[Federal Register Volume 83, Number 81 (Thursday, April 26, 2018)]
[Notices]
[Pages 18301-18308]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08704]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1677-N]
RIN 0938-ZB47


Medicare Program; Extension of the Payment Adjustment for Low-
Volume Hospitals and the Medicare-Dependent Hospital (MDH) Program 
Under the Hospital Inpatient Prospective Payment Systems (IPPS) for 
Acute Care Hospitals for Fiscal Year 2018

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

ACTION: Extension of a payment adjustment and a program.

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SUMMARY: This document announces changes to the payment adjustment for 
low-volume hospitals and to the Medicare-dependent Hospital (MDH) 
Program under the hospital inpatient prospective payment systems (IPPS) 
for FY 2018 in accordance with sections 50204 and 50205, respectively, 
of the Bipartisan Budget Act of 2018.

DATES: 
    Effective Date: The extensions are effective April 24, 2018.
    Applicability Date: The provisions described in this document are 
applicable for discharges on or after October 1, 2017 and on or before 
September 30, 2018.

FOR FURTHER INFORMATION CONTACT: 
    Michele Hudson, (410) 786-5490.
    Mark Luxton, (410) 786-4530.
    Shevi Marciano, (410) 786-2874.

SUPPLEMENTARY INFORMATION:

I. Background

    On February 9, 2018 the Bipartisan Budget Act of 2018 (Pub. L. 115-
123) was enacted. Section 50204 of the Bipartisan Budget Act of 2018 
extends certain temporary changes to the payment adjustment for low-
volume hospitals for an additional year, through fiscal year (FY) 2018. 
Section 50205 of the Bipartisan Budget Act of 2018 extends the 
Medicare-dependent hospital (MDH) program through FY 2022 and revises 
the definition of an MDH.

II. Provisions of the Document

A. Extension of the Payment Adjustment for Low-Volume Hospitals

1. Background
    Section 1886(d)(12) of the Act provides for an additional payment 
to each qualifying low-volume hospital under the IPPS beginning in FY 
2005.

[[Page 18302]]

