J. 
Behavioral Counseling Interventions in Primary Care to Reduce Risky/
Harmful Alcohol Use by Adults: A Summary of the Evidence for the U.S 
Preventive Services Task Force. Ann Intern Med. 2004; 140:558-569.
    \232\ McQueen J, Howe TE, Allan L, Mains D, Hardy V. Brief 
interventions for heavy alcohol users admitted to general hospital 
wards. Cochrane Database Syst Rev. 2011 Jan 1;8(8).
---------------------------------------------------------------------------

    We note that The Joint Commission has been using these chart-
abstracted measures for optional reporting since January 1, 2012.\233\ 
The chart-abstracted versions of the Substance Use measures (SUB-1, 
SUB-2/2a and SUB-3/3a) are also part of the IPFQR Program measure set 
(81 FR 57246); thus, future inclusion of the eCQM versions of these 
measures in the Hospital IQR Program measure set would promote 
programmatic alignment across these quality reporting programs. Lastly, 
we note that electronic versions of these measures are in development 
by SAMHSA; we anticipate that the eCQM versions will be ready for 
review within the next 18-24 months.
---------------------------------------------------------------------------

    \233\ The Joint Commission, Substance Use Measures overview, 
available at: https://www.jointcommission.org/core_measure_sets.aspx.
---------------------------------------------------------------------------

    Additional information on the chart-abstracted versions of these 
measures is available in TJC's Specification Manual for National 
Hospital Inpatient Quality Measures at: https://www.jointcommission.org/specifications_manual_for_national_hospital_inpatient_quality_measures.aspx.
    We are inviting public comment on the possible future inclusion of 
one or more of the eCQM versions of the Substance Use measures (SUB-1, 
SUB-2/2a and SUB-3/3a) in the Hospital IQR Program. In addition, we are 
inviting public comment on the possible future inclusion of a composite 
measure comprised of all of these individual substance use measures in 
the Hospital IQR Program.
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 2018 payment determination will begin the 
fourth 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, submission, and validation 
requirements. For each Hospital IQR Program payment determination, we 
require that hospitals submit data on each specified 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/. The annual update of electronic clinical quality 
measure (eCQM) specifications and implementation guidance documents are 
available on the eCQI Resource Center Web site at: https://ecqi.healthit.gov/. 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 2020 Payment Determination and 
Subsequent Years
    The Hospital IQR Program's procedural requirements are codified in 
regulation at 42 CFR 412.140. We refer readers to these codified 
regulations for participation requirements, as further explained by the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50810 through 50811) and the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57168). We are not proposing any 
changes to these 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. We are not proposing any changes to the 
data submission requirements for chart-abstracted measures.
d. Proposed Changes to the Reporting and Submission Requirements for 
eCQMs
    In this proposed rule, we are proposing changes to the Hospital IQR 
Program eCQM reporting and submission requirements to align them with 
the Medicare EHR Incentive Program for eligible hospitals and CAHs.
(1) Background
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57157 through 
57159), we finalized policies to require hospitals to submit a full 
calendar year (four quarterly reporting periods) of data on at least 
eight self-selected eCQMs from the available eCQMs in the Hospital IQR 
Program for the FY 2019 and FY 2020 payment determinations. However, in 
this proposed rule, we are proposing to modify: (1) The CY 2017 
reporting period/FY 2019 payment determination eCQM reporting 
requirements so that hospitals would be required to report on six eCQMs 
and submit two, self-selected, calendar quarters of CY 2017 data; and 
(2) for the CY 2018 reporting period/FY 2020 payment determination eCQM 
reporting requirements so that hospitals would be required to report on 
six eCQMs and to submit the first three calendar quarters of CY 2018 
data. We refer readers to section IX.A.8. of the preamble of this 
proposed rule for more detail on these proposals. In order to fully 
align the Hospital IQR Program with the requirements for the CQM 
electronic reporting option in the Medicare EHR Incentive Program for 
the CY 2017 reporting period/FY 2019 payment determination and the CY 
2018 reporting period/FY 2020 payment determination, we are proposing 
similar policies for the Medicare EHR Incentive Program for eligible 
hospitals and CAHs. We are proposing these changes to assist hospitals 
in their efforts to transition towards reporting more eCQMs and towards 
reporting four full

[[Page 20065]]

quarters of eCQM data. We refer readers to section IX.E.3. of the 
preamble of this proposed rule, where we are proposing aligned policies 
for the CQM electronic reporting option in the Medicare EHR Incentive 
Program for eligible hospitals and CAHs.
(2) Proposed Changes to the Reporting and Submission Requirements for 
eCQMs for the FY 2019 Payment Determination and Subsequent Years
    In this proposed rule, we are not proposing any changes to our file 
format requirements or reporting deadlines. However, we are proposing 
changes to our requirements related to eCQM electronic specification 
and certification. These are discussed in more detail below.
(a) File Format
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49705 through 
49708), we finalized that hospitals must submit eCQM data via the 
Quality Reporting Document Architecture Category I (QRDA I) file format 
for the CY 2016 reporting period/FY 2018 payment determination. In 
addition, we finalized that for the CY 2016 reporting period/FY 2018 
payment determination, hospitals may use third parties to submit QRDA I 
files on their behalf and can either use abstraction or pull the data 
from non-certified sources in order to then input these data into CEHRT 
for capture and reporting QRDA I (80 FR 49706). In the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57170), we finalized our proposal to 
continue these eCQM reporting policies for the CY 2017 reporting 
period/FY 2019 payment determination and subsequent years. These 
finalized requirements align with those of the Medicare EHR Incentive 
Program for eligible hospitals and CAHs (81 FR 57255 through 57257). We 
are not proposing any changes to these requirements in this proposed 
rule.
(b) Proposed Changes to the Certification Requirements for eCQM 
Reporting
(i) Background
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57170 through 
57171), we finalized policies that hospitals must: (1) Report eCQM data 
using EHR technology certified to either the 2014 or 2015 Edition for 
the CY 2017 reporting period/FY 2019 payment determination; and (2) 
report eCQM data using EHR technology certified to the 2015 Edition 
beginning with the CY 2018 reporting period/FY 2020 payment 
determination and subsequent years. As we discuss in further detail in 
section IX.G.4. of the preamble of this proposed rule where the same 
considerations are discussed in detail for the Medicare and Medicaid 
EHR Incentive Programs, based on our past experience with the 
transition from the 2011 Edition to the 2014 Edition and concerns 
expressed by stakeholders, we understand that transitioning to 
technology certified to a new Edition can be complex and can require 
more resources and time than anticipated, including the time necessary 
to effectively deploy the upgraded system and make the necessary 
patient safety, staff training, and workflow investments. We understand 
and appreciate these concerns, and are working in cooperation with our 
federal partners at ONC to monitor progress on the 2015 Edition 
upgrade. Furthermore, we believe that there are many benefits for 
switching to EHR technology certified to the 2015 Edition. We will work 
with ONC to monitor the status of EHR technology certified to the 2015 
Edition and the deployment and implementation of such technology. If we 
identify a change in the current trends and significant issues with the 
certification and deployment of the 2015 Edition, we will consider 
additional methods to offer flexibility in CY 2018 for those hospitals 
that are not able to implement 2015 Edition of CEHRT. One possibility 
is the flexibility to use technology certified to the 2014 Edition or 
the 2015 Edition in CY 2018. Another option is allowing a combination 
of EHR technologies certified to the 2014 Edition and 2015 Edition to 
be used in CY 2018, for those hospitals that are not able to fully 
implement EHR technology certified to the 2015 Edition. We invite 
public comment on these options for offering flexibility in CY 2018 
with regard to EHR certification requirements.
    In this proposed rule, we are proposing two changes related to 
certification requirements with regard to eCQM reporting: (1) To 
require EHR technology certified to all eCQMs that are available to 
report; and (2) to note that certified EHR technology does not need to 
be recertified each time it is updated to a more recent version of the 
eCQM specifications, to align with the Medicare EHR Incentive Program 
requirements for eligible hospitals and CAHs. These proposals are 
discussed in more detail below.
(ii) Proposal To Require EHR Technology To Be Certified to All eCQMs 
That Are Available To Report for the CY 2017 Reporting Period/FY 2019 
Payment Determination and the CY 2018 Reporting Period/FY 2020 Payment 
Determination
    We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49705) where we noted that although we require 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. In this proposed rule, we are 
proposing new policies regarding the Hospital IQR Program eCQM 
specification requirements to align with the Medicare EHR Incentive 
Program requirements.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57256) for the 
Medicare EHR Incentive Program, we finalized the continuation of a 
policy that electronic submission of CQMs will require the use of the 
most recent version of the electronic specification for each eCQM to 
which the EHR is certified. For the Medicare EHR Incentive Program, we 
finalized that in the event an eligible hospital or CAH has EHR 
technology that is certified to the 2014 Edition and not certified to 
all of the eCQMs that are available to electronically report for the CY 
2017 reporting period/FY 2019 payment determination, we require that a 
hospital needs to have its EHR technology certified to all such eCQMs 
in order to meet the reporting requirements for the CY 2017 reporting 
period/FY 2019 payment determination (81 FR 57256). Further, for the 
Medicare EHR Incentive Program, we stated that for the CY 2017 
reporting period/FY 2019 payment determination, eligible hospitals and 
CAHs be required to use the Spring 2016 version of the eCQM 
specifications available on the eCQI Resource Center Web site at: 
https://ecqi.healthit.gov/.
    In order to align with the Medicare EHR Incentive Program 
requirements for eligible hospitals and CAHs, in this proposed rule, we 
are proposing that for the CY 2017 reporting period/FY 2019 payment 
determination, a hospital using EHR technology certified to the 2014 or 
2015 Edition, but for which such EHR technology is not certified to all 
15 available eCQMs, would be required to have its EHR technology 
certified to all 15 eCQMs that are available to report under the 
Hospital IQR Program for the CY 2017 reporting period/FY 2019 payment 
determination in order to meet the eCQM reporting requirements for the 
CY 2017 reporting period/FY 2019

[[Page 20066]]

payment determination. We further propose that for the CY 2017 
reporting period/FY 2019 payment determination, hospitals would be 
required to use the most recent version of the eCQM electronic 
specifications (in other words, the Spring 2016 version of the eCQM 
specifications and any applicable addenda) available on the eCQI 
Resource Center Web site at: https://ecqi.healthit.gov/.
    For the CY 2018 reporting period/FY 2020 payment determination, we 
are proposing to continue our policy regarding the reporting of eCQMs, 
which would require the use of the most recent version of the eCQM 
specifications for each eCQM to which the EHR is certified. For the CY 
2018 eCQM reporting period, this means hospitals would be required to 
use the most recent version of the eCQM electronic specifications (in 
other words, the Spring 2017 version of the CQM electronic 
specifications and any applicable addenda) available on the eCQI 
Resource Center Web page https://ecqi.healthit.gov/. In addition, we 
are proposing to require that a hospital would need to have its EHR 
technology certified to all 15 available eCQMs in order to meet the 
reporting requirements for the CY 2018 reporting period/FY 2020 payment 
determination. As described in the 2015 EHR Incentive Programs final 
rule (80 FR 62767) and as previously finalized for the Hospital IQR 
Program's eCQM reporting requirements, starting with the CY 2018 
reporting period, hospitals are required to use EHR technology 
certified to the 2015 Edition. Furthermore, we are proposing that an 
EHR certified for eCQMs under the 2015 Edition certification criteria 
would not need to be recertified each time it is updated to a more 
recent version of the eCQMs. We believe it is not necessary for EHRs 
certified for eCQMs under the 2015 Edition certification criteria to be 
recertified each time it is updated to the most recent version of the 
eCQMs. This is because the EHR technology continues to meet the 2015 
Edition certification criteria and any updates to the eCQM 
specifications would not impact any elements regarding certification. 
Therefore, we are proposing that recertification would not be necessary 
and would reduce the burden associated with recertification. For 
further discussion regarding EHR certification requirements, we refer 
readers to section IX.G.4. of the preamble of this proposed rule.
    We are inviting public comment on these proposals.
(c) Electronic Submission Deadlines for the FY 2020 Payment 
Determination and Subsequent Years
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50256 through 50259) and the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49705 through 49708) for our previously adopted policies to align eCQM 
data reporting periods and submission deadlines for both the Hospital 
IQR Program and the Medicare EHR Incentive Program for eligible 
hospitals and CAHs.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57172), we 
established eCQM submission deadlines for the Hospital IQR Program. We 
are not proposing any changes to the eCQM submission deadlines for the 
FY 2020 payment determination or subsequent years.
(d) Summary
    As noted in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49759) and 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 57257), we continue to 
encourage health IT developers to test any updates on an annual basis, 
including any updates to the eCQMs and eCQM reporting requirements for 
the Hospital IQR and Medicare EHR Incentive Programs based on the CMS 
Implementation Guide for Quality Reporting Document Architecture [QRDA] 
Category I and Category III Eligible Professional Programs and Hospital 
Quality Reporting (HQR) (CMS Implementation Guide for QRDA). The CMS 
Implementation Guide for QRDA, program specific performance calculation 
guidance, and eCQM electronic specifications and guidance documents are 
available on the eCQI Resource Center Web site at: https://ecqi.healthit.gov/.
    As noted in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57172), we 
also continue to encourage all hospitals and vendors to submit QRDA I 
files early, and to use one of the pre-submission testing tools for 
electronic reporting, such as the CMS Pre-Submission Validation 
Application (PSVA), to allow additional time for testing and to make 
sure all required data files are successfully submitted by the 
deadline. The PSVA can be downloaded from the Secure File Transfer 
(SFT) section of the QualityNet Secure Portal at: https://cportal.qualitynet.org/QNet/pgm_select.jsp.
    In summary, in this FY 2018 IPPS/LTCH PPS proposed rule, for the CY 
2017 reporting period/FY 2019 payment determination, we are proposing 
for the Hospital IQR Program that: (1) A hospital using EHR technology 
certified to the 2014 or 2015 Edition of CEHRT, but for which such EHR 
technology is not certified to all available eCQMs, would be required 
to have its EHR technology certified to all eCQMs that are available to 
report; and (2) EHR technology that is certified to all available eCQMs 
would not need to be recertified each time the eCQMs are updated to a 
more recent version of the eCQM specifications.
    For the CY 2018 reporting period/FY 2020 payment determination, we 
are proposing for the Hospital IQR Program that: (1) A hospital using 
EHR technology certified to the 2015 Edition of CEHRT, but for which 
such EHR technology is not certified to all available eCQMs, would be 
required to have its EHR technology certified to all eCQMs that are 
available to report; and (2) EHR technology that is certified to all 
available eCQMs would not need to be recertified each time the eCQMs 
are updated to a more recent version of the eCQM specifications. 
Further, we are proposing that: (1) For the CY 2017 reporting period, 
hospitals would be required to use the most recent version of the eCQM 
electronic specifications (in other words, the Spring 2016 version of 
the eCQM specifications, and any applicable addenda); and (2) for the 
CY 2018 reporting period, hospitals would be required to use the most 
recent version of the eCQM electronic specifications (in other words, 
the Spring 2017 version of the eCQM specifications, and any applicable 
addenda). eCQM specifications are available on the eCQI Resource Center 
Web site at: https://ecqi.healthit.gov/.
    We are inviting public comment on our proposals related to the 
reporting and submission requirements of eCQM data for the Hospital IQR 
Program. We refer readers to section IX.E.3.c. of the preamble of this 
proposed rule, where similar policies are described for the Medicare 
EHR Incentive Program for eligible hospitals and CAHs.
e. Proposed Submission Form and Method for the Proposed Voluntary 
Hybrid Hospital-Wide Readmission Measure With Claims and Electronic 
Health Record Data (NQF #2879)
(1) Background
    In section IX.A.7. of the preamble of this proposed rule, we are 
proposing voluntary reporting of the Hybrid Hospital-Wide Measure with 
Claims and Electronic Health Record Data. In the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49701 through 49704), we signaled our intent to use 
core clinical data elements in the Hospital IQR Program and

[[Page 20067]]

requested comment on the use of the QRDA Category I (QRDA I) file 
format for this purpose. In that rule, we noted that many commenters 
supported submitting the core clinical data elements using an EHR 
technology certified by the ONC. In addition, some commenters were 
supportive of our suggested use of QRDA I specifically for reporting 
core clinical data elements and recommended aligning the standards for 
data transmission requirements with those used in other reporting 
programs.
(2) Proposed Certification and File Format Requirements for Core 
Clinical Data Element Submissions
    We are proposing that hospitals that voluntary report data for the 
Hybrid Hospital-Wide Readmission measure use EHR technology certified 
to the 2015 Edition. We also refer readers to our discussion of EHR 
certification requirements for eCQM reporting above and in section 
IX.G.4. of the preamble of this proposed rule where the same proposed 
requirements are discussed in detail for the Medicare EHR Incentive 
Program for eligible hospitals and CAHs. In addition, we are proposing 
that the 13 core clinical data elements and six linking variables for 
the Hybrid Hospital-Wide Readmission measure be submitted using the 
QRDA I file format.
    In order to ensure that the data have been appropriately connected 
to the encounter, the core clinical data elements specified for risk 
adjustment need to be captured in relation to the start of an inpatient 
encounter. The QRDA I standard enables the creation of an individual 
patient-level quality report that contains quality data for one patient 
for one or more quality measures. We note that as described in section 
IX.A.7. of the preamble of this proposed rule, participating hospitals 
are expected to successfully submit data values for vital signs and six 
linking variables required to merge with the CMS claims data on more 
than 95 percent of all Medicare FFS patients who are 65 years and older 
discharged from the hospital during the voluntary data collection 
period. In addition, participating hospitals are expected to 
successfully submit values for laboratory test results on more than 50 
percent of these patients discharged over the same time period. 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.
    We are inviting public comment on our proposals related to the 
reporting and submission requirements of core clinical data elements 
and linking variables for the proposed, voluntary Hybrid Hospital-Wide 
Readmission measure as discussed above.
f. Sampling and Case Thresholds for the FY 2020 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), the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50819), and the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49709) for details on our sampling and case thresholds for the FY 2016 
payment determination and subsequent years. We are not proposing any 
changes to our sampling and case threshold policies.
g. HCAHPS Administration and Submission Requirements for the FY 2020 
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 previously-adopted HCAHPS requirements. We also 
refer hospitals and HCAHPS Survey vendors to 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. We refer readers to section IX.A.6.a. of the preamble 
of this proposed rule for details on our proposal to refine the three 
questions of the Pain Management measure in the HCAHPS Survey. While we 
are proposing to refine the survey with respect to the questions about 
pain management in section IX.A.6.a. of the preamble of this proposed 
rule, we are not proposing any changes to the HCAHPS administration nor 
the HCAHPS submission requirements.
h. Data Submission Requirements for Structural Measures for the FY 2020 
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 are not proposing any changes to data 
submission requirements for structural measures.
i. Data Submission and Reporting Requirements for HAI Measures Reported 
via NHSN
    For details on the data submission and reporting requirements for 
HAI measures reported via the CDC's 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), the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50821 through 50822), and 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 org/. We are not proposing any changes to data 
submission and reporting requirements for HAI measures reported via the 
NHSN.
11. Proposed Modifications to the 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 that are still in effect. We refer readers 
to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50822 through 50835), 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50262 through 50273), and 
the FY 2016 IPPS/LTCH PPS final rule (80 FR 49710 through 49712) for 
detailed information on the modifications to these processes finalized 
for the FY 2016, FY 2017, and FY 2018 payment determinations and 
subsequent years.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173 through 
57181), we finalized our proposal to update the validation procedures 
in order to incorporate a process for validating eCQM data for the FY 
2020 payment determination and subsequent years. Specifically, we 
finalized a policy to: (1) Validate eCQM data submitted by up to 200 
hospitals selected via random sample; (2) exclude any hospital selected 
for chart-abstracted measure validation as well as any hospital that 
has been granted a Hospital IQR Program Extraordinary Circumstances 
Exemption for the applicable eCQM reporting period; and (3) randomly 
select 32 cases from the QRDA I files submitted by each hospital 
selected for eCQM validation for the FY 2020 payment determination and 
subsequent years. As described in the FY 2017

[[Page 20068]]

IPPS/LTCH PPS final rule (81 FR 57176), we will not conduct the first 
validation of eCQM data until spring of 2018 to validate data from the 
CY 2017 reporting period. Validation of CY 2017 data during spring of 
2018 affects the FY 2020 payment determination (81 FR 57177). 
Accordingly, below we refer to the CY 2017 reporting period/FY 2020 
payment determination for validation of data for encounters occurring 
during CY 2017 and the CY 2018 reporting period/FY 2021 payment 
determination for validation of data for encounters during CY 2018.
    In this proposed rule, we are proposing to modify policies for eCQM 
validation for the FY 2020 payment determination and subsequent years. 
First, for hospitals selected to participate in validation of eCQMs, we 
are proposing that we will select eight cases per quarter for the CY 
2017 reporting period/FY 2020 payment determination and subsequent 
years. We note that this proposal is contingent upon whether or not our 
proposed modifications to eCQM reporting requirements for the CY 2017 
reporting period/FY 2019 payment determination and CY 2018 reporting 
period/FY 2020 payment determination, as described in section IX.A.8. 
of the preamble of this proposed rule, are finalized as proposed. 
Second, we are proposing to add additional exclusion criteria to our 
hospital and case selection process for eCQM validation for the CY 2017 
reporting period/FY 2020 payment determination and subsequent years. 
Third, we are proposing to continue our previously finalized medical 
record submission requirements for the FY 2021 payment determination 
and subsequent years as well as to provide clarification of our 
finalized policy.
    For validation of chart-abstracted measures data, we are proposing 
to update our educational review process for the FY 2020 payment 
determination and subsequent years. These proposals are discussed in 
more detail below.
b. Proposed Changes to the Existing Processes for Validation of 
Hospital IQR Program eCQM Data for the FY 2020 Payment Determination 
and Subsequent Years
(1) Number of Cases
    We finalized in the FY 2017 IPPS/LTCH PPS final rule that we would 
select eight cases per quarter, for four quarters, for a total of 32 
cases (individual patient-level reports), from the QRDA I files 
submitted by each hospital selected for eCQM validation (81 FR 57178). 
In this proposed rule, we are proposing to modify that requirement and 
are proposing that we will select eight cases per quarter, (the number 
of quarters required will vary by specific FY payment determination) to 
complete eCQM validation for the FY 2020 payment determination and 
subsequent years, instead of 32 cases, over all four quarters, as 
previously finalized. This proposal is being made in conjunction with 
our proposals to modify the number of quarters required for eCQM data 
submission from: (1) Four to two quarters for CY 2017 (with validation 
of these data affecting the FY 2020 payment determination); and (2) 
four to three quarters for CY 2018 (with validation of these data 
affecting the FY 2021 payment determination) as discussed in section 
IX.A.8. of the preamble of this proposed rule. If all of these 
proposals are finalized as proposed, hospitals participating in eCQM 
validation would be required to submit: (1) 16 cases over two calendar 
quarters (eight cases x two quarters) for the CY 2017 reporting period/
FY 2020 payment determination; and (2) 24 cases over three quarters 
(eight cases x three quarters) for the CY 2018 reporting period/FY 2021 
payment determination.
    We are inviting public comment on these proposals as discussed 
above.
(2) Selection of Hospitals and Cases
    In this proposed rule, for the CY 2017 reporting period/FY 2020 
payment determination and subsequent years, we are proposing changes to 
our policies related to the selection of hospitals and cases for eCQM 
validation to: (1) Expand the types of hospitals that could be 
excluded; and (2) expand the types of cases excluded from selection. 
These proposals are discussed in more detail below.
(a) Selection of Hospitals
    As previously finalized in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57174-57178), we will validate eCQM data submitted by up to 200 
hospitals selected via random sample. Further, we finalized that the 
following hospitals may be excluded from this random sample of 200 
hospitals selected for eCQM validation (81 FR 57178):
     Any hospital selected for chart-abstracted measure 
validation; and
     Any hospital that has been granted a Hospital IQR Program 
Extraordinary Circumstances Exemption for the applicable eCQM reporting 
period.
    In this proposed rule, we are proposing to expand the types of 
hospitals that could be excluded. For the FY 2020 payment determination 
and subsequent years, we are proposing to also exclude any hospital 
that does not have at least five discharges for at least one reported 
eCQM included among their QRDA I file submissions. In addition, we are 
proposing that the three exclusions described above would be applied 
before the random selection of 200 hospitals for eCQM validation, so 
that hospitals meeting any of these exclusions would not be eligible 
for selection. We believe that these proposals improve the likelihood 
that there would be sufficient data for validation obtained from the 
hospitals selected for eCQM data validation.
    We are inviting public comment on our proposals to: (1) Exclude any 
hospital that does not have at least five discharges for at least one 
reported eCQM included among their QRDA I file submissions in eCQM 
validation; and/or (2) to exclude from selection hospitals meeting 
either of the two exclusion criteria finalized in the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 57178) as discussed above.
(b) Selection of Cases
    We have not previously specified processes for the selection of 
cases for eCQM validation. For the FY 2020 payment determination and 
subsequent years, we are proposing to exclude the following cases from 
validation for those hospitals selected to participate in eCQM 
validation:
     Episodes of care that are longer than 120 days; and
     Cases with a zero denominator for each measure.
    We believe that excluding episodes of care that are longer than 120 
days will reduce the reporting burden on hospitals selected for eCQM 
validation, as the volume of data reported for longer cases is greater. 
Further, we believe that excluding cases with zero denominators for 
each measure would ensure that we perform validation on cases with 
applicable measure data. We note that this proposed exclusion applies 
to cases, rather than measures. However, a measure would not be 
validated if a hospital did not have any applicable cases for the 
measure.
    We are inviting public comments on our proposal to exclude: (1) 
Episodes of care that are longer than 120 days; and (2) cases with a 
zero denominator for each measure from eCQM validation for the FY 2020 
payment determination and subsequent years as discussed above.
(3) Medical Record Submission Requirements and Scoring
(a) Medical Record Submission Requirements
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57179), we finalized 
that hospitals participating in eCQM

[[Page 20069]]

validation for the FY 2020 payment determination and subsequent years 
are required to: (1) Submit data by 30 calendar days following the 
medical records request date listed on the CDAC request form; (2) 
provide sufficient patient level information necessary to match the 
requested medical record to the original Hospital IQR Program submitted 
eCQM measure data record; and (3) submit records in PDF file format 
through QualityNet using the Secure File Transfer (SFT). We also 
finalized, for the FY 2020 payment determination only, that for 
hospitals selected for eCQM validation, that: (1) We require submission 
of at least 75 percent of sampled eCQM measure medical records in a 
timely and complete manner; and (2) the accuracy of eCQM data submitted 
for validation would not affect a hospital's validation score (81 FR 
57180). In this proposed rule, we are not making any changes related to 
these operational procedures. However, we are proposing to continue 
these policies for the FY 2021 payment determination and subsequent 
years.
    In this proposed rule, we are proposing to extend to the FY 2021 
payment determination and subsequent years our previously finalized 
medical record submission policy for eCQM validation, as finalized in 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 57181), requiring 
submission of at least 75 percent of sampled eCQM measure medical 
records in a timely and complete manner. We are proposing to extend to 
the FY 2021 payment determination our previously finalized medical 
record submission policy for eCQM validation, as finalized in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57181), that the accuracy of eCQM 
data submitted for validation would not affect a hospital's validation 
score. We note that if our proposals in section IX.A.8. of the preamble 
of this proposed rule to require two quarters of data for CY 2017 eCQM 
data submission and eight cases per quarter for hospitals selected for 
validation (16 total cases for the entire data collection period), are 
finalized as proposed, and hospitals selected for eCQM validation are 
required to submit complete information for 75 percent of requested 
cases as previously finalized, then those hospitals would be required 
to submit information for at least 12 records, or 75 percent of the 
requested 16 records for the FY 2020 payment determination. Similarly, 
if our proposals: (1) To continue our medical record submission 
policies for the FY 2021 payment determination and subsequent years; 
(2) to require three quarters of data for CY 2018 eCQM data submission 
and eight cases per quarter for hospitals selected for validation (24 
total cases for the entire data collection period) as detailed in 
section IX.A.8. of the preamble of this proposed rule; and (3) that 
hospitals selected for eCQM validation are required to submit complete 
information for 75 percent of requested cases are all finalized as 
proposed, then those hospitals would be required to submit complete 
information for at least 18 records, or 75 percent of the requested 24 
records for the FY 2021 payment determination.
    Furthermore, as finalized in the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57180) for the FY 2020 payment determination, we are proposing 
for the FY 2021 payment determination and subsequent years that any 
hospital that fails any validation requirement, such as submission of 
records in PDF file format within 30 days of the date listed on the 
CDAC medical records request, and/or submission of complete information 
for at least 75 percent of the requested records, would be considered 
not to have met the eCQM validation requirements and would be subject 
to a one-quarter reduction of the applicable percentage increase for 
not meeting all Hospital IQR Program requirements.
    We are inviting public comment on our proposal as discussed above.
(b) Scoring
    As finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57178) 
for the FY 2020 payment determination only, the accuracy of eCQM data 
(the extent to which eCQM data reported for validation matches the data 
previously reported in the QRDA I files for eCQM reporting) submitted 
for validation will not affect a hospital's validation score. In this 
proposed rule, we are proposing the continuation of this policy for the 
FY 2021 payment determination, such that the accuracy of eCQM data 
submitted for validation would not affect a hospital's validation 
score. We intend for the accuracy of eCQM validation to affect 
validation scores in the future and would propose any changes related 
to this in future rulemaking. The data submission deadlines and 
additional details about the eCQM validation procedures will be posted 
on the QualityNet Web site at: http://www.QualityNet.org/.
    We are inviting public comment on this proposal as discussed above.
c. Proposed Modifications to the Educational Review Process for Chart-
Abstracted Measures Validation
(1) Background
    In the FY 2015 IPPS/LTCH PPS final rule, we stated that we rely on 
hospitals to request an educational review or appeal cases to identify 
any potential CDAC or CMS errors (79 FR 50260). We also noted that a 
hospital may request from CMS at any time an educational review to 
better understand whether or not we reached a correct conclusion during 
validation; hospitals that fail to meet Hospital IQR Program validation 
requirements have 30 days to appeal after this determination (79 FR 
50260). We have described our processes for educational review on the 
QualityNet Web site.\234\ We note that historically this process 
functioned as an outreach opportunity we provided hospitals, but based 
on our experience, and more robust validation requirements, we believe 
that it would beneficial to hospitals to propose formalizing this 
process.
---------------------------------------------------------------------------

    \234\ QualityNet: Validation- Educational Review. https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228775419006.
---------------------------------------------------------------------------

    Under the current process, if the results of an educational review 
indicate that CDAC or CMS has incorrectly scored a hospital, those 
scores are not changed unless and until the hospital submits a 
reconsideration request. Therefore, in this proposed rule, we are 
proposing: (1) To formalize this process; and (2) to update the process 
to specify that if the results of an educational review indicate that 
we incorrectly scored a hospital, the corrected score would be used to 
compute the hospital's final validation score whether or not the 
hospital submits a reconsideration request. These proposals are 
discussed in more detail below.
    Stakeholder feedback, provided via email, has indicated that while 
the educational review process is helpful to participating hospitals, 
it is limited in its impact, given that a hospital's score is not 
corrected even after an educational review determines that CMS reached 
an incorrect conclusion regarding a hospital's validation score for a 
given quarter. Based on this feedback, we are proposing to change the 
Hospital IQR Program's chart-abstracted measure validation educational 
review process. Our goal is to reduce the number of reconsideration 
requests by identifying and correcting errors before the final yearly 
validation score is derived. By identifying and correcting any mistakes 
early on, this process could help decrease the burden

[[Page 20070]]

during the annual reconsideration process, both for hospitals and CMS.
(2) Proposed Educational Review Process Modifications for the FY 2020 
Payment Determination and Subsequent Years
(a) Request for Educational Review
    Under this proposal, the educational review request process, as 
well as our procedures for responding to requests, remain the same. 
Specifically, under the current process, hospitals may request an 
educational review if they believe they have been scored incorrectly or 
if they have questions about their score. We would provide the results 
of the educational review, outlining the findings of whether the scores 
were correct or incorrect, to the requesting hospital through secure 
file transfer.
    In this proposed rule, we are proposing to formalize this process. 
In formalizing our current procedures, the educational review request 
process, as well as our procedures for responding to requests, would 
remain the same. First, we are proposing that, for the FY 2020 payment 
determination and subsequent years, a hospital may request from CMS an 
educational review to better understand whether or not CDAC or CMS 
reached a correct conclusion during validation for the first three 
quarters of validation. Specifically, upon receipt of an unsatisfactory 
score, a hospital would have 30 calendar days to contact the Validation 
Support Contractor (VSC) to solicit a written explanation of the 
provided score. We note that currently hospitals receive validation 
results on a quarterly basis, and that would not change under this 
proposed process. Accordingly, under this proposal, an educational 
review could be requested on a quarterly basis for the first three 
quarters of validation. Results of the educational review would be 
provided to hospitals via secure file transfer.
    Second, we are proposing that the process used to evaluate whether 
or not validation results are correct would be the same in both an 
educational review and a reconsideration request. Specifically, as 
finalized in the FY 2012 IPPS/LTCH PPS final rule for the Hospital IQR 
Program's reconsideration request process, we are proposing that upon 
receipt of an educational review request, we would review the data 
elements that were labeled as mismatched, as well as the written 
justifications provided by the hospitals, and make a decision on the 
educational review request.
(b) Scoring Update
    For the FY 2020 payment determination and subsequent years, we are 
proposing that if an educational review, that is requested for any of 
the first 3 quarters of validation, yields incorrect CMS validation 
results for chart-abstracted measures, we would use the corrected 
quarterly score, as recalculated during the educational review process, 
to compute the final confidence interval (CI). These corrected scores 
would be applicable to the corresponding quarter, within the first 3 
quarters of validation, for which a request was submitted. We note that 
under this proposal, the quarterly validation reports issued to 
hospitals would not be changed to reflect the updated score due to the 
burden associated with reissuing corrected reports. Beginning with the 
FY 2020 payment determination, we are proposing to use the revised 
score identified through an educational review when determining whether 
or not a hospital failed validation. Further, under this proposal, as 
with the current educational review process, corrected scores 
identified through the educational review would only be used if they 
indicate that the hospital performed more favorably than previously 
determined.
    Under this proposal, the educational review request process, as 
well as our procedures for responding to requests, remain the same. We 
also note that, in accordance with our previously established policies, 
a hospital may still request reconsideration even if an educational 
review determined that a hospital was scored correctly. Hospitals that 
fail Hospital IQR Program requirements, which include validation, can 
request reconsideration at the end of the year after the annual payment 
update has been made. We refer readers to section IX.A.14. of the 
preamble of this proposed rule for a discussion about our 
reconsideration and appeals process. We note that under this proposal, 
corrected scores identified through the educational review would only 
be used if they indicate that the hospital performed more favorably 
than previously determined.
    In addition, we note that for the last quarter of validation, 
because of the need to calculate the confidence interval in a timely 
manner and the insufficient time available to conduct educational 
reviews, the existing reconsideration process would be used to dispute 
an unsatisfactory validation result. If a hospital does not fail 
validation they still would have the opportunity to request an 
educational review within 30 days of receiving the results.
    We are inviting public comment on our proposals to formalize the 
educational review process and use this process to correct scores for 
the first three quarters of chart-abstracted measure validation as 
discussed above.
12. Data Accuracy and Completeness Acknowledgement (DACA) Requirements 
for the FY 2020 Payment Determination and Subsequent Years
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53554) for previously-adopted details on DACA requirements. We are not 
proposing any changes to the DACA requirements.
13. Public Display Requirements for the FY 2020 Payment Determination 
and Subsequent Years
a. Background
    We refer readers to the FY 2008 IPPS/LTCH PPS 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), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836), 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277), and the FY 2016 
final rule (80 FR 49712 through 49713) 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: https://data.medicare.gov.
    In this proposed rule, we are not proposing any changes to public 
display requirements. However, we are soliciting public comment on 
potential options for confidential and public reporting measures 
stratified by patient dual eligibility status as early as the summer of 
2018 using data from the FY 2019 reporting period (July 1, 2014 through 
June 30, 2017). In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57167 
through 57168), we previously sought public comment on the potential 
public reporting of quality measures data stratified by SES factors and 
future hospital quality measures that incorporate health equity. In 
this proposed rule, we are seeking additional public comment on the 
potential confidential and public reporting of Hospital 30-day, All-
Cause, Risk-Standardized Readmission Rate Following Pneumonia 
Hospitalization (NQF #0506), (the Pneumonia Readmission measure), and 
the Hospital 30-Day, All-Cause, Risk-Standardized

[[Page 20071]]

Mortality Rate Following Pneumonia Hospitalization (NQF #0468), (the 
Pneumonia Mortality measure), data stratified specifically by patient 
dual eligibility status.
b. Potential Options for Confidential and Public Reporting of Hospital 
IQR Measures Stratified by Patient Dual Eligibility Status
(1) Background
    In section IX.A.1.d. of the preamble of this proposed rule, we 
discuss the importance of improving beneficiary outcomes including 
reducing health disparities, and our commitment to ensuring that 
medically complex patients, as well as those with social risk factors, 
receive excellent care. As we note in section IX.A.1.d. of the preamble 
of this proposed rule, studies show that social risk factors, such as 
earning a low-income, belonging to a racial or ethnic minority group, 
or living with a disability, to be associated with poor health outcomes 
and some of this disparity is related to the quality of health 
care.\235\ One of our core objectives is to improve health outcomes for 
all beneficiaries, and ensure that complex patients as well as those 
with social risk factors receive excellent care. Within this context, 
recent reports by the Office of the Assistant Secretary for Planning 
and Evaluation (ASPE) and the National Academies of Sciences, 
Engineering, and Medicine have examined the influence of social risk 
factors in CMS value-based purchasing programs.\236\ In addition, as 
noted in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57185), the NQF 
has undertaken a 2-year trial period in which certain new measures and 
measures undergoing maintenance review have been assessed to determine 
if risk adjustment for social risk factors is appropriate for these 
measures.\237\
---------------------------------------------------------------------------

    \235\ See, for example, United States Department of Health and 
Human Services. ``Healthy People 2020: Disparities. 2014,'' http://www.healthypeople.gov/2020/about/foundation-health-measures/Disparities or National Academies of Sciences, Engineering, and 
Medicine. Accounting for Social Risk Factors in Medicare Payment: 
Identifying Social Risk Factors. Washington, DC: National Academies 
of Sciences, Engineering, and Medicine 2016.
    \236\ Department of Health and Human Services Office of the 
Assistant Secretary for Planning and Evaluation (ASPE), ``Report to 
Congress: Social Risk Factors and Performance Under Medicare's 
Value-Based Purchasing Programs.'' December 2016, https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \237\ http://www.qualityforum.org/SES_Trial_Period.aspx.
---------------------------------------------------------------------------

    As part of this effort, we are soliciting feedback on which social 
risk factors provide information that is most valuable to stakeholders. 
We also are seeking public comment on confidential reporting and future 
public reporting of some of our measures, specifically the Pneumonia 
Readmission measure (NQF #0506) and the Pneumonia Mortality measure 
(NQF #0468), stratified by patient dual eligibility. There are two 
potential purposes for providing information on hospital results 
stratified by dual eligibility. The approach we are considering would 
illuminate differences in outcome rates among patient groups within a 
hospital and would also allow for a comparison of those differences, or 
disparities, across hospitals. We also considered an alternative 
approach that would measure outcome rates for subgroups of patients, 
such as the dual eligible patients, across hospitals. However, this 
alternative would not allow for an examination of the difference in 
rates between groups (for example dual eligible compared to non-dual 
eligible).
    The goal of measuring and monitoring disparities in patient 
outcomes for specific sub-groups of patients within hospitals is to 
reduce health inequities, improve health care quality for vulnerable 
populations, and promote greater transparency for health care 
consumers. This is in alignment with the CMS Quality Strategy \238\ and 
the ASPE report \239\ to Congress, which stated performance rates 
including readmission rates stratified by social risk should be 
developed and considered for hospital specific confidential preview 
reports and public reporting in places such as Hospital Compare, so 
hospitals, health systems, policymakers, and consumers can see and 
address important disparities in care.
---------------------------------------------------------------------------

    \238\ https://www.cms.gov/medicare/quality-initiatives-patient-
assessment-instruments/qualityinitiativesgeninfo/cms-quality-
strategy.html.
    \239\ Department of Health and Human Services Office of the 
Assistant Secretary for Planning and Evaluation (ASPE), ``Report to 
Congress: Social Risk Factors and Performance Under Medicare's 
Value-Based Purchasing Programs.'' December 2016. Available at: 
https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
---------------------------------------------------------------------------

    Many levers exist for addressing and improving disparities in care 
and outcomes. The 21st Century Cures Act (Pub. L. 114-255) addresses 
payment penalty scoring in the Hospital Readmissions Reduction Program 
by identifying hospitals based on their proportion of dual eligible 
patients and supporting improvement efforts for hospitals caring for 
patients with social risk factors by setting penalty thresholds among 
similar peer hospitals.\240\ As discussed in sections V.I.7. through 
V.I.10. of the preamble of this proposed rule, the Hospital 
Readmissions Reduction Program, as required by the statute, is 
proposing to use dual eligibility as a marker of poverty, one key 
patient social risk factor, and we would like to move in that direction 
for the Hospital IQR Program as well in the future. In the Hospital IQR 
Program, we are exploring methods to distinguish vulnerable patients 
with social risk factors, such as poverty. As such, we intend to use 
dual eligible status among the over 65 year old patients included in 
the measures as a marker of poverty.
---------------------------------------------------------------------------

    \240\ Ibid.
---------------------------------------------------------------------------

    Dual eligible status describes whether Medicare beneficiaries are 
also enrolled in Medicaid. We use dual enrollment in Medicare and 
Medicaid as a marker for a beneficiary having low income and/or few 
assets. The recent report to Congress by ASPE has shown that dual 
eligibility was the most powerful predictor of poor health care 
outcomes among the social risk factors they tested.\241\
---------------------------------------------------------------------------

    \241\ Ibid.
---------------------------------------------------------------------------

    The Hospital Compare Web site currently displays readmission rates 
for each hospital's patients together, but does not specifically 
highlight hospitals' quality of care for vulnerable populations. We 
believe stratifying data by social risk factors would supplement the 
current reporting of the Pneumonia Readmission and Pneumonia Mortality 
measures by highlighting disparities, that is, differences in outcomes, 
within hospitals that are not simply due to differences in illness 
level, to the extent that such disparities exist for any given 
hospital. To do so, we developed a method to quantify the disparities 
of readmission and mortality, between these groups within each hospital 
after accounting for patient case mix. The disparities indicator used 
in the hospital specific confidential preview reports would provide 
information assessing the increased odds, or rates, of readmission for 
dual eligible patients admitted to the same hospital, after accounting 
for differences in age and comorbidities.
    For the Hospital IQR Program, we are considering options to improve 
health disparities among patient groups within hospitals by increasing 
the transparency of disparities among patients within hospitals and the 
ability to compare these disparities across hospitals. This would be 
accomplished by the methods described below. Our alternative approach, 
also described below, to measure outcome rates for subgroups of 
patients, such as the dual eligible patients, across hospitals, would 
examine the performance of hospitals

[[Page 20072]]

on the subgroup of dual eligible patients.
    We previously sought public comment on the potential public 
reporting of quality measures data stratified by race, ethnicity, sex, 
and disability and future hospital quality measures that incorporate 
health equity in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57167 
through 57168). In general, commenters supported the development of 
health equity measures and their inclusion in the Hospital IQR Program 
(81 FR 57167). In particular, stakeholders noted that stratified 
measures could serve as tools for hospitals to identify gaps in 
outcomes for different groups of patients, improve the quality of 
health care for all patients, empower consumers to make informed 
decisions about health care, and encouraged us to stratify measures by 
other social risk factors such as age, income, and educational 
attainment (81 FR 57167). However, commenters raised concerns about the 
small denominator sample size associated with measure stratification by 
social risk factors, which would skew the reliability of stratified 
quality measures. Commenters also were concerned that it may not be a 
simple task to stratify measures by race, ethnicity, sex, and 
disability because specific considerations are required for every 
measure and each reporting mechanism to implement such a requirement 
(81 FR 57168). For more details on the public comments, we refer the 
readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 57167 through 
57168).
    We acknowledge the complexity of interpreting stratified outcome 
measures. Due to this complexity, prior to publicly reporting 
stratified outcome measure data, as early as the summer of 2018 using 
data from the FY 2019 reporting period (July 1, 2014 through June 30, 
2017), we are considering first providing hospitals with confidential 
results showing outcomes stratified by patient dual eligibility within 
the hospital, or more specifically, differences in outcome rates for 
the dual eligible and non-dual eligible patients in the measures. This 
would allow us to obtain feedback on reporting options and to ensure 
the information is reliable, valid, and understandable prior to any 
future public display on Hospital Compare.
    Our goal in producing stratified results is to provide information 
about disparities in patient outcomes within hospitals to the extent 
that they exist for a given hospital. This information would supplement 
the assessment of overall hospital quality provided through the current 
measures of readmission and mortality rates; these measures would 
remain unchanged. We discuss below the methods and results of 
stratification for the current Hospital 30-day, All-Cause, Risk-
Standardized Readmission Rate Following Pneumonia Hospitalization (NQF 
#0506) (the READM-30-PN or Pneumonia Readmission measure).
    The stratified results would provide hospitals with confidential 
reporting with information that could illuminate any disparities in 
care and outcome that can be targeted through quality improvement 
efforts. Then for the future, we are considering publicly posting both 
of these results on Hospital Compare to allow consumers and other 
stakeholders to view critical information about the care and outcomes 
of subgroups of patients, particularly those with social risk factors. 
This information could drive consumer choice and spark improvement 
efforts targeting dual eligible patients. In the future, we would also 
consider expanding this approach to other social risk factors and other 
measures.
    We are inviting public comment on: (1) Which social risk factors 
provide information that is most valuable to stakeholders; (2) 
providing hospitals with confidential preview reports containing 
stratified results for certain Hospital IQR Program measures, 
specifically the Pneumonia Readmission measure and the Pneumonia 
Mortality (MORT-30-PN) measure; (3) a potential methodology for 
illuminating differences in outcomes rates among patient groups within 
a hospital that would also allow for a comparison of those differences, 
or disparities, across hospitals; (4) an alternative methodology that 
compares performance for patient subgroups across hospitals but does 
not provide information on hospital disparities and any additional 
suggested methodologies for calculating stratified results by patient 
dual eligible status; and (5) future public reporting of these same 
measures stratified by patient dual eligibility status on Hospital 
Compare. These are discussed in more detail below.
(2) Hospital Specific Confidential Preview Reports Prior to Publicly 
Reporting Stratified Data
    We are seeking public comment on the possibility of providing 
hospitals specific confidential preview reports containing the results 
of the Pneumonia Readmission (NQF #0506) and Pneumonia Mortality (NQF 
#0468) measures stratified by patient dual eligibility, as early as the 
summer of 2018 using data from the FY 2019 reporting period (July 1, 
2014 through June 30, 2017), prior to any future potential public 
reporting of this data. The current publicly reported measures used in 
the Hospital IQR Program and reported on the Hospital Compare Web site 
would remain unchanged. Following the time period during which 
hospitals received confidential preview reports, we may display 
stratified results on Hospital Compare solely for the purpose of 
``stratification,'' that is, producing results to describe differences 
between subgroups within the hospital.
(3) Potential Methodology for Calculating Stratified Results by Patient 
Dual Eligibility Status
(a) Background
    Under any future option to stratify measure results by patient dual 
eligibility status, we intend to focus on disparities between dual 
eligible and non-dual eligible patients because dual eligibility is an 
important social risk factor among the Medicare Fee-for-Service 
population and is feasible to measure.\242\ In order to provide 
information about differences in readmission outcomes for dual eligible 
and non-dual eligible patients within a hospital that may be due to 
quality differences, we need a methodology that accounts for any 
differences in comorbidities, age, and other risk factors between these 
groups of patients. Such a methodology ensures that differences in 
outcomes are not simply due to differences in clinical severity and 
comorbid conditions among the patient groups. Therefore, any approach 
to identifying within-hospital disparities for readmission measures by 
patients' dual eligibility would build on the methodology used to 
calculate the currently implemented RSRRs.\243\ As the Pneumonia 
Readmission measure (NQF #0506) is currently specified, risk-adjusted 
rates are estimated using a hierarchical logistic regression to account 
for the clustering of observations within hospitals and differences in 
the number of admissions across hospitals.\244\
---------------------------------------------------------------------------

    \242\ Department of Health and Human Services Office of the 
Assistant Secretary for Planning and Evaluation (ASPE), ``Report to 
Congress: Social Risk Factors and Performance Under Medicare's 
Value-Based Purchasing Programs.'' December 2016, https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \243\ http://www.qualitynet.org/dcs/ContentServer?cid=1219069855841&pagename=QnetPublic%2FPage%2FQnetTier4&c=Page.
    \244\ Krumholz H, Normand SL, Keenan P, et al. Hospital 30-Day 
Pneumonia Readmission Measure Methodology: Report prepared for the 
Centers for Medicare & Medicaid Services, 2008, http://www.qualitynet.org/dcs/ContentServer?cid=1219069855841&pagename=QnetPublic%2FPage%2FQnetTier4&c=Page.

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

[[Page 20073]]

(b) Option To Measure Difference in Outcomes by Adding Three Additional 
Factors to Current Statistical Models
    There is both a hospital and patient-level effect of dual 
eligibility on readmission risk. We have considered the hospital fixed 
effect in our approaches to stratifications (described in the preceding 
section IX.A.13.b.(3)(a) of the preamble of this proposed rule) because 
without it, we will introduce bias in the patient-level dual 
eligibility, which would produce misleading results. The statistical 
approach we may employ in the future would use current statistical 
models and add three additional factors to the statistical model for 
the purposes of measuring differences in outcomes: (1) An indicator for 
patient-level dual eligibility; (2) a hospital-level dual eligible 
factor \245\ (for example, percentage of dual eligible patients in each 
hospital); and (3) a hospital-specific indicator (random coefficient) 
for dual eligibility. This third factor, the hospital-specific random 
coefficient for dual eligibility, assesses the disparity or difference 
in readmissions for dual eligible patients within a specific hospital 
after accounting for other factors, such as differences in clinical 
disease or comorbid conditions. The first two factors, (the patient-
level dual eligibility coefficient, which represents the overall 
difference between dual and non-dual groups in the entire country, and 
the hospital-level dual eligible factor, which reflects the difference 
in readmission rate between hospitals with different proportions of 
dual eligible patients) are only included in order to be able to 
interpret the third factor random coefficient and ensure it is specific 
to a particular hospital. It is the third factor, the hospital-specific 
indicator, which would be used to calculate the differences in 
readmission rates between the dual and non-dual eligible patients 
within the hospital.
---------------------------------------------------------------------------

    \245\ We note that although hospital-level dual eligible effect 
was not of interest, it often mixed with patient-level effect. 
Therefore, by breaking down the dual eligible effect into patient-
level and hospital-level components, we were able to better assess 
of relationship between readmission and patient-level dual 
eligibility.
---------------------------------------------------------------------------

    Using this method, within-hospital disparities in readmissions 
between dual eligible and non-dual eligible patients would be included 
in confidential hospital specific preview reports in addition to the 
currently calculated and displayed Pneumonia Readmission (NQF #0506) 
and Pneumonia Mortality (NQF #0468) measures. For ease of 
interpretation, we would provide information in the form of odds ratios 
(that is, the increased odds of readmission for dual eligible patients 
at a given hospital) or, alternatively, the average difference in 
readmission rates between dual and non-dual patients after accounting 
for differences in other risk-factors.
    To calculate odds ratios, we would convert hospital-specific 
coefficients for dual eligibility into odds ratios. Odds ratios compare 
dual eligible patients relative to non-dual eligible patients in terms 
of their risk of readmission, assuming that the two groups have the 
same case mix (that is, comorbidities). If the readmission rate is the 
same in both groups, the odds ratio is 1. If the odds ratio is greater 
than 1, it would mean that dual eligible patients have worse 
readmission rates, and vice versa. To estimate the average difference 
of readmission rates between dual and non-dual beneficiaries for each 
hospital, we would first calculate the predicted probabilities of being 
readmitted by assuming all patients are dual eligible or all patients 
are non-dual eligible in a hospital. The difference between the two 
predicted probabilities is the average difference in the readmission 
rate between the two groups of patients at each hospital.
    Rather than assuming a uniform impact of dual eligible and non-dual 
eligible status across hospitals, this approach would assess the impact 
of dual eligibility across all hospitals separately, recognizing that 
socioeconomic disparities of patients may be greater or lesser at some 
hospitals as compared with others. Therefore, this approach would allow 
quantification of the difference in readmissions between dual and non-
dual eligible patients within each hospital, as long as a hospital has 
a sufficient number of cases to produce a reliable estimate for both 
groups.
    In summary, this statistical model would uniquely identify 
disparities in readmission rates for dual eligible beneficiaries 
compared to non-dual eligible beneficiaries, after controlling for 
patients' prior medical history and age for each hospital. This random 
coefficient for dual eligibility within the statistical model would 
indicate how much readmission rates at the same hospital would differ 
between two patients at that hospital with exactly the same age and 
underlying risk factors (those comorbid clinical conditions included in 
the statistical model), but differ with respect to dual eligibility.
(c) Option To Measure Difference in Outcomes Using Current Statistical 
Models
    Depending on the information that is most useful to stakeholders, 
an alternative approach to examining readmission rates among dual 
eligible patients could be considered. To examine the relative 
performance of hospitals on readmission rates for their dual eligible 
patients, rather than to compare hospitals on within-hospital 
disparities in rates, we could calculate the current measures' 
statistical model (without the additional factors mentioned above) and 
include only dual eligible patients. Similarly, this could be done for 
non-dual eligible patients. This approach of using two separate models 
for the separate patient subgroups would produce information on 
readmission rates for dual eligible patients at one hospital compared 
to another (or non-dual eligible patients across hospitals). There is a 
trade-off; because of the use of two separate statistical models, this 
approach would not ensure consistent treatment of risk factors across 
patient groups and could not be used to compare readmission rates for 
two groups within a hospital.
(d) Summary of Statistical Method Options
    We intend to provide information on the difference in readmission 
rates of dual or non-dual beneficiaries within hospitals and also 
provide information for hospitals and consumers on the relative 
disparities across hospitals. We are soliciting public comment on the 
information that stakeholders would find most useful and any additional 
suggested methodologies for calculating stratified results by patient 
dual eligible status.
    The hospital specific confidential preview reports containing data 
stratified by patient dual eligibility would be modelled after current 
hospital specific confidential preview reports and include patient-
level data for hospitalizations included in the measure. The current 
hospital specific confidential preview reports would be supplemented by 
information for each patient on their dual eligible status and a 
summary of the difference in readmission rates for dual eligible 
patients in the hospital as compared to other hospitals in the state 
and nation.
    We are inviting public comment on both methodologies, as described 
above, to produce stratified results by determining the differences in 
readmission and mortality by dual eligible status within a hospital, 
and a comparison of those disparities across

[[Page 20074]]

hospitals, accounting for differences in comorbidities, age, and other 
risk factors between dual eligible and non-dual eligible patients.
(4) Data Sources
    To provide an example of the statistical approach we could apply, 
below we describe stratified results by patient dual eligibility for 
the Pneumonia Readmission measure (NQF #0506), using the first 
calculation method described in section IX.A.13.b.(3)(b) of the 
preamble of this proposed rule, above. To calculate the example rate, 
we used the CMS administrative claims data from each index pneumonia 
hospitalization, as well as from inpatient and outpatient Medicare 
claims from the 12 months prior to the hospitalization from July 2012 
to June 2015 to calculate the publicly reported RSRRs following 
pneumonia hospitalization (NQF #0506) in the July 2016 Hospital Compare 
update. Both the cohort and the risk-adjustment approach remain 
unchanged. For more details on the publicly reported RSRRs following 
pneumonia as currently implemented, we refer readers to its measure 
methodology report and measure update zip file on our Web site at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. The data was 
then linked to CMS denominator files \246\ (2012 to 2015) to derive the 
indicator of dual eligibility for each patient admission (1.3 percent 
index admissions were excluded because there is no information 
available in the denominator files).
---------------------------------------------------------------------------

    \246\ https://www.cms.gov/research-statistics-data-and-systems/files-for-order/limiteddatasets/denominatorlds.html.
---------------------------------------------------------------------------

    We conducted preliminary analyses on the Pneumonia Readmission 
measure (NQF #0506) \247\ and determined that there is a total of 3,851 
hospitals that have a least 25 included index hospitalizations overall, 
and at least 10 dual eligible and 10 non-dual eligible index 
hospitalizations for which we could report outcome disparity (82 
percent of hospitals). The minimum sample size for 25 hospitalizations 
is consistent with the current publicly reported measures. We imposed 
an additional requirement of at least 10 dual eligible and 10 non-dual 
eligible index hospitalizations for this example to ensure we had 
adequate numbers to observe any meaningful differences in outcome. We 
used this requirement because if a hospital has fewer than 10 patients 
in one subgroup of patients, it is not clear that readmission rates for 
that group as compared to others would be reliable, nor that it is 
meaningful or has face validity to measure stratified rates for 
hospitals with very few of one of the categories of patients. We 
welcome public comment on this sample size determination.
---------------------------------------------------------------------------

    \247\ 1,456,289 hospitalizations (98.7 percent) were linked to 
the denominator data and 24.4 percent of those hospitalizations are 
from dual eligible patients.
---------------------------------------------------------------------------

    The observed readmission rate within 30-days of index discharge for 
all patients was 17.1 percent when we did not adjust for patients' 
prior medical history, and dual eligible beneficiaries had an 
approximately 3 percent higher readmission rate. Results from the 
hierarchical model \248\ indicate that there is a statistically 
significant association between dual eligibility and pneumonia 
readmission (adjusted odds ratio, 1.07; 95 percent CI, 1.06-1.08). In 
addition, there is substantial variation in the relationship between 
dual eligibility and readmission across hospitals (Median odd ratio, 
1.06; Min., 0.95; Max., 1.22). Findings also revealed that dual 
eligible patients are more likely to get readmitted in 95 percent of 
hospitals.
---------------------------------------------------------------------------

    \248\ Our hierarchical model is described in our measure 
methodology reports. See, for example, Krumholz H, Normand SL, 
Keenan P, et al. Hospital 30-Day Pneumonia Readmission Measure 
Methodology: Report prepared for the Centers for Medicare & Medicaid 
Services, 2008, http://www.qualitynet.org/dcs/ContentServer?cid=1219069855841&pagename=QnetPublic%2FPage%2FQnetTier4&c=Page.
---------------------------------------------------------------------------

(5) Future Potential Public Display
    We are inviting public comment on the potential future public 
reporting of certain outcomes measures, such as the Pneumonia 
Readmission (NQF #0506) and Pneumonia Mortality measures (NQF #0468), 
stratified by social risk factors, specifically dual eligible status, 
to illuminate within-hospital disparities. If we decide to display 
measure data stratified by dual eligible status on the Hospital Compare 
Web site, we would clearly differentiate between the measure 
information we currently display and the measure information that is 
stratified by patients' dual eligible status. In addition, as discussed 
above, if we decide to display measure data stratified by dual eligible 
status on the Hospital Compare Web site, hospitals would receive 
information about their stratified readmission rates for a certain 
period of time through hospital specific confidential preview reports 
prior to the public reporting of any information.
    We are inviting public comment on this future consideration to 
display the stratified measure results, in addition to the current 
measure results, for certain Hospital IQR Program measures, in future 
reporting years. We note that public display of measure data stratified 
by social risk factors such as dual eligible status would not occur 
until after a period of confidential reporting.
(6) Summary
    To summarize, we are inviting public comment on: (1) Which social 
risk factors provide the most valuable information to stakeholders; (2) 
providing hospitals with confidential preview reports containing 
stratified results for certain Hospital IQR Program measures, 
specifically the Pneumonia Readmission measure and the Pneumonia 
Mortality measure; (3) a potential methodology for illuminating 
differences in outcomes rates among patient groups within a hospital 
and would also allow for a comparison of those differences, or 
disparities, across hospitals; (4) an alternative methodology that 
compares performance for patient subgroups across hospitals but does 
not provide information on within hospital disparities and any 
additional suggested methodologies for calculating stratified results 
by patient dual eligibility status; and (5) future public reporting of 
these same measures stratified by patient dual eligibility status on 
Hospital Compare as discussed above.
14. Reconsideration and Appeal Procedures for the FY 2020 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 42 CFR 412.140(e) for details on reconsideration and appeal 
procedures for the FY 2017 payment determination and subsequent years. 
We are not proposing any changes to the reconsideration and appeals 
procedures in this proposed rule.
15. Proposed Change to the Hospital IQR Program Extraordinary 
Circumstances Exceptions (ECE) Policy
a. Background
    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), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277), the 
FY 2016 IPPS/LTCH PPS final rule (80 FR 49713), the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 57181 through 57182), and 42 CFR 412.140(c)(2) 
for details on the current Hospital IQR Program ECE policy. We also 
refer readers to the

[[Page 20075]]

QualityNet Web site at: http://www.QualityNet.org/ for our current 
requirements for submission of a request for an extension or exemption. 
In this proposed rule, we are making one proposal and a clarification 
in order to align the ECE policy across CMS quality programs. We are 
also proposing updates to 42 CFR 412.140(c)(2) to reflect our ECE 
policy.
    Many of our quality reporting and value-based purchasing programs 
share common processes for requesting an exception from program 
reporting due to an extraordinary circumstance not within a provider's 
control. The Hospital IQR Program, Hospital OQR Program, IPFQR Program, 
ASCQR Program, and PCHQR Program, as well as the Hospital VBP Program, 
HAC Reduction Program, and the Hospital Readmissions Reduction Program, 
share common processes for ECE requests. We refer readers to the 
Hospital IQR Program (76 FR 51651 through 51652, 78 FR 50836 through 
50837, 79 FR 50277, 81 FR 57181 through 57182, and 42 CFR 
412.140(c)(2)), Hospital OQR Program (77 FR 68489, 78 FR 75119 through 
75120, 79 FR 66966, and 80 FR 70524), and ASCQR Program (77 FR 53642 
through 53643 and 78 FR 75140 through 75141) along with the HAC Program 
(80 FR 49579 through 49581), Hospital Readmissions Reduction Program 
(80 FR 49542 through 49543), IPFQR (77 FR 53659 through 53660 and 79 FR 
45978), and PCHQR Program (78 FR 50848) for program specific 
information about extraordinary circumstances exceptions requests.
    In reviewing the policies for these programs, we recognized that 
there are five areas in which these programs have variance regarding 
ECE requests. These are: (1) Allowing the facilities or hospitals to 
submit a form signed by the facility's or hospital's CEO versus CEO or 
designated personnel; (2) requiring the form be submitted within 30 
days following the date that the extraordinary circumstance occurred 
versus within 90 days following the date the extraordinary circumstance 
occurred; (3) inconsistency regarding specification of a timeline for 
us to provide our formal response notifying the facility or hospital of 
our decision; (4) inconsistency regarding specification of our 
authority to grant ECEs due to CMS data system issues; and (5) 
referring to the program as ``extraordinary extensions/exemptions'' 
versus as ``extraordinary circumstances exceptions.'' We believe 
addressing these five areas across programs, can improve administrative 
efficiencies for affected facilities or hospitals.
b. Proposals To Align the Hospital IQR Program ECE Policy With Other 
CMS Quality Programs
    With the exception of the timeline for us to provide our formal 
response (item 3 above) and the nomenclature used to refer to the ECE 
process (item 5 above), the Hospital IQR Program is aligned with the 
ECE policies across the other CMS quality programs described above. In 
this proposed rule, we are proposing to: (1) Update the nomenclature to 
align with the ECE policies across the other CMS quality programs and 
update the regulatory text to reflect this change; and (2) update our 
regulatory text to reflect other existing ECE policies. Also, we are 
clarifying the timing of our response to ECE requests. These proposals 
are discussed in more detail below.
(1) ECE Policy Nomenclature
    We have observed that while all quality programs listed above have 
developed similar policies to provide exceptions from program 
requirements to facilities that have experienced extraordinary 
circumstances, such as natural disasters, these programs refer to these 
policies using inconsistent terminology. Some programs refer to these 
policies as ``extraordinary circumstances extensions/exemptions'' while 
others refer to the set of policies as ``extraordinary circumstances 
exceptions.'' Several programs (specifically, the Hospital VBP Program, 
HAC Reduction Program, and the Hospital Readmissions Reduction Program) 
are not able to grant extensions to required data reporting timelines 
due to their reliance on data external to their program, and thus the 
term, ``extraordinary circumstances extensions/exemptions'' is not 
applicable to all programs. However, all of the described programs are 
able to offer exceptions from their reporting requirements. Therefore, 
we are proposing to change the name of this policy from ``extraordinary 
circumstances extensions/exemptions'' to ``extraordinary circumstances 
exceptions'' for the Hospital IQR Program, beginning October 1, 2017, 
and to revise section 412.140(c)(2) of our regulations to reflect this 
change. We note that changing the name of this policy does not change 
the availability for a hospital to request an extension under the 
Hospital IQR Program.
    We are inviting public comment on this proposal as discussed above.
(2) Timeline for CMS Response to ECE Requests
    We strive to provide our formal response notifying the facility of 
our decision within 90 days of receipt of the facility's ECE request. 
We believe that it is important for facilities to receive timely 
feedback regarding the status of ECE requests. We strive to complete 
our review of each ECE request as quickly as possible. However, we 
recognize that the number of requests we receive and the complexity of 
the information provided impacts the actual timeframe to make ECE 
determinations. To improve transparency of our process, we believe it 
is appropriate to clarify that we will strive to complete our review of 
each request within 90 days of receipt.
(3) Updates to CFR
    In this proposed rule, we are proposing to make conforming changes 
to the regulations at 42 CFR 412.140(c)(2) to reflect our previously 
finalized policy that the ECE request form be submitted within 90 days 
following the date the extraordinary circumstance occurred (81 FR 57181 
through 57182). In addition, we are proposing to make conforming 
changes to the regulations to codify our other existing policies in the 
Hospital IQR Program: (1) At 42 CFR 412.140(c)(2)(i), that a separate 
submission deadline of April 1 following the end of the reporting 
calendar year in which the extraordinary circumstance occurred and 
applies to a hospital that wishes to request an extraordinary 
circumstances exception with respect to the reporting of electronic 
clinical quality measure data (81 FR 57182); (2) at 42 CFR 
412.140(c)(2)(ii), that at the discretion of CMS, an exception may be 
granted to a hospital if a systemic problem arises with CMS data 
collection systems which directly affected the ability of a hospital to 
submit data (78 FR 50837), and that CMS may also grant exceptions to 
hospitals that have not requested them if an extraordinary circumstance 
affects an entire region or locale (76 FR 51651).
    We are inviting public comments on these proposals as discussed 
above.

B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

1. Background
    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

[[Page 20076]]

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 
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: FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53556 through 53561); the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50838 through 50846); the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50277 through 50288); the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49713 through 49723); and the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57182 through 57193).
2. Criteria for Removal and Retention of PCHQR Program Measures
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57182 through 
57183), we adopted policies for measure retention and removal. We 
generally retain measures from the previous year's PCHQR Program 
measure set for subsequent years' measure sets, except when we 
specifically propose to remove or replace a measure. We adopted the 
following measure removal criteria for the PCHQR Program, which are 
based on criteria established in the Hospital IQR Program (80 FR 49641 
through 49642):
     Measure performance among PCHs is so high and unvarying 
that meaningful distinctions and improvements in performance can no 
longer be made (``topped-out'' measures);
     A measure does not align with current clinical guidelines 
or practice;
     The availability of a more broadly applicable measure 
(across settings or populations) or the availability of a measure that 
is more proximal in time to desired patient outcomes for the particular 
topic;
     Performance or improvement on a measure does not result in 
better patient outcomes;
     The availability of a measure that is more strongly 
associated with desired patient outcomes for the particular topic;
     Collection or public reporting of a measure leads to 
negative unintended consequences other than patient harm; and
     It is not feasible to implement the measure 
specifications.
    For the purposes of considering measures for removal from the 
program, we consider a measure to be ``topped-out'' if there is 
statistically indistinguishable performance at the 75th and 90th 
percentiles and the truncated coefficient of variation is less than or 
equal to 0.10.
    However, we recognized that there are times when measures may meet 
some of the outlined criteria for removal from the program, but 
continue to bring value to the program. Therefore, we adopted the 
following criteria for consideration in determining whether to retain a 
measure in the PCHQR Program, which also are based on criteria 
established in the Hospital IQR Program (80 FR 49641 through 49642):
     Measure aligns with other CMS and HHS policy goals;
     Measure aligns with other CMS programs, including other 
quality reporting programs; and
     Measure supports efforts to move PCHs towards reporting 
electronic measures.
    We are not proposing any changes to these policies in this proposed 
rule.
3. Retention and Proposed Removal of Previously Finalized Quality 
Measures for PCHs Beginning With the FY 2020 Program Year
a. Background
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through 
53561), we finalized five quality measures for the FY 2014 program year 
and subsequent years. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50837 through 50847), we finalized one new quality measure for the FY 
2015 program year and subsequent years and 12 new quality measures for 
the FY 2016 program year and subsequent years. In the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50278 through 50280), we finalized one new 
quality measure for the FY 2017 program year and subsequent years. In 
the FY 2016 IPPS/LTCH PPS final rule (80 FR 49713 through 49719), we 
finalized three new CDC NHSN measures for the FY 2018 program year and 
subsequent years, and finalized the removal of six previously finalized 
measures for fourth quarter (Q4) 2015 discharges and subsequent years. 
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57183 through 57184), FY 
2019 program year, we finalized one additional quality measure and 
updated the Oncology: Radiation Dose Limits to Normal Tissues (NQF 
#0382) measure.
    We refer readers to the final rules referenced in section IX.B.1. 
of the preamble of this proposed rule for more information regarding 
these previously finalized measures.
b. Proposed Removal of Measures From the PCHQR Program Beginning With 
the FY 2020 Program Year
    Based on a review of the above criteria, we are proposing to remove 
the following clinical process/cancer specific treatment measures from 
the PCHQR Program beginning with the FY 2020 program year because they 
are topped-out:
     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 (PCH-01/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 (PCH-
02/NQF #0559); and
     Adjuvant Hormonal Therapy (PCH-03/NQF #0220).
    We first adopted these three Clinical Process/Cancer Specific 
Treatment Measures for the FY 2014 program year in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53556 through 53561). We refer readers to 
that rule for a detailed discussion of the measures. However, based on 
an analysis of data from January 1, 2014 through September 30, 2015, we 
have determined that these three measures meet our topped-out criteria. 
This analysis, performed by the HCQIS Reports and Analytics Team, 
evaluated data sets provided from Program Data Management and 
calculated the 5th, 10th, 25th, 50th, 75th, 90th, and 95th percentiles 
of national facility performance for each measure. For measures where 
higher values indicate better performance, the percent relative 
difference (PRD) between the 75th and 90th percentiles were obtained by 
taking their absolute difference divided by the average of their values 
and result multiplied by 100. To calculate the truncated coefficient of 
variation (TCV), the lowest 5 percent and the highest 5 percent of 
hospital rates were discarded before calculating the mean and standard 
deviation for reach measure.
    The following criteria were applied to the results:
     For measures ranging from 0-100 percent, with 100 percent 
being best, national measure data for the 75th and 90th percentiles 
have a relative difference of <=5 percent, or for measures ranging from 
0-100 percent, with 100 percent being the best, performance achieved by 
the median hospital is >=95 percent, and national

[[Page 20077]]

measure data have a truncated coefficient of variation <=0.10.
     For measures ranging from 0-100 percent, with 0 percent 
being best, national measure data for the complement of the 10th and 
25th percentiles have a relative difference of <=5 percent, or for 
measures ranging from 0-100 percent, with 0% being best, national 
measure data for the median hospital is <=5 percent, or for other 
measures with a low number indicating good performance, national 
measure data for the 10th and 25th percentiles have a relative 
difference of <=5 percent, and national measure data have a truncated 
coefficient of variation <=0.10.
    The results for 2014 and 2015 are set out in the tables below.

                                                  Topped-Out Analysis Results for PCHQR Measures (2014)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        75th            90th          Relative
             Measure                    Mean           Median        percentile      percentile    difference (%)        TCV             Topped out
--------------------------------------------------------------------------------------------------------------------------------------------------------
PCH-01...........................           .9680           .9800          1.0000          1.0000          0.0000           .0313  Yes.
PCH-02...........................           .9501           .9595           .9821          1.0000          1.8018           .0358  Yes.
PCH-03...........................           .9714           .9682           .9823           .9930          1.0807           .0149  Yes.
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                  Topped-Out Analysis Results for PCHQR Measures (2015)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        75th            90th          Relative
             Measure                    Mean           Median        percentile      percentile    difference (%)        TCV             Topped out
--------------------------------------------------------------------------------------------------------------------------------------------------------
PCH-01...........................           .9824          1.0000          1.0000          1.0000          0.0000           .0169  Yes.
PCH-02...........................           .9389           .9434           .9750          1.0000           2.532           .0431  Yes.
PCH-03...........................           .9383           .9449           .9556           .9703           1.535           .0232  Yes.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Based on this analysis, we have concluded that these three measures 
are topped out and, as discussed below, we believe that collecting PCH 
data on these measures does not further program goals.
    We believe that continuing to collect PCH data on these measures 
does not further program goals of improving quality, given that measure 
performance is so high and unvarying that meaningful distinctions and 
improvements in performance can no longer be made. We believe that 
these measures also do not meet the criteria for retention of an 
otherwise topped-out measure, as they do not align with other HHS and 
CMS policy goals, such as moving toward outcome measures; do not align 
with other CMS programs; and do not support the movement to electronic 
clinical quality measures due to the chart extraction required to 
collect the data for these measures. If we determine at a subsequent 
point in the future that hospital adherence to these practices has 
unacceptably declined, we may propose to readopt these measures in 
future rulemaking.
    We are inviting public comment on our proposal to remove these 
three measures from the PCHQR Program beginning with the FY 2020 
program year.
4. Proposed New Quality Measures Beginning With the FY 2020 Program 
Year
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 take 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 this proposed rule, we are not proposing any 
changes to the principles we consider when developing and selecting 
measures for the PCHQR Program.
    Section 1866(k)(3)(A) 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 is the entity that 
currently holds this contract). Section 1866(k)(3)(B) of the Act 
provides an exception under which, 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.
    Using the principles for measure selection in the PCHQR Program, we 
are proposing four new measures, described below.
b. Proposed New Quality Measures Beginning With the FY 2020 Program 
Year
    For the FY 2020 PCHQR program year, we are proposing to adopt two 
clinical process measures and two intermediate clinical outcome quality 
measures. These measures meet the requirement under section 
1866(k)(3)(A) of the Act that measures specified for the PCHQR Program 
generally be endorsed by the entity with a contract under section 
1890(a) of the Act (currently the NQF). Although there is no financial 
incentive or penalty associated with the PCHQR Program, we encourage 
participation to further the goal of improving the quality of care for 
the PCH patient population. The proposed measures are:
     Proportion of Patients Who Died from Cancer Receiving 
Chemotherapy in the Last 14 Days of Life (NQF #0210);
     Proportion of Patients Who Died from Cancer Admitted to 
the ICU in the Last 30 Days of Life (NQF #0213);
     Proportion of Patients Who Died from Cancer Not Admitted 
to Hospice (NQF #0215); and
     Proportion of Patients Who Died from Cancer Admitted to 
Hospice for Less Than Three Days (NQF #0216).
    In compliance with section 1890A(a)(2) of the Act, the proposed

[[Page 20078]]

measures were included on a publicly available document entitled ``List 
of Measures under Consideration for December 1, 2016,'' \249\ a list of 
quality and efficiency measures under consideration for use in various 
Medicare programs, and were reviewed by the MAP Hospital Workgroup. The 
MAP Hospital Workgroup supported the inclusion of these measures in the 
PCHQR Program in final recommendations it made in its February 2017 
report to HHS and CMS for 2016 to 2017.\250\ Additional details on MAP 
discussions of these measures may be found in the ``MAP Pre-Rulemaking 
Report: 2016 Recommendations on Measures Under Consideration by HHS,'' 
with additional discussion in the ``MAP 2017 Considerations for 
Implementing Measures in Federal Programs: Hospitals (Draft Report).'' 
\251\ The sections below outline our rationale for proposing these 
measures.
---------------------------------------------------------------------------

    \249\ Centers for Medicare and Medicaid Services, List of 
Measures under Consideration for December 1, 2016. Available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityMeasures/Downloads/Measures-under-Consideration-List-for-2016.pdf.
    \250\ National Quality Forum. Measures Application Partnership 
Hospital Workgroup. MAP 2016-2017 Spreadsheet of Final 
Recommendations to HHS and CMS. Available at: http://www.qualityforum.org/MAP_Hospital_Workgroup.aspx.
    \251\ National Quality Forum. Measures Application Partnership 
Hospital Workgroup. MAP 2016-2017 Preliminary Recommendations. 
Available at: http://www.qualityforum.org/MAP_Hospital_Workgroup.aspx. National Quality Forum. Measures 
Application Partnership Hospital Workgroup. Draft for Comment, MAP 
2017 Considerations for Implementing Measures in Federal Programs: 
Hospitals. Available at: http://www.qualityforum.org/Project_Pages/MAP_Hospital_Workgroup.aspx.
---------------------------------------------------------------------------

(1) Background
    The quality of end-of-life care has been identified by the NQF as 
an area of care that continues to need improvement.\252\ End-of-life 
care may be defined as ``comprehensive care that addresses medical, 
emotional, spiritual, and social needs during the last stages of a 
person's terminal illness,'' \253\ and may include palliative care. 
Palliative care is generally defined as multi-faceted, holistic care 
that anticipates, prevents, and alleviates suffering.\254\ Both 
palliative and end-of-life care can be provided when a patient is 
receiving hospice services, but it is not necessary to be admitted to 
hospice to receive such care. The NQF notes that hospice is both a type 
of care team and a care philosophy, and is intended to enable patients 
to prepare for death while living as fully as possible.\255\ The 
Institute of Medicine of the National Academies (IOM) has noted that 
while clinicians are encouraged to counsel patients about palliative 
care, which betters chances of maintaining a high quality of life when 
dying, ``too few patients and families receive this help in a timely 
manner.'' \256\ In the same report, the IOM proposed a number of core 
components of quality end-of-life care. These proposals included 
offering a referral to hospice if a patient ``has a prognosis of 6 
months or less'' and regular revision of a patient's care plan to 
address the patient's changing needs, as well as the changing needs of 
the family.\257\
---------------------------------------------------------------------------

    \252\ National Quality Forum, Technical Report. Palliative and 
End-of-Life Care 2015-2016. (December 23, 2016).
    \253\ National Quality Forum, Technical Report. Palliative and 
End-of-Life Care 2015-2016. (December 23, 2016).
    \254\ National Quality Forum, Technical Report. Palliative and 
End-of-Life Care 2015-2016. (December 23, 2016).
    \255\ National Quality Forum, Technical Report. Palliative and 
End-of-Life Care 2015-2016. (December 23, 2016).
    \256\ Committee on Approaching Death: Addressing Key End of Life 
Issues, Institute of Medicine: Dying in America: Improving Quality 
and Honoring Individual Preferences Near the End of Life. 
Washington, DC, National Academies Press, 2015.
    \257\ Committee on Approaching Death: Addressing Key End of Life 
Issues, Institute of Medicine: Dying in America: Improving Quality 
and Honoring Individual Preferences Near the End of Life. 
Washington, DC, National Academies Press, 2015.
---------------------------------------------------------------------------

    In addition to all of the quality of care benefits of end-of-life 
care to patients and caregivers, there are financial cost benefits as 
well. In its Technical Report on palliative and end-of-life care, the 
NQF cited research indicating that the use of palliative care, 
including end-of-life care, results in various positive outcomes, 
including a reduction of costs.\258\ For example, one study evaluated 
the impact of hospice enrollment at different time periods on Medicare 
expenditures, and found that regardless of when a patient was enrolled 
in hospice, such patients' subsequent Medicare costs were significantly 
lowered.\259\
---------------------------------------------------------------------------

    \258\ NQF. Final Report, National Voluntary Consensus Standards: 
Palliative Care and End-of-Life Care--A Consensus Report. 2012.
    \259\ Kelley AS et al., Hospice Enrollment Saves Money for 
Medicare and Improves Care Quality Across a Number of Different 
Lengths-of-Stay, Health Affairs (March 2013)32:3;552-561.
---------------------------------------------------------------------------

    Despite the benefits attributed to the use of palliative and end-
of-life services and the increase in their availability, the NQF and 
others have noted that such services remain underutilized. By proposing 
to include two process measures and two intermediate clinical outcome 
measures related to end-of-life care in the PCHQR Program, our intent 
is to assess the quality of end-of-life care provided to patients in 
the PCH setting. We recognize that these measures may also be used in 
the broader population of all hospitals providing cancer care; 
therefore, as discussed in section IX.A.9.b. of the preamble of this 
proposed rule, we are inviting public comment on the future inclusion 
of these measures in the Hospital IQR Program. These four measures are 
described in more detail below.
(2) Proportion of Patients Who Died From Cancer Receiving Chemotherapy 
in the Last 14 Days of Life (EOL-Chemo) Measure (NQF #0210)
    Chemotherapy is typically used to treat cancer, but in patients 
with incurable cancer it may also be used with the goal of easing 
symptoms and improving survival.\260\ One study estimated that 6.2 
percent of cancer patients continue receiving chemotherapy close to the 
end of their lives (defined as within 2 weeks of death).\261\ However, 
studies have shown that administering palliative chemotherapy to 
terminally ill cancer patients may not be beneficial, as it may be 
associated with higher rates of interventions such as cardiopulmonary 
resuscitation in the last week of life without any difference in 
survival.\262\ Such patients may also be more likely to die in the 
intensive care unit (ICU), and less likely to die either at home or in 
the place where they had expressed preference to die.\263\ In addition, 
research has shown that some patients may receive chemotherapy for 
treatment instead of palliative care at the end of life, even when 
treatment has been determined to be unnecessary.\264\ While the impetus 
for continuing treatment may vary from case to case,\265\ the available 
evidence indicates continuing to receive chemotherapy--for palliation

[[Page 20079]]

or treatment--toward the end of a patient's illness is associated with 
increased hospitalization and may be associated decreased experience of 
care.
---------------------------------------------------------------------------

    \260\ Wright A et al., Associations Between Palliative 
Chemotherapy and Adult Cancer Patients' End of Life Care and Place 
of Death: Prospective Cohort Study, BMJ 2014;348:g1219.
    \261\ Wright A et al., Associations Between Palliative 
Chemotherapy and Adult Cancer Patients' End of Life Care and Place 
of Death: Prospective Cohort Study, BMJ 2014;348:g1219.
    \262\ Wright A et al., Associations Between Palliative 
Chemotherapy and Adult Cancer Patients' End of Life Care and Place 
of Death: Prospective Cohort Study, BMJ 2014;348:g1219.
    \263\ Wright A et al., Associations Between Palliative 
Chemotherapy and Adult Cancer Patients' End of Life Care and Place 
of Death: Prospective Cohort Study, BMJ 2014;348:g1219.
    \264\ Mack JW et al., Patient Beliefs that Chemotherapy May be 
Curative and Care Received at the End of Life Among Patients with 
Metastatic Lung and Colorectal Cancer, Cancer (June 1, 
2015)121:11;1891-1897.
    \265\ Mack JW et al., Patient Beliefs that Chemotherapy May be 
Curative and Care Received at the End of Life Among Patients with 
Metastatic Lung and Colorectal Cancer, Cancer (June 1, 
2015)121:11;1891-1897.
---------------------------------------------------------------------------

    Researchers have also observed that patients receiving chemotherapy 
late into the course of a terminal illness tended to be referred to 
hospice later, resulting in lower quality of life, distress for 
caregivers, and increased cost.\266\ They noted that their results 
could suggest that either less use chemotherapy at the end of life or 
more frequent end-of-life discussions could improve the quality of 
those patients' end-of-life care.\267\ Another study of early 
engagement in palliative care in patients diagnosed with metastatic 
lung cancer found that patients who received palliative care and less 
chemotherapy survived longer, in addition to experiencing improvement 
in quality of life.\268\ In this study, palliative care was integrated 
into standard oncologic care, and included an assessment of physical 
and psychosocial symptoms as well as care decision assistance.\269\ 
Results from this study showed significantly higher quality of life in 
the patient cohort receiving palliative care compared to those 
receiving only the standard oncologic care.\270\ In particular, 
clinically meaningful improvements in quality of life and mood were 
noted.\271\
---------------------------------------------------------------------------

    \266\ Wright A et al., Associations Between Palliative 
Chemotherapy and Adult Cancer Patients' End of Life Care and Place 
of Death: Prospective Cohort Study, BMJ 2014;348:g1219.
    \267\ Wright A et al., Associations Between Palliative 
Chemotherapy and Adult Cancer Patients' End of Life Care and Place 
of Death: Prospective Cohort Study, BMJ 2014;348:g1219.
    \268\ Committee on Approaching Death: Addressing Key End of Life 
Issues, Institute of Medicine: Dying in America: Improving Quality 
and Honoring Individual Preferences Near the End of Life. 
Washington, DC, National Academies Press, 2015 (citing Temel JC et 
al. Early Palliative Care for Patients with Metastatic Non-Small-
Cell Lung Cancer. NEJM. 2010; 363:733-742).
    \269\ Temel JC et al. Early Palliative Care for Patients with 
Metastatic Non-Small-Cell Lung Cancer. NEJM. 2010; 363:733-742.
    \270\ Temel JC et al. Early Palliative Care for Patients with 
Metastatic Non-Small-Cell Lung Cancer. NEJM. 2010; 363:733-742.
    \271\ Temel JC et al. Early Palliative Care for Patients with 
Metastatic Non-Small-Cell Lung Cancer. NEJM. 2010; 363:733-742.
---------------------------------------------------------------------------

    The proposed EOL-Chemo measure addresses the NQS Communication and 
Care Coordination and Affordable Care domains, and aligns with the CMS 
Quality Strategy goals of strengthening person and family engagement as 
partners in their care, and promoting effective communication and 
coordination of care. The proposed measure is a process measure that 
evaluates the proportion of patients who died from cancer who received 
chemotherapy in the last 14 days of life. Similar to the other three 
end-of-life measures we are proposing, this proposed measure seeks to 
assess the use of chemotherapy at the end-of-life, a practice advanced 
with the intent to alleviate disease symptoms but which has been shown 
to also be associated with reduced quality of life and increased costs. 
This measure was finalized for use in the Merit-based Incentive Payment 
System (MIPS) in the FY 2017 MIPS final rule with comment period (81 FR 
77672). By introducing this measure here, we are seeking to evaluate 
how often chemotherapy is administered near the end of life in PCHs.
    The proposed EOL-Chemo measure cohort includes all Medicare 
beneficiaries who died of cancer and who received chemotherapy at a PCH 
within the last 14 days of their lives. The proposed measure uses 
Medicare administrative claims data to derive the numerator and 
denominator. The numerator for this measure is defined as cancer 
patients who received chemotherapy (regardless of whether for treatment 
or palliative purposes) in the last fourteen days of life. The 
denominator is defined as patients who died from cancer. Patients for 
whom numerator or denominator data cannot be identified will not be 
included in the calculation. The measure specifications contain no 
exclusions, risk adjustments or risk stratifications because the 
measure is intended to evaluate the quality of care provided to all 
cancer patients at the end of life. The measure will be calculated as 
the numerator divided by the denominator. Measure specifications for 
the proposed EOL-Chemo measure can be accessed on the NQF's Web site 
at: http://www.qualityforum.org/Publications/2016/12/Palliative_and_End-of-Life_Care_2015-2016.aspx.
    We are inviting public comment on our proposal to adopt the 
Proportion of Patients Who Died from Cancer Receiving Chemotherapy in 
the Last 14 Days of Life (NQF #0210) measure for the FY 2020 program 
year and subsequent years.
(3) Proportion of Patients Who Died From Cancer Admitted to the ICU in 
the Last 30 Days of Life (EOL-ICU) Measure (NQF #0213)
    A number of research studies have determined that cancer care can 
become more aggressive at the end of life, which can result in a lower 
quality of care and lower quality of life.\272\ Care defined as 
``aggressive'' may include the ``possible misuse of treatment resulting 
in high rates of emergency room visits, hospitalization, or ICU stays 
for terminal patients'' in addition to overuse of chemotherapy close to 
death and the underuse of hospice.\273\ In a retrospective study of 
patients with advanced lung cancer, researchers found that between 1993 
and 2002, the number of patients being admitted to the ICU near death 
increased, and while in the ICU, one in four of those patients received 
mechanical ventilation, despite the likelihood that neither 
intervention would necessarily have effect on the advanced cancer.\274\ 
In this study, two-thirds of the patients died within a month of their 
admission to the ICU, which the authors interpreted as demonstrating 
that ICU admission in the context of advanced lung cancer was 
potentially ineffective.\275\ The authors noted other studies that 
showed that in-hospital mortality during ICU admissions exact a toll on 
patients and families in terms of ``financial cost, emotional burden, 
and failed expectations.'' \276\ The impact of ICU admission at the end 
of life is also observed amongst caregivers, who report excellent end-
of-life care less often for patients admitted to the ICU within 30 days 
of death compared to those who are not.\277\
---------------------------------------------------------------------------

    \272\ Barbera L et al., Quality of End-of-Life Cancer Care in 
Canada: A Retrospective Four-Province Study Using Administrative 
Health Care Data, Oncology (October 2015)22:5;341-355; Earle CC et 
al. Aggressiveness of Cancer Care Near the End of Life: Is It a 
Quality-of-Care Issue? Journal of Clinical Oncology. 2008; 26:23, 
3860-3866.
    \273\ Earle CC et al. Aggressiveness of Cancer Care Near the End 
of Life: Is It a Quality-of-Care Issue? Journal of Clinical 
Oncology. 2003; 26:23, 3860-3866.
    \274\ Sharma G et al., Trends in End-of-Life ICU Use Among Older 
Adults with Advanced Lung Cancer, Chest (January 2008)133:1;72-78.
    \275\ Sharma G et al., Trends in End-of-Life ICU Use Among Older 
Adults with Advanced Lung Cancer, Chest (January 2008)133:1;72-78.
    \276\ Sharma G et al., Trends in End-of-Life ICU Use Among Older 
Adults with Advanced Lung Cancer, Chest (January 2008)133:1;72-78.
    \277\ Wright AA et al., Family Perspectives on Aggressive Cancer 
Care Near the End of Life, JAMA (2016)315:3;284-292.
---------------------------------------------------------------------------

    Patients who are not admitted to the ICU or involved in other 
aggressive mechanisms of care in their final week of life have been 
shown to experience a higher quality of life via less physical and 
emotional distress.\278\ Researchers have theorized that while patients 
who die at home are able to have care that focuses on symptom 
management and

[[Page 20080]]

comfort; hospitals and ICUs focus instead on keeping the patient 
alive.\279\
---------------------------------------------------------------------------

    \278\ Zhang B et al., Factors Important to Patients' Quality-of-
Life at the End-of-Life, Arch. Intern. Med (August 13, 
2012)172:15;1133-1142; Wright AA et al., Place of Death: 
Correlations with Quality of Life of Patients with Cancer and 
Predictors of Bereaved Caregivers' Mental Health, J Clin Oncol 
(October 10, 2010)28:29;4457-4464.
    \279\ Wright AA et al., Place of Death: Correlations with 
Quality of Life of Patients with Cancer and Predictors of Bereaved 
Caregivers' Mental Health, J Clin Oncol (October 10, 
2010)28:29;4457-4464.
---------------------------------------------------------------------------

    ICU admission at the end of life is also costly,\280\ with ICU 
admissions identified as one of the ``key drivers of resource use and 
expenditures.'' \281\ Studies of claims data indicate that 
aggressiveness of care given to Medicare beneficiaries with cancer at 
the end of life continues to increase, with nearly 25 percent of 
Medicare expenditures in the last month of such beneficiaries' lives, 
despite limited evidence that such an intervention improves patient 
outcomes.\282\
---------------------------------------------------------------------------

    \280\ Wright AA et al., Place of Death: Correlations with 
Quality of Life of Patients with Cancer and Predictors of Bereaved 
Caregivers' Mental Health, J Clin Oncol (October 10, 
2010)28:29;4457-4464.
    \281\ Langton JL et al., Retrospective Studies of End-of-Life 
Resource Utilization and Costs in Cancer Care Using Health 
Administrative Data: A Systematic Review, Palliative Medicine 
(2014)28:10;1167-1196.
    \282\ Wright AA et al. Place of Death: Correlations with Quality 
of Life of Patients with Cancer and Predictors of Bereaved 
Caregivers' Mental Health. Journal of Clinical Oncology. 
(2010)28:4457-4464.
---------------------------------------------------------------------------

    The proposed EOL-ICU measure addresses the NQS Communication and 
Care Coordination and Affordable Care domains, and addresses several 
CMS Quality Strategy goals: Making care safer by reducing harm caused 
in the delivery of care; strengthening person and family engagement as 
partners in their care; and promoting effective communication and 
coordination of care. The proposed EOL-ICU measure is an intermediate 
clinical outcome measure that assesses whether cancer patients were 
admitted to the ICU in the last 30 days of their lives. As with the 
other three proposed end-of-life measures discussed in section 
IX.B.4.b. of the preamble of this proposed rule, this proposed measure 
seeks to evaluate the end-of-life care provided to patients at PCHs. In 
particular, we seek to assess the frequency of end-of-life admissions 
to the ICU in this setting, as the research has shown that 
interventions provided in the ICU to patients with irreversible disease 
can be futile and may negatively impact patients' quality of life. We 
recognize, however, that in some cases ICU admissions may be 
appropriate, and note that this measure broadly assesses how many 
patients are admitted to the ICU close to death, without excluding 
admissions for specific reasons.
    The proposed EOL-ICU measure cohort includes Medicare beneficiaries 
who are PCH patients who died of cancer and who were admitted to the 
ICU within the last thirty days of their lives. This proposed measure 
uses Medicare administrative claims data to derive the numerator and 
denominator. The numerator for this measure is defined as the number of 
patients who died from cancer and who were admitted to the ICU in the 
last 30 days of life. The denominator is defined as patients who died 
from cancer. The measure specifications do not contain exclusions from 
the denominator and do not provide for risk adjustment or risk 
stratification in order to assess the quality of care provided to all 
cancer patients at the end of life. The rate of ICU admissions in the 
last 30 days of life will be calculated from the numerator divided by 
the denominator. Measure specifications for the proposed EOL-ICU 
measure can be accessed on the NQF's Web site at: http://www.qualityforum.org/Publications/2016/12/Palliative_and_End-of-Life_Care_2015-2016.aspx.
    We are inviting public comment on our proposal to adopt the 
Proportion of Patients Who Died from Cancer Admitted to the ICU in the 
Last 30 Days of Life (NQF #0213) measure for the FY 2020 program year 
and subsequent years.
(4) Proportion of Patients Who Died From Cancer Not Admitted to Hospice 
(EOL-Hospice) Measure (NQF #0215)
    A number of research studies have determined that cancer care can 
become more aggressive at the end of life, which can result in a lower 
quality of care and lower quality of life.\283\ Such aggressive care 
has been identified to include the underutilization of hospice,\284\ 
which is either lack of referral or late referral to hospice 
services.\285\ Patients with advanced cancer who die while admitted to 
the hospital have been shown to have lower quality of life than those 
who die at home with hospice services.\286\
---------------------------------------------------------------------------

    \283\ Barbera L et al., Quality of End-of-Life Cancer Care in 
Canada: A Retrospective Four-Province Study Using Administrative 
Health Care Data, Oncology (October 2015)22:5;341-355; Earle CC et 
al., Aggressiveness of Cancer Care Near the End of Life: Is It a 
Quality-of-Care Issue? Journal of Clinical Oncology. 2008; 26:23, 
3860-3866.
    \284\ Earle CC et al. Aggressiveness of Cancer Care Near the End 
of Life: Is It a Quality-of-Care Issue? Journal of Clinical 
Oncology. 2003; 26:23, 3860-3866.
    \285\ Earle CC et al., Aggressiveness of Cancer Care Near the 
End of Life: Is It a Quality-of-Care Issue? Journal of Clinical 
Oncology. 2003; 26:23, 3860-3866.
    \286\ Wright AA et al., Place of Death: Correlations with 
Quality of Life of Patients with Cancer and Predictors of Bereaved 
Caregivers' Mental Health, J Clin Oncol (October 10, 
2010)28:29;4457-4464.
---------------------------------------------------------------------------

    By contrast, studies have shown that cancer patients enrolled in 
hospice were hospitalized less frequently and received fewer procedures 
than those who were not receiving hospice care.\287\ In addition, 
cancer patients who were enrolled in hospice 5 to 8 weeks prior to 
their deaths demonstrated significant cost savings, with savings 
decreasing as the time period enrolled shortens.\288\ Researchers 
theorize that one reason aggressive or ``injudicious'' treatment occurs 
at the end of life is that end-of-life discussions are not being held 
with patients, and note that it is ``the physician's responsibility to 
counsel patients and their families and . . . focus on the need for 
effective palliative care as patients approach the end of life.'' \289\
---------------------------------------------------------------------------

    \287\ Obermeyer Z et al., Association Between the Medicare 
Hospice Benefit and Health Care Utilization and Costs for Patients 
with Poor-Prognosis Cancer, JAMA (2014)312:18;1888-1896.
    \288\ Obermeyer Z et al., Association Between the Medicare 
Hospice Benefit and Health Care Utilization and Costs for Patients 
with Poor-Prognosis Cancer, JAMA (2014)312:18;1888-1896.
    \289\ Earle CC et al., Aggressiveness of Cancer Care Near the 
End of Life: Is It a Quality-of-Care Issue? Journal of Clinical 
Oncology. 2003; 26:23, 3860-3866.
---------------------------------------------------------------------------

    The proposed EOL-Hospice measure addresses the NQS Communication 
and Care Coordination and Affordable Care domains, as well as the CMS 
Quality Strategy goals of strengthening person and family engagement as 
partners in their care and promoting effective communication and 
coordination of care. The proposed measure is a process measure that 
assesses the proportion of patients who died from cancer who were not 
admitted to hospice. This measure evaluates whether or not patients 
were admitted to hospice, and then ties in to the following measure 
(EOL-3DH), which evaluates whether patients who were admitted to 
hospice were admitted to hospice late in the course of their illness, 
defined as within 3 days of their death. We discuss this proposed 
follow-on measure, EOL-3DH, in more detail in section IX.B.4.b.(5) of 
the preamble of this proposed rule. In summary, EOL-Hospice seeks to 
evaluate, simply, whether patients were admitted to hospice or not; the 
proposed follow-on measure EOL-3DH will then assess whether those 
patients admitted to hospice were admitted in a timely fashion to 
derive maximum benefit from hospice services. We do not expect PCHs to 
achieve perfect rates on the EOL-Hospice measure because we understand 
that some patients may refuse hospice, or that there may be additional 
intervening events or circumstances that impact whether or not a 
patient is admitted to hospice.
    The proposed EOL-Hospice measure cohort includes Medicare 
beneficiaries who are PCH patients who died of cancer. The proposed 
measure uses

[[Page 20081]]

Medicare administrative claims data to derive the numerator and 
denominator. The numerator in this proposed measure is defined as the 
proportion of PCH patients not enrolled in hospice. The denominator is 
defined as patients who died from cancer. The measure specifications 
contain no denominator exclusions nor any risk adjustment or risk 
stratification. The proposed measure is calculated by dividing the 
numerator by the denominator. Measure specifications for the proposed 
EOL-Hospice measure can be accessed on the NQF's Web site at: http://www.qualityforum.org/Publications/2016/12/Palliative_and_End-of-Life_Care_2015-2016.aspx.
    We are inviting public comment on our proposal to adopt the 
Proportion of Patients Who Died from Cancer Not Admitted to Hospice 
(NQF #0215) measure for the FY 2020 program year and subsequent years.
(5) Proportion of Patients Who Died From Cancer Admitted to Hospice for 
Less Than 3 Days (EOL-3DH) Measure (NQF #0216)
    Older studies of patient cohorts from the mid-1990s have shown 
that, though there was an increasing trend to admit cancer patients to 
hospice, the number of patients admitted close to death was also 
increasing, about which the authors surmised that hospice care was not 
being used to mitigate symptoms but only to manage death.\290\ Patients 
with cancer have been identified as the largest users of hospice, but 
are also the cohort with the highest rates of hospice stays of less 
than 3 days.\291\
---------------------------------------------------------------------------

    \290\ Earle CC et al., Aggressiveness of Cancer Care Near the 
End of Life: Is It a Quality-of-Care Issue? Journal of Clinical 
Oncology. August 2008; 26:23; 3860-3866; Earle CC. et al., Trends in 
the Aggressiveness of Cancer Care Near the End of Life, Journal of 
Clinical Oncology 22 no. 2 (January 2004) 315-321.
    \291\ Obermeyer Z et al., Association Between the Medicare 
Hospice Benefit and Health Care Utilization and Costs for Patients 
with Poor-Prognosis Cancer, JAMA (2014)312:18;1888-1896.
---------------------------------------------------------------------------

    In one study involving cancer patients' family members, patients' 
loved ones were more likely to report that the patients received 
excellent end-of-life care when hospice was initiated earlier than 
three days prior to death.\292\ The researchers indicated that 
enhancing counseling of patients and families and early referral to 
palliative care services could result in more ``preference-sensitive 
care for patients'' and overall improvement in the quality of care 
cancer patients receive at the end of life.\293\ Because this and other 
research indicates that earlier discussion with patients about 
palliative care can positively impact the care received at the end of 
life, including timely admission to hospice, we believe including the 
proposed EOL-3DH measure in the measure set will incentivize timely 
discussions and admissions to hospice within the PCH setting. We 
believe that the emphasis on timely admission to hospice may lead to 
improving the quality of care for cancer patients at PCHs.
---------------------------------------------------------------------------

    \292\ Wright AA et al., Family Perspectives on Aggressive Cancer 
Care Near the End of Life, JAMA (2016)315:3;284-292.
    \293\ Wright AA et al., Family Perspectives on Aggressive Cancer 
Care Near the End of Life, JAMA (2016)315:3;284-292.
---------------------------------------------------------------------------

    The proposed EOL-3DH measure addresses the NQS Communication and 
Care Coordination domain. It also addresses two CMS Quality Strategy 
goals: Strengthening person and family engagement as partners in their 
care and promoting effective communication and coordination of care. 
The proposed EOL-3DH measure is an intermediate clinical outcome 
measure that assesses the proportion of patients who died from cancer 
who were admitted to hospice late in the course of their illness, 
within 3 days of their death. The measure ties in to the proposed 
process measure (EOL-Hospice) we discuss in section IX.B.4.b.(4) of the 
preamble of this proposed rule, above, and assesses whether, if 
patients were admitted to hospice, they were admitted prior to or when 
death was immediately imminent. As discussed, research has shown that 
the longer patients receive hospice services before the end of life, 
the more improvements in their quality of life and mood are observed.
    The proposed EOL-3DH measure cohort includes Medicare beneficiaries 
who are PCH patients that died of cancer and were admitted to hospice 
within the last 3 days of their lives. The proposed measure uses 
Medicare administrative claims data to derive the numerator and 
denominator. The numerator is defined as the number of patients who 
died from cancer and spent fewer than 3 days in hospice. The 
denominator is defined as the number of patients who died from cancer 
who were admitted to hospice. There are no exclusions from the 
denominator in the measure specifications, nor risk adjustment or risk 
stratification, because the goal of the measure is to assess the 
quality of care provided to all cancer patients at the end of life. 
Measure specifications for the proposed EOL-3DH measure can be accessed 
on the NQF's Web site at: http://www.qualityforum.org/Publications/2016/12/Palliative_and_End-of-Life_Care_2015-2016.aspx.
    We are inviting public comment on our proposal to adopt the 
Proportion of Patients Who Died from Cancer Admitted to Hospice for 
Less Than 3 Days (NQF #0216) measure for the FY 2020 program year and 
subsequent years.
c. Summary of Previously Finalized and Newly Proposed PCHQR Program 
Measures for the FY 2020 Program Year and Subsequent Years
    In summary, the previously finalized and newly proposed measures 
for the PCHQR Program for the FY 2020 program year and subsequent years 
are listed in the table below.

 Previously Finalized and Newly Proposed PCHQR Measures for the FY 2020
                    Program Year and Subsequent Years
------------------------------------------------------------------------
            Short name                  NQF No.         Measure name
------------------------------------------------------------------------
            Safety and Healthcare-Associated Infection (HAI)
------------------------------------------------------------------------
CLABSI............................            0139  National Healthcare
                                                     Safety Network
                                                     (NHSN) Central Line-
                                                     Associated
                                                     Bloodstream
                                                     Infection Outcome
                                                     Measure.
CAUTI.............................            0138  National Healthcare
                                                     Safety Network
                                                     (NHSN) Catheter-
                                                     Associated Urinary
                                                     Tract Infections
                                                     Outcome Measure.
SSI...............................            0753  American College of
                                                     Surgeons--Centers
                                                     for Disease Control
                                                     and Prevention (ACS-
                                                     CDC) Harmonized
                                                     Procedure Specific
                                                     Surgical Site
                                                     Infection (SSI)
                                                     Outcome Measure
                                                     [currently includes
                                                     SSIs following
                                                     Colon Surgery and
                                                     Abdominal
                                                     Hysterectomy
                                                     Surgery].
CDI...............................            1717  National Healthcare
                                                     Safety Network
                                                     (NHSN)
                                                     Facility[dash]wide
                                                     Inpatient Hospital-
                                                     onset Clostridium
                                                     difficile Infection
                                                     (CDI) Outcome
                                                     Measure.

[[Page 20082]]

 
MRSA..............................            1716  National Healthcare
                                                     Safety Network
                                                     (NHSN)
                                                     Facility[dash]wide
                                                     Inpatient Hospital-
                                                     onset
                                                     Methicillin[dash]re
                                                     sistant
                                                     Staphylococcus
                                                     aureus Bacteremia
                                                     Outcome Measure.
HCP...............................            0431  Influenza
                                                     Vaccination
                                                     Coverage Among
                                                     Healthcare
                                                     Personnel.
------------------------------------------------------------------------
                 Clinical Process/Oncology Care Measures
------------------------------------------------------------------------
N/A...............................            0382  Oncology: Radiation
                                                     Dose Limits to
                                                     Normal Tissues*.
N/A...............................            0383  Oncology: Plan of
                                                     Care for Pain--
                                                     Medical Oncology
                                                     and Radiation
                                                     Oncology.
N/A...............................            0384  Oncology: Medical
                                                     and Radiation--Pain
                                                     Intensity
                                                     Quantified.
N/A...............................            0390  Prostate Cancer:
                                                     Adjuvant Hormonal
                                                     Therapy for High
                                                     Risk Prostate
                                                     Cancer Patients.
N/A...............................            0389  Prostate Cancer:
                                                     Avoidance of
                                                     Overuse of Bone
                                                     Scan for Staging
                                                     Low Risk Prostate
                                                     Cancer Patients.
EOL-Chemo.........................            0210  Proportion of
                                                     Patients Who Died
                                                     from Cancer
                                                     Receiving
                                                     Chemotherapy in the
                                                     Last 14 Days of
                                                     Life.\y\
EOL-Hospice.......................            0215  Proportion of
                                                     Patients Who Died
                                                     from Cancer Not
                                                     Admitted to
                                                     Hospice.\y\
------------------------------------------------------------------------
                 Intermediate Clinical Outcome Measures
------------------------------------------------------------------------
EOL-ICU...........................            0213  Proportion of
                                                     Patients Who Died
                                                     from Cancer
                                                     Admitted to the ICU
                                                     in the Last 30 Days
                                                     of Life.\y\
EOL-3DH...........................            0216  Proportion of
                                                     Patients Who Died
                                                     from Cancer
                                                     Admitted to Hospice
                                                     for Less Than Three
                                                     Days.\y\
------------------------------------------------------------------------
                  Patient Engagement/Experience of Care
------------------------------------------------------------------------
HCAHPS............................            0166  HCAHPS.
------------------------------------------------------------------------
                     Clinical Effectiveness Measure
------------------------------------------------------------------------
EBRT..............................            1822  External Beam
                                                     Radiotherapy for
                                                     Bone Metastases.
------------------------------------------------------------------------
                      Claims Based Outcome Measure
------------------------------------------------------------------------
N/A...............................             N/A  Admissions and
                                                     Emergency
                                                     Department (ED)
                                                     Visits for Patients
                                                     Receiving
                                                     Outpatient
                                                     Chemotherapy.**
------------------------------------------------------------------------
 We note that the previously finalized measures proposed for
  removal in this proposed rule are not included in this table. These
  measures are: (1) Adjuvant Chemotherapy is Considered or Administered
  Within 4 Months (120 Days) of Diagnosis to Patients Under the Age of
  80 with AJCC II (Lymph Node Positive) Colon Cancer; (2) 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; and (3) Adjuvant Hormonal
  Therapy.
* Finalized update in FY 2019 program year.
** Finalized for FY 2019 program year.
*** This measure was previously titled ``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 Hormones Receptor
  Negative Breast Cancer.'' This name change, which we used in the FY
  2017 IPPS/LTCH PPS final rule (81 FR 57191), is consistent with NQF
  updates to the measure name and reflects an update in the AJCC
  staging, does not reflect a change in the measure inclusion criteria,
  and is not considered substantive.
\y\ This measure is proposed for adoption for the FY 2020 program year.

5. Accounting for Social Risk Factors in the PCHQR Program
    We understand that social risk factors such as income, education, 
race and ethnicity, employment, disability, community resources, and 
social support (certain factors of which are also sometimes referred to 
as socioeconomic status (SES) factors or socio-demographic status (SDS) 
factors) play a major role in health. One of our core objectives is to 
improve beneficiary outcomes including reducing health disparities, and 
we want to ensure that all beneficiaries, including those with social 
risk factors, receive high quality care. In addition, we seek to ensure 
that the quality of care furnished by providers and suppliers is 
assessed as fairly as possible under our programs while ensuring that 
beneficiaries have adequate access to excellent care.
    We have been reviewing reports prepared by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) \294\ and the 
National Academies of Sciences, Engineering, and Medicine on the issue 
of measuring and accounting for social risk factors in CMS' value-based 
purchasing and quality reporting programs, and considering options on 
how to address the issue in these programs. On December 21, 2016, ASPE 
submitted a Report to Congress on a study it was required to conduct 
under section 2(d) of the Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014. The study analyzed the effects of 
certain social risk factors of Medicare beneficiaries on quality 
measures and measures of resource use used in one or more of nine 
Medicare value-based purchasing programs.\295\ The report also included 
considerations for strategies to account for social risk factors in 
these programs. In a January 10, 2017 report released by the National 
Academies of Sciences, Engineering, and Medicine, that body provided 
various potential methods for measuring and accounting

[[Page 20083]]

for social risk factors, including stratified public reporting.\296\
---------------------------------------------------------------------------

    \294\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \295\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \296\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press.
---------------------------------------------------------------------------

    As noted in the FY 2017 IPPS/LTCH PPS final rule, the NQF has 
undertaken a 2-year trial period in which new measures, measures 
undergoing maintenance review, and measures endorsed with the condition 
that they enter the trial period can be assessed to determine whether 
risk adjustment for selected social risk factors is appropriate for 
these measures. This trial entails temporarily allowing inclusion of 
social risk factors in the risk-adjustment approach for these measures. 
At the conclusion of the trial, NQF will issue recommendations on the 
future inclusion of social risk factors in risk adjustment for these 
quality measures, and we will closely review their findings.
    As we continue to consider the analyses and recommendations from 
these reports and await the results of the NQF pilot on risk adjustment 
for quality measures, we are continuing to work with stakeholders in 
this process. As we have previously communicated, we are concerned 
about holding providers to different standards for the outcomes of 
their patients with social risk factors because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes 
for disadvantaged populations. Keeping this concern in mind, while we 
sought input on this topic previously, we continue to seek public 
comment on whether we should account for social risk factors in the 
PCHQR Program, and if so, what method or combination of methods would 
be most appropriate for accounting for social risk factors. Examples of 
methods include: Confidential reporting to providers of measure rates 
stratified by social risk factors; public reporting of stratified 
measure rates; and potential risk adjustment of a particular measure as 
appropriate based on data and evidence.
    In addition, we are also seeking public comment on which social 
risk factors might be most appropriate for reporting stratified measure 
scores and/or potential risk adjustment of a particular measure. 
Examples of social risk factors include, but are not limited to, dual 
eligibility/low-income subsidy, race and ethnicity, and geographic area 
of residence. We are seeking comments on which of these factors, 
including current data sources where this information would be 
available, could be used alone or in combination, and whether other 
data should be collected to better capture the effects of social risk. 
We will take commenters' input into consideration as we continue to 
assess the appropriateness and feasibility of accounting for social 
risk factors in the PCHQR Program. We note that any such changes would 
be proposed through future notice-and-comment rulemaking.
    We look forward to working with stakeholders as we consider the 
issue of accounting for social risk factors and reducing health 
disparities in CMS programs. Of note, implementing any of the above 
methods would be taken into consideration in the context of how this 
and other CMS programs operate (for example, data submission methods, 
availability of data, statistical considerations relating to 
reliability of data calculations, among others), so we also welcome 
comment on operational considerations. CMS is committed to ensuring 
that its beneficiaries have access to and receive excellent care, and 
that the quality of care furnished by providers and suppliers is 
assessed fairly in CMS programs.
6. Possible New Quality Measure Topics for Future Years
a. Background
    We discussed future quality measure topics and quality measure 
domain areas in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50280), the 
FY 2016 IPPS/LTCH PPS final rule (80 FR4979), and the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 25211). Specifically, we discussed public comment 
and suggestions for measure topics addressing the following CMS Quality 
Strategy domains: (1) Making care affordable; (2) communication and 
care coordination; and (3) working with communities to promote best 
practices of healthy living. We welcome public comment and specific 
suggestions for measure topics that we should consider for future 
rulemaking, including considerations related to risk adjustment and the 
inclusion of social risk factors in risk adjustment for any individual 
performance measures.
    We are also seeking public comment on six measures for potential 
future inclusion in the PCHQR Program:
     Localized Prostate Cancer: Vitality;
     Localized Prostate Cancer: Urinary Incontinence;
     Localized Prostate Cancer: Urinary Frequency, Obstruction, 
and/or Irritation;
     Localized Prostate Cancer: Sexual Function;
     Localized Prostate Cancer: Bowel Function; and
     30-Day Unplanned Readmissions for Cancer Patients.
    These measures are discussed in more detail below.
b. Localized Prostate Cancer: Vitality; Localized Prostate Cancer: 
Urinary Incontinence; Localized Prostate Cancer: Urinary Frequency, 
Obstruction, and/or Irritation; Localized Prostate Cancer: Sexual 
Function; and Localized Prostate Cancer: Bowel Function
    The Localized Prostate Cancer measures are five related, patient-
reported outcome measures drawn from the Expanded Prostate Inventory 
Composite (EPIC), which is a survey intended to gather input from 
patients on their experience. The survey questions are intended to be 
administered to all non-metastatic prostate cancer patients undergoing 
radiation or surgical treatment for prostate cancer at the reporting 
facility (denominator); the numerator is patients with clinically 
significant changes in each of the listed areas from baseline to 
follow-up. The goal of the measurement is to identify issues of 
variation, suboptimal performance, and disparities in care. This 
measurement aligns with recent initiatives to include patient-reported 
outcomes and experience of care into quality reporting programs, as 
well as to incorporate more outcome measures generally. Patient-
centered experience measures are also a component of the 2016 CMS 
Quality Strategy, which emphasizes patient-centered care by rating 
patient experience as a means for empowering patients and improving the 
quality of their care and care experience.\297\
---------------------------------------------------------------------------

    \297\ CMS Quality Strategy 2016. Available at: https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/qualityinitiativesgeninfo/downloads/cms-quality-strategy.pdf.
---------------------------------------------------------------------------

    These measures were included on the publicly available document 
entitled ``List of Measures under Consideration for December 1, 2016'' 
\298\ but were not reviewed by the MAP. We anticipate that they will be 
included on a future list of measures under consideration for MAP 
review. For further information on these measures, we refer readers to 
the discussion from the Measures Application Partnership's Hospital 
Workgroup Discussion at: http://public.qualityforum.org/MAP/
MAP%20Hospital%20Workgroup/2016-2017%20Hospital%20MAP/
MAP_Hospital_Workgroup_Discussion_

[[Page 20084]]

Guide.html#MUC16-375PCHQ. We are requesting public comment on the 
possible inclusion of these measures in future years of the program.
---------------------------------------------------------------------------

    \298\ Centers for Medicare and Medicaid Services, List of 
Measures under Consideration for December 1, 2016. Available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityMeasures/Downloads/Measures-under-Consideration-List-for-2016.pdf.
---------------------------------------------------------------------------

c. 30-Day Unplanned Readmissions for Cancer Patients
    The 30-Day Unplanned Readmissions for Cancer Patients measure would 
measure the number of hospital-specific 30-day unscheduled and 
potentially avoidable readmissions following hospitalization among 
diagnosed malignant cancer patients. The measure numerator is the total 
number of unscheduled readmissions within 30 days of index admission. 
The measure denominator is total PCH admissions within the reporting 
year for patients, aged 18 years or older, who were discharged alive 
from the facility with an active malignant cancer diagnosis.
    For further information on this measure, we refer readers to the 
AHRQ National Quality Measure Clearinghouse at: https://www.qualitymeasures.ahrq.gov/summaries/summary/50490/cancer-30day-unplanned-readmission-rate-for-cancer-patients. We are requesting 
public comment on the possible inclusion of this measure in future 
years of the program.
7. 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 adopted a 
policy under which we use a subregulatory process to make 
nonsubstantive updates to measures used for the PCHQR Program. We are 
not proposing any changes to this policy in this proposed rule.
8. Public Display Requirements
a. Background
    Under section 1866(k)(4) of the Act, we are required 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 the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57191 through 57192), we listed our finalized public display 
requirements. The measures we have finalized for public display are 
shown in the table below.

            Previously Finalized Public Display Requirements
------------------------------------------------------------------------
                    Measures                         Public reporting
------------------------------------------------------------------------
       Summary of Previously Finalized Public Display Requirements
------------------------------------------------------------------------
 Adjuvant Chemotherapy is Considered or   2014 and subsequent
 Administered Within 4 Months (120 days) of        years.
 Diagnosis to Patients Under the Age of 80 with
 AJCC III (lymph node positive) Colon Cancer
 (NQF #0223) \x\.
 Combination Chemotherapy is Considered
 or Administered Within 4 Months (120 days) of
 Diagnosis for Women Under 70 with AJCC T1cN0M0,
 or Stage IB--III Hormone Receptor Negative
 Breast Cancer (NQF #0559) \x\.
 Adjuvant Hormonal Therapy (NQF #0220)    2015 and subsequent
 \x\.                                              years.
 Oncology: Radiation Dose Limits to
 Normal Tissues (NQF #0382) *.
 Oncology: Plan of Care for Pain--
 Medical Oncology and Radiation Oncology (NQF
 #0383).
 Oncology: Medical and Radiation--Pain
 Intensity Quantified (NQF #0384).
 Prostate Cancer: Adjuvant Hormonal
 Therapy for High Risk Prostate Cancer Patients
 (NQF #0390).
 Prostate Cancer: Avoidance of Overuse
 of Bone Scan for Staging Low Risk Prostate
 Cancer Patients (NQF #0389).
 HCAHPS (NQF #0166).....................  2016 and subsequent
                                                   years.
 CLABSI (NQF #0139) **..................
 CAUTI (NQF #0138) **...................  Deferred.
 External Beam Radiotherapy for Bone      Beginning at the first
 Metastases (NQF #1822) ***.                       opportunity in 2017
                                                   and for subsequent
                                                   years.
------------------------------------------------------------------------
* Update newly finalized for display for the FY 2019 program year and
  subsequent years in the FY 2017 IPPS/LTCH PPS final rule (81 FR
  57192)--expanded cohort will be displayed as soon as feasible.
** Deferral finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR
  57192).
*** Measure newly finalized for public display in the FY 2017 IPPS/LTCH
  PPS final rule (81 FR 57192).
\x\ Measure proposed for removal beginning the FY 2020 program year.

