[Federal Register Volume 83, Number 88 (Monday, May 7, 2018)]
[Proposed Rules]
[Pages 20164-20643]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08705]



[[Page 20163]]

Vol. 83

Monday,

No. 88

May 7, 2018

Part II

Book 2 of 2 Books

Pages 20163-20706





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 412, 413, 424, et al.



Medicare Program; Hospital Inpatient Prospective Payment Systems for 
Acute Care Hospitals and the Long[dash]Term Care Hospital Prospective 
Payment System and Proposed Policy Changes and Fiscal Year 2019 Rates; 
Proposed Quality Reporting Requirements for Specific Providers; 
Proposed Medicare and Medicaid Electronic Health Record (EHR) Incentive 
Programs (Promoting Interoperability Programs) Requirements for 
Eligible Hospitals, Critical Access Hospitals, and Eligible 
Professionals; Medicare Cost Reporting Requirements; and Physician 
Certification and Recertification of Claims; Proposed Rule

  Federal Register / Vol. 83 , No. 88 / Monday, May 7, 2018 / Proposed 
Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 412, 413, 424, and 495

[CMS-1694-P]
RIN 0938-AT27


Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals and the Long[dash]Term Care Hospital 
Prospective Payment System and Proposed Policy Changes and Fiscal Year 
2019 Rates; Proposed Quality Reporting Requirements for Specific 
Providers; Proposed Medicare and Medicaid Electronic Health Record 
(EHR) Incentive Programs (Promoting Interoperability Programs) 
Requirements for Eligible Hospitals, Critical Access Hospitals, and 
Eligible Professionals; Medicare Cost Reporting Requirements; and 
Physician Certification and Recertification of Claims

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

ACTION: Proposed rule.

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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 2019. Some of these 
proposed changes implement certain statutory provisions contained in 
the 21st Century Cures Act and the Bipartisan Budget Act of 2018, and 
other legislation. We also are proposing to make changes relating to 
Medicare graduate medical education (GME) affiliation agreements for 
new urban teaching hospitals. In addition, we are proposing to provide 
the market basket update that would apply to the 
rate[dash]of[dash]increase limits for certain hospitals excluded from 
the IPPS that are paid on a reasonable cost basis subject to these 
limits for FY 2019. 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 2019.
    In addition, we are proposing to establish new requirements or 
revise existing requirements for quality reporting by specific Medicare 
providers (acute care hospitals, PPS[dash]exempt cancer hospitals, and 
LTCHs). 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 
(now referred to as the Promoting Interoperability Programs). In 
addition, we are proposing changes to the requirements that apply to 
States operating Medicaid Promoting Interoperability Prrograms. We are 
proposing to update policies for the Hospital Value-Based Purchasing 
(VBP) Program, the Hospital Readmissions Reduction Program, and the 
Hospital-Acquired Condition (HAC) Reduction Program.
    We also are proposing to make changes relating to the required 
supporting documentation for an acceptable Medicare cost report 
submission and the supporting information for physician certification 
and recertification of claims.

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. on June 25, 2018.

ADDRESSES: In commenting, please refer to file code CMS-1694-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1694-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 to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1694-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    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[dash]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[dash]Term Care Hospital Prospective 
Payment System and MS-LTC-DRG Relative Weights Issues.
    Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital 
Demonstration Program Issues.
    Jeris Smith, (410) 786-0110, Frontier Community Health Integration 
Project Demonstration Issues.
    Cindy Tourison, (410) 786-1093, Hospital Readmissions Reduction 
Program--Readmission Measures for Hospitals Issues.
    James Poyer, (410) 786-2261, 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 Snyder, (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 Spalding 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.
    Joel Andress, (410) 786-5237 and Caitlin Cromer, (410) 786-3106, 
PPS-Exempt Cancer Hospital Quality Reporting Issues.
    Mary Pratt, (410) 786-6867, Long-Term Care Hospital Quality Data 
Reporting Issues.

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    Elizabeth Holland, (410) 786-1309, Promoting Interoperability 
Programs Clinical Quality Measure Related Issues.
    Kathleen Johnson, (410) 786-3295 and Steven Johnson (410) 786-3332, 
Promoting Interoperability Programs Nonclinical Quality Measure Related 
Issues.
    Kellie Shannon, (410) 786-0416, Acceptable Medicare Cost Report 
Submissions Issues.
    Thomas Kessler, (410) 786-1991, Physician Certification and 
Recertification of Claims.

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 
website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that website to 
view public comments.

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 Website

    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, the majority 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 website 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 2019 IPPS Proposed Rule Home Page'' or ``Acute 
Inpatient--Files for Download''. The LTCH PPS tables for this FY 2019 
proposed rule are available through the Internet on the CMS website at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for Regulation 
Number CMS-1694-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 websites identified above should contact 
Michael Treitel at (410) 786-4552.

Table of Contents

I. Executive Summary and Background
    A. Executive Summary
    B. Background Summary
    C. Summary of Provisions of Recent Legislation Proposed To Be 
Implemented in This Proposed Rule
    D. Summary of 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 2019 MS-DRG Documentation and Coding Adjustment
    E. Refinement of the MS-DRG Relative Weight Calculation
    F. Proposed Changes to Specific MS-DRG Classifications
    G. Recalibration of the Proposed FY 2019 MS-DRG Relative Weights
    H. Proposed Add-On Payments for New Services and Technologies 
for FY 2019
III. Proposed Changes to the Hospital Wage Index for Acute Care 
Hospitals
    A. Background
    B. Worksheet S-3 Wage Data for the Proposed FY 2019 Wage Index
    C. Verification of Worksheet S-3 Wage Data
    D. Method for Computing the Proposed FY 2019 Unadjusted Wage 
Index
    E. Proposed Occupational Mix Adjustment to the FY 2019 Wage 
Index
    F. Analysis and Implementation of the Proposed Occupational Mix 
Adjustment and the Proposed FY 2019 Occupational Mix Adjusted Wage 
Index
    G. Proposed Application of the Rural, Imputed, and Frontier 
Floors
    H. Proposed FY 2019 Wage Index Tables
    I. Proposed Revisions to the Wage Index Based on Hospital 
Redesignations and Reclassifications
    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 and Proposed 
Change to Lock-In Date
    L. Process for Requests for Wage Index Data Corrections
    M. Proposed Labor-Related Share for the Proposed FY 2019 Wage 
Index
    N. Request for Public Comments on Wage Index Disparities
IV. Other Decisions and Proposed Changes to the IPPS for Operating 
System
    A. Proposed Changes to MS-DRGs Subject to Postacute Care 
Transfer Policy and MS-DRG Special Payment Policies (Sec.  412.4)
    B. Proposed Changes in the Inpatient Hospital Updates for FY 
2019 (Sec.  412.64(d))
    C. Rural Referral Centers (RRCs) Proposed Annual Updates to 
Case-Mix Index and Discharge Criteria (Sec.  412.96)
    D. Proposed Payment Adjustment for Low-Volume Hospitals (Sec.  
412.101)
    E. Indirect Medical Education (IME) Payment Adjustment Factor 
(Sec.  412.105)
    F. Proposed Payment Adjustment for Medicare Disproportionate 
Share Hospitals (DSHs) for FY 2019 (Sec.  412.106)
    G. Sole Community Hospitals (SCHs) and Medicare-Dependent, Small 
Rural Hospitals (MDHs) (Sec. Sec.  412.90, 412.92, and 412.108)
    H. Hospital Readmissions Reduction Program: Proposed Updates and 
Changes (Sec. Sec.  412.150 Through 412.154)
    I. Hospital Value-Based Purchasing (VBP) Program: Proposed 
Policy Changes
    J. Hospital-Acquired Condition (HAC) Reduction Program
    K. Payments for Indirect and Direct Graduate Medical Education 
Costs (Sec. Sec.  412.105 and 413.75 Through 413.83)
    L. Rural Community Hospital Demonstration Program
    M. Proposed Revision of Hospital Inpatient Admission Orders 
Documentation Requirements Under Medicare Part A
V. Proposed Changes to the IPPS for Capital-Related Costs
    A. Overview
    B. Additional Provisions
    C. Proposed Annual Update for FY 2019
VI. Proposed Changes for Hospitals Excluded From the IPPS
    A. Proposed Rate-of-Increase in Payments to Excluded Hospitals 
for FY 2019
    B. Proposed Changes to Regulations Governing Satellite 
Facilities
    C. Proposed Changes to Regulations Governing Excluded Units of 
Hospitals
    D. Critical Access Hospitals (CAHs)
VII. Proposed Changes to the Long-Term Care Hospital Prospective 
Payment System (LTCH PPS) for FY 2019
    A. Background of the LTCH PPS
    B. Proposed Medicare Severity Long-Term Care Diagnosis-Related 
Group (MS-LTC-DRG) Classifications and Relative Weights for FY 2019
    C. Proposed Modifications to the Application of the Site Neutral 
Payment Rate (Sec.  412.522)
    D. Proposed Changes to the LTCH PPS Payment Rates and Other 
Proposed Changes to the LTCH PPS for FY 2019
    E. Proposed Elimination of the ``25-Percent Threshold Policy'' 
Adjustment (Sec.  412.538)
VIII. Quality Data Reporting Requirements for Specific Providers and 
Suppliers
    A. Hospital Inpatient Quality Reporting (IQR) Program
    B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
    C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    D. Proposed Changes to the Medicare and Medicaid EHR Incentive 
Programs (Now Referred to as the Medicare and Medicaid Promoting 
Interoperability Programs)

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IX. Proposed Revisions of the Supporting Documentation Required for 
Submission of an Acceptable Medicare Cost Report
X. Requirements for Hospitals To Make Public a List of Their 
Standard Charges via the Internet
XI. Proposed Revisions Regarding Physician Certification and 
Recertification of Claims
XII. Request for Information on Promoting Interoperability and 
Electronic Healthcare Information Exchange Through Possible 
Revisions to the CMS Patient Health and Safety Requirements for 
Hospitals and Other Medicare- and Medicaid-Participating Providers 
and Suppliers
XIII. MedPAC Recommendations
XIV. Other Required Information
    A. Publicly Available Data
    B. Collection of Information Requirements
    C. Response to Public Comments
Regulation Text
Addendum--Proposed Schedule of Proposed Standardized Amounts, Update 
Factors, Rate[dash]of[dash]Increase Percentages Effective With Cost 
Reporting Periods Beginning on or After October 1, 2018, and Payment 
Rates for LTCHs Effective for Discharges Occurring on or After 
October 1, 2018
I. Summary and Background
II. Proposed Changes to the Prospective Payment Rates for Hospital 
Inpatient Operating Costs for Acute Care Hospitals for FY 2019
    A. Calculation of the Adjusted Standardized Amount
    B. Proposed 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[dash]Related Costs for FY 2019
    A. Determination of Federal Hospital Inpatient 
Capital[dash]Related Prospective Payment Rate Update for FY 2019
    B. Calculation of the Inpatient Capital[dash]Related Prospective 
Payments for FY 2019
    C. Capital Input Price Index
IV. Proposed Changes to Payment Rates for Excluded Hospitals: 
Rate[dash]of[dash]Increase Percentages for FY 2019
V. Proposed Changes to the Payment Rates for the LTCH PPS for FY 
2019
    A. Proposed LTCH PPS Standard Federal Payment Rate for FY 2019
    B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS 
for FY 2019
    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. Proposed 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 2019
VI. Tables Referenced in This Proposed Rule Generally Available Only 
Through the Internet on the CMS Website
Appendix A--Economic Analyses
I. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Objectives of the IPPS and the LTCH PPS
    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
    H. Effects of Other Proposed Policy Changes
    I. Effects of Proposed Changes in the Capital IPPS
    J. Effects of Proposed Payment Rate Changes and Policy Changes 
Under the LTCH PPS
    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 Requirements Regarding the Promoting 
Interoperability Programs
    O. Alternatives Considered
    P. Reducing Regulation and Controlling Regulatory Costs
    Q. Overall Conclusion
    R. 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 2019
    A. Proposed FY 2019 Inpatient Hospital Update
    B. Proposed Update for SCHs and MDHs for FY 2019
    C. Proposed FY 2019 Puerto Rico Hospital Update
    D. Proposed Update for Hospitals Excluded From the IPPS for FY 
2019
    E. Proposed Update for LTCHs for FY 2019
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[dash]related costs of acute care hospitals as well as for 
certain hospitals and hospital units excluded from the IPPS. In 
addition, it would make payment and policy changes for inpatient 
hospital services provided by long-term care hospitals (LTCHs) under 
the long[dash]term care hospital prospective payment system (LTCH PPS). 
This proposed rule also would make policy changes to programs 
associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and 
LTCHs.
    We are proposing to establish new requirements and revise existing 
requirements for quality reporting by specific providers (acute care 
hospitals, PPS[dash]exempt cancer hospitals, and LTCHs) that are 
participating in Medicare. We also are proposing to establish new 
requirements and revise existing requirements for eligible 
professionals (EPs), eligible hospitals, and CAHs participating in the 
Medicare and Medicaid Promoting Interoperability Programs. We are 
proposing to update policies for the Hospital Value[dash]Based 
Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, 
and the Hospital-Acquired Condition (HAC) Reduction Program.
    We also are proposing to make changes relating to the supporting 
documentation required for an acceptable Medicare cost report 
submission and the supporting information for physician certification 
and recertification of claims.
    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 2019 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; extended neoplastic disease care 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,

[[Page 20167]]

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[dash]113) 
and section 307(b)(1) of the BIPA (Pub. L. 106[dash]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 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 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 point 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(c) 
of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 
(Pub. L. 113-67) and amended by section 51005(a) of the Bipartisan 
Budget Act of 2018 (Pub. L. 115-123), which provided for the 
establishment of site neutral payment rate criteria under the LTCH PPS 
with implementation beginning in FY 2016, and provides for a 4-year 
transitional blended payment rate for discharges occurring in LTCH cost 
reporting periods beginning in FYs 2016 through 2019. Section 51005(b) 
of the Bipartisan Budget Act of 2018 amended section 1886(m)(6)(B)(ii) 
by adding new clause (iv), which specifies that the IPPS comparable 
amount defined in subclause (I) shall be reduced by 4.6 percent for FYs 
2018 through 2026.
     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 in the LTCH QRP for change in 
mobility among inpatients requiring ventilator support.
     Section 1899B of the Act, as added by section 2(a) of the 
Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT 
Act, Pub. L. 113-185), which provides for the establishment of 
standardized data reporting for certain post-acute care providers, 
including LTCHs.
2. Improving Patient Outcomes and Reducing Burden Through Meaningful 
Measures
    Regulatory reform and reducing regulatory burden are high 
priorities for CMS. To reduce the regulatory burden on the healthcare 
industry, lower health care costs, and enhance patient care, in October 
2017, we launched the Meaningful Measures Initiative.\1\ This 
initiative is one component of our agency-wide Patients Over Paperwork 
Initiative,\2\ which is aimed at evaluating and streamlining 
regulations with a goal to reduce unnecessary cost and burden, increase 
efficiencies, and improve beneficiary experience. The Meaningful 
Measures Initiative is aimed at identifying the highest priority areas 
for quality measurement and quality improvement in order to assess the 
core quality of care issues that are most vital

[[Page 20168]]

to advancing our work to improve patient outcomes. The Meaningful 
Measures Initiative represents a new approach to quality measures that 
will foster operational efficiencies and will reduce costs, including 
collection and reporting burden while producing quality measurement 
that is more focused on meaningful outcomes.
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    \1\ Meaningful Measures webpage: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/MMF/General-info-Sub-Page.html.
    \2\ Remarks by Administrator Seema Verma at the Health Care 
Payment Learning and Action Network (LAN) Fall Summit, as prepared 
for delivery on October 30, 2017. Available at: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-10-30.html.
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    The Meaningful Measures framework has the following objectives:
     Address high-impact measure areas that safeguard public 
health;
     Patient-centered and meaningful to patients;
     Outcome-based where possible;
     Fulfill each program's statutory requirements;
     Minimize the level of burden for health care providers 
(for example, through a preference for EHR-based measures where 
possible, such as electronic clinical quality measures; \3\
---------------------------------------------------------------------------

    \3\ Refer to section VIII.A.9.c.of the preamble of this proposed 
rule where we are seeking public comment on the potential future 
development and adoption of eCQMs.
---------------------------------------------------------------------------

     Significant opportunity for improvement;
     Address measure needs for population based payment through 
alternative payment models; and
     Align across programs and/or with other payers.
    In order to achieve these objectives, we have identified 19 
Meaningful Measures areas and mapped them to six overarching quality 
priorities as shown in the following table:

------------------------------------------------------------------------
            Quality priority                 Meaningful measure area
------------------------------------------------------------------------
Making Care Safer by Reducing Harm       Healthcare-Associated
 Caused in the Delivery of Care.          Infections
                                         Preventable Healthcare Harm
Strengthen Person and Family Engagement  Care is Personalized and
 as Partners in Their Care.               Aligned with Patient's Goals
                                         End of Life Care According to
                                          Preferences
                                         Patient's Experience of Care
                                         Patient Reported Functional
                                          Outcomes
Promote Effective Communication and      Medication Management
 Coordination of Care.                   Admissions and Readmissions to
                                          Hospitals
                                         Transfer of Health Information
                                          and Interoperability
Promote Effective Prevention and         Preventive Care
 Treatment of Chronic Disease.           Management of Chronic
                                          Conditions
                                         Prevention, Treatment, and
                                          Management of Mental Health
                                         Prevention and Treatment of
                                          Opioid and Substance Use
                                          Disorders
                                         Risk Adjusted Mortality
Work with Communities to Promote Best    Equity of Care
 Practices of Healthy Living.            Community Engagement
Make Care Affordable...................  Appropriate Use of Healthcare
                                         Patient-focused Episode of Care
                                         Risk Adjusted Total Cost of
                                          Care
------------------------------------------------------------------------

    By including Meaningful Measures in our programs, we believe that 
we can also address the following cross-cutting measure criteria:
     Eliminating disparities;
     Tracking measurable outcomes and impact;
     Safeguarding public health;
     Achieving cost savings;
     Improving access for rural communities; and
     Reducing burden.
    We believe that the Meaningful Measures Initiative will improve 
outcomes for patients, their families, and health care providers while 
reducing burden and costs for clinicians and providers as well as 
promoting operational efficiencies.
3. Summary of the Major Provisions
    Below we provide a summary of the major provisions in this proposed 
rule. In general, these major provisions are being proposed as part of 
the annual update to the payment policies and payment rates, consistent 
with the applicable statutory provisions. A general summary of the 
proposed changes included in this proposed rule is presented below in 
section I.D. of this preamble.
a. MS-DRG Documentation and Coding Adjustment
    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 
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 of 
2015 (MACRA) (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.) Therefore, for FY 2019, we are proposing to make an adjustment of 
+0.5 percent to the standardized amount.
b. Expansion of the Postacute Care Transfer Policy
    Section 53109 of the Bipartisan Budget Act of 2018 amended section 
1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care 
by a hospice program as a qualified discharge, effective for discharges 
occurring on or after October 1, 2018. Accordingly, we are proposing to 
make conforming amendments to Sec.  412.4(c) of the regulation, 
effective for discharges on or after October 1, 2018, to specify that 
if a discharge is assigned to one of the MS-DRGs subject to the 
postacute care transfer policy and the individual is transferred to 
hospice care by a hospice program, the discharge would be subject to 
payment as a transfer case.
c. DSH Payment Adjustment and Additional Payment for Uncompensated Care
    Section 3133 of the Affordable Care Act modified the Medicare

[[Page 20169]]

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 
2019. We are continuing 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 continuing to incorporate data from Worksheet S-10 in the 
calculation of hospitals' share of the aggregate amount of 
uncompensated care by combining data on uncompensated care costs from 
Worksheet S-10 for FYs 2014 and 2015 with proxy data regarding a 
hospital's share of low-income insured days for FY 2013 to determine 
Factor 3 for FY 2019. In addition, we are proposing to use only data 
regarding low-income insured days for FY 2013 to determine the amount 
of uncompensated care payments for Puerto Rico hospitals, Indian Health 
Service and Tribal hospitals, and all-inclusive rate providers. For 
this proposed rule, we also are proposing the following policies: (1) 
For providers with multiple cost reports beginning in the same fiscal 
year, to use the longest cost report and annualize Medicaid data and 
uncompensated care data if a hospital's cost report does not equal 12 
months of data; (2) in the rare case where a provider has multiple cost 
reports beginning in the same fiscal year, but one report also spans 
the entirety of the following fiscal year such that the hospital has no 
cost report for that fiscal year, the cost report that spans both 
fiscal years would be used for the latter fiscal year; and (3) to apply 
statistical trim methodologies to potentially aberrant cost-to-charge 
ratios (CCRs) and potentially aberrant uncompensated care costs 
reported on the Worksheet S-10.
d. 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 2019. In addition, we are proposing to 
eliminate the 25-percent threshold policy, and under this proposal we 
would apply a one-time permanent adjustment of approximately -0.9 
percent to the LTCH PPS standard Federal payment rate to ensure this 
proposed elimination of the 25-percent threshold policy is budget 
neutral.
e. 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 and further 
amended by section 15002 of the 21st Century Cures 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 to 
establish the applicable periods for FY 2019, FY 2020, and FY 2021. We 
are also proposing to codify the definitions of dual-eligible patients, 
the proportion of dual-eligibles, and the applicable period for dual-
eligibility.
f. 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. As 
part of agency-wide efforts under the Meaningful Measures Initiative to 
use a parsimonious set of the most meaningful measures for patients, 
clinicians, and providers in our quality programs and the Patients Over 
Paperwork Initiative to reduce costs and burden and program complexity 
as discussed in section I.A.2. of the preamble of this proposed rule, 
we are proposing to remove a total of 10 measures from the Hospital VBP 
Program, all of which would continue to be used in the Hospital IQR 
Program or the HAC Reduction Program, in order to reduce the costs and 
complexity of tracking these measures in multiple programs. We also are 
proposing to adopt measure removal factors for the Hospital VBP 
Program. Specifically, we are proposing to remove six measures 
beginning with the FY 2021 program year: (1) Elective Delivery (NQF 
#0469) (PC-01); (2) National Healthcare Safety Network (NHSN) Catheter-
Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138); 
(3) National Healthcare Safety Network (NHSN) Central Line-Associated 
Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139); (4) 
American College of Surgeons-Centers for Disease Control and Prevention 
(ACS-CDC) Harmonized Procedure Specific Surgical Site Infection (SSI) 
Outcome Measure (NQF #0753); (5) National Healthcare Safety Network 
(NHSN) Facility-wide Inpatient Hospital-onset Methicillin-resistant 
Staphylococcus aureus Bacteremia (MRSA) Outcome Measure (NQF #1716); 
and (6) National Healthcare Safety Network (NHSN) Facility-wide 
Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome 
Measure (NQF #1717). We are also proposing to remove four measures from 
the Hospital VBP Program effective with the effective date of the FY 
2019 IPPS/LTCH PPS final rule: (1) Patient Safety and Adverse Events 
(Composite) (NQF #0531) (PSI 90); (2) Hospital-Level, Risk-Standardized 
Payment Associated With a 30-Day Episode-of-Care for Acute Myocardial 
Infarction (NQF #2431) (AMI Payment); (3) Hospital-Level, Risk-
Standardized Payment Associated With a 30-Day Episode-of-Care for Heart 
Failure (NQF #2436) (HF Payment); and (4) Hospital-Level, Risk-
Standardized Payment Associated With a 30-Day Episode-of-Care for 
Pneumonia (PN Payment) (NQF #2579). In addition, we are proposing to 
rename the Clinical Care domain as the Clinical Outcomes domain 
beginning with the FY 2020 program year; we are proposing to remove the 
Safety domain from the Hospital VBP Program, if our proposals to 
removal all of the measures in this domain are finalized, and to weight 
the three remaining domains as follows: Clinical Outcomes domain--50 
percent; Person and Community Engagement domain--25 percent; and 
Efficiency and Cost Reduction domain--25 percent.

[[Page 20170]]

g. 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 in the worst-
performing 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. As part of our agency-wide Patients over Paperwork and Meaningful 
Measures Initiatives, discussed in section I.A.2. of the preamble of 
this proposed rule, we are proposing that the measures currently 
included in the HAC Reduction Program should be retained because the 
measures address a performance gap in patient safety and reducing harm 
caused in the delivery of care. In this proposed rule, we are proposing 
to: (1) Establish administrative policies to collect, validate, and 
publicly report NHSN healthcare-associated infection (HAI) quality 
measure data that facilitate a seamless transition, independent of the 
Hospital IQR Program, beginning with January 1, 2019 infectious events; 
(2) change the scoring methodology by removing domains and assigning 
equal weighting to each measure for which a hospital has a measure; and 
(3) establish the applicable period for FY 2021. In addition, we are 
seeking stakeholder comment regarding the potential future inclusion of 
additional measures, including eCQMs.
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 this proposed rule, we are proposing several changes. As part of 
agency-wide efforts under the Meaningful Measures Initiative to use a 
parsimonious set of the most meaningful measures for patients and 
clinicians in our quality programs and the Patients Over Paperwork 
initiative to reduce burden, cost, and program complexity as discussed 
in section I.A.2. of the preamble of this proposed rule, we are 
proposing to add a new measure removal factor and to remove a total of 
39 measures from the Hospital IQR Program. For a full list of measures 
proposed for removal, we refer readers to section VIII.A.4.b. of the 
preamble of this proposed rule. Beginning with the CY 2018 reporting 
period/FY 2020 payment determination and subsequent years, we are 
proposing to remove 17 claims-based measures and two structural 
measures. Beginning with the CY 2019 reporting period/FY 2021 payment 
determination and subsequent years, we are proposing to remove eight 
chart-abstracted measures and two claims-based measures. Beginning with 
the CY 2020 reporting period/FY 2022 payment determination and 
subsequent years, we are proposing to remove one chart-abstracted 
measure, one claims[dash]based measure, and seven eCQMs from the 
Hospital IQR Program measure set. Beginning with the CY 2021 reporting 
period/FY 2023 payment determination, we are proposing to remove one 
claims-based measure.
    In addition, for the CY 2019 reporting period/FY 2021 payment 
determination, we are proposing to: (1) Require the same eCQM reporting 
requirements that were adopted for the CY 2018 reporting period/FY 2020 
payment determination (82 FR 38355 through 38361), such that hospitals 
submit one, self-selected calendar quarter of 2019 discharge data for 4 
eCQMs in the Hospital IQR Program measure set; and (2) require that 
hospitals use the 2015 Edition certification criteria for CEHRT. These 
proposals are in alignment with proposals or current established 
policies under the Medicare and Medicaid Promoting Interoperability 
Programs (previously known as the Medicare and Medicaid EHR Incentive 
Programs). In addition, we are seeking public comment on two measures 
for potential future inclusion in the Hospital IQR Program, as well as 
the potential future development and adoption of electronic clinical 
quality measures generally.
i. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    The LTCH QRP is authorized by section 1886(m)(5) of the Act and 
applies to all hospitals certified by Medicare as long-term care 
hospitals (LTCHs). Under the LTCH QRP, the Secretary reduces by 2 
percentage points the annual update to the LTCH PPS standard Federal 
rate for discharges for an LTCH during a fiscal year if the LTCH fails 
to submit data in accordance with the LTCH QRP requirements specified 
for that fiscal year. As part of agency-wide efforts under the 
Meaningful Measures Initiative to use a parsimonious set of the most 
meaningful measures for patients and clinicians in our quality programs 
and the Patients Over Paperwork Initiative to reduce cost and burden 
and program complexity as discussed in section I.A.2. of the preamble 
of this proposed rule, we are proposing to remove three measures from 
the LTCH QRP. We also are proposing to adopt a new measure removal 
factor and are proposing to codify the measure removal factors in our 
regulations. In addition, we are proposing to update our regulations to 
change methods by which an LTCH is notified of noncompliance with the 
requirements of the LTCH QRP for a program year; and how CMS will 
notify an LTCH of a reconsideration decision.
4. 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.) For FY 2019, we are proposing to make an adjustment of +0.5 
percent to the standardized amount consistent with the MACRA.
     Expansion of the Postacute Care Transfer Policy. Section 
53109 of the Bipartisan Budget Act of 2018 amended section 
1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care 
by a hospice program as a qualified discharge, effective for discharges 
occurring on or after October 1, 2018. Accordingly, we are proposing to 
make conforming amendments to Sec.  412.4(c) of the regulation to 
specify that, effective for discharges on or after October 1, 2018, if 
a discharge is assigned to one of the MS-DRGs subject to the postacute 
care transfer policy and the individual is transferred to hospice care 
by a hospice program, the discharge would be subject to payment as a 
transfer case. We estimate that this statutory expansion to the 
postacute care transfer policy will reduce Medicare payments under the 
IPPS by approximately $240 million in FY 2019.
     Proposed 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

[[Page 20171]]

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 2019, we are proposing to update our estimates of the three 
factors used to determine uncompensated care payments. We are 
continuing to use uninsured estimates produced by OACT as part of the 
development of the NHEA in the calculation of Factor 2. We also are 
continuing to incorporate data from Worksheet S-10 in the calculation 
of hospitals' share of the aggregate amount of uncompensated care by 
combining data on uncompensated care costs from Worksheet S-10 for FY 
2014 and FY 2015 with proxy data regarding a hospital's share of low-
income insured days for FY 2013 to determine Factor 3 for FY 2019. To 
determine the amount of uncompensated care for Puerto Rico hospitals, 
Indian Health Service and Tribal hospitals, and all-inclusive rate 
providers, we are proposing to use only the data regarding low-income 
insured days for FY 2013. In addition, in this proposed rule, we are 
proposing the following policies: (1) For providers with multiple cost 
reports beginning in the same fiscal year, to use the longest cost 
report and annualize Medicaid data and uncompensated care data if a 
hospital's cost report does not equal 12 months of data; (2) in the 
rare case where a provider has multiple cost reports beginning in the 
same fiscal year, but one report also spans the entirety of the 
following fiscal year such that the hospital has no cost report for 
that fiscal year, the cost report that spans both fiscal years would be 
used for the latter fiscal year; and (3) to apply statistical trim 
methodologies to potentially aberrant CCRs and potentially aberrant 
uncompensated care costs.
    We are projecting that proposed estimated Medicare DSH payments, 
and additional payments for uncompensated care made for FY 2019, would 
increase payments overall by approximately 1.3 percent as compared to 
the estimate of overall payments, including Medicare DSH payments and 
uncompensated care payments that will be distributed in FY 2018. 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 Update to the LTCH PPS Payment Rates and Other 
Payment Policies. Based on the best available data for the 409 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 continuation of the 
transition of the statutory application of the site neutral payment 
rate, the update to the LTCH PPS standard Federal payment rate for FY 
2019, and the proposed one-time permanent adjustment of approximately-
0.9 percent to the LTCH PPS standard Federal payment rate to ensure 
this proposed elimination of the 25[dash]percent threshold policy is 
budget neutral would result in an estimated decrease in payments in FY 
2019 of approximately $5 million.
     Proposed Changes to the Hospital Readmissions Reduction 
Program. For FY 2019 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 2,610 
hospitals would have their base operating DRG payments reduced by their 
determined proposed proxy FY 2019 hospital-specific readmission 
adjustment. As a result, we estimate that the Hospital Readmissions 
Reduction Program would save approximately $566 million in FY 2019.
     Value-Based Incentive Payments under the Hospital VBP 
Program. We estimate that there will be no net financial impact to the 
Hospital VBP Program for the FY 2019 program year in the aggregate 
because, by law, the amount available for value[dash]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 2019 program year 
and, therefore, the estimated amount available for value-based 
incentive payments for FY 2019 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 depend on several different factors. Any 
significant impact due to the proposed HAC Reduction Program changes 
for FY 2019, including which hospitals would receive the adjustment, 
would depend on actual experience.
    The proposed removal of NHSN HAI measures from the Hospital IQR 
Program and the subsequent cessation of its validation processes for 
NHSN HAI measures and proposed creation of a validation process for the 
HAC Reduction program represent no net change in reporting burden 
across CMS hospital quality programs. However, if our proposal to 
remove HAI chart-abstracted measures from the Hospital IQR Program is 
finalized, we anticipate a total burden shift of 43,200 hours and 
approximately $1.6 million as a result of no longer needing to validate 
those HAI measures under the Hospital IQR Program and beginning the 
validation process under the HAC Reduction Program.
     Proposed Changes to the Hospital Inpatient Quality 
Reporting (IQR) Program. Across 3,300 IPPS hospitals, we estimate that 
our proposed requirements for the Hospital IQR Program would result in 
the following changes to costs and burdens related to information 
collection for this program compared to previously adopted 
requirements: (1) A total collection of information burden reduction of 
1,046,071 hours and a total cost reduction of approximately $38.3 
million for the CY 2019 reporting period/FY 2021 payment determination, 
due to the proposed removal of ED-1, IMM-2, and VTE-6 measures; and (2) 
a total collection of information burden reduction of 901,200 hours and 
a total cost reduction of $33 million for the CY 2020 reporting period/
FY 2022 payment determination, due to: (a) The proposed removal of ED-
2, and (b) validation of the NHSN HAI measures no longer being 
conducted under the Hospital IQR Program once the HAC Reduction Program 
begins validating these measures, as proposed in the preamble

[[Page 20172]]

of this proposed rule for the HAC Reduction Program.
    Further, we anticipate that the proposed removal of 39 measures 
would result in a reduction in costs unrelated to information 
collection. For example, it may be costly for health care providers to 
track the confidential feedback, preview reports, and publicly reported 
information on a measure where we use the measure in more than one 
program. Also, when measures are in multiple programs, maintaining the 
specifications for those measures, as well as the tools we need to 
collect, validate, analyze, and publicly report the measure data may 
result in costs to CMS. In addition, beneficiaries may find it 
confusing to see public reporting on the same measure in different 
programs. We anticipate that our proposals will reduce the above-
described costs.
     Proposed Changes Related to the LTCH QRP. In this proposed 
rule, we are proposing to remove three measures from the LTCH QRP, two 
measures beginning with the FY 2020 LTCH QRP and one measure beginning 
with the FY 2021 LTCH QRP. We also are proposing a new quality measure 
removal factor for the LTCH QRP. We estimate that the impact of these 
proposed changes is a reduction in costs of approximately $1,148 per 
LTCH annually or approximately $482,469 for all LTCHs annually.

B. Background 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[dash]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[dash]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[dash]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[dash]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 2022. 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[dash]specific 
rate. For discharges occurring on or after October 1, 2007, but before 
October 1, 2022, 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 (or, as 
amended by the Bipartisan Budget Act of 2018, a hospital located in a 
State with no rural area that meets certain statutory criteria), 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.

[[Page 20173]]

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; extended 
neoplastic disease care 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. 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 included along with the IPPS 
annual update in this 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[dash]of[dash]increase ceiling on inpatient operating costs. 
Similarly, extended neoplastic disease care hospitals are paid on a 
reasonable cost basis subject to a rate[dash]of[dash]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 through September 30, 2016, all 
LTCHs were 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 
generally paid for 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. 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[dash]specific criteria. In 
this proposed rule, we are continuing to update certain policies that 
implemented provisions under section 1206 of the Pathway for SGR Reform 
Act.
2. 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 Hospital 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(a) 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.
3. The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 
114-10)
    Section 414 of the Medicare Access and CHIP Reauthorization Act of 
2015 (MACRA, Pub. L. 114-10) specifies a 0.5 percent positive 
adjustment to the standardized amount of Medicare payments to acute 
care hospitals for FYs 2018 through 2023. These adjustments follow the 
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 2017 to fully offset $11 billion, in 
accordance with section 631 of the ATRA. The FY 2018 adjustment was 
subsequently adjusted to 0.4588 percent by section 15005 of the 21st 
Century Cures Act.
4. The 21st Century Cures Act (Pub. L. 114-255)
    The 21st Century Cures Act (Pub. L. 114-255), enacted on December 
13, 2016, contained the following provision affecting payments under 
the Hospital Readmissions Reduction Program,

[[Page 20174]]

which we are proposing to continue to implement in this proposed rule:
     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 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 continue 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.
5. The Bipartisan Budget Act of 2018 (Pub. L. 115-123)
    The Bipartisan Budget Act of 2018 (Pub. L. 115-123), enacted on 
February 9, 2018, contains provisions affecting payments under the IPPS 
and the LTCH PPS, which we are proposing to implement or continue to 
implement in this proposed rule:
     Section 50204 amended section 1886(d)(12) of the Act to 
provide for certain temporary changes to the low-volume hospital 
payment adjustment policy for FYs 2018 through 2022. For FY 2018, this 
provision extends the qualifying criteria and payment adjustment 
formula that applied for FYs 2011 through 2017. For FYs 2019 through 
2022, this provision modifies the discharge criterion and payment 
adjustment formula. In FY 2023 and subsequent fiscal years, the 
qualifying criteria and payment adjustment revert to the requirements 
that were in effect for FYs 2005 through 2010.
     Section 50205 extends the MDH program through FY 2022. It 
also provides for an eligible hospital that is located in a State with 
no rural area to qualify for MDH status under an expanded definition if 
the hospital satisfies any of the statutory criteria at section 
1886(d)(8)(E)(ii)(I), (II) (as of January 1, 2018), or (III) of the Act 
to be reclassified as rural.
     Section 51005(a) modified section 1886(m)(6) of the Act by 
extending the blended payment rate for site neutral payment rate LTCH 
discharges for cost reporting periods beginning in FY 2016 by an 
additional 2 years (FYs 2018 and 2019). In addition, section 51005(b) 
reduces the LTCH IPPS comparable per diem amount used in the site 
neutral payment rate for FYs 2018 through 2026 by 4.6 percent. In this 
proposed rule, we are proposing to make conforming changes to the 
existing regulations.
     Section 53109 modified section 1886(d)(5)(J) of the Act to 
require that, beginning in FY 2019, discharges to hospice care will 
also qualify as a postacute care transfer and be subject to payment 
adjustments.

D. Summary of the Provisions of This Proposed Rule

    In this proposed rule, we are setting forth proposed payment and 
policy changes to the Medicare IPPS for FY 2019 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 2019.
    Below is a general summary of the proposed changes included in this 
proposed rule.
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 2019.
     Proposed adjustment to the standardized amounts under 
section 1886(d) of the Act for FY 2019 in accordance with the 
amendments made to section 7(b)(1)(B) of Public Law 110-90 by section 
414 of the MACRA.
     Proposed recalibration of the MS-DRG relative weights.
     A discussion of the proposed FY 2019 status of new 
technologies approved for add-on payments for FY 2018 and a 
presentation of our evaluation and analysis of the FY 2019 applicants 
for add[dash]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 2019 wage index update using wage data 
from cost reporting periods beginning in FY 2015.
     Proposal regarding other wage-related costs in the wage 
index.
     Calculation of the proposed occupational mix adjustment 
for FY 2019 based on the 2016 Occupational Mix Survey.
     Analysis and implementation of the proposed FY 2019 
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.
     Proposals to codify policies regarding multicampus 
hospitals.
     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.
     The proposed adjustment to the wage index for acute care 
hospitals for FY 2019 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 2019 wage index.
     Public comment solicitation on wage index disparities.
3. Other Decisions and Proposed Changes to the IPPS for Operating Costs
    In section IV. 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 and special payment policy and implementation of the 
statutory changes to the postacute care transfer policy.
     Proposed changes to the inpatient hospital update for FY 
2019.
     Proposed changes related to the statutory changes to the 
low-volume hospital payment adjustment policy.
     Proposed updated national and regional case-mix values and 
discharges for purposes of determining RRC status.
     The statutorily required IME adjustment factor for FY 
2019.
     Proposed changes to the methodologies for determining 
Medicare DSH payments and the additional payments for uncompensated 
care.
     Proposed changes to the effective date of SCH and MDH 
classification status determinations.
     Proposed changes related to the extension of the MDH 
program.
     Proposed changes to the rules for payment adjustments 
under the Hospital Readmissions Reduction Program based on hospital 
readmission

[[Page 20175]]

measures and the process for hospital review and correction of those 
rates for FY 2019.
     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 2019.
     Proposed changes to Medicare GME affiliation agreements 
for new urban teaching hospitals.
     Discussion of and proposals relating to the implementation 
of the Rural Community Hospital Demonstration Program in FY 2019.
     Proposed revisions of the hospital inpatient admission 
orders documentation requirements.
4. Proposed FY 2019 Policy Governing the IPPS for Capital-Related Costs
    In section V. of the preamble to this proposed rule, we discuss the 
proposed payment policy requirements for capital[dash]related costs and 
capital payments to hospitals for FY 2019.
5. Proposed Changes to the Payment Rates for Certain Excluded 
Hospitals: Rate[dash]of[dash]Increase Percentages
    In section VI. of the preamble of this proposed rule, we discuss--
     Proposed changes to payments to certain excluded hospitals 
for FY 2019.
     Proposed changes to the regulations governing satellite 
facilities.
     Proposed changes to the regulations governing excluded 
units of hospitals.
     Proposed continued implementation of the Frontier 
Community Health Integration Project (FCHIP) Demonstration.
6. Proposed Changes to the LTCH PPS
    In section VII. of the preamble of the proposed rule, we set 
forth--
     Proposed changes to the LTCH PPS Federal payment rates, 
factors, and other payment rate policies under the LTCH PPS for FY 
2019.
     Proposed changes to the blended payment rate for site 
neutral payment rate cases.
     Proposed elimination of the 25-percent threshold policy.
7. Proposed Changes Relating to Quality Data Reporting for Specific 
Providers and Suppliers
    In section VIII. 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 requirements pertaining to the 
clinical quality measurement for eligible hospitals and CAHs 
participating in the Medicare and Medicaid Promoting Interoperability 
Programs.
8. Proposed Revision to the Supporting Documentation Requirements for 
an Acceptable Medicare Cost Report Submission
    In section IX. of the preamble of this proposed rule, we set forth 
proposed revisions to the supporting documentation required for an 
acceptable Medicare cost report submission.
9. Requirements for Hospitals To Make Public List of Standard Charges
    In section X. of the preamble of this proposed rule, we discuss our 
efforts to further improve the public accessibility of hospital 
standard charge information, effective January 1, 2019, in accordance 
with section 2718(e) of the Public Health Service Act.
10. Proposed Revisions Regarding Physician Certification and 
Recertification of Claims
    In section XI. of the preamble of this proposed rule, we set forth 
proposed revisions to the requirements for supporting information used 
for physician certification and recertification of claims.
11. Request for Information
    In section XII. of the preamble of this proposed rule, we include a 
request for information on possible establishment of CMS patient health 
and safety requirements for hospitals and other Medicare- and Medicaid-
participating providers and suppliers for interoperable electronic 
health records and systems for electronic health care information 
exchange.
12. Determining Prospective Payment Operating and Capital Rates and 
Rate[dash]of[dash]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 2019 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 
address the update factors for determining the 
rate[dash]of[dash]increase limits for cost reporting periods beginning 
in FY 2019 for certain hospitals excluded from the IPPS.
13. Determining Prospective Payment Rates for LTCHs
    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 2019 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 
2019. We are proposing to establish the adjustments for wage levels, 
the labor[dash]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.
14. 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, and PCHs.
15. 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 provide our recommendations of the 
appropriate percentage changes for FY 2019 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[dash]specific rates applicable to 
SCHs and MDHs).
     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.
16. 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 2018 recommendations concerning hospital inpatient 
payment policies address the update factor for hospital inpatient 
operating costs and capital-related costs for hospitals under

[[Page 20176]]

the IPPS. We address these recommendations in Appendix B of this 
proposed rule. For further information relating specifically to the 
MedPAC March 2018 report or to obtain a copy of the report, contact 
MedPAC at (202) 220-3700 or visit MedPAC's website 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 2018 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; 81 FR 56787 through 
56872; and 82 FR 38010 through 38085, respectively).

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 2019 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 and 
the Recoupment or Repayment Adjustment Authorized by Section 631 of the 
American Taxpayer Relief Act of 2012 (ATRA)
    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 rulemakings, 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 under 
Public Law 110-90.
    In addition, as discussed in prior rulemakings and most recently in 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38008 through 38009), 
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.
2. Adjustment Made for FY 2018 as 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. 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. 
As we discussed in the FY 2018

[[Page 20177]]

rulemaking, we believe the directive under section 15005 of Public Law 
114-255 is clear. Therefore, in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38009) for FY 2018, we implemented the required +0.4588 
percentage point adjustment to the standardized amount. This is a 
permanent adjustment to payment rates. While we did not address future 
adjustments required under section 414 of the MACRA and section 15005 
of Public Law 114-255 at that time, we stated that we expected to 
propose positive 0.5 percentage point adjustments to the standardized 
amounts for FYs 2019 through 2023.
3. Proposed Adjustment for FY 2019
    Consistent with the requirements of section 414 of the MACRA, we 
are proposing to implement a positive 0.5 percentage point adjustment 
to the standardized amount for FY 2019. This would be a permanent 
adjustment to payment rates. We plan to propose future adjustments 
required under section 414 of the MACRA for FYs 2020 through 2023 in 
future rulemaking.

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background
    Beginning in FY 2007, we implemented relative weights for DRGs 
based on cost report data instead of charge information. We refer 
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed 
discussion of our final policy for calculating the cost[dash]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 2019
    Consistent with our established policy, we are calculating the 
proposed MS-DRG relative weights for FY 2019 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 2019 is included in section 
II.G. of the preamble to this FY 2019 IPPS/LTCH PPS proposed rule. As 
we did with the FY 2018 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 website 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 2019 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 
2019 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 ICD-10-CM and ICD-10-PCS Official 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 Proposed FY 2019 MS-DRG Updates
    CMS has previously encouraged input from our stakeholders 
concerning the annual IPPS updates when that input was made available 
to us by December 7 of the year prior to the next annual proposed rule 
update. As discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38010), as we work 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, which 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 
changed the deadline to request updates to the MS-DRGs to November 1 of 
each year. This will provide an additional 5 weeks for the data 
analysis and review process. Interested parties had to submit any 
comments and suggestions for FY 2019 by November 1, 2017, and are 
encouraged to submit any comments and suggestions for FY 2020 by 
November 1, 2018 via the CMS MS-DRG Classification Change Request 
Mailbox located at: [email protected]. The comments 
that were submitted in a timely manner for FY 2019 are discussed in 
this section of the preamble of this proposed rule.
    Following are the changes that we are proposing to the MS-DRGs for 
FY 2019 in this FY 2019 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 and consultation with our clinical advisors. In other 
cases, we are proposing to maintain the existing MS-DRG classifications 
based on our analysis of claims data and consultation with our clinical 
advisors. For this FY 2019 IPPS/LTCH PPS proposed rule, our MS-DRG 
analysis was based on ICD-10 claims data from the September 2017 update 
of the FY 2017 MedPAR file, which contains hospital bills received 
through September 30, 2017, for discharges occurring through September 
30, 2017. In our discussion of the proposed MS-DRG reclassification 
changes, we refer to our analysis of claims data from the ``September 
2017 update of the FY 2017 MedPAR file.''
    As explained in previous rulemaking (76 FR 51487), in deciding 
whether to propose to make further modifications 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

[[Page 20178]]

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; and
     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. Pre-MDC
a. Heart Transplant or Implant of Heart Assist System
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38012), we stated 
our intent to review the ICD-10 logic for Pre-MDC MS-DRGs 001 and 002 
(Heart Transplant or Implant of Heart Assist System with and without 
MCC, respectively), as well as MS-DRG 215 (Other Heart Assist System 
Implant) and MS-DRGs 268 and 269 (Aortic and Heart Assist Procedures 
Except Pulsation Balloon with and without MCC, respectively) where 
procedures involving heart assist devices are currently assigned. We 
also encouraged the public to submit any comments on restructuring the 
MS-DRGs for heart assist system procedures to the CMS MS-DRG 
Classification Change Request Mailbox located at: 
[email protected] by November 1, 2017.
    The logic for Pre-MDC MS-DRGs 001 and 002 is comprised of two 
lists. The first list includes procedure codes identifying a heart 
transplant procedure, and the second list includes procedure codes 
identifying the implantation of a heart assist system. The list of 
procedure codes identifying the implantation of a heart assist system 
includes the following three codes.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
02HA0QZ...................  Insertion of implantable heart assist system
                             into heart, open approach.
02HA3QZ...................  Insertion of implantable heart assist system
                             into heart, percutaneous approach.
02HA4QZ...................  Insertion of implantable heart assist system
                             into heart, percutaneous endoscopic
                             approach.
------------------------------------------------------------------------

    In addition to these three procedure codes, there are also 33 pairs 
of code combinations or procedure code ``clusters'' that, when reported 
together, satisfy the logic for assignment to MS-DRGs 001 and 002. The 
code combinations are represented by two procedure codes and include 
either one code for the insertion of the device with one code for 
removal of the device or one code for the revision of the device with 
one code for the removal of the device. The 33 pairs of code 
combinations are listed below.

----------------------------------------------------------------------------------------------------------------
           Code                Code description                         Code                Code description
----------------------------------------------------------------------------------------------------------------
02HA0RS..................  Insertion of                with   02PA0RZ.................  Removal of short-term
                            biventricular short-                                         external heart assist
                            term external heart                                          system from heart, open
                            assist system into                                           approach.
                            heart, open approach.
02HA0RS..................  Insertion of                with   02PA3RZ.................  Removal of short-term
                            biventricular short-                                         external heart assist
                            term external heart                                          system from heart,
                            assist system into                                           percutaneous approach.
                            heart, open approach.
02HA0RS..................  Insertion of                with   02PA4RZ.................  Removal of short-term
                            biventricular short-                                         external heart assist
                            term external heart                                          system from heart,
                            assist system into                                           percutaneous endoscopic
                            heart, open approach.                                        approach.
02HA0RZ..................  Insertion of short-term     with   02PA0RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system into heart, open                                      system from heart, open
                            approach.                                                    approach.
02HA0RZ..................  Insertion of short-term     with   02PA3RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system into heart, open                                      system from heart,
                            approach.                                                    percutaneous approach.
02HA0RZ..................  Insertion of short-term     with   02PA4RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system into heart, open                                      system from heart,
                            approach.                                                    percutaneous endoscopic
                                                                                         approach.
02HA3RS..................  Insertion of                with   02PA0RZ.................  Removal of short-term
                            biventricular short-                                         external heart assist
                            term external heart                                          system from heart, open
                            assist system into                                           approach.
                            heart, percutaneous
                            approach.
02HA3RS..................  Insertion of                with   02PA3RZ.................  Removal of short-term
                            biventricular short-                                         external heart assist
                            term external heart                                          system from heart,
                            assist system into                                           percutaneous approach.
                            heart, percutaneous
                            approach.
02HA3RS..................  Insertion of                with   02PA4RZ.................  Removal of short-term
                            biventricular short-                                         external heart assist
                            term external heart                                          system from heart,
                            assist system into                                           percutaneous endoscopic
                            heart, percutaneous                                          approach.
                            approach.
02HA4RS..................  Insertion of                with   02PA0RZ.................  Removal of short-term
                            biventricular short-                                         external heart assist
                            term external heart                                          system from heart, open
                            assist system into                                           approach.
                            heart, percutaneous
                            endoscopic approach.

[[Page 20179]]

 
02HA4RS..................  Insertion of                with   02PA3RZ.................  Removal of short-term
                            biventricular short-                                         external heart assist
                            term external heart                                          system from heart,
                            assist system into                                           percutaneous approach.
                            heart, percutaneous
                            endoscopic approach.
02HA4RS..................  Insertion of                with   02PA4RZ.................  Removal of short-term
                            biventricular short-                                         external heart assist
                            term external heart                                          system from heart,
                            assist system into                                           percutaneous endoscopic
                            heart, percutaneous                                          approach.
                            endoscopic approach.
02HA4RZ..................  Insertion of short-term     with   02PA0RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system into heart,                                           system from heart, open
                            percutaneous endoscopic                                      approach.
                            approach.
02HA4RZ..................  Insertion of short-term     with   02PA3RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system into heart,                                           system from heart,
                            percutaneous endoscopic                                      percutaneous approach.
                            approach.
02HA4RZ..................  Insertion of short-term     with   02PA4RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system into heart,                                           system from heart,
                            percutaneous endoscopic                                      percutaneous endoscopic
                            approach.                                                    approach.
02WA0QZ..................  Revision of implantable     with   02PA0RZ.................  Removal of short-term
                            heart assist system in                                       external heart assist
                            heart, open approach.                                        system from heart, open
                                                                                         approach.
02WA0QZ..................  Revision of implantable     with   02PA3RZ.................  Removal of short-term
                            heart assist system in                                       external heart assist
                            heart, open approach.                                        system from heart,
                                                                                         percutaneous approach.
02WA0QZ..................  Revision of implantable     with   02PA4RZ.................  Removal of short-term
                            heart assist system in                                       external heart assist
                            heart, open approach.                                        system from heart,
                                                                                         percutaneous endoscopic
                                                                                         approach.
02WA0RZ..................  Revision of short-term      with   02PA0RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system in heart, open                                        system from heart, open
                            approach.                                                    approach.
02WA0RZ..................  Revision of short-term      with   02PA3RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system in heart, open                                        system from heart,
                            approach.                                                    percutaneous approach.
02WA0RZ..................  Revision of short-term      with   02PA4RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system in heart, open                                        system from heart,
                            approach.                                                    percutaneous endoscopic
                                                                                         approach.
02WA3QZ..................  Revision of implantable     with   02PA0RZ.................  Removal of short-term
                            heart assist system in                                       external heart assist
                            heart, percutaneous                                          system from heart, open
                            approach.                                                    approach.
02WA3QZ..................  Revision of implantable     with   02PA3RZ.................  Removal of short-term
                            heart assist system in                                       external heart assist
                            heart, percutaneous                                          system from heart,
                            approach.                                                    percutaneous approach.
02WA3QZ..................  Revision of implantable     with   02PA4RZ.................  Removal of short-term
                            heart assist system in                                       external heart assist
                            heart, percutaneous                                          system from heart,
                            approach.                                                    percutaneous endoscopic
                                                                                         approach.
02WA3RZ..................  Revision of short-term      with   02PA0RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system in heart,                                             system from heart, open
                            percutaneous approach.                                       approach.
02WA3RZ..................  Revision of short-term      with   02PA3RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system in heart,                                             system from heart,
                            percutaneous approach.                                       percutaneous approach.
02WA3RZ..................  Revision of short-term      with   02PA4RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system in heart,                                             system from heart,
                            percutaneous approach.                                       percutaneous endoscopic
                                                                                         approach.
02WA4QZ..................  Revision of implantable     with   02PA0RZ.................  Removal of short-term
                            heart assist system in                                       external heart assist
                            heart, percutaneous                                          system from heart, open
                            endoscopic approach.                                         approach.
02WA4QZ..................  Revision of implantable     with   02PA3RZ.................  Removal of short-term
                            heart assist system in                                       external heart assist
                            heart, percutaneous                                          system from heart,
                            endoscopic approach.                                         percutaneous approach.
02WA4QZ..................  Revision of implantable     with   02PA4RZ.................  Removal of short-term
                            heart assist system in                                       external heart assist
                            heart, percutaneous                                          system from heart,
                            endoscopic approach.                                         percutaneous endoscopic
                                                                                         approach.
02WA4RZ..................  Revision of short-term      with   02PA0RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system in heart,                                             system from heart, open
                            percutaneous endoscopic                                      approach.
                            approach.
02WA4RZ..................  Revision of short-term      with   02PA3RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system in heart,                                             system from heart,
                            percutaneous endoscopic                                      percutaneous approach.
                            approach.
02WA4RZ..................  Revision of short-term      with   02PA4RZ.................  Removal of short-term
                            external heart assist                                        external heart assist
                            system in heart,                                             system from heart,
                            percutaneous endoscopic                                      percutaneous endoscopic
                            approach.                                                    approach.
----------------------------------------------------------------------------------------------------------------

    In response to our solicitation for public comments on 
restructuring the MS-DRGs for heart assist system procedures, 
commenters recommended that CMS maintain the current logic under the 
Pre-MDC MS-DRGs 001 and 002. Similar to the discussion in the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38011 through 38012) involving MS-DRG 
215 (Other Heart Assist System Implant), the commenters provided 
examples of common clinical scenarios involving a left ventricular 
assist device (LVAD) and included the procedure codes that were 
reported under the ICD-9 based MS-DRGs in comparison to the procedure 
codes reported under the ICD-10 MS-DRGs, which are reflected in the 
following table.

[[Page 20180]]



----------------------------------------------------------------------------------------------------------------
                                    ICD-9-CM procedure
            Procedure                      code          ICD-9 MS-DRG       ICD-10-PCS codes       ICD-10 MS-DRG
----------------------------------------------------------------------------------------------------------------
New LVAD inserted................  37.66 (Insertion of      001 or 002  02WA0QZ (Insertion of         001 or 002
                                    implantable heart                    implantable heart
                                    assist system).                      assist system into
                                                                         heart, open approach).
                                                                        02WA3QZ (Insertion of
                                                                         implantable heart
                                                                         assist system into
                                                                         heart, percutaneous
                                                                         approach).
                                                                        02WA4QZ (Insertion of
                                                                         implantable heart
                                                                         assist system into
                                                                         heart, percutaneous
                                                                         endoscopic approach).
LVAD Exchange--existing LVAD is    37.63 (Repair of                215  02PA0QZ (Removal of           001 or 002
 removed and replaced with either   heart assist                         implantable heart
 new LVAD system or new LVAD pump.  system).                             assist system from
                                                                         heart, open approach).
                                                                        02PA3QZ (Removal of
                                                                         implantable heart
                                                                         assist system from
                                                                         heart, percutaneous
                                                                         approach).
                                                                        02PA4QZ (Removal of
                                                                         implantable heart
                                                                         assist system from
                                                                         heart, percutaneous
                                                                         endoscopic approach)
                                                                         and.
                                                                        02WA0QZ (Insertion of
                                                                         implantable heart
                                                                         assist system into
                                                                         heart, open approach).
                                                                        02WA3QZ (Insertion of
                                                                         implantable heart
                                                                         assist system into
                                                                         heart, percutaneous
                                                                         approach).
                                                                        02WA4QZ (Insertion of
                                                                         implantable heart
                                                                         assist system into
                                                                         heart, percutaneous
                                                                         endoscopic approach).
LVAD revision and repair--         37.63 (Repair of                215  02WA0QZ (Revision of                 215
 existing LVAD is adjusted or       heart assist                         implantable heart
 repaired without removing the      system).                             assist system in heart,
 existing LVAD device.                                                   open approach).
                                                                        02WA3QZ (Revision of
                                                                         implantable heart
                                                                         assist system in heart,
                                                                         percutaneous approach).
                                                                        02WA4QZ (Revision of
                                                                         implantable heart
                                                                         assist system in heart,
                                                                         percutaneous endoscopic
                                                                         approach).
----------------------------------------------------------------------------------------------------------------

    The commenters noted that, for Pre-MDC MS-DRGs 001 and 002, the 
procedures involving the insertion of an implantable heart assist 
system, such as the insertion of a LVAD, and the procedures involving 
exchange of an LVAD (where an existing LVAD is removed and replaced 
with either a new LVAD or a new LVAD pump) demonstrate clinical 
similarities and utilize similar resources. Although the commenters 
recommended that CMS maintain the current logic under the Pre-MDC MS-
DRGs 001 and 002, they also recommended that CMS continue to monitor 
the data in these MS-DRGs for future consideration of distinctions (for 
example, different approaches and evolving technologies) that may 
impact the clinical and resource use of patients undergoing procedures 
utilizing heart assist devices. The commenters also requested that 
coding guidance be issued for assignment of the correct ICD-10-PCS 
procedure codes describing LVAD exchanges to encourage accurate 
reporting of these procedures.
    We agree with the commenters that we should continue to monitor the 
data in Pre-MDC MS-DRGs 001 and 002 for future consideration of 
distinctions (for example, different approaches and evolving 
technologies) that may impact the clinical and resource use of patients 
undergoing procedures utilizing heart assist devices. In response to 
the request that coding guidance be issued for assignment of the 
correct ICD-10-PCS procedure codes describing LVAD exchanges to 
encourage accurate reporting of these procedures, as we noted in the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38012), coding advice is issued 
independently from payment policy. We also noted that, historically, we 
have not provided coding advice in rulemaking with respect to policy 
(82 FR 38045). 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 for these 
technologies to the AHA.
    In response to the public comments we received on this topic, we 
are providing the results of our claims analysis from the September 
2017 update of the FY 2017 MedPAR file for cases in Pre-MDC MS-DRGs 001 
and 002. Our findings are shown in the following table.

                         MS-DRGs for Heart Transplant or Implant of Heart Assist System
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 001--All cases...........................................           1,993            35.6        $185,660
MS-DRG 002--All cases...........................................             179            18.3          99,635
----------------------------------------------------------------------------------------------------------------

    As shown in this table, for MS-DRG 001, there were a total of 1,993 
cases with an average length of stay of 35.6 days and average costs of 
$185,660. For MS-DRG 002, there were a total of 179 cases with an 
average length of stay of 18.3 days and average costs of $99,635.
    We then examined claims data in Pre-MDC MS-DRGs 001 and 002 for 
cases that reported one of the three procedure codes identifying the 
implantation of a heart assist system such as the LVAD. Our findings 
are shown in the following table.

[[Page 20181]]



                         MS-DRGs for Heart Transplant or Implant of Heart Assist System
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 001--All cases...........................................           1,993            35.6        $185,660
MS-DRG 001--Cases with procedure code 02HA0QZ (Insertion of                1,260            35.5         206,663
 implantable heart assist system into heart, open approach).....
MS-DRG 001--Cases with procedure code 02HA3QZ (Insertion of                    1               8          33,889
 implantable heart assist system into heart, percutaneous
 approach)......................................................
MS-DRG 001--Cases with procedure code 02HA4QZ (Insertion of                    0               0               0
 implantable heart assist system into heart, percutaneous
 endoscopic approach)...........................................
MS-DRG 002--All cases...........................................             179            18.3          99,635
MS-DRG 002--Cases with procedure code 02HA0QZ (Insertion of                   82            19.9         131,957
 implantable heart assist system into heart, open approach).....
MS-DRG 002--Cases with procedure code 02HA3QZ (Insertion of                    0               0               0
 implantable heart assist system into heart, percutaneous
 approach)......................................................
MS-DRG 002--Cases with procedure code 02HA4QZ (Insertion of                    0               0               0
 implantable heart assist system into heart, percutaneous
 endoscopic approach)...........................................
----------------------------------------------------------------------------------------------------------------

    As shown in this table, for MS-DRG 001, there were a total of 1,260 
cases reporting procedure code 02HA0QZ (Insertion of implantable heart 
assist system into heart, open approach) with an average length of stay 
of 35.5 days and average costs of $206,663. There was one case that 
reported procedure code 02HA3QZ (Insertion of implantable heart assist 
system into heart, percutaneous approach) with an average length of 
stay of 8 days and average costs of $33,889. There were no cases 
reporting procedure code 02HA4QZ (Insertion of implantable heart assist 
system into heart, percutaneous endoscopic approach). For MS-DRG 002, 
there were a total of 82 cases reporting procedure code 02HA0QZ 
(Insertion of implantable heart assist system into heart, open 
approach) with an average length of stay of 19.9 days and average costs 
of $131,957. There were no cases reporting procedure codes 02HA3QZ 
(Insertion of implantable heart assist system into heart, percutaneous 
approach) or 02HA4QZ (Insertion of implantable heart assist system into 
heart, percutaneous endoscopic approach).
    We also examined the cases in MS-DRGs 001 and 002 that reported one 
of the possible 33 pairs of code combinations or clusters. Our findings 
are shown in the following 8 tables. The first table provides the total 
number of cases reporting a procedure code combination (or cluster) 
compared to all of the cases in the respective MS-DRG, followed by 
additional detailed tables showing the number of cases, average length 
of stay, and average costs for each specific code combination that was 
reported in the claims data.

                               Heart Transplant or Implant of Heart Assist System
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                       MS-DRG 001 and 002                              cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 001--All cases...........................................           1,993            35.6        $185,660
MS-DRG 001--Cases with a procedure code combination (cluster)...             149            28.4         179,607
MS-DRG 002--All cases...........................................             179            18.3          99,635
MS-DRG 002--Cases with a procedure code combination (cluster)...               6             3.8          57,343
----------------------------------------------------------------------------------------------------------------


                         Procedure Code Combinations for Implant of Heart Assist System
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                           MS-DRG 001                                  cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
Cases with a procedure code combination of 02HA0RS (Insertion of               3            20.3        $121,919
 biventricular short-term external heart assist system into
 heart, open approach) with 02PA0RZ (Removal of short-term
 external heart assist system from heart, open approach)........
Cases with a procedure code combination of 02HA0RS (Insertion of               2              12         114,688
 biventricular short-term external heart assist system into
 heart, open approach) with 02PA3RZ (Removal of short-term
 external heart assist system from heart, percutaneous approach)
All cases reporting one or more of the above procedure code                    5              17         119,027
 combinations in MS-DRG 001.....................................
----------------------------------------------------------------------------------------------------------------


[[Page 20182]]


                         Procedure Code Combinations for Implant of Heart Assist System
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                                                                       cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
                                                   MS-DRG 001
----------------------------------------------------------------------------------------------------------------
Cases with a procedure code combination of 02HA0RZ (Insertion of              30            55.6        $351,995
 short-term external heart assist system into heart, open
 approach) with 02PA0RZ (Removal of short-term external heart
 assist system from heart, open approach).......................
Cases with a procedure code combination of 02HA0RZ (Insertion of              19            29.8         191,163
 short-term external heart assist system into heart, open
 approach) with 02PA3RZ (Removal of short-term external heart
 assist system from heart, percutaneous approach)...............
All cases reporting one or more of the above procedure code                   49            45.6         289,632
 combinations in MS-DRG 001.....................................
----------------------------------------------------------------------------------------------------------------
                                                   MS-DRG 002
----------------------------------------------------------------------------------------------------------------
Cases with a procedure code combination of 02HA0RZ (Insertion of               1               4          48,212
 short-term external heart assist system into heart, open
 approach) with 02PA0RZ (Removal of short-term external heart
 assist system from heart, open approach).......................
Cases with a procedure code combination of 02HA0RZ (Insertion of               2             4.5          66,386
 short-term external heart assist system into heart, open
 approach) with 02PA3RZ (Removal of short-term external heart
 assist system from heart, percutaneous approach)...............
All cases reporting one or more of the above procedure code                    3             4.3          60,328
 combinations in MS-DRG 002.....................................
All cases reporting one or more of the above procedure code                   52            43.3         276,403
 combinations across both MS-DRGs 001 and 002...................
----------------------------------------------------------------------------------------------------------------


                         Procedure Code Combinations for Implant of Heart Assist System
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                                                                       cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
                                                   MS-DRG 001
----------------------------------------------------------------------------------------------------------------
Cases with a procedure code combination of 02HA3RS (Insertion of               3            43.3        $233,330
 biventricular short-term external heart assist system into
 heart, percutaneous approach) with 02PA0RZ (Removal of short-
 term external heart assist system from heart, open approach)...
Cases with a procedure code combination of 02HA3RS (Insertion of              24            14.8         113,955
 biventricular short-term external heart assist system into
 heart, percutaneous approach) with 02PA3RZ (Removal of short-
 term external heart assist system from heart, percutaneous
 approach)......................................................
Cases with a procedure code combination of 02HA3RS (Insertion of               1              44         153,284
 biventricular short-term external heart assist system into
 heart, percutaneous approach) with 02PA4RZ (Removal of short-
 term external heart assist system from heart, percutaneous
 endoscopic approach)...........................................
All cases reporting one or more of the above procedure code                   28            18.9         128,150
 combinations in MS-DRG 001.....................................
----------------------------------------------------------------------------------------------------------------
                                                   MS-DRG 002
----------------------------------------------------------------------------------------------------------------
Cases with a procedure code combination of 02HA3RS (Insertion of               2               4         $30,954
 biventricular short-term external heart assist system into
 heart, percutaneous approach) with 02PA3RZ (Removal of short-
 term external heart assist system from heart, percutaneous
 approach)......................................................
All cases reporting one of the above procedure code combinations               2               4          30,954
 in MS-DRG 002..................................................
All cases reporting one or more of the above procedure code                   30            17.9         121,670
 combinations across both MS[dash]DRGs 001 and 002..............
----------------------------------------------------------------------------------------------------------------


                         Procedure Code Combinations for Implant of Heart Assist System
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                           MS-DRG 001                                  cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
Cases with a procedure code combination of 02HA4RZ (Insertion of               4            17.3        $154,885
 short-term external heart assist system into heart,
 percutaneous endoscopic approach) with 02PA3RZ (Removal of
 short-term external heart assist system from heart,
 percutaneous approach).........................................
Cases with a procedure code combination of 02HA4RZ (Insertion of               2            15.5          80,852
 short-term external heart assist system into heart, open
 approach) with 02PA4RZ (Removal of short-term external heart
 assist system from heart, percutaneous endoscopic approach)....
All cases reporting one or more of the above procedure code                    6            16.7         130,207
 combinations in MS-DRG 001.....................................
----------------------------------------------------------------------------------------------------------------


[[Page 20183]]


                         Procedure Code Combinations for Implant of Heart Assist System
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                           MS-DRG 001                                  cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
Cases with a procedure code combination of 02WA0QZ (Revision of                1             105        $516,557
 implantable heart assist system in heart, open approach) with
 02PA0RZ (Removal of short-term external heart assist system
 from heart, open approach).....................................
----------------------------------------------------------------------------------------------------------------


                         Procedure Code Combinations for Implant of Heart Assist System
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                           MS-DRG 001                                  cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
Cases with a procedure code combination of 02WA0RZ (Revision of                2              40        $285,818
 short-term external heart assist system in heart, open
 approach) with 02PA0RZ (Removal of short-term external heart
 assist system from heart, open approach).......................
Cases with a procedure code combination of 02WA0RZ (Revision of                1              43         372,673
 short-term external heart assist system in heart, open
 approach) with 02PA03Z (Removal of short-term external heart
 assist system from heart, percutaneous approach)...............
All cases reporting one or more of the above procedure code                    3              41         314,770
 combinations in MS-DRG 001.....................................
----------------------------------------------------------------------------------------------------------------


                         Procedure Code Combinations for Implant of Heart Assist System
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                                                                       cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
                                                   MS-DRG 001
----------------------------------------------------------------------------------------------------------------
Cases with a procedure code combination of 02WA3RZ (Revision of                2              24        $123,084
 short-term external heart assist system in heart, percutaneous
 approach) with 02PA0RZ (Removal of short-term external heart
 assist system from heart, open approach).......................
Cases with a procedure code combination of 02WA3RZ (Revision of               55            14.7         104,963
 short-term external heart assist system in heart, percutaneous
 approach) with 02PA3RZ (Removal of short-term external heart
 assist system from heart, percutaneous approach)...............
All cases reporting one or more of the above procedure code                   57              15         105,599
 combinations in MS-DRG 001.....................................
----------------------------------------------------------------------------------------------------------------
                                                   MS-DRG 002
----------------------------------------------------------------------------------------------------------------
Cases with a procedure code combination of 02WA3RZ (Revision of                1               2         101,168
 short-term external heart assist system in heart, percutaneous
 approach) with 02PA3RZ (Removal of short-term external heart
 assist system from heart, percutaneous approach)...............
All cases reporting one or more of the above procedure code                   58            14.8         105,522
 combinations across both MS-DRGs 001 and 002...................
----------------------------------------------------------------------------------------------------------------
                                                   MS-DRG 001
----------------------------------------------------------------------------------------------------------------
Cases with a procedure code combination of 02WA4RZ (Revision of                1              10         112,698
 short-term external heart assist system in heart, percutaneous
 endoscopic approach) with 02PA0RZ (Removal of short-term
 external heart assist system from heart, open approach)........
----------------------------------------------------------------------------------------------------------------

    We did not find any cases reporting the following procedure code 
combinations (clusters) in the claims data.

----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
02HA4RS..................  Insertion of                with   02PA0RZ.................  Removal of short-term
                            biventricular short-                                         external heart assist
                            term external heart                                          system from heart, open
                            assist system into                                           approach.
                            heart, percutaneous
                            endoscopic approach.
02HA4RS..................  Insertion of                with   02PA3RZ.................  Removal of short-term
                            biventricular short-                                         external heart assist
                            term external heart                                          system from heart,
                            assist system into                                           percutaneous approach.
                            heart, percutaneous
                            endoscopic approach.
02HA4RS..................  Insertion of                with   02PA4RZ.................  Removal of short-term
                            biventricular short-                                         external heart assist
                            term external heart                                          system from heart,
                            assist system into                                           percutaneous endoscopic
                            heart, percutaneous                                          approach.
                            endoscopic approach.
02WA3QZ..................  Revision of implantable     with   02PA0RZ.................  Removal of short-term
                            heart assist system in                                       external heart assist
                            heart, percutaneous                                          system from heart, open
                            approach.                                                    approach.
02WA3QZ..................  Revision of implantable     with   02PA3RZ.................  Removal of short-term
                            heart assist system in                                       external heart assist
                            heart, percutaneous                                          system from heart,
                            approach.                                                    percutaneous approach.

[[Page 20184]]

 
02WA3QZ..................  Revision of implantable     with   02PA4RZ.................  Removal of short-term
                            heart assist system in                                       external heart assist
                            heart, percutaneous                                          system from heart,
                            approach.                                                    percutaneous endoscopic
                                                                                         approach.
----------------------------------------------------------------------------------------------------------------

    The data show that there are differences in the average length of 
stay and average costs for cases in Pre-MDC MS-DRGs 001 and 002 
according to the type of procedure (insertion, revision, or removal), 
the type of device (biventricular short-term external heart assist 
system, short-term external heart assist system or implantable heart 
assist system), and the approaches that were utilized (open, 
percutaneous, or percutaneous endoscopic). We agree with the 
commenters' recommendation to maintain the structure of Pre-MDC MS-DRGs 
001 and 002 for FY 2019 and will continue to analyze the claims data. 
We are inviting public comments on our decision to maintain the current 
structure of Pre[dash]MDC MS-DRGs 001 and 002 for FY 2019.
    Commenters also suggested that CMS maintain the current logic for 
MS-DRG 215 (Other Heart Assist System Implant), but they recommended 
that CMS continue to monitor the data in MS-DRG 215 for future 
consideration of distinctions (for example, different approaches and 
evolving technologies) that may impact the clinical and resource use of 
procedures utilizing heart assist devices. We also received a request 
to review claims data for procedures involving extracorporeal membrane 
oxygenation (ECMO) in combination with the insertion of a percutaneous 
short-term external heart assist device to determine if the current MS-
DRG assignment is appropriate.
    The logic for MS-DRG 215 is comprised of the procedure codes shown 
in the following table, for which we examined claims data in the 
September 2017 update of the FY 2017 MedPAR file in response to the 
commenters' requests. Our findings are shown in the following table.

                                                   MS-DRG 215
                                       [Other heart assist system implant]
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                                                                       cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
All cases.......................................................           3,428             8.7         $68,965
Cases with procedure code 02HA0RJ (Insertion of short-term                     0               0               0
 external heart assist system into heart, intraoperative, open
 approach)......................................................
Cases with procedure code 02HA0RS (Insertion of biventricular                  9              10         118,361
 short-term external heart assist system into heart, open
 approach)......................................................
Cases with procedure code 02HA0RZ (Insertion of short-term                    66            11.5          99,107
 external heart assist system into heart, open approach)........
Cases with procedure code 02HA3RJ (Insertion of short-term                     0               0               0
 external heart assist system into heart, intraoperative,
 percutaneous approach).........................................
Cases with procedure code 02HA3RS (Insertion of biventricular                117             7.2          64,302
 short-term external heart assist system into heart,
 percutaneous approach).........................................
Cases with procedure code 02HA3RZ (Insertion of short-term                 3,136             8.4          67,670
 external heart assist system into heart, percutaneous approach)
Cases with procedure code 02HA4RJ (Insertion of short-term                     0               0               0
 external heart assist system into heart, intraoperative,
 percutaneous endoscopic approach)..............................
Cases with procedure code 02HA4RS (Insertion of biventricular                  1               2          43,988
 short-term external heart assist system into heart,
 percutaneous endoscopic approach)..............................
Cases with procedure code 02HA4RZ (Insertion of short-term                    31             5.3          57,042
 external heart assist system into heart, percutaneous
 endoscopic approach)...........................................
Cases with procedure code 02WA0JZ (Revision of synthetic                       1              84         366,089
 substitute in heart, open approach)............................
Cases with procedure code 02WA0QZ (Revision of implantable heart              56            25.1         123,410
 assist system in heart, open approach).........................
Cases with procedure code 02WA0RS (Revision of biventricular                   0               0               0
 short-term external heart assist system in heart, open
 approach)......................................................
Cases with procedure code 02WA0RZ (Revision of short-term                      8            13.5          99,378
 external heart assist system in heart, open approach)..........
Cases with procedure code 02WA3QZ (Revision of implantable heart               0               0               0
 assist system in heart, percutaneous approach).................
Cases with procedure code 02WA3RS (Revision of biventricular                   0               0               0
 short-term external heart assist system in heart, percutaneous
 approach)......................................................
Cases with procedure code 02WA3RZ (Revision of short-term                     80              10          71,077
 external heart assist system in heart, percutaneous approach)..
Cases with procedure code 02WA4QZ (Revision of implantable heart               0               0               0
 assist system in heart, percutaneous endoscopic approach)......
Cases with procedure code 02WA4RS (Revision of biventricular                   0               0               0
 short-term external heart assist system in heart, percutaneous
 endoscopic approach)...........................................
Cases with procedure code 02WA4RZ (Revision of short-term                      0               0               0
 external heart assist system in heart, percutaneous endoscopic
 approach)......................................................
----------------------------------------------------------------------------------------------------------------

    As shown in this table, for MS-DRG 215, we found a total of 3,428 
cases with an average length of stay of 8.7 days and average costs of 
$68,965. For procedure codes describing the insertion of a 
biventricular short-term external heart

[[Page 20185]]

assist system with open, percutaneous or percutaneous endoscopic 
approaches, we found a total of 127 cases with an average length of 
stay ranging from 2 to 10 days and average costs ranging from $43,988 
to $118,361. For procedure codes describing the insertion of a short-
term external heart assist system with open, percutaneous or 
percutaneous endoscopic approaches, we found a total of 3,233 cases 
with an average length of stay ranging from 5.3 days to 11.5 days and 
average costs ranging from $57,042 to $99,107. For procedure codes 
describing the revision of a short-term external heart assist system 
with open or percutaneous approaches, we found a total of 88 cases with 
an average length of stay ranging from 10 to 13.5 days and average 
costs ranging from $71,077 to $99,378. We found 1 case reporting 
procedure code 02WA0JZ (Revision of synthetic substitute in heart, open 
approach), with an average length of stay of 84 days and average costs 
of $366,089. Lastly, we found 56 cases reporting procedure code 02WA0QZ 
(Revision of implantable heart assist system in heart, open approach) 
with an average length of stay of 25.1 days and average costs of 
$123,410.
    As the data show, there is a wide range in the average length of 
stay and the average costs for cases reporting procedures that involve 
a biventricular short-term external heart assist system versus a short-
term external heart assist system. There is an even greater range in 
the average length of stay and the average costs when comparing the 
revision of a short-term external heart assist system to the revision 
of a synthetic substitute in the heart or to the revision an 
implantable heart assist system.
    We agree with the commenters that continued monitoring of the data 
and further analysis is necessary prior to proposing any modifications 
to MS-DRG 215. As stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38012), we are aware that the AHA published Coding Clinic advice that 
clarified coding and reporting for certain external heart assist 
devices due to the technology being approved for new indications. The 
current claims data do not yet reflect that updated guidance. We also 
note that there have been recent updates to the descriptions of the 
codes for heart assist devices in the past year. For example, the 
qualifier ``intraoperative'' was added effective October 1, 2017 (FY 
2018) to the procedure codes describing the insertion of short-term 
external heart assist system procedures to distinguish between 
procedures where the device was only used intraoperatively and was 
removed at the conclusion of the procedure versus procedures where the 
device was not removed at the conclusion of the procedure and for which 
that qualifier would not be reported. The current claims data do not 
yet reflect these new procedure codes, which are displayed in the 
following table and are assigned to MS-DRG 215.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
02HA0RJ...................  Insertion of short-term external heart
                             assist system into heart, intraoperative,
                             open approach.
02HA3RJ...................  Insertion of short-term external heart
                             assist system into heart, intraoperative,
                             percutaneous approach.
02HA4RJ...................  Insertion of short-term external heart
                             assist system into heart, intraoperative,
                             percutaneous endoscopic approach.
------------------------------------------------------------------------

    Our clinical advisors agree that additional claims data are needed 
for analysis prior to proposing any changes to MS-DRG 215. Therefore, 
we are proposing not to make any modifications to MS-DRG 215 for FY 
2019. We are inviting public comments on our proposal.
    As stated earlier in this section, we also received a request to 
review cases reporting the use of ECMO in combination with the 
insertion of a percutaneous short[dash]term external heart assist 
device. Under ICD-10-PCS, ECMO is identified with procedure code 
5A15223 (Extracorporeal membrane oxygenation, continuous) and the 
insertion of a percutaneous short-term external heart assist device is 
identified with procedure code 02HA3RZ (Insertion of short-term 
external heart assist system into heart, percutaneous approach). 
According to the commenter, when ECMO procedures are performed 
percutaneously, they are less invasive and less expensive than 
traditional ECMO. The commenter also noted that, currently under ICD-
10-PCS, there is not a specific procedure code to identify percutaneous 
ECMO, and providers are only able to report ICD-10-PCS procedure code 
5A15223, which may be inappropriately resulting in a higher paying MS-
DRG. Therefore, the commenter submitted a separate request to create a 
new ICD-10-PCS procedure code specifically for percutaneous ECMO which 
was discussed at the March 6-7, 2018 ICD-10 Coordination and 
Maintenance Committee Meeting. We refer readers to section II.F.18. of 
the preamble of this proposed rule for further information regarding 
this meeting and the discussion for a new procedure code.
    The requestor suggested that cases reporting a procedure code for 
ECMO in combination with the insertion of a percutaneous short-term 
external heart assist device could be reassigned from Pre-MDC MS-DRG 
003 (ECMO or Tracheostomy with Mechanical Ventilation >96 Hours or 
Principal Diagnosis Except Face, Mouth and Neck with Major O.R. 
Procedure) to MS-DRG 215. Our analysis involved examining cases in Pre-
MDC MS-DRG 003 in the September 2017 update of the FY 2017 MedPAR file 
for cases reporting ECMO with and without the insertion of a 
percutaneous short-term external heart assist device. Our findings are 
shown in the following table.

                          ECMO and Percutaneous Short-Term External Heart Assist Device
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                         Pre-MDC MS-DRG                                cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 003--All cases...........................................          14,383            29.5        $118,218
MS-DRG 003--Cases with procedure code 5A15223 (Extracorporeal              1,786              19         119,340
 membrane oxygenation, continuous)..............................
MS-DRG 003--Cases with procedure code 5A15223 (Extracorporeal                 94            11.4         110,874
 membrane oxygenation, continuous) and 02HA3RZ (Insertion of
 short-term external heart assist system into heart,
 percutaneous approach).........................................

[[Page 20186]]

 
MS-DRG 003--Cases with procedure code 5A15223 (Extracorporeal                  1               1          64,319
 membrane oxygenation, continuous) and 02HA4RZ (Insertion of
 short-term external heart assist system into heart,
 percutaneous endoscopic approach)..............................
----------------------------------------------------------------------------------------------------------------

    As shown in this table, we found a total of 14,383 cases with an 
average length of stay of 29.5 days and average costs of $118,218 in 
Pre-MDC MS-DRG 003. We found 1,786 cases reporting procedure code 
5A15223 (Extracorporeal membrane oxygenation, continuous) with an 
average length of stay of 19 days and average costs of $119,340. We 
found 94 cases reporting procedure code 5A15223 and 02HA3RZ (Insertion 
of short-term external heart assist system into heart, percutaneous 
approach) with an average length of stay of 11.4 days and average costs 
of $110,874. Lastly, we found 1 case reporting procedure code 5A15223 
and 02HA4RZ (Insertion of short-term external heart assist system into 
heart, percutaneous endoscopic approach) with an average length of stay 
of 1 day and average costs of $64,319.
    We also reviewed the cases in MS-DRG 215 for procedure codes 
02HA3RZ and 02HA4RZ. Our findings are shown in the following table.

                              Percutaneous Short-Term External Heart Assist Device
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 215--All cases...........................................           3,428             8.7         $68,965
MS-DRG 215--Cases with procedure code 02HA3RZ (Insertion of                3,136             8.4          67,670
 short-term external heart assist system into heart,
 percutaneous approach).........................................
MS-DRG 215--Cases with procedure code 02HA4RZ (Insertion of                   31             5.3          57,042
 short-term external heart assist system into heart,
 percutaneous endoscopic approach)..............................
----------------------------------------------------------------------------------------------------------------

    As shown in this table, we found a total of 3,428 cases with an 
average length of stay of 8.7 days and average costs of $68,965. We 
found a total of 3,136 cases reporting procedure code 02HA3RZ with an 
average length of stay of 8.4 days and average costs of $67,670. We 
found a total of 31 cases reporting procedure code 02HA4RZ with an 
average length of stay of 5.3 days and average costs of $57,042.
    For Pre-MDC MS-DRG 003, while the average length of stay and 
average costs for cases where procedure code 5A15223 was reported with 
procedure code 02HA3RZ or procedure code 02HA4RZ are lower than the 
average length of stay and average costs for cases where procedure code 
5A15223 was reported alone, we are unable to determine from the data if 
those ECMO procedures were performed percutaneously in the absence of a 
unique code. In addition, the one case reporting procedure code 5A15223 
with 02HA4RZ only had a 1 day length of stay and it is unclear from the 
data what the circumstances of that case may have involved. For 
example, the patient may have been transferred or may have expired. 
Therefore, we are proposing to not reassign cases reporting procedure 
code 5A15223 when reported with procedure code 02HA3RZ or procedure 
code 02HA4RZ for FY 2019. Our clinical advisors agree that until there 
is a way to specifically identify percutaneous ECMO in the claims data 
to enable further analysis, a proposal at this time is not warranted. 
We are inviting public comments on our proposal.
    A commenter also suggested that CMS maintain the current logic for 
MS-DRGs 268 and 269 (Aortic and Heart Assist Procedures Except 
Pulsation Balloon with and without MCC, respectively), but recommended 
that CMS continue to monitor the data in these MS-DRGs for future 
consideration of distinctions (for example, different approaches and 
evolving technologies) that may impact the clinical and resource use of 
procedures involving heart assist devices.
    The logic for heart assist system devices in MS-DRGs 268 and 269 is 
comprised of the procedure codes shown in the following table, for 
which we examined claims data in the September 2017 update of the FY 
2017 MedPAR file in response to the commenter's request. Our findings 
are shown in the following table.

                     MS-DRGs for Aortic and Heart Assist Procedures Except Pulsation Balloon
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                                                                       cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 268--All cases...........................................           3,798             9.6         $49,122
MS-DRG 268--Cases with procedure code 02PA0QZ (Removal of                     16            23.4          79,850
 implantable heart assist system from heart, open approach).....
MS-DRG 268--Cases with procedure code 02PA0RS (Removal of                      0               0               0
 biventricular short-term external heart assist system from
 heart, open approach)..........................................
MS-DRG 268--Cases with procedure code 02PA0RZ (Removal of short-               0               0               0
 term external heart assist system from heart, open approach)...
MS-DRG 268--Cases with procedure code 02PA3QZ (Removal of                     28            10.5          31,797
 implantable heart assist system from heart, percutaneous
 approach)......................................................