The additional payment adjustment to a low-volume hospital provided for 
under section 1886(d)(12) of the Act is ``[i]n addition to any payment 
calculated under this section.'' Therefore, the additional payment 
adjustment is based on the per discharge amount paid to the qualifying 
hospital under section 1886 of the Act. In other words, the low-volume 
hospital payment adjustment is based on total per discharge payments 
made under section 1886 of the Act, including capital, DSH, IME, and 
outlier payments. For SCHs and MDHs, the low-volume hospital payment 
adjustment is based in part on either the Federal rate or the hospital-
specific rate, whichever results in a greater operating IPPS payment.
    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 while 
subsequent legislation extended these modifications through FY 2017. 
(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.)
    Prior to the enactment of the Bipartisan Budget Act of 2018 (Pub. 
L. 115-123) on February 9, 2018, beginning with FY 2018, the low-volume 
hospital qualifying criteria and payment adjustment methodology 
returned to the statutory requirements that were in effect prior to FY 
2011. However, section 50204 of the Bipartisan Budget Act of 2018 
extended for an additional year, through FY 2018, the temporary changes 
in the low-volume hospital definition and methodology for determining 
the payment adjustment originally made by the Affordable Care Act for 
FYs 2011 and 2012. (We note that section 50204 of the Bipartisan Budget 
Act of 2018 also further modified the definition of a low-volume 
hospital and the methodology for calculating the payment adjustment for 
low volume hospitals for FYs 2019 through 2022, as addressed in 
separate rulemaking.) For additional information on the expiration of 
these provisions, we refer readers to the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38184 through 38188). The regulations describing the 
payment adjustment for low-volume hospitals are at 42 CFR 412.101.
2. Low-Volume Hospital Payment Adjustment for FYs 2011 Through 2017
    As discussed previously, for FYs 2011 through 2017, the Affordable 
Care Act and subsequent legislation expanded the definition of low-
volume hospital and modified the methodology for determining the 
payment adjustment for hospitals meeting that definition. Specifically, 
those provisions amended the qualifying criteria for low-volume 
hospitals under section 1886(d)(12)(C)(i) of the Act to specify that, 
for FYs 2011 through 2017, a subsection (d) hospital qualifies as a 
low-volume hospital if it is more than 15 road miles from another 
subsection (d) hospital and has less than 1,600 discharges of 
individuals entitled to, or enrolled for, benefits under Part A during 
the fiscal year. In addition, these provisions amended section 
1886(d)(12)(D) of the Act, to provide that for FYs 2011 through 2017, 
the low-volume hospital payment adjustment (that is, the percentage 
increase) is to be determined using a continuous linear sliding scale 
ranging from 25 percent for low-volume hospitals with 200 or fewer 
discharges of individuals entitled to, or enrolled for, benefits under 
Part A in the fiscal year to zero percent for low-volume hospitals with 
greater than 1,600 discharges of such individuals in the fiscal year. 
(We note that under Sec.  412.101(b)(2)(ii), for FYs 2011 through 2017, 
a hospital's Medicare discharges from the most recently available 
MedPAR data, as determined by CMS, are used to determine if the 
hospital meets the discharge criterion to receive the low-volume 
hospital payment adjustment in the applicable year.)
3. Implementation of the Extension of the Temporary Changes to the Low-
Volume Hospital Definition and Payment Adjustment Methodology for FY 
2018
    Section 50204 of the Bipartisan Budget Act of 2018 extended, for FY 
2018, the temporary changes in the low-volume hospital payment policy 
originally provided for in the Affordable Care Act. As noted 
previously, prior to the enactment of section 50204 of the Bipartisan 
Budget Act of 2018, beginning with FY 2018, the low-volume hospital 
definition and payment adjustment methodology returned to the policy 
established under statutory requirements that were in effect prior to 
the amendments made by the Affordable Care Act. Specifically, section 
50204 of the Bipartisan Budget Act of 2018 amended section 
1886(d)(12)(C) of the Act to extend the changes to the qualification 
criteria to FY 2018 (as reflected by new clause (i)(II)) and amended 
section 1886(d)(12)(D) of the Act to extend the applicable percentage 
increase to FY 2018 (as reflected by new clause (i)), and made other 
conforming changes to section 1886(d)(12)(C) and (D) of the Act.
    Prior to the enactment of the Bipartisan Budget Act of 2018, in the 
FY 2018 IPPS/LTCH PPS final rule (82 FR 38184 through 38188), we 
discussed the low-volume hospital payment adjustment for FY 2018 and 
subsequent fiscal years. Specifically, we discussed that in accordance 
with section 1886(d)(12) of the Act, beginning with FY 2018, the low-
volume hospital definition and payment adjustment methodology reverted 
back to the statutory requirements that were in effect prior to the 
amendments made by the Affordable Care Act. Therefore, we explained, as 
specified under the existing regulations at Sec.  412.101, effective 
for FY 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 total discharges, including both Medicare and 
non-Medicare discharges) during the fiscal year. We also discussed the 
procedure for hospitals to request low-volume hospital status for FY 
2018 (which was consistent with our previously established procedures 
for FYs 2011 through 2017).
    To implement the extension of the temporary changes in the low-
volume hospital payment policy for FY 2018 provided for by the 
Bipartisan Budget Act of 2018, in accordance with the existing 
regulations at Sec.  412.101(b)(2)(ii) and consistent with our 
implementation of the changes in FYs 2011 through 2017, we are updating 
the discharge data source used to identify qualifying low-volume 
hospitals and calculate the payment adjustment (percentage increase) 
for FY 2018. As noted previously, under Sec.  412.101(b)(2)(ii), for 
FYs 2011 through 2017, a hospital's Medicare discharges from the most 
recently available MedPAR data, as determined by CMS, are used to 
determine if the hospital meets the discharge criterion to receive the 
low-volume payment adjustment in the current year. The applicable low-
volume percentage increase provided for by the provisions of the 
Affordable Care Act and subsequent legislation is determined using a 
continuous linear sliding scale equation that results in a low-volume 
adjustment ranging from an additional 25 percent for hospitals with 200 
or fewer Medicare discharges to a zero percent additional payment 
adjustment for hospitals with 1,600 or more Medicare discharges.
    For FY 2018, consistent with our historical policy, qualifying low-
volume

[[Page 18303]]