    As we strive to publicly display data as soon as possible on a CMS 
Web site, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57191 through 
57192), we finalized an update to our public display polices. We 
believe it is best to not specify in rulemaking the exact timeframe 
during the year for publication as doing so may prevent earlier 
publication. Therefore, we finalized our policy to make these data 
available as soon as it is feasible during the year, starting with the 
first year for which we are publishing data for each measure. We will 
continue to propose in rulemaking the first year for which we intend to 
publish data for each measure. We intend to make the data available on 
at least a yearly basis.
    As stated above, we are required to give PCHs an opportunity to 
review their data before the data are made public. Because we will make 
the data for this program available as soon as possible, and the 
timeframe for this publication may change year to year, we will not 
propose to specify in rulemaking the exact dates for review. However, 
in that final rule, we stated that the time period for review would be 
approximately 30 days in length. We will announce the exact timeframes 
on a CMS Web site and/or on our applicable listservs. We are not 
proposing any changes to this policy in this proposed rule.
b. Deferment of Public Display of Two Measures
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50281 through 
50282), we finalized public display of the CLABSI

[[Page 20085]]

and CAUTI measures beginning no later than 2017 and subsequent years. 
However, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57192), we 
finalized a proposal to continue to defer public reporting of the 
CLABSI and CAUTI measures pending ongoing collaboration with the CDC to 
identify an appropriate timeframe for public reporting and the analytic 
methods that will be used to summarize the CLABSI and CAUTI data for 
public reporting purposes. We continue to collaborate with the CDC on 
these issues and continue to defer the public reporting of these two 
measures accordingly.
9. 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 year, 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. There 
are no financial incentives or penalties associated with the PCHQR 
Program.
    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.
    In this proposed rule, we are not proposing any changes to 
previously finalized data submission requirements.
b. Proposed Reporting Requirements for the Proposed New Measures
    As further described above, we are proposing four new measures 
beginning with the FY 2020 program year: Proportion of Patients Who 
Died from Cancer Receiving Chemotherapy in the Last 14 Days of Life 
(NQF #0210); Proportion of Patients Who Died from Cancer Admitted to 
the ICU in the Last 30 Days of Life (NQF #0213); Proportion of Patients 
Who Died from Cancer Not Admitted to Hospice (NQF #0215); and 
Proportion of Patients Who Died from Cancer Admitted to Hospice for 
Less Than Three Days (NQF #0216). All four measures are claims-based 
measures. Therefore, there will be no data submission requirements for 
PCHs related to these measures. As these measures use Medicare 
administrative claims data, we are proposing to calculate these 
measures on a yearly basis. Specifically, we are proposing that the 
data collection period will be from July 1 from the year 3 years prior 
to the program year to June 30 from the year 2 years prior to the 
program year. Thus, for the FY 2020 program year, we would collect data 
from July 1, 2017 through June 30, 2018.
    We are inviting public comment on this proposal.
10. Extraordinary Circumstances Exceptions (ECE) Policy Under the PCHQR 
Program
a. Background
    In our experience with other quality reporting and performance 
programs, we have noted occasions when providers have been unable to 
submit required quality data due to extraordinary circumstances that 
are not within their control (for example, natural disasters). We do 
not wish to increase their burden unduly during these times. Therefore, 
in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50848), we finalized our 
policy that, for the FY 2014 program year and subsequent years, PCHs 
may request and we may grant exceptions (formerly referred to as 
waivers) \299\ with respect to the reporting of required quality data 
when extraordinary circumstances beyond the control of the PCH warrant. 
The PCH may request a reporting extension or a complete exception from 
the requirement to submit quality data for one or more quarters. Under 
our current policy, PCHs can submit a request form to CMS with the 
following information:
---------------------------------------------------------------------------

    \299\ ECEs were originally referred to as ``waivers.'' This term 
was changed to ``exceptions'' in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50286).
---------------------------------------------------------------------------

     The PCH's CCN;
     The PCH's name;
     Contact information for the PCH's CEO and any other 
designated personnel, including name, email address, telephone number, 
and mailing address (the address must be a physical address, not a post 
office box);
     The PCH's reason for requesting an extension or exception;
     Evidence of the impact of extraordinary circumstances, 
including but not limited to photographs, newspaper and other media 
articles; and
     A date when the PCH will again be able to submit PCHQR 
Program data, and a justification for the proposed date.
    In addition, we finalized that the form must be signed by the PCH's 
CEO or designee and submitted within 30 days of the date that the 
extraordinary circumstances occurred. Lastly, we finalized that 
following the receipt of the request form, we would: (1) provide a 
written acknowledgement; and (2) provide a formal response notifying 
the PCH of our decision.
    We also clarified that the above policy does not preclude us from 
granting exceptions (including extensions) to PCHs that have not 
requested them when we determine that an extraordinary circumstance has 
affected an entire region or locale. We stated that if we make the 
determination to grant such an exception, we would communicate this 
decision through routine communication channels.
b. Proposed Modifications to the ECE Policy
    We are proposing to modify the ECE policy for the PCHQR Program by: 
(1) Extending the deadline for a PCH to submit a request for an 
extension or exception from 30 days following the date that the 
extraordinary circumstance occurred to 90 days following the date that 
the extraordinary circumstance occurred; and (2) allowing CMS to grant 
an exception or extension due to CMS data system issues which affect 
data submission. These proposed modifications will better align our ECE 
policy with that adopted for the Hospital IQR Program (76 FR 51651 
through 51652, 78 FR 50836 through 50837, and 81 FR 57181 through 
57182), the Hospital OQR Program (77 FR 68489 and 81 FR 79795), as well 
as other quality reporting programs that already have such policies in 
place or are proposing to modify their policies to achieve alignment. 
We are proposing that these modifications would apply beginning in FY 
2018 as related to extraordinary circumstances that occur on or after 
October 1, 2017.
    We also believe that it is important for facilities to receive 
timely feedback regarding the status of ECE requests. We strive to 
complete our review of each ECE request as quickly as possible. 
However, we recognize that the number of requests we receive, and the 
complexity of the information provided impacts the actual timeframe to 
make ECE determinations. Therefore, to ensure transparency and 
understanding of our process, we are also taking this opportunity to 
clarify that we will strive to provide our response to an ECE request 
within 90 days of receipt.
(1) Proposal To Extend the ECE Request Deadline
    In the past, we have allowed facilities to submit an ECE request 
form within 30 calendar days following the occurrence of an 
extraordinary circumstance that causes hardship and prevents them from 
providing data. In certain circumstances, however, it may be difficult 
for facilities to timely evaluate the impact of a certain extraordinary 
circumstance within 30 calendar days.

[[Page 20086]]

We believe that extending the deadline to 90 calendar days would allow 
PCHs more time to determine whether it is necessary and appropriate to 
submit an ECE request and to provide a more comprehensive account of 
the extraordinary circumstance in their ECE request form to CMS. For 
example, if a PCH has suffered damage due to a hurricane on June 1, it 
would have until August 30 to submit an ECE form via the QualityNet 
Secure Portal, mail, email, or secure fax as instructed on the ECE 
form.
    We are inviting public comments on this proposal.
(2) Proposal To Grant Exceptions or Extensions Due to CMS Data System 
Issues
    Although we do not anticipate this situation will happen often, 
there may be times where CMS experiences issues with its data systems 
that directly affects facilities' abilities to submit data. In these 
circumstances, we are proposing to grant exceptions or extensions to 
one or more data reporting requirements. If we make the determination 
to grant exceptions or extensions to PCHs on this basis, we are 
proposing to communicate this decision through routine communication 
channels.
    We are inviting public comment on this proposal.

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) 
of the Act by adding paragraph (5), 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 LTCH QRP, the Secretary is required 
to reduce any annual update to the LTCH PPS 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. Specifically, section 1886(m)(5) of the Act requires that 
beginning with the FY 2014 LTCH QRP, each LTCH submit data on quality 
measures specified by the Secretary in a form and manner, and at a 
time, specified by the Secretary. For more information on the statutory 
history of the LTCH QRP, we refer readers to the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50286).
    Please note that term ``FY [year] LTCH QRP'' refers to the fiscal 
year for which the LTCH QRP requirements applicable to that fiscal year 
must be met for an LTCH to receive the full annual update when 
calculating the payment rates applicable to it for that fiscal year.
    The Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act) (Pub. L. 113-185) amended Title XVIII of the Act, in part, 
by adding a new section 1899B of the Act, entitled ``Standardized Post-
Acute Care (PAC) Assessment Data for Quality, Payment and Discharge 
Planning,'' that enacts new data reporting requirements for certain 
post-acute care (PAC) providers, including LTCHs. Specifically, new 
sections 1899B(a)(1)(A)(ii) and (iii) of the Act require LTCHs, 
inpatient rehabilitation facilities (IRFs), skilled nursing facilities 
(SNFs) and home health agencies (HHAs), under each of their respective 
quality reporting program (which, for LTCHs, is found at section 
1886(m)(5) of the Act), to report data on quality measures specified 
under section 1899B(c)(1), with respect to at least five domains, and 
data on resource use and other measures specified under section 
1899B(d)(1) of the Act with respect toat least three domains. Section 
1899B(a)(1)(A)(i) of the Act further requires each of these PAC 
providers to report under their respective quality reporting program 
standardized patient assessment data in accordance with subsection (b) 
for at least the quality measures specified under subsection (c)(1) and 
that is with respect to five specific categories: functional status; 
cognitive function and mental status; special services, treatments, and 
interventions; medical conditions and co-morbidities; and impairments. 
All of the data that must be reported in accordance with section 
1899B(a)(1)(A) of the Act must be standardized and interoperable so as 
to allow for the exchange of the information among PAC providers and 
other providers and the use of such data in order to enable access to 
longitudinal information and to facilitate coordinated care. We refer 
readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49723 through 
49724) for additional information on the IMPACT Act and its 
applicability to LTCHs.
2. General Considerations Used for Selection of Quality Measures for 
the LTCH QRP
a. Background
    We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49728) for a detailed discussion of the considerations we apply in 
measure selection for the LTCH QRP, such as alignment with the CMS 
Quality Strategy,\300\ which incorporates the three broad aims of the 
National Quality Strategy.\301\
---------------------------------------------------------------------------

    \300\ http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html.
    \301\ http://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.htm.
---------------------------------------------------------------------------

    As part of our consideration for measures for use in the LTCH QRP, 
we review and evaluate measures that have been implemented in other 
programs and take into account measures that have been endorsed by NQF 
for provider settings other than the LTCH setting. We have previously 
adopted measures with the term ``Application of'' in the names of those 
measures. We have received questions pertaining to the term 
``application'' and want to clarify that when we refer to a measure as 
an ``application of'' the measure, it means that the measure will be 
used in the LTCH setting, rather than the setting for which it was 
endorsed by the NQF. For example, in the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49736 through 49739) we adopted an Application of Percent 
of Residents Experiencing One or More Falls With Major Injury (Long 
Stay) (NQF #0674), which is endorsed for the nursing home setting but 
not for the LTCH setting. For such measures, we intend to seek NQF 
endorsement for the LTCH setting, and if the NQF endorses one or more 
of them, we will update the title of the measure to remove the 
reference to ``application.''
b. Accounting for Social Risk Factors in the LTCH QRP
    We consider related factors that may affect measures in the LTCH 
QRP. We understand that social risk factors such as income, education, 
race and ethnicity, employment, disability, community resources, and 
social support (certain factors of which are also sometimes referred to 
as socioeconomic status (SES) factors or socio-demographic status (SDS) 
factors) play a major role in health. One of our core objectives is to 
improve beneficiary outcomes including reducing health disparities, and 
we want to ensure that all beneficiaries, including those with social 
risk factors, receive high quality care. In addition, we seek to ensure 
that the quality of care furnished by providers and suppliers is 
assessed as fairly as possible under our programs while ensuring that 
beneficiaries have adequate access to excellent care.
    We have been reviewing reports prepared by the Office of the 
Assistant Secretary for Planning and Evaluation

[[Page 20087]]

(ASPE) \302\ and the National Academies of Sciences, Engineering, and 
Medicine on the issue of measuring and accounting for social risk 
factors in CMS' value-based purchasing and quality reporting programs, 
and considering options on how to address the issue in these programs. 
On December 21, 2016, ASPE submitted a Report to Congress on a study it 
was required to conduct under section 2(d) of the Improving Medicare 
Post-Acute Care Transformation (IMPACT) Act of 2014. The study analyzed 
the effects of certain social risk factors of Medicare beneficiaries on 
quality measures and measures of resource use used in one or more of 
nine Medicare value-based purchasing programs.\303\ The report also 
included considerations for strategies to account for social risk 
factors in these programs. In a January 10, 2017 report released by The 
National Academies of Sciences, Engineering, and Medicine, that body 
provided various potential methods for measuring and accounting for 
social risk factors, including stratified public reporting.\304\
---------------------------------------------------------------------------

    \302\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \303\ https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \304\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press.
---------------------------------------------------------------------------

    As discussed in the FY 2017 IPPS/LTCH PPS final rule, the NQF has 
undertaken a 2-year trial period in which new measures, measures 
undergoing maintenance review, and measures endorsed with the condition 
that they enter the trial period can be assessed to determine whether 
risk adjustment for selected social risk factors is appropriate for 
these measures. Measures from the LTCH QRP are being addressed in this 
trial. This trial entails temporarily allowing inclusion of social risk 
factors in the risk-adjustment approach for these measures. At the 
conclusion of the trial, NQF will issue recommendations on the future 
inclusion of social risk factors in risk adjustment for quality 
measures.
    As we continue to consider the analyses and recommendations from 
these reports and await the results of the NQF trial on risk adjustment 
for quality measures, we are continuing to work with stakeholders in 
this process. As we have previously communicated, we are concerned 
about holding providers to different standards for the outcomes of 
their patients with social risk factors because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes 
for disadvantaged populations. Keeping this concern in mind, while we 
sought input on this topic previously, we continue to seek public 
comment on whether we should account for social risk factors in 
measures in the LTCH QRP, and if so, what method or combination of 
methods would be most appropriate for accounting for social risk 
factors. Examples of methods include: confidential reporting to 
providers of measure rates stratified by social risk factors; public 
reporting of stratified measure rates; and potential risk adjustment of 
a particular measure as appropriate based on data and evidence.
    In addition, we are also seeking public comment on which social 
risk factors might be most appropriate for reporting stratified measure 
scores and/or potential risk adjustment of a particular measure. 
Examples of social risk factors include, but are not limited to, dual 
eligibility/low-income subsidy, race and ethnicity, and geographic area 
of residence. We are seeking comments on which of these factors, 
including current data sources where this information would be 
available, could be used alone or in combination, and whether other 
data should be collected to better capture the effects of social risk. 
We will take commenters' input into consideration as we continue to 
assess the appropriateness and feasibility of accounting for social 
risk factors in the LTCH QRP. We note that any such changes would be 
proposed through future notice and comment rulemaking.
    We look forward to working with stakeholders as we consider the 
issue of accounting for social risk factors and reducing health 
disparities in CMS programs. Of note, implementing any of the above 
methods would be taken into consideration in the context of how this 
and other CMS programs operate (for example, data submission methods, 
availability of data, statistical considerations relating to 
reliability of data calculations, among others), so we also welcome 
comment on operational considerations. CMS is committed to ensuring 
that its beneficiaries have access to and receive excellent care, and 
that the quality of care furnished by providers and suppliers is 
assessed fairly in CMS programs.
3. Proposed Collection of Standardized Patient Assessment Data Under 
the LTCH QRP
a. Proposed Definition of Standardized Patient Assessment Data
    Section 1886(m)(5)(F)(ii) of the Act requires that, for fiscal year 
2019 and each subsequent year, LTCHs report standardized patient 
assessment data required under section 1899B(b)(1) of the Act. For 
purposes of meeting this requirement, section 1886(m)(5)(F)(iii) of the 
Act requires an LTCH to submit the standardized patient assessment data 
required under section 1899B(b)(1) of the Act using the standard 
instrument in a time, form, and manner specified by the Secretary.
    Section 1899B(b)(1)(B) of the Act describes standardized patient 
assessment data as data required for at least the quality measures 
described in section 1899B(c)(1) of the Act and that is with respect to 
the following categories:
     Functional status, such as mobility and self-care at 
admission to a PAC provider and before discharge from a PAC provider;
     Cognitive function, such as ability to express ideas and 
to understand and mental status, such as depression and dementia;
     Special services, treatments and interventions such as the 
need for ventilator use, dialysis, chemotherapy, central line placement 
and total parenteral nutrition;
     Medical conditions and comorbidities such as diabetes, 
congestive heart failure and pressure ulcers;
     Impairments, such as incontinence and an impaired ability 
to hear, see or swallow; and
     Other categories deemed necessary and appropriate.
    As required under section 1899B(b)(1)(A) of the Act, the 
standardized patient assessment data must be reported at least with 
respect to LTCH admissions and discharges, but the Secretary may 
require the data to be reported more frequently.
    In this proposed rule, we are proposing to define the standardized 
patient assessment data that LTCHs must report to comply with section 
1886(m)(5)(F)(ii) of the Act, as well as the requirements for the 
reporting of these data. The collection of standardized patient 
assessment data is critical to our efforts to drive improvement in 
health care quality across the four PAC settings to which the IMPACT 
Act applies. We intend to use these data for a number of purposes, 
including facilitating their exchange and

[[Page 20088]]

longitudinal use among health care providers to enable high quality 
care and outcomes through care coordination, as well as for quality 
measure calculation and identifying comorbidities that might increase 
the medical complexity of a particular admission.
    LTCHs are currently required to report patient assessment data 
through the Long-Term Care Hospital Continuity Assessment Record and 
Evaluation Data Set (LTCH CARE Data Set or LCDS) by responding to an 
identical set of assessment questions using an identical set of 
response options (we refer to each solitary question/response option as 
a data element and we refer to a group of questions/responses as data 
elements), both of which incorporate an identical set of definitions 
and standards. The primary purpose of the identical questions and 
response options is to ensure that we collect a set of standardized 
data elements across LTCHs which can then be used for a number of 
purposes, including LTCH payment and measure calculation for the LTCH 
QRP.
    SNFs, IRFs, and HHAs are also required to report patient assessment 
data through their applicable PAC assessment instruments, and they do 
so by responding to identical assessment questions developed for their 
respective settings using an identical set of response options (which 
incorporate an identical set of definitions and standards). Like the 
LCDS, the questions and response options for each of these other PAC 
assessment instruments are standardized across the PAC provider type to 
which the PAC assessment instrument applies. However, the assessment 
questions and response options in the four PAC assessment instruments 
are not currently standardized with each other. As a result, questions 
and response options that appear on the LCDS cannot be readily compared 
with questions and response options that appear, for example, on the 
Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF-
PAI), the PAC assessment instrument used by IRFs. This is true even 
when the questions and response options are similar. This lack of 
standardization across the four PAC providers has limited our ability 
to compare one PAC provider type with another for purposes such as care 
coordination and quality improvement.
    To achieve a level of standardization across SNFs, LTCHs, IRFs, and 
HHAs that enables us to make comparisons between them, we are proposing 
to define ``standardized patient assessment data'' as patient 
assessment questions and response options that are identical in all 
four PAC assessment instruments, and to which identical standards and 
definitions apply. Standardizing the questions and response options 
across the four PAC assessment instruments will also enable the data to 
be interoperable, allowing it to be shared electronically, or 
otherwise, between PAC provider types. It will enable the data to be 
comparable for various purposes, including the development of cross-
setting quality measures and to inform payment models that take into 
account patient characteristics rather than setting, as described in 
the IMPACT Act.
    We are inviting public comment on this proposed definition.
b. General Considerations Used for the Selection of Proposed 
Standardized Patient Assessment Data
    As part of our effort to identify appropriate standardized patient 
assessment data for purposes of collecting under the LTCH QRP, we 
sought input from the general public, stakeholder community, and 
subject matter experts on items that would enable person-centered, high 
quality health care, as well as access to longitudinal information to 
facilitate coordinated care and improved beneficiary outcomes.
    To identify optimal data elements for standardization, our data 
element contractor organized teams of researchers for each category, 
and each team worked with a group of advisors made up of clinicians and 
academic researchers with expertise in PAC. Information-gathering 
activities were used to identify data elements, as well as key themes 
related to the categories described in section 1899B(b)(1)(B) of the 
Act. In January and February 2016, our data element contractor also 
conducted provider focus groups for each of the four PAC provider 
types, and a focus group for consumers that included current or former 
PAC patients and residents, caregivers, ombudsmen, and patient advocacy 
group representatives. The Development and Maintenance of Post-Acute 
Care Cross-Setting Standardized Patient Assessment Data Focus Group 
Summary Report is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html. 
Our data element contractor also assembled a 16-member TEP that met on 
April 7 and 8, 2016, and January 5 and 6, 2017, in Baltimore, Maryland, 
to provide expert input on data elements that are currently in each PAC 
assessment instrument, as well as data elements that could be 
standardized. The Development and Maintenance of Post-Acute Care Cross-
Setting Standardized Patient Assessment Data TEP Summary Reports are 
available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    As part of the environmental scan, data elements currently in the 
four existing PAC assessment instruments were examined to see if any 
could be considered for proposal as standardized patient assessment 
data. Specifically, this evaluation included consideration of data 
elements in OASIS-C2 (effective January 2017); IRF-PAI, v1.4 (effective 
October 2016); LCDS, v3.00 (effective April 2016); and MDS 3.0, v1.14 
(effective October 2016). Data elements in the standardized assessment 
instrument that we tested in the Post-Acute Care Payment Reform 
Demonstration (PAC PRD)--the Continuity Assessment Record and 
Evaluation (CARE)--were also considered. A literature search was also 
conducted to determine whether additional data elements to propose as 
standardized patient assessment data could be identified.
    We also held four Special Open Door Forums (SODFs) on October 27, 
2015; May 12, 2016; September 15, 2016; and December 8, 2016, to 
present data elements we were considering and solicit input. At each 
SODF, some stakeholders provided immediate input, and all were invited 
to submit additional comments via the CMS IMPACT Mailbox at: 
[email protected].
    We also convened a meeting with federal agency subject matter 
experts (SMEs) on May 13, 2016. In addition, a public comment period 
was open from August 12 to September 12, 2016, to solicit comments on 
detailed candidate data element descriptions, data collection methods, 
and coding methods. The IMPACT Act Public Comment Summary Report 
containing the public comments (summarized and verbatim) and our 
responses, is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    We specifically sought to identify standardized patient assessment 
data that we could feasibly incorporate into the LTCH, IRF, SNF, and 
HHA

[[Page 20089]]

assessment instruments and that have the following attributes: (1) 
Being supported by current science; (2) testing well in terms of their 
reliability and validity, consistent with findings from the Post-Acute 
Care-Payment Reform Demonstration (PAC PRD); (3) the potential to be 
shared (for example, through interoperable means) among PAC and other 
provider types to facilitate efficient care coordination and improved 
beneficiary outcomes; (4) the potential to inform the development of 
quality, resource use and other measures, as well as future payment 
methodologies that could more directly take into account individual 
beneficiary health characteristics; and (5) the ability to be used by 
practitioners to inform their clinical decision and care planning 
activities. We also applied the same considerations that we apply with 
quality measures, including the CMS Quality Strategy which is framed 
using the three broad aims of the National Quality Strategy.
4. Policy for Retaining LTCH QRP Measures and Proposal To Apply That 
Policy to Standardized Patient Assessment Data
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53614 through 
53615), we adopted a policy that would allow any quality measure 
adopted for use in the LTCH QRP to remain in effect until the measure 
is removed, suspended, or replaced. For further information on how 
measures are considered for removal, suspension, or replacement, we 
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53614 
through 53615). We are proposing to apply this policy to the 
standardized patient assessment data that we adopt for the LTCH QRP.
    We are inviting public comment on our proposal.
5. Policy for Adopting Changes to LTCH QRP Measures and Proposal To 
Apply That Policy to Standardized Patient Assessment Data
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through 
53616), we adopted a subregulatory process to incorporate updates to 
LTCH quality measure specifications that do not substantively change 
the nature of the measure. Substantive changes will be proposed and 
finalized through rulemaking. For further information on what 
constitutes a substantive versus a nonsubstantive change and the 
subregulatory process for nonsubstantive changes, we refer readers to 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through 53616). We 
are proposing to apply this policy to the standardized patient 
assessment data that we adopt for the LTCH QRP.
    We are inviting public comment on our proposal.
6. Quality Measures Previously Finalized for the LTCH QRP
    The LTCH QRP currently has 17 finalized measures as outlined in the 
table below:

           Quality Measures Currently Adopted for the LTCH QRP
------------------------------------------------------------------------
          Short name                  Measure name and data source
------------------------------------------------------------------------
                           LTCH CARE Data Set
------------------------------------------------------------------------
Pressure Ulcers..............  Percent of Residents or Patients with
                                Pressure Ulcers That Are New or Worsened
                                (Short Stay) (NQF #0678).
Patient Influenza Vaccine....  Percent of Residents or Patients Who Were
                                Assessed and Appropriately Given the
                                Seasonal Influenza Vaccine (Short Stay)
                                (NQF #0680).
Application of Falls.........  Application of Percent of Residents
                                Experiencing One or More Falls with
                                Major Injury (Long Stay) (NQF #0674).*
Functional Assessment........  Percent of Long-Term Care Hospital (LTCH)
                                Patients with an Admission and Discharge
                                Functional Assessment and a Care Plan
                                That Addresses Function (NQF #2631).
Application of Functional      Application of Percent of Long-Term Care
 Assessment.                    Hospital (LTCH) Patients with an
                                Admission and Discharge Functional
                                Assessment and a Care Plan That
                                Addresses Function (NQF #2631).
Change in Mobility...........  Functional Outcome Measure: Change in
                                Mobility Among Long-Term Care Hospital
                                (LTCH) Patients Requiring Ventilator
                                Support (NQF #2632).
DRR..........................  Drug Regimen Review Conducted With Follow-
                                Up for Identified Issues- Post Acute
                                Care (PAC) Long-Term Care Hospital
                                (LTCH) Quality Reporting Program (QRP).*
------------------------------------------------------------------------
                                  NHSN
------------------------------------------------------------------------
CAUTI........................  National Healthcare Safety Network (NHSN)
                                Catheter-Associated Urinary Tract
                                Infection Outcome Measure (NQF #0138).
CLABSI.......................  National Healthcare Safety Network (NHSN)
                                Central Line-Associated Bloodstream
                                Infection Outcome Measure (NQF #0139).
MRSA.........................  National Healthcare Safety Network (NHSN)
                                Facility-wide Inpatient Hospital-onset
                                Methicillin-resistant Staphylococcus
                                aureus (MRSA) Bacteremia Outcome Measure
                                (NQF #1716).
CDI..........................  National Healthcare Safety Network (NHSN)
                                Facility-wide Inpatient Hospital-onset
                                Clostridium difficile Infection (CDI)
                                Outcome Measure (NQF #1717).
HCP Influenza Vaccine........  Influenza Vaccination Coverage among
                                Healthcare Personnel (NQF #0431).
VAE..........................  National Healthcare Safety Network (NHSN)
                                Ventilator-Associated Event (VAE)
                                Outcome Measure.*
------------------------------------------------------------------------
                              Claims-Based
------------------------------------------------------------------------
All-Cause Readmissions.......  All-Cause Unplanned Readmission Measure
                                for 30-Days Post[dash]Discharge from
                                Long-Term Care Hospitals (LTCHs) (NQF
                                #2512).
MSPB.........................  Medicare Spending Per Beneficiary (MSPB)-
                                Post Acute Care (PAC) Long-Term Care
                                Hospital (LTCH) Quality Reporting
                                Program (QRP).*
DTC..........................  Discharge to Community-Post Acute Care
                                (PAC) Long-Term Care Hospital (LTCH)
                                Quality Reporting Program (QRP).*

[[Page 20090]]

 
PPR..........................  Potentially Preventable 30-Day Post-
                                Discharge Readmission Measure for Long-
                                Term Care Hospital (LTCH) Quality
                                Reporting Program (QRP).*
------------------------------------------------------------------------
* Not currently NQF-endorsed for the LTCH setting.

7. LTCH QRP Quality Measures Proposed Beginning With the FY 2020 LTCH 
QRP
    Beginning with the FY 2020 LTCH QRP, in addition to the quality 
measures we are retaining under our policy described in section IX.C.4. 
of the preamble of this proposed rule, we are proposing to remove the 
current pressure ulcer measure entitled Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short Stay) 
(NQF #0678) and replace it with a modified version of the measure 
entitled Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/
Injury and adopt two new measures (one process and one outcome) related 
to ventilator weaning. We are also proposing to characterize the data 
elements described below as standardized patient assessment data under 
section 1899B(b)(1)(B) of the Act that must be reported by LTCHs under 
the LTCH QRP through the LTCH CARE Data Set.
    The proposed measures are as follows:
     Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/
Injury
     Compliance with Spontaneous Breathing Trial (SBT) by Day 2 
of the LTCH Stay
     Ventilator Liberation Rate
    The measures are described in more detail below.
a. Proposal To Replace the Current Pressure Ulcer Quality Measure, 
Percent of Residents or Patients With Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678), With a Modified Pressure Ulcer 
Measure, Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/
Injury
(1) Measure Background
    In this proposed rule, we are proposing to remove the current 
pressure ulcer measure, Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678), from the LTCH 
QRP measure set and to replace it with a modified version of that 
measure, Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/
Injury, beginning with the FY 2020 LTCH QRP. The change in the measure 
name is to reduce confusion about the new modified measure. The 
modified version differs from the current version of the measure 
because it includes new or worsened unstageable pressure ulcers, 
including deep tissue injuries (DTIs), in the measure numerator. The 
proposed modified version of the measure also contains updated 
specifications intended to eliminate redundancies in the assessment 
items needed for its calculation and to reduce the potential for 
underestimating the frequency of pressure ulcers. The modified version 
of the measure would satisfy the IMPACT Act domain of skin integrity 
and changes in skin integrity.
(2) Measure Importance
    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 history and 
rationale for the relevance, importance, and applicability of having a 
pressure ulcer measure in the LTCH QRP, we refer readers to the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51748 through 51750) and the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50861 through 50863).
    We are proposing to adopt a modified version of the current 
pressure ulcer measure because unstageable pressure ulcers, including 
DTIs, are similar to Stage 2, Stage 3, and Stage 4 pressure ulcers in 
that they represent poor outcomes, are a serious medical condition that 
can result in death and disability, are debilitating and painful, and 
are often an avoidable outcome of medical care.305 
306 307 308 309 
310 Studies show that most pressure ulcers can be avoided 
and can also be healed in acute, post-acute, and long-term care 
settings with appropriate medical care.\311\ Furthermore, some studies 
indicate that DTIs, if managed using appropriate care, can be resolved 
without deteriorating into a worsened pressure ulcer.312 
313
---------------------------------------------------------------------------

    \305\ Casey, G. (2013). ``Pressure ulcers reflect quality of 
nursing care.'' Nurs N Z 19(10): 20-24.
    \306\ Gorzoni, M. L. and S. L. Pires (2011). ``Deaths in nursing 
homes.'' Rev Assoc Med Bras 57(3): 327-331.
    \307\ Thomas, J. M., et al. (2013). ``Systematic review: health-
related characteristics of elderly hospitalized adults and nursing 
home residents associated with short-term mortality.'' J Am Geriatr 
Soc 61(6): 902-911.
    \308\ White-Chu, E. F., et al. (2011). ``Pressure ulcers in 
long-term care.'' Clin Geriatr Med 27(2): 241-258.
    \309\ Bates-Jensen BM. Quality indicators for prevention and 
management of pressure ulcers in vulnerable elders. Ann Int Med. 
2001;135 (8 Part 2), 744-51.
    \310\ Bennet, G, Dealy, C Posnett, J (2004). The cost of 
pressure ulcers in the UK, Age and Aging, 33(3):230-235.
    \311\ Black, Joyce M., et al. ``Pressure ulcers: avoidable or 
unavoidable? Results of the national pressure ulcer advisory panel 
consensus conference.'' Ostomy-Wound Management 57.2 (2011): 24.
    \312\ Sullivan, R. (2013). A Two-year Retrospective Review of 
Suspected Deep Tissue Injury Evolution in Adult Acute Care Patients. 
Ostomy Wound Management 59(9) http://www.o-wm.com/article/two-year-retrospective-review-suspected-deep-tissue-injury-evolution-adult-acute-care-patient.
    \313\ Posthauer, ME, Zulkowski, K. (2005). Special to OWM: The 
NPUAP Dual Mission Conference: Reaching Consensus on Staging and 
Deep Tissue Injury. Ostomy Wound Management 51(4) http://www.o-wm.com/content/the-npuap-dual-mission-conference-reaching-consensus-staging-and-deep-tissue-injury.
---------------------------------------------------------------------------

    While there are few studies that provide information regarding the 
incidence of unstageable pressure ulcers in PAC settings, an analysis 
conducted by a contractor suggests the incidence of unstageable 
pressure ulcers varies according to the type of unstageable pressure 
ulcer and setting. This analysis examined the national incidence of new 
unstageable pressure ulcers in LTCHs at discharge compared with 
admission using LTCH discharges from January through December 2015. The 
contractor found a national incidence of 1.15 percent of new 
unstageable pressure ulcers due to slough and/or eschar, 0.05 percent 
of new unstageable pressure ulcers due to non-removable dressing/
device, and 1.01 percent of new DTIs. In addition, an international 
study spanning the time period 2006 to 2009 provides some evidence to 
suggest that the proportion of pressure ulcers identified as DTI has 
increased over time. The study found DTIs increased by three fold, to 
nine percent of all observed ulcers in 2009, and that DTIs were more 
prevalent than either Stage 3 or 4 ulcers. During the same time period, 
the proportion of Stage 1 and 2 ulcers decreased, and the proportion of 
Stage 3 and 4 ulcers remained constant.\314\
---------------------------------------------------------------------------

    \314\ VanGilder, C, MacFarlane, GD, Harrison, P, Lachenbruch, C, 
Meyer, S (2010). The Demographics of Suspected Deep Tissue Injury in 
the United States: An Analysis of the International Pressure Ulcer 
Prevalence Survey 2006-2009. Advances in Skin & Wound Care. 23(6): 
254-261.

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

[[Page 20091]]

    The inclusion of unstageable pressure ulcers, including DTIs, in 
the numerator of this measure is expected to increase measure scores 
and variability in measure scores, thereby improving the ability to 
discriminate among poor- and high-performing LTCHs. In the currently 
implemented pressure ulcer measure, Percent of Residents or Patients 
with Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678), 
analysis using data from Quarter 1 through Quarter 4 2015 data reveals 
that the LTCH mean score is 1.95 percent; the 25th and 75th percentiles 
are 0.53 percent and 2.49 percent, respectively; and 12.11 percent of 
facilities have perfect scores. In the proposed measure, Changes in 
Skin Integrity Post-Acute Care: Pressure Ulcer/Injury, during the same 
timeframe, the LTCH mean score is 3.73 percent; the 25th and 75th 
percentiles are 1.53 percent and 4.89 percent, respectively; and 5.46 
percent of facilities have perfect scores.
(3) Stakeholder Feedback
    Our measure development contractor sought input from subject matter 
experts, including Technical Expert Panels (TEPs), over the course of 
several years on various skin integrity topics and specifically those 
associated with the inclusion of unstageable pressure ulcers, including 
DTIs. Most recently, on July 18, 2016, a TEP convened by our measure 
development contractor provided input on the technical specifications 
of this proposed quality measure, including the feasibility of 
implementing the proposed measure's updates across PAC settings. The 
TEP supported the updates to the measure across PAC settings, including 
the inclusion in the numerator of unstageable pressure ulcers due to 
slough and/or eschar that are new or worsened, new unstageable pressure 
ulcers due to a non-removable dressing or device, and new DTIs. The TEP 
also supported the use of different data elements for measure 
calculation. The TEP recommended supplying additional guidance to 
providers regarding each type of unstageable pressure ulcer. This 
support was in agreement with earlier TEP meetings, held on June 13 and 
November 15, 2013, which had recommended that CMS update the 
specifications for the pressure ulcer measure to include unstageable 
pressure ulcers in the numerator.315 316 Exploratory data 
analysis conducted by our measure development contractor suggests that 
the addition of unstageable pressure ulcers, including DTIs, will 
increase the observed incidence and variation in the rate of new or 
worsened pressure ulcers at the facility level, which may improve the 
ability of the proposed quality measure to discriminate between poor- 
and high-performing facilities.
---------------------------------------------------------------------------

    \315\ 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. Available: https://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.
    \316\ Schwartz, M., Ignaczak, M.K., Swinson Evans, T.M., Thaker, 
S., and Smith, L.: The Development of a Cross-Setting Pressure Ulcer 
Quality Measure: Summary Report on November 15, 2013, Technical 
Expert Panel Follow-Up Webinar. Centers for Medicare & Medicaid 
Services, January 2014. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Pressure-Ulcer-Quality-Measure-Summary-Report-on-November-15-2013-Technical-Expert-Pa.pdf.
---------------------------------------------------------------------------

    We solicited stakeholder feedback on this proposed measure by means 
of a public comment period held from October 17 through November 17, 
2016. In general, we received considerable support for the proposed 
measure. A few commenters supported all of the changes to the current 
pressure ulcer measure that resulted in the proposed measure, with one 
commenter noting the significance of the work to align the pressure 
ulcer quality measure specifications across the PAC settings.
    Many commenters supported the inclusion of unstageable pressure 
ulcers due to slough/eschar, due to non-removable dressing/device, and 
DTIs in the proposed quality measure. Other commenters did not support 
the inclusion of DTIs in the proposed quality measure because they 
stated that there is no universally accepted definition for this type 
of skin injury.
    Some commenters provided feedback on the data elements used to 
calculate the proposed quality measure. We believe that these data 
elements will promote facilitation of cross-setting quality comparison 
as mandated by the IMPACT Act, alignment between quality measures and 
payment, reduction in redundancies in assessment items, and prevention 
of inappropriate underestimation of pressure ulcers. The currently 
implemented pressure ulcer measure is calculated using retrospective 
data elements that assess the number of new or worsened pressure ulcers 
at each stage, while the proposed measure is calculated using the 
number of unhealed pressure ulcers at each stage after subtracting the 
number that were present upon admission. Some commenters did not 
support the data elements that would be used to calculate the proposed 
measure, and requested further testing of these data elements. Other 
commenters supported the use of these data elements stating that these 
data elements simplified the measure calculation process.
    The public comment summary report for the proposed measure is 
available on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html. 
This summary includes further detail about our responses to various 
concerns and ideas stakeholders raised.
    The NQF-convened Measures Application Partnership (MAP) Post-Acute 
Care/Long-Term Care (PAC/LTC) Workgroup met on December 14 and 15, 
2016, and provided input to CMS about this measure. The Workgroup 
provided a recommendation of ``support for rulemaking'' for use of the 
proposed measure in the LTCH QRP. The MAP Coordinating Committee met on 
January 24 and 25, 2017, and provided a recommendation of ``conditional 
support for rulemaking'' for use of the proposed measure in the LTCH 
QRP. The MAP's conditions of support include that, as a part of measure 
implementation, CMS provide guidance on the correct collection and 
calculation of the measure result, as well as guidance on public 
reporting Web sites explaining the impact of the specification changes 
on the measure result. The MAP's conditions also specify that CMS 
continue analyzing the proposed measure in order to investigate 
unexpected results reported in public comment. We intend to fulfill 
these conditions by offering additional training opportunities and 
educational materials in advance of public reporting, and by continuing 
to monitor and analyze the proposed measure. More information about the 
MAP's recommendations for this measure is available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=84452.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed pressure ulcer quality measures for PAC 
settings that are inclusive of unstageable pressure ulcers. There are 
related measures, but after careful review, we determined these 
measures are not applicable for use in LTCHs based on the populations 
addressed or other

[[Page 20092]]

aspects of the specifications. We are unaware of any other such quality 
measures that have been endorsed or adopted by another consensus 
organization for the LTCH setting. Therefore, based on the evidence 
discussed above, we are proposing to adopt the quality measure 
entitled, Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/
Injury, for the LTCH QRP beginning with the FY 2020 LTCH QRP. We plan 
to submit the proposed measure to the NQF for endorsement consideration 
as soon as feasible.
(4) Data Collection
    The data for this quality measure would be collected using the LTCH 
CARE Data Set, which is currently submitted by LTCHs through the QIES 
ASAP System. The proposed standardized patient assessment data 
applicable to this measure that must be reported by LTCHs for 
admissions as well as discharges occurring on or after April 1, 2018 is 
described in section IX.C.11. of the preamble of this proposed rule. 
While the inclusion of unstageable wounds in the proposed measure 
results in a measure calculation methodology that is different from the 
methodology used to calculate the current pressure ulcer measure, the 
data elements needed to calculate the proposed measure are already 
included on the LTCH CARE Data Set. In addition, our proposal to 
eliminate duplicative data elements that were used in calculation of 
the current pressure ulcer measure will result in an overall reduced 
reporting burden for LTCHs with respect to the proposed measure. For 
more information on LTCH CARE Data Set submission using the QIES ASAP 
System, we refer readers to: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
    For technical information about this proposed measure, including 
information about the measure calculation and the standardized patient 
assessment data elements used to calculate this measure, we refer 
readers to the document titled, Proposed Specifications for LTCH QRP 
Quality Measures and Standardized Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    We are proposing that LTCHs would begin reporting the proposed 
pressure ulcer measure, Changes in Skin Integrity Post-Acute Care: 
Pressure Ulcer/Injury, which will replace the current pressure ulcer 
measure, with data collection beginning April 1, 2018.
    We are inviting public comment on our proposal to replace the 
current pressure ulcer measure, Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678), with 
a modified version of that measure, entitled Changes in Skin Integrity 
Post-Acute Care: Pressure Ulcer/Injury, for the LTCH QRP beginning with 
the FY 2020 LTCH QRP.
b. Proposed Mechanical Ventilation Process Quality Measure: Compliance 
With Spontaneous Breathing Trial (SBT) by Day 2 of the LTCH Stay
    Invasive mechanical ventilation care was identified through 
technical expert panels convened by our measure development contractor 
and public comment periods as a gap in the LTCH QRP measure set and 
aligns with the National Quality Strategy priority and the CMS Quality 
Strategy goal of ``promoting the most effective prevention and 
treatment practices'' by reducing the risk of complications from 
unnecessarily prolonged mechanical ventilation. We are proposing to 
adopt the quality measure, Compliance with Spontaneous Breathing Trial 
(SBT) by Day 2 of the LTCH Stay, beginning with the FY 2020 LTCH QRP. 
The data applicable to this measure that must be reported by LTCHs for 
admissions as well as discharges occurring on or after April 1, 2018 is 
described in section IX.C.11. of the preamble of this proposed rule.
    The Compliance with SBT by Day 2 of the LTCH Stay measure is a 
process quality measure. For patients on invasive mechanical 
ventilation support upon admission to the LTCH, except those who meet 
measure exclusion criteria, this measure assesses facility-level 
compliance with SBT, including TCT or CPAP breathing trial, by Day 2 of 
the LTCH stay, where Day 1 is the day of admission to the LTCH and Day 
2 is the subsequent calendar day. This measure is calculated and 
reported for the following two components: (1) The percentage of 
patients admitted on invasive mechanical ventilation who were assessed 
for readiness for SBT by Day 2 of the LTCH Stay, and (2) the percentage 
of patients deemed medically ready for SBT who received SBT by Day 2 of 
the LTCH stay. Higher percentages indicate better compliance. Patients 
are included in this quality measure if they are on invasive mechanical 
ventilation support upon admission to the LTCH, unless they meet 
measure exclusion criteria.
    Patients on invasive mechanical ventilation support present a 
critical focus for assessment of high quality care because they 
comprise a substantial proportion of LTCH patient admissions. 
Mechanically ventilated patients are increasingly common in both acute 
care hospital intensive care units (ICUs), where up to 40 percent of 
patients require some duration of mechanical ventilation,\317\ and 
LTCHs, where patients are frequently transferred for weaning following 
treatment in ICUs.318 319 320 Patients 
who require invasive mechanical ventilation of longer than 14 or 21 
days are undergoing prolonged mechanical ventilation (PMV). In 2012, 
about 22,000 or 15.8 percent of all LTCH discharges received PMV 
services during the LTCH stay.\321\
---------------------------------------------------------------------------

    \317\ Dasta, J. F., et al. (2005). ``Daily cost of an intensive 
care unit day: the contribution of mechanical ventilation.'' Crit 
Care Med 33(6): 1266-1271.
    \318\ Dasta, J. F., et al. (2005). ``Daily cost of an intensive 
care unit day: the contribution of mechanical ventilation.'' Crit 
Care Med 33(6): 1266-1271.
    \319\ Kahn, J. M., et al. (2010). ``Long-term acute care 
hospital utilization after critical illness.'' JAMA 303(22): 2253-
2259.
    \320\ Szubski, C. R., et al. (2014). ``Predicting discharge to a 
long-term acute care hospital after admission to an intensive care 
unit.'' Am J Crit Care 23(4): e46-53.
    \321\ MedPAC (2016). Chapter 10. Long-term Care Hospital 
Services. In: Report to the Congress: Medicare Payment Policy. 
Washington, DC, Medicare Payment Advisory Commission.
---------------------------------------------------------------------------

    This ventilator weaning-related process quality measure is 
important for encouraging implementation of evidence-based weaning 
guidelines as early during the LTCH patient stay as is beneficial to 
the patient. Although often necessary for life support, invasive 
mechanical ventilation is not without risk of harm to patients, and 
these risks increase as duration of ventilation 
continues.322 323 324 In both ICUs and 
LTCHs, unsuccessful weaning and delayed weaning increase patient 
exposure to a number of ventilator-associated negative health outcomes, 
including ventilator-associated pneumonia,325 326 
327 328 ventilator-

[[Page 20093]]

associated lung injury,329 330 331 
ventilator induced diaphragm dysfunction,\332\ psychological distress 
333 334 335 and post-traumatic stress 
disorder,\336\ disability \337\ and decreased functional 
status,338 339 and chronic critical illness 
syndrome.\340\ Furthermore, these ventilator-associated negative health 
outcomes particularly affect the LTCH population since a significant 
number of its patients are on PMV. The majority of mechanically 
ventilated patients who are transferred to an LTCH have received 
mechanical ventilation for at least 21 days.\341\ PMV increases the 
risk of patient morbidity and short-term and long-term mortality. 
According to a recent systematic review, the pooled mortality of 
patients with PMV (defined here as invasive mechanical ventilation for 
>=14 days) undergoing weaning attempts in LTCHs was 31 percent (18 
studies); however, the pooled mortality at one year significantly 
increased to 73 percent (8 studies).\342\
---------------------------------------------------------------------------

    \322\ Esteban, A., et al. (2002). ``Characteristics and outcomes 
in adult patients receiving mechanical ventilation: a 28-day 
international study.'' JAMA 287(3): 345-355.
    \323\ Cox, C. E., et al. (2007). ``Differences in one-year 
health outcomes and resource utilization by definition of prolonged 
mechanical ventilation: a prospective cohort study.'' Crit Care 
11(1): R9.
    \324\ Penuelas, O., et al. (2011). ``Characteristics and 
outcomes of ventilated patients according to time to liberation from 
mechanical ventilation.'' Am J Respir Crit Care Med 184(4): 430-437.
    \325\ Cook, D. J., et al. (1998). ``Incidence of and risk 
factors for ventilator-associated pneumonia in critically ill 
patients.'' Ann Intern Med 129(6): 433-440.
    \326\ Papazian, L., et al. (1996). ``Effect of ventilator-
associated pneumonia on mortality and morbidity.'' Am J Respir Crit 
Care Med 154(1): 91-97.
    \327\ Vincent, J. L., et al. (1995). ``The prevalence of 
nosocomial infection in intensive care units in Europe. Results of 
the European Prevalence of Infection in Intensive Care (EPIC) Study. 
EPIC International Advisory Committee.'' JAMA 274(8): 639-644.
    \328\ Safdar, N., et al. (2005). ``Clinical and economic 
consequences of ventilator-associated pneumonia: a systematic 
review.'' Crit Care Med 33(10): 2184-2193.
    \329\ Meade, M. O. and D. J. Cook (1995). ``The aetiology, 
consequences and prevention of barotrauma: a critical review of the 
literature.'' Clin Intensive Care 6(4): 166-173.
    \330\ Meade, M. O., et al. (1997). ``How to use articles about 
harm: the relationship between high tidal volumes, ventilating 
pressures, and ventilator-induced lung injury.'' Crit Care Med 
25(11): 1915-1922.
    \331\ Slutsky, A. S. and L. N. Tremblay (1998). ``Multiple 
system organ failure. Is mechanical ventilation a contributing 
factor?'' Am J Respir Crit Care Med 157(6 Pt 1): 1721-1725.
    \332\ Levine, S., et al. (2008). ``Rapid disuse atrophy of 
diaphragm fibers in mechanically ventilated humans.'' N Engl J Med 
358(13): 1327-1335.
    \333\ Rose, L., et al. (2014). ``Psychological wellbeing, health 
related quality of life and memories of intensive care and a 
specialised weaning centre reported by survivors of prolonged 
mechanical ventilation.'' Intensive Crit Care Nurs 30(3): 145-151.
    \334\ Schou, L. and I. Egerod (2008). ``A qualitative study into 
the lived experience of post-CABG patients during mechanical 
ventilator weaning.'' Intensive Crit Care Nurs 24(3): 171-179.
    \335\ Rotondi, A. J., et al. (2002). ``Patients' recollections 
of stressful experiences while receiving prolonged mechanical 
ventilation in an intensive care unit.'' Crit Care Med 30(4): 746-
752.
    \336\ Jubran, A., et al. (2010). ``Post-traumatic stress 
disorder after weaning from prolonged mechanical ventilation.'' 
Intensive Care Med 36(12): 2030-2037.
    \337\ Barnato, A. E., et al. (2011). ``Disability among elderly 
survivors of mechanical ventilation.'' Am J Respir Crit Care Med 
183(8): 1037-1042.
    \338\ Scheinhorn, D. J., et al. (2007). ``Post-ICU mechanical 
ventilation at 23 long-term care hospitals: a multicenter outcomes 
study.'' Chest 131(1): 85-93.
    \339\ Cox, C. E., et al. (2007). ``Differences in one-year 
health outcomes and resource utilization by definition of prolonged 
mechanical ventilation: a prospective cohort study.'' Crit Care 
11(1): R9.
    \340\ Cox, C. E., et al. (2007). ``Differences in one-year 
health outcomes and resource utilization by definition of prolonged 
mechanical ventilation: a prospective cohort study.'' Crit Care 
11(1): R9.
    \341\ MacIntyre, N. R., Epstein, S. K., Carson, S., Scheinhorn, 
D., Christopher, K., Muldoon, S., & National Association for Medical 
Direction of Respiratory, C. (2005). Management of patients 
requiring prolonged mechanical ventilation: report of a NAMDRC 
consensus conference. Chest, 128(6), 3937-3954.
    \342\ Damuth, E., et al. (2015). ``Long-term survival of 
critically ill patients treated with prolonged mechanical 
ventilation: a systematic review and meta-analysis.'' Lancet Respir 
Med. 2015 May 20.
---------------------------------------------------------------------------

    In addition to increased morbidity and mortality, mechanical 
ventilation is also associated with higher costs. While the literature 
on costs of mechanical ventilation are limited for the LTCH setting, 
studies in the acute care hospital ICU setting indicate that patients 
who require mechanical ventilation can have up to 50 percent higher 
costs than patients who do not receive mechanical ventilation.\343\ ICU 
patients who develop VAP incur at least $40,000 more in hospital costs 
than ventilated patients without VAP, and costs increase with 
increasing duration of mechanical ventilation.344 
345 346
---------------------------------------------------------------------------

    \343\ Dasta, J. F., et al. (2005). ``Daily cost of an intensive 
care unit day: the contribution of mechanical ventilation.'' Crit 
Care Med 33(6): 1266-1271.
    \344\ Kollef, M. H., et al. (2012). ``Economic impact of 
ventilator-associated pneumonia in a large matched cohort.'' Infect 
Control Hosp Epidemiol 33(3): 250-256.
    \345\ Restrepo, M. I., et al. (2010). ``Economic burden of 
ventilator-associated pneumonia based on total resource 
utilization.'' Infect Control Hosp Epidemiol 31(5): 509-515.
    \346\ Sedwick, M. B., et al. (2012). ``Using evidence-based 
practice to prevent ventilator-associated pneumonia.'' Crit Care 
Nurse 32(4): 41-51.
---------------------------------------------------------------------------

    Although there is evidence regarding the benefit of daily 
assessments of patient readiness for weaning from invasive mechanical 
ventilation,\347\ as well as for the importance of adherence to weaning 
protocols,\348\ we are not aware of any studies in LTCHs that evaluate 
timing of assessment for readiness to wean with respect to the 
admission date. However, an international task force, convened in 2005, 
developed guideline recommendations to address the entire weaning 
process. Despite the limited evidence, this task force recommended that 
weaning be considered as soon as possible,\349\ because failure to 
assess the patient for readiness to wean may lead to undue prolonged 
mechanical ventilation,\350\ thus exposing patients unnecessarily to 
adverse ventilator-associated morbidity and mortality.\351\ Based on 
studies and observations of implementation of regular assessment for 
SBTs and weaning protocols in ICUs, adherence to the recommended 
weaning processes, including prompt assessment of weaning readiness and 
initiation of SBTs, appears quite variable, likely due to differences 
in clinicians' intuitive thresholds for determination of patients' 
readiness to wean.352 353 Clinician delays in 
recognizing that weaning may be possible and beginning assessment of 
weaning readiness are two common causes of weaning delays.\354\ In one 
study, 50 percent of the patients considered to be incapable of 
sustaining spontaneous ventilation by clinicians later were able to 
tolerate a weaning trial. The authors concluded that tests used to 
validate clinician intuition on a patient's readiness for weaning are 
often inaccurate and that clinicians should follow explicit protocols 
to consistently test patients on their readiness to wean.\355\ Because 
prompt identification of patients' readiness for SBTs has been shown to 
reduce weaning duration without harm to patients,\356\ such delays 
indicate less than optimal

[[Page 20094]]

performance \357\ and opportunities for improvement.
---------------------------------------------------------------------------

    \347\ Robertson, T. E., et al. (2008). ``Improved extubation 
rates and earlier liberation from mechanical ventilation with 
implementation of a daily spontaneous-breathing trial protocol.'' J 
Am Coll Surg 206(3): 489-495.
    \348\ Blackwood, B., et al. (2014). ``Protocolized versus non-
protocolized weaning for reducing the duration of mechanical 
ventilation in critically ill adult patients.'' Cochrane Database 
Syst Rev 11: Cd006904.
    \349\ Boles, J. M., et al. (2007). ``Weaning from mechanical 
ventilation.'' Eur Respir J 29(5): 1033-1056.
    \350\ MacIntyre, N. R., Epstein, S. K., Carson, S., Scheinhorn, 
D., Christopher, K., Muldoon, S., & National Association for Medical 
Direction of Respiratory, C. (2005). Management of patients 
requiring prolonged mechanical ventilation: report of a NAMDRC 
consensus conference. Chest, 128(6), 3937-3954.
    \351\ Hess, D. R., & MacIntyre, N. R. (2011). Ventilator 
discontinuation: why are we still weaning? Am J Respir Crit Care 
Med, 184(4), 392-394.
    \352\ MacIntyre, N. R. (2013). ``The ventilator discontinuation 
process: an expanding evidence base.'' Respir Care 58(6): 1074-1086.
    \353\ Kollef, M. H., et al. (1997). ``A randomized, controlled 
trial of protocol-directed versus physician-directed weaning from 
mechanical ventilation.'' Crit Care Med 25(4): 567-574.
    \354\ Boles, J. M., et al. (2007). ``Weaning from mechanical 
ventilation.'' Eur Respir J 29(5): 1033-1056.
    \355\ Cook, D., et al. (2000). Criteria for Weaning from 
Mechanical Ventilation. Evidence Reports/Technology Assessments, 
Agency for Healthcare Research and Quality.
    \356\ Ely, E. W., et al. (1996). ``Effect on the duration of 
mechanical ventilation of identifying patients capable of breathing 
spontaneously.'' N Engl J Med 335(25): 1864-1869.
    \357\ Blackwood, B., et al. (2014). ``Protocolized versus non-
protocolized weaning for reducing the duration of mechanical 
ventilation in critically ill adult patients.'' Cochrane Database 
Syst Rev 11: Cd006904.
---------------------------------------------------------------------------

    Indirect evidence for the need for prompt recognition of patients' 
readiness to wean in LTCHs comes from a recent study of patients newly 
admitted to LTCHs on invasive mechanical ventilation, which reported 
that 32 percent of invasively mechanically ventilated patients admitted 
to an LTCH passed a 5-day TCT following admission.\358\ That nearly one 
third of newly admitted LTCH patients were able to be completely weaned 
within five days underscores the need to assess patients' ability to 
breathe without assistance soon after admission to an LTCH, and also 
indicates that this quality measure has potential to positively impact 
the health and quality of care received by a considerable proportion of 
the LTCH patient population.
---------------------------------------------------------------------------

    \358\ Jubran, A., et al. (2013). ``Effect of pressure support vs 
unassisted breathing through a tracheostomy collar on weaning 
duration in patients requiring prolonged mechanical ventilation: a 
randomized trial.'' JAMA 309(7): 671-677.
---------------------------------------------------------------------------

    Because invasive mechanical ventilation should be discontinued as 
soon as patients are capable of breathing 
independently,359 360 unnecessarily prolonged mechanical 
ventilation can be an indicator of poor care quality or of persistent 
illness.\361\ This quality measure is designed to encourage adherence 
to evidence-based and consensus-based guidelines through implementation 
of timely assessment of patient readiness to wean and trials of 
unassisted breathing. To increase timeliness of weaning and reduce 
patient risk of complications, it is important to assess a patient's 
need for continued mechanical ventilation at the time of admission. 
Measuring and comparing assessment of readiness to wean and compliance 
with SBT by Day 2 is expected to help differentiate among facilities 
with varying performance in this important domain. The anticipated 
improvement in quality is an improvement in timeliness of weaning and 
ventilator liberation for patients admitted to LTCHs on invasive 
mechanical ventilation. In addition, facilities can use results of this 
measure to improve timely compliance with evidence-based weaning 
guidelines and develop ventilator weaning quality improvement programs.
---------------------------------------------------------------------------

    \359\ Blackwood, B., et al. (2011). ``Use of weaning protocols 
for reducing duration of mechanical ventilation in critically ill 
adult patients: Cochrane systematic review and meta-analysis.'' BMJ 
342: c7237.
    \360\ Epstein, S. K. (2009). Weaning from ventilatory support. 
Curr Opin Crit Care, 15(1), 36-43. doi: 10.1097/
MCC.0b013e3283220e07.
    \361\ MacIntyre, N. R. (2013). ``The ventilator discontinuation 
process: an expanding evidence base.'' Respir Care 58(6): 1074-1086.
---------------------------------------------------------------------------

    A TEP assembled by our measure development contractor convened nine 
meetings (two in-person meetings and seven webinars) between April 2014 
and August 2016 in order to refine the quality measure's technical 
specifications, including the measure target population, inclusion and 
exclusion criteria, and key definitions (for example, ``non-weaning''). 
The TEP also offered feedback on the individual LTCH CARE Data Set 
ventilator weaning items and supported the feasibility of implementing 
this measure in the LTCH setting. The measure developer recruited two 
former patients successfully weaned from mechanical ventilation as well 
as the primary caregiver of one of the patients to solicit their views 
on the measures. The 2014-2016 Development of Long-Term Care Hospital 
(LTCH) Ventilator Weaning Quality Measures Technical Expert Panel 
Summary Report is available on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    We also solicited stakeholder feedback on the development of this 
measure through a public comment period held from May 19, 2016, through 
June 9, 2016. Several stakeholders and organizations supported this 
measure for implementation, including hospitals and professional 
organizations. The public comment summary report for the proposed 
measure is available on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Our measure development contractor conducted a pilot test on the 
data elements used to calculate this quality measure. The pilot test 
was conducted in 10 LTCHs among approximately 150 LTCH patients and 
used a mixed methods research design to collect data. Quantitative data 
on the ventilator weaning items was collected from May 27, 2016 through 
September 10, 2016, and qualitative data on these items was collected 
from June 6, 2016 through October 4, 2016. The LTCHs who participated 
in the pilot test were selected to represent variation across several 
key facility-level characteristics: geographic location, size, and 
profit status.
    The qualitative data from the pilot test of the ventilator weaning 
process measure supported the importance of the measure. Results from 
qualitative and quantitative analysis further support the feasibility 
of data collection for this quality measure. Data collection for this 
quality measure was not seen as burdensome by pilot sites. The pilot 
test summary report for this measure is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    The NQF-convened MAP PAC/LTC Workgroup met on December 12, 2014 and 
again on December 14 and 15, 2015. During these meetings, the MAP 
encouraged continued development of this proposed measure, 
acknowledging that there is evidence for interventions that improve 
ventilator care,\362\ that variation in quality of care exists among 
LTCHs,\363\ and that ventilator care is an important safety priority 
for LTCHs.\364\
---------------------------------------------------------------------------

    \362\ ``Spreadsheet of MAP 2015 Final Recommendations (XLSX).'' 
Measure Applications Partnership Post Acute Care/Long-Term Care 
Workgroup. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711.
    \363\ ``Spreadsheet of MAP 2016 Final Recommendations (XLSX).'' 
Measure Applications Partnership Post Acute Care/Long-Term Care 
Workgroup. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
    \364\ MAP 2015 Considerations for Implementing Measures in 
Federal Programs: Draft for Public Comment. Measure Applications 
Partnership Post Acute Care/Long-Term Care Workgroup. Available at: 
http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75370.
---------------------------------------------------------------------------

    Since the MAP's review and recommendation of continued development 
in 2015, we have continued to refine this proposed measure in 
compliance with the MAP's recommendations. Results of continued 
development activities, including stakeholder feedback from the 2016 
public comment period and 2016 pilot test findings, were presented to 
the MAP during the MAP feedback loop meeting in October 2016. The 
proposed measure is consistent with the information submitted to the 
MAP, and the original MAP submission and our continued refinements 
support its scientific acceptability for use in quality reporting 
programs. As discussed with the MAP, we fully anticipate that 
additional analyses will continue once data collection for the measure 
begins. More information about the MAP's recommendations for this 
proposed measure is available at: http://www.qualityforum.org/
Publications/2016/02/MAP_2016_Considerations_

[[Page 20095]]

for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed ventilator weaning quality measures 
focused on assessment of readiness to wean for patients admitted on 
invasive mechanical ventilation in the LTCH setting. We are unaware of 
any other quality measures for weaning from invasive mechanical 
ventilation that have been endorsed or adopted by another consensus 
organization for the LTCH setting. Therefore, based on the evidence 
discussed above, we are proposing to adopt the quality measure 
entitled, Compliance with SBT by Day 2 of the LTCH Stay, for the LTCH 
QRP beginning with the FY 2020 LTCH QRP. We plan to submit the quality 
measure to the NQF for consideration for endorsement.
    We are proposing that data for this ventilator weaning quality 
measure be collected through the LTCH CARE Data Set, with submission 
through the QIES ASAP System. 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 
intend to revise the LTCH CARE Data Set to include new items that 
assess processes for weaning from invasive mechanical ventilation, 
should this proposed measure be adopted.
    This measure is calculated and reported for two components. The 
proposed measure denominator for Component 1, Percentage of Patients 
Assessed for Readiness for SBT by Day 2 of LTCH Stay, is the total 
number of patients admitted during the reporting period who were on 
invasive mechanical ventilation upon admission to an LTCH and expected 
or anticipated by the provider to undergo weaning attempts at 
admission. The proposed measure numerator for Component 1 is the number 
of patients admitted on invasive mechanical ventilation during the 
reporting period who were assessed for readiness for SBT (including TCT 
or CPAP breathing trial) by Day 2 of the LTCH stay.
    The proposed measure denominator for Component 2, Percentage of 
Patients Ready for SBT Who Received SBT by Day 2 of LTCH Stay, is the 
subset of patients in the denominator of the Component 1, who were 
assessed and deemed ready for SBT by Day 2 of the LTCH stay. The 
proposed measure numerator for Component 2, Percentage of Patients 
Ready for SBT Who Received SBT by Day 2 of LTCH Stay, is the number of 
patients admitted on invasive mechanical ventilation during the 
reporting period who were ready for SBT and who received an SBT 
(including TCT or CPAP breathing trial) by Day 2 of the LTCH stay.
    For technical information about this proposed measure, including 
information about the measure calculation and proposed measure 
denominator exclusions, we refer readers to the document titled, 
Proposed Specifications for LTCH QRP Quality Measures and Standardized 
Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    We are inviting public comments on our proposal to adopt the 
quality measure, Compliance with SBT by Day 2 of the LTCH Stay, 
beginning with the FY 2020 LTCH QRP.
c. Proposed Mechanical Ventilation Outcome Quality Measure: Ventilator 
Liberation Rate
    Invasive mechanical ventilation care was identified as an important 
gap in the LTCH QRP measure set,\365\ and aligns with the National 
Quality Strategy priority and the CMS Quality Strategy goal of 
``promoting the most effective prevention and treatment practices'' by 
reducing the risk of complications from unnecessarily prolonged 
mechanical ventilation. We are proposing to adopt the quality measure, 
Ventilator Liberation Rate, for the LTCH QRP beginning with the FY 2020 
LTCH QRP. The data applicable to this measure that must be reported by 
LTCHs for admissions as well as discharges occurring on or after April 
1, 2018 is described in section IX.C.11. of the preamble of this 
proposed rule.
---------------------------------------------------------------------------

    \365\ Technical Expert Panel Report: Quality Measures for Long-
Term Care Hospitals. Thaker, S., Gage, B., Bernard, S., and Nguyen, 
K. March 2011.
---------------------------------------------------------------------------

    The Ventilator Liberation Rate measure is an outcome quality 
measure. This quality measure is a facility-level measure that reports 
the percentage of LTCH patients admitted on invasive mechanical 
ventilation, for whom weaning attempts were expected or anticipated, 
and are fully weaned by the end of their LTCH stay. Patients who are 
considered fully weaned at discharge are those who did not require any 
invasive mechanical ventilation support for at least 2 consecutive 
calendar days immediately prior to discharge. While the first 
ventilator weaning measure we are proposing captures the weaning 
process, this measure captures the key outcome of successful liberation 
from invasive mechanical ventilation.
    We refer readers to section IX.C.7.b. of the preamble of this 
proposed rule for information regarding the literature review in 
support of proposing the mechanical ventilation process quality 
measure, Compliance with SBT by Day 2 of the LTCH Stay.
    Discontinuation of invasive mechanical ventilation, known as 
weaning or liberation, is feasible for many ventilated patients, and is 
associated with improved health outcomes. In LTCHs, higher weaning 
rates have been associated with lower post-discharge mortality, even 
among the elderly,366 367 368 369 370 and fewer days of 
mechanical ventilation may lead to decreased risk of ventilator-
associated complications/events, enhanced rehabilitation opportunities, 
and a shorter length of stay.\371\ Based on the evidence, increasing 
weaning rates is expected to reduce the risk of harm associated with 
invasive mechanical ventilation, thus contributing to more favorable 
clinical outcomes for patients 372 373 and 
decreased costs.
---------------------------------------------------------------------------

    \366\ Blackwood, B., et al. (2014). ``Protocolized versus non-
protocolized weaning for reducing the duration of mechanical 
ventilation in critically ill adult patients.'' Cochrane Database 
Syst Rev 11: Cd006904.
    \367\ Frengley, J., et al. (2014). ``Prolonged mechanical 
ventilation in 540 seriously ill older adults: effects of increasing 
age on clinical outcomes and survival.'' J Am Geriatr Soc 62(1): 1-
9.
    \368\ Rose, L. and I. M. Fraser (2012). ``Patient 
characteristics and outcomes of a provincial prolonged-ventilation 
weaning centre: a retrospective cohort study.'' Can Respir J 19(3): 
216-220.
    \369\ Scheinhorn, D. J., et al. (2007). ``Post-ICU mechanical 
ventilation at 23 long-term care hospitals: a multicenter outcomes 
study.'' Chest 131(1): 85-93.
    \370\ Stearn-Hassenpflug, M., et al. (2013). ``Post-ICU 
Mechanical Ventilation: Trends in Mortality and 12-month Post-
discharge Survival.'' Critical Care Medicine 41(12): A166.
    \371\ Hassenpflug, M. S., et al. (2015). Post-ICU Mechanical 
Ventilation: Outcomes of the Revised Therapist-Implemented Patient-
Specific Weaning Protocol. [abstract] B44. Invasive And Non-Invasive 
Mechanical Ventilation, American Thoracic Society: A3166-A3166.
    \372\ Blackwood, B., et al. (2014). ``Protocolized versus non-
protocolized weaning for reducing the duration of mechanical 
ventilation in critically ill adult patients.'' Cochrane Database 
Syst Rev 11: Cd006904.
    \373\ Jubran, ``Effect of pressure support vs unassisted 
breathing through a tracheostomy collar on weaning duration in 
patients requiring prolonged mechanical ventilation: a randomized 
trial.''
---------------------------------------------------------------------------

    Numerous studies from 1991 through 2015 have reported a range of 
ventilator liberation rates among LTCHs. A review of nine single-center 
studies conducted between 1991 and 2001 reported that, among more than 
3,000 patients with

[[Page 20096]]

PMV >21 days, facility-level liberation rates ranged from 34 percent to 
60 percent, with an overall weaning rate of 52 percent.\374\ A recent 
systematic review identified nine studies (4,769 patients) reporting 
the proportion of patients successfully liberated from ventilation in 
LTCHs, and found a pooled weaning rate of 47 percent (95 percent CI 42-
51); rates reported by individual studies conducted in the United 
States varied from 13 percent to 56 percent.\375\ Lower liberation 
rates may indicate less-than-optimal performance.
---------------------------------------------------------------------------

    \374\ Scheinhorn, D. J., et al. (2001). ``Post-ICU weaning from 
mechanical ventilation: the role of long-term facilities.'' Chest 
120(6 Suppl): 482S-484S.
    \375\ Damuth, E., et al. (2015). ``Long-term survival of 
critically ill patients treated with prolonged mechanical 
ventilation: a systematic review and meta-analysis.'' Lancet Respir 
Med.
---------------------------------------------------------------------------

    Ventilator liberation rate is an actionable health care outcome. 
Multiple interventions have been shown to increase ventilator 
liberation rates, including selection and implementation of weaning 
protocols, ventilator modes, and type of pressure support strategies. 
Multiple studies in LTCHs 376 377 378 and ICUs 
379 380 provide evidence to support the relationship between 
weaning processes and the successful weaning of mechanically ventilated 
LTCH patients. The effectiveness of these interventions suggests that 
improvement in liberation rates among LTCH patients is possible through 
modifying provider-led processes and interventions.
---------------------------------------------------------------------------

    \376\ Jubran, A., et al. (2013). ``Effect of pressure support vs 
unassisted breathing through a tracheostomy collar on weaning 
duration in patients requiring prolonged mechanical ventilation: a 
randomized trial.'' JAMA 309(7): 671-677.
    \377\ Vitacca, M., et al. (2001). ``Comparison of two methods 
for weaning patients with chronic obstructive pulmonary disease 
requiring mechanical ventilation for more than 15 days.'' Am J 
Respir Crit Care Med 164(2): 225-230.
    \378\ Hassenpflug, M. S., et al. (2015). Post-ICU Mechanical 
Ventilation: Outcomes of the Revised Therapist-Implemented Patient-
Specific (TIPS?) Weaning Protocol. B44. Invasive And Non-Invasive 
Mechanical Ventilation, American Thoracic Society: A3166-A3166.
    \379\ Ely, E. W., et al. (1996). ``Effect on the duration of 
mechanical ventilation of identifying patients capable of breathing 
spontaneously.'' N Engl J Med 335(25): 1864-1869.
    \380\ Burns, K. E., et al. (2014). ``Noninvasive ventilation as 
a weaning strategy for mechanical ventilation in adults with 
respiratory failure: a Cochrane systematic review.'' CMAJ 186(3): 
E112-122.
---------------------------------------------------------------------------

    Expectations of successful ventilator liberation are high for many 
LTCH patients.381 382 383 Unnecessarily prolonged mechanical 
ventilation increases the risk of negative patient outcomes and can be 
an indicator of poor quality care or of persistent illness.\384\ Based 
on the evidence, improving weaning processes and increasing weaning 
rates are expected to mitigate the risk of harm associated with 
invasive mechanical ventilation, thus contributing to more favorable 
clinical outcomes for patients 385 386 and decreased 
costs.\387\ This quality measure, Ventilator Liberation Rate, will 
assess the proportion of patients discharged alive from an LTCH who are 
fully weaned, thereby promoting weaning efforts and encouraging quality 
management of LTCH patients on invasive mechanical ventilation. Kahn et 
al. (2013) noted that inclusion of a liberation outcome measure is key 
to providing a truly patient-centered measure related to invasive 
mechanical ventilation weaning among LTCH patients.\388\
---------------------------------------------------------------------------

    \381\ Rose, L. and I. M. Fraser (2012). ``Patient 
characteristics and outcomes of a provincial prolonged-ventilation 
weaning centre: a retrospective cohort study.'' Can Respir J 19(3): 
216-220.
    \382\ Hassenpflug, M. S., et al. (2011). Post-ICU Mechanical 
Ventilation: Extended Care Facility Residents Transferred From 
Intensive Care To Long-Term Acute Care. American Thoracic Society 
2011 International Conference. Denver, Colorado.
    \383\ Hassenpflug, M. S., et al. (2015). Post-ICU Mechanical 
Ventilation: Outcomes of the Revised Therapist-Implemented Patient-
Specific (TIPS?) Weaning Protocol. B44. Invasive And Non-Invasive 
Mechanical Ventilation, American Thoracic Society: A3166-A3166.
    \384\ MacIntyre, N. R. (2013). ``The ventilator discontinuation 
process: an expanding evidence base.'' Respir Care 58(6): 1074-1086.
    \385\ Blackwood, B., et al. (2014). ``Protocolized versus non-
protocolized weaning for reducing the duration of mechanical 
ventilation in critically ill adult patients.'' Cochrane Database 
Syst Rev 11: Cd006904.
    \386\ Jubran, A., et al. (2013). ``Effect of pressure support vs 
unassisted breathing through a tracheostomy collar on weaning 
duration in patients requiring prolonged mechanical ventilation: a 
randomized trial.'' JAMA 309(7): 671-677.
    \387\ Dasta, J. F., et al. (2005). ``Daily cost of an intensive 
care unit day: the contribution of mechanical ventilation.'' Crit 
Care Med 33(6): 1266-1271.
    \388\ Kahn, J. M., & Carson, S. S. (2013). Generating evidence 
on best practice in long-term acute care hospitals. JAMA, 309(7), 
719-720.
---------------------------------------------------------------------------

    A TEP assembled by our measure development contractor convened nine 
meetings (two in-person meetings and seven webinars) between April 2014 
and August 2016. TEP members provided input to guide the development of 
the quality measures, including feedback on the individual LTCH CARE 
Data Set ventilator weaning items, the target population, inclusion and 
exclusion criteria, and patient demographic and clinical factors that 
could affect ventilator weaning outcomes (risk adjustors). The TEP also 
supported the feasibility of implementing this measure in the LTCH 
setting. The measure developer recruited two former patients 
successfully weaned from mechanical ventilation as well as the primary 
caregiver of one of the patients to solicit their views on the 
measures. The 2014-2016 Development of Long-Term Care Hospital (LTCH) 
Ventilator Weaning Quality Measures Technical Expert Panel Summary 
Report is available on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    We also solicited stakeholder feedback on the development of this 
measure through a public comment period held from May 19, 2016, through 
June 9, 2016. Several stakeholders and organizations supported this 
measure for implementation, including hospitals and professional 
organizations. The public comment summary report for the proposed 
measure is available on the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Our measure development contractor conducted a pilot test on the 
proposed data elements used to calculate this quality measure. The 
pilot test was conducted in ten LTCHs among approximately 150 LTCH 
patients and used a mixed methods research design to collect data. 
Quantitative data on the ventilator weaning items was collected from 
May 27, 2016 through September 10, 2016, and qualitative data on these 
items was collected from June 6, 2016 through October 4, 2016. The 
LTCHs who participated in the pilot test were selected to represent 
variation across several key facility-level characteristics: geographic 
location, size, and profit status.
    The qualitative data from the pilot test of the ventilator 
liberation quality measure supported the importance of the measure; 
results from qualitative and quantitative analysis also supported the 
feasibility of data collection. Data collection for this quality 
measure was not seen as burdensome by pilot sites. The pilot test 
summary report for this measure is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    The NQF-convened MAP PAC/LTC Workgroup met on December 12, 2014, 
and on December 14 and 15, 2015. During these meetings, the MAP 
provided input on the importance and

[[Page 20097]]

specifications of this measure. The MAP encouraged continued 
development of the measure, stating that this measure has high value 
potential for the LTCH QRP \389\ because successful weaning is 
important for improving quality of life and decreasing morbidity, 
mortality, and resource use among patients.390 391
---------------------------------------------------------------------------

    \389\ ``Spreadsheet of MAP 2016 Final Recommendations (XLSX).'' 
Measure Applications Partnership Post Acute Care/Long-Term Care 
Workgroup. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
    \390\ MAP 2015 Considerations for Implementing Measures in 
Federal Programs: Draft for Public Comment. Measure Applications 
Partnership Post Acute Care/Long-Term Care Workgroup. Available at: 
http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75370.
    \391\ ``Spreadsheet of MAP 2016 Final Recommendations (XLSX).'' 
Measure Applications Partnership Post Acute Care/Long-Term Care 
Workgroup. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=81593.
---------------------------------------------------------------------------

    Since the MAP's review and recommendation of continued development 
in 2015, we have continued to refine this proposed measure in 
compliance with the MAP's recommendations. Results of continued 
development activities, including stakeholder feedback from the 2016 
public comment period and 2016 pilot test findings, were presented to 
the MAP during the MAP feedback loop meeting in October 2016. The 
proposed measure is consistent with the information submitted to the 
MAP, and the original MAP submission and our continued refinements 
support its scientific acceptability for use in quality reporting 
programs. As discussed with the MAP, we fully anticipate that 
additional analyses will continue once data collection for the measure 
begins. More information about the MAP's recommendations for this 
measure is available at: http://www.qualityforum.org/Publications/2016/02/MAP_2016_Considerations_for_Implementing_Measures_in_Federal_Programs_-_PAC-LTC.aspx.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed ventilator weaning quality measures 
focused on the liberation status at discharge for patients admitted on 
invasive mechanical ventilation in the LTCH setting. We are unaware of 
any other quality measures for liberation from invasive mechanical 
ventilation that have been endorsed or adopted by another consensus 
organization for the LTCH setting. Therefore, based on the evidence 
discussed above, we are proposing to adopt the quality measure 
entitled, Ventilator Liberation Rate, for the LTCH QRP beginning with 
the FY 2020 LTCH QRP. We plan to submit the quality measure to the NQF 
for consideration for endorsement.
    We are proposing that data for this quality measure be collected 
through the LTCH CARE Data Set, with the submission through the QIES 
ASAP System. 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 intend to revise 
the LTCH CARE Data Set to include new items that assess invasive 
mechanical ventilation liberation at discharge, should this proposed 
measure be adopted.
    This measure reports facility-level Ventilator Liberation Rate for 
patients admitted to an LTCH on invasive mechanical ventilation, and 
for whom weaning attempts were expected or anticipated as reported on 
the Admission Assessment. The Ventilator Liberation Rate is defined as 
the percentage of patients on invasive mechanical ventilation upon 
admission who are alive and fully liberated at discharge. The proposed 
measure denominator is the number of patients requiring invasive 
mechanical ventilation support upon admission to an LTCH, except those 
who meet exclusion criteria. The proposed measure numerator is the 
number of patients who are discharged alive and fully liberated. This 
measure is risk-adjusted for variables such as age, neurological injury 
or disease, dialysis, and other comorbidities and treatments. If a 
patient has more than one LTCH stay during the reporting period, then 
each LTCH stay will be included in the measure calculation and 
reporting. For technical information about this measure, including 
information about the measure calculation, risk adjustment, and 
proposed measure denominator exclusions, we refer readers to the 
document titled, Proposed Specifications for LTCH QRP Quality Measures 
and Standardized Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    We are inviting public comments on our proposal to adopt the 
quality measure, Ventilation Liberation Rate, beginning with the FY 
2020 LTCH QRP.
8. Proposed Removal of the All-Cause Unplanned Readmission Measure for 
30 Days Post-Discharge From LTCHs From the LTCH QRP
    We are proposing to remove the All-Cause Unplanned Readmission 
Measure for 30 Days Post-Discharge from LTCHs (NQF #2512) from the LTCH 
QRP.
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49730 through 
49731), we adopted the All-Cause Unplanned Readmission Measure for 30 
Days Post-Discharge from LTCHs (NQF #2512) for the LTCH QRP. This 
measure assesses all-cause unplanned hospital readmissions from LTCHs. 
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57215 through 57219), we 
adopted the Potentially Preventable 30-Day Post-Discharge Readmission 
Measure for LTCH QRP to fulfill IMPACT Act requirements. In response to 
the FY 2017 IPPS/LTCH PPS proposed rule, we received public comments 
expressing concern over the multiplicity of readmission measures and 
the overlap between the All-Cause Readmission and Potentially 
Preventable Readmission (PPR) 30-Day Post-Discharge measures (see 81 FR 
57217 through 57218). Commenters also stated that more than one 
readmission measure would create confusion and require additional 
effort by providers to track and improve performance.
    We retained the All-Cause Readmission measure because it would 
allow us to monitor trends in both all-cause and PPR rates. In 
particular, we could compare facility performance on the All-Cause 
Readmission and PPR 30-Day Post-Discharge measures. However, upon 
further consideration of the public comments, we believe that removing 
the All-Cause Readmission measure and retaining the PPR 30-Day Post-
Discharge measure in the LTCH QRP would prevent duplication, because 
potentially preventable readmissions are a subset of all-cause 
readmissions. Although there is no data collection burden associated 
with these claims-based measures, we recognize that having two hospital 
readmission measures in the LTCH QRP may create confusion. We agree 
with commenters that there is overlap between the All-Cause Readmission 
measure and the PPR 30-Day Post-Discharge measure, which identifies a 
subset of all-cause readmissions, and believe the PPR measure will be 
more actionable for quality improvement.
    We are proposing to remove the All-Cause Unplanned Readmission 
measure beginning with the FY 2019 LTCH QRP. We are proposing that 
public reporting of this measure would end by October 2018 when public 
reporting of the PPR

[[Page 20098]]

30-Day Post-Discharge measure begins by October 2018. We refer readers 
to section IX.C.17. of the preamble of this proposed rule for more 
information regarding our proposal to publicly report the PPR 30-Day 
Post-Discharge measure. We refer readers to the PPR 30-Day Post-
Discharge measure specifications available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/Downloads/Measure-Specifications-for-FY17-LTCH-QRP-Final-Rule.pdf.
    We are inviting public comment on our proposal to remove the All-
Cause Unplanned Readmission Measure for 30 Days Post-Discharge from 
LTCHs (NQF #2512) from the LTCH QRP, beginning with the FY 2019 LTCH 
QRP.
9. LTCH QRP Quality Measures Under Consideration for Future Years
a. LTCH QRP Quality Measures Under Consideration for Future Years
    We are inviting public comment on the importance, relevance, 
appropriateness, and applicability of each of the quality measures 
listed in the table below for future years in the LTCH QRP.

     LTCH QRP Quality Measures Under Consideration for Future Years
------------------------------------------------------------------------
 
------------------------------------------------------------------------
           NQS Priority: Patient- and Caregiver-Centered Care
------------------------------------------------------------------------
Measures..........................   Experience of Care.
                                     Application of Percent of
                                     Residents Who Self-Report Moderate
                                     to Severe Pain (Short Stay) (NQF
                                     #0676).
                                     Advance Care Plan.
------------------------------------------------------------------------
                      NQS Priority: Patient Safety
------------------------------------------------------------------------
Measure...........................   Patients Who Received an
                                     Antipsychotic Medication.
------------------------------------------------------------------------
            NQS Priority: Communication and Care Coordination
------------------------------------------------------------------------
Measure...........................   Modification of the
                                     Discharge to Community-PAC LTCH QRP
                                     measure.
------------------------------------------------------------------------

    In this proposed rule, we are also soliciting public comments on 
the use of survey-based experience of care measures for the LTCH QRP. 
We are currently developing an experience of care survey for LTCHs and 
survey-based measures will be developed from this survey. These survey-
based measures may be considered for inclusion in the LTCH QRP through 
future notice-and-comment rulemaking. This survey was developed using a 
rigorous survey development methodology that included a public request 
for measures titled Request for Information To Aid in the Design and 
Development of a Survey Regarding Patient and Family Member Experiences 
With Care Received in Long-Term Care Hospitals (80 FR 72722 through 
72725); focus groups and interviews with patients, family members, and 
caregivers; input from a TEP of LTCHs, researchers, and patient 
advocates; and cognitive interviewing. The survey has also been field 
tested. The survey explores experience of care across five main areas: 
(1) Beginning stay at the hospital; (2) interactions with staff; (3) 
experience during the hospital stay; (4) preparing for leaving 
hospital; and (5) overall hospital rating. We are specifically 
interested in comments regarding survey implementation and logistics, 
use of the survey-based measures in the LTCH QRP, and general feedback.
    Also, we are considering a measure focused on pain that relies on 
the collection of patient-reported pain data, and another measure that 
documents whether a patient has an Advance Care Plan. Finally, we are 
considering a measure related to patient safety, specifically, Patients 
Who Received an Antipsychotic Medication. We are inviting public 
comment on the possible inclusion of such measures in future years of 
the LTCH QRP.
b. IMPACT Act Measure--Possible Future Update to Measure Specifications
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57207 through 
57215), we finalized the Discharge to Community-PAC LTCH QRP measure, 
which assesses successful discharge to the community from an LTCH 
setting, with successful discharge to the community including no 
unplanned rehospitalizations and no death in the 31 days following 
discharge from the LTCH. We received public comments (see 81 FR 57211) 
recommending exclusion of baseline nursing facility residents from the 
measure, as these residents did not live in the community prior to 
their LTCH stay. At that time, we highlighted that, using Medicare FFS 
claims alone, we were unable to accurately identify baseline nursing 
facility residents. We stated that potential future modifications of 
the measure could include assessment of the feasibility and impact of 
excluding baseline nursing facility residents from the measure through 
the addition of patient assessment-based data. In response to these 
public comments, we are considering a future modification of the 
Discharge to Community-PAC LTCH QRP measure, which would exclude 
baseline nursing facility residents from the measure.
    We are inviting public comment on the possibility of excluding 
baseline nursing facility residents from the Discharge to Community-PAC 
LTCH QRP measure in future years of the LTCH QRP.
c. IMPACT Act Implementation Update
    As a result of the input and suggestions provided by technical 
experts at the TEPs held by our measure developer, and through public 
comment, we are engaging in additional development work, including 
performing additional testing, with respect to two measures that would 
satisfy the domain of accurately communicating the existence of and 
providing for the transfer of health information and care preferences 
when the individual transitions, in section 1899B(c)(1)(E) of the Act. 
The measures under development are: Transfer of Information at Post-
Acute Care Admission, Start or Resumption of Care from other Providers/
Settings; and Transfer of Information at Post-Acute Care Discharge, and 
End of Care to other Providers/Settings. We intend to specify these 
measures under section 1899B(c)(1)(E) of the Act no later than October 
1, 2018, and we intend to propose to adopt them for the FY 2021 LTCH 
QRP, with data collection beginning on or about April 1, 2019.

[[Page 20099]]

10. Proposed Standardized Patient Assessment Data Reporting for the 
LTCH QRP
a. Proposed Standardized Patient Assessment Data Reporting for the FY 
2019 LTCH QRP
    Section 1886(m)(5)(F)(ii) of the Act requires that for fiscal year 
2019 and each subsequent year, LTCHs report standardized patient 
assessment data required under section 1899B(b)(1) of the Act. As we 
describe in more detail above, we are proposing that the current 
pressure ulcer measure, Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678), be replaced 
with the proposed pressure ulcer measure, Changes in Skin Integrity 
Post-Acute Care: Pressure Ulcer/Injury, beginning with the FY 2020 LTCH 
QRP. The current pressure ulcer measure will remain in the LTCH QRP 
until that time. Accordingly, with respect to the requirement that 
LTCHs report standardized patient assessment data for the FY 2019 LTCH 
QRP, we are proposing that the data elements used to calculate that 
measure meet the definition of standardized patient assessment data 
with respect to medical conditions and co-morbidities under section 
1899B(b)(1)(B)(iv) of the Act, and that the successful reporting of 
that data under section 1886(m)(5)(F)(i) of the Act with respect to 
admissions as well as discharges occurring during last three quarters 
of CY 2017 would also satisfy the requirement to report standardized 
patient assessment data for the FY 2019 LTCH QRP.
    The collection of assessment data pertaining to skin integrity, 
specifically pressure related wounds, is important for multiple 
reasons. Clinical decision support, care planning, and quality 
improvement all depend on reliable assessment data collection. Pressure 
related wounds represent poor outcomes, are a serious medical condition 
that can result in death and disability, are debilitating, painful and 
are often an avoidable outcome of medical 
care.392 393 394 395 396 397 Pressure related wounds are 
considered healthcare acquired conditions.
---------------------------------------------------------------------------

    \392\ Casey, G. (2013). ``Pressure ulcers reflect quality of 
nursing care.'' Nurs N Z 19(10): 20-24.
    \393\ Gorzoni, M.L. and S.L. Pires (2011). ``Deaths in nursing 
homes.'' Rev Assoc Med Bras 57(3): 327-331.
    \394\ Thomas, J.M., et al. (2013). ``Systematic review: health-
related characteristics of elderly hospitalized adults and nursing 
home residents associated with short-term mortality.'' J Am Geriatr 
Soc 61(6): 902-911.
    \395\ White-Chu, E.F., et al. (2011). ``Pressure ulcers in long-
term care.'' Clin Geriatr Med 27(2): 241-258.
    \396\ Bates-Jensen BM. Quality indicators for prevention and 
management of pressure ulcers in vulnerable elders. Ann Int Med. 
2001;135 (8 Part 2), 744-51.
    \397\ Bennet, G, Dealy, C, Posnett, J (2004). The cost of 
pressure ulcers in the UK, Age and Aging, 33(3):230-235.
---------------------------------------------------------------------------

    As we note above, the data elements needed to calculate the current 
pressure ulcer measure are already included on the LTCH CARE Data Set 
and reported by LTCHs, and exhibit validity and reliability for use 
across PAC providers. Item reliability for these data elements was also 
tested for the nursing home setting during implementation of MDS 3.0. 
Testing results are from the RAND Development and Validation of MDS 3.0 
project.\398\ The RAND pilot test of the MDS 3.0 data elements showed 
good reliability and is also applicable to both the IRF-PAI and the 
LTCH CARE Data Set because the data elements tested are the same. 
Across the pressure ulcer data elements, the average gold-standard 
nurse to gold-standard nurse kappa statistic was 0.905. The average 
gold-standard nurse to facility-nurse kappa statistic was 0.937. Data 
elements used to risk adjust this quality measure were also tested 
under this same pilot test, and the gold-standard to gold-standard 
kappa statistic, or percent agreement (where kappa statistic not 
available), ranged from 0.91 to 0.99 for these data elements. These 
kappa scores indicate ``almost perfect'' agreement using the Landis and 
Koch standard for strength of agreement.\399\
---------------------------------------------------------------------------

    \398\ Saliba, D., & Buchanan, J. (2008, April). Development and 
validation of a revised nursing home assessment tool: MDS 3.0. 
Contract No. 500-00-0027/Task Order #2. Santa Monica, CA: Rand 
Corporation. Retrieved from http://www.cms.hhs.gov/NursingHomeQualityInits/Downloads/MDS30FinalReport.pdf.
    \399\ Landis, R., & Koch, G. (1977, March). The measurement of 
observer agreement for categorical data. Biometrics 33(1), 159-174.
---------------------------------------------------------------------------

    The data elements used to calculate the current pressure ulcer 
measure received public comment on several occasions, including when 
that measure was proposed in the FY 2012 IRF PPS (76 FR 47876) and 
IPPS/LTCH PPS proposed rules (76 FR 51754). Further, they were 
discussed in the past by TEPs held by our measure development 
contractor on June 13 and November 15, 2013, and recently by a TEP on 
July 18, 2016. TEP members supported the measure and its cross-setting 
use in PAC. The report, Technical Expert Panel Summary Report: 
Refinement of the Percent of Patients or Residents with Pressure Ulcers 
that are New or Worsened (Short Stay) (NQF #0678) Quality Measure for 
Skilled Nursing Facilities (SNFs), Inpatient Rehabilitation Facilities 
(IRFs), Long-Term Care Hospitals (LTCHs), and Home Health Agencies 
(HHAs), is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    We are inviting public comment on this proposal.
b. Proposed Standardized Patient Assessment Data Reporting Beginning 
With the FY 2020 LTCH QRP
    We describe below our proposals for the reporting of standardized 
patient assessment data by LTCHs beginning with the FY 2020 LTCH QRP. 
LTCHs would be required to report these data with respect to LTCH 
admissions and discharges that occur between April 1, 2018 and December 
31, 2018, with the exception of three data elements (Brief Interview of 
Mental Status (BIMS), Hearing, and Vision) that would be required with 
respect to LTCH admissions only that occur between April 1, 2018 and 
December 31, 2018. The BIMS, Hearing, and Vision data elements would be 
assessed at admission only due to the relatively stable nature of the 
types of cognitive function, hearing impairment, and vision impairment, 
making it unlikely that these assessments would change between the 
start and end of the PAC stay. Assessment of the BIMS, Hearing, and 
Vision data elements at discharge would introduce additional burden 
without improving the quality or usefulness of the data, and is 
unnecessary. Following the initial reporting year for the FY 2020 LTCH 
QRP, subsequent years for the LTCH QRP would be based on a full 
calendar year of such data reporting.
    In selecting the data elements proposed below, we carefully weighed 
the balance of burden in assessment-based data collection and aimed to 
minimize additional burden through the utilization of existing data in 
the assessment instruments.
    We also took into consideration the following factors with respect 
to each data element: overall clinical relevance; ability to support 
clinical decisions, care planning and interoperable exchange to 
facilitate care coordination during transitions in care; and the 
ability to capture medical complexity and risk factors that can inform 
both payment and quality. In addition, the data elements had to have 
strong scientific reliability and validity; be meaningful enough to 
inform longitudinal analysis by providers; had to have received general 
consensus agreement for its usability; and had to have the ability to 
collect such data once but support multiple uses. Further,

[[Page 20100]]

to inform the final set of data elements for proposal, we took into 
account technical and clinical subject matter expert review, public 
comment, and consensus input in which such principles were applied. We 
also took into account the consensus work and empirical findings from 
the PAC-PRD.
    Below, we discuss the proposed standardized patient assessment data 
by category.
(1) Functional Status Data
    We are proposing that the data elements currently reported by LTCHs 
to calculate the measure, Application of Percent of Long-Term Care 
Hospital Patients with an Admission and Discharge Functional Assessment 
and a Care Plan That Addresses Function (NQF #2631), would also meet 
the definition of standardized patient assessment data with respect to 
functional status under section 1899B(b)(1)(B)(i) of the Act, and that 
the successful reporting of that data under section 1886(m)(5)(F)(i) of 
the Act would also satisfy the requirement to report standardized 
patient assessment data under section 1886(m)(5)(F)(ii) of the Act.
    These patient assessment data for functional status are from the 
CARE Item Set. 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 Continuity Assessment Record and 
Evaluation (CARE) Item Set: Final Report on the Development of the CARE 
Item Set: Volume 1 of 3.'' \400\ Reliability and validity testing were 
conducted as part of CMS' Post-Acute Care Payment Reform Demonstration, 
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 Continuity Assessment Record And 
Evaluation (CARE) Item Set: Final Report On Reliability Testing: Volume 
2 of 3'' \401\ and the report entitled ``The Development and Testing of 
The Continuity Assessment Record And Evaluation (CARE) Item Set: Final 
Report on Care Item Set and Current Assessment Comparisons: Volume 3 of 
3.'' \402\ The reports are available on CMS' 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.
---------------------------------------------------------------------------

    \400\ 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).
    \401\ Ibid.
    \402\ Ibid.
---------------------------------------------------------------------------

    For more information about this quality measure and the data 
elements used to calculate it, we refer readers to the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49739 through 49747).
    We are inviting public comment on this proposal.
(2) Cognitive Function and Mental Status Data
    Cognitive function and mental status in PAC patient and resident 
populations can be affected by a number of underlying conditions, 
including dementia, stroke, traumatic brain injury, side effects of 
medication, metabolic and/or endocrine imbalances, delirium, and 
depression.\403\ The assessment of cognitive function and mental status 
by PAC providers is important because of the high percentage of 
patients and residents with these conditions,\404\ and the opportunity 
for improving the quality of care. Symptoms of dementia may improve 
with pharmacotherapy, occupational therapy, or physical 
activity,405 406 407 and promising treatments for severe 
traumatic brain injury are currently being tested.\408\ For older 
patients and residents diagnosed with depression, treatment options to 
reduce symptoms and improve quality of life include antidepressant 
medication and psychotherapy,409 410 411 412 and targeted 
services, such as therapeutic recreation, exercise, and restorative 
nursing, to increase opportunities for psychosocial interaction.\413\
---------------------------------------------------------------------------

    \403\ National Institute on Aging. (2014). Assessing Cognitive 
Impairment in Older Patients. A Quick Guide for Primary Care 
Physicians. Retrieved from: https://www.nia.nih.gov/alzheimers/publication/assessing-cognitive-impairment-older-patients.
    \404\ Gage B., Morley M., Smith L., et al. (2012). Post-Acute 
Care Payment Reform Demonstration (Final report, Volume 4 of 4). 
Research Triangle Park, NC: RTI International.
    \405\ Casey D.A., Antimisiaris D., O'Brien J. (2010). Drugs for 
Alzheimer's Disease: Are They Effective? Pharmacology & 
Therapeutics, 35, 208-11.
    \406\ Graff M.J., Vernooij-Dassen M.J., Thijssen M., Dekker J., 
Hoefnagels W.H., Rikkert M.G.O. (2006). Community Based Occupational 
Therapy for Patients with Dementia and their Care Givers: Randomised 
Controlled Trial. BMJ, 333(7580): 1196.
    \407\ Bherer L., Erickson K.I., Liu-Ambrose T. (2013). A Review 
of the Effects of Physical Activity and Exercise on Cognitive and 
Brain Functions in Older Adults. Journal of Aging Research, 657508.
    \408\ Giacino J.T., Whyte J., Bagiella E., et al. (2012). 
Placebo-controlled trial of amantadine for severe traumatic brain 
injury. New England Journal of Medicine, 366(9), 819-826.
    \409\ Alexopoulos G.S., Katz I.R., Reynolds C.F. 3rd, Carpenter 
D., Docherty J.P., Ross R.W. (2001). Pharmacotherapy of depression 
in older patients: a summary of the expert consensus guidelines. 
Journal of Psychiatric Practice, 7(6), 361-376.
    \410\ Arean P.A., Cook B.L. (2002). Psychotherapy and combined 
psychotherapy/pharmacotherapy for late life depression. Biological 
Psychiatry, 52(3), 293-303.
    \411\ Hollon S.D., Jarrett R.B., Nierenberg A.A., Thase M.E., 
Trivedi M., Rush A.J. (2005). Psychotherapy and medication in the 
treatment of adult and geriatric depression: which monotherapy or 
combined treatment? Journal of Clinical Psychiatry, 66(4), 455-468.
    \412\ Wagenaar D, Colenda CC, Kreft M, Sawade J, Gardiner J, 
Poverejan E. (2003). Treating depression in nursing homes: practice 
guidelines in the real world. J Am Osteopath Assoc. 103(10), 465-
469.
    \413\ Crespy SD, Van Haitsma K, Kleban M, Hann CJ. Reducing 
Depressive Symptoms in Nursing Home Residents: Evaluation of the 
Pennsylvania Depression Collaborative Quality Improvement Program. J 
Healthc Qual. 2016. Vol. 38, No. 6, pp. e76-e88.
---------------------------------------------------------------------------

    Accurate assessment of cognitive function and mental status of 
patients and residents in PAC would be expected to have a positive 
impact on the National Quality Strategy's domains of patient and family 
engagement, patient safety, care coordination, clinical process/
effectiveness, and efficient use of health care resources. For example, 
standardized assessment of cognitive function and mental status of 
patients and residents in PAC will support establishing a baseline for 
identifying changes in cognitive function and mental status (for 
example, delirium), anticipating the patient or resident's ability to 
understand and participate in treatments during a PAC stay, ensuring 
patient and resident safety (for example, risk of falls), and 
identifying appropriate support needs at the time of discharge or 
transfer. Standardized assessment data elements will enable or support 
clinical decision-making and early clinical intervention; person-
centered, high quality care through: Facilitating better care 
continuity and coordination; better data exchange and interoperability 
between settings; and longitudinal outcome analysis. Hence, reliable 
data elements assessing cognitive impairment and mental status are 
needed in order to initiate a management program that can optimize a 
patient or resident's prognosis and reduce the possibility of adverse 
events.
 Brief Interview for Mental Status (BIMS)
    We are proposing that the data elements that comprise the Brief 
Interview for Mental Status meet the definition of standardized patient 
assessment data with respect to cognitive function and mental status 
under section 1899B(b)(1)(B)(ii) of the Act. The proposed data elements 
consist of seven BIMS questions that result in a cognitive function 
score. For more information on the BIMS, we refer readers to the 
document titled, Proposed

[[Page 20101]]

Specifications for LTCH QRP Quality Measures and Standardized Data 
Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Dementia and cognitive impairment are associated with long-term 
functional dependence and, consequently, poor quality of life and 
increased health care costs and mortality.\414\ This makes assessment 
of mental status and early detection of cognitive decline or impairment 
critical in the PAC setting. The burden of cognitive impairment in PAC 
is high. The intensity of routine nursing care is higher for patients 
and residents with cognitive impairment than those without, and 
dementia is a significant variable in predicting readmission after 
discharge to the community from PAC providers.\415\ The BIMS is a 
performance-based cognitive assessment that assesses repetition, recall 
with and without prompting, and temporal orientation. It was developed 
to be a brief screener to assess cognition, with a focus on learning 
and memory. The BIMS data elements are currently in use in two of the 
PAC assessments: The MDS 3.0 in SNFs and the IRF-PAI in IRFs. The BIMS 
was tested in the PAC PRD where it was found to have substantial to 
almost perfect agreement for inter-rater reliability (kappa range of 
0.71 to 0.91) when tested in all four PAC settings.\416\ Clinical and 
subject matter expert advisors working with our data element contractor 
agreed that the BIMS is a feasible data element for use by PAC 
providers. In addition, discussions during a TEP convened on April 6 
and 7, 2016, demonstrated support for the BIMS. The Development and 
Maintenance of Post-Acute Care Cross-Setting Standardized Patient 
Assessment Data Technical Expert Panel Summary Report is available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
---------------------------------------------------------------------------

    \414\ Ag[uuml]ero-Torres, H., Fratiglioni, L., Guo, Z., 
Viitanen, M., von Strauss, E., & Winblad, B. (1998). ``Dementia is 
the major cause of functional dependence in the elderly: 3-year 
follow-up data from a population-based study.'' Am J of Public 
Health 88(10): 1452-1456.
    \415\ RTI International. Proposed Measure Specifications for 
Measures Proposed in the FY 2017 LTCH QRP NPRM. Research Triangle 
Park, NC. 2016.
---------------------------------------------------------------------------

    To solicit additional feedback on the BIMS, we asked for public 
comment from August 12 to September 12, 2016. Many commenters expressed 
support for use of the BIMS, noting that it is reliable, feasible to 
use across settings, and will provide useful information about patients 
and residents. These comments noted that the data collected through the 
BIMS will provide a clearer picture of patient or resident complexity, 
help with the care planning process, and be useful during care 
transitions and when coordinating across providers. A full report of 
the comments is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing to adopt the BIMS for use in the LTCH 
QRP. We are proposing to add the data elements that comprise the BIMS 
to the LCDS, and that LTCHs would be required to report these data for 
the FY 2020 LTCH QRP with respect to LTCH admissions that occur between 
April 1, 2018 and December 31, 2018. Following the initial reporting 
year for the FY 2020 LTCH QRP, subsequent years for the LTCH QRP would 
be based on a full calendar year of such data reporting. The BIMS data 
element would be assessed at admission only due to the relatively 
stable nature of the types of cognitive function assessed by the BIMS, 
making it unlikely that a patient's score on this assessment would 
change between the start and end of the PAC stay. Assessment at 
discharge would introduce additional burden without improving the 
quality or usefulness of the data, and we believe that it is 
unnecessary.
    We are inviting public comment on these proposals.
 Confusion Assessment Method (CAM)
    We are proposing that the data elements that comprise the Confusion 
Assessment Method (CAM) meet the definition of standardized patient 
assessment data with respect to cognitive function and mental status 
under section 1899B(b)(1)(B)(ii) of the Act. The CAM is a six-question 
instrument that screens for overall cognitive impairment, as well as 
distinguishes delirium or reversible confusion from other types of 
cognitive impairment. For more information on the CAM, we refer readers 
to the document titled, Proposed Specifications for LTCH QRP Quality 
Measures and Standardized Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    The CAM was developed to identify the signs and symptoms of 
delirium. It results in a score that suggests whether the patient or 
resident should be assigned a diagnosis of delirium. Because patients 
and residents with multiple comorbidities receive services from PAC 
providers, it is important to assess delirium, which is associated with 
a high mortality rate and prolonged duration of stay in hospitalized 
older adults.\417\ Assessing these signs and symptoms of delirium is 
clinically relevant for care planning by PAC providers.
---------------------------------------------------------------------------

    \417\ Fick, D. M., Steis, M. R., Waller, J. L., & Inouye, S. K. 
(2013). ``Delirium superimposed on dementia is associated with 
prolonged length of stay and poor outcomes in hospitalized older 
adults.'' J of Hospital Med 8(9): 500-505.
---------------------------------------------------------------------------

    The CAM is currently in use in two of the PAC assessments: the MDS 
3.0 in SNFs and the LCDS in LTCHs. The CAM was tested in the PAC PRD 
where it was found to have substantial agreement for inter-rater 
reliability for the ``Inattention and Disorganized Thinking'' questions 
(kappa range of 0.70 to 0.73); and moderate agreement for the ``Altered 
Level of Consciousness'' question (kappa of 0.58).\418\
---------------------------------------------------------------------------

    \418\ Gage B., Morley M., Smith L., et al. (2012). Post-Acute 
Care Payment Reform Demonstration (Final report, Volume 2 of 4). 
Research Triangle Park, NC: RTI International.
---------------------------------------------------------------------------

    Clinical and subject matter expert advisors working with our data 
element contractor agreed that the CAM is feasible for use by PAC 
providers, that it assesses key aspects of cognition, and that this 
information about patient or resident cognition would be clinically 
useful both within and across PAC provider types. The CAM was also 
supported by a TEP that discussed and rated candidate data elements 
during a meeting on April 6 and 7, 2016. The Development and 
Maintenance of Post-Acute Care Cross-Setting Standardized Patient 
Assessment Data Technical Expert Panel Summary Report is available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html. We asked for public comment on 
the CAM from August 12 to September 12, 2016. Many commenters expressed 
support for use of the CAM, noting that it would provide important 
information for care planning and care coordination, and therefore, 
contribute to quality improvement. The commenters noted it is 
particularly helpful in distinguishing

[[Page 20102]]

delirium and reversible confusion from other types of cognitive 
impairment. A full report of the comments is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    As noted above, the CAM is already included on the LCDS. For 
purposes of reporting for the FY 2020 LTCH QRP, LTCHs would be required 
to report these data with respect to LTCH admissions and discharges 
that occur between April 1, 2018 and December 31, 2018. Following the 
initial reporting year for the FY 2020 LTCH QRP, subsequent years for 
the LTCH QRP would be based on a full calendar year of such data 
reporting.
    We are inviting public comment on these proposals.
 Behavioral Signs and Symptoms
    We are proposing that the Behavioral Signs and Symptoms data 
elements meet the definition of standardized patient assessment data 
with respect to cognitive function and mental status under section 
1899B(b)(1)(B)(ii) of the Act. The proposed data elements consist of 
three Behavioral Signs and Symptoms questions and result in three 
scores that categorize respondents as having or not having certain 
types of behavioral signs and symptoms. For more information on the 
Behavioral Signs and Symptoms data elements, we refer readers to the 
document titled, Proposed Specifications for LTCH QRP Quality Measures 
and Standardized Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    The questions included in the Behavioral Signs and Symptoms group 
assess whether the patient or resident has exhibited any behavioral 
symptoms that may indicate cognitive impairment or other mental health 
issues during the assessment period, including physical, verbal, and 
other disruptive or dangerous behavioral symptoms, but excluding 
patient wandering. Such behavioral disturbances can indicate 
unrecognized needs and care preferences and are associated most 
commonly with dementia and other cognitive impairment, and less 
commonly with adverse drug events, mood disorders, and other 
conditions. Assessing behavioral disturbances can lead to early 
intervention, patient- and resident-centered care planning, clinical 
decision support, and improved staff and patient or resident safety 
through early detection. Assessment and documentation of these 
disturbances can help inform care planning and patient transitions and 
provide important information about resource use.
    Data elements that capture behavioral symptoms are currently 
included in two of the PAC assessments: the MDS 3.0 in SNFs and the 
OASIS-C2 in HHAs.\419\ In the MDS, each question includes four response 
options ranging from ``behavior not exhibited'' (0) to behavior 
``occurred daily'' (3). The OASIS-C2 includes some similar data 
elements which record the frequency of disruptive behaviors on a 6-
point scale ranging from ``never'' (0) to ``at least daily'' (5). Data 
elements that mirror those used in the MDS and serve the same 
assessment purpose were tested in post-acute providers in the PAC PRD 
and found to be clinically relevant, meaningful for care planning, and 
feasible for use in each of the four PAC settings.\420\
---------------------------------------------------------------------------

    \420\ Gage B., Morley M., Smith L., et al. (2012). Post-Acute 
Care Payment Reform Demonstration (Final report, Volume 2 of 4). 
Research Triangle Park, NC: RTI International.
---------------------------------------------------------------------------

    The proposed data elements were supported by comments from the 
Standardized Patient Assessment Data TEP held by our data element 
contractor. The TEP identified patient and resident behaviors as an 
important consideration for resource intensity and care planning, and 
affirmed the importance of the standardized assessment of patient 
behaviors through data elements such as those in use in the MDS. The 
Development and Maintenance of Post-Acute Care Cross-Setting 
Standardized Patient Assessment Data Technical Expert Panel Summary 
Report is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Because the PAC PRD version of the Behavioral Signs and Symptoms 
data elements were previously tested across PAC providers, we solicited 
additional feedback on this version of the data elements by including 
these data elements in a call for public comment that was open from 
August 12 to September 12, 2016. Consistent with the TEP discussion on 
the importance of patient and resident behaviors, many commenters 
expressed support for use of the Behavioral Signs and Symptoms data 
elements, noting that they would provide useful information about 
patient and resident behavior at both admission and discharge and 
contribute to care planning related to what treatment is appropriate 
for the patient or resident and what resources are needed. Public 
comment also supported the use of highly similar MDS version of the 
data element in order to provide continuity with existing assessment 
processes in SNFs. A full report of the comments is available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing the MDS version of the Behavioral Signs 
and Symptoms data elements because they focus more closely on 
behavioral symptoms than the OASIS data elements, and include more 
detailed response categories than those used in the PAC PRD version, 
capturing more information about the frequency of behaviors. We are 
proposing to add the Behavioral Signs and Symptoms data elements to the 
LCDS, and that LTCHs would be required to report these data for the FY 
2020 LTCH QRP with respect to LTCH admissions and discharges that occur 
between April 1, 2018 and December 31, 2018. Following the initial 
reporting year for the FY 2020 LTCH QRP, subsequent years for the LTCH 
QRP would be based on a full calendar year of such data reporting.
    We are inviting public comment on these proposals.
 Patient Health Questionnaire-2 (PHQ-2)
    We are proposing that the PHQ-2 data elements meet the definition 
of standardized patient assessment data with respect to cognitive 
function and mental status under section 1899B(b)(1)(B)(ii) of the Act. 
The proposed data elements consist of the PHQ-2 two-item questionnaire 
that assesses the cardinal criteria for depression: depressed mood and 
anhedonia (inability to feel pleasure). For more information on the 
PHQ-2, we refer readers to the document titled, Proposed Specifications 
for LTCH QRP Quality Measures and Standardized Data Elements, available 
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Depression is a common mental health condition often missed and 
under-recognized. Assessments of depression help PAC providers better 
understand the needs of their patients

[[Page 20103]]

and residents by: Prompting further evaluation (that is, to establish a 
diagnosis of depression); elucidating the patient's or resident's 
ability to participate in therapies for conditions other than 
depression during their stay; and identifying appropriate ongoing 
treatment and support needs at the time of discharge. A PHQ-2 score 
beyond a predetermined threshold signals the need for additional 
clinical assessment in order to determine a depression diagnosis.
    The proposed data elements that comprise the PHQ-2 are currently 
used in the OASIS-C2 for HHAs and the MDS 3.0 for SNFs (as part of the 
PHQ-9). The PHQ-2 data elements were tested in the PAC PRD, where they 
were found to have almost perfect agreement for inter-rater reliability 
(kappa range of 0.84 to 0.91) when tested by all four PAC 
providers.\421\
---------------------------------------------------------------------------

    \421\ Gage B., Smith L., Ross J. et al. (2012). The Development 
and Testing of the Continuity Assessment Record and Evaluation 
(CARE) Item Set (Final Report on Reliability Testing, Volume 2 of 
3). Research Triangle Park, NC: RTI International.
---------------------------------------------------------------------------

    Clinical and subject matter expert advisors working with our data 
element contractor agreed that the PHQ-2 is feasible for use in PAC, 
that it assesses key aspects of mental status, and that this 
information about patient or resident mood would be clinically useful 
both within and across PAC provider types. We note that both the PHQ-9 
and the PHQ-2 were supported by TEP members who discussed and rated 
candidate data elements during a meeting on April 6 and 7, 2016. They 
particularly noted that the brevity of the PHQ-2 made it feasible with 
low burden for both assessors and PAC patients or residents. The 
Development and Maintenance of Post-Acute Care Cross-Setting 
Standardized Patient Assessment Data Technical Expert Panel Summary 
Report is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    To solicit additional feedback on the PHQ-2, we asked for public 
comment from August 12 to September 12, 2016. Many commenters provided 
feedback on using the PHQ-2 for the assessment of mood. Overall, 
commenters believed that collecting these data elements across PAC 
provider types was appropriate, given the role that depression plays in 
well-being. Several commenters expressed support for an approach that 
would use PHQ-2 as a gateway to the longer PHQ-9 and would maintain the 
reduced burden on most patients and residents, as well as test 
administrators, which is a benefit of the PHQ-2, while ensuring that 
the PHQ-9, which exhibits higher specificity,\422\ would be 
administered for patients and residents who showed signs and symptoms 
of depression on the PHQ-2. Specific comments are described in a full 
report available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
---------------------------------------------------------------------------

    \422\ Arroll B, Goodyear-Smith F, Crengle S, Gunn J, Kerse N, 
Fishman T, et al. Validation of PHQ-2 and PHQ-9 to screen for major 
depression in the primary care population. Annals of family 
medicine. 2010;8(4):348-53. doi: 10.1370/afm.1139 pmid:20644190; 
PubMed Central PMCID: PMC2906530.
---------------------------------------------------------------------------

    Therefore, we are proposing to add the PHQ-2 data elements to the 
LCDS, and that LTCHs would be required to report these data for the FY 
2020 LTCH QRP with respect to LTCH admissions and discharges that occur 
between April 1, 2018 and December 31, 2018. Following the initial 
reporting year for the FY 2020 LTCH QRP, subsequent years for the LTCH 
QRP would be based on a full calendar year of such data reporting.
    We are inviting public comment on these proposals.
(3) Special Services, Treatments, and Interventions Data
    Special services, treatments, and interventions performed in PAC 
can have a major effect on an individual's health status, self-image, 
and quality of life. The assessment of these special services, 
treatments, and interventions in PAC is important to ensure the 
continuing appropriateness of care for the patients and residents 
receiving them, and to support care transitions from one PAC provider 
to another, an acute care hospital, or discharge. Accurate assessment 
of special services, treatments, and interventions of patients and 
residents served by PAC providers are expected to have a positive 
impact on the National Quality Strategy's domains of patient and family 
engagement, patient safety, care coordination, clinical process/
effectiveness, and efficient use of health care resources.
    For example, standardized assessment of special services, 
treatments, and interventions used in PAC can promote patient and 
resident safety through appropriate care planning (for example, 
mitigating risks such as infection or pulmonary embolism associated 
with central intravenous access), and identifying life-sustaining 
treatments that must be continued, such as mechanical ventilation, 
dialysis, suctioning, and chemotherapy, at the time of discharge or 
transfer. Standardized assessment of these data elements will enable or 
support: Clinical decision-making and early clinical intervention; 
person-centered, high quality care through, for example, facilitating 
better care continuity and coordination; better data exchange and 
interoperability between settings; and longitudinal outcome analysis. 
Hence, reliable data elements assessing special services, treatments, 
and interventions are needed to initiate a management program that can 
optimize a patient or resident's prognosis and reduce the possibility 
of adverse events.
    We are proposing 15 special services, treatments, and interventions 
as presented below grouped by cancer treatments, respiratory 
treatments, other treatments, and nutritional approaches. A TEP 
convened by the data element standardization contractor provided input 
on the 15 data elements for Special Services, Treatments, and 
Interventions. This TEP, held on January 5 and 6, 2017, opined that 
these data elements are appropriate for standardization because they 
would provide useful clinical information to inform care planning and 
care coordination. The TEP affirmed that assessment of these services 
and interventions is standard clinical practice, and that the 
collection of these data by means of a list and checkbox format would 
conform with common workflow for PAC providers. A full report of the 
TEP discussion is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
 Cancer Treatment: Chemotherapy (IV, Oral, Other)
    We are proposing that the Chemotherapy (IV, Oral, Other) data 
elements meet the definition of standardized patient assessment data 
with respect to special services, treatments, and interventions under 
section 1899B(b)(1)(B)(iii) of the Act. The proposed data elements 
consist of the principal Chemotherapy data element and three sub-
elements: IV Chemotherapy, Oral Chemotherapy, and Other. For more 
information on the Chemotherapy data element, we refer readers to the 
document titled, Proposed Specifications for LTCH QRP Quality Measures 
and Standardized Data Elements, available at: https://