[[Page 20187]]

 
MS-DRG 268--Cases with procedure code 02PA3RS (Removal of                      0               0               0
 biventricular short-term external heart assist system from
 heart, percutaneous approach)..................................
MS-DRG 268--Cases with procedure code 02PA3RZ (Removal of short-              96            12.4          51,469
 term external heart assist system from heart, percutaneous
 approach)......................................................
MS-DRG 268--Cases with procedure code 02PA4QZ (Removal of                      5             7.8          37,592
 implantable heart assist system from heart, percutaneous
 endoscopic approach)...........................................
MS-DRG 268--Cases with procedure code 02PA4RS (Removal of                      0               0               0
 biventricular short-term external heart assist system from
 heart, percutaneous endoscopic approach).......................
MS-DRG 268--Cases with procedure code 02PA4RZ (Removal of short-               0               0               0
 term external heart assist system from heart, percutaneous
 endoscopic approach)...........................................
MS-DRG 269--All cases...........................................          16,900             2.4          30,793
MS-DRG 269--Cases with procedure code 02PA0QZ (Removal of                     10               8          23,741
 implantable heart assist system from heart, open approach).....
MS-DRG 269--Cases with procedure code 02PA0RS (Removal of                      0               0               0
 biventricular short-term external heart assist system from
 heart, open approach)..........................................
MS-DRG 269--Cases with procedure code 02PA0RZ (Removal of short-               0               0               0
 term external heart assist system from heart, open approach)...
MS-DRG 269--Cases with procedure code 02PA3QZ (Removal of                      6               5          19,421
 implantable heart assist system from heart, percutaneous
 approach)......................................................
MS-DRG 269--Cases with procedure code 02PA3RS (Removal of                      0               0               0
 biventricular short-term external heart assist system from
 heart, percutaneous approach)..................................
MS-DRG 269--Cases with procedure code 02PA3RZ (Removal of short-              11               4          25,719
 term external heart assist system from heart, percutaneous
 approach)......................................................
MS-DRG 269--Cases with procedure code 02PA4QZ (Removal of                      1               3          14,415
 implantable heart assist system from heart, percutaneous
 endoscopic approach)...........................................
MS-DRG 269--Cases with procedure code 02PA4RS (Removal of                      0               0               0
 biventricular short-term external heart assist system from
 heart, percutaneous endoscopic approach).......................
MS-DRG 269--Cases with procedure code 02PA4RZ (Removal of short-               0               0               0
 term external heart assist system from heart, percutaneous
 endoscopic approach)...........................................
----------------------------------------------------------------------------------------------------------------

    As shown in this table, for MS-DRG 268, there were a total of 3,798 
cases, with an average length of stay of 9.6 days and average costs of 
$49,122. There were 16 cases reporting procedure code 02PA0QZ (Removal 
of implantable heart assist system from heart, open approach), with an 
average length of stay of 23.4 days and average costs of $79,850. There 
were no cases that reported procedure codes 02PA0RS (Removal of 
biventricular short-term external heart assist system from heart, open 
approach), 02PA0RZ (Removal of short-term external heart assist system 
from heart, open approach), 02PA3RS (Removal of biventricular short-
term external heart assist system from heart, percutaneous approach), 
02PA4RS (Removal of biventricular short-term external heart assist 
system from heart, percutaneous endoscopic approach) or 02PA4RZ 
(Removal of short-term external heart assist system from heart, 
percutaneous endoscopic approach). There were 28 cases reporting 
procedure code 02PA3QZ (Removal of implantable heart assist system from 
heart, percutaneous approach), with an average length of stay of 10.5 
days and average costs of $31,797. There were 96 cases reporting 
procedure code 02PA3RZ (Removal of short-term external heart assist 
system from heart, percutaneous approach), with an average length of 
stay of 12.4 days and average costs of $51,469. There were 5 cases 
reporting procedure code 02PA4QZ (Removal of implantable heart assist 
system from heart, percutaneous endoscopic approach), with an average 
length of stay of 7.8 days and average costs of $37,592. For MS-DRG 
269, there were a total of 16,900 cases, with an average length of stay 
of 2.4 days and average costs of $30,793. There were 10 cases reporting 
procedure code 02PA0QZ (Removal of implantable heart assist system from 
heart, open approach), with an average length of stay of 8 days and 
average costs of $23,741. There were no cases reporting procedure codes 
02PA0RS (Removal of biventricular short-term external heart assist 
system from heart, open approach), 02PA0RZ (Removal of short-term 
external heart assist system from heart, open approach), 02PA3RS 
(Removal of biventricular short-term external heart assist system from 
heart, percutaneous approach), 02PA4RS (Removal of biventricular short-
term external heart assist system from heart, percutaneous endoscopic 
approach) or 02PA4RZ (Removal of short-term external heart assist 
system from heart, percutaneous endoscopic approach). There were 6 
cases reporting procedure code 02PA3QZ (Removal of implantable heart 
assist system from heart, percutaneous approach), with an average 
length of stay of 5 days and average costs of $19,421. There were 11 
cases reporting procedure code 02PA3RZ (Removal of short-term external 
heart assist system from heart, percutaneous approach), with an average 
length of stay of 4 days and average costs of $25,719. There was 1 case 
reporting procedure code 02PA4QZ (Removal of implantable heart assist 
system from heart, percutaneous endoscopic approach), with an average 
length of stay of 3 days and average costs of $14,415.
    The data show that there are differences in the average length of 
stay and average costs for cases in MS-DRGs 268 and 269 according to 
the type of device (short-term external heart assist system or 
implantable heart assist system), and the approaches that were utilized 
(open, percutaneous, or percutaneous endoscopic). We agree with the 
recommendation to maintain the structure of MS-DRGs 268 and 269 for FY 
2019 and will continue to analyze the claims data for possible future 
updates. As such, we are proposing to not make any changes to the 
structure of MS-DRGs 268 and 269

[[Page 20188]]

for FY 2019. We are inviting public comments on our proposal.
b. Brachytherapy
    We received a request to create a new Pre-MDC MS-DRG for all 
procedures involving the CivaSheet[reg] technology, an implantable, 
planar brachytherapy source designed to enable delivery of radiation to 
the site of the cancer tumor excision or debulking, while protecting 
neighboring tissue. The requestor stated that physicians have used the 
CivaSheet[reg] technology for a number of indications, such as 
colorectal, gynecological, head and neck, soft tissue sarcomas and 
pancreatic cancer. The requestor noted that potential uses also include 
nonsmall-cell lung cancer, ocular melanoma, and atypical meningioma. 
Currently, procedures involving the CivaSheet[reg] technology are 
reported using ICD-10-PCS Section D--Radiation Therapy codes, with the 
root operation ``Brachytherapy.'' These codes are non-O.R. codes and 
group to the MS-DRG to which the principal diagnosis is assigned.
    In response to this request, we have analyzed claims data from the 
September 2017 update of the FY 2017 MedPAR file for cases representing 
patients who received treatment that reported low dose rate (LDR) 
brachytherapy procedure codes across all MS-DRGs. We refer readers to 
Table 6P.--ICD-10-CM and ICD-10-PCS Codes for Proposed MS-DRG Changes 
associated with this proposed rule, which is available via the Internet 
on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. A detailed list of these 
procedure codes are shown in Table 6P.1. Our findings are reflected in 
the following table.

              Cases Reporting Low Dose Rate (LDR) Brachytherapy Procedure Codes Across All MS-DRGs
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                      ICD-10-PCS procedures                            cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 129 (Major Head and Neck Procedures with CC/MCC or Major                1               7         $10,357
 Device)--Cases with procedure code D710BBZ (Low dose rate (LDR)
 brachytherapy of bone marrow using Palladium[dash]103 (Pd-103))
MS-DRG 724 (Malignancy, Male Reproductive System without CC/                   1               7          32,298
 MCC)--Cases with procedure code DV10BBZ (Low dose rate (LDR)
 brachytherapy of prostate using Palladium[dash]103 (Pd-103))...
MS-DRG 129--Cases with procedure code DW11BBZ (Low dose rate                   1               3          42,565
 (LDR) brachytherapy of head and neck using Palladium[dash]103
 (Pd-103))......................................................
MS-DRG 330 (Major Small and Large Bowel Procedures with CC)--                  1               8          74,190
 Cases with procedure code DW16BBZ (Low dose rate (LDR)
 brachytherapy of pelvic region using Palladium[dash]103 (Pd-
 103))..........................................................
----------------------------------------------------------------------------------------------------------------

    As shown in the immediately preceding table, we identified 4 cases 
reporting one of these LDR brachytherapy procedure codes across all MS-
DRGs, with an average length of stay of 6.3 days and average costs of 
$39,853. We believe that creating a new Pre-MDC MS-DRG based on such a 
small number of cases could lead to distortion in the relative payment 
weights for the Pre-MDC MS-DRG. Having a larger number of clinically 
cohesive cases within the Pre-MDC MS-DRG provides greater stability for 
annual updates to the relative payment weights. Therefore, we are not 
proposing to create a new Pre-MDC MS-DRG for procedures involving the 
CivaSheet[reg] technology for FY 2019. We are inviting public comments 
on our proposal to maintain the current MS[dash]DRG structure for 
procedures involving the CivaSheet[reg] technology.
c. Laryngectomy
    The logic for case assignment to Pre-MDC MS-DRGs 11, 12, and 13 
(Tracheostomy for Face, Mouth and Neck Diagnoses with MCC, with CC, and 
without CC/MCC, respectively) as displayed in the ICD-10 MS-DRG Version 
35 Definitions Manual, which is available via the Internet on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2018-IPPS-Final-Rule-Home-Page-Items/FY2018-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending, is 
comprised of a list of procedure codes for laryngectomies, a list of 
procedure codes for tracheostomies, and a list of diagnosis codes for 
conditions involving the face, mouth, and neck. The procedure codes for 
laryngectomies are listed separately and are reported differently from 
the procedure codes listed for tracheostomies. The procedure codes 
listed for tracheostomies must be reported with a diagnosis code 
involving the face, mouth, or neck as a principal diagnosis to satisfy 
the logic for assignment to Pre-MDC MS-DRG 11, 12, or 13. 
Alternatively, any principal diagnosis code reported with a procedure 
code from the list of procedure codes for laryngectomies will satisfy 
the logic for assignment to Pre[dash]MDC MS-DRG 11, 12, or 13.
    To improve the manner in which the logic for assignment is 
displayed in the ICD-10 MS-DRG Definitions Manual and to clarify how it 
is applied for grouping purposes, we are proposing to reorder the lists 
of the diagnosis and procedure codes. The list of principal diagnosis 
codes for face, mouth, and neck would be sequenced first, followed by 
the list of the tracheostomy procedure codes and, lastly, the list of 
laryngectomy procedure codes.
    We also are proposing to revise the titles of Pre-MDC MS-DRGs 11, 
12, and 13 from ``Tracheostomy for Face, Mouth and Neck Diagnoses with 
MCC, with CC and without CC/MCC, respectively'' to ``Tracheostomy for 
Face, Mouth and Neck Diagnoses or Laryngectomy with MCC'', 
``Tracheostomy for Face, Mouth and Neck Diagnoses or Laryngectomy with 
CC'', and ``Tracheostomy for Face, Mouth and Neck Diagnoses or 
Laryngectomy without CC/MCC'', respectively, to reflect that 
laryngectomy procedures may also be assigned to these MS-DRGs.
    We are inviting public comments on our proposals.
d. Chimeric Antigen Receptor (CAR) T-Cell Therapy
    Chimeric Antigen Receptor (CAR) T-cell therapy is a cell-based gene 
therapy in which a patient's own T-cells are genetically engineered in 
a laboratory and used to assist in the patient's treatment to attack 
certain cancerous cells. Blood is drawn from the patient and the T-
cells are separated. The laboratory then utilizes the CAR process to 
genetically engineer the T[dash]cells,

[[Page 20189]]

resulting in the addition of a chimeric antigen receptor that will bind 
to a certain protein on the patient's cancerous cells. The CAR 
T[dash]cells are then administered to the patient by infusion.
    Two CAR T[dash]cell therapy drugs received FDA approval in 2017. 
KYMRIAHTM (manufactured by Novartis Pharmaceuticals 
Corporation) was approved for the use in the treatment of patients up 
to 25 years of age with B-cell precursor acute lymphoblastic leukemia 
(ALL) that is refractory or in second or later relapse. 
YESCARTATM (manufactured by Kite Pharma, Inc.) was approved 
for use in the treatment of adult patients with relapsed or refractory 
large B-cell lymphoma and who have not responded to or who have 
relapsed after at least two other kinds of treatment.
    Procedures involving the CAR T[dash]cell therapy drugs are 
currently identified with ICD-10-PCS procedure codes XW033C3 
(Introduction of engineered autologous chimeric antigen receptor t-cell 
immunotherapy into peripheral vein, percutaneous approach, new 
technology group 3) and XW043C3 (Introduction of engineered autologous 
chimeric antigen receptor t-cell immunotherapy into central vein, 
percutaneous approach, new technology group 3), which both became 
effective October 1, 2017. Procedures described by these two ICD-10-PCS 
procedure codes are designated as non-O.R. procedures that have no 
impact on MS-DRG assignment.
    We have received many inquiries from the public regarding payment 
of CAR T[dash]cell therapy under the IPPS. Suggestions for the MS-DRG 
assignment for FY 2019 ranged from assigning ICD-10-PCS procedure codes 
XW033C3 and XW043C3 to an existing MS-DRG to the creation of a new MS-
DRG for CAR T[dash]cell therapy. In the context of the recommendation 
to create a new MS-DRG for FY 2019, we also received suggestions that 
payment should be established in a way that promotes comparability 
between the inpatient setting and outpatient setting.
    As part of our review of these suggestions, we examined the 
existing MS-DRGs to identify the MS-DRGs that represent cases most 
clinically similar to those cases in which the CAR T[dash]cell therapy 
procedures would be reported. The CAR T-cell procedures involve a type 
of autologous immunotherapy in which the patient's cells are 
genetically transformed and then returned to that patient after the 
patient undergoes cell depleting chemotherapy. Our clinical advisors 
believe that patients receiving treatment utilizing CAR T-cell therapy 
procedures would have similar clinical characteristics and 
comorbidities to those seen in cases representing patients receiving 
treatment for other hematopoietic carcinomas who are treated with 
autologous bone marrow transplant therapy that are currently assigned 
to MS-DRG 016 (Autologous Bone Marrow Transplant with CC/MCC). 
Therefore, after consideration of the inquiries received as to how the 
IPPS can appropriately group cases reporting the use of CAR T-cell 
therapy, we are proposing to assign ICD-10-PCS procedure codes XW033C3 
and XW043C3 to Pre[dash]MDC MS-DRG 016 for FY 2019. In addition, we are 
proposing to revise the title of MS-DRG 016 from ``Autologous Bone 
Marrow Transplant with CC/MCC'' to ``Autologous Bone Marrow Transplant 
with CC/MCC or T-cell Immunotherapy.''
    However, we note that, as discussed in greater detail in section 
II.H.5.a. of the preamble of this proposed rule, the manufacturer of 
KYMRIAHTM and the manufacturer of YESCARTATM 
submitted applications for new technology add-on payments for FY 2019. 
We also recognize that many members of the public have noted that the 
combination of the new technology add-on payment applications, the 
extremely high[dash]cost of these CAR T-cell therapy drugs, and the 
potential for volume increases over time present unique challenges with 
respect to the MS-DRG assignment for procedures involving the 
utilization of CAR T-cell therapy drugs and cases representing patients 
receiving treatment involving CAR T-cell therapy. We believe that, in 
the context of these pending new technology add-on payment 
applications, there may also be merit in the alternative suggestion we 
received to create a new MS-DRG for procedures involving the 
utilization of CAR T-cell therapy drugs and cases representing patients 
receiving treatment involving CAR T-cell therapy to which we could 
assign ICD-10-PCS procedure codes XW033C3 and XW043C3, effective for 
discharges occurring in FY 2019. As noted in section II.H.5.a. of the 
preamble of this proposed rule, if a new MS-DRG were to be created then 
consistent with section 1886(d)(5)(K)(ix) of the Act there may no 
longer be a need for a new technology add-on payment under section 
1886(d)(5)(K)(ii)(III) of the Act.
    We are inviting public comments on our proposed approach of 
assigning ICD-10-PCS procedure codes XW033C3 and XW043C3 to Pre-MDC MS-
DRG 016 for FY 2019. We also are inviting public comments on 
alternative approaches, including in the context of the pending 
KYMRIAHTM and YESCARTATM new technology add-on 
payment applications, and the most appropriate way to establish payment 
for FY 2019 under any alternative approaches. Such payment alternatives 
may include using a CCR of 1.0 for charges associated with ICD-10-PCS 
procedure codes XW033C3 and XW043C3, given that many public inquirers 
believed that hospitals would be unlikely to set charges different from 
the costs for KYMRIAHTM and YESCARTATM CAR T-cell 
therapy drugs, as discussed further in section II.A.4.g.2. of the 
Addendum of this proposed rule. These payment alternatives, including 
payment under any potential new MS-DRG, also could take into account an 
appropriate portion of the average sales price (ASP) for these drugs, 
including in the context of the pending new technology add-on payment 
applications.
    We are inviting comments on how these payment alternatives would 
affect access to care, as well as how they affect incentives to 
encourage lower drug prices, which is a high priority for this 
Administration. In addition, we are considering approaches and 
authorities to encourage value-based care and lower drug prices. We 
solicit comments on how the payment methodology alternatives may 
intersect and affect future participation in any such alternative 
approaches.
    As stated in section II.F.1.b. of the preamble of this proposed 
rule, we described the criteria used to establish new MS-DRGs. In 
particular, we consider whether the resource consumption and clinical 
characteristics of the patients with a given set of conditions are 
significantly different than the remaining patients in the MS-DRG. We 
evaluate patient care costs using average costs and lengths of stay and 
rely on the judgment of our clinical advisors to decide whether 
patients are clinically distinct or similar to other patients in the 
MS-DRG. In evaluating resource costs, we consider both the absolute and 
percentage differences in average costs between the cases we select for 
review and the remainder of cases in the MS-DRG. We also consider 
whether observed average differences are consistent across patients or 
attributable to cases that were 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. 
Based on the principles typically used to establish a new MS-DRG, we 
are soliciting comments on how the administration of the CAR T-cell

[[Page 20190]]

therapy drugs and associated services meet the criteria for the 
creation of a new MS-DRG. Also, section 1886(d)(4)(C)(iii) of the Act 
specifies that, beginning in FY 1991, the annual DRG reclassification 
and recalibration of the relative weights must be made in a manner that 
ensures that aggregate payments to hospitals are not affected. Given 
that a new MS-DRG must be established in a budget neutral manner, we 
are concerned with the redistributive effects away from core hospital 
services over time toward specialized hospitals and how that may affect 
payment for these core services. Therefore, we are soliciting public 
comments on our concerns with the payment alternatives that we are 
considering for CAR T-cell therapy drugs and therapies.
3. MDC 1 (Diseases and Disorders of the Nervous System)
a. Epilepsy With Neurostimulator
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015 through 
38019), based on a request we received and our review of the claims 
data, the advice of our clinical advisors, and consideration of public 
comments, we finalized our proposal to reassign all cases reporting a 
principal diagnosis of epilepsy and one of the following ICD-10-PCS 
code combinations, which capture cases involving neurostimulator 
generators inserted into the skull (including cases involving the use 
of the RNS(copyright) neurostimulator), to retitled MS-DRG 023 
(Craniotomy with Major Device Implant or Acute Complex Central Nervous 
System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant 
or Epilepsy with Neurostimulator), 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).
    The finalized listing of epilepsy diagnosis codes (82 FR 38018 
through 38019) contained codes provided by the requestor (82 FR 38016), 
in addition to diagnosis codes organized in subcategories G40.A- and 
G40.B- as recommended by a commenter in response to the proposed rule 
(82 FR 38018) because the diagnosis codes organized in these 
subcategories also are representative of diagnoses of epilepsy.
    For FY 2019, we received a request to include two additional 
diagnosis codes organized in subcategory G40.1- in the listing of 
epilepsy diagnosis codes for cases assigned to MS-DRG 023 because these 
diagnosis codes also represent diagnoses of epilepsy. The two 
additional codes identified by the requestor are:
     G40.109 (Localization-related (focal) (partial) 
symptomatic epilepsy and epileptic syndromes with simple partial 
seizures, not intractable, without status epilepticus); and
     G40.111 (Localization-related (focal) (partial) 
symptomatic epilepsy and epileptic syndromes with simple partial 
seizures, intractable, with status epilepticus).
    We agree with the requestor that diagnosis codes G40.109 and 
G40.111 also are representative of epilepsy diagnoses and should be 
added to the listing of epilepsy diagnosis codes for cases assigned to 
MS-DRG 023 because they also capture a type of epilepsy. Our clinical 
advisors reviewed this issue and agree that adding the two additional 
epilepsy diagnosis codes is appropriate. Therefore, we are proposing to 
add ICD-10-CM diagnosis codes G40.109 and G40.111 to the listing of 
epilepsy diagnosis codes for cases assigned to MS-DRG 023, effective 
October 1, 2018.
    We are inviting public comments on our proposal.
b. Neurological Conditions With Mechanical Ventilation
    We received two separate, but related requests to create new MS-
DRGs for cases that identify patients who have been diagnosed with 
neurological conditions classified under MDC 1 (Diseases and Disorders 
of the Nervous System) and who require mechanical ventilation with and 
without a thrombolytic and in the absence of an O.R. procedure. The 
requestors suggested that CMS consider when mechanical ventilation is 
reported with a neurological condition for the ICD-10 MS-DRG GROUPER 
assignment logic, similar to the current logic for MS-DRGs 207 and 208 
(Respiratory System Diagnosis with Ventilator Support >96 Hours and 
<=96 Hours, respectively) under MDC 4 (Diseases and Disorders of the 
Respiratory System), which consider respiratory conditions that require 
mechanical ventilation and are assigned a higher relative weight.
    The requestors stated that patients with a principal diagnosis of 
respiratory failure requiring mechanical ventilation are currently 
assigned to MS-DRG 207 (Respiratory System Diagnoses with Ventilator 
Support >96 Hours), which has a relative weight of 5.4845, and to MS-
DRG 208 (Respiratory System Diagnoses with Ventilator Support <=96 
Hours), which has a relative weight of 2.3678. The requestors also 
stated that patients with a principal diagnosis of ischemic cerebral 
infarction who received a thrombolytic agent during the hospital stay 
and did not undergo an O.R. procedure are assigned to MS-DRGs 061, 062, 
and 063 (Ischemic Stroke, Precerebral Occlusion or Transient Ischemia 
with Thrombolytic Agent with MCC, with CC, and without CC/MCC, 
respectively) under MDC 1, while patients with a principal diagnosis of 
intracranial hemorrhage or ischemic cerebral infarction who did not 
receive a thrombolytic agent during the hospital stay and did not 
undergo an O.R. procedure are assigned to MS-DRGs 064, 065 and 66 
(Intracranial Hemorrhage or Cerebral Infarction with MCC, with CC or 
TPA in 24 Hours, and without CC/MCC, respectively) under MDC 1.
    The requestors provided the current FY 2018 relative weights for 
these MS-DRGs as shown in the following table.

------------------------------------------------------------------------
                                                             Relative
           MS-DRG                    MS-DRG title             weight
------------------------------------------------------------------------
MS-DRG 061..................  Ischemic Stroke,                    2.7979
                               Precerebral Occlusion or
                               Transient Ischemia with
                               Thrombolytic Agent with
                               MCC.
MS-DRG 062..................  Ischemic Stroke,                    l.9321
                               Precerebral Occlusion or
                               Transient Ischemia with
                               Thrombolytic Agent with
                               CC.
MS-DRG 063..................  Ischemic Stroke,                    l.6169
                               Precerebral Occlusion or
                               Transient Ischemia with
                               Thrombolytic Agent
                               without CC/MCC.
MS-DRG 064..................  Intracranial Hemorrhage or          l.7685
                               Cerebral Infarction with
                               MCC.
MS-DRG 065..................  Intracranial Hemorrhage or          1.0311
                               Cerebral Infarction with
                               CC or TPA in 24 hours.
MS-DRG 066..................  Intracranial Hemorrhage or           .7466
                               Cerebral Infarction with
                               MCC.
------------------------------------------------------------------------


[[Page 20191]]

    The requestors stated that although the ICD-10-CM Official 
Guidelines for Coding and Reporting allow sequencing of acute 
respiratory failure as the principal diagnosis when it is jointly 
responsible (with an acute neurologic event) for admission, which would 
result in assignment to MS-DRGs 207 or 208 when the patient requires 
mechanical ventilation, it would not be appropriate to sequence acute 
respiratory failure as the principal diagnosis when it is secondary to 
intracranial hemorrhage or ischemic cerebral infarction.
    The requestors also stated that reporting for other purposes, such 
as quality measures, clinical trials, and Joint Commission and State 
certification or survey cases, is based on the principal diagnosis, and 
it is important, from a quality of care perspective, that the 
intracranial hemorrhage or cerebral infarction codes continue to be 
sequenced as principal diagnosis. The requestors believed that cases of 
patients who present with cerebral infarction or cerebral hemorrhage 
and acute respiratory failure are currently in conflict for principal 
diagnosis sequencing because the cerebral infarction or cerebral 
hemorrhage code is needed as the principal diagnosis for quality 
reporting and other purposes. However, acute respiratory failure is 
needed as the principal diagnosis for purposes of appropriate payment 
under the MS-DRGs.
    The requestors stated that by creating new MS-DRGs for neurological 
conditions with mechanical ventilation, those patients who require 
mechanical ventilation for airway protection on admission and those 
patients who develop acute respiratory failure requiring mechanical 
ventilation after admission can be grouped to MS-DRGs that provide 
appropriate payment for the mechanical ventilation resources. The 
requestors suggested two new MS-DRGs, citing as support that new MS-
DRGs were created for patients with sepsis requiring mechanical 
ventilation greater than and less than 96 hours.
    As discussed earlier in this section, the requests we received were 
separate, but related requests. The first request was to specifically 
identify patients presenting with intracranial hemorrhage or cerebral 
infarction with mechanical ventilation and create two new MS-DRGs as 
follows:
     Suggested new MS-DRG XXX (Intracranial Hemorrhage or 
Cerebral Infarction with Mechanical Ventilation >96 Hours); and
     Suggested new MS-DRG XXX (Intracranial Hemorrhage or 
Cerebral Infarction with Mechanical Ventilation <=96 Hours).
    The second request was to consider any principal diagnosis under 
the current GROUPER logic for MDC 1 with mechanical ventilation and 
create two new MS-DRGs as follows:
     Suggested New MS-DRG XXX (Neurological System Diagnosis 
with Mechanical Ventilation 96+ Hours); and
     Suggested New MS-DRG XXX (Neurological System Diagnosis 
with Mechanical Ventilation <=96 Hours).
    Both requesters suggested that CMS use the three ICD-10-PCS codes 
identifying mechanical ventilation to assign cases to the respective 
suggested new MS-DRGs. The three ICD-10-PCS codes are shown in the 
following table.

------------------------------------------------------------------------
           ICD-10-PCS code                     Code description
------------------------------------------------------------------------
5A1935Z.............................  Respiratory ventilation, less than
                                       96 consecutive hours.
5A1945Z.............................  Respiratory ventilation, 24-96
                                       consecutive hours.
5A1955Z.............................  Respiratory ventilation, greater
                                       than 96 consecutive hours.
------------------------------------------------------------------------

    Below we discuss the different aspects of each request in more 
detail.
    The first request involved two aspects: (1) Analyzing patients 
diagnosed with cerebral infarction and required mechanical ventilation 
who received a thrombolytic (for example, TPA) and did not undergo an 
O.R. procedure; and (2) analyzing patients diagnosed with intracranial 
hemorrhage or ischemic cerebral infarction and required mechanical 
ventilation who did not receive a thrombolytic (for example, TPA) 
during the current episode of care and did not undergo an O.R. 
procedure.
    For the first subset of patients, we analyzed claims data from the 
September 2017 update of the FY 2017 MedPAR file for MS-DRGs 061, 062, 
and 063 because cases that are assigned to these MS-DRGs specifically 
identify patients who were diagnosed with a cerebral infarction and 
received a thrombolytic. The 90 ICD-10-CM diagnosis codes that specify 
a cerebral infarction and were included in our analysis are listed in 
Table 6P.1a associated with this proposed rule (which is available via 
the Internet on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
    The ICD-10-PCS procedure codes displayed in the following table 
describe use of a thrombolytic agent.

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

    We examined claims data in MS-DRGs 061, 062, and 063 and identified 
cases that reported mechanical ventilation of any duration with a 
principal diagnosis of cerebral infarction where a thrombolytic agent 
was administered and the patient did not undergo an O.R. procedure. Our

[[Page 20192]]

findings are shown in the following table.

                                  Cerebral Infarction With Thrombolytic and MV
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 061--All cases...........................................           5,192             6.4         $20,097
MS-DRG 061--Cases with principal diagnosis of cerebral                       166            12.8          41,691
 infarction and mechanical ventilation >96 hours................
MS-DRG 061--Cases with principal diagnosis of cerebral                       378             7.5          26,368
 infarction and mechanical ventilation =24-96 hours.............
MS-DRG 061--Cases with principal diagnosis of cerebral                       214             4.9          19,795
 infarction and mechanical ventilation <24 hours................
MS-DRG 062--All cases...........................................           9,730             3.9          13,865
MS-DRG 062--Cases with principal diagnosis of cerebral                         0             0.0               0
 infarction and mechanical ventilation >96 hours................
MS-DRG 062--Cases with principal diagnosis of cerebral                        10             5.3          19,817
 infarction and mechanical ventilation =24-96 hours.............
MS-DRG 062--Cases with principal diagnosis of cerebral                        23             3.8          14,026
 infarction and mechanical ventilation <24 hours................
MS-DRG 063--All cases...........................................           1,984             2.7          11,771
MS-DRG 063--Cases with principal diagnosis of cerebral                         0             0.0               0
 infarction and mechanical ventilation >96 hours................
MS-DRG 063--Cases with principal diagnosis of cerebral                         3             2.7          14,588
 infarction and mechanical ventilation =24-96 hours.............
MS-DRG 063--Cases with principal diagnosis of cerebral                         5             2.0          11,195
 infarction and mechanical ventilation <24 hours................
----------------------------------------------------------------------------------------------------------------

    As shown in this table, there were a total of 5,192 cases in MS-DRG 
061 with an average length of stay of 6.4 days and average costs of 
$20,097. There were a total of 758 cases reporting the use of 
mechanical ventilation in MS-DRG 061 with an average length of stay 
ranging from 4.9 days to 12.8 days and average costs ranging from 
$19,795 to $41,691. For MS-DRG 062, there were a total of 9,730 cases 
with an average length of stay of 3.9 days and average costs of 
$13,865. There were a total of 33 cases reporting the use of mechanical 
ventilation in MS-DRG 062 with an average length of stay ranging from 
3.8 days to 5.3 days and average costs ranging from $14,026 to $19,817. 
For MS[dash]DRG 063, there were a total of 1,984 cases with an average 
length of stay of 2.7 days and average costs of $11,771. There were a 
total of 8 cases reporting the use of mechanical ventilation in MS-DRG 
063 with an average length of stay ranging from 2.0 days to 2.7 days 
and average costs ranging from $11,195 to $14,588.
    We then compared the total number of cases in MS-DRGs 061, 062, and 
063 specifically reporting mechanical ventilation >96 hours with a 
principal diagnosis of cerebral infarction where a thrombolytic agent 
was administered and the patient did not undergo an O.R. procedure 
against the total number of cases reporting mechanical ventilation <=96 
hours with a principal diagnosis of cerebral infarction where a 
thrombolytic agent was administered and the patient did not undergo an 
O.R. procedure. Our findings are shown in the following table.

                                  Cerebral Infarction With Thrombolytic and MV
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 061--All cases...........................................           5,192             6.4         $20,097
MS-DRG 061--Cases with principal diagnosis of cerebral                       166            12.8          41,691
 infarction and mechanical ventilation >96 hours................
MS-DRG 061--Cases with principal diagnosis of cerebral                       594             6.5          23,780
 infarction and mechanical ventilation <=96 hours...............
MS-DRG 062--All cases...........................................           9,730             3.9          13,865
MS-DRG 062--Cases with principal diagnosis of cerebral                         0             0.0               0
 infarction and mechanical ventilation >96 hours................
MS-DRG 062--Cases with principal diagnosis of cerebral                        34             4.2          15,558
 infarction and mechanical ventilation <=96 hours...............
MS-DRG 063--All cases...........................................           1,984             2.7          11,771
MS-DRG 063--Cases with principal diagnosis of cerebral                         0             0.0              $0
 infarction and mechanical ventilation >96 hours................
MS-DRG 063--Cases with principal diagnosis of cerebral                         8             2.3          12,467
 infarction and mechanical ventilation <=96 hours...............
----------------------------------------------------------------------------------------------------------------

    As shown in this table, the total number of cases reported in MS-
DRG 061 was 5,192, with an average length of stay of 6.4 days and 
average costs of $20,097. There were 166 cases that reported mechanical 
ventilation >96

[[Page 20193]]

hours, with an average length of stay of 12.8 days and average costs of 
$41,691. There were 594 cases that reported mechanical ventilation <=96 
hours, with an average length of stay of 6.5 days and average costs of 
$23,780.
    The total number of cases reported in MS-DRG 062 was 9,730, with an 
average length of stay of 3.9 days and average costs of $13,865. There 
were no cases identified in MS-DRG 062 where mechanical ventilation >96 
hours was reported. However, there were 34 cases that reported 
mechanical ventilation <=96 hours, with an average length of stay of 
4.2 days and average costs of $15,558.
    The total number of cases reported in MS-DRG 63 was 1,984 with an 
average length of stay of 2.7 days and average costs of $11,771. There 
were no cases identified in MS-DRG 063 where mechanical ventilation >96 
hours was reported. However, there were 8 cases that reported 
mechanical ventilation <=96 hours, with an average length of stay of 
2.3 days and average costs of $12,467.
    For the second subset of patients, we examined claims data for MS-
DRGs 064, 065, and 066. We identified cases reporting mechanical 
ventilation of any duration with a principal diagnosis of cerebral 
infarction or intracranial hemorrhage where a thrombolytic agent was 
not administered during the current hospital stay and the patient did 
not undergo an O.R. procedure. The 33 ICD-10-CM diagnosis codes that 
specify an intracranial hemorrhage and were included in our analysis 
are listed in Table 6P.1b associated with this proposed rule (which is 
available via the Internet on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
    We also used the list of 90 ICD-10-CM diagnosis codes that specify 
a cerebral infarction listed in Table 6P.1a associated with this 
proposed rule for our analysis. We note that the GROUPER logic for case 
assignment to MS-DRG 065 includes that a thrombolytic agent (for 
example, TPA) was administered within 24 hours of the current hospital 
stay. The ICD-10-CM diagnosis code that describes this scenario is 
Z92.82 (Status post administration of tPA (rtPA) in a different 
facility within the last 24 hours prior to admission to current 
facility). We did not review the cases reporting that diagnosis code 
for our analysis. Our findings are shown in the following table.

                 Cerebral Infarction or Intracranial Hemorrhage With MV and Without Thrombolytic
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 064--All cases...........................................          76,513             6.0         $12,574
MS-DRG 064--Cases with principal diagnosis of cerebral                     2,153            13.4          38,262
 infarction or intracranial hemorrhage and mechanical
 ventilation >96 hours..........................................
MS-DRG 064--Cases with principal diagnosis of cerebral                     4,843             6.6          18,119
 infarction or intracranial hemorrhage and mechanical
 ventilation =24-96 hours.......................................
MS-DRG 064--Cases with principal diagnosis of cerebral                     4,001             3.1           8,675
 infarction or intracranial hemorrhage and mechanical
 ventilation <24 hours..........................................
MS-DRG 065--All cases...........................................         106,554             3.7           7,236
MS-DRG 065--Cases with principal diagnosis of cerebral                        22            10.2          20,759
 infarction or intracranial hemorrhage and mechanical
 ventilation >96 hours..........................................
MS-DRG 065--Cases with principal diagnosis of cerebral                       127             4.2          12,688
 infarction or intracranial hemorrhage and mechanical
 ventilation =24-96 hours.......................................
MS-DRG 065--Cases with principal diagnosis of cerebral                       301             2.1           6,145
 infarction or intracranial hemorrhage and mechanical
 ventilation <24 hours..........................................
MS-DRG 066--All cases...........................................          34,689             2.5           5,321
MS-DRG 066--Cases with principal diagnosis of cerebral                         1             4.0           3,426
 infarction or intracranial hemorrhage and mechanical
 ventilation >96 hours..........................................
MS-DRG 066--Cases with principal diagnosis of cerebral                        31             3.7          10,364
 infarction or intracranial hemorrhage and mechanical
 ventilation =24-96 hours.......................................
MS-DRG 066--Cases with principal diagnosis of cerebral                       163             1.4           4,148
 infarction or intracranial hemorrhage and mechanical
 ventilation <24 hours..........................................
----------------------------------------------------------------------------------------------------------------

    The total number of cases reported in MS-DRG 064 was 76,513, with 
an average length of stay of 6.0 days and average costs of $12,574. 
There were a total of 10,997 cases reporting the use of mechanical 
ventilation in MS-DRG 064 with an average length of stay ranging from 
3.1 days to 13.4 days and average costs ranging from $8,675 to $38,262. 
For MS-DRG 065, there were a total of 106,554 cases with an average 
length of stay of 3.7 days and average costs of $7,236. There were a 
total of 450 cases reporting the use of mechanical ventilation in MS-
DRG 065 with an average length of stay ranging from 2.1 days to 10.2 
days and average costs ranging from $6,145 to $20,759. For MS-DRG 066, 
there were a total of 34,689 cases with an average length of stay of 
2.5 days and average costs of $5,321. There were a total of 195 cases 
reporting the use of mechanical ventilation in MS-DRG 066 with an 
average length of stay ranging from 1.4 days to 4.0 days and average 
costs ranging from $3,426 to $10,364.
    We then compared the total number of cases in MS-DRGs 064, 065, and 
066 specifically reporting mechanical ventilation >96 hours with a 
principal diagnosis of cerebral infarction or intracranial hemorrhage 
where a thrombolytic agent was not administered and the patient did not 
undergo an O.R. procedure against the total number of cases reporting 
mechanical ventilation <=96 hours with a principal diagnosis of 
cerebral infarction or intracranial hemorrhage where a thrombolytic 
agent was not administered and the patient did not undergo an O.R. 
procedure. Our findings are shown in the following table.

[[Page 20194]]



                 Cerebral Infarction or Intracranial Hemorrhage With MV and Without Thrombolytic
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 064--All cases...........................................          76,513             6.0         $12,574
MS-DRG 064--Cases with principal diagnosis of cerebral                     2,153            13.4          38,262
 infarction or intracranial hemorrhage and mechanical
 ventilation >96 hours..........................................
MS-DRG 064--Cases with principal diagnosis of cerebral                     8,794             4.9          13,704
 infarction or intracranial hemorrhage and mechanical
 ventilation <=96 hours.........................................
MS-DRG 065--All cases...........................................         106,554             3.7           7,236
MS-DRG 065--Cases with principal diagnosis of cerebral                        22            10.2          20,759
 infarction or intracranial hemorrhage and mechanical
 ventilation >96 hours..........................................
MS-DRG 065--Cases with principal diagnosis of cerebral                       428             2.7           8,086
 infarction or intracranial hemorrhage and mechanical
 ventilation <=96 hours.........................................
MS-DRG 066--All cases...........................................          34,689             2.5           5,321
MS-DRG 066--Cases with principal diagnosis of cerebral                         1             4.0           3,426
 infarction or intracranial hemorrhage and mechanical
 ventilation >96 hours..........................................
MS-DRG 066--Cases with principal diagnosis of cerebral                       194             1.8           5,141
 infarction or intracranial hemorrhage and mechanical
 ventilation <=96 hours.........................................
----------------------------------------------------------------------------------------------------------------

    The total number of cases reported in MS-DRG 064 was 76,513, with 
an average length of stay of 6.0 days and average costs of $12,574. 
There were 2,153 cases that reported mechanical ventilation >96 hours, 
with an average length of stay of 13.4 days and average costs of 
$38,262, and there were 8,794 cases that reported mechanical 
ventilation <=96 hours, with an average length of stay of 4.9 days and 
average costs of $13,704.
    The total number of cases reported in MS-DRG 65 was 106,554, with 
an average length of stay of 3.7 days and average costs of $7,236. 
There were 22 cases that reported mechanical ventilation >96 hours, 
with an average length of stay of 10.2 days and average costs of 
$20,759, and there were 428 cases that reported mechanical 
ventilation<=96 hours, with an average length of stay of 2.7 days and 
average costs of $8,086.
    The total number of cases reported in MS-DRG 66 was 34,689, with an 
average length of stay of 2.5 days and average costs of $5,321. There 
was one case that reported mechanical ventilation >96 hours, with an 
average length of stay of 4.0 days and average costs of $3,426, and 
there were 194 cases that reported mechanical ventilation <=96 hours, 
with an average length of stay of 1.8 days and average costs of $5,141.
    We also analyzed claims data for MS-DRGs 207 and 208. As shown in 
the following table, there were a total of 19,471cases found in MS-DRG 
207 with an average length of stay of 13.8 days and average costs of 
$38,124. For MS-DRG 208, there were a total of 55,802 cases found with 
an average length of stay of 6.7 days and average costs of $17,439.

                              Respiratory System Diagnosis With Ventilator Support
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 207--All cases...........................................          19,471            13.8         $38,124
MS-DRG 208--All cases...........................................          55,802             6.7          17,439
----------------------------------------------------------------------------------------------------------------

    Our analysis of claims data relating to the first request for MS-
DRGs 061, 062, 063, 064, 065, and 066 and consultation with our 
clinical advisors do not support creating new MS-DRGs for cases that 
identify patients diagnosed with cerebral infarction or intracranial 
hemorrhage who require mechanical ventilation with or without a 
thrombolytic and in the absence of an O.R. procedure.
    For the first subset of patients (in MS-DRGs 061, 062 and 063), our 
data findings for MS-DRG 061 demonstrate the 166 cases that reported 
mechanical ventilation >96 hours had a longer average length of stay 
(12.8 days versus 6.4 days) and higher average costs ($41,691 versus 
$20,097) compared to all the cases in MS-DRG 061. However, there were 
no cases that reported mechanical ventilation >96 hours for MS-DRG 062 
or MS-DRG 063. For the 594 cases that reported mechanical ventilation 
<=96 hours in MS[dash]DRG 061, the data show that the average length of 
stay was consistent with the average length of stay of all of the cases 
in MS-DRG 061 (6.5 days versus 6.4 days) and the average costs were 
also consistent with the average costs of all of the cases in 
MS[dash]DRG 061 ($23,780 versus $20,097). For the 34 cases that 
reported mechanical ventilation <=96 hours in MS-DRG 062, the data show 
that the average length of stay was consistent with the average length 
of stay of all of the cases in MS-DRG 062 (4.2 days versus 3.9 days) 
and the average costs were also consistent with the average costs of 
all of the cases in MS DRG 062 ($15,558 versus $13,865). Lastly, for 
the 8 cases that reported mechanical ventilation <=96 hours in MS-DRG 
063, the data show that the average length of stay was consistent with 
the average length of stay of all of the cases in MS-DRG 063 (2.3 days 
versus 2.7 days) and the average costs were also consistent with the 
average costs of all of the cases in MS DRG 063 ($12,467 versus 
$11,771).
    For the second subset of patients (in MS-DRGs 064, 065 and 066), 
the data findings for the 2,153 cases that reported mechanical 
ventilation >96 hours in MS-DRG 064 showed a longer average length of 
stay (13.4 days versus 6.0 days) and higher average costs ($38,262 
versus $12,574) compared to all of the cases in MS-DRG 064. However, 
the 2,153 cases represent only 2.8 percent of all the cases in MS-DRG

[[Page 20195]]

064. For the 22 cases that reported mechanical ventilation >96 hours in 
MS-DRG 065, the data showed a longer average length of stay (10.2 days 
versus 3.7 days) and higher average costs ($20,759 versus $7,236) 
compared to all of the cases in MS-DRG 065. However, the 22 cases 
represent only 0.02 percent of all the cases in MS-DRG 065. For the one 
case that reported mechanical ventilation >96 hours in MS-DRG 066, the 
data showed a longer average length of stay (4.0 days versus 2.5 days) 
and lower average costs ($3,426 versus $5,321) compared to all of the 
cases in MS-DRG 066. For the 8,794 cases that reported mechanical 
ventilation <=96 hours in MS-DRG 064, the data showed that the average 
length of stay was shorter than the average length of stay for all of 
the cases in MS-DRG 064 (4.9 days versus 6.0 days) and the average 
costs were consistent with the average costs of all of the cases in MS-
DRG 064 ($13,704 versus $12,574). For the 428 cases that reported 
mechanical ventilation <=96 hours in MS-DRG 065, the data showed that 
the average length of stay was shorter than the average length of stay 
for all of the cases in MS-DRG 065 (2.7 days versus 3.7 days) and the 
average costs were consistent with the average costs of all the cases 
in MS-DRG 065 ($8,086 versus $7,236). For the 194 cases that reported 
mechanical ventilation <=96 hours in MS-DRG 066, the data showed that 
the average length of stay was shorter than the average length of stay 
for all of the cases in MS-DRG 066 (1.8 days versus 2.5 days) and the 
average costs were less than the average costs of all of the cases in 
MS-DRG 066 ($5,141 versus $5,321).
    Based on the analysis described above, the current MS-DRG 
assignment for the cases in MS-DRGs 061, 062, 063, 064, 065 and 066 
that identify patients diagnosed with cerebral infarction or 
intracranial hemorrhage who require mechanical ventilation with or 
without a thrombolytic and in the absence of an O.R. procedure appears 
appropriate.
    Our clinical advisors also noted that patients requiring mechanical 
ventilation (in the absence of an O.R. procedure) are known to be more 
resource intensive and it would not be practical to create new MS-DRGs 
specifically for this subset of patients diagnosed with an acute 
neurologic event, given the various indications for which mechanical 
ventilation may be utilized. If we were to create new MS-DRGs for 
patients diagnosed with an intracranial hemorrhage or cerebral 
infarction who require mechanical ventilation, it would not address all 
of the other patients who also utilize mechanical ventilation 
resources. It would also necessitate further extensive analysis and 
evaluation for several other conditions that require mechanical 
ventilation across each of the 25 MDCs under the ICD-10 MS-DRGs.
    To evaluate the frequency in which the use of mechanical 
ventilation is reported for different clinical scenarios, we examined 
claims data across each of the 25 MDCs to determine the number of cases 
reporting the use of mechanical ventilation >96 hours. Our findings are 
shown in the table below.

                                Mechanical Ventilation >96 Hours Across All MDCs
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                               MDC                                     cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
All cases with mechanical ventilation >96 hours.................         127,626            18.4         $61,056
MDC 1 (Diseases and Disorders of the Nervous System)--Cases with          13,668            18.3          61,234
 mechanical ventilation >96 hours...............................
MDC 2 (Disease and Disorders of the Eye)--Cases with mechanical               33            22.7          79,080
 ventilation >96 hours..........................................
MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth and                    602            20.3          62,625
 Throat)--Cases with mechanical ventilation >96 hours...........
MDC 4 (Diseases and Disorders of the Respiratory System)--Cases           27,793            16.6          48,869
 with mechanical ventilation >96 hours..........................
MDC 5 (Diseases and Disorders of the Circulatory System)--Cases           16,923            20.7          84,565
 with mechanical ventilation >96 hours..........................
MDC 6 (Diseases and Disorders of the Digestive System)--Cases              6,401            22.4          73,759
 with mechanical ventilation >96 hours..........................
MDC 7 (Diseases and Disorders of the Hepatobiliary System and              1,803            24.5          80,477
 Pancreas)--Cases with mechanical ventilation >96 hours.........
MDC 8 (Diseases and Disorders of the Musculoskeletal System and            2,780            22.3          83,271
 Connective Tissue)--Cases with mechanical ventilation >96 hours
MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue               390            22.2          68,288
 and Breast)--Cases with mechanical ventilation >96 hours.......
MDC 10 (Endocrine, Nutritional and Metabolic Diseases and                  1,168            20.9          60,682
 Disorders)--Cases with mechanical ventilation >96 hours........
MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract)--          2,325            19.6          57,893
 Cases with mechanical ventilation >96 hours....................
MDC 12 (Diseases and Disorders of the Male Reproductive System)--             54            26.8          95,204
 Cases with mechanical ventilation >96 hours....................
MDC 13 (Diseases and Disorders of the Female Reproductive                     89            24.6          83,319
 System)--Cases with mechanical ventilation >96 hours...........
MDC 14 (Pregnancy, Childbirth and the Puerperium)--Cases with                 22            17.4          56,981
 mechanical ventilation >96 hours...............................
MDC 16 (Diseases and Disorders of Blood, Blood Forming Organs,               468            20.1          68,658
 Immunologic Disorders)--Cases with mechanical ventilation >96
 hours..........................................................
MDC 17 (Myeloproliferative Diseases and Disorders, Poorly                    538            29.7          99,968
 Differentiated Neoplasms)--Cases with mechanical ventilation
 >96 hours......................................................
MDC 18 (Infectious and Parasitic Diseases, Systemic or                    48,176            17.3          55,022
 Unspecified Sites)--Cases with mechanical ventilation >96 hours
MDC 19 (Mental Diseases and Disorders)--Cases with mechanical                 54            29.3          52,749
 ventilation >96 hours..........................................
MDC 20 (Alcohol/Drug Use and Alcohol/Drug Induced Organic Mental             312            20.5          47,637
 Disorders)--Cases with mechanical ventilation >96 hours........

[[Page 20196]]

 
MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs)--Cases            2,436            18.2          57,712
 with mechanical ventilation >96 hours..........................
MDC 22 (Burns)--Cases with mechanical ventilation >96 hours.....             242            34.8         188,704
MDC 23 (Factors Influencing Health Status and Other Contacts                  64            17.7          50,821
 with Health Services)--Cases with mechanical ventilation >96
 hours..........................................................
MDC 24 (Multiple Significant Trauma)--Cases with mechanical                  922            17.6          72,358
 ventilation >96 hours..........................................
MDC 25 (Human Immunodeficiency Virus Infections)--Cases with                 363            19.1          56,688
 mechanical ventilation >96 hours...............................
----------------------------------------------------------------------------------------------------------------

    As shown in the table, the top 5 MDCs with the largest number of 
cases reporting mechanical ventilation >96 hours are MDC 18, with 
48,176 cases; MDC 4, with 27,793 cases; MDC 5, with 16,923 cases; MDC 
1, with 13,668 cases; and MDC 6, with 6,401 cases. We note that the 
claims data demonstrate that the average length of stay is consistent 
with what we would expect for cases reporting the use of mechanical 
ventilation >96 hours across each of the 25 MDCs. The top 5 MDCs with 
the highest average costs for cases reporting mechanical ventilation 
>96 hours were MDC 22, with average costs of $188,704; MDC 17, with 
average costs of $99,968; MDC 12, with average costs of $95,204; MDC 5, 
with average costs of $84,565; and MDC 13, with average costs of 
$83,319. We note that the data for MDC 8 demonstrated similar results 
compared to MDC 13 with average costs of $83,271 for cases reporting 
mechanical ventilation >96 hours. In summary, the claims data reflect a 
wide variance with regard to the frequency and average costs for cases 
reporting the use of mechanical ventilation >96 hours.
    We also examined claims data across each of the 25 MDCs for the 
number of cases reporting the use of mechanical ventilation <=96 hours. 
Our findings are shown in the table below.

                                Mechanical Ventilation <=96 Hours Across All MDCs
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                               MDC                                     cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
All cases with mechanical ventilation <=96 hours................         266,583             8.5         $26,668
MDC 1 (Diseases and Disorders of the Nervous System)--Cases with          29,896             7.4          22,838
 mechanical ventilation <=96 hours..............................
MDC 2 (Disease and Disorders of the Eye)--Cases with mechanical               60             8.4          29,708
 ventilation <=96 hours.........................................
MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth and                  1,397             9.8          29,479
 Throat)--Cases with mechanical ventilation <=96 hours..........
MDC 4 (Diseases and Disorders of the Respiratory System)--Cases           64,861             7.8          20,929
 with mechanical ventilation <=96 hours.........................
MDC 5 (Diseases and Disorders of the Circulatory System)--Cases           45,147             8.8          35,818
 with mechanical ventilation <=96 hours.........................
MDC 6 (Diseases and Disorders of the Digestive System)--Cases             15,629            11.3          33,660
 with mechanical ventilation <=96 hours.........................
MDC 7 (Diseases and Disorders of the Hepatobiliary System and              4,678            10.5          31,565
 Pancreas)--Cases with mechanical ventilation <=96 hours........
MDC 8 (Diseases and Disorders of the Musculoskeletal System and            7,140            10.4          40,183
 Connective Tissue)--Cases with mechanical ventilation <=96
 hours..........................................................
MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue             1,036            10.7          26,809
 and Breast)--Cases with mechanical ventilation <=96 hours......
MDC 10 (Endocrine, Nutritional and Metabolic Diseases and                  3,591             9.0          23,863
 Disorders)--Cases with mechanical ventilation <=96 hours.......
MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract)--          5,506            10.2          27,951
 Cases with mechanical ventilation <=96 hours...................
MDC 12 (Diseases and Disorders of the Male Reproductive System)--            168            11.5          35,009
 Cases with mechanical ventilation <=96 hours...................
MDC 13 (Diseases and Disorders of the Female Reproductive                    310            10.8          32,382
 System)--Cases with mechanical ventilation <=96 hours..........
MDC 14 (Pregnancy, Childbirth and the Puerperium)--Cases with                 55             7.6          21,785
 mechanical ventilation <=96 hours..............................
MDC 16 (Diseases and Disorders of Blood, Blood Forming Organs,             1,171             8.7          26,138
 Immunologic Disorders)--Cases with mechanical ventilation <=96
 hours..........................................................
MDC 17 (Myeloproliferative Diseases and Disorders, Poorly                  1,178            15.3          46,335
 Differentiated Neoplasms)--Cases with mechanical ventilation
 <=96 hours.....................................................
MDC 18 (Infectious and Parasitic Diseases, Systemic or                    69,826             8.5          25,253
 Unspecified Sites)--Cases with mechanical ventilation <=96
 hours..........................................................
MDC 19 (Mental Diseases and Disorders)--Cases with mechanical                264            10.4          18,805
 ventilation <=96 hours.........................................
MDC 20 (Alcohol/Drug Use and Alcohol/Drug Induced Organic Mental             918             8.3          19,376
 Disorders)--Cases with mechanical ventilation <=96 hours.......
MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs)--Cases           10,842             6.5          17,843
 with mechanical ventilation <=96 hours.........................

[[Page 20197]]

 
MDC 22 (Burns)--Cases with mechanical ventilation <=96 hours....             353             9.7          45,557
MDC 23 (Factors Influencing Health Status and Other Contacts                 307             6.6          16,159
 with Health Services)--Cases with mechanical ventilation <=96
 hours..........................................................
MDC 24 (Multiple Significant Trauma)--Cases with mechanical                1,709             8.8          36,475
 ventilation <=96 hours.........................................
MDC 25 (Human Immunodeficiency Virus Infections)--Cases with                 541            10.4          29,255
 mechanical ventilation <=96 hours..............................
----------------------------------------------------------------------------------------------------------------

    As shown in the table, the top 5 MDCs with the largest number of 
cases reporting mechanical ventilation <=96 hours are MDC 18, with 
69,826 cases; MDC 4, with 64,861 cases; MDC 5, with 45,147 cases; MDC 
1, with 29,896 cases; and MDC 6, with 15,629 cases. We note that the 
claims data demonstrate that the average length of stay is consistent 
with what we would expect for cases reporting the use of mechanical 
ventilation <=96 hours across each of the 25 MDCs. The top 5 MDCs with 
the highest average costs for cases reporting mechanical ventilation 
<=96 hours are MDC 17, with average costs of $46,335; MDC 22, with 
average costs of $45,557; MDC 8, with average costs of $40,183; MDC 24, 
with average costs of $36,475; and MDC 5, with average costs of 
$35,818. Similar to the cases reporting mechanical ventilation >96 
hours, the claims data for cases reporting the use of mechanical 
ventilation <=96 hours also reflect a wide variance with regard to the 
frequency and average costs. Depending on the number of cases in each 
MS-DRG, it may be difficult to detect patterns of complexity and 
resource intensity.
    With respect to the requestor's statement that reporting for other 
purposes, such as quality measures, clinical trials, and Joint 
Commission and State certification or survey cases, is based on the 
principal diagnosis, and their belief that patients who present with 
cerebral infarction or cerebral hemorrhage and acute respiratory 
failure are currently in conflict for principal diagnosis sequencing 
because the cerebral infarction or cerebral hemorrhage code is needed 
as the principal diagnosis for quality reporting and other purposes 
(however, acute respiratory failure is needed as the principal 
diagnosis for purposes of appropriate payment under the MS-DRGs), we 
note that providers are required to assign the principal diagnosis 
according to the ICD-10-CM Official Guidelines for Coding and Reporting 
and these assignments are not based on factors such as quality measures 
or clinical trials indications. Furthermore, we do not base MS-DRG 
reclassification decisions on those factors. If the cerebral hemorrhage 
or ischemic cerebral infarction is the reason for admission to the 
hospital, the cerebral hemorrhage or ischemic cerebral infarction 
diagnosis code should be assigned as the principal diagnosis.
    We acknowledge that new MS-DRGs were created for cases of patients 
with sepsis requiring mechanical ventilation greater than and less than 
96 hours. However, those MS-DRGs (MS-DRG 575 (Septicemia with 
Mechanical Ventilation 96+ Hours Age >17) and MS-DRG 576 (Septicemia 
without Mechanical Ventilation 96+ Hours Age >17)) were created several 
years ago, in FY 2007 (71 FR 47938 through 47939) in response to public 
comments suggesting alternatives for the need to recognize the 
treatment for that subset of patients with severe sepsis who exhibit a 
greater degree of severity and resource consumption as septicemia is a 
systemic condition, and also as a preliminary step in the transition 
from the CMS DRGs to MS-DRGs.
    We believe that additional analysis and efforts toward a broader 
approach to refining the MS-DRGs for cases of patients requiring 
mechanical ventilation across the MDCs involves carefully examining the 
potential for instability in the relative weights and disrupting the 
integrity of the MS-DRG system based on the creation of separate 
MS[dash]DRGs involving small numbers of cases for various indications 
in which mechanical ventilation may be required.
    The second request focused on patients diagnosed with any 
neurological condition classified under MDC 1 requiring mechanical 
ventilation in the absence of an O.R. procedure and without having 
received a thrombolytic agent. Because the first request specifically 
involved analysis for the acute neurological conditions of cerebral 
infarction and intracranial hemorrhage under MDC 1 and our findings do 
not support creating new MS-DRGs for those specific conditions, we did 
not perform separate claims analysis for other conditions classified 
under MDC 1.
    Therefore, we are not proposing to create new MS-DRGs for cases 
that identify patients diagnosed with neurological conditions 
classified under MDC 1 who require mechanical ventilation with or 
without a thrombolytic and in the absence of an O.R. procedure. We are 
inviting public comments on our proposal.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Pacemaker Insertions
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56804 through 
56809), we discussed a request to examine the ICD-10-PCS procedure code 
combinations that describe procedures involving pacemaker insertions to 
determine if some procedure code combinations were excluded from the 
Version 33 ICD-10 MS-DRG assignments for MS-DRGs 242, 243, and 244 
(Permanent Cardiac Pacemaker Implant with MCC, with CC, and without CC/
MCC, respectively) under MDC 5. We finalized our proposal to modify the 
Version 34 ICD-10 MS-DRG GROUPER logic so the specified procedure code 
combinations were no longer required for assignment into those MS-DRGs. 
As a result, the logic for pacemaker insertion procedures was 
simplified by separating the procedure codes describing cardiac 
pacemaker device insertions into one list and separating the procedure 
codes describing cardiac pacemaker lead insertions into another list. 
Therefore, when any ICD-10-PCS procedure code describing the insertion 
of a pacemaker device is reported from that specific logic list with 
any ICD-10-PCS procedure code describing the insertion of a pacemaker 
lead from that specific logic list (81 FR 56804 through 56806), the 
case is assigned to MS-DRGs 242, 243, and 244 under MDC 5.
    We then discussed our examination of the Version 33 GROUPER logic 
for MS[dash]DRGs 258 and 259 (Cardiac Pacemaker Device Replacement with 
and without MCC, respectively) because assignment of cases to these MS-
DRGs

[[Page 20198]]

also included qualifying ICD-10-PCS procedure code combinations 
involving pacemaker insertions (81 FR 56806 through 56808). 
Specifically, the logic for Version 33 ICD-10 MS-DRGs 258 and 259 
included ICD-10-PCS procedure code combinations describing the removal 
of pacemaker devices and the insertion of new pacemaker devices. We 
finalized our proposal to modify the Version 34 ICD-10 MS-DRG GROUPER 
logic for MS-DRGs 258 and 259 to establish that a case reporting any 
procedure code from the list of ICD-10-PCS procedure codes describing 
procedures involving pacemaker device insertions without any other 
procedure codes describing procedures involving pacemaker leads 
reported would be assigned to MS-DRGs 258 and 259 (81 FR 56806 through 
56807) under MDC 5. In addition, we pointed out that a limited number 
of ICD-10-PCS procedure codes describing pacemaker insertion are 
classified as non-operating room (non-O.R.) codes within the MS-DRGs 
and that the Version 34 ICD-10 MS-DRG GROUPER logic would continue to 
classify these procedure codes as non-O.R. codes. We noted that a case 
reporting any one of these non-O.R. procedure codes describing a 
pacemaker device insertion without any other procedure code involving a 
pacemaker lead would be assigned to MS-DRGs 258 and 259. Therefore, the 
listed procedure codes describing a pacemaker device insertion under 
MS-DRGs 258 and 259 are designated as non-O.R. affecting the MS-DRG.
    Lastly, we discussed our examination of the Version 33 GROUPER 
logic for MS-DRGs 260, 261, and 262 (Cardiac Pacemaker Revision Except 
Device Replacement with MCC, with CC, and without CC/MCC, 
respectively), and noted that cases assigned to these MS-DRGs also 
included lists of procedure code combinations describing procedures 
involving the removal of pacemaker leads and the insertion of new 
leads, in addition to lists of single procedure codes describing 
procedures involving the insertion of pacemaker leads, removal of 
cardiac devices, and revision of cardiac devices (81 FR 56808). We 
finalized our proposal to modify the ICD-10 MS-DRG GROUPER logic for 
MS-DRGs 260, 261, and 262 so that cases reporting any one of the listed 
ICD-10-PCS procedure codes describing procedures involving pacemakers 
and related procedures and associated devices are assigned to MS DRGs 
260, 261, and 262 under MDC 5. Therefore, the GROUPER logic that 
required a combination of procedure codes be reported for assignment 
into MS-DRGs 260, 261 and 262 under Version 33 was no longer required 
effective with discharges occurring on or after October 1, 2016 (FY 
2017) under Version 34 of the ICD-10 MS-DRGs.
    We note that while the discussion in the FY 2017 IPPS/LTCH PPS 
final rule focused on the MS-DRGs involving pacemaker procedures under 
MDC 5, similar GROUPER logic exists in Version 33 of the ICD-10 MS-DRGs 
under MDC 1 (Diseases and Disorders of the Nervous System) in 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) and MDC 21 (Injuries, Poisonings and Toxic 
Effects of Drugs) in MS-DRGs 907, 908, and 909 (Other O.R. Procedures 
for Injuries with MCC, with CC, and without MCC, respectively) where 
procedure code combinations involving cardiac pacemaker device 
insertions or removals and cardiac pacemaker lead insertions or 
removals are required to be reported together for assignment into those 
MS-DRGs. We also note that, with the exception of when a principal 
diagnosis is reported from MDC 1, MDC 5, or MDC 21, the procedure codes 
describing the insertion, removal, replacement, or revision of 
pacemaker devices are assigned to a medical MS-DRG in the absence of 
another O.R. procedure according to the GROUPER logic. We refer the 
reader to the ICD-10 MS-DRG Definitions Manual Version 33, which is 
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page-Items/FY2016-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for 
complete documentation of the GROUPER logic that was in effect at that 
time for the Version 33 ICD-10 MS-DRGs discussed earlier.
    For FY 2019, we received a request to assign all procedures 
involving the insertion of pacemaker devices to surgical MS-DRGs, 
regardless of the principal diagnosis. The requestor recommended that 
procedures involving pacemaker insertion be grouped to surgical MS-DRGs 
within the MDC to which the principal diagnosis is assigned, or that 
they group to MS-DRGs 981, 982, and 983 (Extensive O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC and without CC/MCC, 
respectively). Currently, in Version 35 of the ICD-10 MS-DRGs, 
procedures involving pacemakers are assigned 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 (Diseases and Disorders of the Nervous 
System), to MS-DRGs 242, 243, and 244 (Permanent Cardiac Pacemaker 
Implant with MCC, with CC, and without CC/MCC, respectively), MS-DRGs 
258 and 259 (Cardiac Pacemaker Device Replacement with MCC and without 
MCC, respectively), and MS-DRGs 260, 261 and 262 (Cardiac Pacemaker 
Revision Except Device Replacement with MCC, with CC, and without CC/
MCC, respectively) under MDC 5 (Diseases and Disorders of the 
Circulatory System), and to MS-DRGs 907, 908, and 909 (Other O.R. 
Procedures for Injuries with MCC, with CC, and without CC/MCC, 
respectively), under MDC 21 (Injuries, Poisoning and Toxic Effects of 
Drugs), with all other unrelated principal diagnoses resulting in a 
medical MS-DRG assignment. According to the requestor, the medical MS-
DRGs do not provide adequate payment for the pacemaker device, 
specialized operating suites, time, skills, and other resources 
involved for pacemaker insertion procedures. Therefore, the requestor 
recommended that procedures involving pacemaker insertions be grouped 
to surgical MS-DRGs. We refer readers to the ICD-10 MS-DRG Definitions 
Manual Version 35, which is available via the Internet on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2018-IPPS-Final-Rule-Home-Page-Items/FY2018-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for 
complete documentation of the GROUPER logic for the MS-DRGs discussed 
earlier.
    The following procedure codes describe procedures involving the 
insertion of a cardiac rhythm related device which are classified as a 
type of pacemaker insertion under the ICD-10 MS-DRGs. These four codes 
are assigned to MS-DRGs 040, 041, and 042, as well as MS-DRGs 907, 908, 
and 909, and are designated as O.R. procedures.

[[Page 20199]]



------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0JH60PZ...................  Insertion of cardiac rhythm related device
                             into chest subcutaneous tissue and fascia,
                             open approach.
0JH63PZ...................  Insertion of cardiac rhythm related device
                             into chest subcutaneous tissue and fascia,
                             percutaneous approach.
0JH80PZ...................  Insertion of cardiac rhythm related device
                             into abdomen subcutaneous tissue and
                             fascia, open approach.
0JH83PZ...................  Insertion of cardiac rhythm related device
                             into abdomen subcutaneous tissue and
                             fascia, percutaneous approach.
------------------------------------------------------------------------

    We examined cases from the September update of the FY 2017 MedPAR 
claims data for cases involving pacemaker insertion procedures 
reporting the above ICD-10-PCS codes in MS-DRGs 040, 041 and 042 under 
MDC 1. Our findings are shown in the following table.

                             Cases Involving Pacemaker Insertion Procedures in MDC 1
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                         MS-DRG in MDC 1                               cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 040--All cases...........................................           4,462            10.4         $26,877
MS-DRG 040--Cases with procedure code 0JH60PZ (Insertion of                   13            14.2          55,624
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, open approach).....................................
MS-DRG 040--Cases with procedure code 0JH63PZ (Insertion of                    2             3.5          15,826
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, percutaneous approach).............................
MS-DRG 040--Cases with procedure code 0JH80PZ (Insertion of                    0               0               0
 cardiac rhythm related device into abdomen subcutaneous tissue
 and fascia, open approach).....................................
MS-DRG 040--Cases with procedure code 0JH83PZ (Insertion of                    0               0               0
 cardiac rhythm related device into abdomen subcutaneous tissue
 and fascia, percutaneous approach).............................
MS-DRG 041--All cases...........................................           5,648             5.2          16,927
MS-DRG 041--Cases with procedure code 0JH60PZ (Insertion of                   12             6.4          22,498
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, open approach).....................................
MS-DRG 041--Cases with procedure code 0JH63PZ (Insertion of                    4               5          17,238
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, percutaneous approach).............................
MS-DRG 041--Cases with procedure code 0JH80PZ (Insertion of                    0               0               0
 cardiac rhythm related device into abdomen subcutaneous tissue
 and fascia, open approach).....................................
MS-DRG 041--Cases with procedure code 0JH83PZ (Insertion of                    0               0               0
 cardiac rhythm related device into abdomen subcutaneous tissue
 and fascia, percutaneous approach).............................
MS-DRG 042--All cases...........................................           2,154             3.1          13,730
MS-DRG 042--Cases with procedure code 0JH60PZ (Insertion of                    5               8          18,183
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, open approach).....................................
MS-DRG 042--Cases with procedure code 0JH83PZ (Insertion of                    0               0               0
 cardiac rhythm related device into abdomen subcutaneous tissue
 and fascia, percutaneous approach).............................
MS-DRG 042--Cases with procedure code 0JH80PZ (Insertion of                    0               0               0
 cardiac rhythm related device into abdomen subcutaneous tissue
 and fascia, open approach).....................................
MS-DRG 042--Cases with procedure code 0JH83PZ (Insertion of                    0               0               0
 cardiac rhythm related device into abdomen subcutaneous tissue
 and fascia, percutaneous approach).............................
----------------------------------------------------------------------------------------------------------------

    The following table is a summary of the findings shown above from 
our review of MS-DRGs 040, 041 and 042 and the total number of cases 
reporting a pacemaker insertion procedure.

                       MS-DRGs for Cases Involving Pacemaker Insertion Procedures in MDC 1
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                         MS-DRG in MDC 1                               cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 040, 041, and 042--All cases............................          12,264             6.7         $19,986
MS-DRGs 040, 041, and 042--Cases with a pacemaker insertion                   36             9.1          32,906
 procedure......................................................
----------------------------------------------------------------------------------------------------------------

    We found a total of 12,264 cases in MS-DRGs 040, 041, and 042 with 
an average length of stay of 6.7 days and average costs of $19,986. We 
found a total of 36 cases in MS-DRGs 040, 041, and 042 reporting 
procedure codes describing the insertion of a pacemaker device with an 
average length of stay of 9.1 days and average costs of $32,906.
    We then examined cases involving pacemaker insertion procedures 
reporting those same four ICD-10-PCS procedure codes 0JH60PZ, 0JH63PZ, 
0JH80PZ and 0JH83PZ in MS-DRGs 907, 908, and 909 under MDC 21. Our 
findings are shown in the following table.

[[Page 20200]]



                      MS-DRGs for Cases Involving Pacemaker Insertion Procedures in MDC 21
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                        MS-DRG in MDC 21                               cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 907--All cases...........................................           7,405            10.1         $28,997
MS-DRG 907--Cases with procedure code 0JH60PZ (Insertion of                    7            11.1          60,141
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, open approach).....................................
MS-DRG 908--All cases...........................................           8,519             5.2          14,282
MS-DRG 908--Cases with procedure code 0JH60PZ (Insertion of                    4             3.8          35,678
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, open approach).....................................
MS-DRG 909--All cases...........................................           3,224             3.1           9,688
MS-DRG 909--Cases with procedure code 0JH60PZ (Insertion of                    2               2          42,688
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, open approach).....................................
----------------------------------------------------------------------------------------------------------------

    We note that there were no cases found where procedure codes 
0JH63PZ, 0JH80PZ or 0JH83PZ were reported in MS-DRGs 907, 908 and 909 
under MDC 21 and, therefore, they are not displayed in the table.
    The following table is a summary of the findings shown above from 
our review of MS-DRGs 907, 908, and 909 and the total number of cases 
reporting a pacemaker insertion procedure.

                      MS-DRGs for Cases Involving Pacemaker Insertion Procedures in MDC 21
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                        MS-DRG in MDC 21                               cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 907, 908 and 909--All cases.............................          19,148             6.7         $19,199
MS-DRGs 907, 908 and 909--Cases with a pacemaker insertion                    13             7.5          49,929
 procedure......................................................
----------------------------------------------------------------------------------------------------------------

    We found a total of 19,148 cases in MS-DRGs 907, 908, and 909 with 
an average length of stay of 6.7 days and average costs of $19,199. We 
found a total of 13 cases in MS-DRGs 907, 908, and 909 reporting 
pacemaker insertion procedures with an average length of stay of 7.5 
days and average costs of $49,929.
    We also examined cases involving pacemaker insertion procedures 
reporting the following procedure codes that are assigned to MS-DRGs 
242, 243, and 244 under MDC 5.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0JH604Z...................  Insertion of pacemaker, single chamber into
                             chest subcutaneous tissue and fascia, open
                             approach.
0JH605Z...................  Insertion of pacemaker, single chamber rate
                             responsive into chest subcutaneous tissue
                             and fascia, open approach.
0JH606Z...................  Insertion of pacemaker, dual chamber into
                             chest subcutaneous tissue and fascia, open
                             approach.
0JH607Z...................  Insertion of cardiac resynchronization
                             pacemaker pulse generator into chest
                             subcutaneous tissue and fascia, open
                             approach.
0JH60PZ...................  Insertion of cardiac rhythm related device
                             into chest subcutaneous tissue and fascia,
                             open approach.
0JH634Z...................  Insertion of pacemaker, single chamber into
                             chest subcutaneous tissue and fascia,
                             percutaneous approach.
0JH635Z...................  Insertion of pacemaker, single chamber rate
                             responsive into chest subcutaneous tissue
                             and fascia, percutaneous approach.
0JH636Z...................  Insertion of pacemaker, dual chamber into
                             chest subcutaneous tissue and fascia,
                             percutaneous approach.
0JH637Z...................  Insertion of cardiac resynchronization
                             pacemaker pulse generator into chest
                             subcutaneous tissue and fascia,
                             percutaneous approach.
0JH63PZ...................  Insertion of cardiac rhythm related device
                             into chest subcutaneous tissue and fascia,
                             percutaneous approach.
0JH804Z...................  Insertion of pacemaker, single chamber into
                             abdomen subcutaneous tissue and fascia,
                             open approach.
0JH805Z...................  Insertion of pacemaker, single chamber rate
                             responsive into abdomen subcutaneous tissue
                             and fascia, open approach.
0JH806Z...................  Insertion of pacemaker, dual chamber into
                             abdomen subcutaneous tissue and fascia,
                             open approach.
0JH807Z...................  Insertion of cardiac resynchronization
                             pacemaker pulse generator into abdomen
                             subcutaneous tissue and fascia, open
                             approach.
0JH80PZ...................  Insertion of cardiac rhythm related device
                             into abdomen subcutaneous tissue and
                             fascia, open approach.
0JH834Z...................  Insertion of pacemaker, single chamber into
                             abdomen subcutaneous tissue and fascia,
                             percutaneous approach.
0JH835Z...................  Insertion of pacemaker, single chamber rate
                             responsive into abdomen subcutaneous tissue
                             and fascia, percutaneous approach.
0JH836Z...................  Insertion of pacemaker, dual chamber into
                             abdomen subcutaneous tissue and fascia,
                             percutaneous approach.
0JH837Z...................  Insertion of cardiac resynchronization
                             pacemaker pulse generator into abdomen
                             subcutaneous tissue and fascia,
                             percutaneous approach.
0JH83PZ...................  Insertion of cardiac rhythm related device
                             into abdomen subcutaneous tissue and
                             fascia, percutaneous approach.
------------------------------------------------------------------------

    Our data findings are shown in the following table. We note that 
procedure codes displayed with an asterisk (*) in the table are 
designated as non-O.R. procedures affecting the MS-DRG.

[[Page 20201]]



                             Cases Involving Pacemaker Insertion Procedures in MDC 5
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                         MS-DRG in MDC 5                               cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 242--All cases...........................................          18,205             6.9         $26,414
MS-DRG 242--Cases with procedure code 0JH604Z* (Insertion of               2,518             7.7          25,004
 pacemaker, single chamber into chest subcutaneous tissue and
 fascia, open approach).........................................
MS-DRG 242--Cases with procedure code 0JH605Z* (Insertion of                 306             7.7          24,454
 pacemaker, single chamber rate responsive into chest
 subcutaneous tissue and fascia, open approach).................
MS-DRG 242--Cases with procedure code 0JH606Z* (Insertion of              13,323             6.7          25,497
 pacemaker, dual chamber into chest subcutaneous tissue and
 fascia, open approach).........................................
MS-DRG 242--Cases with procedure code 0JH607Z (Insertion of                1,528             8.1          37,060
 cardiac resynchronization pacemaker pulse generator into chest
 subcutaneous tissue and fascia, open approach).................
MS-DRG 242--Cases with procedure code 0JH60PZ (Insertion of                    5            16.6          59,334
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, open approach).....................................
MS-DRG 242--Cases with procedure code 0JH634Z* (Insertion of                  65             8.5          26,789
 pacemaker, single chamber into chest subcutaneous tissue and
 fascia, percutaneous approach).................................
MS-DRG 242--Cases with procedure code 0JH635Z* (Insertion of                  10               7          35,104
 pacemaker, single chamber rate responsive into chest
 subcutaneous tissue and fascia, percutaneous approach).........
MS-DRG 242--Cases with procedure code 0JH636Z* (Insertion of                 313             6.4          23,699
 pacemaker, dual chamber into chest subcutaneous tissue and
 fascia, percutaneous approach).................................
MS-DRG 242--Cases with procedure code 0JH637Z (Insertion of                   82             7.1          35,382
 cardiac resynchronization pacemaker pulse generator into chest
 Subcutaneous tissue and fascia, percutaneous approach).........
MS-DRG 242--Cases with procedure code 0JH63PZ (Insertion of                    2            12.5          32,405
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, percutaneous approach).............................
MS-DRG 242--Cases with procedure code 0JH804Z* (Insertion of                  25            14.4          43,080
 pacemaker, single chamber into abdomen subcutaneous tissue and
 fascia, open approach).........................................
MS-DRG 242--Cases with procedure code 0JH805Z* (Insertion of                   2               4          26,949
 pacemaker, single chamber rate responsive into abdomen
 subcutaneous tissue and fascia, open approach).................
MS-DRG 242--Cases with procedure code 0JH806Z* (Insertion of                  50             6.8          25,306
 pacemaker, dual chamber into abdomen subcutaneous tissue and
 fascia, open approach).........................................
MS-DRG 242--Cases with procedure code 0JH807Z (Insertion of                    5            21.2          67,908
 cardiac resynchronization pacemaker pulse generator into
 abdomen subcutaneous tissue and fascia, open approach).........
MS-DRG 242--Cases with procedure code 0JH836Z (Insertion of                    1               5          36,111
 pacemaker, dual chamber into abdomen subcutaneous tissue and
 fascia, percutaneous approach).................................
MS-DRG 243--All cases...........................................          24,586               4          18,669
MS-DRG 243--Cases with procedure code 0JH604Z* (Insertion of               2,537             4.7          17,118
 pacemaker, single chamber into chest subcutaneous tissue and
 fascia, open approach).........................................
MS-DRG 243--Cases with procedure code 0JH605Z* (Insertion of                 271             4.4          17,268
 pacemaker, single chamber rate responsive into chest
 subcutaneous tissue and fascia, open approach).................
MS-DRG 243--Cases with procedure code 0JH606Z* (Insertion of              19,921             3.9          18,306
 pacemaker, dual chamber into chest subcutaneous tissue and
 fascia, open approach).........................................
MS-DRG 243--Cases with procedure code 0JH607Z (Insertion of                1,236             4.4          28,658
 cardiac resynchronization pacemaker pulse generator into chest
 subcutaneous tissue and fascia, open approach).................
MS-DRG 243--Cases with procedure code 0JH60PZ (Insertion of                    6             4.2          20,994
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, open approach).....................................
MS-DRG 243--Cases with procedure code 0JH634Z* (Insertion of                  55             5.2          16,784
 pacemaker, single chamber into chest subcutaneous tissue and
 fascia, percutaneous approach).................................
MS-DRG 243--Cases with procedure code 0JH635Z* (Insertion of                  15             4.1          17,938
 pacemaker, single chamber rate responsive into chest
 subcutaneous tissue and fascia, percutaneous approach).........
MS-DRG 243--Cases with procedure code 0JH636Z* (Insertion of                 431             3.7          16,164
 pacemaker, dual chamber into chest subcutaneous tissue and
 fascia, percutaneous approach).................................
MS-DRG 243--Cases with procedure code 0JH637Z (Insertion of                   58               5          28,926
 cardiac resynchronization pacemaker pulse generator into chest
 subcutaneous tissue and fascia, percutaneous approach).........
MS-DRG 243--Cases with procedure code 0JH63PZ (Insertion of                    3             8.3          23,717
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, percutaneous approach).............................
MS-DRG 243--Cases with procedure code 0JH804Z* (Insertion of                  10             8.2          20,871
 pacemaker, single chamber into abdomen subcutaneous tissue and
 fascia, open approach).........................................
MS-DRG 243--Cases with procedure code 0JH805Z* (Insertion of                   1               4          15,739
 pacemaker, single chamber rate responsive into abdomen
 subcutaneous tissue and fascia, open approach).................
MS-DRG 243--Cases with procedure code 0JH806Z* (Insertion of                  57             4.4          18,787
 pacemaker, dual chamber into abdomen subcutaneous tissue and
 fascia, open approach).........................................
MS-DRG 243--Cases with procedure code 0JH807Z (Insertion of                    3               4          19,653
 cardiac resynchronization pacemaker pulse generator into
 abdomen subcutaneous tissue and fascia, open approach).........
MS-DRG 243--Cases with procedure code 0JH80PZ (Insertion of                    1               7          16,224
 cardiac rhythm related device into abdomen subcutaneous tissue
 and fascia, open approach).....................................
MS-DRG 243--Cases with procedure code 0JH836Z* (Insertion of                   1               2          14,005
 pacemaker, dual chamber into abdomen subcutaneous tissue and
 fascia, percutaneous approach).................................
MS-DRG 244--All cases...........................................          15,974             2.7          15,670
MS-DRG 244--Cases with procedure code 0JH604Z* (Insertion of               1,045             3.2          14,541
 pacemaker, single chamber into chest subcutaneous tissue and
 fascia, open approach).........................................

[[Page 20202]]

 
MS-DRG 244--Cases with procedure code 0JH605Z* (Insertion of                 127               3          13,208
 pacemaker, single chamber rate responsive into chest
 subcutaneous tissue and fascia, open approach).................
MS-DRG 244--Cases with procedure code 0JH606Z* (Insertion of              14,092             2.7          15,596
 pacemaker, dual chamber into chest subcutaneous tissue and
 fascia, open approach).........................................
MS-DRG 244--Cases with procedure code 0JH607Z (Insertion of                  303             2.8          26,221
 cardiac resynchronization pacemaker pulse generator into chest
 subcutaneous tissue and fascia, open approach).................
MS-DRG 244--Cases with procedure code 0JH60PZ (Insertion of                    2             4.5           9,248
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, open approach).....................................
MS-DRG 244--Cases with procedure code 0JH634Z* (Insertion of                  32             2.8          11,525
 pacemaker, single chamber into chest subcutaneous tissue and
 fascia, percutaneous approach).................................
MS-DRG 244--Cases with procedure code 0JH635Z* (Insertion of                   1               2          30,100
 pacemaker, single chamber rate responsive into chest
 subcutaneous tissue and fascia, percutaneous approach).........
MS-DRG 244--Cases with procedure code 0JH636Z* (Insertion of                 320             2.6          13,670
 pacemaker, dual chamber into chest subcutaneous tissue and
 fascia, percutaneous approach).................................
MS-DRG 244--Cases with procedure code 0JH637Z (Insertion of                   20             2.7          19,218
 cardiac resynchronization pacemaker pulse generator into chest
 subcutaneous tissue and fascia, percutaneous approach).........
MS-DRG 244--Cases with procedure code 0JH63PZ (Insertion of                    1               3          12,120
 cardiac rhythm related device into chest subcutaneous tissue
 and fascia, percutaneous approach).............................
MS-DRG 244--Cases with procedure code 0JH805Z* (Insertion of                   1               1          21,604
 pacemaker, single chamber rate responsive into abdomen
 subcutaneous tissue and fascia, open approach).................
MS-DRG 244--Cases with procedure code 0JH806Z* (Insertion of                  36             3.2          16,492
 pacemaker, dual chamber into abdomen subcutaneous tissue and
 fascia, open approach).........................................
MS-DRG 244--Cases with procedure code 0JH836Z* (Insertion of                   1               3          12,160
 pacemaker, dual chamber into abdomen subcutaneous tissue and
 fascia, percutaneous approach).................................
----------------------------------------------------------------------------------------------------------------

    The following table is a summary of the findings shown above from 
our review of MS-DRGs 242, 243, and 244 and the total number of cases 
reporting a pacemaker insertion procedure.

                             Cases Involving Pacemaker Insertion Procedures in MDC 5
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                         MS-DRG in MDC 5                               cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 242, 243 and 244--All cases.............................          58,765             4.6         $20,253
MS-DRGs 242, 243, and 244--Cases with a pacemaker insertion             * 58,822             4.6          20,270
 procedure......................................................
----------------------------------------------------------------------------------------------------------------
* The figure is not adjusted for cases reporting more than one pacemaker insertion procedure code. The figure
  represents the frequency in which the number of pacemaker insertion procedures was reported.

    We found a total of 58,765 cases in MS-DRGs 242, 243, and 244 with 
an average length of stay of 4.6 days and average costs of $20,253. We 
found a total of 58,822 cases reporting pacemaker insertion procedures 
in MS-DRGs 242, 243, and 244 with an average length of stay of 4.6 days 
and average costs of $20,270. We note that the analysis performed is by 
procedure code, and because multiple pacemaker insertion procedures may 
be reported on a single claim, the total number of these pacemaker 
insertion procedure cases exceeds the total number of all cases found 
across MS-DRGs 242, 243, and 244 (58,822 procedures versus 58,765 
cases).
    We then analyzed claims for cases reporting a procedure code 
describing (1) the insertion of a pacemaker device only, (2) the 
insertion of a pacemaker lead only, and (3) both the insertion of a 
pacemaker device and a pacemaker lead across all the MDCs except MDC 5 
to determine the number of cases currently grouping to medical MS-DRGs 
and the potential impact of these cases moving into the surgical 
unrelated MS-DRGs 981, 982 and 983 (Extensive O.R. Procedure Unrelated 
to Principal Diagnosis with MCC, with CC and without CC/MCC, 
respectively). Our findings are shown in the following table.

                                Pacemaker Insertion Procedures in Medical MS-DRGs
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                      All MDCs except MDC 5                            cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
Procedures for insertion of pacemaker device....................           2,747             9.5         $29,389
Procedures for insertion of pacemaker lead......................           2,831             9.4          29,240
Procedures for insertion of pacemaker device with insertion of             2,709             9.4          29,297
 pacemaker lead.................................................
----------------------------------------------------------------------------------------------------------------


[[Page 20203]]

    We found a total of 2,747 cases reporting the insertion of a 
pacemaker device in 177 medical MS-DRGs with an average length of stay 
of 9.5 days and average costs of $29,389 across all the MDCs except MDC 
5. We found a total of 2,831 cases reporting the insertion of a 
pacemaker lead in 175 medical MS-DRGs with an average length of stay of 
9.4 days and average costs of $29,240 across all the MDCs except MDC 5. 
We found a total of 2,709 cases reporting both the insertion of a 
pacemaker device and the insertion of a pacemaker lead in 170 medical 
MS-DRGs with an average length of stay of 9.4 days and average costs of 
$29,297 across all the MDCs except MDC 5.
    We also analyzed claims for cases reporting a procedure code 
describing the insertion of a pacemaker device with a procedure code 
describing the insertion of a pacemaker lead in all the surgical MS-
DRGs across all the MDCs except MDC 5. Our findings are shown in the 
following table.