hospitals and their payment adjustment will be determined using 
Medicare discharge data from the March 2017 update of the FY 2016 
MedPAR file, as these data were the most recent data available at the 
time of the development of the FY 2018 payment rates and factors 
established in the FY 2018 IPPS/LTCH PPS final rule. Table 1 of this 
document (which is available only through the internet on the CMS 
website at hhtp://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp) 
lists the ''subsection (d)'' hospitals with fewer than 1,600 Medicare 
discharges based on the March 2017 update of the FY 2016 MedPAR files 
and their FY 2018 low-volume payment adjustment (if eligible). 
Eligibility for the low-volume hospital payment adjustment for FY 2018 
is also dependent upon meeting (in the case of a hospital that did not 
qualify for the low-volume hospital payment adjustment in FY 2017) or 
continuing to meet (in the case of a hospital that did qualify for the 
low-volume hospital payment adjustment in FY 2017) the mileage 
criterion specified at Sec.  412.101(b)(2)(ii). We note that the list 
of hospitals with fewer than 1,600 Medicare discharges in Table 1 does 
not reflect whether or not the hospital meets the mileage criterion, 
and a hospital also must be located more than 15 road miles from any 
other IPPS hospital in order to qualify for a low-volume hospital 
payment adjustment in FY 2018.
    In order to receive a low-volume hospital payment adjustment under 
Sec.  412.101, in accordance with our previously established procedure, 
a hospital must notify and provide documentation to its Medicare 
Administrative Contractor (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. The MAC may 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 Medicare discharge data determined by CMS 
to determine whether or not the hospital meets the discharge criterion, 
and the amount of the FY 2018 payment adjustment, once it is determined 
that the mileage criterion has been met. The Medicare discharge data 
shown in Table 1, as well as the Medicare discharge data for all 
''subsection (d)'' hospitals with claims in the March 2017 update of 
the FY 2016 MedPAR file, is also available on the CMS website for 
hospitals to view their Medicare discharges to help hospitals to decide 
whether or not to apply for low-volume hospital status for FY 2018.
    Consistent with our previously established procedure, we are 
applying the following procedure for a hospital to request low-volume 
hospital status for FY 2018. In order for the applicable low-volume 
percentage increase to be applied to payments for its discharges 
beginning on or after October 1, 2017 (that is, the beginning of FY 
2018), a hospital must send a written request for low-volume hospital 
status that is received by its MAC no later than May 29, 2018. A 
hospital that qualified for the low-volume payment adjustment in FY 
2017 may continue to receive a low-volume payment adjustment in FY 2018 
without reapplying, if it continues to meet the Medicare discharge 
criterion, based on the March 2017 update of the FY 2016 MedPAR data 
(shown in Table 1), and the distance criterion; however, the hospital 
must send written verification that is received by its MAC no later 
than May 29, 2018, that it continues to be more than 15 miles from any 
other ''subsection (d)'' hospital. In this case, the written 
verification could be a brief letter to the MAC stating that the 
hospital continues to meet the low-volume hospital distance criterion 
as documented in a prior low-volume hospital status request. For 
hospitals that newly qualify for the low-volume adjustment (that is, 
hospitals that did not receive the low-volume adjustment in FY 2017), 
the written request for low-volume hospital status should include the 
documentation described above. Furthermore, for written requests or 
written verification for low-volume hospital status for FY 2018 
received after May 29, 2018, if the hospital meets the criteria to 
qualify as a low-volume hospital, the MAC will apply the applicable 
low-volume hospital adjustment in determining payments for the 
hospital's FY 2018 discharges prospectively effective within 30 days of 
the date of the MAC's low-volume hospital status determination. (As 
noted previously, this procedure is similar to our previously 
established procedure for requesting low volume hospital status, as 
well as the procedures we used to implement prior extensions of the 
Affordable Care Act amendments to the low-volume hospital payment 
policy.)
    Program guidance on the systems implementation of these provisions, 
including changes to PRICER software used to make payments, will be 
announced in an upcoming transmittal. We intend to make conforming 
changes to the regulations text at 42 CFR 412.101 to reflect the 
changes to the qualifying criteria and the payment adjustment for low-
volume hospitals according to the amendments made by section 50204 of 
the Bipartisan Budget Act of 2018, including the implementation of the 
provisions specifying the low-volume hospital discharge criterion and 
payment adjustment methodology for FYs 2019 through 2022, in future 
rulemaking.

B. Extension of the Medicare-Dependent, Small Rural Hospital (MDH) 
Program

    Section 1886(d)(5)(G) of the Act provides special payment 
protections, under the IPPS, to a 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).) Prior to 
the Bipartisan Budget Act of 2018, the MDH program had been extended by 
the Affordable Care Act and subsequent legislation though FY 2017 (that 
is, for discharges occurring before October 1, 2017).
    Section 50205 of the Bipartisan Budget Act of 2018 provides for an 
extension of the MDH program for discharges occurring on or after 
October 1, 2017, through FY 2022 (that is, for discharges occurring on 
or before September 30, 2022). Specifically, section 50205 of the 
Bipartisan Budget Act of 2018 amended sections 1886(d)(5)(G)(i) and 
1886(d)(5)(G)(ii)(II) of the Act by striking ``October 1, 2017'' and 
inserting ``October 1, 2022''. It also amended the definition of an MDH 
at section 1886(d)(5)(G)(iv) by striking subclause (I) and inserting a 
new subclause that reads, ``(I) that is located in--(aa) a rural area; 
or (bb) a State with no rural area (as defined in paragraph (2)(D)) and 
satisfies any of the criteria in subclause (I), (II), or (III) of 
paragraph (8)(E)(ii).'' It also amended section 1886(d)(5)(G)(iv) by 
inserting a provision after subclause (IV) to specify that new 
subclause (I)(bb) applies for purposes of MDH payment under section 
1886(d)(5)(G)(ii) of the Act (that is, 75 percent of the amount by 
which the Federal rate is exceeded by the updated hospital-specific 
rate from certain specified base years) only for discharges of a 
hospital occurring on or after the effective date of a

[[Page 18304]]