[[Page 20104]]

www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-
Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-
Information.html.
    Chemotherapy is a type of cancer treatment that uses drugs to 
destroy cancer cells. It is sometimes used when a patient has a 
malignancy (cancer), which is a serious, often life-threatening or 
life-limiting condition. Both intravenous (IV) and oral chemotherapy 
have serious side effects, including nausea/vomiting, extreme fatigue, 
risk of infection due to a suppressed immune system, anemia, and an 
increased risk of bleeding due to low platelet counts. Oral 
chemotherapy can be as potent as chemotherapy given by IV, but can be 
significantly more convenient and less resource-intensive to 
administer. Because of the toxicity of these agents, special care must 
be exercised in handling and transporting chemotherapy drugs. IV 
chemotherapy may be given by peripheral IV, but is more commonly given 
via an indwelling central line, which raises the risk of bloodstream 
infections. Given the significant burden of malignancy, the resource 
intensity of administering chemotherapy, and the side effects and 
potential complications of these highly-toxic medications, assessing 
the receipt of chemotherapy is important in the PAC setting for care 
planning and determining resource use.
    The need for chemotherapy predicts resource intensity, both because 
of the complexity of administering these potent, toxic drug 
combinations under specific protocols, and because of what the need for 
chemotherapy signals about the patient's underlying medical condition. 
Furthermore, the resource intensity of IV chemotherapy is higher than 
for oral chemotherapy, as the protocols for administration and the care 
of the central line (if present) require significant resources.
    The Chemotherapy (IV, Oral, Other) data elements consist of a 
principal data element and three sub-elements: IV chemotherapy, which 
is generally resource-intensive; oral chemotherapy, which is less 
invasive and generally less intensive with regard to administration 
protocols; and a third category provided to enable the capture of other 
less common chemotherapeutic approaches. This third category is 
potentially associated with higher risks and is more resource intensive 
due to delivery by other routes (for example, intraventricular or 
intrathecal).
    The principal Chemotherapy data element is currently in use in the 
MDS 3.0. One proposed sub-element, IV Chemotherapy, was tested in the 
PAC PRD and found feasible for use in each of the four PAC settings. We 
solicited public comment on IV Chemotherapy from August 12 to September 
12, 2016. Several commenters provided support for the data element and 
suggested it be included as standardized patient assessment data. 
Commenters stated that assessing the use of chemotherapy services is 
relevant to share across the care continuum to facilitate care 
coordination and care transitions and noted the validity of the data 
element. Commenters also noted the importance of capturing all types of 
chemotherapy, regardless of route, and stated that collecting data only 
on patients and residents who received chemotherapy by IV would limit 
the usefulness of this standardized data element. A full report of the 
comments is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    As a result of the comments and input received from clinical and 
subject matter experts, we are proposing a principal Chemotherapy data 
element with three sub-elements, including Oral and Other for 
standardization. Our data element contractor then presented the 
proposed data elements to the Standardized Patient Assessment Data TEP 
on January 5 and 6, 2017, who supported these data elements for 
standardization. A full report of the TEP discussion is available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing that the Chemotherapy (IV, Oral, Other) 
data elements with a principal data element and three sub-elements meet 
the definition of standardized patient assessment data with respect to 
special services, treatments, and interventions under section 
1899B(b)(1)(B)(iii) of the Act. We are proposing to add the 
Chemotherapy (IV, Oral, Other) data elements to the LCDS, and that 
LTCHs would be required to report these data for the FY 2020 LTCH QRP 
with respect to LTCH admissions and discharges that occur between April 
1, 2018 and December 31, 2018. Following the initial reporting year for 
the FY 2020 LTCH QRP, subsequent years for the LTCH QRP would be based 
on a full calendar year of such data reporting.
    We are inviting public comment on these proposals.
 Cancer Treatment: Radiation
    We are proposing that the Radiation data element meets the 
definition of standardized patient assessment data with respect to 
special services, treatments, and interventions under section 
1899B(b)(1)(B)(iii) of the Act. The proposed data element consists of 
the single Radiation data element. For more information on the 
Radiation data element, we refer readers to the document titled, 
Proposed Specifications for LTCH QRP Quality Measures and Standardized 
Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Radiation is a type of cancer treatment that uses high-energy 
radioactivity to stop cancer by damaging cancer cell DNA, but it can 
also damage normal cells. Radiation is an important therapy for 
particular types of cancer, and the resource utilization is high, with 
frequent radiation sessions required, often daily for a period of 
several weeks. Assessing whether a patient or resident is receiving 
radiation therapy is important to determine resource utilization 
because PAC patients and residents will need to be transported to and 
from radiation treatments, and monitored and treated for side effects 
after receiving this intervention. Therefore, assessing the receipt of 
radiation therapy, which would compete with other care processes given 
the time burden, would be important for care planning and care 
coordination by PAC providers.
    The Radiation data element is currently in use in the MDS 3.0. This 
data element was not tested in the PAC PRD. However, public comment and 
other expert input on the Radiation data element supported its 
importance and clinical usefulness for patients in PAC settings, due to 
the side effects and consequences of radiation treatment on patients 
that need to be considered in care planning and care transitions. To 
solicit additional feedback on the Radiation data element we are 
proposing, we asked for public comment from August 12 to September 12, 
2016. Several commenters provided support for the data element, noting 
the relevance of this data element to facilitating care coordination 
and supporting care transitions, the feasibility of the item, and the 
potential for it to improve quality. A full report of the comments is 
available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-
Assessment-

[[Page 20105]]

Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/
IMPACT-Act-Downloads-and-Videos.html.
    The proposed data element was presented to and supported by the TEP 
held by our data element contractor on January 5-6, 2017, which opined 
that Radiation was important corollary information about cancer 
treatment to collect alongside Chemotherapy (IV, Oral, Other), and 
that, because capturing this information is a customary part of 
clinical practice, the proposed data element would be feasible, 
reliable, and easily incorporated into existing workflow.
    Therefore, we are proposing that the Radiation data element meets 
the definition of standardized patient assessment data with respect to 
special services, treatments, and interventions under section 
1899B(b)(1)(B)(iii) of the Act. We are proposing to add the Radiation 
data element to the LCDS, and that LTCHs would be required to report 
these data for the FY 2020 LTCH QRP with respect to LTCH admissions and 
discharges that occur between April 1, 2018 and December 31, 2018. 
Following the initial reporting year for the FY 2020 LTCH QRP, 
subsequent years for the LTCH QRP would be based on a full calendar 
year of such data reporting.
    We are inviting public comment on these proposals.
 Respiratory Treatment: Oxygen Therapy (Continuous, 
Intermittent)
    We are proposing that the Oxygen Therapy (Continuous, Intermittent) 
data elements meet the definition of standardized patient assessment 
data with respect to special services, treatments, and interventions 
under section 1899B(b)(1)(B)(iii) of the Act. The proposed data 
elements consist of the principal Oxygen data element and two sub-
elements, ``Continuous'' (whether the oxygen was delivered 
continuously, typically defined as >=14 hours per day), or 
``Intermittent.'' For more information on the Oxygen Therapy 
(Continuous, Intermittent) data elements, we refer readers to the 
document titled, Proposed Specifications for LTCH QRP Quality Measures 
and Standardized Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Oxygen therapy provides a patient or resident with extra oxygen 
when medical conditions such as chronic obstructive pulmonary disease, 
pneumonia, or severe asthma prevent the patient or resident from 
getting enough oxygen from breathing. Oxygen administration is a 
resource-intensive intervention, as it requires specialized equipment 
such as a source of oxygen, delivery systems (for example, oxygen 
concentrator, liquid oxygen containers, and high-pressure systems), the 
patient interface (for example, nasal cannula or mask), and other 
accessories (for example, regulators, filters, tubing). These data 
elements capture patient or resident use of two types of oxygen therapy 
(continuous and intermittent) which are reflective of intensity of care 
needs, including the level of monitoring and bedside care required. 
Assessing the receipt of this service is important for care planning 
and resource use for PAC providers.
    The proposed data elements were developed based on similar data 
elements that assess oxygen therapy, currently in use in the MDS 3.0 
(``Oxygen Therapy'') and OASIS-C2 (``Oxygen (intermittent or 
continuous)''), and a data element tested in the PAC PRD that focused 
on intensive oxygen therapy (``High O2 Concentration Delivery System 
with FiO2 > 40%'').
    As a result of input from expert advisors, we solicited public 
comment on the single data element, Oxygen (inclusive of intermittent 
and continuous oxygen use), from August 12 to September 12, 2016. 
Several commenters supported the importance of the Oxygen data element, 
noting feasibility of this item in PAC, and the relevance of it to 
facilitating care coordination and supporting care transitions, but 
suggesting that the extent of oxygen use be documented. A full report 
of the comments is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    As a result of public comment and input from expert advisors about 
the importance and clinical usefulness of documenting the extent of 
oxygen use, we expanded the single data element to include two sub-
elements, intermittent and continuous.
    Therefore, we are proposing that the Oxygen Therapy (Continuous, 
Intermittent) data elements with a principal data element and two sub-
elements meet the definition of standardized patient assessment data 
with respect to special services, treatments, and interventions under 
section 1899B(b)(1)(B)(iii) of the Act. We are proposing to add the 
Oxygen Therapy (Continuous, Intermittent) data elements to the LCDS, 
and that LTCHs would be required to report these data for the FY 2020 
LTCH QRP with respect to LTCH admissions and discharges that occur 
between April 1, 2018 and December 31, 2018. Following the initial 
reporting year for the FY 2020 LTCH QRP, subsequent years for the LTCH 
QRP would be based on a full calendar year of such data reporting.
    We are inviting public comment on these proposals.
 Respiratory Treatment: Suctioning (Scheduled, as Needed)
    We are proposing that the Suctioning (Scheduled, As needed) data 
elements meet the definition of standardized patient assessment data 
element with respect to special services, treatments, and interventions 
under section 1899B(b)(1)(B)(iii) of the Act. The proposed data 
elements consist of the principal Suctioning data element, and two sub-
elements, ``Scheduled'' and ``As needed.'' These sub-elements capture 
two types of suctioning. ``Scheduled'' indicates suctioning based on a 
specific frequency, such as every hour; ``As needed'' means suctioning 
only when indicated. For more information on the Suctioning (Scheduled, 
As needed) data elements, we refer readers to the document titled, 
Proposed Specifications for LTCH QRP Quality Measures and Standardized 
Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Suctioning is a process used to clear secretions from the airway 
when a person cannot clear those secretions on his or her own. It is 
done by aspirating secretions through a catheter connected to a suction 
source. Types of suctioning include oropharyngeal and nasopharyngeal 
suctioning, nasotracheal suctioning, and suctioning through an 
artificial airway such as a tracheostomy tube. Oropharyngeal and 
nasopharyngeal suctioning are a key part of many patients' care plans, 
both to prevent the accumulation of secretions than can lead to 
aspiration pneumonias (a common condition in patients with inadequate 
gag reflexes), and to relieve obstructions from mucus plugging during 
an acute or chronic respiratory infection, which often lead to 
desaturations and increased respiratory effort. Suctioning can be done 
on a scheduled basis if the patient is judged to clinically benefit 
from regular interventions; or can be done as needed, such as when 
secretions become so prominent that gurgling or choking is noted, or a 
sudden

[[Page 20106]]

desaturation occurs from a mucus plug. As suctioning is generally 
performed by a care provider rather than independently, this 
intervention can be quite resource-intensive if it occurs every hour, 
for example, rather than once a shift. It also signifies an underlying 
medical condition that prevents the patient from clearing his/her 
secretions effectively (such as after a stroke, or during an acute 
respiratory infection). Generally, suctioning is necessary to ensure 
that the airway is clear of secretions which can inhibit successful 
oxygenation of the individual. The intent of suctioning is to maintain 
a patent airway, the loss of which can lead to death, or complications 
associated with hypoxia.
    The proposed data elements are based on an item currently in use in 
the MDS 3.0 (``Suctioning'' without the two sub-elements), and data 
elements tested in the PAC PRD that focused on the frequency of 
suctioning required for patients with tracheostomies (``Trach Tube with 
Suctioning: Specify most intensive frequency of suctioning during stay 
[Every__hours]'').
    Clinical and subject matter expert advisors working with our data 
element contractor agreed that the proposed Suctioning (Scheduled, As 
needed) data elements are feasible for use in PAC, and that they 
indicate important treatment that would be clinically useful to capture 
both within and across PAC providers. We solicited public comment on 
the suctioning data element currently included in the MDS 3.0 between 
August 12, to September 12, 2016. Several commenters wrote in support 
of this data element, noting feasibility of this item in PAC, and the 
relevance of this data element to facilitating care coordination and 
supporting care transitions. We also received comments suggesting that 
we examine the frequency of suctioning in order to better understand 
the use of staff time, the impact on a patient or resident's capacity 
to speak and swallow, and intensity of care required. Based on these 
comments, we decided to add two sub-elements (scheduled and as needed) 
to the suctioning element. The proposed data elements, Suctioning 
(Scheduled, As needed) includes both the principal suctioning data 
element that is included on the MDS 3.0 and two sub-elements, 
``scheduled'' and ``as needed.'' A full report of the comments is 
available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    A TEP convened by the data element contractor provided input on the 
proposed data elements. This TEP, held on January 5 and 6, 2017, opined 
that these data elements are appropriate for standardization because 
they would provide useful clinical information to inform care planning 
and care coordination. The TEP affirmed that assessment of these 
services and interventions is standard clinical practice. A full report 
of the TEP discussion is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing that the Suctioning (Scheduled, As 
needed) data elements with a principal data element and two sub-
elements meet the definition of standardized patient assessment data 
with respect to special services, treatments, and interventions under 
section 1899B(b)(1)(B)(iii) of the Act. We are proposing to add the 
Suctioning (scheduled, as needed) data element to the LCDS, and that 
LTCHs would be required to report these data for the FY 2020 LTCH QRP 
with respect to LTCH admissions and discharges that occur between April 
1, 2018 and December 31, 2018. Following the initial reporting year for 
the FY 2020 LTCH QRP, subsequent years for the LTCH QRP would be based 
on a full calendar year of such data reporting.
    We are inviting public comment on these proposals.
 Respiratory Treatment: Tracheostomy Care
    We are proposing that the Tracheostomy Care data element meets the 
definition of standardized patient assessment data with respect to 
special services, treatments, and interventions under section 
1899B(b)(1)(B)(iii) of the Act. The proposed data element consists of 
the single Tracheostomy Care data element. For more information on the 
Tracheostomy Care data element, we refer readers to the document 
titled, Proposed Specifications for LTCH QRP Quality Measures and 
Standardized Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    A tracheostomy provides an air passage to help a patient or 
resident breathe when the usual route for breathing is obstructed or 
impaired. Generally, in all of these cases, suctioning is necessary to 
ensure that the tracheostomy is clear of secretions which can inhibit 
successful oxygenation of the individual. Often, individuals with 
tracheostomies are also receiving supplemental oxygenation. The 
presence of a tracheostomy, albeit permanent or temporary, warrants 
careful monitoring and immediate intervention if the tracheostomy 
becomes occluded or in the case of a temporary tracheostomy, the device 
used becomes dislodged. While in rare cases the presence of a 
tracheostomy is not associated with increased care demands (and in some 
of those instances, the care of the ostomy is performed by the patient) 
in general the presence of such a device is associated with increased 
patient risk, and clinical care services will necessarily include close 
monitoring to ensure that no life-threatening events occur as a result 
of the tracheostomy, often considered part of the patient's life line. 
In addition, tracheostomy care, which primarily consists of cleansing, 
dressing changes, and replacement of the tracheostomy cannula (tube), 
is also a critical part of the care plan. Regular cleansing is 
important to prevent infection such as pneumonia and to prevent any 
occlusions with which there are risks for inadequate oxygenation.
    The proposed data element is currently in use in the MDS 3.0 
(``Tracheostomy care''). Data elements (``Trach Tube with Suctioning'') 
that were tested in the PAC PRD included an equivalent principal data 
element on the presence of a tracheostomy. This data element was found 
feasible for use in each of the four PAC settings as the data 
collection aligned with usual work flow.
    Clinical and subject matter expert advisors working with our data 
element contractor agreed that the Tracheostomy Care data element is 
feasible for use in PAC and that it assesses an important treatment 
that would be clinically useful both within and across PAC provider 
types.
    We solicited public comment on this data element from August 12 to 
September 12, 2016. Several commenters wrote in support of this data 
element, noting the feasibility of this item in PAC, and the relevance 
of this data element to facilitating care coordination and supporting 
care transitions. A full report of the comments is available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    A TEP convened by the data element contractor provided input on the

[[Page 20107]]

proposed data elements. This TEP, held on January 5 and 6, 2017, opined 
that these data elements are appropriate for standardization because 
they would provide useful clinical information to inform care planning 
and care coordination. The TEP affirmed that assessment of these 
services and interventions is standard clinical practice. A full report 
of the TEP discussion is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing that the Tracheostomy Care data element 
meets the definition of standardized patient assessment data with 
respect to special services, treatments, and interventions under 
section 1899B(b)(1)(B)(iii) of the Act. We are proposing to add the 
Tracheostomy Care data element to the LCDS, and that LTCHs would be 
required to reporting these data for the FY 2020 LTCH QRP with respect 
to LTCH admissions and discharges that occur between April 1, 2018 and 
December 31, 2018. Following the initial reporting year for the FY 2020 
LTCH QRP, subsequent years for the LTCH QRP would be based on a full 
calendar year of such data reporting.
    We are inviting public comment on these proposals.
 Respiratory Treatment: Non-invasive Mechanical Ventilator 
(BiPAP, CPAP)
    We are proposing that the Non-invasive Mechanical Ventilator 
(Bilevel Positive Airway Pressure [BiPAP], Continuous Positive Airway 
Pressure [CPAP]) data elements meet the definition of standardized 
patient assessment data with respect to special services, treatments, 
and interventions under section 1899B(b)(1)(B)(iii) of the Act. The 
proposed data elements consist of the principal Non-invasive Mechanical 
Ventilator data element and two sub-elements, BiPAP and CPAP. For more 
information on the Non-invasive Mechanical Ventilator (BiPAP, CPAP) 
data element, we refer readers to the document titled, Proposed 
Specifications for LTCH QRP Quality Measures and Standardized Data 
Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    BiPAP and CPAP are respiratory support devices that prevent the 
airways from closing by delivering slightly pressurized air via 
electronic cycling throughout the breathing cycle (Bilevel PAP, 
referred to as BiPAP) or through a mask continuously (Continuous PAP, 
referred to as CPAP). Assessment of non-invasive mechanical ventilation 
is important in care planning, as both CPAP and BiPAP are resource-
intensive (although less so than invasive mechanical ventilation) and 
signify underlying medical conditions about the patient or resident who 
requires the use of this intervention. Particularly when used in 
settings of acute illness or progressive respiratory decline, 
additional staff (for example, respiratory therapists) are required to 
monitor and adjust the CPAP and BiPAP settings and the patient or 
resident may require more nursing resources.
    Data elements that assess BiPAP and CPAP are currently included on 
the OASIS-C2 for HHAs (``Continuous/Bi-level positive airway 
pressure''), LCDS for the LTCH setting (``Non-invasive Ventilator 
(BIPAP, CPAP)''), and the MDS 3.0 for the SNF setting (``BiPAP/CPAP''). 
A data element that focused on CPAP was tested across the four PAC 
providers in the PAC-PRD study and found to be feasible for 
standardization. All of these data elements assess BiPAP or CPAP with a 
single check box, not separately.
    Clinical and subject matter expert advisors working with our data 
element contractor agreed that the standardized assessment of Non-
invasive Mechanical Ventilator (BiPAP, CPAP) data elements would be 
feasible for use in PAC, and assess an important treatment that would 
be clinically useful both within and across PAC provider types.
    To solicit additional feedback on the form of the Non-invasive 
Mechanical Ventilator (BiPAP, CPAP) data elements best suited for 
standardization, we asked for public comment on a single data element, 
BiPAP/CPAP, equivalent (but for labeling) to what is currently in use 
on the MDS, OASIS, and LCDS, from August 12 to September 12, 2016. 
Several commenters wrote in support of this data element, noting the 
feasibility of these items in PAC, and the relevance of these data 
elements for facilitating care coordination and supporting care 
transitions. In addition, there was support in the public comment 
responses for separating out BiPAP and CPAP as distinct sub-elements, 
as they are therapies used for different types of patients and 
residents. A full report of the comments is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    A TEP convened by the data element contractor provided input on the 
proposed data elements. This TEP, held on January 5 and 6, 2017, opined 
that these data elements are appropriate for standardization because 
they would provide useful clinical information to inform care planning 
and care coordination. The TEP affirmed that assessment of these 
services and interventions is standard clinical practice. A full report 
of the TEP discussion is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore we are proposing that the Non-invasive Mechanical 
Ventilator (BiPAP, CPAP) data elements with a principal data element 
and two sub-elements meet the definition of standardized patient 
assessment data with respect to special services, treatments, and 
interventions under section 1899B(b)(1)(B)(iii) of the Act. We are 
proposing to expand the existing ``Non-invasive Ventilator (BiPAP, 
CPAP)'' data element on the LCDS, by retaining and renaming the main 
data element to be Non-invasive Mechanical Ventilator and adding two 
sub-elements for BiPAP and CPAP. For the purposes of reporting for the 
FY 2020 LTCH QRP, LTCHs would be required to report the Non-invasive 
Mechanical Ventilator (BiPAP, CPAP) data elements with respect to LTCH 
admissions and discharges that occur between April 1, 2018 and December 
31, 2018. Following the initial reporting year for the FY 2020 LTCH 
QRP, subsequent years for the LTCH QRP would be based on a full 
calendar year of such data reporting.
    We are inviting public comment on these proposals.
 Respiratory Treatment: Invasive Mechanical Ventilator
    We are proposing that the Invasive Mechanical Ventilator data 
element meets the definition of standardized patient assessment data 
with respect to special services, treatments, and interventions under 
section 1899B(b)(1)(B)(iii) of the Act. The proposed data element 
consists of a single Invasive Mechanical Ventilator data element which, 
for LTCHs, will be collected from the Invasive Mechanical Ventilator 
(Weaning) and Invasive Mechanical Ventilator (Non-Weaning) data 
elements that are already included on the LCDS. For more information on 
the Invasive Mechanical Ventilator data element, we refer readers to 
the document titled, Proposed

[[Page 20108]]

Specifications for LTCH QRP Quality Measures and Standardized Data 
Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Invasive mechanical ventilation includes ventilators and 
respirators that ventilate the patient through a tube that extends via 
the oral airway into the pulmonary region or through a surgical opening 
directly into the trachea. Thus, assessment of invasive mechanical 
ventilation is important in care planning and risk mitigation. 
Ventilation in this manner is a resource-intensive therapy associated 
with life-threatening conditions without which the patient or resident 
would not survive. However, ventilator use has inherent risks requiring 
close monitoring. Failure to adequately care for the patient or 
resident who is ventilator dependent can lead to iatrogenic events such 
as death, pneumonia and sepsis. Mechanical ventilation further 
signifies the complexity of the patient's underlying medical and or 
surgical condition. Of note, invasive mechanical ventilation is 
associated with high daily and aggregate costs.\423\
---------------------------------------------------------------------------

    \423\ Wunsch, H., Linde-Zwirble, W. T., Angus, D. C., Hartman, 
M. E., Milbrandt, E. B., & Kahn, J. M. (2010). ``The epidemiology of 
mechanical ventilation use in the United States.'' Critical Care Med 
38(10): 1947-1953.
---------------------------------------------------------------------------

    Data elements that capture invasive mechanical ventilation, but 
vary in their level of specificity, are currently in use in the MDS 3.0 
(``Ventilator or respirator'') and LCDS (``Invasive Mechanical 
Ventilator: weaning'' and ``Invasive Mechanical Ventilator: non-
weaning''), and related data elements that assess invasive ventilator 
use and weaning status were tested in the PAC PRD (``Ventilator--
Weaning'' and ``Ventilator--Non-Weaning'') and found feasible for use 
in each of the four PAC settings.
    Clinical and subject matter expert advisors working with our data 
element contractor agreed that assessing Invasive Mechanical Ventilator 
use is feasible in PAC, and would be clinically useful both within and 
across PAC providers.
    To solicit additional feedback on the form of a data element on 
this topic that would be appropriate for standardization, data elements 
that assess invasive ventilator use and weaning status that were tested 
in the PAC PRD (``Ventilator--Weaning'' and ``Ventilator--Non-
Weaning'') were included in a call for public comment that was open 
from August 12 to September 12, 2016 because it was being considered 
for standardization. Several commenters wrote in support of this data 
element, highlighting the importance of this information in supporting 
care coordination and care transitions. Some commenters expressed 
concern about the appropriateness for standardization, given the 
prevalence of ventilator weaning across PAC providers; the timing of 
administration; how weaning is defined; and how it weaning status in 
particular relates to quality of care. These comments guided the 
decision to propose a single data element focused on current use of 
invasive mechanical ventilation only, and does not attempt to capture 
weaning status. A full report of the comments is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    A TEP convened by the data element contractor provided input on the 
proposed data elements. This TEP, held on January 5 and 6, 2017, opined 
that these data elements are appropriate for standardization because 
they would provide useful clinical information to inform care planning 
and care coordination. The TEP affirmed that assessment of these 
services and interventions is standard clinical practice. A full report 
of the TEP discussion is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing that the Invasive Mechanical Ventilator 
data element that assesses the use of an invasive mechanical 
ventilator, but does not assess weaning status, meets the definition of 
standardized patient assessment data with respect to special services, 
treatments, and interventions under section 1899B(b)(1)(B)(iii) of the 
Act. However, and as noted above, two data elements that capture 
invasive mechanical ventilator use and weaning status are already 
included on the LCDS: Invasive Mechanical Ventilator (Weaning) and 
Invasive Mechanical Ventilator (Non-Weaning) data elements. Because 
these two existing data elements both indicate the same information, 
the presence of invasive ventilator use, we propose that these existing 
data elements will provide the necessary data on invasive mechanical 
ventilation use required for standardization. The inclusion of weaning 
status pertains to other purposes in the LCDS, and does not disrupt the 
intended standardization of the overarching indication of ventilator 
use. For purposes of reporting for the FY 2020 LTCH QRP, LTCHs will be 
required to report these data with respect to LTCH admissions and 
discharges that occur between April 1, 2018 and December 31, 2018. 
Following the initial reporting year for the FY 2020 LTCH QRP, 
subsequent years for the LTCH QRP would be based on a full calendar 
year of such data reporting.
    We are inviting public comment on these proposals.
 Other Treatment: Intravenous (IV) Medications (Antibiotics, 
Anticoagulation, Other)
    We are proposing that the IV Medications (Antibiotics, 
Anticoagulation, Other) data elements meet the definition of 
standardized patient assessment data with respect to special services, 
treatments, and interventions under section 1899B(b)(1)(B)(iii) of the 
Act. The proposed data elements consist of the principal IV Medications 
data element and three sub-elements, Antibiotics, Anticoagulation, and 
Other. For more information on the IV Medications (Antibiotics, 
Anticoagulation, Other) data element, we refer readers to the document 
titled, Proposed Specifications for LTCH QRP Quality Measures and 
Standardized Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    IV medications are solutions of a specific medication (for example, 
antibiotics, anticoagulants) administered directly into the venous 
circulation via a syringe or intravenous catheter (tube). IV 
medications are administered via intravenous push (bolus), single, 
intermittent, or continuous infusion through a tube placed into the 
vein (for example, commonly referred to as central, midline, or 
peripheral ports). Further, IV medications are more resource intensive 
to administer than oral medications, and signify a higher patient 
complexity (and often higher severity of illness).
    The clinical indications for each of the sub-elements of the IV 
Medication data element (Antibiotics, Anticoagulants, and Other) are 
very different. IV antibiotics are used for severe infections when: (1) 
The bioavailability of the oral form of the medication would be 
inadequate to kill the pathogen; (2) an oral form of the

[[Page 20109]]

medication does not exist; or (3) the patient is unable to take the 
medication by mouth. IV anticoagulants refer to anti-clotting 
medications (that is, ``blood thinners''), often used for the 
prevention and treatment of deep vein thrombosis and other 
thromboembolic complications. IV anticoagulants are commonly used in 
patients with limited mobility (either chronically or acutely, in the 
post-operative setting), who are at risk of deep vein thrombosis, or 
patients with certain cardiac arrhythmias such as atrial fibrillation. 
The indications, risks, and benefits of each of these classes of IV 
medications are distinct, making it important to assess each separately 
in PAC. Knowing whether or not patients are receiving IV medication and 
the type of medication provided by each PAC provider will improve 
quality of care.
    The principal IV Medication data element is currently in use on the 
MDS 3.0 and there is a related data element in OASIS-C2 that collects 
information on Intravenous and Infusion Therapies. One sub-element of 
the proposed data elements, IV Anti-coagulants, and two other data 
elements related to IV therapy (IV Vasoactive Medications and IV 
Chemotherapy), were tested in the PAC PRD and found feasible for use in 
that the data collection aligned with usual work flow in each of the 
four PAC settings, demonstrating the feasibility of collecting IV 
medication information, including type of IV medication, through 
similar data elements in these settings.
    Clinical and subject matter expert advisors working with our data 
element contractor agreed that standardized collection of information 
on medications, including IV medications, would be feasible in PAC, and 
assess an important treatment that would be clinically useful both 
within and across PAC provider types.
    We solicited public comment on a related data element, Vasoactive 
Medications, from August 12 to September 12, 2016. While commenters 
supported this data element with one noting the importance of this data 
element in supporting care transitions, others criticized the need for 
collecting specifically on Vasoactive Medications, giving feedback that 
the data element was too narrowly focused. In addition, comment 
received indicated that the clinical significance of vasoactive 
medications administration alone was not high enough in PAC to merit 
mandated assessment, noting that related and more useful information 
could be captured in an item that assessed all IV medication use.
    Overall, public comment indicated the importance of including the 
additional check box data elements to distinguish particular classes of 
medications. A full report of the comments is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    A TEP convened by the data element contractor provided input on the 
proposed data elements. This TEP, held on January 5 and 6, 2017, opined 
that these data elements are appropriate for standardization because 
they would provide useful clinical information to inform care planning 
and care coordination. The TEP affirmed that assessment of these 
services and interventions is standard clinical practice. A full report 
of the TEP discussion is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing that the IV Medications (Antibiotics, 
Anticoagulation, Other) data elements with a principal data element and 
three sub-elements meet the definition of standardized patient 
assessment data with respect to special services, treatments, and 
interventions under section 1899B(b)(1)(B)(iii) of the Act. We are 
proposing to add the IV Medications (Antibiotics, Anticoagulation, 
Other) data element to the LCDS, and that LTCHs would be required to 
report these data for the FY 2020 LTCH QRP with respect to LTCH 
admissions and discharges that occur between April 1, 2018 and December 
31, 2018. Following the initial reporting year for the FY 2020 LTCH 
QRP, subsequent years for the LTCH QRP would be based on a full 
calendar year of such data reporting.
    We are inviting public comment on these proposals.
 Other Treatment: Transfusions
    We are proposing that the Transfusions data element meets the 
definition of standardized patient assessment data element with respect 
to special services, treatments, and interventions under section 
1899B(b)(1)(B)(iii) of the Act. The proposed data element consists of 
the single Transfusions data element. For more information on the 
Transfusions data element, we refer readers to the document titled, 
Proposed Specifications for LTCH QRP Quality Measures and Standardized 
Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Transfusion refers to introducing blood, blood products, or other 
fluid into the circulatory system of a person. Blood transfusions are 
based on specific protocols, with multiple safety checks and monitoring 
required during and after the infusion in case of adverse events. 
Coordination with the provider's blood bank is necessary, as well as 
documentation by clinical staff to ensure compliance with regulatory 
requirements. In addition, the need for transfusions signifies 
underlying patient complexity that is likely to require care 
coordination and patient monitoring, and impacts planning for 
transitions of care, as transfusions are not performed by all PAC 
providers.
    The proposed data element was selected from three existing 
assessment items on transfusions and related services, currently in use 
in the MDS 3.0 (``Transfusions'') and OASIS-C2 (``Intravenous or 
Infusion Therapy''), and a data element tested in the PAC PRD (``Blood 
Transfusions''), that was found feasible for use in each of the four 
PAC settings. We chose to propose the MDS version because of its 
greater level of specificity over the OASIS-C2 data element. This 
selection was informed by expert advisors and reviewed and supported in 
the proposed form by the Standardized Patient Assessment Data TEP held 
by our data element contractor on January 5 and 6, 2017. A full report 
of the TEP discussion is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing that the Transfusions data element that 
is currently in use in the MDS meets the definition of standardized 
patient assessment data with respect to special services, treatments, 
and interventions under section 1899B(b)(1)(B)(iii) of the Act. We are 
proposing to add the Transfusions data element to the LCDS, and that 
LTCHs would be required to report these data for the FY 2020 LTCH QRP 
with respect to LTCH admissions and discharges that occur between April 
1, 2018 and December 31, 2018. Following the initial reporting year for 
the FY 2020 LTCH QRP, subsequent years for the LTCH QRP would be based 
on a full calendar year of such data reporting.

[[Page 20110]]

    We are inviting public comment on these proposals.
 Other Treatment: Dialysis (Hemodialysis, Peritoneal Dialysis)
    We are proposing that the Dialysis (Hemodialysis, Peritoneal 
dialysis) data elements meet the definition of standardized patient 
assessment data with respect to special services, treatments, and 
interventions under section 1899B(b)(1)(B)(iii) of the Act. The 
proposed data elements consist of the principal Dialysis data element 
and two sub-elements, Hemodialysis and Peritoneal dialysis. For more 
information on the Dialysis (Hemodialysis, Peritoneal dialysis) data 
element, we refer readers to the document titled, Proposed 
Specifications for LTCH QRP Quality Measures and Standardized Data 
Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Dialysis is a treatment primarily used to provide replacement for 
lost kidney function. Both forms of dialysis (hemodialysis and 
peritoneal dialysis) are resource intensive, not only during the actual 
dialysis process but before, during and following. Patients and 
residents who need and undergo dialysis procedures are at high risk for 
physiologic and hemodynamic instability from fluid shifts and 
electrolyte disturbances as well as infections that can lead to sepsis. 
Further, patients or residents receiving hemodialysis are often 
transported to a different facility, or at a minimum, to a different 
location in the same facility. Close monitoring for fluid shifts, blood 
pressure abnormalities, and other adverse effects is required prior to, 
during and following each dialysis session. Nursing staff typically 
perform peritoneal dialysis at the bedside, and as with hemodialysis, 
close monitoring is required.
    The principal Dialysis data element is currently included on the 
MDS 3.0 and the LCDS v3.0 and assesses the overall use of dialysis. The 
sub-elements for Hemodialysis and Peritoneal dialysis were tested 
across the four PAC providers in the PAC PRD study, and found to be 
feasible for standardization. Clinical and subject matter expert 
advisors working with our data element contractor opined that the 
standardized assessment of dialysis is feasible in PAC, and that it 
assesses an important treatment that would be clinically useful both 
within and across PAC providers. As the results of expert and public 
feedback, described below, we decided to propose a data element that 
includes both the principal Dialysis data element and the two sub-
elements (hemodialysis and peritoneal dialysis).
    The Hemodialysis data element, which was tested in the PAC PRD, was 
included in a call for public comment that was open from August 12 to 
September 12, 2016. Commenters supported the assessment of hemodialysis 
and recommended that the data element be expanded to include peritoneal 
dialysis. Several commenters supported the Hemodialysis data element, 
noting the relevance of this information for sharing across the care 
continuum to facilitate care coordination and care transitions, the 
potential for this data element to be used to improve quality, and the 
feasibility for use in PAC. In addition, we received comment that the 
item would be useful in improving patient and resident transitions of 
care. Several commenters also stated that peritoneal dialysis should be 
included in a standardized data element on dialysis and recommended 
collecting information on peritoneal dialysis in addition to 
hemodialysis. The rationale for including peritoneal dialysis from 
commenters included the fact that patients and residents receiving 
peritoneal dialysis will have different needs at post-acute discharge 
compared to those receiving hemodialysis or not having any dialysis. 
Based on these comments, the Hemodialysis data element was expanded to 
include a principal Dialysis data element and two sub-elements, 
hemodialysis and peritoneal dialysis; these are the same two data 
elements that were tested in the PAC PRD. This expanded version, 
Dialysis (Hemodialysis, Peritoneal dialysis), are the data elements 
being proposed. A full report of the comments is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    We note that the Dialysis (Hemodialysis, Peritoneal dialysis) data 
elements were also supported by the TEP that discussed candidate data 
elements for Special Services, Treatments, and Interventions during a 
meeting on January 5 and 6, 2017. A full report of the TEP discussion 
is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing that the Dialysis (Hemodialysis, 
Peritoneal dialysis) data elements with a principal data element and 
two sub-elements meet the definition of standardized patient assessment 
data with respect to special services, treatments, and interventions 
under section 1899B(b)(1)(B)(iii) of the Act. We are proposing to 
expand the Dialysis data element in current use on the LCDS to include 
sub-elements for Hemodialysis and Peritoneal dialysis. For the purposes 
of reporting for the FY 2020 LTCH QRP, LTCHs would be required to 
report these data with respect to LTCH admissions and discharges that 
occur between April 1, 2018 and December 31, 2018. Following the 
initial reporting year for the FY 2020 LTCH QRP, subsequent years for 
the LTCH QRP would be based on a full calendar year of such data 
reporting.
    We are inviting public comment on these proposals.
 Other Treatment: Intravenous (IV) Access (Peripheral IV, 
Midline, Central line, Other)
    We are proposing that the IV Access (Peripheral IV, Midline, 
Central line, Other) data elements meet the definition of standardized 
patient assessment data element with respect to special services, 
treatments, and interventions under section 1899B(b)(1)(B)(iii) of the 
Act. The proposed data elements consist of the principal IV Access data 
element and four sub-elements, Peripheral IV, Midline, Central line, 
and Other. For more information on the IV Access data element, we refer 
readers to the document titled, Proposed Specifications for LTCH QRP 
Quality Measures and Standardized Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Patients or residents with central lines, including those 
peripherally inserted or who have subcutaneous central line ``port'' 
access, always require vigilant nursing care to keep patency of the 
lines and ensure that such invasive lines remain free from any 
potentially life-threatening events such as infection, air embolism, or 
bleeding from an open lumen. Clinically complex patients and residents 
are likely to be receiving medications or nutrition intravenously. The 
sub-elements included in the IV Access data elements distinguish 
between peripheral access and different types of central access. The 
rationale for distinguishing between a peripheral IV and central IV 
access is

[[Page 20111]]

that central lines confer higher risks associated with life-threatening 
events such as pulmonary embolism, infection, and bleeding.
    The proposed IV Access (Peripheral IV, Midline, Central line, 
Other) data elements are not currently included on any of the mandated 
PAC assessment instruments. However, related data elements (for 
example, IV Medication in MDS 3.0 for SNF, Intravenous or infusion 
therapy in OASIS-C2 for HHAs) currently assess types of IV access. 
Several related data elements that describe types of IV access (for 
example, Central Line Management, IV Vasoactive Medications) were 
tested across the four PAC providers in the PAC PRD study, and found to 
be feasible for standardization.
    Clinical and subject matter expert advisors working with our data 
element contractor agreed that assessing type of IV access would be 
feasible for use in PAC and that it assesses an important treatment 
that would be clinically useful both within and across PAC provider 
types.
    We asked for public comment on one of the PAC PRD data elements, 
Central Line Management, from August 12 to September 12, 2016. A 
central line is one type of IV access. Commenters supported the 
assessment of central line management and recommended that the data 
element be broadened to also include other types of IV access. Several 
commenters supported the data element, noting feasibility and 
importance for facilitating care coordination and care transitions. 
However, a few commenters recommended that the definition of this data 
element be broadened to include peripherally inserted central catheters 
(``PICC lines'') and midline IVs. Based on public comment feedback and 
in consultation with clinical and subject matters experts, we expanded 
the Central Line Management data element to include more types of IV 
access (Peripheral IV, Midline, Central line, Other). This expanded 
version, IV Access (Peripheral IV, Midline, Central line, Other), are 
the data elements being proposed. A full report of the comments is 
available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    We note that the IV Access (Peripheral IV, Midline, Central line, 
Other) data elements were supported by the TEP that discussed candidate 
data elements for Special Services, Treatments, and Interventions 
during a meeting on January 5 and 6, 2017. A full report of the TEP 
discussion is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing that the IV access (Peripheral IV, 
Midline, Central line, Other) data elements with a principal data 
element and four sub-elements meet the definition of standardized 
patient assessment data with respect to special services, treatments, 
and interventions under section 1899B(b)(1)(B)(iii) of the Act. We are 
proposing to add the IV Access (Peripheral IV, Midline, Central line, 
Other) data elements to the LCDS and that LTCHs would be required to 
report these data for the FY 2020 LTCH QRP with respect to LTCH 
admissions and discharges that occur between April 1, 2018 and December 
31, 2018. Following the initial reporting year for the FY 2020 LTCH 
QRP, subsequent years for the LTCH QRP would be based on a full 
calendar year of such data reporting.
    We are inviting public comment on these proposals.
 Nutritional Approach: Parenteral/IV Feeding
    We are proposing that the Parenteral/IV Feeding data element meets 
the definition of standardized patient assessment data with respect to 
special services, treatments, and interventions under section 
1899B(b)(1)(B)(iii) of the Act. The proposed data element consists of 
the single Parenteral/IV Feeding data element. For more information on 
the Parenteral/IV Feeding data element, we refer readers to the 
document titled, Proposed Specifications for LTCH QRP Quality Measures 
and Standardized Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Parenteral/IV Feeding refers to a patient or resident being fed 
intravenously using an infusion pump, bypassing the usual process of 
eating and digestion. The need for IV/parenteral feeding indicates a 
clinical complexity that prevents the patient or resident from meeting 
his/her nutritional needs enterally, and is more resource intensive 
than other forms of nutrition, as it often requires monitoring of blood 
chemistries, and maintenance of a central line. Therefore, assessing a 
patient or resident's need for parenteral feeding is important for care 
planning and resource use. In addition to the risks associated with 
central and peripheral intravenous access, total parenteral nutrition 
is associated with significant risks such as embolism and sepsis.
    The Parenteral/IV Feeding data element is currently in use in the 
MDS 3.0, and equivalent or related data elements are in use in the 
LCDS, IRF-PAI, and the OASIS-C2. An equivalent data element was tested 
in the PAC PRD (``Total Parenteral Nutrition'') and found feasible for 
use in each of the four PAC settings, demonstrating the feasibility of 
collecting information about this nutritional service in these 
settings.
    Total Parenteral Nutrition (an item with the same meaning as the 
proposed data element, but with the label used in the PAC PRD) was 
included in a call for public comment that was open from August 12 to 
September 12, 2016. Several commenters supported this data element, 
noting its relevance to facilitating care coordination and supporting 
care transitions. After the public comment period, the Total Parenteral 
Nutrition data element was re-named Parenteral/IV Feeding, to be 
consistent with how this data element is referred to in the MDS. A full 
report of the comments is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    A TEP convened by the data element contractor provided input on the 
proposed data elements. This TEP, held on January 5 and 6, 2017, opined 
that these data elements are appropriate for standardization because 
they would provide useful clinical information to inform care planning 
and care coordination. The TEP affirmed that assessment of these 
services and interventions is standard clinical practice.
    A full report of the TEP discussion is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing that the Parenteral/IV Feeding data 
element meets the definition of standardized patient assessment data 
with respect to special services, treatments, and interventions under 
section 1899B(b)(1)(B)(iii) of the Act. We are proposing to retain and 
rename the existing and equivalent Total Parenteral Nutrition data 
element to be Parenteral/IV Feeding on the LCDS, and that LTCHs would 
be required to report these data for the FY 2020 LTCH QRP

[[Page 20112]]

with respect to LTCH admissions and discharges that occur between April 
1, 2018 and December 31, 2018. Following the initial reporting year for 
the FY 2020 LTCH QRP, subsequent years for the LTCH QRP would be based 
on a full calendar year of such data reporting.
    We are inviting public comment on these proposals.
 Nutritional Approach: Feeding Tube
    We are proposing that the Feeding Tube data element meets the 
definition of standardized patient assessment data with respect to 
special services, treatments, and interventions under section 
1899B(b)(1)(B)(iii) of the Act. The proposed data element consists of 
the single Feeding Tube data element. For more information on the 
Feeding Tube data element, we refer readers to the document titled, 
Proposed Specifications for LTCH QRP Quality Measures and Standardized 
Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    The majority of patients admitted to acute care hospitals 
experience deterioration of their nutritional status during their 
hospital stay, making assessment of nutritional status and method of 
feeding if unable to eat orally very important in PAC. A feeding tube 
can be inserted through the nose or the skin on the abdomen to deliver 
liquid nutrition into the stomach or small intestine. Feeding tubes are 
resource intensive and are therefore important to assess for care 
planning and resource use. Patients with severe malnutrition are at 
higher risk for a variety of complications.\424\ In PAC settings, there 
are a variety of reasons that patients and residents may not be able to 
eat orally (including clinical or cognitive status).
---------------------------------------------------------------------------

    \424\ Dempsey, D. T., Mullen, J. L., & Buzby, G. P. (1988). 
``The link between nutritional status and clinical outcome: can 
nutritional intervention modify it?'' Am J of Clinical Nutrition 
47(2): 352-356.
---------------------------------------------------------------------------

    The Feeding Tube data element is currently included in the MDS 3.0 
for SNFs, and in the OASIS-C2 for HHAs, where it is labeled Enteral 
Nutrition. A related data element, collected in the IRF-PAI for IRFs 
(Tube/Parenteral Feeding), assesses use of both feeding tubes and 
parenteral nutrition. The testing of similar nutrition-focused data 
elements in the PAC PRD, and the current assessment of feeding tubes 
and related nutritional services and devices, demonstrates the 
feasibility of collecting information about this nutritional service in 
these settings.
    Clinical and subject matter expert advisors working with our data 
element contractor opined that the Feeding Tube data element is 
feasible for use in PAC, and supported its importance and clinical 
usefulness for patients in PAC settings, due to the increased level of 
nursing care and patient monitoring required for patients who received 
enteral nutrition with this device.
    We solicited additional feedback on an Enteral Nutrition data 
element (an item with the same meaning as the proposed data element, 
but with the label used in the OASIS) in a call for public comment that 
was open from August 12 to September 12, 2016. Several commenters 
supported the data element, noting the importance of assessing enteral 
nutrition status for facilitating care coordination and care 
transitions. After the public comment period, the Enteral Nutrition 
data element used in public comment was re-named Feeding Tube, 
indicating the presence of an assistive device. A full report of the 
comments is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    We note that the Feeding Tube data element was also supported by 
the TEP that discussed candidate data elements for Special Services, 
Treatments, and Interventions during a meeting on January 5 and 6, 
2017. A full report of the TEP discussion is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing that the Feeding Tube data element 
meets the definition of standardized patient assessment data with 
respect to special services, treatments, and interventions under 
section 1899B(b)(1)(B)(iii) of the Act. We are proposing to add the 
Feeding Tube data element to the LCDS and that LTCHs would be required 
to report these data for the FY 2020 LTCH QRP with respect to LTCH 
admissions and discharges that occur between April 1, 2018 and December 
31, 2018. Following the initial reporting year for the FY 2020 LTCH 
QRP, subsequent years for the LTCH QRP would be based on a full 
calendar year of such data reporting.
    We are inviting public comment on these proposals.
 Nutritional Approach: Mechanically Altered Diet
    We are proposing that the Mechanically Altered Diet data element 
meets the definition of standardized patient assessment data with 
respect to special services, treatments, and interventions under 
section 1899B(b)(1)(B)(iii) of the Act. The proposed data element 
consists of the single Mechanically Altered Diet data element. For more 
information on the Mechanically Altered Diet data element, we refer 
readers to the document titled, Proposed Specifications for LTCH QRP 
Quality Measures and Standardized Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    The Mechanically Altered Diet data element refers to food that has 
been altered to make it easier for the patient or resident to chew and 
swallow, and this type of diet is used for patients and residents who 
have difficulty performing these functions. Patients with severe 
malnutrition are at higher risk for a variety of complications.\425\ In 
PAC settings, there are a variety of reasons that patients and 
residents may have impairments related to oral feedings, including 
clinical or cognitive status. The provision of a mechanically altered 
diet may be resource intensive, and can signal difficulties associated 
with swallowing/eating safety, including dysphagia. In other cases, it 
signifies the type of altered food source, such as ground or puree, 
that will enable the safe and thorough ingestion of nutritional 
substances and ensure safe and adequate delivery of nourishment to the 
patient. Often, patients on mechanically altered diets also require 
additional nursing supports such as individual feeding, or direct 
observation, to ensure the safe consumption of the food product. 
Assessing whether a patient or resident requires a mechanically altered 
diet is therefore important for care planning and resource 
identification.
---------------------------------------------------------------------------

    \425\ Dempsey, D. T., Mullen, J. L., & Buzby, G. P. (1988). 
``The link between nutritional status and clinical outcome: can 
nutritional intervention modify it?'' Am J of Clinical Nutrition 
47(2): 352-356.
---------------------------------------------------------------------------

    The proposed data element for a mechanically altered diet is 
currently included on the MDS 3.0 for SNFs. A related data element for 
modified food consistency/supervision is currently included on the IRF-
PAI for IRFs. A related data element is included in the OASIS-C2 for 
HHAs that collects

[[Page 20113]]

information about independent eating that requires ``a liquid, pureed 
or ground meat diet.'' The testing of similar nutrition-focused data 
elements in the PAC PRD, and the current assessment of various 
nutritional services across the four PAC settings, demonstrates the 
feasibility of collecting information about this nutritional service in 
these settings.
    Clinical and subject matter expert advisors working with our data 
element contractor agreed that the proposed Mechanically Altered Diet 
data element is feasible for use in PAC, and it assesses an important 
treatment that would be clinically useful both within and across PAC 
settings. Expert input on the Mechanically Altered Diet data element 
highlighted its importance and clinical usefulness for patients in PAC 
settings, due to the increased monitoring and resource use required for 
patients on special diets. We note that the Mechanically Altered Diet 
data element was also supported by the TEP that discussed candidate 
data elements for Special Services, Treatments, and Interventions 
during a meeting on January 5 and 6, 2017. A full report of the TEP 
discussion is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing that the Mechanically Altered Diet data 
element meets the definition of standardized patient assessment data 
with respect to special services, treatments, and interventions under 
section 1899B(b)(1)(B)(iii) of the Act. We are proposing to add the 
Mechanically Altered Diet data element to the LCDS and that LTCHs would 
be required to report these data for the FY 2020 LTCH QRP with respect 
to LTCH admissions and discharges that occur between April 1, 2018 and 
December 31, 2018. Following the initial reporting year for the FY 2020 
LTCH QRP, subsequent years for the LTCH QRP would be based on a full 
calendar year of such data reporting.
    We are inviting public comment on these proposals.
 Nutritional Approach: Therapeutic Diet
    We are proposing that the Therapeutic Diet data element meets the 
definition of standardized patient assessment data with respect to 
special services, treatments, and interventions under section 
1899B(b)(1)(B)(iii) of the Act. The proposed data element consists of 
the single Therapeutic Diet data element. For more information on the 
Therapeutic Diet data element, we refer readers to the document titled, 
Proposed Specifications for LTCH QRP Quality Measures and Standardized 
Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Therapeutic Diet refers to meals planned to increase, decrease, or 
eliminate specific foods or nutrients in a patient or resident's diet, 
such as a low-salt diet, for the purpose of treating a medical 
condition. The use of therapeutic diets among patients in PAC provides 
insight on the clinical complexity of these patients and their multiple 
comorbidities. Therapeutic diets are less resource intensive from the 
bedside nursing perspective, but do signify one or more underlying 
clinical conditions that preclude the patient from eating a regular 
diet. The communication among PAC providers about whether a patient is 
receiving a particular therapeutic diet is critical to ensure safe 
transitions of care.
    The Therapeutic Diet data element is currently in use in the MDS 
3.0. The testing of similar nutrition-focused data elements in the PAC 
PRD, and the current assessment of various nutritional services across 
the four PAC settings, demonstrates the feasibility of collecting 
information about this nutritional service in these settings.
    Clinical and subject matter expert advisors working with our data 
element contractor supported the importance and clinical usefulness of 
the proposed Therapeutic Diet data element for patients in PAC 
settings, due to the increased monitoring and resource use required for 
patients on special diets, and agreed that it is feasible for use in 
PAC and that it assesses an important treatment that would be 
clinically useful both within and across PAC settings. We note that the 
Therapeutic Diet data element was also supported by the TEP that 
discussed candidate data elements for Special Services, Treatments, and 
Interventions during a meeting on January 5 and 6, 2017.
    Therefore, we are proposing that the Therapeutic Diet data element 
meets the definition of standardized patient assessment data with 
respect to special services, treatments, and interventions under 
section 1899B(b)(1)(B)(iii) of the Act. We are proposing to add the 
Therapeutic Diet data element to the LCDS, and that LTCHs would be 
required to begin reporting these data for the FY 2020 LTCH QRP with 
respect to LTCH admissions and discharges that occur between April 1, 
2018 and December 31, 2018. Following the initial reporting year for 
the FY 2020 LTCH QRP, subsequent years for the LTCH QRP would be based 
on a full calendar year of such data reporting.
    We are inviting public comment on these proposals.
(4) Medical Condition and Comorbidity Data
    We are proposing that the data elements needed to calculate the 
current measure, Percent of Residents or Patients with Pressure Ulcers 
That Are New or Worsened (Short Stay) (NQF #0678), and the proposed 
measure, Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/
Injury, meet the definition of standardized patient assessment data 
with respect to medical conditions and co-morbidities under section 
1899B(b)(1)(B)(iv) of the Act, and that the successful reporting of 
that data under section 1886(m)(5)(F)(i) of the Act would also satisfy 
the requirement to report standardized patient assessment data under 
section 1886(m)(5)(F)(ii) of the Act.
    ``Medical conditions and comorbidities'' and the conditions 
addressed in the standardized data elements used in the calculation and 
risk adjustment of these measures, that is, the presence of pressure 
ulcers, diabetes, incontinence, peripheral vascular disease or 
peripheral arterial disease, mobility, as well as low body mass index, 
are all health-related conditions that indicate medical complexity that 
can be indicative of underlying disease severity and other 
comorbidities.
    Specifically, the data elements used in the measure are important 
for care planning and provide information pertaining to medical 
complexity. Pressure ulcers are serious wounds representing poor 
outcomes, and can result in sepsis and death. Assessing skin condition, 
care planning for pressure ulcer prevention and healing, and informing 
providers about their presence in patient transitions of care is a 
customary and best practice. Venous and arterial disease and diabetes 
are associated with low blood flow which may increase the risk of 
tissue damage. These diseases are indicators of factors that may place 
individuals at risk for pressure ulcer development and are therefore 
important for care planning. Low BMI, which may be an indicator of 
underlying disease severity, may be associated with loss of fat and 
muscle, resulting in potential risk for pressure ulcers. Bowel 
incontinence, and the possible maceration to the skin associated, can 
lead to higher risk for

[[Page 20114]]

pressure ulcers. In addition, the bacteria associated with bowel 
incontinence can complicate current wounds and cause local infection. 
Mobility is an indicator of impairment or reduction in mobility and 
movement which is a major risk factor for the development of pressure 
ulcers. Taken separately and together, these data elements are 
important for care planning, transitions in services and identifying 
medical complexities.
    In sections IX.C.7.a. and IX.C.10.a. of the preamble of this 
proposed rule, we discuss our rationale for proposing that the data 
elements used in the measures meet the definition of standardized 
patient assessment data. In summary, we believe that the collection of 
such assessment data is important for multiple reasons, including 
clinical decision support, care planning, and quality improvement, and 
that the data elements assessing pressure ulcers and the data elements 
used to risk adjust showed good reliability. We solicited stakeholder 
feedback on the quality measure, and the data elements from which it is 
derived, by means of a public comment period and TEPs, as described in 
section IX.C.7.a. of the preamble of this proposed rule.
    We are inviting public comment on this proposal.
(5) Impairment Data
    Hearing and vision impairments are conditions that, if unaddressed, 
affect activities of daily living, communication, physical functioning, 
rehabilitation outcomes, and overall quality of life. Sensory 
limitations can lead to confusion in new settings, increase isolation, 
contribute to mood disorders, and impede accurate assessment of other 
medical conditions. Failure to appropriately assess, accommodate, and 
treat these conditions increases the likelihood that patients will 
require more intensive and prolonged treatment. Onset of these 
conditions can be gradual, so individualized assessment with accurate 
screening tools and follow-up evaluations are essential to determining 
which patients need hearing- or vision-specific medical attention or 
assistive devices and accommodations, including auxiliary aids and/or 
services, and to ensure that person-directed care plans are developed 
to accommodate a patient's needs. Accurate diagnosis and management of 
hearing or vision impairment would likely improve rehabilitation 
outcomes and care transitions, including transition from institutional-
based care to the community. Accurate assessment of hearing and vision 
impairment would be expected to lead to appropriate treatment, 
accommodations, including the provision of auxiliary aids and services 
during the stay, and ensure that patients continue to have their vision 
and hearing needs met when they leave the facility.
    Accurate individualized assessment, treatment, and accommodation of 
hearing and vision impairments of patients and residents in PAC would 
be expected to have a positive impact on the National Quality 
Strategy's domains of patient and family engagement, patient safety, 
care coordination, clinical process/effectiveness, and efficient use of 
health care resources. For example, standardized assessment of hearing 
and vision impairments used in PAC will support ensuring patient safety 
(for example, risk of falls), identifying accommodations needed during 
the stay, and appropriate support needs at the time of discharge or 
transfer. Standardized assessment of these data elements will enable or 
support clinical decision-making and early clinical intervention; 
person-centered, high quality care (for example, facilitating better 
care continuity and coordination); better data exchange and 
interoperability between settings; and longitudinal outcome analysis. 
Hence, reliable data elements assessing hearing and vision impairments 
are needed to initiate a management program that can optimize a patient 
or resident's prognosis and reduce the possibility of adverse events.
 Hearing
    We are proposing that the Hearing data element meets the definition 
of standardized patient assessment data with respect to impairments 
under section 1899B(b)(1)(B)(v) of the Act. The proposed data element 
consists of the single Hearing data element. This data element assesses 
level of hearing impairment, and consists of one question. For more 
information on the Hearing data element, we refer readers to the 
document titled, Proposed Specifications for LTCH QRP Quality Measures 
and Standardized Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Accurate assessment of hearing impairment is important in the PAC 
setting for care planning and resource use. Hearing impairment has been 
associated with lower quality of life, including poorer physical, 
mental, and social functioning, and emotional health.426 427 
Treatment and accommodation of hearing impairment led to improved 
health outcomes, including but not limited to quality of life.\428\ For 
example, hearing loss in elderly individuals has been associated with 
depression and cognitive impairment,429 430 431 higher rates 
of incident cognitive impairment and cognitive decline,\432\ and less 
time in occupational therapy.\433\ Accurate assessment of hearing 
impairment is important in the PAC setting for care planning and 
defining resource use.
---------------------------------------------------------------------------

    \426\ Dalton DS, Cruickshanks KJ, Klein BE, Klein R, Wiley TL, 
Nondahl DM. The impact of hearing loss on quality of life in older 
adults. Gerontologist. 2003;43(5):661-668.
    \427\ Hawkins K, Bottone FG, Jr., Ozminkowski RJ, et al. The 
prevalence of hearing impairment and its burden on the quality of 
life among adults with Medicare Supplement Insurance. Qual Life Res. 
2012;21(7):1135-1147.
    \428\ Horn KL, McMahon NB, McMahon DC, Lewis JS, Barker M, 
Gherini S. Functional use of the Nucleus 22-channel cochlear implant 
in the elderly. The Laryngoscope. 1991;101(3):284-288.
    \429\ Sprinzl GM, Riechelmann H. Current trends in treating 
hearing loss in elderly people: a review of the technology and 
treatment options--a mini-review. Gerontology. 2010;56(3):351-358.
    \430\ Lin FR, Thorpe R, Gordon-Salant S, Ferrucci L. Hearing 
Loss Prevalence and Risk Factors Among Older Adults in the United 
States. The Journals of Gerontology Series A: Biological Sciences 
and Medical Sciences. 2011;66A(5):582-590.
    \431\ Hawkins K, Bottone FG, Jr., Ozminkowski RJ, et al. The 
prevalence of hearing impairment and its burden on the quality of 
life among adults with Medicare Supplement Insurance. Qual Life Res. 
2012;21(7):1135-1147.
    \432\ Lin FR, Metter EJ, O'Brien RJ, Resnick SM, Zonderman AB, 
Ferrucci L. Hearing Loss and Incident Dementia. Arch Neurol. 
2011;68(2):214-220.
    \433\ Cimarolli VR, Jung S. Intensity of Occupational Therapy 
Utilization in Nursing Home Residents: The Role of Sensory 
Impairments. J Am Med Dir Assoc. 2016;17(10):939-942.
---------------------------------------------------------------------------

    The proposed data element was selected from two forms of the 
Hearing data element based on expert and stakeholder feedback. We 
considered the two forms of the Hearing data element, one of which is 
currently in use in the MDS 3.0 (Hearing) and another data element with 
different wording and fewer response option categories that is 
currently in use in the OASIS-C2 (Ability to Hear). Ability to Hear was 
also tested in the PAC PRD and found to have substantial agreement for 
inter-rater reliability across PAC settings (kappa of 0.78).\434\
---------------------------------------------------------------------------

    \434\ Gage B., Smith L., Ross J. et al. (2012). The Development 
and Testing of the Continuity Assessment Record and Evaluation 
(CARE) Item Set (Final Report on Reliability Testing, Volume 2 of 
3). Research Triangle Park, NC: RTI International.
---------------------------------------------------------------------------

    Several data elements that assess hearing impairment were presented 
to the Standardized Patient Assessment Data TEP held by our data 
element contractor. The TEP did not reach consensus on the ideal number 
of

[[Page 20115]]

response categories or phrasing of response options, which are the 
primary differences between the current MDS (Hearing) and OASIS 
(Ability to Hear) items. The Development and Maintenance of Post-Acute 
Care Cross-Setting Standardized Patient Assessment Data Technical 
Expert Panel Summary Report is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    The PAC PRD form of the data element (Ability to Hear) was included 
in a call for public comment that was open from August 12 to September 
12, 2016. This data element includes three response choices, in 
contrast to the Hearing data element (in use in the MDS 3.0 and being 
proposed for standardization), which includes four response choices. 
Several commenters supported the use of the Ability to Hear data 
element, although some commenters raised concerns that the three-level 
response choice was not compatible with the current, four-level 
response used in the MDS, and favored the use of the MDS version of the 
Hearing data element. In addition, we received comments stating that 
standardized assessment related to hearing impairment has the ability 
to improve quality of care if information on hearing is included in 
medical records of patients and residents, which would improve care 
coordination and facilitate the development of patient- and resident-
centered treatment plans. Based on comments that the three-level 
response choice (Ability to Hear) was not congruent with the current, 
four-level response used in the MDS (Hearing), and support for the use 
of the MDS version of the Hearing data element received in the public 
comment, we are proposing the Hearing data element. A full report of 
the comments is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Therefore, we are proposing the Hearing data element currently in 
use in the MDS. We are proposing to add the Hearing data element to the 
LCDS. LTCHs would be required to report these data for the FY 2020 LTCH 
QRP with respect to LTCH admissions that occur between April 1, 2018 
and December 31, 2018. Following the initial reporting year for the FY 
2020 LTCH QRP, subsequent years for the LTCH QRP would be based on a 
full calendar year of such data reporting. The Hearing data element 
would be assessed at admission only due to the relatively stable nature 
of hearing impairment, making it unlikely that this assessment would 
change between the start and end of the PAC stay. Assessment at 
discharge would introduce additional burden without improving the 
quality or usefulness of the data, and we believe it is unnecessary.
    We are inviting public comment on these proposals.
 Vision
    We are proposing that the Vision data element meets the definition 
of standardized patient assessment data element with respect to 
impairments under section 1899B(b)(1)(B)(v) of the Act. The proposed 
data element consists of the single Vision (Ability To See in Adequate 
Light) data element that consists of one question with five response 
categories. For more information on the Vision data element, we refer 
readers to the document titled, Proposed Specifications for LTCH QRP 
Quality Measures and Standardized Data Elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Evaluation of an individual's ability to see is important for 
assessing for risks such as falls and provides opportunities for 
improvement through treatment and the provision of accommodations, 
including auxiliary aids and services, which can safeguard patients and 
improve their overall quality of life. Further, vision impairment is 
often a treatable risk factor associated with adverse events and poor 
quality of life. For example, individuals with visual impairment are 
more likely to experience falls and hip fracture, have less mobility, 
and report depressive symptoms.435 436 437 438 439 440 441
---------------------------------------------------------------------------

    \435\ Colon-Emeric CS, Biggs DP, Schenck AP, Lyles KW. Risk 
factors for hip fracture in skilled nursing facilities: who should 
be evaluated? Osteoporos Int. 2003;14(6):484-489.
    \436\ Freeman EE, Munoz B, Rubin G, West SK. Visual field loss 
increases the risk of falls in older adults: the Salisbury eye 
evaluation. Invest Ophthalmol Vis Sci. 2007;48(10):4445-4450.
    \437\ Keepnews D, Capitman JA, Rosati RJ. Measuring patient-
level clinical outcomes of home health care. J Nurs Scholarsh. 
2004;36(1):79-85.
    \438\ Nguyen HT, Black SA, Ray LA, Espino DV, Markides KS. 
Predictors of decline in MMSE scores among older Mexican Americans. 
J Gerontol A Biol Sci Med Sci. 2002;57(3):M181-185.
    \439\ Prager AJ, Liebmann JM, Cioffi GA, Blumberg DM. Self-
reported Function, Health Resource Use, and Total Health Care Costs 
Among Medicare Beneficiaries With Glaucoma. JAMA ophthalmology. 
2016;134(4):357-365.
    \440\ Rovner BW, Ganguli M. Depression and disability associated 
with impaired vision: the MoVies Project. J Am Geriatr Soc. 
1998;46(5):617-619.
    \441\ Tinetti ME, Ginter SF. The nursing home life-space 
diameter. A measure of extent and frequency of mobility among 
nursing home residents. J Am Geriatr Soc. 1990;38(12):1311-1315.
---------------------------------------------------------------------------

    Individualized initial screening can lead to life-improving 
interventions such as accommodations, including the provision of 
auxiliary aids and services, during the stay and/or treatments that can 
improve vision and prevent or slow further vision loss. For patients 
with some types of visual impairment, use of glasses and contact lenses 
can be effective in restoring vision.\442\ Other conditions, including 
glaucoma \443\ and age-related macular degeneration,444 445 
have responded well to treatment. In addition, vision impairment is 
often a treatable risk factor associated with adverse events which can 
be prevented and accommodated during the stay. Accurate assessment of 
vision impairment is important in the LTCH setting for care planning 
and defining resource use.
---------------------------------------------------------------------------

    \442\ Rein DB, Wittenborn JS, Zhang X, et al. The Cost-
effectiveness of Welcome to Medicare Visual Acuity Screening and a 
Possible Alternative Welcome to Medicare Eye Evaluation Among 
Persons Without Diagnosed Diabetes Mellitus. Archives of 
ophthalmology. 2012;130(5):607-614.
    \443\ Leske M, Heijl A, Hussein M, et al. Factors for glaucoma 
progression and the effect of treatment: The early manifest glaucoma 
trial. Archives of Ophthalmology. 2003;121(1):48-56.
    \444\ Age-Related Eye Disease Study Research G. A randomized, 
placebo-controlled, clinical trial of high-dose supplementation with 
vitamins c and e, beta carotene, and zinc for age-related macular 
degeneration and vision loss: AREDS report no. 8. Archives of 
Ophthalmology. 2001;119(10):1417-1436.
    \445\ Takeda AL, Colquitt J, Clegg AJ, Jones J. Pegaptanib and 
ranibizumab for neovascular age[hyphen]related macular degeneration: 
a systematic review. The British Journal of Ophthalmology. 
2007;91(9):1177-1182.
---------------------------------------------------------------------------

    The Vision data element that we are proposing for standardization 
was tested as part of the development of the MDS 3.0 and is currently 
in use in that assessment. Similar data elements, but with different 
wording and fewer response option categories, are in use in the OASIS-
C2 and was tested in post-acute providers in the PAC PRD and found to 
be clinically relevant, meaningful for care planning, reliable (kappa 
of 0.74),\446\ and feasible for use in each of the four PAC settings.
---------------------------------------------------------------------------

    \446\ Gage B., Smith L., Ross J. et al. (2012). The Development 
and Testing of the Continuity Assessment Record and Evaluation 
(CARE) Item Set (Final Report on Reliability Testing, Volume 2 of 
3). Research Triangle Park, NC: RTI International.
---------------------------------------------------------------------------

    Several data elements that assess vision were presented to the TEP 
held by our data element contractor. The TEP

[[Page 20116]]

did not reach consensus on the ideal number of response categories or 
phrasing of response options, which are the primary differences between 
the current MDS and OASIS items; some members preferring more granular 
response options (for example, mild impairment and moderate impairment) 
while others were comfortable with collapsed response options (that is, 
mild/moderate impairment). The Development and Maintenance of Post-
Acute Care Cross-Setting Standardized Patient Assessment Data Technical 
Expert Panel Summary Report is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html. We solicited public comment from August 12 to September 
12, 2016, on the Ability to See in Adequate Light data element (version 
tested in the PAC PRD with three response categories). The data element 
in public comment differed from the proposed data element, but the 
comments supported the assessment of vision in PAC settings and the 
useful information a vision data element would provide. The commenters 
stated that the Ability to See item would provide important information 
that would facilitate care coordination and care planning, and 
consequently improve the quality of care. Other commenters suggested it 
would be helpful as an indicator of resource use and noted that the 
item would provide useful information about the abilities of patients 
and residents to care for themselves. Additional commenters noted that 
the item could feasibly be implemented across PAC providers and that 
its kappa scores from the PAC PRD support its validity. Some commenters 
noted a preference for MDS version of the Vision data element over the 
form put forward in public comment, citing the widespread use of this 
data element. A full report of the comments is available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014/IMPACT-Act-Downloads-and-Videos.html.
    Clinical and subject matter expert advisors working with our data 
element contractor agreed that assessing vision impairment of patients 
and residents with a standardized data element is feasible in PAC, that 
it can reliably and accurately identify adults with objective impaired 
vision, and that this information about impaired vision would be 
clinically useful to identify needed accommodations and/or treatment 
both within and across PAC settings.
    Therefore, we are proposing the Vision data element from the MDS. 
We are proposing to add the Vision data element to the LCDS and that 
LTCHs would be required to report these data for the FY 2020 LTCH QRP 
with respect to LTCH admissions that occur between April 1, 2018 and 
December 31, 2018. Following the initial reporting year for the FY 2020 
LTCH QRP, subsequent years for the LTCH QRP would be based on a full 
calendar year of such data reporting. The Vision data element would be 
assessed at admission only due to the relatively stable nature of 
vision impairment, making it unlikely that this assessment would change 
between the start and end of the PAC stay. Assessment at discharge 
would introduce additional burden without improving the quality or 
usefulness of the data, and we believe that it is unnecessary.
    We are inviting public comment on these proposals.
11. Proposals Relating to the Form, Manner, and Timing of Data 
Submission Under the LTCH QRP
a. Proposed Start Date for Standardized Patient Assessment Data 
Reporting by New LTCHs
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49749 through 
49752), we adopted timing for new LTCHs to begin reporting quality data 
under the LTCH QRP beginning with the FY 2017 LTCH QRP. We are 
proposing that new LTCHs will be required to begin reporting 
standardized patient assessment data on the same schedule.
    We are inviting public comment on this proposal.
b. Proposed Mechanism for Reporting Standardized Patient Assessment 
Data Beginning With the FY 2019 LTCH QRP
    Under our current policy, LTCHs report data by completing 
applicable sections of the LCDS, and submitting the LCDS to CMS through 
the QIES ASAP system. For more information on LTCH QRP reporting 
through the QIES ASAP system, refer to the ``Related Links'' section at 
the bottom of: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Technical-Information.html.
    The proposed standardized patient assessment data elements are 
already included on, or would be added to, the LCDS. Details regarding 
the LCDS with respect to the proposed standardized assessment data are 
available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    We are inviting public comments on this proposal.
c. Proposed Schedule for Reporting Standardized Patient Assessment Data 
Beginning With the FY 2019 LTCH QRP
    We are proposing that the standardized patient assessment data as 
discussed in section IX.C.10.a. of the preamble of this proposed rule 
necessary to calculate the quality measure ``Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short Stay) 
(NQF #0678)'' would be used for the FY 2019 LTCH QRP. We are also 
proposing that for purposes of the FY 2019 LTCH QRP program year such 
data would only include the last three quarters of calendar year 2017 
(April 1, 2017 through December 31, 2017). In section IX.C.7.a. of the 
preamble of this proposed rule, we proposed to adopt the measure, 
``Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury'' to 
replace the current measure, ``Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay) (NQF # 0678)'' 
with data collection beginning on April 1, 2018. Should the proposed 
measure be finalized, the FY 2020 LTCH QRP will be determined using the 
data from the first quarter of CY 2018 using the current measure, 
``Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678)'' and last three quarters of CY 2018 
using the data from the proposed measure, ``Changes in Skin Integrity 
Post-Acute Care: Pressure Ulcer/Injury.''
    In section IX.C.10.b of the preamble of this proposed rule, we 
discussed the additional standardized patient data proposed beginning 
with the FY 2020 LTCH QRP. Unless otherwise indicated, under our 
current policy, except for the first program year for which a measure 
is adopted, LTCHs must report data on measures with respect to LTCH 
admissions and discharges that occur during the 12 month calendar year 
period that applies to the program year. For the first program year for 
which a measure is adopted, LTCHs are only required to report data for 
LTCH admissions and discharges that occur during the last three 
quarters of the calendar year that applies to that program year, as the 
version of the LTCH CARE Data Set that will contain the new items that 
allow LTCHs to report a new measure, is routinely released on April 1st 
of any given year.

[[Page 20117]]

For example, for the FY 2018 LTCH QRP, data on measures adopted for 
earlier program years must be reported with respect to all CY 2016 LTCH 
admissions and discharges. However, data on new measures adopted for 
the first time for the FY 2018 LTCH QRP must only be reported with 
respect to LTCH admissions and discharges that occur during the last 
three calendar quarters of 2016. This is because the newest iteration 
of the LTCH CARE Data Set would have been scheduled for release on 
April 1, 2016. We are proposing to apply this policy to the reporting 
of standardized patient assessment data beginning with the FY 2020 LTCH 
QRP. The tables below illustrate this policy using the FY 2020 and FY 
2021 LTCH QRP as examples.

    Summary Illustration of Initial Reporting Cycle for Newly Adopted
   Measure and Standardized Patient Assessment Data Reporting Using CY
                       Quarters 2, 3, and 4 Data *
------------------------------------------------------------------------
                                             Proposed data submission
  Proposed data collection/submission     quarterly deadlines beginning
      quarterly reporting period *         with the FY 2020 LTCH QRP *
                                                    [supcaret]
------------------------------------------------------------------------
Q2: CY 2018 4/1/2018-6/30/2018.........  CY 2017 Q2 Deadline: November
                                          15, 2018.
Q3: CY 2018 7/1/2018-9/30/2018.........  CY 2017 Q3 Deadline: February
                                          15, 2019.
Q4: CY 2018 10/1/2018-12/31/2018.......  CY 2017 Q4 Deadline: May 15,
                                          2019.
------------------------------------------------------------------------
* Applies to data reporting using the LTCH CARE Data Set and data
  reporting using the National Healthcare Safety Network.
[supcaret] The term ``FY 2020 LTCH QRP'' means the fiscal year for which
  the LTCH QRP requirements applicable to that fiscal year must be met
  in order for an LTCH to receive the full annual update when
  calculating the payment rates applicable to it for that fiscal year.


   Summary Illustration of Calendar Year Quarterly Reporting Cycle for
      Measure and Standardized Patient Assessment Data Reporting *
------------------------------------------------------------------------
                                             Proposed data submission
  Proposed data collection/submission     quarterly deadlines beginning
      quarterly reporting period *         with the FY 2021 LTCH QRP *
                                                    [supcaret]
------------------------------------------------------------------------
Q1: CY 2019--1/1/2019-3/31/2019........  CY 2018 Q1 Deadline: August 15,
                                          2019.
Q2: CY 2019--4/1/2019-6/30/2019........  CY 2018 Q2 Deadline: November
                                          15, 2019.
Q3: CY 2019--7/1/2019-9/30/2019........  CY 2018 Q3 Deadline: February
                                          15, 2020.
Q4: CY 2019--10/1/2019-12/31/2019......  CY 2018 Q4 Deadline: May 15,
                                          2020.
------------------------------------------------------------------------
* Applies to data reporting using the LTCH CARE Data Set and data
  reporting using the National Healthcare Safety Network.
[supcaret] The term ``FY 2021 LTCH QRP'' means the fiscal year for which
  the LTCH QRP requirements applicable to that fiscal year must be met
  in order for an LTCH to receive the full annual update when
  calculating the payment rates applicable to it for that fiscal year.

    We are inviting public comment on our proposal for standardized 
data reporting beginning with the FY 2019 LTCH QRP and to extend our 
current policy governing the schedule for reporting quality measure 
data to the reporting of standardized patient assessment data beginning 
with the FY 2020 LTCH QRP.
d. Proposed Schedule for Reporting the Proposed Quality Measures 
Beginning With the FY 2020 LTCH QRP
    As discussed in section IX.C.7. of the preamble of this proposed 
rule, we are proposing to adopt three quality measures beginning with 
the FY 2020 LTCH QRP: Changes in Skin Integrity Post-Acute Care: 
Pressure Ulcer/Injury, Compliance with SBT by Day 2 of the LTCH Stay, 
and Ventilator Liberation Rate. We are proposing that LTCHs would 
report data on these measures using the LTCH CARE Data Set that is 
submitted through the QIES ASAP system. LTCHs would be required to 
report these data beginning with LTCH admissions and discharges that 
occur between April 1, 2018 and December 31, 2018. More information on 
LTCH reporting using the QIES ASAP system is located at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Technical-Information.html.
    Under our currently policy, LTCHs would only be required to submit 
data on the proposed measures for the last three quarters of CY 2018 
for purposes of the FY 2020 LTCH QRP. Starting in CY 2019, LTCHs would 
be required to submit data for the entire calendar year beginning with 
the FY 2021 LTCH QRP.
    We are inviting public comment on this proposal.
e. Proposed Removal of Interrupted Stay Items From the LTCH CARE Data 
Set
    We are proposing to remove the program interruption items from the 
LTCH CARE Data Set. Specifically, we are proposing to remove the 
following items: (1) A2500, Program Interruption(s); (2) A2510, Number 
of Program Interruptions During This Stay in This Facility; and (3) 
A2525, Program Interruption Dates, because we do not currently utilize 
this information nor do we have plans to utilize this information for 
the LTCH QRP. For a detailed discussion of burden related to LTCH CARE 
Data Set, we refer readers to section XIV.B.9. of the preamble of this 
proposed rule.
    We are inviting public comment on this proposal.
12. Proposed Changes to Previously Codified Participation Requirements 
Under the LTCH QRP
    We are proposing to revise the regulatory text at Sec.  412.560(a) 
to state that an LTCH must begin submitting quality data, including 
standardized patient assessment 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.
    We are inviting public comments on this proposal.
13. Proposed Changes to Previously Codified Data Submission 
Requirements Under the LTCH QRP
    We are proposing to revise the regulatory text at Sec.  
412.560(b)(1) to require LTCHs to report both data on measures and 
standardized patient assessment data under the LTCH QRP in a form and 
manner, and at a time, specified by CMS.
    We are inviting public comments on this proposal.
14. Proposed Changes to Previously Codified Exception and Extension 
Requirements Under the LTCH QRP
    We are proposing to revise the regulatory text at Sec.  412.560(c) 
to extend

[[Page 20118]]

these policies to the submission of standardized patient assessment 
data beginning with the FY 2019 LTCH QRP.
    We are inviting public comments on this proposal.
15. Proposed Changes to Previously Codified Reconsiderations 
Requirements Under the LTCH QRP
    We are proposing to revise the regulatory text at Sec.  412.560(d) 
to extend these policies to the submission of standardized patient 
assessment data beginning with the FY 2019 LTCH QRP.
    We are inviting public comments on this proposal.
16. Proposal To Apply the LTCH QRP Data Completion Thresholds to the 
Submission of Standardized Patient Assessment Data Beginning With the 
FY 2019 LTCH QRP
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50311 through 
50314), we finalized 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 LTCH QRP, LTCHs must meet or exceed two 
separate data completeness thresholds: One threshold set at 80 percent 
for completion of measures data collected using the LTCH CARE Data Set 
submitted through the QIES ASAP system and a second threshold set at 
100 percent for measures data collected and submitted using the CDC 
NHSN.
    We note that in our finalized policy we included that LTCHs must 
meet or exceed a threshold set at 80 percent for completion of measures 
data collected using the LTCH CARE Data Set submitted through the QIES 
ASAP system. However, some assessment data will not invoke a response 
and, in those circumstances, are not ``missing'' nor is the data 
incomplete. For example, in the case of a patient who does not have any 
of the medical conditions in a ``check all that apply'' listing, the 
absence of a response of a health condition indicates that the 
condition is not present, and it would be incorrect to consider the 
absence of such data as missing in a threshold determination. We are 
inviting public comment on our proposal to extend our current LTCH QRP 
data completion requirements to the reporting of standardized patient 
assessment data.
    We are also proposing to codify these LTCH QRP data completion 
thresholds at a new Sec.  412.560(f) for measures data collected using 
the LTCH CARE Data Set, beginning with the FY 2016 LTCH QRP, and 
standardized patient assessment data elements collected using the LTCH 
CARE Data Set, beginning with the FY 2019 LTCH QRP. Under this section, 
we are proposing to codify that LTCHs must meet or exceed two separate 
data completeness thresholds: 80 percent for completion of measures 
data and standardized patient assessment data collected using the LTCH 
CARE Data Set submitted through the QIES; and 100 percent for measures 
data collected and submitted using the CDC NHSN. These thresholds would 
apply to all measures and data elements adopted into LTCH QRP. An LTCH 
must meet or exceed both thresholds to avoid receiving a 2 percentage 
point reduction to their annual payment update for a given fiscal year, 
beginning with the FY 2016 LTCH QRP for measures data and beginning 
with the FY 2019 LTCH QRP for standardized patient assessment data 
elements.
    We are inviting public comment on our proposal to extend our 
current LTCH QRP data completion requirements to the reporting of 
standardized patient assessment data. We are also inviting public 
comment on our proposal to codify the LTCH QRP data completion 
thresholds at Sec.  412.560(f) for measures and standardized patient 
assessment data elements collected using the LTCH CARE Data Set.
17. Proposals and Policies Regarding Public Display of 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 after ensuring that an LTCH has the opportunity to review its 
data prior to public display. Measure data is currently displayed on 
the Long-Term Care Hospital Compare Web site, which is an interactive 
web tool that assists individuals by providing information on LTCH 
quality of care including those who need to select an LTCH. For more 
information on LTCH Compare, we refer readers to: https://www.medicare.gov/longtermcarehospitalcompare/. In addition, for a more 
detailed discussion about the provider's confidential review process 
prior to public display of quality measures we refer readers to the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57231 through 57236).
    We also finalized the process we use to publish a list of LTCHs 
that successfully meet the reporting requirements for the applicable 
LTCH QRP year on the LTCH QRP Web site in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57231). The list of compliant LTCHs is available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Data-Submission-Deadlines.html.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57231 through 
57236), we finalized the public display of measure data on the LTCH 
Compare Web site in CY 2017 for the following 4 quality measures 
pending the availability of data: (1) NHSN Facility-wide Inpatient 
Hospital-onset MRSA Bacteremia Outcome Measure (NQF #1716); (2) NHSN 
Facility-wide Inpatient Hospital-onset CDI Outcome Measure (NQF #1717); 
(3) Influenza Vaccination Coverage Among Healthcare Personnel (NQF 
#0431); and (4) Percent of Residents or Patients Who Were Assessed and 
Appropriately Given the Seasonal Influenza Vaccine (NQF #0680).
    The public display of NHSN Facility-wide Inpatient Hospital-onset 
MRSA Bacteremia Outcome Measure (NQF #1716) and NHSN Facility-wide 
Inpatient Hospital-onset CDI Outcome Measure (NQF #1717) will initially 
be based on data collected from January 1, 2015 through December 31, 
2015 and will be displayed based on 4 rolling quarters. The Influenza 
Vaccination Coverage Among Healthcare Personnel (NQF #0431) and Percent 
of Residents or Patients Who Were Assessed and Appropriately Given the 
Seasonal Influenza Vaccine (NQF #0680) will be based on the influenza 
vaccination season from October 1, 2015 through March 31, 2016 and will 
be updated annually. We refer readers to the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57231 through 57233) for details on the calculations 
and display of these quality measures.
    In this proposed rule, pending the availability of data, we are 
proposing to publicly report data in CY 2018 for the following 3 
assessment-based measures: (1) Percent of LTCH Patients With an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631); (2) Application of Percent of LTCH 
Patients With an Admission and Discharge Functional Assessment and a 
Care Plan That Addresses Function (NQF #2631); and (3) Application of 
Percent of Residents Experiencing One or More Falls with Major Injury 
(NQF #0674). In addition, pending the availability of data, we are 
proposing to publicly report data in CY 2020 for the assessment-based 
measure Functional Outcome Measure: Change in Mobility Among Patients 
Requiring Ventilator Support (NQF #2632). Data collection for these 4 
new assessment-based

[[Page 20119]]

measures began on April 1, 2016. We are proposing to display data for 
the assessment-based measures based on four rolling quarters of data 
and would initially use discharges from January 1, 2017 through 
December 31, 2017, with the exception of Functional Outcome Measure: 
Change in Mobility Among Patients Requiring Ventilator Support (NQF 
#2632) which would be based on eight rolling quarters of data and would 
initially use discharges from January 1, 2017 through December 31, 
2018.
    In addition, we are proposing to publicly report 3 claims-based 
measures: (1) Medicare Spending Per Beneficiary-PAC LTCH QRP; (2) 
Discharge to Community-PAC LTCH QRP; and (3) Potentially Preventable 
30-Day Post-Discharge Readmission Measure for LTCH QRP.
    These measures were adopted for the LTCH QRP in the FY 2017 rule to 
be based on data from 2 consecutive calendar years. As previously 
adopted in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57233 through 
57236), confidential feedback reports for these 3 claims-based measures 
will be based on calendar years 2015 and 2016 and data collected for 
discharges beginning January 1, 2015 through December 31, 2016. 
However, our current proposal revises the dates for public reporting 
and we are proposing to transition from calendar year to fiscal year to 
make these measure data publicly available by October 2018. Thus, we 
are proposing public reporting beginning in CY 2018 for these claims-
based measures based on fiscal years 2016 and 2017 and data collected 
from discharges beginning October 1, 2015 through September 30, 2017.
    We are proposing to remove the following claims-based measure 
``All-Cause Unplanned Readmission Measure for 30 Days Post Discharge 
from LTCHs'' from the LTCH QRP and public reporting by October 2018. We 
refer readers to section IX.C.8. of the preamble of this proposed rule 
for additional information regarding the proposed removal of this 
measure from quality reporting and public display. We also are 
proposing to remove the following assessment-based measure ``Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678)'' and to replace it with a modified version of 
the measure entitled ``Changes in Skin Integrity Post-Acute Care: 
Pressure Ulcer/Injury'' from the LTCH QRP and public reporting by 
October 2020. We refer readers to section IX.C.7.a. of the preamble of 
this proposed rule for additional information regarding the proposed 
replacement of this measure from quality reporting and public display.
    For the assessment-based measures: Percent of LTCH Patients With an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631); Application of Percent of LTCH Patients 
With an Admission and Discharge Functional Assessment and a Care Plan 
That Addresses Function (NQF #2631); and Application of Percent of 
Residents Experiencing One or More Falls with Major Injury (NQF #0674), 
to ensure the statistical reliability of the measures, we are proposing 
to assign LTCHs with fewer than 20 eligible cases during a performance 
period to a separate category: ``The number of cases/patient stays is 
too small to report.'' If an LTCH had fewer than 20 eligible cases, the 
LTCH's performance would not be publicly reported for the measure for 
that performance period.
    For the claims-based measures: Discharge to Community-PAC LTCH QRP 
and Potentially Preventable 30-Day Post-Discharge Readmission Measure 
for LTCH QRP, to ensure the statistical reliability of the measures, we 
are proposing to assign LTCHs with fewer than 25 eligible cases during 
a performance period to a separate category: ``The number of cases/
patient stays is too small to report.'' If an LTCH had fewer than 25 
eligible cases, the LTCH's performance would not be publicly reported 
for the measure for that performance period. For Medicare Spending Per 
Beneficiary-PAC LTCH QRP, to ensure the statistical reliability of the 
measure, we are proposing to assign LTCHs with fewer than 20 eligible 
cases during a performance period to a separate category: ``The number 
of cases/patient stays is too small to report.'' If an LTCH had fewer 
than 20 eligible cases, the LTCH's performance would not be publicly 
reported for the measure for that performance period.

  Previously Finalized and Proposed Measures for CY 2018 Public Display
                    and Confidential Feedback Reports
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Previously Finalized Measures:
    Percent of Residents or Patients with Pressure Ulcers That Are New
     or Worsened (Short Stay) (NQF #0678).
    National Healthcare Safety Network (NHSN) Catheter-Associated
     Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138).
    National Healthcare Safety Network (NHSN) Central Line-Associated
     Bloodstream Infection (CLABSI) Measure (NQF #0139).
    NHSN Facility-wide Inpatient Hospital-onset Methicillin-resistant
     Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF
     #1716).
    NHSN Facility-wide Inpatient Hospital-onset Clostridium difficile
     Infection (CDI) Outcome Measure (NQF #1717).
    Influenza Vaccination Coverage Among Healthcare Personnel (NQF
     #0431).
    Percent of Residents or Patients Who Were Assessed and Appropriately
     Given the Seasonal Influenza Vaccine (NQF #0680).
Proposed Measures:
    Percent of Long-Term Care Hospital (LTCH) Patients With an Admission
     and Discharge Functional Assessment and a Care Plan That Addresses
     Function (NQF #2631).
    Application of Percent of Long-Term Care Hospital (LTCH) Patients
     With an Admission and Discharge Functional Assessment and a Care
     Plan That Addresses Function (NQF #2631).
    Application of Percent of Residents Experiencing One or More Falls
     with Major Injury (NQF #0674).
    Medicare Spending Per Beneficiary-PAC LTCH QRP.
    Discharge to Community-PAC LTCH QRP.
    Potentially Preventable 30-Day Post-Discharge Readmission Measure
     for LTCH QRP.
------------------------------------------------------------------------


 Proposed Additional Measure for CY 2020 Public Display and Confidential
                            Feedback Reports
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Functional Outcome Measure: Change in Mobility Among Long-Term Care
 Hospital (LTCH) Patients Requiring Ventilator Support (NQF #2632).
------------------------------------------------------------------------


[[Page 20120]]

    We are inviting public comment on the proposal for the public 
display of the four assessment-based measures and three claims-based 
measures, the removal of the All-Cause Unplanned Readmission Measure 
for 30 Days Post Discharge from LTCHs from the LTCH QRP and public 
display, and the replacement of ``Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678)'' 
with a modified version of the measure entitled ``Changes in Skin 
Integrity Post-Acute Care: Pressure Ulcer/Injury'' as described above.
18. Mechanism for Providing Feedback Reports to LTCHs
    Section 1899B(f) of the Act requires the Secretary to provide 
confidential feedback reports to PAC providers on their performance on 
the measures specified under sections 1899B(c)(1) and (d)(1) of the 
Act, beginning one year after the specified application date that 
applies to such measures and PAC providers. In the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 57233 through 57236), we finalized processes to 
provide LTCHs the opportunity to review their data and information 
using confidential feedback reports that will enable LTCHs to review 
their performance on the measures required under the LTCH QRP. 
Information on how to obtain these and other reports available to the 
LTCH can be found at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Public-Reporting.html.
    We are not proposing any changes to this policy.

D. Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program

1. Background
a. Statutory Authority
    Section 1886(s)(4) of the Act, as added and amended by sections 
3401(f) and 10322(a) of the Patient Protection and Affordable Care Act, 
requires the Secretary to implement a quality reporting program for 
inpatient psychiatric hospitals and psychiatric units. Section 
1886(s)(4)(A)(i) of the Act requires that, for fiscal year (FY) 2014 
\447\ and each subsequent fiscal year, the Secretary must reduce any 
annual update to a standard federal rate for discharges occurring 
during the fiscal year by 2.0 percentage points for any inpatient 
psychiatric hospital or psychiatric unit that does not comply with 
quality data submission requirements with respect to an applicable 
fiscal year.
---------------------------------------------------------------------------

    \447\ The statute uses the term ``rate year'' (RY). However, 
beginning with the annual update of the inpatient psychiatric 
facility prospective payment system (IPF PPS) that took effect on 
July 1, 2011 (RY 2012), we aligned the IPF PPS update with the 
annual update of the ICD codes, effective on October 1 of each year. 
This change allowed for annual payment updates and the ICD coding 
update to occur on the same schedule and appear in the same Federal 
Register document, promoting administrative efficiency. To reflect 
the change to the annual payment rate update cycle, we revised the 
regulations at 42 CFR 412.402 to specify that, beginning October 1, 
2012, the RY update period would be the 12-month period from October 
1 through September 30, which we refer to as a ``fiscal year'' (FY) 
(76 FR 26435). Therefore, with respect to the IPFQR Program, the 
terms ``rate year,'' as used in the statute, and ``fiscal year'' as 
used in the regulation, both refer to the period from October 1 
through September 30. For more information regarding this 
terminology change, we refer readers to section III. of the RY 2012 
IPF PPS final rule (76 FR 26434 through 26435).
---------------------------------------------------------------------------

    As provided in section 1886(s)(4)(A)(ii) of the Act, the 
application of the reduction for failure to report under section 
1886(s)(4)(A)(i) of the Act may result in an annual update of less than 
0.0 percent for a fiscal year, and may result in payment rates under 
section 1886(s)(1) of the Act being less than the payment rates for the 
preceding year. In addition, section 1886(s)(4)(B) of the Act requires 
that the application of the reduction to a standard Federal rate update 
be noncumulative across fiscal years. Thus, any reduction applied under 
section 1886(s)(4)(A) of the Act will apply only with respect to the 
fiscal year rate involved and the Secretary may not take into account 
the reduction in computing the payment amount under the system 
described in section 1886(s)(1) of the Act for subsequent years.
    Section 1886(s)(4)(C) of the Act requires that, for FY 2014 
(October 1, 2013, through September 30, 2014) and each subsequent year, 
each psychiatric hospital and psychiatric unit must submit to the 
Secretary data on quality measures as specified by the Secretary. The 
data must be submitted in a form and manner and at a time specified by 
the Secretary. Under section 1886(s)(4)(D)(i) of the Act, unless the 
exception of subclause (ii) applies, measures selected for the quality 
reporting program must have been endorsed by the entity with a contract 
under section 1890(a) of the Act. The National Quality Forum (NQF) 
currently holds this contract.
    Section 1886(s)(4)(D)(ii) of the Act provides an exception to the 
requirement for NQF endorsement of measures: In the case of a specified 
area or medical topic determined appropriate by the Secretary for which 
a feasible and practical measure has not been endorsed by the entity 
with a contract under section 1890(a) of the Act, the Secretary may 
specify a measure that is not so endorsed as long as due consideration 
is given to measures that have been endorsed or adopted by a consensus 
organization identified by the Secretary.
    Section 1886(s)(4)(E) of the Act requires the Secretary to 
establish procedures for making public the data submitted by inpatient 
psychiatric hospitals and psychiatric units under the IPFQR Program. 
These procedures must ensure that a facility has the opportunity to 
review its data prior to the data being made public. The Secretary must 
report quality measures that relate to services furnished by the 
psychiatric hospitals and units on the CMS Web site.
b. Covered Entities
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53645), we 
established that the IPFQR Program's quality reporting requirements 
cover those psychiatric hospitals and psychiatric units paid under 
Medicare's Inpatient Psychiatric Facility Prospective Payment System 
(IPF PPS) (42 CFR 412.404(b)). Generally, psychiatric hospitals and 
psychiatric units within acute care and critical access hospitals that 
treat Medicare patients are paid under the IPF PPS. Consistent with 
prior rules, we continue to use the term ``inpatient psychiatric 
facility'' (IPF) to refer to both inpatient psychiatric hospitals and 
psychiatric units. This usage follows the terminology in our IPF PPS 
regulations at 42 CFR 412.402. For more information on covered 
entities, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53645).
c. Considerations in Selecting Quality Measures
    Our objective in selecting quality measures is to balance the need 
for information on the full spectrum of care delivery and the need to 
minimize the burden of data collection and reporting. We have primarily 
focused on measures that evaluate critical processes of care that have 
significant impact on patient outcomes and support CMS and HHS 
priorities for improved quality and efficiency of care provided by 
IPFs. When possible, we also seek to incorporate measures that directly 
evaluate patient outcomes. We refer readers to section VIII.F.4.a. of 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53645 through 53646) for a 
detailed discussion of the considerations taken into account in 
selecting quality measures.

[[Page 20121]]

(1) Measure Selection Process
    Before being proposed for inclusion in the IPFQR Program, measures 
are placed on a list of measures under consideration, which is 
published annually by December 1 on behalf of CMS by the NQF. In 
compliance with section 1890A(a)(2) of the Act, measures proposed for 
the IPFQR Program were included in a publicly available document: 
``List of Measures under Consideration for December 1, 2016'' available 
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityMeasures/Downloads/Measures-under-Consideration-List-for-2016.pdf. The Measure Applications Partnership 
(MAP), a multi-stakeholder group convened by the NQF, reviews the 
measures under consideration for the IPFQR Program, among other Federal 
programs, and provides input on those measures to the Secretary. The 
MAP's 2017 recommendations for quality measures under consideration are 
captured in the following documents: ``Process and Approach for MAP 
Pre-Rulemaking Deliberations, 2016-2017,'' available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=84455 and ``2016-2017 Spreadsheet 
of Final Recommendations to HHS and CMS'' available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=84452. We considered the input and 
recommendations provided by the MAP in selecting all measures for the 
IPFQR Program, including those discussed below.
(2) Accounting for Social Risk Factors in the IPFQR Program
    We understand that social risk factors such as income, education, 
race and ethnicity, employment, disability, community resources, and 
social support (certain factors of which are also sometimes referred to 
as socioeconomic status (SES) factors or socio-demographic status (SDS) 
factors) play a major role in health. One of our core objectives is to 
improve beneficiary outcomes including reducing health disparities, and 
we want to ensure that all beneficiaries, including those with social 
risk factors, receive high quality care. In addition, we seek to ensure 
that the quality of care furnished by providers and suppliers is 
assessed as fairly as possible under our programs while ensuring that 
beneficiaries have adequate access to excellent care.
    We have been reviewing reports prepared by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) \448\ and the 
National Academies of Sciences, Engineering, and Medicine on the issue 
of measuring and accounting for social risk factors in CMS' value-based 
purchasing and quality reporting programs, and considering options on 
how to address the issue in these programs. On December 21, 2016, ASPE 
submitted a Report to Congress on a study it was required to conduct 
under section 2(d) of the Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014. The study analyzed the effects of 
certain social risk factors in Medicare beneficiaries on quality 
measures and measures of resource use used in one or more of nine 
Medicare value-based purchasing programs.\449\ The report also included 
considerations for strategies to account for social risk factors in 
these programs. In a January 10, 2017 report released by the National 
Academies of Sciences, Engineering, and Medicine, that body provided 
various potential methods for measuring and accounting for social risk 
factors, including stratified public reporting.\450\
---------------------------------------------------------------------------

    \448\ Office of the Assistant Secretary for Planning and 
Evaluation. 2016. Report to Congress: Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs. 
Available at: https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \449\ Office of the Assistant Secretary for Planning and 
Evaluation. 2016. Report to Congress: Social Risk Factors and 
Performance Under Medicare's Value-Based Purchasing Programs. 21 
Dec. 2016. Available at: https://aspe.hhs.gov/pdf-report/report-congress-social-risk-factors-and-performance-under-medicares-value-based-purchasing-programs.
    \450\ National Academies of Sciences, Engineering, and Medicine. 
2017. Accounting for social risk factors in Medicare payment. 
Washington, DC: The National Academies Press.
---------------------------------------------------------------------------

    As noted in the FY 2017 IPPS/LTCH PPS final rule, the NQF has 
undertaken a 2-year trial period in which new measures, measures 
undergoing maintenance review, and measures endorsed with the condition 
that they enter the trial period can be assessed to determine whether 
risk adjustment for selected social risk factors is appropriate for 
these measures. This trial entails temporarily allowing inclusion of 
social risk factors in the risk-adjustment approach for these measures. 
At the conclusion of the trial, NQF will issue recommendations on the 
future inclusion of social risk factors in risk adjustment for these 
quality measures, and we will closely review their findings.
    As we continue to consider the analyses and recommendations from 
these reports and await the results of the NQF trial on risk adjustment 
for quality measures, we are continuing to work with stakeholders in 
this process. As we have previously communicated, we are concerned 
about holding providers to different standards for the outcomes of 
their patients with social risk factors because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes 
for disadvantaged populations. Keeping this concern in mind, while we 
sought input on this topic previously, we continue to seek public 
comment on whether we should account for social risk factors in the 
IPFQR Program, and if so, what method or combination of methods would 
be most appropriate for accounting for social risk factors. Examples of 
methods include: Confidential reporting to providers of measure rates 
stratified by social risk factors; public reporting of stratified 
measure rates; and potential risk adjustment of a particular measure as 
appropriate based on data and evidence.
    In addition, we are seeking public comment on which social risk 
factors might be most appropriate for reporting stratified measure 
scores and/or potential risk adjustment of a particular measure. 
Examples of social risk factors include, but are not limited to, dual 
eligibility/low-income subsidy, race and ethnicity, and geographic area 
of residence. We are seeking comments on which of these factors, 
including current data sources where this information would be 
available, could be used alone or in combination, and whether other 
data should be collected to better capture the effects of social risk. 
We will take commenters' input into consideration as we continue to 
assess the appropriateness and feasibility of accounting for social 
risk factors in the IPFQR Program. We note that any such changes would 
be proposed through future notice-and-comment rulemaking.
    We look forward to working with stakeholders as we consider the 
issue of accounting for social risk factors and reducing health 
disparities in CMS programs. Of note, implementing any of the above 
methods would be taken into consideration in the context of how this 
and other CMS programs operate (for example, data submission methods, 
availability of data, statistical considerations relating to 
reliability of data calculations, among others), so we also welcome 
comment on operational considerations. CMS is committed to ensuring 
that its beneficiaries have access to and receive excellent care, and 
that the quality of care furnished by providers and suppliers is 
assessed fairly in CMS programs.

[[Page 20122]]

(3) IPFQR Program Measures Adopted in Previous Payment Determinations
    The current IPFQR Program includes 18 mandatory measures. For more 
information on these measures, we refer readers to the following final 
rules:
     The FY 2013 IPPS/LTCH PPS final rule (77 FR 53646 through 
53652);
     The FY 2014 IPPS/LTCH PPS final rule (78 FR 50889 through 
50895);
     The FY 2015 IPF PPS final rule (79 FR 45963 through 
45974);
     The FY 2016 IPF PPS final rule (80 FR 46694 through 
46714); and
     The FY 2017 IPPS/LTCH PPS final rule (81 FR 57236 through 
57249).
2. Factors for Removal or Retention of IPFQR Program Measures
a. Background
    The Hospital IQR Program adopted formal policies regarding measure 
retention and removal in the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50185). We believe that it is important to be consistent between 
programs to the extent possible. Therefore, to align with the policies 
adopted in this and other quality reporting programs, we are proposing 
to adopt similar policies within the IPFQR Program. In the past, we 
have retained measures from each previous year's IPFQR Program measure 
set for subsequent years' measure sets, except when we specifically 
proposed to remove or replace a measure. For example, we removed HBIPS-
6 and HBIPS-7 and replaced these measures with Transition Record with 
Specified Elements Received by Discharged Patients (NQF #0647) and 
Timely Transmission of Transition Record (NQF #0648) respectively in 
the FY 2016 IPF PPS final rule (80 FY 46701 through 46709). In this 
proposed rule, we are proposing factors to consider in removing or 
retaining measures effective upon finalization of this proposed rule, 
anticipated to be effective October 1, 2017 and for subsequent years.
    We will continue to use the notice and comment rulemaking process 
to propose measures for removal or replacement.
b. Proposed Considerations in Removing or Retaining Measures
    With respect to measure removal, we believe it is important to be 
transparent in identifying factors that we would take into 
consideration on a case-by-case basis as guidelines to evaluate a 
measure for potential removal from the IPFQR Program. We believe that 
these factors should be aligned between our programs whenever possible. 
Therefore, we refer readers to the Hospital IQR Program (80 FR 49641 
through 49642) factors we consider in removing or retaining measures. 
We intend to align our policies in the IPFQR Program with those in the 
Hospital IQR Program. Thus, in this proposed rule, we are proposing: 
(1) Measure removal factors; (2) criteria for determining when a 
measure is ``topped-out;'' and (3) measure retention factors. These 
proposals are discussed in more detail below.
    We are proposing the following measure removal factors for the 
IPFQR Program:
     Measure performance among IPFs is so high and unvarying 
that meaningful distinctions and improvements in performance can no 
longer be made (``topped-out'' measures);
     Measure does not align with current clinical guidelines or 
practice;
     Measure can be replaced by a more broadly applicable 
measure (across settings or populations) or a measure that is more 
proximal in time to desired patient outcomes for the particular topic;
     Measure performance or improvement does not result in 
better patient outcomes;
     Measure can be replaced by a measure that is more strongly 
associated with desired patient outcomes for the particular topic;
     Measure collection or public reporting leads to negative 
unintended consequences other than patient harm; and
     Measure is not feasible to implement as specified.
    For the purposes of considering measures for removal from the 
program, we are also proposing to align our criteria for determining 
that a measure is ``topped-out'' with the Hospital IQR Program's 
criteria (80 FR 49642), which states that a measure is ``topped-out'' 
if there is statistically indistinguishable performance at the 75th and 
90th percentiles and the truncated coefficient of variation is less 
than or equal to 0.10.
    Furthermore, we recognize that there may be times when measures may 
meet some of the outlined factors for removal, but continue to bring 
value to the program. Therefore, we are also proposing the following 
factors for consideration in determining whether to retain a measure in 
the IPFQR Program, which also are based on factors established in the 
Hospital IQR Program (80 FR 49641 through 49642):
     Measure aligns with other CMS and HHS policy goals, such 
as those delineated in the National Quality Strategy or CMS Quality 
Strategy;
     Measure aligns with other CMS programs, including other 
quality reporting programs; and
     Measure supports efforts to move IPFs towards reporting 
electronic measures.
    We reiterate that these removal and retention factors are 
considerations that we take into account in balancing the benefits and 
drawbacks of whether or not to remove measures on a case-by-case basis.
    We are inviting public comment on our proposals to adopt: (1) 
Measure removal factors; (2) criteria for determining when a measure is 
``topped out;'' and (3) measure retention factors as discussed above. 
If finalized, these factors and criteria will become effective upon 
finalization of this proposed rule, anticipated to be effective October 
1, 2017 and for subsequent years; measures identified as appropriate 
for removal would be proposed through notice-and-comment rulemaking 
subsequent to that date.
3. Proposed New Quality Measure for the FY 2020 Payment Determination 
and Subsequent Years--Medication Continuation Following Inpatient 
Psychiatric Discharge
a. Background
    We are proposing one new measure, Medication Continuation following 
Inpatient Psychiatric Discharge, for the FY 2020 payment determination 
and subsequent years. The measure uses Medicare fee-for-service (FFS) 
claims to identify whether patients admitted to IPFs with diagnoses of 
major depressive disorder (MDD), schizophrenia, or bipolar disorder had 
filled at least one evidence-based medication within 2 days prior to 
discharge through 30 days post-discharge. We believe that medication 
continuation is important for patients discharged from the inpatient 
psychiatric setting with MDD, schizophrenia, or bipolar disorder 
because of significant negative outcomes associated with non-adherence 
to medication regimens. For example, patients with MDD who do not 
remain on prescribed medications are more likely to have negative 
health outcomes such as relapse and readmission, decreased quality of 
life, and increased healthcare costs.451 452 Patients with 
schizophrenia who do not adhere to their medication regimen are more 
likely to be hospitalized, use emergency psychiatric services, be 
arrested, be victims of crimes, and consume alcohol

[[Page 20123]]

or drugs compared to those who adhere to their medication regimen.\453\ 
Patients with bipolar disorder who do not adhere to their medications 
have increased suicide risk.\454\ For these reasons, guidelines from 
the American Psychiatric Association (APA) and the Department of 
Veterans Affairs/Department of Defense (VA/DoD), which are based on 
extensive literature, recommend pharmacotherapy as the primary form of 
treatment for patients with these 
conditions.455 456 457 458 459
---------------------------------------------------------------------------

    \451\ Geddes JR, Carney SM, Davies C, et al. Relapse prevention 
with antidepressant drug treatment in depressive disorders: a 
systematic review. Lancet. 2003;361(9358):653-661.
    \452\ Glue P, Donovan MR, Kolluri S, Emir B. Meta-analysis of 
relapse prevention antidepressant trials in depressive disorders. 
The Australian and New Zealand journal of psychiatry. 
2010;44(8):697-705.
    \453\ Gilmer TP, Dolder CR, Lacro JP, et al. Adherence to 
treatment with antipsychotic medication and health care costs among 
Medicaid beneficiaries with schizophrenia. The American journal of 
psychiatry. 2004;161(4):692-699.
    \454\ Gonzalez-Pinto A, Mosquera F, Alonso M, et al. Suicidal 
risk in bipolar I disorder patients and adherence to long-term 
lithium treatment. Bipolar disorders. 2006;8(5 Pt 2):618-624.
    \455\ American Psychiatric Association. (2002). Practice 
guideline for the treatment of patients with bipolar disorder, 
second edition. Retrieved from: http://psychiatryonline.org/pb/assets/raw/sitewide/practice_guidelines/guidelines/bipolar.pdf.
    \456\ American Psychiatric Association. (2010). Practice 
guideline for the treatment of patients with major depressive 
disorder, 3rd ed. Retrieved from: http://psychiatryonline.org/pb/assets/raw/sitewide/practice_guidelines/guidelines/mdd.pdf.
    \457\ American Psychiatric Association. (2010). Practice 
guideline for the treatment of patients with schizophrenia: 2nd ed. 
Retrieved from: http://psychiatryonline.org/pb/assets/raw/sitewide/practice_guidelines/guidelines/schizophrenia.pdf.
    \458\ U.S. Department of Veterans Affairs, & U.S. Department of 
Defense. (2016). Management of major depressive disorder (MDD). 
Retrieved from: http://www.healthquality.va.gov/guidelines/MH/mdd/VADoDMDDCPGFINAL82916.pdf.
    \459\ U.S. Department of Veterans Affairs & U.S. Department of 
Defense. (2010) VA/DOD clinical practice guideline for management of 
bipolar disorder in adults. Retrieved from: http://www.healthquality.va.gov/guidelines/MH/bd/bd_305_full.pdf.
---------------------------------------------------------------------------

    Interventions that can be applied in the inpatient setting that 
increase medication compliance and prevent the negative outcomes 
associated with nonadherence have been identified. These interventions 
include patient education, enhanced therapeutic relationships, shared 
decision-making, and text-message reminders, with multidimensional 
approaches resulting in the best 
outcomes.460 461 462 463 464 465 Furthermore, patients and 
caregivers interviewed during the development of this measure indicated 
the importance of the facility's role in communicating information 
about medications to the patient, pharmacy, and outpatient 
providers.\466\
---------------------------------------------------------------------------

    \460\ Douaihy AB, Kelly TM, Sullivan C. Medications for 
substance use disorders. Social work in public health. 2013;28(3-
4):264-278.
    \461\ Haddad PM, Brain C, Scott J. Nonadherence with 
antipsychotic medication in schizophrenia: challenges and management 
strategies. Patient related outcome measures. 2014;5:43-62.
    \462\ Hung CI. Factors predicting adherence to antidepressant 
treatment. Current opinion in psychiatry. 2014;27(5):344-349.
    \463\ Lanouette NM, Folsom DP, Sciolla A, Jeste DV. Psychotropic 
medication nonadherence among United States Latinos: a comprehensive 
literature review. Psychiatric services (Washington, DC). 
2009;60(2):157-174.
    \464\ Mitchell AJ. Understanding Medication Discontinuation in 
Depression. BMedSci Psychiatric Times. 2007;24(4).
    \465\ Sylvia LG, Hay A, Ostacher MJ, et al. Association between 
therapeutic alliance, care satisfaction, and pharmacological 
adherence in bipolar disorder. Journal of clinical 
psychopharmacology. 2013;33(3):343-350.
    \466\ Health Services Advisory Group. Final Methodology Report: 
Medication Continuation Following Inpatient Discharge. Tampa, FL; 
2016.
---------------------------------------------------------------------------

b. Appropriateness for the IPFQR Program
    In compliance with section 1890A(a)(2) of the Act, this measure was 
included in a publicly available document: ``List of Measures under 
Consideration for December 1, 2016'' available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityMeasures/Downloads/Measures-under-Consideration-List-for-2016.pdf. The MAP Hospital Workgroup concluded that the measure 
addressed a critical quality objective, was evidence-based, and would 
contribute to efficient use of resources.\467\ One Workgroup member 
commented that it was appropriate to hold IPFs accountable for patients 
filling a prescription for an evidence-based medication post-discharge, 
further remarking that the measure was moving in the right 
direction.\468\
---------------------------------------------------------------------------

    \467\ MAP Hospital Workgroup, Preliminary Analysis Worksheet. 
December 2017.
    \468\ National Quality Forum, Measure Applications Partnership. 
Meeting Transcript, Day 1 of 2--In-Person Meeting. 2016.
---------------------------------------------------------------------------

    The MAP Hospital Workgroup classified the measure as ``Refine and 
Resubmit Prior to Rulemaking.'' \469\ The measure received this 
classification because the MAP recommended that measure testing be 
completed to demonstrate reliability and validity at the facility level 
in the hospital setting and that the measure be submitted to NQF for 
review and endorsement.\470\ The MAP also requested additional details 
on the measure, such as: (1) The definition of medication dispensation; 
(2) how does the facility know whether the medication was dispensed; 
and (3) how the measure would be impacted if Medicare Part D coverage 
is optional. The MAP also recommended that this measure be submitted to 
NQF for review and endorsement. The final methodology report includes 
the results of reliability and validity testing, and additional measure 
updates that occurred between the MAP review and NQF submission in 
December 2016.\471\ This methodology report also provides the 
additional details requested by MAP at the December meeting.
---------------------------------------------------------------------------

    \469\ http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=84452.
    \470\ National Quality Forum, Measure Application Partnership. 
MAP 2017 Considerations for Implementing Measures in Federal 
Programs: Hospitals. 2017.
    \471\ Health Services Advisory Group. Final Methodology Report: 
Medication Continuation Following Inpatient Discharge. Tampa, FL; 
2016. https://www.cms.gov/medicare/Quality-Initiatives-Patient-
Assessment-Instruments/HospitalQualityInits/Measure-
Methodology.html. To access the report, click on the zip file titled 
``Inpatient Psychiatric Facility Medication Continuation Measure.''
---------------------------------------------------------------------------

    Reliability and validity testing completed in 2016 using the final 
measure specifications demonstrates that the measure, as specified, 
provides reliable and valid facility-level scores of medication 
continuation.\472\
---------------------------------------------------------------------------

    \472\ Health Services Advisory Group. Final Methodology Report: 
Medication Continuation Following Inpatient Discharge. Tampa, FL; 
2016.
---------------------------------------------------------------------------

    Reliability was established using a method of mean denominator and 
volume categories. Using that approach, a minimum denominator size of 
75 discharges was established to attain an overall reliability score of 
at least 0.7; this reliability score is within acceptable norms and 
indicates sufficient signal strength to discriminate performance 
between facilities.\473\ This means that it is possible to distinguish 
good performance from poor performance based on measure scores among 
facilities with at least 75 cases in the denominator.
---------------------------------------------------------------------------

    \473\ Adams J. The reliability of provider profiling: a 
tutorial. Santa Monica, CA: RAND; 2009.
---------------------------------------------------------------------------

    Validity was established by evaluating the correlations of 
medication continuation scores with the conceptually related IPFQR 
Program measures. The medication continuation scores were moderately 
correlated with the scores for 7- and 30-day follow-up after 
hospitalization for mental illness scores as expected (rho = 0.35 and 
0.45, where rho is the Spearman's rank correlation coefficient). In 
other words, the positive correlation between scores of these two types 
of measures is expected because high follow-up rates with mental health 
providers and high follow-up rates of medication continuation both 
indicate a high-quality transition from the inpatient to the outpatient 
setting. The medication continuation scores were negatively correlated 
with readmission scores as expected (rho = -0.27). This negative 
correlation is expected because patients that do not continue their 
medications are more likely to relapse and be

[[Page 20124]]

readmitted.474 475 476 All correlations are statistically 
significant at p-value <0.0001. After reviewing these results and the 
proposed measure specifications, all of the 10 TEP members who were 
present for the face validity vote agreed that the measure score had 
face validity.
---------------------------------------------------------------------------

    \474\ 1 Glue P, Donovan MR, Kolluri S, Emir B. Meta-analysis of 
relapse prevention antidepressant trials in depressive disorders. 
The Australian and New Zealand journal of psychiatry. 
2010;44(8):697-705.
    \475\ Geddes JR, Carney SM, Davies C, et al. Relapse prevention 
with antidepressant drug treatment in depressive disorders: a 
systematic review. Lancet. 2003;361(9358):653-661.
    \476\ Gilmer TP, Dolder CR, Lacro JP, et al. Adherence to 
treatment with antipsychotic medication and health care costs among 
Medicaid beneficiaries with schizophrenia. The American journal of 
psychiatry. 2004;161(4):692-699.
---------------------------------------------------------------------------

    This measure was submitted to NQF for endorsement on December 16, 
2016, the NQF Standing Committee has recommended the measure for 
endorsement, and we are currently awaiting NQF's final decision. Under 
section 1886(s)(4)(D)(i) of the Act, measures selected for the IPFQR 
Program 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(s)(4)(D)(ii) of the Act provides that, in the 
case of a specified area or medical topic determined appropriate by the 
Secretary for which a feasible and practical measure has not been 
endorsed by the entity with a contract under section 1890(a) of the 
Act, the Secretary may specify a measure that is not so endorsed as 
long as due consideration is given to measures that have been endorsed 
or adopted by a consensus organization identified by the Secretary. We 
have reviewed NQF endorsed measures related to medication continuation 
in this patient population and did not identify any equivalent 
measures. We believe this measure is consensus-based because of the 
extensive measure development process, including the solicitation of 
expert and patient opinion and public comments (discussed in more 
detail below).
    In addition, the proposed measure addresses several aspects of the 
CMS Quality Strategy goals and objectives. The measure supports the CMS 
Quality Strategy Goal to ``promote effective prevention and treatment 
of chronic disease,'' which includes an objective to improve behavioral 
health access and quality of care by using evidence-based 
practices.\477\ The measure also supports the CMS Quality Strategy Goal 
to ``promote effective communication and coordination of care.'' \478\ 
Specifically, the measure addresses three objectives within the goal of 
``promoting effective communication and coordination of care'': (1) 
``To reduce admissions and readmissions'' \479\ as patients with these 
conditions who do not adhere to their medication regimens are at an 
increased risk of relapse and readmission; \480 481 482\ (2) ``to embed 
best practices to enable successful transitions between all settings of 
care,'' \483\ because ensuring medication continuation following 
discharge is a critical component of transitioning from the IPF to the 
home or home health care; and (3) ``to enable effective healthcare 
system navigation,'' \484\ as we believe that this measure will 
encourage IPFs to provide information to patients regarding the 
importance of medication continuation and guidance on how to fill 
prescriptions following discharge.
---------------------------------------------------------------------------

    \477\ Centers for Medicare & Medicaid Services. CMS Quality 
Strategy 2016. Baltimore, MD: US Department of Health and Human 
Services; 2015. http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf.
    \478\ Centers for Medicare & Medicaid Services. CMS Quality 
Strategy 2016. Baltimore, MD: US Department of Health and Human 
Services; 2015. http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf.
    \479\ Centers for Medicare & Medicaid Services. CMS Quality 
Strategy 2016. Baltimore, MD: US Department of Health and Human 
Services; 2015. http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf.
    \480\ Glue P, Donovan MR, Kolluri S, Emir B. Meta-analysis of 
relapse prevention antidepressant trials in depressive disorders. 
The Australian and New Zealand journal of psychiatry. 
2010;44(8):697-705.
    \481\ Geddes JR, Carney SM, Davies C, et al. Relapse prevention 
with antidepressant drug treatment in depressive disorders: a 
systematic review. Lancet. 2003;361(9358):653-661.
    \482\ Gilmer TP, Dolder CR, Lacro JP, et al. Adherence to 
treatment with antipsychotic medication and health care costs among 
Medicaid beneficiaries with schizophrenia. The American journal of 
psychiatry. 2004;161(4):692-699.
    \483\ Centers for Medicare & Medicaid Services. CMS Quality 
Strategy 2016. Baltimore, MD: US Department of Health and Human 
Services; 2015. http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf.
    \484\ Centers for Medicare & Medicaid Services. CMS Quality 
Strategy 2016. Baltimore, MD: US Department of Health and Human 
Services; 2015. http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf.
---------------------------------------------------------------------------

    The proposed measure would complement the portfolio of facility-
level measures in the IPFQR Program that assess the transition from the 
inpatient to outpatient setting: Follow-Up After Hospitalization for 
Mental Illness; Thirty-day All Cause Unplanned Readmission Following 
Psychiatric Hospitalization in an Inpatient Psychiatric Facility; 
Transition Record with Specified Elements Received by Discharged 
Patients; and Timely Transmission of Transition Record.
    More detailed information about the development of this measure as 
well as final measure specifications can be downloaded from the CMS Web 
site at: https://www.cms.gov/medicare/Quality-Initiatives-Patient-
Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. 
To access the report, click on the zip file titled ``Inpatient 
Psychiatric Facility Medication Continuation Measure.''
c. Measure Calculation
    The measure is calculated by dividing the number of admissions that 
meet the numerator criteria (described below) by the number of 
admissions that meet the denominator criteria (also described below).
(1) Numerator
    The numerator for the measure includes discharges for patients with 
a principal diagnosis of MDD, schizophrenia, or bipolar disorder in the 
denominator who were dispensed at least one evidence-based outpatient 
medication within 2 days prior to discharge through 30 days post-
discharge. The evidence-based medications that define the numerator are 
based on the practice guidelines for each condition from the APA and 
VA/DoD.485 486 487 488 489 Furthermore, we sought to align 
the medications with evidence-based medications from existing quality 
measures including the Antidepressant Medication Management measure 
from the Healthcare Effectiveness Data and Information Set (HEDIS) 2015 
for MDD, the Adherence

[[Page 20125]]

to Antipsychotic Medications for Individuals with Schizophrenia measure 
(NQF #1879) for schizophrenia, and the Adherence to Mood Stabilizers 
for Individuals with Bipolar I Disorder measure (NQF #1880) for bipolar 
disorder. Staff pharmacists reviewed these lists of medications for 
completeness and appropriateness in the IPF setting. The finalized 
lists of evidence-based medications are available in the measure 
methodology report at: https://www.cms.gov/medicare/Quality-
Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/
Measure-Methodology.html. To access the report, click on the zip file 
titled ``Inpatient Psychiatric Facility Medication Continuation 
Measure.''
---------------------------------------------------------------------------

    \485\ American Psychiatric Association. (2010). Practice 
guideline for the treatment of patients with major depressive 
disorder, 3rd ed. Retrieved from: http://psychiatryonline.org/pb/assets/raw/sitewide/practice_guidelines/guidelines/mdd.pdf.
    \486\ American Psychiatric Association. (2002). Practice 
guideline for the treatment of patients with bipolar disorder, 
second edition. Retrieved from: http://psychiatryonline.org/pb/assets/raw/sitewide/practice_guidelines/guidelines/bipolar.pdf.
    \487\ American Psychiatric Association. (2010). Practice 
guideline for the treatment of patients with schizophrenia: 2nd ed. 
Retrieved from: http://psychiatryonline.org/pb/assets/raw/sitewide/practice_guidelines/guidelines/schizophrenia.pdf.
    \488\ U.S. Department of Veterans Affairs & U.S. Department of 
Defense. (2016). Management of major depressive disorder (MDD). 
Retrieved from: http://www.healthquality.va.gov/guidelines/MH/mdd/VADoDMDDCPGFINAL82916.pdf.
    \489\ U.S. Department of Veterans Affairs & U.S. Department of 
Defense. (2010) VA/DOD clinical practice guideline for management of 
bipolar disorder in adults. Retrieved from: http://www.healthquality.va.gov/guidelines/MH/bd/bd_305_full.pdf.
---------------------------------------------------------------------------

    We considered the appropriate number of days prior to discharge and 
post-discharge to include in the follow-up period for the numerator. 
Clinical experts noted that discharge planning may start as early as 2 
days prior to discharge and that some facilities may help patients fill 
their outpatient prescriptions prior to discharge. Therefore, the 
numerator includes outpatient medications filled up to 2 days prior to 
discharge (Day 2 through Day 1). The follow-up period extends 30 days 
post-discharge (Day 0 through Day 30) to align with other care 
coordination measures, such as the 30 day follow-up period in Follow-Up 
After Hospitalization for Mental Illness (FUH) (NQF #0576) which we 
finalized for the IPFQR Program in the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50894 through 50896). To further support a 30-day follow-up 
period, we confirmed that over 93 percent of the evidence-based 
prescriptions filled prior to the admission were for a 30-day supply, 
which indicates that most patients would need to fill a medication 
within 30 days of discharge to avoid gaps in treatment even if they had 
some medications at home.
(2) Denominator
    The denominator for the measure includes Medicare FFS beneficiaries 
aged 18 years and older who were discharged from an IPF to home or home 
health care \490\ with a principal diagnosis of MDD, schizophrenia, or 
bipolar disorder. The denominator excludes discharges for patients who:
---------------------------------------------------------------------------

    \490\ The measure specifications, as submitted to the MAP, did 
not include home health care. For details of this addition, please 
see the measure methodology report: https://www.cms.gov/medicare/
Quality-Initiatives-Patient-Assessment-Instruments/
HospitalQualityInits/Measure-Methodology.html. To access the report, 
click on the zip file titled ``Inpatient Psychiatric Facility 
Medication Continuation Measure.''
---------------------------------------------------------------------------

     Received Electroconvulsive Therapy (ECT) during the 
inpatient stay or follow-up period because some patients who receive 
ECT during the inpatient stay or follow-up period may have failed 
pharmacotherapy and would not fill an evidence-based prescription post-
discharge;
     Received Transcranial Magnetic Stimulation (TMS) during 
the inpatient stay or follow-up period because some patients who 
receive TMS during the inpatient stay or follow-up period may have 
failed pharmacotherapy and would not fill an evidence-based 
prescription post-discharge;
     Were pregnant during the inpatient stay because some of 
the evidence-based medications for the treatment of MDD, schizophrenia, 
and bipolar disorder are contraindicated during pregnancy;
     Had a secondary diagnosis of delirium because some of the 
evidence-based medications for the treatment of MDD, schizophrenia, and 
bipolar disorder are contraindicated for patients with delirium; or
     Had a principal diagnosis of schizophrenia and secondary 
diagnosis of dementia because evidence-based medications for the 
treatment of schizophrenia have an FDA Black Box Warning due to an 
increased risk of mortality for elderly patients with dementia related 
psychosis.\491\
---------------------------------------------------------------------------

    \491\ U.S. Food and Drug Administration. Public Health Advisory: 
Deaths with Antipsychotics in Elderly Patients with Behavioral 
Disturbances. 2005. Accessed at: https://www.fda.gov/Drugs/DrugSafety/PostmarketDrugSafetyInformationforPatientsandProviders/ucm053171.htm.
---------------------------------------------------------------------------

    All patients in the measure denominator are enrolled in Medicare 
Parts A, B, and D during the measurement and follow-up periods. 
Therefore, these patients have prescription drug coverage for evidence-
based medications in the measure. While patients are responsible for 
some out-of-pocket medication costs after Part D has been applied, low 
income patients qualify for additional support through both Medicare 
and Medicaid to help mitigate the cost of prescriptions and ensure that 
patients do not face financial barriers to filling necessary 
medications.
    We refer readers to the measure specifications for more details 
about measure inclusions and exclusions at: https://www.cms.gov/
medicare/Quality-Initiatives-Patient-Assessment-Instruments/
HospitalQualityInits/Measure-Methodology.html. To access the report, 
click on the zip file titled ``Inpatient Psychiatric Facility 
Medication Continuation Measure.''
d. Data Sources
    The proposed measure would be implemented using Medicare FFS Parts 
A, B, and D claims and enrollment data to calculate the measure 
results. Valid prescription drug claims from Medicare Parts B and D 
provide the data necessary to calculate this measure. Therefore, no 
data collection will be required from IPFs. The measure would be 
reported as a combined facility-level rate across all three conditions. 
The measurement period is 2 years to maximize the number of facilities 
with a minimum of 75 discharges, which is necessary for calculation of 
reliable facility-level scores.\492\ If this measure is finalized as 
proposed, we will inform stakeholders of the claims data collection 
period through a subregulatory process, such as on a CMS Web site and/
or on our applicable listservs.
---------------------------------------------------------------------------

    \492\ Health Services Advisory Group. Final Methodology Report: 
Medication Continuation Following Inpatient Discharge. Tampa, FL; 
2016.
---------------------------------------------------------------------------

e. Public Comment
    During the measure development process, we solicited public 
comments on the measure via the CMS Quality Measures Public Comment 
Page.\493\ We provided the draft measure information form \494\ and 
draft measure justification form \495\ to the public for review. We 
accepted public comments from August 25, 2016 through September 15, 
2016. Numerous commenters expressed support for the Medication 
Continuation following Inpatient Psychiatric Discharge measure (with 
only 6 of 53 commenters expressing reluctance to support the measure) 
and commented on the importance of measuring medication continuation as 
this is an important component of care transitions and reduces the risk 
of readmissions. We received public comments about denominator 
specifications, numerator specifications, data collection, attribution 
of the measure to the IPF, and the relevance of the proposed measure. 
After review and evaluation of all the public comments received, we 
expanded the follow-up period from day of discharge (Day 0) through 30 
days post discharge to include outpatient

[[Page 20126]]

prescriptions filled up to 2 days prior to discharge as described 
above. For specific information regarding the comments we received, we 
refer readers to the public comment summary at: https://www.cms.gov/
medicare/Quality-Initiatives-Patient-Assessment-Instruments/
HospitalQualityInits/Measure-Methodology.html. To access the report, 
click on the zip file titled ``Inpatient Psychiatric Facility 
Medication Continuation Measure.''
---------------------------------------------------------------------------

    \493\ CMS Quality Measure Public Comment Page: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/CallforPublicComment.html#44 In the ``Downloads'' 
section of this page, please select ``Recently Archived Call for 
Public Comments Files.'' The information regarding the Medication 
Continuation following Inpatient Psychiatric Discharge information 
is available in the ``Inpatient-Psychiatric-Facility-IPF-Outcome-
and-Process-Measure-Development-and-Maintenance'' zip file).
    \494\ Ibid.
    \495\ Ibid.
---------------------------------------------------------------------------

    We believe the proposed measure evaluates a process with a 
demonstrated quality gap and has the potential to benefit patients. For 
these reasons and the reasons stated above, we are proposing the 
Medication Continuation following Inpatient Psychiatric Discharge 
measure described in this section for the FY 2020 payment determination 
and subsequent years.
    In summary, we are proposing one measure for the FY 2020 payment 
determination and subsequent years, as shown in the table below.