                                Pacemaker Insertion Procedures in Medical MS-DRGs
----------------------------------------------------------------------------------------------------------------
                                                                                 Average length
                    All MDCs except MDC 5                      Number of cases      of stay       Average costs
----------------------------------------------------------------------------------------------------------------
Procedures for insertion of pacemaker device with insertion             3,667             12.8          $48,856
 of pacemaker lead...........................................
----------------------------------------------------------------------------------------------------------------

    We found a total of 3,667 cases reporting the insertion of a 
pacemaker device and the insertion of a pacemaker lead in 194 surgical 
MS-DRGs with an average length of stay of 12.8 days and average costs 
of $48,856 across all the MDCs except MDC 5.
    For cases where the insertion of a pacemaker device, the insertion 
of a pacemaker lead or the insertion of both a pacemaker device and 
lead were reported on a claim grouping to a medical MS-DRG, the average 
length of stay and average costs were generally higher for these cases 
when compared to the average length of stay and average costs for all 
the cases in their assigned MS-DRGs. For example, we found 113 cases 
reporting both the insertion of a pacemaker device and lead in MS-DRG 
378 (G.I. Hemorrhage with CC), with an average length of stay of 7.1 
days and average costs of $23,711. The average length of stay for all 
cases in MS-DRG 378 was 3.6 days and the average cost for all cases in 
MS-DRG 378 was $7,190. The average length of stay for cases reporting 
both the insertion of a pacemaker device and lead were twice as long as 
the average length of stay for all the cases in MS-DRG 378 (7.1 days 
versus 3.6 days). In addition, the average costs for the cases 
reporting both the insertion of a pacemaker device and lead were 
approximately $16,500 higher than the average costs of all the cases in 
MS-DRG 378 ($23,711 versus $7,190). We refer readers to Table 6P.1c 
associated with this proposed rule (which is available via the internet 
on the CMS website) for the detailed report of our findings across the 
other medical MS-DRGs. We note that the average costs and average 
length of stay for cases reporting the insertion of a pacemaker device, 
the insertion of a pacemaker lead or the insertion of both a pacemaker 
device and lead are reflected in Columns D and E, while the average 
costs and average length of stay for all cases in the respective MS-DRG 
are reflected in Columns I and J.
    The claims data results from our analysis of this request showed 
that if we were to support restructuring the GROUPER logic so that 
pacemaker insertion procedures that include a combination of the 
insertion of the pacemaker device with the insertion of the pacemaker 
lead are designated as an O.R. procedure across all the MDCs, we would 
expect approximately 2,709 cases to move or ``shift'' from the medical 
MS-DRGs where they are currently grouping into the surgical unrelated 
MS-DRGs 981, 982, and 983.
    Our clinical advisors reviewed the data results and recommended 
that pacemaker insertion procedures involving a complete pacemaker 
system (insertion of pacemaker device combined with insertion of 
pacemaker lead) warrant classification into surgical MS-DRGs because 
the patients receiving these devices demonstrate greater treatment 
difficulty and utilization of resources when compared to procedures 
that involve the insertion of only the pacemaker device or the 
insertion of only the pacemaker lead. We note that the request we 
addressed in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 24981 
through 24984) was to determine if some procedure code combinations 
were excluded from the ICD-10 MS-DRG assignments for MS-DRGs 242, 243, 
and 244. We proposed and, upon considering public comments received, 
finalized an alternate approach that we believed to be less 
complicated. We also stated in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56806) that we would continue to monitor the MS-DRGs for pacemaker 
insertion procedures as we receive ICD-10 claims data. Upon further 
review, we believe that recreating the procedure code combinations for 
pacemaker insertion procedures would allow for the grouping of these 
procedures to the surgical MS-DRGs, which we believe is warranted to 
better recognize the resources and complexity of performing these 
procedures. Therefore, we are proposing to recreate pairs of procedure 
code combinations involving both the insertion of a pacemaker device 
with the insertion of a pacemaker lead to act as procedure code 
combination pairs or ``clusters'' in the GROUPER logic that are 
designated as O.R. procedures outside of MDC 5 when reported together. 
We are inviting public comments on our proposal.
    We also are proposing to designate all the procedure codes 
describing the insertion of a pacemaker device or the insertion of a 
pacemaker lead as non-O.R. procedures when reported as a single, 
individual stand-alone code based on the recommendation of our clinical 
advisors as noted earlier in this section and consistent with how these 
procedures were classified under the Version 33 ICD-10 MS-DRG GROUPER 
logic. We are inviting public comments on our proposal.
    We refer readers to Table 6P.1d, Table 6P.1e, and Table 6P.1f 
associated with this proposed rule (which is available via the internet 
on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for (1) a complete 
list of the proposed procedure code combinations or ``pairs''; (2) a 
complete list of the procedure codes describing the insertion of a 
pacemaker device; and (3) a complete list of the procedure codes 
describing the insertion of a pacemaker lead. We are inviting public 
comments on our lists of procedure codes that we are proposing to 
include for restructuring the ICD-10 MS-DRG GROUPER logic for pacemaker 
insertion procedures.
    In addition, we are proposing to maintain the current GROUPER logic 
for MS-DRGs 258 and 259 (Cardiac

[[Page 20204]]

Pacemaker Device Replacement with MCC and without MCC, respectively) 
where the listed procedure codes as shown in the ICD-10 MS-DRG 
Definitions Manual Version 35, which is available via the internet on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2018-IPPS-Final-Rule-Home-Page-Items/FY2018-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending, 
describing a pacemaker device insertion, continue to be designated as 
``non-O.R. affecting the MS-DRG'' because they are reported when a 
pacemaker device requires replacement and have a corresponding 
diagnosis from MDC 5. Also, we are proposing to maintain the current 
GROUPER logic for MS-DRGs 260, 261, and 262 (Cardiac Pacemaker Revision 
Except Device Replacement with MCC, with CC, and without CC/MCC, 
respectively) so that cases reporting any one of the listed ICD-10-PCS 
procedure codes as shown in the ICD-10 MS-DRG Definitions Manual 
Version 35 describing procedures involving pacemakers and related 
procedures and associated devices will continue to be assigned to those 
MS-DRGs under MDC 5 because they are reported when a pacemaker device 
requires revision and they have a corresponding circulatory system 
diagnosis. We are inviting public comments on our proposal.
    We note that, while the requestor did not include the following 
procedure codes in its request, these codes are also currently 
designated as O.R. procedure codes and are assigned to MS-DRGs 260, 
261, and 262 under MDC 5.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
02PA0MZ...................  Removal of cardiac lead from heart, open
                             approach.
02PA3MZ...................  Removal of cardiac lead from heart,
                             percutaneous approach.
02PA4MZ...................  Removal of cardiac lead from heart,
                             percutaneous endoscopic approach.
02WA0MZ...................  Revision of cardiac lead in heart, open
                             approach.
02WA3MZ...................  Revision of cardiac lead in heart,
                             percutaneous approach.
02WA4MZ...................  Revision of cardiac lead in heart,
                             percutaneous endoscopic approach.
0JPT0PZ...................  Removal of cardiac rhythm related device
                             from trunk subcutaneous tissue and fascia,
                             open approach.
0JPT3PZ...................  Removal of cardiac rhythm related device
                             from trunk subcutaneous tissue and fascia,
                             percutaneous approach.
0JWT0PZ...................  Revision of cardiac rhythm related device in
                             trunk subcutaneous tissue and fascia, open
                             approach.
0JWT3PZ...................  Revision of cardiac rhythm related device in
                             trunk subcutaneous tissue and fascia,
                             percutaneous approach.
------------------------------------------------------------------------

    We are soliciting public comments on whether these procedure codes 
describing the removal or revision of a cardiac lead and removal or 
revision of a cardiac rhythm related (pacemaker) device should also be 
designated as non-O.R. procedure codes for FY 2019 when reported as a 
single, individual stand-alone code with a principal diagnosis outside 
of MDC 5 for consistency in the classification among these devices.
    We also note that, while the requestor did not include the 
following procedure codes in its request, the codes in the following 
table became effective October 1, 2016 (FY 2017) and also describe 
procedures involving the insertion of a pacemaker. Specifically, the 
following list includes procedure codes that describe an intracardiac 
or ``leadless'' pacemaker. These procedure codes are designated as O.R. 
procedure codes and are currently assigned to MS-DRGs 228 and 229 
(Other Cardiothoracic Procedures with MCC and without MCC, 
respectively) under MDC 5.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
02H40NZ...................  Insertion of intracardiac pacemaker into
                             coronary vein, open approach.
02H43NZ...................  Insertion of intracardiac pacemaker into
                             coronary vein, percutaneous approach.
02H44NZ...................  Insertion of intracardiac pacemaker into
                             coronary vein, percutaneous endoscopic
                             approach.
02H60NZ...................  Insertion of intracardiac pacemaker into
                             right atrium, open approach.
02H63NZ...................  Insertion of intracardiac pacemaker into
                             right atrium, percutaneous approach.
02H64NZ...................  Insertion of intracardiac pacemaker into
                             right atrium, percutaneous endoscopic
                             approach.
02H70NZ...................  Insertion of intracardiac pacemaker into
                             left atrium, open approach.
02H73NZ...................  Insertion of intracardiac pacemaker into
                             left atrium, percutaneous approach.
02H74NZ...................  Insertion of intracardiac pacemaker into
                             left atrium, percutaneous endoscopic
                             approach.
02HK0NZ...................  Insertion of intracardiac pacemaker into
                             right ventricle, open approach.
02HK3NZ...................  Insertion of intracardiac pacemaker into
                             right ventricle, percutaneous approach.
02HK4NZ...................  Insertion of intracardiac pacemaker into
                             right ventricle, percutaneous endoscopic
                             approach.
02HL0NZ...................  Insertion of intracardiac pacemaker into
                             left ventricle, open approach.
02HL3NZ...................  Insertion of intracardiac pacemaker into
                             left ventricle, percutaneous Approach.
02HL4NZ...................  Insertion of intracardiac pacemaker into
                             left ventricle, percutaneous endoscopic
                             approach.
02WA0NZ...................  Revision of intracardiac pacemaker in heart,
                             open approach.
02WA3NZ...................  Revision of intracardiac pacemaker in heart,
                             percutaneous approach.
02WA4NZ...................  Revision of intracardiac pacemaker in heart,
                             percutaneous endoscopic approach.
02WAXNZ...................  Revision of intracardiac pacemaker in heart,
                             external approach.
02H40NZ...................  Insertion of intracardiac pacemaker into
                             coronary vein, open approach.
02H43NZ...................  Insertion of intracardiac pacemaker into
                             coronary vein, percutaneous approach.
------------------------------------------------------------------------

    We examined claims data for procedures involving an intracardiac 
pacemaker reporting any of the above codes across all MS-DRGs. Our 
findings are shown in the following table.

[[Page 20205]]



                                        Intracardiac Pacemaker Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                 Average length
                      Across all MS-DRGs                       Number of cases      of stay       Average costs
----------------------------------------------------------------------------------------------------------------
Procedures for intracardiac pacemaker........................           1,190              8.6          $38,576
----------------------------------------------------------------------------------------------------------------

    We found 1,190 cases reporting a procedure involving an 
intracardiac pacemaker with an average length of stay of 8.6 days and 
average costs of $38,576. Of these 1,190 cases, we found 1,037 cases in 
MS-DRGs under MDC 5. We also found that the 153 cases that grouped to 
MS-DRGs outside of MDC 5 grouped to surgical MS-DRGs; therefore, 
another O.R. procedure was also reported on the claim. However, we are 
soliciting public comments on whether these procedure codes describing 
the insertion and revision of intracardiac pacemakers should also be 
considered for classification into all surgical unrelated MS-DRGs 
outside of MDC 5 for FY 2019.
b. Drug-Coated Balloons in Endovascular Procedures
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38111), we 
discontinued new technology add[dash]on payments for the LUTONIX[reg] 
and IN.PACTTM AdmiralTM drug-coated balloon (DCB) 
technologies, effective for FY 2018, because the technology no longer 
met the newness criterion for new technology add-on payments. For FY 
2019, we received a request to reassign cases that utilize a drug-
coated balloon in the performance of an endovascular procedure 
involving the treatment of superficial femoral arteries for peripheral 
arterial disease from the lower severity level MS-DRG 254 (Other 
Vascular Procedures without CC/MCC) and MS-DRG 253 (Other Vascular 
Procedures with CC) to the highest severity level MS-DRG 252 (Other 
Vascular Procedures with MCC). We also received a request to revise the 
title of MS-DRG 252 to ``Other Vascular Procedures with MCC or Drug-
Coated Balloon Implant''.
    There are currently 36 ICD-10-PCS procedure codes that describe the 
performance of endovascular procedures involving treatment of the 
superficial femoral arteries that utilize a drug-coated balloon, which 
are listed 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.
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.
------------------------------------------------------------------------


[[Page 20206]]

    The requestor performed its own analysis of claims data and 
expressed concern that it found that the average costs of cases using a 
drug-coated balloon in the performance of percutaneous endovascular 
procedures involving treatment of patients who have been diagnosed with 
peripheral arterial disease are significantly higher than the average 
costs of all of the cases in the MS-DRGs where these procedures are 
currently assigned. The requestor also expressed concern that payments 
may no longer be adequate because the new technology add-on payments 
have been discontinued and may affect patient access to these 
procedures.
    We first examined claims data from the September 2017 update of the 
FY 2017 MedPAR file for cases reporting any 1 of the 36 ICD-10-PCS 
procedure codes listed in the immediately preceding table that describe 
the use of a drug-coated balloon in the performance of endovascular 
procedures in MS-DRGs 252, 253, and 254. Our findings are shown in the 
following table.

                       MS-DRGs for Other Vascular Procedures With Drug[dash]Coated Balloon
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 252--All cases...........................................          33,583             7.6         $23,906
MS-DRG 252--Cases with drug-coated balloon......................             870             8.8          30,912
MS-DRG 253--All cases...........................................          25,714             5.4          18,986
MS-DRG 253--Cases with drug-coated balloon......................           1,532             5.4          23,051
MS-DRG 254--All cases...........................................          12,344             2.8          13,287
MS-DRG 254--Cases with drug-coated balloon......................             488             2.4          17,445
----------------------------------------------------------------------------------------------------------------

    As shown in this table, there were a total of 33,583 cases in MS-
DRG 252, with an average length of stay of 7.6 days and average costs 
of $23,906. There were 870 cases in MS-DRG 252 reporting the use of a 
drug-coated balloon in the performance of an endovascular procedure, 
with an average length of stay of 8.8 days and average costs of 
$30,912. The total number of cases in MS-DRG 253 was 25,714, with an 
average length of stay of 5.4 days and average costs of $18,986. There 
were 1,532 cases in MS-DRG 253 reporting the use of a DCB in the 
performance of an endovascular procedure, with an average length of 
stay of 5.4 days and average costs of $23,051. The total number of 
cases in MS-DRG 254 was 12,344, with an average length of stay of 2.8 
days and average costs of $13,287. There were 488 cases in MS-DRG 254 
reporting the use of a DCB in the performance of an endovascular 
procedure, with an average length of stay of 2.4 days and average costs 
of $17,445.
    The results of our data analysis show that there is not a very high 
volume of cases reporting the use of a drug-coated balloon in the 
performance of endovascular procedures compared to all of the cases in 
the assigned MS-DRGs. The data results also show that the average 
length of stay for cases reporting the use of a drug[dash]coated 
balloon in the performance of endovascular procedures in MS-DRGs 253 
and 254 is lower compared to the average length of stay for all of the 
cases in the assigned MS-DRGs, while the average length of stay for 
cases reporting the use of a drug-coated balloon in the performance of 
endovascular procedures in MS-DRG 252 is slightly higher compared to 
all of the cases in MS-DRG 252 (8.8 days versus 7.6 days). Lastly, the 
data results showed that the average costs for cases reporting the use 
of a drug-coated balloon in the performance of percutaneous 
endovascular procedures were higher compared to all of the cases in the 
assigned MS-DRGs. Specifically, for MS-DRG 252, the average costs for 
cases reporting the use of a DCB in the performance of endovascular 
procedures were $30,912 versus the average costs of $23,906 for all 
cases in MS-DRG 252, a difference of $7,006. For MS-DRG 253, the 
average costs for cases reporting the use of a drug-coated balloon in 
the performance of endovascular procedures were $23,051 versus the 
average costs of $18,986 for all cases in MS-DRG 253, a difference of 
$4,065. For MS-DRG 254, the average costs for cases reporting the use 
of a drug-coated balloon in the performance of endovascular procedures 
were $17,445 versus the average costs of $13,287 for all cases in MS-
DRG 254, a difference of $4,158.
    The following table is a summary of the findings discussed above 
from our review of MS-DRGs 252, 253 and 254 and the total number of 
cases that used a drug[dash]coated balloon in the performance of the 
procedure across MS-DRGs 252, 253, and 254.

                    MS-DRGs for Other Vascular Procedures and Cases With Drug-Coated Balloon
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average Length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 252, 253, and 254--All cases............................          71,641             6.0         $20,310
MS-DRGs 252, 253, and 254--Cases with drug-coated balloon.......           2,890             6.0          24,569
----------------------------------------------------------------------------------------------------------------

    As shown in this table, there were a total of 71,641 cases across 
MS-DRGs 252, 253, and 254, with an average length of stay of 6.0 days 
and average costs of $20,310. There were a total of 2,890 cases across 
MS-DRGs 252, 253, and 254 reporting the use of a drug-coated balloon in 
the performance of the procedure, with an average length of stay of 6.0 
days and average costs of $24,569. The data analysis showed that cases 
reporting the use of a drug-coated balloon in the performance of the 
procedure across MS-DRGs 252, 253 and 254 have similar lengths of stay 
(6.0 days) compared to the average length of stay for all of the cases 
in MS-DRGs 252, 253, and 254. The data results also showed that the 
cases reporting the use of a drug-coated balloon in the performance of 
the procedure across

[[Page 20207]]

these MS-DRGs have higher average costs ($24,569 versus $20,310) 
compared to the average costs for all of the cases across these MS-
DRGs.
    The results of our claims data analysis and the advice from our 
clinical advisors do not support reassigning cases reporting the use of 
a drug-coated balloon in the performance of these procedures from the 
lower severity level MS-DRGs 253 and 254 to the highest severity level 
MS-DRG 252 at this time. If we were to reassign cases that utilize a 
drug-coated balloon in the performance of these types of procedures 
from MS-DRG 254 to MS-DRG 252, the cases would result in overpayment 
and also would have a shorter length of stay compared to all of the 
cases in MS-DRG 252. While the cases reporting the use of a drug-coated 
balloon in the performance of these procedures are higher compared to 
the average costs for all cases in their assigned MS-DRGs, it is not by 
a significant amount. We believe that as use of a drug-coated balloon 
becomes more common, the costs will be reflected in the data. Our 
clinical advisors also agreed that it would not be clinically 
appropriate to reassign cases for patients from the lowest severity 
level (without CC/MCC) MS-DRG to the highest severity level (with MCC) 
MS-DRG in the absence of additional data to better determine the 
resource utilization for this subset of patients. Therefore, for these 
reasons, we are proposing to not reassign cases reporting the use of a 
drug-coated balloon in the performance of endovascular procedures from 
MS-DRGs 253 and 254 to MS-DRG 252. We are inviting public comments on 
our proposal.
    We note that because 24 of the 36 ICD-10-PCS procedure codes 
describing the use of a drug-coated balloon in the performance of 
endovascular procedures also include the use of an intraluminal device, 
we conducted further analysis to determine the number of cases 
reporting an intraluminal device with the use of a drug-coated balloon 
in the performance of the procedure versus the number of cases 
reporting the use of a drug[dash]coated balloon alone. We analyzed the 
number of cases across MS-DRGs 252, 253, and 254 reporting: (1) The use 
of an intraluminal device (stent) with use of a drug-coated balloon in 
the performance of the procedure; (2) the use of a drug-eluting 
intraluminal device (stent) with the use of a drug-coated balloon in 
the performance of the procedure; and (3) the use of a drug-coated 
balloon only in the performance of the procedure. Our findings are 
shown in the following table.

                    MS-DRGs for Other Vascular Procedures and Cases With Drug-Coated Balloon
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 252, 253 and 254--All cases.............................          71,641             6.0         $20,310
MS-DRGs 252, 253 and 254--Cases with intraluminal device with                522             6.0          28,418
 drug-coated balloon............................................
MS-DRGs 252, 253 and 254--Cases with drug-eluting intraluminal               447             6.0          26,098
 device with drug-coated balloon................................
MS-DRGs 252, 253 and 254--Cases with drug-coated balloon only...           2,705             6.1          24,553
----------------------------------------------------------------------------------------------------------------

    As shown in this table, there were a total of 71,641 cases across 
MS-DRGs 252, 253, and 254, with an average length of stay of 6.0 days 
and average costs of $20,310. There were 522 cases across MS-DRGs 252, 
253, and 254 reporting the use of an intraluminal device with use of a 
drug-coated balloon in the performance of the procedure, with an 
average length of stay of 6.0 days and average costs of $28,418. There 
were 447 cases across MS-DRGs 252, 253, and 254 reporting the use of a 
drug[dash]eluting intraluminal device with use of a drug-coated balloon 
in the performance of the procedure, with an average length of stay of 
6.0 days and average costs of $26,098. Lastly, there were 2,705 cases 
across MS-DRGs 252, 253, and 254 reporting the use of a drug-coated 
balloon alone in the performance of the procedure, with an average 
length of stay of 6.1 days and average costs of $24,553.
    The data showed that the 2,705 cases in MS-DRGs 252, 253, and 254 
reporting the use of a drug-coated balloon alone in the performance of 
the procedure have lower average costs compared to the 969 cases in MS-
DRGs 252, 253, and 254 reporting the use of an intraluminal device (522 
cases) or a drug-eluting intraluminal device (447 cases) with a drug-
coated balloon in the performance of the procedure ($24,553 versus 
$28,418 and $26,098, respectively). The data also showed that the cases 
reporting the use of a drug-coated balloon alone in the performance of 
the procedure have a comparable average length of stay compared to the 
cases reporting the use of an intraluminal device or a drug-eluting 
intraluminal device with a drug-coated balloon in the performance of 
the procedure (6.1 days versus 6.0 days).
    In summary, we believe that further analysis of endovascular 
procedures involving the treatment of superficial femoral arteries for 
peripheral arterial disease that utilize a drug-coated balloon in the 
performance of the procedure would be advantageous. As additional 
claims data become available, we will be able to more fully evaluate 
the differences in cases where a procedure utilizes a drug-coated 
balloon alone in the performance of the procedure versus cases where a 
procedure utilizes an intraluminal device or a drug-eluting 
intraluminal device in addition to a drug-coated balloon in the 
performance of the procedure.
5. MDC 6 (Diseases and Disorders of the Digestive System)
a. Benign Lipomatous Neoplasm of Kidney
    We received a request to reassign ICD-10-CM diagnosis code D17.71 
(Benign lipomatous neoplasm of kidney) from MDC 06 (Diseases and 
Disorders of the Digestive System) to MDC 11 (Diseases and Disorders of 
the Kidney and Urinary Tract). The requestor stated that this diagnosis 
code is used to describe a kidney neoplasm and believed that because 
the ICD-10-CM code is specific to the kidney, a more appropriate 
assignment would be under MDC 11. In FY 2015, under the ICD-9-CM 
classification, there was not a specific diagnosis code for a benign 
lipomatous neoplasm of the kidney. The only diagnosis code available 
was ICD-9-CM diagnosis code 214.3 (Lipoma of intra[dash]abdominal 
organs), which was assigned to MS-DRGs 393, 394, and 395 (Other 
Digestive System Diagnoses with MCC, with CC, and without CC/MCC, 
respectively) under MDC 6. Therefore, when we converted from the ICD-9 
based MS[dash]DRGs to the ICD[dash]10 MS[dash]DRGs, there was not a 
specific code available that identified the kidney from which to

[[Page 20208]]

replicate. As a result, ICD-10-CM diagnosis code D17.71 was assigned to 
those same MS-DRGs (MS-DRGs 393, 394, and 395) under MDC 6.
    While reviewing the MS-DRG classification of ICD-10-CM diagnosis 
code D17.71, we also reviewed the MS-DRG classification of another 
diagnosis code organized in subcategory D17.7, ICD-10-CM diagnosis code 
D17.72 (Benign lipomatous neoplasm of other genitourinary organ). ICD-
10-CM diagnosis code D17.72 is currently assigned under MDC 09 
(Diseases and Disorders of the Skin, Subcutaneous Tissue and Breast) to 
MS-DRGs 606 and 607 (Minor Skin Disorders with and without MCC, 
respectively). Similar to the replication issue with ICD-10-CM 
diagnosis code D17.71, with ICD-10-CM diagnosis code D17.72, under the 
ICD-9-CM classification, there was not a specific diagnosis code to 
identify a benign lipomatous neoplasm of genitourinary organ. The only 
diagnosis code available was ICD-9-CM diagnosis code 214.8 (Lipoma of 
other specified sites), which was assigned to MS-DRGs 606 and 607 under 
MDC 09. Therefore, when we converted from the ICD-9 based MS[dash]DRGs 
to the ICD-10 MS[dash]DRGs, there was not a specific code available 
that identified another genitourinary organ (other than the kidney) 
from which to replicate. As a result, ICD-10-CM diagnosis code D17.72 
was assigned to those same MS-DRGs (MS-DRGs 606 and 607) under MDC 9.
    We are proposing to reassign ICD-10-CM diagnosis code D17.71 from 
MS-DRGs 393, 394, and 395 (Other Digestive System Diagnoses with MCC, 
with CC, and without CC/MCC, respectively) under MDC 06 to MS-DRGs 686, 
687, and 688 (Kidney and Urinary Tract Neoplasms with MCC, with CC, and 
without CC/MCC, respectively) under MDC 11 because this diagnosis code 
is used to describe a kidney neoplasm. We also are proposing to 
reassign ICD-10-CM diagnosis code D17.72 from MS-DRGs 606 and 607 under 
MDC 09 to MS-DRGs 686, 687, and 688 under MDC 11 because this diagnosis 
code is used to describe other types of neoplasms classified to the 
genitourinary tract that do not have a specific code identifying the 
site. Our clinical advisors agree that the conditions described by the 
ICD-10-CM diagnosis codes provide specific anatomic detail involving 
the kidney and genitourinary tract and, therefore, if reclassified 
under this proposed MDC and reassigned to these MS-DRGs, would improve 
the clinical coherence of the patients assigned to these groups.
    We are inviting public comments on our proposals.
b. Bowel Procedures
    We received a request to reassign the following 8 ICD-10-PCS 
procedure codes that describe repositioning of the colon and takedown 
of end colostomy from MS-DRGs 344, 345, and 346 (Minor Small and Large 
Bowel Procedures with MCC, with CC, and without CC/MCC, respectively) 
to MS-DRGs 329, 330, and 331 (Major Small and Large Bowel Procedures 
with MCC, with CC, and without CC/MCC, respectively):

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0DSK0ZZ...................  Reposition ascending colon, open approach.
0DKL4ZZ...................  Reposition ascending colon, percutaneous
                             endoscopic approach.
0DSL0ZZ...................  Reposition transverse colon, open approach.
0DSL4ZZ...................  Reposition transverse colon, percutaneous
                             endoscopic approach.
0DSM0ZZ...................  Reposition descending colon, open approach.
0DSM4ZZ...................  Reposition descending colon, percutaneous
                             endoscopic approach.
0DSN0ZZ...................  Reposition sigmoid colon, open approach.
0DSN4ZZ...................  Reposition sigmoid colon, percutaneous
                             endoscopic approach.
------------------------------------------------------------------------

    The requestor indicated that the resources required for procedures 
identifying repositioning of specified segments of the large bowel are 
more closely aligned with other procedures that group to MS-DRGs 329, 
330, and 331, such as repositioning of the large intestine (unspecified 
segment).
    We analyzed the claims data from the September 2017 update of the 
FY 2017 Med PAR file for MS-DRGs 344, 345 and 346 for all cases 
reporting the 8 ICD[dash]10-PCS procedure codes listed in the table 
above. Our findings are shown in the following table:

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 344--All cases...........................................           1,452             9.5         $20,609
MS-DRG 344--All cases with a specific large bowel reposition                  52             9.6          23,409
 procedure......................................................
MS-DRG 345--All cases...........................................           2,674             5.6          11,552
MS-DRG 345--All cases with a specific large bowel reposition....             246               6          14,915
MS-DRG 346--All cases...........................................             990             3.8           8,977
MS-DRG 346--All cases with a specific large bowel reposition                 223             4.5          12,279
 procedure......................................................
----------------------------------------------------------------------------------------------------------------

    The data showed that the average length of stay and average costs 
for cases that reported a specific large bowel reposition procedure 
were generally consistent with the average length of stay and average 
costs for all of the cases in their assigned MS-DRG.
    We then examined the claims data in the September 2017 update of 
the FY 2017 MedPAR file for MS-DRGs 329, 330 and 331. Our findings are 
shown in the following table.

[[Page 20209]]



 
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 329, 330, and 331--All cases............................         112,388             8.4         $21,382
MS-DRG 329--All cases...........................................          33,640            13.3          34,015
MS-DRG 330--All cases...........................................          52,644             7.3          17,896
MS-DRG 331--All cases...........................................          26,104             4.1          12,132
----------------------------------------------------------------------------------------------------------------

    As shown in this table, across MS-DRGs 329, 330, and 331, we found 
a total of 112,388 cases, with an average length of stay of 8.4 days 
and average costs of $21,382. The results of our analysis indicate that 
the resources required for cases reporting the specific large bowel 
repositioning procedures are more aligned with those resources required 
for all cases assigned to MS-DRGs 344, 345, and 346, with the average 
costs being lower than the average costs for all cases assigned to MS-
DRGs 329, 330, and 331. Our clinical advisors also indicated that the 8 
specific bowel repositioning procedures are best aligned with those in 
MS-DRGs 344, 345, and 346. Therefore, we are proposing to maintain the 
current assignment of the 8 specific bowel repositioning procedures in 
MS[dash]DRGs 344, 345, and 346 for FY 2019. We are inviting public 
comments on this proposal.
    In conducting our analysis of MS-DRGs 329, 330, and 331, we also 
examined the subset of cases reporting one of the bowel procedures 
listed in the following table as the only O.R. procedure.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0DQK0ZZ...................  Repair ascending colon, open approach.
0DQK4ZZ...................  Repair ascending colon, percutaneous
                             endoscopic approach.
0DQL0ZZ...................  Repair transverse colon, open approach.
0DQL4ZZ...................  Repair transverse colon, percutaneous
                             endoscopic approach.
0DQM0ZZ...................  Repair descending colon, open approach.
0DQM4ZZ...................  Repair descending colon, percutaneous
                             endoscopic approach.
0DQN0ZZ...................  Repair sigmoid colon, open approach.
0DQN4ZZ...................  Repair sigmoid colon, percutaneous
                             endoscopic approach.
0DSB0ZZ...................  Reposition ileum, open approach.
0DSB4ZZ...................  Reposition ileum, percutaneous endoscopic
                             approach.
0DSE0ZZ...................  Reposition large intestine, open approach.
0DSE4ZZ...................  Reposition large intestine, percutaneous
                             endoscopic approach.
------------------------------------------------------------------------

    This approach can be useful in determining whether resource use is 
truly associated with a particular procedure or whether the procedure 
frequently occurs in cases with other procedures with higher than 
average resource use. As shown in the following table, we identified 
398 cases reporting a bowel procedure as the only O.R. procedure, with 
an average length of stay of 6.3 days and average costs of $13,595 
across MS-DRGs 329, 330, and 331, compared to the overall average 
length of stay of 8.4 days and average costs of $21,382 for all cases 
in MS-DRGs 329, 330, and 331.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 329, 330 and 331--All cases.............................         112,388             8.4         $21,382
MS-DRGs 329, 330 and 331--All cases with a bowel procedure as                398             6.3          13,595
 only O.R. procedure............................................
MS-DRG 329--All cases...........................................          33,640            13.3          34,015
MS-DRG 329--Cases with a bowel procedure as only O.R. procedure.              86             8.3          19,309
MS-DRG 330--All cases...........................................          52,644             7.3          17,896
MS-DRG 330--Cases with a bowel procedure as only O.R. procedure.             183             6.9          13,617
MS-DRG 331--All cases...........................................          26,104             4.1          12,132
MS-DRG 331--Cases with a bowel procedure as only O.R. procedure.             129             4.3           9,754
----------------------------------------------------------------------------------------------------------------

    The resources required for these cases are more aligned with the 
resources required for cases assigned to MS-DRGs 344, 345, and 346 than 
with the resources required for cases assigned to MS-DRGs 329, 330, and 
331. Our clinical advisors also agreed that these cases are more 
clinically aligned with cases in MS-DRGs 344, 345, and 346, as they are 
minor procedures relative to the major bowel procedures assigned to MS-
DRGs 329, 330, and 331. Therefore, we are proposing to reassign the 12 
ICD-10-PCS procedure codes listed above from MS-DRGs 329, 330, and 331 
to MS-DRGs 344, 345, and 346. We are inviting public comments on this 
proposal.
6. MDC 8 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue): Spinal Fusion
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38036), we announced 
our plans to review the ICD-10 logic for the MS-DRGs where procedures 
involving spinal fusion are currently assigned for FY 2019. After 
publication of the FY 2018 IPPS/LTCH PPS final rule, we

[[Page 20210]]

received a comment suggesting that CMS publish findings from this 
review and discuss possible future actions. The commenter agreed that 
it is important to be able to fully evaluate the MS-DRGs to which all 
spinal fusion procedures are currently assigned with additional claims 
data, particularly considering the 33 clinically invalid codes that 
were identified through the rulemaking process (82 FR 38034 through 
38035) and the 87 codes identified from the upper and lower joint 
fusion tables in the ICD-10-PCS classification and discussed at the 
September 12, 2017 ICD-10 Coordination and Maintenance Committee that 
were proposed to be deleted effective October 1, 2018 (FY 2019). The 
agenda and handouts from that meeting can be obtained from the CMS 
website at: https://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html.
    According to the commenter, deleting the 33 procedure codes 
describing clinically invalid spinal fusion procedures for FY 2018 
partially resolves the issue for data used in setting the FY 2020 
payment rates. However, the commenter also noted that the problem will 
not be fully resolved until the FY 2019 claims are available for FY 
2021 ratesetting (due to the 87 codes identified at the ICD-10 
Coordination and Maintenance Committee meeting for deletion effective 
October 1, 2018 (FY 2019)).
    The commenter noted that it analyzed claims data from the FY 2016 
MedPAR data set and was surprised to discover a significant number of 
discharges reporting 1 of the 87 clinically invalid codes that were 
identified and discussed by the ICD-10 Coordination and Maintenance 
Committee among the following spinal fusion MS-DRGs.

 
------------------------------------------------------------------------
          MS-DRG                             Description
------------------------------------------------------------------------
453.......................  Combined Anterior/Posterior Spinal Fusion
                             with MCC.
454.......................  Combined Anterior/Posterior Spinal Fusion
                             with CC.
455.......................  Combined Anterior/Posterior Spinal Fusion
                             without CC/MCC.
456.......................  Spinal Fusion Except Cervical with Spinal
                             Curvature or Malignancy or Infection or
                             Extensive Fusions with MCC.
457.......................  Spinal Fusion Except Cervical with Spinal
                             Curvature or Malignancy or Infection or
                             Extensive Fusions with CC.
458.......................  Spinal Fusion Except Cervical with Spinal
                             Curvature or Malignancy or Infection or
                             Extensive Fusions without CC/MCC.
459.......................  Spinal Fusion Except Cervical with MCC.
460.......................  Spinal Fusion Except Cervical without MCC.
471.......................  Cervical Spinal Fusion with MCC.
472.......................  Cervical Spinal Fusion with CC.
473.......................  Cervical Spinal Fusion without CC/MCC.
------------------------------------------------------------------------

    In addition, the commenter noted that it also identified a number 
of discharges for the 33 clinically invalid codes we identified in the 
FY 2018 IPPS/LTCH PPS final rule in the same MS-DRGs listed above. 
According to the commenter, its findings of these invalid spinal fusion 
procedure codes in the FY 2016 claims data comprise approximately 30 
percent of all discharges for spinal fusion procedures.
    The commenter expressed its appreciation that CMS is making efforts 
to address coding inaccuracies within the classification and suggested 
that CMS publish findings from its own review of spinal fusion coding 
issues in those MS-DRGs where cases reporting spinal fusion procedures 
are currently assigned and include a discussion of possible future 
actions in the FY 2019 IPPS/LTCH PPS proposed rule. The commenter 
believed that such an approach would allow time for stakeholder input 
on any possible proposals along with time for the invalid codes to be 
worked out of the datasets. The commenter also noted that publishing 
CMS' findings will put the agency, as well as the public, in a better 
position to address any potential payment issues for these services 
beginning in FY 2021.
    We thank the commenter for acknowledging the steps we have taken in 
our efforts to address coding inaccuracies within the classification as 
we continue to refine the ICD-10 MS-DRGs. We are not proposing any 
changes to the MS-DRGs involving spinal fusion procedures for FY 2019. 
However, in response to the commenter's suggestion and findings, we are 
providing the results from our analysis of the September 2017 update of 
the FY 2017 MedPAR claims data for the MS-DRGs involving spinal fusion 
procedures.
    We note that while the commenter stated that 87 codes were 
identified from the upper and lower joint fusion tables in the ICD-10-
PCS classification and discussed at the September 12, 2017 ICD-10 
Coordination and Maintenance Committee meeting to be deleted effective 
October 1, 2018 (FY 2019), there were 99 spinal fusion codes identified 
in the meeting materials, as shown in Table 6P.1g associated with this 
proposed rule (which is available via the Internet on the CMS website 
at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
    As shown in Table 6P.1g associated with this proposed rule, the 99 
procedure codes describe spinal fusion procedures that have device 
value ``Z'' representing No Device for the 6th character in the code. 
Because a spinal fusion procedure always requires some type of device 
(for example, instrumentation with bone graft or bone graft alone) to 
facilitate the fusion of vertebral bones, these codes are considered 
clinically invalid and were proposed for deletion at the September 12, 
2017 ICD-10 Coordination and Maintenance Committee meeting. We received 
public comments in support of the proposal to delete the 99 codes 
describing a spinal fusion without a device, in addition to receiving 
support for the deletion of other procedure codes describing fusion of 
body sites other than the spine. A total of 213 procedure codes 
describing fusion of a specific body part with device value ``Z'' No 
Device are being deleted effective October 1, 2018 (FY 2019) as shown 
in Table 6D.--Invalid Procedure Codes associated with this proposed 
rule (which is available via the Internet on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
    We examined claims data from the September 2017 update of the FY 
2017 MedPAR file for cases reporting any of the clinically invalid 
spinal fusion procedures with device value ``Z'' No Device in MS-DRGs 
028 (Spinal Procedures with MCC), 029 (Spinal Procedures with CC or 
Spinal Neurostimulators), and 030 (Spinal Procedures without CC/MCC) 
under

[[Page 20211]]

MDC 1 and MS-DRGs 453, 454, 455, 456, 457, 458, 459, 460, 471, 472, and 
473 under MDC 8 (that are listed and shown earlier in this section). 
Our findings are shown in the following tables.

                                            Spinal Fusion Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 028--All cases...........................................           1,927            11.7         $37,524
MS-DRG 028--Cases with invalid spinal fusion procedures.........             132              13          52,034
MS-DRG 029--All cases...........................................           3,426             5.7          22,525
MS-DRG 029--Cases with invalid spinal fusion procedures.........             171             7.4          33,668
MS-DRG 030--All cases...........................................           1,578               3          15,984
MS-DRG 030--Cases with invalid spinal fusion procedures.........              52             2.6          22,471
MS-DRG 453--All cases...........................................           2,891             9.5          70,005
MS-DRG 453--Cases with invalid spinal fusion procedures.........             823            10.1          84,829
MS-DRG 454--All cases...........................................          12,288             4.7          47,334
MS-DRG 454--Cases with invalid spinal fusion procedures.........           2,473             5.4          59,814
MS-DRG 455--All cases...........................................          12,751               3          37,440
MS-DRG 455--Cases with invalid spinal fusion procedures.........           2,332             3.2          45,888
MS-DRG 456--All cases...........................................           1,439            11.5          66,447
MS-DRG 456--Cases with invalid spinal fusion procedures.........             404            12.5          71,385
MS-DRG 457--All cases...........................................           3,644               6          48,595
MS-DRG 457--Cases with invalid spinal fusion procedures.........             960             6.7          53,298
MS-DRG 458--All cases...........................................           1,368             3.6          37,804
MS-DRG 458--Cases with invalid spinal fusion procedures.........             244             4.1          43,182
MS-DRG 459--All cases...........................................           4,904             7.8          43,862
MS-DRG 459--Cases with invalid spinal fusion procedures.........             726               9          49,387
MS-DRG 460--All cases...........................................          59,459             3.4          29,870
MS-DRG 460--Cases with invalid spinal fusion procedures.........           5,311             3.9          31,936
MS-DRG 471--All cases...........................................           3,568             8.4          36,272
MS-DRG 471--Cases with invalid spinal fusion procedures.........             389             9.9          43,014
MS-DRG 472--All cases...........................................          15,414             3.2          21,836
MS-DRG 472--Cases with invalid spinal fusion procedures.........           1,270               4          25,780
MS-DRG 473--All cases...........................................          18,095             1.8          17,694
MS-DRG 473--Cases with invalid spinal fusion procedures.........           1,185             2.3          19,503
----------------------------------------------------------------------------------------------------------------


                                   Summary Table for Spinal Fusion Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 028, 029, 030, 453, 454, 455, 456, 457, 458, 459, 460,           142,752             3.9         $31,788
 471, 472, and 473--All cases...................................
MS-DRGs 028, 029, 030, 453, 454, 455, 456, 457, 458, 459, 460,            16,472             5.1          42,929
 471, 472, and 473--Cases with invalid spinal fusion procedures.
----------------------------------------------------------------------------------------------------------------

    As shown in this summary table, we found a total of 142,752 cases 
in MS-DRGs 028, 029, 030, 453, 454, 455, 456, 457, 458, 459, 460, 471, 
472, and 473 with an average length of stay of 3.9 days and average 
costs of $31,788. We found a total of 16,472 cases reporting a 
procedure code for an invalid spinal fusion procedure with device value 
``Z'' No Device across MS-DRGs 028, 029, and 030 under MDC 1 and MS-
DRGs 453, 454, 455, 456, 457, 458, 459, 460, 471, 472, and 473 under 
MDC 8, with an average length of stay of 5.1 days and average costs of 
$42,929. The results of the data analysis demonstrate that these 
invalid spinal fusion procedures represent approximately 12 percent of 
all discharges across the spinal fusion MS-DRGs. Because these 
procedure codes describe clinically invalid procedures, we would not 
expect these codes to be reported on any claims data. It is unclear why 
providers assigned procedure codes for spinal fusion procedures with 
the device value ``Z'' No Device. Our analysis did not examine whether 
these claims were isolated to a specific provider or whether this 
inaccurate reporting was widespread among a number of providers.
    With regard to possible future action, we will continue to monitor 
the claims data for resolution of the coding issues previously 
identified. Because the procedure codes that we analyzed and presented 
findings for in this FY 2019 IPPS/LTCH PPS proposed rule are no longer 
in the classification effective October 1, 2018 (FY 2019), the claims 
data that we examine for FY 2020 may still contain claims with the 
invalid codes. As such, we will continue to collaborate with the AHA as 
one of the four Cooperating Parties through the AHA's Coding Clinic for 
ICD-10-CM/PCS and provide further education on spinal fusion procedures 
and the proper reporting of the ICD-10-PCS spinal fusion procedure 
codes. We agree with the commenter that until these coding inaccuracies 
are no longer reflected in the claims data, it would be premature to 
propose any MS-DRG modifications for spinal fusion procedures. Possible 
MS-DRG modifications may include taking into account the approach that 
was utilized in performing the spinal fusion procedure (for example, 
open versus percutaneous).
    For the reasons described, stated earlier in our discussion, we are 
proposing to not make any changes to the spinal fusion MS-DRGs for FY 
2019.

[[Page 20212]]

We are inviting public comments on our proposal.
7. MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue and 
Breast): Cellulitis With Methicillin Resistant Staphylococcus Aureus 
(MSRA) Infection
    We received a request to reassign ICD-10-CM diagnosis codes 
reported with a primary diagnosis of cellulitis and a secondary 
diagnosis code of B95.62 (Methicillin resistant Staphylococcus aureus 
infection as the cause of diseases classified elsewhere) or A49.02 
(Methicillin resistant Staphylococcus aureus infection, unspecified 
site). Currently, these cases are assigned to MS-DRG 602 (Cellulitis 
with MCC) and MS-DRG 603 (Cellulitis without MCC) in MDC 9. The 
requestor believed that cases of cellulitis with MSRA infection should 
be reassigned to MS-DRG 867 (Other Infectious and Parasitic Diseases 
Diagnoses with MCC) because MS-DRGs 602 and 603 include cases that do 
not accurately reflect the severity of illness or risk of mortality for 
patients diagnosed with cellulitis and MRSA. The requestor acknowledged 
that the organism is not to be coded before the localized infection, 
but stated in its request that patients diagnosed with cellulitis and 
MRSA are entirely different from patients diagnosed only with 
cellulitis. The requestor stated that there is a genuine threat to life 
or limb in these cases. The requestor further stated that, with the 
opioid crisis and the frequency of MRSA infection among this 
population, cases of cellulitis with MRSA should be identified with a 
specific combination code and assigned to MS-DRG 867.
    We analyzed claims data from the September 2017 update of the FY 
2017 MedPAR file for all cases assigned to MS-DRGs 602 and 603 and 
subsets of these cases reporting a primary ICD-10-CM diagnosis of 
cellulitis and a secondary diagnosis code of B95.62 or A49.02. Our 
findings are shown in the following table.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 602--All cases...........................................          26,244             5.8         $10,034
MS-DRG 603--All cases...........................................         104,491             3.9           6,128
MS-DRGs 602 and 603--Cases reported with a primary diagnosis of            5,364             5.3           8,245
 cellulitis and a secondary diagnosis of B95.62.................
MS-DRGs 602 and 603--Cases reported with a primary diagnosis of              309             5.4           8,832
 cellulitis and a secondary diagnosis of A49.02.................
----------------------------------------------------------------------------------------------------------------

    As shown in this table, we examined the subsets of cases in MS-DRGs 
602 and 603 reported with a primary diagnosis of cellulitis and a 
secondary diagnosis code B95.62 or A49.02. Both of these subsets of 
cases had an average length of stay that was comparable to the average 
length of stay for all cases in MS-DRG 602 and greater than the average 
length of stay for all cases in MS-DRG 603, and average costs that were 
lower than the average costs of all cases in MS-DRG 602 and higher than 
the average costs of all cases in MS-DRG 603. As we have discussed in 
prior rulemaking (77 FR 53309), it is a fundamental principle of an 
averaged payment system that half of the procedures in a group will 
have above average costs. It is expected that there will be higher cost 
and lower cost subsets, especially when a subset has low numbers.
    To examine the request to reassign ICD-10-CM diagnosis codes 
reported with a primary diagnosis of cellulitis and a secondary 
diagnosis code of B95.62 or A49.02 from MS-DRGs 602 and 603 to MS-DRG 
867 (which would typically involve also reassigning those cases to the 
two other severity level MS-DRGs 868 and 869 (Other Infectious and 
Parasitic Diseases Diagnoses with CC and Other Infectious and Parasitic 
Diseases Diagnoses without CC/MCC, respectively)), we then analyzed the 
data for all cases in MS-DRGs 867, 868 and 869. The results of our 
analysis are shown in the following table.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 867-All cases............................................           2,653             7.5         $14,762
MS-DRG 868-All cases............................................           2,096             4.4           7,532
MS-DRG 869-All cases............................................             499             3.3           5,624
----------------------------------------------------------------------------------------------------------------

    We compared the average length of stay and average costs for MS-
DRGs 867, 868, and 869 to the average length of stay and average costs 
for the subsets of cases in MS-DRGs 602 and 603 reported with a primary 
diagnosis of cellulitis and a secondary diagnosis code of B95.62 or 
A49.02. We found that the average length of stay for these subsets of 
cases was shorter and the average costs were lower than those for all 
cases in MS-DRG 867, but that the average length of stay and average 
costs were higher than those for all cases in MS-DRG 868 and MS-DRG 
869. Our findings from the analysis of claims data do not support 
reassigning cellulitis cases reported with ICD-10-CM diagnosis code 
B95.62 or A49.02 from MS-DRGs 602 and 603 to MS-DRGs 867, 868 and 869. 
Our clinical advisors noted that when a primary diagnosis of cellulitis 
is accompanied by a secondary diagnosis of B95.62 or A49.02 in MS-DRGs 
602 or 603, the combination of these primary and secondary diagnoses is 
the reason for the hospitalization, and the level of acuity of these 
subsets of patients is similar to other patients in MS-DRGs 602 and 
603. Therefore, these cases are more clinically aligned with all cases 
in MS-DRGs 602 and 603. For these reasons, we are not proposing to 
reassign cellulitis cases reported with ICD-10-CM diagnosis code of 
B95.62 or A49.02 to MS-DRG 867, 868, or 869 for FY 2019. We are 
inviting public comments on our proposal to maintain the current MS-DRG 
assignment for ICD-10-CM codes B95.62 and A49.02 when reported as 
secondary diagnoses with a primary diagnosis of cellulitis.
8. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and 
Disorders): Acute Intermittent Porphyria
    We received a request to revise the MS-DRG classification for cases 
of

[[Page 20213]]

patients diagnosed with porphyria and reported with ICD-10-CM diagnosis 
code E80.21 (Acute intermittent (hepatic) porphyria) to recognize the 
resource requirements in caring for these patients, to ensure 
appropriate payment for these cases, and to preserve patient access to 
necessary treatments. Porphyria is defined as a group of rare disorders 
(``porphyrias'') that interfere with the production of hemoglobin that 
is needed for red blood cells. While some of these disorders are 
genetic (inborn) and others are acquired, they all result in the 
abnormal accumulation of hemoglobin building blocks, called porphyrins, 
which can be deposited in the tissues where they particularly interfere 
with the functioning of the nervous system and the skin. Treatment for 
patients suffering from disorders of porphyrin metabolism consists of 
an intravenous injection of Panhematin[reg] (hemin for injection). ICD-
10-CM diagnosis code E80.21 is currently assigned to MS-DRG 642 (Inborn 
and Other Disorders of Metabolism). (We note that this issue has been 
discussed previously in the FY 2013 IPPS/LTCH PPS proposed and final 
rules (77 FR 27904 through 27905 and 77 FR 53311 through 53313, 
respectively) and the FY 2015 IPPS/LTCH PPS proposed and final rules 
(79 FR 28016 and 79 FR 49901, respectively).)
    We analyzed claims data from the September 2017 update of the FY 
2017 MedPAR file for cases assigned to MS-DRG 642. Our findings are 
shown in the following table.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 642--All cases...........................................           1,801             4.3          $9,157
MS-DRG 642--Cases reporting diagnosis code E80.21 as principal               183             5.6          19,244
 diagnosis......................................................
MS-DRG 642--Cases not reporting diagnosis code E80.21 as                   1,618             4.1           8,016
 principal diagnosis............................................
----------------------------------------------------------------------------------------------------------------

    As shown in this table, cases reporting diagnosis code E80.21 as 
the principal diagnosis in MS-DRG 642 had higher average costs and 
longer average lengths of stay compared to the average costs and 
lengths of stay for all other cases in MS-DRG 642.
    To examine the request to reassign cases with ICD-10-CM diagnosis 
code E80.21 as the principal diagnosis, we analyzed claims data for all 
cases in MS-DRGs for endocrine disorders, including MS-DRG 643 
(Endocrine Disorders with MCC), MS[dash]DRG 644 (Endocrine Disorders 
with CC), and MS-DRG 645 (Endocrine Disorders without CC/MCC). The 
results of our analysis are shown in the following table.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 643--All cases...........................................           9,337             6.3         $11,268
MS-DRG 644--All cases...........................................          11,306             4.2           7,154
MS-DRG 645--All cases...........................................           4,297             3.2           5,406
----------------------------------------------------------------------------------------------------------------

    The data results showed that the average length of stay for the 
subset of cases reporting ICD-10-CM diagnosis code E80.21 as the 
principal diagnosis in MS-DRG 642 is lower than the average length of 
stay for all cases in MS-DRG 643, but higher than the average length of 
stay for all cases in MS-DRGs 644 and 645. The average costs for the 
subset of cases reporting ICD-10-CM diagnosis code E80.21 as the 
principal diagnosis in MS-DRG 642 are much higher than the average 
costs for all cases in MS-DRGs 643, 644, and 645. However, after 
considering these findings in the context of the current MS-DRG 
structure, we were unable to identify an MS-DRG that would more closely 
parallel these cases with respect to average costs and length of stay 
that would also be clinically aligned. Our clinical advisors believe 
that, in the current MS-DRG structure, the clinical characteristics of 
patients in these cases are most closely aligned with the clinical 
characteristics of patients in all cases in MS-DRG 642. Moreover, given 
the small number of porphyria cases, we do not believe there is 
justification for creating a new MS-DRG. Basing a new MS-DRG on such a 
small number of cases could lead to distortions in the relative payment 
weights for the MS-DRG because several expensive cases could impact the 
overall relative payment weight. Having larger clinical cohesive groups 
within an MS-DRG provides greater stability for annual updates to the 
relative payment weights. In summary, we are not proposing to revise 
the MS-DRG classification for porphyria cases. We are inviting public 
comments on our proposal to maintain porphyria cases in MS-DRG 642.
9. MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract): 
Admit for Renal Dialysis
    We received a request to review the codes assigned to MS-DRG 685 
(Admit for Renal Dialysis) to determine if the MS-DRG should be 
deleted, or if it should remain as a valid MS-DRG. Currently, the ICD-
10-CM diagnosis codes shown in the table below are assigned to MS-DRG 
685:

------------------------------------------------------------------------
      ICD-10-CM code                      ICD-CM code title
------------------------------------------------------------------------
Z49.01....................  Encounter for fitting and adjustment of
                             extracorporeal dialysis catheter.
Z49.02....................  Encounter for fitting and adjustment of
                             peritoneal dialysis catheter.
Z49.31....................  Encounter for adequacy testing for
                             hemodialysis.
Z49.32....................  Encounter for adequacy testing for
                             peritoneal dialysis.
------------------------------------------------------------------------


[[Page 20214]]

    The requestor stated that, under ICD-9-CM, diagnosis code V56.0 
(Encounter for extracorporeal dialysis) was reported as the principal 
diagnosis to identify patients who were admitted for an encounter for 
dialysis. However, under ICD-10-CM, there is no comparable code in 
which to replicate such a diagnosis. The requestor noted that, while 
patients continue to be admitted under inpatient status (under certain 
circumstances) for dialysis services, there is no existing ICD-10-CM 
diagnosis code within the classification that specifically identifies a 
patient being admitted for an encounter for dialysis services.
    The requestor also noted that three of the four ICD-10-CM diagnosis 
codes currently assigned to MS-DRG 685 are on the ``Unacceptable 
Principal Diagnosis'' edit code list in the Medicare Code Editor (MCE). 
Therefore, these codes are not allowed to be reported as a principal 
diagnosis for an inpatient admission.
    We examined claims data from the September 2017 update of the FY 
2017 MedPAR file for cases reporting ICD-10-CM diagnosis codes Z49.01, 
Z49.02, Z49.31, and Z49.32. Our findings are shown in the following 
table.

                                       Admit for Renal Dialysis Encounter
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 685--All cases...........................................              78               4          $8,871
MS-DRG 685--Cases reporting ICD-10-CM diagnosis code Z49.01.....              78               4           8,871
MS-DRG 685--Cases reporting ICD-10-CM diagnosis code Z49.02.....               0               0               0
MS-DRG 685--Cases reporting ICD-10-CM diagnosis code Z49.31.....               0               0               0
MS-DRG 685--Cases reporting ICD-10-CM diagnosis code Z49.32.....               0               0               0
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, for MS-DRG 685, there were a total of 
78 cases reporting ICD-10-CM diagnosis code Z49.01, with an average 
length of stay of 4 days and average costs of $8,871. There were no 
cases reporting ICD-10-CM diagnosis code Z49.02, Z49.31, or Z49.32.
    Our clinical advisors reviewed the clinical issues, as well as the 
claims data for MS-DRG 685. Based on their review of the data analysis, 
our clinical advisors recommended that MS-DRG 685 be deleted and ICD-
10-CM diagnosis codes Z49.01, Z49.02, Z49.31, and Z49.32 be reassigned. 
Historically, patients were admitted as inpatients to receive 
hemodialysis services. However, over time, that practice has shifted to 
outpatient and ambulatory settings. Because of this change in medical 
practice, we do not believe that it is appropriate to maintain a 
vestigial MS-DRG, particularly due to the fact that the transition to 
ICD-10 has resulted in three out of four codes that map to the MS-DRG 
being precluded from being used as principal diagnosis codes on the 
claim. In addition, our clinical advisors believe that reassigning the 
ICD-10-CM diagnosis codes from MS-DRG 685 to MS-DRGs 698, 699, and 700 
(Other Kidney and Urinary Tract Diagnoses with MCC, with CC, and 
without CC\MCC, respectively) is clinically appropriate because the 
reassignment will result in an accurate MS-DRG assignment of a specific 
case or inpatient service and encounter based on acceptable principal 
diagnosis codes under these MS-DRGs.
    Therefore, for FY 2019, because there is no existing ICD-10-CM 
diagnosis code within the classification system that specifically 
identifies a patient being admitted for an encounter for dialysis 
services and three of the four ICD-10-CM diagnosis codes, Z49.02, 
Z49.31, and Z49.32, currently assigned to MS-DRG 685 are on the 
Unacceptable Principal Diagnosis edit code list in the Medicare Code 
Editor (MCE), we are proposing to delete MS-DRG 685 and reassign ICD-
10-CM diagnosis codes Z49.01, Z49.02, Z49.31, and Z49.32 from MS-DRG 
685 to MS-DRGs 698, 699, and 700.
    We are inviting public comments on our proposals.
10. MDC 14 (Pregnancy, Childbirth and the Puerperium)
    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19834) and final 
rule (82 FR 38036 through 38037), we noted that 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. As a result, we solicited 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, we sought public comments on further refinements to the 
conditions defined as a complicating diagnosis in MS-DRG 774 and MS-DRG 
781 (Other Antepartum Diagnoses with Medical Complications). We 
indicated that we would review public comments received in response to 
the solicitation as we continued to evaluate these MS-DRGs under MDC 14 
and, if warranted, we would propose refinements for FY 2019. Commenters 
were instructed to direct comments for consideration to the CMS MS-DRG 
Classification Change Request Mailbox located at 
[email protected] by November 1, 2017.
    In response to our solicitation for public comments on the MS-DRGs 
related to vaginal delivery, one commenter recommended that CMS convene 
a workgroup that would include hospital staff and physicians to 
systematically review the MDC 14 MS-DRGs and to identify which 
conditions should appropriately be considered complicating diagnoses. 
As an interim step, this commenter recommended that CMS consider the 
following suggestions as a result of its own evaluation of MS-DRGs 767, 
774 and 775.
    For MS-DRG 767, the commenter recommended that the following ICD-
10-CM diagnosis codes and ICD-10-PCS procedure code be removed from the 
GROUPER logic and provided the rationale for why the commenter 
suggested removing each code.

[[Page 20215]]



                       Suggestions for MS-DRG 767
            [Vaginal delivery with sterilization and/or D&C]
------------------------------------------------------------------------
                                                  Rationale for removing
     ICD-10-CM code          Code description      code from MS-DRG 767
------------------------------------------------------------------------
O66.41..................  Failed attempted        This code indicates
                           vaginal birth after     that the attempt at
                           previous cesarean       vaginal delivery has
                           delivery.               failed.
O71.00..................  Rupture of uterus       This code indicates
                           before onset of         that the uterus has
                           labor, unspecified      ruptured before onset
                           trimester.              of labor and
                                                   therefore, a vaginal
                                                   delivery would not be
                                                   possible.
O82.....................  Encounter for cesarean  This code indicates
                           delivery without        the encounter is for
                           indication.             a cesarean delivery.
O75.82..................  Onset (spontaneous) of  This code indicates
                           labor after 37 weeks    this is a cesarean
                           of gestation but        delivery.
                           before 39 completed
                           weeks, with delivery
                           by (planned) C-
                           section.
------------------------------------------------------------------------


                       Suggestions for MS-DRG 767
            [Vaginal delivery with sterilization and/or D&C]
------------------------------------------------------------------------
                                                  Rationale for removing
     ICD-10-PCS code         Code description      code from MS-DRG 767
------------------------------------------------------------------------
10A07Z6.................  Abortion of products    This code indicates
                           of conception,          the procedure to be
                           vacuum, via natural     an abortion rather
                           or artificial opening.  than a vaginal
                                                   delivery.
------------------------------------------------------------------------

    For MS-DRG 774, the commenter recommended that the following ICD-
10-CM diagnosis codes be removed from the GROUPER logic and provided 
the rationale for why the commenter suggested removing each code.

                       Suggestions for MS-DRG 774
             [Vaginal delivery with Complicating Diagnoses]
------------------------------------------------------------------------
                                                  Rationale for removing
     ICD-10-CM code          Code description      code from MS-DRG 774
------------------------------------------------------------------------
O66.41..................  Failed attempted        This code indicates
                           vaginal birth after     that the attempt at
                           previous cesarean       vaginal delivery has
                           delivery.               failed.
O71.00..................  Rupture of uterus       This code indicates
                           before onset of         that the uterus has
                           labor, unspecified      ruptured before onset
                           trimester.              of labor and
                                                   therefore, a vaginal
                                                   delivery would not be
                                                   possible.
O75.82..................  Onset (spontaneous) of  This code indicates
                           labor after 37 weeks    this is a planned
                           of gestation but        cesarean delivery.
                           before 39 completed
                           weeks, with delivery
                           by (planned) C-
                           section.
O82.....................  Encounter for cesarean  This code indicates
                           delivery without        the encounter is for
                           indication.             a cesarean delivery.
O80.....................  Encounter for full-     According to the
                           term uncomplicated      Official Guidelines
                           delivery.               for Coding and
                                                   Reporting, ``Code O80
                                                   should be assigned
                                                   when a woman is
                                                   admitted for a full
                                                   term normal delivery
                                                   and delivers a
                                                   single, healthy
                                                   infant without any
                                                   complications
                                                   antepartum, during
                                                   the delivery, or
                                                   postpartum during the
                                                   delivery episode.''
------------------------------------------------------------------------

    For MS-DRG 775, the commenter recommended that the following ICD-
10-CM diagnosis codes and ICD-10-PCS procedure code be removed from the 
GROUPER logic and provided the rationale for why the commenter 
suggested removing each code.

                       Suggestions for MS-DRG 775
            [Vaginal delivery without complicating diagnoses]
------------------------------------------------------------------------
                                                  Rationale for removing
     ICD-10-CM code          Code description      code from MS-DRG 775
------------------------------------------------------------------------
O66.41..................  Failed attempted        This code indicates
                           vaginal birth after     that the attempt at
                           previous cesarean       vaginal delivery has
                           delivery.               failed.
O69.4XX0................  Labor and delivery      According to the
                           complicated by vasa     physicians consulted,
                           previa, not             vasa previa always
                           applicable or           results in C-section.
                           unspecified.            Research indicates
                                                   that when vasa previa
                                                   is diagnosed, C-
                                                   section before labor
                                                   begins can save the
                                                   baby's life.

[[Page 20216]]

 
O69.4XX2................  Labor and delivery      According to the
                           complicated by vasa     physicians consulted,
                           previa, fetus 2.        vasa previa always
                                                   results in C-section.
                                                   Research indicates
                                                   that when vasa previa
                                                   is diagnosed, C-
                                                   section before labor
                                                   begins can save the
                                                   baby's life.
O69.4XX3................  Labor and delivery      According to the
                           complicated by vasa     physicians consulted,
                           previa, fetus 3.        vasa previa always
                                                   results in C-section.
                                                   Research indicates
                                                   that when vasa previa
                                                   is diagnosed, C-
                                                   section before labor
                                                   begins can save the
                                                   baby's life.
O69.4XX4................  Labor and delivery      According to the
                           complicated by vasa     physicians consulted,
                           previa, fetus 4.        vasa previa always
                                                   results in C-section.
                                                   Research indicates
                                                   that when vasa previa
                                                   is diagnosed, C-
                                                   section before labor
                                                   begins can save the
                                                   baby's life.
O69.4XX5................  Labor and delivery      According to the
                           complicated by vasa     physicians consulted,
                           previa, fetus 5.        vasa previa always
                                                   results in C-section.
                                                   Research indicates
                                                   that when vasa previa
                                                   is diagnosed, C-
                                                   section before labor
                                                   begins can save the
                                                   baby's life.
O69.4XX9................  Labor and delivery      According to the
                           complicated by vasa     physicians consulted,
                           previa, other fetus.    vasa previa always
                                                   results in C-section.
                                                   Research indicates
                                                   that when vasa previa
                                                   is diagnosed, C-
                                                   section before labor
                                                   begins can save the
                                                   baby's life.
O71.00..................  Rupture of uterus       This code indicates
                           before onset of         that the uterus has
                           labor, unspecified      ruptured before onset
                           trimester.              of labor and
                                                   therefore, a vaginal
                                                   delivery would not be
                                                   possible.
O82.....................  Encounter for cesarean  This code indicates
                           delivery without        the encounter is for
                           indication.             a cesarean delivery.
------------------------------------------------------------------------


                       Suggestions for MS-DRG 775
            [Vaginal delivery without Complicating Diagnosis]
------------------------------------------------------------------------
                                                  Rationale for removing
     ICD-10-CM code          Code description      code from MS-DRG 775
------------------------------------------------------------------------
10A07Z6.................  Abortion of Products    This code indicates
                           of Conception,          the procedure to be
                           Vacuum, Via Natural     an abortion rather
                           or Artificial Opening.  than a vaginal
                                                   delivery.
------------------------------------------------------------------------

    Another commenter agreed that the MS-DRG logic for a vaginal 
delivery under MDC 14 is technically complex and provided examples to 
illustrate these facts. For instance, the commenter noted that the 
GROUPER logic code lists appear redundant with several of the same 
codes listed for different MS-DRGs and that the GROUPER logic code list 
for a vaginal delivery in MS-DRG 774 is comprised of diagnosis codes 
while the GROUPER logic code list for a vaginal delivery in MS-DRG 775 
is comprised of procedure codes. The commenter also noted that several 
of the ICD-10-CM diagnosis codes shown in the table below that became 
effective with discharges on and after October 1, 2016 (FY 2017) or 
October 1, 2017 (FY 2018) appear to be missing from the GROUPER logic 
code lists for MS-DRGs 781 and 774.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
O11.4.....................  Pre-existing hypertension with pre-
                             eclampsia, complicating childbirth.
O11.5.....................  Pre-existing hypertension with pre-
                             eclampsia, complicating the puerperium.
012.04....................  Gestational edema, complicating childbirth.
012.05....................  Gestational edema, complicating the
                             puerperium.
012.14....................  Gestational proteinuria, complicating
                             childbirth.
012.15....................  Gestational proteinuria, complicating the
                             puerperium.
012.24....................  Gestational edema with proteinuria,
                             complicating childbirth.
012.25....................  Gestational edema with proteinuria,
                             complicating the puerperium.
O13.4.....................  Gestational [pregnancy-induced] hypertension
                             without significant proteinuria,
                             complicating childbirth.
O13.5.....................  Gestational [pregnancy-induced] hypertension
                             without significant proteinuria,
                             complicating the puerperium.
O14.04....................  Mild to moderate pre-eclampsia, complicating
                             childbirth.
O14.05....................  Mild to moderate pre-eclampsia, complicating
                             the puerperium.
O14.14....................  Severe pre-eclampsia, complicating
                             childbirth.
O14.15....................  Severe pre-eclampsia, complicating the
                             puerperium.
O14.24....................  HELLP syndrome, complicating childbirth.
O14.25....................  HELLP syndrome, complicating the puerperium.
O14.94....................  Unspecified pre-eclampsia, complicating
                             childbirth.
O14.95....................  Unspecified pre-eclampsia, complicating the
                             puerperium.
O15.00....................  Eclampsia complicating pregnancy,
                             unspecified trimester.

[[Page 20217]]

 
O15.02....................  Eclampsia complicating pregnancy, second
                             trimester.
O15.03....................  Eclampsia complicating pregnancy, third
                             trimester.
O15.1.....................  Eclampsia complicating labor.
O15.2.....................  Eclampsia complicating puerperium, second
                             trimester.
O16.4.....................  Unspecified maternal hypertension,
                             complicating childbirth.
O16.5.....................  Unspecified maternal hypertension,
                             complicating the puerperium.
O24.415...................  Gestational diabetes mellitus in pregnancy,
                             controlled by oral hypoglycemic drugs.
O24.425...................  Gestational diabetes mellitus in childbirth,
                             controlled by oral hypoglycemic drugs.
O24.435...................  Gestational diabetes mellitus in puerperium,
                             controlled by oral hypoglycemic drugs.
O44.20....................  Partial placenta previa NOS or without
                             hemorrhage, unspecified trimester.
O44.21....................  Partial placenta previa NOS or without
                             hemorrhage, first trimester.
O44.22....................  Partial placenta previa NOS or without
                             hemorrhage, second trimester.
O44.23....................  Partial placenta previa NOS or without
                             hemorrhage, third trimester.
O44.30....................  Partial placenta previa with hemorrhage,
                             unspecified trimester.
O44.31....................  Partial placenta previa with hemorrhage,
                             first trimester.
O44.32....................  Partial placenta previa with hemorrhage,
                             second trimester.
O44.33....................  Partial placenta previa with hemorrhage,
                             third trimester.
O44.40....................  Low lying placenta NOS or without
                             hemorrhage, unspecified trimester.
O44.41....................  Low lying placenta NOS or without
                             hemorrhage, first trimester.
O44.42....................  Low lying placenta NOS or without
                             hemorrhage, second trimester.
O44.43....................  Low lying placenta NOS or without
                             hemorrhage, third trimester.
O44.50....................  Low lying placenta with hemorrhage,
                             unspecified trimester.
O44.51....................  Low lying placenta with hemorrhage, first
                             trimester.
O44.52....................  Low lying placenta with hemorrhage, second
                             trimester.
O44.53....................  Low lying placenta with hemorrhage, third
                             trimester.
O70.20....................  Third degree perineal laceration during
                             delivery, unspecified.
O70.21....................  Third degree perineal laceration during
                             delivery, IIIa.
O70.22....................  Third degree perineal laceration during
                             delivery, IIIb.
O70.23....................  Third degree perineal laceration during
                             delivery, IIIc.
O86.11....................  Cervicitis following delivery.
O86.12....................  Endometritis following delivery.
O86.13....................  Vaginitis following delivery.
O86.19....................  Other infection of genital tract following
                             delivery.
O86.20....................  Urinary tract infection following delivery,
                             unspecified.
O86.21....................  Infection of kidney following delivery.
O86.22....................  Infection of bladder following delivery.
O86.29....................  Other urinary tract infection following
                             delivery.
O86.81....................  Puerperal septic thrombophlebitis.
O86.89....................  Other specified puerperal infections.
------------------------------------------------------------------------

    Lastly, the commenter stated that the list of ICD-10-PCS procedure 
codes appears comprehensive, but indicated that inpatient coding is not 
their expertise. We note that it was not clear which list of procedure 
codes the commenter was specifically referencing. The commenter did not 
provide a list of any procedure codes for CMS to review or reference a 
specific MS-DRG in its comment.
    Another commenter expressed concern that ICD-10-PCS procedure codes 
10D17Z9 (Manual extraction of products of conception, retained, via 
natural or artificial opening) and 10D18Z9 (Manual extraction of 
products of conception, retained, via natural or artificial opening 
endoscopic) are not assigned to the appropriate MS-DRG. ICD-10-PCS 
procedure codes 10D17Z9 and 10D18Z9 describe the manual removal of a 
retained placenta and are currently assigned to MS-DRG 767 (Vaginal 
Delivery with Sterilization and/or D&C). According to the commenter, a 
patient that has a vaginal delivery with manual removal of a retained 
placenta is not having a sterilization or D&C procedure. The commenter 
noted that, under ICD-9-CM, a vaginal delivery with manual removal of 
retained placenta grouped to MS-DRG 774 (Vaginal Delivery with 
Complicating Diagnosis) or MS-DRG 775 (Vaginal Delivery without 
Complicating Diagnosis). The commenter suggested CMS review these 
procedure codes for appropriate MS-DRG assignment under the ICD-10 MS-
DRGs.
    We thank the commenters and appreciate the recommendations and 
suggestions provided in response to our solicitation for comments on 
the GROUPER logic for the MS-DRGs involving a vaginal delivery or 
complicating diagnosis under MDC 14. With regard to the commenter who 
recommended that we convene a workgroup that would include hospital 
staff and physicians to systematically review the MDC 14 MS-DRGs and to 
identify which conditions should appropriately be considered 
complicating diagnoses, we note that we formed an internal workgroup 
comprised of clinical advisors that included physicians, coding 
specialists, and other IPPS policy staff that assisted in our review of 
the GROUPER logic for a vaginal delivery and complicating diagnoses. We 
also received clinical input from 3M/Health Information Systems (HIS) 
staff, which, under contract with CMS, is responsible for updating and 
maintaining the GROUPER program. We note that our analysis involved 
other MS-DRGs under MDC 14, in addition to those for which we 
specifically solicited public comments. As one of the other commenters 
correctly pointed out, there is redundancy, with several of the same 
codes listed for different MS-DRGs. Below we provide a summary of our 
internal analysis with responses to the commenters' recommendations and 
suggestions incorporated into the applicable sections. We refer readers 
to the ICD-10 MS-DRG Version 35 Definitions Manual located via the 
Internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-
Fee-

[[Page 20218]]

for-Service-Payment/AcuteInpatientPPS/FY2018-IPPS-Final-Rule-Home-Page-
Items/FY2018-IPPS-Final-Rule-Data-
Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for 
documentation of the GROUPER logic associated with the MDC 14 MS-DRGs 
to assist in the review of our discussion that follows.
    We started our evaluation of the GROUPER logic for the MS-DRGs 
under MDC 14 by first reviewing the current concepts that exist. For 
example, there are ``groups'' for cesarean section procedures, vaginal 
delivery procedures, and abortions. There also are groups where no 
delivery occurs, and lastly, there are groups for after the delivery 
occurs, or the ``postpartum'' period. These groups are then further 
subdivided based on the presence or absence of complicating conditions 
or the presence of another procedure. We examined how we could simplify 
some of the older, complex GROUPER logic and remain consistent with the 
structure of other ICD-10 MS-DRGs. We identified the following MS-DRGs 
for closer review, in addition to MS-DRG 767, MS-DRG 768, MS-DRG 774, 
MS-DRG 775 and MS-DRG 781.

------------------------------------------------------------------------
          MS-DRG                             Description
------------------------------------------------------------------------
MS-DRG 765................  Cesarean Section with CC/MCC.
MS-DRG 766................  Cesarean Section without CC/MCC.
MS-DRG 769................  Postpartum and Post Abortion Diagnoses with
                             O.R. Procedure.
MS-DRG 770................  Abortion with D&C, Aspiration Curettage or
                             Hysterotomy.
MS-DRG 776................  Postpartum and Post Abortion Diagnoses
                             without O.R. Procedure.
MS-DRG 777................  Ectopic Pregnancy.
MS-DRG 778................  Threatened Abortion.
MS-DRG 779................  Abortion without D&C.
MS-DRG 780................  False Labor.
MS-DRG 782................  Other Antepartum Diagnoses without Medical
                             Complications.
------------------------------------------------------------------------

    The first issue we reviewed was the GROUPER logic for complicating 
conditions (MS-DRGs 774 and 781). Because one of the main objectives in 
our transition to the MS-DRGs was to better recognize the severity of 
illness of a patient, we believed we could structure the vaginal 
delivery and other MDC 14 MS-DRGs in a similar way. Therefore, we began 
working with the concept of vaginal delivery ``with MCC, with CC and 
without CC/MCC'' to replace the older, ``complicating conditions'' 
logic.
    Next, we compared the additional GROUPER logic that exists between 
the vaginal delivery and the cesarean section MS-DRGs (MS-DRGs 765, 
766, 767, 774, and 775). Currently, the vaginal delivery MS-DRGs take 
into account a sterilization procedure; however, the cesarean section 
MS-DRGs do not. Because a patient can have a sterilization procedure 
performed along with a cesarean section procedure, we adopted a working 
concept of ``cesarean section with and without sterilization with MCC, 
with CC and without CC/MCC'', as well as ``vaginal delivery with and 
without sterilization with MCC, with CC and without CC/MCC''.
    We then reviewed the GROUPER logic for the MS-DRGs involving 
abortion and where no delivery occurs (MS-DRGs 770, 777, 778, 779, 780, 
and 782). We believed that we could consolidate the groups in which no 
delivery occurs.
    Finally, we considered the GROUPER logic for the MS-DRGs related to 
the postpartum period (MS-DRGs 769 and 776) and determined that the 
structure of these MS-DRGs did not appear to require modification.
    After we established those initial working concepts for the MS-DRGs 
discussed above, we examined the list of the ICD-10-PCS procedure codes 
that comprise the sterilization procedure GROUPER logic for the vaginal 
delivery MS-DRG 767. We identified the two manual extraction of 
placenta codes that the commenter had brought to our attention (ICD-10-
PCS codes 10D17Z9 and 10D18Z9). We also identified two additional 
procedure codes, ICD-10-PCS codes 10D17ZZ (Extraction of products of 
conception, retained, via natural or artificial opening) and 10D18ZZ 
(Extraction of products of conception, retained, via natural or 
artificial opening endoscopic) in the list that are not sterilization 
procedures. Two of the four procedure codes describe manual extraction 
(removal) of retained placenta and the other two procedure codes 
describe dilation and curettage procedures. We then identified four 
more procedure codes in the list that do not describe sterilization 
procedures. ICD-10-PCS procedure codes 0UDB7ZX (Extraction of 
endometrium, via natural or artificial opening, diagnostic), 0UDB7ZZ 
(Extraction of endometrium, via natural or artificial opening), 0UDB8ZX 
(Extraction of endometrium, via natural or artificial opening 
endoscopic, diagnostic), and 0UDB8ZZ (Extraction of endometrium, via 
natural or artificial opening endoscopic) describe dilation and 
curettage procedures that can be performed for diagnostic or 
therapeutic purposes. We believe that these ICD-10-PCS procedure codes 
would be more appropriately assigned to MDC 13 (Diseases and Disorders 
of the Female Reproductive System) in MS-DRGs 744 and 745 (D&C, 
Conization, Laparascopy and Tubal Interruption with and without CC/MCC, 
respectively) and, therefore, removed them from our working list of 
sterilization and/or D&C procedures. Because the GROUPER logic for MS-
DRG 767 includes both sterilization and/or D&C, we agreed that all the 
other procedure codes currently included under that logic list of 
sterilization procedures should remain, with the exception of the two 
identified by the commenter. Therefore, we agree with the commenter 
that the manual extraction of retained placenta procedure codes should 
be reassigned to a more clinically appropriate vaginal delivery MS-DRG 
because they are not describing sterilization procedures.
    Our attention then turned to other MDC 14 GROUPER logic code lists 
starting with the ``CC for C-section'' list under MS-DRGs 765 and 766 
(Cesarean Section with and without CC/MCC, respectively). As noted 
earlier in this section, in conducting our review, we considered how we 
could utilize the severity level concept (with MCC, with CC, and 
without CC/MCC) where applicable. Consistent with this approach, we 
removed the ``CC for C-section'' logic from these MS-DRGs as part of 
our working concept and efforts to refine MDC 14. We determined it 
would be less complicated to simply allow the existing ICD-10 
MS[dash]DRG CC and MCC code list logic to apply for these MS-DRGs. 
Next, we reviewed the logic code lists for ``Malpresentation'' and 
``Twins'' and concluded that this logic was not necessary for the 
cesarean section MS-DRGs because these are

[[Page 20219]]

describing antepartum conditions and it is the procedure of the 
cesarean section that determines whether or not a patient would be 
classified to these MS-DRGs. Therefore, those code lists were also 
removed for purposes of our working concept. With regard to the 
``Operating Room Procedure'' code list, we agreed there should be no 
changes. However, we note that the title to ICD-10-PCS procedure code 
10D00Z0 (Extraction of products of conception, classical, open 
approach) is being revised effective October 1, 2018, to replace the 
term ``classical'' with ``high'' and ICD-10-PCS procedure code 10D00Z1 
(Extraction of products of conception, low cervical, open approach) is 
being revised to replace the term ``low cervical'' to ``low''. These 
revisions are also shown in Table 6F--Revised Procedure Code Titles 
available via the Internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    Next, we reviewed the ``Delivery Procedure'' and ``Delivery 
Outcome'' GROUPER logic code lists for the vaginal delivery MS-DRGs 
767, 768, 774, and 775. We identified ICD-10-PCS procedure code 10A0726 
(Abortion of products of conception, vacuum, via natural or artificial 
opening) and ICD-10-PCS procedure code 10S07ZZ (Reposition products of 
conception, via natural or artificial opening) under the ``Delivery 
Procedure'' code list as procedure codes that should not be included 
because ICD-10-PCS procedure code 10A07Z6 describes an abortion 
procedure and ICD-10-PCS procedure code 10S07ZZ describes repositioning 
of the fetus and does not indicate a delivery took place. We also note 
that, as described earlier in this discussion, a commenter recommended 
that ICD-10-PCS procedure code 10A07Z6 be removed from the GROUPER 
logic specifically for MS-DRGs 767 and 775. Therefore, we removed these 
two procedure codes from the logic code list for ``Delivery Procedure'' 
in MS-DRGs 767, 768, 774, and 775. We agreed with the commenter that 
ICD-10-PCS procedure code 10A07Z6 would be more appropriately assigned 
to one of the Abortion MS-DRGs. For the remaining procedures currently 
included in the ``Delivery Procedure'' code list we considered which 
procedures would be expected to be performed during the course of a 
standard, uncomplicated delivery episode versus those that would 
reasonably be expected to require additional resources outside of the 
delivery room. The list of procedure codes we reviewed is shown in the 
following table.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0DQP7ZZ...................  Repair rectum, via natural or artificial
                             opening.
0DQQ0ZZ...................  Repair anus, open approach.
0DQQ3ZZ...................  Repair anus, percutaneous approach.
0DQQ4ZZ...................  Repair anus, percutaneous endoscopic
                             approach.
0DQQ7ZZ...................  Repair anus, via natural or artificial
                             opening.
0DQQ8ZZ...................  Repair anus, via natural or artificial
                             opening endoscopic.
0DQR0ZZ...................  Repair anal sphincter, open approach.
0DQR3ZZ...................  Repair anal sphincter, percutaneous
                             approach.
0DQR4ZZ...................  Repair anal sphincter, percutaneous
                             endoscopic approach.
------------------------------------------------------------------------

While we acknowledge that these procedures may be performed to treat 
obstetrical lacerations as discussed in prior rulemaking (81 FR 56853), 
we also believe that these procedures would reasonably be expected to 
require a separate operative episode and would not be performed 
immediately at the time of the delivery. Therefore, we removed those 
procedure codes describing repair of the rectum, anus, and anal 
sphincter shown in the table above from our working concept list of 
procedures to consider for a vaginal delivery. Our review of the list 
of diagnosis codes for the ``Delivery Outcome'' as a secondary 
diagnosis did not prompt any changes. We agreed that the current list 
of diagnosis codes continues to appear appropriate for describing the 
outcome of a delivery.
    As the purpose of our analysis and this review was to clarify what 
constitutes a vaginal delivery to satisfy the ICD-10 MS-DRG logic for 
the vaginal delivery MS-DRGs, we believed it was appropriate to expect 
that a procedure code describing the vaginal delivery or extraction of 
``products of conception'' procedure and a diagnosis code describing 
the delivery outcome should be reported on every claim in which a 
vaginal delivery occurs. This is also consistent with Section 
I.C.15.b.5 of the ICD-10-CM Official Guidelines for Coding and 
Reporting, which states ``A code from category Z37, Outcome of 
delivery, should be included on every maternal record when a delivery 
has occurred. These codes are not to be used on subsequent records or 
on the newborn record.'' Therefore, we adopted the working concept 
that, regardless of the principal diagnosis, if there is a procedure 
code describing the vaginal delivery or extraction of ``products of 
conception'' procedure and a diagnosis code describing the delivery 
outcome, this logic would result in assignment to a vaginal delivery 
MS-DRG. We note that, as a result of this working concept, there would 
no longer be a need to maintain the ``third condition'' list under MS-
DRG 774. In addition, as noted earlier in this discussion, because we 
were working with the concept of vaginal delivery ``with MCC, with CC, 
and without CC/MCC'' to replace the older, ``complicating conditions'' 
logic, there would no longer be a need to maintain the ``second 
condition'' list of complicating diagnosis under MS-DRG 774.
    We then reviewed the GROUPER logic code list of ``Or Other O.R. 
procedures'' (MS-DRG 768) to determine if any changes to these lists 
were warranted. Similar to our analysis of the procedures listed under 
the ``Delivery Procedure'' logic code list, our examination of the 
procedures currently described in the ``Or Other O.R. procedures'' 
procedure code list also considered which procedures would be expected 
to be performed during the course of a standard, uncomplicated delivery 
episode versus those that would reasonably be expected to require 
additional resources outside of the delivery room. Our analysis of all 
the procedures resulted in the working concept to allow all O.R. 
procedures to be applicable for assignment to MS-DRG 768, with the 
exception of the procedure codes for sterilization and/or D&C and ICD-
10-PCS procedure codes 0KQM0ZZ (Repair perineum muscle, open approach) 
and 0UJM0ZZ (Inspection of vulva, open approach),

[[Page 20220]]

which we determined would be reasonably expected to be performed during 
a standard delivery episode and, therefore, assigned to MS-DRG 774 or 
MS-DRG 775. We also note that, this working concept for MS-DRG 768 
would eliminate vaginal delivery cases with an O.R. procedure grouping 
to the unrelated MS[dash]DRGs because all O.R. procedures would be 
included in the GROUPER logic procedure code list for ``Or Other O.R. 
Procedures''.
    The next set of MS-DRGs we examined more closely included MS-DRGs 
777, 778, 780, 781, and 782. We believed that, because the conditions 
in these MS-DRGs are all describing antepartum related conditions, we 
could group the conditions together clinically. Diagnoses described as 
occurring during pregnancy and diagnoses specifying a trimester or 
maternal care in the absence of a delivery procedure reported were 
considered antepartum conditions. We also believed we could better 
classify these groups of patients based on the presence or absence of a 
procedure. Therefore, we worked with the concept of ``antepartum 
diagnoses with and without O.R. procedure''.
    As noted earlier in the discussion, we adopted a working concept of 
``cesarean section with and without sterilization with MCC, with CC, 
and without CC/MCC.'' This concept is illustrated in the following 
table and includes our suggested modifications.