determination of MDH status made with respect to the hospital after the 
date of the enactment of this provision. Furthermore, this same new 
provision also states ``For purposes of applying subclause (II) of 
paragraph (8)(E)(ii) under subclause (I)(bb), such subclause (II) shall 
be applied by inserting `as of January 1, 2018,' after `such State' 
each place it appears.'' That is, this provision specifies that for a 
hospital in a State with no rural area, the criteria in paragraph 
(8)(E)(ii)(II) must have been satisfied as of January 1, 2018. Section 
50205 of the Bipartisan Budget Act also made conforming amendments to 
sections 1886(b)(3)(D) of the Act (in the language proceeding clause 
(i)) and 1886(b)(3)(D)(iv) of the Act).
a. Extension of the MDH Program
    Generally, as a result of the section 50205 of the Bipartisan 
Budget Act of 2018 extension, a provider that was classified as an MDH 
prior to the September 30, 2017 expiration of the MDH program will be 
reinstated as an MDH effective October 1, 2017, with no need to reapply 
for MDH classification.
    Prior to the enactment of section 50205 of the Bipartisan Budget 
Act of 2018, under section 205 of the Medicare Access and CHIP 
Reauthorization Act of 2015 (MACRA), the MDH program authorized by 
section 1886(d)(5)(G) of the Act was set to expire at the end of FY 
2017.
    In the FY 2016 interim final rule with comment period (80 FR 49596 
through 49597), we amended the regulations at Sec.  412.108(a)(1) and 
(c)(2)(iii) to reflect the MACRA extension of the MDH program through 
FY 2017. We intend to amend the regulations at Sec.  412.108(a)(1) and 
(c)(2)(iii) to reflect the statutory extension of the MDH program 
through FY 2022 provided for by the provisions of the Bipartisan Budget 
Act of 2018 in future rulemaking.
    Since MDH status is now extended by statute through the end of FY 
2022, generally, hospitals that previously qualified for MDH status 
will be reinstated as an MDH retroactively to October 1, 2017. However, 
in the following two situations, the effective date of MDH status may 
not be retroactive to October 1, 2017.
1. MDHs That Classified as Sole Community Hospitals (SCHs) on or After 
October 1, 2017
    Under the regulations at Sec.  412.92(b)(2)(v), an MDH could apply 
for reclassification as a sole community hospital (SCH) by August 31, 
2017, in anticipation of the September 30, 2017 expiration of the MDH 
provision, and have such status be effective on October 1, 2017. 
Hospitals that applied by the August 31, 2017 deadline and were 
approved for SCH classification received SCH status effective October 
1, 2017. Additionally, some hospitals that had MDH status as of the 
September 30, 2017 expiration of the MDH program may have missed the 
August 31, 2017 application deadline. These hospitals applied for SCH 
status in the usual manner instead and were approved for SCH status 
effective 30 days from the date of approval, resulting in an effective 
date later than October 1, 2017. These hospitals must reapply for MDH 
status under Sec.  412.108(b).
2. MDHs That Requested a Cancellation of Their Rural Classification 
Under Sec.  412.103(b)
    One of the criteria to be classified as an MDH is that the hospital 
is located in a rural area. To qualify for MDH status, some MDHs 
reclassified from an urban to a rural hospital designation, under the 
regulations at Sec.  412.103(b). With the expiration of the MDH 
provision, some of these providers may have requested a cancellation of 
their rural classification. Therefore, in order to qualify for MDH 
status, these hospitals must request to be reclassified as rural under 
Sec.  412.103(b) and must reapply for MDH status under Sec.  
412.108(b).
    Any provider that falls within either of the two exceptions listed 
above may not have its MDH status automatically reinstated effective 
October 1, 2017. That is, if a provider reclassified to SCH status or 
cancelled its rural status effective October 1, 2017, its MDH status 
will not be retroactive to October 1, 2017, but will instead be applied 
prospectively based on the date the hospital is notified that it again 
meets the requirements for MDH status in accordance with Sec.  
412.108(b)(4) after reapplying for MDH status. However, if a provider 
reclassified to SCH status or cancelled its rural status effective on a 
date later than October 1, 2017, MDH status will be reinstated 
effective from October 1, 2017 but will end on the date on which the 
provider changed its status to an SCH or cancelled its rural status. 
Those hospitals may also reapply for MDH status to be effective again 
30 days from the date the hospital is notified of the determination, in 
accordance with Sec.  412.108(b)(4). Providers that fall within either 
of the two exceptions will have to reapply for MDH status according to 
the classification procedures in 42 CFR 412.108(b). Specifically, the 
regulations at Sec.  412.108(b) require the following:
     The hospital submit a written request along with 
qualifying documentation to its contractor to be considered for MDH 
status.
     The contractor make its determination and notify the 
hospital within 90 days from the date that it receives the request for 
MDH classification and all required documentation.
     The determination of MDH status be effective 30 days after 
the date of the contractor's written notification to the hospital.
    The following are examples of various scenarios that illustrate how 
and when MDH status will be determined for hospitals that were MDHs as 
of the September 30, 2017 expiration of the MDH program:
    Example 1: Hospital A was classified as an MDH prior to the 
September 30, 2017 expiration of the MDH program. Hospital A retained 
its rural classification and did not reclassify as an SCH. Hospital A's 
MDH status will be automatically reinstated to October 1, 2017.
    Example 2: Hospital B was classified as an MDH prior to the 
September 30, 2017 expiration of the MDH program. Per the regulations 
at Sec.  412.92(b)(2)(v) and in anticipation of the expiration of the 
MDH program, Hospital B applied for reclassification as an SCH by 
August 31, 2017, and was approved for SCH status effective on October 
1, 2017. Hospital B's MDH status will not be automatically reinstated. 
In order to reclassify as an MDH, Hospital B must cancel its SCH 
status, in accordance with Sec.  412.92(b)(4), and reapply for MDH 
status under the regulations at Sec.  412.108(b).
    Example 3: Hospital C was classified as an MDH prior to the 
September 30, 2017 expiration of the MDH program. Hospital C missed the 
application deadline of August 31, 2017 for reclassification as an SCH 
under the regulations at Sec.  412.92(b)(2)(v) and was not eligible for 
its SCH status to be effective as of October 1, 2017. Hospitals C's 
Medicare contractor approved its request for SCH status effective 
November 16, 2017. Hospital C's MDH status will be reinstated effective 
October 1, 2017 through November 15, 2017 and will subsequently be 
cancelled effective November 16, 2017. In order to reclassify as an 
MDH, Hospital C must cancel its SCH status, in accordance Sec.  
412.92(b)(4), and reapply for MDH status under the regulations at Sec.  
412.108(b).
    Example 4: Hospital D was classified as an MDH prior to the 
September 30, 2017 expiration of the MDH program. In anticipation of 
the expiration of the MDH program, Hospital D requested that its rural 
classification be cancelled