         Newly Proposed IPFQR Program Measure for the FY 2020 Payment Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
    National quality strategy priority           NQF #        Measure ID                   Measure
----------------------------------------------------------------------------------------------------------------
Communication/Care Coordination...........             N/A             N/A  Medication Continuation following
                                                                             Inpatient Psychiatric Discharge.
----------------------------------------------------------------------------------------------------------------

    We welcome public comment on our proposal to adopt the Medication 
Continuation following Inpatient Psychiatric Discharge measure.
4. Summary of Proposed and Previously Finalized Measures for the FY 
2020 Payment Determinations and Subsequent Years
    If the Medication Continuation following Inpatient Psychiatric 
Discharge measure is adopted, the number of measures for the FY 2020 
payment determination and subsequent years will total 19 as set forth 
in the table below.

   Proposed and Previously Finalized Measures for the FY 2020 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
             NQF #                  Measure ID            Measure
------------------------------------------------------------------------
640...........................  HBIPS-2..........  Hours of Physical
                                                    Restraint Use.
641...........................  HBIPS-3..........  Hours of Seclusion
                                                    Use.
560...........................  HBIPS-5..........  Patients Discharged
                                                    on Multiple
                                                    Antipsychotic
                                                    Medications with
                                                    Appropriate
                                                    Justification.
576...........................  FUH..............  Follow-up After
                                                    Hospitalization for
                                                    Mental Illness.
1661..........................  SUB-1............  Alcohol Use
                                                    Screening.
1663..........................  SUB-2 and SUB-2a.  Alcohol Use Brief
                                                    Intervention
                                                    Provided or Offered
                                                    and SUB-2a Alcohol
                                                    Use Brief
                                                    Intervention.
1664..........................  SUB-3 and SUB-3a.  Alcohol and Other
                                                    Drug Use Disorder
                                                    Treatment Provided
                                                    or Offered at
                                                    Discharge and SUB-3a
                                                    Alcohol and Other
                                                    Drug Use Disorder
                                                    Treatment at
                                                    Discharge.
1651..........................  TOB-1............  Tobacco Use
                                                    Screening.
1654..........................  TOB-2 and TOB-2a.  Tobacco Use Treatment
                                                    Provided or Offered
                                                    and TOB-2a Tobacco
                                                    Use Treatment.
1656..........................  TOB-3 and TOB-3a.  Tobacco Use Treatment
                                                    Provided or Offered
                                                    at Discharge and Tob-
                                                    3a Tobacco Use
                                                    Treatment at
                                                    Discharge.
1659..........................  IMM-2............  Influenza
                                                    Immunization.
647...........................  N/A..............  Transition Record
                                                    with Specified
                                                    Elements Received by
                                                    Discharged Patients
                                                    (Discharges from an
                                                    Inpatient Facility
                                                    to Home/Self Care or
                                                    Any Other Site of
                                                    Care).
648...........................  N/A..............  Timely Transmission
                                                    of Transition Record
                                                    (Discharges from an
                                                    Inpatient Facility
                                                    to Home/Self Care or
                                                    Any Other Site of
                                                    Care).
N/A...........................  N/A..............  Screening for
                                                    Metabolic Disorders.
431...........................  N/A..............  Influenza Vaccination
                                                    Coverage Among
                                                    Healthcare
                                                    Personnel.
N/A...........................  N/A..............  Assessment of Patient
                                                    Experience of Care.
N/A...........................  N/A..............  Use of an Electronic
                                                    Health Record.
2860 *........................  N/A..............  Thirty-Day All-Cause
                                                    Unplanned
                                                    Readmission
                                                    Following
                                                    Psychiatric
                                                    Hospitalization in
                                                    an Inpatient
                                                    Psychiatric
                                                    Facility.
N/A...........................  N/A..............  Medication
                                                    Continuation
                                                    following Inpatient
                                                    Psychiatric
                                                    Discharge.**
------------------------------------------------------------------------
* Since this measure was finalized in the FY 2017 IPPS/LTCH PPS final
  rule (57239 through 57246), NQF endorsement has been received.
** New measure proposed for the FY 2020 payment determination and
  subsequent years.

5. Possible IPFQR Program Measures and Topics for Future Consideration
    As we have previously indicated (79 FR 45974 through 45975), we 
seek to develop a comprehensive set of quality measures to be available 
for widespread use for informed decision-making and quality improvement 
in the IPF setting. Therefore, through future rulemaking, we intend to 
propose new measures for development or adoption that will help further 
our goals of achieving better healthcare and improved health for 
individuals who obtain inpatient psychiatric services through the 
widespread dissemination and use of quality information. As noted on 
the ``List of Measures under Consideration for December 1, 2016'' \496\ 
published by the NQF on behalf of CMS, we are considering a measure of 
Medication Reconciliation on Admission and a measure of Identification 
of Opioid Use Disorder among Patients Admitted to

[[Page 20127]]

Inpatient Psychiatric Facilities. We welcome comments on these measure 
concepts for future inclusion in the IPFQR Program. In addition, we 
have identified several areas which we believe are important to 
stakeholders, but which are not currently sufficiently covered by IPFQR 
Program measures. These areas are:
---------------------------------------------------------------------------

    \496\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityMeasures/Downloads/Measures-under-Consideration-List-for-2016.pdf.
---------------------------------------------------------------------------

     Family and caregiver engagement;
     Patient experience of care;
     Opioid use and treatment;
     Access to care; and
     Inpatient assaults and violence.
    We welcome public comments on possible new measures in these or 
other areas.
6. Public Display and Review Requirements
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53653 through 53654), in which we finalized that we would publicly 
display the submitted data on the CMS Web site beginning in the first 
quarter of the calendar year following the respective payment 
determination year. We also finalized that IPFs would have the 
opportunity to preview their data between September 20 and October 19 
of the respective payment determination year. In the FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50897 through 50898), we finalized policies on 
public display and review of data stating that we would publicly 
display the data in April of the calendar year following the start of 
the payment determination year and that the preview period would be 30 
days approximately twelve weeks prior to the public display of the 
data. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57248 through 
57249), we finalized changes to how we specify the timeframes for the 
IPFQR Program, including that we would: (1) No longer specify the exact 
dates of the preview period or data publication in rulemaking; (2) make 
the data for the IPFQR Program available as soon as possible; (3) 
announce the exact timeframes through subregulatory guidance; and (4) 
continue our policy that the time period for review will be 
approximately 30 days. In this proposed rule, we are not proposing any 
changes to the public display and review policies.
7. Form, Manner, and Timing of Quality Data Submission for the FY 2019 
Payment Determination and Subsequent Years
a. Procedural Requirements for FY 2019 Payment Determination and 
Subsequent Years
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53654 through 77 FR 
53655), we finalized procedural requirements for the IPFQR Program, 
including the requirements that facilities must do the following to 
participate in the IPFQR Program:
     Register with QualityNet before the IPF begins reporting;
     Identify a QualityNet Administrator who follows the 
registration process listed on the QualityNet Web site;
     Complete a Notice of Participation (NOP) within a 
specified time period; and,
     Submit aggregate numerator and denominator data for all 
age groups, for all measures.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50901), we clarified 
that the policy we adopted for the FY 2016 payment determination also 
applies to the FY 2017 payment determination and subsequent years, 
unless we change it through future rulemaking. In this proposed rule, 
we are proposing to make changes related to the Notice of Participation 
(NOP) and withdrawals for the FY 2019 payment determination and 
subsequent years.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53654), we finalized 
our policies that IPFs participating in the IPFQR Program must comply 
with several procedural requirements. In that rule, one of the policies 
we finalized was that the time frame for completing an online NOP form 
is between January 1 and August 15 before each respective payment 
determination year (for example, for the FY 2017 payment determination 
year, IPFs would be required to submit an NOP between January 1, 2016 
and August 15, 2016). Similarly, in the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53654), we also finalized that withdrawals from the IPFQR 
Program will be accepted no later than August 15 before the beginning 
of each respective payment determination year.
    As described in section IX.D.7.b. of the preamble of this proposed 
rule, there have been times that we have updated the data submission 
period through subregulatory means; this has led to a data submission 
period that is not aligned with the submission period for the NOP or 
program withdrawal. To ensure these dates align, in this proposed rule, 
we are proposing to change the submission timeframes for both NOPs and 
withdrawals from between January 1 and August 15 before each respective 
payment determination year to prior to the end of the data submission 
period before each respective payment determination year. This means 
that we are proposing to accept NOPs and withdrawals any time prior to 
the end of the data submission period before the payment determination 
year. For example, for the FY 2019 payment determination year, if our 
proposal in IX.D.7.b. of the preamble of this proposed rule is 
finalized, the end of the data submission period would be a date on or 
after June 15, 2018 (which we would announce via subregulatory means). 
This date would coincide with the deadline to submit an NOP or withdraw 
from the program.
    In addition, we are proposing to provide precise dates that define 
the end of the data submission period/NOP/withdrawal submission 
deadline through subregulatory means, such as on a CMS Web site and/or 
on our applicable listservs, beginning with the FY 2019 payment 
determination.
    We are inviting public comment on our proposals to: (1) Change the 
submission timeframes for both NOPs and withdrawals to the end of the 
data submission period before each respective payment determination 
year; and (2) provide precise dates that define the end of the data 
submission period/NOP/withdrawal submission deadline through 
subregulatory means for the FY 2019 payment determination and 
subsequent years.
b. Data Submission Requirements for the FY 2019 Payment Determination 
and Subsequent Years
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53655 through 53656) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50901) for our previously finalized policies regarding quality data 
submission requirements. In this proposed rule, we are proposing to 
make changes related to the data submission period for the FY 2019 
payment determination and subsequent years.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53655) we finalized 
our policies related to reporting periods and submission timelines for 
data required by the IPFQR Program. IPFs are required to submit their 
aggregated data on the measures on an annual basis, beginning in FY 
2014 (77 FR 53655). In that rule, we specified that data must be 
submitted between July 1 and August 15 of the calendar year preceding a 
given payment determination year (for example, between July 1, 2015 and 
August 15, 2015 for the FY 2016 payment determination (77 FR 53655 
through 53656)). In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50899), 
we clarified that this policy applies to all future years of data 
submission for the IPFQR Program unless we change the policy through 
future rulemaking.
    Because there have been times that the submission period has been 
updated

[[Page 20128]]

through the subregulatory process (for example, due to systems issues 
impacting data collection in the specified timeframe), in order to 
avoid contradictory guidance between dates established in the Federal 
Register and dates established through subregulatory guidance, we are 
proposing to no longer specify the exact dates of the submission period 
through rulemaking. We are proposing to provide these exact dates 
through a subregulatory process instead, beginning with the FY 2019 
payment determination. We are proposing to shift to a 45-day submission 
period beginning at least 30 calendar days following the end of the 
data collection period. For example, for the FY 2019 payment 
determination, the latest reporting period for a measure for which 
facilities must submit data ends on March 31, 2018. In this example, 
the submission period would begin at least 30 days after March 31, 2018 
(that is, no earlier than May 1, 2018). IPFs then would have 45 days 
from May 1 to submit their data, which would result in a June 15, 2018 
submission deadline for this example. Because the exact dates could 
vary from year to year, for the FY 2019 payment determination and 
subsequent years, we are also proposing to provide notification of the 
exact dates of the 45-day submission period through subregulatory 
means, such as on a CMS Web site and/or on our applicable listservs.
    We welcome public comments on our proposals to: (1) Change the 
specification of the submission deadline from exact dates (that is, 
July 1-August 15) to a 45-day submission period beginning at least 30 
days following the end of the data collection period; and (2) provide 
notification of the exact dates of the 45-day submission period through 
subregulatory means for the FY 2019 payment determination and 
subsequent years.
c. Reporting Requirements for the FY 2019 Payment Determination and 
Subsequent Years
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53655 through 53657), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50901 
through 50902), and the FY 2016 IPF PPS final rule (80 FR 46715 and 
46716), for information about data reporting periods. We are not 
proposing any changes to these policies in this proposed rule.
d. Population and Sampling
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53657 through 53658), the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50902), FY 2015 IPF PPS final rule (79 FR 45973), the FY 2016 IPF PPS 
final rule (80 FR 46717 through 46719), for information about 
population, sampling, and minimum case thresholds. In this proposed 
rule, we are not proposing any changes to the population and sampling 
methodology or to the minimum case thresholds.
e. Data Accuracy and Completeness Acknowledgement (DACA) Requirements
    We are not proposing any changes to the DACA requirements and refer 
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53658) for more 
information on these requirements.
8. Reconsideration and Appeals Procedures
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53658 through 53660), FY 2014 IPPS/LTCH PPS final rule (78 FR 50953), 
and 42 CFR 412.434 for details on our reconsideration and appeals 
procedures. We are not proposing any changes to these policies.
9. Extraordinary Circumstances Exceptions (ECE) Policy for the IPFQR 
Program
a. Background
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53659 through 
53660), we finalized policies for facilities to request waivers, now 
called ``exceptions'' (79 FR 45978), from quality reporting 
requirements for the FY 2014 payment determination and subsequent 
years. We stated that in the event of extraordinary circumstances not 
within the control of IPFs, such as a natural disaster, IPFs may 
request a reporting extension or a complete waiver of the requirement 
to submit quality data for one or more quarters for the FY 2014 payment 
determination and subsequent years. In that rule, we also finalized 
that facilities would be required to submit a request form with the 
following information:
     The IPF's CMS Certification Number (CCN);
     The IPF's name;
     Contact information for the IPF's Chief Executive Officer 
(CEO) and any other designated personnel, including name, email 
address, telephone number, and mailing address (the address must be a 
physical address, not a post office box);
     The IPF's reason for requesting an extension or waiver;
     Evidence of the impact of extraordinary circumstances, 
including but not limited to photographs, newspaper and other media 
articles; and
     A date when the IPF will again be able to submit IPFQR 
Program data, and a justification for the proposed date.
    In addition, we finalized that the form must be signed by the IPF's 
CEO and submitted within 30 days of the date that the extraordinary 
circumstance occurred. We also finalized that following the receipt of 
the request form, we would: (1) Provide a written acknowledgement, 
using the contact information provided in the request, to the CEO and 
any additional designated IPF personnel, notifying them that the IPF's 
request has been received; and (2) provide a formal response to the CEO 
and any designated IPF personnel, using the contact information 
provided in the request, notifying the IPF of our decision. 
Furthermore, in that rule, we discussed that the above policy does not 
preclude us from granting waivers or extensions to IPFs that have not 
requested them when we determine that an extraordinary circumstance has 
affected an entire region or locale. We stated that if we make the 
determination to grant such a waiver or extension, we would communicate 
this decision through routine communication channels (77 FR 53659). In 
the FY 2014 IPPS/LTCH PPS final rule, we did not make any changes to 
this policy (78 FR 50903).
    In the FY 2015 IPF PPS final rule (79 FR 45978), we clarified that 
the term ``exception'' is synonymous with the term ``waiver'' used in 
previous rules and renamed our policy to ``Extraordinary Circumstances 
Exception'' in order to align with similar exceptions in other CMS 
quality reporting programs. In that rule, we also finalized that that 
we may grant a waiver or extension to IPFs if we determine that a 
systemic problem with one of our data collection systems directly 
affects the ability of the IPFs to submit data. We stated that because 
we do not anticipate that these types of systemic errors will occur 
often, we do not anticipate granting a waiver or extension on this 
basis frequently (79 FR 45978). We noted that if we make the 
determination to grant a waiver or extension, we would communicate this 
decision through routine communication channels to IPFs, vendors, and 
quality improvement organizations (QIOs) by means of, for example, 
memoranda, emails, and notices on the QualityNet Web site (79 FR 
45978).
    In this proposed rule, we are proposing to modify aspects of our 
current ECE policy to align with those of other CMS quality reporting 
programs. Many of our quality reporting and value-based purchasing 
programs

[[Page 20129]]

share common processes for requesting an exception from program 
reporting due to an extraordinary circumstance not within a provider's 
control. We refer readers to the Hospital IQR Program (76 FR 51651 
through 51652, 78 FR 50836 through 50837, 79 FR 50277, 81 FR 57181 
through 57182, and 42 CFR 412.140(c)(2)), Hospital OQR Program (77 FR 
68489, 78 FR 75119 through 75120, 79 FR 66966, and 80 FR 70524), and 
ASCQR Program (77 FR 53642 through 53643 and 78 FR 75140 through 75141) 
as well as the HAC Reduction Program (80 FR 49579 through 49581), 
Hospital Readmissions Reduction Program (80 FR 49542 through 49543), 
and PCHQR Program (78 FR 50848) for program specific information about 
extraordinary circumstances exceptions requests. In reviewing the 
policies for these programs, however, we found five areas in which 
these programs have variance: (1) Contact Information and Signature on 
ECE Form--there is inconsistency regarding whether the program requires 
contact information and a signature on the ECE form from the facility's 
or hospital's CEO versus CEO or designated personnel; (2) Submission 
deadline--there is inconsistency in requiring the form be submitted 
within 90 days following the date that the extraordinary circumstance 
occurred versus within 30 days following the date the extraordinary 
circumstance occurred; (3) CMS' response following an ECE request--
there is inconsistency regarding specification of a timeline for us to 
provide our formal response notifying the facility or hospital of our 
decision; (4) CMS system issues--there is inconsistency regarding 
whether programs make explicit the ability to grant ECEs specific for 
systemic issues with CMS data collection systems that directly affect 
the ability of hospitals/facilities to submit data; and (5) Policy 
name--there is inconsistency in the names used to refer to the policy, 
with some programs using ``extraordinary circumstances extensions/
exemptions'' and some using ``extraordinary circumstances exceptions.''
    We believe aligning these five areas across the programs will 
improve administrative efficiencies for affected facilities or 
hospitals. We note that, in this FY 2018 IPPS/LTCH PPS proposed rule, 
we are also proposing to update ECE policies in the Hospital 
Readmissions Reduction Program (in section V.I.12. of the preamble of 
this proposed rule); the HAC Reduction Program (in section V.K.8. of 
the preamble of this proposed rule), Hospital IQR Program (in section 
IX.A.15. of the preamble of this proposed rule), and the PCHQR Program 
(in section IX.B.10. of the preamble of this proposed rule) in order to 
align policies. We refer readers to these sections for more details.
b. Proposed ECE Policy Modifications
    The IPFQR Program currently includes policies to: (1) Make explicit 
the ability to grant ECEs specific for systemic issues with CMS data 
collection systems that directly affect the ability of hospitals/
facilities to submit data; and (2) refer to the ECE policy as 
``extraordinary circumstances exceptions.'' Therefore we are not making 
proposals related to these two items. However, to improve cross-program 
alignment we are proposing to update the IPFQR Program's ECE policy by: 
(1) Allowing designated personnel to sign the ECE request form that 
IPFs currently submit with contact information for the CEO and 
designated personnel and the signature from the CEO; (2) extending the 
deadline from 30 days following the date that the extraordinary 
circumstance occurred to 90 days following the date the extraordinary 
circumstance occurred; and (3) specifying that we will strive to 
provide our formal response to an ECE request notifying the IPF of our 
decision within 90 days of receipt of the IPF's request. We are 
proposing that these policies would apply beginning with extraordinary 
circumstances that occur on or after the effective date of the 2018 
IPPS/LTCH PPS final rule, anticipated to be October 1, 2017. These 
proposals are discussed in more detail below.
(1) Signature of Either Designated Personnel or CEO
    As discussed above, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53659 through 53660) we finalized ECE requests for the IPFQR Program 
must submitted with contact information for the CEO and any designated 
personnel, and be signed by the IPF's CEO. However, we now believe that 
there may be circumstances in which it is not feasible for an IPF's CEO 
to sign the ECE request form, such as in cases where the CEO has become 
disabled or is deceased. Also, in the event that the CEO of a facility 
affected by an extraordinary circumstance, such as a natural disaster, 
is unavailable to sign the ECE request form, we believe that the 
affected facility should be able to submit ECE form despite the CEO's 
inability to sign. Therefore, we are proposing that ECE forms may be 
signed by either the CEO or the designated personnel as listed on the 
ECE form.
(2) ECE Request Submission Deadline
    As discussed above, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53659 through 53660) we finalized that ECE requests for the IPFQR 
Program must be submitted within 30 days of the date that the 
extraordinary circumstance occurred. However, we believe that it may be 
difficult for some IPFs to timely evaluate the impact of a certain 
extraordinary circumstance within 30 calendar days. Therefore, we are 
proposing to change the ECE request form submission deadline from 
within 30 days of the date that the extraordinary circumstance occurred 
to within 90 days of the date that the extraordinary circumstance 
occurred.
    We believe that extending the deadline to 90 calendar days would 
allow IPFs more time to determine whether it is necessary and 
appropriate to submit an ECE request and to provide a more 
comprehensive account of the extraordinary circumstance in their ECE 
request form to CMS. As an example, if an IPF has suffered damage due 
to a hurricane on October 1, 2017, it would have until December 30, 
2017, 90 calendar days after the hurricane, to submit an ECE form via 
the QualityNet Secure Portal, mail, email, or secure fax as instructed 
on the ECE form.
(3) Clarification of CMS Response Timeframe
    As stated above, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53659 through 53660), we finalized that following the receipt of the 
request form, we would provide: (1) A written acknowledgement, using 
the contact information provided in the request, to the CEO and any 
additional designated IPF personnel, notifying them that the IPF's ECE 
request has been received; and (2) a formal response to the CEO and any 
designated IPF personnel, using the contact information provided in the 
request, notifying the IPF of our decision. We believe that it is 
important for IPFs to receive timely feedback in a predictable time 
frame regarding the status of ECE requests. We strive to complete our 
review of each ECE request as quickly as possible. However, the number 
of requests we receive and the complexity of the information provided 
affect the timeframe that we need to make ECE determinations. 
Therefore, in an effort to provide facilities with a predictable 
timeframe, we are clarifying that we will strive to complete our review 
of ECE requests within 90 days of receipt, depending on the number of 
requests and the complexity of the information provided by facilities.

[[Page 20130]]

    We welcome public comments on our proposals to: (1) Specify that 
ECE forms can be signed by either the CEO or the designated personnel 
as listed on the ECE form; and (2) change the ECE request form 
submission deadline to within 90 days of the date that the 
extraordinary circumstance occurred. We also invite public comments on 
our intent to clarify that we will strive to complete our review of ECE 
requests within 90 days of receipt.

E. Clinical Quality Measurement for Eligible Hospitals and Critical 
Access Hospitals (CAHs) Participating in the EHR Incentive Programs

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). Incentive 
payments under Medicare were available to eligible hospitals and CAHs 
for certain payment years (as authorized under sections 1886(n) and 
1814(l) of the Act, respectively) if they successfully demonstrated 
meaningful use of CEHRT, which includes reporting on clinical quality 
measures (CQMs or eCQMs) 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 do not successfully demonstrate 
meaningful use 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 1814(l)(3)(A), 1886(n)(3)(A), and 
1903(t)(6)(C)(i)(II) 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 and Medicaid EHR Incentive Programs.
2. Proposed Modifications to the CQM Reporting Requirements for the 
Medicare and Medicaid EHR Incentive Programs for CY 2017
a. Background
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57255), we stated 
the CQM reporting periods in CY 2017 for the Medicare and Medicaid EHR 
Incentive Programs as outlined below. For the Medicare EHR Incentive 
Program, we finalized the following submission periods for eligible 
hospitals and CAHs reporting CQMs by attestation and eligible hospitals 
and CAHs electronically reporting CQMs (81 FR 57255). In regard to the 
Medicaid EHR Incentive Program, we provided States with the flexibility 
to determine the submission periods for reporting CQMs.
     Eligible Hospitals and CAHs Reporting CQMs by Attestation:
    ++ For eligible hospitals and CAHs demonstrating meaningful use for 
the first time in 2017, the reporting period is any continuous 90-day 
period within CY 2017. The submission period for attestation is the 2 
months following the close of the calendar year, ending February 28, 
2018.
    ++ For eligible hospitals and CAHs that demonstrated meaningful use 
in any year prior to 2017, the reporting period is the full CY 2017 
(consisting of four quarterly data reporting periods). The submission 
period for attestation is the 2 months following the close of the 
calendar year, ending February 28, 2018.
     Eligible Hospitals and CAHs Reporting CQMs Electronically: 
For eligible hospitals and CAHs demonstrating meaningful use for the 
first time in 2017 or that have demonstrated meaningful use in any year 
prior to 2017, the reporting period is the full CY 2017 (consisting of 
four quarterly data reporting periods). The submission period for 
reporting CQMs electronically begins in late spring 2017 and continues 
through the 2 months following the close of the calendar year, ending 
February 28, 2018.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57251 through 
57255), we finalized the following reporting criteria regarding the 
number of CQMs eligible hospitals and CAHs are required to report for 
the reporting periods in CY 2017:
     For Attestation: If only participating in the EHR 
Incentive Program, report on all 16 available CQMs.
     For Electronic Reporting: If only participating in the EHR 
Incentive Program, or participating in both the EHR Incentive Program 
and the Hospital IQR Program (81 FR 57150 through 57159), report on 8 
of the available CQMs.
    For further information on the policies applicable for CQM 
reporting for the EHR Incentive Program in 2017, we refer readers to 
the discussion in the FY 2017 IPPS/LTCH PPS final rule at 81 FR 57249 
through 57257.
    Since the publication of the FY 2017 IPPS/LTCH PPS final rule, we 
have continued to receive frequent feedback from hospitals and EHR 
vendors about the ongoing challenges of implementing CQM reporting 
capabilities. A summary of the main concerns identified by these data 
submitters is as follows:
     The timing of the transition to a new EHR system during 
2017 (system upgrades or new EHR vendor) may influence hospitals' 
ability to report in a timely manner;
     The current timeframe for the implementation of new EHR 
requirements presents challenges due to the varying 6 to 24-month 
cycles needed for vendors to code new measures, test and institute 
measure updates, train hospital staff, and rollout other upgraded 
features;
     Hospitals have had difficulty identifying applicable 
measures that reflect their patient population, given the reduction in 
the number of available CQMs (from 29 to 16) for CY 2017; and
     Hospitals have had challenges with data mapping and 
workflow because of the need to collect CY 2017 data while still 
reporting CY 2016 data.
    In addition, there have been other recent issues related to the CMS 
data receiving system not being able to process QRDA Category I files, 
and as a result, the system is not generating notifications confirming 
for providers that their files have been received and processed by the 
system. The aforementioned issues and challenges being experienced by 
hospitals and vendors are impacting the capability of hospitals to meet 
the requirements for CY 2017. As a result, we are proposing 
modifications to the CY 2017 final policies in this proposed rule, 
which would reduce CQM reporting requirements in order for hospitals 
and vendors to address these issues.
    In this proposed rule, we are proposing two modifications to our CY 
2017 electronic CQM reporting policies for the Medicare and Medicaid 
EHR Incentive Programs. For eligible hospitals and CAHs reporting CQMs 
electronically in CY 2017, we are proposing to: (1) Decrease the number 
of calendar quarters for which such hospitals are required to submit 
data; and (2) decrease the number of CQMs for which such hospitals must 
submit data (further discussion below). These proposals are made in 
conjunction with our proposals discussed in sections IX.A.8. and 
IX.A.10.d. of the preamble of this proposed rule to align requirements 
for the Medicare and Medicaid EHR Incentive Programs and the Hospital 
IQR Program. In making these proposals, we believe that eligible

[[Page 20131]]

hospitals and CAHs would have additional time to upgrade their systems 
and processes in preparation for the transition to electronic reporting 
on additional CQMs for additional quarters in future years.
    As we continue to make strides with electronic reporting, we want 
to ensure we provide eligible hospitals and CAHs with a robust 
selection of CQMs. As noted above, hospitals have expressed concerns 
with identifying applicable measures that reflect their patient 
population; thus, we believe that the addition of new CQMs in the 
future will offer more clinically relevant CQMs that facilitate 
reporting and help drive quality improvement. In section IX.A.9.d. of 
the preamble of this proposed rule, we discuss and seek feedback on 
future potential CQMs for the Hospital IQR Program and the Medicare and 
Medicaid EHR Incentive Programs for eligible hospitals and CAHs.
b. Proposed Changes to Policies Regarding Electronic Reporting of CQMs 
for CY 2017
    In response to concerns from stakeholders, we are proposing to 
modify the CQM reporting period for eligible hospitals and CAHs 
reporting CQMs electronically for the Medicare and Medicaid EHR 
Incentive Programs in CY 2017--for eligible hospitals and CAHs 
demonstrating meaningful use for the first time in 2017 or that have 
demonstrated meaningful use in any year prior to 2017, the reporting 
period would be two self-selected quarters of CQM data in CY 2017.
    In addition, we are proposing to modify the reporting criteria 
regarding the required number of CQMs for eligible hospitals and CAHs 
that are reporting electronically for the reporting periods in CY 2017 
under the Medicare and Medicaid EHR Incentive Programs--if only 
participating in the EHR Incentive Program, or participating in both 
the EHR Incentive Program and the Hospital IQR Program, eligible 
hospitals and CAHs would report on at least 6 (self-selected) of the 
available CQMs. For a list of the available CQMs for reporting periods 
in CY 2017, we refer readers to the table in the FY 2017 IPPS/LTCH PPS 
final rule at 81 FR 57255.
    It should be noted that we are not proposing to modify any other 
aspects of the policies for reporting CQMs electronically for CY 2017, 
including the submission periods, nor are we proposing any changes to 
our policies for reporting CQMs by attestation.
    Through our proposals for CY 2017, we intend to continue to 
maintain alignment between the Medicare and Medicaid EHR Incentive 
Programs and the Hospital IQR Program to reduce confusion and reporting 
burden among participants in the Medicare and Medicaid EHR Incentive 
Programs that also participate in the Hospital IQR Program. As noted 
above, we are retaining the submission period for reporting CQMs 
electronically under the Medicare EHR Incentive Program, in which such 
submission period begins in late spring 2017 and continues through the 
2 months following the close of the calendar year, ending February 28, 
2018. In addition, we are continuing to provide States with the 
flexibility to determine the submission periods for reporting CQMs 
under the Medicaid EHR Incentive Program. For more details on the 
aligned reporting requirements for the Hospital IQR and Medicare and 
Medicaid EHR Incentive Programs, we refer readers to section IX.A.10.d. 
of the preamble of this proposed rule.
    We believe that reducing the number of CQMs required to be 
electronically reported from 8 to 6 would ease the burden on data 
submitters, allowing them to shift resources to support system 
upgrades, map data, and train staff on CQMs. Reducing the number of 
data reporting periods to 2 quarters, rather than 4 quarters, and 
allowing eligible hospitals and CAHs to select which two quarters of CY 
2017 to electronically report would offer greater reporting flexibility 
and allow eligible hospitals, CAHs, and vendors more time to plan for 
reporting, and account for and schedule hospital-specific scenarios 
such as EHR upgrades or system transitions. We recognize that eligible 
hospitals and CAHs are concerned about their capability of meeting the 
CY 2017 requirements established in the FY 2017 IPPS/LTCH PPS final 
rule and believe that these modified reporting requirements for CY 2017 
account for the challenges stakeholders are experiencing while 
requiring the electronic reporting on a portion of CQMs, which is 
consistent with our goal to transition to electronic reporting (81 FR 
57254).
    We are inviting public comment on our proposals to modify the CY 
2017 CQM reporting requirements for the Medicare and Medicaid EHR 
Incentive Programs as described above.
3. CQM Reporting for the Medicare and Medicaid EHR Incentive Programs 
in 2018
a. Background
    In the 2015 EHR Incentive Programs Final Rule (80 FR 62892 through 
62893), beginning in CY 2017 and for subsequent years, we established a 
CQM reporting period of one full calendar year (consisting of four 
quarterly data reporting periods) for the reporting of CQMs by eligible 
hospitals and CAHs participating in the Medicare and Medicaid EHR 
Incentive Programs, with an exception for providers demonstrating 
meaningful use for the first time under the Medicaid EHR Incentive 
Program, for whom the CQM reporting period is any continuous 90-day 
period within the calendar year. In the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 57250), we noted that one full calendar year of data will 
result in more complete and accurate data, and hospitals will be able 
to submit one full calendar year of data for both the Medicare and 
Medicaid EHR Incentive Programs and the Hospital IQR Program, thereby 
reducing the reporting burden.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57250 through 
57255), we removed 13 CQMs from the set of CQMs available for eligible 
hospitals and CAHs to report under the Medicare and Medicaid EHR 
Incentive Programs, beginning with the reporting periods in CY 2017. 
All 16 of the remaining measures listed in Table 10 of the EHR 
Incentive Program Stage 2 final rule (77 FR 54083 through 54087) are 
available for eligible hospitals and CAHs to report for the Medicare 
and Medicaid EHR Incentive Programs. The following table lists the 16 
CQMs available for eligible hospitals and CAHs to report for the 
Medicare and Medicaid EHR Incentive Programs beginning in CY 2017 (81 
FR 57255).

                           CQMs for Eligible Hospitals and CAHs Beginning With CY 2017
----------------------------------------------------------------------------------------------------------------
               Short name                                      Measure name                            NQF #
----------------------------------------------------------------------------------------------------------------
                                  Electronic Clinical Quality Measures (eCQMs)
----------------------------------------------------------------------------------------------------------------
AMI-8a.................................  Primary PCI Received Within 90 Minutes of Hospital                 0163
                                          Arrival.
ED-3...................................  Median Time from ED Arrival to ED Departure for                    0496
                                          Discharged ED Patients.

[[Page 20132]]

 
CAC-3..................................  Home Management Plan of Care Document Given to Patient/             (+)
                                          Caregiver.
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 Admitted              0497
                                          Patients.
EHDI-1a................................  Hearing Screening Prior to Hospital Discharge..........            1354
PC-01..................................  Elective Delivery (Collected in aggregate, submitted               0469
                                          via web-based tool or electronic clinical quality
                                          measure).
PC-05..................................  Exclusive Breast Milk Feeding..........................            0480
STK-02.................................  Discharged on Antithrombotic Therapy...................            0435
STK-03.................................  Anticoagulation Therapy for Atrial Fibrillation/Flutter            0436
STK-05.................................  Antithrombotic Therapy by the End of Hospital Day Two..            0438
STK-06.................................  Discharged on Statin Medication........................            0439
STK-08.................................  Stroke Education.......................................             (+)
STK-10.................................  Assessed for Rehabilitation............................            0441
VTE-1..................................  Venous Thromboembolism Prophylaxis.....................            0371
VTE-2..................................  Intensive Care Unit Venous Thromboembolism Prophylaxis.            0372
----------------------------------------------------------------------------------------------------------------
* NQF endorsement has been removed.
(+) NQF endorsement has been removed.

    For CY 2018 and future calendar years, we plan to continue to align 
the CQM reporting requirements for the Medicare and Medicaid EHR 
Incentive Programs and the Hospital IQR Program. As we expect to expand 
the current measures to align with the National Quality Strategy and 
the CMS Quality Strategy \497\ and incorporate updated standards and 
terminology 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 future years. We will continue to engage stakeholders to 
provide input on future proposals for CQMs as well as request comment 
on future electronic specifications for new and updated CQMs.
---------------------------------------------------------------------------

    \497\ 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 2018
(1) Background
    Our goal is to continue to move toward increased electronic 
reporting while also addressing stakeholder concerns as described 
above, which we believe will likely continue into CY 2018, but to a 
lesser extent than in CY 2017. With the CY 2017 proposed policies 
reducing reporting requirements and providing additional time for 
eligible hospitals, CAHs, and vendors to make EHR upgrades and system 
transitions in CY 2017, we believe that stakeholders would be able to 
address some of the issues and challenges they face prior to CY 2018, 
but recognize that certain challenges and issues (for example, EHR 
upgrade and system transition challenges associated with the 
development cycle of technology and the timeframe to develop and 
execute work flows and processes and train staff based on EHR upgrades 
and system transitions) may not be fully resolved and as a result, may 
persist in CY 2018. As established in the 2015 EHR Incentive Programs 
Final Rule (80 FR 62894), reporting CQMs by attestation will no longer 
be an option for eligible hospitals and CAHs starting with the 
reporting periods in CY 2018, except in circumstances in which 
electronic reporting is not feasible.
    For CY 2018, we are proposing the following CQM reporting period 
for the Medicare and Medicaid EHR Incentive Programs and the following 
submission period for the Medicare EHR Incentive Program--for eligible 
hospitals and CAHs reporting CQMs electronically that demonstrate 
meaningful use for the first time in 2018 or that have demonstrated 
meaningful use in any year prior to 2018, the reporting period would be 
the first 3 quarters of CY 2018, and the submission period would be the 
2 months following the close of the calendar year, ending February 28, 
2019.
    For eligible hospitals and CAHs that report CQMs by attestation 
under the Medicare EHR Incentive Program as a result of electronic 
reporting not being feasible, and for eligible hospitals and CAHs that 
report CQMs by attestation under their state's Medicaid EHR Incentive 
Program, we established a CQM reporting period of the full CY 2018 
(consisting of 4 quarterly data reporting periods) (80 FR 62893). We 
also established an exception to this full-year reporting period for 
eligible hospitals and CAHs demonstrating meaningful use for the first 
time under their state's Medicaid EHR Incentive Program; under this 
exception, the CQM reporting period is any continuous 90-day period 
within CY 2018 (80 FR 62893).
    In this proposed rule, we are proposing the submission period for 
eligible hospitals and CAHs reporting CQMs by attestation under the 
Medicare EHR Incentive Program would be the 2 months following the 
close of the CY 2018 CQM reporting period, ending February 28, 2019.
    In regard to the Medicaid EHR Incentive Program, we provide States 
with the flexibility to determine the method of reporting CQMs 
(attestation or electronic reporting) and the submission periods for 
reporting CQMs, subject to prior approval by CMS.
(2) CQM Reporting Criteria for the Medicare and Medicaid EHR Incentive 
Programs in CY 2018
    We are proposing the following reporting criteria under the 
Medicare and Medicaid EHR Incentive Program for eligible hospitals and 
CAHs reporting CQMs electronically for the reporting period in CY 
2018--for eligible hospitals and CAHs participating only in the EHR 
Incentive Program, or participating in both the EHR Incentive Program 
and the Hospital IQR Program, report on at least six (self-selected) of 
the available CQMs from the table in the FY 2017 IPPS/LTCH PPS final 
rule at 81 FR 57255.
    We are proposing the following reporting criteria for eligible 
hospitals and CAHs that report CQMs by attestation under the Medicare 
EHR Incentive Program because electronic reporting is not feasible, and 
for eligible hospitals and CAHs that report CQMs by attestation under 
their state's

[[Page 20133]]

Medicaid EHR Incentive Program, for the reporting period in CY 2018--
report on all 16 available CQMs from the table in the FY 2017 IPPS/LTCH 
PPS final rule at 81 FR 57255.
    In developing these proposals, we considered several alternatives. 
Specifically, we considered aligning the requirements for CY 2018 with 
the proposed requirements for CY 2017 outlined in this proposed rule, 
such that eligible hospitals and CAHs would report on 6 (self-selected) 
available CQMs for two self-selected quarters of data in both CY 2017 
and CY 2018. We also considered the final policy in the FY 2017 IPPS/
LTCH PPS final rule for the Hospital IQR Program (81 FR 57150 through 
57159), which would require hospitals to report one full calendar year 
of data for at least 8 (self-selected) CQMs out of the available CQMs 
for both the CY 2017 reporting period/FY 2019 payment determination and 
the CY 2018 reporting period/FY 2020 payment determination. However, we 
are proposing changes to this previously adopted policy in the Hospital 
IQR Program and refer readers to section IX.A.8. of the preamble of 
this proposed rule for more details. Ultimately, we believe that our 
proposal balances our goal to shift towards electronic reporting of 
quality measure data with concerns from stakeholders regarding an 
increased burden to meet CQM reporting requirements.
    In addition, the proposal provides eligible hospitals and CAHs with 
the opportunity to have several years of experience reporting data 
electronically for the Hospital IQR and Medicare and Medicaid EHR 
Incentive Programs. Therefore, we believe that eligible hospitals and 
CAHs will be better prepared to submit an additional quarter of data 
for the CY 2018 reporting period compared to the number of quarters we 
are proposing for the CY 2017 reporting period. This proposal is being 
made in conjunction with our proposals discussed in section IX.A.10.d. 
of the preamble of this proposed rule to align requirements for the 
Medicare and Medicaid EHR Incentive Programs and the Hospital IQR 
Program.
    We are inviting public comment on our proposals regarding the CY 
2018 reporting requirements for eligible hospitals and CAHs reporting 
CQMs under the Medicare and Medicaid EHR Incentive Programs.
c. CQM Reporting Form and Method for the Medicare EHR Incentive Program 
in 2018
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49759 through 
49760), we removed the QRDA-III as an option for reporting under the 
Medicare EHR Incentive Program for eligible hospitals and CAHs. For the 
reporting periods in 2016 and future years, we are requiring QRDA-I for 
CQM electronic submissions for the Medicare EHR Incentive Program. As 
noted in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49760), States 
would continue to have the option, subject to our prior approval, to 
allow or require QRDA-III for CQM reporting.
    As noted in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49759), we 
encourage health IT developers to test any updates, including any 
updates to the CQMs and CMS reporting requirements based on the CMS 
Implementation Guide for Quality Reporting Document Architecture (QRDA) 
Category I and Category III (CMS Implementation Guide for QRDA) for 
Hospital Quality Reporting (HQR), 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 Implementation Guide for QRDA; 
program specific performance calculation guidance; and CQM electronic 
specifications and guidance documents. These documents are located on 
the eCQI Resource Center Web page at https://ecqi.healthit.gov/. For 
further information on CQM reporting, we refer readers to the EHR 
Incentive Program Web site where guides and tip sheets are located at: 
http://www.cms.gov/ehrincentiveprograms.
    For the CY 2018 reporting period, we are proposing the following 
for CQM submission under the Medicare EHR Incentive Program:
     Eligible hospital and CAH participating in the Medicare 
EHR Incentive Program (single program participation)--electronically 
report CQMs through QualityNet Portal.
     Eligible hospital and CAH options for electronic reporting 
for multiple programs (that is, EHR Incentive Program and Hospital IQR 
Program participation)--electronically report through QualityNet 
Portal.
    As noted in the 2015 EHR Incentive Programs Final Rule (80 FR 
62894), starting in 2018, eligible hospitals and CAHs participating in 
the Medicare EHR Incentive Program must electronically report CQMs 
where feasible; and attestation to CQMs will no longer be an option 
except in certain circumstances where electronic reporting is not 
feasible.
    For the Medicaid EHR Incentive Program, States 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.
    For CY 2018, we are proposing to continue our policy regarding the 
electronic submission of CQMs, which would require the use of the most 
recent version of the CQM electronic specification for each CQM to 
which the EHR is certified. For the CY 2018 electronic reporting of 
CQMs, this means eligible hospitals and CAHs would be required to use 
the Spring 2017 version of the CQM electronic specifications and any 
applicable addenda available on the eCQI Resource Center Web page at: 
https://ecqi.healthit.gov/. In addition, we are proposing to require 
that an eligible hospital or CAH would need to have its EHR technology 
certified to all 16 available CQMs from the table in the FY 2017 IPPS/
LTCH PPS final rule at 81 FR 57255 in order to meet the reporting 
requirements for CY 2018. As described in the 2015 EHR Incentive 
Programs Final Rule (80 FR 62767), starting in CY 2018, eligible 
hospitals and CAHs are required to have EHR technology certified to the 
2015 Edition.
    Starting in CY 2018, we are proposing to require the use of EHR 
technology certified to the 2015 Edition for CQM reporting. 
Furthermore, we are proposing that an EHR certified for CQMs under the 
2015 Edition certification criteria would not need to be recertified 
each time it is updated to a more recent version of the CQMs. We 
believe it is not necessary for an EHR certified for CQMs under the 
2015 Edition certification criteria to be recertified each time it is 
updated to the most recent version of the CQMs because the EHR 
technology continues to meet the 2015 Edition certification criteria 
and any updates to the CQM specifications do not impact or change any 
elements regarding certification and thus, we are proposing that 
recertification is not necessary. For further discussion regarding EHR 
certification requirements for 2018, we refer readers to section 
IX.G.4. of the preamble of this proposed rule. We are inviting public 
comment on these proposals.

[[Page 20134]]

F. Clinical Quality Measurement for Eligible Professionals (EPs) 
Participating in the Medicaid EHR Incentive Program in 2017

    The proposals in this section would apply only to EPs participating 
in the Medicaid EHR Incentive Program. They would not apply to eligible 
hospitals or CAHs, or to the Medicare EHR Incentive Program.
1. Proposed Modifications to the CQM Reporting Period for EPs in 2017
    In the 2015 EHR Incentive Programs Final Rule (80 FR 62762), we 
established for the Medicare and Medicaid EHR Incentive Programs a CQM 
reporting period of the full CY 2017 for EPs who have demonstrated 
meaningful use in a prior year and a CQM reporting period of any 
continuous 90 days within CY 2017 for EPs who are demonstrating 
meaningful use for the first time (80 FR 62891 through 62892). We also 
noted that we would continue to allow the States to determine the form 
and manner in which Medicaid EPs should report CQMs, subject to CMS 
approval (80 FR 62891, 62894).
    In the final rule with comment period titled Medicare Program; 
Merit-Based Incentive Payment System (MIPS) and Alternative Payment 
Model (APM) Incentive Under the Physician Fee Schedule, and Criteria 
for Physician-Focused Payment Models (81 FR 77008) (referred to as the 
``CY 2017 Quality Payment Program final rule with comment period''), we 
established at Sec.  414.1320(a), for the 2019 MIPS payment year, a 
minimum of a continuous 90-day performance period within CY 2017, up to 
and including the full CY 2017, for the quality performance category of 
the MIPS. We established at Sec.  414.1320(b), for the 2020 MIPS 
payment year, a performance period of the full CY 2018.
    Following the publication of that final rule with comment period, 
we received feedback from EPs observing that having CQM reporting or 
performance periods for Medicare professionals under MIPS that are 
different from the CQM reporting period for EPs under the Medicaid EHR 
Incentive Program would create administrative burdens for EPs who wish 
to participate in both programs and to report CQMs electronically. Our 
goal has always been to align Medicare and Medicaid reporting and 
quality improvement programs to the extent possible. In addition, while 
participation in MIPS is required for professionals who are considered 
``MIPS eligible clinicians,'' participation in the Medicaid EHR 
Incentive Program is not required. If the CQM reporting periods and 
MIPS performance periods are not aligned, we believe it is less likely 
that MIPS eligible clinicians will also participate as EPs in the 
remaining years of the Medicaid EHR Incentive Program.
    Therefore, we are proposing to change the CQM reporting period for 
EPs who report CQMs electronically in the Medicaid EHR Incentive 
Program to match the performance period established under MIPS in the 
quality performance category for MIPS eligible clinicians. We are 
proposing a minimum of a continuous 90-day period during CY 2017 for 
EPs electronically reporting CQMs for the Medicaid EHR Incentive 
Program. We note that we consider the reporting periods established 
through rulemaking to be minimums and would encourage States to accept 
data from longer reporting periods. The reporting period for CQMs for 
EPs who choose to attest rather than report electronically, and who 
have demonstrated meaningful use in a previous program year under the 
EHR Incentive Program would remain one full year (CY 2017), which is in 
alignment with the requirements for eligible hospitals and CAHs for the 
Medicare and Medicaid EHR Incentive Programs for 2017 (80 FR 62892 
through 62893). We note that reporting CQMs by attestation is not an 
option for eligible clinicians under MIPS, so the reason for proposing 
a shortened reporting period for EPs reporting CQMs electronically, 
which is to align this reporting period with the MIPS performance 
period, would not exist for EPs who choose not to report 
electronically. Nothing in this proposal would change the CQM reporting 
period for EPs demonstrating meaningful use for the first time, which 
was established in the 2015 EHR Incentive Programs Final Rule to be any 
continuous 90 day period regardless of the method of CQM submission (80 
FR 62892).
    The CQM reporting period for the Medicaid EHR Incentive Program in 
2018 for EPs that have demonstrated meaningful use in a previous 
program year would remain one full year (CY 2018) to align with the 
corresponding performance period in MIPS for MIPS eligible clinicians. 
If changes are made to the MIPS performance period through future 
rulemaking, we will revisit the Medicaid EHR Incentive Program policies 
to continue our alignment goals.
    We intend to reduce EP burden and simplify the program through this 
proposal, which is intended to better align CQM reporting periods and 
CQM reporting for the Medicaid EHR Incentive Program with policies 
under MIPS. Overall, we believe the proposed alignment at the State 
attestation system and EP levels would both reduce burden associated 
with reporting on multiple CMS programs and enhance State and CMS 
operational efficiency.
    We are inviting public comment on this proposal, including on 
whether making the proposed change would create burdens for EPs or 
States.
2. Proposed Modifications to CQM Reporting Requirements for Medicaid 
EPs Under the Medicaid EHR Incentive Program
    We also are proposing to align the specific CQMs available to EPs 
participating in the Medicaid EHR Incentive Program with those 
available to clinicians participating in MIPS who submit CQMs through 
their EHR. In the final rule titled ``Medicare and Medicaid Programs; 
Electronic Health Record Incentive Program--Stage 2,'' we established 
(77 FR 54058) that EPs are required to report 9 CQMs covering at least 
3 of the National Quality Strategy (NQS) domains from a list of 64 CQMs 
(77 FR 54069, Table 8). Subsequently and in the following years, in 
general, there has been alignment between the CQMs selected for the 
Medicaid and Medicare EHR Incentive Programs for EPs and the electronic 
measures selected for the PQRS program. Updates to the PQRS measure set 
were proposed and finalized in the annual Physician Fee Schedule (PFS) 
rule for purposes such as keeping specifications in line with industry 
standards and clinical guidelines.
    In the CY 2017 Quality Payment Program final rule with comment 
period (81 FR 77144), we revised the list of CQMs for the 2019 MIPS 
payment year, based on performance periods within CY 2017, to better 
reflect updated clinical standards and guidelines. Specifically, we 
removed a number of CQMs that had not been updated and were no longer 
clinically relevant (81 FR 77773, Appendix, Table F). Because MIPS is 
replacing PQRS, in order to keep CQM specifications current, we are 
proposing to align the CQMs for Medicaid EPs with those updated 
annually for MIPS. Specifically, we are proposing that the CQMs 
available for Medicaid EPs in 2017 would consist of the list of 
available CQMs for reporting from an EHR for MIPS in 2017, available in 
the Appendix of the CY 2017 Quality Payment Program final rule with 
comment period under Table A, which are denoted with a CMS e-Measure ID 
number.
    In the CY 2017 Quality Payment Program final rule with comment 
period

[[Page 20135]]

(81 FR 77145), we noted that one commenter requested that we engage 
State Medicaid leaders to maximize measure alignment across Medicare 
and Medicaid. We responded that we intend to align quality measures 
among all CMS quality programs where possible, including Medicaid, and 
would take this comment into account in the future. In addition, States 
have requested alignment between the CQM set for MIPS and the CQM set 
for EPs in the Medicaid EHR Incentive Program for consistency and 
convenience, to reduce burden, and to avoid confusion. In addition, we 
believe it is more likely that professionals would participate in both 
programs if the CQM sets are aligned. While participation in MIPS is 
required for professionals who are considered ``MIPS eligible 
clinicians,'' participation in the Medicaid EHR Incentive Program is 
not required. If the CQMs are not aligned across both programs, we 
believe it is less likely that MIPS eligible clinicians would also 
participate as EPs in the remaining years of the Medicaid EHR Incentive 
Program. Finally, as noted above, the CQMs that were removed from MIPS 
(81 FR 77773, Appendix, Table F) had not been updated and were no 
longer clinically relevant, and we believe that the revised list of 
CQMs would better reflect updated clinical standards and guidelines (81 
FR 77144).
    We anticipate that this proposal would reduce burden for Medicaid 
EPs, and that the systems changes that would be needed to implement it 
would not be significant for either States or EPs. The set of 53 CQMs 
available to MIPS participants is a subset of the 64 CQMs currently 
available under the Medicaid EHR Incentive Program. In addition, we 
believe that if EPs also plan to participate in MIPS, they should 
already be prepared to report on the 53 CQMs. However, we welcome 
comments on whether any EPs might be negatively affected by the 
proposal; for example, on whether any EPs might have EHRs that do not 
measure enough of the 53 remaining CQMs because they were relying on 
some of the 11 CQMs that would be removed. We do not anticipate that 
this would be a common situation because these 11 CQMs are outdated, 
and the industry is moving away from them as EHRs are upgraded to meet 
the MIPS requirements.
    We anticipate that the proposal to reduce the number of available 
CQMs would have only a minimal impact on States, which would have to 
make minor adjustments to State systems to reduce the available 
measures from 64 to 53. It is our understanding that State systems can 
turn off or easily exclude CQMs from user visibility on the front end 
and still easily manage on the back end.
    The data submission criteria for the MIPS quality performance 
category at Sec.  414.1335(a)(1)(i) provide that individual MIPS 
eligible clinicians and groups who elect to submit data via claims, 
qualified registry, EHR or qualified clinical data registry must submit 
data on at least six quality measures, including at least one outcome 
measure (or, if an applicable outcome measure is not available, one 
other high priority measure). We refer readers to Sec.  414.1335(a)(2) 
and (3) for the data submission criteria that apply to individual MIPS 
eligible clinicians and groups who elect to submit data via other data 
submission mechanisms.
    Instead of requiring MIPS eligible clinicians to report on CQMs 
across a certain number of NQS domains, MIPS provides individual MIPS 
eligible clinicians and groups with a variety of alternatives for 
participating in MIPS, including a variety of data submission 
mechanisms and scoring criteria. We believe that the burden on EPs and 
States of adopting all of these MIPS alternatives for the Medicaid EHR 
Incentive Program would outweigh any benefits gained. The alternative 
reporting options for MIPS are calibrated as part of an overall quality 
improvement program beyond what the Medicare and Medicaid EHR Incentive 
Programs are designed to be. We believe it would be inappropriate to 
apply all of these new requirements to the Medicaid EHR Incentive 
Program.
    We are proposing to eliminate the requirement to report on CQMs 
across 3 of the 6 NQS domains that existed in previous years of the 
Medicaid EHR Incentive Program, for improved alignment with the data 
submission criteria for the MIPS quality performance category. The 
removal of this requirement would provide EPs greater flexibility in 
selecting CQMs to report and would assure that they could report on the 
same CQMs from their EHR to both MIPS and the Medicaid EHR Incentive 
Program.
    We propose that for 2017 Medicaid EPs would be required to report 
on any six measures that are relevant to the EP's scope of practice. 
This proposal would better align with the data submission criteria for 
the MIPS quality performance category in 2017.
    We note that we would continue our policy on allowing zero 
denominators to be reported to allow EPs to meet the CQM reporting 
requirements of the EHR Incentive Programs (80 FR 62889). Future years' 
requirements for reporting CQMs in the Medicaid EHR Incentive Program 
will be established in future rulemaking, as the policies for MIPS are 
developed for 2018 and beyond. We will continue to align the quality 
reporting requirements, as logical and feasible, to reduce EP burden.
    We are inviting public comment on these proposals, specifically on 
whether making these proposed changes to CQM measures and measure 
reporting effective for 2017 would create burdens on EPs or States. If 
so, CMS will consider making these proposed changes to the CQM 
reporting requirements effective beginning with the reporting period in 
2018.

G. Changes to the Medicare and Medicaid EHR Incentive Programs

1. Proposed Revisions to the EHR Reporting Period in 2018
    We received additional feedback from EPs, hospitals, hospital 
associations, and other clinical associations indicating that 
additional time may be necessary for testing and implementation of the 
new application programming interface (API) functionality requirement 
for Stage 3 citing inability to meet the required timeframe for 
implementation of Stage 3 and complexity of the new functionality and 
associated requirements for the Patient Electronic Access to Health 
Information (80 FR 62841 through 62846) and Coordination of Care 
Through Patient Engagement (80 FR 62846 through 62852) objectives. The 
API functionality supports health care providers and patient electronic 
access to health information, which is key to improving the free flow 
of health information, quality improvement, and patient engagement. 
Because this functionality is included as part of the 2015 Edition Base 
EHR definition (and thus must be part of CEHRT) (80 FR 62675 through 
62676), APIs may be enabled by a health care provider or organization 
for their own use of third party applications with their CEHRT, such as 
for quality improvement. An API could also be enabled by a health care 
provider to give patients access to their health information through a 
third-party application with more flexibility than is often found in 
many current patient portals. From the health care provider 
perspective, an API could complement a specific provider branded 
patient portal or could also potentially make one unnecessary if 
patients are able to use software applications designed to interact 
with an API that could support their ability to view, download, and 
transmit their health information to a third party (80 FR 62842). We 
want to ensure that health

[[Page 20136]]

care providers have the opportunity to thoroughly test their systems 
and make adjustments in order to successfully attest for the EHR 
reporting period in CY 2018. In addition, we believe that health care 
providers may need extra time to fully implement and test workflows 
with the 2015 Edition of CEHRT, which is required beginning in CY 2018 
(80 FR 62874 through 62875).
    The Office of the National Coordinator for Health Information 
Technology (ONC) monitors technical development and progress toward 
certification to evaluate readiness among the health IT industry for 
implementation of technology certified to 2015 Edition certification 
criteria. One part of this evaluation involves monitoring products in 
the certification process, which is supplemented by discussions with 
health IT developers, ONC-Authorized Testing Laboratory (ONC-ATLs), and 
ONC-Authorized Certification Body (ONC-ACBs). Health IT developers have 
conveyed to the ONC that some of the 2015 Edition certification 
criteria required additional effort, including implementation of new 
functionalities (including APIs) and facilitation of greater 
interoperability in comparison to previous Editions. The 2015 Edition 
health IT certification criteria enables health information exchange 
through new and enhanced certification criteria standards, and 
implementation specifications for interoperability while incorporating 
changes that are designed to spur innovation and provide more choices 
to health care providers and patients for the exchange of electronic 
health information including new application access (API) certification 
criteria. For example, new transitions of care certification criterion 
rigorously assesses a product's ability to create and receive an 
interoperable Consolidated-Clinical Document Architecture (C-CDA). The 
ONC also adopted certification criteria that both support 
interoperability in other settings and use cases, such as the Common 
Clinical Data Set summary record, data segmentation for privacy, and 
care plan certification criteria (80 FR 62603). It also indicated that 
it did not anticipate any significant delays toward the delivery and 
roll out of products to customers because of this additional effort. 
This timing was expressed as a goal of developers to enable health care 
providers to engage in upgrades, training, and other improvements that 
would be needed to begin using the 2015 Edition CEHRT in 2018.
    In addition, the ONC also compares data such as program tracking 
and projections related to the release of the previous Editions of 
CEHRT to help inform its evaluation of progress during this current 
transition period for the 2015 Edition. In particular, ONC has reviewed 
historical data for actual participation and implementation of 
technologies certified to the 2014 Edition during the transition year 
in CY 2014, when users were transitioning from technology certified to 
the 2011 Edition to technology certified to the 2014 Edition. In 2014, 
projections indicated expectations of market readiness of greater than 
90 percent by the end of the CY 2014. However, subsequent analysis 
found that the actual market coverage for hospitals was approximately 
98 percent at the end of CY 2014, meaning that 98 percent of hospitals 
had implemented the 2014 Edition by the end of CY 2014. However, 
attestations for the EHR Incentive Program for CY 2014 indicated a 
potential lag in implementation and variability in the amount of time 
required by hospitals to complete implementation of the technology and 
the subsequent training, technical processes, and operational and 
clinical workflows required for successful use. Attestation data show 
that 9 percent of eligible hospitals and CAHs used EHR technology 
certified to the 2011 Edition for part or all of their EHR reporting 
period.
    In addition, ONC considers the number of health care providers 
likely to be covered by the individual developers seeking certification 
under the ONC Health IT Certification Program. The ONC considers trends 
within the industry when projecting for 2015 Edition readiness. The 
market trend of consolidation was considered as part of the projection 
model and supports an analysis that supports an estimate of greater 
than 85 percent of hospitals will be ready by the end of CY 2017. 
However, a more conservative approach--based on the identified variance 
in implementation timelines for hospitals may be necessary to support 
the hospitals that may require additional time to successfully 
implement technology certified to the 2015 Edition.
    In addition, the historical data indicates EPs are more likely to 
use a wider range of products, including products which individually 
make up a smaller segment of the overall market. Therefore, when market 
factors are taken into account, there exists a larger proportion of 
readiness that is unknown due to the wider range of products used by 
EPs. Therefore, a more conservative approach is necessary and supports 
an estimate of greater than 74 percent readiness by the end of CY 2017 
for EPs.
    Thus, while we expect a majority of EPs, eligible hospitals and 
CAHs participating in the EHR Incentive Programs to be ready to begin 
using 2015 Edition CEHRT in CY 2018, it is reasonable to assume there 
will still be some who will not be ready and will require a longer 
timeframe for successful implementation. In addition, it is likely that 
there will be a proportion of them that have the technology implemented 
in time for the beginning of CY 2018 who would similarly benefit from 
additional time to implement new processes and workflows supporting 
their use of certified EHR technology in the EHR Incentive Program. 
This is especially important given requirements in the ONC Health IT 
Certification program which leverage new functionalities such as APIs 
which also require adherence to existing security and privacy 
standards. We stated in the 2015 EHR Incentive Programs Final Rule (80 
FR 62842 through 62843) that the requirement to conduct and review a 
security risk analysis in compliance with HIPAA Security Rule would 
include the certified API enabled as a part of the health care 
provider's CEHRT.
    For the reasons discussed above, we are proposing to modify the EHR 
reporting periods in 2018 for new and returning participants attesting 
to CMS or their State Medicaid agency from the full year (CY 2018) to a 
minimum of any continuous 90-day period within CY 2018. This would mean 
that EPs that attest directly to a State for the State's Medicaid EHR 
Incentive Program and eligible hospitals and CAHs attesting to CMS or 
the State's Medicaid EHR Incentive Program would attest to meaningful 
use of CEHRT for an EHR reporting period of a minimum of any continuous 
90-day period from January 1, 2018 through December 31, 2018. The 
applicable incentive payment year and payment adjustment years for the 
EHR reporting period in 2018, as well as the deadlines for attestation 
and other related program requirements, would remain the same as 
established in prior rulemaking. We are proposing corresponding changes 
to the definition of ``EHR reporting period'' and ``EHR reporting 
period for a payment adjustment year'' at 42 CFR 495.4.
    We are inviting public comment on our proposal.
2. Exception for Decertified EHR Technology for EPs, Eligible 
Hospitals, and CAHs Seeking To Avoid the Medicare Payment Adjustment
    The 21st Century Cures Act (Pub. L. 114-255) was enacted on 
December 13, 2016. Section 4002(b)(1)(A) amended

[[Page 20137]]

section 1848(a)(7)(B) of the Act to provide that the Secretary shall 
exempt an eligible professional from the application of the payment 
adjustment under section 1848(a)(7)(A) of the Act with respect to a 
year, subject to annual renewal, if the Secretary determines that 
compliance with the requirement for being a meaningful EHR user is not 
possible because the certified EHR technology used by such professional 
has been decertified under ONC's Health IT Certification Program. 
Similarly, section 4002(b)(2) of the 21st Century Cures Act amended 
section 1886(b)(3)(B)(ix)(II) of the Act to provide that the Secretary 
shall exempt a hospital from the application of the payment adjustment 
under section 1886(b)(3)(B)(ix)(I) with respect to a fiscal year, 
subject to annual renewal, if the Secretary determines that compliance 
with the requirement for being a meaningful EHR user is not possible 
because the certified EHR technology used by the hospital is 
decertified under ONC's Health IT Certification Program. We include 
proposals below to implement these amendments with respect to EPs, 
eligible hospitals, and CAHs. We note that sections 1848(a)(7)(B) and 
1886(b)(3)(B)(ix)(II) of the Act provide that in no case may an EP, 
eligible hospital, or CAH be granted an exemption from the payment 
adjustment based on significant hardship or decertified EHR technology 
for more than five years.
    The ONC Health IT Certification Program: Enhanced Oversight and 
Accountability final rule (``EOA final rule'') (81 FR 72404), effective 
December 19, 2016, created a regulatory framework for the ONC's direct 
review of health information technology (health IT) certified under the 
ONC Health IT Certification Program, including, when necessary, 
requiring the correction of non-conformities found in health IT 
certified under the Program and terminating certifications issued to 
certified health IT. Prior to the EOA final rule, ONC-Authorized 
Certification Bodies (ONC-ACBs) had the only authority to terminate or 
revoke certification of health IT under the program, which they used on 
previous occasions. On September 23, 2015, we posted an FAQ discussing 
the requirements for using a decertified CEHRT.\498\
---------------------------------------------------------------------------

    \498\ https://questions.cms.gov/faq.php?isDept=0&search=decertify&searchType=keyword&submitSearch=1&id=5005.
---------------------------------------------------------------------------

    Once all administrative processes, if any, are complete, then 
notice of a ``termination of certification'' is listed on the Certified 
Health IT Product List (CPHL) Web page.\499\ As appropriate, ONC will 
also publicize the termination of certification of health IT through 
other communication channels (for example, ONC list serve(s)). Further, 
when ONC terminates the certification of a health IT product, the 
health IT developer is required to notify all potentially affected 
customers in a timely manner.
---------------------------------------------------------------------------

    \499\ The ``list can be found at: https://chpl.healthit.gov/#/decertifications/products.
---------------------------------------------------------------------------

    We further note that in comparison to termination actions taken by 
ONC and ONC-ACBs, a health IT developer may voluntarily withdraw a 
certification that is in good standing under the ONC Health IT 
Certification Program. A voluntary withdrawal may be the result of the 
health IT developer going out of business, the developer no longer 
supporting the product, or for other reasons that are not in response 
to ONC-ACB surveillance, ONC direct review, or a finding of non-
conformity by ONC or an ONC-ACB.\500\ In such instances, ONC will list 
these products on the ``Inactive Certificates'' \501\ Web page of the 
CHPL.
---------------------------------------------------------------------------

    \500\ For further descriptions of certification statuses, we 
refer readers to the CHPL Public User Guide.
    \501\ The ``Inactive Certificates'' Web page can be found at: 
https://chpl.healthit.gov/#/decertifications/inactive.
---------------------------------------------------------------------------

    We are proposing to revise Sec.  495.102(d) to add a new exception 
for EPs who demonstrate through an application process that compliance 
with the requirement for being a meaningful EHR user is not possible 
because the certified EHR technology used by the EP has been 
decertified under ONC's Health IT Certification Program. We are 
proposing this exception for the CY 2018 payment adjustment year, which 
is the final year of the payment adjustment for EPs under section 
1848(a)(7)(A) of the Act. We considered but are not proposing this 
exception also for the CY 2017 payment adjustment year because it would 
require us to reprocess claims for potentially the entire CY 2017, 
which would be costly and administratively burdensome. ONC provides 
that there is a 6-step process that usually occurs when implementing a 
certified EHR technology system.\502\ We believe that if an EP has to 
procure new certified EHR technology they will likely have to go 
through some phases of this cycle again and understand that it would be 
time consuming and may take up to a year to implement.
---------------------------------------------------------------------------

    \502\ https://www.healthit.gov/providers-professionals/ehr-implementation-steps.
---------------------------------------------------------------------------

    We are proposing an EP may qualify for this exception if their 
certified EHR technology was decertified either before or during the 
applicable EHR reporting period for the CY 2018 payment adjustment 
year, which under Sec.  495.4 is any continuous 90-day period in CY 
2016 or 2017, depending on whether the EP has successfully demonstrated 
meaningful use in a prior year. If the certified EHR technology was 
decertified at any time during the 12-month period preceding the 
applicable EHR reporting period for the CY 2018 payment adjustment 
year, or during the applicable EHR reporting period for the CY 2018 
payment adjustment year, the EP may qualify for this exception. For 
example, if an EP intended to attest to meaningful use for a 90-day EHR 
reporting period beginning on April 1, 2016, the EP could apply for 
this exception if their certified EHR technology was decertified at any 
time during the 12-month period beginning on April 1, 2015 and ending 
on March 31, 2016, or if their certified EHR technology was decertified 
at any time during their 90-day EHR reporting period beginning on April 
1, 2016. We believe a 12-month period is reasonable because we 
understand the burden placed on EPs related to time and funds needed to 
purchase and deploy new certified EHR technology including the process 
that goes along with implementing new certified EHR technology.
    In addition, we are proposing that the EP must demonstrate in its 
application and through supporting documentation if available that the 
EP intended to attest to meaningful use for a certain EHR reporting 
period and made a good faith effort to adopt and implement another 
CEHRT in advance of that EHR reporting period. We are proposing an EP 
seeking to qualify for this exception would submit an application in 
the form and manner specified by us by October 1, 2017, or a later date 
specified by us.
    We are proposing to revise Sec.  412.64(d)(4) to add a new category 
of exception for eligible hospitals that demonstrate through an 
application process that compliance with the requirement for being a 
meaningful EHR user is not possible because the certified EHR 
technology used by the eligible hospital has been decertified under 
ONC's Health IT Certification Program. We are proposing this exception 
would be available beginning with the FY 2019 payment adjustment year. 
We considered but are not proposing to make this exception available 
beginning with the FY 2018 payment adjustment year because making this 
exception available beginning with the FY 2018

[[Page 20138]]

payment adjustment would be administratively burdensome, since previous 
guidance at FAQ 12657 indicated that providers could apply for a 
hardship if their product was decertified prior to the end of the EHR 
reporting period.\503\ Therefore, we believe that an eligible hospital 
would have already received a hardship exception under this 
circumstance. We also note that to date no certifications have been 
terminated under ONC's direct review authority. We are proposing an 
eligible hospital may qualify for this exception if their certified EHR 
technology was decertified either before or during the applicable EHR 
reporting period for the payment adjustment year. We refer readers to 
the definition of ``EHR reporting period for a payment adjustment 
year'' under Sec.  495.4 for the applicable EHR reporting periods for 
payment adjustment years for eligible hospitals. For example, under 
Sec.  495.4, for the FY 2019 payment adjustment year, the EHR reporting 
period is any continuous 90-day period in CY 2017. If the certified EHR 
technology was decertified at any time during the 12-month period 
preceding the applicable EHR reporting period for the payment 
adjustment year, or during the applicable EHR reporting period for the 
payment adjustment year, the eligible hospital may qualify for this 
exception. For example, if an eligible hospital intended to attest to 
meaningful use for a 90-day EHR reporting period beginning on April 1, 
2017, the eligible hospital could apply for this exception if their 
certified EHR technology was decertified at any time during the 12-
month period beginning on April 1, 2016 and ending on March 31, 2017, 
or if their certified EHR technology was decertified at any time during 
their 90-day EHR reporting period beginning on April 1, 2017.
---------------------------------------------------------------------------

    \503\ https://questions.cms.gov/faq.php?isDept=0&search=decertified&searchType=keyword&submitSearch=1&id=5005.
---------------------------------------------------------------------------

    We believe a 12-month period is reasonable for the same reasons 
stated above for EPs. In addition, we are proposing that the eligible 
hospital must demonstrate in its application and through supporting 
documentation if available that the eligible hospital intended to 
attest to meaningful use for a certain EHR reporting period and made a 
good faith effort to adopt and implement another CEHRT in advance of 
that EHR reporting period. We are proposing an eligible hospital 
seeking to qualify for this exception would submit an application in 
the form and manner specified by us by July 1 of the year before the 
payment adjustment year (for example, for the FY 2019 payment 
adjustment year, by July 1, 2018), or a later date specified by us.
    We are proposing to revise Sec.  413.70(a)(6) to add a new category 
of exception for CAHs that demonstrate through an application process 
that compliance with the requirement for being a meaningful EHR user is 
not possible because the certified EHR technology used by the CAH has 
been decertified under ONC's Health IT Certification Program. We are 
proposing this exception would be available beginning with the FY 2018 
payment adjustment year. We are proposing a CAH may qualify for this 
exception if their certified EHR technology was decertified either 
before or during the applicable EHR reporting period for the payment 
adjustment year. We refer readers to the definition of ``EHR reporting 
period for a payment adjustment year'' under Sec.  495.4 for the 
applicable EHR reporting periods for payment adjustment years for CAHs. 
For example, under Sec.  495.4, for the FY 2018 payment adjustment 
year, the EHR reporting period is either CY 2018 or a continuous 90-day 
period in CY 2018, depending on whether the CAH has successfully 
demonstrated meaningful use in a prior year. If the certified EHR 
technology was decertified at any time during the 12-month period 
preceding the applicable EHR reporting period for the payment 
adjustment year, or during the applicable EHR reporting period for the 
payment adjustment year, the CAH may qualify for this exception. For 
example, if a CAH intended to attest to meaningful use for a 90-day EHR 
reporting period beginning on April 1, 2018, the CAH could apply for 
this exception if their certified EHR technology was decertified at any 
time during the 12-month period beginning on April 1, 2017 and ending 
on March 31, 2018, or if their certified EHR technology was decertified 
at any time during their 90-day EHR reporting period beginning on April 
1, 2018. We believe a 12-month period is reasonable for the same 
reasons stated above for EPs. In addition, we are proposing that the 
CAH must demonstrate in its application and through supporting 
documentation if available that the CAH intended to attest to 
meaningful use for a certain EHR reporting period and made a good faith 
effort to adopt and implement another CEHRT in advance of that EHR 
reporting period. We are proposing a CAH seeking to qualify for this 
exception would submit an application in the form and manner specified 
by us by November 30 after the end of the applicable payment adjustment 
year (for example, for the FY 2018 payment adjustment year, by November 
30, 2018), or a later date specified by us.
    We are inviting public comment on these proposals. We considered 
alternative timeframes for decertification to the proposed 12-month 
period preceding the applicable EHR reporting period. We are requesting 
public comments on whether this 12-month timeframe is reasonable or 
whether another period should be considered.
3. Ambulatory Surgical Center (ASC)-Based Eligible Professionals (EPs)
    Section 16003 of the 21st Century Cures Act amended section 
1848(a)(7)(D) of the Act to provide that no payment adjustment may be 
made under section 1848(a)(7)(A) of the Act for 2017 and 2018 in the 
case of an eligible professional who furnishes substantially all of his 
or her covered professional services in an ambulatory surgical center 
(ASC). Section 1848(a)(7)(D)(iii) of the Act provides that 
determinations of whether an eligible professional is ASC-based may be 
made based on the site of service as defined by the Secretary or an 
attestation, but shall be made without regard to any employment or 
billing arrangement between the eligible professional and any other 
supplier or provider of services. Section 1848(a)(7)(D)(iv) of the Act 
provides that the ASC-based exception shall no longer apply as of the 
first year that begins more than 3 years after the date on which the 
Secretary determines, through notice-and-comment rulemaking, that 
certified EHR technology applicable to the ASC setting is available.
    The statute refers to an EP who furnishes ``substantially all'' of 
his or her covered professional services in an ASC. Therefore, we must 
identify the minimum percentage of an EP's covered professional 
services that must be furnished in an ASC setting in order for the EP 
to be considered as furnishing ``substantially all'' of his or her 
covered professional services in an ASC. To this end, we are proposing 
two alternative definitions of an ASC-based EP and requesting public 
comment to determine the final definition.
    We are proposing to define an ASC-based EP under Sec.  495.4 as an 
EP who furnishes 75 percent or more of his or her covered professional 
services in sites of service identified by the codes used in the HIPAA 
standard transaction as an ASC setting in the calendar year that is two 
years before the payment

[[Page 20139]]

adjustment year. The percentage of covered professional services in 
this proposed definition is the same as our definition of a hospital-
based MIPS eligible clinician under the Quality Payment Program (Sec.  
414.1305 and 81 FR 77238 through 77240). In the alternative, we are 
proposing to define an ASC-based EP as an EP who furnishes 90 percent 
or more of his or her covered professional services in sites of service 
identified by the codes used in the HIPAA standard transaction as an 
ASC setting in the calendar year that is two years before the payment 
adjustment year. The percentage of covered professional services in 
this alternative proposal is the same as our definition of a hospital-
based EP for the EHR Incentive Programs (Sec.  495.4 and 75 FR 44439 
through 44442). Under these proposals, we would use claims for services 
furnished in CY 2015 to determine whether an EP is ASC-based for the CY 
2017 payment adjustment year, and we would use claims for services 
furnished in CY 2016 to determine whether an EP is ASC-based for the CY 
2018 payment adjustment year. We are also proposing to use Place of 
Service (POS) code 24 to identify services furnished in an ASC and are 
requesting public comment on whether other POS codes or mechanisms to 
identify sites of service should be used in addition to or in lieu of 
POS code 24.
    We analyzed claims data from CYs 2015 and 2016 to estimate how many 
EPs would be considered ASC-based under our proposal and alternative 
proposal. Under our proposed definition of ``substantially all,'' for 
CY 2015, we found that 380 EPs billed at least 75 percent of their 
covered professional services in POS 24, out of 523,000 Medicare EPs, 
which equals approximately .07 percent of Medicare EPs. For CY 2016, we 
found that 404 EPs billed at least 75 percent of their covered 
professional services in POS 24, out of 508,575 Medicare EPs, which 
equals approximately .08 percent of Medicare EPs.
    Under our alternative proposed definition of ``substantially all,'' 
for CY 2015, we found that 176 EPs billed at least 90 percent of their 
covered professional services in POS 24, out of 523,000 Medicare EPs, 
which equals approximately .03 percent of Medicare EPs. For CY 2016, we 
found that 197 EPs billed at least 90 percent of their covered 
professional services in POS 24, out of 508,575 Medicare EPs, which 
equals approximately .04 percent of Medicare EPs.
    We are inviting public comment on these proposals.
4. Certification Requirements for 2018
    In the 2015 EHR Incentive Program final rule (80 FR 62871 through 
62875), we adopted a final policy regarding which Edition of CEHRT must 
be used by EPs, eligible hospitals, and CAHs for the EHR Incentive 
Program, which is reflected in the definition of CEHRT Sec.  495.4. At 
a minimum, EPs, eligible hospitals, and CAHs would be required to use 
EHR technology certified to the 2014 Edition certification criteria for 
their respective EHR reporting periods in 2015 through 2017. They may 
also upgrade to the 2015 Edition to meet the required certified EHR 
technology definition for the EHR reporting periods in 2015, 2016, or 
2017, or they may use a combination of 2014 and 2015 Editions if they 
have modules from both editions that meet the requirements for the 
meaningful use objectives and measures or if they fully upgrade during 
an EHR reporting period. Starting with 2018, all EPs, eligible 
hospitals, and CAHs would be required to use technology certified to 
the 2015 Edition to demonstrate meaningful use for an EHR reporting 
period in 2018 and subsequent years (80 FR 62873 through 62875). We 
received comments on the Stage 3 proposed rule requesting that we allow 
health care providers to use the 2014 and 2015 Editions of CEHRT in 
2018 (80 FR 62874 through 62875). We also received feedback from EPs, 
eligible hospitals and hospital associations after the 2015 EHR 
Incentive Program final rule was published. The feedback expressed 
concerns regarding the burden that will likely occur as a result of the 
new functionalities required in the implementation of the Stage 3 
requirements including an increase in the cost of care without better 
patient outcomes.
    Based on our past experience with the transition from the 2011 
Edition to the 2014 Edition and concerns expressed by stakeholders, we 
understand that transitioning to technology certified to a new Edition 
can be complex and can require more resources and time than 
anticipated, including the time necessary to effectively deploy the 
upgraded system and make the necessary patient safety, staff training 
and workflow investments. We understand and appreciate these concerns, 
and are working in cooperation with our Federal partners at ONC to 
monitor progress on the 2015 Edition upgrade. Furthermore, we believe 
that there are many benefits for switching to EHR technology certified 
to the 2015 Edition. At this time, our analysis shows that progress 
toward certification and upgrade of systems should enable EPs that 
attest directly to a State for the State's Medicaid EHR Incentive 
Program and eligible hospitals and CAHs attesting to CMS or the State's 
Medicaid EHR Incentive Program to upgrade systems to the 2015 Edition 
and successfully attest for an EHR reporting period in 2018.
    We will work with ONC to monitor the deployment and implementation 
status of EHR technology certified to the 2015 Edition. If we identify 
a change in the current trends and significant issues with the 
certification and deployment of the 2015 Edition, we will consider 
flexibility in 2018, for those EPs that attest directly to a State for 
the State's Medicaid EHR Incentive Program and eligible hospitals and 
CAHs attesting to CMS or the State's Medicaid EHR Incentive Program 
that are not able to implement 2015 Edition CEHRT to attest for an EHR 
reporting period in 2018.
    One possibility is the flexibility to use technology certified to 
the 2014 Edition or the 2015 Edition for an EHR reporting period in 
2018. Another option is allowing a combination of EHR technologies 
certified to the 2014 Edition and 2015 Edition to be used for an EHR 
reporting period in 2018, for those EPs, eligible hospitals, and CAHs 
that are not able to fully implement EHR technology certified to the 
2015 Edition.
    We are inviting public comment on these options for offering 
flexibility in CY 2018 with regard to EHR certification requirements.

X. Proposed Revisions of Medicare Cost Reporting and Provider 
Requirements

A. Electronic Signature and Submission of the Certification and 
Settlement Summary Page of the Medicare Cost Report

1. Background
    Sections 1815(a) and 1833(e) of the Act provide that no payments 
will be made to a provider unless it has furnished such information, as 
may be requested by the Secretary, to determine the amount of payments 
due the provider under the Medicare program. In general, providers 
submit this information through annual cost reports that cover a 12-
month period of time. Under the provisions of 42 CFR 413.20(b) and 
413.24(f), providers are required to submit cost reports annually, with 
the reporting period based on the provider's accounting year. For cost 
reporting periods beginning on or after October 1, 1989, section 
1886(f)(1) of the Act and Sec.  413.24(f)(4) of the regulations require 
hospitals to submit cost reports in a standardized electronic format, 
and the same

[[Page 20140]]

requirement was later imposed for other types of providers.
    Currently, under Sec.  413.24(f)(4)(ii), hospitals, skilled nursing 
facilities, home health agencies, hospices, end-stage renal disease 
facilities, organ procurement organizations, histocompatibility 
laboratories, rural health clinics, Federally qualified health centers, 
and community mental health centers are required to file Medicare cost 
reports in a standardized electronic format. When preparing the cost 
report, the provider's electronic program must produce the CMS 
standardized output file in a form that can be read by the contractor's 
automated system. This electronic file, also known as the electronic 
cost report, is forwarded to the contractor for processing through its 
system. (42 CFR 413.24(f)(4)(ii) and (iii))
    Although the Medicare cost report is forwarded to the contractor in 
electronic format, certain hard copy portions must be separately 
submitted by the provider to its contractor. Specifically, under Sec.  
413.24(f)(4)(iv), the provider is required to submit a hard copy of the 
settlement summary, if applicable, which is a statement of certain 
worksheet totals, and a certification statement containing a signature 
by the provider's administrator or chief financial officer certifying 
the accuracy of the electronic file. The certification statement and 
the settlement summary both appear together on the ``Certification and 
Settlement Summary'' page of the Medicare cost report for all providers 
that are required to file a Medicare cost report. By signing the 
certification statement, the provider is certifying, among other 
things, to the accuracy of the electronic file, and also that it has 
read the statement that misrepresentation or falsification of 
information contained in the cost report may be punishable by criminal, 
civil or administrative action.
    This certification statement signed by the provider's administrator 
or chief financial officer was incorporated into Sec.  413.24(f)(4) of 
the regulations in a final rule with comment period (59 FR 26964 
through 26965) issued in response to public comments received following 
the Uniform Electronic Cost Reporting System for Hospitals proposed 
rule (56 FR 41110). Currently, this certification statement is required 
to have an original signature. This original signature requirement is 
also set forth in Chapter 1 of the Provider Reimbursement Manual (CMS 
Pub. 15-2), which explains that a facsimile or stamped copy of the 
signature is unacceptable.
    Due to the original signature requirement, the Certification and 
Settlement Summary page containing the original signature is required 
to be mailed by the provider to the contractor. As set forth in Sec.  
413.24(f)(4)(iv) and (5)(i) and (ii), an acceptable cost report 
submission must include the electronic cost report, along with a hard 
copy of the Certification and Settlement Summary page with an original 
signature, the Provider Cost Reimbursement Questionnaire, if 
applicable, and the supporting documentation required from teaching 
hospitals (the Intern and Resident Information System diskette).
2. Proposed Changes Relating to Electronic Signature on the 
Certification and Settlement Summary Page of the Medicare Cost Report
    In this proposed rule, in lieu of requiring the provider to sign 
the certification statement with an original signature on a hard copy 
of the Medicare cost report's Certification and Settlement Summary 
page, we are proposing to revise Sec.  413.24(f)(4)(iv) to allow 
providers to use an electronic signature. For Medicare cost reporting 
purposes, we are proposing that this electronic signature be placed on 
the signature line of the certification statement and may be (1) any 
format of the original signature that contains the first and last name 
of the provider's administrator or chief financial officer (for 
example, photocopy or stamp) or (2) an electronic signature that must 
be the first and last name of the provider's administrator or chief 
financial officer entered in the provider's electronic program. An 
electronic signature for this purpose cannot be a symbol, numerical 
characters, or codes. We believe that allowing providers to utilize an 
electronic signature would afford providers greater flexibility in 
signing the certification statement and allow a faster and more 
efficient submission of the Medicare cost report.
    To indicate the provider's election to sign the certification 
statement with an electronic signature, we are proposing to add an 
electronic signature checkbox placed immediately after the 
certification statement and above the signature line on the 
Certification and Settlement Summary page of the Medicare cost report. 
The checkbox electing the electronic signature would read: ``I have 
read and agree with the above certification statement. I certify that I 
intend my electronic signature on this certification statement to be 
the legally binding equivalent of my original signature.'' We are 
proposing that the checkbox must be checked to signify that the 
certification statement has been read and that an electronic signature 
will be placed on the signature line by the provider.
    Only when the checkbox is checked would the signature line be 
accepted with an electronic signature. Completion of both the 
electronic signature checkbox and the electronic signature, placed on 
the signature line by the provider's administrator or chief financial 
officer under the certification statement, would together constitute an 
accepted electronic signature of the provider's administrator or chief 
financial officer on the certification statement. By signing the 
certification statement with an electronic signature on the 
Certification and Settlement Summary page, the signatory would be 
attesting that its electronic signature was executed with the intent to 
sign the certification statement, that the electronic signature is 
being submitted in lieu of an original signature, and additionally that 
the electronic signature has the same legal effect as an original 
signature. Because we are proposing that it would be optional for 
providers to utilize an electronic signature on the certification 
statement, providers would continue to be able to sign the 
certification statement with an original signature on a hard copy of 
the Certification and Settlement Summary page.
    We are inviting public comments on our proposals.
3. Proposed Changes Relating to Electronic Submission of the 
Certification and Settlement Summary Page of the Medicare Cost Report
    In section X.A.2. of the preamble of this proposed rule, we are 
proposing to allow providers to use an electronic signature on the 
certification statement of the Certification and Settlement Summary 
page of the Medicare cost report. We are further proposing that if the 
provider signs the certification statement with an electronic signature 
in the manner proposed in section X.A.2. of the preamble of this 
proposed rule and checks the electronic signature checkbox, the 
provider also may submit the Certification and Settlement Summary page 
electronically to the contractor at the same time and in the same 
manner in which the Medicare cost report is submitted. For example, if 
the provider submits the electronic cost report file via electronic 
mail to the contractor, the provider may also include the Certification 
and Settlement Summary page signed with an electronic signature.
    Under our proposal, a provider could still choose to sign the 
certification statement with an original signature on the Certification 
and Settlement

[[Page 20141]]

Summary page. However, if the provider chooses to do so, this page 
would have to be mailed to its contractor. We believe this proposal, to 
allow the electronic submission of the Certification and Settlement 
Summary page, would reduce the need for and storage of paper documents. 
Under our proposal, providers would have the option to submit the 
entire cost report electronically, in lieu of the previous requirement 
to mail a hard copy of the Certification and Settlement Summary page of 
the Medicare cost report to the contractor. We believe this proposed 
option would improve the capability of providers to efficiently 
transmit the Medicare cost report and save providers an appreciable 
amount of time as well as the cost of separately mailing a hard copy of 
the Certification and Settlement Summary page of the Medicare cost 
report to the contractor.
    We are inviting public comments on this proposal.
4. Clarifications Relating to the Items Required To Be Submitted by 
Providers With the Medicare Cost Report
a. Settlement Summary and Certification Statement
    In this proposed rule, we are clarifying the portion of the 
language in Sec.  413.24(f)(4)(iv) that describes the items a provider 
is required to submit along with the electronically filed cost report. 
Section 413.24(f)(4)(iv) currently sets forth that a provider is 
required to submit a hard copy of a settlement summary, a statement of 
certain worksheet totals found within the electronic file, and a 
statement signed by its administrator or chief financial officer 
certifying the accuracy of the electronic file or the manually prepared 
cost report. These items are contained on the Certification and 
Settlement Summary page of the Medicare cost report. We believe that 
the structure of the sentence in the regulation text describing these 
items may give rise to the impression that these are three separate 
items: (1) A ``settlement summary''; (2) a ``statement of certain 
worksheet totals found within the electronic file''; and (3) a 
``statement signed by its administrator or chief financial officer 
certifying the accuracy of the electronic file or the manually prepared 
cost report'', also known as the certification statement. We are 
clarifying that ``a statement of certain worksheet totals found within 
the electronic file'' is not a separate item but rather intended as a 
descriptor of the ``settlement summary.'' The settlement summary is 
actually the list of ``certain worksheet totals found within the 
electronic file.'' Therefore, in this proposed rule, we are proposing 
to revise Sec.  413.24(f)(4)(iv) to clarify this, as further discussed 
in section X.A.5. of the preamble of this proposed rule.
b. Removal of the Transition Period Language
    Following the effective dates for which certain providers were 
required to submit cost reports in a standardized electronic format 
under Sec.  413.24(f)(4)(ii), a transition period was implemented when 
certain providers were required to submit a hard copy of the completed 
cost report forms in addition to the electronic file. In this proposed 
rule, we are proposing to remove the language in Sec.  413.24(f)(4)(iv) 
which sets forth this expired transition period. Specifically, we are 
proposing to remove the language that specifies that, during a 
transition period (first two cost-reporting periods on or after 
December 31, 2004 for hospices and end-stage renal disease facilities, 
and the first two cost-reporting periods on or after March 31, 2005 for 
organ procurement organizations, histocompatibility laboratories, rural 
health clinics, Federally qualified health centers, and community 
mental health centers), providers must submit a hard copy of the 
completed cost report forms in addition to the electronic file. Because 
the transition period has expired and these providers are no longer 
required to submit a hard copy of the completed cost report forms in 
addition to the electronic file, this language in Sec.  
413.24(f)(4)(iv) is no longer necessary.
5. Proposed Revisions to 42 CFR 413.24(f)(4)(iv)
    In this proposed rule, to reflect our proposals discussed earlier, 
we are proposing to revise Sec.  413.24(f)(4)(iv) to specify that, 
effective for cost reporting periods beginning on or after October 1, 
2017, providers that are required to file an electronic Medicare cost 
report may elect to electronically submit the settlement summary, if 
applicable, and the cost report's certification statement, found on the 
Certification and Settlement Summary page of the Medicare cost report, 
with an electronic signature of the provider's administrator or chief 
financial officer. A provider that elects to electronically sign and 
submit the Certification and Settlement Summary page would no longer be 
required to send this page in hard copy to its contractor with an 
original signature. We are further proposing to revise Sec.  
413.24(f)(4)(iv) to specify that the provider must check the electronic 
signature checkbox that would be placed immediately after the 
certification statement and directly above the signature line of the 
certification statement. This electronic signature checkbox would 
specify that the provider's administrator or chief financial officer 
has read and agrees with the certification statement, and certifies 
that he or she intends the electronic signature to be the legally 
binding equivalent of his or her original signature. The provider must 
check the electronic signature checkbox in order for the provider to 
sign the certification statement with an electronic signature and in 
order for the electronic signature to be accepted.
    In addition, we are proposing to revise the regulatory language 
under Sec.  413.24(f)(4)(iv) to reflect our clarification that the 
phrase ``a statement of certain worksheet totals found within the 
electronic file'' describes the settlement summary and does not denote 
a separate item. Specifically, we are proposing to revise Sec.  
413.24(f)(4)(iv) to state that a provider must submit a settlement 
summary, if applicable, which is a statement of certain worksheet 
totals found within the electronic file, and a certification statement 
signed by its administrator or chief financial officer certifying the 
accuracy of the electronic file or manually prepared cost report.
    In addition, as indicated earlier, because the transition period 
during which certain providers were required to submit a hard copy of 
the completed cost report forms in addition to the electronic file has 
expired, we are proposing to remove the transition period language in 
Sec.  413.24(f)(4)(iv).
    Finally, we are proposing to revise the regulation text at Sec.  
413.24(f)(4)(iv) by adding the certification statement from the 
certification section of the Certification and Settlement Summary page 
of the Medicare cost report. This certification statement appears in 
all caps and informs the provider that ``Misrepresentation or 
falsification of any information contained in this cost report may be 
punishable by criminal, civil and administrative action, fine and/or 
imprisonment under Federal law. Furthermore if services identified in 
this report were provided or procured through the payment directly or 
indirectly of a kickback or were otherwise illegal, criminal, civil and 
administrative action, fines, and/or imprisonment may result.'' This 
language has appeared on the Certification and Settlement Summary page 
for many years. Because the certification section of the Medicare cost 
report refers to it as having been read by the provider, incorporation 
of it into the

[[Page 20142]]

regulation text would provide completeness and clarification of the 
certification statement.
    We are inviting public comments on these proposals.

B. Clarification of Limitations on the Valuation of Depreciable Assets 
Disposed of On or After December 1, 1997

    In this section of this proposed rule, we are proposing revisions 
to the Medicare provider reimbursement regulations to clarify our 
longstanding policy pertaining to allowable costs and the limits on the 
valuation of a depreciable asset that may be recognized in establishing 
an appropriate allowance for depreciation for assets disposed of on or 
after December 1, 1997. Questions have arisen with regard to whether 
this limitation on the valuation of depreciable assets depends on the 
manner in which a provider disposes of an asset. In this proposed rule, 
we are clarifying that the elimination of the gain or loss for 
depreciable assets applies to assets a provider disposes of by sale or 
scrapping on or after December 1, 1997, regardless of whether the asset 
is scrapped, sold as an individual asset of a Medicare participating 
provider, or sold incident to a provider's change of ownership.
    Reasonable cost is defined at section 1861(v)(1)(A) of the Act and 
in the implementing regulations at 42 CFR part 413. Since the inception 
of the Medicare program, allowable costs under Medicare have included a 
provider's direct and indirect costs necessary for the provision of 
patient care, including the cost of using assets in patient care. 
Depreciation of these assets is an allowable cost under Medicare and 
the allowance is computed using the depreciable basis and estimated 
useful life of the assets (Sec.  413.134). Under Medicare's reasonable 
cost reimbursement system, the appropriate allowance for depreciation 
and for interest on capital indebtedness on buildings and equipment 
used in the provision of patient care is based in part on the 
historical cost of the asset (Sec.  413.134(a) and (b)). When an asset 
is disposed of, no further depreciation may be taken on it. Gains and 
losses on the disposition of depreciable assets may be includable, as 
applicable, either in computing allowable cost or in computing the 
adjustment to Medicare reimbursable cost, depending upon the manner of 
disposition of the asset, the date of the disposal, and the amount of 
the depreciation adjustment (Sec.  413.134 and Part 1, Chapter 1 of the 
Provider Reimbursement Manual (CMS Pub. 15-1)).
    Prior to the enactment of the Balanced Budget Act of 1997 (Pub. L. 
105-33), when a Medicare certified provider's capital asset was 
disposed of through sale or scrapping, Medicare shared in any gain or 
loss from the transaction. In this regard, if a provider realized a 
gain or loss from the sale or scrapping of an asset, an adjustment to 
the provider's allowable costs was necessary so that Medicare paid its 
share of the actual cost the provider incurred in using the asset for 
patient care. Generally, when a provider sold its depreciable assets at 
more than the net book value, Medicare shared in the gain. If the 
provider sold its depreciable assets at less than the net book value, 
Medicare shared in the loss. The amount of a gain was limited to the 
amount of depreciation previously included in Medicare allowable costs. 
The amount of a loss was limited to the undepreciated basis of the 
asset permitted under the program.
    In the Balanced Budget Act of 1997, Congress eliminated Medicare's 
recognition of gains or losses on a provider's disposition of assets on 
or after December 1, 1997. Section 4404 of the Balanced Budget Act of 
1997 (Pub. L. 105-33) amended section 1861(v)(1)(O)(i) of the Act to 
state that, in establishing an appropriate allowance for depreciation 
and for interest on capital indebtedness with respect to an asset of a 
provider of services which has undergone a change of ownership, such 
regulations shall provide, except as provided in clause (iii), that the 
valuation of the asset after such change of ownership shall be the 
historical cost of the asset, as recognized under the Medicare program, 
less depreciation allowed, to the owner of record as of August 5, 1997 
(or, in the case of an asset not in existence as of August 5, 1997, the 
first owner of record of the asset after August 5, 1997).
    In enacting section 4404 of Public Law 105-33, Congress was 
concerned with providers that may have been ``creating specious 
`losses' '' on the disposition of assets ``in order to be eligible for 
additional Medicare payments'' (H. Rep. No. 105-149 (1997)). In 
addition, Congress was concerned with the June 1997 OIG report, 
Medicare Losses on Hospital Sales (OEI-03-96-00170), which indicated 
that there were substantial Medicare losses due to depreciation 
adjustments for hospitals that underwent changes of ownership.
    In a January 1998 final rule with comment period (63 FR 1379), we 
conformed the regulations at Sec.  413.134 to section 1861(v)(1)(O) of 
the Act, as amended by section 4404 of Public Law 105-33. In that rule, 
we stated that, under the provisions of section 4404 of Public Law 105-
33, ``when a depreciable asset of a provider undergoes a change of 
ownership, the valuation of the asset, for purposes of establishing a 
Medicare allowance for depreciation and interest, will be the 
historical cost of the asset to the owner of record, less depreciation 
allowed. Thus, when a depreciable asset is sold, the value of the asset 
to the seller will be the historical cost (as recognized under 
Medicare) to the owner of record as of August 5, 1997, less 
depreciation allowed. In this case, there will be no adjustment for 
gain or loss on the sale. For the buyer, the value of the asset will 
also be the historical cost (as recognized under Medicare) to the owner 
of record as of August 5, 1997, less depreciation allowed. Accordingly, 
the new owner's allowance for depreciation and interest will be based 
on this value. Stated simply, the asset moves from the hands of the 
seller to the hands of the buyer at the asset's net book value defined 
in Sec.  413.134(b)(9)'' (63 FR 1381).
    Our policy referenced the asset of a provider undergoing a change 
of ownership, meaning the asset itself changing owners, regardless of 
whether the provider changes ownership. In conforming the regulations 
to the new statutory provision, we revised the regulations at Sec.  
413.134(f)(1) to specify that ``[d]epreciable assets may be disposed of 
through sale, scrapping, trade-in, exchange, demolition, abandonment, 
condemnation, fire, theft, or other casualty. If disposal of a 
depreciable asset, including the sale or scrapping of an asset before 
December 1, 1997, results in a gain or loss, an adjustment is necessary 
in the provider's allowable cost. (No gain or loss is recognized on 
either the sale or the scrapping of an asset that occurs on or after 
December 1, 1997.) The amount of a gain included in the determination 
of allowable cost is limited to the amount of depreciation previously 
included in Medicare allowable costs. The amount of a loss to be 
included is limited to the undepreciated basis of the asset permitted 
under the program. The treatment of the gain or loss depends upon the 
manner of disposition of the asset, as specified in paragraphs (f)(2) 
through (6) of [Sec.  413.134]. The gain or loss on the disposition of 
depreciable assets has no retroactive effect on a proprietary 
provider's equity capital for years prior to the year of disposition.''
    In the January 1998 final rule with comment period, we added the 
parenthetical ``(No gain or loss is recognized on either the sale or 
the

[[Page 20143]]

scrapping of an asset that occurs on or after December 1, 1997)'' to 
Sec.  413.134(f)(1). This parenthetical was intended to implement 
section 4404 of the BBA of 1997 by disallowing the gain or loss when a 
provider sells or scraps an asset.
    We believe that, under section 4404 of the BBA of 1997, Medicare's 
nonrecognition of a loss or gain with respect to an asset a provider 
disposes of by sale or scrapping applies, regardless of whether the 
sale of the asset occurs incident to a provider's change of ownership 
or whether the asset is otherwise sold or scrapped by a currently 
participating Medicare provider.
    We note that following the enactment of the Deficit Reduction Act 
of 1984 (Pub. L. 98-369, section 2314), in which Congress amended 
section 1861(v)(1) of the Act by adding new subparagraph (O) concerning 
the valuation and determination of historical costs of assets after 
July 18, 1984, we stated that the new provisions applied ``not only to 
the sale or purchase of groups of assets, but also to the sale or 
purchase of individual assets'' (57 FR 43913). Similarly, we believe 
section 4404 of the BBA of 1997 applies to a provider's disposition of 
assets through sale or scrapping, including the sale or scrapping of 
individual provider assets and assets sold or scrapped incident to a 
provider's change of ownership. Accordingly, we are proposing to revise 
the regulation text at Sec.  413.134(f)(1) to clarify our longstanding 
policy that Medicare does not recognize a provider's gain or loss on 
the sale or scrapping of an asset that occurs on or after December 1, 
1997, regardless of whether the asset is sold incident to a provider's 
change of ownership or is otherwise sold or scrapped as an asset of a 
Medicare participating provider.

XI. Proposed Changes Relating to Survey and Certification Requirements

A. Proposed Revisions to the Application and Re-Application Procedures 
for National Accrediting Organizations (AOs), Provider and Supplier 
Conditions, and Posting of Survey Reports and Acceptable Plans of 
Corrections (PoCs)

1. Background
    Health care facilities must demonstrate compliance with the 
Medicare conditions of participation (CoPs), conditions for coverage 
(CfCs), or conditions for certification (depending on the type of 
facility) to be eligible to receive Medicare payments. Section 1865 of 
the Act allows health care facilities that are ``provider entities'' to 
demonstrate this compliance through accreditation by an accreditation 
program of a private, national accrediting organization (AO) that is 
approved by the Secretary. An AO must demonstrate the ability to 
effectively evaluate a facility's compliance using accreditation 
standards that meet or exceed the applicable Medicare conditions, as 
well as survey processes that are comparable to those survey methods, 
procedures, and forms required by CMS for conducting Federal surveys 
for the same health care facility type, which are generally outlined in 
regulations and specified in the State Operations Manual (SOM).
    Section 1865(a)(2) of the Act requires that the Secretary base its 
decision to approve or deny the Medicare accreditation program 
application of an accrediting organization after considering at least 
the following factors: (a) Program requirements for the accreditation 
program to meet or exceed Medicare requirements; (b) survey procedures 
that are comparable to those of Medicare; (c) the ability to provide 
adequate resources for conducting surveys; (d) the capacity to furnish 
information for use by CMS in enforcement activities; (e) monitoring 
procedures for providers or suppliers identified as being out of 
compliance with conditions or requirements; and (f) the ability to 
provide the necessary data for validation surveys to the Secretary. In 
addition, section 1865(a)(2) of the Act specifies that the Secretary 
shall consider other factors with respect to determining the AOs 
ability to meet or exceed applicable conditions, therefore meaning that 
CMS has the ability to determine ``other factors'' when considering an 
AO for deemed status.
    CMS has responsibility for oversight and approval of AO 
accreditation programs used for Medicare certification purposes, and 
for ensuring that providers and suppliers that are accredited under an 
approved AO accreditation program meet the quality and patient safety 
standards required by the Medicare conditions and requirements. The 
Medicare regulations at 42 CFR 488.5 set forth the detailed 
requirements that a national AO must satisfy in order to receive 
approval, and maintain recognition, of a Medicare accreditation 
program. Section 488.5 also details the procedures that CMS follows in 
reviewing applications from AOs.
    The results of surveys conducted by State Survey Agencies of a 
facility's compliance with Medicare conditions and requirements of CMS-
certified facilities are reported using the CMS Form 2567, ``Statement 
of Deficiencies and Plan of Correction'' (OMB No. 0938-0391). These 
reports describe any findings of noncompliance with Federal 
requirements (also referred to as ``deficiencies'') that the surveyors 
may have found. If there are cited deficiencies, a facility must submit 
an acceptable plan of correction (PoC) for achieving compliance to CMS 
describing how and when, within a reasonable timeframe, it will correct 
them. Failure to correct deficiencies will lead to the facility's 
termination from Medicare participation.
    CMS makes survey reports and acceptable PoCs publicly available 
through a variety of settings as part of the Department's commitment to 
transparency, and to providing all health care consumers and the 
general public with access to quality and safety information. CMS began 
posting redacted CMS Form 2567 survey data for skilled nursing 
facilities and nursing facilities on its Nursing Home Compare Web site 
in July 2012. In March 2013, CMS began posting on its Web site the CMS 
Form-2567 surveys reports based on complaint investigations for short-
term acute care hospitals and critical access hospitals (CAHs).\504\ In 
addition, two Web sites owned by private entities also publish the 
public CMS survey data of nursing homes, short-term acute care 
hospitals, and CAHs, based on the CMS survey information. The 
ProPublica Web site \505\ and the Association for Health Care 
Journalist (AHCJ) Web sites, respectively, provide search engines that 
refer back to the CMS Form 2567 data that CMS has made available. These 
Web sites enable all health care consumers and the general public 
across the country to learn about the performance of these providers in 
order to make more informed decisions about where to get health care. 
We also believe that release of this information encourages these 
health care providers to improve the quality of care and services they 
provide. Such information can also be obtained by the public directly 
from State Survey Agencies.
---------------------------------------------------------------------------

    \504\ Survey & Certification Policy Memorandum (SC-13-21-ALL). 
Available at: https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-13-21.pdf.
    \505\ ProPublica (2016) Web site: http://projects.propublica.org/nursing-homes/.
---------------------------------------------------------------------------

    AOs perform their own accreditation surveys and issue their own 
survey reports which provide information on accredited facilities' 
compliance with Federal standards. These facilities include: Hospitals, 
psychiatric hospitals, CAHs, home health agencies (HHAs), hospices, 
ambulatory surgery

[[Page 20144]]

centers (ASCs), outpatient physical therapy and speech-language 
pathology services (OPTs), and rural health clinics (RHCs).\506\ These 
facilities participate in Medicare based on their accreditation from a 
CMS-approved AO and are not subject to routine surveys from State 
survey agencies.
---------------------------------------------------------------------------

    \506\ Note that other types of facilities may also participate 
in Medicare via an approved accreditation program, but to date, no 
AO has sought and received approval for any of these additional 
facility types.
---------------------------------------------------------------------------

    By contrast, AOs currently do not make their survey reports and 
accompanying PoCs publicly available. We believe it is important to 
continue to lead the effort to make information regarding a health care 
facility's compliance with health and safety requirements found in 
survey reports publicly available through our various provider and 
supplier Compare sites, including hospital and home health Compare 
sites to increase transparency. CMS recognizes, based on the above 
references to CMS Compare sites and other resources which make survey 
reports publically available, that these survey reports vary in the 
type of information accessible to the public (complaint) based on the 
provider or supplier type. For example, the current CMS Survey and 
Certification site for hospital 2567 downloads (https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/CertificationandCompliance/Hospitals.html) only contains complaint 
surveys; no recertification survey reports are posted. In addition, 
there has been an increasing concern in terms of AO disparity rates 
based on the AO deficiency findings compared to serious, condition-
level deficiencies found by the State Survey Agencies. For example, in 
FY 2015, the disparity rates increased by 1 percent to 39 percent for 
hospitals and decreased by 6 percent to 69 percent for psychiatric 
hospitals, from FY 2014. This continued trend of high disparity rates 
from FY 2012 to FY 2015 raises serious concerns regarding the AOs' 
ability to appropriately identify and cite health and safety 
deficiencies during the survey process. Therefore, we believe that 
posting AO survey reports and acceptable PoCs would address some of the 
concerns of reporting hospital information from both CMS and AOs, as 
well as the disparity between serious deficiency findings, and provide 
a more comprehensive picture to health care consumers and the public in 
general.
    As the number of health care facilities participating in Medicare 
by virtue of their accreditation and deemed status increases, the 
number of survey reports and acceptable PoC available to health care 
consumers decreases. The table below illustrates that 40 percent of 
Medicare-participating providers or suppliers with an accreditation 
option participate in Medicare via accreditation and deemed status. In 
addition, 89 percent of hospitals and psychiatric hospitals across the 
country participate in Medicare via accreditation and deemed status. 
This represents a significant number of hospital and other health care 
facility survey reports and acceptable PoCs that are currently not 
available to health care consumers. This information is not available 
to assist health care consumers in their decision making when selecting 
a health care facility in which to receive care for themselves or a 
loved one. Therefore, we believe that it is critical that accrediting 
organizations with CMS-approved accreditation programs make available 
publicly all survey reports and acceptable plans of correction on their 
Web sites.