              Suggested Modifications to MS-DRGs for MDC 14
               [Pregnancy, childbirth and the puerperium]
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
DELETE 2 MS-DRGs:
  MS-DRG 765 (Cesarean Section with CC/MCC).
  MS-DRG 766 (Cesarean Section without CC/MCC).
CREATE 6 MS-DRGs:
  MS-DRG XXX (Cesarean Section with Sterilization with MCC).
  MS-DRG XXX (Cesarean Section with Sterilization with CC).
  MS-DRG XXX (Cesarean Section with Sterilization without CC/MCC).
  MS-DRG XXX (Cesarean Section without Sterilization with MCC).
  MS-DRG XXX (Cesarean Section without Sterilization with CC).
  MS-DRG XXX (Cesarean Section without Sterilization without CC/MCC).
------------------------------------------------------------------------

    As shown in the table, we suggest deleting MS-DRGs 765 and 766. We 
also suggest creating 6 new MS-DRGs that are subdivided by a 3-way 
severity level split that includes ``with Sterilization'' and ``without 
Sterilization''.
    We also adopted a working concept of ``vaginal delivery with and 
without sterilization with MCC, with CC, and without CC/MCC''. This 
concept is illustrated in the following table and includes our 
suggested modifications.

              Suggested Modifications to MS-DRGs for MDC 14
               [Pregnancy, childbirth and the puerperium]
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
DELETE 3 MS-DRGs:
  MS-DRG 767 (Vaginal Delivery with Sterilization and/or D&C).
  MS-DRG 774 (Vaginal Delivery with Complicating Diagnosis).
  MS-DRG 775 (Vaginal Delivery without Complicating Diagnosis).
CREATE 6 MS-DRGs:
  MS-DRG XXX (Vaginal Delivery with Sterilization/D&C with MCC).
  MS-DRG XXX (Vaginal Delivery with Sterilization/D&C with CC).
  MS-DRG XXX (Vaginal Delivery with Sterilization/D&C without CC/MCC).
  MS-DRG XXX (Vaginal Delivery without Sterilization/D&C with MCC).
  MS-DRG XXX (Vaginal Delivery without Sterilization/D&C with CC).
  MS-DRG XXX (Vaginal Delivery without Sterilization/D&C without CC/
   MCC).
------------------------------------------------------------------------

    As shown in the table, we suggest deleting MS-DRGs 767, 774, and 
775. We also suggest creating 6 new MS-DRGs that are subdivided by a 3-
way severity level split that includes ``with Sterilization/D&C'' and 
``without Sterilization/D&C''.
    In addition, as indicated above, we believed that we could 
consolidate the groups in which no delivery occurs. We believe that 
consolidating MS-DRGs where clinically coherent conditions exist is 
consistent with our approach to MS-DRG reclassification and our 
continued refinement efforts. This concept is illustrated in the 
following table and includes our suggested modifications.

              Suggested Modifications to MS-DRGs for MDC 14
               [Pregnancy, childbirth and the puerperium]
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
DELETE 5 MS-DRGs:
  MS-DRG 777 (Ectopic Pregnancy).
  MS-DRG 778 (Threatened Abortion).
  MS-DRG 780 (False Labor).
  MS-DRG 781 (Other Antepartum Diagnoses with Medical Complications).
  MS-DRG 782 (Other Antepartum Diagnoses without Medical Complications).
CREATE 6 MS-DRGs:
  MS-DRG XXX (Other Antepartum Diagnoses with O.R. Procedure with MCC).
  MS-DRG XXX (Other Antepartum Diagnoses with O.R. Procedure with CC).
  MS-DRG XXX (Other Antepartum Diagnoses with O.R. Procedure without CC/
   MCC).
  MS-DRG XXX (Other Antepartum Diagnoses without O.R. Procedure with
   MCC).
  MS-DRG XXX (Other Antepartum Diagnoses without O.R. Procedure with
   CC).
  MS-DRG XXX (Other Antepartum Diagnoses without O.R. Procedure without
   CC/MCC).
------------------------------------------------------------------------

    As shown in the table, we suggest deleting MS-DRGs 777, 778, 780, 
781, and 782. We also suggest creating 6 new MS-DRGs that are 
subdivided by a 3-way severity level split that includes ``with O.R. 
Procedure'' and ``without O.R. Procedure''.
    Once we established each of these fundamental concepts from a 
clinical perspective, we were able to analyze the data to determine if 
our initial suggested modifications were supported.
    To analyze our suggested modifications for the cesarean section and 
vaginal delivery MS-DRGs, we examined the claims data from the 
September 2017 update of the FY 2017 MedPAR file for MS-DRGs 765, 766, 
767, 768, 774, and 775.

                           MS-DRGs for MDC 14 Pregnancy, Childbirth and the Puerperium
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 765 (Cesarean Section with CC/MCC)--All cases............           3,494             4.6          $8,929
MS-DRG 766 (Cesarean Section without CC/MCC)--All cases.........           1,974             3.1           6,488
MS-DRG 767 (Vaginal Delivery with Sterilization and/or D&C)--All             351             3.2           7,886
 cases..........................................................
MS-DRG 768 (Vaginal Delivery with O.R. Procedure Except                       17             6.2          26,164
 Sterilization and/or D&C)--All cases...........................
MS-DRG 774 (Vaginal Delivery with Complicating Diagnosis)--All             1,650             3.3           6,046
 cases..........................................................
MS-DRG 775 (Vaginal Delivery without Complicating Diagnosis)--             4,676             2.4           4,769
 All cases......................................................
----------------------------------------------------------------------------------------------------------------


[[Page 20221]]

    As shown in the table, there were a total of 3,494 cases in MS-DRG 
765, with an average length of stay of 4.6 days and average costs of 
$8,929. For MS-DRG 766, there were a total of 1,974 cases, with an 
average length of stay of 3.1 days and average costs of $6,488. For MS-
DRG 767, there were a total of 351 cases, with an average length of 
stay of 3.2 days and average costs of $ 7,886. For MS-DRG 768, there 
were a total of 17 cases, with an average length of stay of 6.2 days 
and average costs of $26,164. For MS-DRG 774, there were a total of 
1,650 cases, with an average length of stay of 3.3 days and average 
costs of $6,046. Lastly, for MS-DRG 775, there were a total of 4,676 
cases, with an average length of stay of 2.4 days and average costs of 
$4,769.
    To compare and analyze the impact of our suggested modifications, 
we ran a simulation using the Version 35 ICD-10 MS-DRG GROUPER. The 
following table reflects our findings for the suggested Cesarean 
Section MS-DRGs with a 3-way severity level split.

                                     Suggested MS-DRGs for Cesarean Section
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average Length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 783 (Cesarean Section with Sterilization with MCC).......             178             6.4         $12,977
MS-DRG 784 (Cesarean Section with Sterilization with CC)........             511             4.1           8,042
MS-DRG 785 (Cesarean Section with Sterilization without CC/MCC).             475             3.0           6,259
MS-DRG 786 (Cesarean Section without Sterilization with MCC)....             707             5.9          11,515
MS-DRG 787 (Cesarean Section without Sterilization with CC).....           1,887             4.2           7,990
MS-DRG 788 (Cesarean Section without Sterilization without CC/             1,710             3.3           6,663
 MCC)...........................................................
----------------------------------------------------------------------------------------------------------------

    As shown in the table, there were a total of 178 cases for the 
cesarean section with sterilization with MCC group, with an average 
length of stay of 6.4 days and average costs of $12,977. There were a 
total of 511 cases for the cesarean section with sterilization with CC 
group, with an average length of stay of 4.1 days and average costs of 
$8,042. There were a total of 475 cases for the cesarean section with 
sterilization without CC/MCC group, with an average length of stay of 
3.0 days and average costs of $6,259. For the cesarean section without 
sterilization with MCC group there were a total of 707 cases, with an 
average length of stay of 5.9 days and average costs of $11,515. There 
were a total of 1,887 cases for the cesarean section without 
sterilization with CC group, with an average length of stay of 4.2 days 
and average costs of $7,990. Lastly, there were a total of 1,710 cases 
for the cesarean section without sterilization without CC/MCC group, 
with an average length of stay of 3.3 days and average costs of $6,663.
    The following table reflects our findings for the suggested Vaginal 
Delivery MS-DRGs with a 3-way severity level split.

                                     Suggested MS-DRGs for Vaginal Delivery
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 796 (Vaginal Delivery with Sterilization/D&C with MCC)...              25             6.7         $11,421
MS-DRG 797 (Vaginal Delivery with Sterilization/D&C with CC)....              63             2.4           6,065
MS-DRG 798 (Vaginal Delivery with Sterilization/D&C without CC/              126             2.3           6,697
 MCC)...........................................................
MS-DRG 805 (Vaginal Delivery without Sterilization/D&C with MCC)             406             5.0           9,605
MS-DRG 806 (Vaginal Delivery without Sterilization/D&C with CC).           1,952             2.9           5,506
MS-DRG 807 (Vaginal Delivery without Sterilization/D&C without             4,105             2.3           4,601
 CC/MCC)........................................................
----------------------------------------------------------------------------------------------------------------

    As shown in the table, there were a total of 25 cases for the 
vaginal delivery with sterilization/D&C with MCC group, with an average 
length of stay of 6.7 days and average costs of $11,421. There were a 
total of 63 cases for the vaginal delivery with sterilization/D&C with 
CC group, with an average length of stay of 2.4 days and average costs 
of $6,065. There were a total of 126 cases for vaginal delivery with 
sterilization/D&C without CC/MCC group, with an average length of stay 
of 2.3 days and average costs of $6,697. There were a total of 406 
cases for the vaginal delivery without sterilization/D&C with MCC 
group, with an average length of stay of 5.0 days and average costs of 
$9,605. There were a total of 1,952 cases for the vaginal delivery 
without sterilization/D&C with CC group, with an average length of stay 
of 2.9 days and average costs of $5,506. There were a total of 4,105 
cases for the vaginal delivery without sterilization/D&C without CC/MCC 
group, with an average length of stay of 2.3 days and average costs of 
$4,601.
    We then reviewed the claims data from the September 2017 update of 
the FY 2017 MedPAR file for MS-DRGs 777, 778, 780, 781, and 782. Our 
findings are shown in the following table.

                           MS-DRGs for MDC 14 Pregnancy, Childbirth and the Puerperium
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 777 (Ectopic Pregnancy)--All cases.......................              72             1.9          $7,149
MS-DRG 778 (Threatened Abortion)--All cases.....................             205             2.7           4,001

[[Page 20222]]

 
MS-DRG 780 (False Labor)--All cases.............................              41             2.1           3,045
MS-DRG 781 (Other Antepartum Diagnoses with Medical                        2,333             3.7           5,817
 Complications)--All cases......................................
MS-DRG 782 (Other Antepartum Diagnoses without Medical                        70             2.1           3,381
 Complications)--All cases......................................
----------------------------------------------------------------------------------------------------------------

    As shown in the table, there were a total of 72 cases in MS-DRG 
777, with an average length of stay of 1.9 days and average costs of 
$7,149. For MS-DRG 778, there were a total of 205 cases, with an 
average length of stay of 2.7 days and average costs of $4,001. For MS-
DRG 780, there were a total of 41 cases, with an average length of stay 
of 2.1 days and average costs of $3,045. For MS-DRG 781, there were a 
total of 2,333 cases, with an average length of stay of 3.7 days and 
average costs of $5,817. Lastly, for MS-DRG 782, there were a total of 
70 cases, with an average length of stay of 2.1 days and average costs 
of $3,381.
    To compare and analyze the impact of deleting those 5 MS-DRGs and 
creating 6 new MS-DRGs, we ran a simulation using the Version 35 ICD-10 
MS-DRG GROUPER. Our findings below represent what we found and would 
expect under the suggested modifications. The following table reflects 
the MS-DRGs for the suggested Other Antepartum Diagnoses MS-DRGs with a 
3-way severity level split.

                                Suggested MS-DRGs for Other Antepartum Diagnoses
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 817 (Other Antepartum Diagnoses with O.R. Procedure with               60             5.1         $13,117
 MCC)...........................................................
MS-DRG 818 (Other Antepartum Diagnoses with O.R. Procedure with               66             4.2          10,483
 CC)............................................................
MS-DRG 819 (Other Antepartum Diagnoses with O.R. Procedure                    44             1.7           5,904
 without CC/MCC)................................................
MS-DRG 831 (Other Antepartum Diagnoses without O.R. Procedure                786             4.3           7,248
 with MCC)......................................................
MS-DRG 832 (Other Antepartum Diagnoses without O.R. Procedure                910             3.5           4,994
 with CC).......................................................
MS-DRG 833 (Other Antepartum Diagnoses without O.R. Procedure                855             2.7           3,843
 without CC/MCC)................................................
----------------------------------------------------------------------------------------------------------------

    Our analysis of claims data from the September 2017 update of the 
FY 2017 MedPAR file recognized that when the criteria to create 
subgroups were applied for the 3-way severity level splits for the 
suggested MS-DRGs, those criteria were not met in all instances. For 
example, the criteria that there are at least 500 cases in the MCC or 
CC group was not met for the suggested Vaginal Delivery with 
Sterilization/D&C 3[dash]way severity level split or the suggested 
Other Antepartum Diagnoses with O.R. Procedure 3[dash]way severity 
level split.
    However, as we have noted in prior rulemaking (72 FR 47152), we 
cannot adopt the same approach to refine the maternity and newborn MS-
DRGs because of the extremely low volume of Medicare patients there are 
in these DRGs. While there is not a high volume of these cases 
represented in the Medicare data, and while we generally advise that 
other payers should develop MS-DRGs to address the needs of their 
patients, we believe that our suggested 3[dash]way severity level 
splits would address the complexity of the current MDC 14 GROUPER logic 
for a vaginal delivery and takes into account the new and different 
clinical concepts that exist under ICD-10 for this subset of patients 
while also maintaining the existing MS-DRG structure for identifying 
severity of illness, utilization of resources and complexity of 
service.
    However, as an alternative option, we also performed analysis for a 
2-way severity level split for the suggested MS-DRGs. Our findings are 
shown in the following tables.

                                     Suggested MS-DRGs for Cesarean Section
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG XXX (Cesarean Section with Sterilization with CC/MCC)....             689             4.7          $9,317
MS-DRG XXX (Cesarean Section with Sterilization without CC/MCC).             475             3.0           6,259
MS-DRG XXX (Cesarean Section without Sterilization with MCC)....           2,594             4.7           8,951
MS-DRG XXX (Cesarean Section without Sterilization without CC/             1,710             3.3           6,663
 MCC)...........................................................
----------------------------------------------------------------------------------------------------------------


                                     Suggested MS-DRGs for Vaginal Delivery
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG XXX (Vaginal Delivery with Sterilization/D&C with CC/MCC)              88             3.6          $7,586
MS-DRG XXX (Vaginal Delivery with Sterilization/D&C without CC/              126             2.3           6,697
 MCC)...........................................................
MS-DRG XXX (Vaginal Delivery without Sterilization/D&C with MCC)           2,358             3.2           6,212

[[Page 20223]]

 
MS-DRG XXX (Vaginal Delivery without Sterilization/D&C without             4,105             2.3           4,601
 CC/MCC)........................................................
----------------------------------------------------------------------------------------------------------------


                                Suggested MS-DRGs for Other Antepartum Diagnoses
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG XXX (Other Antepartum Diagnoses with O.R. Procedure with              126             4.7         $11,737
 MCC)...........................................................
MS-DRG XXX (Other Antepartum Diagnoses with O.R. Procedure                    44             1.7           5,904
 without CC/MCC)................................................
MS-DRG XXX (Other Antepartum Diagnoses without O.R. Procedure              1,696             3.9           6,039
 with MCC)......................................................
MS-DRG XXX (Other Antepartum Diagnoses without O.R. Procedure                855             2.7           3,843
 without CC/MCC)................................................
----------------------------------------------------------------------------------------------------------------

    Similar to the analysis performed for the 3-way severity level 
split, we acknowledge that when the criteria to create subgroups was 
applied for the alternative 2[dash]way severity level splits for the 
suggested MS-DRGs, those criteria were not met in all instances. For 
example, the suggested Vaginal Delivery with Sterilization/D&C and the 
Other Antepartum Diagnoses with O.R. Procedure alternative option 2-way 
severity level splits did not meet the criteria for 500 or more cases 
in the MCC or CC group.
    Based on our review, which included support from our clinical 
advisors, and the analysis of claims data described above, we are 
proposing the deletion of 10 MS-DRGs and the creation of 18 new MS-DRGs 
(as shown below). This proposal is based on the approach described 
above, which involves consolidating specific conditions and concepts 
into the structure of existing logic and making additional 
modifications, such as adding severity levels, as part of our 
refinement efforts for the ICD-10 MS-DRGs. Our proposals are intended 
to address the vaginal delivery ``complicating diagnosis'' logic and 
antepartum diagnoses with ``medical complications'' logic with the 
proposed addition of the existing and familiar severity level concept 
(with MCC, with CC, and without CC/MCC) to the MDC 14 MS-DRGs to 
provide the ability to distinguish the varying resource requirements 
for this subset of patients and allow the opportunity to make more 
meaningful comparisons with regard to severity across the MS-DRGs. Our 
proposals, as set forth below, would also simplify the vaginal delivery 
procedure logic that we identified and commenters acknowledged as 
technically complex by eliminatng the extensive diagnosis and procedure 
code lists for several conditions that must be met for assignment to 
the vaginal delivery MS-DRGs. Our proposals are also intended to 
respond to issues identified and brought to our attention through 
public comments for consideration in updating the GROUPER logic code 
lists in MDC 14.
    Specifically, we are proposing to delete the following 10 MS-DRGs 
under MDC 14:
     MS-DRG 765 (Cesarean Section with CC/MCC);
     MS-DRG 766 (Cesarean Section without CC/MCC);
     MS-DRG 767 (Vaginal Delivery with Sterilization and/or 
D&C);
     MS-DRG 774 (Vaginal Delivery with Complicating Diagnosis);
     MS-DRG 775 (Vaginal Delivery without Complicating 
Diagnosis);
     MS-DRG 777 (Ectopic Pregnancy);
     MS-DRG 778 (Threatened Abortion);
     MS-DRG 780 (False Labor);
     MS-DRG 781 (Other Antepartum Diagnoses with Medical 
Complications); and
     MS-DRG 782 (Other Antepartum Diagnoses without Medical 
Complications).
    We are proposing to create the following new 18 MS-DRGs under MDC 
14:
     Proposed new MS-DRG 783 (Cesarean Section with 
Sterilization with MCC);
     Proposed new MS-DRG 784 (Cesarean Section with 
Sterilization with CC);
     Proposed new MS-DRG 785 (Cesarean Section with 
Sterilization without CC/MCC);
     Proposed new MS-DRG 786 (Cesarean Section without 
Sterilization with MCC);
     Proposed new MS-DRG 787 (Cesarean Section without 
Sterilization with CC);
     Proposed new MS-DRG 788 Cesarean Section without 
Sterilization without CC/MCC);
     Proposed new MS-DRG 796 (Vaginal Delivery with 
Sterilization/D&C with MCC);
     Proposed new MS-DRG 797 (Vaginal Delivery with 
Sterilization/D&C with CC);
     Proposed new MS-DRG 798 (Vaginal Delivery with 
Sterilization/D&C without CC/MCC);
     Proposed new MS-DRG 805 (Vaginal Delivery without 
Sterilization/D&C with MCC);
     Proposed new MS-DRG 806 (Vaginal Delivery without 
Sterilization/D&C with CC);
     Proposed new MS-DRG 807 (Vaginal Delivery without 
Sterilization/D&C without CC/MCC);
     Proposed new MS-DRG 817 (Other Antepartum Diagnoses with 
O.R. Procedure with MCC);
     Proposed new MS-DRG 818 (Other Antepartum Diagnoses with 
O.R. Procedure with CC);
     Proposed new MS-DRG 819 (Other Antepartum Diagnoses with 
O.R. Procedure without CC/MCC);
     Proposed new MS-DRG 831 (Other Antepartum Diagnoses 
without O.R. Procedure with MCC);
     Proposed new MS-DRG 832 (Other Antepartum Diagnoses 
without O.R. Procedure with CC); and
     Proposed new MS-DRG 833 (Other Antepartum Diagnoses 
without O.R. Procedure without CC/MCC).
    The diagrams below illustrate how the proposed MS-DRG logic for MDC 
14 would function. The first diagram (Diagram 1.) begins by asking if 
there is a principal diagnosis from MDC 14. If no, the GROUPER logic 
directs the case to the appropriate MDC based on the principal 
diagnosis reported. Next, the logic asks if there is a cesarean section 
procedure reported on the claim. If yes, the logic asks if there was a 
sterilization procedure reported on the claim. If yes, the logic 
assigns the case to one of the proposed new MS-DRGs 783, 784, or

[[Page 20224]]

785. If no, the logic assigns the case to one of the proposed new MS-
DRGs 786, 787, or 788. If there was not a cesarean section procedure 
reported on the claim, the logic asks if there was a vaginal delivery 
procedure reported on the claim. If yes, the logic asks if there was 
another O.R. procedure other than sterilization, D&C, delivery 
procedure or a delivery inclusive O.R. procedure. If yes, the logic 
assigns the case to existing MS-DRG 768. If no, the logic asks if there 
was a sterilization and/or D&C reported on the claim. If yes, the logic 
assigns the case to one of the proposed new MS-DRGs 796, 797, or 798. 
If no, the logic assigns the case to one of the proposed new MS-DRGs 
805, 806, or 807. If there was not a vaginal delivery procedure 
reported on the claim, the GROUPER logic directs you to the other non-
delivery MS-DRGs as shown in Diagram 2.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP07MY18.000

    The logic for Diagram 2. begins by asking if there is a principal 
diagnosis of abortion reported on the claim. If yes, the logic then 
asks if there was a D&C, aspiration curettage or hysterotomy procedure 
reported on the claim. If yes, the logic assigns the case to existing 
MS-DRG 770. If no, the logic assigns the case to existing MS-DRG 779. 
If there was not a principal diagnosis of abortion reported on the 
claim, the logic asks if there was a principal diagnosis of an 
antepartum condition reported on the claim. If yes, the logic then asks 
if there was an O.R. procedure reported on the claim. If yes, the logic 
assigns the case to one of the proposed new MS-DRGs 817, 818, or 819. 
If no, the logic assigns the case to one of the proposed new MS-DRGs 
831, 832, or 833. If there was not a principal diagnosis of an

[[Page 20225]]

antepartum condition reported on the claim, the logic asks if there was 
a principal diagnosis of a postpartum condition reported on the claim. 
If yes, the logic then asks if there was an O.R. procedure reported on 
the claim. If yes, the logic assigns the case to existing MS-DRG 769. 
If no, the logic assigns the case to existing MS-DRG 776. If there was 
not a principal diagnosis of a postpartum condition reported on the 
claim, the logic identifies that there was a principal diagnosis 
describing childbirth, delivery or an intrapartum condition reported on 
the claim without any other procedures, and assigns the case to 
existing MS-DRG 998 (Principal Diagnosis Invalid as Discharge 
Diagnosis).
    To assist in detecting coding and MS-DRG assignment errors for MS-
DRG 998 that could result when a provider does not report the procedure 
code for either a cesarean section or a vaginal delivery along with an 
outcome of delivery diagnosis code, as discussed in section II.F.13.d., 
we are proposing to add a new Questionable Obstetric Admission edit 
under the MCE. We are inviting public comments on this proposed MCE 
edit and we also are inviting public comments on the need for any 
additional MCE considerations with regard to the proposed changes for 
the MDC 14 MS-DRGs.
[GRAPHIC] [TIFF OMITTED] TP07MY18.001

BILLING CODE 4120-01-C
    We refer readers to Tables 6P.1h through 6P.1k for the lists of the 
diagnosis and procedure codes that we are proposing to assign to the 
GROUPER logic for the proposed new MS-DRGs and the existing MS-DRGs 
under MDC

[[Page 20226]]

14. We are inviting public comments on our proposed list of diagnosis 
codes, which also addresses the list of diagnosis codes that a 
commenter identified as missing from the GROUPER logic. We note that, 
as a result of our proposed GROUPER logic changes to the vaginal 
delivery MS-DRGs, which would only take into account the procedure 
codes for a vaginal delivery and the outcome of delivery secondary 
diagnosis codes, there is no longer a need to maintain a specific 
principal diagnosis logic list for those MS-DRGs. Therefore, while we 
appreciate the detailed suggestions and rationale submitted by the 
commenter for why specific diagnosis codes should be removed from the 
vaginal delivery principal diagnosis logic as displayed earlier in this 
discussion, we are proposing to remove that logic. We are inviting 
public comments on our proposal.
    We also are inviting public comments on our proposal to reassign 
ICD-10-PCS procedure codes 0UDB7ZX, 0UDB7ZZ, 0UDB8ZX, and 0UDB8ZZ that 
describe dilation and curettage procedures from MS-DRG 767 under MDC 14 
to MS-DRGs 744 and 745 under MDC 13.
    In addition, we are inviting public comments on our proposed list 
of procedure codes for the proposed revised MDC 14 MS-DRG logic, which 
would require a procedure code for case assignment. Finally, we are 
inviting public comments on the proposed deletion of the 10 MS-DRGs and 
the proposed creation of 18 new MS-DRGs with a 3-way severity level 
split listed above in this section, as well as on the potential 
alternative new MS-DRGs using a 2-way severity level split as also 
presented above.
11. MDC 18 (Infectious and Parasitic Diseases (Systematic or 
Unspecified Sites): Systemic Inflammatory Response Syndrome (SIRS) of 
Non-Infectious Origin
    ICD-10-CM diagnosis codes R65.10 (Systemic Inflammatory Response 
Syndrome (SIRS) of non-infectious origin without acute organ 
dysfunction) and R65.11 (Systemic Inflammatory Response Syndrome (SIRS) 
of non-infectious origin with acute organ dysfunction) are currently 
assigned to MS-DRGs 870 (Septicemia or Severe Sepsis with Mechanical 
Ventilation >96 Hours), 871 (Septicemia or Severe Sepsis with 
Mechanical Ventilation >96 Hours with MCC), and 872 (Septicemia or 
Severe Sepsis with Mechanical Ventilation >96 Hours without MCC) under 
MDC 18 (Infectious and Parasitic Diseases, Systemic or Unspecified 
Sites). Our clinical advisors noted that these diagnosis codes are 
specifically describing conditions of a non-infectious origin, and 
recommended that they be reassigned to a more clinically appropriate 
MS-DRG.
    We examined claims data from the September 2017 update of the FY 
2017 MedPAR file for cases in MS-DRGs 870, 871, and 872. Our findings 
are shown in the following table.

       Septicemia or Severe Sepsis With and Without Mechanical Ventilation >96 Hours With and Without MCC
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 870--All cases...........................................          31,658            14.3         $42,981
MS-DRG 871--All cases...........................................         566,531             6.3          13,002
MS-DRG 872--All cases...........................................         150,437             4.3           7,532
----------------------------------------------------------------------------------------------------------------

    As shown in this table, we found a total of 31,658 cases in MS-DRG 
870, with an average length of stay of 14.3 days and average costs of 
$42,981. We found a total of 566,531 cases in MS-DRG 871, with an 
average length of stay of 6.3 days and average costs of $13,002. 
Lastly, we found a total of 150,437 cases in MS-DRG 872, with an 
average length of stay of 4.3 days and average costs of $7,532.
    We then examined claims data in MS-DRGs 870, 871, or 872 for cases 
reporting an ICD-10-CM diagnosis code of R65.10 or R65.11. Our findings 
are shown in the following table.

                     SIRS of Non-Infectious Origin With and Without Acute Organ Dysfunction
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                    MS-DRGs 870, 871 and 872                           cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 870, 871, and 872--Cases reporting a principal diagnosis           1,254             3.8          $6,615
 code of R65.10.................................................
MS-DRGs 870, 871, and 872--Cases reporting a principal diagnosis             138             4.8           9,655
 code of R65.11.................................................
MS-DRGs 870, 871, and 872--Cases reporting a secondary diagnosis           1,232             5.5          10,670
 code of R65.10.................................................
MS-DRGs 870, 871, and 872--Cases reporting a secondary diagnosis             117             6.2          12,525
 code of R65.11.................................................
----------------------------------------------------------------------------------------------------------------

    As shown in this table, we found a total of 1,254 cases reporting a 
principal diagnosis code of R65.10 in MS-DRGs 870, 871, and 872, with 
an average length of stay of 3.8 days and average costs of $6,615. We 
found a total of 138 cases reporting a principal diagnosis code of 
R65.11 in MS-DRGs 870, 871, and 872, with an average length of stay of 
4.8 days and average costs of $9,655. We found a total of 1,232 cases 
reporting a secondary diagnosis code of R65.10 in MS-DRGs 870, 871, and 
872, with an average length of stay of 5.5 days and average costs of 
$10,670. Lastly, we found a total of 117 cases reporting a secondary 
diagnosis code of R65.11 in MS-DRGs 870, 871, and 872, with an average 
length of stay of 6.2 days and average costs of $12,525.
    The claims data included a total of 1,392 cases in MS-DRGs 870, 
871, and 872 that reported a principal diagnosis code of R65.10 or 
R65.11. We note that these 1,392 cases appear to have been coded 
inaccurately according to the ICD-10-CM Official Guidelines for Coding 
and Reporting at Section I.C.18.g., which specifically state: ``The 
systemic inflammatory response syndrome (SIRS) can develop as a result 
of certain non[dash]infectious disease processes, such as trauma, 
malignant neoplasm, or pancreatitis. When SIRS is documented with a 
non-infectious condition, and no subsequent infection

[[Page 20227]]

is documented, the code for the underlying condition, such as an 
injury, should be assigned, followed by code R65.10, Systemic 
inflammatory response syndrome (SIRS) of non-infectious origin without 
acute organ dysfunction or code R65.11, Systemic inflammatory response 
syndrome (SIRS) of non-infectious origin with acute organ 
dysfunction.'' Therefore, according to the Coding Guidelines, ICD-10-CM 
diagnosis codes R65.10 and R65.11 should not be reported as the 
principal diagnosis on an inpatient claim.
    We have acknowledged in past rulemaking the challenges with coding 
for SIRS (and sepsis) (71 FR 24037). In addition, we note that there 
has been confusion with regard to how these codes are displayed in the 
ICD-10 MS-DRG Definitions Manual under MS-DRGs 870, 871, and 872, which 
may also impact the reporting of these conditions. For example, in 
Version 35 of the ICD-10 MS-DRG Definitions Manual (which is available 
via the Internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2018-IPPS-Final-Rule-Home-Page-Items/FY2018-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending, the 
logic for case assignment to MS-DRGs 870, 871, and 872 is comprised of 
a list of several diagnosis codes, of which ICD-10-CM diagnosis codes 
R65.10 and R65.11 are included. Because these codes are listed under 
the heading of ``Principal Diagnosis'', it may appear that these codes 
are to be reported as a principal diagnosis for assignment to MS-DRGs 
870, 871, or 872. However, the Definitions Manual display of the 
GROUPER logic assignment for each diagnosis code is for grouping 
purposes only. The GROUPER (and, therefore, documentation in the MS-DRG 
Definitions Manual) was not designed to account for coding guidelines 
or coverage policies. Since the inception of the IPPS, the data editing 
function has been a separate and independent step in the process of 
determining a DRG assignment. Except for extreme data integrity issues 
that prevent a DRG from being assigned, such as an invalid principal 
diagnosis, the DRG assignment GROUPER does not edit for data integrity. 
Prior to assigning the MS-DRG to a claim, the MACs apply a series of 
data integrity edits using programs such as the Medicare Code Editor 
(MCE). The MCE is designed to identify cases that require further 
review before classification into an MS-DRG. These data integrity edits 
address issues such as data validity, coding rules, and coverage 
policies. The separation of the MS-DRG grouping and data editing 
functions allows the MS-DRG GROUPER to remain stable during a fiscal 
year even though coding rules and coverage policies may change during 
the fiscal year. As such, in the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38050 through 38051), we finalized our proposal to add ICD-10-CM 
diagnosis codes R65.10 and R65.11 to the Unacceptable Principal 
Diagnosis edit in the MCE as a result of the Official Guidelines for 
Coding and Reporting related to SIRS, in efforts to improve coding 
accuracy for these types of cases.
    To address the issue of determining a more appropriate MS-DRG 
assignment for ICD-10-CM diagnosis codes R65.10 and R65.11, we reviewed 
alternative options under MDC 18. Our clinical advisors determined the 
most appropriate option is MS-DRG 864 (Fever) because the conditions 
that are assigned here describe conditions of a non-infectious origin.
    Therefore, we are proposing to reassign ICD-10-CM diagnosis codes 
R65.10 and R65.11 to MS-DRG 864 and to revise the title of MS-DRG 864 
to ``Fever and Inflammatory Conditions'' to better reflect the 
diagnoses assigned there.

                         Proposed Revised MS-DRG 864 (Fever and Inflammatory Conditions)
----------------------------------------------------------------------------------------------------------------
                                                                                 Average length
                            MS-DRG                             Number of cases      of stay       Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 864--All cases........................................          12,144              3.4           $6,232
----------------------------------------------------------------------------------------------------------------

    We are inviting public comments on our proposals.
12. MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs): Corrosive 
Burns
    ICD-10-CM Coding Guidelines include ``Code first'' sequencing 
instructions for cases reporting a primary diagnosis of toxic effect 
(ICD-10-CM codes T51 through T65) and a secondary diagnosis of 
corrosive burn (ICD-10-CM codes T21.40 through T21.79). We received a 
request to reassign these cases from MS-DRGs 901 (Wound Debridements 
for Injuries with MCC), 902 (Wound Debridements for Injuries with CC), 
903 (Wound Debridements for Injuries without CC/MCC), 904 (Skin Grafts 
for Injuries with CC/MCC), 905 (Skin Grafts for Injuries without CC/
MCC), 917 (Poisoning and Toxic Effects of Drugs with MCC), and 918 
(Poisoning and Toxic Effects of Drugs without MCC) to MS-DRGs 927 
(Extensive Burns or Full Thickness Burns with Mechanical Ventilation 
>96 Hours with Skin Graft), 928 (Full Thickness Burn with Skin Graft or 
Inhalation Injury with CC/MCC), 929 (Full Thickness Burn with Skin 
Graft or Inhalation Injury without CC/MCC), 933 (Extensive Burns or 
Full Thickness Burns with Mechanical Ventilation >96 Hours without Skin 
Graft), 934 (Full Thickness Burn without Skin Graft or Inhalation 
Injury), and 935 (Nonextensive Burns).
    The requestor noted that, for corrosion burns codes T21.40 through 
T21.79, ICD[dash]10-CM Coding Guidelines instruct to ``Code first (T51 
through T65) to identify chemical and intent.'' Because code first 
notes provide sequencing directive, when patients are admitted with 
corrosive burns (which can be full thickness and extensive), toxic 
effect codes T51 through T65 must be sequenced first followed by codes 
for the corrosive burns. This causes full-thickness and extensive burns 
to group to MS-DRGs 901 through 905 when excisional debridement and 
split thickness skin grafts are performed, and to MS-DRGs 917 and 918 
when procedures are not performed. This is in contrast to cases 
reporting a primary diagnosis of corrosive burn, which group to 
MS[dash]DRGs 927 through 935.
    The requestor stated that MS-DRGs 456 (Spinal Fusion except 
Cervical with Spinal Curvature or Malignancy or Infection or Extensive 
Fusions with MCC), 457 (Spinal Fusion Except Cervical with Spinal 
Curvature or Malignancy or Infection or Extensive Fusions with CC), and 
458 (Spinal Fusion Except Cervical with Spinal Curvature or Malignancy 
or Infection or Extensive Fusions without CC/MCC) are grouped based on 
the procedure performed in combination with the principal diagnosis or 
secondary

[[Page 20228]]

diagnosis (secondary scoliosis). The requestor stated that when codes 
for corrosive burns are reported as secondary diagnoses in conjunction 
with principal diagnoses codes T5l through T65, particularly when skin 
grafts are performed, they would be more appropriately assigned to MS-
DRGs 927 through 935.
    We analyzed claims data from the September 2017 update of the FY 
2017 MedPAR file for all cases assigned to MS-DRGs 901, 902, 903, 904, 
905, 917, and 918, and subsets of these cases with primary diagnosis of 
toxic effect with secondary diagnosis of corrosive burn. We note that 
we found no cases from this subset in MS[dash]DRGs 903, 907, 908, and 
909 and, therefore, did not include the results for these MS[dash]DRGs 
in the table below. We also analyzed all cases assigned to MS-DRGs 927, 
928, 929, 933, 934, and 935 and those cases that reported a primary 
diagnosis of corrosive burn. Our findings are shown in the following 
two tables.

                             MDC 21 Injuries, Poisonings and Toxic Effects of Drugs
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
All Cases with primary diagnosis of toxic effect and secondary                55             5.5         $18,077
 diagnosis of corrosive burn--Across all MS-DRGs................
MS-DRG 901--All cases...........................................             968              13          31,479
MS-DRG 901--Cases with primary diagnosis of toxic effect and                   1               8          12,388
 secondary diagnosis of corrosive burn..........................
MS-DRG 902--All cases...........................................           1,775             6.6          14,206
MS-DRG 902--Cases with primary diagnosis of toxic effect and                   8            10.3          20,940
 secondary diagnosis of corrosive burn..........................
MS-DRG 904--All cases...........................................             905             9.8          23,565
MS-DRG 904--Cases with primary diagnosis of toxic effect and                   8             6.4          22,624
 secondary diagnosis of corrosive burn..........................
MS-DRG 905--All cases...........................................             263             4.9          13,291
MS-DRG 905--Cases with primary diagnosis of toxic effect and                   2             2.5           7,682
 secondary diagnosis of corrosive burn..........................
MS-DRG 906--All cases...........................................             458             4.8          13,555
MS-DRG 906--Cases with primary diagnosis of toxic effect and                   1               5           7,409
 secondary diagnosis of corrosive burn..........................
MS-DRG 917--All cases...........................................          31,730             4.8          10,280
MS-DRG 917--Cases with primary diagnosis of toxic effect and                   6             4.8           7,336
 secondary diagnosis of corrosive burn..........................
MS-DRG 918--All cases...........................................          19,819               3           5,529
MS-DRG 918--Cases with primary diagnosis of toxic effect and                  28             3.5           5,643
 secondary diagnosis of corrosive burn..........................
----------------------------------------------------------------------------------------------------------------

    As shown in this table, there were a total of 55 cases with a 
primary diagnosis of toxic effect and a secondary diagnosis of 
corrosive burn across MS-DRGs 901, 902, 903, 904, 905, 917, and 918. 
When comparing this subset of codes relative to those of each MS-DRG as 
a whole, we noted that, in most of these MS-DRGs, the average costs and 
average length of stay for this subset of cases were roughly equivalent 
to or lower than the average costs and average length of stay for cases 
in the MS-DRG as a whole, while in one case, they were higher. As we 
have noted in prior rulemaking (77 FR 53309) and elsewhere in this 
rule, it is a fundamental principle of an averaged payment system that 
half of the procedures in a group will have above average costs. It is 
expected that there will be higher cost and lower cost subsets, 
especially when a subset has low numbers. The results of this analysis 
indicate that these cases are appropriately placed within their current 
MDC.
    Our clinical advisors reviewed this request and indicated that 
patients with a primary diagnosis of toxic effect and a secondary 
diagnosis of corrosive burn have been exposed to an irritant or 
corrosive substance and, therefore, are clinically similar to those 
patients in MDC 21. Furthermore, our clinical advisors do not believe 
that the size of this subset of cases justifies the significant changes 
to the GROUPER logic that would be required to address the commenter's 
request, which would involve rerouting cases when the primary and 
secondary diagnoses are in different MDCs.

                                                  MDC 22 Burns
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
All cases with primary diagnosis of corrosive burn--Across all                60             8.5         $19,456
 MS-DRGs........................................................
MS-DRG 927--All cases...........................................             159            28.1         128,960
MS-DRG 927--Cases with primary diagnosis of corrosive burn......               1              41          75,985
MS-DRG 928--All cases...........................................           1,021            15.1          42,868
MS-DRG 928--Cases with primary diagnosis of corrosive burn......              13            13.2          31,118
MS-DRG 929--All cases...........................................             295             7.9          21,600
MS-DRG 929--Cases with primary diagnosis of corrosive burn......               4            12.5          18,527
MS-DRG 933--All cases...........................................             121             4.6          21,291
MS-DRG 933--Cases with primary diagnosis of corrosive burn......               1               7          91,779
MS-DRG 934--All cases...........................................             503             6.1          13,286

[[Page 20229]]

 
MS-DRG 934--Cases with primary diagnosis of corrosive burn......              11             5.8          13,280
MS-DRG 935--All cases...........................................           1,705             5.2          13,065
MS-DRG 935--Cases with primary diagnosis of corrosive burn......              29               5           9,822
----------------------------------------------------------------------------------------------------------------

    To address the request of reassigning cases with a primary 
diagnosis of toxic effect and secondary diagnosis of corrosive burn, we 
reviewed the data for all cases in MS-DRGs 927, 928, 929, 933, 934, and 
935 and those cases reporting a primary diagnosis of corrosive burn. We 
found a total of 60 cases reporting a primary diagnosis of corrosive 
burn, with an average length of stay of 8.5 days and average costs of 
$19,456. Our clinical advisors believe that these cases reporting a 
primary diagnosis of corrosive burn are appropriately placed in MDC 22 
as they are clinically aligned with other patients in this MDC. In 
summary, the results of our claims data analysis and the advice from 
our clinical advisors do not support reassigning cases in MS-DRGs 901, 
902, 903, 904, 905, 917, and 918 reporting a primary diagnosis of toxic 
effect and a secondary diagnosis of corrosive burn to MS-DRGs 927, 928, 
929, 933, 934 and 935. Therefore, we are not proposing to reassign 
these cases. We are inviting public comments on our proposal to 
maintain the current MS[dash]DRG structure for these cases.
13. 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 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 2018 IPPS/LTCH PPS final rule (82 FR 38045), 
we made available the FY 2018 ICD-10 MCE Version 35 manual file. The 
link to this MCE manual file, along with the link to the mainframe and 
computer software for the MCE Version 35 (and ICD-10 MS-DRGs) are 
posted on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html through the FY 2018 
IPPS Final Rule Home Page.
    For this FY 2019 IPPS/LTCH PPS proposed rule, below we address the 
MCE requests we received by the November 1, 2017 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 0-17 years inclusive (for example, 
Reye's syndrome, routine child health exam).
     Maternity--Age range is 12-55 years inclusive (for 
example, diabetes in pregnancy, antepartum pulmonary complication).
     Adult--Age range is 15-124 years inclusive (for example, 
senile delirium, mature cataract).
(1) Perinatal/Newborn Diagnoses Category
    Under the ICD-10 MCE, the Perinatal/Newborn Diagnoses 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 14 diagnosis codes that 
describe specific suspected conditions that have been evaluated and 
ruled out during the newborn period and are currently not on the 
Perinatal/Newborn Diagnoses 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 the 
following diagnosis codes are appropriate to add to the edit code list 
for the Perinatal/Newborn Diagnoses Category.

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

[[Page 20230]]

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

    Therefore, we are proposing to add the ICD-10-CM diagnosis codes 
listed in the table above to the Age Conflict edit under the Perinatal/
Newborn Diagnoses Category edit code list. We also are proposing to 
continue to include the existing diagnosis codes currently listed under 
the Perinatal/Newborn Diagnoses Category edit code list. We are 
inviting public comments on our proposals.
(2) Pediatric Diagnoses Category
    Under the ICD-10 MCE, the Pediatric Diagnoses Category for 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.
    As discussed in section II.F.15. of the preamble of this proposed 
rule, Table 6C.--Invalid Diagnosis Codes associated with this proposed 
rule (which is available via the Internet on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) lists the diagnoses that are no longer 
effective as of October 1, 2018. Included in this table is an ICD-10-CM 
diagnosis code currently listed on the Pediatric Diagnoses Category 
edit code list, ICD-10-CM diagnosis code Z13.4 (Encounter for screening 
for certain developmental disorders in childhood). We are proposing to 
remove this code from the Pediatric Diagnoses Category edit code list. 
We also are proposing to continue to include the other existing 
diagnosis codes currently listed under the Pediatric Diagnoses Category 
edit code list. We are inviting public comments on our proposals.
(3) Maternity Diagnoses
    Under the ICD-10 MCE, the Maternity Diagnoses Category for the Age 
Conflict edit considers the age range of 12 to 55 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.
    As discussed in section II.F.15. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes associated with this proposed rule 
(which is available via the Internet on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) lists the new diagnoses codes that have 
been approved to date, which will be effective with discharges 
occurring on and after October 1, 2018. The following table lists the 
new ICD-10-CM diagnosis codes included in Table 6A associated with 
pregnancy and maternal care that we believe are appropriate to add to 
the Maternity Diagnoses Category edit code list under the Age Conflict 
edit. Therefore, we are proposing to add these codes to the Maternity 
Diagnoses Category edit code list under the Age Conflict edit.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
F53.0.....................  Postpartum depression.
F53.1.....................  Puerperal psychosis.
O30.131...................  Triplet pregnancy, trichorionic/triamniotic,
                             first trimester.
O30.132...................  Triplet pregnancy, trichorionic/triamniotic,
                             second trimester.
O30.133...................  Triplet pregnancy, trichorionic/triamniotic,
                             third trimester.
O30.139...................  Triplet pregnancy, trichorionic/triamniotic,
                             unspecified trimester.
O30.231...................  Quadruplet pregnancy, quadrachorionic/quadra-
                             amniotic, first trimester.
O30.232...................  Quadruplet pregnancy, quadrachorionic/quadra-
                             amniotic, second trimester.
O30.233...................  Quadruplet pregnancy, quadrachorionic/quadra-
                             amniotic, third trimester.
O30.239...................  Quadruplet pregnancy, quadrachorionic/quadra-
                             amniotic, unspecified trimester.
O30.831...................  Other specified multiple gestation, number
                             of chorions and amnions are both equal to
                             the number of fetuses, first trimester.
O30.832...................  Other specified multiple gestation, number
                             of chorions and amnions are both equal to
                             the number of fetuses, second trimester.
O30.833...................  Other specified multiple gestation, number
                             of chorions and amnions are both equal to
                             the number of fetuses, third trimester.
O30.839...................  Other specified multiple gestation, number
                             of chorions and amnions are both equal to
                             the number of fetuses, unspecified
                             trimester.
O86.00....................  Infection of obstetric surgical wound,
                             unspecified.
O86.01....................  Infection of obstetric surgical wound,
                             superficial incisional site.
O86.02....................  Infection of obstetric surgical wound, deep
                             incisional site.
O86.03....................  Infection of obstetric surgical wound, organ
                             and space site.
O86.04....................  Sepsis following an obstetrical procedure.
O86.09....................  Infection of obstetric surgical wound, other
                             surgical site.
------------------------------------------------------------------------

    In addition, as discussed in section II.F.15. of the preamble of 
this proposed rule, Table 6C.--Invalid Diagnosis Codes associated with 
this proposed rule (which is available via the Internet on the CMS 
website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) lists the diagnosis codes that 
are no longer effective as of October 1, 2018. Included in this table 
are two ICD-10-CM diagnosis codes currently listed on the Maternity 
Diagnoses Category edit code list: ICD-10-CM diagnosis codes F53 
(Puerperal psychosis) and O86.0 (Infection of obstetric surgical 
wound). We are proposing to remove these codes from the Maternity 
Diagnoses Category Edit code list. We also are proposing to continue to 
include the other existing diagnosis codes currently listed under the 
Maternity Diagnoses Category edit

[[Page 20231]]

code list. We are inviting public comments on our proposals.
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 Females Only Edit
    We received a request to consider the addition of the following 
ICD-10-CM diagnosis codes to the list for the Diagnoses for Females 
Only edit.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
Z30.015...................  Encounter for initial prescription of
                             vaginal ring hormonal contraceptive.
Z31.7.....................  Encounter for procreative management and
                             counseling for gestational carrier.
Z98.891...................  History of uterine scar from previous
                             surgery.
------------------------------------------------------------------------

    The requestor noted that, currently, ICD-10-CM diagnosis code 
Z30.44 (Encounter for surveillance of vaginal ring hormonal 
contraceptive device) is on the Diagnoses for Females Only edit code 
list and suggested that ICD-10-CM diagnosis code Z30.015, which also 
describes an encounter involving a vaginal ring hormonal contraceptive, 
be added to the Diagnoses for Females Only edit code list as well. In 
addition, the requestor suggested that ICD-10-CM diagnosis codes Z31.7 
and Z98.891 be added to the Diagnoses for Females Only edit code list.
    We reviewed ICD-10-CM diagnosis codes Z30.015, Z31.7, and Z98.891, 
and we agree with the requestor that it is clinically appropriate to 
add these three ICD-10-CM diagnosis codes to the Diagnoses for Females 
Only edit code list because the conditions described by these codes are 
specific to and consistent with the female sex.
    In addition, as discussed in section II.F.15. of the preamble of 
this proposed rule, Table 6A.--New Diagnosis Codes associated with this 
proposed rule (which is available via the Internet on the CMS website 
at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) lists the new diagnosis codes that have 
been approved to date, which will be effective with discharges 
occurring on and after October 1, 2018. The following table lists the 
new diagnosis codes that are associated with conditions consistent with 
the female sex. We are proposing to add these ICD-10-CM diagnosis codes 
to the Diagnoses for Females Only edit code list under the Sex Conflict 
edit.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
F53.0.....................  Postpartum depression.
F53.1.....................  Puerperal psychosis.
N35.82....................  Other urethral stricture, female.
N35.92....................  Unspecified urethral stricture, female.
O30.131...................  Triplet pregnancy, trichorionic/triamniotic,
                             first trimester.
O30.132...................  Triplet pregnancy, trichorionic/triamniotic,
                             second trimester.
O30.133...................  Triplet pregnancy, trichorionic/triamniotic,
                             third trimester.
O30.139...................  Triplet pregnancy, trichorionic/triamniotic,
                             unspecified trimester.
O30.231...................  Quadruplet pregnancy, quadrachorionic/quadra-
                             amniotic, first trimester.
O30.232...................  Quadruplet pregnancy, quadrachorionic/quadra-
                             amniotic, second trimester.
O30.233...................  Quadruplet pregnancy, quadrachorionic/quadra-
                             amniotic, third trimester.
O30.239...................  Quadruplet pregnancy, quadrachorionic/quadra-
                             amniotic, unspecified trimester.
O30.831...................  Other specified multiple gestation, number
                             of chorions and amnions are both equal to
                             the number of fetuses, first trimester.
O30.832...................  Other specified multiple gestation, number
                             of chorions and amnions are both equal to
                             the number of fetuses, second trimester.
O30.833...................  Other specified multiple gestation, number
                             of chorions and amnions are both equal to
                             the number of fetuses, third trimester.
O30.839...................  Other specified multiple gestation, number
                             of chorions and amnions are both equal to
                             the number of fetuses, unspecified
                             trimester.
O86.00....................  Infection of obstetric surgical wound,
                             unspecified.
O86.01....................  Infection of obstetric surgical wound,
                             superficial incisional site.
O86.02....................  Infection of obstetric surgical wound, deep
                             incisional site.
O86.03....................  Infection of obstetric surgical wound, organ
                             and space site.
O86.04....................  Sepsis following an obstetrical procedure.
O86.09....................  Infection of obstetric surgical wound, other
                             surgical site.
Q51.20....................  Other doubling of uterus, unspecified.
Q51.21....................  Other complete doubling of uterus.
Q51.22....................  Other partial doubling of uterus.
Q51.28....................  Other doubling of uterus, other specified.
Z13.32....................  Encounter for screening for maternal
                             depression.
------------------------------------------------------------------------

    We are inviting public comments on our proposals.
    In addition, as discussed in section II.F.15. of the preamble of 
this proposed rule, Table 6C.--Invalid Diagnosis Codes associated with 
this proposed rule (which is available via the internet on the CMS 
website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) lists the diagnosis codes that 
are no longer effective as of October 1, 2018. Included

[[Page 20232]]

in this table are the following three ICD-10-CM diagnosis codes 
currently listed on the Diagnoses for Females Only edit code list.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
F53.......................  Puerperal psychosis.
O86.00....................  Infection of obstetric surgical wound.
Q51.20....................  Other doubling of uterus, unspecified.
------------------------------------------------------------------------

    Because these three ICD-10-CM diagnosis codes will no longer be 
effective as of October 1, 2018, we are proposing to remove them from 
the Diagnoses for Females Only edit code list under the Sex Conflict 
edit. We are inviting public comments on our proposal.
(2) Procedures for Females Only Edit
    As discussed in section II.F.15. of the preamble of this proposed 
rule, Table 6B.--New Procedure Codes associated with this proposed rule 
(which is available via the Internet on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) lists the procedure codes that have been 
approved to date, which will be effective with discharges occurring on 
and after October 1, 2018. We are proposing to add the three ICD-10-PCS 
procedure codes in the following table describing procedures associated 
with the female sex to the Procedures for Females Only edit code list.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
0UY90Z0...................  Transplantation of uterus, allogeneic, open
                             approach.
0UY90Z1...................  Transplantation of uterus, syngeneic, open
                             approach.
0UY90Z2...................  Transplantation of uterus, zooplastic, open
                             approach.
------------------------------------------------------------------------

    We also are proposing to continue to include the existing procedure 
codes currently listed under the Procedures for Females Only edit code 
list. We are inviting public comments on our proposals.
(3) Diagnoses for Males Only Edit
    As discussed in section II.F.15. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes associated with this proposed rule 
(which is available via the Internet on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) lists the new diagnosis codes that have 
been approved to date, which will be effective with discharges 
occurring on and after October 1, 2018. The following table lists the 
new diagnosis codes that are associated with conditions consistent with 
the male sex. We are proposing to add these ICD-10-CM diagnosis codes 
to the Diagnoses for Males Only edit code list under the Sex Conflict 
edit.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
N35.016...................  Post-traumatic urethral stricture, male,
                             overlapping sites.
N35.116...................  Postinfective urethral stricture, not
                             elsewhere classified, male, overlapping
                             sites.
N35.811...................  Other urethral stricture, male, meatal.
N35.812...................  Other urethral bulbous stricture, male.
N35.813...................  Other membranous urethral stricture, male.
N35.814...................  Other anterior urethral stricture, male,
                             anterior.
N35.816...................  Other urethral stricture, male, overlapping
                             sites.
N35.819...................  Other urethral stricture, male, unspecified
                             site.
N35.911...................  Unspecified urethral stricture, male,
                             meatal.
N35.912...................  Unspecified bulbous urethral stricture,
                             male.
N35.913...................  Unspecified membranous urethral stricture,
                             male.
N35.914...................  Unspecified anterior urethral stricture,
                             male.
N35.916...................  Unspecified urethral stricture, male,
                             overlapping sites.
N35.919...................  Unspecified urethral stricture, male,
                             unspecified site.
N99.116...................  Postprocedural urethral stricture, male,
                             overlapping sites.
R93.811...................  Abnormal radiologic findings on diagnostic
                             imaging of right testicle.
R93.812...................  Abnormal radiologic findings on diagnostic
                             imaging of left testicle.
R93.813...................  Abnormal radiologic findings on diagnostic
                             imaging of testicles, bilateral.
R93.819...................  Abnormal radiologic findings on diagnostic
                             imaging of unspecified testicle.
------------------------------------------------------------------------

    We also are proposing to continue to include the existing diagnosis 
codes currently listed under the Diagnoses for Males Only edit code 
list. We are inviting public comments on our proposals.
c. Manifestation Code as Principal Diagnosis Edit
    In the ICD-10-CM classification system, manifestation codes 
describe the manifestation of an underlying disease, not the disease 
itself and, therefore, should not be used as a principal diagnosis.
    As discussed in section II.F.15. of the preamble of this proposed 
rule, Table 6A.--New Diagnosis Codes associated with this proposed rule 
(which is available via the Internet on the CMS

[[Page 20233]]

website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) lists the new diagnosis codes 
that have been approved to date which will be effective with discharges 
occurring on and after October 1, 2018. Included in this table are ICD-
10-CM diagnosis codes K82.A1 (Gangrene of gallbladder in cholecystitis) 
and K82.A2 (Perforation of gallbladder in cholecystitis). We are 
proposing to add these two ICD-10-CM diagnosis codes to the 
Manifestation Code as Principal Diagnosis edit code list because the 
type of cholecystitis would be required to be reported first. We also 
are proposing to continue to include the existing diagnosis codes 
currently listed under the Manifestation Code as Principal Diagnosis 
edit code list. We are inviting public comments on our proposals.
d. Questionable Admission Edit
    In the MCE, some diagnoses are not usually sufficient justification 
for admission to an acute care hospital. For example, if a patient is 
assigned ICD-10-CM diagnosis code R03.0 (Elevated blood pressure 
reading, without diagnosis of hypertension), the patient would have a 
questionable admission because an elevated blood pressure reading is 
not normally sufficient justification for admission to a hospital.
    As discussed in section II.F.10. of the preamble of this proposed 
rule, we are proposing several modifications to the MS-DRGs under MDC 
14 (Pregnancy, Childbirth and the Puerperium). One aspect of these 
proposed modifications involves the GROUPER logic for the cesarean 
section and vaginal delivery MS-DRGs. We refer readers to section 
II.F.10. of the preamble of this proposed rule for a detailed 
discussion of the proposals regarding these MS-DRG modifications under 
MDC 14 and the relation to the MCE.
    If a patient presents to the hospital and either a cesarean section 
or a vaginal delivery occurs, it is expected that, in addition to the 
specific type of delivery code, an outcome of delivery code is also 
assigned and reported on the claim. The outcome of delivery codes are 
ICD-10-CM diagnosis codes that are to be reported as secondary 
diagnoses as instructed in Section I.C.15.b.5 of the ICD-10-CM Official 
Guidelines for Coding and Reporting which states: ``A code from 
category Z37, Outcome of delivery, should be included on every maternal 
record when a delivery has occurred. These codes are not to be used on 
subsequent records or on the newborn record.'' Therefore, to encourage 
accurate coding and appropriate MS-DRG assignment in alignment with the 
proposed modifications to the delivery MS-DRGs, we are proposing to 
create a new ``Questionable Obstetric Admission Edit'' under the 
Questionable Admission edit to read as follows:

``b. Questionable obstetric admission

ICD-10-PCS procedure codes describing a cesarean section or vaginal 
delivery are considered to be a questionable admission except when 
reported with a corresponding secondary diagnosis code describing 
the outcome of delivery.

Procedure code list for cesarean section

10D00Z0 Extraction of Products of Conception, High, Open Approach
10D00Z1 Extraction of Products of Conception, Low, Open Approach
10D00Z2 Extraction of Products of Conception, Extraperitoneal, Open 
Approach

Procedure code list for vaginal delivery

10D07Z3 Extraction of Products of Conception, Low Forceps, Via 
Natural or Artificial Opening
10D07Z4 Extraction of Products of Conception, Mid Forceps, Via 
Natural or Artificial Opening
10D07Z5 Extraction of Products of Conception, High Forceps, Via 
Natural or Artificial Opening
10D07Z6 Extraction of Products of Conception, Vacuum, Via Natural or 
Artificial Opening
10D07Z7 Extraction of Products of Conception, Internal Version, Via 
Natural or Artificial Opening
10D07Z8 Extraction of Products of Conception, Other, Via Natural or 
Artificial Opening
10D17Z9 Manual Extraction of Products of Conception, Retained, Via 
Natural or Artificial Opening
10D18Z9 Manual Extraction of Products of Conception, Retained, Via 
Natural or Artificial Opening Endoscopic
10E0XZZ Delivery of Products of Conception, External Approach

Secondary diagnosis code list for outcome of delivery

Z37.0 Single live birth
Z37.1 Single stillbirth
Z37.2 Twins, both liveborn
Z37.3 Twins, one liveborn and one stillborn
Z37.4 Twins, both stillborn
Z37.50 Multiple births, unspecified, all liveborn
Z37.51 Triplets, all liveborn
Z37.52 Quadruplets, all liveborn
Z37.53 Quintuplets, all liveborn
Z37.54 Sextuplets, all liveborn
Z37.59 Other multiple births, all liveborn
Z37.60 Multiple births, unspecified, some liveborn
Z37.61 Triplets, some liveborn
Z37.62 Quadruplets, some liveborn
Z37.63 Quintuplets, some liveborn
Z37.64 Sextuplets, some liveborn
Z37.69 Other multiple births, some liveborn
Z37.7 Other multiple births, all stillborn
Z37.9 Outcome of delivery, unspecified''
    We are proposing that the three ICD-10-PCS procedure codes listed 
in the following table would be used to establish the list of codes for 
the proposed Questionable Obstetric Admission edit logic for cesarean 
section.

   ICD-10-PCS Procedure Codes for Cesarean Section Under the Proposed
       Questionable Obstetric Admission Edit Code List in the MCE
------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
10D00Z0...................  Extraction of products of conception, high,
                             open approach.
10D00Z1...................  Extraction of products of conception, low,
                             open approach.
10D00Z2...................  Extraction of products of conception,
                             extraperitoneal, open approach.
------------------------------------------------------------------------

    We are proposing that the nine ICD-10-PCS procedure codes listed in 
the following table would be used to establish the list of codes for 
the proposed new Questionable Obstetric Admission edit logic for 
vaginal delivery.

[[Page 20234]]



   ICD-10-PCS Procedure Codes for Vaginal Delivery Under the Proposed
       Questionable Obstetric Admission Edit Code List in the MCE
------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
10D07Z3...................  Extraction of products of conception, low
                             forceps, via natural or artificial opening.
10D07Z4...................  Extraction of products of conception, mid
                             forceps, via natural or artificial opening.
10D07Z5...................  Extraction of products of conception, high
                             forceps, via natural or artificial opening.
10D07Z6...................  Extraction of products of conception,
                             vacuum, via natural or artificial opening.
10D07Z7...................  Extraction of products of conception,
                             internal version, via natural or artificial
                             opening.
10D07Z8...................  Extraction of products of conception, other,
                             via natural or artificial opening.
10D17Z9...................  Manual extraction of products of conception,
                             retained, via natural or artificial
                             opening.
10D18Z9...................  Manual extraction of products of conception,
                             retained, via natural or artificial
                             opening.
10E0XZZ...................  Delivery of products of conception, external
                             approach.
------------------------------------------------------------------------

    We are proposing that the 19 ICD-10-CM diagnosis codes listed in 
the following table would be used to establish the list of secondary 
diagnosis codes for the proposed new Questionable Obstetric Admission 
edit logic for outcome of delivery.

  ICD-10-CM Secondary Diagnosis Codes for Outcome of Delivery Under the
   Proposed Questionable Obstetric Admission Edit Code List in the MCE
------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
Z37.0.....................  Single live birth.
Z37.1.....................  Single stillbirth.
Z37.2.....................  Twins, both liveborn.
Z37.3.....................  Twins, one liveborn and one stillborn.
Z37.4.....................  Twins, both stillborn.
Z37.50....................  Multiple births, unspecified, all liveborn.
Z37.51....................  Triplets, all liveborn.
Z37.52....................  Quadruplets, all liveborn.
Z37.53....................  Quintuplets, all liveborn.
Z37.54....................  Sextuplets, all liveborn.
Z37.59....................  Other multiple births, all liveborn.
Z37.60....................  Multiple births, unspecified, some liveborn.
Z37.61....................  Triplets, some liveborn.
Z37.62....................  Quadruplets, some liveborn.
Z37.63....................  Quintuplets, some liveborn.
Z37.64....................  Sextuplets, some liveborn.
Z37.69....................  Other multiple births, some liveborn.
Z37.7.....................  Other multiple births, all liveborn.
Z37.9.....................  Outcome of delivery, unspecified.
------------------------------------------------------------------------

    We are inviting public comments on our proposal to create this new 
Questionable Obstetric Admission edit. We also are inviting public 
comments on the lists of diagnosis and procedure codes that we are 
proposing to include for this edit.
e. Unacceptable Principal Diagnosis Edit
    In the MCE, there are select codes that describe a circumstance 
which 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.
    As discussed in section II.F.9. of the preamble of this proposed 
rule, ICD-10-CM diagnosis codes Z49.02 (Encounter for fitting and 
adjustment of peritoneal dialysis catheter), Z49.31 (Encounter for 
adequacy testing for hemodialysis), and Z49.32 (Encounter for adequacy 
testing for peritoneal dialysis) are currently on the Unacceptable 
Principal Diagnosis edit code list. We are proposing to add diagnosis 
code Z49.01 (Encounter for fitting and adjustment of extracorporeal 
dialysis catheter) to the Unacceptable Principal Diagnosis edit code 
list because this is an encounter code that would more likely be 
performed in an outpatient setting.
    As discussed in section II.F.15. of the preamble of this proposed 
rule, Table 6C.--Invalid Diagnosis Codes associated with this proposed 
rule (which is available via the Internet on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) lists the diagnosis codes that are no 
longer effective as of October 1, 2018. As previously noted, included 
in this table is an ICD-10-CM diagnosis code Z13.4 (Encounter for 
screening for certain developmental disorders in childhood) which is 
currently listed on the Unacceptable Principal diagnoses Category edit 
code list. We are proposing to remove this code from the Unacceptable 
Principal Diagnoses Category edit code list.
    We also are proposing to continue to include the other existing 
diagnosis codes currently listed under the Unacceptable Principal 
Diagnosis edit code list. We are inviting public comments on our 
proposals.

[[Page 20235]]

f. Future Enhancement
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38053 through 
38054), we noted the importance of ensuring accuracy of the coded data 
from the reporting, collection, processing, coverage, payment, and 
analysis aspects. We have engaged a contractor to assist in the review 
of the limited coverage and noncovered procedure edits in the MCE that 
may also be present in other claims processing systems that are 
utilized by our MACs. The MACs must adhere to criteria specified within 
the National Coverage Determinations (NCDs) and may implement their own 
edits in addition to what are already incorporated into the MCE, 
resulting in duplicate edits. The objective of this review is to 
identify where duplicate edits may exist and to determine what the 
impact might be if these edits were to be removed from the MCE.
    We have noted that the purpose of the MCE is to ensure that errors 
and inconsistencies in the coded data are recognized during Medicare 
claims processing. We are considering whether the inclusion of coverage 
edits in the MCE necessarily aligns with that specific goal because the 
focus of coverage edits is on whether or not a particular service is 
covered for payment purposes and not whether it was coded correctly.
    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 2018 IPPS/LTCH PPS final rule, we recognize a 
need to further examine the current list of edits and the definitions 
of those edits. We continue to 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. Comments should be 
directed to the MS-DRG Classification Change Mailbox located at: 
[email protected] by November 1, 2018 for FY 2020.
14. 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[dash]intensive to least resource[dash]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[dash]intensive surgical class.
    A surgical class can be composed of one or more MS-DRGs. For 
example, in MDC 11, the surgical class ``kidney transplant'' consists 
of a single MS-DRG (MS-DRG 652) and the class ``major bladder 
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655). 
Consequently, in many cases, the surgical hierarchy has an impact on 
more than one MS-DRG. The methodology for determining the most 
resource-intensive surgical class involves weighting the average 
resources for each MS-DRG by frequency to determine the weighted 
average resources for each surgical class. For example, assume surgical 
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG 
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To 
determine whether surgical class A should be higher or lower than 
surgical class B in the surgical hierarchy, we would weigh the average 
costs of each MS-DRG in the class by frequency (that is, by the number 
of cases in the MS-DRG) to determine average resource consumption for 
the surgical class. The surgical classes would then be ordered from the 
class with the highest average resource utilization to that with the 
lowest, with the exception of ``other O.R. procedures'' as discussed in 
this proposed rule.
    This methodology may occasionally result in assignment of a case 
involving multiple procedures to the lower[dash]weighted MS-DRG (in the 
highest, most resource[dash]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[dash]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[dash]ordered surgical class has lower average costs than the 
class ordered below it.
    Based on the changes that we are proposing to make in this FY 2019 
IPPS/LTCH PPS proposed rule, as discussed in section II.F.10. of the 
preamble of this proposed rule, we are proposing to revise the surgical 
hierarchy for MDC 14 (Pregnancy, Childbirth & the Puerperium) as 
follows: In MDC 14, we are proposing to delete MS-DRGs 765 and 766 
(Cesarean Section with and without CC/MCC, respectively) and MS-DRG 767 
(Vaginal Delivery with Sterilization and/or D&C) from the surgical 
hierarchy. We are proposing to sequence proposed new MS-DRGs 783, 784, 
and 785 (Cesarean Section with Sterilization with MCC, with CC and 
without CC/MCC, respectively) above proposed new MS-DRGs 786, 787, and 
788 (Cesarean Section without Sterilization with MCC, with CC and 
without CC/MCC, respectively). We are proposing to sequence proposed 
new MS-DRGs 786, 787, and 788 (Cesarean Section without Sterilization 
with MCC, with CC and without CC/MCC, respectively) above MS-DRG 768 
(Vaginal Delivery with O.R. Procedure Except Sterilization and/or D&C). 
We also are proposing to sequence proposed new MS-DRGs 796, 797, and 
798 (Vaginal Delivery with Sterilization/D&C with MCC, with CC and 
without CC/MCC, respectively) below MS-DRG 768 and above MS-DRG 770 
(Abortion with D&C, Aspiration Curettage or Hysterotomy). Finally, we 
are proposing to sequence proposed new MS-DRGs 817, 818, and 819 (Other 
Antepartum Diagnoses with O.R. procedure with

[[Page 20236]]

MCC, with CC and without CC/MCC, respectively) below MS-DRG 770 and 
above MS-DRG 769 (Postpartum and Post Abortion Diagnoses with O.R. 
Procedure). Our proposals for Appendix D MS-DRG Surgical Hierarchy by 
MDC and MS-DRG of the ICD-10 MS-DRG Definitions Manual Version 36 are 
illustrated in the following table.

                   Proposed Surgical Hierarchy: MDC 14
               [Pregnancy, childbirth and the puerperium]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Proposed New MS-DRGs 783-785...........  Cesarean Section with
                                          Sterilization.
Proposed New MS-DRGs 786-788...........  Cesarean Section without
                                          Sterilization.
MS-DRG 768.............................  Vaginal Delivery with O.R.
                                          Procedures.
Proposed New MS-DRGs 796-798...........  Vaginal Delivery with
                                          Sterilization/D&C.
MS-DRG 770.............................  Abortion with D&C, Aspiration
                                          Curettage or Hysterotomy.
Proposed New MS-DRGs 817-819...........  Other Antepartum Diagnoses with
                                          O.R. Procedure.
MS-DRG 769.............................  Postpartum and Post Abortion
                                          Diagnoses with O.R. Procedure.
------------------------------------------------------------------------

    We are inviting public comments on our proposals.
    As with other MS-DRG related issues, we encourage commenters to 
submit requests to examine ICD-10 claims pertaining to the surgical 
hierarchy via the CMS MS[dash]DRG Classification Change Request Mailbox 
located at: [email protected] by November 1, 2018 
for FY 2020 consideration.
15. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2019
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[dash]DRGs we adopted for FY 
2008 (72 FR 47152 through 47171).
b. Proposed Additions and Deletions to the Diagnosis Code Severity 
Levels for FY 2019
    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 2019 are available 
via the Internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    Table 6I.1--Proposed Additions to the MCC List--FY 2019;
    Table 6I.2--Proposed Deletions to the MCC List--FY 2019;
    Table 6J.1--Proposed Additions to the CC List--FY 2019; and
    Table 6J.2--Proposed Deletions to the CC List--FY 2019.
    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, with the exception of 
diagnosis codes B20 and J80, which are the result of proposed severity 
level designation changes. Therefore, the diagnosis codes on these 
lists will no longer be valid codes, effective FY 2019.
    We refer readers to the Tables 6I.1, 6I.2, 6J.1, and 6J.2 
associated with this proposed rule, which are available via the 
Internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
c. Principal Diagnosis Is Its Own CC or MCC
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38060), we provided 
the public with notice of our plans to conduct a comprehensive review 
of the CC and MCC lists for FY 2019. In the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38056 through 38057), we also finalized our proposal to 
maintain the existing lists of principal diagnosis codes in Table 6L.--
Principal Diagnosis Is Its Own MCC List and Table 6M.--Principal 
Diagnosis Is Its Own CC List for FY 2018, without any changes to the 
existing lists, noting our plans to conduct a comprehensive review of 
the CC and MCC lists for FY 2019 (82 FR 38060). We stated that 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.
    We also stated that 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. The Principal Diagnosis Is Its Own CC 
or MCC Lists were developed for the FY 2016 implementation of the ICD-
10 version of the MS-DRGs to facilitate replication of the ICD-9-CM MS-
DRGs. As part of our efforts to replicate the ICD-9-CM MS-DRGs, we 
implemented logic that may have increased the complexity of the MS-DRG 
assignment hierarchy and altered the format of the ICD-10 MS-DRG 
Definitions Manual. Two examples of workarounds used to facilitate 
replication are the proliferation of procedure clusters in the surgical 
MS-DRGs and the creation of the Principal Diagnosis Is Its Own CC or 
MCC Lists special logic.
    The following paragraph was added to the Version 33 ICD-10 MS-DRG 
Definitions Manual to explain the use of the Principal Diagnosis Is Its 
Own CC or MCC Lists: ``A few ICD-10-CM diagnosis codes express 
conditions that are normally coded in ICD-9-CM using two or more ICD-9-
CM diagnosis codes. In the interest of ensuring that the ICD-10 MS-DRGs 
Version 33 places a patient in the same DRG regardless whether the 
patient record were to be coded in ICD-9-CM or ICD-10-CM/PCS, whenever 
one of these ICD-10-CM combination codes is used as principal 
diagnosis, the cluster of ICD-9-CM codes that would be coded on an ICD-
9-CM record is considered. If one of the ICD-9-CM codes in the cluster 
is a CC

[[Page 20237]]

or MCC, then the single ICD-10-CM combination code used as a principal 
diagnosis must also imply the CC or MCC that the ICD-9-CM cluster would 
have presented. The ICD-10-CM diagnoses for which this implication must 
be made are listed here.'' Versions 34 and 35 of the ICD-10 MS-DRG 
Definitions Manual also include this special logic for the MS-DRGs.
    The Principal Diagnosis Is Its Own CC or MCC Lists were developed 
in the absence of ICD-10 coded data by mapping the ICD-9-CM diagnosis 
codes to the new ICD-10-CM combination codes. CMS has historically used 
clinical judgment combined with data analysis to assign a principal 
diagnosis describing a complex or severe condition to the appropriate 
DRG or MS-DRG. The initial ICD-10 version of the MS[dash]DRGs 
replicated from the ICD-9 version can now be evaluated using clinical 
judgment combined with ICD-10 coded data because it is no longer 
necessary to replicate MS-DRG assignment across the ICD-9 and ICD-10 
versions of the MS-DRGs for purposes of calculating relative weights. 
Now that ICD-10 coded data are available, in addition to using the data 
for calculating relative weights, ICD-10 data can be used to evaluate 
the effectiveness of the special logic for assigning a severity level 
to a principal diagnosis, as an indicator of resource utilization. To 
evaluate the effectiveness of the special logic, we have conducted 
analysis of the ICD-10 coded data combined with clinical review to 
determine whether to propose to keep the special logic for assigning a 
severity level to a principal diagnosis, or to propose to remove the 
special logic and use other available means of assigning a complex 
principal diagnosis to the appropriate MS[dash]DRG.
    Using claims data from the September 2017 update of the FY 2017 
MedPAR file, we employed the following method to determine the impact 
of removing the special logic used in the current Version 35 GROUPER to 
process claims containing a code on the Principal Diagnosis Is Its Own 
CC or MCC Lists. Edits and cost estimations used for relative weight 
calculations were applied, resulting in 9,070,073 IPPS claims analyzed 
for this special logic impact evaluation. We refer readers to section 
II.G. of the preamble of this proposed rule for further information 
regarding the methodology for calculation of the proposed relative 
weights.
    First, we identified the number of cases potentially impacted by 
the special logic. We identified 310,184 cases reporting a principal 
diagnosis on the Principal Diagnosis Is Its Own CC or MCC lists. Of the 
310,184 total cases that reported a principal diagnosis code on the 
Principal Diagnosis Is Its Own CC or MCC Lists, 204,749 cases also 
reported a secondary diagnosis code at the same severity level or 
higher severity level, and therefore the special logic had no impact on 
MS-DRG assignment. However, of the 310,184 total cases, there were 
105,435 cases that did not report a secondary diagnosis code at the 
same severity level or higher severity level, and therefore the special 
logic could potentially impact MS-DRG assignment, depending on the 
specific severity leveling structure of the base DRG.
    Next, we removed the special logic in the GROUPER that is used for 
processing claims reporting a principal diagnosis on the Principal 
Diagnosis Is Its Own CC or MCC Lists, thereby creating a Modified 
Version 35 GROUPER. Using this Modified Version 35 GROUPER, we 
reprocessed the 105,435 claims for which the principal diagnosis code 
was the sole source of a MCC or CC on the case, to obtain data for 
comparison showing the effect of removing the special logic.
    After removing the special logic in the Version 35 GROUPER for 
processing claims containing diagnosis codes on the Principal Diagnosis 
Is Its Own CC or MCC Lists, and reprocessing the claims using the 
Modified Version 35 GROUPER software, we found that 18,596 (6 percent) 
of the 310,184 cases reporting a principal diagnosis on the Principal 
Diagnosis Is Its Own CC or MCC Lists resulted in a different MS-DRG 
assignment. Overall, the number of claims impacted by removal of the 
special logic (18,596) represents 0.2 percent of the 9,070,073 IPPS 
claims analyzed.
    Below we provide a summary of the steps that we followed for the 
analysis performed.
    Step 1. We analyzed 9,070,073 claims to determine the number of 
cases impacted by the special logic.

              With Special Logic--9,070,073 Claims Analyzed
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Number of cases reporting a principal diagnosis from the         310,184
 Principal Diagnosis Is Its Own CC/MCC lists (special
 logic).................................................
Number of cases reporting an additional CC/MCC secondary         204,749
 diagnosis code at or above the level of the designated
 severity level of the principal diagnosis..............
Number of cases not reporting an additional CC/MCC               105,435
 secondary diagnosis code...............................
------------------------------------------------------------------------

    Step 2. We removed special logic from GROUPER and created a 
modified GROUPER.
    Step 3. We reprocessed 105,435 claims with modified GROUPER.

             Without Special Logic--105,435 Claims Analyzed
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Number of cases reporting a principal diagnosis from the         310,184
 Principal Diagnosis Is Its Own CC/MCC lists............
Number of cases resulting in different MS-DRG assignment          18,596
------------------------------------------------------------------------

    To estimate the overall financial impact of removing the special 
logic from the GROUPER, we calculated the aggregate change in estimated 
payment for the MS-DRGs by comparing average costs for each MS-DRG 
affected by the change, before and after removing the special logic. 
Before removing the special logic in the Version 35 GROUPER, the cases 
impacted by the special logic had an estimated average payment of $58 
million above the average costs for all the MS-DRGs to which the claim 
was originally assigned. After removing the special logic in the 
Version 35 GROUPER, the 18,596 cases impacted by the special logic had 
an estimated average payment of $39 million below the average costs for 
the newly assigned MS-DRGs.
    We performed regression analysis to compare the proportion of 
variance in the MS-DRGs with and without the special logic. The results 
of the

[[Page 20238]]

regression analysis showed a slight decrease in variance when the logic 
was removed. While the decrease itself was not statistically 
significant (an R-squared of 36.2603 percent after the special logic 
was removed, compared with an R-squared of 36.2501 percent in the 
current version 35 GROUPER), we note that the proportion of variance 
across the MS-DRGs essentially stayed the same, and certainly did not 
increase, when the special logic was removed.
    We further examined the 18,596 claims that were impacted by the 
special logic in the GROUPER for processing claims containing a code on 
the Principal Diagnosis Is Its Own CC or MCC Lists. The 18,596 claims 
were analyzed by the principal diagnosis code and the MS-DRG assigned, 
resulting in 588 principal diagnosis and MS-DRG combinations or 
subsets. Of the 588 subsets of cases that utilized the special logic, 
556 of the 588 subsets (95 percent) had fewer than 100 cases, 529 of 
the 588 subsets (90 percent) had fewer than 50 cases, and 489 of the 
588 subsets (83 percent) had fewer than 25 cases.
    We examined the 32 subsets of cases (5 percent of the 588 subsets) 
that utilized the special logic and had 100 or more cases. Of the 32 
subsets of cases, 18 (56 percent) are similar in terms of average costs 
and length of stay to the MS-DRG assignment that results when the 
special logic is removed, and 14 of the 32 subsets of cases (44 
percent) are similar in terms of average costs and length of stay to 
the MS-DRG assignment that results when the special logic is utilized.
    The table below contains examples of four subsets of cases that 
utilize the special logic, comparing average length of stay and average 
costs between two MS-DRGs within a base DRG, corresponding to the MS-
DRG assigned when the special logic is removed and the MS-DRG assigned 
when the special logic is utilized. All four subsets of cases involve 
the principal diagnosis code E11.52 (Type 2 diabetes mellitus with 
diabetic peripheral angiopathy with gangrene). There are four subsets 
of cases in this example because the records involving the principal 
diagnosis code E11.52 are assigned to four different base DRGs, one 
medical MS-DRG and three surgical MS[dash]DRGs, depending on the 
procedure code(s) reported on the claim. All subsets of cases contain 
more than 100 claims. In three of the four subsets, the cases are 
similar in terms of average length of stay and average costs to the MS-
DRG assignment that results when the special logic is removed, and in 
one of the four subsets, the cases are similar in terms of average 
length of stay and average costs to the MS-DRG assignment that results 
when the special logic is utilized.
    As shown in the following table, using ICD-10-CM diagnosis code 
E11.52 (Type 2 diabetes mellitus with diabetic peripheral angiopathy 
with gangrene) as our example, the data findings show four different 
MS-DRG pairs for which code E11.52 was the principal diagnosis on the 
claim and where the special logic impacted MS-DRG assignment. For the 
first MS-DRG pair, we examined MS-DRGs 240 and 241 (Amputation for 
Circulatory System Disorders Except Upper Limb and Toe with CC and 
without CC/MCC, respectively). We found 436 cases reporting diagnosis 
code E11.52 as the principal diagnosis, with an average length of stay 
of 5.5 days and average costs of $11,769. These 436 cases are assigned 
to MS-DRG 240 with the special logic utilized, and assigned to MS-DRG 
241 with the special logic removed. The total number of cases reported 
in MS-DRG 240 was 7,675, with an average length of stay of 8.3 days and 
average costs of $17,876. The total number of cases reported in MS-DRG 
241 was 778, with an average length of stay of 5.0 days and average 
costs of $10,882. The 436 cases are more similar to MS-DRG 241 in terms 
of length of stay and average cost and less similar to MS-DRG 240.
    For the second MS-DRG pair, we examined MS-DRGs 256 and 257 (Upper 
Limb and Toe Amputation for Circulatory System Disorders with CC and 
without CC/MCC, respectively). We found 193 cases reporting ICD-10-CM 
diagnosis code E11.52 as the principal diagnosis, with an average 
length of stay of 4.2 days and average costs of $8,478. These 193 cases 
are assigned to MS-DRG 256 with the special logic utilized, and 
assigned to MS-DRG 257 with the special logic removed. The total number 
of cases reported in MS-DRG 256 was 2,251, with an average length of 
stay of 6.1 days and average costs of $11,987. The total number of 
cases reported in MS-DRG 257 was 115, with an average length of stay of 
4.6 days and average costs of $7,794. These 193 cases are more similar 
to MS-DRG 257 in terms of average length of stay and average costs and 
less similar to MS-DRG 256.
    For the third MS-DRG pair, we examined MS-DRGs 300 and 301 
(Peripheral Vascular Disorders with CC and without CC/MCC, 
respectively). We found 185 cases reporting ICD-10-CM diagnosis code 
E11.52 as the principal diagnosis, with an average length of stay of 
3.6 days and average costs of $5,981. These 185 cases are assigned to 
MS-DRG 300 with the special logic utilized, and assigned to MS-DRG 301 
with the special logic removed. The total number of cases reported in 
MS-DRG 300 was 29,327, with an average length of stay of 4.1 days and 
average costs of $7,272. The total number of cases reported in MS-DRG 
301 was 9,611, with an average length of stay of 2.8 days and average 
costs of $5,263. These 185 cases are more similar to MS-DRG 301 in 
terms of average length of stay and average costs and less similar to 
MS-DRG 300.
    For the fourth MS-DRG pair, we examined MS-DRGs 253 and 254 (Other 
Vascular Procedures with CC and without CC/MCC, respectively). We found 
225 cases reporting diagnosis code E11.52 as the principal diagnosis, 
with an average length of stay of 5.2 days and average costs of 
$17,901. These 225 cases are assigned to MS-DRG 253 with the special 
logic utilized, and assigned to MS-DRG 254 with the special logic 
removed. The total number of cases reported in MS-DRG 253 was 25,714, 
with an average length of stay of 5.4 days and average costs of 
$18,986. The total number of cases reported in MS-DRG 254 was 12,344, 
with an average length of stay of 2.8 days and average costs of 
$13,287. Unlike the previous three MS-DRG pairs, these 225 cases are 
more similar to MS-DRG 253 in terms of average length of stay and 
average costs and less similar to MS-DRG 254.