[[Page 18305]]

per the regulations at Sec.  412.103(g). Hospital D's rural 
classification was cancelled effective October 1, 2017. Hospital D's 
MDH status will not be automatically reinstated. In order to reclassify 
as an MDH, Hospital D must request to be reclassified as rural under 
Sec.  412.103(b) and must reapply for MDH status under Sec.  
412.108(b).
    Example 5: Hospital E was classified as an MDH prior to the 
September 30, 2017 expiration of the MDH program. In anticipation of 
the expiration of the MDH program, Hospital E requested that its rural 
classification be cancelled per the regulations at Sec.  412.103(g). 
Hospital E's rural classification was cancelled effective January 1, 
2018. Hospital E's MDH status will be reinstated but only for the 
period of time during which it met the criteria for MDH status. Since 
Hospital E cancelled its rural status and was classified as urban 
effective January 1, 2018, MDH status will only be reinstated effective 
October 1, 2017 through December 31, 2017 and will be cancelled 
effective January 1, 2018. In order to reclassify as an MDH, Hospital E 
must request to be reclassified as rural under Sec.  412.103(b) and 
must reapply for MDH status under Sec.  412.108(b).
    We note that hospitals that were MDHs as of the September 30, 2017 
expiration of the MDH program that have returned to urban status will 
first need to apply for rural status under Sec.  412.103(b), and 
hospitals that became SCHs will first need to request cancellation of 
SCH status under Sec.  412.92(b)(4).
    Finally, we note that hospitals continue to be bound by Sec.  
412.108(b)(4)(i) through (iii) to report a change in the circumstances 
under which the status was approved. Thus, if a hospital's MDH status 
has been extended and it no longer meets the requirements for MDH 
status, it is required under Sec.  412.108(b)(4)(i) through (iii) to 
make such a report to its MAC. Additionally, under the regulations at 
Sec.  412.108(b)(5), Medicare contractors are required to evaluate on 
an ongoing basis whether or not a hospital continues to qualify for MDH 
status.
    A provider affected by the MDH program extension will receive a 
notice from its Medicare contractor detailing its status in light of 
the MDH program extension.
    Program guidance on the systems implementation of these provisions, 
including changes to PRICER software used to make payments, will be 
announced in an upcoming transmittal. As noted previously, we intend to 
make the conforming changes to the regulations text at 42 CFR 412.108 
to reflect the changes made by section 50205 of the Bipartisan Budget 
Act of 2018 in future rulemaking.
b. Additional Provisions to the MDH Program
    In addition to extending the MDH program, section 50205 of the 
Bipartisan Budget Act also provides for a hospital that is located in a 
state without a rural area to be eligible to qualify for MDH status if 
it otherwise satisfies any of the statutory criteria to be reclassified 
as rural under sections 1886(d)(8)(E)(ii)(I), (II), or (III) of the Act 
while further specifying that the criteria at sections 
1886(d)(8)(E)(ii)(II) of the Act must have been satisfied as of January 
1, 2018.
    Section 1886(d)(8)(E) of the Act provides for an IPPS hospital that 
is located in an urban area to be reclassified as a rural hospital if 
it submits an application in accordance with CMS' established process 
and meets certain criteria at sections 1886(d)(8)(E)(ii)(I), (II), or 
(III) of the Act (these statutory criteria are implemented in the 
regulations at Sec. Sec.  412.103(a)(1) through (3)). A subsection (d) 
hospital that is located in an urban area and meets one of the three 
criteria under Sec.  412.103(a) can reclassify as rural and is treated 
as being located in the rural area of the State in which it is located. 
However, a hospital that is located in an all-urban State is ineligible 
to reclassify as rural in accordance with the provisions of Sec.  
412.103 because its State does not have a rural area into which it can 
reclassify. Prior to the amendments made by the Bipartisan Budget Act, 
a hospital could only qualify for MDH status if it was either 
geographically located in a rural area or if it reclassified as rural 
under the regulations at Sec.  412.103. This precluded hospitals in 
all-urban states from being classified as MDHs. The newly added 
provision in the Bipartisan Budget Act of 2018 allows a hospital in an 
all-urban state to be eligible for MDH classification if, in addition 
to meeting the other criteria for MDH eligibility, it satisfies one of 
the criteria for rural reclassification under section 
1886(d)(8)(E)(ii)(I), (II), or (III) of the Act (as of January 1, 2018 
where applicable) notwithstanding its location in an all-urban state.
    Under this provision of the Bipartisan Budget Act, a hospital in an 
all-urban State can apply and be approved for MDH classification if it 
can demonstrate that: (1) It meets the criteria at Sec.  412.103(a)(1) 
or (3) or the criteria at Sec.  412.103(a)(2) as of January 1, 2018 for 
the sole purposes of qualifying for MDH classification and; (2) it 
meets the MDH classification criteria at Sec. Sec.  412.108(a)(1)(i) 
through (iii). We note the following:
     For a hospital in an all-urban State to demonstrate that 
it would have qualified for rural reclassification notwithstanding its 
location in an all-urban state (as of January 1, 2018 where 
applicable), it must follow the applicable procedures for rural 
reclassification and MDH classification at Sec.  412.103(b) and Sec.  
412.108(b), respectively.
     As noted previously, under existing regulations at Sec.  
412.108(b)(4), the determination of MDH status is effective 30 days 
after the date the MAC provides written notification to the hospital.
     A hospital in an all-urban state that qualifies as an MDH 
under the newly-added statutory provision will not be considered as 
having reclassified as rural but only as having satisfied one of the 
criteria at section 1886(d)(8)(E)(ii)(I), (II), or (III) (as of January 
1, 2018 as applicable) for purposes of MDH classification, in 
accordance with amended section 1886(d)(5)(G)(iv) of the Act.

III. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

IV. Regulatory Impact Analysis

A. Statement of Need

    This document is necessary to update the IPPS final FY 2018 payment 
policies to reflect changes required by the implementation of two 
provisions of the Bipartisan Budget Act of 2018. Section 50204 of the 
Bipartisan Budget Act of 2018 extends certain temporary changes to the 
payment adjustment for low-volume hospitals through FY 2018. Section 
50205 of the Bipartisan Budget Act of 2018 extends the MDH program 
through FY 2022. As noted previously, program guidance on the systems 
implementation of these provisions, including changes to PRICER 
software used to make payments, will be announced in an upcoming 
transmittal.

B. Overall Impact

    We have examined the impacts of this document 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

[[Page 18306]]

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.
    A regulatory impact analysis (RIA) must be prepared for regulatory 
actions with economically significant effects ($100 million or more in 
any 1 year). Although we do not consider this document to constitute a 
substantive rule or regulatory action, the changes announced in this 
document are ``economically'' significant, under section 3(f)(1) of 
Executive Order 12866, and therefore we have prepared a RIA, that to 
the best of our ability, presents the costs and benefits of the 
provisions announced in this document.
    The FY 2018 IPPS/LTCH PPS final rule in conjunction with the FY 
2018 IPPS/LTCH PPS correcting document included an impact analysis for 
the changes to the IPPS included in that final rule. This document 
updates those impacts to the IPPS to reflect the changes made by 
sections 50204 and 50205 of the Bipartisan Budget Act of 2018. Since 
these sections were not budget neutral, the overall estimates for 
hospitals have changed from our estimates that were published in the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38585) in conjunction with the FY 
2018 IPPS/LTCH PPS correcting document (82 FR 46163). We estimate that 
the changes in the FY 2018 IPPS/LTCH PPS final rule, in conjunction 
with the changes included in this document, will result in an 
approximate $2.97 billion increase in total payments to IPPS hospitals 
in FY 2018 relative to FY 2017, as described later in this section. In 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38585) in conjunction with 
the FY 2018 IPPS/LTCH PPS correcting document (82 FR 46163), we had 
projected that total payments to IPPS hospitals would increase by $2.5 
billion relative to FY 2017. However, since the changes in this 
document are expected to increase payments by approximately $470 
million ($349 million for the extension of certain temporary changes to 
the low-volume hospital adjustment policy and $119 million for the 
extension of the MDH program) relative to what was projected in the FY 
2018 IPPS/LTCH PPS final rule in conjunction with the FY 2018 IPPS/LTCH 
PPS correcting document, these changes will result in a net increase of 
$2.97 billion ($2.5 billion currently, plus the additional estimated 
increase of approximately $0.35 billion for the extension of certain 
temporary changes to the low-volume hospital adjustment policy and 
approximately $0.12 billion for the extension of the MDH program) in 
total payments to IPPS hospitals relative to FY 2017.

C. Anticipated Effects

1. Effects on IPPS Hospitals
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses, if a rule has a significant impact on a 
substantial number of small entities. For purposes of the RFA, small 
entities include small businesses, nonprofit organizations, and small 
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 to $34.5 million in any 1 year). 
(For details on the latest standard for health care providers, we refer 
readers to page 33 of the Table of Small Business Size Standards for 
NAIC 622 at the Small Business Administration's website at https://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 
changes announced in this document will have a significant impact on 
small entities. Because we acknowledge that many of the affected 
entities are small entities, the analysis discussed in this section 
would fulfill any requirement for a final regulatory flexibility 
analysis.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. With 
the exception of hospitals located in certain New England counties, for 
purposes of section 1102(b) of the Act, we now 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, we continue to classify these hospitals as urban hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
(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 is approximately $148 million. This 
document will not mandate any requirements for State, local, or tribal 
governments, nor will it affect private sector costs.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This document will not have a substantial effect on State 
and local governments.
    Although this document merely reflects the implementation of two 
provisions of the Bipartisan Budget Act of 2018 and does not constitute 
a substantive rule, we nevertheless prepared this impact analysis in 
the interest of ensuring that the impacts of these changes are fully 
understood. The following analysis, in conjunction with the remainder 
of this document,