                    Total Medicare Participating Facilities--FY 2015 Deemed Versus Non-Deemed
----------------------------------------------------------------------------------------------------------------
                                                                     Deemed *      Non-deemed **
                          Program type                             (percentage)    (percentage)        Total
----------------------------------------------------------------------------------------------------------------
Hospital........................................................      3,500 (89)        432 (11)           3,932
Psychiatric Hospital............................................        424 (89)         53 (11)             477
CAH.............................................................        420 (32)        887 (68)           1,307
HHA.............................................................      4,450 (47)      5,008 (53)           9,458
Hospice.........................................................      1,694 (40)      2,573 (60)           4,267
ASC.............................................................      1,499 (27)      3,973 (73)           5,472
OPT.............................................................         175 (8)      1,957 (92)           2,132
RHC.............................................................         253 (6)      3,862 (94)           4,115
                                                                 -----------------------------------------------
    Total.......................................................     12,415 (40)     18,745 (60)          31,160
----------------------------------------------------------------------------------------------------------------
* As reported by accrediting organizations.
** Surveyed by a State survey agency for compliance with Medicare conditions.

2. Proposed Regulation Changes
    In an effort to increase transparency, in this proposed rule, we 
are proposing to require AOs with CMS-approved accreditation programs 
to post final accreditation survey reports and acceptable PoCs on 
public facing Web site designated by the AO. All current AOs with CMS-
approved accreditation programs have Web sites that inform the general 
public about their organization. Therefore, we are proposing to require 
AOs to have their final accreditation survey reports and acceptable 
PoCs available on their Web sites.
    Establishing the standard for posting both accredited and 
nonaccredited provider and supplier survey reports, which would include 
initial and recertification surveys, and acceptable PoCs would expand 
transparency even further. Disclosure of survey findings protects both 
patient health and safety, in which public disclosure of findings 
currently only shows the subset of complaint activity. Expanding these 
requirements through the posting of all survey reports and acceptable 
PoCs would allow for a more comprehensive way to show a provider's or 
supplier's compliance with all health and safety requirements.
    Therefore, we are proposing to revise Sec.  488.5 of the 
regulations to incorporate this proposed requirement. We are proposing 
to add a new standard at Sec.  488.5(a)(21) to require that each 
national AO applying or reapplying for CMS-approval of its Medicare 
provider or supplier accreditation program provide a statement 
acknowledging that it agrees to make all Medicare provider or supplier 
final accreditation survey reports (including statements of deficiency 
findings) as well as acceptable PoCs publicly available on

[[Page 20145]]

its Web site within 90 days after such information is made available to 
those facilities for the most recent 3 years. This provision would 
include all triennial, full, follow-up, focused, and complaint surveys, 
whether they are performed onsite or offsite.
    In addition, pursuant to section 1834(e) of the Act, State Survey 
Agencies do not evaluate suppliers of the technical component of 
advanced diagnostic imaging services. CMS-approved advanced diagnostic 
imaging AOs are the only source of compliance data for suppliers of the 
technical component of advanced diagnostic imaging services. Therefore, 
we believe it is critical that these AOs also be required to post 
survey reports and acceptable PoCs on their Web sites. Otherwise, it 
will not be possible to provide health care consumers with compliance 
information about Medicare-participating suppliers of advanced 
diagnostic imaging services. We are proposing to amend our regulations 
at 42 CFR 414.68 governing imaging accreditation under Medicare by 
redesignating paragraphs (c)(7) through (c)(14) as paragraphs (c)(8) 
through (c)(15), respectively, and adding a new paragraph (c)(7) to 
require that each national advanced diagnostic imaging AO that applies 
or reapplies for CMS approval of its Medicare advanced diagnostic 
imaging accreditation program must provide a statement acknowledging 
that it agrees to make all Medicare advanced diagnostic imaging final 
accreditation survey reports as well as acceptable PoCs publicly 
available on its Web site within 90 days after such information is made 
available to the supplier of advanced diagnostic imaging services for 
the most recent 3 years. This provision would apply to all full, 
follow-up, focused, and complaint surveys, regardless of whether they 
are performed onsite or offsite.
    We are inviting public comments on these proposals.

B. Proposed Changes to Termination Public Notice Requirements for 
Certain Providers and Suppliers

1. Background
    Under the provisions of sections 1866(b)(2) of the Act and 
implementing regulations at 42 CFR 489.53, the Secretary may terminate 
an agreement with a provider of services if it is determined that the 
provider is not in substantial compliance with applicable requirements 
governing provider agreements. For instance, CMS must determine that 
the provider:
     Is not complying substantially with the terms of the 
agreement, the provisions of title XVIII, or regulations promulgated 
thereunder;
     Has failed to supply information necessary to determine 
whether payments are or were due and the amounts of such payments;
     Refuses to permit examination of fiscal and other records 
(including medical records) necessary for the verification of 
information furnished as a basis for claiming payment under the 
Medicare program; or
     Refuses to permit photocopying of any records or other 
information necessary to determine or verify compliance with 
participation requirements.
    Sections 1866(b)(1) and (2) of the Act require reasonable public 
notice, as prescribed in regulations, of both voluntary and involuntary 
terminations of Medicare and Medicaid participating providers and 
suppliers. Various existing regulations specify the requirements of 
public notice for voluntary and involuntary terminations prior to 
termination of a provider or supplier agreement. Specifically, for 
voluntary terminations, providers at 42 CFR 489.52(c)(2), RHCs at 42 
CFR 405.2404(d), FQHCs at 42 CFR 405.2442, ASCs at 42 CFR 416.35(d), 
and OPOs at 42 CFR 486.312(e) are required to publish termination 
notices in the local public newspaper.
2. Basis for Proposed Changes
    The existing regulations requiring termination notices to be 
published in local newspapers have become outdated over time as the 
public and beneficiaries increasingly turn to the Internet and other 
electronic forums for information. Currently, rural health centers 
(RHCs), Federally qualified health centers (FQHCs), ambulatory surgical 
centers (ASCs), and organ procurement organizations (OPOs) are required 
to publish public notices of voluntary and involuntary termination of 
participation in the Medicare and Medicaid programs in one or more 
local newspapers. Providers and suppliers that voluntarily terminate 
their participation agreement must give notice to the public at least 
15 days before the effective date of termination and the notice must be 
published in one or more local newspapers. The use of hard copy local 
newspaper through time has become less effective, as a large majority 
of the public uses alternate sources such as Web sites or other online 
news and resources.
    According to national studies, approximately 23 percent of the 
general public continues to read print newspapers.\507\ Many 
individuals have turned to digital platforms to read news rather than 
print news, which continues to decline on an annual basis, therefore, 
limiting the effectiveness of publishing termination notices in local 
newspapers. In light of the public's increased access to the Internet 
and other electronic forums for information and the decline of print 
newspaper readership, in this proposed rule, we are proposing changes 
in the existing regulations noted earlier regarding newspaper 
publication of termination notices to allow CMS Regional Offices and 
providers and suppliers more media platforms in which to publish 
termination notices, both voluntary and involuntary, with the intent of 
making these notices more visible and effective.
---------------------------------------------------------------------------

    \507\ PewResearchCenter (2012) Number of Americans Who Read 
Print Newspapers Continues Decline. Available at: http://www.pewresearch.org/daily-number/number-of-americans-who-read-print-newspapers-continues-decline/.
---------------------------------------------------------------------------

3. Proposed Changes to Regulations
    In this proposed rule, we are proposing to remove the regulatory 
language specifying public notice of terminations for FQHCs, RHCs, 
ASCs, and OPOs to be exclusively in newspapers to allow for more 
flexibility for both the CMS Regional Offices and providers and 
suppliers. Specifically, we are proposing changes to the regulations 
for RHCs at 42 CFR 405.2404(d), for FQHCs at 42 CFR 405.2442(a) and 
(b), for ASCs at 42 CFR 416.35(d), and for OPOs at 42 CFR 486.312(e) to 
remove the reference to publication in newspapers as the means for 
notifying the community of involuntary and voluntary terminations from 
participation in Medicare and Medicaid programs. This proposal for 
termination notices to the public for RHCs, FHQCs, ASCs, and OPOs would 
align with the termination notices CMS currently has set forth for all 
other providers and suppliers. For example, under 42 CFR 488.456(c) 
(enforcement procedures for long-term care facilities), CMS must notify 
the public of a termination of a nursing home's provider agreement, but 
the regulation does not specify through which public forum this notice 
is to be given. Similarly, 42 CFR 489.53(d)(5) also does not specify 
the method of public notification required for terminations. Through 
this proposed change, RHCs, FQHCs, ASCs, and OPOs would have the same 
requirement for the notice to the public as under 42 CFR 489.53(d)(5), 
where there is a termination by CMS in which public notice is required 
but the method for these providers or suppliers

[[Page 20146]]

for providing public notice is not specified, to allow for flexibility.
    In addition, we are proposing to revise 42 CFR 489.52(c)(2) to 
remove the requirement to publish notice in one or more local 
newspapers in circumstances of the termination of a provider agreement 
by a provider and instead to allow providers to inform the community 
via public notice, without specifying the method used for public 
notice. We believe that these proposed changes will ensure that the 
community continues to be aware of terminations of Medicare and 
Medicaid participating providers and suppliers.
    The method for delivering the required public notice is no longer 
being specified by removing the word ``newspaper'' from the regulations 
for RHCs, FQHCs, ASCs, and OPOs. Instead, we are proposing to allow for 
flexibility for the CMS Regional Offices and the providers or suppliers 
to post public notices through a manner in which the maximum number of 
community individuals and beneficiaries would be informed. This may 
include, but is not limited to State Web site postings, facility Web 
sites, or local news and social media channels. It also would not 
preclude publication in local newspapers. Through this proposed rule, 
we will continue to fulfill the regulatory requirement to publically 
post involuntary termination notices. We are also operationally 
considering allowing voluntarily terminating providers and suppliers 
the same public notice platform used for involuntary notices in order 
to meet their regulatory public notice requirements. This could include 
media venues such as Web site postings and press releases through the 
use of CMS Regional press officers.
    We are inviting public comments on our proposals. In addition, we 
are seeking suggestions from the public on sufficient mechanisms to 
provide public information, other than local newspapers, for posting 
Medicare and Medicaid participating provider and supplier termination 
notices.

XII. 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 2017 ``Report 
to the Congress: Medicare Payment Policy'' and have given the 
recommendations in the report consideration in conjunction with the 
proposed policies set forth in this proposed rule. MedPAC 
recommendations for the IPPS for FY 2018 are addressed in Appendix B to 
this proposed 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.

XIII. Other Required Information

A. Publicly Available Data

    IPPS-related data are available on the Internet for public use. The 
data can be found on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. 
Following is a listing of the IPPS-related files that are available.
1. CMS Wage Data Public Use File
    This file contains the hospital hours and salaries from Worksheet 
S-3, Parts II and III from FY 2014 Medicare cost reports used to create 
the proposed FY 2018 IPPS wage index. Multiple versions of this file 
are created each year. For a complete schedule on the release of 
different versions of this file, we refer readers to the wage index 
schedule in section III.M. of the preamble of this proposed rule.

------------------------------------------------------------------------
    Processing year           Wage data year          PPS fiscal year
------------------------------------------------------------------------
             2017                     2014                    2018
             2016                     2013                    2017
             2015                     2012                    2016
             2014                     2011                    2015
             2013                     2010                    2014
             2012                     2009                    2013
             2011                     2008                    2012
             2010                     2007                    2011
             2009                     2006                    2010
             2008                     2005                    2009
             2007                     2004                    2008
------------------------------------------------------------------------

    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Periods Available: FY 2007 through FY 2018 IPPS Update.
2. CMS Occupational Mix Data Public Use File
    This file contains the CY 2013 occupational mix survey data to be 
used to compute the occupational mix adjustment wage indexes. Multiple 
versions of this file are created each year. For a complete schedule on 
the release of different versions of this file, we refer readers to the 
wage index schedule in section III.M. of the preamble of this proposed 
rule.
    Media: Internet at: https://www.cms.gov/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Period Available: FY 2018 IPPS Update.
3. Provider Occupational Mix Adjustment Factors for Each Occupational 
Category Public Use File
    This file contains each hospital's occupational mix adjustment 
factors by occupational category. Two versions of these files are 
created each year to support the rulemaking.
    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-AService-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Period Available: FY 2018 IPPS Update.
4. Other Wage Index Files
    CMS releases other wage index analysis files after each proposed 
and final rule.
    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Periods Available: FY 2005 through FY 2018 IPPS Update.
5. FY 2018 IPPS SSA/FIPS CBSA State and County Crosswalk
    This file contains a crosswalk of State and county codes used by 
the Social Security Administration (SSA) and the Federal Information 
Processing Standards (FIPS), county name, and a list of Core-Based 
Statistical Areas (CBSAs).
    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2018 IPPS Update.
6. HCRIS Cost Report Data
    The data included in this file contain cost reports with fiscal 
years ending on or after September 30, 1996. These data files contain 
the highest level of cost report status.
    Media: Internet at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Cost-Reports-by-Fiscal-Year.html.
    (We note that data are no longer offered on a CD. All of the data 
collected are now available free for download from the cited Web site.)

[[Page 20147]]

7. Provider-Specific File
    This file is a component of the PRICER program used in the MAC's 
system to compute DRG/MS-DRG payments for individual bills. The file 
contains records for all prospective payment system eligible hospitals, 
including hospitals in waiver States, and data elements used in the 
prospective payment system recalibration processes and related 
activities. Beginning with December 1988, the individual records were 
enlarged to include pass-through per diems and other elements.
    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ProspMedicareFeeSvcPmtGen/psf_text.html.
    Period Available: Quarterly Update.
8. CMS Medicare Case-Mix Index File
    This file contains the Medicare case-mix index by provider number 
as published in each year's update of the Medicare hospital inpatient 
prospective payment system. The case-mix index is a measure of the 
costliness of cases treated by a hospital relative to the cost of the 
national average of all Medicare hospital cases, using DRG/MS-DRG 
weights as a measure of relative costliness of cases. Two versions of 
this file are created each year to support the rulemaking.
    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Periods Available: FY 1985 through FY 2018.
9. MS-DRG Relative Weights (Also Table 5--MS-DRGs)
    This file contains a listing of MS-DRGs, MS-DRG narrative 
descriptions, relative weights, and geometric and arithmetic mean 
lengths of stay for each fiscal year. Two versions of this file are 
created each year to support the rulemaking.
    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Periods Available: FY 2005 through FY 2018 IPPS Update
10. IPPS Payment Impact File
    This file contains data used to estimate payments under Medicare's 
hospital inpatient prospective payment systems for operating and 
capital-related costs. The data are taken from various sources, 
including the Provider-Specific File, HCRIS Cost Report Data, MedPAR 
Limited Data Sets, and prior impact files. The data set is abstracted 
from an internal file used for the impact analysis of the changes to 
the prospective payment systems published in the Federal Register. Two 
versions of this file are created each year to support the rulemaking.
    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Historical-Impact-Files-for-FY-1994-through-Present.html.
    Periods Available: FY 1994 through FY 2018 IPPS Update.
11. AOR/BOR Tables
    This file contains data used to develop the MS-DRG relative 
weights. It contains mean, maximum, minimum, standard deviation, and 
coefficient of variation statistics by MS-DRG for length of stay and 
standardized charges. The BOR tables are ``Before Outliers Removed'' 
and the AOR is ``After Outliers Removed.'' (Outliers refer to 
statistical outliers, not payment outliers.)
    Two versions of this file are created each year to support the 
rulemaking.
    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Periods Available: FY 2005 through FY 2018 IPPS Update.
12. Prospective Payment System (PPS) Standardizing File
    This file contains information that standardizes the charges used 
to calculate relative weights to determine payments under the hospital 
inpatient operating and capital prospective payment systems. Variables 
include wage index, cost-of-living adjustment (COLA), case-mix index, 
indirect medical education (IME) adjustment, disproportionate share, 
and the Core-Based Statistical Area (CBSA). The file supports the 
rulemaking.
    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2018 IPPS Update.
13. Hospital Readmissions Reduction Program Supplemental File
    This file contains information on the calculation of the Hospital 
Readmissions Reduction Program (HRRP) payment adjustment. Variables 
include the proxy excess readmission ratios for acute myocardial 
infarction (AMI), pneumonia (PN) and heart failure (HF), coronary 
obstruction pulmonary disease (COPD), total hip arthroplasty (THA)/
total knee arthroplasty (TKA), and coronary artery bypass grafting 
(CABG) and the proxy readmissions payment adjustment for each provider 
included in the program. In addition, the file contains information on 
the number of cases for each of the applicable conditions excluded in 
the calculation of the readmission payment adjustment factors. It also 
contains MS-DRG relative weight information to estimate the payment 
adjustment factors. The file supports the rulemaking.
    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2018 IPPS Update.
14. Medicare Disproportionate Share Hospital (DSH) Supplemental File
    This file contains information on the calculation of the 
uncompensated care payments for FY 2018. Variables include the data 
used to determine a hospital's share of uncompensated care payments, 
total uncompensated care payments and estimated per claim uncompensated 
care payment amounts. The file supports the rulemaking.
    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Acute-Inpatient-Files-for-Download.html.
    Period Available: FY 2018 IPPS Update.

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

[[Page 20148]]

affected public, including automated collection techniques.
    In this proposed rule, we are soliciting 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
    Section II.H.1. of the preamble of this proposed rule discusses 
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 2019 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, 2016, 2017, and 2018, we received 1, 4, 5, 3, 3, 5, 5, 7, 9, 9, 
and 9 applications, respectively. We note that 3 of the 9 applications 
for FY 2018 were withdrawn prior to the publication of the proposed 
rule as indicated in section II.H.6. of the preamble of this proposed 
rule.
3. ICRs for the Occupational Mix Adjustment to the Proposed FY 2018 
Wage Index (Hospital Wage Index Occupational Mix Survey)
    Section III.E. of the preamble of this proposed rule discusses the 
occupational mix adjustment to the proposed FY 2018 wage index. While 
the preamble does 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 us 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.
4. Hospital Applications for Geographic Reclassifications by the MGCRB
    Section III.I.2. of the preamble of this proposed rule discusses 
proposed changes to the wage index based on hospital reclassifications. 
As stated in that section, 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 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. The current information 
collection requirement for this application process is approved under 
OMB Control Number 0938-0573 in 2014 but expired on February 28, 2017. 
A request for an extension of this currently approved collection 
requirement under OMB control number 0938-0573 is currently awaiting 
OMB approval and can be accessed at: https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201612-0938-023.
5. ICRs for Temporary Exception to the LTCH PPS Site Neutral Payment 
Rate for Certain Spinal Cord Specialty Hospitals
    In section VIII.E. of the preamble of this proposed rule, we 
discuss the proposed implementation of section 15009 of Public Law 114-
255, which provides for a temporary exception to the site neutral 
payment rate for certain spinal cord specialty hospitals under section 
1886(m)(6)(F) of the Act. Under this provision, discharges occurring in 
cost reporting periods beginning during FY 2018 and FY 2019 for LTCHs 
that meet the specified statutory criteria are excepted from the site 
neutral payment rate (that is, all discharges from such LTCHs during 
this period would be paid at the LTCH PPS standard Federal payment 
rate). In order for an LTCH to qualify for this temporary exception, 
the LTCH must, among other things, meet the ``significant out-of-state 
admissions criterion'' at section 1886(m)(6)(F)(iii) of the Act. To 
meet the significant out-of-state admissions criterion, an LTCH must 
have discharged inpatients (including both individuals entitled to, or 
enrolled for, Medicare Part A benefits and individuals not so entitled 
or enrolled) during FY 2014 who had been admitted from at least 20 of 
the 50 States, determined by the States of residency of such inpatients 
and based on such data submitted by the hospital to the Secretary as 
the Secretary may require. The statute further provides authority for 
the Secretary to implement the significant out-of-state admissions 
criterion at section 1886(m)(6)(F)(iii) of the Act by program 
instruction or otherwise, and exempts the policy initiatives from any 
information collection requirements under the Paperwork Reduction Act. 
As such, the burden associated with the data submitted by the hospital 
to meet the significant out-of-State admissions criteria is not subject 
the PRA. However, our estimate of the burden associated with this data 
submission is discussed in section I.J. of Appendix A of this proposed 
rule.
6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program
a. Background
    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 currently approved under OMB control number 0938-
1022. We no longer use OMB control number 0938-0918. OMB has currently 
approved 3,681,023 hours of burden and approximately $121 million under 
OMB control number 0938-1022, accounting for burden experienced by 
3,300 IPPS hospitals and 1,100 non-IPPS hospitals for the FY 2019 
payment determination. Below, we describe the burden changes for IPPS 
hospitals due to the proposals in this proposed rule.
    In section IX.A. of the preamble of this proposed rule, we are 
making the following proposals that we expect to

[[Page 20149]]

affect our burden estimates: (1) Updates to the electronic clinical 
quality measure (eCQM) reporting requirements with regard to the number 
of eCQMs and quarters of data for the FY 2019 and FY 2020 payment 
determinations; (2) updates to our previously finalized eCQM validation 
procedures for the FY 2020 payment determination and subsequent years; 
and; (3) begin voluntary reporting on the new Hybrid Hospital-Wide 30-
Day Readmission measure for the CY 2018 reporting period. Details on 
these proposals, as well as the expected burden changes, are discussed 
below.
    This proposed rule also includes proposals to: (1) Update the eCQM 
certification requirements for the FY 2019 and FY 2020 payment 
determinations; (2) allow hospitals to use an educational review 
process to correct incorrect validation results for the first three 
quarters of validation for chart-abstracted measures beginning with the 
FY 2020 payment determination and for subsequent years; (3) refine the 
Hospital Consumer Assessment of Healthcare Providers and Systems 
(HCAHPS) Survey measure (NQF #0166 and 0228) to replace the questions 
on pain management for the FY 2020 payment determination and subsequent 
years; (4) refine the Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate Following Acute Ischemic Stroke Measure to include the 
National Institutes of Health (NIH) Stroke Scale data for the FY 2023 
payment determination and subsequent years; (5) provide confidential 
reports of measure data stratified by dual eligible status for the 
Hospital 30-day, All-Cause, Risk-Standardized Readmission Rate 
Following Pneumonia Hospitalization and Hospital 30-day, All-Cause, 
Risk Standardized Mortality Rate (RSRR) for Pneumonia measures; and (6) 
align the naming of the Extraordinary Circumstances Exceptions (ECE) 
Policy for the FY 2020 payment determination and subsequent years. As 
discussed further below, we do not expect these proposals to affect our 
burden estimates.
    In prior rules (81 FR 57260), we have estimated that reporting 
eCQMs for the Hospital IQR Program measures could be accomplished by 
staff with a mean hourly wage of $16.42 per hour,\508\ and we are 
retaining that wage rate, and applying it broadly for all of our 
calculations in this proposed rule, as we have done previously (81 FR 
57260). We note that more recent wage data has become available, and we 
intend to update the wage rate used in these calculations in the FY 
2018 IPPS/LTCH PPS final rule. We have chosen to calculate the cost of 
overhead, including fringe benefits, at 100 percent of the mean hourly 
wage, as has been done in previous years (81 FR 57260). This is 
necessarily a rough adjustment, both because fringe benefits and 
overhead costs vary significantly from employer-to-employer and because 
methods of estimating these costs vary widely from study-to-study. 
Nonetheless, we believe that doubling the hourly wage rate ($16.42 x 2 
= $32.84) to estimate total cost is a reasonably accurate estimation 
method. Accordingly, we calculate cost burden to hospitals using a wage 
plus benefits estimate of $32.84 throughout the discussion below for 
the Hospital IQR Program.
---------------------------------------------------------------------------

    \508\ Occupational Outlook Handbook. Available at: http://www.bls.gov/oes/2012/may/oes292071.htm.
---------------------------------------------------------------------------

b. Burden Estimates for the Proposed Updates to the eCQM Reporting 
Requirements
    In the FY 2017 IPPS/LTCH PPS final rule, we finalized policies to 
require hospitals to submit a full year (four quarters) (81 FR 57159) 
of data for at least eight eCQMs of the available eCQMs (81 FR 57157) 
for both the FY 2019 and FY 2020 payment determinations. In section 
IX.A.8. of the preamble of this proposed rule, we are proposing the 
following changes to these finalized policies: (1) Revise the CY 2017 
reporting period/FY 2019 payment determination eCQM reporting 
requirements, such that hospitals are required to report six eCQMs and 
to submit two, self-selected, calendar quarters of data; and (2) revise 
the CY 2018 reporting period/FY 2020 payment determination eCQM 
reporting requirements such that hospitals are required to report six 
eCQMs for the first three quarters of CY 2018.
(1) Calculations for the CY 2017 Reporting Period/FY 2019 Payment 
Determination
    As in previous years, we believe the total burden associated with 
the eCQM reporting policy will be similar to that previously outlined 
in the Medicare EHR Incentive Program Stage 2 final rule (77 FR 54126 
through 54133). Under that program, the burden estimate for a hospital 
to report one eCQM is 10 minutes per record per quarter. We believe 
this estimate is accurate and appropriate to apply to the Hospital IQR 
Program because we align the eCQM reporting requirements between both 
programs. Therefore, using the estimate of 10 minutes per record per 
quarter, we anticipate our proposal to require: (1) Reporting on at 
least six of the available eCQMs; and (2) submission of two self-
selected quarters of eCQM data, would result in a burden reduction of 3 
hours and 20 minutes (200 minutes) per hospital for the FY 2019 payment 
determination. This estimate was calculated by considering the burden 
difference between the updated eCQM reporting requirements proposed for 
the FY 2019 payment determination (10 minutes per record x 6 eCQMs x 2 
quarters = 120 minutes for 2 quarters of reporting) and the eCQM 
reporting requirements previously finalized in the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 57157 through 57159) (10 minutes per record x 8 
eCQMs x 4 quarters = 320 minutes for 4 quarters of reporting). Through 
these calculations (120 minutes-320 minutes), we arrived at a reduction 
of 200 minutes per hospital per year, or 3 hours and 20 minutes per 
hospital per year, for the FY 2019 payment determination.
    In total, for the FY 2019 payment determination, we expect our 
proposal to require hospitals to report data on six eCQMs for two 
quarters (as compared to our previously finalized requirements to 
report data on eight eCQMs for four quarters) to represent an annual 
burden reduction of 11,000 hours across all 3,300 IPPS hospitals 
participating in the Hospital IQR Program (-200 minutes per hospital/60 
minutes per hour x 3,300 hospitals = -11,000 hours). Using the wage 
estimate described above, we expect this to represent a cost reduction 
of $361,240 ($32.84 hourly wage x 11,000 annual hours reduction) across 
all 3,300 IPPS hospitals participating in the Hospital IQR Program.
(2) Calculations for the CY 2018 Reporting Period/FY 2020 Payment 
Determination
    Using the same estimate as described above of 10 minutes per record 
per quarter, if our proposed updates to the CY 2018 reporting period/FY 
2020 payment determination are finalized, we anticipate our proposal to 
require: (1) Reporting on at least 6 of the available eCQMs; and (2) 
submission of the first three quarters of CY 2018 eCQM data, would 
result in a burden reduction of 2 hours and 20 minutes (140 minutes) 
per hospital for the FY 2020 payment determination as compared to the 
previously finalized requirements to report eight eCQMs for four 
quarters for the FY 2020 payment determination (81 FR 57157 through 
57159). This estimate was calculated by considering the burden 
difference between the updated eCQM reporting requirements proposed for 
the FY 2020 payment determination (10 minutes per record x 6 eCQMs x 3 
quarters = 180 minutes for 3 quarters of reporting) and the eCQM 
reporting

[[Page 20150]]

requirements previously finalized for the FY 2020 payment determination 
(10 minutes per record x 8 eCQMs x 4 quarters = 320 minutes for 4 
quarters of reporting). Through these calculations (180 minutes-320 
minutes), we arrived at a reduction of 140 minutes per hospital per 
year, or 2 hours and 20 minutes per hospital per year, for the FY 2020 
payment determination as compared to the previously finalized 
requirements for the FY 2020 payment determination. In total, this 
would represent an annual burden reduction of 7,700 hours across all 
3,300 IPPS hospitals participating in the Hospital IQR Program (-140 
minutes per hospital/60 minutes per hour x 3,300 hospitals) and a cost 
reduction of $252,868 ($32.84 hourly wage x 7,700 annual hours 
reduction) across all 3,300 IPPS hospitals.
c. Burden Estimate for the Proposed Modifications to eCQM Certification 
Requirements for the FY 2019 and FY 2020 Payment Determinations and 
Subsequent Years
    In section IX.10.d of the preamble of this proposed rule, we 
discuss our proposed changes to the Hospital IQR Program eCQM 
submission requirements to align them with the Medicare EHR Incentive 
Program for eligible hospitals and CAHs. Specifically, for the CY 2017 
reporting period/FY 2019 payment determination, we are proposing that: 
(1) A hospital using EHR technology certified to the 2014 or 2015 
Edition, but such EHR technology is not certified to all available 
eCQMs, would be required to have its EHR technology certified to all 
eCQMs that are available to report; and (2) EHR technology that is 
certified to all available eCQMs would not need to be recertified each 
time it is updated to a more recent version of the eCQM specifications. 
For the CY 2018 reporting period/FY 2020 payment determination, we are 
proposing that: (1) A hospital using EHR technology certified to the 
2015 Edition, but such EHR technology is not certified to all available 
eCQMs, would be required to have its EHR technology certified to all 
eCQMs that are available to report; and (2) an EHR certified for all 
available eCQMs under the 2015 Edition of CEHRT would not need to be 
recertified each time it is updated to a more recent version of the 
eCQM specifications. Further, we are proposing that: (1) For the CY 
2017 reporting period, hospitals would be required to use the most 
recent version of the CQM electronic specifications; Spring 2016 
version of the eCQM specifications and any applicable addenda; and (2) 
for the CY 2018 reporting period, hospitals be required to use the most 
recent version of the CQM electronic specifications; Spring 2017 
version of the eCQM specifications and any applicable addenda. For eCQM 
specifications, we refer readers to the eCQI Resource Center Web site 
at: https://ecqi.healthit.gov/. Because the use of certified EHR 
technology is already required for the Medicare EHR Incentive Program, 
we believe that these proposals will have no effect on burden for 
hospitals under the Hospital IQR Program.
d. Burden Estimates for the Proposed Modifications to the Existing 
Validation Processes
(1) Calculations for Proposed Modifications to the Validation of eCQM 
Data for the FY 2020 Payment Determination and Subsequent Years
    In section IX.A.11. of the preamble of this proposed rule, we 
discuss our proposal to adopt a modification to the existing eCQM data 
validation process for the Hospital IQR Program data beginning with 
validation for the FY 2020 payment determination. First, we are 
proposing to require eight cases to be submitted per quarter for eCQM 
validation for the FY 2020 payment determination and subsequent years. 
We are making this proposal in conjunction with our proposal to require 
two quarters of data for the CY 2017 eCQM reporting period and our 
proposal to require three quarters of data for the CY 2018 eCQM 
reporting period. Accordingly, if those eCQM reporting proposals are 
finalized, we are proposing that the number of required case files for 
validation would be 16 records (eight cases per quarter over two 
quarters) for the FY 2020 payment determination and 24 records (eight 
cases per quarter over three quarters) for the FY 2021 payment 
determination. We note that, as discussed in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57176), CY 2017 eCQM data will be validated beginning 
in CY 2018 for the FY 2020 payment determination and subsequent years. 
Therefore, CY 2018 data will be validated beginning in CY 2019 for the 
FY 2021 payment determination. Second, we are proposing to add 
additional exclusion criteria to our hospital and case selection 
process for eCQM validation for the CY 2018 reporting period/FY 2020 
payment determination and subsequent years. Third, we are proposing to 
continue our previously finalized medical record submission 
requirements for the FY 2021 payment determination and subsequent years 
as well as to provide clarification to our finalized policy. We believe 
the updates to the exclusions and maintaining previously finalized 
medical record submission requirements will have no effect on burden 
for hospitals. We discuss the burden associated with the proposed eCQM 
validation process in more detail below.
    In previous years (79 FR 50347), we estimated a burden of 16 hours 
(960 minutes) for the submission of 12 records, which will equal 1 hour 
and 20 minutes (or 80 minutes) per record (960 minutes/12 records) for 
validation of eCQM data. Applying the time per individual submission of 
1 hour and 20 minutes (or 80 minutes) per record for the 16 records we 
are proposing that hospitals submit for validation for the FY 2020 
payment determination, we estimate a total burden of approximately 21 
hours (80 minutes x 16 records/60 minutes per hour) for each hospital 
selected for participation in eCQM validation for the FY 2020 payment 
determination. We estimate that the total burden would be approximately 
4,200 hours across the 200 hospitals selected for eCQM validation (21 
hours per hospital x 200 hospitals = 4,200 hours). As compared to our 
total burden estimate of 8,533 hours previously estimated in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57261), this represents a burden 
reduction of approximately 4,333 hours across up to 200 hospitals 
selected for eCQM validation (4,200 hours estimated in this proposed 
rule -8,533 hours estimated in the FY 2017 IPPS/LTCH PPS final rule = -
4,333 hours). Using the estimated hourly labor cost of $32.84, we 
estimate an annual cost reduction of $142,296 (4,333 hours x $32.84 per 
hour) across the 200 hospitals selected for eCQM validation due to our 
proposal to decrease the number of records collected for validation 
from 32 records to 16 records for the FY 2020 payment determination.
(2) Calculations for Proposed Modifications to the Validation of eCQM 
Data for the FY 2021 Payment Determination and Subsequent Years
    Applying the time per individual submission of 1 hour and 20 
minutes (or 80 minutes) per record for the 24 records we are proposing 
that hospitals submit for eCQM validation for the FY 2021 payment 
determination, we estimate a total burden of approximately 32 hours (80 
minutes x 24 records/60 minutes per hour) for each hospital selected 
for participation in eCQM validation. We estimate that the total burden 
would be approximately 6,400 hours across the 200 hospitals selected

[[Page 20151]]

for eCQM validation (32 hours per hospital x 200 hospitals = 6,400 
hours). We note that compared to our total burden estimate of 8,533 
hours previously estimated in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57261) for the FY 2020 payment determination and subsequent years, 
this would represent a burden reduction of approximately 2,133 hours 
across up to 200 hospitals selected for eCQM validation for the FY 2021 
payment determination (6,400 hours estimated for the FY 2021 payment 
determination in this proposed rule--8,533 hours estimated in the FY 
2017 IPPS/LTCH PPS final rule = -2,133 hours). Using the estimated 
hourly labor cost of $32.84, we estimate an annual cost reduction of 
$70,048 (2,133 hours x $32.84 per hour) across the 200 hospitals 
selected for eCQM validation due to our proposal to reduce the number 
of records collected from 32 records as finalized in the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57178) to 24 records for the FY 2021 payment 
determination.
(3) Calculations for Proposed Modifications to the eCQM Validation 
Exclusions for the FY2020 Payment Determination and Subsequent Years
    In section IX.A.11.b. of the preamble of this proposed rule, we are 
proposing a new eCQM validation exclusion criterion. Specifically, 
hospitals that do not have at least five discharges for at least one 
reported eCQM (among the six required eCQMs proposed for the CY 2017 
and CY 2018 eCQM reporting periods) included in their QRDA I file 
submissions would be excluded from the random sample of up to 200 
hospitals selected for eCQM validation for the FY 2020 payment 
determination and subsequent years. In summary, for the FY 2020 payment 
determination and subsequent years, we would exclude hospitals meeting 
the newly proposed exclusion criterion discussed above and/or either of 
the two exclusion criteria finalized in the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 57178). Lastly, we are proposing that the three exclusions 
would be applied before the random selection of 200 hospitals for eCQM 
validation, such that hospitals meeting any of these exclusions would 
not be eligible for selection.
    In section IX.A.11.b. of the preamble of this proposed rule, we are 
proposing to exclude the following cases from validation for those 
hospitals selected to participate in eCQM validation: (1) Episodes of 
care that are longer than 120 days; and (2) cases with a zero 
denominator for each measure, for the FY 2020 payment determination and 
subsequent years.
    We do not believe that these proposals will impact the burden 
experienced by hospitals because, while they influence which hospitals 
and cases would be selected, they would not change the number of 
hospitals that must participate in eCQM validation, the number of 
records that would be collected for validation, or the validation 
reporting requirements for the hospitals selected.
(4) Calculations for the Proposed Modifications to the Medical Record 
Submission Requirements for the FY 2021 Payment Determination and 
Subsequent Years
    In section IX.A.11.b. of the preamble of this proposed rule, we are 
proposing for the FY 2021 payment determination and subsequent years, 
to apply the medical record submission requirements that were finalized 
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57179) only for the FY 
2020 payment determination. Specifically, we are proposing that for 
hospitals participating in eCQM validation we: (1) Would require 
submission of at least 75 percent of sampled eCQM measure medical 
records in a timely and complete manner; and (2) would maintain the 
previously finalized policy that the accuracy of eCQM data submitted 
for validation would not affect a hospital's validation score (81 FR 
57180). We do not expect these proposals to influence our burden 
estimates, as we are proposing to continue existing policies.
(5) Calculations for the Proposed Educational Review Process for Chart-
Abstracted Measures for the FY 2020 Payment Determination and 
Subsequent Years
    In section IX.A.11.c. of the preamble of this proposed rule, we are 
proposing to formalize the process of allowing hospitals to use an 
educational review process to correct incorrect validation results for 
the first three quarters of validation for chart-abstracted measures. 
Secondly, we are proposing to update the process to specify that if the 
results of an educational review indicate that we incorrectly scored a 
hospital, the corrected score would be used to compute the hospital's 
final validation score whether or not the hospital submits a 
reconsideration request. Under this proposal, the educational review 
request process, as well as CMS' procedures for responding to requests, 
remain the same for the FY 2020 payment determination and subsequent 
years, except that revised scores identified through an educational 
review would be used to correct a hospital's validation score. As 
stated in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49762), we 
estimate a burden of 15 minutes per hospital to report structural 
measure data and to complete all forms, including the reconsideration 
request form and the educational review form. We refer readers to the 
FY 2017 IPPS/LTCH PPS final rule for more detailed information on the 
burden associated with the chart-abstracted validation requirements (81 
FR 57260). Although this proposal may allow hospitals to avoid the 
formal reconsideration process, we do not expect this proposal to 
influence our burden estimates for the chart-abstracted measures 
validation process as it would not change the requirements for 
selecting hospitals for validation of chart-abstracted measures nor 
change the chart-abstracted validation reporting requirements for the 
selected hospitals.
e. Burden Estimate for the Proposed Voluntary Reporting on the Hybrid 
Hospital-Wide 30-Day Readmission Measure for the CY 2018 Reporting 
Period
    In section IX.A.7.a. of the preamble of this proposed rule, we are 
proposing voluntary reporting on the Hybrid Hospital-Wide 30-Day 
Readmission measure for CY 2018 reporting period. This measure uses 
both claims-based data as well as a set of 13 core clinical data 
elements from patient electronic health records (EHRs). We do not 
expect any additional burden to hospitals to report the claims-based 
portion of this measure because these data are already reported to the 
Medicare program for payment purposes.
    As described in section IX.A.7.b. of the preamble of this proposed 
rule, we are proposing that hospitals submit the 13 core clinical data 
elements and the six data elements required for linking with claims 
data for this measure using the same submission process required for 
eCQM reporting, specifically, that these data be reported using QRDA I 
files submitted to the CMS data receiving system. Accordingly, we 
expect the burden associated with voluntarily reporting this measure to 
be similar to our estimates for eCQM reporting (that is 10 minutes per 
measure, per quarter). We anticipate that approximately 100 hospitals 
would voluntarily report the Hybrid Hospital-Wide 30-Day Readmission 
measure. Therefore, using the estimate of 10 minutes per measure per 
quarter, we estimate that our proposal would result in a burden 
increase of 0.67 hours (40 minutes) per participating hospital for

[[Page 20152]]

the one year (4 quarters) during which this pilot would take place (10 
minutes per record x 1 measure x 4 quarters/60 minutes per hour = 0.67 
hours). In total, for the one year duration of voluntary reporting the 
Hybrid Hospital-Wide 30-Day Readmission measure, we estimate an annual 
burden increase of 67 hours across up to 100 hospitals voluntarily 
participating (40 minutes per hospital/60 minutes per hour x 100 
hospitals = 67 hours). Using the wage estimate described above, we 
estimate this to represent a cost increase of $2,200 ($32.84 hourly 
wage x 67 annual hours) across up to 100 hospitals voluntarily 
participating in the pilot. We note that the claims-based version of 
the Hospital-Wide All-Cause Unplanned Readmission (HWR) measure is 
currently a part of the Hospital IQR Program measure set, as adopted in 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53530).
f. Burden Estimate for the Proposed Refinement of the HCAHPS Survey 
Measure for the FY 2020 Payment Determination and Subsequent Years
    In section IX.A.6.a. of the preamble of this proposed rule, we are 
proposing to update the HCAHPS Survey measure by replacing the current 
Pain Management questions (HCAHPS Q12, Q13, and Q14) with new questions 
referred to collectively as the ``Communication About Pain'' composite 
measure beginning with the FY 2020 payment determination. There is no 
additional information collection burden associated with the refinement 
of these questions because we are rewording the existing questions and 
not changing the total number of questions. In addition, consistent 
with previous years (81 FR 57261), the burden estimate for the Hospital 
IQR Program excludes the burden associated with the HCAHPS survey 
measure, which is submitted under a separate information collection 
request and approved under OMB control number 0938-0981.
g. Burden Estimate for the Proposed Refinement of the Hospital 30-Day, 
All-Cause, Risk-Standardized Mortality Rate Following Acute Ischemic 
Stroke Measure for the FY 2023 Payment Determination and Subsequent 
Years
    In section IX.A.6.b. of the preamble of this proposed rule, we are 
proposing to update the Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate Following Acute Ischemic Stroke measure to include the 
use of NIH stroke scale claims data for risk adjustment beginning with 
the FY 2023 payment determination. Because this proposed update would 
result only in the inclusion of additional claims-based data that are 
already reported to the Medicare program for payment purposes, we 
believe no additional burden on hospitals will result from the update 
to the stroke mortality measure.
h. Burden Estimate for the Confidential and Potential Future Public 
Reporting of Readmission Measure Data Stratified by Social Risk Factors
    In section IX.A.13 of the preamble of this proposed rule we discuss 
our intent to provide confidential reports to hospitals that include 
measure data stratified by dual eligible status for the Hospital 30-
day, All-Cause, Risk-Standardized Readmission Rate Following Pneumonia 
Hospitalization and Hospital 30-day, All-Cause, Risk-Standardized 
Mortality Rate (RSRR) for Pneumonia measures. In addition to 
confidential reporting, we are seeking comment on options for public 
display of measure data stratified by social risk factor indicators on 
the Hospital Compare Web site. Because this proposal is related to the 
way we display data, and not the methods of data collection implemented 
by the hospitals, we believe no additional burden on hospitals would 
result from confidential reporting of stratified measure data using 
social risk factor indicators. We note that all measures for which we 
might consider confidential reporting or public display of stratified 
measure data would already be included in the Hospital IQR Program, and 
as claims-based measures, we do not expect any additional burden 
because these data are already reported to the Medicare program for 
payment purposes.
i. Burden Estimate for the Proposed Changes to the Hospital IQR Program 
Extraordinary Circumstances Exceptions (ECE) Policy for the FY2020 
Payment Determination and Subsequent Years
    In section IX.A.15.b. of the preamble of this proposed rule we 
discuss our intent to align the naming of this exception policy and 
update CFR 412.140 to reflect our current ECE policies. We also are 
clarifying the timing of CMS' response to ECE requests. Because we are 
not seeking any new or additional information in our ECE proposals, we 
believe the updates will have no effect on burden for hospitals.
j. Summary of Burden Estimates for the Hospital IQR Program
    In summary, under OMB control number 0938-1022, we estimate: (1) A 
total burden reduction of 11,000 hours (-11,000 hours due to the 
proposed updates to the CY 2017 eCQM reporting requirements) and a 
total cost reduction of $361,240 (-11,000 hours x $32.84 per hour) for 
the FY 2019 payment determination; (2) a total burden reduction of 
11,966 hours (-7,700 hours due to the proposed updates to the CY 2018 
eCQM reporting requirements--4,333 hours due to the proposed updates to 
the eCQM validation procedures for the FY 2020 payment determination + 
67 hours for the proposed Hybrid Hospital-Wide 30-Day Readmission 
measure pilot) and a total cost reduction of $392,963 (-11,866 hours x 
$32.84 per hour) for the FY 2020 payment determination; and (3) a total 
burden reduction of 2,133 hours (-2,133 hours due to the proposed 
updates to eCQM validation procedures for the FY 2021 payment 
determination) and a total cost reduction of $70,048 (-2,133 hours x 
$32.84 per hour) for the FY 2021 payment determination. These are the 
burden estimate totals for which we are requesting OMB approval under 
OMB number 0938-1022.

[[Page 20153]]



                                           Hospital IQR Program FY 2019 Payment Determination Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Annual recordkeeping and reporting requirements under OMB control number 0938-1022 for FY 2019 payment determination
                                  ----------------------------------------------------------------------------------------------------------------------
                                                                                                                               Previously
                                                                                                                                finalized
                                                                                                                              annual burden
                                                                                                             Newly proposed  (hours) across
                                                            Number     Number of     Average       Annual     annual burden  IPPS hospitals      Net
             Activity               Estimated time per    reporting       IPPS        number       burden    (hours) across    for FY 2019    difference
                                    record (minutes) FY    quarters    hospitals   records per  (hours) per  IPPS hospitals      payment      in annual
                                           2019          per year FY   reporting     hospital     hospital     for FY 2019    determination     burden
                                                             2019                  per quarter                   payment       per the  FY      hours
                                                                                                              determination    2017  IPPS/
                                                                                                                             LTCH PPS final
                                                                                                                                  rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reporting on 6 eCQMs for 2         60 (10 minutes x 6              2        3,300            1            2           6,600          17,600      -11,000
 Quarters.                          measures).
                                  ----------------------------------------------------------------------------------------------------------------------
                                                                           Total Change in Burden Hours: -11,000
                                  ----------------------------------------------------------------------------------------------------------------------
                                                  Total Cost Estimate: Hourly Wage ($32.84) x Change in Burden Hours (-11,000) = -$361,240
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                           Hospital IQR Program FY 2020 Payment Determination Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Annual recordkeeping and reporting requirements under OMB control number 0938-1022 for FY 2020 payment determination
                                  ----------------------------------------------------------------------------------------------------------------------
                                                                                                                               Previously
                                                                                                             Newly proposed     finalized
                                                            Number     Number of     Average       Annual     annual burden   annual burden      Net
             Activity               Estimated time per    reporting       IPPS        number       burden    (hours) across  (hours) across   difference
                                    record (minutes) FY    quarters    hospitals   records per  (hours) per  IPPS hospitals  IPPS hospitals   in annual
                                           2020          per year FY   reporting     hospital     hospital     for FY 2020     per the FY       burden
                                                             2020                  per quarter                   payment     2017 IPPS/LTCH     hours
                                                                                                              determination  PPS final rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reporting on 6 eCQMs for 3         60 (10 minutes x 6              3        3,300            1            3           9,900          17,600       -7,700
 Quarters.                          measures).
FY 2020 eCQM Validation..........  80..................            2          200            8           21           4,200           8,533       -4,333
Hybrid Hospital-Wide 30-Day        10..................            4          100            1         0.67              67               0           67
 Readmission Measure Voluntary
 Pilot.
                                  ----------------------------------------------------------------------------------------------------------------------
                                                                           Total Change in Burden Hours: -11,966
                                  ----------------------------------------------------------------------------------------------------------------------
                                                  Total Cost Estimate: Hourly Wage ($32.84) x Change in Burden Hours (-11,966) = -$392,963
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                           Hospital IQR Program FY 2021 Payment Determination Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Annual recordkeeping and reporting requirements under OMB control number 0938-1022 for FY 2021 payment determination
                                  ----------------------------------------------------------------------------------------------------------------------
                                                                                                                               Previously
                                                                                                             Newly proposed     finalized
                                                            Number     Number of     Average       Annual     annual burden   annual burden      Net
             Activity               Estimated time per    reporting       IPPS        number       burden    (hours) across  (hours) across   difference
                                    record (minutes) FY    quarters    hospitals   records per  (hours) per  IPPS hospitals  IPPS hospitals   in annual
                                           2021          per year FY   reporting     hospital     hospital     for FY 2021     per the FY       burden
                                                             2021                  per quarter                   payment     2017 IPPS/LTCH     hours
                                                                                                              determination  PPS final rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 2021 eCQM Validation..........  80..................            3          200            8           32           6,400           8,533       -2,133
                                  ----------------------------------------------------------------------------------------------------------------------
                                                                            Total Change in Burden Hours: -2,133
                                  ----------------------------------------------------------------------------------------------------------------------
                                                   Total Cost Estimate: Hourly Wage ($32.84) x Change in Burden Hours (-2,133) = -$70,048
--------------------------------------------------------------------------------------------------------------------------------------------------------

7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
    As discussed in sections IX.B. of the preamble of this proposed 
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. There is no financial impact to PCH 
Medicare reimbursement if a PCH does not participate.
    We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50957 through 50959), the FY 2015 IPPS/LTCH PPS final rule (79 FR 50347 
through 50348), the FY 2016 IPPS/LTCH PPS final rule (80 FR 49764), and 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 57182), as well as to OMB 
Control Number 0938-1175, for a detailed discussion of the burden for 
the program requirements that we have previously adopted. Below we 
discuss only changes in burden that would result from the proposals in 
this proposed rule.

[[Page 20154]]

a. Estimated Hourly Labor Cost
    Previously, we used $66 as our hourly labor cost in calculating the 
burden associated with chart-abstraction activities in the PCHQR 
Program. However, our experience working with our data analysis 
contractors and those performing chart abstraction indicates that this 
work is performed by a different labor category than we previously 
thought. In addition, our previous labor cost is different from those 
used in other quality reporting and value-based purchasing programs, 
and we do not believe there is a justification for these different 
values given the similarity in quality measures and required staff. 
Therefore, to align the estimated hourly labor costs (hourly wage plus 
fringe and overhead, as discussed below) used to calculate burden in 
the PCHQR Program with those used in other CMS quality reporting 
programs, including the Hospital IQR Program, we are proposing to 
revise our hourly labor cost estimate to $32.84.\509\
---------------------------------------------------------------------------

    \509\ https://www.bls.gov/oes/2012/may/oes292071.htm.
---------------------------------------------------------------------------

    This labor cost is based on the BLS wage for a Medical Records and 
Health Information Technician. The BLS is ``the principal Federal 
agency responsible for measuring labor market activity, working 
conditions, and price changes in the economy.'' \510\ The BLS describes 
Medical Records and Health Information Technicians as those responsible 
for organizing and managing health information data; therefore, we 
believe it is reasonable to assume that these individuals would be 
tasked with abstracting clinical data for submission for the PCHQR 
Program. According to the BLS, the median pay for Medical Records and 
Health Information Technicians is $16.42 per hour, before inclusion of 
overhead and fringe benefits.
---------------------------------------------------------------------------

    \510\ http://www.bls.gov/bls/infohome.htm.
---------------------------------------------------------------------------

    Obtaining data on overhead costs is challenging because overhead 
costs vary across PCHs, and cost elements assigned as ``indirect'' or 
``overhead'' costs, as opposed to direct costs or employee wages, are 
subject to interpretation at the facility level. Therefore, we are 
proposing to calculate the cost of overhead, including fringe benefits, 
at 100 percent of the mean hourly wage, as is currently done in other 
CMS quality reporting programs.\511\ This is necessarily a rough 
adjustment, both because fringe benefits and overhead costs vary 
significantly from employer to employer and because methods of 
estimating these costs vary widely from study to study. Nonetheless, we 
believe that doubling the hourly wage rate ($16.42 x 2 = $32.84) to 
estimate total cost is a reasonably accurate estimation method. 
Accordingly, we are proposing to use an hourly labor cost estimate of 
$32.84 ($16.42 base salary + $16.42 fringe and overhead) for 
calculation of burden forthwith. We note that more recent wage data has 
become available, and we intend to update the wage rate used in these 
calculations in the FY 2018 IPPS/LTCH PPS final rule.
---------------------------------------------------------------------------

    \511\ See, e.g., FY2016 IPPS/LTCH Final Rule at 80 FR 49764 FN 
153.
---------------------------------------------------------------------------

    We are inviting public comment on this proposal.
b. Estimated Burden of PCHQR Program Proposals for the FY 2020 Program 
Year
    In section IX.B.4. of the preamble of this proposed rule, we are 
proposing to adopt four claims-based measures beginning with the FY 
2020 program: (1) Proportion of Patients Who Died from Cancer Receiving 
Chemotherapy in the Last 14 Days of Life (NQF #0210); (2) Proportion of 
Patients Who Died from Cancer Admitted to the ICU in the Last 30 Days 
of Life (NQF #0213); (3) Proportion of Patients Who Died from Cancer 
Not Admitted to Hospice (NQF #0215); and (4) Proportion of Patients Who 
Died from Cancer Admitted to Hospice for Less Than Three Days (NQF 
#0216)).
    In conjunction with our proposal in section IX.B.3. of the preamble 
of this proposed rule, we are proposing to remove three existing chart-
abstracted measures beginning with the FY 2020 program--(1) 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 (PCH-01/NQF #0223); (2) 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 (PCH-02/NQF #0559); and (3) Adjuvant Hormonal 
Therapy (PCH-03/NQF #0220)). If all of these proposals are finalized, 
the PCHQR Program measure set would consist of 18 measures for the FY 
2020 program.
    Our proposal to remove the three chart-abstracted measures would 
reduce the burden associated with quality data reporting on PCHs. Based 
on the FY 2013 IPPS/LTCH final rule (77 FR 53667) finalized estimates 
of the burden of collecting measure information, submitting measure 
information, and training personnel, we estimate the reduction in 
burden for collecting measure information, submitting measure 
information, and training personnel provided by the proposed removal of 
the three measures to be approximately 3,776 hours per year for each 
PCH, or an average reduction in burden of 315 hours per month per PCH. 
Therefore, we estimate a reduction in hourly burden of chart 
abstraction and data submission of approximately 41,536 hours per year 
across the 11 PCHs.\512\
---------------------------------------------------------------------------

    \512\ In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53667), we 
originally calculated the burden for reporting the three chart-
abstracted cancer measures and two NHSN CDC measures (CLABSI and 
CAUTI) at approximately 6,293.5 hours annually for each PCH, or 
69,228.5 burden hours annually for all 11 PCHs. To calculate the 
reduction in burden achieved by removing three of these five 
measures, we multiplied the annual burden by 11 (the number of 
PCHs), divided by 5 (the total number of measures making up the 
burden estimate), and multiplied the result by 3 (the total number 
of measures being removed).
---------------------------------------------------------------------------

    We do not anticipate any increase in burden on the PCHs 
corresponding to our proposal to adopt four claims-based measures into 
the PCHQR Program beginning with the FY 2020 program year. The four 
measures are claims-based and therefore do not require facilities to 
report any additional data. Because these measures do not require 
facilities to submit any additional data, we do not believe that there 
is any increase in burden associated with this proposal.
    In summary, as a result of our proposals, we estimate a reduction 
of 40,910 hours of burden per year associated with the proposals above 
for all 11 PCHs beginning with the FY 2020 program. Coupled with our 
revised estimated salary costs, we estimate that these proposed changes 
would result in a reduction in annual labor costs of $1,364,078 
(41,537.1 hours x $32.84 hourly labor cost) across the 11 PCHs 
beginning with the FY 2020 PCHQR Program. The burden associated with 
these reporting requirements is currently under OMB Control Number 
0938-1175. The information collection will be revised and submitted to 
OMB.
8. ICRs for the Hospital Value-Based Purchasing (VBP) Program
    In section V.J. of the preamble of this proposed rule, we discuss 
proposed requirements for the Hospital VBP Program. Specifically, in 
this proposed rule, with respect to quality measures, we are proposing 
to: (1) Remove the current PSI 90 measure beginning with the FY 2019 
program year; (2) adopt the Hospital-Level, Risk-Standardized Payment 
Associated with a 30-Day Episode-of-Care for Pneumonia PN Payment) 
measure beginning with the FY 2022 program year; and (3) adopt the 
Patient Safety and Adverse Events

[[Page 20155]]

(Composite) (NQF #0531) (Modified PSI 90) beginning with the PY 2023 
program year.
    As required under section 1886(o)(2)(A) of the Act, Hospital VBP 
Program measures, including the proposed additional and updated 
measures, are used in 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 
and collected under the Hospital IQR Program. Therefore, the burden 
associated with these reporting requirements is currently approved 
under OMB Control Number 0938-1022.
9. ICRs for the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP)
    As discussed in section IX.C.7. of the preamble of this proposed 
rule, we are proposing to replace the current pressure ulcer measure 
beginning with the FY 2020 LTCH QRP and adopt two new measures (one 
process and one outcome) related to ventilator weaning also beginning 
with the FY 2020 LTCH QRP.

    LTCH QRP Quality Measures Proposed in This FY 2018 IPPS/LTCH PPS
            Proposed Rule Beginning With the FY 2020 LTCH QRP
------------------------------------------------------------------------
                              Measure title
-------------------------------------------------------------------------
Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/Injury.
Compliance with Spontaneous Breathing Trial (SBT) by Day 2 of the LTCH
 Stay.
Ventilator Liberation Rate.
------------------------------------------------------------------------

    The LTCH QRP measure set also currently includes claims-based 
measures that are calculated based on data that LTCHs are already 
required to report to the Medicare program for payment purposes. In 
this proposed rule, we are proposing to remove the All-Cause Unplanned 
Readmission Measure for 30 Days Post-Discharge from LTCHs (NQF #2512) 
from the LTCH QRP measure set, beginning with the FY 2019 LTCH QRP. 
However, because LTCHs will still be required to report data on this 
measure for payment purposes, we believe that the removal of this 
measure will not affect the burden estimate for the LTCH QRP.
    The LTCH CARE Data Set Version 3.00 was implemented April 1, 2016 
and is approved under OMB control number 0938-1163. The LTCH CARE Data 
Set Version 3.00 is available on the LTCH QRP Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-CARE-Data-Set-and-LTCH-QRP-Manual.html. For a discussion of burden related to LTCH CARE Data Set 
Version 3.00, we refer readers to the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57339 through 57341).
    In this proposed rule, we are proposing three measures: Changes in 
Skin Integrity Post-Acute Care: Pressure Ulcer/Injury; and two new 
measures related to ventilator weaning, Compliance with SBT by Day 2 of 
the LTCH Stay and Ventilator Liberation Rate. The data for these 
measures will be collected using the LTCH CARE Data Set Version 4.00.
    The LTCH CARE Data Set Version 4.00, effective April 1, 2018, will 
also contain additional data elements needed to calculate the Drug 
Regimen Review Conducted with Follow-Up for Identified Issues-PAC LTCH 
QRP quality measure, which was finalized in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57219 through 57223) as well as the data elements 
needed to calculate the measures we are proposing to adopt in this 
proposed rule.
    Adoption of the proposed pressure ulcer measure, Change in Skin 
Integrity Post-Acute Care: Pressure Ulcer Injury, to replace the 
current pressure ulcer measure, Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678), 
would result in the removal of some data elements related to pressure 
ulcer assessment that we believe are duplicative or no longer 
necessary. As a result, the estimated burden and cost for LTCHs to 
report the proposed measure would be reduced from the burden and cost 
to report the current measure. Specifically, we believe that there 
would be a 3-minute reduction in clinical staff time to report data. We 
estimate 146,592 discharges from 426 LTCHs annually. This equates to a 
decrease of 7,330 hours in burden for all LTCHs (0.05 hours x 146,592 
discharges). Given 3 minutes of RN time at $69.40 per hour completing 
an average of 344 sets of LTCH CARE Data Set assessments per provider 
per year, we estimated the total cost would be reduced by $1,194.07 per 
LTCH annually, or $508,674 for all LTCHs annually. This decrease in 
burden will be accounted for in the information collection under OMB 
control number (0938-1163).
    We estimate the additional data elements for the newly proposed 
Compliance with SBT by Day 2 of the LTCH Stay quality measure would 
take 1.5 minutes of clinical staff time to report data on admission. We 
believe that the additional LTCH CARE Data Set items we are proposing 
will be completed by registered nurses and respiratory therapists (RT). 
Individual LTCHs determine the staffing resources necessary. We 
estimate 146,592 discharges from 426 LTCHs annually. This equates to an 
increase of 3,665 hours in burden for all LTCHs (0.025 hours x 146,592 
discharges). Given 0.75 minutes of RN time at $69.40 per hour and 0.75 
minutes of RT time at $58.30 per hour completing an average of 344 sets 
of LTCH CARE Data Set assessments per provider per year, we estimated 
the total cost would be increased by $549.29 per LTCH annually, or 
$233,997 for all LTCHs annually. This increase in burden will be 
accounted for in the information collection under OMB control number 
(0938-1163).
    We estimate the additional elements for the newly proposed 
Ventilator Liberation Rate quality measure would take 2.7 minutes of 
clinical staff time to report data on admission and 0.3 minutes of 
clinical staff time to report data on discharge, for a total of 3 
minutes. We believe that the additional LTCH CARE Data Set items we are 
proposing will be completed by registered nurses and respiratory 
therapists. Individual providers determine the staffing resources 
necessary. We estimate 146,592 discharges from 426 LTCHs annually. This 
equates to an increase of 7,330 hours in burden for all LTCHs (0.05 
hours x 146,592 discharges). Given 2.85 minutes of RN time at $69.40 
per hour and 0.15 minutes of respiratory therapist (RT) time at $58.30 
per hour completing an average of 344 sets of LTCH CARE Data Set 
assessments per provider per year, we estimated the total cost would be 
increased by $1,184.52 per LTCH annually, or $504,606 for all LTCHs 
annually. This increase in burden will be accounted for in the 
information collection under OMB control number (0938-1163).
    We are proposing to remove the program interruption items from the 
LTCH CARE Data Set. Specifically, we are proposing to remove the 
following items: (1) A2500, Program Interruption(s); (2) A2510, Number 
of Program Interruptions During This Stay in This Facility; and (3) 
A2525, Program Interruption Dates, because we do not currently utilize 
this information nor do we have plans to utilize this information for 
the LTCH QRP. As a result, the estimated burden and cost for LTCHs 
would be reduced. Specifically, we believe that there would be a 3.6 
minute reduction in clinical staff time to report data. We estimate 
146,592 discharges from 426 LTCHs annually. This equates

[[Page 20156]]

to a decrease of 8,796 hours in burden for all LTCHs (0.06 hours x 
146,592 discharges). Given 3.6 minutes of RN time at $69.40 per hour 
completing an average of 344 sets of LTCH CARE Data Set assessments per 
provider per year, we estimated the total cost would be reduced by 
$1,432.89 per LTCH annually, or $610,409 for all LTCHs annually. This 
decrease in burden will be accounted for in the information collection 
under OMB control number (0938-1163).
    Also, in section IX.C.10.b. of the preamble of this proposed rule, 
we are proposing requirements related to the reporting of standardized 
patient assessment data beginning with the FY 2019 LTCH QRP. Some of 
the proposed data elements are already included on the LTCH CARE Data 
Set, and our proposal to characterize those data elements as 
standardized patient assessment data will not result in an additional 
reporting burden for LTCHs. However, we are proposing to adopt 25 new 
standardized patient assessment data elements with respect to LTCH 
admissions and 17 new standardized patient assessment data elements 
with respect to LTCH discharges. We estimate that it will take an 
LTCH's clinical staff 7.5 minutes to report the data elements required 
with respect to admissions and 5.1 minutes to report the data elements 
required with respect to discharges, for a total of additional 12.6 
minutes. This equates to an increase of 30,784 hours in burden for all 
LTCHs (0.21 hours x 146,592 discharges). We believe that the additional 
LTCH CARE Data Set data elements we are proposing will be completed by 
registered nurses (approximately 45 percent of the time), licensed 
vocational nurses (approximately 45 percent of the time) and 
respiratory therapists (approximately 10 percent of the time). We 
estimate 146,592 discharges from 426 LTCHs annually.
    We obtained mean hourly wages for these staff from the U.S. Bureau 
of Labor Statistics' May 2016 National Occupational Employment and Wage 
Estimates (https://www.bls.gov/oes/current/oes_nat.htm). The mean 
hourly wage for a RN (BLS occupation code: 29-1141) is $34.70, for a 
respiratory therapist (BLS occupation code: 29-1126) is $29.15, and for 
a licensed vocational nurse (BLS occupation code: 29-2061) is $21.56. 
Individual providers determine the staffing resources necessary. 
However, to account for overhead and fringe benefits, we have doubled 
the mean hourly wage, making it $69.40 for an RN, $58.30 for a 
respiratory therapist, and $43.12 for a licensed vocational nurse. 
Given the clinician times and wages above completing an average of 344 
sets of LTCH CARE Data Set assessments per provider per year, the total 
cost related to the additional standardized patient assessment data 
elements is estimated at $4,080.30 per LTCH annually, or $1,738,206 for 
all LTCHs annually.
    In summary, the 4.5-minute increase in burden for the two proposed 
ventilator weaning quality measures is offset with the 3 minute 
reduction in burden for the proposed pressure ulcer quality measure and 
the 3.6 minute reduction in burden for the program interruption items. 
This results in a net reduction in burden of 2.1 minutes. In addition, 
we are proposing that data for the new standardized data elements will 
be collected by LTCHs and reported to CMS using the LTCH CARE Data Set 
(LTCH CARE Data Set Version 4.00, effective April 1, 2018) for the 
purpose of fulfilling the requirements of the IMPACT Act. This results 
in an additional 12.6 minutes of burden for the proposed standardized 
data elements, with a net burden of 10.5 minutes. Overall, the cost 
associated with the proposed changes to the LTCH QRP is estimated at an 
additional $3,187.15 per LTCH annually, or $1,357,726 for all LTCHs 
annually.
    The proposed LTCH CARE Data Set Version 4.00 is available on the 
LTCH QRP Web site at: https://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 LTCH CARE Data Set Version 
4.00, we refer readers to section I.M. of Appendix A of the preamble of 
this proposed rule.
10. ICRs for the Inpatient Psychiatric Facility Quality Reporting 
(IPFQR) Program
    We refer readers to the FY 2015 IPF PPS final rule (79 FR 45978 
through 45980), the FY 2016 IPF PPS final rule (80 FR 46720 through 
46721), and the FY 2017 IPPS/LTCH PPS (81 FR 57265 through 57266) final 
rule for a detailed discussion of the burden for the program 
requirements that we have previously adopted. Additional information on 
the full burden of existing requirements can also be found in the 
materials associated with OMB 0938-1171, the OMB Paperwork Reduction 
Act materials for this Program. We are proposing provisions that affect 
the FY 2019 payment determination (through procedural requirements that 
occur in FY 2018) and the FY 2020 payment determination and subsequent 
years. ICRs associated with proposals for each period are discussed in 
more detail below.
a. Burden Associated With Procedural Proposals for the FY 2019 Payment 
Determination and Subsequent Years
    For FY 2018 and subsequent years we are proposing: (1) Updates to 
the Extraordinary Circumstances Exception (ECE) process (affecting 
submission of ECE requests in FY 2018, which would impact payment 
determination year FY 2019 and subsequent years); (2) to adopt measure 
removal factors, including criteria for determining when a measure is 
``topped-out,'' and measure retention factors (which could affect 
measures for the FY 2020 payment determination and subsequent years); 
and (3) changes associated with procedural deadlines (which affects FY 
2019 payment determination and subsequent years).
    For the ECE proposals, we are specifically proposing to: (1) 
Specify that ECE forms can be signed by either the CEO or the 
designated personnel as listed in the contact information section of 
the form; (2) change the ECE request form submission deadline to within 
90 days of the date that the extraordinary circumstance occurred; and 
(3) we will strive to complete our review of ECE requests within 90 
days of receipt. These changes to the ECE process would not change data 
submission requirements for facilities requesting ECEs, but update 
procedural requirements related to ECE requests instead. Therefore, we 
do not expect any changes to burden associated with these proposals.
    Second, the proposal to adopt measures removal and retention 
factors does not affect the data submission requirements. These factors 
are intended to improve transparency of our measure review and 
evaluation process.
    Third, for the procedural deadlines, we are proposing to: (1) 
Change the submission deadline such that facilities have a 45-day 
submission period beginning at least 30 days following the end of the 
data collection period for a measure; (2) change the submission 
timeframes for both NOPs and withdrawals to the end of the data 
submission period before each respective payment determination year; 
and (3) provide exact dates that define the end of the data submission 
period/NOP/withdrawal submission deadline through subregulatory means. 
These proposals do not affect the data that a facility must submit, 
instead these proposals affect the specification of timeframes.
    Because none of the policies that we are proposing for FY 2018 and 
subsequent years affects the data that

[[Page 20157]]

IPFs are required to submit, we do not believe there will be any change 
in burden.
b. Burden Associated With Proposal for the FY 2020 Payment 
Determination and Subsequent Years
    For FY 2020 and subsequent years, we are proposing one measure, 
Medication Continuation following Inpatient Psychiatric Discharge. This 
measure is claims based and therefore does not require facilities to 
report any additional data. Because this measure does not require 
facilities to submit any additional data, we do not believe that there 
is any associated burden associated with this proposal.
11. ICRs for the Electronic Health Record (EHR) Incentive Programs and 
Meaningful Use
    In section IX.E. of the preamble of this proposed rule, we discuss 
proposed policies for eligible hospitals and CAHs reporting CQMs 
electronically under the Medicare and Medicaid EHR Incentive Programs. 
As outlined in this proposed rule, we are proposing the following 
modifications to the CY 2017 final CQM policies: (1) Revise the CY 2017 
reporting period for eligible hospitals and CAHs reporting CQMs 
electronically to require the submission of 2 self-selected quarters of 
data; and (2) revise the number of CQMs eligible hospitals and CAHs are 
required to report electronically for CY 2017 to 6 (self-selected) 
available CQMs. In addition, we are proposing the following CQM 
reporting requirements for CY 2018: (1) Eligible hospitals and CAHs 
reporting CQMs electronically that demonstrate meaningful use for the 
first time in 2018 or that have demonstrated meaningful use in any year 
prior to 2018, the reporting period would be the first 3 quarters of CY 
2018 with a submission period (Medicare EHR Incentive Program only) 
consisting of the 2 months following the close of the calendar year, 
ending on February 28, 2019; (2) eligible hospitals and CAHs reporting 
CQMs electronically would be required to report at least 6 (self-
selected) of the available CQMs; (3) eligible hospitals and CAHs that 
report CQMs by attestation under the Medicare EHR Incentive Program 
because electronic reporting is not feasible, and eligible hospitals 
and CAHs that report CQMs by attestation under their State's Medicaid 
EHR Incentive Program, would be required to report on all 16 available 
CQMs; and (4) eligible hospitals and CAHs reporting CQMs by attestation 
under the Medicare EHR Incentive Program would have a submission period 
that would be the 2 months following the close of the CY 2018 CQM 
reporting period, ending February 28, 2019.
    Because the proposed reporting requirements for data collection 
regarding the reporting of CQMs electronically under the Medicare and 
Medicaid EHR Incentive Programs would align with the reporting 
requirements under the Hospital IQR Program, we do not believe that 
there is any additional burden for the collection of such information. 
We are not proposing modifications for the CQMs reporting requirements 
by attestation. Therefore, there would be no change in burden 
associated with attestation of CQMs.
    In section IX.F. of the preamble of this proposed rule, we discuss 
proposed policies regarding clinical quality measurement for EPs 
participating in the Medicaid EHR Incentive Program. We note that there 
may be costs incurred by States associated with systems development as 
a result of the proposed policies. State attestation systems would 
likely require minor updates, which may be eligible for support through 
enhanced Federal funding, subject to CMS prior approval, if outlined in 
an updated Implementation Advanced Planning Document (IAPD). We 
anticipate that EPs may also face minor burden and incremental capital 
cost for updating clinical quality measures and reporting capabilities 
in the EHR. We intend to reduce EP burden and simplify the program 
through these proposals, which are intended to better align CQM 
reporting periods and CQM reporting for the Medicaid EHR Incentive 
Program with policies under MIPS. Overall, we believe the proposed CQM 
alignment at the State attestation system and EP levels would both 
reduce burden associated with reporting on multiple CMS programs and 
enhance state and CMS operational efficiency.
    In section IX.G.1. of the preamble of this proposed rule, we 
discuss our proposals to change the EHR reporting period in 2018 from 
the full CY 2018 to any continuous 90-day period within CY 2018 for all 
returning EPs, eligible hospitals and CAHs in the Medicare and Medicaid 
EHR Incentive Programs. We do not believe that modifying the EHR 
reporting period would cause an increase in burden as the reporting 
requirements for a 90 day reporting period are virtually the same for a 
full calendar year reporting period and the same objectives and 
measures will be used for reporting for a full calendar year reporting 
or a 90 day reporting period.
    In section IX.G.2. of the preamble of this proposed rule, as 
required by the 21st Century Cures Act (Pub. L. 114-255), we are 
proposing an exemption from the payment adjustments under sections 
1848(a)(7)(A), 1886(b)(3)(B)(ix)(I), and 1814(l)(4) of the Act for EPs, 
eligible hospitals and CAHs, respectively, that demonstrate through an 
application process that compliance with the requirement for being a 
meaningful EHR user is not possible because their certified EHR 
technology has been decertified under ONC's Health IT Certification 
Program. The application process involves participants completing an 
application form for an exception. While the form is standardized, we 
believe it is exempt from the PRA. The form is structured as an 
attestation. Therefore, we believe it is exempt under 5 CFR 
1320.3(h)(1) of the implementing regulations of the PRA. The form is an 
attestation that imposes no burden beyond what is required to provide 
identifying information and to attest to the applicable information.
    In section IX.G.3. of the preamble of this proposed rule, as 
required by the 21st Century Cures Act, we are proposing to exempt 
ambulatory surgical center-based EPs from the 2017 and 2018 payment 
adjustments under section 1848(a)(7)(A) of the Act if they furnish 
substantially all of their covered professional services in an 
ambulatory surgical center. We do not believe this requirement would 
cause an increase in burden as CMS would identify the EPs who might 
meet this requirement.
    For the expected effects relating to the above proposals, we refer 
readers to section I.O. of Appendix A of this proposed rule.
    We are requesting public comments on these information collection 
and recordkeeping requirements.
12. ICRs Relating to Proposed Electronic Signature and Electronic 
Submission of the Certification and Settlement Summary Page of Medicare 
Cost Reports
    In section X.A. of the preamble of this proposed rule, we discuss 
our proposal to allow providers to use an electronic signature on the 
certification statement of the Certification and Settlement Summary 
page of the Medicare cost report and submit it electronically. The 
Certification and Settlement Summary page, which contains the required 
provider signature line, currently exists in the Medicare cost report 
and is mailed to the contractor from the provider. We are proposing to 
allow providers the option to sign and submit this page electronically. 
The signature from the provider's administrator or chief financial 
officer is an existing data

[[Page 20158]]

collection requirement. There would be no new data collection from 
providers resulting from our proposal. The proposal to allow providers 
to sign this page electronically is not a substantive change to the 
existing data collection instrument and would have a minimal impact on 
providers to complete.
13. ICRs Relating to Survey and Certification Requirements
a. Proposed Transparency in Survey Reports and Plans of Correction
    In section XI.A. of the preamble of this proposed rule, we are 
proposing to require accrediting organizations (AO) to post survey 
results and findings (that is, statements of deficiency findings) as 
well as any associated acceptable plans of correction (PoCs), and make 
this information publicly available on its Web site within 90 days 
after such information is made available to those facilities, for the 
most recent 3 years.
    According to data and information available to us, as of September 
30, 2016, there are approximately 12,434 deemed facilities (providers 
and suppliers) across all CMS-approved programs that have surveys 
(either initial and renewal, including complaints) for which an AO 
would be required to make survey reports and associated PoCs publicly 
available under our proposal.513 514 515 The CY 2016 
Advanced Diagnostic Imaging (ADI) AO annual data submission lists 
approximately 16,873 ADI suppliers and locations that have surveys 
(initial, renewal, complaint, and mid-cycle) (approximately 2,128) for 
which AOs of ADI suppliers would be required to make survey reports and 
PoCs publicly available on their Web site under our proposal. Unlike 
Medicare- and Medicaid-certified providers and suppliers, there are no 
prescriptive statutory, regulatory, or policy requirements regarding 
the frequency of ADI AOs surveys.
---------------------------------------------------------------------------

    \513\ FY 2016 Report to Congress (RTC): Review of Medicare's 
Program Oversight of Accrediting Organizations (AOs) and the 
Clinical Laboratory Improvement Amendments of 1988 (CLIA) Validation 
Program--Section 2, Table 5.
    \514\ CMS Survey and Certification Web site for hospital Form 
CMS-2567 (Statement of Deficiencies and Plan or Correction) 
downloads: https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/CertificationandComplianc/Hospitals.html.
    \515\ ProPublica (2016) Web site: http://projects.propublica.org/nursing-homes/.
---------------------------------------------------------------------------

    We do not have sufficient data to determine the burden associated 
with the information collection requirements under our proposal. 
Therefore, we are requesting public comments on the potential costs and 
burden associated with our proposal on AOs regarding modifying their 
existing public Web sites and uploading of survey reports and PoCs.
b. Proposed Changes in Public Notices of Terminations
    In section XI.B. of the preamble of this proposed rule, we are 
proposing to no longer require the posting of voluntary and involuntary 
termination public notice in newspapers for RHCs, FQHCs, ASCs, and 
OPOs. These providers and suppliers would be permitted to use other 
methods of notification in light of the expanded use of information 
technology. We also are proposing to change the regulations regarding 
termination of provider agreements by CMS (that is, involuntary 
termination) or providers or suppliers to remove the provision for 
public notice through ``newspapers'' to allow flexibility in the method 
of public notice.
    We believe none of the proposed provisions would have a financial 
burden as we are only eliminating the specification which requires 
newspaper hard print to be the notice source.
    We refer readers to the economic impact provisions of section I.P. 
of Appendix A of this proposed rule for additional information.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget,
    Attention: CMS Desk Officer, CMS-1677-P
    Fax: (202) 395-6974; or
    Email: [email protected].

C. Request for Information on CMS Flexibilities and Efficiencies

    CMS is committed to transforming the health care delivery system--
and the Medicare program--by putting an additional focus on patient-
centered care and working with providers, physicians, and patients to 
improve outcomes. We seek to reduce burdens for hospitals, physicians, 
and patients, improve the quality of care, decrease costs, and ensure 
that patients and their providers and physicians are making the best 
health care choices possible. These are the reasons we are including 
this Request for Information in this proposed rule.
    As we work to maintain flexibility and efficiency throughout the 
Medicare program, we would like to start a national conversation about 
improvements that can be made to the health care delivery system that 
reduce unnecessary burdens for clinicians, other providers, and 
patients and their families. We aim to increase quality of care, lower 
costs improve program integrity, and make the health care system more 
effective, simple and accessible.
    We would like to take this opportunity to invite the public to 
submit their ideas for regulatory, subregulatory, policy, practice, and 
procedural changes to better accomplish these goals. Ideas could 
include payment system redesign, elimination or streamlining of 
reporting, monitoring and documentation requirements, aligning Medicare 
requirements and processes with those from Medicaid and other payers, 
operational flexibility, feedback mechanisms and data sharing that 
would enhance patient care, support of the physician-patient 
relationship in care delivery, and facilitation of individual 
preferences. Responses to this Request for Information could also 
include recommendations regarding when and how CMS issues regulations 
and policies and how CMS can simplify rules and policies for 
beneficiaries, clinicians, physicians, providers, and suppliers. Where 
practicable, data and specific examples would be helpful. If the 
proposals involve novel legal questions, analysis regarding CMS' 
authority is welcome for CMS' consideration. We are particularly 
interested in ideas for incentivizing organizations and the full range 
of relevant professionals and paraprofessionals to provide screening, 
assessment and evidence-based treatment for individuals with opioid use 
disorder and other substance use disorders, including reimbursement 
methodologies, care coordination, systems and services integration, use 
of paraprofessionals including community paramedics and other 
strategies. We are requesting commenters to provide clear and concise 
proposals that include data and specific examples that could be 
implemented within the law.
    We note that this is a Request for Information only. Respondents 
are encouraged to provide complete but concise responses. This Request 
for Information is issued solely for information and planning purposes; 
it does not constitute a Request for Proposal (RFP), applications, 
proposal abstracts, or quotations. This Request for Information does 
not commit the U.S. Government to contract for any supplies or services 
or make a grant award.

[[Page 20159]]

Further, CMS is not seeking proposals through this Request for 
Information and will not accept unsolicited proposals. Responders are 
advised that the U.S. Government will not pay for any information or 
administrative costs incurred in response to this Request for 
Information; all costs associated with responding to this Request for 
Information will be solely at the interested party's expense. We note 
that not responding to this Request for Information does not preclude 
participation in any future procurement, if conducted. It is the 
responsibility of the potential responders to monitor this Request for 
Information announcement for additional information pertaining to this 
request. In addition, we note that CMS will not respond to questions 
about the policy issues raised in this Request for Information. CMS 
will not respond to comment submissions in response to this Request for 
Information in the FY 2018 IPPS/LTCH PPS final rule. Rather, CMS will 
actively consider all input as we develop future regulatory proposals 
or future subregulatory policy guidance. CMS may or may not choose to 
contact individual responders. Such communications would be for the 
sole purpose of clarifying statements in the responders' written 
responses. Contractor support personnel may be used to review responses 
to this Request for Information. Responses to this notice are not 
offers and cannot be accepted by the Government to form a binding 
contract or issue a grant. Information obtained as a result of this 
Request for Information may be used by the Government for program 
planning on a nonattribution basis. Respondents should not include any 
information that might be considered proprietary or confidential. This 
Request for Information should not be construed as a commitment or 
authorization to incur cost for which reimbursement would be required 
or sought. All submissions become U.S. Government property and will not 
be returned. CMS may publically post the public comments received, or a 
summary of those public comments.

D. Response to Public Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all public comments we 
receive by the date and time specified in the DATES section of this 
preamble, and, when we proceed with a subsequent document, we will 
respond to the public comments in the preamble of that document.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping, 
Rural areas, X-rays.

42 CFR Part 412

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

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.

42 CFR Part 414

    Administrative practice and procedures, Biologics, Drugs, Health 
facilities, Health professions, Kidney diseases, Medicare, Reporting 
and recordkeeping requirements.

42 CFR Part 416

    Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 486

    Grant programs--health, Health facilities, Medicare, Reporting and 
recordkeeping requirements, X-ray.

42 CFR Part 488

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

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 495

    Administrative practice and procedure, Electronic health records, 
Health facilities, Health professions, Health maintenance organizations 
(HMO), Medicaid, Medicare, Penalties, Privacy, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble of this proposed rule, 
the Centers for Medicare and Medicaid Services is proposing to amend 42 
CFR Chapter IV as set forth below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 is revised to read as follows:

    Authority:  Secs. 205(a), 1102, 1142, 1861, 1862(a), 1869, 1871, 
1874, 1881, and 1886(k) of the Social Security Act (42 U.S.C. 
405(a), 1302, 1320b-12, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 
1395rr, and 1395ww(k)), and sec. 353 of the Public Health Service 
Act (42 U.S.C. 263a).

0
2. Section 405.2404 is amended by revising paragraph (d) introductory 
text to read as follows:


Sec.  405.2404  Termination of rural health clinic agreements.

* * * * *
    (d) Notice to the public. Prompt notice of the date and effect of 
termination must be given to the public by either of the following:
* * * * *
0
3. Section 405.2442 is amended by revising paragraph (a) introductory 
text and paragraph (b) to read as follows:


Sec.  405.2442  Notice to the public.

    (a) When the FQHC voluntarily terminates the agreement and an 
effective date is set for the termination, the FQHC must notify the 
public in the area serviced by the FQHC prior to a prospective 
effective date or on the actual day that business ceases, if no 
prospective date of termination has been set. The notice must include--
* * * * *
    (b) When CMS terminates the agreement, CMS will notify the public 
in the area serviced by the FQHC.

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
4. The authority citation for part 412 is revised to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh); sec. 124 of Pub. L. 106-113 (113 Stat. 
1501A-332); sec. 1206 of Pub. L. 113-67; sec. 112 of Pub. L. 113-93; 
sec. 231 of Pub. L. 114-113; and secs. 15004, 15006, 15007, 15008, 
15009, and 15010 of Pub. L. 114-255.

0
5. Section 412.22 is amended by revising paragraph (e) introductory 
text and paragraph (e)(1)(v) introductory text to read as follows:


Sec.  412.22  Excluded hospitals and hospital units: General rules.

* * * * *
    (e) Hospitals-within-hospitals. A hospital-within-a-hospital is a 
hospital that occupies space in a building also used by another 
hospital, or in one or more separate buildings located on the same 
campus as buildings used by another hospital. Prior to October 1, 2017, 
except as provided in paragraphs (e)(1)(vi) and (f) of this section, a 
hospital-within-a-hospital must meet the following criteria in order to 
be excluded from the prospective payment systems specified in Sec.  
412.1(a)(1). On or

[[Page 20160]]

after October 1, 2017, except as provided in paragraphs (e)(1)(vi) and 
(f) of this section, a hospital-within-hospital that is excluded from 
the prospective payment systems specified in Sec.  412.1(a)(1) that 
occupies space in a building also used by a hospital which is not 
excluded from the prospective payment systems specified in Sec.  
412.1(a)(1), or in one or more separate buildings located on the same 
campus as buildings used by a hospital not excluded from the 
prospective payment systems specified in Sec.  412.1(a)(1) must meet 
the following criteria in order to be excluded from the prospective 
payment systems specified in Sec.  412.1(a)(1).
    (1) * * *
    (v) Performance of basic hospital functions. Prior to October 1, 
2017, the hospital meets one of the following criteria:
* * * * *
0
6. Section 412.23 is amended by revising paragraphs (e)(2)(ii), 
(e)(3)(vi), and (e)(7)(iii) and adding paragraph (j) to read as 
follows:


Sec.  412.23  Excluded hospitals: Classifications.

* * * * *
    (e) * * *
    (2) * * *
    (ii) For cost reporting periods beginning on or after August 5, 
1997 and on or before December 31, 2014, a hospital that was first 
excluded from the prospective payment system under this section in 1986 
meets the length-of-stay criterion if it has an average inpatient 
length of stay for all patients, including both Medicare and non-
Medicare inpatients, of greater than 20 days and demonstrates that at 
least 80 percent of its annual Medicare inpatient discharges in the 12-
month cost reporting period ending in fiscal year 1997 have a principal 
diagnosis that reflects a finding of neoplastic disease as defined in 
paragraph (f)(1)(iv) of this section.
    (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.
* * * * *
    (7) * * *
    (iii) April 1, 2014 through September 30, 2017--The number of 
Medicare-certified beds in an existing long-term care hospital or an 
existing long-term care hospital satellite facility must not be 
increased beyond the number of Medicare-certified beds prior to April 
1, 2014, unless one of the exceptions specified in paragraph (e)(6)(ii) 
of this section is met.
* * * * *
    (j) Long-term care neoplastic disease hospitals--(1) General. For 
cost reporting periods beginning on or after January 1, 2015, a long-
term care neoplastic disease hospital must be a hospital that was first 
excluded from the prospective payment system under this section in 1986 
which has an average inpatient length of stay for all patients, 
including both Medicare and non-Medicare inpatients, of greater than 20 
days and demonstrates that at least 80 percent of its annual Medicare 
inpatient discharges in the 12-month cost reporting period ending in 
fiscal year 1997 have a principal diagnosis that reflects a finding of 
neoplastic disease as defined in paragraph (f)(1)(iv) of this section.
    (2) Payment. Payment for inpatient operating costs for hospitals 
classified under paragraph (j)(1) of this section is made as set forth 
in Sec.  412.526(c)(3). Payment for capital costs for hospitals 
classified under paragraph (j)(1) of this section is made as set forth 
in Sec.  412.526(c)(4).
0
7. Section 412.64 is amended by--
0
a. Revising paragraph (d)(1)(vii);
0
b. Adding paragraph (d)(4)(iii); and
0
c. Revising paragraph (i)(3)(iii).
    The revisions and addition read as follows:


Sec.  412.64  Federal rates for inpatient operating costs for Federal 
fiscal year 2005 and subsequent fiscal years.

* * * * *
    (d) * * *
    (1) * * *
    (vii) For fiscal years 2017 and 2018, 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 0.75 percentage 
point.
* * * * *
    (4) * * *
    (iii) Exception for decertified EHR technology. Beginning with the 
fiscal year 2019 payment adjustment year, the Secretary shall exempt an 
eligible hospital that is not a qualifying eligible hospital from the 
application of the reduction under paragraph (d)(3) of this section if 
the Secretary determines that compliance with the requirement for being 
a meaningful EHR user is not possible because the certified EHR 
technology used by the eligible hospital has been decertified under 
ONC's Health IT Certification Program. To be considered for an 
exception, an eligible hospital must submit an application, in the 
manner specified by CMS, demonstrating that the certified EHR 
technology was decertified during the 12-month period preceding the 
applicable EHR reporting period for the payment adjustment year, or 
during the applicable EHR reporting period for the payment adjustment 
year, and that the eligible hospital made a good faith effort to obtain 
another certified EHR technology for that EHR reporting period. (See 
Sec.  495.4 for definitions of payment adjustment year, EHR reporting 
period, and meaningful EHR user.) Applications requesting this 
exception must be submitted by July 1 of the year before the applicable 
payment adjustment year, or a later date specified by CMS. This 
exception is subject to annual renewal, but in no case may an eligible 
hospital be granted an exception under paragraph (d)(4) of this section 
for more than 5 years.
* * * * *
    (i) * * *
    (3) * * *
    (iii) Any wage index adjustment made under this paragraph (i) is 
effective for a period of 3 fiscal years, except that hospitals in a 
qualifying county may elect to waive the application of the wage index 
adjustment. A hospital may waive the application of the wage index 
adjustment by notifying CMS in writing within 45 days of the date of 
public display of the annual notice of proposed rulemaking for the 
hospital inpatient prospective payment system at the Office of the 
Federal Register.
* * * * *
0
8. Section 412.87 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  412.87  Additional payment for new medical services and 
technologies: General provisions.

* * * * *
    (b) * * *
    (2) 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 inpatient hospital code (as defined in section 
1886(d)(5)(K)(iii) of the Social Security Act) assigned to the new 
service or technology (depending on when a new code is assigned and 
data on the new service or technology become available for DRG 
recalibration). After CMS has recalibrated the DRGs, based on available 
data, to reflect the costs of an otherwise new medical service or 
technology, the medical service or technology will no longer be

[[Page 20161]]

considered ``new'' under the criterion of this section.
* * * * *
0
9. Section 412.90 is amended by revising paragraph (j) to read as 
follows:


Sec.  412.90  General rules.

* * * * *
    (j) Medicare-dependent, small rural hospitals. For cost reporting 
periods beginning on or after April 1, 1990, and before October 1, 
1994, and for discharges occurring on or after October 1, 1997 and 
before October 1, 2017, CMS adjusts the prospective payment rates for 
inpatient operating costs determined under subparts D and E of this 
part if a hospital is classified as a Medicare-dependent, small rural 
hospital.
* * * * *
0
10. Section 412.92 is amended by revising paragraph (e)(3) introductory 
text to read as follows:


Sec.  412.92  Special treatment: Sole community hospitals.

* * * * *
    (e) * * *
    (3) Effective for cost reporting periods beginning before October 
1, 2017, the intermediary determines a lump sum adjustment amount not 
to exceed the difference between the hospital's Medicare inpatient 
operating costs and the hospital's total DRG revenue for inpatient 
operating costs based on DRG-adjusted prospective payment rates for 
inpatient operating costs (including outlier payments for inpatient 
operating costs determined under subpart F of this part and additional 
payments made for inpatient operating costs for hospitals that serve a 
disproportionate share of low-income patients as determined under Sec.  
412.106 and for indirect medical education costs as determined under 
Sec.  412.105). Effective for cost reporting periods beginning on or 
after October 1, 2017, the MAC determines a lump sum adjustment amount 
equal to the difference between the hospital's fixed Medicare inpatient 
operating costs and the hospital's total MS-DRG revenue based on MS-
DRG-adjusted prospective payment rates for inpatient operating costs 
(including outlier payments for inpatient operating costs determined 
under subpart F of this part and additional payments made for inpatient 
operating costs for hospitals that serve a disproportionate share of 
low-income patients as determined under Sec.  412.106 and for indirect 
medical education costs as determined under Sec.  412.105) multiplied 
by the ratio of the hospital's fixed Medicare inpatient operating costs 
to its total Medicare inpatient operating costs.
* * * * *
0
11. Section 412.101 is amended by revising paragraph (b)(2) 
introductory text and adding paragraph (e) to read as follows:


Sec.  412.101  Special treatment: Inpatient hospital payment adjustment 
for low-volume hospitals.

* * * * *
    (b) * * *
    (2) In order to qualify for this adjustment, a hospital must meet 
the following criteria, subject to the provisions of paragraph (e) of 
this section:
* * * * *
    (e) Special treatment regarding hospitals operated by the Indian 
Health Service (IHS) or a Tribe. For discharges occurring in FY 2018 
and subsequent fiscal years--
    (1) A hospital operated by the IHS or a Tribe will be considered to 
meet the applicable mileage criterion specified under paragraph (b)(2) 
of this section if it is located more than the specified number of road 
miles from the nearest subsection (d) hospital operated by the IHS or a 
Tribe.
    (2) A hospital, other than a hospital operated by the IHS or a 
Tribe, will be considered to meet the applicable mileage criterion 
specified under paragraph (b)(2) of this section if it is located more 
than the specified number of road miles from the nearest subsection (d) 
hospital other than a subsection (d) hospital operated by the IHS or a 
Tribe.
0
12. Section 412.106 is amended by adding paragraph (g)(1)(iii)(C)(4) to 
read as follows:


Sec.  412.106  Special treatment: Hospitals that serve a 
disproportionate share of low-income patients.

* * * * *
    (g) * * *
    (1) * * *
    (iii) * * *
    (C) * * *
    (4) For fiscal year 2018, 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 (4) of this section, using data on Medicaid 
utilization from 2012 and 2013 cost reports from the most recent HCRIS 
database extract and 2012 cost report data submitted to CMS by IHS or 
Tribal hospitals and the most recent available 2 years of data on 
Medicare SSI utilization (or, for Puerto Rico hospitals, a proxy for 
Medicare SSI utilization data), and data on uncompensated care costs, 
defined as charity care costs plus non-Medicare bad debt costs from 
2014 cost reports from the most recent HCRIS database extract.
* * * * *
0
13. Section 412.140 is amended by revising paragraphs (c)(2) and (d)(2) 
to read as follows:


Sec.  412.140  Participation, data submission, and validation 
requirements under the Hospital Inpatient Quality Reporting (IQR) 
Program.

* * * * *
    (c) * * *
    (2) Extraordinary circumstances exceptions. CMS may grant an 
exception with respect to quality data reporting requirements in the 
event of extraordinary circumstances beyond the control of the 
hospital. CMS may grant an exception as follows:
    (i) For circumstances not relating to the reporting of electronic 
clinical quality measure data, a hospital participating in the Hospital 
IQR Program that wishes to request an exception with respect to quality 
data reporting requirements must submit its request to CMS within 90 
days of the date that the extraordinary circumstances occurred. For 
circumstances relating to the reporting of electronic clinical quality 
measures, a hospital participating in the Hospital IQR Program that 
wishes to request an exception must submit its request to CMS by April 
1 following the end of the reporting calendar year in which the 
extraordinary circumstances occurred. Specific requirements for 
submission of a request for an exception are available on 
QualityNet.org.
    (ii) CMS may grant an exception to one or more hospitals that have 
not requested an exception if: CMS determines that a systemic problem 
with CMS data collection systems directly affected the ability of the 
hospital to submit data; or if CMS determines that an extraordinary 
circumstance has affected an entire region or locale.
    (d) * * *
    (2)(i) A hospital meets the chart-abstracted validation requirement 
with respect to a fiscal year if it achieves a 75-percent score, as 
determined by CMS.
    (ii) A hospital meets the eCQM validation requirement with respect 
to a fiscal year if it submits at least 75 percent of sampled eCQM 
measure medical records in a timely and complete manner, as determined 
by CMS.
* * * * *

[[Page 20162]]

0
14. Section 412.211 is amended by revising paragraph (f)(3)(iii) to 
read as follows:


Sec.  412.211  Puerto Rico rates for Federal fiscal year 2004 and 
subsequent fiscal years.

* * * * *
    (f) * * *
    (3) * * *
    (iii) Any wage index adjustment made under this paragraph (f) is 
effective for a period of 3 fiscal years, except that hospitals in a 
qualifying county may elect to waive the application of the wage index 
adjustment. A hospital may waive the application of the wage index 
adjustment by notifying CMS in writing within 45 days of the date of 
public display of the annual notice of proposed rulemaking for the 
hospital inpatient prospective payment system at the Office of the 
Federal Register.
* * * * *
0
15. Section 412.230 is amended by revising paragraphs (a)(3) 
introductory text, (a)(3)(i) and (ii), and (d)(3) to read as follows:


Sec.  412.230  Criteria for an individual hospital seeking 
redesignation to another rural area or an urban area.

    (a) * * *
    (3) Special rules for sole community hospitals and rural referral 
centers. To be redesignated under the special rules in this paragraph, 
the hospital must submit documentation of the approval of sole 
community hospital or rural referral center status to the MGCRB no 
later than the first business day after January 1.
    (i) A hospital that is approved as a rural referral center or a 
sole community hospital, or both, does not have to demonstrate a close 
proximity to the area to which it seeks redesignation.
    (ii) If a hospital that is approved as a rural referral center or a 
sole community hospital, or both, qualifies for urban redesignation, it 
is redesignated to the urban area that is closest to the hospital or to 
the hospital's geographic home area. If the hospital is closer to 
another rural area than to any urban area, it may seek redesignation to 
either the closest rural area or the closest urban area.
* * * * *
    (d) * * *
    (3) Rural referral center exceptions. For the exceptions in this 
paragraph to apply, the hospital must submit documentation of the 
approval of rural referral center status to the MGCRB no later than the 
first business day after January 1.
    (i) If a hospital was ever approved as a rural referral center, it 
does not have to demonstrate that it meets the average hourly wage 
criterion set forth in paragraph (d)(1)(iii) of this section.
    (ii) If a hospital was ever approved as a rural referral center, it 
is required to meet only the criterion that applies to rural hospitals 
under paragraph (d)(1)(iv) of this section, regardless of its actual 
location in an urban or rural area.
* * * * *
0
16. Section 412.273 is amended by revising paragraphs (c)(1)(ii) and 
(c)(2) to read as follows:


Sec.  412.273  Withdrawing an application, terminating an approved 3-
year classification, or cancelling a previous withdrawal or 
termination.

* * * * *
    (c) * * *
    (1) * * *
    (ii) After the MGCRB issues a decision, provided that the request 
for withdrawal is received by the MCGRB within 45 days of the date of 
public display at the Office of the Federal Register of CMS' annual 
notice of proposed rulemaking concerning changes to the inpatient 
hospital prospective payment system and proposed payment rates for the 
fiscal year for which the application has been filed.
    (2) A request for termination must be received by the MGCRB within 
45 days of the date of public display at the Office of the Federal 
Register of CMS' annual notice of proposed rulemaking concerning 
changes to the inpatient hospital prospective payment system and 
proposed payment rates for the fiscal year for which the termination is 
to apply.
* * * * *
0
17. Section 412.500 is amended by adding paragraphs (a)(7) and (8) to 
read as follows:


Sec.  412.500  Basis and scope of subpart.

    (a) * * *
    (7) Section 411 of Public Law 114-10 which revises the annual 
update to the LTCH PPS standard Federal payment rate in FY 2018.
    (8) Public Law 114-255 which at--
    (i) Section 15004 amended the moratorium on increasing beds in 
existing LTCHs and LTCH satellite facilities and amended high cost 
outlier payment requirements;
    (ii) Section 15006 amended moratoria on certain payment policies;
    (iii) Section 15007 amended the average length of stay 
requirements;
    (iv) Section 15009 temporally excepted certain spinal cord 
specialty hospitals from the site neutral payment rate; and
    (v) Section 15010 temporally excepted certain wound care discharges 
from certain LTCHs from the site neutral payment rate.
* * * * *
0
18. Section 412.522 is amended by adding paragraphs (b)(3) and (4) to 
read as follows:


Sec.  412.522  Application of site neutral payment rate.

* * * * *
    (b) * * *
    (3) Temporary exception for certain severe wound discharges.--(i) 
Definitions. For purposes of this paragraph (b)(3) the following 
definitions are applicable:
    Severe wound means a wound which is a stage 3 wound, stage 4 wound, 
unstageable wound, non-healing surgical wound, fistula, as identified 
by the applicable code on the claim from the long-term care hospital.
    Wound means an injury, usually involving division of tissue or 
rupture of the integument or mucous membrane with exposure to the 
external environment.
    (ii) Discharges for severe wounds. A discharge that occurs in a 
cost reporting period beginning during fiscal year 2018 for a patient 
who was treated for a severe wound that meets all of the following 
criteria is excluded from the site neutral payment rate specified under 
this section:
    (A) The severe wound meets the definition specified in paragraph 
(b)(3)(i) of this section.
    (B) The discharge is from a long-term care hospital that is 
described in Sec.  412.23(e)(2)(i) and meets the criteria of Sec.  
412.22(f); and
    (C) The discharge is classified under MS-LTC-DRG 539, 540, 602, or 
603.
    (4) Temporary exception for certain spinal cord specialty 
hospitals. For discharges in cost reporting periods beginning in fiscal 
years 2018 and 2019, the site neutral payment rate specified under this 
section does not apply if such discharge is from a long-term care 
hospital that meets each of the following requirements:
    (i) The hospital was a not-for-profit long-term care hospital on 
June 1, 2014, as determined by cost report data;
    (ii) Of the discharges in calendar year 2013 from the long-term 
care hospital for which payment was made under subpart O, at least 50 
percent were classified under MS-LTC-DRGs 28, 29, 52, 57, 551, 573, and 
963; and
    (iii) The long-term care hospital discharged inpatients (including 
both individuals entitled to, or enrolled for, benefits under Medicare 
Part A and individuals not so entitled or enrolled) during fiscal year 
2014 who had been admitted from at least 20 of the 50

[[Page 20163]]

States determined by the States of residency of such inpatients.
* * * * *
0
19. Section 412.523 is amended by--
0
a. Adding paragraph (c)(3)(xiv);
0
b. Revising paragraph (d)(1); and
0
c. Adding paragraph (d)(5).
    The additions and revision read as follows:


Sec.  412.523  Methodology for calculating the Federal prospective 
payment rates.

* * * * *
    (c) * * *
    (3) * * *
    (xiv) For long-term care hospital prospective payment system fiscal 
year beginning October 1, 2017, and ending September 30, 2018. The LTCH 
PPS standard Federal payment rate for the long-term care hospital 
prospective payment system beginning October 1, 2017, and ending 
September 30, 2018, is the standard Federal payment rate for the 
previous long-term care hospital prospective payment system fiscal year 
updated by 1.0 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) (notwithstanding the 
provisions of Sec.  412.525(a)(2)(ii) for FY 2018 and subsequent years.
* * * * *
    (5) Adjustment for changes to the short-stay outlier policy. The 
standard Federal rate determined under paragraph (c)(3) of this section 
is permanently adjusted by a one-time factor so that estimated 
aggregate payments to LTCH PPS standard Federal rate cases in FY 2018 
are projected to equal estimated aggregate payments that would have 
been paid for such cases without regard to the change in the short-stay 
outlier policy for FY 2018 under Sec.  412.529(c)(5).
* * * * *
0
20. Section 412.525 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  412.525  Adjustments to the Federal prospective payment.

    (a) * * *
    (2)(i) 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.
    (ii) For FY 2018 and subsequent years, the fixed-loss amount for 
long-term care hospital discharges described under Sec.  412.522(a)(2) 
is determined such that the estimated proportion of outlier payments 
under paragraph (a) of this section payable for such discharges is 
projected to be equal to 99.6875 of 8 percent.
* * * * *
0
21. Section 412.529 is amended by--
0
a. Revising paragraph (c)(3) introductory text;
0
b. Adding paragraph (c)(4); and
0
c. Revising paragraph (f) introductory text.
    The revisions and addition read as follows:


Sec.  412.529  Special payment provision for short-stay outliers.

* * * * *
    (c) * * *
    (3) Discharges occurring on or after July 1, 2007 and before 
December 29, 2007 and discharges occurring on or after December 29, 
2012 and on or before September 30, 2017. For discharges from long-term 
care hospitals described under Sec.  412.23(e)(2)(i) occurring on or 
after July 1, 2007, and on or before December 29, 2007 and discharges 
occurring on or after December 29, 2012, and on or before September 30, 
2017, the LTCH prospective payment system adjusted payment amount for a 
short-stay outlier case is adjusted by either of the following:
* * * * *
    (4) Discharges occurring on or after October 1, 2017. For 
discharges occurring on or after October 1, 2017, short-stay outlier 
payments are determined according to paragraph (c)(2)(iv) of this 
section.
* * * * *
    (f) Reconciliation of short-stay payments. Payments for discharges 
occurring before October 1, 2017 are reconciled in accordance with one 
of the following:
* * * * *
0
22. Section 412.538 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  412.538  Limitation on long-term care hospital admissions from 
referring hospitals.

    (a) * * *
    (1) The provisions of this section apply to all long-term care 
hospitals excluded from the hospital inpatient prospective payment 
system under Sec.  412.23(e), except as specified in paragraph (a)(2) 
of this section, effective for discharges occurring on or after October 
1, 2018.
* * * * *
0
23. Section 412.560 is amended by revising the section heading, 
paragraphs (a), (b)(1), (c) introductory text, (c)(1), (c)(3)(vii), 
(c)(4)(ii), (d)(1), and (d)(2)(vii), and adding paragraph (f) to read 
as follows:


Sec.  412.560  Requirements under the Long-Term Care Hospital Quality 
Reporting Program (LTCH QRP).

    (a) Participation in the LTCH QRP. A long-term-care hospital must 
begin submitting data on measures specified under sections 
1886(m)(5)(D), 1899B(c)(1) and 1899B(d)(1) of the Act, and standardized 
patient assessment data required under section 1899B(b)(1) of the Act, 
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.
    (b) Data submission 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, and standardized 
patient assessment data required under section 1899B(b)(1) of the Act. 
Such data must be submitted in a form and manner, and at a time, 
specified by CMS.
* * * * *
    (c) Exception and extension request requirements. Upon request by a 
long-term care hospital, CMS may grant an exception or extension with 
respect to the measures data and standardized patient assessment 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 measures data and standardized patient 
assessment data reporting requirements must submit its request to CMS 
within 90 days of the date that the extraordinary circumstances 
occurred.
* * * * *
    (3) * * *
    (vii) The date on which the long-term care hospital will be able to 
again submit measures data and standardized patient assessment data 
under the LTCH QRP and a justification for the proposed date.
    (4) * * *

[[Page 20164]]

    (ii) A systemic problem with one of CMS' data collection systems 
directly affected the ability of the long-term care hospital to submit 
measures data and standardized patient assessment data.
* * * * *
    (d) * * *
    (1) Written notification of noncompliance decision. CMS will send a 
long-term care hospital written notification of a decision of 
noncompliance with the measures data and standardized patient 
assessment 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) * * *
    (vii) Accompanying documentation that demonstrates compliance of 
the long-term care hospital with the LTCH QRP requirements. This 
documentation must be submitted electronically at the same time as the 
reconsideration request as an attachment to the email.
* * * * *
    (f) Data completion thresholds. (1) Long-term care hospitals must 
meet or exceed two separate data completeness thresholds: One threshold 
set at 80 percent for completion of measures data and standardized 
patient assessment data collected using the LTCH CARE Data Set 
submitted through the QIES ASAP System; and a second threshold set at 
100 percent for measures data collected and submitted using the CDC 
NHSN.
    (2) The thresholds in paragraph (f)(1) of this section apply to all 
data that must be submitted under paragraph (b) of this section.
    (3) A long-term care hospital must meet or exceed both thresholds 
in paragraph (f)(1) of this section to avoid receiving a 2 percentage 
point reduction to its annual payment update for a given fiscal year, 
beginning with the FY 2019 LTCH QRP.

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES; PAYMENT FOR ACUTE 
KIDNEY INJURY DIALYSIS

0
24. The authority citation for part 413 is revised to read as follows:

    Authority:  Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), 
and (n), 1861(v), 1871, 1881, 1883 and 1886 of the Social Security 
Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and 
(n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of 
Public Law 106-113, 113 Stat. 1501A-332; sec. 3201 of Public Law 
112-96, 126 Stat. 156; sec. 632 of Public Law 112-240, 126 Stat. 
2354; sec. 217 of Public Law 113-93, 129 Stat. 1040; and sec. 204 of 
Public Law 113-295, 128 Stat. 4010; and sec. 808 of Public Law 114-
27, 129 Stat. 362.

0
25. Section 413.24 is amended by revising paragraph (f)(4)(iv) to read 
as follows:


Sec.  413.24  Adequate cost data and cost finding.

* * * * *
    (f) * * *
    (4) * * *
    (iv)(A) Effective as specified in paragraphs (f)(4)(iv)(A)(1) 
through (4) and except as provided in paragraph (f)(4)(iv)(C) of this 
section, a provider must submit a hard copy of a settlement summary, if 
applicable, which is a statement of certain worksheet totals found 
within the electronic file, and the certification statement described 
in paragraph (f)(4)(iv)(B) of this section signed by its administrator 
or chief financial officer certifying the accuracy of the electronic 
file or the manually prepared cost report.
    (1) For hospitals, effective for cost reporting periods ending on 
or after September 30, 1994;
    (2) For skilled nursing facilities and home health agencies, 
effective for cost reporting periods ending on or after February 1, 
1997;
    (3) For hospices and end-stage renal disease facilities, effective 
for cost reporting periods ending on or after December 31, 2004; and
    (4) For organ procurement organizations, histocompatibility 
laboratories, rural health clinics, Federally qualified health centers, 
and community mental health centers, effective for cost reporting 
periods ending on or after March 31, 2005.
    (B) The following certification statement must immediately precede 
the dated original signature, or electronic signature as set forth in 
paragraph (f)(4)(iv)(C)(1) of this section, of the provider's 
administrator or chief financial officer:
    MISREPRESENTATION OR FALSIFICATION OF ANY INFORMATION CONTAINED IN 
THIS COST REPORT MAY BE PUNISHABLE BY CRIMINAL, CIVIL AND 
ADMINISTRATIVE ACTION, FINE AND/OR IMPRISONMENT UNDER FEDERAL LAW. 
FURTHERMORE, IF SERVICES IDENTIFIED IN THIS REPORT WERE PROVIDED OR 
PROCURED THROUGH THE PAYMENT DIRECTLY OR INDIRECTLY OF A KICKBACK OR 
WERE OTHERWISE ILLEGAL, CRIMINAL, CIVIL AND ADMINISTRATIVE ACTION, 
FINES AND/OR IMPRISONMENT MAY RESULT.
    I hereby certify that I have read the above certification statement 
and that I have examined the accompanying electronically filed or 
manually submitted cost report and the Balance Sheet and Statement of 
Revenue and Expenses prepared by _____ (Provider Name(s) and Number(s)) 
for the cost reporting period beginning _____ and ending _____ and that 
to the best of my knowledge and belief, this report and statement are 
true, correct, complete and prepared from the books and records of the 
provider in accordance with applicable instructions, except as noted. I 
further certify that I am familiar with the laws and regulations 
regarding the provision of health care services, and that the services 
identified in this cost report were provided in compliance with such 
laws and regulations.
    (C) Effective for cost reporting periods beginning on or after 
October 1, 2017--
    (1) A provider that is required to file an electronic cost report 
may elect to electronically submit the settlement summary, if 
applicable, and the certification statement with an electronic 
signature of the provider's administrator or chief financial officer. 
The following checkbox for electronic signature and submission will 
immediately follow the certification statement as set forth in 
paragraph (f)(4)(iv)(B) of this section and must be checked if 
electronic signature and submission is elected.
    [squ] I have read and agree with the above certification statement. 
I certify that I intend my electronic signature on this certification 
statement to be the legally binding equivalent of my original 
signature.
    (2) A provider that is required to file an electronic cost report 
but does not elect to electronically submit the certification statement 
with an electronic signature, must submit a hard copy of the settlement 
summary, if applicable, and a certification statement with an original 
signature of the provider's administrator or chief financial officer as 
set forth in paragraphs (f)(4)(iv)(A) and (B) of this section.
* * * * *
0
26. Section 413.65 is amended by revising paragraph (m) introductory 
text to read as follows:

[[Page 20165]]

Sec.  413.65  Requirements for a determination that a facility or an 
organization has provider-based status.

* * * * *
    (m) Status of Indian Health Service and Tribal facilities and 
organizations. Facilities and organizations operated by the Indian 
Health Services and Tribes will be considered to be departments of 
hospitals operated by the Indian Health Service or Tribes if they 
furnish only services that are billed, using the CCN of the main 
provider and with the consent of the main provider, as if they had been 
furnished by a department of a hospital operated by the Indian Health 
Service or a Tribe and they are:
* * * * *
0
27. Section 413.70 is amended by--
0
a. Redesignating paragraph (a)(6)(iii) as paragraph (a)(6)(iv);
0
b. Adding a new paragraph (a)(6)(iii); and
0
c. Revising newly redesignated paragraph (a)(6)(iv).
    The addition and revision read as follows:


Sec.  413.70  Payment for services of a CAH.

    (a) * * *
    (6) * * *
    (iii) Exception for decertified EHR technology. Beginning with the 
fiscal year 2018 payment adjustment year, the Secretary shall exempt a 
CAH that is not a qualifying CAH from the application of the payment 
adjustment under paragraph (a)(6)(i) of this section if the Secretary 
determines that compliance with the requirement for being a meaningful 
EHR user is not possible because the certified EHR technology used by 
the CAH has been decertified under ONC's Health IT Certification 
Program. In order to be considered for an exception, a CAH must submit 
an application, in the manner specified by CMS, demonstrating that the 
certified EHR technology was decertified during the 12-month period 
preceding the applicable EHR reporting period for the payment 
adjustment year, or during the applicable EHR reporting period for the 
payment adjustment year, and that the CAH made a good faith effort to 
obtain another certified EHR technology for that EHR reporting period. 
Applications requesting this exception must be submitted by November 30 
after the end of the applicable payment adjustment year, or a later 
date specified by CMS.
    (iv) Exceptions granted under paragraphs (a)(6)(ii) and (iii) of 
this section are subject to annual renewal, but in no case may a CAH be 
granted such an exception for more than 5 years.
* * * * *
0
28. Section 413.134 is amended by revising paragraph (f)(1) to read as 
follows:


Sec.  413.134  Depreciation: Allowance for deprecation based on asset 
costs.

* * * * *
    (f) * * *
    (1) General. Depreciable assets may be disposed of through sale, 
scrapping, trade-in, exchange, demolition, abandonment, condemnation, 
fire, theft, or other casualty.
    (i) Disposal of an asset before December 1, 1997. If disposal of a 
depreciable asset, including the sale or scrapping of an asset before 
December 1, 1997, results in a gain or loss, an adjustment is necessary 
in the provider's allowable cost.
    (A) The amount of a gain included in the determination of allowable 
cost is limited to the amount of depreciation previously included in 
Medicare allowable costs.
    (B) The amount of a loss to be included is limited to the 
undepreciated basis of the asset permitted under the program.
    (C) The treatment of the gain or loss depends upon the manner of 
disposition of the asset, as specified in paragraphs (f)(2) through (6) 
of this section.
    (D) The gain or loss on the disposition of depreciable assets has 
no retroactive effect on a proprietary provider's equity capital for 
years prior to the year of disposition.
    (ii) Disposal of an asset on or after December 1, 1997. No gain or 
loss is recognized on either the sale or scrapping of an asset that 
occurs on or after December 1, 1997, regardless of whether the asset is 
sold incident to a provider's change of ownership, or otherwise sold or 
scrapped as an asset of a Medicare participating provider. Gains or 
losses on dispositions other than sales or scrapping are recognized to 
the same extent as prior to December 1, 1997.
* * * * *

PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES

0
29. The authority citation for part 414 continues to read as follows:

    Authority:  Secs. 1102, 1871, and 1881(b)(1) of the Social 
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(1)).