        MS-DRG Pairs for Principal Diagnosis ICD-10-CM Code E11.52 With and Without Special MS-DRG Logic
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 240 and 241--Special logic impacted cases with ICD-10-CM             436             5.5         $11,769
 code E11.52 as principal diagnosis.............................
MS-DRG 240--All cases...........................................           7,675             8.3          17,876
MS-DRG 241--All cases...........................................             778             5.0          10,882

[[Page 20239]]

 
MS-DRGs 253 and 254--Special logic impacted cases with ICD-10-CM             225             5.2          17,901
 E11.52 as principal diagnosis..................................
MS-DRG 253--All cases...........................................          25,714             5.4          18,986
MS-DRG 254--All cases...........................................          12,344             2.8          13,287
MS-DRGs 256 and 257--Special logic impacted cases with ICD-10-CM             193             4.2           8,478
 E11.52 as principal diagnosis..................................
MS-DRG 256--All cases...........................................           2,251             6.1          11,987
MS-DRG 257--All cases...........................................             115             4.6           7,794
MS-DRGs 300 and 301--Special logic impacted cases with ICD-10-CM             185             3.6           5,981
 E11.52 as principal diagnosis..................................
MS-DRG 300--All cases...........................................          29,327             4.1           7,272
MS-DRG 301--All cases...........................................           9,611             2.8           5,263
----------------------------------------------------------------------------------------------------------------

    Based on our analysis of the data, we believe that there may be 
more effective indicators of resource utilization than the Principal 
Diagnosis Is Its Own CC or MCC Lists and the special logic used to 
assign clinical severity to a principal diagnosis. As stated earlier in 
this discussion, it is no longer necessary to replicate MS-DRG 
assignment across the ICD-9 and ICD-10 versions of the MS-DRGs. The 
available ICD-10 data can now be used to evaluate other indicators of 
resource utilization.
    Therefore, as an initial recommendation from the first phase in our 
comprehensive review of the CC and MCC lists, we are proposing to 
remove the special logic in the GROUPER for processing claims 
containing a diagnosis code from the Principal Diagnosis Is Its Own CC 
or MCC Lists, and we are proposing to delete the tables containing the 
lists of principal diagnosis codes, Table 6L.--Principal Diagnosis Is 
Its Own MCC List and Table 6M.--Principal Diagnosis Is Its Own CC List, 
from the ICD-10 MS-DRG Definitions Manual for FY 2019. We are inviting 
public comments on our proposals.
d. Proposed CC Exclusions List for FY 2019
    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.
    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.
    In this proposed rule, for FY 2019, we are proposing changes to the 
ICD-10 MS-DRGs Version 36 CC Exclusion List. Therefore, we developed 
Table 6G.1.--Proposed Secondary Diagnosis Order Additions to the CC 
Exclusions List--FY 2019; Table 6G.2.--Proposed Principal Diagnosis 
Order Additions to the CC Exclusions List--FY 2019; Table 6H.1.--
Proposed Secondary Diagnosis Order Deletions to the CC Exclusions 
List--FY 2019; and Table 6H.2.--Proposed Principal Diagnosis Order 
Deletions to the CC Exclusions List--FY 2019. For Table 6G.1, each 
secondary diagnosis code proposed for addition to the CC Exclusion List 
is shown with an asterisk and the principal diagnoses proposed to 
exclude the secondary diagnosis code are provided in the indented 
column immediately following it. For Table 6G.2, each of the principal 
diagnosis codes for which there is a CC exclusion is shown with an 
asterisk and the conditions proposed for addition to the CC Exclusion 
List that will not count as a CC are provided in an indented column 
immediately following the affected principal diagnosis. For Table 6H.1, 
each secondary diagnosis code proposed for deletion from the CC 
Exclusion List is shown with an asterisk followed by the principal 
diagnosis codes that currently exclude it. For Table 6H.2, each of the 
principal diagnosis codes is shown with an asterisk and the proposed 
deletions to the CC Exclusions List are provided in an indented column 
immediately following the affected principal diagnosis. Tables 6G.1., 
6G.2., 6H.1., and 6H.2. associated with this proposed rule are 
available via the Internet on the CMS website 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 2019, we 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 the proposed rule 
but are available via the Internet on the CMS

[[Page 20240]]

website 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.18. 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.
    In this FY 2019 IPPS/LTCH PPS proposed rule, we are inviting public 
comments on the MDC and MS-DRG assignments for the new 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.
    We are making available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html 
the following tables associated with this proposed rule:
     Table 6A.--New Diagnosis Codes--FY 2019;
     Table 6B.--New Procedure Codes--FY 2019;
     Table 6C.--Invalid Diagnosis Codes--FY 2019;
     Table 6D.--Invalid Procedure Codes--FY 2019;
     Table 6E.--Revised Diagnosis Code Titles--FY 2019;
     Table 6F.--Revised Procedure Code Titles--FY 2019;
     Table 6G.1.--Proposed Secondary Diagnosis Order Additions 
to the CC Exclusions List--FY 2019;
     Table 6G.2.--Proposed Principal Diagnosis Order Additions 
to the CC Exclusions List--FY 2019;
     Table 6H.1.--Proposed Secondary Diagnosis Order Deletions 
to the CC Exclusions List--FY 2019;
     Table 6H.2.--Proposed Principal Diagnosis Order Deletions 
to the CC Exclusions List--FY 2019;
     Table 6I.1.--Proposed Additions to the MCC List--FY 2019;
     Table 6I.2.--Proposed Deletions to the MCC List--FY 2019;
     Table 6J.1.--Proposed Additions to the CC List--FY 2019; 
and
     Table 6J.2.--Proposed Deletions to the CC List--FY 2019.
    We note that, as discussed in section II.F.15.c. of the preamble of 
this proposed rule, we are proposing to delete Table 6L. and Table 6M. 
from the ICD-10 MS-DRG Definitions Manual for FY 2019.
16. Comprehensive Review of CC List for FY 2019
a. Overview of Comprehensive CC/MCC Analysis
    In the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159), we described 
our process for establishing three different levels of CC severity into 
which we would subdivide the diagnosis codes. The categorization of 
diagnoses as an MCC, CC, or non[dash]CC was accomplished using an 
iterative approach in which each diagnosis was evaluated to determine 
the extent to which its presence as a secondary diagnosis resulted in 
increased hospital resource use. We refer readers to the FY 2008 IPPS/
LTCH PPS final rule (72 FR 47159) for a complete discussion of our 
approach. Since this comprehensive analysis was completed for FY 2008, 
we have evaluated diagnosis codes individually when receiving requests 
to change the severity level of specific diagnosis codes. However, 
given the transition to ICD-10-CM and the significant changes that have 
occurred to diagnosis codes since this review, we believe it is 
necessary to conduct a comprehensive analysis once again. We have begun 
this analysis and will discuss our findings in future rulemaking. We 
are currently using the same methodology utilized in FY 2008 and 
described below to conduct this analysis.
    For each secondary diagnosis, we measured the impact in resource 
use for the following three subsets of patients:
    (1) Patients with no other secondary diagnosis or with all other 
secondary diagnoses that are non-CCs.
    (2) Patients with at least one other secondary diagnosis that is a 
CC but none that is an MCC.
    (3) Patients with at least one other secondary diagnosis that is an 
MCC.
    Numerical resource impact values were assigned for each diagnosis 
as follows:

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

    Each diagnosis for which Medicare data were available was evaluated 
to determine its impact on resource use and to determine the most 
appropriate CC subclass (non[dash]CC, CC, or MCC) assignment. In order 
to make this determination, the average cost for each subset of cases 
was compared to the expected cost for cases in that subset. The 
following format was 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 cost 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 a major CC. The C3 
value reflects a patient with at least one other secondary diagnosis 
that is a major CC. 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[dash]CCs, the impact on resource use of the secondary diagnoses is 
greater than the expected value for a non[dash]CC by an amount equal to 
80

[[Page 20241]]

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[dash]CC).
    These mathematical constructs are used as guides in conjunction 
with the judgment of our clinical advisors to classify each secondary 
diagnosis reviewed as an MCC, CC or non-CC. Our clinical panel reviews 
the resource use impact reports and suggests modifications to the 
initial CC subclass assignments when clinically appropriate.
b. Requested Changes to Severity Levels
(1) Human Immunodeficiency Virus [HIV] Disease
    We received a request that we consider changing the severity level 
of ICD-10-CM diagnosis code B20 (Human immunodeficiency virus [HIV] 
disease) from an MCC to a CC. We used the approach outlined above to 
evaluate this request. The table below contains the data that were 
evaluated for this request.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                               Proposed
                ICD-10-CM diagnosis code                     Cnt1         C1         Cnt2         C2         Cnt3         C3      Current CC      CC
                                                                                                                                   subclass    subclass
--------------------------------------------------------------------------------------------------------------------------------------------------------
B20 (Human immunodeficiency virus [HIV] disease)........      2,918      0.9946       8,938      2.1237      11,479      3.0960           MCC          CC
--------------------------------------------------------------------------------------------------------------------------------------------------------

    While the data did not strongly suggest that the categorization of 
HIV as an MCC was inaccurate, our clinical advisors indicated that, for 
many patients with HIV disease, symptoms are well controlled by 
medications. Our clinical advisors stated that if these patients have 
an HIV-related complicating disease, that complicating disease would 
serve as a CC or an MCC. Therefore, they advised us that ICD-10-CM 
diagnosis code B20 is more similar to a CC than an MCC. Based on the 
data results and the advice of our clinical advisors, we are proposing 
to change the severity level of ICD-10-CM diagnosis code B20 from an 
MCC to a CC. We are inviting public comments on our proposal.
(2) Acute Respiratory Distress Syndrome
    We also received a request to change the severity level for ICD-10-
CM diagnosis code J80 (Acute respiratory distress syndrome) from a CC 
to a MCC. We used the approach outlined above to evaluate this request. 
The following table contains the data that were evaluated for this 
request.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                               Proposed
                ICD-10-CM diagnosis code                     Cnt1         C1         Cnt2         C2         Cnt3         C3      Current CC      CC
                                                                                                                                   subclass    subclass
--------------------------------------------------------------------------------------------------------------------------------------------------------
J80 (Acute respiratory distress syndrome)...............      1,840      1.7704       6,818      2.5596      18,376      3.3428            CC         MCC
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The data suggest that the resources involved in caring for a 
patient with this condition are 77 percent greater than expected when 
the patient has either no other secondary diagnosis present, or all the 
other secondary diagnoses present are non[dash]CCs. The resources are 
56 percent greater than expected when reported in conjunction with 
another secondary diagnosis that is a CC, and 34 percent greater than 
expected when reported in conjunction with another secondary diagnosis 
code that is an MCC. Our clinical advisors agree that the resources 
required to care for a patient with this secondary diagnosis are 
consistent with those of an MCC. Therefore, we are proposing to change 
the severity level of ICD-10-CM diagnosis code J80 from a CC to an MCC. 
We are inviting public comments on our proposal.
(3) Encephalopathy
    We also received a request to change the severity level for ICD-10-
CM diagnosis code G93.40 (Encephalopathy, unspecified) from an MCC to a 
non-CC. The requestor pointed out that the nature of the encephalopathy 
or its underlying cause should be coded. The requestor also noted that 
unspecified heart failure is a non-CC. We used the approach outlined 
earlier to evaluate this request. The following table contains the data 
that were evaluated for this request.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                               Proposed
                ICD-10-CM diagnosis code                     Cnt1         C1         Cnt2         C2         Cnt3         C3      Current CC      CC
                                                                                                                                   subclass    subclass
--------------------------------------------------------------------------------------------------------------------------------------------------------
G93.40 (Encephalopathy, unspecified)....................      1.840      16,306      1.8471      80,222      2.4901     139,066           MCC         MCC
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The data suggest that the resources involved in caring for a 
patient with this condition are 84 percent greater than expected when 
the patient has either no other secondary diagnosis present, or all the 
other secondary diagnoses present are non[dash]CCs. The resources are 
15 percent lower than expected when reported in conjunction with 
another secondary diagnosis that is a CC, and 49 percent greater than 
expected when reported in conjunction with another secondary diagnosis 
code that is an MCC. We note that the pattern observed in resource use 
for the condition of unspecified heart failure (ICD-10-CM diagnosis 
code I50.9) differs from that of unspecified encephalopathy. Our 
clinical advisors reviewed this request and agree that the resources 
involved in caring for a patient with this condition are aligned with 
those of an MCC. Therefore, we are not proposing a change to the 
severity level for ICD-10-CM diagnosis code G93.40. We are inviting 
public comments on our proposal.
17. Review of Procedure Codes in MS DRGs 981 Through 983 and 987 
Through 989
    Each year, we review cases assigned to MS-DRGs 981, 982, and 983

[[Page 20242]]

(Extensive 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 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.
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 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. 
Based on the results of our review of the claims data from the 
September 2017 update of the FY 2017 MedPAR file, we are not proposing 
to move 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 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, or 987 through 989, to ascertain whether 
any of those procedures should be reassigned from one of those two 
groups of MS-DRGs to the other group 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 September 2017 update of 
the FY 2017 MedPAR file, we are proposing to maintain the current 
structure of MS-DRGs 981 through 983 and MS-DRGs 987 through 989.
    We are inviting public comments on our proposal.
c. Adding Diagnosis or Procedure Codes to MDCs
    We received a request recommending that CMS reassign cases for 
congenital pectus excavatum (congenital depression of the sternum or 
concave chest) when reported with a procedure describing repositioning 
of the sternum (the Nuss procedure) from MS-DRGs 981, 982, and 983 
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, 
with CC, and without CC/MCC, respectively) 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). ICD-10-CM 
diagnosis code Q67.6 (Pectus excavatum) is reported for this congenital 
condition and is currently assigned to MDC 4 (Diseases and Disorders of 
the Respiratory System). ICD-10-PCS procedure code 0PS044Z (Reposition 
sternum with internal fixation device, percutaneous endoscopic 
approach) may be reported to identify the Nuss procedure and is 
currently assigned to MDC 8 (Diseases and Disorders of the 
Musculoskeletal System and Connective Tissue) in MS-DRGs 515, 516, and 
517. The requester noted that acquired pectus excavatum (ICD-10-CM 
diagnosis code M95.4) groups to MS-DRGs 515, 516, and 517 when reported 
with a ICD-10-PCS procedure code describing repositioning of the 
sternum and requested that cases involving diagnoses describing 
congenital pectus excavatum also group to those MS-DRGs when reported 
with a ICD-10-PCS procedure code describing repositioning of the 
sternum.
    Our analysis of this grouping issue confirmed that, when pectus 
excavatum (ICD-10-CM diagnosis code Q67.6) is reported as a principal 
diagnosis with a procedure such as the Nuss procedure (ICD-10-PCS 
procedure code 0PS044Z), these cases group to MS-DRGs 981, 982, and 
983. The reason for this grouping is because whenever there is a 
surgical procedure reported on a claim, which is unrelated to the MDC 
to which the case was assigned based on the principal diagnosis, it 
results in an MS-DRG assignment to a surgical class referred to as 
``unrelated operating room procedures.'' In the example provided, 
because the ICD-10-CM diagnosis code Q67.6 describing pectus excavatum 
is classified to MDC 4 and the ICD-10-PCS procedure code 0PS044Z is 
classified to MDC 8, the GROUPER logic assigns this case to the 
``unrelated operating room procedures'' set of MS-DRGs.
    During our review of ICD-10-CM diagnosis code Q67.6, we also 
reviewed additional ICD-10-CM diagnosis codes in the Q65 through Q79 
code range to determine if there might be other conditions classified 
to MDC 4 that describe congenital malformations and deformities of the 
musculoskeletal system. We identified the following six ICD-10-CM 
diagnosis codes:

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
Q67.7.....................  Pectus carinatum.
Q76.6.....................  Other congenital malformations of ribs.
Q76.7.....................  Congenital malformation of sternum.
Q76.8.....................  Other congenital malformations of bony
                             thorax.
Q76.9.....................  Congenital malformation of bony thorax,
                             unspecified.
Q77.2.....................  Short rib syndrome.
------------------------------------------------------------------------


[[Page 20243]]

    We are proposing to reassign ICD-10-CM diagnosis code Q67.6, as 
well as the additional six ICD-10-CM diagnosis codes above describing 
congenital musculoskeletal conditions, from MDC 4 to MDC 8 where other 
related congenital conditions that correspond to the musculoskeletal 
system are classified, as discussed further below.
    We identified other related ICD-10-CM diagnosis codes that are 
currently assigned to MDC 8 in categories Q67 (Congenital 
musculoskeletal deformities of head, face, spine and chest), Q76 
(Congenital malformations of spine and bony thorax), and Q77 
(Osteochondrodysplasia with defects of growth of tubular bones and 
spine) that are listed in the following table.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
Q67.0.....................  Congenital facial asymmetry.
Q67.1.....................  Congenital compression facies.
Q67.2.....................  Dolichocephaly.
Q67.3.....................  Plagiocephaly.
Q67.4.....................  Other congenital deformities of skull, face
                             and jaw.
Q67.5.....................  Congenital deformity of spine.
Q67.8.....................  Other congenital deformities of chest.
Q76.1.....................  Klippel-Feil syndrome.
Q76.2.....................  Congenital spondylolisthesis.
Q76.3.....................  Congenital scoliosis due to congenital bony
                             malformation.
Q76.411...................  Congenital kyphosis, occipito-atlanto-axial
                             region.
Q76.412...................  Congenital kyphosis, cervical region.
Q76.413...................  Congenital kyphosis, cervicothoracic region.
Q76.414...................  Congenital kyphosis, thoracic region.
Q76.415...................  Congenital kyphosis, thoracolumbar region.
Q76.419...................  Congenital kyphosis, unspecified region.
Q76.425...................  Congenital lordosis, thoracolumbar region.
Q76.426...................  Congenital lordosis, lumbar region.
Q76.427...................  Congenital lordosis, lumbosacral region.
Q76.428...................  Congenital lordosis, sacral and
                             sacrococcygeal region.
Q76.429...................  Congenital lordosis, unspecified region.
Q76.49....................  Other congenital malformations of spine, not
                             associated with scoliosis.
Q76.5.....................  Cervical rib.
Q77.0.....................  Achondrogenesis.
Q77.1.....................  Thanatophoric short stature.
Q77.3.....................  Chondrodysplasia punctate.
Q77.4.....................  Achondroplasia.
Q77.5.....................  Diastrophic dysplasia.
Q77.6.....................  Chondroectodermal dysplasia.
Q77.7.....................  Spondyloepiphyseal dysplasia.
Q77.8.....................  Other osteochondrodysplasia with defects of
                             growth of tubular bones and spine.
Q77.9.....................  Osteochondrodysplasia with defects of growth
                             of tubular bones and spine, unspecified.
------------------------------------------------------------------------

    Next, we analyzed the MS-DRG assignments for the related codes 
listed above and found that cases with the following conditions are 
assigned to MS-DRGs 551 and 552 (Medical Back Problems with and without 
MCC, respectively) under MDC 8.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
Q76.2.....................  Congenital spondylolisthesis.
Q76.411...................  Congenital kyphosis, occipito-atlanto-axial
                             region.
Q76.412...................  Congenital kyphosis, cervical region.
Q76.413...................  Congenital kyphosis, cervicothoracic region.
Q76.414...................  Congenital kyphosis, thoracic region.
Q76.415...................  Congenital kyphosis, thoracolumbar region.
Q76.419...................  Congenital kyphosis, unspecified region.
Q76.49....................  Other congenital malformations of spine, not
                             associated with scoliosis.
------------------------------------------------------------------------

    The remaining conditions shown below are assigned to MS-DRGs 564, 
565, and 566 (Other Musculoskeletal System and Connective Tissue 
Diagnoses with MCC, with CC, and without CC/MCC, respectively) under 
MDC 8.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
Q67.0.....................  Congenital facial asymmetry.
Q67.1.....................  Congenital compression facies.
Q67.2.....................  Dolichocephaly.
Q67.3.....................  Plagiocephaly.

[[Page 20244]]

 
Q67.4.....................  Other congenital deformities of skull, face
                             and jaw.
Q67.5.....................  Congenital deformity of spine.
Q67.8.....................  Other congenital deformities of chest.
Q76.1.....................  Klippel-Feil syndrome.
Q76.3.....................  Congenital scoliosis due to congenital bony
                             malformation.
Q76.425...................  Congenital lordosis, thoracolumbar region.
Q76.426...................  Congenital lordosis, lumbar region.
Q76.427...................  Congenital lordosis, lumbosacral region.
Q76.428...................  Congenital lordosis, sacral and
                             sacrococcygeal region.
Q76.429...................  Congenital lordosis, unspecified region.
Q76.5.....................  Cervical rib.
Q77.0.....................  Achondrogenesis.
Q77.1.....................  Thanatophoric short stature.
Q77.3.....................  Chondrodysplasia punctate.
Q77.4.....................  Achondroplasia.
Q77.5.....................  Diastrophic dysplasia.
Q77.6.....................  Chondroectodermal dysplasia.
Q77.7.....................  Spondyloepiphyseal dysplasia.
Q77.8.....................  Other osteochondrodysplasia with defects of
                             growth of tubular bones and spine.
Q77.9.....................  Osteochondrodysplasia with defects of growth
                             of tubular bones and spine, unspecified.
------------------------------------------------------------------------

    As a result of our review, we are proposing to reassign ICD-10-CM 
diagnosis code Q67.6, as well as the additional six ICD-10-CM diagnosis 
codes above describing congenital musculoskeletal conditions, from MDC 
4 to MDC 8 in MS-DRGs 564, 565, and 566. Our clinical advisors agree 
with this proposed reassignment because it is clinically appropriate 
and consistent with the other related ICD-10-CM diagnosis codes grouped 
in the Q65 through Q79 range that describe congenital malformations and 
deformities of the musculoskeletal system that are classified under MDC 
8 in MS-DRGs 564, 565, and 566. By reassigning ICD-10-CM diagnosis code 
Q67.6 and the additional six ICD-10-CM diagnosis codes listed in the 
table above from MDC 4 to MDC 8, cases reporting these ICD-10-CM 
diagnosis codes in combination with the respective ICD-10-PCS procedure 
code will reflect a more appropriate grouping from a clinical 
perspective because they will now be classified under a surgical 
musculoskeletal system related MS-DRG and will no longer result in an 
MS-DRG assignment to the ``unrelated operating room procedures'' 
surgical class.
    In summary, we are proposing to reassign ICD-10-CM diagnosis codes 
Q67.6, Q67.7, Q76.6, Q76.7, Q76.8, Q76.9, and Q77.2 from MDC 4 to MDC 8 
in MS-DRGs 564, 565, and 566 (Other Musculoskeletal System and 
Connective Tissue Diagnoses with MCC, with CC, and without CC/MCC, 
respectively). We are inviting public comments on our proposals.
    We also received a request recommending that CMS reassign cases for 
sternal fracture repair procedures from MS-DRGs 981, 982, and 983 and 
from MS-DRGs 166, 167 and 168 (Other Respiratory System O.R. Procedures 
with MCC, with CC and without CC/MCC, respectively) under MDC 4 to MS-
DRGs 515, 516, and 517 under MDC 8. The requester noted that clavicle 
fracture repair procedures with an internal fixation device group to 
MS-DRGs 515, 516, and 517 when reported with an ICD-10-CM diagnosis 
code describing a fractured clavicle. However, sternal fracture repair 
procedures with an internal fixation device group to MS-DRGs 981, 982, 
and 983 or MS-DRGs 166, 167 and 168 when reported with an ICD-10-CM 
diagnosis code describing a fracture of the sternum. According to the 
requestor, because the clavicle and sternum are in the same anatomical 
region of the body, it would appear that assignment to MS-DRGs 515, 
516, and 517 would be more appropriate for sternal fracture repair 
procedures.
    The requestor provided the following list of ICD-10-PCS procedure 
codes in its request for consideration to reassign to MS-DRGs 515, 516 
and 517 when reported with an ICD-10-CM diagnosis code for sternal 
fracture.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0PS000Z...................  Reposition sternum with rigid plate internal
                             fixation device, open approach.
0PS004Z...................  Reposition sternum with internal fixation
                             device, open approach.
0PS00ZZ...................  Reposition sternum, open approach.
0PS030Z...................  Reposition sternum with rigid plate internal
                             fixation device, percutaneous approach.
0PS034Z...................  Reposition sternum with internal fixation
                             device, percutaneous approach.
------------------------------------------------------------------------

    We note that the above five ICD-10-PCS procedure codes that may be 
reported to describe a sternal fracture repair are already assigned to 
MS-DRGs 515, 516, and 517 under MDC 8. In addition, ICD-10-PCS 
procedure codes 0PS000Z and 0PS030Z are assigned to MS-DRGs 166, 167 
and 168 under MDC 4.
    As noted in the previous discussion, whenever there is a surgical 
procedure reported on a claim, which is unrelated to the MDC to which 
the case was assigned based on the principal diagnosis, it results in 
an MS-DRG assignment to a surgical class referred to as ``unrelated 
operating room procedures.'' In the examples provided by the requestor, 
when the ICD-10-CM diagnosis code describing a sternal fracture is 
classified under MDC 4 and the ICD-10-PCS procedure code describing a 
sternal fracture repair procedure is classified under MDC 8, the 
GROUPER logic assigns these cases to the ``unrelated operating room 
procedures'' group of MS-DRGs (981,

[[Page 20245]]

982, and 983) and when the ICD-10-CM diagnosis code describing a 
sternal fracture is classified under MDC 4 and the ICD-10-PCS procedure 
code describing a sternal repair procedure is also classified under MDC 
4, the GROUPER logic assigns these cases to MS-DRG 166, 167, or 168.
    For our review of this grouping issue and the request to have 
procedures for sternal fracture repairs assigned to MDC 8, we analyzed 
the ICD-10-CM diagnosis codes describing a sternal fracture currently 
classified under MDC 4. We identified 10 ICD-10-CM diagnosis codes 
describing a sternal fracture with an ``initial encounter'' classified 
under MDC 4 that are listed in the following table.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
S22.20XA..................  Unspecified fracture of sternum, initial
                             encounter for closed fracture.
S22.20XB..................  Unspecified fracture of sternum, initial
                             encounter for open fracture.
S22.21XA..................  Fracture of manubrium, initial encounter for
                             closed fracture.
S22.21XB..................  Fracture of manubrium, initial encounter for
                             open fracture.
S22.22XA..................  Fracture of body of sternum, initial
                             encounter for closed fracture.
S22.22XB..................  Fracture of body of sternum, initial
                             encounter for open fracture.
S22.23XA..................  Sternal manubrial dissociation, initial
                             encounter for closed fracture.
S22.23XB..................  Sternal manubrial dissociation, initial
                             encounter for open fracture.
S22.24XA..................  Fracture of xiphoid process, initial
                             encounter for closed fracture.
S22.24XB..................  Fracture of xiphoid process, initial
                             encounter for open fracture.
------------------------------------------------------------------------

    Our analysis of this grouping issue confirmed that when 1 of the 10 
ICD-10-CM diagnosis codes describing a sternal fracture listed in the 
table above from MDC 4 is reported as a principal diagnosis with an 
ICD-10-PCS procedure code for a sternal repair procedure from MDC 8, 
these cases group to MS-DRG 981, 982, or 983. We also confirmed that 
when 1 of the 10 ICD-10-CM diagnosis codes describing a sternal 
fracture listed in the table above from MDC 4 is reported as a 
principal diagnosis with an ICD-10-PCS procedure code for a sternal 
repair procedure from MDC 4, these cases group to MS-DRG 166, 167 or 
168.
    Our clinical advisors agree with the requested reclassification of 
ICD-10-CM diagnosis codes S22.20XA, S22.20XB, S22.21XA, S22.21XB, 
S22.22XA, S22.22XB, S22.23XA, S22.23XB, S22.24XA, and S22.24XB 
describing a sternal fracture with an initial encounter from MDC 4 to 
MDC 8. They advised that this requested reclassification is clinically 
appropriate because it is consistent with the other related ICD-10-CM 
diagnosis codes that describe fractures of the sternum and which are 
classified under MDC 8. The ICD-10-CM diagnosis codes describing a 
sternal fracture currently classified under MDC 8 to MS-DRGs 564, 565, 
and 566 are listed in the following table.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
S22.20XD..................  Unspecified fracture of sternum, subsequent
                             encounter for fracture with routine
                             healing.
S22.20XG..................  Unspecified fracture of sternum, subsequent
                             encounter for fracture with delayed
                             healing.
S22.20XK..................  Unspecified fracture of sternum, subsequent
                             encounter for fracture with nonunion.
S22.20XS..................  Unspecified fracture of sternum, sequela.
S22.21XD..................  Fracture of manubrium, subsequent encounter
                             for fracture with routine healing.
S22.21XG..................  Fracture of manubrium, subsequent encounter
                             for fracture with delayed healing.
S22.21XK..................  Fracture of manubrium, subsequent encounter
                             for fracture with nonunion.
S22.21XS..................  Fracture of manubrium, sequela.
S22.22XD..................  Fracture of body of sternum, subsequent
                             encounter for fracture with routine
                             healing.
S22.22XG..................  Fracture of body of sternum, subsequent
                             encounter for fracture with delayed
                             healing.
S22.22XK..................  Fracture of body of sternum, subsequent
                             encounter for fracture with nonunion.
S22.22XS..................  Fracture of body of sternum, sequela.
S22.23XD..................  Sternal manubrial dissociation, subsequent
                             encounter for fracture with routine
                             healing.
S22.23XG..................  Sternal manubrial dissociation, subsequent
                             encounter for fracture with delayed
                             healing.
S22.23XK..................  Sternal manubrial dissociation, subsequent
                             encounter for fracture with nonunion.
S22.23XS..................  Sternal manubrial dissociation, sequela.
S22.24XD..................  Fracture of xiphoid process, subsequent
                             encounter for fracture with routine
                             healing.
S22.24XG..................  Fracture of xiphoid process, subsequent
                             encounter for fracture with delayed
                             healing.
S22.24XK..................  Fracture of xiphoid process, subsequent
                             encounter for fracture with nonunion.
S22.24XS..................  Fracture of xiphoid process, sequela.
------------------------------------------------------------------------

    By reclassifying the 10 ICD-10-CM diagnosis codes listed in the 
table earlier in this section describing sternal fracture codes with an 
``initial encounter'' from MDC 4 to MDC 8, the cases reporting these 
ICD-10-CM diagnosis codes in combination with the respective ICD-10-PCS 
procedure codes will reflect a more appropriate grouping from a 
clinical perspective and will no longer result in an MS-DRG assignment 
to the ``unrelated operating room procedures'' surgical class when 
reported with a surgical procedure classified under MDC 8.
    Therefore, we are proposing to reassign ICD-10-CM diagnosis codes 
S22.20XA, S22.20XB, S22.21XA, S22.21XB, S22.22XA, S22.22XB, S22.23XA, 
S22.23XB, S22.24XA, and S22.24XB from under MDC 4 to MDC 8 to MS-DRGs 
564, 565, and 566. We are inviting public comments on our proposals.
    In addition, we received a request recommending that CMS reassign 
cases for rib fracture repair procedures from MS-DRGs 981, 982, and 
983, and from MS-DRGs 166, 167 and 168 (Other Respiratory System O.R. 
Procedures

[[Page 20246]]

with MCC, with CC, and without CC/MCC, respectively) under MDC 4 to MS-
DRGs 515, 516, and 517 under MDC 8. The requestor noted that clavicle 
fracture repair procedures with an internal fixation device group to 
MS-DRGs 515, 516, and 517 when reported with an ICD-10-CM diagnosis 
code describing a fractured clavicle. However, rib fracture repair 
procedures with an internal fixation device group to MS-DRGs 981, 982, 
and 983 or to MS-DRGs 166, 167 and 168 when reported with an ICD-10-CM 
diagnosis code describing a rib fracture. According to the requestor, 
because the clavicle and ribs are in the same anatomical region of the 
body, it would appear that assignment to MS-DRGs 515, 516, and 517 
would be more appropriate for rib fracture repair procedures.
    The requestor provided the following list of 10 ICD-10-PCS 
procedure codes in its request for consideration for reassignment to 
MS-DRGs 515, 516 and 517 when reported with an ICD-10-CM diagnosis code 
for rib fracture.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0PH104Z...................  Insertion of internal fixation device into 1
                             to 2 ribs, open approach.
0PH134Z...................  Insertion of internal fixation device into 1
                             to 2 ribs, percutaneous approach.
0PH144Z...................  Insertion of internal fixation device into 1
                             to 2 ribs, percutaneous endoscopic
                             approach.
0PH204Z...................  Insertion of internal fixation device into 3
                             or more ribs, open approach.
0PH234Z...................  Insertion of internal fixation device into 3
                             or more ribs, percutaneous approach.
0PH244Z...................  Insertion of internal fixation device into 3
                             or more ribs, percutaneous endoscopic
                             approach.
0PS104Z...................  Reposition 1 to 2 ribs with internal
                             fixation device, open approach.
0PS134Z...................  Reposition 1 to 2 ribs with internal
                             fixation device, percutaneous approach.
0PS204Z...................  Reposition 3 or more ribs with internal
                             fixation, device, open approach.
0PS234Z...................  Reposition 3 or more ribs with internal
                             fixation device, percutaneous approach.
------------------------------------------------------------------------

    We note that the above 10 ICD-10-PCS procedure codes that may be 
reported to describe a rib fracture repair are already assigned to MS-
DRGs 515, 516, and 517 under MDC 8. In addition, 6 of the 10 ICD 10-PCS 
procedure codes listed above (0PH104Z, 0PH134Z, 0PH144Z, 0PH204Z, 
0PH234Z and 0PH244Z) are also assigned to MS-DRGs 166, 167, and 168 
under MDC 4.
    As noted in the previous discussions above, whenever there is a 
surgical procedure reported on a claim, which is unrelated to the MDC 
to which the case was assigned based on the principal diagnosis, it 
results in an MS-DRG assignment to a surgical class referred to as 
``unrelated operating room procedures.'' In the examples provided by 
the requestor, when the ICD-10-CM diagnosis code describing a rib 
fracture is classified under MDC 4 and the ICD-10-PCS procedure code 
describing a rib fracture repair procedure is classified under MDC 8, 
the GROUPER logic assigns these cases to the ``unrelated operating room 
procedures'' group of MS-DRGs (981, 982, and 983) and when the ICD-10-
CM diagnosis code describing a rib fracture is classified under MDC 4 
and the ICD-10-PCS procedure code describing a rib repair procedure is 
also classified under MDC 4, the GROUPER logic assigns these cases to 
MS-DRG 166, 167, or 168.
    For our review of this grouping issue and the request to have 
procedures for rib fracture repairs assigned to MDC 8, we analyzed the 
ICD-10-CM diagnosis codes describing a rib fracture and found that, 
while some rib fracture ICD-10-CM diagnosis codes are classified under 
MDC 8 (which would result in those cases grouping appropriately to MS-
DRGs 515, 516, and 517), there are other ICD-10-CM diagnosis codes that 
are currently classified under MDC 4. We identified the following ICD-
10-CM diagnosis codes describing a rib fracture with an initial 
encounter classified under MDC 4, as listed in the following table.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
S2231XA...................  Fracture of one rib, right side, initial
                             encounter for closed fracture.
S2231XB...................  Fracture of one rib, right side, initial
                             encounter for open fracture.
S2232XA...................  Fracture of one rib, left side, initial
                             encounter for closed fracture.
S2232XB...................  Fracture of one rib, left side, initial
                             encounter for open fracture.
S2239XA...................  Fracture of one rib, unspecified side,
                             initial encounter for closed fracture.
S2239XB...................  Fracture of one rib, unspecified side,
                             initial encounter for open fracture.
S2241XA...................  Multiple fractures of ribs, right side,
                             initial encounter for closed fracture.
S2241XB...................  Multiple fractures of ribs, right side,
                             initial encounter for open fracture.
S2242XA...................  Multiple fractures of ribs, left side,
                             initial encounter for closed fracture.
S2242XB...................  Multiple fractures of ribs, left side,
                             initial encounter for open fracture.
S2243XA...................  Multiple fractures of ribs, bilateral,
                             initial encounter for closed fracture.
S2243XB...................  Multiple fractures of ribs, bilateral,
                             initial encounter for open fracture.
S2249XA...................  Multiple fractures of ribs, unspecified
                             side, initial encounter for closed
                             fracture.
S2249XB...................  Multiple fractures of ribs, unspecified
                             side, initial encounter for open fracture.
S225XXA...................  Flail chest, initial encounter for closed
                             fracture.
S225XXB...................  Flail chest, initial encounter for open
                             fracture.
------------------------------------------------------------------------

    Our analysis of this grouping issue confirmed that, when one of the 
following four ICD-10-PCS procedure codes identified by the requestor 
(and listed in the table earlier in this section) from MDC 8 (0PS104Z, 
0PS134Z, 0PS204Z, or 0PS234Z) is reported to describe a rib fracture 
repair procedure with a principal diagnosis code for a rib fracture 
with an initial encounter listed in the table above from MDC 4, these 
cases group to MS-DRG 981, 982, or 983.
    During our review of those four repositioning of the rib procedure 
codes, we also identified the following four ICD-10-PCS procedure codes 
classified

[[Page 20247]]

to MDC 8 that describe repositioning of the ribs.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0PS10ZZ...................  Reposition 1 to 2 ribs, open approach.
0PS144Z...................  Reposition 1 to 2 ribs with internal
                             fixation device, percutaneous endoscopic
                             approach.
0PS20ZZ...................  Reposition 3 or more ribs, open approach.
0PS244Z...................  Reposition 3 or more ribs with internal
                             fixation device, percutaneous endoscopic
                             approach.
------------------------------------------------------------------------

    We confirmed that when one of the above four procedure codes is 
reported with a principal diagnosis code for a rib fracture listed in 
the table above from MDC 4, these cases also group to MS-DRG 981, 982, 
or 983.
    Lastly, we confirmed that when one of the six ICD-10-PCS procedure 
codes describing a rib fracture repair listed in the previous table 
above from MDC 4 is reported with a principal diagnosis code for a rib 
fracture with an initial encounter from MDC 4, these cases group to MS-
DRG 166, 167, or 168.
    In response to the request to reassign the procedure codes that 
describe a rib fracture repair procedure from MS-DRGs 981, 982, and 983 
and from MS-DRGs 166, 167, and 168 under MDC 4 to MS-DRGs 515, 516, and 
517 under MDC 8, as discussed above, the 10 ICD-10-PCS procedure codes 
submitted by the requestor that may be reported to describe a rib 
fracture repair are already assigned to MS-DRGs 515, 516, and 517 under 
MDC 8 and 6 of those 10 procedure codes (0PH104Z, 0PH134Z, 0PH144Z, 
0PH204Z, 0PH234Z, and 0PH244Z) are also assigned to MS-DRGs 166, 167, 
and 168 under MDC 4.
    We analyzed claims data from the September 2017 update of the FY 
2017 MedPAR file for cases reporting a principal diagnosis of a rib 
fracture (initial encounter) from the list of diagnosis codes shown in 
the table above with one of the six ICD-10-PCS procedure codes 
describing the insertion of an internal fixation device into the rib 
(0PH104Z, 0PH134Z, 0PH144Z, 0PH204Z, 0PH234Z, and 0PH244Z) in MS-DRGs 
166, 167, and 168 under MDC 4. Our findings are shown in the table 
below.

                              MS-DRGs for Other Respiratory System O.R. Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 166--All cases...........................................          22,938            10.2         $24,299
MS-DRG 166--Cases with principal diagnosis of rib fracture(s)                 40            11.4          43,094
 and insertion of internal fixation device for the rib(s).......
MS-DRG 167--All cases...........................................          10,815             5.7          13,252
MS-DRG 167--Cases with principal diagnosis of rib fracture(s)                 10             6.7          30,617
 and insertion of internal fixation device for the rib(s).......
MS-DRG 168--All cases...........................................           3,242             3.1           9,708
MS-DRG 168--Cases with principal diagnosis of rib fracture(s)                  4               2          21,501
 and insertion of internal fixation device for the rib(s).......
----------------------------------------------------------------------------------------------------------------

    As shown in this table, there were a total of 22,938 cases in MS-
DRG 166, with an average length of stay of 10.2 days and average costs 
of $24,299. In MS-DRG 166, we found 40 cases reporting a principal 
diagnosis of a rib fracture(s) with insertion of an internal fixation 
device for the rib(s), with an average length of stay of 11.4 days and 
average costs of $43,094. There were a total of 10,815 cases in MS-DRG 
167, with an average length of stay of 5.7 days and average costs of 
$13,252. In MS-DRG 167, we found 10 cases reporting a principal 
diagnosis of a rib fracture(s) with insertion of an internal fixation 
device for the rib(s), with an average length of stay of 6.7 days and 
average costs of $30,617. There were a total of 3,242 cases in MS-DRG 
168, with an average length of stay of 3.1 days and average costs of 
$9,708. In MS-DRG 168, we found 4 cases reporting a principal diagnosis 
of a rib fracture(s) with insertion of an internal fixation device for 
the rib(s), with an average length of stay of 2 days and average costs 
of $21,501. Overall, for MS-DRGs 166, 167, and 168, there were a total 
of 54 cases reporting a principal diagnosis of a rib fracture(s) with 
insertion of an internal fixation device for the rib(s), demonstrating 
that while rib fractures may require treatment, they are not typically 
corrected surgically. Our clinical advisors agree with the current 
assignment of procedure codes to MS-DRGs 166, 167, and 168 that may be 
reported to describe repair of a rib fracture under MDC 4, as well as 
the current assignment of procedure codes to MS-DRGs 515, 516, and 517 
that may be reported to describe repair of a rib fracture under MDC 8. 
Our clinical advisors noted that initial, acute rib fractures can cause 
numerous respiratory related issues requiring various treatments and 
problems with the healing of a rib fracture are considered 
musculoskeletal issues.
    We also note that the procedure codes submitted by the requestor 
may be reported for other indications and they are not restricted to 
reporting for repair of a rib fracture. Therefore, assignment of these 
codes to the MDC 4 MS-DRGs and the MDC 8 MS-DRGs is clinically 
appropriate.
    To address the cases reporting procedure codes describing the 
repositioning of a rib(s) that are grouping to MS-DRGs 981, 982, and 
983 when reported with a principal diagnosis of a rib fracture (initial 
encounter), we are proposing to add the following eight ICD-10-PCS 
procedure codes currently assigned to MDC 8 into MDC 4, in MS-DRGs 166, 
167 and 168.

[[Page 20248]]



------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0PS104Z...................  Reposition 1 to 2 ribs with internal
                             fixation device, open approach.
0PS10ZZ...................  Reposition 1 to 2 ribs, open approach.
0PS134Z...................  Reposition 1 to 2 ribs with internal
                             fixation device, percutaneous approach.
0PS144Z...................  Reposition 1 to 2 ribs with internal
                             fixation device, percutaneous endoscopic
                             approach.
0PS204Z...................  Reposition 3 or more ribs with internal
                             fixation device, open approach.
0PS20ZZ...................  Reposition 3 or more ribs, open approach.
0PS234Z...................  Reposition 3 or more ribs with internal
                             fixation device, percutaneous approach.
0PS244Z...................  Reposition 3 or more ribs with internal
                             fixation device, percutaneous endoscopic
                             approach.
------------------------------------------------------------------------

    Our clinical advisors agree with this proposed addition to the 
classification structure because it is clinically appropriate and 
consistent with the other related ICD-10-PCS procedure codes that may 
be reported to describe rib fracture repair procedures with the 
insertion of an internal fixation device and are classified under MDC 
4.
    By adding the eight ICD-10-PCS procedure codes describing 
repositioning of the rib(s) that may be reported to describe a rib 
fracture repair procedure under the classification structure for MDC 4, 
these cases will no longer result in an MS-DRG assignment to the 
``unrelated operating room procedures'' surgical class when reported 
with a diagnosis code under MDC 4.
    We are inviting public comments on our proposals.
18. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
    In September 1985, the ICD[dash]9[dash]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 (CDC), and CMS, 
charged with maintaining and updating the ICD[dash]9[dash]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[dash]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 website 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 website 
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 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 2019 at a public meeting held on September 12-13, 
2017, and finalized the coding changes after consideration of comments 
received at the meetings and in writing by November 13, 2017.
    The Committee held its 2018 meeting on March 6-7, 2018. The 
deadline for submitting comments on these code proposals is scheduled 
for April 6, 2018. 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 2018 
would be included in the October 1, 2018 update to ICD-10-CM/ICD-10-
PCS. As discussed in earlier sections of the preamble of the 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 
website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. The code titles are adopted as 
part of the ICD-10 (previously ICD-9-CM) Coordination and Maintenance 
Committee process. Therefore, although we make the code titles 
available for the IPPS proposed rule, they are not subject to comment 
in the proposed rule. We are inviting public comments on the MDC and 
MS-DRG assignments for the new 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. 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 12-13, 2017 meeting and March 6-7, 2018 
meeting can be obtained from the CMS website at: http://cms.hhs.gov/
Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/
icd9ProviderDiagnosticCodes/

[[Page 20249]]

03_meetings.asp. The minutes of the discussions of diagnosis codes at 
the September 12-13, 2017 meeting and March 6-7, 2018 meeting can be 
found at: http://www.cdc.gov/nchs/icd/icd10cm_maintenance.html. These 
websites 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[dash]Chairperson, ICD-
10 Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo 
Road, Hyattsville, MD 20782. Comments may be sent by E[dash]mail to: 
[email protected].
    Questions and comments concerning the procedure codes should be 
submitted via E[dash]mail to: [email protected].
    In the September 7, 2001 final rule implementing the IPPS new 
technology add[dash]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[dash]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[dash]related group 
classification) until the fiscal year that begins after such date. This 
requirement improves the recognition of new technologies under the IPPS 
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[dash]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 website. 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 websites 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[dash]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 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[dash]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 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 not 
any requests approved for an expedited April l, 2018 implementation of 
a code at the September 12-13, 2017 Committee meeting. Therefore, there 
are not any new codes for implementation on April 1, 2018.
    ICD-9-CM addendum and code title information is published on the 
CMS website 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 
website at: http://www.cms.gov/Medicare/Coding/ICD10/index.html. 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.
    Information on ICD-10-CM diagnosis codes, along with the Official 
ICD-10-CM Coding Guidelines, can also be found on the CDC website at: 
http://www.cdc.gov/nchs/icd/icd10.htm. Additionally, information on 
new, revised, and deleted ICD-10-CM/ICD-10-PCS codes is provided to the 
AHA for publication in the Coding Clinic for ICD-10. AHA also 
distributes coding update information to publishers and software 
vendors.
    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

[[Page 20250]]

 
FY 2018:
  ICD-10-CM.........................................    71,704      +218
  ICD-10-PCS........................................    78,705    +2,916
Proposed FY 2019:
  ICD-10-CM.........................................    71,902      +198
  ICD-10-PCS........................................    78,533      -172
------------------------------------------------------------------------

    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, 2017 and March 6-7, 2018 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, 2018. We invited public comments on any code 
requests discussed at the September 12-13, 2017 and March 6-7, 2018 
Committee meetings for implementation as part of the October 1, 2018 
update. The deadline for commenting on code proposals discussed at the 
September 12-13, 2017 Committee meeting was November 13, 2017. The 
deadline for commenting on code proposals discussed at the March 6-7, 
2018 Committee meeting was April 6, 2018.
19. 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 subsequently failed or was 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 2019
    In this FY 2019 IPPS/LTCH PPS proposed rule, for FY 2019, 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.
    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.

------------------------------------------------------------------------
            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 or Acute
                                              Complex CNS Principal
                                              Diagnosis with MCC or
                                              Chemotherapy Implant or
                                              Epilepsy with
                                              Neurostimulator.
1..........................             024  Craniotomy with Major
                                              Device Implant or 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.
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.

[[Page 20251]]

 
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 Hip and Knee Joint
                                              Replacement or
                                              Reattachment of Lower
                                              Extremity with MCC or
                                              Total Ankle Replacement.
8..........................             470  Major Hip and Knee Joint
                                              Replacement or
                                              Reattachment of Lower
                                              Extremity without MCC.
------------------------------------------------------------------------

20. Other Policy Changes: Other Operating Room (O.R.) and Non-O.R. 
Issues
    In this proposed rule, we are addressing requests that we received 
regarding changing the designation of specific ICD-10-PCS procedure 
codes from non-O.R. to O.R. procedures, or changing the designation 
from O.R. procedure to non-O.R. procedure. In cases where we are 
proposing to change the designation of procedure codes from non-O.R. to 
O.R. procedures, we also are proposing one or more MS-DRGs with which 
these procedures are clinically aligned and to which the procedure code 
would be assigned. We generally examine the MS-DRG assignment for 
similar procedures, such as the other approaches for that procedure, to 
determine the most appropriate MS-DRG assignment for procedures newly 
designated as O.R. procedures. We are inviting public comments on these 
proposed MS-DRG assignments.
    We also note that many MS-DRGs require the presence of any O.R. 
procedure. As a result, cases with a principal diagnosis associated 
with a particular MS-DRG would, by default, be grouped to that MS-DRG. 
Therefore, we do not list these MS-DRGs in our discussion below. 
Instead, we only discuss MS-DRGs that require explicitly adding the 
relevant procedures codes to the GROUPER logic in order for those 
procedure codes to affect the MS-DRG assignment as intended. In 
addition, cases that contain O.R. procedures will map to MS-DRGs 981, 
982, or 983 (Extensive O.R. Procedure Unrelated to Principal Diagnosis 
with MCC, with CC, and without CC/MCC, respectively) or MS-DRGs 987, 
988, or 989 (Non-Extensive O.R. Procedure Unrelated to Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively) when 
they do not contain a principal diagnosis that corresponds to one of 
the MDCs to which that procedure is assigned. These procedures need not 
be assigned to MS-DRGs 981 through 989 in order for this to occur. 
Therefore, if requestors included some or all of MS-DRGs 981 through 
989 in their request or included MS-DRGs that require the presence of 
any O.R. procedure, we did not specifically address that aspect in 
summarizing their request or our response to the request in the section 
below.
a. Percutaneous and Percutaneous Endoscopic Excision of Brain and 
Cerebral Ventricle
    One requestor identified 22 ICD-10-PCS procedure codes that 
describe procedures involving transcranial brain and cerebral ventricle 
excision that the requestor stated would generally require the 
resources of an operating room. The 22 procedure codes are listed in 
the following table.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
00B03ZX...................  Excision of brain, percutaneous approach,
                             diagnostic.
00B13ZX...................  Excision of cerebral meninges, percutaneous
                             approach, diagnostic.
00B23ZX...................  Excision of dura mater, percutaneous
                             approach, diagnostic.
00B63ZX...................  Excision of cerebral ventricle, percutaneous
                             approach, diagnostic.
00B73ZX...................  Excision of cerebral hemisphere,
                             percutaneous approach, diagnostic.
00B83ZX...................  Excision of basal ganglia, percutaneous
                             approach, diagnostic.
00B93ZX...................  Excision of thalamus, percutaneous approach,
                             diagnostic.
00BA3ZX...................  Excision of hypothalamus, percutaneous
                             approach, diagnostic.
00BB3ZX...................  Excision of pons, percutaneous approach,
                             diagnostic.
00BC3ZX...................  Excision of cerebellum, percutaneous
                             approach, diagnostic.
00BD3ZX...................  Excision of medulla oblongata, percutaneous
                             approach, diagnostic.
00B04ZX...................  Excision of brain, percutaneous endoscopic
                             approach, diagnostic.
00B14ZX...................  Excision of cerebral meninges, percutaneous
                             endoscopic approach, diagnostic.
00B24ZX...................  Excision of dura mater, percutaneous
                             endoscopic approach, diagnostic.
00B64ZX...................  Excision of cerebral ventricle, percutaneous
                             endoscopic approach, diagnostic.
00B74ZX...................  Excision of cerebral hemisphere,
                             percutaneous endoscopic approach,
                             diagnostic.
00B84ZX...................  Excision of basal ganglia, percutaneous
                             endoscopic approach, diagnostic.
00B94ZX...................  Excision of thalamus, percutaneous
                             endoscopic approach, diagnostic.
00BA4ZX...................  Excision of hypothalamus, percutaneous
                             endoscopic approach, diagnostic.
00BB4ZX...................  Excision of pons, percutaneous endoscopic
                             approach, diagnostic.
00BC4ZX...................  Excision of cerebellum, percutaneous
                             endoscopic approach, diagnostic.
00BD4ZX...................  Excision of medulla oblongata, percutaneous
                             endoscopic approach, diagnostic.
------------------------------------------------------------------------

    The requestor stated that, although percutaneous burr hole biopsies 
are performed through smaller openings in the skull than open burr hole 
biopsies, these procedures require drilling or cutting through the 
skull using sterile technique with anesthesia for pain control. The 
requestor also noted that similar procedures involving percutaneous 
drainage of the subdural space are currently classified as O.R. 
procedures in Version 35 of the ICD-10

[[Page 20252]]

MS-DRGs. However, these 22 ICD-10-PCS procedure codes are not 
recognized as O.R. procedures for purposes of MS-DRG assignment. The 
requestor recommended that the 22 ICD-10-PCS codes be designated as 
O.R. procedures and assigned to MS-DRGs 25, 26, and 27 (Craniotomy and 
Endovascular Intracranial Procedures with MCC, with CC, and without CC/
MCC, respectively).
    We agree with the requestor that these procedures typically require 
the resources of an operating room. Therefore, we are proposing to add 
these 22 ICD-10-PCS procedure codes to the FY 2019 ICD-10 MS-DRGs 
Version 36 Definitions Manual in Appendix E--Operating Room Procedures 
and Procedure Code/MS-DRG Index as O.R. procedures assigned to MS-DRGs 
25, 26, and 27 in MDC 1 (Diseases and Disorders of the Nervous System). 
We are inviting public comments on our proposal.
b. Open Extirpation of Subcutaneous Tissue and Fascia
    One requestor identified 22 ICD-10-PCS procedure codes that 
describe procedures involving open extirpation of subcutaneous tissue 
and fascia that the requestor stated would generally require the 
resources of an operating room. The 22 procedure codes are listed in 
the following table.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0JC00ZZ...................  Extirpation of matter from scalp
                             subcutaneous tissue and fascia, open
                             approach.
0JC10ZZ...................  Extirpation of matter from face subcutaneous
                             tissue and fascia, open approach.
0JC40ZZ...................  Extirpation of matter from right neck
                             subcutaneous tissue and fascia, open
                             approach.
0JC50ZZ...................  Extirpation of matter from left neck
                             subcutaneous tissue and fascia, open
                             approach.
0JC60ZZ...................  Extirpation of matter from chest
                             subcutaneous tissue and fascia, open
                             approach.
0JC70ZZ...................  Extirpation of matter from back subcutaneous
                             tissue and fascia, open approach.
0JC80ZZ...................  Extirpation of matter from abdomen
                             subcutaneous tissue and fascia, open
                             approach.
0JC90ZZ...................  Extirpation of matter from buttock
                             subcutaneous tissue and fascia, open
                             approach.
0JCB0ZZ...................  Extirpation of matter from perineum
                             subcutaneous tissue and fascia, open
                             approach.
0JCC0ZZ...................  Extirpation of matter from pelvic region
                             subcutaneous tissue and fascia, open
                             approach.
0JCD0ZZ...................  Extirpation of matter from right upper arm
                             subcutaneous tissue and fascia, open
                             approach.
0JCF0ZZ...................  Extirpation of matter from left upper arm
                             subcutaneous tissue and fascia, open
                             approach.
0JCG0ZZ...................  Extirpation of matter from right lower arm
                             subcutaneous tissue and fascia, open
                             approach.
0JCH0ZZ...................  Extirpation of matter from left lower arm
                             subcutaneous tissue and fascia, open
                             approach.
0JCJ0ZZ...................  Extirpation of matter from right hand
                             subcutaneous tissue and fascia, open
                             approach.
0JCK0ZZ...................  Extirpation of matter from left hand
                             subcutaneous tissue and fascia, open
                             approach.
0JCL0ZZ...................  Extirpation of matter from right upper leg
                             subcutaneous tissue and fascia, open
                             approach.
0JCM0ZZ...................  Extirpation of matter from left upper leg
                             subcutaneous tissue and fascia, open
                             approach.
0JCN0ZZ...................  Extirpation of matter from right lower leg
                             subcutaneous tissue and fascia, open
                             approach.
0JCP0ZZ...................  Extirpation of matter from left lower leg
                             subcutaneous tissue and fascia, open
                             approach.
0JCQ0ZZ...................  Extirpation of matter from right foot
                             subcutaneous tissue and fascia, open
                             approach.
0JCR0ZZ...................  Extirpation of matter from left foot
                             subcutaneous tissue and fascia, open
                             approach.
------------------------------------------------------------------------

    The requestor stated that these procedures involve making an open 
incision deeper than the skin under general anesthesia, and that 
irrigation and/or excision of devitalized tissue or cavity are often 
required and are considered inherent to the procedure. The requestor 
also stated that open drainage of subcutaneous tissue and fascia, open 
excisional debridement of subcutaneous tissue and fascia, and open 
nonexcisional debridement/extraction of subcutaneous tissue and fascia 
are designated as O.R. procedures, and that these 22 procedures should 
be designated as O.R. procedures for the same reason. In the ICD-10 MS-
DRGs Version 35, these 22 ICD-10-PCS procedure codes are not recognized 
as O.R. procedures for purposes of MS-DRG assignment. The requestor 
recommended that the 22 ICD-10-PCS procedure codes listed in the table 
be assigned to MS-DRGs 579, 580, and 581 (Other Skin, Subcutaneous 
Tissue and Breast Procedures with MCC, CC, and without CC/MCC, 
respectively).
    We disagree with the requestor that these procedures typically 
require the resources of an operating room. Our clinical advisors 
indicated that these open extirpation procedures are minor procedures 
that can be performed outside of an operating room, such as in a 
radiology suite with CT or MRI guidance. We disagree that these 
procedures are similar to open drainage procedures. Therefore, we are 
proposing to maintain the status of these 22 ICD-10-PCS procedure codes 
as non-O.R. procedures. We are inviting public comments on our 
proposal.
c. Open Scrotum and Breast Procedures
    One requestor identified 13 ICD-10-PCS procedure codes that 
describe procedures involving open drainage, open extirpation, and open 
debridement/excision of the scrotum and breast. The requestor stated 
that the 13 procedures listed in the following table involve making an 
open incision deeper than the skin under general anesthesia, and that 
irrigation and/or excision of devitalized tissue or cavity are often 
required and are considered inherent to the procedure. The requestor 
also stated that open drainage of subcutaneous tissue and fascia, open 
excisional debridement of subcutaneous tissue and fascia, open 
non[dash]excisional debridement/extraction of subcutaneous tissue and 
fascia, and open excision of breast are designated as O.R. procedures, 
and that these 13 procedures should be designated as O.R. procedures 
for the same reason. In the ICD-10 MS-DRGs Version 35, these 13 ICD-10-
PCS procedure codes are not recognized as O.R. procedures for purposes 
of MS-DRG assignment.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0V950ZZ...................  Drainage of scrotum, open approach.
0VB50ZZ...................  Excision of scrotum, open approach.
0VC50ZZ...................  Extirpation of matter from scrotum, open
                             approach.

[[Page 20253]]

 
0H9U0ZZ...................  Drainage of left breast, open approach.
0H9T0ZZ...................  Drainage of right breast, open approach.
0H9V0ZZ...................  Drainage of bilateral breast, open approach.
0H9W0ZZ...................  Drainage of right nipple, open approach.
0H9X0ZZ...................  Drainage of left nipple, open approach.
0HCT0ZZ...................  Extirpation of matter from right breast,
                             open approach.
0HCU0ZZ...................  Extirpation of matter from left breast, open
                             approach.
0HCV0ZZ...................  Extirpation of matter from bilateral breast,
                             open approach.
0HCW0ZZ...................  Extirpation of matter from right nipple,
                             open approach.
0HCX0ZZ...................  Extirpation of matter from left nipple, open
                             approach.
------------------------------------------------------------------------

    The requestor recommended that the 3 ICD-10-PCS scrotal procedure 
codes be assigned to MS-DRGs 717 and 718 (Other Male Reproductive 
System O.R. Procedures Except Malignancy with CC/MCC and without CC/
MCC, respectively) and the 10 breast procedure codes be assigned to MS-
DRGs 584 and 585 (Breast Biopsy, Local Excision and Other Breast 
Procedures with CC/MCC and without CC/MCC, respectively).
    We agree with the requestor that these procedures typically require 
the resources of an operating room due to the nature of breast and 
scrotal tissue, as well as with the MS-DRG assignments recommended by 
the requestor. In addition, we believe that the scrotal codes should 
also be assigned to MS-DRGs 715 and 716 (Other Male Reproductive System 
O.R. Procedures for Malignancy with CC/MCC and without CC/MCC, 
respectively). Therefore, we are proposing to add these 13 ICD-10-PCS 
procedure codes to the FY 2019 ICD-10 MS-DRGs Version 36 Definitions 
Manual in Appendix E--Operating Room Procedures and Procedure Code/MS-
DRG Index as O.R. procedures, assigned to MS-DRGs 715, 716, 717, and 
718 in MDC 12 (Diseases and Disorders of the Male Reproductive System) 
for the scrotal procedure codes and assigned to MS-DRGs 584 and 585 in 
MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue & 
Breast) for the breast procedure codes. We are inviting public comments 
on our proposal.
d. Open Parotid Gland and Submaxillary Gland Procedures
    One requestor identified eight ICD-10-PCS procedure codes that 
describe procedures involving open drainage and open extirpation of the 
parotid or submaxillary glands, shown in the following table.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0C980ZZ...................  Drainage of right parotid gland, open
                             approach.
0C990ZZ...................  Drainage of left parotid gland, open
                             approach.
0C9G0ZZ...................  Drainage of right submaxillary gland, open
                             approach.
0C9H0ZZ...................  Drainage of left submaxillary gland, open
                             approach.
0CC80ZZ...................  Extirpation of matter from right parotid
                             gland, open approach.
0CC90ZZ...................  Extirpation of matter from left parotid
                             gland, open approach.
0CCG0ZZ...................  Extirpation of matter from right
                             submaxillary gland, open approach.
0CCH0ZZ...................  Extirpation of matter from left submaxillary
                             gland, open approach.
------------------------------------------------------------------------

    The requestor stated that these procedures involve making an open 
incision through subcutaneous tissue, fascia, and potentially muscle, 
to reach and incise the parotid or submaxillary gland under general 
anesthesia, and that irrigation and/or excision of devitalized tissue 
or cavity may be required and are considered inherent to the procedure. 
The requestor also stated that open drainage of subcutaneous tissue and 
fascia, open excisional debridement of subcutaneous tissue and fascia, 
and open non[dash]excisional debridement/extraction of subcutaneous 
tissue and fascia are designated as O.R. procedures, and that these 
eight procedures should be designated as O.R. procedures for the same 
reason. In the ICD-10 MS-DRGs Version 35, these eight ICD-10-PCS 
procedure codes are not recognized as O.R. procedures for purposes of 
MS-DRG assignment. The requestor requested that these procedures be 
assigned to MS-DRG 139 (Salivary Gland Procedures).
    We agree with the requestor that these eight procedures typically 
require the resources of an operating room. Therefore, we are proposing 
to add these ICD-10-PCS procedure codes to the FY 2019 ICD-10 MS-DRGs 
Version 36 Definitions Manual in Appendix E--Operating Room Procedures 
and Procedure Code/MS-DRG Index as O.R. procedures assigned to MS-DRG 
139 in MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth and 
Throat). We are inviting public comments on our proposal.
e. Removal and Reinsertion of Spacer; Knee Joint and Hip Joint
    One requestor identified four sets of ICD-10-PCS procedure code 
combinations (eight ICD-10-PCS codes) that describe procedures 
involving open removal and insertion of spacers into the knee or hip 
joints, shown in the following table. The requestor stated that these 
are invasive procedures involving removal and reinsertion of devices 
into major joints and are performed in the operating room under general 
anesthesia. In the ICD-10 MS-DRGs Version 35, these four ICD-10-PCS 
procedure code combinations are not recognized as O.R. procedures for 
purposes of MS-DRG assignment. The requestor recommended that CMS 
determine the most appropriate surgical DRGs for these procedures.

[[Page 20254]]



------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0SPC08Z...................  Removal of spacer from right knee joint,
                             open approach.
0SHC08Z...................  Insertion of spacer into right knee joint,
                             open approach.
0SPD08Z...................  Removal of spacer from left knee joint, open
                             approach.
0SHD08Z...................  Insertion of spacer into left knee joint,
                             open approach.
0SP908Z...................  Removal of spacer from right hip joint, open
                             approach.
0SH908Z...................  Insertion of spacer into right hip joint,
                             open approach.
0SPB08Z...................  Removal of spacer from left hip joint, open
                             approach.
0SHB08Z...................  Insertion of spacer into left hip joint,
                             open approach.
------------------------------------------------------------------------

    We agree with the requestor that these procedures typically require 
the resources of an operating room. However, our clinical advisors 
indicated that these codes should be designated as O.R. procedures even 
when reported as stand-alone procedures. Therefore, for the knee 
procedures, we are proposing to add these four ICD-10-PCS procedure 
codes to the FY 2019 ICD-10 MS-DRGs Version 36 Definitions Manual in 
Appendix E--Operating Room Procedures and Procedure Code/MS-DRG Index 
as O.R. procedures assigned to MS-DRGs 485, 486, and 487 (Knee 
Procedures with Principal Diagnosis of Infection with MCC, with CC, and 
without CC/MCC, respectively) or MS-DRGs 488 and 489 (Knee Procedures 
without Principal diagnosis of Infection with CC/MCC and without CC/
MCC, respectively), both in MDC 8 (Diseases and Disorders of the 
Musculoskeletal System and Connective Tissue). For the hip procedures, 
we are proposing to add these four ICD-10-PCS procedure codes to the FY 
2019 ICD-10 MS-DRGs Version 36 Definitions Manual in Appendix E--
Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. 
procedures assigned to MS-DRGs 480, 481, and 482 (Hip and Femur 
Procedures Except Major Joint with MCC, with CC, and without CC/MCC, 
respectively) in MDC 8 (Diseases and Disorders of the Musculoskeletal 
System and Connective Tissue). We are inviting public comments on our 
proposal.
f. Endoscopic Dilation of Ureter(s) With Intraluminal Device
    One requestor identified the following three ICD-10-PCS procedure 
codes that describe procedures involving endoscopic dilation of 
ureter(s) with intraluminal device.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0T778DZ...................  Dilation of left ureter with intraluminal
                             device, via natural or artificial opening
                             endoscopic.
0T768DZ...................  Dilation of right ureter with intraluminal
                             device, via natural or artificial opening
                             endoscopic.
0T788DZ...................  Dilation of bilateral ureters with
                             intraluminal device, via natural or
                             artificial opening endoscopic.
------------------------------------------------------------------------

    The requestor stated that these procedures involve the use of 
cystoureteroscopy to view the bladder and ureter and dilation under 
visualization, which are often followed by placement of a ureteral 
stent. The requestor also stated that endoscopic extirpation of matter 
from ureter, endoscopic biopsy of bladder, endoscopic dilation of 
bladder, endoscopic dilation of renal pelvis, and endoscopic dilation 
of the ureter without insertion of intraluminal device are all assigned 
to surgical DRGs, and that these three procedures should be designated 
as O.R. procedures for the same reason. In the ICD-10 MS-DRGs Version 
35, these three ICD-10-PCS procedure codes are not recognized as O.R. 
procedures for purposes of MS-DRG assignment. The requestor recommended 
that these procedures be assigned to MS-DRGs 656, 657, and 658 (Kidney 
and Ureter Procedures for Neoplasm with MCC, with CC, and without CC/
MCC, respectively) and MS-DRGs 659, 660, and 661 (Kidney and Ureter 
Procedures for Non-Neoplasm with MCC, with CC, and without CC/MCC, 
respectively).
    We agree with the requestor that these procedures typically require 
the resources of an operating room. In addition to the MS-DRGs 
recommended by the requestor, we believe that these procedure codes 
should also be assigned to other MS-DRGs, consistent with the 
assignment of other dilation of ureter procedures: MS-DRG 907, 908, and 
909 (Other O.R. Procedures for Injuries with MCC, with CC, and without 
CC/MCC, respectively) and MS-DRGs 957, 958, and 959 (Other O.R. 
Procedures for Multiple Significant Trauma with MCC, with CC, and 
without CC/MCC, respectively). Therefore, we are proposing to add the 
three ICD-10-PCS procedure codes identified by the requestor to the FY 
2019 ICD-10 MS-DRGs Version 36 Definitions Manual in Appendix E--
Operating Room Procedures and Procedure Code/MS-DRG Index as O.R. 
procedures assigned to MS-DRGs 656, 657, and 658 in MDC 11 (Diseases 
and Disorders of the Kidney and Urinary Tract), MS-DRGs 659, 660, and 
661 in MDC 11, MS-DRGs 907, 908, and 909 in MDC 21 (Injuries, 
Poisonings and Toxic Effects of Drugs), and MS-DRGs 957, 958, and 959 
in MDC 24 (Multiple Significant Trauma). We are inviting public 
comments on our proposal.
g. Thoracoscopic Procedures of Pericardium and Pleura
    One requestor identified seven ICD-10-PCS procedure codes that 
describe procedures involving thoracoscopic drainage of the pericardial 
cavity or pleural cavity, or extirpation of matter from the pleura, as 
shown in the following table.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0W9D4ZZ...................  Drainage of pericardial cavity, percutaneous
                             endoscopic approach.
0W9D40Z...................  Drainage of pericardial cavity with drainage
                             device, percutaneous endoscopic approach.
0W9D4ZX...................  Drainage of pericardial cavity, percutaneous
                             endoscopic approach, diagnostic.

[[Page 20255]]

 
0W994ZX...................  Drainage of right pleural cavity,
                             percutaneous endoscopic approach,
                             diagnostic.
0W9B4ZX...................  Drainage of left pleural cavity,
                             percutaneous endoscopic approach,
                             diagnostic.
0BCP4ZZ...................  Extirpation of matter from left pleura,
                             percutaneous endoscopic approach.
0BCN4ZZ...................  Extirpation of matter from right pleura,
                             percutaneous endoscopic approach.
------------------------------------------------------------------------

    The requestor stated that these procedures involve making an 
incision through the chest wall and inserting a thoracoscope for 
visualization of thoracic structures during the procedure. The 
requestor also stated that some thoracoscopic procedures are assigned 
to surgical MS-DRGs, while other procedures are assigned to medical MS-
DRGs. In the ICD-10 MS-DRGs Version 35, these seven ICD-10-PCS 
procedure codes are not recognized as O.R. procedures for purposes of 
MS-DRG assignment.
    We agree with the requestor that these procedures typically require 
the resources of an operating room, as well as significant time and 
skill. During our review, we noted that the following two related 
procedures using the open approach also were not currently recognized 
as O.R. procedures:

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0BCP0ZZ...................  Extirpation of matter from left pleura, open
                             approach.
0BCN0ZZ...................  Extirpation of matter from right pleura,
                             open approach.
------------------------------------------------------------------------

    Therefore, to be consistent with the MS-DRGs to which other 
approaches for procedures involving drainage or extirpation of matter 
from the pleura are assigned, we are proposing to add these nine ICD-
10-PCS procedure codes to the FY 2019 ICD-10 MS-DRGs Version 36 
Definitions Manual in Appendix E--Operating Room Procedures and 
Procedure Code/MS-DRG Index as O.R. procedures assigned to one of the 
following MS-DRGs: MS-DRGs 163, 164, and 165 (Major Chest Procedures 
with MCC, with CC, and without CC/MCC, respectively) in MDC 4 (Diseases 
and Disorders of the Respiratory System); MS-DRGs 270, 271, and 272 
(Other Major Cardiovascular Procedures with MCC, with CC, and without 
CC/MCC, respectively) in MDC 5 (Diseases and Disorders of the 
Circulatory System); MS-DRGs 820, 821, and 822 (Lymphoma and Leukemia 
with Major O.R. Procedure with MCC, with CC, and without CC/MCC, 
respectively) in MDC 17 (Myeloproliferative Diseases and Disorders, 
Poorly Differentiated Neoplasms); MS-DRGs 826, 827, and 828 
(Myeloproliferative Disorders or Poorly Differentiated Neoplasms with 
Major O.R. Procedure with MCC, with CC, and without CC/MCC, 
respectively) in MDC 17; MS-DRGs 907, 908, and 909 (Other O.R. 
Procedures for Injuries with MCC, with CC, and without CC/MCC, 
respectively) in MDC 21 (Injuries, Poisonings and Toxic Effects of 
Drugs); and MS-DRGs 957, 958, and 959 (Other O.R. Procedures for 
Multiple Significant Trauma with MCC, with CC, and without CC/MCC, 
respectively) in MDC 24 (Multiple Significant Trauma). We are inviting 
public comments on our proposal.
h. Open Insertion of Totally Implantable and Tunneled Vascular Access 
Devices
    One requestor identified 20 ICD-10-PCS procedure codes that 
describe procedures involving open insertion of totally implantable and 
tunneled vascular access devices. The codes are identified in the 
following table.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0JH60WZ...................  Insertion of totally implantable vascular
                             access device into chest subcutaneous
                             tissue and fascia, open approach.
0JH60XZ...................  Insertion of tunneled vascular access device
                             into chest subcutaneous tissue and fascia,
                             open approach.
0JH80WZ...................  Insertion of totally implantable vascular
                             access device into abdomen subcutaneous
                             tissue and fascia, open approach.
0JH80XZ...................  Insertion of tunneled vascular access device
                             into abdomen subcutaneous tissue and
                             fascia, open approach.
0JHD0WZ...................  Insertion of totally implantable vascular
                             access device into right upper arm
                             subcutaneous tissue and fascia, open
                             approach.
0JHD0XZ...................  Insertion of tunneled vascular access device
                             into right upper arm subcutaneous tissue
                             and fascia, open approach.
0JHF0WZ...................  Insertion of totally implantable vascular
                             access device into left upper arm
                             subcutaneous tissue and fascia, open
                             approach.
0JHF0XZ...................  Insertion of tunneled vascular access device
                             into left upper arm subcutaneous tissue and
                             fascia, open approach.
0JHG0WZ...................  Insertion of totally implantable vascular
                             access device into right lower arm
                             subcutaneous tissue and fascia, open
                             approach.
0JHG0XZ...................  Insertion of tunneled vascular access device
                             into right lower arm subcutaneous tissue
                             and fascia, open approach.
0JHH0WZ...................  Insertion of totally implantable vascular
                             access device into left lower arm
                             subcutaneous tissue and fascia, open
                             approach.
0JHH0XZ...................  Insertion of tunneled vascular access device
                             into left lower arm subcutaneous tissue and
                             fascia, open approach.
0JHL0WZ...................  Insertion of totally implantable vascular
                             access device into right upper leg
                             subcutaneous tissue and fascia, open
                             approach.
0JHL0XZ...................  Insertion of tunneled vascular access device
                             into right upper leg subcutaneous tissue
                             and fascia, open approach.
0JHM0WZ...................  Insertion of totally implantable vascular
                             access device into left upper leg
                             subcutaneous tissue and fascia, open
                             approach.
0JHM0XZ...................  Insertion of tunneled vascular access device
                             into left upper leg subcutaneous tissue and
                             fascia, open approach.
0JHN0WZ...................  Insertion of totally implantable vascular
                             access device into right lower leg
                             subcutaneous tissue and fascia, open
                             approach.
0JHN0XZ...................  Insertion of tunneled vascular access device
                             into right lower leg subcutaneous tissue
                             and fascia, open approach.
0JHP0WZ...................  Insertion of totally implantable vascular
                             access device into left lower leg
                             subcutaneous tissue and fascia, open
                             approach.
0JHP0XZ...................  Insertion of tunneled vascular access device
                             into left lower leg subcutaneous tissue and
                             fascia, open approach.
------------------------------------------------------------------------

    The requestor stated that open procedures to insert totally 
implantable vascular access devices (VAD) involve implantation of a 
port by open approach, cutting through subcutaneous tissue/fascia, 
placing the device, and

[[Page 20256]]

then closing tissues so that none of the device is exposed. The 
requestor explained that open procedures to insert tunneled VADs 
involve insertion of the catheter into central vasculature, and then 
open incision of subcutaneous tissue and fascia through which the 
device is tunneled. The requestor also indicated that these procedures 
require two ICD-10-PCS codes: One for the insertion of the VAD or port 
within the subcutaneous tissue; and one for percutaneous insertion of 
the central venous catheter that is connected to the device. The 
requestor further noted that, in MDC 11, cases with these procedure 
codes are assigned to surgical MS-DRGs and that insertion of infusion 
pumps by open approach groups to surgical MS-DRGs. The requestor 
recommended that these procedures be assigned to surgical MS-DRGs in 
MDC 09 as well. We examined the O.R. designations for this group of 
procedures and determined that they currently are designated as non-
O.R. procedures for MDC 09 and MDC 11.
    We agree with the requestor that procedures involving open 
insertion of totally implantable VAD procedures typically require the 
resources of an operating room. However, we disagree that the tunneled 
VAD procedures typically require the resources of an operating room. 
Therefore, we are proposing to update the FY 2019 ICD-10 MS-DRGs 
Version 36 Definitions Manual in Appendix E--Operating Room Procedures 
and Procedure Code/MS-DRG Index to designate the 10 ICD-10-PCS 
procedure codes describing the totally implantable VAD procedures as 
O.R. procedures, which will continue to be assigned to MS-DRGs 579, 
580, and 581 (Other Skin, Subcutaneous Tissue and Breast Procedures 
with MCC, with CC, and without CC/MCC, respectively) in MDC 9 (Diseases 
and Disorders of the Skin, Subcutaneous Tissue and Breast) and MS-DRGs 
673, 674, and 675 (Other Kidney and Urinary Tract Procedures, with CC, 
with MCC, and without CC/MCC, respectively) in MDC 11 (Diseases and 
Disorders of the Kidney and Urinary Tract). We note that these 
procedures already affect MS-DRG assignment to these MS-DRGs. However, 
if the procedure is unrelated to the principal diagnosis, it will be 
assigned to MS-DRGs 981, 982, and 983 instead of a medical MS[dash]DRG. 
We are inviting public comments on our proposal.
i. Percutaneous Joint Reposition With Internal Fixation Device
    One requestor identified 20 ICD-10-PCS procedure codes that 
describe procedures involving percutaneous joint reposition with 
internal fixation device, shown in the following table.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0SS034Z...................  Reposition lumbar vertebral joint with
                             internal fixation device, percutaneous
                             approach.
0SS334Z...................  Reposition lumbosacral joint with internal
                             fixation device, percutaneous approach.
0SS534Z...................  Reposition sacrococcygeal joint with
                             internal fixation device, percutaneous
                             approach.
0SS634Z...................  Reposition coccygeal joint with internal
                             fixation device, percutaneous approach.
0SS734Z...................  Reposition right sacroiliac joint with
                             internal fixation device, percutaneous
                             approach.
0SS834Z...................  Reposition left sacroiliac joint with
                             internal fixation device, percutaneous
                             approach.
0SS934Z...................  Reposition right hip joint with internal
                             fixation device, percutaneous approach.
0SSB34Z...................  Reposition left hip joint with internal
                             fixation device, percutaneous approach.
0SSC34Z...................  Reposition right knee joint with internal
                             fixation device, percutaneous approach.
0SSD34Z...................  Reposition left knee joint with internal
                             fixation device, percutaneous approach.
0SSF34Z...................  Reposition right ankle joint with internal
                             fixation device, percutaneous approach.
0SSG34Z...................  Reposition left ankle joint with internal
                             fixation device, percutaneous approach.
0SSH34Z...................  Reposition right tarsal joint with internal
                             fixation device, percutaneous approach.
0SSJ34Z...................  Reposition left tarsal joint with internal
                             fixation device, percutaneous approach.
0SSK34Z...................  Reposition right tarsometatarsal joint with
                             internal fixation device, percutaneous
                             approach.
0SSL34Z...................  Reposition left tarsometatarsal joint with
                             internal fixation device, percutaneous
                             approach.
0SSM34Z...................  Reposition right metatarsal-phalangeal joint
                             with internal fixation device, percutaneous
                             approach.
0SSN34Z...................  Reposition left metatarsal-phalangeal joint
                             with internal fixation device, percutaneous
                             approach.
0SSP34Z...................  Reposition right toe phalangeal joint with
                             internal fixation device, percutaneous
                             approach.
0SSQ34Z...................  Reposition left toe phalangeal joint with
                             internal fixation device, percutaneous
                             approach.
------------------------------------------------------------------------

    The requestor stated that reposition of the sacrum, femur, tibia, 
fibula, and other fractures of bone with internal fixation device by 
percutaneous approach are assigned to surgical DRGs, and that 
reposition of sacroiliac, hip, knee, and other joint locations with 
internal fixation should therefore also be assigned to surgical DRGs. 
In the ICD-10 MS-DRGs Version 35, these 20 ICD-10-PCS procedure codes 
are not recognized as O.R. procedures for purposes of MS-DRG 
assignment.
    We disagree with the requestor that these procedures typically 
require the resources of an operating room, as these procedures are not 
as invasive as the bone reposition procedures referenced by the 
requestor. Our clinical advisors advised that these procedures are 
typically performed in a radiology suite. Therefore, we are proposing 
to maintain the status of these 20 ICD-10-PCS procedure codes as non-
O.R. procedures. We are inviting public comments on our proposal.
j. Endoscopic Destruction of Intestine
    One requestor identified four ICD-10-PCS procedure codes that 
describe procedures involving endoscopic destruction of the intestine, 
as shown in the following table.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0D5A8ZZ...................  Destruction of jejunum, via natural or
                             artificial opening endoscopic.
0D5B8ZZ...................  Destruction of ileum, via natural or
                             artificial opening endoscopic.
0D5C8ZZ...................  Destruction of ileocecal valve, via natural
                             or artificial opening endoscopic.
0D588ZZ...................  Destruction of small intestine, via natural
                             or artificial opening endoscopic.
------------------------------------------------------------------------


[[Page 20257]]

    The requestor stated that these procedures are rarely performed in 
the operating room. In the ICD-10 MS-DRGs Version 35, these 20 ICD-10-
PCS procedure codes are currently recognized as O.R. procedures for 
purposes of MS-DRG assignment.
    We agree with the requestor that these procedures do not typically 
require the resources of an operating room. Therefore, we are proposing 
to remove these four procedure codes from the FY 2019 ICD-10 MS-DRGs 
Version 36 Definitions Manual in Appendix E--Operating Room Procedures 
and Procedure Code/MS-DRG Index as O.R. procedures. We are inviting 
public comments on our proposal.
k. Drainage of Lower Lung Via Natural or Artificial Opening Endoscopic, 
Diagnostic
    One requestor identified the following ICD-10-PCS procedure codes 
that describe procedures involving endoscopic drainage of the lung via 
natural or artificial opening for diagnostic purposes.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0B9J8ZX...................  Drainage of left lower lung lobe, via
                             natural or artificial opening endoscopic,
                             diagnostic.
0B9F8ZX...................  Drainage of right lower lung lobe, via
                             natural or artificial opening endoscopic,
                             diagnostic.
------------------------------------------------------------------------

    The requestor stated that these procedures are rarely performed in 
the operating room.
    We agree with the requestor that these procedures do not require 
the resources of an operating room. In addition, while we were 
reviewing this comment, we identified three additional related codes:

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0B9D8ZX...................  Drainage of right middle lung lobe, via
                             natural or artificial opening endoscopic,
                             diagnostic.
0B9C8ZX...................  Drainage of right upper lung lobe, via
                             natural or artificial opening endoscopic,
                             diagnostic.
0B9G8ZX...................  Drainage of left upper lung lobe, via
                             natural or artificial opening endoscopic,
                             diagnostic.
------------------------------------------------------------------------

    In the ICD-10 MS-DRGs Version 35, these ICD-10-PCS procedure codes 
are currently recognized as O.R. procedures for purposes of MS-DRG 
assignment.
    We are proposing to remove ICD-10-PCS procedure codes 0B9J8ZX, 
0B9F8ZX, 0B9D8ZX, 0B9C8ZX, and 0B9G8ZX from the FY 2019 ICD-10 MS-DRGs 
Version 36 Definitions Manual in Appendix E--Operating Room Procedures 
and Procedure Code/MS-DRG Index as O.R. procedures. We are inviting 
public comments on our proposal.

G. Recalibration of the Proposed FY 2019 MS-DRG Relative Weights

1. Data Sources for Developing the Proposed Relative Weights
    In developing the proposed FY 2019 system of weights, we are 
proposing to use 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 2017 MedPAR data used in this proposed 
rule include discharges occurring on October 1, 2016, through September 
30, 2017, based on bills received by CMS through December 31, 2017, 
from all hospitals subject to the IPPS and short[dash]term, acute care 
hospitals in Maryland (which at that time were under a waiver from the 
IPPS). The FY 2017 MedPAR file used in calculating the proposed 
relative weights includes data for approximately 9,652,400 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, 
2017 update of the FY 2017 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 2019 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 2019 relative weights are 
based on the ICD[dash]10[dash]CM diagnoses and ICD-10-PCS procedure 
codes from the FY 2017 MedPAR claims data, grouped through the 
ICD[dash]10 version of the proposed FY 2019 GROUPER (Version 36).
    The second data source used in the cost[dash]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, 2017 update of the FY 2016 HCRIS for calculating the 
proposed FY 2019 cost[dash]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 2019 relative weights based on 19 
CCRs, as we did for FY 2018. The methodology we are proposing to use to 
calculate the FY 2019 MS-DRG cost[dash]based relative weights based on 
claims data in the FY 2017 MedPAR file and data from the FY 2016 
Medicare cost reports is as follows:
     To the extent possible, all the claims were regrouped 
using the proposed FY 2019 MS[dash]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[dash]lung, liver and/or 
intestinal, and lung transplants (MS-DRGs 001, 002, 005, 006, and 007, 
respectively) were limited to those Medicare[dash]approved transplant 
centers that have cases in the FY 2017 MedPAR

[[Page 20258]]

file. (Medicare coverage for heart, heart[dash]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[dash]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 92.5 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[dash]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 (77 FR 53341 through 53343). 
Specifically, because acute care hospitals participating in the BPCI 
initiative still receive IPPS payments under section 1886(d) of the 
Act, we include all applicable data from these subsection (d) hospitals 
in our IPPS payment modeling and ratesetting calculations as if they 
were not participating in those models under the BPCI initiative. 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.
    The participation of hospitals in the BPCI initiative is set to 
conclude on September 30, 2018. The participation of hospitals in the 
Bundled Payments for Care Improvement (BPCI) Advanced model is set to 
start on October 1, 2018. The BPCI Advanced model, tested under the 
authority of section 3021 of the Affordable Care Act (codified at 
section 1115A of the Act), is comprised of a single payment and risk 
track, which bundles payments for multiple services beneficiaries 
receive during a Clinical Episode. Acute care hospitals may participate 
in BPCI Advanced in one of two capacities: As a model Participant or as 
a downstream Episode Initiator. Regardless of the capacity in which 
they participate in the BPCI Advanced model, participating acute care 
hospitals will continue to receive IPPS payments under section 1886(d) 
of the Act. Acute care hospitals that are Participants also assume 
financial and quality performance accountability for Clinical Episodes 
in the form of a reconciliation payment. For additional information on 
the BPCI Advanced model, we refer readers to the BPCI Advanced webpage 
on the CMS Center for Medicare and Medicaid Innovation's website at: 
https://innovation.cms.gov/initiatives/bpci-advanced/. For FY 2019, 
consistent with how we have treated hospitals that participated in the 
BPCI Initiative, we believe it is appropriate to include all applicable 
data from the subsection (d) hospitals participating in the BPCI 
Advanced model in our IPPS payment modeling and ratesetting 
calculations because, as noted above, these hospitals are still 
receiving IPPS payments under section 1886(d) of the Act.
    The charges for each of the proposed 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[dash]of[dash]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

[[Page 20259]]

adjustment factors, cost[dash]of[dash]living adjustments, and DSH 
payments under the capital IPPS as well. Charges were then summed by 
MS-DRG for each of the proposed 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 2016 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.
    We are inviting public comments on our proposals related to 
recalibration of the proposed FY 2019 relative weights and the changes 
in relative weights from FY 2018.
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3. Development of Proposed National Average CCRs
    We developed the proposed national average CCRs as follows:
    Using the FY 2016 cost report data, we removed CAHs, Indian Health 
Service hospitals, all[dash]inclusive rate hospitals, and cost reports 
that represented time periods of less than 1 year (365 days). We 
included hospitals located in Maryland because we include their charges 
in our claims database. We then created CCRs for each provider for each 
cost center (see prior table for line items used in the calculations) 
and removed any CCRs that were greater than 10 or less than 0.01. We 
normalized the departmental CCRs by dividing the CCR for each 
department by the total CCR for the hospital for the purpose of 
trimming the data. We then took the logs of the normalized cost center 
CCRs and removed any cost center CCRs where the log of the cost center 
CCR was greater or less than the mean log plus/minus 3 times the 
standard deviation for the log of that cost center CCR. Once the cost 
report data were trimmed, we calculated a Medicare[dash]specific CCR. 
The Medicare[dash]specific CCR was determined by taking the Medicare 
charges for each line item from Worksheet D-3 and deriving the 
Medicare[dash]specific costs by applying the hospital[dash]specific 
departmental CCRs to the Medicare[dash]specific charges for each line 
item from Worksheet D-3. Once each hospital's Medicare[dash]specific 
costs were established, we summed the total Medicare[dash]specific 
costs and divided by the sum of the total Medicare[dash]specific 
charges to produce national average, charge[dash]weighted CCRs.
    After we multiplied the total charges for each MS-DRG in each of 
the proposed 19 cost centers by the corresponding national average CCR, 
we summed the 19 ``costs'' across each proposed MS-DRG to produce a 
total standardized cost for the proposed MS-DRG. The average 
standardized cost for each proposed MS-DRG was then computed as the 
total standardized cost for the proposed MS-DRG divided by the 
transfer[dash]adjusted case count for the proposed MS-DRG. We 
calculated the transfer-adjusted discharges for use in the calculation 
of the Version 36 MS-DRG relative weights using the statutory expansion 
of the postacute care transfer policy to include discharges to hospice 
care by a hospice program discussed in section IV.A.2.b. of the 
preamble of this proposed rule. For the purposes of calculating the 
normalization factor, we used the transfer-adjusted discharges with the 
expanded postacute care transfer policy for Version 35 as well. (When 
we calculate the normalization factor, we calculate the transfer-
adjusted case count for the prior GROUPER version (in this case Version 
35) and multiply by the weights of that GROUPER. We then compare that 
pool to the transfer-adjusted case count using the new GROUPER 
version.) The average cost for each proposed MS-DRG was then divided by 
the national average standardized cost per case to determine the 
proposed relative weight.
    The proposed FY 2019 cost-based relative weights were then 
normalized by a proposed adjustment factor of 1.760698 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 2019 are as follows:

------------------------------------------------------------------------
                             Group                                 CCR
------------------------------------------------------------------------
Routine Days...................................................    0.451
Intensive Days.................................................    0.373
Drugs..........................................................    0.196
Supplies & Equipment...........................................    0.299
Implantable Devices............................................    0.321
Therapy Services...............................................    0.312
Laboratory.....................................................    0.116
Operating Room.................................................    0.185
Cardiology.....................................................    0.107
Cardiac Catheterization........................................    0.115
Radiology......................................................    0.149
MRIs...........................................................    0.076
CT Scans.......................................................    0.037
Emergency Room.................................................    0.165
Blood and Blood Products.......................................    0.306
Other Services.................................................    0.355
Labor & Delivery...............................................    0.363
Inhalation Therapy.............................................    0.163
Anesthesia.....................................................    0.081
------------------------------------------------------------------------

    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 proposed MS-DRG relative weights for FY 
2019. Using data from the FY 2017 MedPAR file, there were 7 MS-DRGs 
that contain fewer than 10 cases. For FY 2019, because we do not have 
sufficient MedPAR data to set accurate and stable cost relative weights 
for these low[dash]volume MS-DRGs, we are proposing to compute relative 
weights for the proposed low-volume MS-DRGs by adjusting their final FY 
2018 relative weights by the percentage change in the average weight of 
the cases in other MS-DRGs. The crosswalk table is shown:

------------------------------------------------------------------------
    Low-volume MS-DRG          MS-DRG title        Crosswalk to MS-DRG
------------------------------------------------------------------------
789......................  Neonates, Died or    Final FY 2018 relative
                            Transferred to       weight (adjusted by
                            Another Acute Care   percent change in
                            Facility.            average weight of the
                                                 cases in other MS-
                                                 DRGs).
790......................  Extreme Immaturity   Final FY 2018 relative
                            or Respiratory       weight (adjusted by
                            Distress Syndrome,   percent change in
                            Neonate.             average weight of the
                                                 cases in other MS-
                                                 DRGs).
791......................  Prematurity with     Final FY 2018 relative
                            Major Problems.      weight (adjusted by
                                                 percent change in
                                                 average weight of the
                                                 cases in other MS-
                                                 DRGs).
792......................  Prematurity without  Final FY 2018 relative
                            Major Problems.      weight (adjusted by
                                                 percent change in
                                                 average weight of the
                                                 cases in other MS-
                                                 DRGs).
793......................  Full-Term Neonate    Final FY 2018 relative
                            with Major           weight (adjusted by
                            Problems.            percent change in
                                                 average weight of the
                                                 cases in other MS-
                                                 DRGs).
794......................  Neonate with Other   Final FY 2018 relative
                            Significant          weight (adjusted by
                            Problems.            percent change in
                                                 average weight of the
                                                 cases in other MS-
                                                 DRGs).
795......................  Normal Newborn.....  Final FY 2018 relative
                                                 weight (adjusted by
                                                 percent change in
                                                 average weight of the
                                                 cases in other MS-
                                                 DRGs).
------------------------------------------------------------------------


[[Page 20276]]

    We are inviting public comments on our proposals.