[[Page 18307]]

demonstrates that this document is consistent with the regulatory 
philosophy and principles identified in Executive Order 12866 and 
13563, the RFA, and section 1102(b) of the Act. The changes announced 
in this document will positively affect payments to a substantial 
number of small rural hospitals and providers, as well as other classes 
of hospitals and providers, and the effects on some hospitals and 
providers may be significant. The impact analysis, which discusses the 
effect on total payments to IPPS hospitals, is presented in this 
section.
    The impact analysis reflects the change in estimated payments to 
IPPS hospitals in FY 2018 due to sections 50204 and 50205 of the 
Bipartisan Budget Act of 2018 relative to estimated FY 2018 payments to 
IPPS hospitals published in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38585) and in conjunction with the FY 2018 IPPS/LTCH PPS correction 
notice (82 FR 46163). As described later in this section in the 
regulatory impact analysis, FY 2018 IPPS payments to hospitals affected 
by sections 50204 and 50205 of the Bipartisan Budget Act of 2018 are 
projected to increase by $468 million ($349 million for the extension 
of certain temporary changes to the low-volume hospital adjustment 
policy and $119 million for the extension of the MDH program) (relative 
to the FY 2018 payments estimated for these hospitals for the FY 2018 
IPPS/LTCH PPS final rule and in conjunction with the FY 2018 IPPS/LTCH 
PPS correcting document). Furthermore, we project that, on the average, 
overall IPPS payments in FY 2018 for all hospitals will increase by 0.4 
percent due to these provisions in the Bipartisan Budget Act of 2018 
compared to the previous estimate of FY 2018 payments to all IPPS 
hospitals published in the FY 2018 IPPS/LTCH PPS final rule in 
conjunction with the FY 2018 IPPS/LTCH PPS correcting document.
2. Effects of the Extension of the Temporary Changes to the Payment 
Adjustment for Low-Volume Hospitals
    The extension, for FY 2018, of the temporary changes to the payment 
adjustment for low-volume hospitals (originally provided for by the 
Affordable Care Act for FYs 2011 and 2012 and extended by subsequent 
legislation) as provided for under Section 50204 of the Bipartisan 
Budget Act of 2018 is a non-budget neutral payment provision. The 
provisions of the Affordable Care Act and subsequent legislation 
expanded the definition of low-volume hospital and modified the 
methodology for determining the payment adjustment for hospitals 
meeting that definition for FYs 2011 through 2017. Prior to the 
enactment of the Bipartisan Budget Act of 2018, beginning with FY 2018, 
the low-volume hospital definition and payment adjustment methodology 
was to return to the statutory requirements that were in effect prior 
to the amendments made by the Affordable Care Act. With the extension 
for FY 2018 provided for by the Bipartisan Budget Act of 2018, based on 
FY 2016 claims data (March 2017 update of the MedPAR file), we estimate 
that approximately 600 hospitals will now qualify as a low-volume 
hospital for FY 2018. We project that these hospitals will experience 
an increase in payments of approximately $349 million as compared to 
our previous estimates of payments to these hospitals for FY 2018 
published in the FY 2018 IPPS/LTCH PPS final rule in conjunction with 
the FY 2018 IPPS/LTCH PPS correcting document.
3. Effects of the Extension of the MDH Program
    The extension of the MDH program in FY 2018 as provided for under 
section 50205 of the Bipartisan Budget Act of 2018 is a non-budget 
neutral payment provision. Hospitals that qualify to be MDHs receive 
the higher of operating IPPS payments made under the Federal 
standardized amount or the payments made under the Federal standardized 
amount plus 75 percent of the difference between the Federal 
standardized amount and the hospital-specific rate (a hospital-specific 
cost-based rate). Because this provision is not budget neutral, we 
estimate that the extension of this payment provision will result in a 
0.2 percent increase in payments overall. Prior to the extension of the 
MDH program, there were 159 MDHs, of which 96 were estimated to be paid 
under the blended payment of the Federal standardized amount and 
hospital-specific rate in FY 2017. Because those 96 MDHs will now 
receive the blended payment (that is, the Federal standardized amount 
plus 75 percent of the difference between the Federal standardized 
amount and the hospital-specific rate) in FY 2018, we estimate that 
those hospitals will experience an overall increase in payments of 
approximately $119 million as compared to our previous estimates of 
payments to these hospitals for FY 2018 published in the FY 2018 IPPS/
LTCH PPS final rule in conjunction with the FY 2018 IPPS/LTCH PPS 
correcting document.

D. Alternatives Considered

    This document provides descriptions of the statutory provisions 
that are addressed and identifies policies for implementing these 
provisions. Due to the prescriptive nature of the statutory provisions, 
no alternatives were considered.