0
30. Section 414.68 is amended by redesignating paragraphs (c)(7) 
through (14) as paragraphs (c)(8) through (15), respectively, and 
adding new paragraph (c)(7) to read as follows:


Sec.  414.68  Imaging accreditation.

* * * * *
    (c) * * *
    (7) A statement acknowledging that the organization agrees to make 
all Medicare final accreditation survey reports (including statements 
of deficiencies) and acceptable plans of correction publicly available 
on the organization's Web site within 90 days after such information is 
made available to those facilities for the most recent 3 years, on an 
ongoing basis. This acknowledgement includes all full, follow-up, 
focused, and complaint surveys, regardless of whether they are 
performed onsite or offsite.
* * * * *

PART 416--AMBULATORY SURGICAL SERVICES

0
31. The authority citation for part 416 is revised to read as follows:

    Authority:  Secs. 1102, 1138, and 1871 of the Social Security 
Act (42 U.S.C. 1302, 1320b-8, and 1395hh) and section 371 of the 
Public Health Service Act (42 U.S.C. 273).

0
32. Section 416.35 is amended by revising paragraph (d) introductory 
text to read as follows:


Sec.  416.35  Termination of agreement.

* * * * *
    (d) Notice to the public. Prompt notice of the date and effect of 
termination is given to the public by--
* * * * *

PART 486--CONDITIONS FOR COVERAGE OF SPECIALIZED SERVICES FURNISHED 
BY SUPPLIERS

0
33. The authority citation for part 486 continues to read as follows:

    Authority:  Secs. 1102, 1138, and 1871 of the Social Security 
Act (42 U.S.C. 1302, 1320b-8, and 1395hh) and section 371 of the 
Public Health Service Act (42 U.S.C. 273).

0
34. Section 486.312 is amended by revising paragraph (e) to read as 
follows:


Sec.  486.312  De-certification.

* * * * *
    (e) Public notice. Once CMS approves the date for a voluntary 
termination, the OPO must provide prompt public notice in the service 
area of the date of de-certification and such other information as CMS 
may require. In the case of involuntary termination or nonrenewal of an 
agreement, CMS also provides notice to the public in the service area 
of the date of de-certification. No payment under titles XVIII or XIX 
of the Act will be made with respect to organ procurement costs 
attributable to the OPO on or after the effective date of de-
certification.

[[Page 20166]]

PART 488--SURVEY, CERTIFICATION, AND ENFORCEMENT PROCEDURES

0
35. The authority citation for part 488 is revised to read as follows:

    Authority:  Secs. 1102, 1128l, 1864, 1865, 1871, and 1875 of the 
Social Security Act, unless otherwise noted (42 U.S.C. 1302, 1320a-
7, 1395aa, 1395bb, 1395hh, and 1395ll).

0
36. Section 488.5 is amended by adding paragraph (a)(21) to read as 
follows:


Sec.  488.5  Application and re-application procedures for national 
accrediting organizations.

    (a) * * *
    (21) A statement acknowledging that the organization agrees to make 
all Medicare final accreditation survey reports (including statements 
of deficiencies) and acceptable plans of correction publicly available 
on the organization's Web site within 90 days after such information is 
made available to those facilities for the most recent 3 years, on an 
ongoing basis. This acknowledgement includes all triennial, full, 
follow-up, focused, and complaint surveys, regardless of whether they 
are performed onsite or offsite.
* * * * *

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

0
37. The authority citation for part 489 continues to read as follows:

    Authority:  Secs. 1102 1819, 1820(E), 1861, 1864(M), 1866, 1869, 
and 1871 of the Social Security Act (42 U.S.C. 1302, 1395i-3, 1395x, 
1395aa(m), 1395cc, 1395ff, and 1395(hh)).

0
38. Section 489.52 is amended by revising paragraph (c)(2) introductory 
text to read as follows:


Sec.  489.52   Termination by the provider.

* * * * *
    (c) * * *
    (2) The notice must--
* * * * *

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD TECHNOLOGY 
INCENTIVE PROGRAM

0
39. The authority citation for part 495 continues to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

0
40. Section 495.4 is amended by--
0
a. Adding in alphabetical order a definition of ``Ambulatory surgical 
center-based EP.''
0
b. In the definition of ``EHR reporting period,'' revising paragraph 
(1)(ii) introductory text, adding paragraph (1)(ii)(D), revising 
paragraph (1)(iii) introductory text, revising paragraph (2)(ii) 
introductory text, adding paragraph (2)(ii)(D) and revising paragraph 
(2)(iii) introductory text.
0
c. In the definition of ``EHR reporting period for a payment adjustment 
year'', revising paragraph (2)(ii) introductory text, adding paragraph 
(2)(ii)(D), revising paragraph (2)(iii) introductory text, revising 
paragraph (3)(ii) introductory text, adding paragraph (3)(ii)(D), and 
revising paragraph (3)(iii) introductory text.
    The additions and revisions read as follows:


Sec.  495.4  Definitions.

* * * * *
    Ambulatory surgical center-based EP means an EP who furnishes 75 
percent or more of his or her covered professional services in sites of 
service identified by the codes used in the HIPAA standard transaction 
as an ASC setting in the calendar year that is 2 years before the 
payment adjustment year.
* * * * *
    EHR reporting period. * * *
    (1) * * *
    (ii) The following are applicable for 2015, 2016, 2017, and 2018:
* * * * *
    (D) For the CY 2018 payment year under the Medicaid EHR Incentive 
Program:
    (1) For the EP first demonstrating he or she is a meaningful EHR 
user, any continuous 90-day period within CY 2018.
    (2) For the EP who has successfully demonstrated he or she is a 
meaningful EHR user in any prior year, any continuous 90-day period 
within CY 2018.
    (iii) The following are applicable beginning with the CY 2019 
payment year under the Medicaid EHR Incentive Program:
* * * * *
    (2) * * *
    (ii) The following are applicable for 2015, 2016, 2017, and 2018:
* * * * *
    (D) For the FY 2018 payment year under the Medicaid EHR Incentive 
Program:
    (1) For the eligible hospital or CAH first demonstrating it is a 
meaningful EHR user, any continuous 90-day period within CY 2018.
    (2) For the eligible hospital or CAH that has successfully 
demonstrated it is a meaningful EHR user in any prior year, any 
continuous 90-day period within CY 2018.
    (iii) The following are applicable beginning with the FY 2019 
payment year under the Medicaid EHR Incentive Program:
* * * * *
    EHR reporting period for a payment adjustment year. * * *
    (2) * * *
    (ii) The following are applicable for 2015, 2016, 2017, and 2018:
* * * * *
    (D) In 2018 as follows:
    (1) If an eligible hospital has not successfully demonstrated it is 
a meaningful EHR user in a prior year, the EHR reporting period is any 
continuous 90-day period within CY 2018 and applies for the FY 2019 and 
2020 payment adjustment years. For the FY 2019 payment adjustment year, 
the EHR reporting period must end before and the eligible hospital must 
successfully register for and attest to meaningful use no later than 
October 1, 2018.
    (2) If in a prior year an eligible hospital has successfully 
demonstrated it is a meaningful EHR user, the EHR reporting period is 
any continuous 90-day period within CY 2018 and applies for the FY 2020 
payment adjustment year.
    (iii) The following are applicable beginning in 2019:
* * * * *
    (3) * * *
    (ii) The following are applicable for 2015, 2016, 2017, and 2018:
* * * * *
    (D) In 2018 as follows:
    (1) If a CAH has not successfully demonstrated it is a meaningful 
EHR user in a prior year, the EHR reporting period is any continuous 
90-day period within CY 2018 and applies for the FY 2018 payment 
adjustment year.
    (2) If in a prior year a CAH has successfully demonstrated it is a 
meaningful EHR user, the EHR reporting period is any continuous 90-day 
period within CY 2018 and applies for the FY 2018 payment adjustment 
year.
    (iii) The following are applicable beginning in 2019:
* * * * *
0
41. Section 495.102 is amended by redesignating paragraph (d)(5) as 
paragraph (d)(6) and adding new paragraphs (d)(5) and (7) to read as 
follows:


Sec.  495.102  Incentive payments to EPs.

* * * * *
    (d) * * *
    (5) Exception for decertified EHR technology. The Secretary shall 
exempt an EP from the application of the payment adjustment for CY 2018 
under paragraph (d)(1) of this section if the Secretary determines that 
compliance with the requirement for being a

[[Page 20167]]

meaningful EHR user is not possible because the certified EHR 
technology used by the EP has been decertified under ONC's Health IT 
Certification Program. To be considered for an exception, an EP must 
submit, in the manner specified by CMS, an application demonstrating 
that the certified EHR technology was decertified during the 12-month 
period preceding the applicable EHR reporting period for the CY 2018 
payment adjustment year, or during the applicable EHR reporting period 
for the CY 2018 payment adjustment year, and that the EP made a good 
faith effort to obtain another certified EHR technology for that EHR 
reporting period. Applications requesting this exception must be 
submitted no later than October 1, 2017, or a later date specified by 
CMS.
* * * * *
    (7) Payment adjustments not applicable to ambulatory surgical 
center-based EPs. For the CY 2017 and CY 2018 payment adjustment years, 
no payment adjustment under paragraphs (d)(1) through (3) of this 
section may be made in the case of an ambulatory surgical center-based 
eligible professional, as defined in Sec.  495.4.

    Dated: April 10, 2017.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 11, 2017
Thomas E. Price,
Secretary, Department of Health and Human Services.

    Note:  The following Addendum and Appendixes will not appear in 
the Code of Federal Regulations.

Addendum--Proposed Schedule of Standardized Amounts, Update Factors, 
Rate-of-Increase Percentages Effective With Cost Reporting Periods 
Beginning on or After October 1, 2017, and Payment Rates for LTCHs 
Effective for Discharges Occurring on or After October 1, 2017

I. Summary and Background

    In this Addendum, we are setting forth a description of the 
methods and data we used to determine the proposed prospective 
payment rates for Medicare hospital inpatient operating costs and 
Medicare hospital inpatient capital-related costs for FY 2018 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 2018. 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 proposed figures for the 
standardized amounts, offsets, and budget neutrality factors. 
Therefore, in this proposed rule, we are setting forth the rate-of-
increase percentage for updating the target amounts for certain 
hospitals excluded from the IPPS that would be effective for cost 
reporting periods beginning on or after October 1, 2017.
    In addition, we are setting forth a description of the methods 
and data we used to determine the proposed standard Federal payment 
rate that would be applicable to Medicare LTCHs for FY 2018.
    In general, except for SCHs, for FY 2018, 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. We 
note that, under section 205 of the Medicare Access and CHIP 
Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, enacted on 
April 16, 2015), the MDH program is set to expire at the end of FY 
2017.
    SCHs are paid based on whichever of the following rates yields 
the greatest aggregate payment: The Federal national rate 
(including, as discussed in section V.G. of the preamble of this 
proposed 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. As noted, under current 
law, the MDH program is set to expire at the end of FY 2017.
    As discussed in section V.B. of the preamble of this proposed 
rule, in accordance with section 1886(d)(9)(E) of the Act as amended 
by section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 
114-113), for FY 2018, subsection (d) Puerto Rico hospitals will 
continue to be paid based on 100 percent of the national 
standardized amount. Because Puerto Rico hospitals are paid 100 
percent of the national standardized amount and are subject to the 
same national standardized amount as subsection (d) hospitals that 
receive the full update, our discussion below does not include 
references to the Puerto Rico standardized amount or the Puerto 
Rico-specific wage index.
    As discussed in section II. of this Addendum, we are proposing 
to make changes in the determination of the prospective payment 
rates for Medicare inpatient operating costs for acute care 
hospitals for FY 2018. In section III. of this Addendum, we discuss 
our proposed policy changes for determining the prospective payment 
rates for Medicare inpatient capital-related costs for FY 2018. 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 2018. In section V. 
of this Addendum, we discuss proposed policy changes for determining 
the standard Federal rate for LTCHs paid under the LTCH PPS for FY 
2018. The tables to which we refer in the preamble of this proposed 
rule are listed in section VI. of this Addendum and are available 
via the Internet on the CMS Web site.

II. Proposed Changes to Prospective Payment Rates for Hospital 
Inpatient Operating Costs for Acute Care Hospitals for FY 2018

    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 Sec.  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 Sec. Sec.  412.211 and 412.212. Below we discuss the factors 
we are proposing to use for determining the proposed prospective 
payment rates for FY 2018.
    In summary, the proposed 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 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 2018, 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 V.B. of the 
preamble of this proposed rule for a complete discussion on the 
proposed FY 2018 inpatient hospital update. Below is a table with 
these four options:

[[Page 20168]]



----------------------------------------------------------------------------------------------------------------
                                                     Hospital        Hospital      Hospital did    Hospital did
                                                     submitted       submitted      NOT submit      NOT submit
                                                   quality data    quality data    quality data    quality data
                     FY 2018                         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
----------------------------------------------------------------------------------------------------------------
Proposed Market Basket                                       2.9             2.9             2.9             2.9
 Rate[dash]of[dash]Increase.....................
Proposed Adjustment for Failure to Submit                    0.0             0.0          -0.725          -0.725
 Quality Data under Section 1886(b)(3)(B)(viii)
 of the Act.....................................
Proposed Adjustment for Failure to be a                      0.0          -2.175             0.0          -2.175
 Meaningful EHR User under Section
 1886(b)(3)(B)(ix) of the Act...................
Proposed MFP Adjustment under Section                       -0.4            -0.4            -0.4            -0.4
 1886(b)(3)(B)(xi) of the Act...................
Statutory Adjustment under Section                         -0.75           -0.75           -0.75           -0.75
 1886(b)(3)(B)(xii) of the Act..................
Proposed Applicable Percentage Increase Applied             1.75          -0.425           1.025           -1.15
 to Standardized Amount.........................
----------------------------------------------------------------------------------------------------------------

    We note that section 1886(b)(3)(B)(viii) of the Act, which 
specifies the adjustment to the applicable percentage increase for 
``subsection (d)'' hospitals that do not submit quality data under 
the rules established by the Secretary, is not applicable to 
hospitals located in Puerto Rico.
    In addition, section 602 of Public Law 114-113 amended section 
1886(n)(6)(B) of the Act to specify that Puerto Rico hospitals are 
eligible for incentive payments for the meaningful use of certified 
EHR technology, effective beginning FY 2016, and also to apply the 
adjustments to the applicable percentage increase under section 
1886(b)(3)(B)(ix) of the Act to Puerto Rico hospitals that are not 
meaningful EHR users, effective FY 2022. Accordingly, because the 
provisions of section 1886(b)(3)(B)(ix) of the Act are not 
applicable to hospitals located in Puerto Rico until FY 2022, the 
adjustments under this provision are not applicable for FY 2018.
     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 and labor-
related share changes are budget neutral, as provided for under 
section 1886(d)(3)(E)(i) of the Act (as discussed in the FY 2006 
IPPS final rule (70 FR 47395) and the FY 2010 IPPS final rule (74 FR 
44005). 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 2017 budget neutrality 
factor and applying a revised factor.
     Removal of the adjustment in FY 2017 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).
     A single positive adjustment of 0.4588 in FY 2018 as 
required under section 15005 of the 21st Century Cures Act (Pub. L. 
114-255), which amended section 7(b)(1)(B) of the TMA, as amended by 
section 631 of the ATRA and section 414 of the MACRA, to reduce the 
adjustment for FY 2018 from 0.5 percentage point to 0.4588 
percentage point.
     An adjustment to remove the FY 2017 outlier offset and 
apply an offset for FY 2018, as provided for in section 
1886(d)(3)(B) of the Act.
     As discussed in section V.M. of the preamble of this 
proposed rule, a factor of (1/1.006) in the calculation of the FY 
2018 standardized amount. Specifically, in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57058 through 57060), using our authority under 
section 1886(d)(5)(I)(i) of the Act, we finalized a policy to 
include a permanent factor of (1/0.998) and a temporary one-time 
factor of (1.006) in the calculation of the FY 2017 standardized 
amount and to include a factor of (1/1.006) in the calculation of 
the FY 2018 standardized amount to remove the temporary one-time 
factor of 1.006 applied in FY 2017 to address the effects of the 0.2 
percent reduction to the rate for the 2-midnight policy in effect 
for FY 2014, FY 2015, and FY 2016. Therefore, in this proposed rule, 
for FY 2018, we are removing the temporary one-time prospective 
increase to the FY 2017 standardized amount of 0.6 percent or a 
factor of 1.006.
    For FY 2018, consistent with current law, we are proposing to 
apply 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 proposing to apply a uniform, 
national budget neutrality adjustment to the FY 2018 wage index for 
the rural floor. We note that, in section III.H.2.b. of the preamble 
to this proposed rule, the imputed floor is set to expire effective 
October 1, 2017, and we are not proposing to extend the imputed 
floor policy.
    In prior fiscal years, CMS made 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 (FYs 2011 through 
2016), were budget neutral as required under section 410A(c)(2) of 
Public Law 108-173. As discussed in section V.L.3. of the preamble 
to this proposed rule, section 15003 of Public Law 114-255 amended 
section 410A of Public Law 108-173 to provide for a 10-year 
extension of the demonstration (in place of the 5-year extension 
required by the Affordable Care Act) beginning on the date 
immediately following the last day of the initial 5-year period 
under section 410A(a)(5) of Public Law 108-173. Thus, section 15003 
of Public Law 114-255 requires an additional 5-year extension of the 
demonstration. Regarding the costs of the demonstration specifically 
for FY 2018, as described in section V.L.3. of the preamble to this 
proposed rule, we are proposing that if the selection of additional 
hospitals pursuant to section 410A(g)(6) of Public Law 108-173 (as 
added by section 15003 of Public Law 114-255) is announced by June 
2017, we would include in the FY 2018 IPPS/LTCH PPS final rule an 
estimate of the costs of the demonstration for FY 2018 and the 
resulting budget neutrality offset amount for the newly selected 
hospitals (Cohort 3 hospitals) and for the previously participating 
hospitals (Cohorts 1 and 2 hospitals). If the final selection of the 
additional hospitals is not announced by June 2017, we would not be 
able to include an estimate of the costs of the demonstration for 
any participating hospitals or an estimated budget neutrality 
adjustment for FY 2018 in the FY 2018 IPPS/LTCH PPS final rule. We 
refer the reader to section V.L.3. of the preamble to this proposed 
rule for complete details on the rural community hospital 
demonstration program and our proposed methodology for calculating 
budget neutrality for this demonstration.

A. Calculation of the Proposed 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. 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.
    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

[[Page 20169]]

and Hawaii, IME costs, and costs to hospitals serving a 
disproportionate share of low-income patients.
    For FY 2018, we are proposing to rebase and revise the national 
labor-related and nonlabor-related shares (based on the proposed 
2014-based hospital market basket discussed in section IV. of the 
preamble of this proposed rule). 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 2018, as 
discussed in section IV.B.3. of the preamble of this proposed rule, 
we are proposing to apply a labor-related share of 68.3 percent for 
the national standardized amounts for all IPPS hospitals (including 
hospitals in Puerto Rico) that have a wage index value that is 
greater than 1.0000. Consistent with section 1886(d)(3)(E) of the 
Act, we are proposing to apply the wage index to a labor-related 
share of 62 percent of the national standardized amount for all IPPS 
hospitals (including hospitals in Puerto Rico) whose wage index 
values are less than or equal to 1.0000.
    The proposed 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 proposed rule and are available via the 
Internet on the CMS Web site.

2. Computing the National Average 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. Accordingly, we are proposing to calculate the FY 2018 
national average standardized amount irrespective of whether a 
hospital is located in an urban or rural location.

3. Updating the National Average 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 proposed rule, we 
are proposing to use the revised and rebased 2014-based IPPS 
operating and capital market baskets for FY 2018. As discussed in 
section V.B. of the preamble of this proposed 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 proposing to reduce the FY 2018 
applicable percentage increase (which is based on IHS Global 
Insight, Inc.'s (IGI's) fourth quarter 2016 forecast of the proposed 
2014-based IPPS market basket) by the MFP adjustment (the 10-year 
moving average of MFP for the period ending FY 2018) of 0.4 
percentage point, which is calculated based on IGI's fourth quarter 
2016 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 proposing to further update the standardized amount 
for FY 2018 by the estimated market basket percentage increase less 
0.75 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 required as inputs to provide hospital inpatient services.
    Based on IGI's 2016 fourth quarter forecast of the hospital 
market basket increase (as discussed in Appendix B of this proposed 
rule), the forecast of the hospital market basket increase for FY 
2018 for this proposed rule is 2.9 percent. As discussed earlier, 
for FY 2018, 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 V.B. of the 
preamble of this proposed rule for a complete discussion on the 
proposed FY 2018 inpatient hospital update to the standardized 
amount. We also refer readers to the table above for the four 
possible applicable percentage increases that would be applied to 
update the national standardized amount. The proposed 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.
    Although the update factors for FY 2018 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 
2018 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 proposed rule.

4. Methodology for Calculation of the Average Standardized Amount

    The methodology we used to calculate the proposed FY 2018 
standardized amount is as follows:
     To ensure we are only including hospitals paid under 
the IPPS in the calculation of the standardized amount, we apply the 
following inclusion and exclusion criteria: include hospitals whose 
last four digits fall between 0001 and 0879 (section 2779A1 of 
Chapter 2 of the State Operations Manual on the CMS Web site at: 
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c02.pdf); exclude CAHs at the time of this proposed 
rule; exclude hospitals in Maryland (because these hospitals are 
paid under an all payer model under section 1115A of the Act); and 
remove PPS-excluded cancer hospitals that have a ``V'' in the fifth 
position of their provider number or a ``E'' or ``F'' in the sixth 
position.
     As in the past, we are proposing to adjust the FY 2018 
standardized amount to remove the effects of the FY 2017 geographic 
reclassifications and outlier payments before applying the FY 2018 
updates. We then apply budget neutrality offsets for outliers and 
geographic reclassifications to the standardized amount based on 
proposed FY 2018 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.
     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.
     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 an FFS claim).
     Consistent with our methodology established in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57277), in order to further 
ensure that we capture only FFS claims, we are excluding claims with 
a ``GHOPAID'' indicator of 1 (which is a field on the MedPAR file 
that indicates a claim is not an FFS claim and is paid by a Group 
Health Organization).
     Consistent with our methodology established in the FY 
2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we 
examine the MedPAR file and remove

[[Page 20170]]

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 remove 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 2018, we are proposing to continue to include 
all applicable data from subsection (d) hospitals participating in 
BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting 
calculations.
     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 the 
Hospital Readmissions Reduction Program and the Hospital VBP Program 
(established under the Affordable Care Act) within our budget 
neutrality calculations.
    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.
    In order to properly determine aggregate payments on each side 
of the comparison, as we have done for the last 4 fiscal years, for 
FY 2018 and subsequent years, we are proposing to continue 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 proposing to apply 
the proposed readmissions payment adjustment factor and the proposed 
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 proposed FY 2018 readmissions 
payment adjustment factors, we are proposing to use 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 2018, 
in this proposed rule, we are proposing to calculate 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 2018 as 
hospitals have had the opportunity to review and correct these data 
under our policy regarding the reporting of hospital-specific 
readmission rates consistent with section 1886(q)(6) of the Act. We 
discuss our proposed policy regarding the reporting of hospital-
specific readmission rates for FY 2018 in section V.I.3.f. of the 
preamble of this proposed 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 2018, in this proposed rule, for the purpose 
of modeling aggregate payments when determining all budget 
neutrality factors, we are proposing to use proxy hospital VBP 
payment adjustment factors for FY 2018 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 2018 
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 2018 (as we did for the last 4 fiscal years), 
we are proposing to include 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 are proposing to 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.
     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 V.G. of the preamble to this proposed rule and below, we 
are proposing to continue the FY 2014 finalized methodology under 
which we would take into consideration uncompensated care payments 
in the comparison of payments under the Federal rate and the 
hospital-specific rate for SCHs. Therefore, we are proposing to 
include estimated uncompensated care payments in this comparison.
     We are proposing to include 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 2018. Similar to FY 2017, we are including this adjustment 
based on data on the prior year's performance. Payments for 
hospitals would be estimated based on the proposed applicable 
standardized amount in Tables 1A and 1B for discharges occurring in 
FY 2018.

a. Proposed Recalibration of MS-DRG Relative Weights

    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

[[Page 20171]]

to hospitals are not affected. As discussed in section II.G. of the 
preamble of this proposed 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 proposing to make a budget neutrality adjustment to 
ensure that the requirement of section 1886(d)(4)(C)(iii) of the Act 
is met.
    For FY 2018, to comply with the requirement that MS-DRG 
reclassification and recalibration of the relative weights be budget 
neutral for the standardized amount and the hospital-specific rates, 
we used FY 2016 discharge data to simulate payments and compared the 
following:
     Aggregate payments using the FY 2017 labor-related 
share percentages, the FY 2017 relative weights, and the FY 2017 
pre-reclassified wage data, and applied the proposed FY 2018 
hospital readmissions payment adjustments and estimated FY 2018 
hospital VBP payment adjustments; and
     Aggregate payments using the FY 2017 labor-related 
share percentages, the proposed FY 2018 relative weights, and the FY 
2017 pre-reclassified wage data, and applied the same proposed FY 
2018 hospital readmissions payment adjustments and estimated FY 2018 
hospital VBP payment adjustments applied above.
    Based on this comparison, we computed a proposed budget 
neutrality adjustment factor equal to 0.997573 and applied this 
factor to the standardized amount. As discussed in section IV. of 
this Addendum, we also are proposing to apply the MS-DRG 
reclassification and recalibration budget neutrality factor of 
0.997555 to the hospital-specific rates that are effective for cost 
reporting periods beginning on or after October 1, 2017.

b. Updated Wage Index--Budget Neutrality Adjustment

    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 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 2018, we are 
proposing to adjust 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 proposed rule.
    To compute a proposed budget neutrality adjustment factor for 
wage index and labor-related share percentage changes, we used FY 
2016 discharge data to simulate payments and compared the following:
     Aggregate payments using the proposed FY 2018 relative 
weights and the FY 2017 pre-reclassified wage indexes, applied the 
FY 2017 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 proposed FY 2018 hospital readmissions 
payment adjustment and the estimated FY 2018 hospital VBP payment 
adjustment; and
     Aggregate payments using the proposed FY 2018 relative 
weights and the proposed FY 2018 pre-reclassified wage indexes, 
applied the proposed labor-related share for FY 2018 of 68.3 percent 
to all hospitals (regardless of whether the hospital's wage index 
was above or below 1.0000), and applied the same proposed FY 2018 
hospital readmissions payment adjustments and estimated FY 2018 
hospital VBP payment adjustments applied above.
    In addition, we applied the proposed 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 2017 to FY 2018. 
By applying this methodology, we determined a proposed budget 
neutrality adjustment factor of 1.000465 for proposed changes to the 
wage index.

c. Reclassified Hospitals--Proposed 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 proposed budget neutrality adjustment factor for FY 
2018, we used FY 2016 discharge data to simulate payments and 
compared the following:
     Aggregate payments using the proposed FY 2018 labor-
related share percentages, proposed FY 2018 relative weights and 
proposed FY 2018 wage data prior to any reclassifications under 
sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act, and 
applied the proposed FY 2018 hospital readmissions payment 
adjustments and the estimated FY 2018 hospital VBP payment 
adjustments; and
     Aggregate payments using the proposed FY 2018 labor-
related share percentages, proposed FY 2018 relative weights, and 
proposed FY 2018 wage data after such reclassifications, and applied 
the same proposed FY 2018 hospital readmissions payment adjustments 
and the estimated FY 2018 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 proposed rule, which is available via the Internet on the 
CMS Web site. This table reflects reclassification crosswalks 
proposed for FY 2018, and apply the proposed policies explained in 
section III. of the preamble to this proposed rule. Based on these 
simulations, we calculated a proposed budget neutrality adjustment 
factor of 0.988522 to ensure that the effects of these provisions 
are budget neutral, consistent with the statute.
    The proposed FY 2018 budget neutrality adjustment factor was 
applied to the standardized amount after removing the effects of the 
FY 2017 budget neutrality adjustment factor. We note that the 
proposed FY 2018 budget neutrality adjustment reflects FY 2018 wage 
index reclassifications approved by the MGCRB or the Administrator 
at the time of development of the proposed rule.

d. Proposed 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) is equal 
to the aggregate prospective payments that would have been made in 
the absence of this provision. Consistent with section 3141 of the 
Affordable Care Act and as discussed in section III.H. of the 
preamble of this proposed rule and codified at Sec.  
412.64(e)(4)(ii), the budget neutrality adjustment for the rural 
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 proposed rule, the imputed floor is set to expire 
effective October 1, 2017, and we are not proposing to extend the 
imputed floor policy.
    Similar to our calculation in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50369 through 50370), for FY 2018, we are proposing to 
calculate a national rural Puerto

[[Page 20172]]

Rico wage index. Because there are no rural Puerto Rico hospitals 
with established wage data, our calculation of the proposed FY 2018 
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 will 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 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 proposed FY 2018 rural Puerto Rico wage index is 
calculated based on the average of the proposed FY 2018 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 budget neutrality 
adjustment factor, we are proposing to use FY 2016 discharge data to 
simulate payments and the proposed post-reclassified national wage 
indexes and compared the following:
     National simulated payments without the proposed 
national rural floor; and
     National simulated payments with the proposed national 
rural floor.
    Based on this comparison, we determined a proposed national 
rural floor budget neutrality adjustment factor of 0.993672. The 
national adjustment was applied to the national wage indexes to 
produce a proposed national rural floor budget neutral wage index.

e. Proposed Adjustment for FY 2018 Required Under Section 414 of Public 
Law 114-10 (MACRA) and Section 15005 of Public Law 114-255

    As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785), 
once the recoupment required under section 631 of the ATRA was 
complete, we had anticipated making a single positive adjustment in 
FY 2018 to offset the reductions required to recoup the $11 billion 
under section 631 of the ATRA. However, section 414 of the MACRA 
(which was 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. In the FY 
2017 rulemaking, we indicated that we would address the adjustments 
for FY 2018 and later fiscal years in future rulemaking. As noted 
previously, section 15005 of the 21st Century Cures Act (Public Law 
114-255), which was enacted December 13, 2016, amended section 
7(b)(1)(B) of the TMA, as amended by section 631 of the ATRA and 
section 414 of the MACRA, to reduce the adjustment for FY 2018 from 
0.5 percentage points to 0.4588 percentage points. Therefore, for FY 
2018, we are proposing to implement the required +0.4588 percent 
adjustment to the standardized amount. This is a permanent 
adjustment to payment rates. While we are not proposing future 
adjustments required under section 414 of the MACRA and section 
15005 of Public Law 114-255 at this time, we expect to propose 
positive 0.5 percent adjustments to the standardized amounts for FYs 
2019 through 2023.

f. Proposed 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 MS-DRG, any IME and DSH payments, 
uncompensated care 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 MS-DRG, any IME and DSH payments, 
uncompensated care 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 2018 is 80 percent, or 90 
percent for burn MS-DRGs 927, 928, 929, 933, 934 and 935. We have 
used a marginal cost factor of 90 percent since FY 1989 (54 FR 36479 
through 36480) for designated burn DRGs as well as a marginal cost 
factor of 80 percent for all other DRGs 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. 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.htm.

(1) Proposed FY 2018 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.
    As we have done in the past, to calculate the proposed FY 2018 
outlier threshold, we simulated payments by applying proposed FY 
2018 payment rates and policies using cases from the FY 2016 MedPAR 
file. Therefore, in order to determine the proposed FY 2018 outlier 
threshold, we inflated the charges on the MedPAR claims by 2 years, 
from FY 2016 to FY 2018. As discussed in the FY 2015 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. As finalized in the FY 2017 IPPS/LTCH final 
rule (81 FR 57282), we are using the following methodology to 
calculate the charge inflation factor for FY 2018:
     To produce the most stable measure of charge inflation, 
we applied the following inclusion and exclusion criteria of 
hospitals claims in our measure of charge inflation: Include 
hospitals whose last four digits fall between 0001 and 0899 (section 
2779A1 of Chapter 2 of the State Operations Manual on the CMS Web 
site at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107c02.pdf); include CAHs that were IPPS 
hospitals for the time period of the MedPAR data being used to 
calculate the charge inflation factor; include hospitals in 
Maryland; and remove PPS-excluded cancer hospitals who have a ``V'' 
in the fifth position of their provider number or a ``E'' or ``F'' 
in the sixth position.
     We excluded Medicare Advantage IME claims for the 
reasons described in section I.A.4. of this Addendum. 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 order to ensure that we capture only FFS claims, we 
included claims with a ``Claim Type'' of 60 (which is a field on the 
MedPAR file that indicates a claim is an FFS claim).
     In order to further ensure that we capture only FFS 
claims, we excluded claims with a ``GHOPAID'' indicator of 1 (which 
is a field on the MedPAR file that indicates a claim is not an FFS 
claim and is paid by a Group Health Organization).
     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. We also 
removed organ acquisition charges from the covered charge field 
because organ acquisition is a pass-through payment not paid under 
the IPPS.
    In the FY 2016 IPPS/LTCH final rule (80 FR 49779-49780), 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

[[Page 20173]]

comments, we stated that we continue to believe that it is optimal 
to use the most recent period of charge data available to measure 
charge inflation. In response to those comments, similar to FY 2016 
and 2017, for FY 2018 we grouped claims data by quarter in the table 
below in order that the public would be able to replicate the claims 
summary for the claims with discharge dates through September 30, 
2016, that are available under the current LDS structure. In order 
to provide even more information in response to the commenters' 
request, similar to FY 2016 and FY 2017, for FY 2018 we have made 
available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (click 
on the link on the left titled ``FY 2018 IPPS Proposed Rule Home 
Page'' and then click the link ``FY 2018 Proposed Rule Data 
Files''') a more detailed summary table by provider with the monthly 
charges that were used to compute the charge inflation factor. We 
continue 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.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Covered charges (January   Cases (January 1, 2015,    Covered charges (January   Cases  (January 1, 2016,
                   Quarter                    1, 2015, through December     through December 31,    1, 2016, through December     through December 31,
                                                      31, 2015)                    2015)                    31, 2016)                    2016)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...........................................           $134,654,491,108                  2,550,009           $140,324,387,852                  2,503,723
2...........................................            128,043,608,047                  2,432,111            134,274,423,481                  2,401,159
3...........................................            125,070,725,661                  2,352,162            129,395,535,792                  2,318,480
4...........................................            130,224,314,081                  2,386,486            104,063,409,952                  1,850,535
                                             -----------------------------------------------------------------------------------------------------------
    Total...................................            517,993,138,897                  9,720,768            508,057,757,077                  9,073,897
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Under this methodology, to compute the 1-year average annualized 
rate-of-change in charges per case for FY 2018, we compared the 
average covered charge per case of $53,287 ($517,993,138,897/
9,720,768) from the second quarter of FY 2015 through the first 
quarter of FY 2016 (January 1, 2015, through December 31, 2015) to 
the average covered charge per case of $55,991 ($508,057,757,077/
9,073,897) from the second quarter of FY 2016 through the first 
quarter of FY 2017 (January 1, 2016, through December 31, 2016). 
This rate-of-change is 5.1 percent (1.05074) or 10.4 percent 
(1.104055) over 2 years. The billed charges are obtained from the 
claim from the MedPAR file and inflated by the inflation factor 
specified above.
    As we have done in the past, in this proposed rule, we are 
proposing to establish the proposed FY 2018 outlier threshold using 
hospital CCRs from the December 2016 update to the Provider-Specific 
File (PSF)--the most recent available data at the time of the 
development of this proposed rule. We are proposing to apply the 
following edits to providers' CCRs in the PSF. We believe these 
edits are appropriate in order to accurately model the outlier 
threshold. We first search for Indian Health Service providers and 
those providers assigned the statewide average CCR from the current 
fiscal year. We then replace these CCRs with the statewide average 
CCR for the upcoming fiscal year. We also assign the statewide 
average CCR (for the upcoming fiscal year) to those providers that 
have no value in the CCR field in the PSF or whose CCRs exceed the 
ceilings described later in this section (3.0 standard deviations 
from the mean of the log distribution of CCRs for all hospitals). We 
do not apply the adjustment factors described below to hospitals 
assigned the statewide average CCR.
    For FY 2018, we also are proposing to continue to apply an 
adjustment factor to the CCRs to account for cost and charge 
inflation (as explained below). We are proposing that, if more 
recent data become available, we would use that data to calculate 
the final FY 2018 outlier threshold.
    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 the last 4 fiscal years, we are 
proposing to adjust the CCRs from the December 2016 update of the 
PSF by comparing the percentage change in the national average case-
weighted operating CCR and capital CCR from the December 2015 update 
of the PSF to the national average case-weighted operating CCR and 
capital CCR from the December 2016 update of the PSF. We note that 
we used total transfer-adjusted cases from FY 2016 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, we calculated a proposed 
December 2015 operating national average case-weighted CCR of 
0.274139 and a proposed December 2016 operating national average 
case-weighted CCR of 0.26579. We then calculated the percentage 
change between the two national operating case-weighted CCRs by 
subtracting the December 2015 operating national average case-
weighted CCR from the December 2016 operating national average case-
weighted CCR and then dividing the result by the December 2015 
national operating average case-weighted CCR. This resulted in a 
proposed national operating CCR adjustment factor of 0.979187.
    We used the same methodology proposed above to adjust the 
capital CCRs. Specifically, we calculated a December 2015 capital 
national average case-weighted CCR of 0.024047 and a December 2016 
capital national average case-weighted CCR of 0.022967. We then 
calculated the percentage change between the two national capital 
case-weighted CCRs by subtracting the December 2015 capital national 
average case-weighted CCR from the December 2016 capital national 
average case-weighted CCR and then dividing the result by the 
December 2015 capital national average case-weighted CCR. This 
resulted in a proposed national capital CCR adjustment factor of 
0.955068.
    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 proposed 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 
would be calculated and applied after rural floor budget neutrality 
adjustments are calculated for all labor market areas, in order to 
ensure that no hospital in a frontier State would receive a wage 
index less than 1.0000 due to the proposed rural 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 2018, it was necessary to adjust the 
proposed wage index of those eligible hospitals in a frontier State 
when calculating the proposed outlier threshold that results in 
outlier payments being 5.1 percent of total payments for FY 2018. If 
we did not take the above into account, our estimate of total FY 
2018 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 2018 outlier payments, we are 
proposing not to make any adjustments for the possibility that 
hospitals' CCRs and outlier payments may be reconciled upon cost 
report settlement. 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

[[Page 20174]]

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 are proposing not to make any 
assumptions regarding the effects of reconciliation on the outlier 
threshold calculation.
    As described in sections V.I. and V.J. respectively, of the 
preamble of this proposed 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 proposed outlier 
threshold calculation or the proposed 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 would 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 are proposing to exclude the hospital VBP payment 
adjustments and the hospital readmissions payment adjustments from 
the calculation of the proposed 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 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 have done since the implementation 
of uncompensated care payments in FY 2014, we also are proposing for 
FY 2018 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 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 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 since FY 2014 to calculate the 
outlier fixed-loss cost threshold, for FY 2018, we are proposing to 
include estimated FY 2018 uncompensated care payments in the 
computation of the proposed outlier fixed-loss cost threshold. 
Specifically, we are proposing 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 
proposed outlier fixed-loss cost threshold methodology.
    Using this methodology, we used the formula described in section 
I.C.1 of this Addendum to simulate and calculate the Federal payment 
rate and outlier payments for all claims. We used a threshold of 
$26,713 and calculated total operating Federal payments of 
$89,955,398,001 and total outlier payments of $4,587,838,750. We 
then divided total outlier payments by total operating Federal 
payments plus total outlier payments and determined that this 
threshold met the 5.1 percent target. As a result, we are proposing 
an outlier fixed-loss cost threshold for FY 2018 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 $26,713.

(2) Other Proposed 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 2018 will 
result in outlier payments that will equal 5.1 percent of operating 
DRG payments and 5.66 percent of capital payments based on the 
Federal rate.
    In accordance with section 1886(d)(3)(B) of the Act, we are 
proposing to reduce the FY 2018 standardized amount by the same 
percentage to account for the projected proportion of payments paid 
as outliers.
    The proposed outlier adjustment factors that would be applied to 
the standardized amount based on the proposed FY 2018 outlier 
threshold are as follows:

------------------------------------------------------------------------
                                             Operating
                                           standardized       Capital
                                              amounts      federal rate
------------------------------------------------------------------------
National................................       0.948999        0.943414
------------------------------------------------------------------------

    We are proposing to apply the outlier adjustment factors to the 
proposed FY 2018 payment rates after removing the effects of the FY 
2017 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 1.17 or capital CCRs greater than 0.161, 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 proposed 
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. These statewide average ratios would be 
effective for discharges occurring on or after October 1, 2017 and 
would replace the statewide average ratios from the prior fiscal 
year. Table 8B listed in section VI. of this Addendum (and available 
via the Internet on the CMS Web site) contains the comparable 
proposed statewide average capital CCRs. As previously stated, the 
proposed CCRs in Tables 8A and 8B would be used during FY 2018 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 proposed 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

[[Page 20175]]

3966 are followed. In addition, as mentioned above, 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.

(3) FY 2016 Outlier Payments

    Our current estimate, using available FY 2016 claims data, is 
that actual outlier payments for FY 2016 were approximately 5.37 
percent of actual total MS-DRG payments. Therefore, the data 
indicate that, for FY 2016, the percentage of actual outlier 
payments relative to actual total payments is higher than we 
projected for FY 2016. 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 2016 are equal to 5.1 percent of 
total MS-DRG payments. As explained in the FY 2003 Outlier Final 
Rule (68 FR 34502), if we were to make retroactive adjustments to 
all outlier payments to ensure total payments are 5.1 percent of MS-
DRG payments (by retroactively adjusting outlier payments), we would 
be removing the important aspect of the prospective nature of the 
IPPS. Because such an across-the-board adjustment would either lead 
to more or less outlier payments for all hospitals, hospitals would 
no longer be able to reliably approximate their payment for a 
patient while the patient is still hospitalized. We believe it would 
be neither necessary nor appropriate to make such an aggregate 
retroactive adjustment. Furthermore, we believe it is consistent 
with the statutory language at section 1886(d)(5)(A)(iv) of the Act 
not to make retroactive adjustments to outlier payments. This 
section calls for the Secretary to ensure that outlier payments are 
equal to or greater than 5 percent and less than or equal to 6 
percent of projected or estimated (not actual) MS-DRG payments. We 
believe that an important goal of a PPS is predictability. 
Therefore, we believe that the fixed-loss outlier threshold should 
be projected based on the best available historical data and should 
not be adjusted retroactively. A retroactive change to the fixed-
loss outlier threshold would affect all hospitals subject to the 
IPPS, thereby undercutting the predictability of the system as a 
whole.
    We note that because the MedPAR claims data for the entire FY 
2017 will not be available until after September 30, 2017, we are 
unable to provide an estimate of actual outlier payments for FY 2017 
based on FY 2017 claims data in this proposed rule. We will provide 
an estimate of actual FY 2017 outlier payments in the FY 2019 IPPS/
LTCH PPS proposed rule.

5. Proposed FY 2018 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 proposing to apply to all hospitals, except hospitals located in 
Puerto Rico, for FY 2018. The proposed standardized amount for 
hospitals in Puerto Rico is shown in Table 1C listed and published 
in section VI. of this Addendum (and available via the Internet on 
the CMS Web site). The proposed amounts shown in Tables 1A and 1B 
differ only in that the labor-related share applied to the 
standardized amounts in Table 1A is 68.3 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 proposing to apply a labor-
related share of 62 percent, unless application of that percentage 
would 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 proposed standardized 
amounts reflecting the proposed applicable percentage increases for 
FY 2018.
    The proposed labor-related and nonlabor-related portions of the 
national average standardized amounts for Puerto Rico hospitals for 
FY 2018 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). Similar to above, 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 2017 
national standardized amount to the proposed FY 2018 national 
standardized amount. The second through fifth columns display the 
proposed changes from the FY 2017 standardized amounts for each 
applicable FY 2018 standardized amount. The first row of the table 
shows the updated (through FY 2017) average standardized amount 
after restoring the FY 2017 offsets for outlier payments, geographic 
reclassification budget neutrality, new labor market delineation 
wage index transition budget neutrality and removing the FY 2017 2-
midnight rule one-time prospective increase. The MS-DRG 
reclassification and recalibration and wage index budget neutrality 
adjustment factors are cumulative. Therefore, those FY 2017 
adjustment factors are not removed from this table.

             Changes From FY 2017 Standardized Amounts to the Proposed FY 2018 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 2018 Base Rate after
 removing:
    1. FY 2017 Geographic         If Wage Index is    If Wage Index is    If Wage Index is    If Wage Index is
     Reclassification Budget       Greater Than        Greater Than        Greater Than        Greater Than
     Neutrality (0.988136).        1.0000:             1.0000:             1.0000:             1.0000:
    2. FY 2017 Operating Outlier     Labor (68.3%):      Labor (68.3%):      Labor (68.3%):      Labor (68.3%):
     Offset (0.948998).               $3,993.72.          $3,993.72.          $3,993.72.          $3,993.72.
    3. FY 2017 2-Midnight Rule       Nonlabor            Nonlabor            Nonlabor            Nonlabor
     One-Time Prospective             (30.4%):            (30.4%):            (30.4%):            (30.4%):
     Increase (1.006).                $1,853.60.          $1,853.60.          $1,853.60.          $1,853.60.
    4. FY 2017 Labor Market       If Wage Index is    If Wage Index is    If Wage Index is    If Wage Index is
     Delineation Wage Index        less Than or        less Than or        less Than or        less Than or
     Transition Budget             Equal to 1.0000:    Equal to 1.0000:    Equal to 1.0000:    Equal to 1.0000:
     Neutrality Factor
     (0.999997)..
                                     Labor (62%):        Labor (62%):        Labor (62%):        Labor (62%):
                                      $3,625.34.          $3,625.34.          $3,625.34.          $3,625.34.
                                     Nonlabor (38%):     Nonlabor (38%):     Nonlabor (38%):     Nonlabor (38%):
                                      $2,221.98.          $2,221.98.          $2,221.98.          $1,853.60.
Proposed FY 2018 Update Factor..  1.0175............  0.99575...........  1.01025...........  0.9885.

[[Page 20176]]

 
Proposed FY 2018 MS[dash]DRG      0.997573..........  0.997573..........  0.997573..........  0.997573.
 Recalibration Budget Neutrality
 Factor.
Proposed FY 2018 Wage Index       1.000465..........  1.000465..........  1.000465..........  1.000465.
 Budget Neutrality Factor.
Proposed FY 2018                  0.988522..........  0.988522..........  0.988522..........  0.988522.
 Reclassification Budget
 Neutrality Factor.
Proposed FY 2018 Operating        0.948999..........  0.948999..........  0.948999..........  0.98999.
 Outlier Factor.
Proposed Adjustment for FY 2018   1.004588..........  1.004588..........  1.004588..........  1.004588.
 Required under Section 414 of
 Public Law 114-10 (MACRA) and
 Section 15005 of Public Law 114-
 255.
Proposed National Standardized    Labor: $3,822.07..  Labor: $3,740.37..  Labor: $3,794.84..  Labor: $3,713.14.
 Amount for FY 2018 if Wage       Nonlabor:           Nonlabor:           Nonlabor:           Nonlabor:
 Index is Greater Than 1.0000;     $1,773.93.          $1,736.01.          $1,761.29.          $1,723.37.
 Labor/Non-Labor Share
 Percentage (68.3/31.7).
Proposed National Standardized    Labor: $3,469.52..  Labor: $3,395.36..  Labor: $3,444.80..  Labor: $3,370.64.
 Amount for FY 2018 if Wage       Nonlabor:           Nonlabor:           Nonlabor:           Nonlabor:
 Index is less Than or Equal to    $2,126.48.          $2,081.02.          $2,111.33.          $2,065.87.
 1.0000; Labor/Non-Labor Share
 Percentage (62/38).
----------------------------------------------------------------------------------------------------------------

    We note that, in recent years, we have estimated the MS-DRG 
recalibration budget neutrality factor, wage index budget neutrality 
factor, reclassification budget neutrality factor and operating 
outlier factor to six decimal places. While we are not proposing any 
changes at this time, we are interested in receiving comments from 
the public as to the continued necessity of six decimal places for 
these four estimates or if fewer decimal places would be sufficient.

B. Proposed 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 proposed labor-related and nonlabor-related shares that 
we are proposing to use to calculate the prospective payment rates 
for hospitals located in the 50 States, the District of Columbia, 
and Puerto Rico for FY 2018. This section addresses two types of 
adjustments to the standardized amounts that are made in determining 
the proposed prospective payment rates as described in this 
Addendum.

1. Proposed 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 prospective payment rate 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. For FY 2018, as discussed in section IV.B.3. of the 
preamble of this proposed rule, we are proposing to apply a labor-
related share of 68.3 percent for the national standardized amounts 
for all IPPS hospitals (including hospitals in Puerto Rico) that 
have a wage index value that is greater than 1.0000. Consistent with 
section 1886(d)(3)(E) of the Act, we are proposing to apply the wage 
index to a labor-related share of 62 percent of the national 
standardized amount for all IPPS hospitals (including hospitals in 
Puerto Rico) whose wage index values are less than or equal to 
1.0000. In section III. of the preamble of this proposed rule, we 
discuss the data and methodology for the proposed FY 2018 wage 
index.

2. Proposed 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 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 in Alaska and Hawaii by an 
adjustment factor. For FY 2011 and in prior fiscal years, we used 
the most recent cost-of-living adjustment (COLA) factors obtained 
from the U.S. Office of Personnel Management (OPM) Web site at 
http://www.opm.gov/oca/cola/rates.asp to update this nonlabor 
portion.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51797), we 
explained that sections 1911 through 1919 of the Nonforeign Area 
Retirement Equity Assurance Act, as contained in subtitle B of title 
XIX of the National Defense Authorization Act (NDAA) for Fiscal Year 
2010 (Pub. L. 111-84, October 28, 2009), transitions the Alaska and 
Hawaii COLAs to locality pay. We finalized that, for FY 2012, as OPM 
transitioned away from COLAs, we would continue to use the same 
``frozen'' COLA factors (published by OPM) that we used to adjust 
payments in FY 2011 (which were based on OPM's 2009 COLA factors) to 
adjust the nonlabor-related portion of the standardized amount for 
hospitals located in Alaska and Hawaii. We refer readers to the FY 
2012 IPPS/LTCH PPS final rule for a more detailed discussion of our 
rationale for continuing to use the frozen COLAs in FY 2012.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53700 and 53701), 
for FY 2013, we continued to use the same COLA factors that were 
used to adjust payments in FY 2012 (as originally used to adjust 
payments in FY 2011, which were based on OPM's 2009 COLA factors). 
We also established a methodology to update the COLA factors 
published by OPM every 4 years (at the same time as the update of 
the labor-related share of the IPPS market basket), beginning in FY 
2014. We refer readers to the FY 2013 IPPS/LTCH PPS proposed rule 
(77 FR 28145 and 28146) for a detailed description of this 
methodology. For FY 2014, we updated the COLA factors for Alaska and 
Hawaii published by OPM for 2009 using the methodology finalized in 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53700 and 53701).
    For FY 2018, we are proposing to continue to update 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 and implemented for the FY 2014 IPPS update. 
Specifically, we are proposing to update the 2009 OPM COLA factors 
by a comparison of the growth in the Consumer Price Indices (CPIs) 
for Anchorage, AK, and Honolulu, HI,

[[Page 20177]]

relative to the growth in the CPI for the average U.S. city as 
published by the Bureau of Labor Statistics (BLS). Because BLS 
publishes CPI data for only Anchorage and Honolulu, using the 
methodology we finalized in the FY 2013 IPPS/LTCH PPS final rule, we 
use the comparison of the growth in the overall CPI relative to the 
growth in the CPI for those cities to update the COLA factors for 
all areas in Alaska and Hawaii, respectively. We believe that the 
relative price differences between these cities and the United 
States (as measured by the CPIs mentioned above) are appropriate 
proxies for the relative price differences between the ``other 
areas'' of Alaska and Hawaii and the United States.
    BLS publishes the CPI for All Items for Anchorage, Honolulu, and 
for the average U.S. city. However, consistent with our methodology 
finalized in the FY 2013 IPPS/LTCH PPS final rule, we are creating 
reweighted CPIs for each of the respective areas to reflect the 
underlying composition of the IPPS market basket nonlabor-related 
share. The current composition of the CPI for All Items for all of 
the respective areas is approximately 40 percent commodities and 60 
percent services. However, the IPPS nonlabor-related share is 
comprised of a different mix of commodities and services. Therefore, 
we create reweighted indexes for Anchorage, Honolulu, and the 
average U.S. city using the respective CPI commodities index and CPI 
services index and using the approximate 55 percent commodities/45 
percent services shares obtained from the proposed 2014-based IPPS 
market basket. We create reweighted indexes using BLS data for 2009 
through 2016--the most recent data available at the time of this 
proposed rulemaking. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50985 through 50987), we created reweighted indexes based on the FY 
2010-based IPPS market basket (which was adopted for the FY 2014 
IPPS update) and BLS data for 2009 through 2012 (the most recent BLS 
data at the time of the FY 2014 IPPS/LTCH PPS rulemaking).
    We continue to believe this methodology is appropriate because 
we continue to make a COLA for hospitals located in Alaska and 
Hawaii by multiplying the nonlabor-related portion of the 
standardized amount by a COLA factor. We note that OPM's COLA 
factors were calculated with a statutorily mandated cap of 25 
percent. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50985 through 50987), under the COLA update methodology we finalized 
in the FY 2013 IPPS/LTCH PPS final rule, we exercised our 
discretionary authority to adjust payments to hospitals in Alaska 
and Hawaii by incorporating this cap. In applying this finalized 
methodology for updating the COLA factors, we are proposing for FY 
2018 to continue to use such a cap, as our proposal is based on 
OPM's COLA factors (updated by the methodology described above).
    Applying this methodology, the COLA factors that we are 
proposing to establish for FY 2018 to adjust the nonlabor-related 
portion of the standardized amount for hospitals located in Alaska 
and Hawaii are shown in the table below. For comparison purposes, we 
also are showing the FY 2013 COLA factors (which were based on OPM's 
published COLA factors for 2009) and the FY 2014 COLA factors.
    Lastly, as we finalized in the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53700 and 53701), we are updating the COLA factors based on 
our methodology every 4 years, at the same time as the update to the 
labor-related share of the IPPS market basket.

                         Cost-of-Living Adjustment Factors: Alaska and Hawaii Hospitals
----------------------------------------------------------------------------------------------------------------
                                                                                      FY 2014
                              Area                                    FY 2013       through  FY     Proposed FY
                                                                                       2017            2018
----------------------------------------------------------------------------------------------------------------
Alaska:
    City of Anchorage and 80-kilometer (50-mile) radius by road.            1.23            1.23            1.25
    City of Fairbanks and 80-kilometer (50-mile) radius by road.            1.23            1.23            1.25
    City of Juneau and 80-kilometer (50-mile) radius by road....            1.23            1.23            1.25
    Rest of Alaska..............................................            1.25            1.25            1.25
Hawaii:
    City and County of Honolulu.................................            1.25            1.25            1.25
    County of Hawaii............................................            1.18            1.19            1.21
    County of Kauai.............................................            1.25            1.25            1.25
    County of Maui and County of Kalawao........................            1.25            1.25            1.25
----------------------------------------------------------------------------------------------------------------

    We note that the reweighted CPI for Honolulu, HI grew faster 
than the reweighted CPI for the average U.S. city over the 2009 to 
2016 time period, at 13.7 percent and 10.5 percent, respectively. As 
a result, for FY 2018, we calculated proposed COLA factors for the 
City and County of Honolulu, County of Kauai, County of Maui, and 
County of Kalawao to be 1.29 compared to the FY 2013 COLA factor of 
1.25 (which was based on OPM's published COLA factors for 2009, as 
described above). However, as stated above, we are applying our 
methodology as finalized in the FY 2013 IPPS/LTCH PPS final rule to 
incorporate a cap of 1.25 for these areas. In addition, the proposed 
COLA factor we calculated for the County of Hawaii for FY 2018 is 
1.21 compared to the FY 2013 COLA factor of 1.18. The COLA factors 
adopted in FY 2014 using this same methodology can be found in the 
table above.
    Similarly, the reweighted CPI for Anchorage, AK grew faster than 
the reweighted CPI for the average U.S. city over the 2009 to 2016 
time period, at 12.4 percent and 10.5 percent, respectively. As a 
result, for FY 2018, we calculated proposed COLA factors for the 
City of Anchorage, City of Fairbanks, and City of Juneau to be 1.25 
compared to the FY 2013 COLA factor of 1.23. For FY 2018, we 
calculated a proposed COLA factor of 1.27 for the rest of Alaska 
compared to the FY 2013 COLA factor of 1.25. However, as stated 
above, we are applying our methodology as finalized in the FY 2013 
IPPS/LTCH PPS final rule to incorporate a cap of 1.25 for the Rest 
of Alaska.
    As stated above, the COLA factors adopted in the FY 2014 IPPS/
LTCH PPS final rule were based on the same methodology used to 
determine the proposed FY 2018 COLA factors but utilizing BLS data 
from 2009 through 2012 (the most recent data available at the time 
of FY 2014 rulemaking) rather than through 2016 (the most recent 
data available at the time of this rulemaking). Compared to the FY 
2014 COLA factors, the proposed FY 2018 COLA factors are higher--
with all areas either reaching or exceeding the cap of 1.25 except 
the County of Hawaii.

C. Calculation of the Proposed Prospective Payment Rates

General Formula for Calculation of the Prospective Payment Rates for FY 
2018

    In general, the operating prospective payment rate for all 
hospitals (including hospitals in Puerto Rico) paid under the IPPS, 
except SCHs, for FY 2018 equals the Federal rate (which includes 
uncompensated care payments).
    SCHs are paid based on whichever of the following rates yields 
the greatest aggregate payment: The Federal national rate (which, as 
discussed in section V.G. of the preamble of this proposed 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 2018 equals the 
higher of the applicable

[[Page 20178]]

Federal rate, or the hospital-specific rate as described below.

1. Operating and Capital Federal Payment Rate and Outlier Payment 
Calculation

    Note: The formula below is used for actual claim payment and is 
also used by CMS to project the outlier threshold for the upcoming 
fiscal year. The difference is the source of some of the variables 
in the formula. For example, operating and capital CCRs for actual 
claim payment are from the PSF while CMS uses an adjusted CCR (as 
described above) to project the threshold for the upcoming fiscal 
year. In addition, charges for a claim payment are from the bill 
while charges to project the threshold are from the MedPAR data with 
an inflation factor applied to the charges (as described earlier).
    Step 1--Determine the MS-DRG and MS-DRG relative weight for each 
claim based on the ICD-10-CM procedure and diagnosis codes on the 
claim.
    Step 2--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 3--Compute the operating and capital Federal payment rate:

--Federal Payment Rate for Operating Costs = MS-DRG Relative Weight 
x [(Labor-Related Applicable Standardized Amount x Applicable CBSA 
Wage Index) + (Nonlabor-Related Applicable Standardized Amount x 
Cost-of-Living Adjustment)] x (1 + IME + (DSH * 0.25))
--Federal Payment for Capital Costs = MS-DRG Relative Weight x 
Federal Capital Rate x Geographic Adjustment Fact x (l + IME + DSH)

    Step 4--Determine operating and capital costs:

--Operating Costs = (Billed Charges x Operating CCR)
--Capital Costs = (Billed Charges x Capital CCR).

    Step 5--Compute operating and capital outlier threshold (CMS 
applies a geographic adjustment to the operating and capital outlier 
threshold to account for local cost variation):

--Operating CCR to Total CCR = (Operating CCR)/(Operating CCR + 
Capital CCR)
--Operating Outlier Threshold = [Fixed Loss Threshold x ((Labor-
Related Portion x CBSA Wage Index) + Nonlabor-Related portion)] x 
Operating CCR to Total CCR + Federal Payment with IME, DSH + 
Uncompensated Care Payment + New Technology Add-On Payment Amount
--Capital CCR to Total CCR = (Capital CCR)/(Operating CCR + Capital 
CCR)
--Capital Outlier Threshold = (Fixed Loss Threshold x Geographic 
Adjustment Factor x Capital CCR to Total CCR) + Federal Payment with 
IME and DSH

    Step 6--Compute operating and capital outlier payments:

--Marginal Cost Factor = 0.80 or 0.90 (depending on the MS-DRG)
--Operating Outlier Payment = (Operating Costs-Operating Outlier 
Threshold) x Marginal Cost Factor
--Capital Outlier Payment = (Capital Costs--Capital Outlier 
Threshold) x Marginal Cost Factor

    The payment rate may then be further adjusted 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 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. Payments also may be reduced by the 1-percent 
adjustment under the HAC Reduction Program as described in section 
1886(p) of the Act. We also make new technology add-on payments in 
accordance with section 1886(d)(5)(K) and (L) of the Act. Finally, 
we add the uncompensated care payment to the total claim payment 
amount. As noted in the formula above, we take uncompensated care 
payments and new technology add-on payments into consideration when 
calculating outlier payments.

2. Hospital-Specific Rate (Applicable Only to SCHs)

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; 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. As 
noted above, under section 205 of the Medicare Access and CHIP 
Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, enacted on 
April 16, 2015), the MDH program is set to expire at the end of FY 
2017.
    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).

b. Updating the FY 1982, FY 1987, FY 1996, FY 2002 and FY 2006 
Hospital-Specific Rate for FY 2018

    Section 1886(b)(3)(B)(iv) of the Act provides that the 
applicable percentage increase applicable to the hospital-specific 
rates for SCHs equals the applicable percentage increase set forth 
in section 1886(b)(3)(B)(i) of the Act (that is, the same update 
factor as for all other hospitals subject to the IPPS). Because the 
Act sets the update factor for SCHs equal to the update factor for 
all other IPPS hospitals, the update to the hospital-specific rates 
for SCHs 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 proposed applicable percentage increases to 
the hospital-specific rates applicable to SCHs are the following:

----------------------------------------------------------------------------------------------------------------
                                                     Hospital        Hospital      Hospital did    Hospital did
                                                     submitted       submitted      NOT submit      NOT submit
                                                   quality data    quality data    quality data    quality data
                     FY 2018                         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
----------------------------------------------------------------------------------------------------------------
Proposed Market Basket                                      2.9            2.9             2.9             2.9
 Rate[dash]of[dash]Increase.....................
Proposed Adjustment for Failure to Submit                   0.0            0.0            -0.725          -0.725
 Quality Data under Section 1886(b)(3)(B)(viii)
 of the Act.....................................
Proposed Adjustment for Failure to be a                     0.0           -2.175           0.0            -2.175
 Meaningful EHR User under Section
 1886(b)(3)(B)(ix) of the Act...................
Proposed MFP Adjustment under Section                      -0.4           -0.4            -0.4            -0.4
 1886(b)(3)(B)(xi) of the Act...................
Statutory Adjustment under Section                         -0.75          -0.75           -0.75           -0.75
 1886(b)(3)(B)(xii) of the Act..................
Proposed Applicable Percentage Increase Applied             1.75          -0.425           1.025          -1.15
 to Hospital-Specific Rate......................
----------------------------------------------------------------------------------------------------------------

    For a complete discussion of the applicable percentage increase 
applied to the hospital-specific rates for SCHs, we refer readers to 
section V.B. of the preamble of this proposed rule.
    In addition, because SCHs 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, the hospital-specific rate for an SCH is adjusted by the 
proposed MS-DRG reclassification and recalibration

[[Page 20179]]

budget neutrality factor of 0.997573, as discussed in section III. 
of this Addendum. The resulting rate is used in determining the 
payment rate that an SCH will receive for its discharges beginning 
on or after October 1, 2017. We note that, in this proposed rule, 
for FY 2018, we are not proposing to make a documentation and coding 
adjustment to the hospital-specific rate. We refer readers to 
section II.D. of the preamble of this proposed rule for a complete 
discussion regarding our proposed 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.
    Also, as discussed in section V.M. of the preamble of this 
proposed rule, we are including a factor of (1/1.006) in the 
calculation of the FY 2018 hospital-specific rates. Specifically, in 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 57058 through 57060), 
using our authority under section 1886(d)(5)(I)(i) of the Act, we 
finalized a policy to include a permanent factor of (1/0.998) and a 
temporary one-time factor of (1.006) in the calculation of the FY 
2017 hospital-specific rates and to include a factor of (1/1.006) in 
the calculation of the FY 2018 hospital-specific rates to remove the 
temporary one-time factor of 1.006 applied in FY 2017 to address the 
effects of the 0.2 percent reduction to the rates for the 2-midnight 
policy in effect for FY 2014, FY 2015, and FY 2016. Therefore, in 
this proposed rule, for FY 2018, we are removing the temporary one-
time prospective increase to the FY 2017 hospital-specific rates of 
0.6 percent or a factor of 1.006.

III. Proposed Changes to Payment Rates for Acute Care Hospital 
Inpatient Capital-Related Costs for FY 2018

    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 are proposing 
to use to determine the capital Federal rate for FY 2018, which 
would be effective for discharges occurring on or after October 1, 
2017.
    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 payments to hospitals located in 
Puerto Rico under the IPPS for acute care hospital inpatient 
capital-related costs. In the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57061 through 57062), we revised Sec.  412.374 to add paragraph 
(e) to provide that, effective with discharges on or after October 
1, 2016, capital IPPS payments to hospitals located in Puerto Rico 
are based on 100 percent of the Federal rate.

A. Determination of the Proposed Federal Hospital Inpatient 
Capital-Related Prospective Payment Rate Update for FY 2018

    In the discussion that follows, we explain the factors that we 
are proposing to use to determine the capital Federal rate for FY 
2018. In particular, we explain why the proposed FY 2018 capital 
Federal rate would increase approximately 1.03 percent, compared to 
the FY 2017 capital Federal rate. As discussed in the impact 
analysis in Appendix A to this proposed rule, we estimate that 
capital payments per discharge would increase approximately 2.4 
percent during that same period. Because capital payments constitute 
approximately 10 percent of hospital payments, a percent change in 
the capital Federal rate yields only approximately a 0.1 percent 
change in actual payments to hospitals.

1. Proposed 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 change as appropriate each year for case-mix 
index-related changes, for intensity, and for errors in previous 
CIPI forecasts. The proposed update factor for FY 2018 under that 
framework is 1.2 percent based on a projected 1.2 percent increase 
in the proposed 2014-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 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 proposed FY 2018 CIPI projection 
in that same section of this Addendum. Below we describe the policy 
adjustments that we are proposing to apply in the update framework 
for FY 2018.
    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 equal percentage increase in 
hospital payments.
    The case-mix index can change for any of several reasons:
     The average resource use of Medicare patient 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 2018, 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 2018. 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, 
the proposed net adjustment for case-mix change in FY 2018 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

[[Page 20180]]

example, we have data available to evaluate the effects of the FY 
2016 DRG reclassification and recalibration as part of our proposed 
update for FY 2018. We estimate that FY 2016 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, we are proposing to make a 0.0 percentage point 
adjustment for reclassification and recalibration in the update 
framework for FY 2018.
    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 0.2 percentage 
point was calculated for the FY 2016 update, for which there are 
historical data. That is, current historical data indicate that the 
forecasted FY 2016 CIPI (1.3 percent) used in calculating the FY 
2016 update factor was 0.2 percentage points higher than actual 
realized price increases (1.1 percent). However, as this does not 
exceed the 0.25 percentage point threshold, we are proposing not to 
make an adjustment for forecast error in the update for FY 2018.
    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 changes 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 change 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 proposed rule, we are proposing to continue to use a 
Medicare-specific intensity measure that is based on a 5-year 
adjusted average of cost per discharge for FY 2018 (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 2018, we are proposing to use an intensity 
measure that is based on an average of cost per discharge data from 
the 5-year period beginning with FY 2011 and extending through FY 
2015. Based on these data, we estimated that case-mix constant 
intensity declined during FYs 2011 through 2015. 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 will decline 
during that 5-year period, we believe it is appropriate to continue 
to apply a zero intensity adjustment for FY 2018. Therefore, we are 
proposing to make a 0.0 percentage point adjustment for intensity in 
the update for FY 2018.
    Above, we described the basis of the components we are proposing 
to use to develop the proposed 1.2 percent capital update factor 
under the capital update framework for FY 2018 as shown in the 
following table.

     CMS Proposed FY 2018 Update Factor to the Capital Federal Rate
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Capital Input Price Index *......................................    1.2
Intensity:.......................................................    0.0
Case-Mix Adjustment Factors:
    Real Across DRG Change.......................................    0.5
    Projected Case-Mix Change....................................    0.5
                                                                  ------
    Subtotal.....................................................    1.2
Effect of FY 2016 Reclassification and Recalibration.............    0.0
Forecast Error Correction........................................    0.0
                                                                  ------
    Total Proposed Update........................................    1.2
------------------------------------------------------------------------
* The capital input price index represents the proposed 2014-based CIPI.

b. Comparison of CMS and MedPAC Update Recommendation

    In its March 2017 Report to Congress, MedPAC did not make a 
specific update recommendation for capital IPPS payments for FY 
2018. (We refer readers to MedPAC's Report to the Congress: Medicare 
Payment Policy, March 2017, Chapter 3, available on the Web site at: 
http://www.medpac.gov.)

2. Proposed 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 2017, we estimated that outlier payments for capital 
would equal 6.14 percent of inpatient capital-related payments based 
on the capital Federal rate in FY 2017. Based on the thresholds as 
set forth in section II.A. of this Addendum, we estimate that 
outlier payments for capital-related costs would equal 5.66 percent 
for inpatient capital-related payments based on the capital Federal 
rate in FY 2018. Therefore, we are proposing to apply an outlier 
adjustment factor of 0.9434 in determining the capital Federal rate 
for FY 2018. Thus, we estimate that the percentage of capital 
outlier payments to total capital Federal rate payments for FY 2018 
will be lower than the percentage for FY 2017.
    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 proposed FY 2018 outlier 
adjustment of 0.9434 is a 0.51 percent change from the FY 2017 
outlier adjustment of 0.9386. Therefore, the net change in the 
proposed outlier adjustment to the capital Federal rate for FY 2018 
is 1.0051(0.9434/0.9386). Thus, the proposed outlier adjustment 
would increase the FY 2018 capital Federal rate by 0.51 percent 
compared to the FY 2017 outlier adjustment.

3. Proposed 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. The 
budget neutrality factor for DRG reclassifications and recalibration 
nationally is applied in determining the capital IPPS Federal rate, 
and is applicable for all hospitals, including those hospitals 
located in Puerto Rico.
    To determine the proposed national capital rate factors for FY 
2018, we compared estimated aggregate capital Federal rate payments 
based on the FY 2017 MS-DRG classifications and relative weights and 
the FY 2017 GAF to estimated aggregate capital Federal rate payments 
based on the FY 2017 MS-DRG classifications and relative weights and 
the proposed FY 2018 GAFs. To achieve budget neutrality for the 
changes in the national GAFs, based on calculations using updated 
data, we are proposing to apply an incremental budget neutrality 
adjustment factor of 0.9997 for FY 2018 to the previous cumulative 
FY 2017 adjustment factor of 0.9850, yielding an adjustment factor 
of 0.9847 through FY 2018.
    We then compared estimated aggregate capital Federal rate 
payments based on the FY 2017 MS-DRG relative weights and the

[[Page 20181]]

proposed FY 2018 GAFs to estimated aggregate capital Federal rate 
payments based on the cumulative effects of the proposed FY 2018 MS-
DRG classifications and relative weights and the proposed FY 2018 
GAFs. The proposed incremental adjustment factor for DRG 
classifications and changes in relative weights is 0.9994. The 
proposed cumulative adjustment factor for MS-DRG classifications and 
changes in relative weights and for changes in the GAFs through FY 
2018 is 0.9842. (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 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 proposed cumulative adjustment factor of 0.9992 (the product 
of the proposed incremental national GAF budget neutrality 
adjustment factor of 0.9997 and the proposed 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 2018 geographic 
reclassification decisions made by the MGCRB compared to FY 2017 
decisions. However, it does not account for changes in payments due 
to changes in the DSH and IME adjustment factors.
    As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57062), we made an adjustment of (1/0.998) to the national capital 
Federal rate to remove the 0.2 percent reduction (an adjustment 
factor of 0.998) to the national capital Federal rate to offset the 
estimated increase in capital IPPS expenditures associated with the 
2-midnight policy. This was consistent with the adjustment to the 
operating IPPS standardized amount and the hospital-specific payment 
rates. In addition, consistent with the approach for the operating 
IPPS standardized amount and hospital-specific payment rates and for 
the reasons discussed in the FY 2017 IPPS/LTCH PPS final rule, we 
made a one-time prospective adjustment of 1.006 in FY 2017 to the 
national capital Federal rate to address the effect of the 0.2 
percent reduction to the national capital Federal rates in effect 
for FY 2014, FY 2015, and FY 2016. Furthermore, as provided for in 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 57294) we are removing 
this one-time prospective adjustment through an adjustment of (1/
1.006) to the national capital Federal rate in FY 2018, consistent 
with the approach for the operating IPPS standardized amount and 
hospital-specific payment rates (as discussed in section V.M. of the 
preamble of this proposed rule). We refer readers to sections V.M. 
and VI.C. of the preamble of this proposed rule for a complete 
discussion of these issues.

4. Proposed Capital Federal Rate for FY 2018

    For FY 2017, we established a capital Federal rate of $446.79 
(81 FR 68947 through 68949 (Correction Notice)). We are proposing to 
establish an update of 1.2 percent in determining the FY 2018 
capital Federal rate for all hospitals. As a result of this proposed 
update, the proposed budget neutrality factors discussed earlier, 
and the adjustment to remove the one-time 0.6 percent adjustment 
made in FY 2017 to address the effect of the 0.2 percent reduction 
to the national capital Federal rates in effect for FY 2014, FY 
2015, and FY 2016, as finalized in the FY 2017 IPPS/LTCH final rule 
(81 FR 57294), we are proposing to establish a national capital 
Federal rate of $451.37 for FY 2018. The proposed national capital 
Federal rate for FY 2018 was calculated as follows:
     The proposed FY 2018 update factor is 1.0120; that is, 
the proposed update is 1.2[deg] percent.
     The proposed FY 2018 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 0.9992.
     The proposed FY 2018 outlier adjustment factor is 
0.9434.
     The 2-midnight policy adjustment to remove the one-time 
0.6 percent adjustment is 1/1.006.
    (We note that, as discussed in section VI.C. of the preamble of 
this proposed rule, we are not making an additional MS-DRG 
documentation and coding adjustment to the capital IPPS Federal rate 
for FY 2018.)
    Because the FY 2018 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 
proposing to make additional adjustments in the capital Federal rate 
for these factors, other than the proposed 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 
proposed factors and adjustments for FY 2018 affects the computation 
of the proposed FY 2018 national capital Federal rate in comparison 
to the FY 2017 national capital Federal rate. The proposed FY 2018 
update factor has the effect of increasing the capital Federal rate 
by 1.02[deg] percent compared to the FY 2017 capital Federal rate. 
The proposed GAF/DRG budget neutrality adjustment factor has the 
effect of decreasing the capital Federal rate by 0.08[deg] percent. 
The proposed FY 2018 outlier adjustment factor has the effect of 
increasing the capital Federal rate by 0.51 percent compared to the 
FY 2017 capital Federal rate. The removal of the one-time 0.6 
percent adjustment for FY 2017 relating to the 2-midnight policy has 
the effect of decreasing the capital Federal rate by 0.60 percent. 
The combined effect of all the proposed changes would increase the 
proposed national capital Federal rate by approximately 1.03[deg] 
percent compared to the FY 2017 national capital Federal rate.

  Comparison of Factors and Adjustments: FY 2017 Capital Federal Rate and FY 2018 Proposed Capital Federal Rate
----------------------------------------------------------------------------------------------------------------
                                                                Proposed  FY      Proposed     Proposed  percent
                                                   FY 2017          2018           change            change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\............................          1.0090          1.0120          1.0120               1.20
GAF/DRG Adjustment Factor \1\................          0.9990          0.9992          0.9992              -0.08
Outlier Adjustment Factor \2\................          0.9386          0.9434          1.0051               0.51
Removal of One-Time 2-Midnight Policy                  1.0060         1/1.006          0.9940               -0.6
 Adjustment Factor...........................
Capital Federal Rate.........................         $446.79         $451.37          1.0103           \3\ 1.03
----------------------------------------------------------------------------------------------------------------
\1\ The update factor and the GAF/DRG budget neutrality adjustment factors are built permanently into the
  capital Federal rates. Thus, for example, the proposed incremental change from FY 2017 to FY 2018 resulting
  from the application of the proposed 0.9992 GAF/DRG budget neutrality adjustment factor for FY 2018 is a
  proposed net change of 0.9992 (or -0.08 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 proposed net change
  resulting from the application of the proposed FY 2018 outlier adjustment factor is 0.9434/0.9386 or 1.0051
  (or 0.51 percent).
\3\ Proposed percent change may not sum due to rounding.


[[Page 20182]]

    In this proposed rule, we also are providing the following chart 
that shows how the proposed FY 2018 capital Federal rate differs 
from the final FY 2017 capital Federal rate as presented in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57291 through 57295) as 
corrected in the Correction Notice published October 5, 2016 (81 FR 
68954).

 Comparison of Factors and Adjustments: Proposed FY 2018 Capital Federal Rate and Final FY 2017 Capital Federal
                                                      Rate
----------------------------------------------------------------------------------------------------------------
                                                                   Proposed  FY
                                                  Final  FY 2017       2018           Change      Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\...............................          1.0090          1.0120          1.0120            1.20
GAF/DRG Adjustment Factor \1\...................          0.9990          0.9992          0.9992           -0.08
Outlier Adjustment Factor \2\...................          0.9386          0.9434          1.0051            0.51
Permanent 2-midnight Policy Adjustment Factor...           1.002             N/A           1.000            0.00
One-Time 2-midnight Policy Adjustment Factor....           1.006         1/1.006          0.9940           -0.60
Capital Federal Rate............................         $446.79         $451.37          1.0103            1.03
----------------------------------------------------------------------------------------------------------------

B. Calculation of the Inpatient Capital-Related Prospective 
Payments for FY 2018

    For purposes of calculating payments for each discharge during 
FY 2018, 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 proposed outlier thresholds for FY 
2018 are in section II.A. of this Addendum. For FY 2018, 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 $26,713.
    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. For this FY 2018 IPPS/
LTCH PPS proposed rule, we are proposing to rebase and revise the 
IPPS operating and capital market baskets to reflect a 2014 base 
year. For a complete discussion of this proposed rebasing, we refer 
readers to section IV. of the preamble of this proposed rule.

2. Forecast of the CIPI for FY 2018

    Based on IHS Global Insight, Inc.'s fourth quarter 2016 
forecast, for this proposed rule, we are forecasting the proposed 
2014-based CIPI to increase 1.2 percent in FY 2018. This reflects a 
projected 1.6 percent increase in vintage-weighted depreciation 
prices (building and fixed equipment, and movable equipment), and a 
projected 3.2 percent increase in other capital expense prices in FY 
2018, partially offset by a projected 1.6 percent decline in 
vintage-weighted interest expense prices in FY 2018. The weighted 
average of these three factors produces the forecasted 1.2 percent 
increase for the proposed 2014-based CIPI in FY 2018.

IV. Proposed Changes to Payment Rates for Excluded Hospitals: Proposed 
Rate-of-Increase Percentages for FY 2018

    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), religious nonmedical health care 
institutions (RNHCIs) are also subject to the rate-of-increase 
limits established under Sec.  413.40 of the regulations.)
    In this FY 2018 IPPS/LTCH PPS proposed rule, the proposed FY 
2018 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 2018, in accordance with applicable regulations at Sec.  
413.40. Based on IHS Global Insight, Inc.'s 2016 fourth quarter 
forecast, we estimate that the proposed 2014-based IPPS operating 
market basket update for FY 2018 is 2.9 percent (that is, the 
estimate of the market basket rate-of-increase). However, we are 
proposing that if more recent data become available for the final 
rule, we would use them to calculate the IPPS operating market 
basket update for FY 2018. Therefore, 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 proposed FY 
2018 rate-of-increase percentage that would be applied to the FY 
2017 target amounts in order to determine the FY 2018 target amounts 
is 2.9 percent.
    The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. 
We refer readers to section VIII. of the preamble of this proposed 
rule and section V. of the Addendum to this proposed rule for the 
proposed update changes to the Federal payment rates for LTCHs under 
the LTCH PPS for FY 2018. The annual updates for the IRF PPS and the 
IPF PPS are issued by the agency in separate Federal Register 
documents.

V. Proposed Changes to the Payment Rates for the LTCH PPS for FY 2018

A. Proposed LTCH PPS Standard Federal Payment Rate for 2018

1. Overview

    In section VIII. of the preamble of this proposed rule, we 
discuss our proposed annual updates to the payment rates, factors, 
and specific policies under the LTCH PPS for FY 2018.
    Under Sec.  412.523(c)(3)(ii) of the regulations, for LTCH PPS 
rate years beginning with RY 2004 through RY 2006, we updated the 
standard Federal payment rate annually by a factor to adjust for the 
most recent estimate of the increases in prices of an appropriate

[[Page 20183]]

market basket of goods and services for LTCHs. We established this 
policy of annually updating the standard Federal payment rate 
because, at that time, we believed that was the most appropriate 
method for updating the 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 payment 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 payment 
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 payment 
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 
payment 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 payment rate 
as set forth in the regulations at Sec.  412.523(c)(3)(iv) through 
(c)(3)(vii). For FYs 2012 through 2017, we updated the standard 
Federal payment rate by the most recent estimate of the LTCH PPS 
market basket at that time, including additional statutory 
adjustments required by sections 1886(m)(3)(A)(i) (citing sections 
1886(b)(3)(B)(xi)(II), 1886(m)(3)(A)(ii), and 1886(m)(4) of the Act 
as set forth in the regulations at Sec.  412.523(c)(3)(viii) through 
(c)(3)(xiii)).
    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 
payment 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 VIII.E.2. of the 
preamble of this proposed 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 VIII.C.2.b. of the 
preamble of this proposed 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.)
    Notwithstanding those provisions, however, section 411(e) of 
Public Law 114-10 (the MACRA) requires a 1.0 percent update in FY 
2018.
    For FY 2017, consistent with our historical practice, we 
established an update to the LTCH PPS standard Federal payment rate 
based on the full estimated LTCH PPS market basket increase of 2.8 
percent and the 1.05 percentage point reductions required by 
sections 1886(m)(3)(A)(i) and 1886(m)(3)(A)(ii) with 1886(m)(4)(F) 
of the Act. Accordingly, at Sec.  412.523(c)(3)(xiii) of the 
regulations, we established an annual update of 1.75 percent to the 
standard Federal payment rate for FY 2017 (81 FR 57296 through 
57297). In addition, as discussed in that same final rule, the 
annual update for FY 2017 was further reduced by 2.0 percentage 
points for LTCHs that failed to submit quality reporting data in 
accordance with the requirements of the LTCH QRP under section 
1886(m)(5) of the Act.
    Section 411(e) of the MACRA amended section 1886(m)(3) of the 
Act by providing an additional special rule for FY 2018. 
Specifically, as amended, section 1886(m)(3)(C) of the Act requires 
that the annual update for FY 2018, after applications of the 
reductions for the MFP adjustment and the ``other adjustment'' 
(under section 1886(m)(3)(A)) is 1 percent. (For additional details, 
refer to section VIII.C.2. of the preamble of this proposed rule.) 
Accordingly, in this proposed rule, we are proposing an annual 
update to the LTCH PPS standard Federal payment rate of 1.0 percent 
for FY 2018 as required by section 411(e)(2) of the MACRA. For LTCHs 
that fail to submit the required quality reporting data for FY 2017 
in accordance with the LTCH QRP, the annual update is reduced by 2.0 
percentage points as required by section 1886(m)(5) of the Act. 
Accordingly, we are proposing an annual update to the LTCH PPS 
standard Federal payment rate of -1.0 percent for LTCHs that fail to 
submit the required quality reporting data for FY 2018 (that is, the 
proposed full update of 1.0 percent 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 Proposed FY 2018 LTCH PPS Standard Federal 
Payment Rate

    Consistent with our historical practice, for FY 2018, we are 
proposing to apply the annual update to the LTCH PPS standard 
Federal payment rate from the previous year. Furthermore, in 
determining the proposed LTCH PPS standard Federal payment rate for 
FY 2018, we also are proposing to make certain regulatory 
adjustments, consistent with past practices. Specifically, in 
determining the proposed FY 2018 LTCH PPS standard Federal payment 
rate, we are proposing to apply a budget neutrality adjustment 
factor for the proposed changes related to the area wage adjustment 
(that is, proposed changes to the wage data and proposed labor-
related share) in accordance with Sec.  412.523(d)(4) and a proposed 
budget neutrality adjustment factor for the proposed change to the 
SSO payment methodology (discussed in VIII.D. of the preamble of 
this proposed rule).
    For FY 2017, we established an annual update to the LTCH PPS 
standard Federal payment rate of 1.75 percent based on the full 
estimated LTCH PPS market basket increase of 2.8 percent, less the 
MFP adjustment of 0.3 percentage point consistent with section 
1886(m)(3)(A)(i) of the Act and less the 0.75 percentage point 
required by sections 1886(m)(3)(A)(ii) and (m)(4)(F) of the Act. 
Accordingly, at Sec.  412.523(c)(3)(xiii), we established an annual 
update to the LTCH PPS standard Federal payment rate for FY 2017 of 
1.75 percent. That is, we applied an update factor of 1.0175 to the 
FY 2016 Federal rate of $41,762.85 to determine the FY 2017 LTCH PPS 
standard Federal payment rate. We also applied an area wage level 
budget neutrality factor for FY 2017 of 0.999593 to the LTCH PPS 
standard Federal payment 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 an LTCH 
PPS standard Federal payment rate for FY 2017 of $42,476.41 
(calculated as $41,762.85 x 1.0175 x 0.999593) (81 FR 57297).
    In this proposed rule, as required by statute, we are proposing 
an annual update to the LTCH PPS standard Federal payment rate of 
1.0 percent for FY 2018 (as described above). Accordingly, under 
Sec.  412.523(c)(3)(xiii), we are proposing to apply a factor of 
1.01 to the FY 2017 LTCH PPS standard Federal payment rate of 
$42,476.41 to determine the proposed FY 2018 LTCH PPS standard 
Federal payment rate. Also, under proposed Sec.  412.523(c)(3)(iv), 
in conjunction with the provisions of Sec.  412.523(c)(4), we are 
proposing to apply an annual update to the LTCH PPS standard Federal 
payment rate of -1.0 percent (that is, a proposed update factor of 
0.99) for FY 2018 for LTCHs that fail to submit the required quality 
reporting data for FY 2018 as required under the LTCH QRP. 
Consistent with Sec.  412.523(d)(4), we also are proposing to apply 
an area wage level budget neutrality factor to the proposed FY 2018 
LTCH PPS standard Federal payment rate of 1.000077, based on the 
best available data at this time, to ensure that any proposed 
changes to the area wage level adjustment (that is, the proposed 
annual update of the wage index values and labor-related share) 
would not result in any change (increase or decrease) in estimated 
aggregate LTCH PPS standard Federal rate payments. Finally, we are 
proposing a budget neutrality adjustment of 0.9672 for our proposed 
changes to the SSO payment methodology (discussed in VIII.D. of the 
preamble of this proposed rule). Accordingly, we are proposing an 
LTCH PPS standard Federal payment rate of $41,497.20 (calculated as 
$42,476.41 x 1.01 x 1.000077

[[Page 20184]]

x 0.9672) for FY 2018. For LTCHs that fail to submit quality 
reporting data for FY 2018, in accordance with the requirements of 
the LTCHQRP under section 1886(m)(5) of the Act, we are proposing an 
LTCH PPS standard Federal payment rate of $40,675.49 (calculated as 
$42,476.41 x 0.99 x 1.000077 x 0.9672) for FY 2018.

B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for 
FY 2018

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 payment 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 payment 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. Proposed 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 (MSA) (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. (Information on OMB's MSA delineations 
based on the 2010 standards can be found at: https://www.obamawhitehouse.archives.gov/sites/default/files/omb/assets/fedreg_2010/06282010_metro_standards-Complete.pdf).
    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 
OMB labor market area delineations based on the 2010 Decennial 
Census data. 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. We adopted these 
labor market area delineations because they 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. Generally, OMB issues major revisions 
to statistical areas every 10 years, based on the results of the 
decennial census. However, OMB occasionally issues minor updates and 
revisions to statistical areas in the years between the decennial 
censuses. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56913 through 56914), OMB issued OMB Bulletin No. 15-01 on July 
15, 2015 to update and supersede Bulletin No. 13-10. Bulletin No. 
15-01 and its attachment provide detailed information on the update 
to statistical areas since the February 28, 2013 release of Bulletin 
No. 13-10 and are based on the application of the 2010 Standards for 
Delineating Metropolitan and Micropolitan Statistical Areas to 
Census Bureau population estimates for July 1, 2012, and July 1, 
2013. A copy of this bulletin may be obtained on the Web site at: 
https://obamawhitehouse.archives.gov/sites/default/files/omb/bulletins/2015/15-01.pdf.
    We believe that these revisions to the 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 (81 FR 57298). Therefore, we are proposing to 
continue to use the CSBA-based labor market area delineations 
adopted under the LTCH PPS, effective October 1, 2017 (as adopted in 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 57298)). Moreover, the 
proposed FY 2018 LTCH PPS wage index values in Tables 12A and 12B 
listed in section VI. of the Addendum of this proposed rule (which 
are available via the Internet on the CMS Web site) reflect the 
revisions to the CBSA-based labor market area delineations described 
above. We note that, as discussed in section III.A.2. of the 
preamble of this proposed rule, the revisions to the CBSA-based 
delineations also were adopted under the IPPS, effective beginning 
October 1, 2016.

3. Proposed 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 
standard Federal payment rate 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 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, beginning in FY 2013, we 
determined the labor-related share annually as the sum of the 
relative importance of each labor-related cost category of the 2009-
based LTCH-specific market basket for the respective fiscal year 
based on the best available data. (For more details, we refer 
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53477 through 
53479).) As noted previously, we rebased and revised the 2009-based 
LTCH-specific market basket to reflect a 2013 base year. In 
conjunction with that policy, as discussed in section VIII.C. of the 
preamble of this proposed rule, we are proposing to establish that 
the LTCH PPS labor-related share for FY 2018 is the sum of the FY 
2018 relative importance of each labor-related cost category in the 
2013-based LTCH market basket using the most recent available data. 
Specifically, we are proposing to establish that the labor-related 
share for FY 2018 would include the sum of the labor-related portion 
of operating costs from the 2013-based LTCH market basket (that is, 
the sum of the FY 2018 relative importance share of Wages and 
Salaries; Employee Benefits; Professional Fees: Labor-Related; 
Administrative and Facilities Support Services; Installation, 
Maintenance, and Repair Services; All Other: Labor-related Services) 
and a portion of the Capital-Related cost weight from the 2013-based 
LTCH PPS market basket. Based on IGI's fourth quarter 2016 forecast 
of the 2013-based LTCH market basket, we are proposing to establish 
a labor-related share under the LTCH PPS for FY 2018 of 66.3 
percent. This labor-related share is determined using the same 
methodology as employed in calculating all previous LTCH

[[Page 20185]]

PPS labor-related shares. Consistent with our historical practice, 
we also are proposing that if more recent data become available, we 
would use that data, if appropriate, to determine the final FY 2018 
labor-related share in the final rule.
    The proposed labor-related share for FY 2018 is the sum of the 
FY 2018 relative importance of each labor-related cost category, and 
would reflect the different rates of price change for these cost 
categories between the base year (2013) and FY 2018. The sum of the 
relative importance for FY 2018 for operating costs (Wages and 
Salaries; Employee Benefits; Professional Fees: Labor-Related; 
Administrative and Facilities Support Services; Installation, 
Maintenance, and Repair Services; All Other: Labor-Related Services) 
is 62.1 percent. The portion of capital-related costs that is 
influenced by the local labor market is estimated to be 46 percent 
(the same percentage applied to the 2009-based LTCH-specific market 
basket). Because the relative importance for capital-related costs 
under our policies is 9.2 percent of the 2013-based LTCH market 
basket in FY 2018, we are proposing to take 46 percent of 9.2 
percent to determine the labor-related share of capital-related 
costs for FY 2018 (0.46 x 9.2). The result is 4.2 percent, which we 
added to 62.1 percent for the operating cost amount to determine the 
total proposed labor-related share for FY 2018. Therefore, we are 
proposing that the labor-related share under the LTCH PPS for FY 
2018 is 66.3 percent.

4. Proposed Wage Index for FY 2018 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 2017 IPPS/LTCH PPS final rule (81 FR 57299 through 
57301), we calculated the FY 2017 LTCH PPS area wage index values 
using the same data used for the FY 2017 acute care hospital IPPS 
(that is, data from cost reporting periods beginning during FY 
2013), 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 2017 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 areas where there are no IPPS 
wage data.
    Consistent with our historical methodology, as discussed in this 
FY 2018 IPPS/LTCH PPS proposed rule, to determine the applicable 
area wage index values for the FY 2018 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, we are proposing to use 
wage data collected from cost reports submitted by IPPS hospitals 
for cost reporting periods beginning during FY 2014, without taking 
into account geographic reclassification under sections 1886(d)(8) 
and 1886(d)(10) of the Act, because these data are the most recent 
complete data available. We also note that these are the same data 
we are using to compute the FY 2018 acute care hospital inpatient 
wage index, as discussed in section III. of the preamble of this 
proposed rule. We are proposing to compute the proposed FY 2018 LTCH 
PPS standard Federal payment rate area wage index values consistent 
with the ``urban'' and ``rural'' geographic classifications (that 
is, labor market area delineations, including the proposed updates, 
as previously discussed in section V.B. 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. We also are 
proposing to continue 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, consistent with our existing methodology 
for determining the LTCH PPS wage index values, for FY 2018, we are 
proposing to continue 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 2014 IPPS wage data that we are proposing to use 
to determine the proposed FY 2018 LTCH PPS standard Federal payment 
rate area wage index values in this proposed 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 
proposed FY 2018 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 proposed 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 2014 IPPS wage data that we are proposing to use 
to determine the proposed FY 2018 LTCH PPS standard Federal payment 
rate area wage index values in this proposed rule, there are no 
rural areas without IPPS hospital wage data. Therefore, it is not 
necessary to use our established methodology to calculate a proposed 
LTCH PPS standard Federal payment rate wage index value for proposed 
rural areas with no IPPS wage data for FY 2018. 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 proposed 
FY 2018 LTCH PPS standard Federal payment rate wage index values 
that would be applicable for LTCH PPS standard Federal payment rate 
discharges occurring on or after October 1, 2017, through September 
30, 2018, 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 proposed rule and available via the Internet on the CMS Web 
site.

5. Proposed Budget Neutrality Adjustment for Proposed 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 
payment 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 payment 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 proposed rule, for FY 2018 LTCH PPS standard Federal 
payment rate cases, in accordance with Sec.  412.523(d)(4), we are 
proposing to apply an area wage level adjustment budget neutrality 
factor to adjust the LTCH PPS standard Federal payment rate to 
account for the estimated effect of the proposed 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, we are proposing to 
determine an area wage level adjustment

[[Page 20186]]

budget neutrality factor that would be applied to the LTCH PPS 
standard Federal payment rate under Sec.  412.523(d)(4) for FY 2018 
using the following methodology:
    Step 1--We simulated estimated aggregate LTCH PPS standard 
Federal payment rate payments using the FY 2017 wage index values 
and the FY 2017 labor-related share of 66.5 percent (as established 
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57099 and 57100)).
    Step 2--We simulated estimated aggregate LTCH PPS standard 
Federal payment rate payments using the proposed FY 2018 wage index 
values (as shown in Tables 12A and 12B listed in the Addendum to 
this proposed rule and available via the Internet on the CMS Web 
site) and the proposed FY 2018 labor-related share of 66.3 percent 
(based on the latest available data as previously discussed 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 
2017 area wage level adjustments (calculated in Step 1) by the 
estimated total LTCH PPS standard Federal payment rate payments 
using the proposed FY 2018 area wage level adjustments (calculated 
in Step 2) to determine the proposed area wage level adjustment 
budget neutrality factor for FY 2018 LTCH PPS standard Federal 
payment rate payments.
    Step 4--We then applied the proposed FY 2018 area wage level 
adjustment budget neutrality factor from Step 3 to determine the 
proposed FY 2018 LTCH PPS standard Federal payment rate after the 
application of the proposed FY 2018 annual update (discussed 
previously in section V.A. of this Addendum).
    We note that, with the exception of cases subject to the 
transitional blend payment rate provisions in the first 2 years and 
certain temporary exemptions for certain spinal cord specialty 
hospitals and certain severe wound cases, 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) are 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 had been in effect at the time of 
discharge to calculate the FY 2017 LTCH PPS standard Federal payment 
rate area wage level adjustment budget neutrality factor described 
above.
    For this proposed rule, using the steps in the methodology 
previously described, we determined a proposed FY 2018 LTCH PPS 
standard Federal payment rate area wage level adjustment budget 
neutrality factor of 1.000077. Accordingly, in section V.A. of the 
Addendum to this proposed rule, to determine the proposed FY 2018 
LTCH PPS standard Federal payment rate, we are proposing to apply an 
area wage level adjustment budget neutrality factor of 1.000077, in 
accordance with Sec.  412.523(d)(4). The proposed FY 2018 LTCH PPS 
standard Federal payment rate shown in Table 1E of the Addendum to 
this proposed rule reflects this adjustment factor.

C. Proposed 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 previously described.
    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. Under our current policy, we update the COLA factors using 
the methodology described above every 4 years; the first year began 
in FY 2014. For FY 2014, we updated the COLA factors for Alaska and 
Hawaii published by OPM for 2009 using the methodology finalized in 
FY 2013. (For additional details on our current methodology for 
updating the COLA factors for Alaska and Hawaii, we refer readers to 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53481 through 53482).) 
As discussed in this proposed rule, 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.
    For FY 2018, we are proposing to continue to update 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 and implemented for the FY 2014 IPPS update. 
Specifically, we are proposing to update the 2009 OPM COLA factors 
by a comparison of the growth in the Consumer Price Indices (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). Because BLS publishes CPI data for only 
Anchorage and Honolulu, using the methodology we finalized in the FY 
2013 IPPS/LTCH PPS final rule, we use the comparison of the growth 
in the overall CPI relative to the growth in the CPI for those 
cities to update the COLA factors for all areas in Alaska and 
Hawaii, respectively. We believe that the relative price differences 
between these cities and the U.S. (as measured by the CPIs mentioned 
above) are appropriate proxies for the relative price differences 
between the ``other areas'' of Alaska and Hawaii and the United 
States.
    BLS publishes the CPI for All Items for Anchorage, Honolulu, and 
for the average U.S. city. However, consistent with our methodology 
finalized in the FY 2013 IPPS/LTCH PPS final rule, we are creating 
reweighted CPIs for each of the respective areas to reflect the 
underlying composition of the IPPS market basket nonlabor-related 
share. The current composition of the CPI for All Items for all of 
the respective areas is approximately 40 percent commodities and 60 
percent services. However, the IPPS nonlabor-related share is 
comprised of a different mix of commodities and services. Therefore, 
we create reweighted indexes for Anchorage, Honolulu, and the 
average U.S. city using the respective CPI commodities index and CPI 
services index using the approximate 55 percent commodities/45 
percent services shares obtained from the proposed 2014-based IPPS 
market basket. We create reweighted indexes using BLS data for 2009 
through 2016--the most recent data available at the time of this 
proposed rulemaking. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50985 through 50987), we created reweighted indexes based on the FY 
2010-based IPPS market basket (which was adopted for the FY 2014 
update) and BLS data for 2009 through 2012 (the most recent BLS data 
at the time of the FY 2014 IPPS/LTCH PPS rulemaking).
    We continue to believe this methodology is appropriate because 
we continue to make a COLA for LTCHs located in Alaska and Hawaii by 
multiplying the nonlabor-related portion of the LTCH PPS standard 
Federal rate by a COLA factor. We note that OPM's COLA factors were 
calculated with a statutorily mandated cap of 25 percent. As stated 
in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50987), when 
developing the COLA update methodology we finalized in the FY 2013 
IPPS/LTCH final rule, we exercised our discretionary authority to 
adjust payments to LTCHs in Alaska and Hawaii by incorporating this 
cap. In applying this finalized methodology for updating the COLA 
factors, our proposal for FY 2018 continues to use a 25-percent cap, 
as our proposal is based on OPM's COLA factors (updated by the 
methodology described earlier).
    Applying this methodology, the COLA factors that we are 
proposing to establish for FY 2018 to adjust the nonlabor related 
portion of the LTCH PPS standard Federal rate for LTCHs located in 
Alaska and Hawaii are shown in the table below. For comparison 
purposes, we also are showing the FY 2013 COLA factors (which were 
based on OPM's published COLA factors for 2009) and the COLA factors 
for FYs 2014 through 2017.

[[Page 20187]]



         Proposed Cost-of-Living Adjustment Factors for Alaska and Hawaii Under the LTCH PPS for FY 2018
----------------------------------------------------------------------------------------------------------------
                                                                                      FY 2014
                              Area                                    FY 2013       through FY      Proposed FY
                                                                                       2017            2018
----------------------------------------------------------------------------------------------------------------
Alaska:
    City of Anchorage and 80-kilometer (50-mile) radius by road.            1.23            1.23            1.25
    City of Fairbanks and 80-kilometer (50-mile) radius by road.            1.23            1.23            1.25
    City of Juneau and 80-kilometer (50-mile) radius by road....            1.23            1.23            1.25
    Rest of Alaska..............................................            1.25            1.25            1.25
Hawaii:
    City and County of Honolulu.................................            1.25            1.25            1.25
    County of Hawaii............................................            1.18            1.19            1.21
    County of Kauai.............................................            1.25            1.25            1.25
    County of Maui and County of Kalawao........................            1.25            1.25            1.25
----------------------------------------------------------------------------------------------------------------

    We note that the reweighted CPI for Honolulu, HI grew faster 
than the reweighted CPI for the average U.S. city over the 2009 to 
2016 time period at 13.7 percent and 10.5 percent, respectively. As 
a result, for FY 2018, we calculated COLA factors for the City and 
County of Honolulu, County of Kauai, and County of Maui and County 
of Kalawao to be 1.29 compared to the FY 2013 COLA factor of 1.25 
(which were based on OPM's published COLA factors for 2009, as 
described above). However, as stated above, we are applying our 
methodology as finalized in the FY 2013 IPPS/LTCH final rule to 
incorporate a cap of 1.25 for these areas. In addition, the proposed 
COLA factor we calculated for the County of Hawaii for FY 2018 is 
1.21 compared to the FY 2013 COLA factor of 1.18. The COLA factors 
adopted in FY 2014 using this same methodology can be found in the 
table above.
    Similarly, the reweighted CPI for Anchorage, AK grew faster than 
the reweighted CPI for the average U.S. city over the 2009 to 2016 
time period, at 12.4 percent and 10.5 percent, respectively. As a 
result, for FY 2018, we calculated proposed COLA factors for the 
City of Anchorage, City of Fairbanks, and City of Juneau to be 1.25 
compared to the FY 2013 COLA factor of 1.23. For FY 2018, we 
calculated a proposed COLA factor of 1.27 for the Rest of Alaska 
compared to the FY 2013 COLA factor of 1.25. However, as stated 
above, we are applying our methodology as finalized in the FY 2013 
IPPS/LTCH PPS final rule to incorporate a cap of 1.25 for the rest 
of Alaska.
    As stated above, the COLA factors adopted in the FY 2014 IPPS/
LTCH PPS final rule were based on the same methodology used to 
determine the proposed FY 2018 COLA factors but utilizing BLS data 
from 2009 through 2012 (the most recent data available at the time 
of the FY 2014 rulemaking) rather than through 2016 (the most recent 
data available at the time of this rulemaking). Compared to the FY 
2014 COLA factors, the proposed FY 2018 COLA factors are higher--
with all areas either reaching or exceeding the cap of 1.25 except 
the County of Hawaii.

D. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases

1. HCO Background

    From the beginning of the LTCH PPS, we have included an 
adjustment to account for cases in which there are extraordinarily 
high costs relative to the costs of most discharges. Under this 
policy, additional payments are made based on the degree to which 
the estimated cost of a case (which is calculated by multiplying the 
Medicare allowable covered charge by the hospital's overall hospital 
CCR) exceeds a fixed-loss amount. This policy results in greater 
payment accuracy under the LTCH PPS and the Medicare program, and 
the LTCH sharing the financial risk for the treatment of 
extraordinarily high-cost cases.
    We retained the basic tenets of our HCO policy in FY 2016 when 
we implemented the dual rate LTCH PPS payment structure under 
section 1206 of Public Law 113-67. LTCH discharges that meet the 
criteria for exclusion from the site neutral payment rate (that is, 
LTCH PPS standard Federal payment rate cases) are paid at the LTCH 
PPS standard Federal payment rate, which includes, as applicable, 
HCO payments under Sec.  412.523(e). LTCH discharges that do not 
meet the criteria for exclusion are paid at the site neutral payment 
rate, which includes, as applicable, HCO payments under Sec.  
412.522(c)(2)(i). In the same rule, we established separate fixed-
loss amounts and targets for the two different LTCH PPS payment 
rates. Under this bifurcated policy, the historic 8 percent HCO 
target was retained for LTCH PPS standard Federal payment rate 
cases, with the fixed-loss amount calculated using only data from 
LTCH cases that would have been paid at the LTCH PPS standard 
Federal payment rate if that rate had been in effect at the time of 
those discharges. For site neutral payment rate cases, we adopted 
the operating IPPS HCO target (currently 5.1 percent) and set the 
fixed-loss amount for site neutral payment rate cases at the value 
of the IPPS fixed-loss amount. Under the HCO policy for both payment 
rates, an LTCH receives 80 percent of the difference between the 
estimated cost of the case and the applicable HCO threshold, which 
is the sum of the LTCH PPS payment for the case and the applicable 
fixed-loss amount for such case.
    In order to maintain budget neutrality, consistent with the 
budget neutrality requirement for HCO payments to LTCH PPS standard 
Federal rate payment cases, we also adopted a budget neutrality 
requirement for HCO payments to site neutral payment rate cases by 
applying a budget neutrality factor to the LTCH PPS payment for 
those site neutral payment rate cases. (We refer readers to Sec.  
412.522(c)(2)(i) of the regulations for further details.) We note 
that, during the 2-year transitional period, the site neutral 
payment rate HCO budget neutrality factor did not apply to the LTCH 
PPS standard Federal payment rate portion of the blended rate at 
Sec.  412.522(c)(3) payable to site neutral payment rate cases. (For 
additional details on the HCO policy adopted for site neutral 
payment rate cases under the dual rate LTCH PPS payment structure, 
including the budget neutrality adjustment for HCO payments to site 
neutral payment rate cases, we refer readers to the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49617 through 49623).)

2. Determining LTCH CCRs Under the LTCH PPS

a. Background

    As noted above, CCRs are used to determine payments for HCO 
adjustments for both payment rates under the LTCH PPS, and also are 
currently used to determine payments for SSO cases under Sec.  
412.529 as well as payments for site neutral payment rate cases. (We 
note that the provisions of Sec.  412.529 are only applicable to 
LTCH PPS standard Federal payment rate cases). However, if our 
proposed SSO payment method is finalized, CCRs would no longer be 
used to determine the payment adjustment for SSO cases. Therefore, 
if our proposed SSO policies are finalized, this discussion would no 
longer be relevant to all HCO and site neutral payment rate 
calculations.
    As noted earlier, currently in determining HCO, SSO, and the 
site neutral payment rate (regardless of whether the case is also an 
HCO) payments, we generally calculate the estimated cost of the case 
by multiplying the LTCH's overall CCR by the Medicare allowable 
charges for the case. An overall CCR is used because the LTCH PPS 
uses a single prospective payment per discharge that covers both 
inpatient operating and capital-related costs. The LTCH's overall 
CCR is generally computed based on the sum of LTCH operating and 
capital costs (as described in Section 150.24, Chapter 3, of the 
Medicare Claims Processing Manual (Pub. 100-4)) as compared to total 
Medicare charges (that is, the sum of its operating and capital 
inpatient routine and ancillary charges), with those values 
determined from either the most recently settled cost report or the 
most recent tentatively settled cost report,

[[Page 20188]]

whichever is from the latest cost reporting period. However, in 
certain instances, we use an alternative CCR, such as the statewide 
average CCR, a CCR that is specified by CMS, or one that is 
requested by the hospital. (We refer readers to Sec.  
412.525(a)(4)(iv) of the regulations for further details regarding 
HCO adjustments for either LTCH PPS payment rate, Sec.  
412.529(f)(4) for SSO adjustments under the current policy, and 
Sec.  412.522(c)(1)(ii) for the site neutral payment rate, 
respectively.)
    The LTCH's calculated CCR is then compared to the LTCH total CCR 
ceiling. Under our established policy, an LTCH with a calculated CCR 
in excess of the applicable maximum CCR threshold (that is, the LTCH 
total CCR ceiling, which is calculated as 3 standard deviations from 
the national geometric average CCR) is generally assigned the 
applicable statewide CCR. This policy is premised on a belief that 
calculated CCRs above the LTCH total CCR ceiling 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.

b. LTCH Total CCR Ceiling

    Consistent with our historical practice, we are proposing to use 
the most recent data to determine the LTCH total CCR ceiling for FY 
2018 in this proposed rule. Specifically, in this proposed rule, 
using our established methodology for determining the LTCH total CCR 
ceiling based on IPPS total CCR data from the December 2016 update 
of the Provider Specific File (PSF), which is the most recent data 
available, we are proposing to establish an LTCH total CCR ceiling 
of 1.276 under the LTCH PPS for FY 2018 in accordance with Sec.  
412.525(a)(4)(iv)(C)(2) for HCO cases under either payment rate and 
Sec.  412.522(c)(1)(ii) for the site neutral payment rate. Also, 
consistent with our historical practice, we are proposing that if 
more recent data become available, we would use it to establish the 
LTCH total CCR ceiling for FY 2018 in the final rule. (For 
additional information on our methodology for determining the LTCH 
total CCR ceiling, we refer readers to the FY 2007 IPPS final rule 
(71 FR 48118 through 48119).)

c. LTCH Statewide Average CCRs

    Our general methodology for determining the statewide average 
CCRs used under the LTCH PPS is similar to our established 
methodology for determining the LTCH total CCR ceiling because it is 
based on ``total'' IPPS CCR data. (For additional information on our 
methodology for determining statewide average CCRs under the LTCH 
PPS, we refer readers to the FY 2007 IPPS final rule (71 FR 48119 
through 48120).) Under the LTCH PPS HCO policy for cases paid under 
either payment rate at Sec.  412.525(a)(4)(iv)(C)(2), the current 
SSO policy at Sec.  412.529(f)(4)(iii)(B), and the site neutral 
payment rate 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 (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 calculated CCR is 
in excess of the LTCH total 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, in this proposed rule, using our established 
methodology for determining the LTCH statewide average CCRs, based 
on the most recent complete IPPS ``total CCR'' data from the 
December 2016 update of the PSF, we are proposing to establish LTCH 
PPS statewide average total CCRs for urban and rural hospitals that 
would be effective for discharges occurring on or after October 1, 
2017, through September 30, 2018, in Table 8C listed in section VI. 
of the Addendum to this proposed rule (and available via the 
Internet on the CMS Web site). Consistent with our historical 
practice, we also are proposing that if more recent data become 
available, we would use that data to determine the LTCH PPS 
statewide average total CCRs for FY 2018 in the final rule.
    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 has areas that are designated as 
rural, in our calculation of the LTCH statewide average CCRs, there 
was no data available from short-term, acute care IPPS hospitals to 
compute a rural statewide average CCR or there were no short-term, 
acute care IPPS hospitals or LTCHs located in that area as of 
December 2016. Therefore, consistent with our existing methodology, 
we are proposing to use the national average total CCR for rural 
IPPS hospitals for rural Connecticut in Table 8C. While 
Massachusetts also has rural areas, the statewide average CCR for 
rural areas in Massachusetts is based on one provider whose CCR is 
an atypical 1.222. Because this is much higher than the statewide 
urban average of 0.466 and furthermore implies costs exceeded 
charges, as with Connecticut, we are proposing to use the national 
average total CCR for rural hospitals for hospitals located in rural 
Massachusetts. Furthermore, consistent with our existing 
methodology, in determining the urban and rural statewide average 
total CCRs for Maryland LTCHs paid under the LTCH PPS, we are 
proposing to continue 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 for cases paid under either payment rate at 
Sec.  412.525(a)(4)(iv)(D) and the current SSO policy at Sec.  
412.529(f)(4)(iv), the payments for HCO and SSO cases are subject to 
reconciliation. Specifically, any such payments are reconciled at 
settlement based on the CCR that is calculated based on the cost 
report coinciding with the discharge. However, under our proposed 
changes to the SSO payment methodology discussed in section VIII.D. 
of the preamble of this proposed rule, we are proposing to remove 
estimated cost as a consideration for payment to SSO cases. As such, 
consistent with our proposed changes to the SSO payment methodology, 
we are proposing that SSO payments would no longer be subject to 
reconciliation. Specifically, we are proposing to revise paragraph 
(f) of Sec.  412.529 to specify that SSO payments would be 
reconciled only for discharges occurring before October 1, 2017. We 
note that this proposal is dependent upon adoption of our proposed 
SSO payment methodology, and if those changes are not finalized, we 
would not finalize this proposal either.
    For additional information on the 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. Proposed Changes to High-Cost Outlier Payments for LTCH PPS Standard 
Federal Payment Rate Cases

    When we implemented the LTCH PPS, 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). Furthermore, Sec.  412.523(d)(1) requires 
the LTCH PPS standard Federal payment rate be adjusted by a 
reduction factor of 8 percent, the estimated proportion of outlier 
payments under Sec.  412.525(a) payable to LTCH PPS standard Federal 
payment rate cases. Section 15004(b) of the 21st Century Cures Act 
(Pub. L. 114-255) amended section 1886(m) of the Act by adding new 
paragraph (7), which specifies certain treatment of HCO payments for 
fiscal years beginning on or after October 1, 2017 (FY 2018). 
Specifically, section 1886(m)(7)(A) of the Act requires, beginning 
in FY 2018, that the LTCH PPS standard Federal payment rate be 
reduced as if estimated HCO payments for standard Federal payment 
rate cases would be equal to 8 percent of estimated aggregate 
payments for standard Federal payment rate cases for

[[Page 20189]]

a given year. In other words, section 1886(m)(7)(A) of the Act makes 
our existing regulatory budget neutrality requirement at Sec.  
412.523(d)(1) for the 8 percent HCO target for standard Federal 
payment rate cases a statutory requirement beginning in FY 2018. In 
addition, section 1886(m)(7)(B) of the Act requires, beginning in FY 
2018, that the fixed-loss amount for HCO payments for LTCH PPS 
standard Federal payment rate cases be determined so that the 
estimated aggregate amount of HCO payments for such cases in a given 
year are equal to 99.6875 percent of the 8 percent estimated 
aggregate payments for standard Federal payment rate cases (that is, 
7.975 percent). In other words, sections 1886(m)(7)(A) and (7)(B) 
require that we adjust the standard Federal payment rate each year 
to ensure budget neutrality for HCO payments as if estimated 
aggregate HCO payments made for standard Federal payment rate 
discharges remain at 8 percent, while the fixed-loss amount for the 
HCO payments is set each year so that the estimated aggregate HCO 
payments for standard Federal payment rate cases are 7.975 percent 
of estimated aggregate payments for standard Federal payment rate 
cases.
    More specifically, section 1886(m)(7)(A) of the Act stipulates 
that, for fiscal years beginning on or after October 1, 2017, the 
Secretary shall reduce the standard Federal payment rate as if the 
estimated aggregate amount of HCO payments for standard Federal 
payment rate discharges for each such fiscal year would be equal to 
8 percent of estimated aggregate payments for standard Federal 
payment rate discharges for each such fiscal year; while section 
1886(m)(7)(B) of the Act states that the Secretary shall set the 
fixed loss amount for HCO payments such that the estimated aggregate 
amount of HCO payments made for standard Federal payment rate 
discharges for fiscal years beginning on or after October 1, 2017, 
shall be equal to 99.6875 percent of 8 percent of estimated 
aggregate payments for standard Federal payment rate discharges for 
each such fiscal year. Furthermore, section 1886(m)(7)(C) of the Act 
requires that any reduction in payments resulting from the 
application of paragraph (B) shall not be taken into account in 
applying any budget neutrality provision. Finally, section 
1886(m)(7)(D) of the Act provides there will be no effect on HCO 
payments to site neutral payment rate cases by this certain 
treatment of HCO payments by requiring that this paragraph shall not 
apply with respect to the computation of the applicable site neutral 
payment rate under section 1886(m)(6) of the Act.
    To codify the treatment of HCO payments provided by section 
15004(b) of the 21st Century Cures Act (discussed earlier), we are 
proposing to revise Sec.  412.525(a) by redesignating paragraph (2) 
as paragraph (2)(i) and adding paragraph (2)(ii) which would specify 
that, for FY 2018 and subsequent years, the fixed-loss amount for 
LTCH discharges described under Sec.  412.522(a)(2) is determined 
such that the estimated proportion of outlier payments under Sec.  
412.522(a) that are payable for such discharges is projected to be 
equal to 99.6875 percent of 8 percent. We also are proposing to make 
conforming changes to Sec.  412.523(d)(1) to specify that the 
provisions under proposed Sec.  412.525(a)(2)(ii) would not affect 
the reduction factor of 8 percent that is applied to the LTCH PPS 
standard Federal payment rate under Sec.  412.523(d)(1).

b. Establishment of the Proposed Fixed-Loss Amount for LTCH PPS 
Standard Federal Payment Rate Cases for FY 2018

    When we implemented the dual rate LTCH PPS payment structure 
beginning in FY 2016, we established that, in general, the 
historical LTCH PPS HCO policy will continue to apply to LTCH PPS 
standard Federal payment rate cases. That is, the fixed-loss amount 
and target for LTCH PPS standard Federal payment rate cases is 
determined using the LTCH PPS HCO policy adopted when the LTCH PPS 
was first implemented, but we limited 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.
    To determine the applicable fixed-loss amount for LTCH PPS 
standard Federal payment rate cases, we estimate outlier payments 
and total LTCH PPS payments for each LTCH PPS standard Federal 
payment rate case (or for each case that would have been a LTCH PPS 
standard Federal payment rate case if the statutory changes had been 
in effect at the time of the discharge) using claims data from the 
MedPAR files. Historically, the applicable fixed-loss amount for 
LTCH PPS standard Federal payment rate cases results in estimated 
total outlier payments being projected to be equal to 8 percent of 
projected total LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases. We use MedPAR claims data and CCRs based on data 
from the most recent PSF (or from the applicable statewide average 
CCR if an LTCH's CCR data are faulty or unavailable) to establish an 
applicable fixed-loss threshold amount for LTCH PPS standard Federal 
payment rate cases. For FY 2018 and subsequent fiscal years, we are 
proposing to continue to use the same general approach as in 
previous years, but the applicable fixed-loss amount for LTCH PPS 
standard Federal payment rate cases would be estimated so that total 
HCO payments are 7.975 percent (that is, 99.6875 percent of 8 
percent) of projected total LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases, consistent with section 1886(m)(7)(B) of 
the Act (as discussed above).
    In this proposed rule, we are proposing to continue to use our 
current methodology to calculate an applicable fixed-loss amount for 
LTCH PPS standard Federal payment rate cases for FY 2018 using the 
best available data that would maintain estimated HCO payments at 
the projected 7.975 percent of total estimated LTCH PPS payments for 
LTCH PPS standard Federal payment rate cases (based on the proposed 
payment rates and policies for these cases presented in this 
proposed rule). Specifically, based on the most recent complete LTCH 
data available (that is, LTCH claims data from the December 2016 
update of the FY 2016 MedPAR file and CCRs from the December 2016 
update of the PSF), we are proposing to determine a fixed-loss 
amount for LTCH PPS standard Federal payment rate cases for FY 2018 
of $30,081 that would result in estimated outlier payments projected 
to be equal to 7.975 percent of estimated FY 2018 payments for such 
cases. Under this proposal, we would 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 proposed adjusted LTCH PPS 
standard Federal payment rate payment and the proposed fixed-loss 
amount for LTCH PPS standard Federal payment rate cases of $30,081).
    We note that the proposed fixed-loss amount for HCO cases paid 
under the LTCH PPS standard Federal payment rate in FY 2018 of 
$30,081 is notably higher than the FY 2017 fixed-loss amount for 
LTCH PPS standard Federal payment rate cases of $22,728. However, 
based on the most recent available data at the time of this proposed 
rule, we found that the current FY 2017 HCO threshold of $21,943 
results in estimated HCO payments for LTCH PPS standard Federal 
payment rate cases of approximately 8.6 percent of the estimated 
total LTCH PPS payments in FY 2017, which exceeds the 8 percent 
target by 0.6 percentage points. We continue to believe, as 
discussed in detail in the FY 2017 IPPS/LTCH PPS proposed rule (81 
FR 25287), this increase is largely attributable to rate-of-change 
(that is, increase) in the Medicare allowable charges on the claims 
data in the MedPAR file. In particular, using the historic 8-percent 
target for projected aggregate outlier payments (absent the required 
changes under the 21st Century Cures Act for comparison purposes), 
the proposed HCO threshold would be $29,934, and thus represents a 
36-percent increase from the final FY 2017 HCO threshold of $21,943. 
However, this increase is in line with previous proposed increases 
of the HCO threshold, such as the 38-percent increase from FY 2016 
($16,432) to our proposed FY 2017 HCO threshold ($22,728). We 
further note that the proposed FY 2017 HCO threshold was established 
based on the most recent data available at that time (specifically, 
the December 2015 update of the FY 2015 MedPAR file and the December 
2015 update of the PSF), and in the FY 2017 final rule, based on the 
March 2016 update of the FY 2015 MedPAR file and the March 2016 
update to the PSF, we finalized a somewhat lower HCO threshold of 
$21,943. Consistent with our historical practice of using the best 
data available, we are proposing that, when determining the fixed-
loss amount for LTCH PPS standard Federal payment rate cases for FY 
2018 in the final rule, we would use the most recent available LTCH 
claims data and CCR data at that time.
    We also note that fluctuations in the fixed-loss amount occurred 
in the first few years after the implementation of the LTCH PPS, 
due, in part, to the changes in LTCH behavior (such as Medicare 
beneficiary treatment patterns) in response to the new payment 
system and the lack of data and information available to predict how 
those changes would

[[Page 20190]]

affect the estimate costs of LTCH cases. As we gain more experience 
with the effects and implementation of the LTCH PPS, the annual 
changes on the fixed-loss amount generally stabilized relative to 
the fluctuations that occurred in the early years of the LTCH PPS. 
Therefore, we are not proposing any changes to our method for the 
inflation factor applied to update the costs of each case (that is, 
an inflation factor based on the most recent estimate of the 2013-
based LTCH market basket as determined by the Office of the Actuary) 
in determining the proposed fixed-loss amount for LTCH PPS standard 
Federal payment rate cases for FY 2018. We continue to believe that 
it is appropriate to continue to use our historical approach until 
we gain experience with the effects and implementation of the dual 
rate LTCH PPS payment structure that began with discharges occurring 
in cost reporting periods beginning on or after October 1, 2015, and 
the types of cases paid at the LTCH PPS standard Federal payment 
rate under this dual rate payment structure. As we explained in the 
FY 2017 proposed and final rules, we may revisit this issue in the 
future if data demonstrate such a change is warranted, and would 
propose any changes in the future through the notice-and-comment 
rulemaking process. Furthermore, we are inviting public comments on 
potential improvements to the determination of the fixed-loss amount 
for LTCH PPS standard Federal payment rate cases, including the most 
appropriate method of determining an inflation factor for projecting 
the costs of each case when determining the fixed-loss threshold. 
Maintaining the fixed-loss amount at the current level would result 
in HCO payments that are substantially more than the current 
statutorily required 7.975 HCO percent target for LTCH PPS standard 
Federal payment rate cases because a lower fixed-loss amount results 
in more cases qualifying as outlier cases, as well as higher HCO 
payments for qualifying cases because the maximum loss that an LTCH 
must incur before receiving an HCO payment (that is, the fixed-loss 
amount) would be smaller. For these reasons, we continue to believe 
it is necessary and appropriate to propose an increase to the fixed-
loss amount for LTCH PPS standard Federal payment rate cases for FY 
2018 to maintain estimated HCO payments that would equal to 7.975 
percent of estimated total LTCH PPS payments for such cases as 
required under proposed Sec.  412.525(a)(2)(ii).
    In summary, for this proposed rule, for FY 2018, we are 
proposing to determine an applicable fixed-loss amount for LTCH PPS 
standard Federal payment rate cases using data from LTCH PPS 
standard Federal payment rate cases (or cases that would have been 
LTCH PPS standard Federal payment rate cases had the dual rate LTCH 
PPS payment structure been in effect at the time of those 
discharges). The proposed fixed-loss amount for LTCH PPS standard 
Federal payment rate cases would be determined so that estimated HCO 
payments would be projected to equal 7.975 percent of estimated 
total LTCH PPS standard Federal payment rate cases, consistent with 
section 1886(m)(7)(B) of the Act as discussed above. Furthermore, in 
accordance with Sec.  412.523(d)(1) and consistent with section 
1886(m)(7)(A) of the Act as discussed above, we are proposing to 
continue to apply a budget neutrality factor to LTCH PPS standard 
Federal payment rate cases to offset our historic 8 percent HCO 
target for LTCH PPS standard Federal payment rate cases that would 
be necessary to achieve budget neutrality if the estimated aggregate 
HCO payments were set to be equal to 8 percent. As described in 
detail above, our calculation of the proposed fixed-loss amount for 
LTCH PPS standard Federal payment rate cases for FY 2018 of $30,081 
is generally consistent with the methodology used to establish the 
FY 2017 LTCH PPS fixed-loss amount (absent the modification from an 
HCO target of 8 percent to the now statutorily required 7.975 
percent HCO target).

c. Application of the High-Cost Outlier Policy to Short Stay Outlier 
(SSO) Cases

    Under our implementation of the dual rate LTCH PPS payment 
structure required by statute, we are proposing that LTCH PPS 
standard Federal payment rate cases (that is, LTCH discharges that 
meet the criteria for exclusion from the site neutral payment rate) 
would continue to be paid based on the LTCH PPS standard Federal 
payment rate, and would include all of the existing payment 
adjustments under Sec.  412.525(d), such as the adjustments for SSO 
cases under Sec.  412.529. 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 applicable fixed-loss amount), the 
discharge is eligible for payment as an HCO. (We note that, under 
our proposed change to the SSO policy discussed in section VIII.D. 
of the preamble of this proposed rule, SSO cases would still be 
eligible to qualify for an HCO payment.) Therefore, for an SSO case 
in FY 2018, we are proposing to establish that the HCO payment would 
be 80 percent of the difference between the estimated cost of the 
case and the outlier threshold (the sum of the proposed fixed-loss 
amount of $30,081 and the amount paid under the proposed SSO policy 
as specified in Sec.  412.529).