H. Proposed Add-On Payments for New Services and Technologies for FY 
2019

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 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 2018 IPPS/LTCH PPS final rule 
contains the final thresholds that we used to evaluate applications for 
new medical service or technology add-on payments for FY 2019. We refer 
readers to the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2018-IPPS-Final-Rule-Home-Page-Items/FY2018-IPPS-Final-Rule-Tables.html to download and view 
Table 10.
    As previously stated, Table 10 that is released with each proposed 
and final rule contains the thresholds that we use to evaluate 
applications for new medical service and technology add-on payments for 
the fiscal year that follows the fiscal year that is otherwise the 
subject of the rulemaking. For example, the thresholds in Table 10 
released with the FY 2018 IPPS/LTCH PPS final rule are applicable to FY 
2019 new technology applications. Beginning with the thresholds for FY 
2020 and future years, we are proposing to provide the thresholds that 
we previously included in Table 10 as one of our data files posted via 
the Internet on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html, which is 
the same URL where the impact data files associated with the rulemaking 
for the applicable fiscal year are posted. We believe that this 
proposed change in the presentation of this information, specifically 
in the data files rather than in a Table 10, will clarify for the 
public that the listed thresholds will be used for new technology add-
on payment applications for the next fiscal year (in this case, for FY 
2020) rather than for the fiscal year that is otherwise the subject of 
the rulemaking (in this case, for FY 2019), while continuing to furnish 
the same information on the new technology add[dash]on payment 
thresholds for applications for the next fiscal year as has been 
provided in previous fiscal years. Accordingly, we would no longer 
include Table 10 as one of our IPPS tables, but would instead include 
the thresholds applicable to the next fiscal year (beginning with FY 
2020) in the data files associated with the prior fiscal year (in this 
case, FY 2019).
    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 or 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

[[Page 20277]]

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 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 the year prior 
to the beginning of the fiscal year that the application is being 
considered.
    The Council on Technology and Innovation (CTI) at CMS oversees the 
agency's cross-cutting priority on coordinating coverage, coding and 
payment processes for Medicare with respect to new technologies and 
procedures, including new drug therapies, as well as promoting the 
exchange of information on new technologies and medical services 
between CMS and other entities. The CTI, composed of senior CMS staff 
and clinicians, was established under section 942(a) of Public Law 108-
173. The Council is co-chaired by the Director of the Center for 
Clinical Standards and Quality (CCSQ) and the Director of the Center 
for Medicare (CM), who is also designated as the CTI's Executive 
Coordinator.
    The specific processes for coverage, coding, and payment are 
implemented by CM, CCSQ, and the local 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[dash]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 website, in a user 
friendly format. This guide was published in 2010 and is available on 
the CMS website at: https://www.cms.gov/Medicare/Coverage/CouncilonTechInnov/Downloads/Innovators-Guide-Master-7-23-15.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 2020 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 website at: https://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 2020, the CMS website also will post the tracking 
forms completed by each applicant. We note that the burden associated 
with this information collection requirement is the time and effort 
required to collect and submit the data in the formal request for add-
on payments for new medical services and technologies to CMS. The 
aforementioned burden is subject to the PRA; it is currently approved 
under OMB control number 0938-1347, which expires on December 31, 2020.
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--

[[Page 20278]]

     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 2019 prior 
to publication of this FY 2019 IPPS/LTCH PPS proposed rule, we 
published a notice in the Federal Register on December 4, 2017 (82 FR 
57275), and held a town hall meeting at the CMS Headquarters Office in 
Baltimore, MD, on February 13, 2018. 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 2019 new medical service and technology 
add[dash]on payment applications before the publication of this FY 2019 
IPPS/LTCH PPS proposed rule.
    Approximately 150 individuals registered to attend the town hall 
meeting in person, while additional individuals listened over an open 
telephone line. We also live[dash]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 23, 2018, in our evaluation of the new 
technology add[dash]on payment applications for FY 2019 in this FY 2019 
IPPS/LTCH PPS proposed rule.
    In response to the published notice and the February 13, 2018 New 
Technology Town Hall meeting, we received written comments regarding 
the applications for FY 2019 new technology add[dash]on payments. We 
note that we do not summarize comments that are unrelated to the 
``substantial clinical improvement'' criterion. As explained earlier 
and in the Federal Register notice announcing the New Technology Town 
Hall meeting (82 FR 57275 through 57277), 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 2019. Therefore, we are not summarizing those 
written comments in this proposed rule. In section II.H.5. of the 
preamble of this proposed rule, we are summarizing comments regarding 
individual applications, or, if applicable, indicating that there were 
no comments received in response to the New Technology Town Hall 
meeting notice, at the end of each discussion of the individual 
applications.
    Comment: One commenter recommended that the specific criteria that 
CMS uses in making substantial clinical improvement determinations be 
codified in the regulations to more explicitly clarify that the new 
medical service or technology will meet the substantial clinical 
improvement criterion if it: (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. The commenter stated that 
criteria similar to these were defined in the September 2001 New 
Technology Final Rule (66 FR 46913 through 46914). The commenter also 
recommended that final decisions on new technology add-on payment 
applications should explicitly discuss how a technology or treatment 
meets or fails to meet these specific criteria.
    Response: We appreciate the commenter's recommendation. However, in 
the September 2001 New Technology Final Rule (66 FR 46913 through 
46914), we explained how we evaluate if a new medical service or 
technology would meet the substantial clinical improvement criterion. 
Specifically, we stated that we evaluate a request for new technology 
payments against the following criteria to determine if the new medical 
service or technology would represent a substantial clinical 
improvement over existing technologies:
     The device offers a treatment option for a patient 
population unresponsive to, or ineligible for, currently available 
treatments.
     The device offers the ability to diagnose a medical 
condition in a patient population where that medical condition is 
currently undetectable or offers the ability to diagnose a medical 
condition earlier in a patient population than allowed by currently 
available methods. There must also be evidence that use of the device 
to make a diagnosis affects the management of the patient.
     Use of the device significantly improves clinical outcomes 
for a patient population as compared to currently available treatments.
    We typically require the applicant to submit evidence that the 
technology meets one or more of these standards. Regarding whether the 
use of the device significantly improves clinical outcomes for a 
patient population as compared to currently available treatments, we 
provided examples of improved clinical outcomes.
    In response to the commenter's recommendation that final decisions 
on new technology add-on applications explicitly discuss how a 
technology or treatment meets or fails to meet these specific 
standards, we believe that we provide this explanation when approving 
or denying an application for new technology add-on payments in the 
final rule.
    Comment: One commenter stated that the United States Food and Drug 
Administration Modernization Act (FDAMA) of 1997 established a category 
of medical devices and diagnostics that are eligible for priority FDA 
review. The commenter explained that, to qualify, products must be 
designated by the FDA as offering the potential for significant 
improvements in the diagnosis or treatment of the most serious 
illnesses, including those that are life-threatening or irreversibly 
debilitating. The commenter indicated that the processes by which 
products meeting the statutory standard for priority treatment are 
considered by the FDA are spelled out in greater detail in FDA's 
Expedited Access Program (EAP), and in the 21st Century Cures Act. The 
commenter believed that the criteria for priority FDA review are very 
similar to the substantial clinical improvement criteria and, 
therefore, devices used in the inpatient setting determined to be 
eligible for expedited review and approved by the FDA should 
automatically be considered as meeting the substantial clinical 
improvement criterion, without further consideration by CMS.

[[Page 20279]]

    Another commenter stated that CMS historically has noted 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.'' The commenter believed that this standard was 
created for medical devices because they dominated new technology of 
the time. The commenter recommended that this standard not be applied 
to regenerative medicine therapies because it believed these criteria 
are likely outside Congressional intent and inconsistent with some of 
the congressionally[dash]created FDA approval rules related to 
expedited approval programs. The commenter explained that the FDA 
defines congressionally-created ``breakthrough therapy'' and designates 
a therapy as such if it ``may demonstrate substantial improvement over 
existing therapies.'' In addition, the commenter stated that the 
Regenerative Medicine Advanced Therapy (RMAT) designation is granted to 
products that are intended to treat, modify, reverse, or cure a serious 
or life-threatening disease or condition, and if clinical evidence 
shows that it has the potential to meet an unmet medical need.
    Response: The FDA provides a number of different types of approvals 
and designations for devices, drugs, and other medical products. As 
required by section 1886(d)(5)(K)(viii) of the Act, CMS provides a 
mechanism for public input, before the publication of the proposed 
rule, regarding whether a new service or technology represents an 
advance in medical technology that substantially improves the diagnosis 
or treatment of individuals entitled to benefits under Medicare Part A. 
We believe that the criteria explained in the September 2001 New 
Technology Final Rule (66 FR 46914) are consistent with the statutory 
requirements for evaluating new medical services and technologies and 
continue to be relevant to determining whether a new medical service or 
technology represents a substantial clinical improvement over existing 
technologies. If the technology has a status designated by the FDA that 
is similar to the standards and conditions required to demonstrate 
substantial clinical improvement under the new technology add-on 
payment criterion, or is designated as a breakthrough therapy, the 
technology should be able to demonstrate with evidence that it meets 
the new technology add-on payment substantial clinical improvement 
criterion. Finally, we do take FDA approvals into consideration in our 
evaluation and determination of approvals and denials of new technology 
add-on payment applications.
    Comment: One commenter stated that, for technologies without a 
special FDA designation, the substantial clinical improvement standard 
is an inappropriate clinical standard for the family of regenerative 
therapies because it creates a threshold that is too high and 
unrealistic to meet. The commenter believed that requiring a vague 
standard such as ``substantial clinical improvement'' ignores that 
innovation is achieved incrementally. The commenter asserted that by 
only approving new technologies that can achieve this standard for new 
technology add-on payments, CMS' policy is at cross-purposes with 
promoting innovation because many worthy technologies will not be 
approved by CMS, which denies the general population the opportunity of 
having the chance to learn and otherwise benefit from those 
technologies.
    The commenter also stated that CMS has questioned how substantial 
clinical improvement can be measured and achieved via small clinical 
trials with FDA approval. The commenter stated that it is concerned 
that this view sets a dangerous precedent by significantly undervaluing 
new transformative therapies. The commenter added that the FDA often 
only requires single-arm trials with small numbers of patients for 
these products because it is often not feasible for product developers 
to provide data on a large number of patients, especially those working 
in rare diseases as many regenerative and advanced therapeutic 
developers are. The commenter stated that, given the transformative 
nature of the products, this should not be a reason for CMS to deny a 
new medical service or technology add-on payment.
    Response: We believe that the September 2001 New Technology Final 
Rule (66 FR 46914) clearly defines the criteria that CMS uses to 
evaluate and determine if a new medical service or technology 
represents a substantial clinical improvement. In addition, we accept 
different types of data (for example, peer-reviewed articles, study 
results, or letters from major associations, among others) that 
demonstrate and support the substantial clinical improvement associated 
with the new medical service or technology's use. In addition to 
clinical data, we will consider any evidence that would support the 
conclusion of a substantial clinical improvement associated with a new 
medical service or technology. Therefore, we believe that we consider 
an appropriate range of evidence.
    Comment: One commenter stated that CMS should consider FDA approval 
and the associated evidence base leading to such an approval as a 
standard for meeting the substantial clinical improvement criterion. 
The commenter believed that additional factors such as improvements in 
patient quality of life, creation of long-term clinical efficiencies in 
care, reductions in the use of other healthcare services, or other such 
criteria should be incorporated into the CMS determination process for 
whether a new medical service or technology demonstrates or represents 
a substantial clinical improvement over existing technologies. The 
commenter believed that, by including these additional factors, CMS 
would align payment rates such that patients would have access to the 
highest standard of treatment for all transformative therapies 
representing a substantial clinical improvement for the patient 
populations they serve, and it would be recognized as such by the 
receipt of new technology add-on payments.
    Response: As stated earlier, one of the standards we use to 
determine whether a new medical service or technology represents a 
substantial clinical improvement over existing technologies is to 
evaluate whether the use of the device, drug, service, or technology 
significantly improves clinical outcomes for a patient population as 
compared to currently available treatments, and we provided examples of 
improved clinical outcomes in the September 2001 New Technology Final 
Rule (66 FR 46913 through 46914).
    Comment: One commenter encouraged CMS to ensure appropriate 
implementation of the substantial clinical improvement criterion under 
the applicable Medicare statutory provisions and regulations, as 
applied to radio pharma ceuticals and other nuclear medicine 
technologies that can lead to significant benefits and advances in the 
diagnosis and treatment of many diseases. The commenter recommended 
that CMS apply an appropriately flexible standard for purposes of 
assessing whether a technology represents a substantial clinical 
improvement over other existing, available therapies. The commenter 
asserted that a flexible standard for this purpose must include new 
products and new formulations of products that increase the safety or 
efficacy, or both, relative to current treatments. The commenter 
believed that failing to recognize a technology that enhances the 
safety and/or efficacy of existing options as both ``new'' and a

[[Page 20280]]

``substantial clinical improvement'' over existing options would be a 
disservice to Medicare beneficiaries and to the mission of the Medicare 
program.
    The commenter encouraged CMS to give consideration to the 
importance of technologies that make radiotherapies safer, as well as 
those that lead to increased efficacy. The commenter explained that 
minimizing a patient's exposure to radiation, while also maximizing the 
effectiveness of the radiotherapy dose results in highly significant 
clinical improvements for patients, including in specific areas that 
CMS has expressly identified as relevant to the substantial clinical 
improvement criterion.
    Response: As stated earlier, we believe that the criteria explained 
in the September 2001 New Technology Final Rule (66 FR 46914) are 
consistent with the statutory requirements for evaluating new medical 
services and technologies and continue to be relevant to determining 
whether a new medical service or technology represents a substantial 
clinical improvement over existing technologies.
    We believe that it is important to maintain an open dialogue 
regarding the IPPS new technology add-on payment process, and we 
appreciate all of the commenters' input and recommendations.
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 
website 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. Proposed FY 2019 Status of Technologies Approved for FY 2018 Add-On 
Payments
a. Defitelio[reg] (Defibrotide)
    Jazz Pharmaceuticals submitted an application for new technology 
add-on payments for FY 2017 for defibrotide (Defitelio[reg]), 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[reg] improves the survival rate of patients diagnosed with 
VOD with multi-organ failure by 23 percent.
    Defitelio[reg] received 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 2006. The applicant's New Drug Application (NDA) 
for Defitelio[reg] received FDA approval on March 30, 2016. The 
applicant confirmed that Defitelio[reg] 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[reg] was finalized with FDA approval, and that 
commercial shipments of Defitelio[reg] to hospitals and treatment 
centers began on April 4, 2016. Therefore, we agreed that, based on 
this information, the newness period for Defitelio[reg] begins on April 
4, 2016, the date of its first commercial availability.
    The applicant received approval to use unique ICD-10-PCS procedure 
codes to describe the use of Defitelio[reg], with an effective date of 
October 1, 2016. The approved ICD-10PCS 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[reg] and consideration of the public comments we received in 
response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved 
Defitelio[reg] 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[reg] 
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[reg] is $75,900.
    Our policy is that a medical service or technology may continue to 
be considered ``new'' for purposes of new technology add-on payments 
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 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 fiscal year (70 FR 
47362).
    With regard to the newness criterion for Defitelio[reg], we 
considered the beginning of the newness period to commence on the first 
day Defitelio[reg] was commercially available (April 4, 2016). Because 
the 3-year anniversary date of the entry of the Defitelio[reg] onto the 
U.S. market (April 4, 2019) will occur in the latter half of FY 2019, 
we are proposing to continue new technology add-on payments for this 
technology for FY 2019. We are

[[Page 20281]]

proposing that the maximum payment for a case involving Defitelio[reg] 
would remain at $75,900 for FY 2019. We are inviting public comments on 
our proposal to continue new technology add-on payments for 
Defitelio[reg] for FY 2019.
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). 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.
    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 determined 
these two devices are substantially similar to each other and that it 
was 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 on January 8, 2016, and was commercially available on the U.S. 
market on February 29, 2016. In accordance with our policy, we stated 
in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38120) 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 is February 
29, 2016, when the Perceval valve became commercially available. The 
ICD-10-PCS code approved to identify procedures involving the use of 
both devices when surgically implanted is ICD-10-PCS code X2RF032 
(Replacement of aortic valve using zooplastic tissue, rapid deployment 
technique, open approach, new technology group 2).
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for the INTUITY 
and Perceval valves and consideration of the public comments we 
received in response to the FY 2018 IPPS/LTCH PPS proposed rule, we 
approved the INTUITY and Perceval valves for new technology add-on 
payments for FY 2018 (82 FR 38125). We stated that we believed that the 
use of a weighted-average of the cost of the standard valves based on 
the projected number of cases involving each technology to determine 
the maximum new technology add-on payment was most appropriate. To 
compute the weighted-cost average, we summed the total number of 
projected cases for each of the applicants, which equaled 2,429 cases 
(1,750 plus 679). 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: 72 percent for the INTUITY and 
28 percent for the Perceval valve. We then multiplied the cost per case 
for the manufacturer specific valve by the case-weighted percentage 
(0.72 * $12,500 = $9,005.76 for INTUITY and 0.28 * $11,500 = $3,214.70 
for the Perceval valve). This resulted in a case-weighted average cost 
of $12,220.46 for the valves. 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 INTUITY or Perceval valves is 
$6,110.23 for FY 2018.
    With regard to the newness criterion for the INTUITY and Perceval 
valves, we considered the newness period for the INTUITY and Perceval 
valves to begin February 29, 2016. 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 
technology onto the U.S. market (February 29, 2019) will occur in the 
first half of FY 2019, we are proposing to discontinue new technology 
add-on payments for the INTUITY and Perceval valves for FY 2019. We are 
inviting public comments on our proposal to discontinue new technology 
add-on payments for the INTUITY and Perceval valves.
c. GORE[reg] EXCLUDER[reg] Iliac Branch Endoprosthesis (Gore IBE 
Device)
    W. L. Gore and Associates, Inc. submitted an application for new 
technology add-on payments for the GORE[reg] EXCLUDER[reg] 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[reg] EXCLUDER[reg] 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 
following procedure codes describe the use of this technology: 04VC0EZ 
(Restriction of right common iliac artery with branched or fenestrated 
intraluminal device, one or two arteries, open approach); 04VC3EZ 
(Restriction of right common iliac artery with branched or fenestrated 
intraluminal device, one or two arteries, percutaneous approach); 
04VC4EZ (Restriction of right common iliac artery with branched or 
fenestrated intraluminal device, one or two arteries, percutaneous 
approach); 04VD0EZ (Restriction of left common iliac artery with 
branched or fenestrated intraluminal device, one or two arteries, open 
approach); 04VD3EZ (Restriction of left common iliac artery with 
branched or fenestrated intraluminal device, one or two arteries, 
percutaneous approach); 04VD4EZ (Restriction of left common iliac 
artery with branched or fenestrated

[[Page 20282]]

intraluminal device, one or two arteries, percutaneous endoscopic 
approach).
    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. 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 GORE IBE device onto the U.S. 
market (February 28, 2019) will occur in the first half of FY 2019, we 
are proposing to discontinue new technology add-on payments for this 
technology for FY 2019. We are inviting public comments on our proposal 
to discontinue new technology add-on payments for the GORE IBE device.
d. Idarucizumab
    Boehringer Ingelheim Pharmaceuticals, Inc. submitted an application 
for new technology add-on payments for FY 2017 for 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: (1) To reduce the risk of stroke and systemic embolism in 
patients who have been diagnosed with nonvalvular atrial fibrillation 
(NVAF); (2) for the treatment of deep venous thrombosis (DVT) and 
pulmonary embolism (PE) in patients who have been administered a 
parenteral anticoagulant for 5 to 10 days; (3) to reduce the risk of 
recurrence of DVT and PE in patients who have been previously treated; 
and (4) for the prophylaxis of DVT and PE in patients who have 
undergone hip replacement surgery. 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. 
Idarucizumab is indicated for the use in the treatment of patients who 
have been administered Pradaxa when reversal of the anticoagulant 
effects of dabigatran is needed for emergency surgery or urgent medical 
procedures or in life-threatening or uncontrolled bleeding.
    The applicant was granted approval to use unique ICD-10-PCS 
procedure codes that became effective October 1, 2016, to describe the 
use of this technology. The approved ICD-10-PCS 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. 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 Idarucizumab onto the U.S. market will occur in the first half 
of FY 2019 (October 15, 2018), we are proposing to discontinue new 
technology add-on payments for this technology for FY 2019. We are 
inviting public comments on our proposal to discontinue new technology 
add-on payments for Idarucizumab.
e. Ustekinumab (Stelara[reg])
    Janssen Biotech submitted an application for new technology add-on 
payments for the Stelara[reg] induction therapy for FY 2018. 
Stelara[reg] 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[reg] and route of administration 
for this monoclonal antibody. IV infusion of Stelara[reg] 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[reg] for IV infusion has only one purpose, induction therapy. 
Stelara[reg] must be administered intravenously by a health care 
professional in either an inpatient hospital setting or an outpatient 
hospital setting.
    Stelara[reg] for IV infusion is packaged in single 130 mg vials. 
Induction therapy consists of a single IV infusion dose using the 
following weight-based dosing regimen: Patients weighing less than 
(<)55 kg are administered 260 mg of Stelara[reg] (2 vials); patients 
weighing more than (>)55 kg, but less than (<)85 kg are administered 
390 mg of Stelara[reg] (3 vials); and patients weighing more than (>)85 
kg are administered 520 mg of Stelara[reg] (4 vials). An average dose 
of Stelara[reg] administered through IV infusion is 390 mg (3 vials). 
Maintenance doses of Stelara[reg] are administered at 90 mg, 
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

[[Page 20283]]

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.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for 
Stelara[reg] and consideration of the public comments we received in 
response to the FY 2018 IPPS/LTCH PPS proposed rule, we approved 
Stelara[reg] for new technology add-on payments for FY 2018 (82 FR 
38129). Cases involving Stelara[reg] that are eligible for new 
technology add-on payments are identified by ICD-10-PCS procedure code 
XW033F3 (Introduction of other New Technology therapeutic substance 
into peripheral vein, percutaneous approach, new technology group 3). 
With the new technology add-on payment application, the applicant 
estimated that the average Medicare beneficiary would require a dosage 
of 390 mg (3 vials) at a hospital acquisition cost of $1,600 per vial 
(for a total of $4,800). 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 Stelara[reg] is 
$2,400.
    With regard to the newness criterion for Stelara[reg], we 
considered the beginning of the newness period to commence when 
Stelara[reg] received FDA approval as an IV infusion treatment of 
Crohn's disease (CD) on September 23, 2016. Because the 3-year 
anniversary date of the entry of Stelara[reg] onto the U.S. market 
(September 23, 2019) will occur after FY 2019, we are proposing to 
continue new technology add-on payments for this technology for FY 
2019. We are proposing that the maximum payment for a case involving 
Stelara[reg] would remain at $2,400 for FY 2019. We are inviting public 
comments on our proposal to continue new technology add-on payments for 
Stelara[reg] for FY 2019.
f. 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 emergency treatment for 
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.
    With regard to the newness criterion, VistogardTM 
received FDA approval on December 11, 2015. However, as discussed in 
the FY 2017 IPPS/LTCH PPS final rule (81 FR 56910), due to the delay in 
VistogardTM's commercial availability, we considered the 
newness period to begin March 2, 2016, instead of December 11, 2015. 
The applicant noted that the VistogardTM is the first 
FDA[dash]approved antidote used to reverse fluorouracil toxicity. The 
applicant submitted a request for a unique ICD-10-PCS procedure code 
and was granted approval for the following procedure code: XW0DX82 
(Introduction of Uridine Triacetate into Mouth and Pharynx, External 
Approach, new technology group 2). The new code became effective on 
October 1, 2016.
    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.
    With regard to the newness criterion for the 
VistogardTM, we considered the beginning of the newness 
period to commence upon the entry of VistogardTM onto the 
U.S. market on March 2, 2016. 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 
VistogardTM onto the U.S. market (March 2, 2019) will occur 
in the first half of FY 2019, we are proposing to discontinue new 
technology add-on payments for this technology for FY 2019. We are 
inviting public comments on our proposal to discontinue new technology 
add-on payments for the VistogardTM.
g. Bezlotoxumab (ZINPLAVA\TM\)
    Merck & Co., Inc. submitted an application for new technology add-
on payments for ZINPLAVATM for FY 2018. 
ZINPLAVATM is indicated to reduce recurrence of Clostridium 
difficile infection (CDI) in adult patients who are receiving 
antibacterial drug treatment for a diagnosis of 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 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

[[Page 20284]]

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[dash]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 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 became commercially available on February 10, 
2017. Therefore, the newness period for ZINPLAVATM began on 
February 10, 2017. The applicant submitted a request for a unique ICD-
10-PCS procedure code and was granted approval for the following 
procedure codes: XW033A3 (Introduction of bezlotoxumab monoclonal 
antibody, into peripheral vein, percutaneous approach, new technology 
group 3) and XW043A3 (Introduction of bezlotoxumab monoclonal antibody, 
into central vein, percutaneous approach, new technology group 3).
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for 
ZINPLAVATM and consideration of the public comments we 
received in response to the FY 2018 IPPS/LTCH PPS proposed rule, we 
approved ZINPLAVATM for new technology add-on payments for 
FY 2018 (82 FR 38119). With the new technology add-on payment 
application, the applicant estimated that the average Medicare 
beneficiary would require a dosage of 10 mg/kg of ZINPLAVATM 
administered as an IV infusion over 60 minutes as a single dose. 
According to the applicant, the WAC for one dose is $3,800. 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 ZINPLAVATM is $1,900.
    With regard to the newness criterion for ZINPLAVATM, we 
considered the beginning of the newness period to commence on February 
10, 2017. Because the 3-year anniversary date of the entry of 
ZINPLAVATM onto the U.S. market (February 10, 2020) will 
occur after FY 2019, we are proposing to continue new technology add-on 
payments for this technology for FY 2019. We are proposing that the 
maximum payment for a case involving ZINPLAVATM would remain 
at $1,900 for FY 2019. We are inviting public comments on our proposal 
to continue new technology add-on payments for ZINPLAVATM 
for FY 2019.
5. FY 2019 Applications for New Technology Add-On Payments
    We received 15 applications for new technology add-on payments for 
FY 2019. In accordance with the regulations under Sec.  412.87(c), 
applicants for new technology add[dash]on payments must have FDA 
approval or clearance by July 1 of the year prior to the beginning of 
the fiscal year that the application is being considered. A discussion 
of the 15 applications is presented below.
a. KYMRIAH\TM\ (Tisagenlecleucel) and YESCARTA\TM\ (Axicabtagene 
Ciloleucel)
    Two manufacturers, Novartis Pharmaceuticals Corporation and Kite 
Pharma, Inc. submitted separate applications for new technology add-on 
payments for FY 2019 for KYMRIAHTM (tisagenlecleucel) and 
YESCARTATM (axicabtagene ciloleucel), respectively. Both of 
these technologies are CD-19-directed T[dash]cell immunotherapies used 
for the purposes of treating patients with aggressive variants of 
non[dash]Hodgkin lymphoma (NHL). We note that KYMRIAHTM was 
approved by the FDA on August 30, 2017, for use in the treatment of 
patients up to 25 years of age with B-cell precursor acute 
lymphoblastic leukemia (ALL) that is refractory or in second or later 
relapse, which is a different indication and patient population than 
the new indication and targeted patient population for which the 
applicant submitted a request for approval of new technology add-on 
payments for FY 2019. Specifically, and as summarized in the following 
table, the new indication for which Novartis Pharmaceuticals 
Corporation is requesting approval for new technology add-on payments 
for KYMRIAHTM is as an autologous T-cell immune therapy 
indicated for use in the treatment of patients with relapsed/refractory 
(R/R) Diffuse Large B[dash]Cell Lymphoma (DLBCL) not eligible for 
autologous stem cell transplant (ASCT). As of the time of the 
development of this proposed rule, Novartis Pharmaceuticals Corporation 
has been granted a Breakthrough Therapy designation by the FDA, and is 
awaiting FDA approval for the use of KYMRIAHTM under this 
new indication. We also note that Kite Pharma, Inc. previously 
submitted an application for approval for new technology add-on 
payments for FY 2018 for KTE-C19 for use as an autologous T[dash]cell 
immune therapy in the treatment of adult patients with R/R aggressive 
B-cell NHL who are ineligible for ASCT. However, Kite Pharma, Inc. 
withdrew its application for KTE-C19 prior to publication of the FY 
2018 IPPS/LTCH PPS final rule. Kite Pharma, Inc. has resubmitted an 
application for approval for new technology add-on payments for FY 2019 
for KTE-C19 under a new name, YESCARTATM, for the same 
indication. Kite Pharma, Inc. received FDA approval for this original 
indication and treatment use of YESCARTATM on October 18, 
2017. (We refer readers to the following table for a comparison of the 
indications and FDA approvals for KYMRIAHTM and 
YESCARTATM.)

[[Page 20285]]



                     Comparison of Indication and FDA Approval for KYMRIAHTM and YESCARTATM
----------------------------------------------------------------------------------------------------------------
                                            Description of indication for which new
    FY 2019 applicant technology name        technology add-on payments are being         FDA approval status
                                                           requested
----------------------------------------------------------------------------------------------------------------
KYMRIAHTM (Novartis Pharmaceuticals       KYMRIAHTM: Autologous T-cell immune         Breakthrough Therapy
 Corporation).                             therapy indicated for use in the            designation granted by
                                           treatment of patients with relapsed/        FDA; FDA approval
                                           refractory (R/R) Diffuse Large B Cell       pending.
                                           Lymphoma (DLBCL) not eligible for
                                           autologous stem cell transplant (ASCT).
YESCARTATM (Kite Pharma, Inc.)..........  YESCARTATM: Autologous T-cell immune        FDA approval received 10/
                                           therapy indicated for use in the            18/2017.
                                           treatment of adult patients with R/R
                                           large B-cell lymphoma after two or more
                                           lines of systemic therapy, including
                                           DLBCL not otherwise specified, primary
                                           mediastinal large B-cell, high grade B-
                                           cell lymphoma, and DLBCL arising from
                                           follicular lymphoma.
----------------------------------------------------------------------------------------------------------------


 
----------------------------------------------------------------------------------------------------------------
      Technology approved for other                                                      FDA approval of other
               indications                      Description of other indication               indication
----------------------------------------------------------------------------------------------------------------
KYMRIAHTM (Novartis Pharmaceuticals       KYMRIAHTM: CD-19[dash]directed T-cell       FDA approval received 8/30/
 Corporation).                             immunotherapy indicated for the use in      2017.
                                           the treatment of patients up to 25 years
                                           of age with B-cell precursor ALL that is
                                           refractory or in second or later relapse.
YESCARTATM (Kite Pharma, Inc.)..........  None......................................  N/A.
----------------------------------------------------------------------------------------------------------------

    We note that procedures involving the KYMRIAHTM and 
YESCARTATM therapies are both reported using the following 
ICD-10-PCS procedure codes: XW033C3 (Introduction of engineered 
autologous chimeric antigen receptor t-cell immunotherapy into 
peripheral vein, percutaneous approach, new technology group 3); and 
XW043C3 (Introduction of engineered autologous chimeric antigen 
receptor t-cell immunotherapy into central vein, percutaneous approach, 
new technology group 3). We further note that, in section II.F.2.d. of 
the preamble of this proposed rule, we are proposing to assign cases 
reporting these ICD-10-PCS procedure codes to Pre-MDC MS-DRG 016 
(Autologous Bone Marrow Transplant with CC/MCC) for FY 2019. We refer 
readers to section II.F.2.d. of this proposed rule for a complete 
discussion of the proposed assignment of cases reporting these 
procedure codes to Pre-MDC MS-DRG 016, which also includes a proposal 
to revise the title of MS-DRG 016 to reflect the proposed assignments.
    According to the applicants, patients with NHL represent a 
heterogeneous group of B-cell malignancies with varying patterns of 
behavior and response to treatment. B-cell NHL can be classified as 
either an aggressive, or indolent disease, with aggressive variants 
including DLBCL; primary mediastinal large B[dash]cell lymphoma 
(PMBCL); and transformed follicular lymphoma (TFL). Within diagnoses of 
NHL, DLBCL is the most common subtype of NHL, accounting for 
approximately 30 percent of patients who have been diagnosed with NHL, 
and survival without treatment is measured in months.\4\ Despite 
improved therapies, only 50 to 70 percent of newly diagnosed patients 
are cured by standard first-line therapy alone. Furthermore, R/R 
disease continues to carry a poor prognosis because only 50 percent of 
patients are eligible for autologous stem cell transplantation (ASCT) 
due to advanced age, poor functional status, comorbidities, inadequate 
social support for recovery after ASCT, and provider or patient 
choice.5 6 7 8 Of the roughly 50 percent of patients that 
are eligible for ASCT, nearly 50 percent fail to respond to 
prerequisite salvage chemotherapy and cannot undergo 
ASCT.9 10 11 12 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 high-dose therapy (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.\13\ Second-line treatment with dexamethasone, high-
dose cytarabine, and cisplatin (DHAP) is considered a standard 
chemotherapy regimen, but is associated with substantial treatment-
related toxicity.\14\ For patients who experience disease progression 
during or after primary treatment, the combination of HDT/ASCT remains 
the only curative option.\15\ According to the applicants,

[[Page 20286]]

given the modest response to second[dash]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 
greater than or equal to 4 cycles of first-line or 2 cycles of later-
line therapy, or relapse within less than or equal to 12 months of 
ASCT.\16\ Based on these definitions and available data from a 
multi[dash]center retrospective study (SCHOLAR-1), chemorefractory 
disease treated with current and historical standards of care has 
consistently poor outcomes with an ORR of 26 percent and median overall 
survival (OS) of 6.3 months.\17\
---------------------------------------------------------------------------

    \4\ Chaganti, S., et al., ``Guidelines for the management of 
diffuse large B-cell lymphoma,'' BJH Guideline, 2016. Available at: 
www.bit.do/bsh-guidelines.
    \5\ Matasar, M., et al., ``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.
    \6\ Hitz, F., et al., ``Outcome of patients with chemotherapy 
refractory and early progressive diffuse large B cell lymphoma after 
R-CHOP treatment,'' Blood (American Society of Hematology (ASH) 
annual meeting abstracts, poster session), 2010, pp. 116 (abstract 
#1751).
    \7\ Telio, D., et al., ``Salvage chemotherapy and autologous 
stem cell transplant in primary refractory diffuse large B-cell 
lymphoma: outcomes and prognostic factors,'' Leukemia & Lymphoma, 
2012, vol. 53(5), pp. 836-41.
    \8\ Moskowitz, C.H., et al., ``Ifosfamide, carboplatin, and 
etoposide: a highly effective cytoreduction and peripheral-blood 
progenitor-cell mobilization regimen for transplant-eligible 
patients with non-Hodgkin's lymphoma,'' Journal of Clinical 
Oncology, 1999, vol. 17(12), pp. 3776-85.
    \9\ Crump, M., et al., ``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.
    \10\ Gisselbrecht, C., et al., ``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.
    \11\ Iams, W., Reddy, N., ``Consolidative autologous 
hematopoietic stem-cell transplantation in first remission for non-
Hodgkin lymphoma: current indications and future perspective,'' Ther 
Adv Hematol, 2014, vol. 5(5), pp. 153-67.
    \12\ Kantoff, P.W., et al., ``Sipuleucel-T immunotherapy for 
castration-resistant prostate cancer,'' N Engl J Med, 2010, vol. 
363, pp. 411-422.
    \13\ Rovira, J., Valera, A., Colomo, L., et al., ``Prognosis of 
patients with diffuse large B cell lymphoma not reaching complete 
response or relapsing after frontline chemotherapy or 
immunochemotherapy,'' Ann Hematol, 2015, vol. 94(5), pp. 803-812.
    \14\ Swerdlow, S.H., Campo, E., Pileri, S.A., et al., ``The 2016 
revision of the World Health Organization classification of lymphoid 
neoplasms,'' Blood, 2016, vol. 127(20), pp. 2375-2390.
    \15\ Koristka, S., Cartellieri, M., Arndt, C., et al., ``Tregs 
activated by bispecific antibodies: killers or suppressors?,'' 
OncoImmunology, 2015, vol. (3):e994441, DOI: 10.4161/
2162402X.2014.994441.
    \16\ Crump, M., Neelapu, S.S., Farooq, U., et al., ``Outcomes in 
refractory diffuse large B-cell lymphoma: results from the 
international SCHOLAR-1 study,'' Blood, Published online: August 3, 
2017, doi: 10.1182/blood-2017-03-69620.
    \17\ Ibid.
---------------------------------------------------------------------------

    According to Novartis Pharmaceuticals Corporation, upon FDA 
approval of the additional indication, KYMRIAHTM will also 
be used for the treatment of patients with R/R DLBCL who are not 
eligible for ASCT. Novartis Pharmaceuticals Corporation describes 
KYMRIAHTM as a CD[dash]19[dash]directed genetically modified 
autologous T[dash]cell immunotherapy which utilizes peripheral blood 
T[dash]cells, which have been reprogrammed with a transgene encoding, a 
chimeric antigen receptor (CAR), to identify and eliminate CD-19-
expressing malignant and normal cells. Upon binding to CD-19-expressing 
cells, the CAR transmits a signal to promote T-cell expansion, 
activation, target cell elimination, and persistence of 
KYMRIAHTM cells. The transduced T[dash]cells expand in vivo 
to engage and eliminate CD-19-expressing cells and may exhibit 
immunological endurance to help support long-lasting remission. 
18 19 20 21 According to the applicant, no other agent 
currently used in the treatment of patients with R/R DLBCL employs gene 
modified autologous cells to target and eliminate malignant cells.
---------------------------------------------------------------------------

    \18\ KYMRIAHTM [prescribing information], East 
Hanover, NJ: Novartis Pharmaceuticals Corp, 2017.
    \19\ Kalos, M., Levine, B.L., Porter, D.L., et al., 
``T[dash]cells with chimeric antigen receptors have potent antitumor 
effects and can establish memory in patients with advanced 
leukemia,'' Sci Transl Med, 2011, vol. 3(95), pp, 95ra73.
    \20\ FDA Briefing Document. Available at: https://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/OncologicDrugsAdvisoryCommittee/UCM566168.pdf.
    \21\ Wang, X., Riviere, I., ``Clinical manufacturing of CART 
cells: foundation of a promising therapy,'' Mol Ther Oncolytics, 
2016, vol. 3, pp. 16015.
---------------------------------------------------------------------------

    According to Kite Pharma, Inc., YESCARTATM is indicated 
for the use in the treatment of adult patients with R/R large B-cell 
lymphoma after two or more lines of systemic therapy, including DLBCL 
not otherwise specified, PMBCL, high grade B-cell lymphoma, and DLBCL 
arising from follicular lymphoma. YESCARTA is not indicated for the 
treatment of patients with primary central nervous system lymphoma. The 
applicant for YESCARTATM described the technology as a CD-
19-directed genetically modified autologous T[dash]cell immunotherapy 
that binds to CD-19-expressing cancer cells and normal B[dash]cells. 
These normal B[dash]cells are considered to be non-essential tissue, as 
they are not required for patient survival. According to the applicant, 
studies demonstrated that following anti-CD-19 CAR T[dash]cell 
engagement with CD-19-expressing target cells, the CD-28 and CD-3-zeta 
co-stimulatory domains activate downstream signaling cascades that lead 
to T-cell activation, proliferation, acquisition of effector functions 
and secretion of inflammatory cytokines and chemokines. This sequence 
of events leads to the elimination of CD-19-expressing tumor cells.
    Both applicants expressed that their technology is the first 
treatment of its kind for the targeted adult population. In addition, 
both applicants asserted that their technology is new and does not use 
a substantially similar mechanism of action or involve the same 
treatment indication as any other currently FDA-approved technology. We 
note that, at the time each applicant submitted its new technology add-
on payment application, neither technology had received FDA approval 
for the indication for which the applicant requested approval for the 
new technology add-on payment; KYMRIAHTM has been granted 
Breakthrough Therapy designation for the use in the treatment of 
patients for the additional indication that is the subject of its new 
technology add-on application and, as of the time of the development of 
this proposed rule, is awaiting FDA approval. However, as stated 
earlier, YESCARTATM received FDA approval for use in the 
treatment of patients and the indication stated in its application on 
October 18, 2017, after each applicant submitted its new technology 
add-on payment application.
    As noted, according to both applicants, KYMRIAHTM and 
YESCARTATM are the first CAR T immunotherapies of their 
kind. Because potential cases representing patients who may be eligible 
for treatment using KYMRIAHTM and YESCARTATM 
would group to the same MS-DRGs (because the same ICD-10-CM diagnosis 
codes and ICD-10-PCS procedures codes are used to report treatment 
using either KYMRIAHTM or YESCARTATM), and we 
believe that these technologies 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 disagree with the applicants and 
believe these two technologies 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. For 
these reasons, and as discussed further below, we would intend to make 
one determination regarding approval for new technology add-on payments 
that would apply to both applications, and in accordance with our 
policy, would use the earliest market availability date submitted as 
the beginning of the newness period for both KYMRIAHTM and 
YESCARTATM. We are inviting public comments on whether 
KYMRIAHTM and YESCARTATM are substantially 
similar.
    With respect to the newness criterion, as previously stated, 
YESCARTATM received FDA approval on October 18, 2017. 
According to the applicant, prior to FDA approval, 
YESCARTATM had been available in the U.S. only on an 
investigational basis under an investigational new drug (IND) 
application. For the same IND patient population, and until commercial 
availability, YESCARTATM was available under an Expanded 
Access Program (EAP) which started on May 17, 2017. The applicant 
stated that it did not recover any costs associated with the EAP. 
According to the applicant, the first commercial shipment of 
YESCARTATM was received by a certified treatment center on 
November 22, 2017. As previously indicated, KYMRIAHTM is not 
currently approved by the FDA for use in the treatment of patients with 
R/R DLBCL that are not eligible for ASCT; the technology has been 
granted Breakthrough Therapy designation by the FDA. The applicant 
anticipates receipt of FDA approval to occur in the second quarter of 
2018. We believe that, in accordance with our policy, if these 
technologies are substantially similar to each other, it is appropriate 
to use the earliest market availability date submitted as the beginning 
of the newness period for both technologies. Therefore, based on

[[Page 20287]]

our policy, with regard to both technologies, if the technologies are 
approved for new technology add-on payments, we believe that the 
beginning of the newness period would be November 22, 2017.
    We previously stated that, because we believe these two 
technologies are substantially similar to each other, we believe it is 
appropriate to evaluate 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 discuss each set 
of data separately. However, we would intend to make one determination 
regarding new technology add-on payments that would apply to both 
applications. 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 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).
    If substantially similar technologies are 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, and 
because we believe they are substantially similar to each other, 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. We are inviting public comments on our proposal to 
evaluate KYMRIAHTM and YESCARTATM as one 
application for new technology add-on payments under the IPPS.
    As stated earlier, we believe that KYMRIAHTM and 
YESCARTATM are substantially similar to each other for 
purposes of analyzing these two applications as one application. We 
also need to determine whether KYMRIAHTM and 
YESCARTATM are substantially similar to existing 
technologies prior to their approval by the FDA and their release onto 
the U.S. 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 KYMRIAHTM asserted that its unique design, 
which utilizes features that were not previously included in 
traditional cytotoxic chemotherapeutic or immunotherapeutic agents, 
constitutes a new mechanism of action. The deployment mechanism allows 
for identification and elimination of CD-19-expressing malignant and 
non-malignant cells, as well as possible immunological endurance to 
help support long-lasting remission.22 23 24 25 The 
applicant provided context regarding how KYMRIAHTM's unique 
design contributes to a new mechanism of action by explaining that 
peripheral blood T-cells, which have been reprogrammed with a transgene 
encoding, a CAR, identify and eliminate CD[dash]19-expressing malignant 
and nonmalignant cells. As explained by the applicant, upon binding to 
CD-19-expressing cells, the CAR transmits a signal to promote T-cell 
expansion, activation, target cell elimination, and persistence of 
KYMRIAHTM cells.26 27 28 According to the 
applicant, transduced T[dash]cells expand in vivo to engage and 
eliminate CD-19-expressing cells and may exhibit immunological 
endurance to help support long-lasting remission.29 30 31
---------------------------------------------------------------------------

    \22\ KYMRIAH [prescribing information]. East Hanover, NJ: 
Novartis Pharmaceuticals Corp; 2017.
    \23\ Kalos, M., Levine, B.L., Porter, D.L., et al., ``T cells 
with chimeric antigen receptors have potent antitumor effects and 
can establish memory in patients with advanced leukemia,'' Sci 
Transl Med, 2011, vol. 3(95), pp. 95ra73.
    \24\ FDA Briefing Document. Available at: https://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/OncologicDrugsAdvisoryCommittee/UCM566168.pdf.
    \25\ Maude, S.L., Frey, N., Shaw, P.A., et al., ``Chimeric 
antigen receptor T cells for sustained remissions in leukemia,'' N 
Engl J Med, 2014, vol. 371(16), pp. 1507-1517.
    \26\ KYMRIAHTM [prescribing information], East 
Hanover, NJ: Novartis Pharmaceuticals Corp, 2017.
    \27\ Kalos, M., Levine, B.L., Porter, D.L., et al., 
``T[dash]cells with chimeric antigen receptors have potent antitumor 
effects and can establish memory in patients with advanced 
leukemia,'' Sci Transl Med, 2011, 3(95), pp, 95ra73.
    \28\ FDA Briefing Document. Available at: https://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/OncologicDrugsAdvisoryCommittee/UCM566168.pdf.
    \29\ Kalos, M., Levine, B.L., Porter, D.L., et al., ``T cells 
with chimeric antigen receptors have potent antitumor effects and 
can establish memory in patients with advanced leukemia,'' Sci 
Transl Med, 2011, vol. 3(95), pp. 95rs73.
    \30\ FDA Briefing Document. Available at: https://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/OncologicDrugsAdvisoryCommittee/UCM566168.pdf.
    \31\ Maude, S.L., Frey, N., Shaw, P.A., et al., ``Chimeric 
antigen receptor T[dash]cells for sustained remissions in 
leukemia,'' N Engl J Med, 2014, vol. 371(16), pp. 1507-1517.
---------------------------------------------------------------------------

    The applicant for YESCARTATM stated that 
YESCARTATM is the first engineered autologous cellular 
immunotherapy comprised of CAR T[dash]cells that recognizes CD-19 
express cancer cells and normal B-cells with efficacy in patients with 
R/R large B-cell lymphoma after two or more lines of systemic therapy, 
including DLBCL not otherwise specified, PMBCL, high grade B-cell 
lymphoma, and DLBCL arising from follicular lymphoma as demonstrated in 
a multi-centered clinical trial. Therefore, the applicant believed that 
YESCARTATM'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 patients who have been diagnosed with aggressive B-
cell NHL, namely single-agent or combination chemotherapy regimens. The 
applicant also pointed out that YESCARTATM is the only 
available therapy that has been granted FDA approval for the treatment 
of adult patients with R/R large B-cell lymphoma after two or more 
lines of systemic therapy, including DLBCL not otherwise specified, 
PMBCL, high grade B-cell lymphoma, and DLBCL arising from follicular 
lymphoma.
    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 
KYMRIAHTM 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 
KYMRIAHTM would be assigned to the same MS-DRGs as cases 
involving

[[Page 20288]]

patients with a DLBCL diagnosis. Potential cases representing patients 
that may be eligible for treatment using KYMRIAHTM map to 
437 separate MS-DRGs, with the top 20 MS-DRGs covering approximately 68 
percent of all patients who have been diagnosed with DLBCL. For 
patients with DLBCL and who have received chemotherapy during their 
hospital stay, the target population mapped to 8 separate MS-DRGs, with 
the top 2 MS-DRGs covering over 95 percent of this population: MS-DRGs 
847 (Chemotherapy without Acute Leukemia as Secondary Diagnosis with 
CC), and 846 (Chemotherapy without Acute Leukemia as Secondary 
Diagnosis with MCC). The applicant for YESCARTATM submitted 
findings that potential cases representing patients that may be 
eligible for treatment using YESCARTATM span 15 unique MS-
DRGs, 8 of which contain more than 10 cases. The most common MS-DRGs 
were: MS-DRGs 840 (Lymphoma and Non-Acute Leukemia with MCC), 841 
(Lymphoma and Non-Acute Leukemia with CC), and 823 (Lymphoma and Non-
Acute Leukemia with other O.R. Procedures with MCC). These 3 MS-DRGs 
accounted for 628 (76 percent) of the 827 cases. While the applicants 
for KYMRIAHTM and YESCARTATM submitted different 
findings regarding the most common MS-DRGs to which potential cases 
representing patients who may be eligible for treatment involving their 
technology would map, we believe that, under the current MS-DRGs (FY 
2018), potential cases representing patients who may be eligible for 
treatment involving either KYMRIAHTM or 
YESCARTATM would map to the same MS-DRGs because the same 
ICD-10-CM diagnosis codes and ICD-10-PCS procedures codes would be used 
to report cases for patients who may be eligible for treatment 
involving KYMRIAHTM and YESCARTATM. Furthermore, 
as noted above, we are proposing that cases reporting these ICD-10-PCS 
procedure codes would be assigned to MS-DRG 016 for FY 2019. Therefore, 
under this proposal, for FY 2019, cases involving the utilization of 
KYMRIAHTM and YESCARTATM would continue to map to 
the same MS-DRGs.
    The applicant for YESCARTATM also addressed the concern 
expressed by CMS in the FY 2018 IPPS/LTCH PPS proposed rule regarding 
Kite Pharma Inc.'s FY 2018 new technology add-on payment application 
for the KTE-C19 technology (82 FR 19888). At the time, CMS expressed 
concern that KTE-C19 may use the same or similar mechanism of action as 
the Bi-Specific T-Cell engagers (BiTE) technology. The applicant for 
YESCARTATM explained that YESCARTATM has a unique 
and distinct mechanism of action that is substantially different from 
BiTE's or any other drug or biologic currently assigned to any MS-DRG 
in the FY 2016 MedPAR Hospital Limited Data Set. In providing more 
detail regarding how YESCARTATM is different from the BiTE 
technology, the applicant explained that the BiTE technology is not an 
engineered autologous T[dash]cell immunotherapy derived from a 
patient's own T[dash]cells. Instead, it is a bi-specific T[dash]cell 
engager that recognizes CD-19 and CD-3 cancer cells. Unlike engineered 
T[dash]cell therapy, BiTE does not have the ability to enhance the 
proliferative and cytolytic capacity of T-cells through ex-vivo 
engineering. Further, BiTE is approved for the treatment of patients 
who have been diagnosed with Philadelphia chromosome[dash]negative 
relapsed or refractory B-cell precursor acute lymphoblastic leukemia 
(ALL) and is not approved for patients with relapsed or refractory 
large B-cell lymphoma, whereas YESCARTATM is indicated for 
use in the treatment of adult patients with R/R aggressive B-cell NHL 
who are ineligible for ASCT.
    The applicant for YESCARTATM also indicated that its 
mechanism of action is not the same or similar to the mechanism of 
action used by KYMRIAHTM's currently available 
FDA[dash]approved CD-19-directed genetically modified autologous 
T[dash]cell immunotherapy indicated for use in the treatment of 
patients up to 25 years of age with B-cell precursor acute 
lymphoblastic leukemia (ALL) that is refractory or in second or later 
relapse.\32\ The applicant for YESCARTATM stated that the 
mechanism of action is different from KYMRIAHTM's 
FDA[dash]approved therapy because the spacer, transmembrane and co-
stimulatory domains of YESCARTATM are different from those 
of KYMRIAHTM. The applicant explained that 
YESCARTATM is comprised of a CD-28 co[dash]stimulatory 
domain and KYMRIAHTM has 4-1BB co-stimulatory domain. 
Further, the applicant stated the manufacturing processes of the two 
immunotherapies are also different, which may result in cell 
composition differences leading to possible efficacy and safety 
differences.
---------------------------------------------------------------------------

    \32\ Food and Drug Administration. Available at: 
www.accessdata.fda.gov/scripts/opdlisting/oopd/.
---------------------------------------------------------------------------

    While the applicant for YESCARTATM stated how its 
technology is different from KYMRIAHTM, because both 
technologies are CD-19-directed T[dash]cell immunotherapies used for 
the purpose of treating patients with aggressive variants of NHL, we 
believe that YESCARTATM and KYMRIAHTM are 
substantially similar treatment options. Furthermore, we also are 
concerned that there may be an age overlap (18 to 25) between the two 
different patient populations for the currently approved 
KYMRIAHTM technology and YESCARTATM technology. 
The currently approved KYMRIAHTM technology is indicated for 
use in the treatment of patients who are up to 25 years of age and 
YESCARTATM technology is indicated for use in the treatment 
of adult patients.
    As noted earlier, the applicant has asserted that 
YESCARTATM is not substantially similar to 
KYMRIAHTM. Under this scenario, if both 
YESCARTATM and KYMRIAHTM meet all of the new 
technology add-on payment criteria and are approved for new technology 
add-on payments for FY 2019, for purposes of making the new technology 
add[dash]on payment, because procedures utilizing either 
YESCARTATM or KYMRIAHTM CAR T-cell therapy drugs 
are reported using the same ICD-10-PCS procedure codes, in order to 
accurately pay the new technology add[dash]on payment to hospitals that 
perform procedures utilizing either technology, it may be necessary to 
use alternative coding mechanisms to make the new technology 
add[dash]on payments. CMS is inviting comments on alternative coding 
mechanisms to make the new technology add-on payments, if necessary.
    We are inviting public comments on whether KYMRIAHTM and 
YESCARTATM are substantially similar to existing 
technologies and whether the technologies meet the newness criterion.
    As we stated above, each applicant submitted separate analysis 
regarding the cost criterion for each of their products, and both 
applicants maintained that their product meets the cost criterion. We 
summarize each analysis below.
    With regard to the cost criterion, the applicant for 
KYMRIAHTM searched the FY 2016 MedPAR claims data file to 
identify potential cases representing patients who may be eligible for 
treatment using KYMRIAHTM. The applicant identified claims 
that reported an ICD-10-CM diagnosis code of: C83.30 (DLBCL, 
unspecified site); C83.31 (DLBCL, lymph nodes of head, face and neck); 
C83.32 (DLBCL, intrathoracic lymph nodes); C83.33 (DLBCL, intra-
abdominal lymph nodes); C83.34 (DLBCL, lymph nodes of axilla and upper 
limb); C83.35 (DLBCL, lymph nodes of inquinal region and lower

[[Page 20289]]

limb); C83.36 (DLBCL, intrapelvic lymph nodes); C83.37 (DLBCL, spleen); 
C83.38 (DLBCL, lymph nodes of multiple sites); or C83.39 (DLBCL, 
extranodal and solid organ sites). The applicant also identified 
potential cases where patients received chemotherapy using two 
encounter codes, Z51.11 (Antineoplastic chemotherapy) and Z51.12 
(Antineoplastic immunotherapy), in conjunction with DLBCL diagnosis 
codes.
    Applying the parameters above, the applicant for 
KYMRIAHTM identified a total of 22,589 DLBCL potential cases 
that mapped to 437 MS-DRGs. The applicant chose the top 20 MS-DRGs 
which made up a total of 15,451 potential cases at 68 percent of total 
cases. Of the 22,589 total DLBCL potential cases, the applicant also 
provided a breakdown of DLBCL potential cases where chemotherapy was 
used, and DLBCL potential cases where chemotherapy was not used. Of the 
6,501 DLBCL potential cases where chemotherapy was used, MS-DRGs 846 
and 847 accounted for 6,181 (95 percent) of the 6,501 cases. Of the 
16,088 DLBCL potential cases where chemotherapy was not used, the 
applicant chose the top 20 MS-DRGs which made up a total of 9,333 
potential cases at 58 percent of total cases. The applicant believed 
the distribution of patients that may be eligible for treatment using 
KYMRIAHTM will include a wide variety of MS-DRGs. As such, 
the applicant conducted an analysis of three scenarios: Potential DLBCL 
cases, potential DLBCL cases with chemotherapy, and potential DLBCL 
cases without chemotherapy.
    The applicant removed reported historic charges that would be 
avoided through the use of KYMRIAHTM. Next, the applicant 
removed 50 percent of the chemotherapy pharmacy charges that would not 
be required for patients that may be eligible to receive treatment 
using KYMRIAHTM. The applicant standardized the charges and 
then applied an inflation factor of 1.09357, which is the 2[dash]year 
inflation factor in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38527), 
to update the charges from FY 2016 to FY 2018. The applicant did not 
add charges for KYMRIAHTM to its analysis. However, the 
applicant provided a cost analysis related to the three categories of 
claims data it previously researched (that is, potential DLBCL cases, 
potential DLBCL cases with chemotherapy, and potential DLBCL cases 
without chemotherapy). The applicant's analysis showed the inflated 
average case[dash]weighted standardized charge per case for potential 
DLBCL cases, potential DLBCL cases with chemotherapy, and potential 
DLBCL cases without chemotherapy was $63,271, $39,723, and $72,781, 
respectively. The average case-weighted threshold amount for potential 
DLBCL cases, potential DLBCL cases with chemotherapy, and potential 
DLBCL cases without chemotherapy was $58,278, $48,190, and $62,355 
respectively. While the inflated average case-weighted standardized 
charge per case ($39,723) is lower than the average case-weighted 
threshold amount ($48,190) for potential DLBCL cases with chemotherapy, 
the applicant expects the cost of KYMRIAHTM to be higher 
than the new technology add-on payment threshold amount for all three 
cohorts. Therefore, the applicant maintained that it meets the cost 
criterion.
    We note that, as discussed earlier, in section II.F.2.d. of the 
preamble of this proposed rule, we are proposing to assign the ICD-10-
PCS procedure codes that describe procedures involving the utilization 
of these CAR T-cell therapy drugs and cases representing patients 
receiving treatment involving CAR T-cell therapy procedures to Pre-MDC 
MS-DRG 016 for FY 2019. Therefore, in addition to the analysis above, 
we compared the inflated average case[dash]weighted standardized charge 
per case from all three cohorts above to the average case-weighted 
threshold amount for MS-DRG 016. The average case-weighted threshold 
amount for MS-DRG 016 from Table 10 in the FY 2018 IPPS/LTCH PPS final 
rule is $161,058. Although the inflated average case-weighted 
standardized charge per case for all three cohorts ($63,271, $39,723, 
and $72,781) is lower than the average case-weighted threshold amount 
for MS-DRG 016, similar to above, the applicant expects the cost of 
KYMRIAHTM to be higher than the new technology add-on 
payment threshold amount for MS-DRG 016. Therefore, it appears that 
KYMRIAHTM would meet the cost criterion under this scenario 
as well.
    We appreciate the applicant's analysis. However, we note that the 
applicant did not provide information regarding which specific historic 
charges were removed in conducting its cost analysis. Nonetheless, we 
believe that even if historic charges were identified and removed, the 
applicant would meet the cost criterion because, as indicated, the 
applicant expects the cost of KYMRIAHTM to be higher than 
the new technology add-on payment threshold amounts listed earlier.
    We are inviting public comments on whether KYMRIAHTM 
meets the cost criterion.
    With regard to the cost criterion in reference to 
YESCARTATM, the applicant conducted the following analysis. 
The applicant examined FY 2016 MedPAR claims data restricted to 
patients discharged in FY 2016. The applicant included potential cases 
reporting an ICD-10 diagnosis code of C83.38. Noting that only MS-DRGs 
820 (Lymphoma and Leukemia with Major O.R. Procedure with MCC), 821 
(Lymphoma and Leukemia with Major O.R. Procedure with CC), 823 and 824 
(Lymphoma and Non[dash]Acute Leukemia with Other O.R. Procedure with 
MCC, with CC, respectively), 825 (Lymphoma and Non Acute Leukemia with 
Other O.R Procedure without CC/MCC), and 840, 841 and 842 (Lymphoma and 
Non-Acute Leukemia with MCC, with CC and without CC/MCC, respectively) 
consisted of 10 or more cases, the applicant limited its analysis to 
these 8 MS-DRGs. The applicant identified 827 potential cases across 
these MS-DRGs. The average case-weighted unstandardized charge per case 
was $126,978. The applicant standardized charges using FY 2016 
standardization factors and applied an inflation factor of 1.09357 from 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38527). The applicant for 
YESCARTATM did not include the cost of its technology in its 
analysis.
    Included in the average case-weighted standardized charge per case 
were charges for the current treatment components. Therefore, the 
applicant for YESCARTATM removed 20 percent of radiology 
charges to account for chemotherapy, and calculated the adjusted 
average case-weighted standardized charge per case by subtracting these 
charges from the standardized charge per case. Based on the 
distribution of potential cases within the eight MS-DRGs, the applicant 
case-weighted the final inflated average case-weighted standardized 
charge per case. This resulted in an inflated average case-weighted 
standardized charge per case of $118,575. Using the FY 2018 IPPS Table 
10 thresholds, the average case-weighted threshold amount was $72,858. 
Even without considering the cost of its technology, the applicant 
maintained that because the inflated average case-weighted standardized 
charge per case exceeds the average case-weighted threshold amount, the 
technology meets the cost criterion.
    We note that, as discussed earlier, in section II.F.2.d. of the 
preamble of this proposed rule, we are proposing to assign the ICD-10-
PCS procedure codes that describe procedures involving the utilization 
of these CAR T-cell therapy

[[Page 20290]]

drugs and cases representing patients receiving treatment involving CAR 
T-cell therapy procedures to Pre-MDC MS-DRG 016 for FY 2019. Therefore, 
in addition to the analysis above, we compared the inflated average 
case-weighted standardized charge per case ($118,575) to the average 
case-weighted threshold amount for MS-DRG 016. The average case-
weighted threshold amount for MS-DRG 016 from Table 10 in the FY 2018 
IPPS/LTCH PPS final rule is $161,058. Although the inflated average 
case-weighted standardized charge per case is lower than the average 
case-weighted threshold amount for MS-DRG 016, the applicant expects 
the cost of YESCARTATM to be higher than the new technology 
add-on payment threshold amount for MS-DRG 016. Therefore, it appears 
that YESCARTATM would meet the cost criterion under this 
scenario as well.
    We are inviting public comments on whether YESCARTATM 
technology meets the cost criterion.
    With regard to substantial clinical improvement for 
KYMRIAHTM, the applicant asserted that several aspects of 
the treatment represent a substantial clinical improvement over 
existing technologies. The applicant believed that KYMRIAHTM 
allows access for a treatment option for those patients who are unable 
to receive standard of care treatment. The applicant stated in its 
application that there are no currently FDA-approved treatment options 
for patients with R/R DLBCL who are ineligible for or who have failed 
ASCT. Additionally, the applicant maintained that KYMRIAHTM 
significantly improves clinical outcomes, including ORR, CR, OS, and 
durability of response, and allows for a manageable safety profile. The 
applicant asserted that, when compared to the historical control data 
(SCHOLAR-1) and the currently available treatment options, it is clear 
that KYMRIAHTM significantly improves clinical outcomes for 
patients with R/R DLBCL who are not eligible for ASCT. The applicant 
conveyed that, given that the patient population has no other available 
treatment options and an expected very short lifespan without therapy, 
there are no randomized controlled trials of the use of 
KYMRIAHTM in patients with R/R DLBCL and, therefore, 
efficacy assessments must be made in comparison to historical control 
data. The SCHOLAR-1 study is the most comprehensive evaluation of the 
outcome of patients with refractory DLBCL. SCHOLAR-1 includes patients 
from two large randomized controlled trials (Lymphoma Academic Research 
Organization-CORAL and Canadian Cancer Trials Group LY.12) and two 
clinical databases (MD Anderson Cancer Center and University of Iowa/
Mayo Clinic Lymphoma Specialized Program of Research Excellence).\33\
---------------------------------------------------------------------------

    \33\ Crump, M., Neelapu, S.S., Farooq, U., et al., ``Outcomes in 
refractory diffuse large B-cell lymphoma: results from the 
international SCHOLAR-1 study,'' Blood, Published online: August 3, 
2017, doi: 10.1182/blood-2017-03-769620.
---------------------------------------------------------------------------

    The applicant for KYMRIAHTM conveyed that the PARMA 
study established high-dose chemotherapy and ASCT as the standard 
treatment for patients with R/R DLBCL.\34\ However, according to the 
applicant, many patients with R/R DLBCL are ineligible for ASCT because 
of medical frailty. Patients who are ineligible for ASCT because of 
medical frailty would also be adversely affected by high-dose 
chemotherapy regimens.\35\ Lowering the toxicity of chemotherapy 
regimens becomes the only treatment option, leaving patients with 
little potential for therapeutic outcomes. According to the applicant, 
the lack of efficacy of these aforementioned salvage regimens was 
demonstrated in nine studies evaluating combined chemotherapeutic 
regimens in patients who were either refractory to first[dash]line or 
first salvage. Chemotherapy response rates ranged from 0 percent to 23 
percent with OS less than 10 months in all studies.\36\ For patients 
who do not respond to combined therapy regimens, the National 
Comprehensive Cancer Network (NCCN) offers only clinical trials or 
palliative care as therapeutic options.\37\
---------------------------------------------------------------------------

    \34\ Philip, T., Guglielmi, C., Hagenbeek, A., et al., 
``Autologous bone marrow transplantation as compared with salvage 
chemotherapy in relapses of chemotherapy-sensitive non-Hodgkin's 
lymphoma,'' N Engl J Med, 1995, vol. 333(23), pp. 1540-1545.
    \35\ Friedberg, J.W., ``Relapsed/refractory diffuse large B-cell 
lymphoma,'' Hematology AM Soc Hematol Educ Program, 2011, vol. (1), 
pp. 498-505.
    \36\ Crump, M., Neelapu, S.S., Farooq, U., et al., ``Outcomes in 
refractory diffuse large B-cell lymphoma: results from the 
international SCHOLAR-1 study,'' Blood, Published online: August 3, 
2017, doi: 10.1182/blood-2017-03-769620.
    \37\ National Comprehensive Cancer Network, NCCN Clinical 
Practice Guidelines in Oncology (NCCN GuidelinesR), ``B-cell 
lymphomas: Diffuse large b-cell lymphoma and follicular lymphoma 
(Version 3.2017),'' May 25, 2017. Available at: https://www.nccn.org/professionals/physician_gls/pdf/b-cell_blocks.pdf.
---------------------------------------------------------------------------

    According to the applicant for KYMRIAHTM, the 
immunomodulatory agent Lenalidomide was only able to show an ORR of 30 
percent, a CR rate of 8 percent, and a 4.6-month median duration of 
response.\38\ M[dash]tor inhibitors such as Everolimus and Temserolimus 
have been studied as single agents, or in combination with Rituximab, 
as have newer monoclonal antibodies Dacetuzumab, Ofatumomab and 
Obinutuzumab. However, none induced a CR rate higher than 20 percent or 
showed a median duration of response longer than 1 year.\39\
---------------------------------------------------------------------------

    \38\ Klyuchnikov, E., Bacher, U., Kroll, T., et al., 
``Allogeneic hematopoietic cell transplantation for diffuse large B 
cell lymphoma: who, when and how?,'' Bone Marrow Transplant, 2014, 
vol. 49(1), pp. 1-7.
    \39\ Ibid.
---------------------------------------------------------------------------

    According to the applicant, although controversial, allogeneic stem 
cell transplantation (allo-SCT) has been proposed for patients who have 
been diagnosed with R/R disease. It is hypothesized that the malignant 
cell will be less able to escape the immune targeting of allogenic T-
cells--known as the graft-vs-lymphoma effect.\40\ \41\ The use of allo-
SCT is limited in patients who are not eligible for ASCT because of the 
high rate of morbidity and mortality. This medically frail population 
is generally excluded from participation. The population most impacted 
by this is the elderly, who are often excluded based on age alone. In 
seven studies evaluating allo-SCT in patients with R/R DLBCL, the 
median age at transplant was 43 years old to 52 years old, considerably 
lower than the median age of patients with DLBCL of 64 years old. Only 
two studies included any patients over 66 years old. In these studies, 
allo-SCT provided OS rates ranging from 18 percent to 52 percent at 3 
to 5 years, but was accompanied by treatment-related mortality rates 
ranging from 23 percent to 56 percent.\42\ According to the applicant, 
this toxicity and efficacy profile of allo-SCT substantially limits its 
use, especially in patients 65 years old and older. Given the high 
unmet medical need, the applicant maintained that KYMRIAHTM 
represents a substantial clinical improvement by offering a treatment 
option for a patient population unresponsive to, or ineligible for, 
currently available treatments.
---------------------------------------------------------------------------

    \40\ Ibid.
    \41\ Maude, S.L., Teachey, D.T., Porter, D.L., Grupp, S.A., 
``CD19-targeted chimeric antigen receptor T-cell therapy for acute 
lymphoblastic leukemia,'' Blood, 2015, vol. 125(26), pp. 4017-4023.
    \42\ Klyuchnikov, E., Bacher, U., Kroll, T., et al., 
``Allogeneic hematopoietic cell transplantation for diffuse large B 
cell lymphoma: who, when and how?,'' Bone Marrow Transplant, 2014, 
vol. 49(1), pp. 1-7.
---------------------------------------------------------------------------

    To express how KYMRIAHTM has improved clinical outcomes, 
including ORR, CR rate, OS, and durability of response, the applicant 
referenced clinical trials in which KYMRIAHTM was tested. 
Study 1 was a single[dash]arm, open[dash]label, multi[dash]site, global 
Phase II study to determine the safety and efficacy of tisagenlecleucel 
in patients

[[Page 20291]]

with R/R DLBCL (CCTL019C2201/CT02445248/`JULIET' study).\43\ \44\ \45\ 
Key inclusion criteria included patients who were 18 years old and 
older, patients with refractory to at least two lines of chemotherapy 
and either relapsed post ASCT or who were ineligible for ASCT, 
measurable disease at the time of infusion, and adequate organ and bone 
marrow function. The study was conducted in three phases. In the 
screening phase patient eligibility was assessed and patient cells 
collected for product manufacture. Patients were also able to receive 
bridging, cytotoxic chemotherapy during this time. In the pre-treatment 
phase patients underwent a restaging of disease followed by 
lymphodepleting chemotherapy with fludarabine 25mg/m2 x3 and 
cyclophosphamide 250mg/m2/d x3 or bendamustine 90mg/m2/d x2 days. The 
treatment and follow[dash]up phase began 2 to 14 days after 
lymphodepleting chemotherapy, when the patient received a single 
infusion of tisagenlecleucel with a target dose of 5x10\8\ CTL019 
transduced viable cells. The primary objective was to assess the 
efficacy of tisagenlecleucel, as measured by the best overall response 
(BOR), which was defined as CR or partial response (PR). It was 
assessed on the Chesson 2007 response criteria amended by Novartis 
Pharmaceutical Corporation as confirmed by an Independent Review 
Committee (IRC). One hundred forty-seven patients were enrolled, and 99 
of them were infused with tisagenlecleucel. Forty-three patients 
discontinued prior to infusion (9 due to inability to manufacture and 
34 due to patient[dash]related issues).\46\ The median age of treated 
patients was 56 years old with a range of 24 to 75; 20 percent were 
older than 65 years old. Patients had received 2 to 7 prior lines of 
therapy, with 60 percent receiving 3 or more therapies, and 51 percent 
having previously undergone ASCT. A primary analysis was performed on 
81 patients infused and followed for more than or at least 3 months. In 
this primary analysis, the BOR was 53 percent; the study met its 
primary objective based on statistical analysis (that is, testing 
whether BOR was greater than 20 percent, a clinically relevant 
threshold chosen based on the response to chemotherapy in a patient 
with R/R DLBCL). Forty-three percent (43 percent) of evaluated patients 
reached a CR, and 14 percent reached a PR. ORR evaluated at 3 months 
was 38 percent with a distribution of 32 percent CR and 6 percent PR. 
All patients in CR at 3 months continued to be in CR. ORR was similar 
across subgroups including 64.7 percent response in patients who were 
older than 65 years old, 61.1 percent response in patients with Grade 
III/IV disease at the time of enrollment, 58.3 percent response in 
patients with Activated B[dash]cell, 52.4 percent response in patients 
with Germinal Center B[dash]cell subtype, and 60 percent response in 
patients with double and triple hit lymphoma. Durability of response 
was assessed based on relapse free survival (RFS), which was estimated 
at 74 percent at 6 months.
---------------------------------------------------------------------------

    \43\ Data on file, Oncology clinical trial protocol 
CCTL019C2201: ``A Phase II, single[dash]arm, multi[dash]center trial 
to determine the efficacy and safety of CTL019 in adult patients 
with relapsed or refractory diffuse large Bcell lymphoma (DLBCL),'' 
Novartis Pharmaceutical Corp, 2015.
    \44\ Schuster, S.J., Bishop, M.R., Tam, C., et al., ``Global 
trial of the efficacy and safety of CTL019 in adult patients with 
relapsed or refractory diffuse large B-cell lymphoma: an interim 
analysis,'' Presented at: 22nd Congress of the European Hematology 
Association, June 22-25, 2017, Madrid, Spain.
    \45\ ClinicalTrials.gov, ``Study of efficacy and safety of 
CTL019 in adult DLBCL patients (JULIET).'' Available at: https://clinicaltrials.gov/ct2/show/NCT02445248.
    \46\ Schuster, S.J., Bishop, M.R., Tam, C., et al., ``Global 
trial of the efficacy and safety of CTL019 in adult patients with 
relapsed or refractory diffuse large B-cell lymphoma: an interim 
analysis,'' Presented at: 22nd Congress of the European Hematology 
Association, June 22-25, 2017, Madrid, Spain.
---------------------------------------------------------------------------

    The applicant for KYMRIAHTM reported that Study 2 was a 
supportive Phase IIa single institution study of adults who were 
diagnosed with advanced CD19+ NHL conducted at the University of 
Pennsylvania.\47\ \48\ Tisagenlecleucel cells were produced at the 
University of Pennsylvania using the same genetic construct and a 
similar manufacturing technique as employed in Study 1. Key inclusion 
criteria included patients who were at least 18 years old, patients 
with CD19+ lymphoma with no available curative options, and measurable 
disease at the time of enrollment. Tisagenlecleucel was delivered in a 
single infusion 1 to 4 days after restaging and lymphodepleting 
chemotherapy. The median tisagenlecleucel cell dose was 5.0 x 108 
transduced cells. The study enrolled 38 patients; of these, 21 were 
diagnosed with DLBCL and 13 received treatment involving 
KYMRIAHTM. Patients ranged in age from 25 to 77 years old, 
and had a median of 4 prior therapies. Thirty-seven percent had 
undergone ASCT and 63 percent were diagnosed with Grade III/IV disease. 
ORR at 3 months was 54 percent. Progression free survival was 43 
percent at a median follow[dash]up of 11.7 months. Safety and efficacy 
results are similar to those of the multi-center study.
---------------------------------------------------------------------------

    \47\ ClinicalTrials.gov, ``Phase IIa study of redirected 
autologous T[dash]cells engineered to contain anti-CD19 attached to 
TCRz and 4-signaling domains in patients with chemotherapy relapsed 
or refractory CD19+ lymphomas,'' Available at: https://clinicaltrials.gov/ct2/show/NCT02030834.
    \48\ Schuster, S.J., Svoboda, J., Nasta, S.D., et al., 
``Sustained remissions following chimeric antigen receptor modified 
T-cells directed against CD-19 (CTL019) in patients with relapsed or 
refractory CD19+ lymphomas,'' Presented at: 57th Annual Meeting of 
the American Society of Hematology, December 6, 2015, Orlando, FL.
---------------------------------------------------------------------------

    The applicant for KYMRIAHTM reported that Study 3 was a 
supportive, patient[dash]level meta-analysis of historical outcomes in 
patients who were diagnosed with refractory DLBCL (SCHOLAR-1).\49\ This 
study included a pooled data analysis of two Phase III clinical trials 
(Lymphoma Academic Research Organization-CORAL and Canadian Cancer 
Trials Group LY.12) and two observational cohorts (MD Anderson Cancer 
Center and University of Iowa/Mayo Clinic Lymphoma Specialized Program 
of Research Excellence). Refractory disease was defined as progressive 
disease or stable disease as best response to chemotherapy (received 
more than or at least 4 cycles of first-line therapy or 2 cycles of 
later[dash]line therapy, respectively) or relapse in less than or at 12 
months post-ASCT. Of 861 abstracted records, 636 were included based on 
these criteria. All patients from each data source who met criteria for 
diagnosis of refractory DLBCL, including TFL and PMBCL, who went on to 
receive subsequent therapy were considered for analysis. Patients who 
were diagnosed with TFL and PMBCL were included because they are 
histologically similar and clinically treated as large cell lymphoma. 
Response rates were similar across the 4 datasets, ranging from 20 
percent to 31 percent, with a pooled response rate of 26 percent. CR 
rates ranged from 2 percent to 15 percent, with a pooled CR rate of 7 
percent. Subgroup analyses including patients with primary refractory, 
refractory to second or later[dash]line therapy, and relapse in less 
than 12 months post-ASCT revealed response rates similar to the pooled 
analysis, with worst outcomes in the primary refractory group (20 
percent). OS from the commencement of therapy was 6.3 months and was 
similar across subgroup analyses. Achieving a CR after last salvage 
chemotherapy predicted a longer OS of 14.9 months compared to 4.6 
months in nonresponders. Patients who had not undergone ASCT had an OS 
of 5.1

[[Page 20292]]

months with a 2 year OS rate of 11 percent.
---------------------------------------------------------------------------

    \49\ Crump, M., Neelapu, S.S., Farooq, U., et al., ``Outcomes in 
refractory diffuse large B-cell lymphoma: results from the 
international SCHOLAR-1 study,'' Blood, Published online: August 3, 
2017, doi: 10.1182/blood-2017-03-769620.
---------------------------------------------------------------------------

    The applicant asserted that KYMRIAHTM provides a 
manageable safety profile when treatment is performed by trained 
medical personnel and, as opposed to ASCT, KYMRIAHTM 
mitigates the need for high-dose chemotherapy to induce response prior 
to infusion. Adverse events were most common in the 8 weeks following 
infusion and were manageable by a trained staff. Cytokine Relapse 
Syndrome (CRS) occurred in 58 percent of patients with 23 percent 
having Grade III or IV events as graded on the University of 
Pennsylvania grading system.\50\ \51\ Median time to onset of CRS was 3 
days and median duration was 7 days with a range of 2 to 30 days. 
Twenty[dash]four percent of the patients required ICU admission. CRS 
was managed with supportive care in most patients. However, 16 percent 
required anti-cytokine therapy including tocilizumab (15 percent) and 
corticosteroids (11 percent). Other adverse events of special interest 
include infection in 34 percent (20 percent Grade III or IV) of 
patients, cytopenias not resolved by day 28 in 36 percent (27 percent 
Grade III or IV) of patients, neurologic events in 21 percent (12 
percent Grade III or IV) of patients, febrile neutropenia in 13 percent 
(13 percent Grade III or IV) of patients, and tumor lysis syndrome 1 
percent (1 percent Grade III). No deaths were attributed to 
tisagenlecleucel including no fatal cases of CRS or neurologic events. 
No cerebral edema was observed.\52\ Study 2 safety results were 
consistent to those of Study 1.\53\
---------------------------------------------------------------------------

    \50\ ClinicalTrials.gov, ``Phase IIa study of redirected 
autologous T-cells engineered to contain anti-CD19 attached to TCRz 
and 4-signaling domains in patients with chemotherapy relapsed or 
refractory CD19+ lymphomas.'' Available at: https://clinicaltrials.gov/ct2/show/NCT02030834.
    \51\ Schuster, S.J., Svoboda, J., Nasta, S.D., et al., 
``Sustained remissions following chimeric antigen receptor modified 
T-cells directed against CD-19 (CTL019) in patients with relapsed or 
refractory CD19+ lymphomas,'' Presented at: 57th Annual Meeting of 
the American Society of Hematology, December 6, 2015, Orlando, FL.
    \52\ Schuster, S.J., Bishop, M.R., Tam, C., et al., ``Global 
trial of the efficacy and safety of CTL019 in adult patients with 
relapsed or refractory diffuse large B-cell lymphoma: an interim 
analysis,'' Presented at: 22nd Congress of the European Hematology 
Association, June 22-25, 2017, Madrid, Spain.
    \53\ Ibid.
---------------------------------------------------------------------------

    After reviewing the studies provided by the applicant, we are 
concerned that the applicant included patients who were diagnosed with 
TFL and PMBCL in the SCHOLAR-1 data results for their comparison 
analysis, possibly skewing results. Furthermore, the discontinue rate 
of the JULIET trial was high. Of 147 patients enrolled for infusion 
involving KYMRIAHTM, 43 discontinued prior to infusion (9 
discontinued due to inability to manufacture, and 34 discontinued due 
to patient[dash]related issues). Finally, the rate of patients who 
experienced a diagnosis of CRS was high, 58 percent.\54\
---------------------------------------------------------------------------

    \54\ Schuster, S.J., Bishop, M.R., Tam, C., et al., ``Global 
trial of the efficacy and safety of CTL019 in adult patients with 
relapsed or refractory diffuse large B-cell lymphoma: an interim 
analysis,'' Presented at: 22nd Congress of the European Hematology 
Association, June 22-25, 2017, Madrid, Spain.
---------------------------------------------------------------------------

    The applicant for YESCARTATM stated that 
YESCARTATM represents a substantial clinical improvement 
over existing technologies when used in the treatment of patients with 
aggressive B-cell NHL. The applicant asserted that 
YESCARTATM can benefit the patient population with the 
highest unmet need, patients with R/R disease after failure of first-
line or second-line therapy, and patients who have failed or who are 
ineligible for ASCT. These patients, otherwise, have adverse outcomes 
as demonstrated by historical control data.
    Regarding clinical data for YESCARTATM, the applicant 
stated that historical control data was the only ethical and feasible 
comparison information for these patients with chemorefractory, 
aggressive NHL who have no other available treatment options and who 
are expected to have a very short lifespan without therapy. According 
to the applicant, based on meta-analysis of outcomes in patients with 
chemorefractory DLBCL, there are no curative options for patients with 
aggressive B-cell NHL, regardless of refractory subgroup, line of 
therapy, and disease stage with their median OS being 6.6 months.\55\
---------------------------------------------------------------------------

    \55\ Seshardi, T., et al., ``Salvage therapy for relapsed/
refractory diffuse large B-cell lymphoma,'' Biol Blood Marrow 
Transplant, 2008 Mar, vol. 14(3), pp. 259-67.
---------------------------------------------------------------------------

    In the applicant's FY 2018 new technology add-on payment 
application for the KTE-C19 technology, which was discussed in the FY 
2018 IPPS/LTCH PPS proposed rule (82 FR 19889), the applicant cited 
ongoing clinical trials. The applicant provided updated data related to 
these ongoing clinical trials as part of its FY 2019 application for 
YESCARTATM.\56\ \57\ \58\ The updated analysis of the 
pivotal Study 1 (ZUMA-1, KTE-C19-101), Phase I and II occurred when 
patients had been followed for 12 months after infusion of 
YESCARTATM. Study 1 is a Phase I-II multi[dash]center, 
open[dash]label study evaluating the safety and efficacy of the use of 
YESCARTATM in patients with aggressive refractory NHL. The 
trial consists of two distinct phases designed as Phase I (n=7) and 
Phase II (n=101). Phase II is a multi-cohort open[dash]label study 
evaluating the efficacy of YESCARTATM.\59\ 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 ORR. After 6 and 12 months, the ORR was 82 and 83 
percent, respectively. Consistent response rates were observed in both 
Study 1, Cohort 1 (DLBCL; n=77) and Cohort 2 (PMBCL or TFL; n=24) and 
across covariates including disease stage, age, IPI scores, CD-19 
status, and refractory disease subset. In the updated analysis, results 
were consistent across age groups. In this analysis, 39 percent of 
patients younger than 65 years old were in ongoing response, and 50 
percent of patients at least 65 years old or older were in ongoing 
response. Similarly, the survival rate at 12 months was 57 percent 
among patients younger than 65 years old and 71 percent among patients 
at least 65 years old or older versus historical control of 26 percent. 
The applicant further stated that evidence of substantial clinical 
improvement regarding the efficacy of YESCARTATM for the 
treatment of patients with chemorefractory, aggressive B-cell NHL is 
supported by the CR of YESCARTATM in Study 1, Phase II (54 
percent) versus the historical control (7 percent).\60\ \61\ \62\ \63\

[[Page 20293]]

The applicant noted that CR rates were observed in both Study 1, Cohort 
1. The applicant reported that, in the updated analysis, results were 
in ongoing response (46 percent of patients at least 65 years old or 
older were in ongoing response). Similarly, the survival rate at 12 
months was 57 percent among patients younger than 65 years old and 71 
percent among patients at least 65 years old or older.\64\ \65\ \66\ 
\67\ The applicant also provided the following tables to depict data to 
support substantial clinical improvement (we refer readers to the two 
tables below).
---------------------------------------------------------------------------

    \56\ Locke, F.L., et al., ``Ongoing complete remissions in Phase 
1 of ZUMA-1: A phase I-II multicenter study evaluating the safety 
and efficacy of KTE-C19 (anti-CD19 CAR T cells) in patients with 
refractory aggressive B-cell non-Hodgkin lymphoma (NHL),'' Oral 
presentation (abstract 10480) presented at European Society for 
Medical Oncology (ESMO), October 2016.
    \57\ Locke, F.L., et al., ``Primary results from ZUMA-1: A 
pivotal trial of axicabtagene ciloretroleucel (axi-cel; KTE-C19) in 
patients with refractory aggressive non-Hodgkins lymphoma (NHL),'' 
Oral presentation, American Association of Cancer Research (AACR).
    \58\ Locke, F.L., et al., ``Phase I results of ZUMA-1: A 
multicenter study of KTE-C19 anti-CD19 CAR T cell therapy in 
refractory aggressive lymphoma,'' Mol Ther, vol. 25, No 1, January 
2017.
    \59\ Neelapu, S.S., Locke, F.L., et al., 2016, ``KTE-C19 (anti-
CD19 CAR T cells) induces complete remissions in patients with 
refractory diffuse large B-cell lymphoma (DLBCL): Results from the 
pivotal Phase II ZUMA-1,'' Abstract presented at American Society of 
Hematology (ASH) 58th Annual Meeting, December 2016.
    \60\ Locke, F.L., et al., ``Ongoing complete remissions in Phase 
I of ZUMA-1: a phase I-II multicenter study evaluating the safety 
and efficacy of KTE-C19 (anti-CD19 CAR T cells) in patients with 
refractory aggressive B-cell non-Hodgkin lymphoma (NHL),'' Oral 
presentation (abstract 10480) presented at European Society for 
Medical Oncology (ESMO), October 2016.
    \61\ Locke, F.L., et al., ``Primary results from ZUMA-1: a 
pivotal trial of axicabtagene ciloretroleucel (axi-cel; KTE-C19) in 
patients with refractory aggressive non-Hodgkins lymphoma (NHL),'' 
Oral presentation, American Association of Cancer Research (AACR).
    \62\ Locke, F.L., et al., ``Phase I results of ZUMA-1: A 
multicenter study of KTE-C19 anti-CD19 CAR T cell therapy in 
refractory aggressive lymphoma,'' Mol Ther, vol. 25, No 1, January 
2017.
    \63\ Crump, et al., 2017, ``Outcomes in refractory diffuse large 
B-cell lymphoma: Results from the international SCHOLAR-1 study,'' 
Blood, vol. 0, 2017, pp. blood-2017-03-769620v1.
    \64\ Locke, F.L., et al., ``Ongoing complete remissions in Phase 
I of ZUMA-1: A phase I-II multicenter study evaluating the safety 
and efficacy of KTE-C19 (anti-CD19 CAR T cells) in patients with 
refractory aggressive B-cell non-Hodgkin lymphoma (NHL),'' Oral 
presentation (abstract 10480) presented at European Society for 
Medical Oncology (ESMO), October 2016.
    \65\ Locke, F.L., et al., ``Primary results from ZUMA-1: A 
pivotal trial of axicabtagene ciloretroleucel (axi-cel; KTE-C19) in 
patients with refractory aggressive non-Hodgkins lymphoma (NHL),'' 
Oral presentation, American Association of Cancer Research (AACR).
    \66\ Locke, F.L., et al., ``Phase I results of ZUMA-1: A 
multicenter study of KTE-C19 anti-CD19 CAR T cell therapy in 
refractory aggressive lymphoma,'' Mol Ther, vol. 25, No 1, January 
2017.
    \67\ Crump, et al., ``Outcomes in refractory diffuse large B-
cell lymphoma: Results from the international SCHOLAR-1 study,'' 
Blood, vol. 0, 2017, pp. blood-2017-03-769620v1.