E. Accounting Statement and Table

    As required by OMB Circular A-4 (available at http://www.whitehousegov/omb/circulars/a004/a-4.pdf), in Table I, we have 
prepared an accounting statement showing the classification of 
expenditures associated with the provisions of this notice as they 
relate to acute care hospitals. This table provides our best estimate 
of the change in Medicare payments to providers as a result of the 
changes to the IPPS presented in this document. All expenditures are 
classified as transfers from the Federal government to Medicare 
providers. As previously discussed, relative to what was projected in 
the FY 2018 IPPS/LTCH PPS final rule in conjunction with the FY 2018 
IPPS/LTCH PPS correcting document, the changes made by sections 50204 
and 50205 of the Bipartisan Budget Act of 2018 presented in this 
document are projected to increase FY 2018 payments to IPPS hospitals 
by $468 million.

 Table I--Accounting Statement: Classification of Estimated Expenditures
        Under the IPPS From Published FY 2018 to Revised FY 2018
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $468 million.
From Whom to Whom.........................  Federal Government to IPPS
                                             Medicare Providers.
                                           -----------------------------
    Total.................................  $468 million.
------------------------------------------------------------------------

F. Regulatory Reform Analysis Under E.O. 13771

    Executive Order 13771, entitled ``Reducing Regulation and 
Controlling Regulatory Costs,'' was issued on January 30, 2017, and 
requires that the costs associated with significant new regulations 
``shall, to the extent permitted by law, be offset by the elimination 
of existing costs associated with at least two prior regulations.'' It 
has been determined that the provisions of this document are actions 
that primarily result in transfers and do not impose more than de 
minimis cost as described previously. Thus, this

[[Page 18308]]

document is not a regulatory or deregulatory action for the purposes of 
Executive Order 13771.

G. Conclusion

    Overall, IPPS hospitals are projected to experience an increase in 
estimated payments of $468 million as a result of the changes made by 
sections 50204 and 50205 of the Bipartisan Budget Act of 2018 presented 
in this document. The analysis above, together with the preamble, 
provides a Regulatory Flexibility Analysis. Furthermore, the previous 
analysis, together with the preamble, provides a Regulatory Impact 
Analysis. In accordance with the provisions of Executive Order 12866, 
this document was reviewed by the Office of Management and Budget.

V. Waiver of Proposed Rulemaking and Delay of Effective Date

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment prior to a rule taking 
effect in accordance with section 553(b) of the Administrative 
Procedure Act (APA) and section 1871 of the Act. In addition, in 
accordance with section 553(d) of the APA and section 1871(e)(1)(B)(i) 
of the Act, we ordinarily provide a 30 day delay to a substantive 
rule's effective date. For substantive rules that constitute major 
rules, in accordance with 5 U.S.C. 801, we ordinarily provide a 60-day 
delay in the effective date.
    None of the processes or effective date requirements apply, 
however, when the rule in question is interpretive, a general statement 
of policy, or a rule of agency organization, procedure or practice. 
They also do not apply when the statute establishes rules that are to 
be applied, leaving no discretion or gaps for an agency to fill in 
through rulemaking.
    In addition, an agency may waive notice and comment rulemaking, as 
well as any delay in effective date, when the agency for good cause 
finds that notice and public comment on the rule as well the effective 
date delay are impracticable, unnecessary, or contrary to the public 
interest. In cases where an agency finds good cause, the agency must 
incorporate a statement of this finding and its reasons in the rule 
issued.
    The policies being publicized in this document do not constitute 
agency rulemaking. Rather, the statute, as amended by the Bipartisan 
Budget Act of 2018, has already required that the agency make these 
changes, and we are simply notifying the public of the extension of 
certain temporary changes to the payment adjustment for low-volume 
hospitals and the MDH program for FY 2018, that is effective October 1, 
2017. As this document merely informs the public of these extensions, 
it is not a rule and does not require any notice and comment 
rulemaking. To the extent any of the policies articulated in this 
document constitute interpretations of the statute's requirements or 
procedures that will be used to implement the statute's directive; they 
are interpretive rules, general statements of policy, and rules of 
agency procedure or practice, which are not subject to notice and 
comment rulemaking or a delayed effective date.
    However, to the extent that notice and comment rulemaking or a 
delay in effective date or both would otherwise apply, we find good 
cause to waive such requirements. Specifically, we find it unnecessary 
to undertake notice and comment rulemaking in this instance as this 
document does not propose to make any substantive changes to the 
policies or methodologies already in effect as a matter of law, but 
simply applies payment adjustments under the Bipartisan Budget Act of 
2018 to these existing policies and methodologies. As the changes 
outlined in this document have already taken effect, it would also be 
impracticable to undertake notice and comment rulemaking. For these 
reasons, we also find that a waiver of any delay in effective date, if 
it were otherwise applicable, is necessary to comply with the 
requirements of the Bipartisan Budget Act of 2018. Therefore, we find 
good cause to waive notice and comment procedures as well as any delay 
in effective date, if such procedures or delays are required at all.

    Dated: March 29, 2018.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 2018-08704 Filed 4-24-18; 4:15 pm]
 BILLING CODE 4120-01-P