4. Proposed High-Cost Outlier Payments for Site Neutral Payment Rate 
Cases

    Under Sec.  412.525(a), site neutral payment rate cases 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 (80 FR 49618 
through 49629). In the following discussion, we note that the 
statutory transitional payment method for cases that are paid the 
site neutral payment rate for LTCH discharges occurring in cost 
reporting periods beginning during FY 2016 or FY 2017 uses a blended 
payment rate, which is determined as 50 percent of the site neutral 
payment rate amount for the discharge and 50 percent of the standard 
Federal prospective payment rate amount for the discharge (Sec.  
412.522(c)(3)). The transitional blended payment rate uses the same 
blend percentages (that is, 50 percent) for both years of the 2-year 
transition period. For FY 2018, 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 during FY 2018. 
Specifically, for a given LTCH, those site neutral payment rate 
cases discharged in FY 2018 and in a cost reporting period that 
begins before October 1, 2017 continue to be paid under the blended 
payment rate. However, site neutral payment rate cases discharged in 
FY 2018 during the LTCH's cost reporting period beginning on or 
after October 1, 2017 will no longer be paid under the blended 
payment rate and instead will be paid the site neutral payment rate 
amount as determined under Sec.  412.522(c)(1). As such, for FY 2018 
discharges paid under the transitional payment method, the 
discussion below pertains only to the site neutral rate portion in 
Sec.  412.522(c)(3)(i)) of the blended payment rate (as well as to 
FY 2018 discharges paid the site neutral payment rate amount 
determined under Sec.  412.522(c)(1)).
    When we implemented the application of the site neutral payment 
rate in FY 2016, in examining the appropriate fixed-loss amount for 
site neutral payment rate cases issue, we considered how LTCH 
discharges based on historical claims data would have been 
classified under the dual rate LTCH PPS payment structure and the 
CMS' Office of the Actuary projections regarding how LTCHs will 
likely respond to our implementation of policies resulting from the 
statutory payment changes. We again relied on these considerations 
and actuarial projections in FY 2017 because the historical claims 
data available in FY 2017 predated the LTCH PPS dual rate payment 
system. Similarly, for FY 2018, we continue to rely on these 
considerations and actuarial projections because, due to the rolling 
effective date of the site neutral payment policy, not all claims in 
FY 2016 were subject to the site neutral payment system.
    For both FY 2016 and FY 2017, at that time our actuaries 
projected that the proportion of cases that would qualify as LTCH 
PPS standard Federal payment rate cases versus site neutral payment 
rate cases under the statutory provisions would remain consistent 
with what is reflected in the historical LTCH PPS claims data. 
Although our actuaries did not project an immediate change in the 
proportions found in the historical data, they did project cost and 
resource changes to account for the lower payment rates. Our 
actuaries also projected 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. (As discussed in the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49619), this

[[Page 20191]]

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 that began in FY 2016, which, in the majority of cases, is 
much lower than the payment that would have been paid if these 
statutory changes were not enacted.) In light of these projections 
and expectations, we discussed that we believed that the use of a 
single fixed-loss amount and HCO target for all LTCH PPS cases would 
be problematic. In addition, we discussed that 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 (80 FR 49617 
through 49619 and 81 FR 57305 through 57307). For those reasons, we 
stated that we believed that the most appropriate fixed-loss amount 
for site neutral payment rate cases for both FY 2016 and FY 2017 
would be equal to the IPPS fixed-loss amount for that year. 
Therefore, we established the fixed-loss amount for site neutral 
payment rate cases as the FY 2016 and FY 2017 IPPS fixed-loss 
amounts, in FY 2016 and FY 2017 respectively. In particular, in FY 
2017, we established that the fixed-loss amount for site neutral 
payment rate cases is the FY 2017 IPPS fixed-loss amount of $23,570.
    As noted earlier, because not all claims in the data used for 
this proposed rule were subject to the site neutral payment rate 
system, we continue to rely on the same considerations and actuarial 
projections used in FY 2016 and FY 2017 when developing a fixed-loss 
amount for site neutral payment rate cases for FY 2018. Because our 
actuaries continue to project that site neutral payment rate cases 
in FY 2018 will continue to mirror an IPPS case paid under the same 
MS-DRG, we continue to believe that it would be inappropriate 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. More specifically, as with FY 2016 and FY 2017, 
our actuaries project that the costs and resource use for FY 2018 
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 will 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. (Based on the most recent FY 2016 LTCH claims data, 
approximately 58 percent of LTCH cases would have been paid the LTCH 
PPS standard Federal payment rate and approximately 42 percent of 
LTCH cases would have been paid the site neutral payment rate if 
those rates had been in effect at that time for all LTCH discharges 
occurring in FY 2016, regardless of LTCHs' cost reporting period 
beginning dates.)
    For these reasons, we continue to believe that the most 
appropriate fixed-loss amount for site neutral payment rate cases 
for FY 2018 is the IPPS fixed-loss amount for FY 2018. Therefore, 
consistent with past practice, for FY 2018, we are proposing 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. That is, we are proposing a fixed-loss amount for 
site neutral payment rate cases of $26,713, which is the same 
proposed FY 2018 IPPS fixed-loss amount discussed in section 
II.A.4.g.(1) of the Addendum to this proposed rule. We continue to 
believe that this policy would 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. Accordingly, for FY 2018, we are proposing to calculate a 
HCO payment 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 proposed site neutral payment rate payment and 
the proposed fixed-loss amount for site neutral payment rate cases 
of $26,713).
    In establishing a HCO policy for site neutral payment rate 
cases, we established a budget neutrality adjustment under Sec.  
412.522(c)(2)(i). We established this requirement because we 
believed, and continue to believe, that the HCO policy for site 
neutral payment rate cases should be budget neutral, just as the HCO 
policy for LTCH PPS standard Federal payment rate cases are budget 
neutral, meaning that estimated site neutral payment rate HCO 
payments should not result in any change in estimated aggregate LTCH 
PPS payments.
    To ensure that estimated HCO payments payable to site neutral 
payment rate cases in FY 2018 would not result in any increase in 
estimated aggregate FY 2018 LTCH PPS payments, under the budget 
neutrality requirement at Sec.  412.522(c)(2)(i), it is necessary to 
reduce site neutral payment rate payments (or the portion of the 
blended payment rate payment for FY 2018 discharges occurring in 
LTCH cost reporting periods beginning before October 1, 2017) by 5.1 
percent to account for the estimated additional HCO payments payable 
to those cases in FY 2018. In order to achieve this, for FY 2018, in 
general we are proposing to continue to use the policy adopted for 
FY 2017.
    As discussed earlier, consistent with the IPPS HCO payment 
threshold, we estimate our proposed fixed-loss threshold of $26,713 
results in HCO payments for site neutral payment rate cases equal to 
5.1 percent of the site neutral payment rate payments that are based 
on the IPPS comparable per diem amount. As such, to ensure estimated 
HCO payments payable for site neutral payment rate cases in FY 2018 
would not result in any increase in estimated aggregate FY 2018 LTCH 
PPS payments, under the budget neutrality requirement at proposed 
revised Sec.  412.522(c)(2)(i), it is necessary to reduce the site 
neutral payment rate amount paid under Sec.  412.522(c)(1)(i) by 5.1 
percent to account for the estimated additional HCO payments payable 
for site neutral payment rate cases in FY 2018. In order to achieve 
this, for FY 2018, we are proposing to apply a proposed 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) to the site 
neutral payment rate for those site neutral payment rate cases paid 
under Sec.  412.522(c)(1)(i). We note that, consistent with the 
policy adopted for FY 2017, under this proposal the proposed HCO 
budget neutrality adjustment would not be applied to the HCO portion 
of the site neutral payment rate amount (80 FR 57309).
    Under the approach for applying the budget neutrality adjustment 
to the site neutral payment rate portion of the transitional blended 
payment rate in FY 2016 and FY 2017, there is no need to perform any 
calculation of the site neutral payment rate case HCO payment budget 
neutrality adjustment under our finalized policy. Because of our 
actuarial assumptions discussed earlier, we project that our 
proposal to use the IPPS fixed-loss threshold for the site neutral 
payment rate cases would 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 would be 5.1 
percent of the site neutral payment rate payments (80 FR 49805 and 
81 FR 57307).

E. Proposed 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 (78 FR 50766), we 
established a policy to reflect the changes to the Medicare IPPS DSH 
payment adjustment methodology made 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 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

[[Page 20192]]

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 Medicare 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. 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 (79 FR 50766 through 50767).
    For FY 2018, as discussed in greater detail in section V.G.3. of 
the preamble of this proposed rule, based on the most recent data 
available, our estimate of 75 percent of the amount that would 
otherwise have been paid as Medicare DSH payments (under the 
methodology outlined in section 1886(r)(2) of the Act) is adjusted 
to 58.01 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 available to make uncompensated 
care payments to eligible IPPS hospitals in FY 2018. In other words, 
the amount of the Medicare DSH payments that would have been made 
prior to the amendments made by the Affordable Care Act will be 
adjusted to 43.51 percent (the product of 75 percent and 58.01 
percent) and the resulting amount would be used to calculate the 
uncompensated care payments to eligible hospitals. As a result, for 
FY 2018, 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, 
would result in overall Medicare DSH payments of 66.52 percent of 
the amount of Medicare DSH payments that would otherwise have been 
made in the absence of the amendments made by the Affordable Care 
Act (that is, 25 percent + 43.51 percent = 68.51 percent).
    In this proposed rule, for FY 2018, we are proposing to 
establish that the calculation of the ``IPPS comparable amount'' 
under Sec.  412.529 and the ``IPPS equivalent amount'' under Sec.  
412.538 would include an applicable operating Medicare DSH payment 
amount that is equal to 68.51 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. Furthermore, consistent with our historical 
practice, we are proposing that if more recent data become 
available, if appropriate, we would use that data to determine this 
factor in the final rule.

F. Computing the Proposed Adjusted LTCH PPS Federal Prospective 
Payments for FY 2018

    Section 412.525 sets forth the adjustments to the LTCH PPS 
standard Federal payment rate. 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 are paid based on the 
LTCH PPS standard Federal payment rate. Under Sec.  412.525(c), the 
proposed LTCH PPS standard Federal payment rate is adjusted to 
account for differences in area wages by multiplying the proposed 
labor-related share of the LTCH PPS standard Federal payment for a 
case by the applicable LTCH PPS wage index (the proposed FY 2018 
values are shown in Tables 12A through 12B listed in section VI. of 
the Addendum of this proposed rule and are available via the 
Internet on the CMS Web site). The proposed LTCH PPS standard 
Federal payment rate is also adjusted to account for the higher 
costs of LTCHs located in Alaska and Hawaii by the applicable COLA 
factors (the proposed FY 2018 factors are shown in the chart in 
section V.C. of this Addendum) in accordance with Sec.  412.525(b). 
In this proposed rule, we are proposing to establish an LTCH PPS 
standard Federal payment rate for FY 2018 of $41,497.20, as 
discussed in section V.A. of the Addendum to this proposed rule. We 
illustrate the methodology to adjust the proposed LTCH PPS standard 
Federal payment rate for FY 2018 in the following example:
    Example: 
    During FY 2018, 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 proposed FY 2018 LTCH PPS 
wage index value for CBSA 16974 is 1.0563 (obtained from Table 12A 
listed in section VI. of the Addendum of this proposed 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 proposed relative weight for FY 
2018 of 0.9158 (obtained from Table 11 listed in section VI. of the 
Addendum of this proposed rule and available via the Internet on the 
CMS Web site). The LTCH submitted quality reporting data for FY 2018 
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 2018, we computed the 
wage-adjusted proposed Federal prospective payment amount by 
multiplying the unadjusted proposed FY 2018 LTCH PPS standard 
Federal payment rate ($41,497.20) by the proposed labor-related 
share (66.3 percent) and the proposed wage index value (1.0563). 
This wage-adjusted amount was then added to the proposed nonlabor-
related portion of the unadjusted proposed LTCH PPS standard Federal 
payment rate (33.7 percent; adjusted for cost of living, if 
applicable) to determine the adjusted proposed LTCH PPS standard 
Federal payment rate, which is then multiplied by the proposed MS-
LTC-DRG relative weight (0.9158) to calculate the total adjusted 
proposed LTCH PPS standard Federal prospective payment for FY 2018 
($39,421.67). The table below illustrates the components of the 
calculations in this example.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Proposed LTCH PPS Standard Federal Prospective                $41,497.20
 Payment Rate.......................................
Proposed Labor-Related Share........................             x 0.663
Proposed Labor-Related Portion of the LTCH PPS              = $27,512.64
 Standard Federal Payment Rate......................
Proposed Wage Index (CBSA 16974)....................            x 1.0563
Proposed Wage-Adjusted Labor Share of LTCH PPS              = $29,061.60
 Standard Federal Payment Rate......................
Proposed Nonlabor-Related Portion of the LTCH PPS           + $13,984.56
 Standard Federal Payment Rate ($41,497.20 x 0.337).
Proposed Adjusted LTCH PPS Standard Federal Payment         = $43,046.16
 Amount.............................................
Proposed MS-LTC-DRG 189 Relative Weight.............            x 0.9158
Proposed Total Adjusted LTCH PPS Standard Federal           = $39,421.67
 Prospective Payment................................
------------------------------------------------------------------------

VI. Tables Referenced in This Proposed Rule and Available Only Through 
the Internet on the CMS Web Site

    This section lists the tables referred to throughout the 
preamble of this proposed 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 2017, for the FY 2018 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.

[[Page 20193]]

    As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49807), we streamlined and consolidated the wage index tables for FY 
2016 and subsequent fiscal years.
    As discussed in sections II.F.14., II.F.15.b., II.F.16., 
II.F.17.a., and II.F.19.a.1., a.3., and c.1. of the preamble of this 
proposed rule, we developed the following ICD-10-CM and ICD-10-PCS 
code tables for FY 2018: Table 6A--New Diagnosis Codes; Table 6B--
New Procedure Codes; Table 6C--Invalid Diagnosis Codes; Table 6D--
Invalid Procedure Codes; Table 6E--Revised Diagnosis Code Titles; 
Table 6F--Revised Procedure Code Titles; Table 6G.1--Proposed 
Secondary Diagnosis Order Additions to the CC Exclusion List; Table 
6G.2--Proposed Principal Diagnosis Order Additions to the CC 
Exclusion List; Table 6H.1--Proposed Secondary Diagnosis Order 
Deletions to the CC Exclusion List; Table 6H.2--Proposed Principal 
Diagnosis Order Deletions to the CC Exclusion List; Table 6I.1--
Proposed Additions to the MCC List; Table 6I.2--Proposed Deletions 
to the MCC List; Table 6J.1--Proposed Additions to the CC List; 
Table 6J.2--Proposed Deletions to the CC List; and Table 6P--
Proposed ICD-10-CM and ICD-10-PCS Code Designations, MCE and MS-DRG 
Changes. Table 6P contains multiple tables, 6P.1a through 6P.4p, 
that include the ICD-10-CM and ICD-10-PCS code lists relating to 
proposed specific MCE and 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 V.I. of the preamble of this proposed rule, we are not 
providing the hospital-level data as a table associated with this 
proposed rule. The hospital-level data for the FY 2018 HAC Reduction 
Program will be made publicly available once it has undergone the 
review and corrections process.
    Finally, Table 18 associated with this proposed rule contains 
the proposed Factor 3 for purposes of determining the FY 2018 
uncompensated care payment for all hospitals and identifies whether 
or not a hospital is projected to receive Medicare DSH payments and, 
therefore, eligible to receive the additional payment for 
uncompensated care for FY 2018. A hospital's Factor 3 determines the 
proportion of the aggregate amount available for uncompensated care 
payments that a Medicare DSH eligible hospital will receive under 
section 3133 of the Affordable Care Act.
    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 2018 proposed 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 2018 IPPS Proposed Rule Home Page'' or 
``Acute Inpatient--Files for Download.''

Table 2--Proposed Case-Mix Index and Wage Index Table by CCN--FY 
2018
Table 3--Proposed Wage Index Table by CBSA--FY 2018
Table 5--List of Proposed Medicare Severity Diagnosis-Related Groups 
(MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic 
Mean Length of Stay--FY 2018
Table 6A--New Diagnosis Codes--FY 2018
Table 6B--New Procedure Codes--FY 2018
Table 6C--Invalid Diagnosis Codes--FY 2018
Table 6D--Invalid Procedure Codes--FY 2018
Table 6E--Revised Diagnosis Code Titles--FY 2018
Table 6F--Revised Procedure Code Titles--FY 2018
Table 6G.1--Proposed Secondary Diagnosis Order Additions to the CC 
Exclusions List--FY 2018
Table 6G.2--Proposed Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2018
Table 6H.1--Proposed Secondary Diagnosis Order Deletions to the CC 
Exclusions List--FY 2018
Table 6H.2--Proposed Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2018
Table 6I.1--Proposed Additions to the MCC List--FY 2018
Table 6I.2--Proposed Deletions to the MCC List--FY 2018
Table 6J.1--Proposed Additions to the CC List--FY 2018
Table 6J.2--Proposed Deletions to the CC List--FY 2018
Table 6P--Proposed ICD-10-CM and ICD-10-PCS Code Designations, MCE 
and MS-DRG Changes--FY 2018
Table 7A--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay: FY 2016 MedPAR Update--December 2016 GROUPER V34.0 
MS-DRGs
Table 7B--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay: FY 2016 MedPAR Update--December 2016 GROUPER V35.0 
MS-DRGs
Table 8A--Proposed FY 2018 Statewide Average Operating Cost-to-
Charge Ratios (CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B--Proposed FY 2018 Statewide Average Capital Cost-to-Charge 
Ratios (CCRs) for Acute Care Hospitals
Table 10--Proposed New Technology Add-On Payment Thresholds for 
Applications for FY 2019
Table 15--Proposed Proxy FY 2018 Readmissions Adjustment Factors
Table 16--Proposed Proxy Hospital Value-Based Purchasing (VBP) 
Program Adjustment Factors for FY 2018
Table 18--Proposed FY 2018 Uncompensated Care Payment Factor 3

    The following LTCH PPS tables for this FY 2018 proposed rule are 
available only through the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for 
Regulation Number CMS-1677-P:

Table 8C--Proposed FY 2018 Statewide Average Total Cost-to-Charge 
Ratios (CCRs) for LTCHs (Urban and Rural)
Table 11--Proposed MS-LTC-DRGs, Relative Weights, Geometric Average 
Length of Stay, and Short-Stay Outlier (SSO) Threshold for LTCH PPS 
Discharges Occurring from October 1, 2017 through September 30, 2018
Table 12A--Proposed LTCH PPS Wage Index for Urban Areas for 
Discharges Occurring from October 1, 2017 through September 30, 2018
Table 12B--Proposed LTCH PPS Wage Index for Rural Areas for 
Discharges Occurring from October 1, 2017 through September 30, 2018
Table 13A--Proposed Composition of Low Volume Quintiles for MS-LTC-
DRGs--FY 2018
Table 13B--Proposed No Volume MS LTC-DRG Crosswalk for FY 2018

                                   Table 1A--Proposed National Adjusted Operating Standardized Amounts, Labor/Nonlabor
                            [(68.3 percent labor share/31.7 percent nonlabor share if wage index is greater than 1)--FY 2018]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital submitted quality data and is   Hospital submitted quality data and  Hospital did NOT submit quality data  Hospital did NOT submit quality data
 a meaningful EHR user (update = 1.75   is NOT a meaningful EHR user (update  and is a meaningful EHR user (update    and is NOT a meaningful EHR user
               percent)                           = -0.425 percent)                     = 1.025 percent)                  (update = -1.15 percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
       Labor             Nonlabor             Labor             Nonlabor            Labor             Nonlabor            Labor             Nonlabor
--------------------------------------------------------------------------------------------------------------------------------------------------------
       $3,822.07           $1,773.93          $3,740.37          $1,736.01          $3,794.84          $1,761.29          $3,713.14          $1,723.37
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 20194]]


                                   Table 1B--Proposed 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 2018]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital submitted quality data and is   Hospital submitted quality data and  Hospital did NOT submit quality data  Hospital did NOT submit quality data
 a meaningful EHR user (update = 1.75   is NOT a meaningful EHR user (update  and is a meaningful EHR user (update    and is NOT a meaningful EHR user
               percent)                           = -0.425 percent)                     = 1.025 percent)                  (update = -1.15 percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
       Labor             Nonlabor             Labor             Nonlabor            Labor             Nonlabor            Labor             Nonlabor
--------------------------------------------------------------------------------------------------------------------------------------------------------
       $3,469.52           $2,126.48          $3,395.36          $2,081.02          $3,444.80          $2,111.33          $3,370.64          $2,065.87
--------------------------------------------------------------------------------------------------------------------------------------------------------


     Table 1C--Proposed Adjusted Operating Standardized Amounts for Hospitals in Puerto Rico, Labor/Nonlabor
 [(National: 62 percent labor share/38 percent nonlabor share because wage index is less than or equal to 1)--FY
                                                      2018]
----------------------------------------------------------------------------------------------------------------
                                        Rates if wage index is greater than 1       Rates if wage index is less
                                   ----------------------------------------------       than or equal to 1
        Standardized amount                                                      -------------------------------
                                            Labor                 Nonlabor             Labor         Nonlabor
----------------------------------------------------------------------------------------------------------------
National \1\......................  Not Applicable.......  Not Applicable.......       $3,469.52       $2,126.48
----------------------------------------------------------------------------------------------------------------
\1\ For FY 2018, there are no CBSAs in Puerto Rico with a national wage index greater than 1.


        Table 1D--Proposed Capital Standard Federal Payment Rate
                                [FY 2018]
------------------------------------------------------------------------
                                                               Rate
------------------------------------------------------------------------
National...............................................         $451.37
------------------------------------------------------------------------


        Table 1E--Proposed LTCH PPS Standard Federal Payment Rate
                                [FY 2018]
------------------------------------------------------------------------
                                                               Reduced
                                                Full update  update * (-
                                                (1 percent)      1.0
                                                               percent)
------------------------------------------------------------------------
Standard Federal Rate.........................  $41,497.20   $40,675.49
------------------------------------------------------------------------
* For LTCHs that fail to submit quality reporting data for FY 2018 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 proposed rule as required 
by Executive Order 12866 on Regulatory Planning and Review 
(September 30, 1993), Executive Order 13563 on Improving Regulation 
and Regulatory Review (January 18, 2011), the Regulatory Flexibility 
Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of 
the Social Security Act, section 202 of the Unfunded Mandates Reform 
Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 
on Federalism (August 4, 1999), the Congressional Review Act (5 
U.S.C. 804(2), and Executive Order 13771 on Reducing Regulation and 
Controlling Regulatory Costs (January 30, 2017).
    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). 
Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a rule: 
(1) (Having an annual effect on the economy of $100 million or more 
in any 1 year, or adversely and materially affecting a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or state, local or tribal governments or 
communities (also referred to as ``economically significant''); (2) 
creating a serious inconsistency or otherwise interfering with an 
action taken or planned by another agency; (3) materially altering 
the budgetary impacts of entitlement grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raising novel legal or policy issues arising out of legal mandates, 
the President's priorities, or the principles set forth in the 
Executive Order.
    We have determined that this proposed rule is a major rule as 
defined in 5 U.S.C. 804(2). We estimate that the proposed changes 
for FY 2018 acute care hospital operating and capital payments would 
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 proposed payment 
changes in this proposed rule, would result in an estimated $3.1 
billion increase in FY 2018 proposed payments, including a $3.8 
billion increase in FY 2018 proposed operating payments (or 1.7 
percent change), an estimated $212 million increase in FY 2018 
proposed capital payments (or 2.4 percent change), and an estimated 
$1.0 billion increase in proposed uncompensated care payments (or a 
1.2 percent change). As noted in section II.A. of this Appendix, all 
expenditures are classified as transfers to Medicare providers. 
These proposed changes are relative to payments made in FY 2017. The 
impact analysis of the proposed 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 $173 million in FY 2018 relative to FY 2017.
    Our operating impact estimate includes the 0.4588 percent 
adjustment required under section 15005 of the 21st Century Cures 
Act (Pub. L. 114-255) applied to the IPPS standardized amount, as 
discussed in section II.D. of the preamble of this proposed rule. In 
addition, our operating payment impact estimate includes the 
proposed 1.75 percent hospital update to the standardized amount 
(which includes the estimated 2.9 percent market basket update less 
0.4 percentage point for the proposed multifactor productivity 
adjustment and less 0.75 percentage point required under the 
Affordable Care Act). Our operating payment impact estimate also 
includes an adjustment factor of (1/1.006) to the FY 2018 rates to 
remove the 1.006 temporary one-time adjustment made in FY 2017 to 
address the effects of the 0.2 percent reduction in effect for FYs 
2014 through 2016 as a result of the 2-midnight policy (we refer 
readers to section V.M. of the preamble of this proposed rule for an 
explanation of this adjustment). 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 proposed payment changes.
    The analysis in this Appendix, in conjunction with the remainder 
of this document, demonstrates that this proposed 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 proposed rule would 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 
proposed rule.

[[Page 20195]]

B. Statement of Need

    This proposed 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 proposed rule also is necessary to make payment and 
policy changes for Medicare hospitals under the LTCH PPS.

C. Objectives of the IPPS and the LTCH PPS

    The primary objective of the IPPS and the LTCH PPS 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 proposed rule would 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 proposed changes 
will ensure that the outcomes of the prospective payment systems are 
reasonable and equitable while avoiding or minimizing unintended 
adverse consequences.
    Because this proposed rule contains a range of proposed 
policies, we refer readers to the section of the proposed rule where 
each proposal is discussed. These sections include the rational for 
our decisions, including the need for the proposed policy.

D. Limitations of Our Analysis

    The following quantitative analysis presents the projected 
effects of our proposed policy changes, as well as statutory changes 
effective for FY 2018, 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. In addition, we discuss limitations of 
our analysis for specific proposals in the discussion of those 
proposals as needed.

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 31 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 March 2017, there were 3,292 IPPS acute care hospitals 
included in our analysis. This represents approximately 54 percent 
of all Medicare-participating hospitals. The majority of this impact 
analysis focuses on this set of hospitals. There also are 
approximately 1,385 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. With the exception of the IPFQR 
provisions presented in section IX.D. of the preamble of this 
proposed rule, changes in the prospective payment systems for IPFs 
and IRFs are made through separate rulemaking. Payment impacts of 
changes to the prospective payment systems for these IPPS-excluded 
hospitals and units are not included in this proposed rule. The 
impact of the proposed update and proposed policy changes to the 
LTCH PPS for FY 2018 is discussed in section I.J. of this Appendix.

F. Effects on Hospitals and Hospital Units Excluded From the IPPS

    As of March 2017, 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, 263 rehabilitation hospitals and 870 
rehabilitation units, and approximately 415 LTCHs, are paid the 
Federal prospective per discharge rate under the IRF PPS and the 
LTCH PPS, respectively, and 513 psychiatric hospitals and 1,113 
psychiatric units are paid the Federal per diem amount under the IPF 
PPS. As stated previously, IRFs and IPFs are not affected by the 
rate updates discussed in this proposed 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, we are 
proposing that the update of the rate-of-increase limit (or target 
amount) would be the estimated FY 2018 percentage increase in the 
proposed 2014-based 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 this proposed rule, we are proposing to revise and 
rebase the IPPS operating market basket to a 2014 base year. 
Therefore, we are proposing to use the percentage increase in the 
2014-based IPPS operating market basket to update the target amounts 
for FY 2018 and subsequent years for children's hospitals, the 11 
cancer hospitals, the 5 short-term acute care hospitals located in 
the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and 
American Samoa, and RNHCs that are paid based on reasonable costs 
subjects to the rate-of-increase limits. Consistent with current 
law, based on IHS Global Insight, Inc.'s 2016 fourth quarter 
forecast of the proposed 2014-based IPPS market basket increase, we 
are estimating the FY 2018 update to be 2.9 percent (that is, the 
estimate of the market basket rate-of-increase). We are proposing 
that if more recent data become available for the final rule, we 
would use them to calculate the IPPS operating market basket update 
for FY 2018. However, the Affordable Care Act requires an adjustment 
for multifactor productivity (currently estimated to be 0.4 
percentage point for FY 2018) and a 0.75 percentage point reduction 
to the market basket update, resulting in a 1.75 percent applicable 
percentage increase for IPPS hospitals that submit quality data and 
are meaningful EHR users, as discussed in section IV.B. of the 
preamble of this proposed 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 RNHCIs 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 would be the percentage increase in the 
proposed 2014-based IPPS operating market basket for FY 2018, 
estimated at 2.9 percent, without the reductions described 
previously under the Affordable Care Act.
    The impact of the proposed 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 
would not be paid.
    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.

[[Page 20196]]

G. Quantitative Effects of the Proposed Policy Changes Under the 
IPPS for Operating Costs

1. Basis and Methodology of Estimates

    In this proposed rule, we are announcing proposed policy changes 
and proposed payment rate updates for the IPPS for FY 2018 for 
operating costs of acute care hospitals. The proposed FY 2018 
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 2018 operating payments would increase by 1.7 percent compared to 
FY 2017. In addition to the applicable percentage increase, this 
amount reflects the FY 2018 adjustment required under section 15005 
of the 21st Century Cures Act described in section II.D. of the 
preamble of this proposed rule of 0.4588 percent to the IPPS 
national standardized amounts. This amount also reflects the 
adjustment factor of (1/1.006) to remove the 1.006 temporary one-
time adjustment made in FY 2017 to address the effects of the 0.2 
percent reduction in effect for FYs 2014 through 2016 related to the 
2-midnight policy, which is discussed in section V.M. of the 
preamble of this proposed rule. The impacts do not reflect changes 
in the number of hospital admissions or real case-mix intensity, 
which would also affect overall proposed payment changes.
    We have prepared separate impact analyses of the proposed 
changes to each system. This section deals with the proposed 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 proposed rule. However, there are 
other proposed changes for which we do not have data available that 
would allow us to estimate the payment impacts using this model. For 
those proposed 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 
proposed changes in payments per case presented in this section are 
taken from the FY 2016 MedPAR file and the most current Provider-
Specific File (PSF) that is used for payment purposes. Although the 
analyses of the proposed 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 proposed 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 2016 MedPAR file, we simulate payments 
under the operating IPPS given various combinations of payment 
parameters. As described previously, Indian Health Service hospitals 
and hospitals in Maryland were excluded from the simulations. The 
proposed 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 2018 are discussed in section I.I. of this Appendix.
    We discuss the following proposed changes:
     The effects of the proposed application of the 
adjustment required under section 15005 of the 21st Century Cures 
Act and the applicable percentage increase (including the proposed 
market basket update, the proposed 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 adjustment of (1/1.006) to remove 
the 1.006 temporary one-time adjustment made in FY 2017 to address 
the effects of the 0.2 percent reduction in effect for FYs 2014 
through 2016 related to the 2-midnight policy, as discussed in 
section V.M. of the preamble of this proposed rule.
     The effects of the proposed changes to the relative 
weights and MS-DRG GROUPER.
     The effects of the proposed changes in hospitals' wage 
index values reflecting updated wage data from hospitals' cost 
reporting periods beginning during FY 2014, compared to the FY 2013 
wage data, to calculate the FY 2018 wage index.
     The effects of the geographic reclassifications by the 
MGCRB (as of publication of this proposed rule) that would be 
effective for FY 2018.
     The effects of the proposed rural floor with the 
application of the proposed national budget neutrality factor to the 
wage index.
     The effects of the proposed 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 effects of the expiration of the special payment 
status for MDHs at the end of FY 2017 under current law as a result 
of which MDHs that currently receive the higher of payments made 
based on the Federal rate or the payments made based on the Federal 
rate plus 75 percent of the difference between payments based on the 
Federal rate and the hospital-specific rate will be paid based on 
the Federal rate starting in FY 2018.
     The total estimated change in payments based on the 
proposed FY 2018 policies relative to payments based on FY 2017 
policies that include the applicable percentage increase of 1.75 
percent (or 2.9 percent market basket update with a proposed 
reduction of 0.4 percentage point for the multifactor productivity 
adjustment, and a 0.75 percentage point reduction, as required under 
the Affordable Care Act).
    To illustrate the impact of the proposed FY 2018 changes, our 
analysis begins with a FY 2017 baseline simulation model using: The 
FY 2017 applicable percentage increase of 1.65 percent and the 
documentation and coding adjustment of -1.5 percent to the Federal 
standardized amount; the adjustment of (1/0.998) to permanently 
remove the -0.2 percent reduction to the rate put in place in FY 
2014 to offset the estimated increase in IPPS expenditures as a 
result of the 2-midnight policy; the 1.006 temporary adjustment to 
address the effects of the 0.2 percent reduction in effect for FYs 
2014 through 2016 related to the 2-midnight policy; the FY 2017 MS-
DRG GROUPER (Version 34); the FY 2017 CBSA designations for 
hospitals based on the OMB definitions from the 2010 Census; the FY 
2017 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 2018, we are proposing 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 would receive an applicable percentage increase of 1.025 
percent. At the time that this impact was prepared, 82 hospitals are 
estimated to not receive the full market basket rate-of-increase for 
FY 2018 because they failed the quality data submission process or 
did not choose to participate but are meaningful EHR users. For 
purposes of the simulations shown later in this section, we modeled 
the proposed payment changes for FY 2018 using a reduced update for 
these hospitals.
    For FY 2018, in accordance with section 1886(b)(3)(B)(ix) of the 
Act, a hospital that has been identified as not a meaningful EHR 
user would be subject to a reduction of three-quarters of such 
applicable percentage increase determined without regard to section 
1886(b)(3)(B)(ix), (xi), or (xii) of the Act. Therefore, for FY 
2018, we are proposing 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 would receive an applicable

[[Page 20197]]

percentage increase of -0.425 percent. At the time that this impact 
analysis was prepared, 103 hospitals are estimated to not receive 
the full market basket rate-of-increase for FY 2018 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 in this section, we modeled the 
proposed payment changes for FY 2018 using a reduced update for 
these hospitals.
    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 would receive an 
applicable percentage increase of -1.15 percent, which reflects a 
one-quarter reduction of the market basket update for failure to 
submit quality data and a three-quarter reduction of the market 
basket update for being identified as not a meaningful EHR user. At 
the time that this impact was prepared, 21 hospitals are estimated 
to not receive the full market basket rate-of-increase for FY 2018 
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.
    Each proposed policy change, statutory or otherwise, is then 
added incrementally to this baseline, finally arriving at an FY 2018 
model incorporating all of the proposed changes. This simulation 
allows us to isolate the effects of each proposed change.
    Our final comparison illustrates the percent change in payments 
per case from FY 2017 to FY 2018. Two factors not discussed 
separately have significant impacts here. The first factor is the 
proposed update to the standardized amount. In accordance with 
section 1886(b)(3)(B)(i) of the Act, we are proposing to update the 
standardized amounts for FY 2018 using a proposed applicable 
percentage increase of 1.75 percent. This includes our forecasted 
IPPS operating hospital market basket increase of 2.9 percent with a 
0.4 percentage point reduction for the multifactor productivity 
adjustment and a 0.75 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 
would receive a proposed update of 1.025 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 would receive an update of -0.425 percent, which includes a 
reduction of three-quarters of the market basket update. 
Furthermore, hospitals that do not comply with the quality data 
submission requirements and also are not meaningful EHR users would 
receive an update of -1.15 percent. Under section 1886(b)(3)(B)(iv) 
of the Act, the update to the hospital-specific amounts for SCHs is 
also equal to the applicable percentage increase, or 1.75 percent if 
the hospital submits quality data and is a meaningful EHR user.
    A second significant factor that affects the proposed changes in 
hospitals' payments per case from FY 2017 to FY 2018 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 2017 that are no longer reclassified in FY 2018. 
Conversely, payments may increase for hospitals not reclassified in 
FY 2017 that are reclassified in FY 2018.

2. Analysis of Table I

    Table I displays the results of our analysis of the proposed 
changes for FY 2018. 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 3,292 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 2,491 
hospitals located in urban areas included in our analysis. Among 
these, there are 1,349 hospitals located in large urban areas 
(populations over 1 million), and 1,142 hospitals in other urban 
areas (populations of 1 million or fewer). In addition, there are 
801 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 2018 proposed 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 2,391, 
1,363, 1,028, and 901, respectively.
    The next three groupings examine the impacts of the proposed 
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 2,211 nonteaching hospitals in our 
analysis, 835 teaching hospitals with fewer than 100 residents, and 
246 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 proposed changes 
on rural hospitals by special payment groups (SCHs, and RRCs). There 
were 243 RRCs, 317 SCHs, and 129 hospitals that are both SCHs 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 2014 or FY 
2013 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 2018. The second grouping 
shows the MGCRB rural reclassifications.

                                                    Table I--Impact Analysis of Proposed Changes to the IPPS for Operating Costs for FY 2018
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Proposed FY
                                                                                         2018 weights  Proposed FY                       Proposed
                                                                             Proposed      and DRG      2018 wage                      rural floor       Proposed
                                                               Number of     hospital    changes with   data with                          with     application of the   Expiration      All
                                                               hospitals   rate update   application   application    FY 2018 MGCRB    application     frontier wage       of MDH    proposed FY
                                                                  \1\          and            of         of wage    reclassifications  of national       index and         status        2018
                                                                           adjustments  recalibration     budget                       rural floor  out[dash]migration                 changes
                                                                                            budget      neutrality                        budget        adjustment
                                                                                          neutrality                                    neutrality
                                                              ...........      (1) \2\       (2) \3\       (3) \4\         (4) \5\         (5) \6\          (6) \7\         (7) \8\      (8) \9\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All Hospitals...............................................        3,292          1.5             0             0               0               0              0.1            -0.1          1.7
By Geographic Location:
    Urban hospitals.........................................        2,491          1.6             0             0            -0.1               0              0.1               0          1.8
    Large urban areas.......................................        1,349          1.6          -0.1             0            -0.4            -0.1                0               0          1.7
    Other urban areas.......................................        1,142          1.6             0             0             0.3             0.2              0.2            -0.1          1.8
    Rural hospitals.........................................          801          1.3           0.3           0.1             1.4            -0.2              0.2            -0.9          0.8
Bed Size (Urban):
    0-99 beds...............................................          638          1.5           0.4           0.1            -0.6             0.1              0.2            -0.7          1.2
    100-199 beds............................................          765          1.6           0.2           0.1            -0.1             0.2              0.2            -0.1          1.9
    200-299 beds............................................          445          1.6           0.1             0             0.1               0              0.1               0          1.7

[[Page 20198]]

 
    300-499 beds............................................          431          1.6             0             0            -0.1               0              0.1               0          1.8
    500 or more beds........................................          212          1.5          -0.3             0            -0.2            -0.1              0.1               0          1.7
Bed Size (Rural):
    0-49 beds...............................................          313          1.2           0.5             0             0.4            -0.1              0.3            -1.6          0.1
    50-99 beds..............................................          285          1.3           0.3             0             0.6            -0.2              0.2            -2.2         -0.8
    100-149 beds............................................          117          1.3           0.3             0             1.3               0              0.2            -0.1          1.4
    150-199 beds............................................           46            1           0.2           0.1             1.8            -0.2              0.1               0          1.7
    200 or more beds........................................           40          1.4           0.1           0.2             2.9            -0.2                0               0            2
Urban by Region:
    New England.............................................          114          1.6           0.1          -0.4             1.3               1                0            -0.2          1.6
    Middle Atlantic.........................................          315          1.6             0          -0.1             0.4            -0.3              0.1               0          1.2
    South Atlantic..........................................          404          1.6             0           0.1            -0.4            -0.3                0            -0.1          1.9
    East North Central......................................          385          1.6           0.1             0            -0.2            -0.3                0               0            2
    East South Central......................................          147          1.6             0          -0.1            -0.3            -0.2                0               0          1.7
    West North Central......................................          160          1.5          -0.1           0.4            -0.8            -0.3              0.7            -0.1            2
    West South Central......................................          378          1.6             0           0.5            -0.5            -0.3                0            -0.1          2.1
    Mountain................................................          162          1.5             0          -0.2               0             0.3              0.3               0            1
    Pacific.................................................          375          1.5          -0.1          -0.3            -0.2             0.9              0.1               0            2
    Puerto Rico.............................................           51          1.6          -0.4           1.4              -1             0.2              0.1               0          1.3
Rural by Region:
    New England.............................................           20          1.3           0.2           1.1             2.2            -0.3              0.2            -2.1          1.2
    Middle Atlantic.........................................           53          1.2           0.4             0             1.1            -0.2              0.2            -1.7         -0.1
    South Atlantic..........................................          125          1.2           0.3          -0.1             1.8            -0.2              0.2            -0.8          0.4
    East North Central......................................          115          1.3           0.2          -0.3             1.2            -0.2              0.1            -1.7         -0.4
    East South Central......................................          154          1.5           0.4           0.1             2.4            -0.3              0.1            -0.3          1.6
    West North Central......................................           97          1.2           0.1             0             0.1             0.2              0.3            -0.3          1.2
    West South Central......................................          154          1.3           0.4           0.3             1.7            -0.3              0.2            -0.7          1.3
    Mountain................................................           59            1           0.3          -0.1             0.2            -0.1              0.3               0          1.4
    Pacific.................................................           24          1.1           0.2             0               1             0.1                0               0          1.2
By Payment Classification:
    Urban hospitals.........................................        2,391          1.6             0             0            -0.2               0              0.1               0          1.8
    Large urban areas.......................................        1,363          1.6          -0.1             0            -0.4            -0.1                0               0          1.7
    Other urban areas.......................................        1,028          1.6             0             0             0.1             0.2              0.2               0          1.8
    Rural areas.............................................          901          1.4           0.1           0.1             1.4               0              0.2            -0.7          1.2
Teaching Status:
    Nonteaching.............................................        2,211          1.5           0.2             0             0.2             0.1              0.1            -0.3          1.6
    Fewer than 100 residents................................          835          1.6           0.1             0            -0.1               0              0.2               0          1.8
    100 or more residents...................................          246          1.5          -0.3          -0.1            -0.1            -0.1                0               0          1.6
Urban DSH:
    Non-DSH.................................................          561          1.6             0             0            -0.2            -0.1              0.2            -0.4          1.3
    100 or more beds........................................        1,563          1.6             0             0            -0.2               0              0.1               0          1.8
    Less than 100 beds......................................          357          1.5           0.4           0.1            -0.1             0.1              0.1            -0.1          2.1
Rural DSH:
    SCH.....................................................          259          1.1           0.2             0               0               0                0               0          1.2
    RRC.....................................................          271          1.4           0.1           0.2             1.7               0              0.3            -0.3          1.9
    100 or more beds........................................           41          1.6           0.2           0.3             1.6            -0.1              0.1               0          1.7
    Less than 100 beds......................................          240          1.5           0.7             0             0.6            -0.3              0.7            -4.7         -3.2
Urban teaching and DSH:
    Both teaching and DSH...................................          870          1.6          -0.1          -0.1            -0.3            -0.1              0.1               0          1.7
    Teaching and no DSH.....................................           94          1.6          -0.1             0            -0.4            -0.2              0.1               0          1.2
    No teaching and DSH.....................................        1,050          1.6           0.2             0               0             0.3              0.1               0            2
    No teaching and no DSH..................................          377          1.6             0           0.1            -0.4            -0.1              0.2               0          1.9
Special Hospital Types:
    RRC.....................................................          243          1.6           0.1           0.2             2.1            -0.1              0.4            -0.4          1.9
    SCH.....................................................          317          1.1          -0.1             0            -0.1             0.2                0               0            1
    SCH and RRC.............................................          129          1.1             0           0.1             0.3               0                0               0          1.3
Type of Ownership:
    Voluntary...............................................        1,914          1.5             0             0               0               0              0.1            -0.1          1.6
    Proprietary.............................................          862          1.6           0.2           0.1             0.1               0              0.1            -0.1          1.9
    Government..............................................          514          1.5             0             0            -0.2             0.2              0.1            -0.1          1.6
Medicare Utilization as a Percent of Inpatient Days:
    0-25....................................................          509          1.5             0             0            -0.4             0.2                0               0          1.6
    25-50...................................................        2,113          1.6             0             0               0               0              0.1            -0.1          1.8
    50-65...................................................          535          1.5           0.1           0.1             0.6               0              0.1            -0.5          1.2
    Over 65.................................................          135          1.5           0.6           0.1            -0.5             0.4              0.3            -3.7         -1.5
FY 2018 Reclassifications by the Medicare Geographic
 Classification Review Board:
    All Reclassified Hospitals..............................          900          1.5           0.1           0.1             1.9            -0.1                0            -0.1          1.7
    Non-Reclassified Hospitals..............................        2,392          1.6             0             0            -0.9               0              0.2            -0.1          1.7

[[Page 20199]]

 
    Urban Hospitals Reclassified............................          629          1.6           0.1           0.1             1.9               0                0            -0.1          1.7
    Urban Nonreclassified Hospitals.........................        1,814          1.6          -0.1          -0.1            -0.9               0              0.1               0          1.8
    Rural Hospitals Reclassified Full Year..................          271          1.3           0.2             0             2.3            -0.1                0            -0.5          1.2
    Rural Nonreclassified Hospitals Full Year...............          482          1.3           0.4           0.1            -0.2            -0.2              0.4            -1.5          0.1
    All Section 401 Reclassified Hospitals:.................          148          1.5             0           0.3             1.4             0.1              0.3            -0.6          1.7
    Other Reclassified Hospitals (Section 1886(d)(8)(B))....           48          1.5           0.6           0.3             3.3            -0.3                0            -1.1          1.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\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
  2016, and hospital cost report data are from reporting periods beginning in FY 2013 and FY 2014.
\2\ This column displays the payment impact of the proposed hospital rate update and other proposed adjustments, including the proposed 1.75 percent adjustment to the national standardized
  amount and the hospital-specific rate (the estimated 2.9 percent market basket update reduced by 0.4 percentage point for the proposed multifactor productivity adjustment and the 0.75
  percentage point reduction under the Affordable Care Act), the 0.4588 percent adjustment to the national standardized amount required under section 15005 of the 21st Century Cures Act and a
  factor of (1/1.006) to remove the 1.006 temporary one-time adjustment made in FY 2017 to address the effects of the 0.2 percent reduction in effect for FYs 2014 through 2016 related to the 2-
  midnight policy.
\3\ This column displays the payment impact of the proposed changes to the Version 35 GROUPER, the proposed changes to the relative weights and the recalibration of the MS-DRG weights based on
  FY 2016 MedPAR data in accordance with section 1886(d)(4)(C)(iii) of the Act. This column displays the application of the proposed recalibration budget neutrality factor of 0.997573 in
  accordance with section 1886(d)(4)(C)(iii) of the Act.
\4\ This column displays the payment impact of the proposed update to wage index data using FY 2014 and 2013 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 proposed wage budget neutrality factor, which is calculated separately from the proposed recalibration budget
  neutrality factor, and is calculated in accordance with section 1886(d)(3)(E)(i) of the Act. The proposed wage budget neutrality factor is 1.000465.
\5\ Shown here are the effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB. The effects demonstrate the FY 2018 payment impact of going from
  no reclassifications to the reclassifications scheduled to be in effect for FY 2018. Reclassification for prior years has no bearing on the payment impacts shown here. This column reflects
  the proposed geographic budget neutrality factor of 0.988522.
\6\ This column displays the effects of the proposed rural floor based on the continued implementation of the OMB labor market area delineations. The Affordable Care Act requires the rural
  floor budget neutrality adjustment to be 100 percent national level adjustment. The proposed rural floor budget neutrality factor applied to the wage index is 0.993672.
\7\ 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 not budget neutral policies.
\8\ This column displays the impact of the expiration of MDH status for FY 2018, a non-budget neutral payment provision.
\9\ This column shows the estimated change in payments from FY 2017 to FY 2018.

a. Effects of the Proposed Hospital Update, Adjustment Required Under 
Section 15005 of the 21st Century Cures Act, and Other Adjustments 
(Column 1)

    As discussed in section V.B. of the preamble of this proposed 
rule, this column includes the proposed hospital update, including 
the proposed 2.9 percent market basket update, the proposed 
reduction of 0.4 percentage point for the multifactor productivity 
adjustment, and the 0.75 percentage point reduction in accordance 
with the Affordable Care Act. In addition, as discussed in section 
II.D. of the preamble of this proposed rule, this column includes 
the FY 2018 adjustment of 0.4588 percent on the national 
standardized amount required under section 15005 of the 21st Century 
Cures Act and, as discussed in section V.M. of the preamble of this 
proposed rule, the adjustment factor of (1/1.006) to remove the 
1.006 temporary one-time adjustment made in FY 2017 to address the 
effects of the 0.2 percent reduction in effect for FYs 2014 through 
2016 related to the 2-midnight policy. As a result, we are proposing 
to make a 1.6 percent update to the national standardized amount. 
This column also includes the proposed update to the hospital-
specific rates which includes the proposed 2.9 percent market basket 
update, the proposed reduction of 0.4 percentage point for the 
multifactor productivity adjustment, and the 0.75 percentage point 
reduction in accordance with the Affordable Care Act and, as 
discussed in section V.M. of the preamble of this proposed rule, the 
adjustment factor of (1/1.006) to remove the 1.006 temporary one-
time adjustment made in FY 2017 to address the effects of the 0.2 
percent reduction in effect for FYs 2014 through 2016 related to the 
2-midnight policy. As a result, we are proposing to make a 1.15 
percent update to the hospital-specific rates.
    Overall, hospitals would experience a 1.5 percent increase in 
payments primarily due to the combined effects of the proposed 
hospital update and the proposed 0.4588 percent adjustment on the 
national standardized amount and the proposed hospital update to the 
hospital-specific rate as well as the adjustment factor of (1/1.006) 
to remove the 1.006 temporary one-time adjustment made in FY 2017 to 
address the effects of the 0.2 percent reduction in effect for FYs 
2014 through 2016 related to the 2-midnight policy to both the 
national standardized amount and the hospital-specific rate. 
Hospitals that are paid under the hospital-specific rate would 
experience a 1.15 percent increase in payments; therefore, hospital 
categories containing hospitals paid under the hospital-specific 
rate would experience a lower than average increases in payments.

b. Effects of the Proposed Changes to the MS-DRG Reclassifications and 
Relative Cost-Based Weights With Recalibration Budget Neutrality 
(Column 2)

    Column 2 shows the effects of the proposed 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-

[[Page 20200]]

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 proposed 
rule, the FY 2018 MS-DRG relative weights would be 100 percent cost-
based and 100 percent MS-DRGs. For FY 2018, the MS-DRGs are 
calculated using the FY 2016 MedPAR data grouped to the Version 35 
(FY 2018) MS-DRGs. The methodology to calculate the relative weights 
and the reclassification changes to the GROUPER are described in 
more detail in section II.G. of the preamble of this proposed rule.
    The ``All Hospitals'' line in Column 2 indicates that proposed 
changes due to the MS-DRGs and relative weights would result in a 
0.0 percent change in payments with the application of the proposed 
recalibration budget neutrality factor of 0.997573 to the 
standardized amount. Hospital categories that generally treat more 
surgical cases than medical cases would experience a decrease in 
their payments under the proposed relative weights for reasons that 
include the proposals regarding operating room procedures described 
in section II.G. of the preamble of this proposed rule. Rural 
hospitals would experience a 0.3 percent increase in payments in 
part because rural hospitals tend to treat fewer surgical cases than 
medical cases, while teaching hospitals with more than 100 residents 
would experience a decrease in payments by 0.3 percent in part 
because those hospitals treat more surgical cases than medical 
cases.

c. Effects of the Proposed Wage Index Changes (Column 3)

    Column 3 shows the impact of updated wage data using FY 2014 
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 2018 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), as updated in OMB 
Bulletin No. 15-01. (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, and to section III.A.2. of the preamble of the FY 2017 
IPPS/LTCH PPS final rule (81 FR 56913) for a discussion of our 
adoption of the CBSA updates in OMB Bulletin No. 15-01, which were 
effective beginning with the FY 2017 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 proposed 
wage index for acute care hospitals for FY 2018 is based on data 
submitted for hospital cost reporting periods beginning on or after 
October 1, 2013 and before October 1, 2014. The estimated impact of 
the updated wage data using the FY 2014 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 2017 wage index, based 
on FY 2013 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 2018 pre-
reclassification wage index based on FY 2014 wage data with the 
labor-related share of 68.3 percent, under the OMB delineations, 
also having a 100-percent occupational mix adjustment applied, while 
holding other proposed payment parameters such as use of the Version 
35 MS-DRG GROUPER constant. The proposed FY 2018 occupational mix 
adjustment is based on the CY 2013 occupational mix survey.
    In addition, the column shows the impact of the proposed 
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 2018, we are 
proposing to calculate the wage budget neutrality factor to ensure 
that payments under updated wage data and the labor-related share of 
68.3 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 proposed FY 2018 wage budget neutrality factor is 1.000465, and 
the overall proposed payment change is 0.0 percent.
    Column 3 shows the impacts of updating the wage data using FY 
2014 cost reports. Overall, the new wage data and the labor-related 
share, combined with the proposed wage budget neutrality adjustment, 
would lead to no change for all hospitals as shown in Column 3.
    In looking at the wage data itself, the proposed national 
average hourly wage would increase 1.02 percent compared to FY 2017. 
Therefore, the only manner in which to maintain or exceed the 
previous year's wage index was to match or exceed the 1.02 percent 
increase in the national average hourly wage. Of the 3,287 hospitals 
with wage data for both FYs 2017 and 2018, 1,698 or 51.7 percent 
would experience an average hourly wage increase of 1.02 percent or 
more.
    The following chart compares the shifts in wage index values for 
hospitals due to proposed changes in the average hourly wage data 
for FY 2018 relative to FY 2017. Among urban hospitals, 10 would 
experience a decrease of 10 percent or more, and 2 urban hospitals 
would experience an increase of 10 percent or more. One hundred and 
one urban hospitals would experience an increase or decrease of at 
least 5 percent or more but less than 10 percent. Among rural 
hospitals, none would experience an increase of at least 5 percent 
or more, but 12 rural hospitals would experience a decrease of 
greater than or equal to 5 percent but less than 10 percent. Three 
rural hospitals would experience decreases of 10 percent or more. 
However, 775 rural hospitals would experience increases or decreases 
of less than 5 percent, while 2,384 urban hospitals would experience 
increases or decreases of less than 5 percent. No urban hospitals 
and no rural hospitals experience no change to their wage index. 
These figures reflect proposed changes in the ``pre-reclassified, 
occupational mix-adjusted wage index,'' that is, the proposed wage 
index before the application of proposed geographic 
reclassification, the proposed rural floor, the proposed out-
migration adjustment, and other proposed wage index exceptions and 
adjustments. (We refer readers to sections III.G. through III.L. of 
the preamble of this proposed rule for a complete discussion of the 
exceptions and adjustments to the wage index.) We note that the 
proposed ``post-reclassified wage index'' or proposed ``payment wage 
index,'' which is the proposed wage index that includes all such 
exceptions and adjustments (as reflected in Tables 2 and 3 
associated with this proposed rule, which are available via the 
Internet on the CMS Web site) is used to adjust the labor-related 
share of a hospital's standardized amount, either 68.3 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 proposed pre-
reclassified wage index figures in the following chart may 
illustrate a somewhat larger or smaller change than would occur in a 
hospital's proposed payment wage index and total payment.
    The following chart shows the projected impact of proposed 
changes in the area wage index values for urban and rural hospitals.

------------------------------------------------------------------------
                                                Number of hospitals
  Proposed FY 2018 percentage change in  -------------------------------
         area wage index values                Urban           Rural
------------------------------------------------------------------------
Increase 10 percent or more.............               2               0
Increase greater than or equal to 5                   54               0
 percent and less than 10 percent.......
Increase or decrease less than 5 percent           2,384             775
Decrease greater than or equal to 5                   47              12
 percent and less than 10 percent.......

[[Page 20201]]

 
Decrease 10 percent or more.............              10               3
Unchanged...............................               0               0
------------------------------------------------------------------------

d. Effects of MGCRB Reclassifications (Column 4)

    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 proposed changes in Column 4 reflect 
the per case payment impact of moving from this baseline to a 
simulation incorporating the MGCRB decisions for FY 2018.
    By spring of each year, the MGCRB makes reclassification 
determinations that would 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 (we refer readers to the 
discussion of our proposed revisions to this policy in section 
III.I.2. of the preamble to this proposed rule).
    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 proposing to apply an 
adjustment of 0.988522 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 proposed rule). 
Geographic reclassification generally benefits hospitals in rural 
areas. We estimate that the geographic reclassification would 
increase payments to rural hospitals by an average of 1.4 percent. 
By region, all the rural hospital categories would experience 
increases in payments due to MGCRB reclassifications.
    Table 2 listed in section VI. of the Addendum to this proposed 
rule and available via the Internet on the CMS Web site reflects the 
proposed reclassifications for FY 2018.

e. Effects of the Proposed Rural Floor, Including Application of 
National Budget Neutrality (Column 5)

    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, 2015, 2016, and 2017 IPPS/LTCH PPS final 
rules, and this proposed 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 would apply a 
uniform budget neutrality adjustment to the wage index. As discussed 
in section III.H. of the preamble of this proposed rule, we are not 
proposing to extend the imputed floor policy. Therefore, column 6 
shows the effects of the proposed rural floor only.
    The Affordable Care Act requires that we apply one rural floor 
budget neutrality factor to the wage index nationally. We have 
calculated a proposed FY 2018 rural floor budget neutrality factor 
to be applied to the wage index of 0.993672, which would reduce wage 
indexes by 0.63 percent.
    Column 5 shows the projected impact of the proposed rural 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 proposed post-reclassification FY 2018 wage 
index of providers before the proposed rural floor adjustment and 
the proposed post-reclassification FY 2018 wage index of providers 
with the proposed rural floor adjustment based on the OMB labor 
market area delineations. Only urban hospitals can benefit from the 
rural floor. 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) would experience a decrease in 
payments due to the budget neutrality adjustment that is applied 
nationally to their wage index.
    We estimate that 392 hospitals would receive the proposed rural 
floor in FY 2018. All IPPS hospitals in our model would have their 
wage index reduced by the rural floor budget neutrality adjustment 
of 0.993672. We project that, in aggregate, rural hospitals would 
experience a 0.63 percent decrease in payments as a result of the 
application of the proposed 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 budget neutral overall. We project 
hospitals located in urban areas would 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 
would experience a 1.0 percent increase in payments primarily due to 
the application of the proposed rural floor in Massachusetts. 
Thirty-six urban providers in Massachusetts are expected to receive 
the proposed rural floor wage index value, including the rural floor 
budget neutrality adjustment, increasing payments overall to 
Massachusetts by an estimated $44 million. We estimate that 
Massachusetts hospitals would receive approximately a 1.3 percent 
increase in IPPS payments due to the application of the proposed 
rural floor in FY 2018.
    Urban Puerto Rico hospitals are expected to experience a 0.2 
percent increase in payments as a result of the application of the 
proposed rural floor.
    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 proposed rural floor with budget neutrality at the 
State level. Column 1 of the following table displays the number of 
IPPS hospitals located in each State. Column 2 displays the number 
of hospitals in each State that would receive the proposed rural 
floor wage index for FY 2018. Column 3 displays the percentage of 
total payments each State would receive or contribute to fund the 
rural floor with national budget neutrality. The column compares the 
proposed post-reclassification FY 2018 wage index of providers 
before the proposed rural floor adjustment and the proposed post-
reclassification FY 2018 wage index of providers with the proposed 
rural floor adjustment. Column 4 displays the estimated payment 
amount that each State would gain or lose due to the application of 
the proposed rural floor with national budget neutrality.

[[Page 20202]]



           Proposed FY 2018 IPPS Estimated Payments Due to Rural Floor With National Budget Neutrality
----------------------------------------------------------------------------------------------------------------
                                                                                     Proposed
                                                                     Proposed     percent change
                                                                     number of      in payments
                                                     Number of    hospitals that      due to         Proposed
                      State                          hospitals     would receive  application of  difference (in
                                                                     the rural      rural floor     $ millions)
                                                                       floor        with budget
                                                                                    neutrality
                                                             (1)             (2)             (3)             (4)
----------------------------------------------------------------------------------------------------------------
Alabama.........................................              84               3             0.2            3.05
Alaska..........................................               6               4             1.4            2.62
Arizona.........................................              57              44             0.9           17.47
Arkansas........................................              44               1            -0.3           -3.39
California......................................             299             177             1.3          136.28
Colorado........................................              47               4             0.4            4.97
Connecticut.....................................              30              10             0.4            6.31
Delaware........................................               6               0            -0.3           -1.61
Washington, D.C.................................               7               0            -0.3           -1.67
Florida.........................................             171              17            -0.2          -14.93
Georgia.........................................             103               0            -0.3           -8.07
Hawaii..........................................              12               0            -0.3           -0.83
Idaho...........................................              14               0            -0.2           -0.77
Illinois........................................             127               3            -0.3          -15.87
Indiana.........................................              85               7            -0.2           -5.92
Iowa............................................              34               0            -0.3           -2.94
Kansas..........................................              53               0            -0.3           -2.62
Kentucky........................................              66               0            -0.3           -4.87
Louisiana.......................................              94               3            -0.3           -4.21
Maine...........................................              17               0            -0.3           -1.59
Massachusetts...................................              57              36             1.3           43.82
Michigan........................................              94               0            -0.3          -13.74
Minnesota.......................................              49               0            -0.3           -5.66
Mississippi.....................................              60               0            -0.3            -3.4
Missouri........................................              74               0            -0.2           -3.89
Montana.........................................              12               4               0            0.08
Nebraska........................................              24               0            -0.3           -1.88
Nevada..........................................              23               0            -0.4           -3.04
New Hampshire...................................              13               9             2.5           14.09
New Jersey......................................              64               0            -0.4          -16.05
New Mexico......................................              25               0            -0.2           -1.01
New York........................................             154              21            -0.1          -11.13
North Carolina..................................              84               0            -0.3            -9.6
North Dakota....................................               6               0            -0.2           -0.62
Ohio............................................             128               6            -0.3          -11.62
Oklahoma........................................              84               4            -0.2           -2.81
Oregon..........................................              34               5            -0.3           -2.64
Pennsylvania....................................             150               3            -0.3          -16.09
Puerto Rico.....................................              51              10             0.2            0.38
Rhode Island....................................              11               0            -0.4           -1.56
South Carolina..................................              56               0            -0.3           -4.66
South Dakota....................................              17               0            -0.2           -0.72
Tennessee.......................................              91               6            -0.3           -7.25
Texas...........................................             310               0            -0.3          -21.42
Utah............................................              33               1            -0.3           -1.49
Vermont.........................................               6               0            -0.2           -0.44
Virginia........................................              73               1            -0.2            -6.7
Washington......................................              48               3            -0.2           -4.36
West Virginia...................................              29               3            -0.1           -0.46
Wisconsin.......................................              66               7            -0.2           -3.57
Wyoming.........................................              10               0            -0.1           -0.18
----------------------------------------------------------------------------------------------------------------

f. Effects of the Application of the Proposed Frontier State Wage Index 
and Out-Migration Adjustment (Column 6)

    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, 5 
States (Montana, Nevada, North Dakota, South Dakota, and Wyoming)

[[Page 20203]]

are considered frontier States and 48 hospitals located in those 
States would receive a frontier wage index of 1.0000. Overall, this 
provision is not budget neutral and is estimated to increase IPPS 
operating payments by approximately $65 million. Rural and urban 
hospitals located in the West North Central region would experience 
an increase in payments by 0.3 and 0.7 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 248 providers that would receive the out-migration wage 
adjustment in FY 2018. Rural hospitals generally qualify for the 
adjustment, resulting in a 0.2 percent increase in payments. This 
provision appears to benefit section 401 hospitals and RRCs in that 
they would experience a 0.3 percent and 0.4 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 would be approximately $39 
million.

g. Effects of the Expiration of MDH Special Payment Status (Column 7)

    Column 7 shows our estimate of the changes in payments due to 
the expiration of MDH status, a nonbudget neutral payment provision. 
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). Therefore, 
under current law, the MDH program will expire at the end of FY 
2017. Hospitals that qualified to be MDHs receive the higher of 
payments made based on the Federal rate or the payments made based 
on the Federal rate amount plus 75 percent of the difference between 
payments based the Federal rate and payments based the hospital-
specific rate (a hospital-specific cost-based rate). Because this 
provision was not budget neutral, the expiration of this payment 
provision results in a 0.1 percent decrease in payments overall. 
There are currently 158 MDHs, of which we estimate 96 would have 
been paid under the blended payment of the Federal rate and 
hospital-specific rate if the MDH program had not expired. Because 
those 96 MDHs will no longer receive the blended payment and will be 
paid only under the Federal rate in FY 2018, it is estimated that 
those hospitals would experience an overall decrease in payments of 
approximately $119 million.
    MDHs were generally rural hospitals, so the expiration of the 
MDH program will result in an overall decrease in payments to rural 
hospitals of 0.9 percent. Rural New England hospitals can expect a 
decrease in payments of 2.1 percent because 6 out of the 20 rural 
New England hospitals are MDHs that will lose this special payment 
status under the expiration of the program at the end of FY 2017. 
MDHs can expect a decrease in payments of 12 percent.

h. Effects of All FY 2018 Proposed Changes (Column 8)

    Column 8 shows our estimate of the proposed changes in payments 
per discharge from FY 2017 and FY 2018, resulting from all proposed 
changes reflected in this proposed rule for FY 2018. It includes 
combined effects of the year to year change of the previous columns 
in the table.
    The proposed average increase in payments under the IPPS for all 
hospitals is approximately 1.7 percent for FY 2018 relative to FY 
2017 and for this row is primarily driven by the changes reflected 
in Column 1. Column 8 includes the proposed annual hospital update 
of 1.6 percent to the national standardized amount. This proposed 
annual hospital update includes the 2.9 percent market basket 
update, the proposed reduction of 0.4 percentage point for the 
multifactor productivity adjustment, and the 0.75 percentage point 
reduction under section 3401 of the Affordable Care Act. As 
discussed in section II.D. of the preamble of this proposed rule, 
this column also includes the proposed FY 2018 adjustment of 0.4588 
percent on the national standardized amount. In addition, this 
column includes the adjustment factor of (1/1.006) to remove the 
1.006 temporary one-time adjustment made in FY 2017 to address the 
effects of the 0.2 percent reduction in effect for FYs 2014 through 
2016 related to the 2-midnight policy, which is discussed in section 
V.M. of the preamble of this proposed rule. Hospitals paid under the 
hospital-specific rate would receive a 1.15 percent proposed 
hospital update. As described in Column 1, the proposed annual 
hospital update with the proposed adjustment of 0.4588 percent for 
hospitals paid under the national standardized amount, the 
adjustment of (1/1.006) to remove the 1.006 temporary one-time 
adjustment made in FY 2017 to address the effects of the 0.2 percent 
reduction in effect for FYs 2014 through 2016, which is discussed in 
section V.M. of the preamble of this proposed rule, combined with 
the proposed annual hospital update for hospitals paid under the 
hospital-specific rates would result in a 1.7 percent increase in 
payments in FY 2018 relative to FY 2017. There are also interactive 
effects among the various factors comprising the payment system that 
we are not able to isolate which contribute to our estimate of the 
proposed changes in payments per discharge from FY 2017 and FY 2018 
in Column 8.
    Overall payments to hospitals paid under the IPPS due to the 
proposed applicable percentage increase and proposed changes to 
policies related to MS-DRGs, geographic adjustments, and outliers 
are estimated to increase by 1.7 percent for FY 2018. Hospitals in 
urban areas would experience a 1.8 percent increase in payments per 
discharge in FY 2018 compared to FY 2017. Hospital payments per 
discharge in rural areas are estimated to increase by 0.8 percent in 
FY 2018.

3. Impact Analysis of Table II

    Table II presents the projected impact of the proposed changes 
for FY 2018 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 2017 with the proposed 
estimated average payments per discharge for FY 2018, as calculated 
under our models. Therefore, this table presents, in terms of the 
average dollar amounts paid per discharge, the combined effects of 
the proposed changes presented in Table I. The proposed 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 Proposed Changes for FY 2018 Acute Care Hospital Operating Prospective Payment
                                                     System
                                            [Payments per discharge]
----------------------------------------------------------------------------------------------------------------
                                                                     Estimated       Estimated
                                                     Number of      average FY      average FY      Proposed FY
                                                     hospitals     2017 payment    2018 payment    2018 changes
                                                                   per discharge   per discharge
                                                             (1)             (2)             (3)             (4)
----------------------------------------------------------------------------------------------------------------
All Hospitals                                              3,292          11,842          12,041             1.7
By Geographic Location:
    Urban hospitals.............................           2,491          12,179          12,393             1.8

[[Page 20204]]

 
    Large urban areas...........................           1,349          12,953          13,174             1.7
    Other urban areas...........................           1,142          11,311          11,516             1.8
    Rural hospitals.............................             801           8,907           8,975             0.8
Bed Size (Urban):
    0-99 beds...................................             638           9,688           9,806             1.2
    100-199 beds................................             765          10,232          10,423             1.9
    200-299 beds................................             445          11,051          11,244             1.7
    300-499 beds................................             431          12,395          12,620             1.8
    500 or more beds............................             212          14,917          15,173             1.7
Bed Size (Rural):
    0-49 beds...................................             313           7,531           7,535             0.1
    50-99 beds..................................             285           8,501           8,431            -0.8
    100-149 beds................................             117           8,736           8,861             1.4
    150-199 beds................................              46           9,453           9,617             1.7
    200 or more beds............................              40          10,433          10,643               2
Urban by Region:
    New England.................................             114          13,107          13,311             1.6
    Middle Atlantic.............................             315          13,750          13,910             1.2
    South Atlantic..............................             404          10,775          10,980             1.9
    East North Central..........................             385          11,495          11,726               2
    East South Central..........................             147          10,247          10,419             1.7
    West North Central..........................             160          11,887          12,127               2
    West South Central..........................             378          10,936          11,163             2.1
    Mountain....................................             162          12,796          12,928               1
    Pacific.....................................             375          15,612          15,922               2
    Puerto Rico.................................              51           8,770           8,886             1.3
Rural by Region:
    New England.................................              20          12,124          12,264             1.2
    Middle Atlantic.............................              53           8,878           8,873            -0.1
    South Atlantic..............................             125           8,271           8,302             0.4
    East North Central..........................             115           9,221           9,183            -0.4
    East South Central..........................             154           7,887           8,012             1.6
    West North Central..........................              97           9,742           9,856             1.2
    West South Central..........................             154           7,535           7,631             1.3
    Mountain....................................              59          10,601          10,754             1.4
    Pacific.....................................              24          12,463          12,614             1.2
By Payment Classification:
    Urban hospitals.............................           2,391          12,193          12,406             1.8
    Large urban areas...........................           1,363          12,940          13,160             1.7
    Other urban areas...........................           1,028          11,201          11,406             1.8
    Rural areas.................................             901          10,084          10,207             1.2
Teaching Status:
    Nonteaching.................................           2,211           9,850          10,010             1.6
    Fewer than 100 residents....................             835          11,367          11,570             1.8
    100 or more residents.......................             246          17,167          17,441             1.6
Urban DSH:
    Non-DSH.....................................             561          10,314          10,448             1.3
    100 or more beds............................           1,563          12,565          12,785             1.8
    Less than 100 beds..........................             357           8,849           9,038             2.1
Rural DSH:
    SCH.........................................             259           9,547           9,662             1.2
    RRC.........................................             271          10,639          10,842             1.9
    100 or more beds............................              41          10,943          11,128             1.7
    Less than 100 beds..........................             240           6,977           6,754            -3.2
Urban teaching and DSH:
    Both teaching and DSH.......................             870          13,659          13,887             1.7
    Teaching and no DSH.........................              94          11,460          11,593             1.2
    No teaching and DSH.........................           1,050          10,218          10,422               2
    No teaching and no DSH......................             377           9,840          10,023             1.9
Special Hospital Types:
    RRC.........................................             243          10,318          10,518             1.9
    SCH.........................................             317          10,781          10,886               1
    SCH and RRC.................................             129          11,225          11,374             1.3
Type of Ownership:

[[Page 20205]]

 
    Voluntary...................................           1,914          12,027          12,223             1.6
    Proprietary.................................             862          10,383          10,585             1.9
    Government..................................             514          12,805          13,012             1.6
Medicare Utilization as a Percent of Inpatient
 Days:
    0-25........................................             509          15,200          15,448             1.6
    25-50.......................................           2,113          11,775          11,983             1.8
    50-65.......................................             535           9,626           9,742             1.2
    Over 65.....................................             135           7,473           7,364            -1.5
FY 2018 Reclassifications by the Medicare
 Geographic Classification Review Board:
    All Reclassified Hospitals..................             900          11,720          11,914             1.7
    Non-Reclassified Hospitals..................           2,392          11,900          12,101             1.7
    Urban Hospitals Reclassified................             629          12,240          12,452             1.7
    Urban Nonreclassified Hospitals.............           1,814          12,157          12,376             1.8
    Rural Hospitals Reclassified Full Year......             271           9,327           9,435             1.2
    Rural Nonreclassified Hospitals Full Year...             482           8,419           8,424             0.1
    All Section 401 Reclassified Hospitals:.....             148          11,661          11,862             1.7
    Other Reclassified Hospitals (Section                     48           8,080           8,169             1.1
     1886(d)(8)(B)).............................
----------------------------------------------------------------------------------------------------------------

H. Effects of Other Proposed Policy Changes

    In addition to those proposed policy changes discussed 
previously that we are able to model using our IPPS payment 
simulation model, we are proposing to make various other changes in 
this proposed rule. Generally, we have limited or no specific data 
available with which to estimate the impacts of these proposed 
changes. Our estimates of the likely impacts associated with these 
other proposed changes are discussed in this section.

1. Effects of Proposed Policy Relating to New Medical Service and 
Technology Add-On Payments

    In section II.H. of the preamble to this proposed rule, we 
discuss six technologies for which we received applications for add-
on payments for new medical services and technologies for FY 2018, 
as well as the status of the new technologies that were approved to 
receive new technology add-on payments in FY 2017. We note that 
three applicants withdrew their applications prior to the issuance 
of this proposed rule. As explained in the preamble to this proposed 
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.H.6. of the preamble of this 
proposed rule, we have not yet determined whether any of these six 
technologies for which we received applications for consideration 
for new technology add-on payments for FY 2018 will meet the 
specified criteria. Consequently, it is premature to estimate the 
potential payment impact of these six technologies for any potential 
new technology add-on payments for FY 2018. We note that if any of 
the six technologies are found to be eligible for new technology 
add-on payments for FY 2018, in the FY 2018 IPPS/LTCH PPS final 
rule, we would discuss the estimated payment impact for FY 2018.
    In section II.H.5. of the preamble of this proposed rule, we are 
proposing to discontinue new technology add-on payments for 
Blinatumomab (BLINCYTOTM), CardioMEMSTM HF 
(Heart Failure) Monitoring System, the LUTONIX[supreg] Drug Coated 
Balloon (DCB) Percutaneous Transluminal Angioplasty (PTA) and 
IN.PACTTM AdmiralTM Paclitaxel Coated 
Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter, and 
the MAGEC[supreg] Spinal Bracing and Distraction System 
(MAGEC[supreg] Spine) for FY 2018 because these technologies will 
have been on the U.S. market for 3 years. We also are proposing to 
continue to make new technology add-on payments for 
Defitelio[supreg] (Defibrotide), GORE[supreg] EXCLUDER[supreg] Iliac 
Branch Endoprosthesis (IBE), Idarucizumab and VistogardTM 
(Uridine Triacetate) in FY 2018 because these technologies would 
still be considered new. We note that new technology add-on payments 
for each 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 new technology add-on payments for FY 2018 as if every 
claim that would qualify for a new technology add-on payment would 
receive the maximum add-on payment. For Defitelio[supreg], based on 
the applicant's estimate from FY 2017, we currently estimate that 
new technology add-on payments for Defitelio[supreg] would increase 
overall FY 2018 payments by $5,161,200 (maximum add-on payment of 
$75,900 * 68 patients). Based on the applicant's estimate for FY 
2017, we currently estimate that new technology add-on payments for 
the GORE[supreg] EXCLUDER[supreg] IBE would increase overall FY 2018 
payments by $5,685,750 (maximum add-on payment of $5,250 * 1,083 
patients). Based on the applicant's estimate for FY 2017, we 
currently estimate that new technology add-on payments for 
Idarucizumab would increase overall FY 2018 payments by $14,766,500 
(maximum add-on payment of $1,750 * 8,438 patients). Based on the 
applicant's estimate for FY 2017, we currently estimate that new 
technology add-on payments for VistogardTM would increase 
overall FY 2018 payments by $2,812,500 (maximum add-on payment of 
$37,500 * 75 patients).

2. Effects of Proposed Changes to MS-DRGs Subject to the Postacute Care 
Transfer Policy and the MS-DRG Special Payment Policy

    In section V.A. of the preamble of this proposed rule, we 
discuss our proposed 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 proposed rule (which is available via the Internet on the CMS 
Web site), using criteria set forth in regulations at 42 CFR 412.4, 
we evaluated MS-DRG charge, discharge, and transfer data to 
determine which MS-DRGs qualify for the postacute care transfer and 
MS-DRG special payment policies. We note that we are not proposing 
to make any changes in these payment policies in this FY 2018 
proposed rule. As a result of our proposals to revise the MS-DRG 
classifications for FY 2018, which are discussed in section II.F. of 
the preamble of this proposed rule, we are proposing to add three 
MS-DRGs to the list of MS-DRGs subject to the postacute care 
transfer policy

[[Page 20206]]

and the MS-DRG special payment policy. Column 4 of Table I in this 
Appendix A shows the effects of the proposed 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 proposed changes due to the MS-DRGs and 
relative payment weights account for and include changes as a result 
of the proposed changes to the MS-DRGs subject to the MS-DRG 
postacute care transfer and MS-DRG special payment policies. We 
refer readers to section I.G. of this Appendix A for a detailed 
discussion of payment impacts due to the proposed MS-DRG 
reclassification policies for FY 2018.

3. Effects of the Proposed Changes to the Volume Decrease Adjustment 
for Sole Community Hospitals (SCHs)

    In section V.C. of the preamble of this proposed rule, we 
discuss our proposal to modify the methodology used to calculate 
volume decrease adjustments for SCHs. We are proposing to 
prospectively require that the MACs compare Medicare revenue 
allocable to fixed costs from the cost reporting period when the 
hospital experienced the volume decrease to the hospital's fixed 
costs from that same cost reporting period when calculating a volume 
decrease adjustment. We also are proposing that the cap will no 
longer be applied to the volume decrease adjustment calculation 
methodology in future periods. In addition, we are proposing to 
prospectively modify the volume decrease adjustment process to no 
longer require that a hospital explicitly demonstrate that it 
appropriately adjusted the number of staff in inpatient areas of the 
hospital based on the decrease in the number of inpatient days and 
to no longer require the MACs to adjust the volume decrease 
adjustment payment amount for excess staffing. We estimate that 
these proposed changes to the volume decrease adjustment would 
increase aggregate volume decrease adjustment payments by a total of 
approximately $15 million for cost reporting periods beginning in FY 
2018. Given that the volume decrease adjustment is only available to 
SCHs and is predicated on the unanticipated nature of the volume 
decrease, it is difficult to predict how many hospitals will qualify 
for the adjustment in FY 2018. We assumed 20 hospitals would qualify 
for the adjustment in FY 2018 that the additional amount of the 
volume decrease adjustment payment based on our proposed methodology 
would be $750,000 per hospital.

4. Effects of Proposed Changes to Low-Volume Hospital Payment 
Adjustment Policy

    In section V.E. of the preamble of this proposed rule, we 
discuss the expiration of the temporary changes to the low-volume 
hospital payment policy originally provided for by the Affordable 
Care Act and extended through FY 2017 by subsequent legislation. 
Effective for FY 2018 and subsequent years, qualifying hospitals 
must have less than 200 combined Medicare and non-Medicare 
discharges (instead of 1,600 Medicare discharges) and must be 
located more than 25 road miles from another subsection (d) hospital 
(instead of 15 road miles from another subsection (d) hospital). In 
this same section, we discuss our proposed parallel low-volume 
hospital payment adjustment regarding hospitals operated by the IHS 
or a Tribe. Under this proposal, an IHS hospital would be able to 
qualify for a low-volume hospital adjustment based on its distance 
to the nearest IHS hospital, and a non-IHS hospital would be able to 
qualify to receive a low-volume hospital adjustment based on its 
distance to the nearest non-IHS hospital. Based upon the best 
available data at this time, we estimate the expiration of the 
temporary changes to the low-volume hospital payment and the 
proposed change to the low-volume payment adjustments would decrease 
aggregate low-volume payment adjustments from $315 million in FY 
2017 to $4 million in FY 2018. This $311 million decrease in FY 2018 
is based on an estimated $314 million decrease in payments from the 
expiration of the temporary changes to the low-volume hospital 
definition and payment adjustment methodology together with an 
estimated increase of $3 million in payments made to hospitals that 
are expected to qualify under our proposed parallel low-volume 
hospital payment adjustment. These payment estimates were determined 
by identifying providers that, based on the best available data, are 
expected to qualify under the criteria that will apply in FY 2018 
(that is, are located at least 25 miles from the nearest subsection 
(d) hospital and have les than 200 total discharges, and were 
determined from the same data used in developing the quantitative 
analyses of proposed changes in payments per case discussed 
previously in section I.G. of this Appendix A.

5. Effects of the Proposed Changes to Medicare DSH and Uncompensated 
Care Payments for FY 2018

    As discussed in section V.G. of the preamble of this proposed 
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 
statutory formula for Medicare DSH payments under section 
1886(d)(5)(F) of the Act. 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 
uninsured individuals 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 hospital eligible for Medicare DSH payments will receive an 
additional payment based on its estimated share of the total amount 
of uncompensated care for all hospitals eligible for Medicare DSH 
payments. The uncompensated care payment methodology has 
redistributive effects based on the proportion of a hospital's 
uncompensated care relative to the uncompensated care for all 
hospitals eligible for Medicare DSH payments (Factor 3).
    For FY 2018, we are proposing a Factor 2 of 58.01 percent 
determined using the uninsured estimates produced by CMS' Office of 
the Actuary (OACT) as part of the development of the National Health 
Expenditure Accounts (NHEA). We also are proposing to continue to 
use low-income insured patient days as a proxy for uncompensated 
care in combination with data on uncompensated care costs from 
Worksheet S-10 in the calculation of Factor 3. The uncompensated 
care payment methodology has redistributive effects based on the 
proportion of a hospital's uncompensated care relative to the total 
uncompensated care for all hospitals eligible for Medicare DSH 
payments. The reduction to Medicare DSH payments under section 3133 
of the Affordable Care Act is not budget neutral.
    In this proposed rule, we are proposing to establish the amount 
to be distributed as uncompensated care payments to DSH eligible 
hospitals, which for FY 2018 is $6,962,310,946.63, or 75 percent of 
what otherwise would have been paid for Medicare DSH payment 
adjustments adjusted by a proposed Factor 2 of 58.01 percent. For FY 
2017, the amount available to be distributed for uncompensated care 
was $5,977,483,146.86, or 75 percent of what otherwise would have 
been paid for Medicare DSH payment adjustments adjusted by a Factor 
2 of 55.36 percent. To calculate Factor 3 for FY 2018, we are 
proposing to use an average of data computed using Medicaid days 
from hospitals' 2012 and 2013 cost reports from the March 2017 
update of the HCRIS database, uncompensated care costs from 
hospitals' 2014 cost reports from the same extract of HCRIS, 
Medicaid days from 2012 cost report data submitted to CMS by IHS 
hospitals, and SSI days from the FY 2014 and FY 2015 SSI ratios. For 
each eligible hospital, we are proposing to calculate an individual 
Factor 3 for cost reporting years beginning during FYs 2012, 2013, 
and 2014. We will then add the individual amounts and divide the sum 
by three in order to calculate an average Factor 3 for FY 2018. For 
purposes of this proposed rule, we are using data from the December 
2016 update of the HCRIS database for the Medicaid days component of 
the Factor 3 calculation as well as for the Worksheet S-10 
uncompensated care cost component. For modeling purposes, as the FY 
2015 SSI ratios are not yet available, we are using SSI days from 
the FY 2013 and FY 2014 SSI ratios, which are the most recent 
available SSI ratios. We expect the March 2017 update of the HCRIS 
database as well as the FY 2015 SSI ratios to be available in time 
for calculating Factor 3 for the FY 2018 IPPS/LTCH PPS final rule.
    The proposed FY 2018 policy of using data from hospitals' FY 
2012, FY 2013, and FY 2014 cost reporting years to determine Factor 
3 is based on our FY 2017 final policy (81 FR 56943 through 56973), 
which is in contrast to the methodology used in FY 2016, when we 
used Medicaid days from the more recent of a hospital's full year 
2012 or 2011 cost report from the March 2015 update of the HCRIS 
database, Medicaid days from

[[Page 20207]]

2012 cost report data submitted to CMS by IHS hospitals, and SSI 
days from the FY 2013 SSI ratios to calculate Factor 3. In addition, 
as explained in section V.G.4.c. of the preamble of this proposed 
rule, we are proposing to make several additional modifications to 
the Factor 3 methodology: (1) To annualize Medicaid data if a 
hospitals' cost report does not equal 12 months of data; (2) to 
apply a scaling factor to the uncompensated care payment amount 
calculated for each DSH eligible hospital so that total 
uncompensated care payments are consistent with the estimated amount 
available to make uncompensated care payments for FY 2018; (3) to 
apply statistical trims to the CCRs on Worksheet S-10 that are 
considered anomalies to ensure reasonable CCRs are used to convert 
charges to costs for purposes of determining uncompensated care 
costs, and (4) to calculate Factor 3 for Puerto Rico hospitals and 
Indian Health Service and Tribal hospitals by substituting data 
regarding low-income insured days for FY 2013 for Worksheet S-10 
data from FY 2014 cost reports. We also are proposing to continue 
the policies that were finalized in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50020 through 50022) 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 2018 and subsequent years, 
as well as proposing to continue the policies finalized in the FY 
2017 IPPS/LTCH PPS final rule concerning the methodology for 
calculating each hospital's relative share of uncompensated care, 
such as combining data from multiple cost reports beginning in the 
same fiscal year and averaging the sum of three individual Factor 3s 
by the number of cost reporting periods with data.
    To estimate the impact of the combined effect of changes in 
Factors 1 and 2, as well as the changes to the data used in 
determining 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 2017 IPPS/LTCH PPS final rule to total DSH 
payments estimated in this FY 2018 IPPS/LTCH PPS proposed rule. For 
FY 2017, for each hospital, we calculated the sum of: (1) 25 Percent 
of the estimated amount of what would have been paid as Medicare DSH 
in FY 2017 in the absence of section 3133 of the Affordable Care 
Act; and (2) 75 percent of the estimated amount of what would have 
been paid as Medicare DSH payments in the absence of section 3133 of 
the Affordable Care Act, adjusted by a Factor 2 of 55.36 percent and 
multiplied by a Factor 3 calculated as described in the FY 2017 
IPPS/LTCH PPS final rule. For FY 2018, we calculated the sum of: (1) 
25 Percent of the estimated amount of what would be paid as Medicare 
DSH payments in FY 2018 absent section 3133 of the Affordable Care 
Act; and (2) 75 percent of the estimated amount of what would be 
paid as Medicare DSH payments absent section 3133 of the Affordable 
Care Act, adjusted by a Factor 2 of 58.01 percent and multiplied by 
a Factor 3 calculated using the methodology described above.
    Our analysis included 2,418 hospitals that are projected to be 
eligible for DSH in FY 2018. It did not include hospitals that had 
terminated their participation in the Medicare program as of 
February 23, 2017, Maryland hospitals, and SCHs that are expected to 
be paid based on their hospital-specific rates. In addition, data 
from merged or acquired hospitals were combined under the surviving 
hospital's CCN, and the nonsurviving CCN was excluded from the 
analysis. The estimated impact of the proposed changes to Factors 1, 
2, and 3 across all hospitals projected to be eligible for DSH 
payments in FY 2018, by hospital characteristic, is presented in the 
following table.

Modeled Disproportionate Share Hospital Proposed Payments for Estimated FY 2018 DSHs by Hospital Type: Model DSH
                                     $ (in Millions) From FY 2017 to FY 2018
----------------------------------------------------------------------------------------------------------------
                                                                      FY 2018         Dollar
                                     Number of     FY 2017 final   proposed rule    difference:
                                  estimated DSHs  rule estimated   estimated DSH    FY 2017- FY   Percent change
                                     (FY 2018)      DSH $  (in        $  (in         2018 (in           **
                                                     millions)       millions)       millions)
                                             (1)             (2)             (3)             (4)             (5)
----------------------------------------------------------------------------------------------------------------
Total...........................           2,418          $9,553         $10,931          $1,378            14.4
By Geographic Location:
    Urban Hospitals.............           1,921           9,113          10,355           1,241            13.6
    Large Urban Areas...........           1,037           5,717           6,538             821            14.4
    Other Urban Areas...........             884           3,396           3,816             420            12.4
    Rural Hospitals.............             497             439             577             137            31.2
Bed Size (Urban):
    0 to 99 Beds................             331             185             240              56            30.2
    100 to 249 Beds.............             841           2,154           2,461             307            14.3
    250+ Beds...................             749           6,775           7,653             878            13.0
Bed Size (Rural):
    0 to 99 Beds................             370             190             291             100            52.7
    100 to 249 Beds.............             114             193             227              34            17.6
    250+ Beds...................              13              56              58               3             4.7
Urban by Region:
    New England.................              92             387             420              34             8.8
    Middle Atlantic.............             237           1,570           1,676             106             6.8
    South Atlantic..............             314           1,724           2,082             359            20.8
    East North Central..........             324           1,252           1,421             169            13.5
    East South Central..........             128             566             617              52             9.1
    West North Central..........             103             439             497              58            13.2
    West South Central..........             253           1,165           1,489             324            27.8
    Mountain....................             120             448             512              64            14.4
    Pacific.....................             311           1,448           1,496              48             3.3
    Puerto Rico.................              41             116             144              28            23.8
Rural by Region:
    New England.................              12              16              21               6            35.4
    Middle Atlantic.............              27              33              34               1             1.5
    South Atlantic..............              84              92             118              27            29.0
    East North Central..........              66              44              59              14            32.4
    East South Central..........             136             141             154              13             9.2
    West North Central..........              28              19              23               4            23.5
    West South Central..........             112              72             140              67            93.6

[[Page 20208]]

 
    Mountain....................              27              15              21               6            37.0
    Pacific.....................               5               7               6             (1)            -8.9
By Payment Classification:
    Urban Hospitals.............           1,912           9,106          10,346           1,239            13.6
    Large Urban Areas...........           1,037           5,717           6,538             821            14.4
    Other Urban Areas...........             875           3,389           3,807             418            12.3
    Rural Hospitals.............             506             447             586             139            31.1
Teaching Status:
    Nonteaching.................           1,510           2,955           3,428             472            16.0
    Fewer than 100 residents....             665           3,213           3,571             358            11.1
    100 or more residents.......             243           3,384           3,932             548            16.2
Type of Ownership:
    Voluntary...................           1,420           5,971           6,710             739            12.4
    Proprietary.................             550           1,650           1,715              65             3.9
    Government..................             448           1,932           2,506             574            29.7
Medicare Utilization Percent:
    Missing or Unknown..........               4            0.65            1.25            0.60            92.2
    0 to 25.....................             424           2,972           3,451             480            16.1
    25 to 50....................           1,635           6,218           7,044             826            13.3
    50 to 65....................             309             352             422              70            20.0
    Greater than 65.............              46              11              13               2            20.1
----------------------------------------------------------------------------------------------------------------
Source: Dobson  DaVanzo analysis of 2012-2014 Hospital Cost Reports.
* 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, DSH payments are estimated to be $9,553 million in FY 2017 and $10,930 million in FY 2018.
**Z0 Percentage change is determined as the difference between Medicare DSH payments modeled for the FY 2018
  IPPS/LTCH PPS proposed rule (column 3) and Medicare DSH payments modeled for the FY 2017 IPPS/LTCH final rule
  (column 2) divided by Medicare DSH payments modeled for the FY 2017 final rule (column 2) 1 times 100 percent.

    Changes in projected FY 2018 DSH payments from DSH payments in 
FY 2017 are primarily driven by (1) proposed changes to Factor 1, 
which increased from $10.797 billion to $12.002 billion; (2) 
proposed changes to Factor 2, which increased from 55.36 percent to 
58.01 percent; and (3) proposed changes to the data used to 
determine Factor 3. The proposed impact analysis found that, across 
all projected DSH eligible hospitals, FY 2018 DSH payments are 
estimated at approximately $10.930 billion, or an increase of 
approximately 14.4 percent from FY 2017 DSH payments (approximately 
$9.553 billion). While these proposed changes result in a net 
increase in the amount available to be distributed in uncompensated 
care payments, DSH payments to select hospital types are expected to 
decrease. This redistribution of DSH payments is caused by changes 
in the data used to determine Factor 3.
    As seen in the above table, percent changes in DSH payments of 
less than 14.4 percent indicate that hospitals within the specified 
category are projected to experience a smaller increase in DSH 
payments, on average, compared to the universe of projected FY 2018 
DSH hospitals. Conversely, percent changes in DSH payments that are 
greater than 14.4 percent indicate a hospital type is projected to 
have a larger increase than the overall average. The variation in 
the distribution of DSH payments by hospital characteristic is 
largely dependent on the change in a given hospital's number of 
Medicaid days and SSI days for purposes of the low-income insured 
days proxy between FY 2017 and FY 2018, as well as on its 
uncompensated care costs as reported on Worksheet S-10, used in the 
Factor 3 computation.
    Many rural hospitals, grouped by geographic location, payment 
classification, and bed size, are projected to experience a larger 
increase in DSH payments than their urban counterparts. Overall, 
urban hospitals are projected to receive a 13.6 percent increase in 
DSH payments, and rural hospitals are projected to receive a 31.2 
percent increase in DSH payments. However, only smaller rural 
hospitals are projected to receive larger than average increases in 
DSH payments, with rural hospitals that have 0-99 beds projected to 
experience a 52.7 percent payment increase, and larger rural 
hospitals with 250+ beds projected to experience a 4.6 percent 
payment increase. This trend is consistent with urban hospitals, in 
which the smallest urban hospitals (0-99 beds) are projected to 
receive an increase in DSH payments of 30.2 percent. Larger 
hospitals (100-250 beds and 250+ beds) are projected to receive 
increases of 14.3 and 13.0 percent in DSH payments, respectively, 
which are relatively consistent with the overall average.
    By region, projected DSH payment increases for urban hospitals 
are smallest in Pacific, Middle Atlantic, New England, and East 
South Central regions. The West South Central, Puerto Rico, and 
South Atlantic region hospitals are projected to receive a larger 
than average increase in DSH payments. Increases in remaining urban 
hospital regions are generally consistent with the overall average 
percent increase of 14.4. Regionally, rural hospitals are projected 
to receive a wider range of increases. Rural hospitals in the 
Pacific region are expected to receive a decrease in DSH payments 
(due to the reduction in the number of DSH hospitals in the region) 
while rural hospitals in the Middle Atlantic region are expected to 
receive virtually no change in in DSH payments, despite an estimated 
increase in the overall amount of DSH payments. Increases are 
projected to be substantially larger than the overall average in 
most regions, including West South Central, Mountain, New England, 
East North Central, South Atlantic, and West North Central regions.
    Teaching hospitals with 100 or more residents are projected to 
receive relatively larger increases than teaching hospitals with 
fewer than 100 residents, although all are fairly consistent with 
the national average. Government hospitals are projected to receive 
larger than average increases, while voluntary hospitals are 
expected to receive increases generally consistent with the overall 
average. Proprietary hospitals are expected to receive smaller 
increases in DSH payments. Hospitals with 25 to 50 percent

[[Page 20209]]

Medicare utilization are projected to receive increases in DSH 
payments slightly below the overall average, while all other 
hospitals are projected to receive larger increases.

6. Effects of Proposed Reduction Under the Hospital Readmissions 
Reduction Program

    In section V.I. of the preamble of this proposed rule, we 
discuss our proposals for the FY 2018 Hospital Readmissions 
Reduction Program (established under section 3025 of the Affordable 
Care Act), which requires a reduction to a hospital's base operating 
MS-DRG payments to account for excess readmissions. In this proposed 
rule, we estimate that 2,591 hospitals would have their base 
operating MS-DRG payments reduced by their proposed proxy FY 2018 
hospital-specific readmissions adjustment. As a result, we estimate 
that the Hospital Readmissions Reduction Program would save 
approximately $564 million in FY 2018, an increase of $27 million 
over the estimated FY 2017 savings. This estimate is based on the 
same data used in developing the quantitative analyses of proposed 
changes in payments per case discussed previously in section I.G. of 
this Regulatory Impact Analysis, in conjunction with the FY 2017 
hospital-specific readmissions adjustment factors and the proposed 
proxy FY 2018 hospital-specific readmissions adjustment factors 
found in Table 15 of this proposed rule (available only through the 
Internet as described in section VI. of the Addendum to this 
proposed rule).

7. Effects of Proposed Changes Under the FY 2018 Hospital Value-Based 
Purchasing (VBP) Program

    In section V.J. of the preamble of this proposed 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 
2018 through a reduction to the FY 2018 base operating DRG payment 
amounts for all discharges for participating hospitals for such 
fiscal year, as required by section 1886(o)(7)(B) of the Act. The 
applicable percentage for FY 2018 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.
    In section V.J.1.b. of the preamble of this proposed rule, we 
estimate the available pool of funds for value-based incentive 
payments in the FY 2018 program year, which, in accordance with 
section 1886(o)(7)(C)(v) of the Act, will be 2.00 percent of base 
operating DRG payments, or a total of approximately $1.9 billion. We 
intend to update this estimate for the FY 2018 IPPS/LTCH PPS final 
rule using the March 2017 update of the FY 2016 MedPAR file.
    The proposed estimated impacts of the FY 2018 program year by 
hospital characteristic, found in the table below, are based on 
historical TPSs. We used the FY 2017 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 December 2016 update to the FY 2016 MedPAR 
file. The proxy adjustment factors can be found in Table 16 
associated with this proposed rule (available via the Internet on 
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-For-
Service-Payment/AcuteInpatientPPS/index.html).
    The impact analysis shows that, for the FY 2018 program year, 
the number of hospitals that would receive an increase in their base 
operating DRG payment amounts is higher than the number of hospitals 
that would 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 would have an increase, on average, in their base operating 
DRG payment amounts. Urban hospitals in the Middle Atlantic region 
would receive an average decrease in their base operating DRG 
payment amounts. Among rural hospitals, those in all regions would 
have an increase, on average, in their base operating DRG payment 
amounts.
    On average, hospitals that receive a higher (over 65) percent of 
DSH payments would receive decreases in base operating DRG payment 
amounts. With respect to hospitals' Medicare utilization as a 
percent of inpatient days (MCR), those hospitals with an MCR above 
65 percent would have the largest average increase in base operating 
DRG payment amounts.
    Nonteaching hospitals would have an average increase, and 
teaching hospitals would experience an average decrease in base 
operating DRG payment amounts.

  Impact Analysis of Base Operating DRG Payment Amount Proposed Changes
             Resulting From the FY 2018 Hospital VBP Program
------------------------------------------------------------------------
                                                              Average
                                             Number of      percentage
                                             hospitals        change
------------------------------------------------------------------------
By Geographic Location:
    All Hospitals.......................           2,955           0.183
    Large Urban.........................           1,227           0.094
    Other Urban.........................           1,048           0.152
    Rural Area..........................             680           0.392
    Urban hospitals.....................           2,275           0.121
        0-99 beds.......................             486           0.685
        100-199 beds....................             721           0.082
        200-299 beds....................             434          -0.039
        300-499 beds....................             423          -0.159
        500 or more beds................             211          -0.159
    Rural hospitals.....................             680           0.392
        0-49 beds.......................             207           0.612
        50-99 beds......................             276           0.398
        100-149 beds....................             114           0.243
        150-199 beds....................              44           0.052
        200 or more beds................              39          -0.009
By Region:
    Urban By Region.....................           2,275           0.121
        New England.....................             110           0.072
        Middle Atlantic.................             297          -0.119
        South Atlantic..................             387           0.025
        East North Central..............             364           0.217
        East South Central..............             135           0.009
        West North Central..............             152           0.451
        West South Central..............             320           0.194
        Mountain........................             156           0.058

[[Page 20210]]

 
        Pacific.........................             354           0.203
    Rural By Region.....................             680           0.392
        New England.....................              19           0.539
        Middle Atlantic.................              52           0.196
        South Atlantic..................             111           0.540
        East North Central..............             106           0.420
        East South Central..............             126           0.172
        West North Central..............              85           0.501
        West South Central..............             107           0.257
        Mountain........................              52           0.740
        Pacific.........................              22           0.504
By MCR Percent:
    0-25................................             424           0.125
    25-50...............................           2,017           0.167
    50-65...............................             459           0.277
    Over 65.............................              40           0.446
    Missing.............................              15           0.424
By DSH Percent:
    0-25................................           1,218           0.355
    25-50...............................           1,405           0.081
    50-65...............................             177           0.113
    Over 65.............................             155          -0.164
By Teaching Status:
    Non-Teaching........................           1,925           0.314
    Teaching............................           1,030          -0.063
------------------------------------------------------------------------

    Actual FY 2018 program year's TPSs will not be reviewed and 
corrected by hospitals until after the FY 2018 IPPS/LTCH PPS final 
rule has been published. Therefore, the same historical universe of 
eligible hospitals and corresponding TPSs from the FY 2017 program 
year will be used for the updated impact analysis in that final 
rule.

8. Effects of Proposed Changes to the HAC Reduction Program for FY 2018

    In section V.K. of the preamble of this proposed rule, we 
discuss the proposed changes to the HAC Reduction Program for FY 
2018. The table and analysis below show the estimated cumulative 
effect of the proposed measures and scoring system for the HAC 
Reduction Program in this proposed rule. In the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 57013 through 57025), we finalized changes to 
the HAC Reduction Program for FY 2018, including adoption of the 
modified PSI 90 Composite, defining the applicable time period, and 
changes to the scoring methodology (adoption of the z-score method 
for calculating measure scores). Based on this z-score methodology, 
the table below presents data on the estimated proportion of 
hospitals in the worst-performing quartile of the Total HAC Scores 
by hospital characteristic. We note that because scores will undergo 
a 30-day review and correction period by the hospitals that will not 
conclude until after the publication of the FY 2018 IPPS/LTCH PPS 
final rule, we are not providing hospital-level data or a hospital-
level payment impact in conjunction with this FY 2018 IPPS/LTCH PPS 
proposed rule.
    To estimate the impact of the FY 2018 HAC Reduction Program, we 
used, as previously finalized, AHRQ PSI 90 measure results based on 
Medicare FFS discharges from July 2014 through September 2015 and 
version 6.0 (recalibrated) of the AHRQ software. For the CLABSI, 
CAUTI, Colon and Abdominal Hysterectomy SSI, MRSA Bacteremia, and 
CDI measure results, we used standardized infection ratios (SIRs) 
calculated with hospital surveillance data reported to the NHSN for 
infections occurring between January 1, 2014 and December 31, 2015. 
We noted that actual FY 2018 HACRP results will be calculated using 
CDC NHSN data from CYs 2015 and 2016 and will use the re-baselined 
values and expansion to non-ICU wards but could not be presented 
here due to data timelines.
    We note that, at this time, we are unable to provide the 
estimated impact of the FY 2018 HAC Reduction Program due to an 
error in the version 6.0 (recalibrated) AHRQ software. We anticipate 
that we will be able to provide this information in the FY 2018 
final rule. We have provided the final impacts from the FY 2017 
final rule as estimated impacts for FY 2018.

Estimated Proportion of Hospitals in the Worst-Performing Quartile (>75th Percentile) of the Total HAC Score for
                                        the FY 2017 HAC Reduction Program
                                          [By hospital characteristic]
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of      Percent of
                                                                                   hospitals in    hospitals in
                     Hospital characteristic                         Number of      the worst-      the worst-
                                                                   hospitals \a\    performing      performing
                                                                                   quartile \b\    quartile \c\
----------------------------------------------------------------------------------------------------------------
Total \d\.......................................................           3,215             771            24.0
By Geographic Location:
All hospitals:
    Urban.......................................................           2,404             653            27.2
    Rural.......................................................             796             107            13.4
Urban hospitals:
    1-99 beds...................................................             592              91            15.4

[[Page 20211]]

 
    100-199 beds................................................             734             166            22.6
    200-299 beds................................................             440             134            30.5
    300-399 beds................................................             276             101            36.6
    400-499.....................................................             150              61            40.7
    500 or more beds............................................             212             100            47.2
Rural hospitals:
    1-49 beds...................................................             303              48            15.8
    50-99 beds..................................................             289              29            10.0
    100-149 beds................................................             118              11             9.3
    150-199 beds................................................              45               9            20.0
    200 or more beds............................................              41              10            24.4
By Region:
    New England.................................................             134              42            31.3
    Mid-Atlantic................................................             365             131            35.9
    South Atlantic..............................................             519             133            25.6
    East North Central..........................................             494              96            19.4
    East South Central..........................................             295              45            15.3
    West North Central..........................................             259              38            14.7
    West South Central..........................................             511             104            20.4
    Mountain....................................................             226              55            24.3
    Pacific.....................................................             397             116            29.2
By DSH Percent: \e\
    0-24........................................................           1,387             321            23.1
    25-49.......................................................           1,454             324            22.3
    50-64.......................................................             181              58            32.0
    65 and over.................................................             178              57            32.0
By Teaching Status: \f\
    Non-teaching................................................           2,160             381            17.6
    Fewer than 100 residents....................................             790             237            30.0
    100 or more residents.......................................             250             142            56.8
By Type of Ownership:
    Voluntary...................................................           1,868             478            25.6
    Proprietary.................................................             825             154            18.7
    Government..................................................             485             121            24.9
By MCR Percent:
    0-24........................................................             472             148            31.4
    25-49.......................................................           2,106             481            22.8
    50-64.......................................................             518             104            20.1
    65 and over.................................................              80              18            22.5
----------------------------------------------------------------------------------------------------------------
Source: FY 2018 HAC Reduction Program Proposed Rule preliminary results are based on AHRQ PSI 90 data from July
  2014 through September 2015 and CDC CLABSI, CAUTI, SSI, CDI, and MRSA results from January 2014 to December
  2015. Hospital Characteristics are based on the FY 2017 Final Rule Impact File updated on October 3, 2016.
\a\ The total number of non-Maryland hospitals with a Total HAC Score with hospital characteristic data (3,200
  for geographic location, bed size, and teaching status; 3,178 for type of ownership; and 3,176 for MCR) does
  not add up to the total number of non-Maryland hospitals with a Total HAC Score for the FY 2018 HAC Reduction
  Program (3,215) because 15 hospitals are not included in the FY 2017 Final Rule Impact File and not all
  hospitals have data for all characteristics.
\b\ This column is the number of non-Maryland hospitals with a Total HAC Score within the corresponding
  characteristic that are estimated to be in the worst-performing quartile.
\c\ This column is the percent of hospitals within each characteristic that are estimated to be in the worst-
  performing quartile. The percentages are calculated by dividing the number of non-Maryland hospitals with a
  Total HAC Score in the worst-performing quartile by the total number of non-Maryland hospitals with a Total
  HAC Score within that characteristic.
\d\ Total excludes 47 Maryland hospitals and 64 non-Maryland hospitals without a Total HAC Score for FY 2017.
\e\ A hospital is considered to be a DSH hospital if it has a DSH patient percentage greater than zero.
\f\ A hospital is considered to be a teaching hospital if it has an IME adjustment factor for Operation PPS
  (TCHOP) greater than zero.

9. Effects of Implementation of the Additional 5-Year Extension of the 
Rural Community Hospital Demonstration Program

    In section V.L. of the preamble of this proposed rule, we 
discuss our proposed implementation of section 410A of Public Law 
108-173, as amended by sections 3123 and 10313 of Public Law 111-
148, and more recently, by section 15003 of Public Law 114-255, 
which requires the Secretary to conduct a demonstration that tests 
the feasibility and advisability of establishing ``rural community'' 
hospitals to furnish covered inpatient hospital services to Medicare 
beneficiaries. The demonstration makes payments under a reasonable 
cost methodology for covered inpatient hospital services furnished 
to Medicare beneficiaries by up to 30 rural hospitals. Section 15003 
of Public Law 114-255, enacted December 13, 2016, requires a 10-year 
extension period (in place of the 5-year extension required by 
Public Law 111-148) for the demonstration. Therefore, the Secretary 
is required to conduct the demonstration for an additional 5-year 
period. Section 15003 of Public Law 114-255 also requires that, no 
later than 120 days after enactment of Public Law 114-255, the 
Secretary issue a solicitation for applications to select additional 
hospitals to

[[Page 20212]]

participate in the demonstration program for the second 5 years of 
the 10-year extension period so long as the maximum number of 30 
hospitals stipulated by Public Law 111-148 is not exceeded. 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 (budget neutrality).
    In this FY 2018 IPPS/LTCH PPS proposed rule, we describe our 
proposals for implementation of the extension under section 15003 of 
Public Law 114-255, the proposed budget neutrality methodology for 
the extension period authorized by the legislation, and the proposed 
reconciliation of actual and estimated costs of the demonstration 
for previous years (2011 through 2016). Our proposal for budget 
neutrality would adopt the general methodology used in previous 
years for the demonstration. As discussed in section V.L. of the 
preamble of this proposed rule, in the IPPS final rules from FYs 
2005 through 2016, we have estimated the additional payments for 
each of the participating hospitals as a result of the 
demonstration. In order to achieve budget neutrality, we have 
adjusted the national IPPS rates by an amount sufficient to account 
for the added costs of this demonstration. In other words, we have 
applied 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.
    Section 15003 of Public Law 114-255 requires the Secretary to 
conduct the Rural Community Hospital Demonstration for a 10-year 
extension period (in place of the 5-year extension period required 
by Public Law 108-173), beginning on the date immediately following 
the last day of the initial 5-year period under section 410A(a)(5) 
of Public Law 108-173. Specifically, section 15003 of Public Law 
114-255 amended section 410A(g)(4) of Public Law 108-173 to require 
that, for hospitals participating in the demonstration as of the 
last day of the initial 5-year period, the Secretary shall provide 
for continued participation of such rural community hospitals in the 
demonstration during the 10-year extension period, unless the 
hospital makes an election to discontinue participation. 
Furthermore, section 15003 of Public Law 114-255 added subsection 
(g)(5) to section 410A of Public Law 108-173 which provides for 
participation under the demonstration during the second 5 years of 
the 10-year extension period for hospitals that are not described in 
section 410A(g)(4) of Public Law 108-173, but that were 
participating in the demonstration as of December 30, 2014, unless 
the hospital makes an election to discontinue participation.
    We are proposing to implement the second 5 years of the 10-year 
extension period in a way that recognizes a gap in participation for 
the previously participating hospitals between the end of the first 
5 years and the start of the second 5 years of the extension period, 
and that provides for alignment of the periods of performance under 
the extension among all participating hospitals. Thus, for each 
previously participating hospital that decides to participate in the 
second 5 years of the 10-year extension period, we are proposing 
that the start date for the period of performance under the second 
5-year extension period would be the start of the first cost 
reporting period on or after October 1, 2017 following upon the 
announcement of the selection of the additional hospitals for the 
demonstration. Our goal is to finalize this selection by June 2017, 
in time to include in the FY 2018 IPPS final rule an estimate of the 
costs of the demonstration during FY 2018 and the resulting budget 
neutrality offset amount for these newly participating hospitals, as 
well as for those hospitals among the previously participating 
hospitals that decide to participate in the second 5 years of the 
10-year extension period.
    We are proposing that if the selection of the additional 
hospitals under the solicitation is not announced by June 2017, we 
would include the estimated costs of the demonstration for all 
participating hospitals for FY 2018 in the budget neutrality offset 
amount to be calculated in the FY 2019 IPPS/LTCH PPS proposed and 
final rules.
    In section V.L. of the preamble of this proposed rule, we also 
describe an alternative approach that we considered, under which 
each previously participating hospital would begin the second 5 
years of the 10-year extension period on the date immediately after 
the date the period of performance under the first 5-year extension 
period ended. In addition, we describe the methodology that we 
considered for calculating the budget neutrality offset amount under 
this alternative approach. We are inviting public comments on this 
alternative approach and calculation methodology.
    In previous years, we have incorporated a second component into 
the budget neutrality offset amounts identified in the final IPPS 
rules. As finalized cost reports became available, we determined the 
amount by which the actual costs of the demonstration for an 
earlier, given year differed from the estimated costs for the 
demonstration set forth in the final IPPS rule for the corresponding 
fiscal year, and we incorporated that amount into the budget 
neutrality offset amount for the upcoming fiscal year. We have 
calculated this difference for FYs 2005 through 2010 between the 
actual costs of the demonstration as determined from finalized cost 
reports once available, and estimated costs of the demonstration as 
identified in the applicable IPPS final rules for these years.
    With the extension of the demonstration for another 5-year 
period, as authorized by section 15003 of Public Law 114-255, we are 
proposing to continue this general procedure. Specifically, we are 
proposing that when finalized cost reports for FYs 2011, 2012, and 
2013 are available, we would include this difference for these years 
in the budget neutrality offset adjustment to be applied to the 
national IPPS rates in a future final rule. We expect that this will 
occur in FY 2019. We also are proposing that when finalized cost 
reports for FYs 2014 through 2016 are available, we would include 
the difference between the actual costs as reflected on these cost 
reports and the estimated amounts included in the budget neutrality 
offset amounts for these fiscal years in a future final rule.
    As discussed in section V.L. of the preamble of this proposed 
rule, depending on when the selection of additional hospitals as 
authorized by section 15003 of Public Law 114-225 is finalized, the 
estimate of the cost of the demonstration for FY 2018 will be 
formulated and included in the budget neutrality offset amount in 
either the FY 2018 final rule or the FY 2019 proposed and final 
rules. Therefore, although this FY 2018 IPPS/LTCH PPS proposed rule 
sets forth our proposed budget neutrality offset methodology, it 
does not include a specific budget neutrality offset amount.