                      Overall Response Rates Across All YESCARTA\TM\ Studies vs. SCHOLAR-1
----------------------------------------------------------------------------------------------------------------
                                        Study 1, Phase                                               Scholar-1
                   %                         I n=7               Study 1, Phase II n=101               n=529
----------------------------------------------------------------------------------------------------------------
Overall Response Rate (%).............              71  83......................................              26
Month 6 (%)...........................              43  41......................................  ..............
Ongoing with >15 Months of follow-up                43  42......................................  ..............
 (%).
Ongoing with >18 Months of follow-up                43  Follow-up ongoing.......................  ..............
 (%).
----------------------------------------------------------------------------------------------------------------


      Results for YESCARTA\TM\ Study 1, Phase II: Complete Response
------------------------------------------------------------------------
                                               Study 1, Phase II n=101
------------------------------------------------------------------------
Complete Response (%) (95 Percent           54 (44,64).
 Confidence Interval).
Duration of Response, median (range in      not reached.
 months).
Ongoing Responses, CR (%); Median 8.7       39.
 months follow-up; median overall survival
 has not been reached.
Ongoing Responses, CR (%); Median 15.3      40.
 months follow-up; median overall survival
 has not been reached.
------------------------------------------------------------------------

    According to the applicant, the 6-month and 12-month survival rates 
(95 percent CI) for patients enrolled in the SCHOLAR-1 study were 53 
percent (49 percent, 57 percent) and 28 percent (25 percent, 32 
percent).\68\ In contrast, the 6-month and 12-month survival rates (95 
percent CI) in the Study 1 updated analysis were 79 percent (70 
percent, 86 percent) and 60 percent (50 percent, 69 percent).\69\ \70\ 
\71\
---------------------------------------------------------------------------

    \68\ Crump, et al., ``Outcomes in refractory diffuse large B-
cell lymphoma: results from the international SCHOLAR-1 study,'' 
Blood, vol. 0, 2017, pp. blood-2017-03-769620v1.
    \69\ Locke, F.L., et al., ``Ongoing complete remissions in Phase 
I of ZUMA-1: a phase I-II multicenter study evaluating the safety 
and efficacy of KTE-C19 (anti-CD19 CAR T cells) in patients with 
refractory aggressive B-cell non-Hodgkin lymphoma (NHL),'' Oral 
presentation (abstract 10480) presented at European Society for 
Medical Oncology (ESMO), October 2016.
    \70\ Locke, F.L., et al., ``Primary results from ZUMA-1: a 
pivotal trial of axicabtagene ciloretroleucel (axi-cel; KTE-C19) in 
patients with refractory aggressive non-Hodgkins lymphoma (NHL),'' 
Oral presentation, American Association of Cancer Research (AACR).
    \71\ Locke, F.L., et al., ``Phase I results of ZUMA-1: a 
multicenter study of KTE-C19 anti-CD19 CAR T cell therapy in 
refractory aggressive lymphoma,'' Mol Ther, vol. 25, No 1, January 
2017.
---------------------------------------------------------------------------

    The applicant also cited safety results from the pivotal Study 1, 
Phase II. According to the applicant, the clinical trial protocol 
stipulated that patients were infused with YESCARTATM in the 
hospital inpatient setting and were monitored in the inpatient setting 
for at least 7 days for early identification and treatment involving 
YESCARTATM-related toxicities, which primarily included CRS 
diagnoses and neurotoxicities. The applicant noted that the interim 
analysis showed the length of stay following infusion of 
YESCARTATM was a median of 15 days. Ninety-three percent of 
patients experienced CRS diagnoses, 13 percent of whom experienced 
Grade III or higher (severe, life threatening or fatal) CRS diagnoses. 
The median time to onset of CRS diagnosis was 2 days (range 1 to 12 
days) and the median time to resolution was 8 days. Ninety-eight 
percent of patients recovered from CRS diagnosis. Neurologic events 
occurred in 64 percent of patients, 28 percent of whom experienced 
Grade III or higher (severe or life threatening) events. The median 
time to onset of neurologic events was 5 days (range 1 to 17 days). The 
median time to resolution was 17 days. Nearly all patients recovered 
from neurologic events. The medications most often used to treat these 
complications included growth factors, blood products, anti-infectives, 
steroids, tocilizumab, and vasopressors. Two patients died from 
YESCARTATM-related adverse events (hemophagocytic 
lymphohistiocytosis and cardiac arrest in the hospital setting as a 
result of CRS diagnoses). According to the applicant, there were no 
clinically important differences in adverse event rates across age 
groups (younger than 65 years old; 65 years old or older), including 
CRS diagnoses and neurotoxicity.\72\ \73\
---------------------------------------------------------------------------

    \72\ Locke, F.L., et al., ``Ongoing complete remissions in Phase 
I of ZUMA-1: a phase I-II multicenter study evaluating the safety 
and efficacy of KTE-C19 (anti-CD19 CAR T cells) in patients with 
refractory aggressive B-cell non-Hodgkin lymphoma (NHL),'' Oral 
presentation (abstract 10480) presented at European Society for 
Medical Oncology (ESMO), October 2016.
    \73\ Locke, F.L., et al., ``Primary results from ZUMA-1: a 
pivotal trial of axicabtagene ciloretroleucel (axi-cel; KTE-C19) in 
patients with refractory aggressive non-Hodgkins lymphoma (NHL),'' 
Oral presentation, American Association of Cancer Research (AACR).
---------------------------------------------------------------------------

    The applicant for YESCARTATM provided information 
regarding a safety expansion cohort, Study 1 Phase II Safety Expansion 
Cohort 3 that was created and carried out in 2017.

[[Page 20294]]

According to the applicant, this Safety Expansion Cohort investigated 
measures to mitigate the incidence and/or severity of anti-CD-19 CAR T 
therapy and evaluated an adverse event mitigation strategy by 
prophylactically using levetiracetam (Keppra), an anticonvulsant, and 
tocilizumab, an IL-6 receptor inhibitor. Of the 30 patients treated, 2 
patients experienced Grade III CRS diagnoses; 1 of the 2 patients 
recovered. In late April 2017, the other patient also experienced 
multi-organ failure and a neurologic event that subsequently progressed 
to a fatal Grade V cerebral edema that was deemed related to 
YESCARTATM treatment. This case of cerebral edema was 
observed in a 21 year-old male with refractory, rapidly progressive, 
symptomatic, stage IVB PMBCL. Analysis of the baseline serum and 
cerebrospinal fluid (CSF) obtained prior to any study treatment 
demonstrated high cytokine and chemokine levels. According to the 
applicant, this suggests a significant preexisting underlying 
inflammatory process, both systemically and within the central nervous 
system. Rapidly progressing disease, recent mediastinal XRT (external 
beam radiation therapy) and/or CMV (cytomegalovirus) reactivation may 
have contributed to the pre-existing state. There were no prior cases 
of cerebral edema in the 200 patients who have been treated with 
YESCARTATM in the ZUMA clinical development program. The 
single patient event from the Study 1 Phase II Safety Expansion Cohort 
3 was the first Grade V cerebral edema event.\74\ \75\
---------------------------------------------------------------------------

    \74\ Locke, F.L., et al., ``Ongoing complete remissions in Phase 
I of ZUMA-1: a phase I-II multicenter study evaluating the safety 
and efficacy of KTE-C19 (anti-CD19 CAR T cells) in patients with 
refractory aggressive B-cell non-Hodgkin lymphoma (NHL),'' Oral 
presentation (abstract 10480) presented at European Society for 
Medical Oncology (ESMO), October 2016.
    \75\ Locke, F.L., et al., ``Primary results from ZUMA-1: a 
pivotal trial of axicabtagene ciloretroleucel (aci-cel; KTE-C19) in 
patients with refractory aggressive non-Hodgkins lymphoma (NHL),'' 
Oral presentation, American Association of Cancer Research (AACR).
---------------------------------------------------------------------------

    After reviewing the information submitted by the applicant as part 
of its FY 2019 new technology add-on payment application for 
YESCARTATM, we are concerned that it does not appear to 
include patient mortality data that was included as part of the 
applicant's FY2018 new technology add-on payment application for the 
KTE-C19 technology. In that application, as discussed in the FY 2018 
IPPS/LTCH PPS proposed rule (82 FR 19890), the applicant provided that 
by an earlier 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 patient had disease 
progression after receiving KTE-C19 treatment and subsequently had 
ASCT. After ASCT, the patient died due to sepsis. Two patients (3 
percent) died due to KTE-C19[dash]related adverse events (Grade V 
hemophagocytic lymphohistiocytosis event and Grade V anoxic brain 
injury), and one died due to an adverse event deemed unrelated to 
treatment involving KTE-C19 (Grade V pulmonary embolism), without 
disease progression. We believe it would be relevant to include this 
information because it is related to the same treatment that is the 
subject of the applicant's FY 2019 new technology add-on payment 
application.
    We also are concerned that there are few published results showing 
any survival benefits from the use of this treatment. In addition, we 
are concerned with the limited number of patients (n=108) that were 
studied after infusion involving YESCARTATM T-cell 
immunotherapy. Finally, we are concerned about the data related to the 
percentage of patients who experience complications or toxicities 
related to YESCARTATM treatment. According to the applicant, 
of the patients who participated in YESCARTATM clinical 
trials, 93 percent developed CRS diagnoses and 64 percent experienced 
neurological adverse events.
    We are inviting public comments on whether KYMRIAHTM and 
YESCARTATM meet the substantial clinical improvement 
criterion.
    Finally, we believe that in the context of these pending new 
technology add-on payment applications, there may also be merit in the 
suggestions from the public to create a new MS-DRG for the assignment 
of procedures involving the utilization of CAR T-cell therapy drugs and 
cases representing patients who receive treatment involving CAR 
T[dash]cell therapy as an alternative to our proposed MS-DRG assignment 
to MS-DRG 016 for FY 2019, or the suggestions to allow hospitals to 
utilize a CCR specific to procedures involving the utilization of 
KYMRIAHTM and YESCARTATM CAR T-cell therapy drugs 
for FY 2019 as part of the determination of the cost of a case for 
purposes of calculating outlier payments for individual FY 2019 cases, 
new technology add-on payments, if approved, for individual FY 2019 
cases, and payments to IPPS-excluded cancer hospitals beginning in FY 
2019. If as discussed in section II.F.2.d. of the preamble of this 
proposed rule a new MS-DRG were to be created, then consistent with 
section 1886(d)(5)(K)(ix) of the Act there may no longer be a need for 
a new technology add-on payment under section 1886(d)(5)(K)(ii)(III) of 
the Act. With respect to an alternative considered for the use of a CCR 
specific to procedures involving the utilization of 
KYMRIAHTM and YESCARTATM CAR T[dash]cell therapy 
drugs for FY 2019 as part of the determination of the cost of a case 
for purposes of calculating outlier payments for individual FY 2019 
cases, new technology add-on payments, if approved, for individual FY 
2019 cases, and payments to IPPS-excluded cancer hospitals beginning in 
FY 2019, we refer readers to the discussion in section II.A.4.g.2. of 
the Addendum to this proposed rule.
    We are inviting public comments regarding the most appropriate 
mechanism to provide payment to hospitals for new technologies such as 
CAR T[dash]cell therapy drugs, including through the use of new 
technology add[dash]on payments.
    We also are inviting public comments on how these payment 
alternatives would affect access to care, as well as how they affect 
incentives to encourage lower drug prices, which is a high priority for 
this Administration. In addition, we are considering alternative 
approaches and authorities to encourage value-based care and lower drug 
prices. We solicit comments on how the payment methodology alternatives 
may intersect and affect future participation in any such alternative 
approaches.
    We did not receive any written public comments in response to the 
New Technology Town Hall meeting notice published in the Federal 
Register regarding the application of KYMRIAHTM for new 
technology add-on payments for FY 2019.
    Below we summarize and respond to a written public comment we 
received during the open comment period regarding YESCARTATM 
in response to the New Technology Town Hall meeting notice published in 
the Federal Register.
    Comment: The applicant commented that the use of 
YESCARTATM as a treatment option has resulted in 
unprecedented and consistent treatment for patients with refractory 
large B[dash]cell lymphoma who previously did not have a curative 
option. In addition, the applicant summarized the substantial clinical 
improvement differences between YESCARTATM and the results 
of KYMRIAHTM's SCHOLAR-1 study. The applicant noted that, 
for the patients enrolled in the SCHOLAR-1 study, the median overall 
survival was 6 months and complete remission was

[[Page 20295]]

7 percent. Conversely, the applicant conveyed that, for the patients 
enrolled in YESCARTATM's Study 1, at median 15.4 months 
follow-up, responses were ongoing in 42 percent of the patients and 40 
percent of the patients were in complete remission.
    Response: We appreciate the applicant's input. We will take these 
comments into consideration when deciding whether to approve new 
technology add-on payments for YESCARTATM for FY 2019.
    We note that the applicant also provided comments that were 
unrelated to the substantial clinical improvement criterion. As stated 
earlier, the purpose of the new technology town hall meeting is 
specifically to discuss the substantial clinical improvement criterion 
in regard to pending new technology add-on payment applications for FY 
2019. Therefore, we are not summarizing these additional comments in 
this proposed rule. However, the applicant may resubmit its comments in 
response to proposals presented in this proposed rule.
b. VYXEOSTM (Cytarabine and Daunorubicin Liposome for 
Injection)
    Jazz Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for the VYXEOSTM technology for 
FY 2019. (We note that Celator Pharmaceuticals, Inc. submitted an 
application for new technology add[dash]on payments for 
VYXEOSTM for FY 2018. However, Celator Pharmaceuticals did 
not receive FDA approval by the July 1, 2017 deadline for applications 
for FY 2018.) VYXEOSTM was approved by FDA on August 3, 
2017, for the treatment of adults with newly diagnosed therapy-related 
acute myeloid leukemia (t[dash]AML) or AML with myelodysplasia-related 
changes (AML-MRC).
    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, among others. 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 greater 
than 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 diagnosis, 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.\76\ The 
applicant asserted that many older adults diagnosed with AML have a 
poor performance status \77\ 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 lower in 
patients over 60 years of age; 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.\78\
---------------------------------------------------------------------------

    \76\ Juliusson, G., Lazarevic, V., Horstedt, A.S., Hagberg, O., 
Hoglund, M., ``Acute myeloid leukemia in the real world: why 
population-based registries are needed'', Blood, 2012 Apr 26; vol. 
119(17), pp. 3890-9.
    \77\ Stone, R.M., et al., (2004), ``Acute myeloid leukemia. 
Hematology'', Am Soc Hematol Educ Program, 2004, pp. 98-117.
    \78\ Appelbaum, F.R., Gundacker, H., Head, D.R., ``Age and acute 
myeloid leukemia'', Blood 2006, vol. 107, pp. 3481-3485.
---------------------------------------------------------------------------

    According to the applicant, 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[dash]called ``salvage'' induction therapy in the treatment of adults 
diagnosed with AML who experience relapse in an attempt to 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. According to the applicant, 
``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.\79\
---------------------------------------------------------------------------

    \79\ 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, vol. 
116(22), pp. 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

[[Page 20296]]

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[dash]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, 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 MS-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. Further, 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 currently available treatment options 
because both the current treatment regimen and VYXEOSTM are 
used in the treatment of AML by intravenous administration of 
cytarabine and daunorubicin. We are concerned that the mechanism of 
action of the ratiometrically fixed liposomal formulation of 
VYXEOSTM is the same or similar to that of the current 
intravenous administration of cytarabine and daunorubicin.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, we believe that potential cases 
representing patients who may be eligible for treatment involving 
VYXEOSTM would be assigned to the same MS[dash]DRGs as cases 
representing patients who receive treatment for diagnoses of 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 use in the treatment 
of patients who have been diagnosed with high-risk AML. The applicant 
also asserted that VYXEOSTM is the first and only approved 
fixed combination of cytarabine and daunorubicin and is designed to 
uniquely control the exposure using a nano-scale drug delivery vehicle 
leading to statistically significant improvements in survival in 
patients who have been diagnosed with high-risk AML compared to the 
conventional ``7+3'' free drug dosing. We believe that 
VYXEOSTM involves the treatment of the same patient 
population as other AML treatment therapies.
    The following unique ICD-10-PCS codes were created to describe the 
administration of VYXEOSTM: XW033B3 (Introduction of 
cytarabine and caunorubicin liposome antineoplastic into peripheral 
vein, percutaneous approach, new technology group 3) and XW043B3 
(Introduction of cytarabine and daunorubicin liposome antineoplastic 
into central vein, percutaneous approach, new technology group 3).
    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 currently available 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 FY 2016 MedPAR Hospital 
Limited Data Set (LDS) to assess the MS-DRGs to which cases 
representing potential patient hospitalizations that may be eligible 
for treatment involving VYXEOSTM would most likely be 
assigned. These potential cases representing patients who may be 
VYXEOSTM candidates were identified if they: (1) Were 
diagnosed with acute myeloid leukemia (AML); and (2) received 
chemotherapy during their

[[Page 20297]]

hospital stay. The cohort was further limited by excluding patients who 
had received bone marrow transplants. The cohort used in the analysis 
is referred to in this discussion as the primary cohort.
    According to the applicant, the primary cohort of cases spans 131 
unique MS-DRGs, 16 of which contained more than 10 cases. The most 
common MS-DRGs are MS-DRG 837, 834, 838, and 839. These 4 MS-DRGs 
account for 4,457 (81 percent) of the 5,483 potential cases in the 
cohort.
    The case-weighted unstandardized charge per case is approximately 
$185,844. The applicant then removed charges related to other 
chemotherapy agents because VYXEOSTM would replace the need 
for the use of current chemotherapy agents. The applicant explained 
that charges for chemotherapy drugs are grouped with charges for 
oncology, diagnostic radiology, therapeutic radiology, nuclear 
medicine, CT scans, and other imaging services in the ``Radiology 
Charge Amount.'' According to the applicant, removing 100 percent of 
the ``Radiology Charge Amount'' would understate the cost of care for 
treatment involving VYXEOSTM for patients who may be 
eligible because treatment involving VYXEOSTM would be 
unlikely to replace many of the services captured in the ``Radiology 
Charge Amount'' category. The applicant found that chemotherapy charges 
represent less than 20 percent of the charges associated with revenue 
centers grouped into the ``Radiology Charge Amount'' and removed 20 
percent of the radiology charge amount in order to capture the effect 
of removing chemotherapy pharmacy charges. The applicant noted that 
regardless of the type of induction chemotherapy, patients being 
treated for AML have AML-related complications, such as bleeding or 
infection that require supportive care drug therapy. For this reason, 
it is expected that eligible patients receiving treatment involving 
VXYEOSTM will continue to incur other pharmacy and IV 
therapy charges for AML[dash]related complications.
    After removing the charges for the prior technology, the applicant 
standardized the charges. The applicant then applied an inflation 
factor of 1.09357, the value used in the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38527) to update the charges from FY 2016 to FY 2018. 
According to the applicant, for the primary new technology add-on 
payment cohort, the cost criterion was met without consideration of 
VYXEOSTM charges. The average case-weighted standardized 
charge was $170,458, which exceeds the average case[dash]weighted Table 
10 MS-DRG threshold amount of $82,561 by $87,897.
    The applicant provided additional analyses with the inclusion of 
VYXEOSTM charges under 3-vial, 4-vial, 6-vial, and 10-vial 
treatment scenarios. According to the applicant, the cost criterion was 
satisfied in each of these scenarios, with charges in excess of the 
average case-weighted threshold amount.
    Finally, the applicant also provided the following sensitivity 
analyses (that did not include charges for VYXEOSTM) using 
the methodology above:
     Sensitivity Analysis 1--limits the cohort to patients who 
have been diagnosed with AML without remission (C92.00 or C92.50) who 
received chemotherapy and did not receive bone marrow transplant.
     Sensitivity Analysis 2--the modified cohort was limited to 
patients who have been diagnosed with relapsed AML who received 
chemotherapy and did not receive bone marrow transplant.
     Sensitivity Analysis 3--the modified cohort was limited to 
patients who have been diagnosed with AML and who did not receive bone 
marrow transplant.
     Sensitivity Analysis 4--the primary cohort was maintained, 
but 100 percent of the charges for revenue centers grouped into the 
``Pharmacy Charge Amount'' were excluded.
     Sensitivity Analysis 5--identifies patients who have been 
diagnosed with AML in remission.
    The applicant noted that, in all of the sensitivity analysis 
scenarios, the average case[dash]weighted standardized charge per case 
exceeded the average case-weighted Table 10 MS-DRG threshold amount. 
Based on all of the analyses above, the applicant maintained that 
VYXEOSTM meets the cost criterion. We are inviting public 
comments on 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[dash]risk, older (60 years 
of age 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 has been 
documented for the poor[dash]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[dash]risk patient group. The applicant provided the following 
specific clinical data results.
     The applicant stated that clinical data results show that 
treatment with VYXEOSTM for older patients (60 years of age 
and older) who have been 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 treatment arm 
and 156 to the ``7+3'' free drug dosing treatment arm. Among patients 
who were 60 to 69 years old, there were 96 patients in the 
VYXEOSTM treatment arm and 102 in the ``7+3'' free drug 
dosing treatment arm. For patients who were 70 to 75 years old, there 
were 57 and 54 patients in each treatment 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 treatment arm resulted in 
substantially greater median overall survival of 9.56 months versus 
5.95 months in the ``7+3'' free drug dosing treatment arm (hazard ratio 
of 0.69; p =0.005).
     The applicant further asserted that high-risk, older 
patients (60 years old 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.,\80\ 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.
---------------------------------------------------------------------------

    \80\ Medeiros, B., et al., ``Big data analysis of treatment 
patterns and outcomes among elderly acute myeloid leukemia patients 
in the United States'', Ann Hematol, 2015, vol. 94(7), pp. 1127-
1138.
---------------------------------------------------------------------------

    Based on data from the Phase III Study 301,\81\ the applicant cited 
the

[[Page 20298]]

following results: The rate of 60-day mortality was less in the 
VYXEOSTM treatment arm (13.7 percent) versus the ``7+3'' 
free drug dosing treatment 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 treatment arm versus the ``7+3'' free 
drug dosing treatment arm during the treatment phase (7.8 percent 
versus 11.3 percent); and there were fewer deaths in the 
VYXEOSTM treatment arm during the follow-up phase than in 
the ``7+3'' free drug dosing treatment arm (59.5 percent versus 71.5 
percent).
---------------------------------------------------------------------------

    \81\ Lancet, J., et al., ``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 old 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 
who were 60 to 69 years of age were 50.0 percent in the 
VYXEOSTM treatment arm and 36.3 percent in the ``7+3'' free 
drug dosing treatment arm, with an odds ratio of 1.76 (95 percent CI, 
1.00-3.10). For patients who were 70 to 75 years old, the rates of CR + 
CRi were 43.9 percent in the VYXEOSTM treatment arm and 27.8 
percent in the ``7+3'' free drug dosing treatment arm.
     The applicant asserted that VYXEOSTM treatment 
will enable high[dash]risk, older patients (60 years old and older) to 
bridge to allogeneic transplant, and VYXEOSTM treated 
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[dash]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[dash]term remissions. However, the applicant stated that 
the clinical study by Medeiros, et al. 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 treatment 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 treatment arm and 39 (25 percent) from the ``7+3'' 
free drug dosing treatment arm. Patient and AML characteristics were 
similar according to randomized arm, including percentage of patients 
in each treatment arm that underwent transplant in CR+CRi status. 
However, the applicant noted that the VYXEOSTM treatment arm 
contained a higher percentage of older patients (70 years old or older) 
who were transplanted (VYXEOSTM, 31 percent; ``7+3'' free 
drug dosing, 15 percent).\82\
---------------------------------------------------------------------------

    \82\ Stone Hematology 2004; Gordon AACR 2016; NCI. Available at: 
www.cancer.gov.
---------------------------------------------------------------------------

    According to the applicant, patient outcome following transplant 
strongly favored patients in the VYXEOSTM treatment arm. The 
Kaplan-Meier analysis of the 91 transplanted patients landmarked at the 
time of HCT showed that patients in the VYXEOSTM treatment 
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 treatment to 
overall survival rate after adjustment for transplant and showed that 
VYXEOSTM treatment remained a significant contributor, even 
after adjusting for transplant. The time-dependent Cox hazard ratio for 
overall survival rates in the VYXEOSTM treatment arm versus 
the ``7+3'' free drug dosing treatment 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 old and older) 
diagnosed with high-risk AML increases the response rate and improves 
survival compared to conventional ``7+3'' free drug dosing treatment 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,\83\ which reported on the 
significant anti-leukemic activity of VYXEOSTM treatment 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 treatment. To determine whether 
the improved complete remission and overall survival rates of treatment 
using VYXEOSTM as compared to conventional ``7+3'' free drug 
dosing treatment 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, as 
well as VYXEOSTM treatment cellular uptake and molecular 
phenotype status including FLT3-ITD, which is a predictor of poor 
patient outcomes to conventional ``7+3'' free drug dosing treatment. 
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 
the VYXEOSTM treatment than those with wild type FLT3. In 
addition, there was evidence that increased sensitivity to 
VYXEOSTM treatment 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 treatment retains significant anti-

[[Page 20299]]

leukemic activity in AML patients exhibiting high-risk characteristics. 
The applicant also noted that a subanalysis of Phase III Study 301 
identified 22 patients who had been diagnosed with FLT3 mutation in the 
VYXEOSTM treatment arm and 20 in the ``7+3'' free drug 
dosing treatment arm, which resulted in the following response rates of 
FLT3 mutated patients, which were higher with VYXEOSTM 
treatments (15 of 22, 68.2 percent) versus ``7+3'' free drug dosing 
treatments (5 of 20, 25.0 percent); and the Kaplan-Meier analysis of 
the 42 FLT3 mutated patients showed that patients in the 
VYXEOSTM treatment arm had a trend towards better overall 
survival rates (hazard ratio 0.57; p=0.093).
---------------------------------------------------------------------------

    \83\ Gordon, M., Tardi, P., Lawrence, M.D., 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 old) with poor risk first relapse AML have shown higher response 
rates with VYXEOSTM treatment 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 \84\ was a 
randomized study comparing VYXEOSTM treatment against the 
investigator's choice of first ``salvage'' chemotherapy in patients who 
had been diagnosed with relapsed AML after a first remission lasting 
greater than 1 month (VYXEOSTM treatment arm, n=81 and 
``7+3'' free drug dosing treatment arm, n=44; 18 to 65 years old). 
Investigator's choice was almost always based on cytarabine + 
anthracycline, usually with the addition of one or two new agents. 
According to the applicant, treatment involving 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[dash]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[dash]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 III-IV adverse events. Even though these 
patients are younger (18 to 65 years old) than the population studied 
in Phase III Study 301 (60 years old and older), Study 205 patients 
were at a later stage of the disease and almost all had responded to 
first-line therapy (cytarabine + anthracycline) and had relapsed. The 
applicant also cited Cortes, et al. 2015,\85\ which reported that 
patients who have been diagnosed with first relapse AML have limited 
likelihood of response and short expected survival following 
``salvage'' treatment with the results from literature showing that:
---------------------------------------------------------------------------

    \84\ Cortes, J., et al., ``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.
    \85\ 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, pp. 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 
who have been diagnosed with poor[dash]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[dash]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 treatment 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 VYXEOSTM 
meets the substantial clinical improvement criterion.
    Below we summarize and respond to a written public comment we 
received regarding the VYXEOSTM during the open comment 
period in response to the New Technology Town Hall meeting notice 
published in the Federal Register.
    Comment: The applicant provided a written comment to provide 
notification of the addition of VYXEOSTM to the Category 1 
Clinical Practice Guidelines in Oncology recommendation by the National 
Comprehensive Cancer Network. The applicant reported that the resources 
made available by NCCN are the NCCN Clinical Practice Guidelines in 
Oncology (NCCN Guidelines[reg]). The intent of the guidelines is to 
assist in the decision-making process of individuals involved in cancer 
treatment and care. According to the NCCN Guidelines[reg], Category 1 
clinical practices are based upon high[dash]level evidence, and there 
is uniform NCCN consensus that the intervention is appropriate. The 
February 7, 2018 NCCN Guidelines[reg] for Acute Myeloid Leukemia 
include a recommendation for cytarabine and daunorubicin for the 
treatment of adult patients 60 years of age or older who have been 
newly diagnosed with therapy-related AML (t-AML) or AML with 
myelodysplasia-related changes

[[Page 20300]]

(AML-RMC) to be included as a Category 1 clinical practice.\86\
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    \86\ NCCN Clinical Practice Guidelines in Oncology (NCCN 
Guidelines[reg]), Acute Myeloid Leukemia, Version I--2018, February 
7, 2018, https://www.nccn.org/professionals/physician_gls/pdf/aml.pdf.
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    Response: We appreciate the applicant's submission of additional 
information. We will take these comments into consideration when 
deciding whether to approve new technology add-on payments for 
VYXEOSTM for FY 2019.
c. VABOMERETM (Meropenem-Vaborbactam)
    Melinta Therapeutics, Inc., submitted an application for new 
technology add-on payments for VABOMERETM for FY 2019. 
VABOMERETM is indicated for use in the treatment of adult 
patients who have been diagnosed with complicated urinary tract 
infections (cUTIs), including pyelonephritis, caused by specific 
bacteria. VABOMERETM received FDA approval on August 29, 
2017.
    Complicated urinary tract infections (cUTIs) are defined as chills, 
rigors, or fever (temperature of greater than or equal to 38.0[deg]C); 
elevated white blood cell count (greater than 10,000/mm\3\), or left 
shift (greater than 15 percent immature PMNs); nausea or vomiting; 
dysuria, increased urinary frequency, or urinary urgency; lower 
abdominal pain or pelvic pain. Acute pyelonephritis is defined as 
chills, rigors, or fever (temperature of greater than or equal to 
38.0[deg]C); elevated white blood cell count (greater than 10,000/
mm\3\), or left shift (greater than 15 percent immature PMNs); nausea 
or vomiting; dysuria, increased urinary frequency, or urinary urgency; 
flank pain; costo[dash]vertebral angle tenderness on physical 
examination. Risk factors for infection with drug-resistant organisms 
do not, on their own, indicate a cUTI.\87\ The increasing incidence of 
multidrug-resistant gram-negative bacteria, such as carbapenem-
resistant Enterobacteriacea (CRE), has resulted in a critical need for 
new antimicrobials.
---------------------------------------------------------------------------

    \87\ Hooton, T. and Kalpana, G., 2018, ``Acute complicated 
urinary tract infection (including pyelonephritis) in adults,'' In 
A. Bloom (Ed.), UpToDate. Available at: https://www.uptodate.com/contents/acute-complicated-urinary-tract-infection-including-pyelonephritis-in-adults.
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    The applicant reported that it has developed a beta-lactamase 
combination antibiotic, VABOMERETM, to treat cUTIs, 
including those caused by certain carbapenem[dash]resistant organisms. 
By combining the carbapenem class antibiotic meropenem with 
vaborbactam, VABOMERETM protects meropenem from degradation 
by certain CRE strains.
    The applicant stated that meropenem, a carbapenem, is a broad 
spectrum beta[dash]lactam antibiotic that works by inhibiting cell wall 
synthesis of both gram-positive and gram-negative bacteria through 
binding of penicillin-binding proteins (PBP). Carbapenemase producing 
strains of bacteria have become more resistant to beta-lactam 
antibiotics, such as meropenem. However, meropenem in combination with 
vaborbactam, inhibits the carbapenemase activity, thereby allowing the 
meropenem to bind PBP and kill the bacteria.
    According to the applicant, vaborbactam, a boronic acid inhibitor, 
is a first-in class beta-lactamase inhibitor. Vaborbactam blocks the 
breakdown of carbapenems, such as meropenem, by bacteria containing 
carbapenemases. Although vaborbactam has no antibacterial properties, 
it allows for the treatment of resistant infections by increasing 
bacterial sensitivity to meropenem. New carbapenemase producing strains 
of bacteria have become more resistant to beta-lactam antibiotics. 
However, meropenem in combination with vaborbactam, can inhibit the 
carbapenemase enzyme, thereby allowing the meropenem to bind PBP and 
kill the bacteria. The applicant stated that the vaborbactem component 
of VABOMERETM helps to protect the meropenem from 
degradation by certain beta-lactamases, such as Klebsiella pneumonia 
carbapenemase (KPC). According to the applicant, VABOMERETM 
is the first of a novel class of beta[dash]lactamase inhibitors. The 
applicant asserted that VABOMERETM's use of vaborbactam to 
restore the efficacy of meropenem is a novel approach to fighting 
antimicrobial resistance.
    The applicant stated that VABOMERETM is indicated for 
use in the treatment of adult patients 18 years old and older who have 
been diagnosed with cUTIs, including pyelonephritis. The recommended 
dosage of VABOMERETM is 4 grams (2 grams of meropenem and 2 
grams of vaborbactam) administered every 8 hours by intravenous (IV) 
infusion over 3 hours with an estimated glomerular filtration rate 
(eGFR) greater than or equal to 50 mL/min/1.73 m\2\. The recommended 
dosage of VABOMERETM for patients with varying degrees of 
renal function is included in the prescribing information. The duration 
of treatment is for up to 14 days.
    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, 
according to the applicant, VABOMERETM is designed primarily 
for the treatment of gram-negative bacteria that are resistant to other 
current antibiotic therapies. The applicant stated that 
VABOMERETM does not use the same or similar mechanism of 
action to achieve a therapeutic outcome. The applicant asserted that 
the vaborbactam component of VABOMERETM is a new class of 
beta-lactamase inhibitor that protects meropenem from degradation by 
certain enzymes such as carbapenamases. The applicant indicated that 
the structure of vaborbactam is distinctly optimized for inhibition of 
serine carbapenamases and for combination with a carbapenem antibiotic. 
Beta-lactamase inhibitors are agents that inhibit bacterial enzymes--
enzymes that destroy beta-lactam antibiotics and result in resistance 
to first[dash]line as well as ``last defense'' antimicrobials used in 
hospitals. According to the applicant, in order for carbapenems to be 
effective these enzymes must be inhibited. The applicant stated that 
the addition of vaborbactam as a potent inhibitor against Class A and C 
serine beta-lactamases, particularly KPC, represents a new mechanism of 
action. According to the applicant, VABOMERETM's use of 
vaborbactam to restore the efficacy of meropenem is a novel approach 
and that the FDA's approval of VABOMERETM for the treatment 
of cUTIs represents a significant label expansion because mereopenem 
alone (without the addition of vaborbactam) is not indicated for the 
treatment of patients with cUTI infections. Therefore, the applicant 
maintained that this technology and resistance-fighting mechanism 
involved in the therapeutic effect achieved by VABOMERETM is 
distinct from any other existing product. The applicant noted that 
VABOMERETM was designated as a qualified infectious disease 
product (QIDP) in January 2014. This designation is given to 
antibacterial products that treat serious or life[dash]threatening 
infections under the Generating Antibiotic Incentives Now (GAIN) title 
of the FDA Safety and Innovation Act.
    We believe that, although the molecular structure of the 
vaborbactam component of VABOMERETM is unique, the 
bactericidal action of VABOMERETM is the same as meropenem 
alone. In

[[Page 20301]]

addition, we note that there are other similar beta-lactam/beta-
lactamase inhibitor combination therapies currently available as 
treatment options. We are inviting public comments on whether 
VABOMERETM's mechanism of action is similar to other 
existing technologies.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant asserted that patients 
who may be eligible to receive treatment involving 
VABOMERETM include hospitalized patients who have been 
diagnosed with a cUTI. These potential cases can be identified by a 
variety of ICD-10-CM diagnosis codes. Therefore, potential cases 
representing patients who have been diagnosed with a cUTI who may be 
eligible for treatment involving VABOMERETM can be mapped to 
multiple MS-DRGs. The following are the most commonly used MS-DRGs for 
patients who have been diagnosed with a cUTI: MS-DRG 690 (Kidney and 
Urinary Tract Infections without MCC); MS-DRG 853 (Infectious and 
Parasitic Diseases with O.R. Procedure with MCC); MS-DRG 870 
(Septicemia or Sever Sepsis with Mechanical Ventilation 96+ Hours); MS-
DRG 871 (Septicemia or Severe Sepsis without Mechanical Ventilation 96+ 
Hours with MCC); and MS-DRG 872 (Septicemia or Severe Sepsis without 
Mechanical Ventilation 96+ Hours without MCC). Potential cases 
representing patients who may be eligible for treatment with 
VABOMERETM would be assigned to the same MS-DRGs as cases 
representing hospitalized patients who have been diagnosed with a cUTI.
    With respect to the third criterion, whether the 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 the use of VABOMERETM would treat a different 
patient population than existing and currently available treatment 
options. According to the applicant, VABOMERETM's use of 
vaborbactam to restore the efficacy of meropenem is a novel approach to 
fighting the global and national public health crisis of antimicrobial 
resistance, and as such, the use of VABOMERETM reaches 
different and expanded patient populations. The applicant further 
asserted that future patient populations are saved as well because the 
growth of resistant infections is slowed. The applicant believed that, 
because of the threat posed by gram-negative bacterial infections and 
the limited number of available treatments currently on the market or 
in development, the combination structure and development of 
VABOMERETM and its potential expanded use is new. While the 
applicant believes that VABOMERETM treats a different 
patient population, we note that VABOMERETM is only approved 
for use in the treatment of adult patients who have been diagnosed with 
cUTIs. Therefore, it appears that VABOMERETM treats the same 
population (adult patients with a cUTI) and there are already other 
treatment options available for diagnoses of cUTIs.
    We are concerned that VABOMERETM may be substantially 
similar to existing beta[dash]lactam/beta-lactamase inhibitor 
combination therapies. As noted above, we are concerned that 
VABOMERETM may have a similar mechanism of action, treats 
the same population (patients with a cUTI) and would be assigned to the 
same MS-DRGs (similar to existing beta[dash]lactam/beta-lactamase 
inhibitor combination therapies currently available as treatment 
options). We are inviting public comments on whether 
VABOMERETM meets the substantial similarity criteria and 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 to which cases 
representing potential patients who may be eligible for treatment using 
VABOMERETM may map, the applicant used the Premier Research 
Database from 2nd Quarter 2015 to 4th Quarter 2016. According to the 
applicant, Premier is an electronic laboratory, pharmacy, and billing 
data repository that collects data from over 600 hospitals and captures 
nearly 20 percent of U.S. hospitalizations. The applicant's list of 
most common MS-DRGs is based on data regarding CRE from the Premier 
Research Database. According to the applicant, approximately 175 member 
hospitals also submit microbiology data, which allowed the applicant to 
identify specific pathogens such as CRE infections. Using the Premier 
Research Database, the applicant identified over 350 MS-DRGs containing 
data for 2,076 cases representing patients who had been hospitalized 
for CRE infections. The applicant used the top five most common MS-
DRGs: MS-DRG 871 (Septicemia or Severe Sepsis without Mechanical 
Ventilation >96 Hours with MCC), MS-DRG 853 (Infectious and Parasitic 
Disease with O.R. Procedure with MCC), MS-DRG 870 (Septicemia or Severe 
Sepsis with Mechanical Ventilation >96 Hours), MS-DRG 872 (Septicemia 
or Severe Sepsis without Mechanical Ventilation >96 Hours without MCC), 
and MS-DRG 690 (Kidney and Urinary Tract Infections without MCC), to 
which 627 cases representing potential patients who may be eligible for 
treatment involving VABOMERETM, or approximately 30.2 
percent of the total cases identified, mapped.
    The applicant reported that the resulting 627 cases from the 
identified top 5 MS-DRGs have an average case-weighted unstandardized 
charge per case of $74,815. We note that, instead of using actual 
charges from the Premier Research Database, the applicant computed this 
amount based on the average case-weighted threshold amounts in Table 10 
from the FY 2018 IPPS/LTCH PPS final rule. For the rest of the 
analysis, the applicant adjusted the average case-weighted threshold 
amounts (referred to above as the average case[dash]weighted 
unstandardized charge per case) rather than the actual average 
case[dash]weighted unstandardized charge per case from the Premier 
Research Database. According to the applicant, based on the Premier 
data, $1,999 is the mean antibiotic costs of treating patients 
hospitalized with CRE infections with current therapies. The applicant 
explained that it identified 69 different regimens that ranged from 1 
to 4 drugs from a study conducted to understand the current management 
of patients diagnosed with CRE infections. Accordingly, the applicant 
estimated the removal of charges for a prior technology of $1,999. The 
applicant then standardized the charges. The applicant applied an 
inflation factor of 9.357 percent from the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38527) to inflate the charges. The applicant noted that it 
does not yet have sufficient charge data from hospitals and will work 
to supplement its application with the information once it is 
available. However, for purposes of calculating charges, the applicant 
used the average charge as the wholesale acquisition cost (WAC) price 
for a treatment duration of 14 days and added this amount to the 
average charge per case. Using this estimate, the applicant calculated 
the final inflated case[dash]weighted standardized charge per case as 
$91,304, which exceeds the average case[dash]weighted threshold amount 
of $74,815. Therefore, the applicant asserted that 
VABOMERETM meets the cost criterion.
    We are concerned that, as noted earlier, instead of using actual 
charges from the Premier Research Database, the applicant computed the 
average case[dash]weighted unstandardized charge per case based on the 
average case-weighted threshold amounts in Table 10

[[Page 20302]]

from the FY 2018 IPPS/LTCH PPS final rule. Because the applicant did 
not demonstrate that the average case-weighted standardized charge per 
case for VABOMERETM (using actual charges from the Premier 
Research Database) would exceed the average case-weighted threshold 
amounts in Table 10, we are unable to determine if the applicant meets 
the cost criterion. We are inviting public comments on whether 
VABOMERETM meets the cost criterion, including with respect 
to the concern regarding the applicant's analysis.
    With regard to the substantial clinical improvement criterion, the 
applicant believed that the results from the VABOMERETM 
clinical trials clearly establish that VABOMERETM represents 
a substantial clinical improvement for treatment of deadly, antibiotic 
resistant infections. Specifically, the applicant asserted that 
VABOMERETM offers a treatment option for a patient 
population unresponsive to, or ineligible for, currently available 
treatments, and the use of VABOMERETM significantly improves 
clinical outcomes for a patient population as compared to currently 
available treatments. The applicant provided the results of the 
Targeting Antibiotic Non-sensitive Gram-Negative Organisms (TANGO) I 
and II clinical trials to support its assertion. TANGO[dash]I \88\ was 
a prospective, randomized, double-blinded trial of 
VABOMERETM versus piperacillin-tazobactam in patients with 
cUTIs and acute pyelonephritis (A/P). TANGO[dash]I is also a 
noninferiority (NI) trial powered to evaluate the efficacy, safety, and 
tolerability of VABOMERETM compared to piperacillin-
tazobactam in the treatment of cUTI, including AP, in adult patients. 
There were two primary endpoints for this study, one for the FDA, which 
was cure or improvement and microbiologic outcome of eradication at the 
end[dash]of[dash]treatment (EOT) (day 5 to 14) in the proportion of 
patients in the Microbiologic Evaluable Modified Intent-to-Treat (m-
MITT) population who achieved overall success (clinical cure or 
improvement and eradication of baseline pathogen to <104 CFU/mL), and 
one for the European Medicines Agency (EMA), which was the proportion 
of patients in the co-primary m-MITT and Microbiologic Evaluable (ME) 
populations who achieve a microbiologic outcome of eradication 
(eradication of baseline pathogen to <103 CFU/mL) at the 
test[dash]of[dash]cure (TOC) visit (day 15 to 23). The trial enrolled 
550 adult patients who were randomized 1:1 to receive 
VABOMERETM as a 3-hour IV infusion every 8 hours, or 
piperacillin 4g-tazobactam 500mg as a 30 minute IV infusion every 8 
hours, for at least 5 days for the treatment of a cUTI. Therapy was set 
at a minimum of 5 days to fully assess the efficacy and safety of 
VABOMERETM. After a minimum of 5 days of IV therapy, 
patients could be switched to oral levofloxacin (500 mg once every 24 
hours) to complete a total of 10-day treatment course (IV + oral), if 
they met pre-specified criteria. Treatment was allowed for up to 14 
days, if clinically indicated.
---------------------------------------------------------------------------

    \88\ Vabomere Prescribing Information, Clinical Studies (August 
2017), available at: https://www.accessdata.fda.gov/drugsatfda_docs/label/2017/209776lbl.pdf.
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    Patient demographic and baseline characteristics were balanced 
between treatment groups in the m-MITT population.
     Approximately 93 percent of patients were Caucasian and 66 
percent were females in both treatment groups.
     The mean age was 54 years old with 32 percent and 42 
percent of the patients 65 years old and older in the 
VABOMERETM and piperacillin/tazobactam treatment groups, 
respectively.
     Mean body mass index was approximately 26.5 kg/m\2\ in 
both treatment groups.
     Concomitant bacteremia was identified in 12 (6 percent) 
and 15 (8 percent) of the patients at baseline in the 
VABOMERETM and piperacillin/tazobactam treatment groups, 
respectively.
     The proportion of patients who were diagnosed with 
diabetes mellitus at baseline was 17 percent and 19 percent in the 
VABOMERETM and piperacillin/tazobactam treatment groups, 
respectively.
     The majority of the patients (approximately 90 percent) 
were enrolled from Europe, and approximately 2 percent of the patients 
were enrolled from North America. Overall, in both treatment groups, 59 
percent of the patients had pyelonephritis and 40 percent had a cUTI, 
with 21 percent and 19 percent of the patients having a 
non[dash]removable and removable source of infection, respectively.
    Mean duration of IV treatment in both treatment groups was 8 days 
and mean total treatment duration (IV and oral) was 10 days; patients 
with baseline bacteremia could receive up to 14 days of therapy (IV and 
oral). Approximately 10 percent of the patients in each treatment group 
in the m-MITT population had a levofloxacin-resistant pathogen at 
baseline and received levofloxacin as the oral switch therapy. 
According to the applicant, this protocol violation may have impacted 
the assessment of the outcomes at the TOC visit. These patients were 
not excluded from the analysis of adverse reactions (headache, 
phlebitis, nausea, diarrhea, and others) occurring in 1 percent or more 
of the patients receiving VABOMERETM, as the decision to 
switch to oral levofloxacin was based on post-randomization factors.
    Regarding the FDA primary endpoint, the applicant stated the 
following:
     Overall success rate at the end of IV treatment (day 5 to 
14) was 98.4 percent and 94 percent for the VABOMERETM and 
piperacillin/tazobactam treatment groups, respectively.
     The TOC--7 days post IV therapy was 76.5 percent (124 of 
162 patients) for the VABOMERETM group and 73.2 percent (112 
of 153 patients) for the piperacillin/tazobactam group.
     Despite being an NI trial, TANGO-I showed a statistically 
significant difference favoring VABOMERETM in the primary 
efficacy endpoint over piperacillin/tazobactam (a commonly used agent 
for gram-negative infections in U.S. hospitals).
     VABOMERETM demonstrated statistical superiority 
over piperacillin-tazobactam with overall success of 98.4 percent of 
patients treated with VABOMERETM in the TANGO-I clinical 
trial compared to 94.0 percent for patients treated with piperacillin/
tazobactam, with a treatment difference of 4.5 percent and 95 percent 
CI of (0.7 percent, 9.1 percent).
     Because the lower limit of the 95 percent CI is also 
greater than 0 percent, VABOMERETM was statistically 
superior to piperacillin/tazobactam.
     Because non-inferiority was demonstrated, then superiority 
was tested. Further, the applicant asserted that a noninferiority 
design may have a ``superiority'' hypothesis imbedded within the study 
design that is appropriately tested using a non[dash]inferiority design 
and statistical analysis. As such, according to the applicant, 
superiority trials concerning antibiotics are impractical and even 
unethical in many cases because one cannot randomize patients to 
receive inactive therapies. The applicant stated that it would be 
unethical to leave a patient with a severe infection without any 
treatment.
     The EMA endpoint of eradication rates at TOC were higher 
in the VABOMERETM group compared to the piperacillin/
tazobactam group in both the m-MITT (66.7 percent versus 57.7 percent) 
and ME (66.3 percent and 60.4 percent) populations; however, it was

[[Page 20303]]

not a statistically significant improvement.
    We note that the eradication rates of the EMA endpoint were not 
statistically significant. We are inviting public comments with respect 
to our concern as to whether the FDA endpoints demonstrating 
noninferiority are statistically sufficient data to support that 
VABOMERETM is a substantial clinical improvement in the 
treatment of patients with a cUTI.
    In TANGO-I the applicant offers data comparing 
VABOMERETM to piperacillin-tazobactam EOT/TOC rates in the 
setting of cUTIs/AP, but does not offer a comparison to other 
antibiotic treatments of cUTIs known to be effective against gram-
negative uropathogens, specifically other carbapenems.\89\ We also note 
that the study population is largely European (98 percent), and given 
the variable geographic distribution of antibiotic resistance we are 
concerned that the use of piperacillin/tazobactam as the comparator may 
have skewed the eradication rates in favor of VABOMERETM, or 
that the favorable results would not be applicable to patients in the 
United States. We are inviting public comments regarding the lack of a 
comparison to other antibiotic treatments of cUTIs known to be 
effective against gram-negative uropathogens, whether the comparator 
the applicant used in its trial studies may have skewed the eradication 
rates in favor of VABOMERETM, and if the favorable results 
would be applicable to patients in the United States to allow for 
sufficient information in evaluating substantial clinical improvement.
---------------------------------------------------------------------------

    \89\ Golan, Y., 2015, ``Empiric therapy for hospital-acquired, 
Gram-negative complicated intra-abdominal infection and complicated 
urinary tract infections: a systematic literature review of current 
and emerging treatment options,'' BMC Infectious Diseases, vol. 15, 
pp. 313. http://doi.org/10.1186/s12879-015-1054-1.
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    The applicant asserted that the TANGO[dash]II study \90\ of 
monotherapy with VABOMERETM compared to best available 
therapy (BAT) (salvage care of cocktails of toxic/poorly efficacious 
last resort agents) for the treatment of CRE infections showed 
important differences in clinical outcomes, including reduced 
mortality, higher clinical cure at EOT and TOC, benefit in important 
patient subgroups of HABP/VABP, bacteremia, renal impairment, and 
immunocompromised and reduced AEs, particularly lower nephrotoxicity in 
the study group. TANGO[dash]II is a multi[dash]center, randomized, 
Phase III, open-label trial of patients with infections due to known or 
suspected CRE, including cUTI, AP, HABP/VABP, bacteremia, or 
complicated intra-abdominal infection (cIAI). Eligible patients were 
randomized 2:1 to monotherapy with VABOMERETM or BAT for 7 
to 14 days. There were no consensus BAT regimes, it could include 
(alone or in combination) a carbapenem, aminoglycoside, polymyxin B, 
colistin, tigecycline or ceftazidime-avibactam.
---------------------------------------------------------------------------

    \90\ Alexander, et al., ``CRE Infections: Results From a 
Retrospective Series and Implications for the Design of Prospective 
Clinical Trials,'' Open Forum Infectious Diseases.
---------------------------------------------------------------------------

    A total of 72 patients were enrolled in the TANGO[dash]II trial. Of 
these, 50 of the patients (69.4 percent) had a gram-negative baseline 
organism (m-MITT population), and 43 of the patients (59.7 percent) had 
a baseline CRE (mCRE-MITT population). Within the mCRE-MITT population, 
20 of the patients had bacteremia, 15 of the patients had a cUTI/AP, 5 
of the patients had HABP/VABP, and 3 of the patients had a cIAI. The 
most common baseline CRE pathogens were K. pneumoniae (86 percent) and 
Escherichia coli (7 percent). Cure rates of the mCRE-MITT population at 
EOT for VABOMERETM and BAT groups were 64.3 percent and 40 
percent, respectively, TOC, 7 days after EOT, were 57.1 percent and 
26.7 percent, respectively, 28-day mortality was 17.9 percent (5 of 28 
patients) and 33.3 percent (5 of 15 patients), respectively. The 
applicant asserted that with further sensitivity analysis, taking into 
account prior antibiotic failures among the VABOMERETM study 
arm, the 28[dash]day all-cause mortality rates were even lower among 
VABOMERETM versus BAT patients (5.3 percent (1 of 19 
patients) versus 33.3 percent (5 of 15 patients)). Additionally, in 
July 2017, randomization in the trial was stopped early following a 
recommendation by the TANGO[dash]II Data Safety Monitoring Board (DSMB) 
based on risk-benefit considerations that randomization of additional 
patients to the BAT comparator arm should not continue.
    According to the applicant, subgroup analyses of the TANGO[dash]II 
studies include an analysis of adverse events in which 
VABOMERETM compared to BAT demonstrated the following:
     VABOMERETM was associated with less severe 
treatment emergent adverse events of 13.3 percent versus 28 percent.
     VABOMERETM was less likely to be associated 
with a significant increase in creatinine 3 percent versus 26 percent.
     Efficacy results of the TANGO[dash]II trial cUTI/AP 
subgroup demonstrated VABOMERETM was associated with an 
overall success rate at EOT for the mCRE-MITT populations of 72 percent 
(8 of 11 patients) versus 50 percent (2 of 4 patients) and an overall 
success rate at TOC of 27.3 percent (3 of 7 patients) versus 50 percent 
(2 of 4 patients).
    We note that many of the TANGO[dash]II trial outcomes showing 
improvements in the use of VABOMERETM over BAT are not 
statistically significant. We also note that the TANGO[dash]II study 
included a small number of patients; the study population in the 
mCRE[dash]MITT only included 43 patients. Additionally, the cUTI/AP 
subgroup analysis only included a total of 15 patients and did not show 
an increased overall success rate at TOC (27.3 percent versus 50 
percent) over the BAT group. We are inviting public comments with 
respect to our concern as to whether the lack of statistically 
significant outcomes and the small number of study participants allows 
for enough information to evaluate substantial clinical improvement.
    We are inviting public comments on whether the 
VABOMERETM technology meets the substantial clinical 
improvement criterion, including with respect to the specific concerns 
we have raised.
    Below we summarize and respond to written public comments we 
received regarding VABOMERETM during the open comment period 
in response to the New Technology Town Hall meeting notice published in 
the Federal Register.
    Comment: The applicant submitted information regarding the 
comparison of VABOMERETM to other antibiotic treatments for 
a cUTI known to be effective against gram[dash]negative uropathogens. 
The applicant asserted that doripenem is a carbapenem antibiotic and, 
therefore, is subject to degradation and inactivation by 
carbapenemases, including the Klebsiella pneumoniae carbapenemase 
(KPC). The applicant stated that doripenem has been shown to have poor 
activity in vitro against CRE and VABOMERETM, in contrast, 
takes a novel, first in class beta-lactamase inhibitor, vaborbactam, 
and combines it with the carbapenem drug meropenem in a manner that--
because of the unique, novel, and new properties of vaborbactam when 
combined with meropenem to create VABOMERETM--to effectively 
restore the effectiveness of meropenem (a carbapenem) in fighting 
against carbapenem-resistant bacteria. The applicant indicated that 
extensive in vitro studies have been conducted and show that 
carbapenems such as doripenem have poor activity in vitro against KPC-
producing CRE. Because the in vitro data show that doripenem has poor 
activity against KPC-producing CRE, the applicant stated that no 
comparative clinical efficacy data

[[Page 20304]]

between doripenem and VABOMERETM exists.
    Response: We appreciate the applicant's comments. However, we 
believe that because the study population for VABOMERETM is 
patients with cUTIs and not UTIs with KPCs, we are concerned that the 
applicant does not offer comparison data to other antibiotic treatments 
of cUTIs known to be effective against gram[dash]negative uropathogens. 
As noted, we are inviting public comments on whether the 
VABOMERETM technology meets the substantial clinical 
improvement criterion, including with respect to the specific concerns 
we have raised.
d. DURAGRAFT[reg] Vascular Conduit Solution
    Somahlution, Inc. submitted an application for new technology add-
on payments for DURAGRAFT[reg] for FY 2019. DURAGRAFT[reg] is designed 
to protect the endothelium of the vein graft following harvesting and 
prior to grafting to prevent vascular graft disease (VGD) and vein 
graft failure (VGF), and to reduce the clinical complications 
associated with graft failure. These complications include myocardial 
infarction and repeat revascularization. DURAGRAFT[reg] is formulated 
into a solution that is used during standard graft handling, flushing, 
and bathing steps.
    VGD is the principal cause of both early (within 30 days) and 
intermediate/late (months to years) VGF. The principal mediator of VGD 
following grafting in bypass surgeries is damage that occurs during 
intra-operative vascular graft harvesting and handling.91 92 
Endothelium can be destroyed or damaged intraoperatively through the 
acute physical stress of harvesting, storage, and handling, and through 
more insidious processes such as those associated with ischemic injury, 
metabolic stress and oxidative damage. According to the applicant, more 
recently, it has been demonstrated that damage associated with graft 
storage solution has the highest correlation with the development of 
12-month VGF.93 94 This is likely due not only to the active 
tissue damage associated with commonly used storage solutions, but also 
to their inability to protect against ischemic 
injury.95 96 97 VGD encompasses the pathophysiological 
changes that occur in damaged vein grafts following their use in 
surgical grafting. These changes, apparent within minutes to hours of 
grafting, are manifested as endothelial dysfunction, death and/or 
denudation and include pro-inflammatory, pro-thrombogenic and 
proliferative changes within the graft. These initial responses to 
damage cause even more damage in a domino-like effect, thereby 
perpetuating the response-damage cycle that is the basis of VGD 
progression.
---------------------------------------------------------------------------

    \91\ Harskamp, Ralf E., MD, Alexander, John H., MD, MHS, 
Schulte, Phillip J., Phd, et al., ``Vein Graft Preservation 
Solutions, Patency, and Outcomes After Coronary Artery Bypass Graft 
Surgery: follow-up from the PREVENT IV randomized clinical trial'', 
Jama Surg, 2014, vol. 149(8), pp. 798-805.
    \92\ Testa, L., Bedogni, F., ``Treatment of Saphenous Vein Graft 
Disease: `Never Ending Story' of the Eternal Return,'' Res 
Cardiovasc Med, 2014, vol. 3(3), pp. e21092.
    \93\ Ibid.
    \94\ Ibid.
    \95\ Weiss, D.R., Juchem, G., Kemkes, B.M., et al., ``Extensive 
deendothelialization and thrombogenicity in routinely prepared vein 
grafts for coronary bypass operations: facts and remedy,'' Century 
Publishing Corporation, International Journal of Clinical 
Experimental Medicine, 2009 May 28, vol. 2(2), pp. 95-113.
    \96\ Wilbring, M., Tugtekin, S.M., Zatschler, B., et al., ``Even 
short-time storage in physiological saline solution impairs 
endothelial vascular function of saphenous vein grafts,'' Elsevier 
Science Inc., European Journal of Cardio-Thoracic Surgery, 2011 Oct, 
vol. 40(4), pp. 811-815.
    \97\ Thatte, H.S., Biswas, K.S., Najjar, S.F., et al., ``Multi-
photon microscopic evaluation of saphenous vein endothelium and its 
preservation with a new solution,'' GALA, Elsevier Science Inc., Ann 
Thorac Surg, 2003 Apr, vol. 75(4), pp. 1145-1152.
---------------------------------------------------------------------------

    The applicant further noted that endothelial dysfunction and 
inflammation also result in the diminished ability of the graft to 
respond appropriately to new blood flow patterns and adaptive positive 
remodeling may be thwarted. This is because proper remodeling is 
dependent upon a functional endothelial response to shear stress that 
involves the production of remodeling factors by the endothelium 
including nitro vasodilators, prostaglandins, lipoxyoxygenases, 
hyperpolarizing factors and other growth factors. Therefore, damaged, 
missing and/or dysfunctional endothelial cells prevent, to varying 
extents, graft adaption which makes the graft susceptible to shear-
mediated endothelial damage. The collective damage results in intimal 
hyperplasia or graft wall thickening that is the basis for atheroma 
development and subsequent lumen narrowing and graft failure, which is 
the end state of VGD. The applicant pointed to several references to 
highlight pathologic changes leading to VGD, occlusion and loss of 
vasomotor function.98 99 100 101 102 103 104 105 The 
applicant summarized, that when the damaged luminal surface of a vein 
graft is presented to the bloodstream at time of reperfusion, a 
domino[dash]effect of further damage is triggered through inflammatory, 
thrombogenic and aberrant hyper-proliferative processes that lead to 
both early and late VGF. Presenting an intact functional endothelial 
layer at the time of grafting is, therefore, tantamount to protecting 
the graft and its associated endothelium from damage that occurs post-
grafting, in turn conferring protection against graft failure. Given 
the low success rate of failed graft intervention, addressing graft 
endothelial protection at the time of surgery is critical.\106\
---------------------------------------------------------------------------

    \98\ Verrier, E.D., Boyle, E.M., ``Endothelial cell injury in 
cardiovascular surgery: an overview,'' Ann Thorac Surg, 1997, vol. 
64, pp. S2-S8.
    \99\ Harskamp, R.E., Lopes, R.D., Baisden, C.E., et al., 
``Saphenous vein graft failure after coronary artery bypass surgery: 
pathophysiology, management, and future directions,'' Ann Thorac 
Surg., 2013 May, vol. 257(5), pp. 824-33.
    \100\ Hess, C.N., Lopes, R.D., Gibson, C.M., et al., ``Saphenous 
vein graft failure after coronary artery bypass surgery: insights 
from PREVENT IV,'' Circulation 2014 Oct 21, vol. 130(17), pp. 1445-
51.
    \101\ Sellke, F.W., Boyle, E.M., Verrier, E.D., ``The 
pathophysiology of vasomotor dysfunction,'' Ann Thorac Surg, 1997, 
vol. 64, pp. S9-S15.
    \102\ Motwani, J.G., Topol, E.J., ``Aortocoronary saphenous vein 
graft disease: pathogenesis, predisposition and prevention,'' 
Circulation 1998, vol. 97(9), pp. 916-31.
    \103\ Mills, N.L., Everson, C.T., ``Vein graft failure,'' Curr 
Opin Cardiol, 1995, vol. 10, pp. 562-8.
    \104\ Davies, M.G., Hagen, P.O., ``Pathophysiology of vein graft 
failure: a review,'' Eur J Vasc Endovasc Surg, 1995, vol. 9, pp. 7-
18.
    \105\ Edmunds, L.H., ``Techniques of myocardial 
revascularization. In: Edmunds LH, ed. Cardiac surgery in the 
adult,'' New York: McGraw-Hill, 1997, pp. 481-534.
    \106\ Kim, F.Y., Marhefka, G., Ruggiero, N.J., et al., 
``Saphenous vein graft disease: review of pathophysiology, 
prevention, and treatment,'' Cardiol, Rev 2013, vol. 21(2), pp. 101-
9.
---------------------------------------------------------------------------

    With respect to the newness criterion, DURAGRAFT[reg] has not 
received FDA approval at the time of the development of this proposed 
rule. The applicant indicated that it anticipates FDA approval of its 
premarket application by the second quarter of 2018. The applicant also 
indicated that ICD-10-PCS code XY0VX83 (Extracorporeal introduction of 
endothelial damage inhibitor to vein graft, new technology group 3) 
would identify procedures involving the use of the DURAGRAFT[reg] 
technology.
    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 similar mechanism of action to achieve a therapeutic outcome, 
according to the applicant, there are currently no other treatment 
options available with the

[[Page 20305]]

same mechanism of action as that of DURAGRAFT[reg]. Moreover, the 
applicant conveyed there are currently no commercial solutions approved 
for treating arteries or veins intended for bypass surgery. The 
applicant explained that the DURAGRAFT[reg] treatment has been 
formulated into a solution so that it can be used to treat grafts 
during handling, flushing, and bathing steps without changing surgical 
practice to perform the treatment. According to the applicant, 
DURAGRAFT[reg] is specifically designed to inhibit endothelial cell 
damage and death, as well as prevent damage to other cells of the 
vascular conduit, which achieves a superior clinical outcome in 
coronary artery bypass grafting (CABG).
    The applicant did not directly address within its application 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. However, the applicant stated, as 
previously indicated, that there are currently no other treatment 
options available that utilize the same mechanism of action as that of 
the DURAGRAFT[reg].
    Based on the applicant's statements presented above, we are 
concerned that the mechanism of action of the DURAGRAFT[reg] may be the 
same or similar to other vein graft storage solutions. We also are 
concerned with the lack of information regarding how the technology 
meets the substantial similarity criteria. Specifically, we understand 
that there are other vein graft storage solutions available, such as 
various saline, blood, and electrolyte solutions. We believe that 
additional information would be helpful regarding whether the use of 
the technology treats the same or similar patient population or type of 
disease, and whether the product is assigned to the same or different 
MS-DRG as compared to the other storage solutions. We are inviting 
public comments on whether DURAGRAFT[reg] meets the substantial 
similarity criteria and 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 
DURAGRAFT[reg] may map to, the applicant identified all MS-DRGs for 
patients who underwent coronary artery bypass grafting (CABG). 
Specifically, the applicant searched the FY 2016 MedPAR file for claims 
that included IPPS patients and identified potential cases by the 
following ICD-10-PCS procedure codes:

------------------------------------------------------------------------
 ICD-10-PCS procedure code                   Code title
------------------------------------------------------------------------
021009W...................  Bypass coronary artery, one artery from
                             aorta with autologous venous tissue, open
                             approach.
02100AW...................  Bypass coronary artery, one artery from
                             aorta with autologous arterial tissue, open
                             approach.
021049W...................  Drainage of intracranial subdural space,
                             percutaneous approach
02104AW...................  Bypass cerebral ventricle to cerebral
                             cisterns, percutaneous approach.
021109W...................  Bypass coronary artery, two arteries from
                             aorta with autologous venous tissue, open
                             approach.
02110AW...................  Bypass coronary artery, two arteries from
                             aorta with autologous arterial tissue, open
                             approach.
021149W...................  Bypass coronary artery, two arteries from
                             aorta with autologous venous tissue,
                             percutaneous endoscopic approach.
02114AW...................  Bypass coronary artery, two arteries from
                             aorta with autologous arterial tissue,
                             percutaneous endoscopic approach.
021209W...................  Bypass coronary artery, three arteries from
                             aorta with autologous venous tissue, open
                             approach.
02120AW...................  Bypass coronary artery, three arteries from
                             aorta with autologous arterial tissue, open
                             approach.
021249W...................  Bypass coronary artery, three arteries from
                             aorta with autologous venous tissue,
                             percutaneous endoscopic approach.
02124AW...................  Bypass coronary artery, three arteries from
                             aorta with autologous arterial tissue,
                             percutaneous endoscopic approach.
021309W...................  Bypass coronary artery, four or more
                             arteries from aorta with autologous venous
                             tissue, open approach.
02130AW...................  Bypass coronary artery, four or more
                             arteries from aorta with autologous
                             arterial tissue, open approach.
021349W...................  Bypass coronary artery, four or more
                             arteries from aorta with autologous venous
                             tissue, percutaneous endoscopic approach.
02134AW...................  Bypass coronary artery, four or more
                             arteries from aorta with autologous
                             arterial tissue, percutaneous endoscopic
                             approach.
------------------------------------------------------------------------

    This resulted in potential cases spanning 98 MS-DRGs, with 
approximately 93 percent of all potential cases, 59,139, mapping to the 
following 10 MS-DRGs:

------------------------------------------------------------------------
          MS-DRG                            MS-DRG title
------------------------------------------------------------------------
MS-DRG 3.................  Extracorporeal Membrane Oxygenation (ECMO) or
                            Tracheostomy with Mechanical Ventilation 96+
                            Hours or Principal Diagnosis Except Face,
                            Mouth & Neck with Major Operating Room.
MS-DRG 216...............  Cardiac Valve and Other Major Cardiothoracic
                            Procedure with Cardiac Catheterization with
                            MCC.
MS-DRG 219...............  Cardiac Valve and Other Major Cardiothoracic
                            Procedure without Cardiac Catheterization
                            with MCC.
MS-DRG 220...............  Cardiac Valve and Other Major Cardiothoracic
                            Procedure without Cardiac Catheterization
                            with CC.
MS-DRG 228...............  Other Cardiothoracic Procedures with MCC.
MS-DRG 229...............  Other Cardiothoracic Procedures without CC.
MS-DRG 233...............  Coronary Bypass with Cardiac Catheterization
                            with MCC.
MS-DRG 234...............  Coronary Bypass with Cardiac Catheterization
                            without MCC.
MS-DRG 235...............  Coronary Bypass without Cardiac
                            Catheterization with MCC.
MS-DRG 236...............  Coronary Bypass without Cardiac
                            Catheterization without MCC.
------------------------------------------------------------------------

    Using the 59,139 identified cases, the average case-weighted 
unstandardized charge per case was $200,886. The applicant then 
standardized the charges. The applicant did not remove charges for any 
current treatment because, as

[[Page 20306]]

discussed above, the applicant indicated there are no other current 
treatment options available. The applicant noted that it did not 
provide an inflation factor to project future charges. The applicant 
added charges for the DURAGRAFT[reg] technology. This charge was 
created by applying the national average CCR for implantable devices of 
0.332 from the FY 2018 IPPS/LTCH PPS final rule (82 FR 38103) to the 
cost of the device. According to the applicant, no further charges or 
related charges were added. Based on the FY 2018 IPPS/LTCH PPS Table 10 
thresholds, the average case-weighted threshold amount was $164,620. 
The final average case-weighted standardized charge per case was 
$185,575. Because the final 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 DURAGRAFT[reg] meets the cost 
criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that the substitutional use of DURAGRAFT[reg] 
significantly reduces clinical complications associated with VGF 
following CABG surgery.
    According to the applicant, DURAGRAFT[reg] provides a benefit by 
protecting vascular grafts and their fragile luminal endothelial layer 
from the point of harvest until the point of grafting; an 
intra[dash]operative ischemic interval lasting from about 10 minutes to 
3 hours depending on the complexity of the surgery. According to the 
applicant, there are currently no products available to protect 
vascular grafts during this time interval. The current standard 
practice is to place grafts in heparinized saline or heparinized 
autologous blood to keep them wet; a practice which has been shown to 
cause significant damage to the graft within minutes, and which has 
been shown to clinically and statistically correlate with the 
development of 12-month VGF.107 108 109 110 Therefore, 
neglecting to protect the endothelial layer prior to implantation can 
have long-term consequences.
---------------------------------------------------------------------------

    \107\ Harskamp, Ralf E., MD, Alexander, John H., MD, MHS, 
Schulte, Phillip J., Phd, et al., ``Vein Graft Preservation 
Solutions, Patency, and Outcomes After Coronary Artery Bypass Graft 
Surgery: follow-up from the PREVENT IV randomized clinical trial'', 
Jama Surg, 2014, vol. 149(8), pp. 798-805.
    \108\ Weiss, D.R., Juchem, G., Kemkes, B.M., et al., ``Extensive 
deendothelialization and thrombogenicity in routinely prepared vein 
grafts for coronary bypass operations: facts and remedy,'' Century 
Publishing Corporation, International Journal of Clinical 
Experimental Medicine, 2009 May 28, vol. 2(2), pp. 95-113.
    \109\ Wilbring, M., Tugtekin, S.M., Zatschler, B., et al., 
``Even short-time storage in physiological saline solution impairs 
endothelial vascular function of saphenous vein grafts,'' Elsevier 
Science Inc., European Journal of Cardio-Thoracic Surgery, 2011 Oct, 
vol. 40(4), pp. 811-815.
    \110\ Thatte, H.S., Biswas, K.S., Najjar, S.F., et al., ``Multi-
photon microscopic evaluation of saphenous vein endothelium and its 
preservation with a new solution,'' GALA, Elsevier Science Inc., Ann 
Thorac Surg, 2003 Apr, vol. 75(4), pp. 1145-1152.
---------------------------------------------------------------------------

    When a damaged luminal surface (endothelium) of a vascular graft is 
presented to the bloodstream at the time of reperfusion, a 
domino[dash]effect of further damage is triggered in vivo through 
inflammatory, thrombogenic, and aberrant adaptive responses including 
hyper-proliferative processes that lead to VGF. These pathophysiologic 
responses occur within minutes of reperfusion of a graft that has 
received sub-optimal treatment/handling initiating a cascade of 
exacerbating damage that can continue for years later. Presenting an 
intact functional endothelial layer at the time of grafting is, 
therefore, tantamount to protecting the graft from damage that occurs 
post-grafting, in turn conferring protection against graft failure. 
Given the low success rate of failed graft intervention addressing the 
graft, endothelial protection at the time of surgery is critical.\111\
---------------------------------------------------------------------------

    \111\ Kim, F.Y., Marhefka, G., Ruggiero, N.J., et al., 
``Saphenous vein graft disease: review of pathophysiology, 
prevention, and treatment,'' Cardiol Rev 2013, vol. 21(2), pp. 101-
9.
---------------------------------------------------------------------------

    The combined PREVENT IV sub-analyses of Hess and Harskamp 
demonstrate that from dozens of factors evaluated for impact on the 
development of 12-month VGF, exposure to solutions used for 
intra[dash]operative graft wetting and storage have the largest 
correlation with the development of VGF.112, 113 Short-term 
exposure of free vascular grafts to these solutions is routine in CABG 
operations, where 10 minutes to 3 hours may elapse between the vein 
harvest and reperfusion.114, 115 According to the applicant, 
standard of care solutions are heparinized saline and heparinized 
autologous blood, which were never designed to protect vascular grafts 
and have also demonstrated an inability to protect against ischemic 
injury, actively harming the graft endothelium as 
well.116 117 118 119 According to the applicant, given the 
criticality of presenting an intact functional endothelium at the time 
of reperfusion, it should not be surprising that the use of these 
solutions is so highly associated with 12-month VGF. Based on these 
data, DURAGRAFT[reg] treatment has been designed to be a fully 
protective solution. DURAGRAFT[reg] is formulated into a flushing, 
wetting, and storage solution replacing solutions traditionally used 
for this purpose and, therefore, does not change surgical practice.
---------------------------------------------------------------------------

    \112\ Harskamp, Ralf E., MD, Alexander, John H., MD, MHS, 
Schulte, Phillip J., Phd, et al., ``Vein Graft Preservation 
Solutions, Patency, and Outcomes After Coronary Artery Bypass Graft 
Surgery: follow-up from the PREVENT IV randomized clinical trial'', 
Jama Surg, 2014, vol. 149(8), pp. 798-805.
    \113\ Testa, L., Bedogni, F., ``Treatment of Saphenous Vein 
Graft Disease: `Never Ending Story' of the Eternal Return,'' Res 
Cardiovasc Med, 2014, vol. 3(3), pp. e21092.
    \114\ Motwani, J.G., Topol, E.J., ``Aortocoronary saphenous vein 
graft disease: pathogenesis, predisposition and prevention,'' 
Circulation 1998, vol. 97(9), pp. 916-31.
    \115\ Mills, N.L., Everson, C.T., ``Vein graft failure,'' Curr 
Opin Cardiol, 1995, vol. 10, pp. 562-8.
    \116\ Harskamp, Ralf E., MD, Alexander, John H., MD, MHS, 
Schulte, Phillip J., Phd, et al., ``Vein Graft Preservation 
Solutions, Patency, and Outcomes After Coronary Artery Bypass Graft 
Surgery: follow-up from the PREVENT IV randomized clinical trial,'' 
Jama Surg, 2014, vol. 149(8), pp. 798-805.
    \117\ Weiss, D.R., Juchem, G., Kemkes, B.M., et al., ``Extensive 
deendothelialization and thrombogenicity in routinely prepared vein 
grafts for coronary bypass operations: facts and remedy,'' Century 
Publishing Corporation, International Journal of Clinical 
Experimental Medicine, 2009 May 28, vol. 2(2), pp. 95-113.
    \118\ Wilbring, M., Tugtekin, S.M., Zatschler, B., et al., 
``Even short-time storage in physiological saline solution impairs 
endothelial vascular function of saphenous vein grafts,'' Elsevier 
Science Inc., European Journal of Cardio-Thoracic Surgery, 2011 Oct, 
vol. 40(4), pp. 811-815.
    \119\ Thatte, H.S., Biswas, K.S., Najjar, S.F., et al., ``Multi-
photon microscopic evaluation of saphenous vein endothelium and its 
preservation with a new solution,'' GALA, Elsevier Science Inc., Ann 
Thorac Surg, 2003 Apr, vol. 75(4), pp. 1145-1152.
---------------------------------------------------------------------------

    The applicant noted that retrospective studies designed to assess 
clinical effectiveness and safety were conducted based on the readily 
available databases already in existence as a result of the use of 
DURAGRAFT[reg] treatment in two hospitals that had noncommercial access 
to the product through hospital pharmacies. These studies evaluated the 
effect of DURAGRAFT[reg] use during CABG surgery on post-CABG clinical 
complications associated with VGF, including myocardial infarction (MI) 
and repeat revascularization. The applicant conveyed that because of 
the time, resources and funding required for randomized studies 
evaluating clinical outcomes following CABG surgery, conducting such a 
study was not a viable approach for a small company such as 
Somahlution.
    The first retrospective study (Protocol 001), an unpublished, 
independent Physician Investigator (PI), single-center, multi-surgeon 
retrospective,

[[Page 20307]]

comparative study (DURAGRAFT[reg] vs. Saline or Blood Solutions), was a 
pilot study conducted at the University of CHU in Angers France, which 
followed patients for 5 years post-CABG surgery. This pilot study was 
conducted to assess the safety and effect of DURAGRAFT[reg] treatment 
on both short and long-term clinical outcomes. This study also served 
as the basis for the design of a larger retrospective study conducted 
at the U.S. Department of Veterans Affairs (VA) Medical Centers, 
discussed later. The objective of this single[dash]center clinical 
study in CABG patients was to evaluate the potential benefits of 
DURAGRAFT[reg] treatment as compared to a no[dash]treatment control 
group (saline). The investigator who prepared the analysis remained 
blinded to individual patient data. Eligibility criteria included 
patients with first[dash]time CABG surgery in which at least one vein 
graft was used. Patients with in-situ internal mammary artery (IMA) 
graft(s) only (no saphenous vein or free arterial grafts) and 
concomitant valve surgery and/or aortic aneurysm repair were excluded. 
The institutional review board of the University Health Alliance (UHA) 
approved the protocol, and patients gave written informed consent for 
their follow-up. A total of 630 patients who underwent elective and 
isolated CABG surgery with at least one saphenous vein graft at a 
single[dash]center in Europe between January 2002 and December 2008 
were included. The no-treatment control group (saline) included 375 
patients who underwent CABG surgery from January 2002 to May 2005 and 
the DURAGRAFT[reg] treatment group included 255 patients who underwent 
CABG surgery from June 2005 to December 2008. At long-term follow-up 
(greater than 30 days and up to 5 years), 5 patients were lost to 
follow-up (10 died before the 30-day follow[dash]up). Therefore, a 
total of 247 patients from the DURAGRAFT[reg] treatment group (97 
percent) and 368 patients from the no-treatment control group (saline) 
(98 percent) were available for the long-term analysis. Patients 
undergoing CABG surgery whose vascular grafts were treated 
intraoperatively with DURAGRAFT[reg] demonstrated no statistically 
significant differences in major adverse cardiac events (MACE) within 
the first 30 days following CABG surgery. According to the applicant, 
these data suggest that DURAGRAFT[reg] treatment is at least as safe as 
the standard of care used in CABG surgeries in that long-term outcomes 
between the two groups were not statistically different. However, also 
according to the applicant, a consistent numerical trend toward 
improved clinical effectiveness outcomes for the DURAGRAFT[reg] 
treatment group compared to the no-treatment control (saline) group was 
clearly identified. Although statistically insignificant, there was a 
consistent reduction observed in the rates for multiple endpoints such 
as all-cause death, MI, MACE, and revascularization. This study found 
reductions in DURAGRAFT[reg]-treated grafts relative to saline for 
revascularization (57 percent), MI (70 percent), MACE (37 percent) and 
all[dash]cause death (23 percent) compared to standard of care 
(heparinized saline/blood) through 5 years follow[dash]up. Based on the 
small sample-size for this evaluation of only 630 patients, and the 
known frequencies of these events following CABG surgeries, statistical 
differences were not expected. A subsequent post-hoc analysis also was 
performed by the researchers at CHU-Angers to evaluate whether any 
long-term clinical variables (such as dual antiplatelet therapy, beta-
blockers, angiotensin receptor-blockers, statins, diabetes, lifestyle 
and other factors) had any impact on the study endpoints. The 
conclusions of the post-hoc analyses were that the assessed clinical 
variables did not impact the clinical study findings and so any 
differences between groups were likely due to ``test article'' effect. 
According to the applicant, importantly, the data collected from this 
feasibility study are consistent with data collected in the 
statistically[dash]powered VA study in which statistically significant 
reductions of MI, repeat revascularization, and MACE were observed in 
the DURAGRAFT[reg] treatment group, lending confidence that the 
observed trends in this study, as well as the VA study, represent real 
differences associated with DURAGRAFT[reg] use.
    The second study, the U.S. VA Hospital Study (Protocol 002), was an 
unpublished, independent PI initiated, single-center, multi-surgeon, 
retrospective, comparative (DURAGRAFT[reg] vs. Saline) clinical trial, 
which was conducted to assess the safety and impact of DURAGRAFT[reg] 
treatment on both short and long-term clinical outcomes in patients who 
underwent isolated CABG surgery with saphenous vein grafts (SVGs) at 
the Boston (West Roxbury) VA Medical Center between 1996 and 2004. The 
time interval from 1996 through 1999 represents a time period when 
DURAGRAFT[reg] treatment was not available and heparinized saline was 
routinely used to wet and store grafts, while 2001 through 2004 
represents a time period after the center began exclusively using 
DURAGRAFT[reg], which was prepared by the hospital's pharmacy. The year 
2000 was omitted from this analysis by the PI due to the transition of 
the implementation of DURAGRAFT[reg] treatment into the clinic and the 
uncertainty of its use in CABG patients during the transition period. 
Data were extracted from a total of 2,436 patients who underwent a CABG 
procedure with at least one SVG from 1996 through 1999 (Control n=1,400 
pts.) and 2001 through 2004 (DURAGRAFT[reg] treatment n=1,036 pts.). 
The median age was 66 years old for the control treatment group and 67 
years old for the DURAGRAFT[reg] treatment group. Patients were 
excluded from the study if they had a prior history of CABG procedures, 
had no use of SVG, or underwent additional procedures during the CABG 
surgery. Mean follow-up in the DURAGRAFT[reg] treatment group was 
8.54.2 years and 9.95.6 years in the control 
treatment group. According to the applicant, this study supports not 
only safety, but also improved long-term clinical outcomes in 
DURAGRAFT[reg][dash]treated CABG patients. Thirty-day MI also was 
significantly reduced in this study. The VA study found statistically 
significant reductions in DURAGRAFT[reg]-treated grafts relative to 
saline for revascularization (35 percent), MI (45 percent), and MACE 
(19 percent) from the follow-up period of 1,000 days to 15 years post-
surgery.
    According to the applicant, in addition to the retrospective 
studies, a multi[dash]center, within-patient randomized, prospective 
study utilizing multidetector computed tomography (MDCT) angiography 
was conducted to assess safety and the effect of the use of 
DURAGRAFT[reg] on the graft by assessing early anatomic markers of VGD 
such as graft wall thickening and early stenotic events. The study was 
based on an ``in-patient control'' design in which both the control 
saline exposed vascular graft and a DURAGRAFT[reg][dash]treated graft 
were grafted within the same patient to reduce patient bias and allow a 
paired analysis of the grafts. The study was conducted under two 
protocols. The first study protocol evaluated patients up to 3 months 
post-CABG and included 1[dash] and 3-month protocol driven MDCT scans 
in 125 patients (250 grafts). The second study, a longer-term safety 
and efficacy study of 97 patients, included a 12-month protocol driven 
angiogram. The 3 month (full data set) and 12 month (interim data set) 
data demonstrate that safety and efficacy appear to be equivalent for