10. Effects of the Proposed Changes Relating to Provider-Based Status 
of Indian Health Service and Tribal Facilities and Organizations

    In section V.N. of the preamble of this proposed rule, we 
discuss our proposals relating to provider-based status of Indian 
Health Service (IHS) and tribal facilities and organizations. 
Regulations at Sec.  413.65(m) currently grandfather facilities from 
provider-based regulations if they meet certain criteria, including 
on or before April 7, 2000, having furnished only services that were 
billed as if they had been furnished by a department of a hospital 
operated by the IHS or a Tribe. We have also issued subregulatory 
guidance on circumstances that would or would not result in a 
facility or organization losing its grandfathered status. After 
consideration of the special and legally recognized relationship 
between Indian Tribes and the U.S. Government, as well as current 
IHS policies and procedures, we are proposing to remove the date 
limitation in Sec.  413.65(m) that restricted the grandfathering 
provision to IHS or Tribal facilities and organizations furnishing 
services on or before April 7, 2000. We also are proposing to make a 
technical change to make the regulation text more consistent with 
our current rules that require these facilities to comply with all 
applicable Medicare conditions of participation that apply to the 
main provider. We do not expect any significant payment impact 
because these proposals are in line with current guidance, and we 
believe that IHS policies and procedures regarding the planning, 
operation, and funding of such facilities are resulting in 
appropriate Medicare payments.

11. Effects of the Proposed Changes Relating to Hospital-within-
Hospital (HwH) Policy

    In section VII.B. of the preamble of this proposed rule, we 
discuss our proposal to revise the regulations applicable to HwHs so 
that the separateness and control

[[Page 20213]]

requirements would only apply to IPPS-excluded HwHs that are co-
located with IPPS hospitals beginning in FY 2018. This proposal is 
premised on the belief that the policy concerns that underlie our 
existing HwH regulations (that is, inappropriate patient shifting 
and hospitals acting as illegal de facto units) are sufficiently 
moderated in situations where IPPS-excluded hospitals are co-located 
with each other but not IPPS hospitals, in large part due to the 
payment system changes that have occurred over the intervening years 
for IPPS-excluded hospitals. In addition, we are proposing to revise 
the HwH requirements to no longer require the provisions that 
outline performance of basic hospital functions in order to maintain 
IPPS-exclusion beginning in FY 2018. This proposed revision would 
not result in a practical change to how HwHs are currently operated 
because the performance of basic hospital functions that are 
required under the HwH regulations are currently addressed under 
CMS' interpretative guidelines for the hospital conditions of 
participation. We do not expect any significant payment impact 
because these proposals are primarily administrative in nature or in 
line with current guidance.

12. Effects of Continued Implementation of the Frontier Community 
Health Integration Project (FCHIP) Demonstration

    In section VIII.C.2. of the preamble of this proposed rule, we 
discuss the implementation of the FCHIP demonstration, which allows 
eligible entities to develop and test new models for the delivery of 
health care services in eligible counties in order to improve access 
to and better integrate the delivery of acute care, extended care, 
and other health care services to Medicare beneficiaries in no more 
than four States. Section 123(g)(1)(B) of Public Law 110-275 
requires that the demonstration be budget neutral. Specifically this 
provision states that, in conducting the demonstration, the 
Secretary shall ensure that the aggregate payments made by the 
Secretary do not exceed the amount which the Secretary estimates 
would have been paid if the demonstration were not implemented. 
Furthermore, section 123(i) of Public Law 110-275 states that the 
Secretary may waive the requirements of Titles XVIII and XIX of the 
Act as may be necessary and appropriate for the purpose of carrying 
out the demonstration, thus allowing the waiver of Medicare payment 
rules encompassed in the demonstration. Budget neutrality estimates 
for the demonstration will be based on the demonstration period of 
August 1, 2016 through July 31, 2019. The demonstration includes 
three intervention prongs, under which specific waivers of Medicare 
payment rules will allow for enhanced payment: Telehealth, skilled 
nursing facility/nursing facility services, and ambulance services. 
These waivers are being implemented with the goal of increasing 
access to care with no net increase in costs. (We initially 
addressed this demonstration in the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57064 through 57065).)
    We specified waivers and payment enhancements for the 
demonstration and selected CAHs for participation with the goal of 
maintaining the budget neutrality of the demonstration on its own 
terms (that is, the demonstration will produce savings from reduced 
transfers and admissions to other health care providers, thus 
offsetting any increase in payments resulting from the 
demonstration). However, because of the small size of this 
demonstration and uncertainty associated with projected Medicare 
utilization and costs, in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57064 through 57065), we adopted a contingency plan to ensure 
that the budget neutrality requirement in section 123 of Public Law 
110-275 is met. Accordingly, if analysis of claims data for the 
Medicare beneficiaries receiving services at each of the 
participating CAHs, as well as of other data sources, including cost 
reports, shows that increases in Medicare payments under the 
demonstration during the 3-year period are not sufficiently offset 
by reductions elsewhere, we will recoup the additional expenditures 
attributable to the demonstration through a reduction in payments to 
all CAHs nationwide. The demonstration is projected to impact 
payments to participating CAHs under both Medicare Part A and Part 
B. Thus, in the event that we determine that aggregate payments 
under the demonstration exceed the payments that would otherwise 
have been made, CMS will recoup payments through reductions of 
Medicare payments to all CAHs under both Medicare Part A and Part B. 
Because of the small scale of the demonstration, it would not be 
feasible to implement budget neutrality by reducing payments only to 
the participating CAHs. Therefore we will make the reduction to 
payments to all CAHs, not just those participating in the 
demonstration, because the FCHIP demonstration is specifically 
designed to test innovations that affect delivery of services by 
this provider category. As we explained in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57065), we believe that the language of the 
statutory budget neutrality requirement at section 123(g)(1)(B) of 
the Act permits the agency to implement the budget neutrality 
provision in this manner. The statutory language merely refers to 
ensuring that aggregate payments made by the Secretary do not exceed 
the amount which the Secretary estimates would have been paid if the 
demonstration project was not implemented, and does not identify the 
range across which aggregate payments must be held equal.
    Given the 3-year period of performance of the FCHIP 
demonstration and the time needed to conduct the budget neutrality 
analysis, in the event the demonstration is found not to have been 
budget neutral, we plan to recoup any excess costs over a period of 
three cost report periods, beginning in CY 2020. Therefore, this 
policy has no impact for any national payment system for FY 2018.

I. Effects of Proposed Changes in the Capital IPPS

1. General Considerations

    For the impact analysis presented below, we used data from the 
December 2016 update of the FY 2016 MedPAR file and the December 
2016 update of the Provider-Specific File (PSF) that is used for 
payment purposes. Although the analyses of the proposed changes to 
the capital prospective payment system do not incorporate cost data, 
we used the December 2016 update of the most recently available 
hospital cost report data (FYs 2013 and 2014) 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 later in this section.
    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 December 2016 update of the FY 2016 MedPAR 
file, we simulated payments under the capital IPPS for FY 2017 and 
proposed payments for FY 2018 for a comparison of total payments per 
case. Any short-term, acute care hospitals not paid under the 
general IPPS (for example, 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 
proposed capital IPPS payments in FY 2018 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 2017 and 2018.
     We estimate that Medicare discharges will be 
approximately 11.1 million in FY 2017 and 11.3 million in FY 2018.
     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 proposed rule, the proposed update is 1.2 
percent for FY 2018.
     In addition to the proposed FY 2018 update factor, the 
proposed FY 2018 capital Federal rate was calculated based on a 
proposed GAF/DRG budget neutrality

[[Page 20214]]

adjustment factor of 0.9992, a proposed outlier adjustment factor of 
0.9434, and an adjustment to remove the one-time prospective 
adjustment of 1.006 made in FY 2017 to address the effect of the 0.2 
percent reduction to the national capital Federal rates in effect 
for FY 2014, FY 2015, and FY 2016 relating to the 2-midnight policy. 
The 2-midnight adjustment that was finalized in the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57294) is discussed in section V.C. of 
the preamble of this proposed rule as it relates to the capital 
Federal rate. As also discussed in section V.C. of the preamble of 
this proposed rule, we are not proposing to make an additional MS-
DRG documentation and coding adjustment to the capital IPPS Federal 
rate for FY 2018.

2. Results

    We used the actuarial model previously described in section I.I. 
of Appendix A of this proposed rule to estimate the potential impact 
of our proposed changes for FY 2018 on total capital payments per 
case, using a universe of 3,292 hospitals. As previously described, 
the individual hospital payment parameters are taken from the best 
available data, including the December 2016 update of the FY 2016 
MedPAR file, the December 2016 update to the PSF, and the most 
recent cost report data from the December 2016 update of HCRIS. In 
Table III, we present a comparison of estimated total payments per 
case for FY 2017 and estimated proposed total payments per case for 
FY 2018 based on the proposed FY 2018 payment policies. Column 2 
shows estimates of payments per case under our model for FY 2017. 
Column 3 shows estimates of proposed payments per case under our 
model for FY 2018. Column 4 shows the total percentage change in 
payments from FY 2017 to FY 2018. The change represented in Column 4 
includes the proposed 1.2 percent update to the capital Federal rate 
and other proposed 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, proposed capital 
payments per case in FY 2018 are expected to increase as compared to 
capital payments per case in FY 2017. This expected increase overall 
is due to the proposed approximately 1.2 percent update to the 
capital Federal rate for FY 2018, as well as the proposed outlier 
adjustment of 0.9434 which is a 0.51 percent change from the FY 2017 
outlier adjustment of 0.9386. The change in the outlier adjustment 
is expected to increase capital payments per case for most hospitals 
to a lesser or greater extent, as are changes in the DRGs. The 
expected increase in capital payments per case as a result of MS-DRG 
changes is somewhat larger for hospitals in rural areas than for 
hospitals in rural areas. (For a discussion of the determination of 
the capital Federal rate and adjustments, we refer readers to 
section III.A. of the Addendum to this proposed rule.) Over all 
hospitals, the proposed changes to the GAFs have no effect on 
capital payments per case. However, by region, hospitals within both 
rural and urban regions may experience an increase or a decrease in 
capital payments per case due to proposed changes in the GAFs. These 
regional effects of the proposed changes to the GAFs on capital 
payments are consistent with the projected changes in payments due 
to proposed changes in the wage index (and policies affecting the 
wage index) as shown in Table I in section I.G. of this Appendix A.
    The net impact of these proposed changes is an estimated 2.4 
percent change in capital payments per case from FY 2017 to FY 2018 
for all hospitals (as shown in Table III).
    The geographic comparison shows that, on average, most hospitals 
in all classifications (urban and rural) would experience an 
increase in capital IPPS payments per case in FY 2018 as compared to 
FY 2017. Capital IPPS payments per case for hospitals in large urban 
areas would increase by an estimated 2.8 percent, while hospitals in 
rural areas, on average, are expected to experience a 2.6 percent 
increase in capital payments per case from FY 2017 to FY 2018. 
Capital IPPS payments per case for other urban hospitals are 
estimated to increase 1.7 percent.
    The comparisons by region show that the estimated increases in 
capital payments per case from FY 2017 to FY 2018 in urban areas 
would range from a 3.6 percent increase for the West South Central 
urban region to a 1.1 percent increase for the Mountain urban 
region. For rural regions, the New England rural region is projected 
to experience the largest increase in capital IPPS payments per case 
of 5.0 percent, while the South Atlantic rural region is projected 
to experience an increase in capital IPPS payments per case of 1.4 
percent.
    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 2017 to FY 2018. The proposed increase in capital payments for 
voluntary hospitals is estimated to be 2.0 percent and for 
government hospitals, the increase is estimated to be 3.4 percent. 
Proprietary hospitals are expected to experience an increase in 
capital IPPS payments of 3.0 percent.
    Section 1886(d)(10) of the Act established the MGCRB. Hospitals 
may apply for reclassification for purposes of the wage index for FY 
2018. 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 proposed rule for FY 2018, we show the average 
capital payments per case for reclassified hospitals for FY 2018. 
Urban reclassified hospitals are expected to experience an increase 
in capital payments of 1.6 percent; urban nonreclassified hospitals 
are expected to experience an increase in capital payments of 2.8 
percent. The estimated percentage increase for rural reclassified 
hospitals is 2.4 percent, and for rural nonreclassified hospitals, 
the estimated increase is 2.6 percent. Hospitals reclassified under 
section 401 are among the few groups of hospitals not expected to 
experience an increase in capital payments--it is expected that 
these hospitals would experience a decrease in capital payments of 
1.8 percent, while capital payments for other reclassified hospitals 
are expected to increase an estimated 6.1 percent.

                                Table III--Comparison of Total Payments per Case
                                 [FY 2017 payments compared to FY 2018 payments]
----------------------------------------------------------------------------------------------------------------
                                                                    Average  FY     Average  FY
                                                     Number of    2017  payments/ 2018  payments/     Change
                                                     hospitals         case            case
----------------------------------------------------------------------------------------------------------------
By Geographic Location:
    All hospitals...............................           3,292             921             943             2.4
    Large urban areas (populations over 1                  1,349           1,016           1,044             2.8
     million)...................................
    Other urban areas (populations of 1 million            1,142             886             902             1.7
     of fewer)..................................
    Rural areas.................................             801             625             642             2.6
    Urban hospitals.............................           2,491             955             977             2.3
        0-99 beds...............................             638             769             799             4.0
        100-199 beds............................             765             826             848             2.7
        200-299 beds............................             445             877             892             1.8
        300-499 beds............................             431             969             993             2.4
        500 or more beds........................             212           1,141           1,166             2.2
    Rural hospitals.............................             801             625             642             2.6
        0-49 beds...............................             313             522             541             3.5
        50-99 beds..............................             285             585             598             2.2
        100-149 beds............................             117             621             636             2.4
        150-199 beds............................              46             668             689             3.1

[[Page 20215]]

 
        200 or more beds........................              40             745             764             2.5
By Region:
    Urban by Region.............................           2,491             955             977             2.3
        New England.............................             114           1,037           1,052             1.4
        Middle Atlantic.........................             315           1,059           1,082             2.1
        South Atlantic..........................             404             850             867             2.0
        East North Central......................             385             918             937             2.1
        East South Central......................             147             801             813             1.5
        West North Central......................             160             932             953             2.3
        West South Central......................             378             863             895             3.6
        Mountain................................             162           1,005           1,016             1.1
        Pacific.................................             375           1,211           1,254             3.5
        Puerto Rico.............................              51             436             449             3.0
    Rural by Region.............................             801             625             642             2.6
        New England.............................              20             861             905             5.0
        Middle Atlantic.........................              53             603             618             2.4
        South Atlantic..........................             125             584             593             1.4
        East North Central......................             115             645             659             2.1
        East South Central......................             154             575             591             2.7
        West North Central......................              97             666             686             3.0
        West South Central......................             154             554             570             2.9
        Mountain................................              59             697             717             2.9
        Pacific.................................              24             807             836             3.6
By Payment Classification:
    All hospitals...............................           3,292             921             943             2.4
    Large urban areas (populations over 1                  1,363           1,014           1,043             2.8
     million)...................................
    Other urban areas (populations of 1 million            1,028             885             907             2.4
     of fewer)..................................
    Rural areas.................................             901             730             733             0.3
    Teaching Status:
        Non-teaching............................           2,211             779             799             2.6
        Fewer than 100 Residents................             835             893             910             1.9
        100 or more Residents...................             246           1,288           1,321             2.6
        Urban DSH:
            100 or more beds....................           1,563             982           1,007             2.6
            Less than 100 beds..................             357             692             720             4.1
        Rural DSH:
            Sole Community (SCH/EACH)...........             259             623             632             1.5
            Referral Center (RRC/EACH)..........             271             772             775             0.4
            Other Rural:
                100 or more beds................              41             862             834            -3.3
                Less than 100 beds..............             240             507             516             1.8
    Urban teaching and DSH:
        Both teaching and DSH...................             870           1,054           1,082             2.6
        Teaching and no DSH.....................              94             928             941             1.4
        No teaching and DSH.....................           1,050             822             844             2.6
        No teaching and no DSH..................             377             833             865             3.8
    Rural Hospital Types:
        Non special status hospitals............           2,601             953             977             2.6
        RRC/EACH................................             243             801             804             0.3
        SCH/EACH................................             317             716             731             2.0
        SCH, RRC and EACH.......................             129             756             773             2.2
Hospitals Reclassified by the Medicare
 Geographic Classification Review Board:
    FY 2018 Reclassifications:
        All Urban Reclassified..................             629             956             971             1.6
        All Urban Non-Reclassified..............           1,814             956             983             2.8
        All Rural Reclassified..................             271             660             675             2.4
        All Rural Non-Reclassified..............             482             580             595             2.6
        All Section 401 Reclassified Hospitals..             148             873             857            -1.8
        Other Reclassified Hospitals (Section                 42             600             637             6.1
         1886(d)(8)(B)).........................
    Type of Ownership:
        Voluntary...............................           1,914             938             957             2.0
        Proprietary.............................             862             823             848             3.0
        Government..............................             514             960             993             3.4
    Medicare Utilization as a Percent of
     Inpatient Days:
        0-25....................................             509           1,096           1,129             3.1
        25-50...................................           2,113             927             948             2.2
        50-65...................................             535             756             772             2.1
        Over 65.................................             135             582             639             9.8
----------------------------------------------------------------------------------------------------------------


[[Page 20216]]

J. Effects of Proposed Payment Rate Changes and Proposed Policy 
Changes Under the LTCH PPS

1. Introduction and General Considerations

    In section VIII. of the preamble of this proposed rule and 
section V. of the Addendum to this proposed rule, we set forth the 
proposed annual update to the payment rates for the LTCH PPS for FY 
2018. In the preamble of this proposed rule, we specify the 
statutory authority for the provisions that are presented, identify 
the proposed policies, and present rationales for our decisions as 
well as alternatives that were considered. In this section of 
Appendix A to this proposed rule, we discuss the impact of the 
proposed changes to the payment rate, factors, and other payment 
rate policies related to the LTCH PPS that are presented in the 
preamble of this proposed rule in terms of their estimated fiscal 
impact on the Medicare budget and on LTCHs.
    There are 415 LTCHs included in this impacts analysis, which 
includes data for 72 nonprofit (voluntary ownership control) LTCHs, 
328 proprietary LTCHs, and 15 LTCHs that are government-owned and 
operated. (We note that, although there are currently approximately 
425 LTCHs, for purposes of this impact analysis, we excluded the 
data of all-inclusive rate providers consistent with the development 
of the proposed FY 2018 MS-LTC-DRG relative weights (discussed in 
section VIII.B.3.c. of the preamble of this proposed rule). 
Moreover, in the claims data use for this proposed rule, 3 of these 
415 LTCHs only have claims for site neutral payment rate cases and 
are therefore not included in our impact analysis for LTCH PPS 
standard Federal payment rate cases.) In the impact analysis, we 
used the proposed payment rate, factors, and policies presented in 
this proposed rule, which include the rolling end to transition to 
the site neutral payment rate required by section 1886(m)(6)(A) of 
the Act (as described below), the proposed 1.0 percent annual update 
to the LTCH PPS standard Federal payment rate required by section 
411 of Public Law 114-10, the proposed update to the MS-LTC-DRG 
classifications and relative weights, the proposed update to the 
wage index values and labor-related share, the proposed change to 
the SSO payment methodology (discussed in VIII.E. of the preamble of 
this proposed rule), our proposal to adopt a 1-year regulatory delay 
of the full implementation of the 25-percent threshold policy for FY 
2018, and our proposals to implement certain provisions of the 21st 
Century Cures Act, and the best available claims and CCR data to 
estimate the proposed change in payments for FY 2018.
    Under the dual rate LTCH PPS payment structure, 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) is based on the LTCH PPS standard Federal payment rate. 
Consistent with the statute, 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, 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 are paid the site neutral payment rate for 
LTCH discharges occurring in cost reporting periods beginning during 
FY 2016 and FY 2017. For FY 2018, the applicability of this 
transitional payment method for site neutral payment rate cases is 
dependent upon both the discharge date and the start date of the 
LTCH's FY 2018 cost reporting period. Specifically, the transitional 
payment method only applies to those site neutral payment rate cases 
that occur in cost reporting periods that begin before October 1, 
2017. The transitional payment amount for site neutral payment rate 
cases is a blended payment rate, which is calculated as 50 percent 
of the applicable site neutral payment rate amount for the discharge 
as determined under 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, while site neutral payment rate 
cases in cost reporting periods beginning on or after October 1, 
2017 are paid the site neutral payment rate amount determined under 
Sec.  412.522(c)(1).
    Based on the best available data for the 415 LTCHs in our 
database that were considered in the analyses used for this proposed 
rule, we estimate that overall LTCH PPS payments in FY 2018 would 
decrease by approximately 5.2 percent (or approximately $238 
million) based on the proposed rates and factors presented in 
section VIII. of the preamble and section V. of the Addendum to this 
proposed rule. (We note that this estimate does not reflect our 
proposal to adopt a 1-year regulatory delay of the full 
implementation of the 25-percent threshold policy for FY 2018 and, 
with the exception of changes to the HCO payment policy, does not 
reflect our proposals regarding the implementation of certain 
provisions of the 21st Century Cures Act. As discussed in greater 
detail below, our actuaries estimate these proposals would increase 
spending by approximately $65 million in FY 2018.) This projection 
takes into account estimated payments for LTCH cases in our database 
that met or would have met the patient-level criteria and been paid 
the LTCH PPS standard Federal payment rate if those criteria had 
been in effect at the time of the discharge, and estimated payments 
for LTCH cases that did not meet or would not have met the 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, as 
described in the following paragraph.
    The statutory transitional payment method for cases that are 
paid the site neutral payment rate for LTCH discharges occurring in 
cost reporting periods beginning during FY 2016 or FY 2017 uses a 
blended payment rate, which is determined as 50 percent of the site 
neutral payment rate amount for the discharge and 50 percent of the 
standard Federal prospective payment rate amount for the discharge 
(Sec.  412.522(c)(3)). The transitional blended payment rate uses 
the same blend percentages (that is, 50 percent) for both years of 
the 2-year transition period. Therefore, when estimating FY 2017 
LTCH PPS payments for site neutral payment rate cases for this 
impact analysis, the transitional blended payment rate was applied 
to all such cases because all discharges in FY 2017 are either in 
the hospital's cost reporting period that began during FY 2016 or in 
the hospital's cost reporting period that will begin during FY 2017. 
However, when estimating FY 2018 LTCH PPS payments for site neutral 
payment rate cases for this impact analysis, because the statute 
specifies that the site neutral payment rate effective date (and 2-
year transitional period) for a given LTCH is based on the date that 
LTCH's cost reporting period begins during FY 2018, we included an 
adjustment to account for this rolling effective date, consistent 
with the general approach used for the LTCH PPS impact analysis 
presented in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49831). 
This approach accounts for the fact that site neutral payment rate 
cases in FY 2018 that are in a LTCH's cost reporting period that 
begin before October 1, 2017 continue to be paid under the 
transitional payment method until the start of the LTCH's first cost 
reporting period beginning on or after October 1, 2017. Site neutral 
payment rate cases in a LTCH's cost reporting period beginning on or 
after October 1, 2017 will no longer be paid under the transitional 
payment method and will instead be paid the site neutral payment 
rate amount as determined by Sec.  412.522(c)(1).
    For purposes of this impact analysis, to estimate proposed total 
FY 2018 LTCH PPS payments for site neutral payment rate cases, we 
used the same general approach as was used in the FY 2016 IPPS/LTCH 
PPS final rule with modifications to account for the rolling end 
date to the transitional site neutral payment rate in FY 2018 
instead of the rolling effective date for implementation of the 
transitional site neutral payment rate in FY 2016. In summary, under 
this approach, we grouped LTCHs based on the quarter their cost 
reporting periods would begin during FY 2018. For example, LTCHs 
with cost reporting periods that begin during October through 
December 2017 begin during the first quarter of FY 2018. For LTCHs 
grouped in each quarter of FY 2018, we modeled those LTCHs' 
estimated FY 2018 site neutral payment rate payments under the 
transitional blended payment rate based on the quarter in which the 
LTCHs in each group would continue to be paid the transitional 
payment method for the site neutral payment rate cases.
    For purposes of this estimate, then, we assume the cost 
reporting period is the same for all LTCHs in each of the quarterly 
groups and that this cost reporting period begins on the first day 
of that quarter. (For example, our first group consists of 41 LTCHs 
whose cost reporting period will begin in the first quarter of FY 
2018 so that, for purposes of this estimate, we assume all 41 LTCH 
will begin their FY 2018 cost reporting period on October 1, 2017.) 
Second, we estimated the proportion of FY 2018 site neutral payment 
rate cases in each of the quarterly groups, and we then assume this 
proportion is applicable

[[Page 20217]]

for all four quarters of FY 2018. (For example, as discussed in more 
detail below, we estimate the first quarter group will discharge 6.3 
percent of all FY 2018 site neutral payment rate cases and 
therefore, we estimate that group of LTCHs will discharge 6.3 
percent of all FY 2018 site neutral payment rate cases in each 
quarter of FY 2018.) Then, we modeled estimated FY 2018 payments on 
a quarterly basis under the LTCH PPS standard Federal payment rate 
based on the assumptions described above. We continue to believe 
that this approach is a reasonable means of taking the rolling 
effective date into account when estimating FY 2018 payments.
    Based on the fiscal year begin date information in the December 
2016 update of the PSF and the LTCH claims from the December 2016 
update of the FY 2016 MedPAR files for the 415 LTCHs in our database 
used for this proposed rule, we found the following: 6.3 percent of 
site neutral payment rate cases are from 41 LTCHs whose cost 
reporting periods will begin during the first quarter of FY 2018; 
23.7 percent of site neutral payment rate cases are from 106 LTCHs 
whose cost reporting periods will begin in the second quarter of FY 
2018; 9.3 percent of site neutral payment rate cases are from 55 
LTCHs whose cost reporting periods will begin in the third quarter 
of FY 2018; and 60.7 percent of site neutral payment rate cases are 
from 213 LTCHs whose cost reporting periods will begin in the fourth 
quarter of FY 2018. Therefore, the following percentages apply in 
the approach described above:
     First Quarter FY 2018: 6.3 percent of site neutral 
payment rate cases (that is, the percentage of discharges from LTCHs 
whose FY 2018 cost reporting will begin in the first quarter of FY 
2018) are no longer eligible for the transitional payment method, 
while the remaining 93.7 percent of site neutral payment rate 
discharges are eligible to be paid under the transitional payment 
method.
     Second Quarter FY 2018: 30.0 percent of site neutral 
payment rate second quarter discharges (that is, the percentage of 
discharges from LTCHs whose FY 2018 cost reporting will begin in the 
first or second quarter of FY 2018) are no longer eligible for the 
transitional payment method while the remaining 70.0 percent of site 
neutral payment rate second quarter discharges are eligible to be 
paid under the transitional payment method.
     Third Quarter FY 2018: 39.3 percent of site neutral 
payment rate third quarter discharges (that is, the percentage of 
discharges from LTCHs whose FY 2018 cost reporting will begin in the 
first, second, or third quarter of FY 2018) are no longer eligible 
for the transitional payment method while the remaining 60.7 percent 
of site neutral payment rate third quarter discharges are eligible 
to be paid under the transitional payment method.
     Fourth Quarter FY 2018: 100.0 percent of site neutral 
payment rate fourth quarter discharges (that is, the percentage of 
discharges from LTCHs whose FY 2018 cost reporting will begin in the 
first, second, third, or fourth quarter of FY 2018) are no longer 
eligible for the transitional payment method so that no site neutral 
payment rate case discharges are eligible be paid under the 
transitional payment method.
    Based on the FY 2016 LTCH cases that were used for the analyses 
in this proposed rule, approximately 42 percent of those cases were 
or would have been classified as site neutral payment rate cases if 
the site neutral payment rate had been in effect at the time of the 
discharge (that is, 42 percent of LTCH cases did not or 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 2018 will not change significantly from the 
historical data. Taking into account the transitional blended 
payment rate and other changes that would apply to the site neutral 
payment rate cases in FY 2018, we estimate that aggregate LTCH PPS 
payments for these site neutral payment rate cases would decrease by 
approximately 22 percent (or approximately $252 million).
    Approximately 58 percent of LTCH cases are expected to meet the 
patient-level criteria for exclusion from the site neutral payment 
rate in FY 2018, and would be paid based on the proposed 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 2018 would increase approximately 0.4 percent (or 
approximately $15 million). This estimated increase in LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases in FY 2018 
is primarily due to the combined effects of the 1.0 percent annual 
update to the LTCH PPS standard Federal payment rate for FY 2018 
required by section 411 of Public Law 114-10 (discussed in section 
V.A. of the Addendum to this proposed rule) and an estimated 
proposed decrease in HCO payments for these cases (discussed in 
section V.D. of the Addendum to this proposed rule). (We note that 
because our proposed SSO payment methodology discussed in VIII.E. of 
the preamble of this proposed rule incorporates a proposed budget 
neutrality adjustment, this proposal does not increase or decrease 
aggregate payments, and therefore does not factor into the 0.4 
percent increase in aggregate payments.)
    Based on the 415 LTCHs that were represented in the FY 2016 LTCH 
cases that were used for the analyses in this proposed rule 
presented in Table IV in section I.J.4. of this Appendix, we 
estimate that aggregate FY 2018 LTCH PPS payments would be 
approximately $4.371 billion, as compared to estimated aggregate FY 
2017 LTCH PPS payments of approximately $4.609 billion, resulting in 
an estimated overall decrease in LTCH PPS payments of approximately 
$238 million. Furthermore, as discussed in more detail below, our 
Office of the Actuary is estimating an additional increase in 
aggregate FY 2018 LTCH PPS payments of approximately $65 million for 
our proposal to delay full implementation of the 25-percent 
threshold policy for FY 2018 and our proposed implementation of 
certain provisions of the 21st Century Cures Act. Therefore, in 
total we project an overall decrease in LTCH PPS payments of 
approximately $173 million (-$238 million + $65 million) or 
approximately a 3.75 percent decrease in LTCH PPS payments in FY 
2018 as compared to FY 2017. Because the proposed combined 
distributional effects and estimated payment changes exceed $100 
million, this proposed rule is a major economic rule. We note that 
the estimated $238 million decrease in LTCH PPS payments in FY 2018 
(which includes proposed estimated payments for LTCH PPS standard 
Federal payment rate cases and site neutral payment rate cases, but 
does not include estimated payments for our proposal to delay full 
implementation of the 25-percent threshold policy for FY 2018 or the 
certain provisions of the 21st Century Cures Act) does not reflect 
changes in LTCH admissions or case-mix intensity, which would also 
affect the overall payment effects of the policies in this proposed 
rule.
    The LTCH PPS standard Federal payment rate for FY 2017 is 
$42,476.41. For FY 2018, we are proposing to establish an LTCH PPS 
standard Federal payment rate of $41,497.20, which reflects the 
proposed 1.0 percent annual update to the LTCH PPS standard Federal 
payment rate, the proposed area wage budget neutrality factor of 
1.000077 to ensure that the changes in the wage indexes and labor-
related share do not influence aggregate payments, and the proposed 
budget neutrality adjustment of 0.9672 to ensure that our proposed 
changes to the SSO payment methodology (discussed in VIII.E. of the 
preamble of this proposed rule) 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 proposing to establish 
an LTCH PPS standard Federal payment rate of $40,675.49. This 
proposed reduced LTCH PPS standard Federal payment rate reflects the 
proposed updates and factors previously described as well as the 
required 2.0 percentage point reduction to the annual update for 
failure to submit data under the LTCH QRP. We note that the factors 
previously described to determine the proposed FY 2018 LTCH PPS 
standard Federal payment rate are applied to the FY 2017 LTCH PPS 
standard Federal rate set forth under Sec.  412.523(c)(3)(xiv) (that 
is, $42,476.41).
    Table IV shows the estimated impact for LTCH PPS standard 
Federal payment rate cases. The estimated change attributable solely 
to the annual update of 1.0 to the LTCH PPS standard Federal payment 
rate is projected to result in an increase of 0.9 percent in 
payments per discharge for LTCH PPS standard Federal payment rate 
cases from FY 2017 to FY 2018, on average, for all LTCHs (Column 6). 
In addition to the proposed annual update to the LTCH PPS standard 
Federal payment rate for FY 2018, the estimated increase of 0.9 
percent shown in Column 6 of Table IV also includes estimated 
payments for SSO cases that would be paid using special 
methodologies that are not affected by the proposed annual update to 
the LTCH PPS standard Federal payment rate (without incorporating 
our proposed SSO payment methodology as discussed in VIII.E. of the 
preamble of this proposed rule),

[[Page 20218]]

as well as the proposed reduction 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 proposed LTCH PPS standard Federal payment 
rate to LTCH PPS standard Federal payment rate cases is somewhat 
less than the proposed 1.0 percent annual update for FY 2018 
required under section 411 of Public Law 114-10.
    For FY 2018, we are proposing to update the wage index values 
based on the most recent available data, and we are proposing to 
continue to use labor market areas based on the OMB CBSA 
delineations (as discussed in section V.B. of the Addendum to this 
proposed rule). In addition, we are proposing to reduce the labor-
related share from 66.5 percent to 66.3 percent under the LTCH PPS 
for FY 2018, based on the most recent available data on the relative 
importance of the labor-related share of operating and capital costs 
of the 2013-based LTCH market basket. We also are proposing to apply 
a proposed area wage level budget neutrality factor of 1.000077 to 
ensure that the proposed 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.
    As we discuss in VIII.E. of the preamble of this proposed rule, 
we are proposing to simplify our SSO payment methodology in order to 
alleviate potential incentives to improperly hold patients beyond 
the SSO threshold. We also note we do not believe aggregate payments 
to LTCHs should increase or decrease as a result of our policy, and 
thus, we are proposing to apply a proposed budget neutrality factor 
of 0.9672 to ensure the proposed changes to the SSO payment 
methodology does not result in a change in estimated aggregate LTCH 
PPS payments to LTCH PPS standard Federal payment rate cases.
    We currently estimate total HCO payments for LTCH PPS standard 
Federal payment rate cases would decrease from FY 2017 to FY 2018. 
Based on the FY 2016 LTCH cases that were used for the analyses in 
this proposed rule, we estimate that the FY 2017 HCO threshold of 
$21,943 (as established in the FY 2017 IPPS/LTCH PPS final rule) 
would result in estimated HCO payments for LTCH PPS standard Federal 
payment rate cases in FY 2017 that are above the estimated 8 percent 
target. Specifically, we currently estimate that HCO payments for 
LTCH PPS standard Federal payment rate cases would be approximately 
8.6 percent of the estimated total LTCH PPS standard Federal payment 
rate payments in FY 2017. Combined with our estimate that proposed 
FY 2018 HCO payments for LTCH PPS standard Federal payment rate 
cases would be 7.975 percent of estimated total LTCH PPS standard 
Federal payment rate payments in FY 2018 as required by section 
15004 of the 21st Century Cures Act, this would result in the 
estimated decrease in HCO payments of approximately 0.6 percent 
between FY 2017 and FY 2018.
    In calculating these estimated HCO payments, we increased 
estimated costs by our actuaries' projected market basket percentage 
increase factor. Without our proposed SSO payment methodology, this 
increase in estimated costs would result in a projected increase in 
SSO payments in FY 2018 (because 100 percent of the estimated cost 
of the case is an option in the SSO payment formula (Sec.  
412.529)). We estimate that those increased SSO payments in FY 2018 
would increase total payments for LTCH PPS standard Federal payment 
rate cases by approximately 0.2 percent.
    Table IV shows the estimated impact of the proposed payment rate 
and policy changes on LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases for FY 2018 by comparing estimated FY 
2017 LTCH PPS payments to estimated proposed FY 2018 LTCH PPS 
payments. (As noted earlier, our analysis does not reflect changes 
in LTCH admissions or case-mix intensity.) The proposed projected 
increase in payments from FY 2017 to FY 2018 for LTCH PPS standard 
Federal payment rate cases of 0.4 percent is attributable to the 
impacts of the proposed change to the LTCH PPS standard Federal 
payment rate (0.9 percent in Column 6) and the effect of the 
proposed estimated decrease in HCO payments for LTCH PPS standard 
Federal payment cases (-0.6 percent), and the proposed estimated 
increase in payments for SSO cases (0.2 percent) prior to 
incorporation of our proposed SSO payment methodology. We note that 
these impacts do not include LTCH PPS site neutral payment rate 
cases for the reasons discussed in section I.J.4. of this Appendix.
    As we discuss in detail throughout this proposed rule, based on 
the most recent available data, we believe that the provisions of 
this proposed 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 would 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 0.4 percent increase in estimated payments for LTCH PPS 
standard Federal payment rate cases. This estimated impact is based 
on the FY 2016 data for the 21 rural LTCHs (out of 415 LTCHs) that 
were used for the impact analyses shown in Table IV.

3. Impact of Other Proposed Changes Under the LTCH PPS for FY 2018

    Overall, our actuaries estimate the provisions of the 21st 
Century Cures Act that affect LTCH PPS payments will increase 
aggregate spending to LTCHs by approximately $15 million in FY 2018. 
Specifically, they estimate the provisions in section 15004, which 
provide for certain exceptions to the moratorium on an increase in 
beds in LTCH or LTCH satellite locations (discussed in section 
VIII.H of the preamble of this proposed rule) and a change in the 
treatment of HCO payments to LTCH PPS standard rate cases (discussed 
in section V.D. of the Addendum of this proposed rule) to result in 
an aggregate increase in Medicare spending of $10 million. The 
remaining estimated increase of $5 million in Medicare spending 
comes from the temporary exception to the site neutral payment rate 
for certain spinal cord hospitals provided for under section 15009 
(as discussed in section VIII.E. of the preamble of this proposed 
rule). Our actuaries estimate the remaining provisions of the 21st 
Century Cures Act applicable to LTCHs (that is, sections 15007, 
15008, and 15010, discussed in sections VIII.I., VIII.J., and 
VIII.F., respectively, of the preamble of this proposed rule) will 
have negligible impact on aggregate Medicare spending in FY 2018. 
(We note that section 15006, which provides for an additional delay 
in the full implementation of the 25-percent threshold policy 
(discussed in VIII.G. of the preamble of this proposed rule), does 
not impact FY 2018 LTCH PPS payments.) In addition, if adopted, our 
actuaries estimate that our proposal to further delay the full 
implementation of the 25-percent threshold policy for FY 2018 would 
increase aggregate Medicare spending by $50 million.
    As discussed in section VIII.E. of the preamble of this proposed 
rule, section 15009 of the 21st Century Cures Act provides for a 
temporary exception to the site neutral payment rate for certain 
spinal cord specialty hospitals for discharges occurring in cost 
reporting periods beginning during FY 2018 and FY 2019. To qualify 
for this temporary exception, an LTCH must, among other things, meet 
the ``significant out-of-state admissions criterion'' at section 
1886(m)(6)(F)(iii) of the Act. The statute further provides 
authority for the Secretary to implement the significant out-of-
state admissions criterion at section 1886(m)(6)(F)(iii) of the Act 
by program instruction or otherwise, and exempts the policy 
initiatives from any information collection requirements under the 
Paperwork Reduction Act. Although exempt from these information 
collection requirements, we estimate that each application will 
require 2.5 hours of work from each LTCH (to review the billing 
addresses of the hospital's Medicare and non-Medicare inpatients). 
This information will be collected on a one-time basis. Based on the 
best information available to CMS, we estimate that only two 
hospitals meet the other requirements for this exception. Therefore, 
we estimate that the total number of hours associated with this 
request will be 5 (2.5 hours per hospital for 2 hospitals). We 
estimate a current, average salary of $29 per hour plus 100 percent 
for fringe benefits ($58 per hour). Therefore, we estimate the total 
costs associated with this information collection will be $290 (5 
hours at $58 per hour).

4. Anticipated Effects of Proposed 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

[[Page 20219]]

standard Federal payment 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 dual rate LTCH 
PPS payment structure with two distinct payment rates for LTCH 
discharges beginning in FY 2016. 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) are paid based on the LTCH PPS standard Federal 
payment rate. LTCH discharges paid at the site neutral payment rate 
are generally 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 are 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 are paid based on 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. As discussed in 
more detail in section I.J. of this Appendix, some LTCH discharges 
in FY 2018 will still be eligible to be paid based on the blended 
payment rate.
    As discussed in section I.J. of this Appendix, we project a 
decrease in aggregate LTCH PPS payments in FY 2018 of approximately 
$238 million based on Table IV. This estimated decrease in payments 
reflects the projected increase in payments to LTCH PPS standard 
Federal payment rate cases of approximately $15 million and the 
projected decrease in payments to site neutral payment rate cases of 
approximately $252 million under the dual rate LTCH PPS payment rate 
structure required by the statute beginning in FY 2016. (As stated 
previously, this estimate does not include the estimated increase in 
aggregate FY 2018 LTCH PPS payments for our proposal to delay full 
implementation of the 25-percent threshold policy or certain 
provisions of the 21st Century Cures Act, which are discussed in 
section I.J.3. of this Appendix.)
    As discussed in section V.D. of the Addendum of this proposed 
rule, our actuaries 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 
proposed rule to project estimated FY 2018 LTCH PPS payments (that 
is, FY 2016 LTCH claims data) do not reflect this actuarial 
projection, we are unable to model the impact of the proposed 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 
proposed changes to LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases. Therefore, Table IV only reflects proposed 
changes in LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases and, unless otherwise noted, the remaining discussion in 
section I.J.4. of this Appendix refers only to the impact on 
proposed LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases. In the following section, we present our provider impact 
analysis for the proposed changes that affect LTCH PPS payments for 
LTCH PPS standard Federal payment rate cases.

b. Impact on Providers

    Under the dual rate LTCH PPS payment structure, there are two 
distinct payment rates for LTCH discharges occurring in cost 
reporting periods beginning on or after October 1, 2016. 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 2017 cost reporting period, discharges are 
paid based on whether or not the discharge meets the patient-level 
criteria to be excluded from the site neutral payment rate. That is, 
LTCH PPS standard Federal payment rate cases are defined as LTCH 
discharges that 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 do not meet 
the patient-level criteria and generally will be paid the lower site 
neutral payment rate. However, for discharges occurring in cost 
reporting periods beginning in FY 2016 or 2017, the statute 
specifies that site neutral payment rate cases are paid based on a 
transitional payment method that is calculated as 50 percent of the 
applicable site neutral payment rate amount and 50 percent of the 
applicable LTCH PPS standard Federal payment rate (which, as 
discussed earlier, will continue to apply to certain discharges 
occurring during FY 2018).
    The basic methodology for determining a per discharge payment 
for LTCH PPS standard Federal payment rate cases is currently set 
forth under Sec. Sec.  412.515 through 412.538. 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 (including our proposed SSO payment methodology). 
LTCHs located in Alaska and Hawaii also have their payments adjusted 
by a COLA. Under our application of the dual rate LTCH PPS payment 
structure, the LTCH PPS standard Federal payment rate is generally 
only 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). LTCH discharges that do not meet the patient-level criteria 
for exclusion are 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 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 proposed changes to the LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases presented 
in this proposed rule on different categories of LTCHs for FY 2018, 
it is necessary to estimate payments per discharge for FY 2017 using 
the rates, factors, and the policies established in the FY 2017 
IPPS/LTCH PPS final rule and estimate payments per discharge for FY 
2018 using the proposed rates, factors, and the policies in this FY 
2018 IPPS/LTCH PPS proposed rule (as discussed in section VIII. of 
the preamble of this proposed rule and section V. of the Addendum to 
this proposed rule). As discussed elsewhere in this proposed 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 HCO cases in each year. The resulting analyses 
can then be used to compare how our 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, 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 Proposed 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 proposed policies on proposed 
payments for LTCH PPS standard Federal payment rate cases, we 
simulated FY 2017 and proposed FY 2018 payments on a case-by-case 
basis using historical LTCH claims from the FY 2016 MedPAR files 
that met or 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 all cases 
in the FY 2016 MedPAR files. For modeling FY 2017 LTCH PPS payments, 
we used the FY 2017 standard Federal payment rate of $42,476.41 (or 
$41,641.49 for LTCHs that failed to submit quality data as required 
under the requirements of the LTCH QRP). Similarly, for modeling 
payments based on the proposed FY 2018 LTCH PPS standard Federal 
payment rate, we used the proposed FY 2018 standard Federal payment 
rate of $41,497.20 (or $40,675.49 for LTCHs that failed to submit 
quality data as required under the requirements of the LTCH QRP). In 
each case, we applied the applicable adjustments for area wage 
levels and the

[[Page 20220]]

COLA for LTCHs located in Alaska and Hawaii. Specifically, for 
modeling FY 2017 LTCH PPS payments, we used the current FY 2017 
labor-related share (66.5 percent); the wage index values 
established in the Tables 12A and 12B listed in the Addendum to the 
FY 2017 IPPS/LTCH PPS final rule (which are available via the 
Internet on the CMS Web site); the FY 2017 HCO fixed-loss amount for 
LTCH PPS standard Federal payment rate cases of $21,943 (as 
discussed in section V.D. of the Addendum to that final rule) and 
the FY 2017 COLA factors (shown in the table in section V.C. of the 
Addendum to that final rule) to adjust the FY 2017 nonlabor-related 
share (33.5 percent) for LTCHs located in Alaska and Hawaii. 
Similarly, for modeling proposed FY 2018 LTCH PPS payments, we used 
the proposed FY 2018 LTCH PPS labor-related share (66.3 percent), 
the proposed FY 2018 wage index values from Tables 12A and 12B 
listed in section VI. of the Addendum to this proposed rule (which 
are available via the Internet on the CMS Web site), the proposed FY 
2018 fixed-loss amount for LTCH PPS standard Federal payment rate 
cases of $30,081 (as discussed in section V.D.3. of the Addendum to 
this proposed rule), and the proposed FY 2018 COLA factors (shown in 
the table in section V.C. of the Addendum to this proposed rule) to 
adjust the FY 2018 nonlabor-related share (33.7 percent) for LTCHs 
located in Alaska and Hawaii.
    As previously discussed, our impact analysis reflects an 
estimated change in payments for SSO cases (including our proposed 
changes to the SSO payment methodology), 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 cases prior to accounting for our 
proposed SSO payment methodology and for HCO cases for LTCH PPS 
standard Federal payment rate cases, we applied a proposed inflation 
factor of 5.6 percent (determined by the Office of the Actuary) to 
update the 2016 costs of each case.
    The impacts that follow reflect the estimated ``losses'' or 
``gains'' among the various classifications of LTCHs from FY 2017 to 
FY 2018 based on the proposed payment rates and proposed policy 
changes applicable to LTCH PPS standard Federal payment rate cases 
presented in this proposed rule. Table IV illustrates the estimated 
aggregate impact of the proposed 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.)
     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 2017 payment 
per discharge for LTCH cases expected to meet the LTCH PPS standard 
Federal payment rate criteria (as described previously).
     The fifth column shows the estimated FY 2018 payment 
per discharge for LTCH cases expected to meet the LTCH PPS standard 
Federal payment rate criteria (as described previously).
     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 2017 to FY 
2018 due to the proposed annual update to the standard Federal rate 
(as discussed in section V.A.2. of the Addendum to this proposed 
rule).
     The seventh column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2017 to FY 2018 for proposed changes to 
the area wage level adjustment (that is, the wage indexes and the 
labor-related share), including the application of the proposed area 
wage level budget neutrality factor (as discussed in section V.B. of 
the Addendum to this proposed rule).
     The eighth column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases for changes resulting from our proposed SSO 
payment methodology and associated budget neutral adjustment to the 
LTCH PPS standard Federal payment rate (column 7).
     The ninth column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2017 (Column 4) to FY 2018 (Column 5) for 
all proposed changes (and includes the effect of estimated changes 
to HCO and SSO payments).

         Table IV--Impact of Proposed Payment Rate and Proposed Policy Changes to LTCH PPS Payments for Standard Payment Rate Cases for FY 2018
                                           [Estimated FY 2017 payments compared to estimated FY 2018 payments]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Proposed
                                                                                                        percent      Proposed     Proposed
                                                                                           Average     change due    percent      percent      Proposed
                                                                             Average FY  proposed FY   to change    change due   change due    percent
                                                                Number of    2017 LTCH    2018 LTCH      to the    to proposed  to proposed   change due
                                                   Number of     LTCH PPS   PPS payment  PPS payment    proposed    changes to   change to      to all
               LTCH classification                   LTCHS       standard       per          per         annual     area wage    the short     proposed
                                                                 payment      standard     standard    update to    adjustment      stay       standard
                                                                rate cases    payment      payment        the       with wage     outlier      payment
                                                                                rate       rate \1\     standard      budget      payment        rate
                                                                                                        federal     neutrality  methodology  changes \5\
                                                                                                        rate \2\       \3\       change \4\
(1)                                                       (2)          (3)          (4)          (5)          (6)          (7)          (8)          (9)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Providers...................................          415       73,231      $46,947      $47,149          0.9          0.0          0.0          0.4
By Location:
    Rural.......................................           21        2,214       37,951       37,702          0.9         -0.3          0.1         -0.7
    Urban.......................................          394       71,017       47,227       47,443          0.9          0.0          0.0          0.5
        Large...................................          200       40,843       49,951       50,249          0.9          0.1          0.1          0.6
        Other...................................          194       30,174       43,541       43,645          0.9         -0.1         -0.2          0.2
By Participation Date:
    Before Oct. 1983............................           16        2,509       42,228       43,135          0.9         -0.5          2.0          2.1
    Oct. 1983-Sept. 1993........................           45        9,580       52,603       52,668          0.8         -0.1         -0.2          0.1
    Oct. 1993-Sept. 2002........................          169       30,469       45,835       46,061          0.9          0.0         -0.1          0.5
    After October 2002..........................          185       30,673       46,671       46,834          0.9          0.0          0.0          0.3
By Ownership Type:
    Voluntary...................................           72        9,536       49,476       49,458          0.9         -0.1         -0.3          0.0
    Proprietary.................................          328       62,236       46,393       46,647          0.9          0.0          0.0          0.5
    Government..................................           15        1,459       54,034       53,468          0.9         -0.2         -1.0         -1.0
By Region:
    New England.................................           12        2,748       44,003       44,457          0.9         -0.3          0.3          1.0
    Middle Atlantic.............................           25        5,845       51,781       52,133          0.9         -0.2          0.4          0.7
    South Atlantic..............................           66       13,245       46,739       47,089          0.9         -0.1          0.4          0.7
    East North Central..........................           68       11,419       46,589       46,717          0.9          0.0         -0.1          0.3
    East South Central..........................           34        5,209       43,878       44,214          0.9          0.0          0.6          0.8
    West North Central..........................           27        4,325       45,735       45,380          0.9          0.2         -1.2         -0.8

[[Page 20221]]

 
    West South Central..........................          127       18,398       41,960       41,929          0.9          0.2         -0.6         -0.1
    Mountain....................................           31        4,184       49,112       49,256          0.9         -0.2         -0.2          0.3
    Pacific.....................................           25        7,858       58,479       59,128          0.8          0.0          0.3          1.1
By Bed Size:
    Beds: 0-24..................................           26        1,753       46,440       46,297          0.9          0.5         -0.7         -0.3
    Beds: 25-49.................................          193       25,450       43,767       43,898          0.9         -0.1          0.0          0.3
    Beds: 50-74.................................          117       20,112       48,449       48,509          0.9          0.0         -0.2          0.1
    Beds: 75-124................................           47       13,018       50,260       50,681          0.9          0.1          0.0          0.8
    Beds: 125-199...............................           23        8,013       48,199       48,375          0.9          0.0         -0.1          0.4
    Beds: 200+..................................            9        4,885       46,633       47,363          0.8          0.1          0.7          1.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimated FY 2018 LTCH PPS payments for LTCH PPS standard Federal payment rate criteria based on the proposed payment rate and factor changes
  applicable to such cases presented in the preamble of and the Addendum to this proposed rule.
\2\ Percent change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2017 to FY 2018 for the proposed annual
  update to the LTCH PPS standard Federal payment rate.
\3\ Percent change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2017 to FY 2018 for proposed changes to
  the area wage level adjustment under Sec.   412.525(c) (as discussed in section V.B. of the Addendum to this proposed rule).
\4\ Percent change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2017 to FY 2018 for proposed change to
  the SSO payment methodology.
\5\ Percent change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2017 (shown in Column 4) to FY 2018
  (shown in Column 5), including all of the proposed changes to the rates and factors applicable to such cases presented in the preamble and the
  Addendum to this proposed rule. We note that this column, which shows the proposed percent change in estimated payments per discharge for all proposed
  changes, does not equal the sum of the proposed percent changes in estimated payments per discharge for the proposed annual update to the LTCH PPS
  standard Federal payment rate (Column 6) and the proposed 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 (prior to accounting for the proposed change to the SSO payment methodology) and
  aggregate HCO payments for LTCH PPS standard Federal payment rate cases (as discussed in this impact analysis), as well as other interactive effects
  that cannot be isolated.

d. Results

    Based on the FY 2016 LTCH cases (from 415 LTCHs) that were used 
for the analyses in this proposed rule, we have prepared the 
following summary of the impact (as shown in Table IV) of the 
proposed LTCH PPS payment rate and proposed policy changes for LTCH 
PPS standard Federal payment rate cases presented in this proposed 
rule. The impact analysis in Table IV shows that estimated payments 
per discharge for LTCH PPS standard Federal payment rate cases are 
projected to increase 0.4 percent, on average, for all LTCHs from FY 
2017 to FY 2018 as a result of the proposed payment rate and 
proposed policy changes applicable to LTCH PPS standard Federal 
payment rate cases presented in this proposed rule. This estimated 
0.4 percent increase in LTCH PPS payments per discharge was 
determined by comparing estimated FY 2018 LTCH PPS payments (using 
the proposed payment rates and factors discussed in this proposed 
rule) to estimated FY 2017 LTCH PPS payments for LTCH discharges 
which will be LTCH PPS standard Federal payment rate cases if the 
dual rate LTCH PPS payment structure was or had been in effect at 
the time of the discharge (as described in section I.J.4. of this 
Appendix).
    As stated previously, we are proposing to update the LTCH PPS 
standard Federal payment rate for FY 2018 by 1.0 percent as required 
by statute. 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 is applied to the 
annual update to the LTCH PPS standard Federal payment rate. 
Consistent with Sec.  412.523(d)(4), we also are proposing to apply 
an area wage level budget neutrality factor to the proposed FY 2018 
LTCH PPS standard Federal payment rate of 1.000077, based on the 
best available data at this time, to ensure that any proposed 
changes to the area wage level adjustment (that is, the proposed 
annual update of the wage index values and labor-related share) 
would not result in any change (increase or decrease) in estimated 
aggregate LTCH PPS standard Federal payment rate payments. Finally, 
we are proposing a budget neutrality adjustment of 0.9672 for our 
proposed changes to the SSO payment methodology (discussed in 
VIII.E.2.d. of the preamble of this proposed rule). As we also 
explained earlier in this section, for most categories of LTCHs (as 
shown in Table IV, Column 6), the estimated payment increase due to 
the proposed 1.0 percent annual update to the LTCH PPS standard 
Federal payment rate is projected to result in approximately a 0.9 
percent increase in estimated payments per discharge for LTCH PPS 
standard Federal payment rate cases for all LTCHs from FY 2017 to FY 
2018. This is because our estimate of the proposed changes in 
payments due to the proposed update to the LTCH PPS standard Federal 
payment rate also reflects estimated payments for SSO cases that are 
paid using special methodologies that are not affected by the update 
to the LTCH PPS standard Federal payment rate (prior to accounting 
for the proposed change to the SSO payment methodology). 
Consequently, for certain hospital categories, we estimate that 
payments to LTCH PPS standard Federal payment rate cases may 
increase by less than 1.0 percent due to the proposed annual update 
to the LTCH PPS standard Federal payment rate for FY 2018.

(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 proposed 
overall average percent increase in estimated payments per discharge 
for LTCH PPS standard Federal payment rate cases from FY 2017 to FY 
2018 for all hospitals is 0.4 percent. However, for rural LTCHs, the 
proposed overall percent change for LTCH PPS standard Federal 
payment rate cases is estimated to be a 0.7 percent decrease. This 
projected decrease is primarily driven by a projected decrease 
resulting from changes to the proposed changes to the FY 2018 MS-
LTC-DRGs and relative weights as well as from the projected 0.3 
percent decrease resulting from the proposed changes to the area 
wage index adjustment. For urban LTCHs, we estimate an increase of 
0.5

[[Page 20222]]

percent from FY 2017 to FY 2018. Among the urban LTCHs, large urban 
LTCHs are projected to experience an increase of 0.6 percent in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2017 to FY 2018, and the remaining urban 
LTCHs are projected to experience an increase of 0.2 percent in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2017 to FY 2018, 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 42 percent) are 
in LTCHs that began participating in the Medicare program after 
September 2002, and they are projected to experience a 0.3 percent 
increase in estimated payments per discharge for LTCH PPS standard 
Federal payment rate cases from FY 2017 to FY 2018, as shown in 
Table IV.
    Approximately 4 percent of LTCHs began participating in the 
Medicare program before October 1983, and these LTCHs are projected 
to experience an average percent increase of 2.1 percent in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2017 to FY 2018, as shown in Table IV 
with a large portion of this increase among this small group of 
LTCHs to be a projected 2.0 percent increase resulting from our 
proposed SSO payment method. Approximately 11 percent of LTCHs began 
participating in the Medicare program between October 1983 and 
September 1993, and these LTCHs are projected to experience an 
increase of 0.1 percent in estimated payments for LTCH PPS standard 
Federal payment rate cases from FY 2017 to FY 2018. LTCHs that began 
participating in the Medicare program between October 1993 and 
October 1, 2002, which treat approximately 42 percent of all LTCH 
PPS standard Federal payment rate cases, are projected to experience 
a 0.5 percent increase in estimated payments from FY 2017 to FY 
2018. Lastly, LTCHs that began participating in Medicare program 
after October, 2002 also treat approximately 42 percent of all LTCH 
PPS standard Federal payment rate cases and are projected to 
experience a 0.3 percent increase in estimated payments from FY 2017 
to FY 2018.

(3) Ownership Control

    LTCHs are grouped into four categories based on ownership 
control type: Voluntary, proprietary, government and unknown. Based 
on the most recent available data, approximately 17 percent of LTCHs 
are identified as voluntary (Table IV). The majority (approximately 
79 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 
no change in payments to LTCH PPS standard Federal payment rate 
cases, while proprietary LTCHs are expected to experience an average 
increase of 0.5 percent in payments to LTCH PPS standard Federal 
payment rate cases. Government owned and operated LTCHs, meanwhile, 
are expected to experience a 1.0 percent decrease in payments to 
LTCH PPS standard Federal payment rate cases from FY 2017 to FY 
2018.

(4) Census Region

    Estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases for FY 2017 are projected to experience a 
decrease from FY 2017 for LTCHs located in the West South Central 
and West North Central regions, while LTCHs located in all other 
regions are projected to experience an increase in estimated 
payments per discharge in comparison to FY 2017. 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 Pacific and New England 
regions (1.1 percent and 1.0 percent, respectively, as shown in 
Table IV), which is largely attributable to the proposed changes in 
the proposed changes to the SSO payment method. In contrast, LTCHs 
located in the East North Central and Mountain regions are projected 
to experience the smallest increase in estimated payments per 
discharge for LTCH PPS standard Federal payment rate cases from FY 
2017 to FY 2018.

(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. We project that LTCHs with 0-24 beds would experience 
a decrease in payments for LTCH PPS standard Federal payment rate 
cases of 0.3 percent, and LTCHs with 25-49 beds would experience an 
increase in payments for LTCH PPS standard Federal payment rate 
cases of 0.3 percent. LTCHs with 50-74 beds would experience an 
increase in payments for LTCH PPS standard Federal payment rate 
cases of 0.1 percent. We project the largest increases in payments 
to occur in LTCHs with at least 75 beds. In particular, we project 
LTCHs with 75-124 beds woud experience an increase in payments for 
LTCH PPS standard Federal payment rate cases of 0.8 percent while 
LTCHs with 125-199 beds would experience an increase in payments for 
LTCH PPS standard Federal payment rate cases of 0.4 percent. 
Finally, LTCHs with 200 or more beds would experience the largest 
increase in payments for LTCH PPS standard Federal payment rate 
cases of 1.6 percent mostly due to estimated increase in payments 
from proposed changes to the FY 2018 MS-LTC-DRG classifications and 
relative weights and our proposed SSO payment method.

4. Effect on the Medicare Program

    As stated previously, we project that the provisions of this 
proposed rule would result in an increase in estimated aggregate 
LTCH PPS payments to LTCH PPS standard Federal payment rate cases in 
FY 2018 relative to FY 2017 of approximately $15 million (or 
approximately 0.4 percent) for the 415 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 proposed rule would result in a decrease in 
estimated aggregate LTCH PPS payments to site neutral payment rate 
cases in FY 2018 relative to FY 2017 of approximately $252 million 
(or approximately 22 percent) for the 415 LTCHs in our database. 
Therefore, we project that the provisions of this proposed rule 
would result in a decrease in estimated aggregate LTCH PPS payments 
to all LTCH cases in FY 2018 relative to FY 2017 of approximately 
$238 million (or approximately 5.2 percent) for the 415 LTCHs in our 
database. Furthermore, as stated previously, our Office of the 
Actuary estimates an additional estimated increase in aggregate FY 
2018 LTCH PPS payments of approximately $65 million for our proposal 
to delay full implementation of the 25-percent threshold policy for 
FY 2018 and our proposed implementation of certain provisions of the 
21st Century Cures Act. Therefore, in total, we project an overall 
decrease in LTCH PPS payments of approximately $173 million ($238 
million decrease + $65 million increase) or approximately a 3.75 
percent decrease in LTCH PPS payments in FY 2018 as compared to FY 
2017.

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 proposed rule, but we 
continue to expect that paying prospectively for LTCH services will 
enhance the efficiency of the Medicare program.

K. Effects of Proposed Requirements for the Hospital Inpatient 
Quality Reporting (IQR) Program

1. Background

    In section IX.A. of the preamble of this proposed 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 2020 payment determination.
    In this proposed rule, we are proposing to: (1) Update the 
electronic clinical quality measure (eCQM) reporting requirements 
with regard to the number of eCQMs and quarters of data for the FY 
2019 and FY 2020 payment determinations; (2) update the eCQM 
certification requirements for the FY 2019 and FY 2020 payment 
determinations; (3) update our previously finalized eCQM validation 
processes for the FY 2020 payment determination and subsequent 
years; (4) allow hospitals to use an educational review process to 
correct incorrect validation results for the first three quarters of 
validation for chart-abstracted measures beginning with the FY 2020 
payment determination and for subsequent years; (5) begin voluntary 
reporting on the new Hybrid Hospital-Wide 30-Day Readmission measure 
for the CY 2018 reporting period; (6) refine the Hospital Consumer 
Assessment of Healthcare Providers and Systems (HCAHPS) survey

[[Page 20223]]

measure to replace the questions on pain management for the FY 2020 
payment determination and subsequent years; (7) refine the Hospital 
30-Day Mortality Following Acute Ischemic Stroke Hospitalization 
measure to include NIH stroke scale for the FY 2023 payment 
determination and subsequent years; (8) provide confidential reports 
of measure data stratified by dual eligible status for the Hospital 
30-day, All-Cause, Risk-Standardized Readmission Rate Following 
Pneumonia Hospitalization and Hospital 30-day, All-Cause, Risk 
Standardized Mortality Rate (RSRR) for Pneumonia measures; and (9) 
update the Extraordinary Circumstances Exceptions (ECE) Policy for 
the FY 2020 payment determination and subsequent years.
    As further explained in section XIII.B.6. of the preamble of 
this proposed rule, we believe that there will be an overall 
decrease in burden for hospitals due to the proposals discussed 
above. We refer readers to section XIII.B.6. of the preamble of this 
proposed rule for a summary of our burden estimates.

2. Impact of the Proposed Updates to the eCQM Reporting Requirements

(a) Impact for the CY 2017 Reporting Period/FY 2019 Payment 
Determination

    In the FY 2017 IPPS/LTCH PPS final rule, we finalized policies 
to require hospitals to submit a full year (four quarters) of data 
(81 FR 57159) for at least eight eCQMs (81 FR 57157) for both the FY 
2019 and FY 2020 payment determinations. In section IX.A.8. of the 
preamble of this proposed rule, we are proposing the following 
changes to this finalized policy: (1) Revise the CY 2017 reporting 
period/FY 2019 payment determination eCQM reporting requirements, 
such that hospitals are required to report six eCQMs and to submit 
two, self-selected, calendar quarters of data; and (2) revise the CY 
2018 reporting period/FY 2020 payment determination eCQM reporting 
requirements such that hospitals are required to report six eCQMs 
for the first three quarters of CY 2018. As described in section 
XIII.B.6.b. of the preamble of this proposed rule, we believe that 
the reduction in the required number of eCQMs for the CY 2017 
reporting period/FY 2019 payment determination will result in a 
reduction of 200 minutes per hospital per year, or 3 hours and 20 
minutes per hospital per year, for the FY 2019 payment 
determination.
    In total, for the FY 2019 payment determination, we expect our 
proposal to require hospitals to report data on six eCQMs for two 
quarters (as compared to our previously finalized requirements to 
report data on eight eCQMs for four quarters) to represent an annual 
burden reduction of 11,000 hours across all 3,300 IPPS hospitals 
participating in the Hospital IQR Program. Using the wage estimate 
described in section XIII.B.6.a. of the preamble of this proposed 
rule, we expect this to represent a cost reduction of $361,240 
across all 3,300 IPPS hospitals participating in the Hospital IQR 
Program.

(b) Impact for the CY 2017 Reporting Period/FY 2019 Payment 
Determination

    Using the same estimate as described above of 10 minutes per 
record per quarter, we note that if our proposed updates to the CY 
2018 reporting period/FY 2020 payment determination are finalized as 
proposed, we anticipate our proposal to require: (1) Reporting on 
six of the available eCQMs; and (2) submission of the first three 
quarters of CY 2018 eCQM data, will result in a burden reduction of 
2 hours and 20 minutes (140 minutes) per hospital for the FY 2020 
payment determination as compared to the previously finalized 
requirements to report eight eCQMs for four quarters for the FY 2020 
payment determination (81 FR 57157 through 57159). In total, this 
would represent an annual burden reduction of 7,700 hours across all 
3,300 IPPS hospitals participating in the Hospital IQR Program and a 
cost reduction of $252,868 ($32.84 hourly wage x 7,700 annual hours 
reduction) across all 3,300 IPPS hospitals.

3. Impact of the Proposed Modifications to eCQM Certification 
Requirements for the FY 2019 and FY 2020 Payment Determinations and 
Subsequent Years

    In section IX.10.d. of the preamble of this proposed rule we 
discuss our proposed changes to the Hospital IQR Program eCQM 
submission requirements to align with the Medicare EHR Incentive 
Program for eligible hospitals and CAHs. Specifically, for the CY 
2017 reporting period/FY 2019 payment determination, we are 
proposing that: (1) A hospital using EHR technology certified to the 
2014 or 2015 Edition, but for which such EHR technology is not 
certified to all available eCQMs, would be required to have its EHR 
technology certified to all eCQMs that are available to report; and 
(2) EHR technology that is certified to all available eCQMs does not 
need to be recertified each time it is updated to a more recent 
version of the eCQM specifications. For the CY 2018 reporting 
period/FY 2020 payment determination, we are proposing that: (1) A 
hospital using EHR technology certified to the 2015 Edition, but 
such EHR technology is not certified to all available eCQMs, would 
be required to have its EHR technology certified to all of the eCQMs 
that are available to report; and (2) an EHR certified for all 
available eCQMs under the 2015 Edition of CEHRT would not need to be 
recertified each time it is updated to a more recent version of the 
eCQM specifications.
    Further, we are proposing that: (1) For the CY 2017 reporting 
period/FY 2019 payment determination, hospitals would be required to 
use the most recent version of the CQM electronic specifications; 
Spring 2016 version of the eCQM specifications and any applicable 
addenda; and (2) for the CY 2018 reporting period/FY 2020 payment 
determination, hospitals be required to use the most recent version 
of the CQM electronic specifications; Spring 2017 version of the 
eCQM specifications and any applicable addenda. Because the use of 
certified EHR technology is already required for the Medicare EHR 
Incentive Program for eligible hospitals and CAHs, we believe that 
these proposals will have no effect on burden for hospitals under 
the Hospital IQR Program.

4. Impact of the Proposed Modifications to the Existing Validation 
Processes for the FY 2020 Payment Determination and Subsequent Years

(a) Impact of the Proposed Modifications to the Validation of eCQM Data 
for the FY 2020 Payment Determination and Subsequent Years

    In section IX.A.11. of the preamble of this proposed rule, we 
discuss our proposal to adopt a modification to the existing eCQM 
data validation process for the Hospital IQR Program data beginning 
with validation for the FY 2020 payment determination. First, we are 
proposing to require eight cases to be submitted per quarter for 
eCQM validation for the FY 2020 payment determination and subsequent 
years. We are making this proposal in conjunction with our proposal 
to require two quarters of data for the CY 2017 eCQM reporting 
period and our proposal to require three quarters of data for the CY 
2018 eCQM reporting period. Accordingly, if those eCQM reporting 
proposals are finalized, we are proposing that the number of 
required case files for validation would be 16 records (eight cases 
per quarter over two quarters) for the FY 2020 payment determination 
and 24 records (eight cases per quarter over three quarters) for the 
FY 2021 payment determination. Second, we are proposing to add 
additional exclusion criteria to our hospital and case selection 
process for eCQM validation for the CY 2018 reporting period/FY 2020 
payment determination and subsequent years. Third, we are proposing 
to extend to the FY 2021 payment determination and subsequent years 
our previously finalized medical record submission policy for eCQM 
validation, as finalized in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57181), requiring submission of at least 75 percent of sampled 
eCQM measure medical records in a timely and complete manner. We are 
proposing to extend to the FY 2021 payment determination our 
previously finalized medical record submission policy for eCQM 
validation, as finalized in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57181), that the accuracy of eCQM data submitted for validation 
would not affect a hospital's validation score. We are also 
proposing to clarify our finalized policy.
    We believe the updates to the exclusions and maintaining 
previously finalized medical record submission requirements will 
have no effect on burden for hospitals. We believe that the changes 
associated with the proposed eCQM validation process will result in 
a burden reduction of approximately 4,333 hours across up to 200 
hospitals selected for eCQM validation. Using the estimated hourly 
labor cost of $32.84, we estimate an annual cost reduction of 
$142,296 (4,333 hours x $32.84 per hour) across the 200 hospitals 
selected for eCQM validation due to our proposal to decrease the 
number of records collected for validation from 32 records to 16 
records for the FY 2020 payment determination. We refer readers to 
section XIII.B.6.d.(1) of the preamble of this proposed rule for 
more detail on these calculations.

[[Page 20224]]

(b) Impact of the Proposed Modifications to the Validation of eCQM Data 
for the FY 2021 Payment Determination and Subsequent Years

    Applying the time per individual submission of 1 hour and 20 
minutes (or 80 minutes) per record for the 24 records we are 
proposing that hospitals submit for eCQM validation for the FY 2021 
payment determination, we estimate a burden reduction of 
approximately 2,133 hours across up to 200 hospitals selected for 
eCQM validation for the FY 2021 payment determination. Using the 
estimated hourly labor cost of $32.84, we estimate an annual cost 
reduction of $70,048 (2,133 hours x $32.84 per hour) across the 200 
hospitals selected for eCQM validation due to our proposal to reduce 
the number of records collected from 32 records as finalized in the 
FY 2017 IPPS/LTCH PPS final rule to 24 records for the FY 2021 
payment determination. We refer readers to section XIII.B.6.d.(2) of 
the preamble of this proposed rule for more detail on these 
calculations.

(c) Impact of the Proposed Modifications to the Validation Exclusions 
for the FY 2020 Payment Determination and Subsequent Years

    In section IX.A.11.b. of the preamble of this proposed rule, we 
are proposing a new eCQM validation exclusion criterion. 
Specifically, hospitals that do not have at least five discharges 
for at least one reported measure (among the six required eCQMs 
proposed for the CY 2017 and CY 2018 eCQM reporting periods) 
included in their QRDA I file submissions would be excluded from the 
random sample of up to 200 hospitals selected for eCQM validation 
for the FY 2020 payment determination and subsequent years. We also 
are proposing, for the FY 2020 payment determination and subsequent 
years, to exclude hospitals meeting the newly proposed exclusion 
criterion discussed above and/or either of the two exclusion 
criteria finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57178). Lastly, we are proposing that the three exclusions would be 
applied before the random selection of 200 hospitals for eCQM 
validation, such that hospitals meeting any of these exclusions 
would not be eligible for selection.
    In section IX.A.11.b. of the preamble of this proposed rule, we 
also are proposing to exclude the following cases from validation 
for those hospitals that are chosen to participate in eCQM 
validation: (1) Episodes of care that are longer than 120 days; and 
(2) cases with a zero denominator for each measure, for the FY 2020 
payment determination and subsequent years.
    We do not believe that these proposals will impact the burden 
experienced by hospitals because, while they influence which 
hospitals and cases would be selected, they would not change the 
number of hospitals that must participate in eCQM validation, the 
number of records that would be collected for validation, or the 
validation reporting requirements for the hospitals selected.

(d) Impact of the Proposed Modifications to the Medical Record 
Submission Requirements for the FY 2021 Payment Determination and 
Subsequent Years

    In section IX.A.11.b. of the preamble of this proposed rule, we 
are proposing that for hospitals participating in eCQM validation 
we: (1) Require submission of at least 75 percent of sampled eCQM 
measure medical records in a timely and complete manner; and (2) 
that the accuracy of eCQM data submitted for validation would not 
affect a hospital's validation score (81 FR 57180). We do not expect 
these proposals to impact the burden experienced by hospitals, as we 
are continuing existing policies.

(e) Impact of the Proposed Educational Review Process for Chart-
Abstracted Measures for the FY 2020 Payment Determination and 
Subsequent Years

    In section IX.A.11.c. of the preamble of this proposed rule, we 
are proposing to formalize the process of allowing hospitals to use 
an educational review process to correct validation results for the 
first three quarters of validation for chart-abstracted measures. 
Second, we are proposing to update the process to specify that if 
the results of an educational review indicate that we incorrectly 
scored a hospital, the corrected score would be used to compute the 
hospital's final validation score whether or not the hospital 
submits a reconsideration request. As stated in the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49762), we estimate a burden of 15 
minutes per hospital to report structural measure data and to 
complete all forms, including the reconsideration request form and 
the educational review form. We refer readers to the FY 2017 IPPS/
LTCH PPS final rule for more detailed information on the burden 
associated with the chart-abstracted validation requirements (81 FR 
57260). Although this proposal may allow hospitals to avoid the 
formal reconsideration process, we do not expect this proposal to 
change our previously finalized burden estimates for the chart-
abstracted measures validation process or add any additional burden, 
as it would not change the requirements for selecting hospitals for 
validation of chart-abstracted measures nor change the chart-
abstracted validation reporting requirements for the selected 
hospitals.

5. Impact of the Proposed Voluntary Reporting on the Hybrid Hospital-
Wide 30-Day Readmission Measure for the CY 2018 Reporting Period

    In section IX.A.7.a. of the preamble of this proposed rule, we 
are proposing voluntary reporting on the Hybrid Hospital-Wide 30-Day 
Readmission measure for the CY 2018 reporting period. This measure 
uses both claims-based data as well as a set of 13 core clinical 
data elements from patient electronic health records (EHRs) and 
linking variables. We do not expect any additional burden to 
hospitals to report the claims-based portion of this measure because 
these data are already reported to the Medicare program for payment 
purposes.
    As described in section IX.A.7.b. of the preamble of this 
proposed rule, we are proposing that hospitals submit the 13 core 
clinical data elements and the six data elements required for 
linking with claims data for this measure using the same submission 
process required for eCQM reporting, specifically, that these data 
be reported using QRDA I files submitted to the CMS data receiving 
system. Accordingly, we expect the burden associated with 
voluntarily reporting this measure to be similar to our estimates 
for eCQM reporting (that is 10 minutes per measure, per quarter). We 
anticipate that approximately 100 hospitals would voluntarily report 
the Hybrid Hospital-Wide 30-Day Readmission measure. As such, this 
proposal represents an annual burden increase of 67 hours across up 
to 100 hospitals voluntarily participating. Using the wage estimate 
described above, we estimate this to represent a cost increase of 
$2,200 ($32.84 hourly wage x 67 annual hours) across up to 100 
hospitals voluntarily reporting data for this measure. We refer 
readers to section XIII.B.6.e. of the preamble of this proposed rule 
for more detail on these burden calculations.

6. Impact of the Proposed Refinement of the HCAHPS Survey Measure for 
the FY 2020 Payment Determination and Subsequent Years

    In section IX.A.6.a. of the preamble of this proposed rule, we 
are proposing to refine and update the HCAHPS Survey measure by 
replacing the set of three current Pain Management questions with 
the ``Communication About Pain'' composite measure beginning with 
the FY 2020 payment determination. There is no additional burden 
associated with the refinement of these questions because we are 
rewording the existing questions to include language that focuses on 
communication about pain. In addition, consistent with previous 
years (81 FR 57261), the burden estimate for the Hospital IQR 
Program excludes the burden associated with the HCAHPS Survey 
measure, which is submitted under a separate information collection 
request and approved under OMB control number 0938-0981.

7. Impact of the Proposed Update to the Hospital 30-Day, All-Cause, 
Risk-Standardized Mortality Rate Following Acute Ischemic Stroke 
Measure for the FY 2023 Payment Determination and Subsequent Years

    In section IX.A.6.b. of the preamble of this proposed rule, we 
are proposing to update the Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate Following Acute Ischemic Stroke measure 
to include the use of NIH stroke scale claims data for risk 
adjustment beginning with the FY 2023 payment determination. Because 
this proposed update would result only in the inclusion of 
additional claims-based data that are already reported to the 
Medicare program for payment purposes, we believe no additional 
burden on hospitals would result from the update to the stroke 
mortality measure.

[[Page 20225]]

8. Impact of Confidential and Potential Future Public Reporting of 
Readmission Measure Data Stratified by Social Risk Factors

    In section IX.A.13. of the preamble of this proposed rule we 
discuss our intent to provide confidential reports to hospitals that 
include measure data stratified by dual eligible status for the 
Hospital 30-day, All-Cause, Risk-Standardized Readmission Rate 
Following Pneumonia Hospitalization and Hospital 30-day, All-Cause, 
Risk Standardized Mortality Rate (RSRR) for Pneumonia measures. 
Because this proposal is related to the way we would display data, 
and not the methods of data collection implemented by the hospitals, 
we believe no additional burden on hospitals would result from the 
confidential reporting of stratified measure data using social risk 
factor indicators. We note that all measures for which we might 
consider confidential reporting or public display of stratified 
measure data would already be included in the Hospital IQR Program, 
and as claims-based measures, we do not expect any additional burden 
because these data are already reported to the Medicare program for 
payment purposes.

9. Impact of Changes to the Hospital IQR Program Extraordinary 
Circumstances Exceptions (ECE) Policy for the FY 2020 Payment 
Determination and Subsequent Years

    In section IX.A.15.b. of the preamble of this proposed rule we 
discuss our intent to align the naming of this exception policy and 
update CFR 412.140 to reflect our current ECE policies. We also are 
clarifying the timing of CMS response to ECE requests. Because we 
are not seeking any new or additional information in our ECE 
proposals, we believe the updates will have no effect on burden for 
hospitals.

10. Summary of Effects

    Historically, 100 hospitals, on average, that participate in the 
Hospital IQR Program do not receive the full annual percentage 
increase in any fiscal year due to the requirements of this program. 
We anticipate that, because of the new requirements for reporting we 
are proposing for the FY 2020 payment determination, the number of 
hospitals not receiving the full annual percentage increase may 
increase, due to the changes in policy described above. At this 
time, information is not available to determine the precise number 
of hospitals that will not meet the requirements to receive the full 
annual percentage increase for the FY 2020 payment determination. If 
the number of hospitals failing to receive the full annual 
percentage increase 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.
    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 improving the quality 
of care and value for Medicare beneficiaries.

L. Effects of Proposed Requirements for the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program

    In section IX.B. of the preamble of this proposed rule, we 
discuss our proposed 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. There is no 
financial impact to PCH Medicare reimbursement if a PCH does not 
submit data.
    In section IX.B.4. of the preamble of this proposed rule, we are 
proposing to adopt four claims-based measures beginning with the FY 
2020 program: (1) Proportion of Patients Who Died from Cancer 
Receiving Chemotherapy in the Last 14 Days of Life (NQF #0210); (2) 
Proportion of Patients Who Died from Cancer Admitted to the ICU in 
the Last 30 Days of Life (NQF #0213); (3) Proportion of Patients Who 
Died from Cancer Not Admitted to Hospice (NQF #0215); and (4) 
Proportion of Patients Who Died from Cancer Admitted to Hospice for 
Less Than Three Days (NQF #0216)). In conjunction with our proposal 
in section IX.B.4. of the preamble of this proposed rule to remove 
three existing chart-abstracted measures beginning with the FY 2020 
program--(1) 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 (PCH-01/NQF 
#0223); (2) 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 
(PCH-02/NQF #0559); and (3) Adjuvant Hormonal Therapy (PCH-03/NQF 
#0220))--if finalized, the PCHQR Program measure set would consist 
of 18 measures for the FY 2020 program.
    As further explained in section XIII.B.7. of the preamble of 
this proposed rule, we anticipate that these proposed new 
requirements would reduce overall burden on participating PCHs. In 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53667), we estimated a 
burden of 2.5 hours to abstract the information from medical records 
and submit it for each case, which equates a reduction in burden of 
40,910 hours total across the 11 centers. Based on the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53667) finalized estimates of the burden 
of collecting measure information, submitting measure information, 
and training personnel, we estimate the reduction in burden for 
collecting measure information, submitting measure information, and 
training personnel provided by the proposed removal of the three 
measures to be approximately 3,776 hours per year for each PCH, or 
an average reduction in burden of 315 hours per month per PCH, or a 
total of 41,536 hours across all 11 PCHs. Our proposal to remove 
three chart-abstracted measures would reduce the burden associated 
with quality data reporting on PCHs by reducing quality measure 
chart abstraction by approximately 16,364 cases across all 11 PCHs.
    We do not anticipate any increase in burden on the PCHs 
corresponding to our proposal to adopt four claims-based measures 
into the PCHQR Program beginning with the FY 2020 program year. 
These measures are claims-based and therefore do not require 
facilities to report any additional data. Because these measures do 
not require facilities to submit any additional data, we do not 
believe that there is any associated burden with this proposal.

M. Effects of Proposed Requirements for the Long-Term Care Hospital 
Quality Reporting Program (LTCH QRP)

    In section IX.C.1. of the preamble of this proposed rule, we 
discuss the implementation of the LTCH QRP. At the time that this 
analysis was prepared, 41, or approximately 9.7 percent, of 424 
eligible LTCHs were determined to be noncompliant and therefore 
received a 2 percentage point reduction to their FY 2017 annual 
payment update. We anticipate that fewer LTCHs would receive the 
reduction for FY 2018 as LTCHs become more familiar with the 
requirements. In addition, we believe that continued trainings, as 
well as utilization of new reports for LTCHs will help LTCHs comply 
with the LTCH QRP requirements. Thus, we estimate that our proposals 
will have a negligible impact on overall LTCH payments for FY 2018.
    In section IX.C.7. of the preamble of this proposed rule, we are 
proposing to replace the current pressure ulcer measure (Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678)) with a new modified version of the 
measure, Changes in Skin Integrity Post-Acute Care: Pressure Ulcer/
Injury, beginning with the FY 2020 LTCH QRP. We are also proposing 
to adopt two additional measures: Compliance with Spontaneous 
Breathing Trial (SBT) by Day 2 of the LTCH Stay; and Ventilator 
Liberation Rate, beginning with the FY 2020 LTCH QRP. In addition, 
we are proposing that data for these measures will be collected and 
reported using the LTCH CARE Data Set (LTCH CARE Data Set Version 
4.00, effective April 1, 2018).
    We also are proposing to remove the All-Cause Unplanned 
Readmission Measure for 30 Days Post-Discharge from LTCHs (NQF 
#2512). However, because LTCHs will still be required to report data 
on this measure for payment purposes, we believe that the removal of 
this measure will not affect the burden estimate for the LTCH QRP.
    In addition, adoption of the proposed pressure ulcer measure, 
Change in Skin Integrity Post-Acute Care: Pressure Ulcer Injury, to 
replace the current pressure ulcer measure, Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short Stay) 
(NQF #0678), would result in the removal of some data elements 
related to pressure ulcer assessment that we believe are duplicative 
or no longer necessary. As a result, the estimated burden and cost 
for LTCHs to report the proposed measure would be reduced from the 
burden and cost to report the current measure.
    We also are proposing to remove the program interruption items 
from the LTCH

[[Page 20226]]

CARE Data Set. Specifically, we are proposing to remove the 
following items: A2500, Program Interruption(s); A2510, Number of 
Program Interruptions During This Stay in This Facility; and A2525, 
Program Interruption Dates, because we do not currently utilize this 
information and do not have plans to utilize this information for 
the LTCH QRP. As a result, the estimated burden and cost for LTCHs 
would be reduced.
    In section IX.C.10. of the preamble of this proposed rule, we 
are proposing requirements related to the reporting of standardized 
patient assessment data beginning with the FY 2019 LTCH QRP. Some of 
the proposed data elements are already included on the LTCH CARE 
Data Set and are already included in current burden estimates. 
However, we are proposing to require LTCHs to report 25 new 
standardized patient assessment data elements with respect to LTCH 
admissions and 17 new standardized patient assessment data elements 
with respect to LTCH discharges.
    In summary, the 4.5-minute increase in burden for the two 
proposed ventilator weaning quality measures is offset with the 3 
minute reduction in burden for the proposed pressure ulcer quality 
measure and the 3.6 minute reduction in burden for the program 
interruption items. This results in a net reduction in burden of 2.1 
minutes. In addition, we are proposing that data for the new 
standardized data elements will be collected by LTCHs and reported 
to CMS using the LTCH CARE Data Set (LTCH CARE Data Set Version 
4.00, effective April 1, 2018) for the purpose of fulfilling the 
requirements of the IMPACT Act. This results in an additional 12.6 
minutes of burden for the proposed standardized data elements, with 
a net burden of 10.5 minutes. Overall, the cost associated with the 
proposed changes to the LTCH QRP is estimated at an additional 
$3,187.15 per LTCH annually, or $1,357,726 for all LTCHs annually.
    While the reporting of data on quality measures and standardized 
patient assessment data involves collecting information, we believe 
that the burden associated with modifications to the LTCH CARE Data 
Set discussed in this proposed rule fall under the PRA exceptions 
provided in section 1899B(m) of the Act. Section 1899B(m) of the 
Act, which was added by the IMPACT Act, states that the PRA 
requirements do not apply to section 1899B of the Act. However, the 
PRA requirements and burden estimates will be submitted to OMB for 
review and approval when modifications to the LTCH CARE Data Set or 
other applicable PAC assessment instruments are not used to achieve 
standardized patient assessment data.
    For a detailed discussion of information collection requirements 
related to our proposals, we refer readers to section XIII.B.9. of 
the preamble of this proposed rule.

N. Effects of Proposed Updates to the Inpatient Psychiatric 
Facility Quality Reporting (IPFQR) Program

    As discussed in section IX.D. of the preamble of this proposed 
rule and in accordance with section 1886(s)(4)(A)(i) of the Act, we 
will implement a 2 percentage point reduction in the FY 2020 market 
basket update for IPFs that have failed to comply with the IPFQR 
Program requirements for the FY 2020 payment determination. In 
section IX.D. of the preamble of this proposed rule, we discuss how 
the 2 percentage point reduction will be applied. For the FY 2017, 
payment determination (that is, data collected during CY 2015 and 
submitted in CY 2016) of the 1,647 IPFs eligible for the IPFQR 
Program, 49 did not receive the full market basket update due to 
reasons specific to the IPFQR Program; 22 of these IPFs chose not to 
participate and 27 did not meet the requirements of the Program. We 
anticipate that even fewer IPFs would receive the reduction for FY 
2018 as IPFs become more familiar with the requirements. Thus, we 
estimate that the IPFQR Program will have a negligible impact on 
overall IPF payments for FY 2018.
    We intend to closely monitor the effects of this quality 
reporting program on IPFs and help facilitate successful reporting 
outcomes through ongoing stakeholder education, national trainings, 
and a technical help desk.
    We are proposing provisions that impact the FY 2018 procedural 
requirements and subsequent years, and the FY 2020 payment 
determinations and subsequent years. We refer readers to section 
XIII.B.10. of the preamble of this proposed rule for details 
discussing information collection requirements for the IPFQR 
Program.

O. Effects of Proposed Requirements Regarding the Electronic Health 
Record (EHR) Incentive Programs and Meaningful Use

    In section IX.E. of the preamble of this proposed rule, we 
discuss proposed policies for eligible hospitals and CAHs reporting 
CQMs electronically under the Medicare and Medicaid EHR Incentive 
Programs in 2017. As outlined in this proposed rule, we are 
proposing the following modifications to the CY 2017 final CQM 
policies: (1) Revise the CY 2017 reporting period for eligible 
hospitals and CAHs reporting CQMs electronically to require the 
submission of 2 self-selected quarters of data; and (2) revise the 
number of CQMs eligible hospitals and CAHs are required to report 
electronically for CY 2017 to 6 (self-selected) available CQMs. In 
addition, we are proposing the following CQM reporting requirements 
for CY 2018: (1) Eligible hospitals and CAHs reporting CQMs 
electronically that demonstrate meaningful use for the first time in 
2018 or that have demonstrated meaningful use in any year prior to 
2018, the reporting period would be the first 3 quarters of data of 
CY 2018 with a submission period (Medicare EHR Incentive Program 
only) consisting of the 2 months following the close of the calendar 
year, ending on February 28, 2019; (2) eligible hospitals and CAHs 
reporting CQMs electronically would be required to report at least 6 
(self-selected) of the available CQMs; (3) eligible hospitals and 
CAHs that report CQMs by attestation under the Medicare EHR 
Incentive Program because electronic reporting is not feasible, and 
eligible hospitals and CAHs that report CQMs by attestation under 
their State's Medicaid EHR Incentive Program, would be required to 
report on all 16 available CQMs; and (4) eligible hospitals and CAHs 
reporting CQMs by attestation under the Medicare EHR Incentive 
Program would have a submission period that would be the 2 months 
following the close of the CY 2018 CQM reporting period, ending 
February 28, 2019.
    Because the proposed reporting requirements for data collection 
regarding the reporting of CQMs electronically under the Medicare 
and Medicaid EHR Incentive Programs would align with the reporting 
requirements under the Hospital IQR Program, we do not believe that 
there is any additional burden for the collection of such 
information. We are not proposing modifications for the CQMs 
reporting requirements by attestation. Therefore, there would be no 
change in burden associated with attestation of CQMs.
    In section IX.F. of the preamble of this proposed rule, we 
discuss proposed policies regarding clinical quality measurement for 
EPs participating in the Medicaid EHR Incentive Program. We note 
that there may be costs incurred by States associated with systems 
development as a result of the proposed policies. State attestation 
systems would likely require minor updates, which may be eligible 
for support through enhanced Federal funding, subject to CMS prior 
approval, if outlined in an updated Implementation Advance Planning 
Document (IAPD). We anticipate that eligible professionals (EPs) may 
also face minor burden and incremental capital cost for updating 
clinical quality measures and reporting capabilities in the EHR. 
However, we intend to reduce EP burden and simplify the program 
through these proposals, which are intended to better align CQM 
reporting periods and CQM reporting for the Medicaid EHR Incentive 
Program with policies under MIPS. Overall, we believe the proposed 
CQM alignment at the State attestation system and EP levels would 
both reduce burden associated with reporting on multiple CMS 
programs and enhance State and CMS operational efficiency.
    In section IX.G.1. of the preamble of this proposed rule, we 
discuss our proposals to change the EHR reporting period in 2018 
from the full CY 2018 to any continuous 90-day period within CY 2018 
for all returning EPs, eligible hospitals and CAHs in the Medicare 
and Medicaid EHR Incentive Programs. We do not believe that 
modifying the EHR reporting period would cause an increase in cost 
as the reporting requirements for a 90 day reporting period are 
virtually the same for a full calendar year reporting period as the 
requirements for a full year calendar year reporting period and 90 
day EHR reporting period requires the same number of objectives and 
measures to be met.
    In section IX.G.2. of the preamble of this proposed rule, as 
required by the 21st Century Cures Act (Pub. L. 114-255), we are 
proposing an exemption from the payment adjustments under sections 
1848(a)(7)(A), 1886(b)(3)(B)(ix)(I), and 1814(l)(4) of the Act for 
EPs, eligible hospitals and CAHs, respectively, that demonstrate 
through an application process that compliance with the

[[Page 20227]]

requirement for being a meaningful EHR user is not possible because 
their certified EHR technology has been decertified under ONC's 
Health IT Certification Program. The application process involves 
participants completing an application form for an exception. While 
the form is standardized, we believe it is exempt from the PRA. The 
form is structured as an attestation. Therefore, we believe it is 
exempt under 5 CFR 1320.3(h)(1) of the implementing regulations of 
the PRA. The form is an attestation that imposes no burden beyond 
what is required to provide identifying information and to attest to 
the applicable information.
    In section IX.G.3. of the preamble of this proposed rule, as 
required by the 21st Century Cures Act, we are proposing to exempt 
ambulatory surgical center-based EPs from the 2017 and 2018 payment 
adjustments under section 1848(a)(7)(A) of the Act if they furnish 
substantially all of their covered professional services in an 
ambulatory surgical center. We do not believe this requirement would 
cause an increase in burden as CMS would identify the EPs who might 
meet this requirement.
    For the information collection requirements relating to the 
above proposals, we refer readers to section XIII.B.11. of the 
preamble of this proposed rule.

P. Effects of Proposed Electronic Signature and Electronic 
Submission of the Certification and Settlement Summary Page of 
Medicare Cost Reports

    In section X.A. of the preamble of this proposed rule, we 
discuss our proposal to allow providers to use an electronic 
signature on the certification statement of the Certification and 
Settlement Summary page of the Medicare cost report and submit it 
electronically. This proposal would result in savings to providers.
    Using the most current data from Medicare's System for Tracking 
Audit and Reimbursement, approximately 51,000 providers file a 
Medicare cost report and, therefore, must currently mail the 
Certification and Settlement Summary page. Because most providers 
mail the Certification and Settlement Summary page via certified 
mail with return receipt (which includes delivery confirmation), at 
the current U.S. Postal Service price of $7.10, if all of these 
providers elect to electronically submit the Certification and 
Settlement Summary page with an electronic signature, this proposal 
would collectively save these providers approximately $362,000 in 
postage costs. This is an underestimate as it does not include 
mailing costs when providers choose to mail the Certification and 
Settlement Summary page to their contractors via overnight mail at a 
significantly higher expense.

Q. Effects of Proposed Changes Relating to Survey and Certification 
Requirements

    In section XI.A. of the preamble of this proposed rule, we 
discuss our proposals to revise the application and reapplication 
procedures for national accrediting organizations (AOs) to require 
them to post final survey results and acceptable plans of 
corrections (PoCs) to the Web sites. The AO programs consist of 10 
provider-supplier AO programs and 4 Advanced Diagnostic Imaging 
(ADI) AO programs. All of these AO programs would be affected by the 
proposal. As of the end of FY 2016, there were a total of 12,434 
deemed providers and suppliers divided among 10 CMS provider/
supplier-approved AO programs. Accreditation surveys for deemed 
provider and suppliers are conducted on a triennial basis, with a 
varying number of surveys conducted annually by the AO, based on the 
provider's or supplier's entry into the AO program. It is estimated 
that approximately 5,492 survey reports and corresponding PoCs would 
need to be posted annually across the 10 provider/supplier AOs. In 
addition to the provider/supplier-approved AO programs, there were 
16,873 ADI suppliers divided among 4 CMS-approved ADI AOs. It is 
estimated that approximately 2,128 survey reports and corresponding 
PoCs would need to be posted annually across the 4 ADI AOs. We are 
not able to estimate the cost associated with the proposed 
requirement for posting of the surveys reports and corresponding 
PoCs at this time. We are seeking public comments, particularly from 
AOs, regarding the potential initial cost of modifications to the 
AOs' existing public Web sites and the ongoing cost associated with 
uploading survey reports and PoCs. We recommend that AOs provide 
public comments in response to this proposed rule on their estimated 
costs for posting survey reports and corresponding PoCs. We will 
consider any public comments received and address them in the final 
rule.
    There is no financial impact of the proposal on deemed 
facilities as the survey reports and associated PoCs would not be 
posted by the facilities, but would be posted by the AOs affiliated 
with the providers or suppliers or ADIs. The overall impact would be 
determined based on the total costs for posting of the survey 
reports for the 10 provider-supplier AO programs and the 4 ADI AOs.
    In section XI.B. of the preamble of this proposed rule, we 
discuss our proposals to eliminate the term ``newspaper'' from the 
requirement to publish public notice upon a provider's involuntary 
termination for RHCs, FQHCs, ASCs, and OPOs. Eliminating the term 
``newspaper'' would allow greater flexibility for the CMS Regional 
Offices in publishing public notices and would also reduce burden on 
the CMS Regional Offices.
    The print newspaper advertisements for an involuntary 
termination are required to be purchased by the CMS Regional Office 
assigned to that provider or supplier. The advertisement is placed 
under the legal advertisement section of the local newspaper outlet. 
A single CMS Regional Office may incur an average annual cost of 
approximately $3,000 to $5,000 for the purchase of involuntary 
termination notices for the providers or suppliers assigned to its 
region. For example, from 2014 to 2016, the Dallas Regional Office 
spent $14,331.89 on the publication of termination notices in local 
newspapers, with costs of $3,949.45 in 2014, costs of $5,386.67 in 
2015, and costs of $4,998.77 in 2016. In same timeframe of 2014 to 
2016, the Philadelphia Regional Office spent a total of $7,114.75 
and the Kansas Regional Office spent a total of $11,121.40. The 
table below depicts the actual FY 2016 costs for all 10 CMS Regional 
Offices.

------------------------------------------------------------------------
                     Regional office                        2016 Costs
------------------------------------------------------------------------
Boston..................................................          $4,766
New York................................................             645
Philadelphia............................................           3,570
Atlanta.................................................           6,712
Chicago.................................................          10,853
Dallas..................................................           4,252
Kansas City.............................................           3,098
Denver..................................................             910
San Francisco...........................................           1,507
Seattle.................................................             707
                                                         ---------------
  Total Cost............................................       37,020.00
------------------------------------------------------------------------

    If one CMS Regional Office spends approximately $5,000 annually, 
and there are 10 CMS Regional Offices, the average cost nationwide 
per annum for termination notices could be as high as $50,000.
    The cost associated with the involuntary termination notice is 
assessed only to the CMS Regional Offices. The provider or supplier 
is not required to post a notice for an involuntary termination. 
Therefore, there would be no associated costs for the provider or 
supplier.
    All CMS Regional Offices have Web sites available to the public, 
which are regularly maintained and updated. Creation of a subsite to 
reflect termination notices for providers would be at no cost to 
CMS. In addition, the use of Regional Press Officers to convey 
termination of a provider would be a minimal cost to CMS and 
absorbed through the Survey & Certification budget.

R. Effects of Clarification of Limitations on the Valuation of 
Depreciable Assets Disposed of on or After December 1, 1997

    In section X.B. of the preamble of this proposed rule, we 
discuss our proposal to revise the Medicare provider reimbursement 
regulations to clarify our longstanding policy pertaining to 
allowable costs and the limits on the valuation of a depreciable 
asset that may be recognized in establishing an appropriate 
allowance for depreciation for assets disposed of on or after 
December 1, 1997. Specifically, we are clarifying that the 
elimination of the gain or loss for depreciable assets applies to 
assets a provider disposes of by sale or scrapping on or after 
December 1, 1997, regardless of whether the asset is scrapped, sold 
as an individual asset of a Medicare participating provider, or sold 
incident to a provider change of ownership. Because we are not 
proposing any change in policy, but rather are restating 
longstanding Medicare policy, there is no economic impact on 
providers resulting from this policy clarification.

S. Alternatives Considered

    This proposed rule contains a range of proposed policies. It 
also provides descriptions of the statutory provisions that are 
addressed, identifies the proposed policies, and presents rationales 
for our decisions and, where relevant, alternatives that were 
considered.

[[Page 20228]]

    As discussed in section III.H. of the preamble of this proposed 
rule, we are not proposing to extend the imputed floor policy for 
developing the hospital wage index. We note that if the imputed 
floor policy were not to expire at the end of FY 2017, we estimate 
that IPPS payments would increase by approximately $19 million in 
New Jersey, $19 million in Rhode Island, and $9 million in Delaware. 
Because the imputed floor policy is budget neutral nationally, these 
additional IPPS payments as a result of the imputed floor policy not 
expiring would reduce payments to all IPPS hospitals by 
approximately $47 million.

T. Reducing Regulation and Controlling Regulatory Costs

    Executive Order 13771, titled ``Reducing Regulation and 
Controlling Regulatory Costs,'' was issued on January 30, 2017. 
Section 2(a) of Executive Order 13771 requires an agency, unless 
prohibited by law, to identify at least two existing regulations to 
be repealed when the agency publicly proposes for notice and 
comment, or otherwise promulgates, a new regulation. In furtherance 
of this requirement, section 2(c) of Executive Order 13771 requires 
that the new incremental costs associated with new regulations 
shall, to the extent permitted by law, be offset by the elimination 
of existing costs associated with at least two prior regulations. 
OMB's implementation guidance, issued on April 5, 2017, explains 
that ``Federal spending regulatory actions that cause only income 
transfers between taxpayers and program beneficiaries (for example, 
regulations associated with . . . Medicare spending) are considered 
`transfer rules' and are not covered by EO 13771. . . . However . . 
. such regulatory actions may impose requirements apart from 
transfers. . . . In those cases, the actions would need to be offset 
to the extent they impose more than de minimis costs. Examples of 
ancillary requirements that may require offsets include new 
reporting or recordkeeping requirements. . . . Analogously, if an 
action reduces the stringency of requirements or conditions . . . 
the action may qualify as an EO 13771 deregulatory action.'' Table I 
of section I.G., Table III of section I.I., and Table IV of section 
I.J. of this Appendix show the IPPS operating and capital costs and 
LTCH PPS costs, respectively, on affected entities. The implications 
of the rule's costs and cost savings will be further considered in 
the context of our compliance with Executive Order 13771.

U. 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 proposed MS-DRG and wage index changes, and for 
the wage index reclassifications under the MGCRB. Table I also shows 
a projected overall increase of 1.7 percent in operating payments 
before accounting for the impact of the proposed changes in Medicare 
DSH payments and uncompensated care payments. When combined with the 
impact of those proposed changes, consistent with our policy 
discussed in section V.G. of the preamble of this proposed rule, we 
estimate that operating payments would increase by approximately 2.9 
percent in FY 2018, or approximately $3.2 billion. We also currently 
estimate that the proposed changes in new technology add-on payments 
for FY 2018 would decrease spending by approximately $52 million and 
the proposed changes to the volume decrease adjustment would 
increase in spending by approximately $15 million. In addition, we 
estimate the change in low-volume hospital payments, including the 
statutory expiration of the temporary increase in the low-volume 
hospital payment adjustment in FY 2018 would decrease spending by 
approximately $311 million in FY 2018. These estimates, combined 
with our estimated increase in FY 2018 operating payment of $3.2 
billion, would result in an estimated increase of approximately $2.8 
billion for FY 2018. We estimate that hospitals would experience a 
2.4 percent increase in capital payments per case, as shown in Table 
III of section I.I. of this Appendix. We project that there would be 
a $212 million increase in capital payments in FY 2018 compared to 
FY 2017. The cumulative operating and capital payments would result 
in a net increase of approximately $3.1 billion to IPPS providers. 
The discussions presented in the previous pages, in combination with 
the rest of this proposed rule, constitute a regulatory impact 
analysis.

2. LTCHs

    Overall, LTCHs are projected to experience a decrease in 
estimated payments per discharge in FY 2018. In the impact analysis, 
we are using the proposed rates, factors, and policies presented in 
this proposed rule based on the best available claims and CCR data 
to estimate the change in payments under the LTCH PPS for FY 2018. 
Accordingly, based on the best available data for the 415 LTCHs in 
our database, we estimate that FY 2017 LTCH PPS payments would 
decrease approximately $173 million relative to FY 2017 as a result 
of the proposed payment rates and factors presented in this proposed 
rule.

V. Regulatory Review Costs

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this proposed rule, we 
should estimate the cost associated with regulatory review. Due to 
the uncertainty involved with accurately quantifying the number of 
entities that will review this proposed rule, we assume that the 
total number of commenters on last year's proposed rule will be the 
number of reviewers of this proposed rule. We acknowledge that this 
assumption may understate or overstate the costs of reviewing this 
rule. It is possible that not all commenters reviewed last year's 
rule in detail, and it is also possible that some reviewers chose 
not to comment on the proposed rule. For these reasons, we believe 
that the number of past commenters would be a fair estimate of the 
number of reviewers of this proposed rule. We welcome any public 
comments on the approach in estimating the number of entities that 
will review this proposed rule.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this proposed rule. 
Therefore, for the purposes of our estimate, we assume that each 
reviewer reads approximately 50 percent of the proposed rule. We are 
seek public comments on this assumption.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimate that the cost of 
reviewing this proposed rule is $90.16 per hour, including overhead 
and fringe benefits (https://www.bls.gov/oes/2015/may/naics4_621100.htm). Assuming an average reading speed, we estimate 
that it would take approximately 16 hours for the staff to review 
half of this proposed rule. For each IPPS hospital or LTCH that 
reviews this proposed rule, the estimated cost is $1,442.56 (16 
hours x $90.16). Therefore, we estimate that the total cost of 
reviewing this proposed rule is $2,071,516 ($1,442.56 x 1,436 
reviewers).

II. 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 the following 
Table V, we have prepared an accounting statement showing the 
classification of the expenditures associated with the provisions of 
this proposed 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 proposed changes to the IPPS 
presented in this proposed rule. All expenditures are classified as 
transfers to Medicare providers.
    The costs to the Federal Government associated with the proposed 
policies in this proposed rule are estimated at $3.1 billion.

 Table V--Accounting Statement: Classification of Estimated Expenditures
                 Under the IPPS From FY 2017 to FY 2018
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $3.1 billion.
From Whom to Whom......................  Federal Government to IPPS
                                          Medicare Providers.
------------------------------------------------------------------------


[[Page 20229]]

B. LTCHs

    As discussed in section I.J. of this Appendix, the impact 
analysis of the proposed payment rates and factors presented in this 
proposed rule under the LTCH PPS is projected to result in a 
decrease in estimated aggregate LTCH PPS payments in FY 2018 
relative to FY 2017 of approximately $173 million based on the data 
for 415 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, 
we have prepared an accounting statement showing the classification 
of the expenditures associated with the provisions of this proposed 
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 proposed payment 
rates and factors and other provisions presented in this proposed 
rule based on the data for the 415 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 proposed rule are estimated at $173 
million.

Table VI--Accounting Statement: Classification of Estimated Expenditures
            From the FY 2017 LTCH PPS to the FY 2018 LTCH PPS
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  -$173 million.
From Whom to Whom......................  Federal Government to LTCH
                                          Medicare Providers.
------------------------------------------------------------------------

III. 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 proposed rule relating to acute 
care hospitals will have a significant impact on small entities as 
explained in this Appendix. For example, we refer readers to ``Table 
I--Impact Analysis of Proposed Changes to the IPPS for Operating 
Costs for FY 2018.'' 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 proposed rule 
constitutes our regulatory flexibility analysis. This proposed rule 
contains a range of proposed policies. It provides descriptions of 
the statutory provisions that are addressed, identifies the proposed 
policies, and presents rationales for our decisions and, where 
relevant, alternatives that were considered.
    In this proposed rule, we are soliciting public comments on our 
estimates and analysis of the impact of our proposals on those small 
entities. Any public comments that we receive and our responses will 
be presented in the final rule.

IV. 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 
proposed policy changes under the IPPS for operating costs.)

V. 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 2017, that threshold level is approximately $146 
million. This proposed rule would not mandate any requirements for 
State, local, or tribal governments, nor would it affect private 
sector costs.

VI. Executive Order 13175

    Executive Order 13175 directs agencies to consult with Tribal 
officials prior to the formal promulgation of regulations having 
tribal implications. This proposed rule contains provisions 
applicable to hospitals and facilities operated by the Indian Health 
Service or Tribes or Tribal organizations under the Indian Self-
Determination and Education Assistance Act and, thus, has tribal 
implications. Therefore, in accordance with Executive Order 13175 
and the CMS Tribal Consultation Policy (December 2015), CMS will 
consult with Tribal officials on these Indian-specific provisions of 
the proposed rule prior to the formal promulgation of this rule.

VII. Executive Order 12866

    In accordance with the provisions of Executive Order 12866, the 
Executive Office of Management and Budget reviewed this proposed 
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 hospital-specific rate for 
SCHs, 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 2018, consistent with approach for FY 2017, we are including 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 MedPAC's recommended update factors for inpatient hospital 
services.

II. Inpatient Hospital Update for FY 2018

A. Proposed FY 2018 Inpatient Hospital Update

    As discussed in section V.B. of the preamble to this proposed 
rule, 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

[[Page 20230]]

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 reduction of 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 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 0.75 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 2018 adjustment of 0.75 percentage point may 
result in the applicable percentage increase being less than zero.
    We note that, in compliance with section 404 of the MMA, in this 
proposed rule, we are proposing to replace the FY 2010-based IPPS 
operating and capital market baskets with the revised and rebased 
2014-based IPPS operating and capital market baskets for FY 2018.
    For this FY 2018 IPPS/LTCH PPS proposed rule, in accordance with 
section 1886(b)(3)(B) of the Act, we are proposing to base the 
proposed FY 2018 market basket update used to determine the 
applicable percentage increase for the IPPS on the IHS Global 
Insight, Inc.'s (IGI's) fourth quarter 2016 forecast of the proposed 
2014-based IPPS market basket rate-of-increase with historical data 
through third quarter 2016, which is estimated to be 2.9 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 V.B. of the 
preamble of this proposed rule, we are proposing an MFP adjustment 
of 0.4 percent for FY 2018. Therefore, based on IGI's fourth quarter 
2016 forecast of the proposed 2014-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), there are four possible applicable percentage increases that 
can be applied to the standardized amount. Below we provide a table 
summarizing the four proposed applicable percentage increases.

----------------------------------------------------------------------------------------------------------------
                                                     Hospital        Hospital      Hospital did    Hospital did
                                                     submitted       submitted      NOT submit      NOT submit
                                                   quality data    quality data    quality data    quality data
                     FY 2018                         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
----------------------------------------------------------------------------------------------------------------
Proposed Market Basket                                       2.9             2.9             2.9             2.9
 Rate[dash]of[dash]Increase.....................
Proposed Adjustment for Failure to Submit                    0.0             0.0          -0.725          -0.725
 Quality Data under Section 1886(b)(3)(B)(viii)
 of the Act.....................................
Proposed Adjustment for Failure to be a                      0.0          -2.175             0.0          -2.175
 Meaningful EHR User under Section
 1886(b)(3)(B)(ix) of the Act...................
Proposed MFP Adjustment under Section                       -0.4            -0.4            -0.4            -0.4
 1886(b)(3)(B)(xi) of the Act...................
Statutory Adjustment under Section                         -0.75           -0.75           -0.75           -0.75
 1886(b)(3)(B)(xii) of the Act..................
Proposed Applicable Percentage Increase Applied             1.75          -0.425           1.025           -1.15
 to Standardized Amount.........................
----------------------------------------------------------------------------------------------------------------

B. Proposed Update for SCHs for FY 2018

    Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2018 
applicable percentage increase in the hospital-specific rate for 
SCHs equals the applicable percentage increase set forth in section 
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for 
all other hospitals subject to the IPPS).
    (We note that, as discussed in section V.H. of the preamble of 
this proposed 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). 
Therefore, under current law, the MDH program will expire at the end 
of FY 2017. However, as discussed in section V.H. of the preamble of 
this proposed rule, MDHs have the opportunity to apply for SCH 
status in advance of the expiration of the MDH program and be paid 
as such under certain conditions, as specified in the regulations at 
42 CFR 412.92(b)(2)(i) and (b)(2)(v).)
    As previously mentioned, the update to the hospital specific 
rate for SCHs 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 proposing the same four 
possible applicable percentage increases in the table above for the 
hospital-specific rate applicable to SCHs.

C. Proposed FY 2018 Puerto Rico Hospital Update

    As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
56939), prior to January 1, 2016, Puerto Rico hospitals were paid 
based on 75 percent of the national standardized amount and 25 
percent of the Puerto Rico-specific standardized amount. Section 601 
of Public Law 114-113 amended section 1886(d)(9)(E) of the Act to 
specify that the payment calculation with respect to operating costs 
of inpatient hospital services of a subsection (d) Puerto Rico 
hospital for inpatient hospital discharges on or after January 1, 
2016, shall use 100 percent of the national standardized amount. 
Because Puerto Rico hospitals are no longer paid with a Puerto Rico-
specific standardized amount under the amendments to section 
1886(d)(9)(E) of the Act, there is no longer a need for us to 
propose an update to the Puerto Rico standardized amount. Hospitals 
in Puerto Rico are now paid 100 percent of the national standardized 
amount and, therefore, are subject to the same update to the 
national standardized amount discussed under section V.B.1. of the 
preamble of this proposed rule. Accordingly, for FY 2018, we are 
proposing an applicable percentage increase of 1.75 percent to the 
standardized amount for hospitals located in Puerto Rico.

D. Proposed Update for Hospitals Excluded From the IPPS for FY 2018

    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. As

[[Page 20231]]

discussed in section VII. of the preamble of this proposed rule, we 
are proposing to use the percentage increase in the 2014-based IPPS 
operating market basket to update the target amounts 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 FY 2018 and 
subsequent fiscal years. Accordingly, for FY 2018, 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 would be the FY 2018 
percentage increase in the 2014-based IPPS operating market basket. 
For this proposed rule, the current estimate of the IPPS operating 
market basket percentage increase for FY 2018 is 2.9 percent.

E. Proposed Update for LTCHs for FY 2018

    Section 123 of Public Law 106-113, as amended by section 307(b) 
of Public Law 106-554 (and codified at section 1886(m)(1) of the 
Act), provides the statutory authority for updating payment rates 
under the LTCH PPS.
    As discussed in section V.A. of the Addendum to this proposed 
rule, we are proposing to update the LTCH PPS standard Federal 
payment rate by 1.0 percent for FY 2018, consistent with the 
amendments to section 1886(m)(3) of the Act provided by section 411 
of MACRA. In accordance with the LTCHQR Program under section 
1886(m)(5) of the Act, we are proposing to reduce 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. Accordingly, 
we are proposing to apply an update factor of 1.01 percent in 
determining the LTCH PPS standard Federal rate for FY 2018. For 
LTCHs that fail to submit quality data for FY 2018, we are proposing 
to apply an annual update to the LTCH PPS standard Federal rate of -
1.0 percent (that is, the proposed annual update for FY 2018 of 1.0 
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 a proposed update factor of 0.99 
percent in determining the LTCH PPS standard Federal rate for FY 
2018.

III. Secretary's Recommendations

    MedPAC is recommending an inpatient hospital update in the 
amount specified in current law for FY 2018. 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.
    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 2.9 percent.
    For FY 2018, consistent with the amendments to section 
1886(m)(3) of the Act provided by section 411 of MACRA, for LTCHs 
that submit quality data, we are recommending an update of 1.0 
percent to the LTCH PPS standard Federal rate. For LTCHs that fail 
to submit quality data for FY 2018, we are recommending an annual 
update to the LTCH PPS standard Federal rate of -1.0 percent.

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

    In its March 2017 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 in the amount specified in current 
law. We refer the reader to the March 2017 MedPAC report, which is 
available for download at www.medpac.gov for a complete discussion 
on this recommendation. MedPAC expects Medicare margins to decline 
from 2015 to 2017.
    Response: We agree with MedPAC, and consistent with current law, 
we are proposing an applicable percentage increase for FY 2018 of 
1.75 percent, provided the hospital submits quality data and is a 
meaningful EHR user, consistent with 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 
proposed rule.

[FR Doc. 2017-07800 Filed 4-14-17; 4:15 pm]
 BILLING CODE 4120-01-P