[[Page 20308]]

DURAGRAFT[reg] and standard of care (SoC) at 3 months, but between 3 
months and 9 months a separation between DURAGRAFT[reg] and SoC begins 
to emerge and by 12 months DURAGRAFT[reg] use is associated with a 
numerical trend towards improved safety relative to SoC. Furthermore by 
12 months, the interim analysis demonstrated that differences in 
markers of early graft disease were able to be discerned between 
DURAGRAFT[reg][dash]treated grafts and SoC. Reductions in both wall 
thickness and degree of stenosis were observed in 
DURAGRAFT[reg][dash]treated grafts relative to SoC grafts. These 
reductions were observed when the entire graft was assessed and were 
more profound when the proximal region of the graft was specifically 
evaluated. According to the applicant, this is of note because the 
proximal region of the graft is the region in which early graft disease 
has been shown to more frequently manifest in many grafting 
indications, including CABG, peripheral bypass, aortic grafting, and AV 
fistula grafting indications, and is thought to be due to hemodynamic 
perturbations that occur in this region where arterial flow is just 
entering the venous environment. While there are no notable differences 
at 3 months in either safety or efficacy, there are trends towards 
better safety at 12 months in patients in the DURAGRAFT[reg] treatment 
group compared to the control group.\120\ The efficacy results of the 
prospective study were presented at the October 2017 meeting of the TCT 
Congress in Denver.
---------------------------------------------------------------------------

    \120\ Perrault, L., ``SOMVC001 (DuraGraft) Vascular Graft 
Treatment in Patients Undergoing Coronary Artery Bypass Grafting,'' 
American Heart Association, Inc, Circulation, 2016, vol. 134, pp. 
A23242, originally published November 11, 2016.
---------------------------------------------------------------------------

    The retrospective studies demonstrated an association of reduced 
risk of non-fatal myocardial infarction, repeat revascularization, and 
MACE with DURAGRAFT[reg] treatment. However, we have a number of 
concerns relating to these studies. In addition to the studies being 
unpublished, we are concerned that they leave too many variables 
unaccounted for that could affect vein integrity such as method of vein 
harvest, vein distention pressure, and post-operative care (including 
use of anti-platelet and anti-lipid treatments). Also, control groups 
underwent CABG procedures many years earlier than the DURAGRAFT[reg] 
treatment groups in both studies. Over the years, with advances in 
medical management and surgical techniques, long-term survival and risk 
of cardiac events are expected to improve. Finally, it may be helpful 
to gain more insight from data that will be available upon completion 
and results of the multi-center, prospective, randomized, double-blind, 
comparative, within[dash]person (DURAGRAFT[reg] vs. Saline) control 
trial that is currently ongoing.
    We are inviting public comments on whether DURAGRAFT[reg] meets the 
substantial clinical improvement criterion.
    Below we summarize and respond to written public comments we 
received regarding the DURAGRAFT[reg] during the open comment period in 
response to the New Technology Town Hall meeting notice published in 
the Federal Register.
    Comment: One commenter, a cardiothoracic surgeon, stated that after 
practicing cardiac surgery for over 30 years, authoring 
peer[dash]reviewed publications in Cardiac Surgery, and participating 
in several clinical studies, it supported the approval of new 
technology add-on payments for the DURAGRAFT[reg] technology. The 
commenter indicated that one of the reasons why vein grafts get 
occluded could be because of poor handling during and after harvest. 
The commenter expressed that there are currently no other solutions 
used in treatment options available that protect vascular conduits once 
they are harvested aside from the standard practice of storing them in 
saline or blood-based solutions until they are ready for implantation. 
The commenter stated that saline and blood-based solutions are very 
damaging to vein segments, and the damage that occurs is linked to poor 
clinical outcomes including increased risk of myocardial infarction 
(MI) and increased rates of repeat revascularization. The commenter 
indicated that it had many years of first-hand experience with the use 
of DURAGRAFT[reg] because the commenter served as the Principal 
Investigator for a retrospective clinical study that evaluated the 
DURAGRAFT[reg]'s effect on clinical outcomes compared to standard-of-
care treatment options. The commenter conveyed that the results of the 
retrospective clinical study included statistically significant 
reductions in MI and repeat revascularization rates. The commenter also 
pointed out its awareness of a prospective clinical study the 
DURAGRAFT[reg]'s manufacturer has conducted evaluating radiologic 
assessments to analyze graft disease, which precedes loss of patency. 
According to the commenter, the study demonstrated increased wall 
thickness and increased stenosis in grafts stored in saline compared to 
grafts stored using the DURAGRAFT[reg]. The commenter stated that this 
finding from the prospective clinical study is very consistent with the 
clinical results of the retrospective study. The commenter concluded by 
stating that it supported the commercial availability and use of the 
DURAGRAFT[reg], including use in the treatment of its own patients.
    Response: We appreciate the commenter's input. We will take these 
comments into consideration when deciding whether to approve new 
technology add-on payment for the DURAGRAFT[reg] for FY 2019.
    Comment: Another commenter, a cardiovascular and thoracic surgeon 
with clinical expertise in coronary artery bypass grafting surgery 
(CABG) who has been involved in endothelial dysfunction as a primary 
field of study and the Principal Investigator for the 
multi[dash]center, within-patient, randomized, prospective study that 
Somahlution submitted to the FDA in support of U.S. product clearance, 
supported the approval of new technology add-on payments for the 
DURAGRAFT[reg]. The commenter indicated that as an author and co-author 
of more than 250 articles in peer-reviewed publications, a senior 
author of more than 75 papers and writer of several book chapters, and 
having delivered over 40 conference presentations worldwide, the study 
results, specifically of the 12-month multidector computed tomography 
(MDCT) imaging showing less lumen narrowing or stenosis, and less wall 
thickening as a resulting outcome of the DURAGRAFT[reg][dash]treated 
veins compared to heparinized-saline, are critically important from a 
clinical perspective. According to the commenter, the primary mechanism 
of the DURAGRAFT[reg] technology is to protect the endothelial cells in 
the vein graft and this has been repeatedly demonstrated in pre-
clinical studies. The commenter explained that the findings of the 
clinical anatomic changes in the graft demonstrated in the prospective 
study are consistent with the pre-clinical findings and the literature 
that has clearly pointed to damaged endothelium of the graft as the 
starting insult for later development of poor patient outcomes from 
graft disease and failure. Finally, the commenter noted that surgeons 
in all countries currently use a variety of graft storage and 
preservation solutions during a CABG procedure because there has been 
no other available solution used in treatment options, aside from the 
DURAGRAFT[reg], with systematic evaluation demonstrating a clear safety

[[Page 20309]]

profile and benefit to patient outcomes. The commenter encouraged CMS 
to approve new technology add-on payments for the DURAGRAFT[reg] 
technology to provide additional support for this new preservation 
solution to become available to surgeons in the United States.
    Response: We appreciate the commenter's input. We will take these 
comments into consideration when deciding whether to approve new 
technology add-on payments for DURAGRAFT[reg] for FY 2019.
e. remed[emacr][reg] System
    Respicardia, Inc. submitted an application for new technology add-
on payments for the remed[emacr][reg] System for FY 2019. According to 
the applicant, the remed[emacr][reg] System is indicated for use as a 
transvenous phrenic nerve stimulator in the treatment of adult patients 
who have been diagnosed with moderate to severe central sleep apnea. 
The remed[emacr][reg] System consists of an implantable pulse 
generator, and a stimulation and sensing lead. The pulse generator is 
placed under the skin, in either the right or left side of the chest, 
and it functions to monitor the patient's respiratory signals. A 
transvenous lead for unilateral stimulation of the phrenic nerve is 
placed either in the left pericardiophrenic vein or the right 
brachiocephalic vein, and a second lead to sense respiration is placed 
in the azygos vein. Both leads, in combination with the pulse 
generator, function to sense respiration and, when appropriate, 
generate an electrical stimulation to the left or right phrenic nerve 
to restore regular breathing patterns.
    The applicant's application describes central sleep apnea (CSA) as 
a chronic respiratory disorder characterized by fluctuations in 
respiratory drive, resulting in the cessation of respiratory muscle 
activity and airflow during sleep.\121\ The applicant reported that 
CSA, as a primary disease, has a low prevalence in the United States 
population; and it is more likely to occur in those individuals who 
have cardiovascular disease, heart failure, atrial fibrillation, 
stroke, or chronic opioid usage. The apneic episodes which occur in 
patients with CSA cause hypoxia, increased blood pressure, increased 
preload and afterload, and promotes myocardial ischemia and 
arrhythmias. In addition, CSA ``enhances oxidative stress, causing 
endothelial dysfunction, inflammation, and activation of neurohormonal 
systems, which contribute to progression of underlying diseases.'' 
\122\
---------------------------------------------------------------------------

    \121\ Jagielski, D., Ponikowski, P., Augostini, R., Kolodziej, 
A., Khayat, R., Abraham, W.T., 2016, ``Transvenous Stimulation of 
the Phrenic Nerve for the Treatment of Central Sleep Apnoea: 12 
months' experience with the remede[reg]system,'' European Journal of 
Heart Failure, pp. 1-8.
    \122\ Costanzo, M.R., Ponikowski, P., Javaheri, S., Augostini, 
R., Goldberg, L., Holcomb, R., Abraham, W.T., ``Transvenous 
Neurostimulation for Centra Sleep Apnoea: A randomised controlled 
trial,'' Lancet, 2016, vol. 388, pp. 974-982.
---------------------------------------------------------------------------

    According to the applicant, prior to the introduction of the 
remed[emacr][reg] System, typical treatments for CSA took the form of 
positive airway pressure devices. Positive airway pressure devices, 
such as continuous positive airway pressure (CPAP), have previously 
been used to treat patients diagnosed with obstructive sleep apnea. 
Positive airway devices deliver constant pressurized air via a mask 
worn over the mouth and nose, or nose alone. For this reason, positive 
airway devices may only function when the patient wears the necessary 
mask. Similar to CPAP, adaptive servo-ventilation (ASV) provides 
noninvasive respiratory assistance with expiratory positive airway 
pressure. However, ASV adds servo-controlled inspiratory pressure, as 
well, in an effort to maintain airway patency.\123\
---------------------------------------------------------------------------

    \123\ Cowie, M.R., Woehrle, H., Wegscheider, K., Andergmann, C., 
d'Ortho, M.P., Erdmann, E., Teschler, H., ``Adaptive Servo-
Ventilation for Central Sleep Apneain Systolic Heart Failure,'' N 
Eng Jour of Med, 2015, pp. 1-11.
---------------------------------------------------------------------------

    On October 6, 2017, the remed[emacr][reg] System was approved by 
the FDA as an implantable phrenic nerve stimulator indicated for the 
use in the treatment of adult patients who have been diagnosed with 
moderate to severe CSA. The device was available commercially upon FDA 
approval. Therefore, the newness period for the remed[emacr][reg] 
System is considered to begin on October 6, 2017. The applicant has 
indicated that the device also is designed to restore regular breathing 
patterns in the treatment of CSA in patients who also have been 
diagnosed with heart failure.
    The applicant was approved for two unique ICD-10-PCS procedure 
codes for the placement of the leads: 05H33MZ (Insertion of 
neurostimulator lead into right innominate (brachiocephalic) vein) and 
05H03MZ (Insertion of neurostimulator lead into azygos vein), effective 
10/01/2016. The applicant indicated that implantation of the pulse 
generator is currently reported using ICD-10-PCS procedure code 0JH60DZ 
(Insertion of multiple array stimulator generator into chest 
subcutaneous tissue).
    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 the 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, the remed[emacr][reg] System provides 
stimulation to nerves to stimulate breathing. Typical treatments for 
hyperventilation CSA include supplemental oxygen and CPAP. Mechanical 
ventilation also has been used to maintain a patent airway. The 
applicant asserted that the remed[emacr][reg] System is a 
neurostimulation device resulting in negative airway pressure, whereas 
devices such as CPAP and ASV utilize positive airway pressure.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant stated that the 
remed[emacr][reg] System is assigned to MS-DRGs 040 (Peripheral, 
Cranial Nerve and Other Nervous System Procedures with MCC), 041 
(Peripheral, Cranial Nerve and Other Nervous System Procedures with CC 
or Peripheral Neurostimulator), and 042 (Peripheral, Cranial Nerve and 
Other Nervous System Procedures without CC/MCC). The current procedures 
for the treatment options of CPAP and ASV are not assigned to these MS-
DRGs.
    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, the remed[emacr][reg] System is indicated for the use as a 
transvenous unilateral phrenic nerve stimulator in the treatment of 
adult patients who have been diagnosed with moderate to severe CSA. The 
applicant stated that the remed[emacr][reg] System reduces the negative 
symptoms associated with CSA, particularly among patients who have been 
diagnosed with heart failure. The applicant asserted that patients who 
have been diagnosed with heart failure are particularly negatively 
affected by CSA and currently available CSA treatment options of CPAP 
and ASV. According to the applicant, the currently available treatment 
options, CPAP and ASV, have been found to have worsened mortality and 
morbidity outcomes for patients who have been diagnosed with both CSA 
and heart failure. Specifically, ASV is currently contraindicated in 
the treatment of CSA in patients who have been diagnosed with heart 
failure.
    The applicant also suggested that the remed[emacr][reg] System is 
particularly suited for the treatment of CSA in patients who

[[Page 20310]]

also have been diagnosed with heart failure. We are concerned that, 
while the remed[emacr][reg] System may be beneficial to patients who 
have been diagnosed with both CSA and heart failure, the FDA approved 
indication is for use in the treatment of adult patients who have been 
diagnosed with moderate to severe CSA. We note that the applicant's 
clinical analyses and data results related to patients who specifically 
were diagnosed with CSA and heart failure. We are inviting public 
comments on whether the remed[emacr][reg] System meets the newness 
criterion.
    With regard to the cost criterion, the applicant provided the 
following analysis to demonstrate that the technology meets the cost 
criterion. The applicant identified cases representing potential 
patients who may be eligible for treatment involving the 
remed[emacr][reg] System within MS-DRGs 040, 041, and 042. Using the 
Standard Analytical File (SAF) Limited Data Set (MedPAR) for FY 2015, 
the applicant included all claims for the previously stated MS-DRGs for 
its cost threshold calculation. The applicant stated that typically 
claims are selected based on specific ICD-10-PCS parameters, however 
this is a new technology for which no ICD-10-PCS procedure code and 
ICD-10-CM diagnosis code combination exists. Therefore, all claims for 
the selected MS-DRGs were included in the cost threshold analysis. This 
process resulted in 4,462 cases representing potential patients who may 
be eligible for treatment involving the remed[emacr][reg] System 
assigned to MS-DRG 040; 5,309 cases representing potential patients who 
may be eligible for treatment involving the remed[emacr][reg] System 
assigned to MS-DRG 041; and 2,178 cases representing potential patients 
who may be eligible for treatment involving the remed[emacr][reg] 
System assigned to MS-DRG 042, for a total of 11,949 cases.
    Using the 11,949 identified cases, the applicant determined that 
the average unstandardized case-weighted charge per case was $85,357. 
Using the FY 2015 MedPAR dataset to identify the total mean charges for 
revenue code 0278, the applicant removed charges associated with the 
current treatment options for each MS-DRG as follows: $9,153.83 for MS-
DRG 040; $12,762.31 for MS-DRG 041; and $21,547.73 for MS-DRG 042. The 
applicant anticipated that no other related charges would be eliminated 
or replaced. The applicant then standardized the charges and applied a 
2-year inflation factor of 1.104055 obtained from the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38524). The applicant then added charges for the 
new technology to the inflated average case-weighted standardized 
charges per case. No other related charges were added to the cases. The 
applicant calculated a final inflated average case-weighted 
standardized charge per case of $175,329 and a Table 10 average case-
weighted threshold amount of $78,399. Because the final inflated 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amount, the applicant maintained that the 
technology meets the cost criterion. With regard to the analysis above, 
we are concerned that all cases in MS-DRGs 040, 041, and 042 were used 
in the analysis. We are unsure if all of these cases represent patients 
that may be truly eligible for treatment involving the 
remed[emacr][reg] System. We are inviting public comments on whether 
the remed[emacr][reg] System meets the cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that the remed[emacr][reg] System meets the 
substantial clinical improvement criterion. The applicant stated that 
the remed[emacr][reg] System offers a treatment option for a patient 
population unresponsive to, or ineligible for, treatment involving 
currently available options. According to the applicant, patients who 
have been diagnosed with CSA have no other available treatment options 
than the remed[emacr] System. The applicant stated that published 
studies on both CPAP and ASV have proven that primary endpoints have 
not been met for treating patients who have been diagnosed with CSA. In 
addition, according to the ASV study, there was an increase in 
cardiovascular mortality.
    According to the applicant, the remed[emacr][reg] System will prove 
to be a better treatment for the negative effects associated with CSA 
in patients who have been diagnosed with heart failure, such as 
cardiovascular insults resulting from sympathetic nervous system 
activation, pulmonary hypertension, and arrhythmias, which ultimately 
contribute to the downward cycle of heart failure,\124\ when compared 
to the currently available treatment options. The applicant also 
indicated that prior studies have assessed CPAP and ASV as options for 
the treatment of diagnoses of CSA primarily in patients who have been 
diagnosed with heart failure.
---------------------------------------------------------------------------

    \124\ Abraham, W., Jagielski, D., Oldenburg, O., Augostini, R., 
Kreuger, S., Kolodziej, A., Ponikowski, P., ``Phrenic Nerve 
Stimulation for the Treatment of Central Sleep Apnea,'' JACC: Heart 
Failure, 2015, vol. 3(5), pp. 360-369.
---------------------------------------------------------------------------

    The applicant shared the results from two studies concerning the 
effects of positive airway pressure ventilation treatment:
     The Canadian Continuous Positive Airway Pressure for 
Patients with Central Sleep Apnea and Heart Failure trial found that, 
while CPAP managed the negative symptoms of CSA, such as improved 
nocturnal oxygenation, increased ejection fraction, lower 
norepinephrine levels, and increased walking distance, it did not 
affect overall patient survival; \125\ and
---------------------------------------------------------------------------

    \125\ Bradley, T.D., Logan, A.G., Kimoff, R.J., Series, F., 
Morrison, D., Ferguson, K., Phil, D., 2005, ``Continous Positive 
Airway Pressure for Central Sleep Apnea and Heart Failure,'' N Eng 
Jour of Med, vol. 353(19), pp. 2025-2033.
---------------------------------------------------------------------------

     In a randomized trial of 1,325 patients who had been 
diagnosed with heart failure who received treatment with ASV plus 
standard treatment or standard treatment alone, ASV was found to 
increase all-cause and cardiovascular mortality as compared to the 
control treatment.\126\
---------------------------------------------------------------------------

    \126\ Cowie, M.R., Woehrle, H., Wegscheider, K., Andergmann, C., 
d'Ortho, M.-P., Erdmann, E., Teschler, H., ``Adaptive Servo-
Ventilation for Central Sleep Apneain Systolic Heart Failure,'' N 
Eng Jour of Med, 2015, pp. 1-11.
---------------------------------------------------------------------------

    The applicant also stated that published literature indicates that 
currently available treatment options do not meet primary endpoints 
with concern to the treatment of CSA; patients treated with ASV 
experienced an increased likelihood of mortality,\127\ and patients 
treated with CPAP experienced alleviation of symptoms, but no change in 
survival.\128\ The applicant provided further research, which suggested 
that a primary drawback of CPAP in the treatment of diagnoses of CSA is 
a lack of patient adherence to therapy.\129\
---------------------------------------------------------------------------

    \127\ Ibid.
    \128\ Bradley, T.D., Logan, A.G., Kimoff, R.J., Series, F., 
Morrison, D., Ferguson, K., Phil, D., 2005, ``Continous Positive 
Airway Pressure for Central Sleep Apnea and Heart Failure,'' N Engl 
Jour of Med, vol. 353(19), pp. 2025-2033.
    \129\ Ponikowski, P., Javaheri, S., Michalkiewicz, D., Bart, 
B.A., Czarnecka, D., Jastrzebski, M., Abraham, W.T., ``Transvenous 
Phrenic Nerve Stimulation for the Treatment of Central Sleep Apnoea 
in Heart Failure,'' European Heart Journal, 2012, vol. 33, pp. 889-
894.
---------------------------------------------------------------------------

    The applicant also stated that the remed[emacr] System represents a 
substantial clinical improvement over existing technologies because of 
the reduction in the number of future hospitalizations, few 
device[dash]related complications, and improvement in CSA symptoms and 
quality of life. Specifically, the applicant stated that the clinical 
data has shown a statistically significant reduction in Apnea-hypopnea 
index (AHI), improvement in quality of life, and significantly improved 
Minnesota Living with Heart Failure Questionnaire score. In addition, 
the applicant

[[Page 20311]]

indicated that study results showed the remed[emacr] System 
demonstrated an acceptable safety profile, and there was a trend toward 
fewer heart failure hospitalizations.
    The applicant provided six published articles as evidence. All six 
articles were prospective studies. In three of the six studies, the 
majority of patients studied had been diagnosed with CSA with a heart 
failure comorbidity, while the remaining three studies only studied 
patients who had been diagnosed with CSA with a heart failure 
comorbidity. The first study \130\ assessed the treatment of patients 
who had been diagnosed with CSA in addition to heart failure. According 
to the applicant, as referenced in the results of the published study, 
Ponikowski, et al., assessed the treatment effects of 16 of 31 enrolled 
patients with evidence of CSA within 6 months prior to enrollment who 
met inclusion criteria (apnea-hypopnea index of greater than or equal 
to 15 and a central apnea index of greater than or equal to 5) and who 
did not meet exclusion criteria (a baseline oxygen saturation of less 
than 90 percent, being on supplemental oxygen, having evidence of 
phrenic nerve palsy, having had severe chronic obstructive pulmonary 
disease (COPD), having hard angina or a myocardial infarction in the 
past 3 months, being pacemaker dependent, or having inadequate capture 
of the phrenic nerve during neurostimulation). Of the 16 patients whose 
treatment was assessed, all had various classifications of heart 
failure diagnoses: 3 (18.8 percent) were classified as class I on the 
New York Heart Association classification scale (No limitation of 
physical activity. Ordinary physical activity does not cause undue 
fatigue, palpitation, dyspnea (shortness of breath)); 8 (50 percent) 
were classified as a class II (Slight limitation of physical activity. 
Comfortable at rest. Ordinary physical activity results in fatigue, 
palpitation, dyspnea (shortness of breath)); and 5 (31.3 percent) were 
classified as class III (Marked limitation of physical activity. 
Comfortable at rest. Less than ordinary activity causes fatigue, 
palpitation, or dyspnea).\131\ After successful surgical implantation 
of a temporary transvenous lead for unilateral phrenic nerve 
stimulation, patients underwent a control night without nerve 
stimulation and a therapy night with stimulation, while undergoing 
polysomnographic (PSG) testing. Comparison of both nights was 
performed.
---------------------------------------------------------------------------

    \130\ Ponikowski, P., Javaheri, S., Michalkiewicz, D., Bart, 
B.A., Czarnecka, D., Jastrzebski, M., Abraham, W.T., ``Transvenous 
Phrenic Nerve Stimulation for the Treatment of Central Sleep Apnoea 
in Heart Failure,'' European Heart Journal, 2012, vol. 33, pp. 889-
894.
    \131\ ``Classes of Heart Failure,'' 2017, May 8, Retrieved from 
American Heart Association: Available at: http://www.heart.org/HEARTORG/Conditions/HeartFailure/AboutHeartFailure/Classes-of-Heart-Failure_UCM_306328_Article.jsp#.WmE2rlWnGUk.
---------------------------------------------------------------------------

    According to the applicant, some improvements of CSA symptoms were 
identified in statistical analyses. Sleep time and efficacy were not 
statistically significantly different for control night and therapy 
night, with median sleep times of 236 minutes and 245 minutes and sleep 
efficacy of 78 percent and 71 percent, respectively. There were no 
statistical differences across categorical time spent in each sleep 
stage (for example, N1, N2, N3, and REM) between control and therapy 
nights. The average respiratory rate and hypopnea index did not differ 
statistically across nights. Marginal positive statistical differences 
occurred between control and therapy nights for the baseline oxygen 
saturation median values (95 and 96 respectively) and obstructive apnea 
index (OAI) (1 and 4, respectively). Beneficial statistically 
significant differences occurred from control to therapy nights for the 
average heart rate (71 to 70, respectively), arousal index events per 
hour (32 to 12, respectively), apnea-hypopnea index (AHI) (45 to 23, 
respectively), central apnea index (CAI) (27 to 1, respectively), and 
oxygen desaturation index of 4 percent (ODI = 4 percent) (31 to 14, 
respectively). Two adverse events were noted: (1) Lead tip thrombus 
noted when lead was removed; the patient was anticoagulated without 
central nervous system sequelae; and (2) an episode of ventricular 
tachycardia upon lead placement and before stimulation was initiated. 
The episode was successfully treated by defibrillation of the patient's 
implanted ICD. Neither adverse event was directly related to the 
phrenic nerve stimulation therapy.
    The second study \132\ was a prospective, multi-center, 
nonrandomized study that followed patients diagnosed with CSA and other 
underlying comorbidities. According to the applicant, as referenced in 
the results of the published study, Abraham, et al., 49 of the 57 
enrolled patients who were followed indicated a primary endpoint of a 
reduction of AHI with secondary endpoints of feasibility and safety of 
the therapy. Patients were included if they had an AHI of 20 or greater 
and apneic events that were related to CSA. Among the study patient 
population, 79 percent had diagnoses of heart failure, 2 percent had 
diagnoses of atrial fibrillation, 13 percent had other cardiac etiology 
diagnoses, and the remainder of patients had other cardiac unrelated 
etiology diagnoses. Exclusion criteria were similar to the previous 
study (that is, (Ponikowski P., 2012)), with the addition of a 
creatinine of greater than 2.5 mg/dl. After implantation of the 
remed[emacr][reg] System, patients were assessed at baseline, 3 months 
(n=47) and 6 months (n=44) on relevant measures. At 3 months, 
statistically nonsignificant results occurred for the OAI and hypopnea 
index (HI) measures. The remainder of the measures showed statistically 
significant differences from baseline to 3 months: AHI with a -27.1 
episodes per hour of sleep difference; CAI with a -23.4 episodes per 
hour of sleep difference; MAI with a -3 episodes per hour of sleep 
difference; ODI = 4 percent with a -23.7 difference; arousal index with 
-12.5 episodes per hour of sleep difference; sleep efficiency with a 
8.4 percent increase; and REM sleep with a 4.5 percent increase. 
Similarly, among those assessed at 6 months, statistically significant 
improvements on all measures were achieved, including OAI and HI. 
Regarding safety, a data safety monitoring board (DSMB) adjudicated and 
found the following 3 of 47 patients (6 percent) as having serious 
adverse events (SAE) related to the device, implantation procedure or 
therapy. None of the DSMB adjudicated SAEs was due to lead 
dislodgement. Two SAEs of hematoma or headache were related to the 
implantation procedure and occurred as single events in two patients. A 
single patient experienced atypical chest discomfort during the first 
night of stimulation, but on reinitiation of therapy on the second 
night no further discomfort occurred.
---------------------------------------------------------------------------

    \132\ Abraham, W., Jagielski, D., Oldenburg, O., Augostini, R., 
Kreuger, S., Kolodziej, A., Ponikowski, P., ``Phrenic Nerve 
Stimulation for the Treatment of Central Sleep Apnea,'' JACC: Heart 
Failure, 2015, vol. 3(5), pp. 360-369.
---------------------------------------------------------------------------

    The third study \133\ assessed the safety and feasibility of 
phrenic nerve stimulation for 6 monthly follow-ups of 8 patients 
diagnosed with heart failure with CSA. Of the eight patients assessed, 
one was lost to follow-up and one died from pneumonia. According to the 
applicant, as referenced in the results in the published study, Zheng, 
et al. (2015), no unanticipated serious adverse events were found to be 
related to the therapy; in one patient, a lead became dislodged and 
subsequently successfully repositioned. Three

[[Page 20312]]

patients reported improved sleep quality, and all patients reported 
increased energy. A reduction in sleep apneic events and decreases in 
AHI and CAI were related to application of the treatment. Gradual 
increases to the 6-minute walking time occurred through the study.
---------------------------------------------------------------------------

    \133\ Zhang, X., Ding, N., Ni, B., Yang, B., Wang, H., & Zhang, 
S.J., 2015, ``Satefy and Feasibility of Chronic Transvenous Phrenic 
Nerve Stimulation for Treatment of Central Sleep Apnea in Heart 
Failure Patients,'' The Clinical Respiratory Journal, pp. 1-9.
---------------------------------------------------------------------------

    The fourth study \134\ extended the previous Phase I study \135\ 
from 6 months to 12 months, and included only 41 of the original 49 
patients continuing in the study. Of the 57 patients enrolled at the 
time of the Phase I study, 41 were evaluated at the 12-month follow-up. 
Of the 41 patients examined at 12 months, 78 percent had diagnoses of 
CSA related to heart failure, 2 percent had diagnoses of atrial 
fibrillation with related CSA, 12 percent had diagnoses of CSA related 
to other cardiac etiology diagnoses, and the remainder of patients had 
diagnoses of CSA related to other noncardiac etiology diagnoses. At 12 
months, 6 sleep parameters remained statistically different and 3 were 
no longer statistically significant. The HI, OAI, and arousal indexes 
were no longer statistically significantly different from baseline 
values. A new parameter, time spent with peripheral capillary oxygen 
saturation (SpO2) below 90 percent was not statistically 
different at 12 months (31.4 minutes) compared to baseline (38.2 
minutes). The remaining 6 parameters showed maintenance of improvements 
at the 12-month time point as compared to the baseline: AHI from 49.9 
to 27.5 events per hour; CAI from 28.2 to 6.0 events per hour; MAI from 
3.0 to 0.5 events per hour; ODI = 4 percent from 46.1 to 26.9 events 
per hour; sleep efficiency from 69.3 percent to 75.6 percent; and REM 
sleep from 11.4 percent to 17.1 percent. At the 3-month, 6-month, and 
12-month time points, patient quality of life was assessed to be 70.8 
percent, 75.6 percent, and 83.0 percent, respectively, indicating that 
patients experienced mild, moderate, or marked improvement. Seventeen 
patients were followed at 18 months with statistical differences from 
baseline for AHI and CAI. Three patients died over the 12-month follow-
up period: 2 died of end-stage heart failure and 1 died from sudden 
cardiac death. All three deaths were adjudicated by the DSMB and none 
were related to the procedure or to phrenic nerve stimulation therapy. 
Five patients were found to have related serious adverse events over 
the 12-month study time. Three events were previously described in the 
results referenced in the published study, Abraham, et al., and an 
additional 2 SAEs occurred during the 12-month follow-up. One patient 
experienced impending pocket perforation resulting in pocket revision, 
and another patient experienced lead failure.
---------------------------------------------------------------------------

    \134\ Jagielski, D., Ponikowski, P., Augostini, R., Kolodziej, 
A., Khayat, R., & Abraham, W.T., 2016, ``Transvenous Stimulation of 
the Phrenic Nerve for the Treatment of Central Sleep Apnoea: 12 
months' experience with the remede[reg]system,'' European Journal of 
Heart Failure, 2016, pp. 1-8.
    \135\ Abraham, W., Jagielski, D., Oldenburg, O., Augostini, R., 
Kreuger, S., Kolodziej, A., Ponikowski, P., 2015, ``Phrenic Nerve 
Stimulation for the Treatment of Central Sleep Apnea,'' JACC: Heart 
Failure, 2015, vol. 3(5), pp. 360-369.
---------------------------------------------------------------------------

    The fifth study \136\ was a randomized control trial with a primary 
outcome of achieving a reduction in AHI of 50 percent or greater from 
baseline to 6 months enrolling 151 patients with the neurostimulation 
treatment (n=73) and no stimulation control (n=78). Of the total 
sample, 96 (64 percent) of the patients had been diagnosed with heart 
failure; 48 (66 percent) of the treated patients had been diagnosed 
with heart failure, and 48 (62 percent) of the control patients had 
been diagnosed with heart failure. Sixty-four (42 percent) of all of 
the patients included in the study had been diagnosed with atrial 
fibrillation and 84 (56 percent) had been diagnosed with coronary 
artery disease. All of the patients had been treated with the 
remed[emacr][reg] System device implanted; the system was activated in 
the treatment group during the first month. ``Over about 12 weeks, 
stimulation was gradually increased in the treatment group until 
diaphragmatic capture was consistently achieved without disrupting 
sleep.'' \137\ While patients and physicians were unblinded, the 
polysomnography core laboratory remained blinded. The per-protocol 
population from which statistical comparisons were made is 58 patients 
treated with the remed[emacr][reg] System and 73 patients in the 
control group. The authors appropriately controlled for Type I errors 
(false positives), which arise from performing multiple tests. Thirty-
five treated patients and 8 control patients met the primary end point, 
the number of patients with a 50 percent or greater reduction in AHI 
from baseline; the difference of 41 percent is statistically 
significant. All seven of the secondary endpoints were assessed and 
found to have statistically significant difference in change from 
baseline between groups at the 6-month follow-up after controlling for 
multiple comparisons: CAI of -22.8 events per hour lower for the 
treatment group; AHI (continuous) of -25.0 events per hour lower for 
the treatment group; arousal events per hour of -15.2 lower for the 
treatment group; percent of sleep in REM of 2.4 percent higher for the 
treatment group; patients with marked or moderate improvement in 
patient global assessment was 55 percent higher in the treatment group; 
ODI = 4 percent was -22.7 events per hour lower for the treatment 
group; and the Epworth sleepiness scale was -3.7 lower for the 
treatment group. At 12 months, 138 (91 percent) of the patients were 
free from device, implant, and therapy related adverse events.
---------------------------------------------------------------------------

    \136\ Costanzo, M.R., Ponikowski, P., Javaheri, S., Augostini, 
R., Goldberg, L., Holcomb, R., Abraham, W.T.,''Transvenous 
Neurostimulation for Centra Sleep Apnoea: A randomised controlled 
trial,'' Lancet, 2016, vol. 388, pp. 974-982.
    \137\ Ibid.
---------------------------------------------------------------------------

    The final study data was from the pivotal study with limited 
information in the form of an abstract \138\ and an executive 
summary.\139\ The executive summary detailed an exploratory analysis of 
the 141 patients enrolled in the pivotal trial which were patients 
diagnosed with CSA. The abstract indicated that the 141 patients from 
the pivotal trial were randomized to either the treatment arm (68 
patients) in which initiation of treatment began 1 month after 
implantation of the remed[emacr][reg] System device with a 6[dash]month 
follow[dash]up period, or to the control group arm (73 patients) in 
which the initiation of treatment with the remed[emacr][reg] System 
device was delayed for 6 months after implantation. Randomization 
efficacy was compared across baseline polysomnography and associated 
respiratory indices in which four of the five measures showed no 
statistical differences between those treated and controls; treated 
patients had an average MAI score of 3.1 as compared to control 
patients with an average MAI score of 2.2 (p=0.029). Patients included 
in the trial must have been medically stable, at least 18 years old, 
have had an electroencephalogram within 40 days of scheduled 
implantation, had an apnoea-hypopnoea index (AHI) of 20 events per hour 
or greater, a central apnoea index at least 50 percent of all apneas, 
and an obstructive apnea index less than or equal to 20 percent.\140\ 
Primary exclusion criteria were CSA caused by pain medication, heart 
failure of state D from the American Heart Association, a

[[Page 20313]]

new implantable cardioverter defibrillator, pacemaker dependent 
subjects without any physiologic escape rhythm, evidence of phrenic 
nerve palsy, documented history of psychosis or severe bipolar 
disorder, a cerebrovascular accident within 12 months of baseline 
testing, limited pulmonary function, baseline oxygen saturation less 
than 92 percent while awake and on room air, active infection, need for 
renal dialysis, or poor liver function.\141\ Patients included in this 
trial were primarily male (89 percent), white (95 percent), with at 
least one comorbidity with cardiovascular conditions being most 
prevalent (heart failure at 64 percent), with a concomitant implantable 
cardiovascular stimulation device in 42 percent of patients at 
baseline. The applicant stated that, after randomization, there were no 
statistically significant differences between the treatment and control 
groups, with the exception of the treated group having a statistically 
higher rate of events per hour on the mixed apnea index (MAI) at 
baseline than the control group.
---------------------------------------------------------------------------

    \138\ Goldberg, L., Ponikowski, P., Javaheri, S., Augostini, R., 
McKane, S., Holcomb, R., Costanzo, M.R., ``In Heart Failure Patients 
with Central Sleep Apnea, Transvenous Stimulation of the Phrenic 
Nerve Improves Sleep and Quality of Life,'' Heart Failure Society of 
America, 21st annual meeting. 2017.
    \139\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
    \140\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
    \141\ Ibid.
---------------------------------------------------------------------------

    The applicant asserted that the results from the pivotal trial 
\142\ allow for the comparison of heart failure status in patients; we 
note that patients with American Heart Association objective assessment 
Class D (Objective evidence of severe cardiovascular disease. Severe 
limitations. Experiences symptoms even while at rest) were excluded 
from this pivotal trial. The primary endpoint in the pivotal trial was 
the proportion of patients with an AHI reduction greater than or equal 
to 50 percent at 6 months. When controlling for heart failure status, 
both treated groups experienced a statistically greater proportion of 
patients with AHI reductions than the controls at 6 months (58 percent 
more of treated patients with diagnoses of heart failure and 35 percent 
more of treated patients without diagnoses of heart failure as compared 
to their respective controls). The secondary endpoints assessed were 
the CAI average events per hour, AHI average events per hour, arousal 
index (ArI) average events per hour, percent of sleep in REM, and 
oxygen desaturation index 4 percent (ODI = 4 percent) average events 
per hour. Excluding the percent of sleep in REM, the treatment groups 
for both patients with diagnoses of heart failure and non-heart failure 
conditions experienced statistically greater improvements at 6 months 
on all secondary endpoints as compared to their respective controls. 
Lastly, quality of life secondary endpoints were assessed by the 
Epworth sleepiness scale (ESS) average scores and the patient global 
assessment (PGA). For both the ESS and PGA assessments, both treatment 
groups of patients with diagnoses of heart failure and non-heart 
failure conditions had statistically beneficial changes between 
baseline and 6 months as compared to their respective control groups.
---------------------------------------------------------------------------

    \142\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
---------------------------------------------------------------------------

    The applicant provided analyses from the above report focusing on 
the primary and secondary polysomnography endpoints, specifically, 
across patients who had been diagnosed with CSA with heart failure and 
non-heart failure. Eighty patients included in the study from the 
executive summary report had comorbid heart failure, while 51 patients 
did not. Of those patients with heart failure, 35 were treated while 45 
patients were controls. Of those patients without heart failure, 23 
were treated and 28 patients were controls. The applicant did not 
provide baseline descriptive statistical comparisons between treated 
and control groups controlling for heart failure status. Across all 
primary and secondary endpoints, the patient group who were diagnosed 
with CSA and comorbid heart failure experienced statistically 
significant improvements. Excepting percent of sleep in REM, the 
patient group who were diagnosed with CSA without comorbid heart 
failure experienced statistically significant improvements in all 
primary and secondary endpoints. We are inviting public comments on 
whether this current study design is sufficient to support substantial 
clinical improvement of the remed[emacr][reg] System with respect to 
all patient populations, particularly the non-heart failure population.
    As previously noted, the applicant also contends that the 
technology offers a treatment option for a patient population 
unresponsive to, or ineligible for, currently available treatment 
options. Specifically, the applicant stated that the remed[emacr][reg] 
System is the only treatment option for patients who have been 
diagnosed with moderate to severe CSA; published studies on positive 
pressure treatments like CPAP and ASV have not met primary endpoints; 
and there was an increase in cardiovascular mortality according to the 
ASV study. According to the applicant, approximately 40 percent of 
patients who have been diagnosed with CSA have heart failure. The 
applicant asserted that the use of the remed[emacr] System not only 
treats and improves the symptoms of CSA, but there is evidence of 
reverse remodeling in patients with reduced left ventricular ejection 
fraction (LVEF).
    We are concerned that the remed[emacr][reg] System is not directly 
compared to the CPAP or ASV treatment options, which, to our 
understanding, are the current treatment options available for patients 
who have been diagnosed with CSA without heart failure. We note that 
the FDA indication for the implantation of the remed[emacr][reg] System 
is for use in the treatment of adult patients who have been diagnosed 
with CSA. We also note that the applicant's supporting studies were 
directed primarily at patients who had been treated with the 
remed[emacr][reg] System who also had been diagnosed with heart 
failure. The applicant asserted that it would not be appropriate to use 
CPAP and ASV treatment options when comparing CPAP and ASV to the 
remed[emacr][reg] System in the patient population of heart failure 
diagnoses because these treatment options have been found to increase 
mortality outcomes in this population. In light of the limited length 
of time in which the remed[emacr][reg] System has been studied, we are 
concerned that any claims on mortality as they relate to treatment 
involving the use of the remed[emacr][reg] System may be limited. 
Therefore, we are concerned as to whether there is sufficient data to 
determine that the technology represents a substantial clinical 
improvement with respect to patients who have been diagnosed with CSA 
without heart failure.
    The applicant has shown that, among the subpopulation of patients 
who have been diagnosed with CSA and heart failure, the 
remed[emacr][reg] System decreases morbidity outcomes as compared to 
the CPAP and ASV treatment options. We understand that not all patients 
evaluated in the applicant's supporting clinical trials had been 
diagnosed with CSA with a comorbidity of heart failure. However, in all 
of the supporting studies for this application, the vast majority of 
study patients did have this specific comorbidity of CSA and heart 
failure. Of the three studies which enrolled both patients diagnosed 
with CSA with and without heart failure,143 144 145 146 only 
two studies

[[Page 20314]]

performed analyses controlling for heart failure 
status.147 148 The data from these two studies, the 
Costanzo, et al. (2016) and the Respicardia, Inc. executive report, are 
analyses based on the same pivotal trial data and, therefore, do not 
provide results from two separate samples. Descriptive comparisons are 
made in the executive summary of the pivotal trial \149\ between all 
treated and control patients. However, we are unable to determine the 
similarities and differences between patients with heart failure and 
non-heart failure treated versus controlled groups. Because 
randomization resulted in one difference between the overall treated 
and control groups (MAI events per hour), it is possible that further 
failures of randomization may have occurred when controlling for heart 
failure status in unmeasured variables. Finally, the sample size 
analyzed and the subsample sizes of the heart failure patients (80) and 
non-heart failure patients (51) are particularly small. It is possible 
that these results are not representative of the larger population of 
patients who have been diagnosed with CSA.
---------------------------------------------------------------------------

    \143\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
    \144\ Costanzo, M.R., Ponikowski, P., Javaheri, S., Augostini, 
R., Goldberg, L., Holcomb, R., Abraham, W.T., ``Transvenous 
Neurostimulation for Centra Sleep Apnoea: A randomised controlled 
trial,'' Lancet, 2016, vol. 388, pp. 974-982.
    \145\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
    \146\ Jagielski, D., Ponikowski, P., Augostini, R., Kolodziej, 
A., Khayat, R., & Abraham, W.T., ``Transvenous Stimulation of the 
Phrenic Nerve for the Treatment of Central Sleep Apnoea: 12 months' 
experience with the remede[reg]system,'' European Journal of Heart 
Failure, 2016, pp. 1-8.
    \147\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
    \148\ Costanzo, M.R., Ponikowski, P., Javaheri, S., Augostini, 
R., Goldberg, L., Holcomb, R., Abraham, W.T., ``Transvenous 
Neurostimulation for Centra Sleep Apnoea: A randomised controlled 
trial,'' Lacet, 2016, vol. 388, pp. 974-982.
    \149\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
---------------------------------------------------------------------------

    Therefore, we are concerned that differences in morbidity and 
mortality outcomes between CPAP, ASV, and the remed[emacr][reg] System 
in the general CSA patient population have not adequately been tested 
or compared. Specifically, the two patient populations, those who have 
been diagnosed with heart failure and CSA versus those who have been 
diagnosed with CSA alone, may experience different symptoms and 
outcomes associated with their disease processes. Patients who have 
been diagnosed with CSA alone present with excessive sleepiness, poor 
sleep quality, insomnia, poor concentration, and inattention.\150\ 
Conversely, patients who have been diagnosed with the comorbid 
conditions of CSA as a result of heart failure experience significant 
cardiovascular insults resulting from sympathetic nervous system 
activation, pulmonary hypertension, and arrhythmias, which ultimately 
contribute to the downward cycle of heart failure.\151\
---------------------------------------------------------------------------

    \150\ Badr, M.S., 2017, Dec 11, ``Central sleep apnea: Risk 
factors, clinical presentation, and diagnosis,'' Available at: 
https://www.uptodate.com/contents/central-sleep-apnea-risk-factors-clinical-presentation-and-diagnosis?csi=d3a535e6-1cca-4cd5-ab5e-50e9847bda6c&source=contentShare.
    \151\ Abraham, W., Jagielski, D., Oldenburg, O., Augostini, R., 
Kreuger, S., Kolodziej, A., Ponikowski, P., ``Phrenic Nerve 
Stimulation for the Treatment of Central Sleep Apnea,'' JACC: Heart 
Failure, 2015, vol. 3(5), pp. 360-369.
---------------------------------------------------------------------------

    We also note that the clinical study had a small patient population 
(n=151), with follow[dash]up for 6 months. We are interested in longer 
follow[dash]up data that would further validate the points made by the 
applicant regarding the beneficial outcomes seen in patients who have 
been diagnosed with CSA who have been treated using the 
remed[emacr][reg] System. We also are interested in additional 
information regarding the possibility of electrical stimulation of 
unintended targets and devices combined with the possibility of 
interference from outside devices. Furthermore, we are unsure with 
regard to the longevity of the implanted device, batteries, and leads 
because it appears that the technology is meant to remain in use for 
the remainder of a patient's life. We are inviting public comments on 
whether the remed[emacr][reg] System represents a substantial clinical 
improvement over existing technologies.
    We did not receive any public comments in response to the published 
notice in the Federal Register regarding the substantial clinical 
improvement criterion for the remed[emacr][reg] System or at the New 
Technology Town Hall Meeting.
f. Titan Spine nanoLOCK[reg] (Titan Spine nanoLOCK[reg] Interbody 
Device)
    Titan Spine submitted an application for new technology add-on 
payments for the Titan Spine nanoLOCK[reg] Interbody Device (the Titan 
Spine nanoLOCK[reg]) for FY 2019. (We note that the applicant 
previously submitted an application for new technology add-on payments 
for this device for FY 2017.) The Titan Spine nanoLOCK[reg] is a 
nanotechnology-based interbody medical device with a dual acid-etched 
titanium interbody system used to treat patients diagnosed with 
degenerative disc disease (DDD). One of the key distinguishing features 
of the device is the surface manufacturing technique and materials, 
which produce macro, micro, and nano[dash]surface textures. According 
to the applicant, the combination of surface topographies enables 
initial implant fixation, mimics an osteoclastic pit for bone growth, 
and produces the nano-scale features that interface with the integrins 
on the outside of the cellular membrane. Further, the applicant noted 
that these features generate better osteogenic and angiogenic responses 
that enhance bone growth, fusion, and stability. The applicant asserted 
that the Titan Spine nanoLOCK[reg]'s clinical features also reduce 
pain, improve recovery time, and produce lower rates of device 
complications such as debris and inflammation.
    On October 27, 2014, the Titan Spine nanoLOCK[reg] received FDA 
clearance for the use of five lumbar interbody devices and one cervical 
interbody device: The nanoLOCK[reg] TA--Sterile Packaged Lumbar ALIF 
Interbody Fusion Device with nanoLOCK[reg] surface, available in 
multiple sizes to accommodate anatomy; the nanoLOCK[reg] TAS--Sterile 
Packaged Lumbar ALIF Stand Alone Interbody Fusion Device with 
nanoLOCK[reg] surface, available in multiple sizes to accommodate 
anatomy; the nanoLOCK[reg] TL--Sterile Packaged Lumbar Lateral Approach 
Interbody Fusion Device with nanoLOCK[reg] surface, available in 
multiple sizes to accommodate anatomy; the nanoLOCK[reg] TO--Sterile 
Packaged Lumbar Oblique/PLIF Approach Interbody Fusion Device with 
nanoLOCK[reg] surface, available in multiple sizes to accommodate 
anatomy; the nanoLOCK[reg] TT--Sterile Packaged Lumbar TLIF Interbody 
Fusion Device with nanoLOCK[reg] surface, available in multiple sizes 
to accommodate anatomy; and the nanoLOCK[reg] TC--Sterile Packaged 
Cervical Interbody Fusion Device with nanoLOCK[reg] surface, available 
in multiple sizes to accommodate anatomy.
    The applicant received FDA clearance on December 14, 2015, for the 
nanoLOCK[reg] TCS-- Sterile Package Cervical Stand Alone Interbody 
Fusion Device with nanoLOCK[reg] surface, available in multiple sizes 
to accommodate anatomy. According to the applicant, July 8, 2016 was 
the first date that the nanotechnology production facility completed 
validations and clearances needed to manufacture the nanoLOCK[reg] 
interbody fusion devices. Once validations and clearances were 
completed, the technology was available on the U.S. market on October 
1, 2016. Therefore, the applicant believes that the newness period for 
nanoLOCK[reg] would begin on October 1, 2016. Procedures involving the 
Titan Spine nanoLOCK[reg] technology can be identified by the following 
ICD-10-PCS Section ``X'' New Technology codes:
     XRG0092 (Fusion of occipital-cervical joint using 
nanotextured

[[Page 20315]]

surface interbody fusion device, open approach);
     XRG1092 (Fusion of cervical vertebral joint using 
nanotextured surface interbody fusion device, open approach);
     XRG2092 (Fusion of 2 or more cervical vertebral joints 
using nanotextured surface interbody fusion device, open approach);
     XRG4092 (Fusion of cervicothoracic vertebral joint using 
nanotextured surface interbody fusion device, open approach);
     XRG6092 (Fusion of thoracic vertebral joint using 
nanotextured surface interbody fusion device, open approach);
     XRG7092 (Fusion of 2 to 7 thoracic vertebral joints using 
nanotextured surface interbody fusion device, open approach);
     XRG8092 (Fusion of 8 or more thoracic vertebral joints 
using nanotextured surface interbody fusion device, open approach);
     XRGA092 (Fusion of thoracolumbar vertebral joint using 
nanotextured surface interbody fusion device, open approach);
     XRGB092 (Fusion of lumbar vertebral joint using 
nanotextured surface interbody fusion device, open approach);
     XRGC092 (Fusion of 2 or more lumbar vertebral joints using 
nanotextured surface interbody fusion device, open approach); and
     XRGD092 (Fusion of lumbosacral joint using nanotextured 
surface interbody fusion device, open approach).
    We note that the applicant expressed concern that interbody fusion 
devices that have failed to gain or apply for FDA clearance with 
nanoscale features could confuse health care providers with marketing 
and advertising using terms related to nanotechnology and ultimately 
adversely affect patient outcomes. Therefore, the applicant believed 
that there is a need for additional clarity to the current ICD-10-PCS 
Section ``X'' codes previously identified for health care providers 
regarding interbody fusion nanotextured surface devices. The applicant 
submitted a request for code revisions at the March 2018 ICD-10 
Coordination and Maintenance Meeting regarding the ICD-10-PCS Section 
``X'' New Technology codes used to identify procedures involving the 
Titan Spine nanoLOCK[reg] technology.
    As discussed previously, 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 the purposes of new technology add-on payments. We note that the 
substantial similarity discussion is applicable to both the lumbar and 
the cervical interbody devices because all of the devices use the Titan 
Spine nanoLOCK[reg] technology.
    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, for both interbody devices (the lumbar and the 
cervical interbody device), the Titan Spine nanoLOCK[reg]'s surface 
stimulates osteogenic cellular response to assist in bone formation 
during fusion. According to the applicant, the mechanism of action 
exhibited by the Titan Spine's nanoLOCK[reg] surface technology 
involves the ability to create surface features that are meaningful to 
cellular regeneration at the nano-scale level. During the manufacturing 
process, the surface produces macro, micro, and nano-surface textures. 
The applicant believes that this unique combination and use of these 
surface topographies represents a new approach to stimulating 
osteogenic cellular response. The applicant further asserted that the 
macro-scale textured features are important for initial implant 
fixation; the micro-scale textured features mimic an osteoclastic pit 
for supporting bone growth; and the nano-scale textured features 
interface with the integrins on the outside of the cellular membrane, 
which generates the osteogenic and angiogenic (mRNA) responses 
necessary to promote healthy bone growth and fusion. The applicant 
stated that when correctly manufactured, an interbody fusion device 
includes a hierarchy of complex surface features, visible at different 
levels of magnification, that work collectively to impact cellular 
response through mechanical, cellular, and biochemical properties. The 
applicant stated that Titan Spine's proprietary and unique surface 
technology, the Titan Spine nanoLOCK[reg] interbody devices, contain 
optimized nano[dash]surface characteristics, which generate the 
distinct cellular responses necessary for improved bone growth, fusion, 
and stability. The applicant further stated that the Titan Spine 
nanoLOCK[reg]'s surface engages with the strongest portion of the 
vertebral endplate, which enables better resistance to subsidence 
because a unique dual acid-etched titanium surface promotes earlier 
bone in-growth. According to the applicant, the Titan Spine 
nanoLOCK[reg]'s surface is created by using a reductive process of the 
titanium itself. The applicant asserted that use of the Titan Spine 
nanoLOCK[reg] significantly reduces the potential for debris generated 
during impaction when compared to treatments using Polyetheretherketone 
(PEEK)-based implants coated with titanium. According to the results of 
an in vitro study \152\ (provided by the applicant), which examined 
factors produced by human mesenchymal stem cells on spine implant 
materials that compared angiogenic factor production using PEEK-based 
versus titanium alloy surfaces, osteogenic production levels were 
greater with the use of rough titanium alloy surfaces than the levels 
produced using smooth titanium alloy surfaces. Human mesenchymal stem 
cells were cultured on tissue culture polystyrene, PEEK, smooth TiAlV, 
or macro-/micro-/nanotextured rough TiAlV (mmnTiAlV) disks. 
Osteoblastic differentiation and secreted inflammatory interleukins 
were assessed after 7 days. The results of an additional study \153\ 
provided by the applicant examined whether inflammatory 
microenvironment generated by cells as a result of use of titanium 
aluminum-vanadium (Ti-alloy, TiAlV) surfaces is effected by surface 
micro[dash]texture, and whether it differs from the effects generated 
by PEEK-based substrates. This in vitro study compared angiogenic 
factor production and integrin gene expression of human osteoblast-like 
MG63 cells cultured on PEEK or titanium-aluminum vanadium (titanium 
alloy). Based on these study results, the applicant asserted that the 
use of micro[dash]textured surfaces has demonstrated greater promotion 
of osteoblast differentiation when compared to use of PEEK-based 
surfaces.
---------------------------------------------------------------------------

    \152\ Olivares-Navarrete, R., Hyzy, S., Gittens, R., ``Rough 
Titanium Alloys Regulate Osteoblast Production of Angiogenic 
Factors,'' The Spine Journal, 2013, vol. 13(11), pp. 1563-1570.
    \153\ Olivares-Navarrete, R., Hyzy, S., Slosar, P., et al., 
``Implant Materials Generate Different Peri-implant Inflammatory 
Factors,'' SPINE, 2015, vol. 40(6), pp. 339-404.
---------------------------------------------------------------------------

    The applicant maintains that the nanoLOCK[reg] was the first, and 
remains the only, device in spinal fusion, to apply for and 
successfully obtain a clearance for nanotechnology from the FDA. 
According to the applicant, in order for a medical device to receive a 
nanotechnology FDA clearance, the burden of proof includes each of the 
following to be present on the medical device in question: (1) Proof of 
specific nano scale features, (2) proof of capability to manufacture 
nano-scale features with repeatability and documented frequency across 
an entire

[[Page 20316]]

device, and (3) proof that those nano-scale features provide a 
scientific benefit, not found on devices where the surface features are 
not present. The applicant further stated that many of the commercially 
available interbody fusion devices are created using additive 
manufacturing processes to mold or build surface from the ground up. 
Conversely, Titan Spine applied a subtractive surface manufacturing to 
remove pieces of a surface. The surface features that remain after this 
subtractive process generate features visible at magnifications that 
additive manufacturing has not been able to produce. According to the 
applicant, this subtractive process has been validated by the White 
House Office of Science and Technology, the National Nanotechnology 
Initiative, and the FDA that provide clearances to products that 
exhibit unique and repeatable features at predictive frequency due to a 
manufacturing technique.
    With regard to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, cases representing patients that may 
be eligible for treatment involving the Titan Spine nanoLOCK[reg] 
technology would map to the same MS-DRGs as other (lumbar and cervical) 
interbody devices currently available to Medicare beneficiaries and 
also are used for the treatment of patients who have been diagnosed 
with DDD (lumbar or cervical).
    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 
stated that the Titan Spine nanoLOCK[reg] can be used in the treatment 
of patients who have been diagnosed with similar types of diseases, 
such as DDD, and for a similar patient population receiving treatment 
involving both lumbar and cervical interbody devices.
    In summary, the applicant maintained that the Titan Spine 
nanoLOCK[reg] technology has a different mechanism of action when 
compared to other spinal fusion devices. Therefore, the applicant did 
not believe that the Titan Spine nanoLOCK[reg] technology is 
substantially similar to existing technologies.
    We are concerned that the Titan Spine nanoLOCK[reg] interbody 
devices may be substantially similar to currently available titanium 
interbody devices because other roughened[dash]surface interbody 
devices also stimulate bone growth. While there is a uniqueness to the 
nanotechnology used by the applicant, other devices also stimulate bone 
growth such as PEEK-based surfaces and, therefore, we remain concerned 
that the Titan Spine nanoLOCK[reg] interbody devices use the same or 
similar mechanism of action as other devices.
    We are inviting public comments on whether the Titan Spine 
nanoLOCK[reg] interbody devices are substantially similar to existing 
technologies and whether these devices meet the newness criterion.
    The applicant provided three analyses of claims data from the FY 
2016 MedPAR file to demonstrate that the Titan Spine nanoLOCK[reg] 
interbody devices meet the cost criterion. We note that cases reporting 
procedures involving lumbar and cervical interbody devices would map to 
different MS-DRGs. As discussed in the Inpatient New Technology 
Add[dash]On Payment Final Rule (66 FR 46915), two separate reviews and 
evaluations of the technologies are necessary in this instance because 
cases representing patients receiving treatment for diagnoses 
associated with lumbar procedures that may be eligible for use of the 
technology under the first indication would not be expected to be 
assigned to the same MS-DRGs as cases representing patients receiving 
treatment for diagnoses associated with cervical procedures that may be 
eligible for use of the technology under the second indication. 
Specifically, cases representing patients who have been diagnosed with 
lumbar DDD and who have received treatment that involved implanting a 
lumbar interbody device would map to MS-DRG 028 (Spinal Procedures with 
MCC), MS-DRG 029 (Spinal Procedures with CC or Spinal 
Neurostimulators), MS-DRG 030 (Spinal Procedures without CC/MCC), MS-
DRG 453 (Combined Anterior/Posterior Spinal Fusion with MCC), MS-DRG 
454 (Combined Anterior/Posterior Spinal Fusion with CC), MS-DRG 455 
(Combined Anterior/Posterior Spinal Fusion without CC/MCC), MS-DRG 456 
(Spinal Fusion Except Cervical with Spinal Curvature or Malignancy or 
Infection or Extensive Fusions with MCC), MS-DRG 457 (Spinal Fusion 
Except Cervical with Spinal Curvature or Malignancy or Infection or 
Extensive Fusion without MCC), MS-DRG 458 (Spinal Fusion Except 
Cervical with Spinal Curvature or Malignancy or Infection or Extensive 
Fusions without CC/MCC), MS-DRG 459 (Spinal Fusion Except Cervical with 
MCC), and MS-DRG 460 (Spinal Fusion Except Cervical without MCC). Cases 
representing patients who have been diagnosed with cervical DDD and who 
have received treatment that involved implanting a cervical interbody 
device would map to MS-DRG 471 (Cervical Spinal Fusion with MCC), MS-
DRG 472 (Cervical Spinal Fusion with CC), and MS-DRG 473 (Cervical 
Spinal Fusion without CC/MCC). Procedures involving the implantation of 
lumbar and cervical interbody devices are assigned to separate MS-DRGs. 
Therefore, the devices categorized as lumbar interbody devices and the 
devices categorized as cervical interbody devices must distinctively 
(each category) meet the cost criterion and the substantial clinical 
improvement criterion in order to be eligible for new technology 
add[dash]on payments beginning in FY 2019.
    The first analysis searched for any of the ICD-10-PCS procedure 
codes within the code series Lumbar--0SG [body parts 0 1 3] [open 
approach only 0] [device A only] [anterior column only 0, J], which 
typically are assigned to MS-DRGs 028, 029, 030, and 453 through 460. 
The average case-weighted unstandardized charge per case was $153,005. 
The applicant then removed charges related to the predicate technology 
and then standardized the charges. The applicant then applied an 
inflation factor of 1.09357, the value used in the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38527) to update the charges from FY 2016 to FY 
2018. The applicant added charges related to the Titan Spine 
nanoLOCK[reg] lumbar interbody devices. This resulted in a final 
inflated average case-weighted standardized charge per case of 
$174,688, which exceeds the average case-weighted Table 10 MS-DRG 
threshold amount of $83,543.
    The second analysis searched for any of the ICD-10-PCS procedure 
codes within the code series Cervical--0RG [body parts 0--A] [open 
approach only 0] [device A only] [anterior column only 0, J], which 
typically are assigned to MS-DRGs 028, 029, 030, 453 through 455, and 
471 through 473. The average case-weighted unstandardized charge per 
case was $88,034. The methodology used in the first analysis was used 
for the second analysis, which resulted in a final inflated average 
case-weighted standardized charge per case of $101,953, which exceeds 
the average case-weighted Table 10 MS-DRG threshold amount of $83,543.
    The third analysis was a combination of the first and second 
analyses described earlier that searched for any of the ICD-10-PCS 
procedure codes within the Lumbar and Cervical code series listed above 
that are assigned to the MS-DRGs in the analyses above. The average 
case[dash]weighted unstandardized charge per case was $127,736. The 
methodology used for the first and second analysis was used for the 
third analysis, which resulted in a

[[Page 20317]]

final inflated average case-weighted standardized charge per case of 
$149,915, which exceeds the average case-weighted Table 10 MS-DRG 
threshold amount of $104,094.
    Because the final inflated average case-weighted standardized 
charge per case exceeds the average case-weighted threshold amount in 
all of the applicant's analyses, the applicant maintained that the 
technology meets the cost criterion.
    We are inviting public comments on whether the Titan Spine 
nanoLOCK[reg] meets the cost criterion.
    With regard to the substantial clinical improvement criterion for 
the Titan Spine nanoLOCK[reg] Interbody Lumbar and Cervical Devices, 
the applicant submitted the results of two clinical evaluations. The 
first clinical evaluation was a case series and the second was a case 
control study. Regarding the case series, 4 physicians submitted 
clinical information on 146 patients. The 146 patients resulted from 2 
surgery groups: a cervical group of 73 patients and a lumbar group of 
73 patients. The division into cervical and lumbar groups was due to 
differences in surgical procedure and expected recovery time. 
Subsequently, the collection and analyses of data were presented for 
lumbar and cervical nanoLOCK[reg] device implants. Data was collected 
using medical record review. Patient baseline characteristics, the 
reason for cervical and lumbar surgical intervention, inclusion and 
exclusion criteria, details on the types of pain medications and the 
pattern of usage preoperatively and postoperatively were not provided. 
We note that the applicant did not provide an explanation of why the 
outcomes studied in the case series were chosen for review. However, 
the applicant noted that the case series data were restricted to 
patients treated with the Titan Spine nanoLOCK[reg] device, with both 
retrospective and prospective data collection. These data appeared to 
be clinically related and included: (1) Pain medication usage; (2) 
extremity and back pain (assessed using the Numeric Pain Rating Scale 
(NPRS)); and (3) function (assessed using the Oswestry Disability Index 
(ODI)). Clinical data collection began with time points defined as 
``Baseline (pre-operation), Month 1 (0-4 weeks), Month 2 (5-8 weeks), 
Month 3 (9-12 weeks), Month 4 (13-16 weeks), Month 5 (17-20 weeks) and 
Month 6+ (>20 weeks)''. The n, mean, and standard deviation were 
presented for continuous variables (NPRS extremity pain, back pain, and 
ODI scores), and the n and percentage were presented for categorical 
variables (subjects taking pain medications). All analyses compared the 
time point (for example, Month 1) to the baseline.
    Pain scores for extremities (leg and arm) were assessed using the 
NPRS, an 11[dash]category ordinal scale where 0 is the lowest value and 
10 is the highest value and, therefore, higher scores indicate more 
severe pain. Of the 73 patients in the lumbar group, the applicant 
presented data on 18 cases for leg or arm pain at baseline that had a 
mean score of 6.4, standard deviation (SD) 2.3. Between Month 1 and 
Month 6+ the number of lumbar patients for which data was submitted for 
leg or arm pain ranged from 3 patients (Month 5, mean score 3.7, SD 
3.5) to 15 patients (Month 6+, mean score 2.5, SD 2.4), with varying 
numbers of patients for each of the other defined time points of Month 
1 through Month 4. None of the defined time points of Month 1 through 
Month 4 had more than 14 patients or less than 3 patients that were 
assessed.
    Of the 73 patients in the cervical group, 7 were assessed for leg 
or arm pain at baseline and had a mean score of 5.1, SD 3.5. Between 
Month 1 and Month 6+ the number of cervical patients assessed for leg 
or arm pain ranged from 0 patients (Month 5, no scores) to 5 patients 
(Month 1, mean score 4.2, SD 2.6), with varying numbers of patients for 
each of the other defined time points of Month 1 through Month 4. None 
of the defined time points of Month 1 through Month 4 had more than 5 
patients or less than 2 patients that were assessed.
    Back pain scores were also assessed using the NPRS, where 0 is the 
lowest value and 10 is the highest value and, therefore, higher scores 
indicate more severe pain. Of the 73 patients in the lumbar group, 66 
were assessed for back pain at baseline and had a mean score of 7.9, SD 
1.8. Between Month 1 and Month 6+ the number of lumbar patients 
assessed for back pain ranged from 4 patients (Month 5, mean score 4.0, 
SD 2.7) to 43 patients (Month 1, mean score 4.5, SD 2.7), with varying 
numbers of patients for each defined time point.
    Of the 73 patients in the cervical group, 71 were assessed for back 
pain at baseline and had a mean score of 7.5, SD 2.3. Between Month 1 
and Month 6+ the number of cervical patients assessed for back pain 
ranged from 2 patients (Month 5, mean score 7.0, SD 2.8) to 47 patients 
(Month 1, mean score 4.4, SD 2.9), with varying numbers of patients for 
each defined time point.
    Function was assessed using the ODI, which ranges from 0 to 100, 
with higher scores indicating increased disability/impairment. Of the 
73 patients in the lumbar group, 59 were assessed for ODI scores at 
baseline and had a mean score of 52.5, SD 18.7. Between Month 1 and 
Month 6+ the number of lumbar patients assessed for ODI scores ranged 
from 3 patients (Month 5, mean score 33.3, SD 19.8) to 38 patients 
(Month 1, mean score 48.1, SD 19.7), with varying numbers of patients 
for each defined time point. Of the 73 patients in the cervical group, 
56 were assessed for ODI scores at baseline and had a mean score of 
53.6, SD 18.2. Between Month 1 and Month 6+ the number of cervical 
patients assessed for ODI score ranged from 1 patient (Month 5, mean 
score 80, no SD noted) to 41 patients (Month 1, mean score 48.6, SD 
20.5), with varying numbers of patients for each defined time point.
    The percentages of patients not taking pain medicines per day for 
the lumbar and cervical groups over time were assessed. Of the 73 
patients in the lumbar group, 69 were assessed at baseline and 27.5 
percent of the 69 patients were not taking pain medication. Between 
Month 1 and Month 6+ the number of lumbar patients assessed for not 
taking pain medicines ranged from 5 patients (Month 5, 80 percent were 
not taking pain medicines) to 46 patients (Month 1, 54.3 percent were 
not taking pain medicines), with varying numbers of patients for each 
defined time point. Of the 73 patients in the cervical group, 72 were 
assessed and 22.2 percent of the 72 patients were not taking pain 
medicines at baseline. Between Month 1 and Month 6+ the number of 
cervical patients assessed for not taking pain medicines ranged from 2 
patients (Month 5, 100 percent were not taking pain medicines) to 50 
patients (Month 1, 70 percent were not taking pain medicines), with 
varying numbers of patients for each defined time point.
    According to the applicant, both the lumbar and cervical groups 
showed a trend of improvement in all four clinical outcomes over time 
for which they collected data in their case series. However, the 
applicant also indicated that the trend was difficult to assess due to 
the relatively limited number of subjects with available assessments 
more than 4 months post-implant. The applicant shared that it had 
missing values for over 80 percent of the subjects in the study after 
the 4th post-operative month. According to the applicant and its 
results of the clinical evaluation, which was based on data from less 
than 20 percent of subjects, there was a statistically significant 
reduction in back pain for nanoLOCK[reg] patients from ``Baseline,'' 
based on improvement at earlier than standard time points.

[[Page 20318]]

    We are concerned that the small sample size of patients assessed at 
each timed follow-up point for each of the clinical outcomes evaluated 
in the case series limits our ability to draw meaningful conclusions 
from these results. The applicant provided t-test results for the 
lumbar and cervical groups assessed for pain (back, leg, and arm). We 
are concerned that the t-test resulting from small sample sizes (for 
example, 2 of 73 patients in Month 5, and 5 of 73 patients in Month 6+) 
does not indicate a statistically meaningful improvement in pain 
scores.
    Based on the results of the case series provided by the applicant, 
we are unable to determine whether the findings regarding extremity and 
back pain, ODI scores, and percentage of subjects not taking pain 
medication for patients who received treatment involving the Titan 
Spine nanoLOCK[reg] devices represent a substantial clinical 
improvement due to the inconsistent sample size over time across both 
treatment arms in all evaluated outcome measures. The quantity of 
missing data in this case series, along with the lack of explanation 
for the missing data, raises concerns for the interpretation of these 
results. We also are unable to determine based on this case series 
whether there were improvements in extremity pain and back pain, ODI 
scores, and percentage of subjects not taking pain medicines for 
patients who received treatment involving the Titan Spine nanoLOCK[reg] 
devices versus conventional and other intervertebral body fusion 
devices, as there were no comparisons to current therapies. As noted 
above, the applicant did not provide an explanation of why the outcomes 
studied in the case series were chosen for review. Therefore, we 
believe that we may have insufficient information to determine if the 
outcomes studied in the case series are validated proxies for evidence 
that the nanoLOCK[reg]'s surface promotes greater osteoblast 
differentiation when compared to use of PEEK-based surfaces. We are 
inviting public comments regarding our concerns, including with respect 
to why the outcomes studied in the case series were chosen for review.
    The applicant's second clinical evaluation was a case-control study 
with a 1:5 case control ratio. The applicant used deterministically 
linked, de-identified, individual[dash]level health care claims, 
electronic medical records (EMR), and other data sources to identify 70 
cases and 350 controls for a total sample size of 420 patients. The 
applicant also identified OM1TM data source and noted that 
the OM1TM data source reflects data from all U.S. States and 
territories and is representative of the U.S. national population. The 
applicant used OM1TM data between January 2016 and June 
2017, and specifically indicated that these data contain medical and 
pharmacy claims information, laboratory data, vital signs, problem 
lists, and other clinical details. The applicant indicated that cases 
were selected using the ICD-10-PCS Section ``X'' New Technology codes 
listed above and controls were chosen from fusion spine procedures 
(Fusion Spine Anterior Cervical, Fusion Spine Anterior Cervical and 
Discectomy, Fusion Spine Anterior Posterior Cervical, Fusion Spine 
Transforaminal Interbody Lumbar, Fusion Spine Cervical Thoracic, Fusion 
Spine Transforaminal Interbody Lumbar with Navigation, and Fusion Spine 
Transforaminal Interbody Lumber Robot-Assisted). Further, the applicant 
stated that cases and controls were matched by age (within 5 years), 
year of surgery, Charlson Comorbidity Index, and gender. According to 
the applicant, regarding clinical outcomes studied, unlike the case 
series, the case-control study captured Charlson Comorbidity Index, the 
average length of stay (ALOS), and 30-day unplanned readmissions; like 
the case series, this case-control study captured the use of pain 
medications by assessing the cumulative post-surgical opioid use.
    The mean age for all patients in the study was 55 years old, and 47 
percent were male. For the clinical length of stay outcome, the 
applicant noted that the mean length of stay was slightly longer among 
control patients, 3.9 days (SD = 5.4) versus 3.2 days (SD = 2.9) for 
cases, and a larger proportion of patients in the control group had 
lengths of stay equal to or longer than 5 days (21 percent versus 17 
percent). Three control patients (0.8 percent) were readmitted within 
30 days compared to zero readmissions among case patients. A slightly 
lower proportion of case patients were on opioids 3 months post-surgery 
compared to control patients (15 percent versus 16 percent).
    We are concerned that there may be significant outliers not 
identified in the case and control arms because for the mean length of 
stay outcome, the standard deviation for control patients (5.4 days) is 
larger than the point estimate (3.9 days). Based on the results of this 
clinical evaluation provided by the applicant, we are unable to 
determine whether the findings regarding lengths of stay and cumulative 
post-surgical opioid use for patients who received treatment involving 
the nanoLOCK[reg] devices versus conventional intervertebral body 
fusion devices represent a substantial clinical improvement. Without 
further information on selection of controls and whether there were 
adjustments in the statistical analyses controlling for confounding 
factors (for example, cause of back pain, level of experience of the 
surgeon, BMI and length of pain), we are concerned that the 
interpretation of the results may be limited. Finally, we are concerned 
that the current data does not adequately support a strong association 
between the outcome measures of length of stay, readmission rates, and 
use of opioids and the use of nano-surface textures in the 
manufacturing of the Titan Spine nanoLOCK[reg] device. For these 
reasons, we are concerned that the current data do not support a 
substantial clinical improvement over the currently available devices 
used for lumbar and cervical DDD treatment.
    We note that the applicant indicated its intent to submit the 
results of additional ongoing studies to support the evidence of 
substantial clinical improvement over existing technologies for 
patients who receive treatment involving the nanoLOCK[reg] devices 
versus patients receiving treatment involving other interbody fusion 
devices. We are inviting public comments on whether the Titan Spine 
nanoLOCK[reg] meets the substantial clinical improvement criterion.
    Below we summarize and respond to written public comments received 
regarding the nanoLOCK[reg] during the open comment period in response 
to the New Technology Town Hall meeting notice published in the Federal 
Register.
    Comment: One commenter focused on two items related to the 
substantial clinical improvement and the lack of real-world evidence 
and published studies regarding the nanoLOCK[reg] technologies. The 
first item referenced by the commenter related to CMS' concern 
presented in the FY 2017 IPPS/LTCH PPS final rule that the results of 
the in vitro studies that the applicant for the nanoLOCK[reg] 
technology relied upon in its application may not have necessarily 
correlated with the clinical results specified by the applicant. 
Specifically, because at that time the applicant had only conducted in 
vitro studies, without obtaining any clinical data from live patients 
during a specific clinical trial, CMS stated that it was unable to 
substantiate the clinical results that the applicant believed the 
technology achieved from a clinical standpoint based on the results of 
the studies provided. As a result, CMS stated that it was concerned 
that the results of the studies provided by the

[[Page 20319]]

applicant did not demonstrate that the Titan Spine nanoLOCK[reg] 
technologies met the substantial clinical improvement criterion. The 
commenter also indicated that it believed the applicant has yet to 
publish data that would satisfy the concerns CMS noted in the FY 2017 
IPPS/LTCH PPS final rule. In addition, the commenter noted that the 
applicant suggested that the health care community has started to move 
away from randomized controlled trials toward real-world evidence, and 
then presented claims analyses that attempted to link any assumed 
substantial clinical improvement in patient outcomes from fusion 
surgery to the nanoLOCK[reg] technology. In response to this assertion, 
the commenter stated that without a randomized controlled study of this 
technology as compared to the standard of care or, as CMS noted in FY 
2017, clinical data from live patients during a specific clinical 
trial, these links cannot be scientifically substantiated. The 
commenter also noted that none of the studies presented during the 
February 13, 2018 New Technology Town Hall meeting appear to be 
published at this time, which would subject them to a rigorous peer-
reviewed process. The commenter continued to support CMS' concern 
previously expressed in the FY 2017 IPPS/LTCH PPS final rule regarding 
whether substantial clinical improvement has been demonstrated.
    The second item of focus referenced by the commenter was also 
presented by CMS in the FY 2017 IPPS/LTCH PPS final rule. The commenter 
noted that there are other titanium surfaced devices currently 
available on the U.S. market. In the FY 2017 IPPS/LTCH PPS final rule, 
CMS stated that, while these devices do not use the Titan Spine 
nanoLOCK[reg] technology, their surfaces also are made of titanium. 
Therefore, CMS believed that the Titan Spine nanoLOCK[reg] interbody 
devices may be substantially similar to currently available titanium 
interbody devices. The commenter stated that it agreed with the 
statements CMS made in the FY 2017 IPPS/LTCH PPS final rule and also 
believed that the Titan Spine nanoLOCK[reg] technology is not only 
substantially similar to other currently available titanium interbody 
devices, but also is similar to other technologies with microscopic, 
roughened surfaces with nano-scale features. The commenter indicated 
that the verification of these surfaces and visualization of nano-scale 
features in other orthopedic and spinal implants have been confirmed in 
consensus standards, as well as in electron microscopy techniques, 
including atomic force microscopy. In addition, the commenter stated 
that the success of these devices at an in vitro level has been 
reported in the peer-reviewed literature, similar to that published on 
the nanoLOCK[reg]. Despite verification of the applicant's claims 
regarding these surfaces, visualization of nano-scale features, and 
success of these devices at an in vitro level being reported in peer-
reviewed literature, the commenter believed that, at this time, there 
is not enough scientifically[dash]validated evidence of improvement in 
patient outcomes to substantiate approval of new technology add-on 
payments for any device manufactured with nano-scale features, 
including the Titan Spine nanoLOCK[reg] technology.
    Response: We appreciate the commenter's input. We will take these 
comments into consideration when deciding whether to approve new 
technology add-on payments for the Titan Spine nanoLock[reg] for FY 
2019.
    Comment: One commenter supported the approval of new technology 
add-on payments for the Titan Spine nanoLock[reg] technology. The 
commenter stated that Titan Spine is the only company that has received 
FDA approval for the use of ``nanotechnology'' in its indication for 
treatment use and has published substantial research on the cellular 
impact of its unique topographic, nano-textured surface. (We note, as 
described above, this technology is currently FDA cleared (not FDA 
approved) and the technology was available on the U.S. market once 
validations and clearances were completed.) The commenter asserted 
that, for these reasons, the nanoLOCK[reg] represents an emerging 
technology that should not be considered substantially similar to other 
spinal technologies on the market. The commenter further asserted that 
the real[dash]world evidence gathered from multiple, independent data 
sources (including actual electronic medical records (EMR) and 
healthcare claims) on nanoLOCK[reg] usage in the treatment of patients 
consistently shows patient improvement in terms of clinically and 
economically relevant outcomes--faster recovery times, reduced length 
of hospital stays, and reductions in downstream medical costs such as 
opiate utilization, among others. The commenter stated that impressive 
patient outcomes by use of the nanoLOCK[reg] are unmatched by other 
competing devices, improving patient outcomes of Medicare beneficiaries 
with serious spinal pathologies.
    Response: We appreciate the commenters' input. We will take these 
comments into consideration when deciding whether to approve new 
technology add-on payments for the Titan Spine nanoLock[reg] for FY 
2019.
g. Plazomicin
    Achaogen, Inc. submitted an application for new technology add-on 
payments for Plazomicin for FY 2019. According to the applicant, 
Plazomicin is a next-generation aminoglycoside antibiotic, which has 
been found in vitro to have enhanced activity against many multi-drug 
resistant (MDR) gram-negative bacteria. The proposed indication for the 
use of Plazomicin, which had not received FDA approval as of the time 
of the development of this proposed rule, is for the treatment of adult 
patients who have been diagnosed with the following infections caused 
by designated susceptible microorganisms: (1) Complicated urinary tract 
infection (cUTI), including pyelonephritis; and (2) bloodstream 
infections (BSIs). The applicant stated that it expects that Plazomicin 
would be reserved for use in the treatment of patients who have been 
diagnosed with these types of infections who have limited or no 
alternative treatment options, and would be used only to treat 
infections that are proven or strongly suspected to be caused by 
susceptible microorganisms.
    The applicant stated that there is a strong need for antibiotics 
that can treat infections caused by MDR Enterobacteriaceae, 
specifically carbapenem resistant Enterobacteriaceae (CRE). 
Life[dash]threatening infections caused by MDR bacteria have increased 
over the past decade, and the patient population diagnosed with 
infections caused by CRE is projected to double within the next 5 
years, according to the Centers for Disease Control and Prevention 
(CDC). Infections caused by CRE are often associated with poor patient 
outcomes due to limited treatment options. Patients who have been 
diagnosed with BSIs due to CRE face mortality rates of up to 50 
percent. Patients most at risk for CRE infections are those with CRE 
colonization, recent hospitalization or stay in a long-term care or 
skilled-nursing facility, an extensive history of antibacterial use, 
and whose care requires invasive devices like urinary catheters, 
intravenous (IV) catheters, or ventilators. The applicant estimated, 
using data from the Center for Disease Dynamics, Economics & Policy 
(CDDEP), that the Medicare population that has been diagnosed with 
antibiotic-resistant cUTI numbers approximately 207,000 and 
approximately 7,000 for BSIs/sepsis due to CRE.

[[Page 20320]]

    The applicant noted that due to the public health concern of 
increasing antibiotic resistance and the need for new antibiotics to 
effectively treat MDR infections, Plazomicin has received the following 
FDA designations: Breakthrough Therapy; Qualified Infectious Disease 
product, Priority Review; and Fast Track. The applicant noted that 
Breakthrough Therapy designation was granted on May 17, 2017, for the 
treatment of bloodstream infections (BSIs) caused by certain 
Enterobacteriaceae in patients who have been diagnosed with these types 
of infections who have limited or no alternative treatment options. The 
applicant noted that Plazomicin is the first antibacterial agent to 
receive this designation. The applicant noted that on December 18, 
2014, the FDA designated Plazomicin as a Qualified Infectious Disease 
Product (QIDP) for the indications of hospital-acquired bacterial 
pneumonia (HAPB), ventilator-associated bacterial pneumonia (VABP), and 
complicated urinary tract infection (cUTI), including pyelonephritis 
and catheter-related blood stream infections (CRBSI). The applicant 
noted that Fast Track designation was granted by the FDA on August 12, 
2012, for the Plazomicin development program for the treatment of 
serious and life-threatening infections due to CRE. Plazomicin had not 
received approval from the FDA as of the time of the development of 
this proposed rule. However, the applicant indicated that it 
anticipates receiving approval from the FDA by July 1, 2018. The 
applicant has submitted a request for approval for a unique ICD-10-PCS 
procedure code for the use of Plazomicin, beginning with FY 2019.
    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 Plazomicin 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 MS-DRG. The applicant stated that 
Plazomicin has a unique chemical structure designed to improve activity 
against aminoglycoside-resistant bacteria, which also are often 
resistant to other key classes of antibiotics, including beta-lactams 
and carbapenems. Bacterial resistance to aminoglycosides usually occurs 
through enzymatic modification by aminoglycoside modifying enzymes 
(AMEs) to compromise binding the target bacterial site. According to 
the applicant, AMEs were found in 98.6 percent of aminoglycoside 
nonsusceptible E. coli, Klebsiella spp, Enterobacter spp, and Proteus 
spp collected in 2016 U.S. surveillance studies. Genes encoding AMEs 
are typically located on elements that also carry other causes of 
antibiotic resistance like B-lactamase and/or carbapenemase genes. 
Therefore, extended spectrum beta-lactamases (ESBL) producing 
Enterobacteriaceae and CRE are commonly resistant to currently 
available aminoglycosides. According to the applicant, Plazomicin 
contains unique structural modifications at key positions in the 
molecule to overcome antibiotic resistance, specifically at the 6 and 
N1 positions. These side chain substituents shield Plazomicin from 
inactivation by AMEs, such that Plazomicin is not inactivated by any 
known AMEs, with the exception of N[dash]acetyltransferase (AAC) 2'-Ia, 
-Ib, and -Ic, which is only found in Providencia species. According to 
the applicant, as an aminoglycoside, Plazomicin also is not hydrolyzed 
by B-lactamase enzymes like ESBLs and carbapenamases. Therefore, the 
applicant asserted that Plazomicin is a potent therapeutic agent for 
treating MDR Enterobacteriaceae, including aminoglycoside-resistant 
isolates, CRE strains, and ESBL-producers.
    The applicant asserted that the mechanism of action is new due to 
the unique chemical structure. With regard to the general mechanism of 
action against bacteria, we are concerned that the mechanism of action 
of Plazomicin appears to be similar to other aminoglycoside 
antibiotics. As with other aminoglycosides, Plazomicin is bactericidal 
through inhibition of bacterial protein synthesis. The applicant 
maintained that the structural changes to the antibiotic constitute a 
new mechanism of action because it allows the antibiotic to remain 
active despite AMEs. Additionally, the applicant stated that Plazomicin 
would be the first, new aminoglycoside brought to market in over 40 
years.
    We are inviting public comments on whether Plazomicin's mechanism 
of action is new, including comments in response to our concern that 
its mechanism of action to eradicate bacteria (inhibition of bacterial 
protein synthesis) may be similar to that of other aminoglycosides, 
even if improvements to its structure may allow Plazomicin to be active 
even in the presence of common AMEs that inactivate currently marketed 
aminoglycosides.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, we believe that potential cases 
representing patients who may be eligible for treatment involving 
Plazomicin would be assigned to the same MS-DRGs as cases representing 
patients who receive treatment for UTI or bacteremia.
    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 Plazomicin is intended for use in the treatment of 
patients who have been diagnosed with cUTI, including pyelonephritis, 
and bloodstream infections, who have limited or no alternative 
treatment options. Because the applicant anticipates that Plazomicin 
will be reserved for use in the treatment of patients who have limited 
or no alternative treatment options, the applicant believed that 
Plazomicin may be indicated to treat a new patient population for which 
no other technologies are available. However, it is possible that 
existing antimicrobials could also be used to treat those same bacteria 
Plazomicin is intended to treat. Specifically, the applicant is seeking 
FDA approval for use in the treatment of patients who have been 
diagnosed with cUTI, including pyelonephritis, caused by the following 
susceptible microorganisms: Escherichia coli (including cases with 
concurrent bacteremia), Klebsiella pneumoniae, Proteus spp (including 
P. mirabilis and P. vulgaris), and Enterobactercloacae, and for use in 
the treatment of patients who have been diagnosed with BSIs caused by 
the following susceptible microorganisms: Klebsiella pneumonia and 
Escherichia coli. Because the susceptible organisms for which 
Plazomicin is proposed to be indicated include nonresistant strains 
that existing antibiotics may effectively treat, we are concerned that 
Plazomicin may not treat a new patient population. Therefore, we are 
inviting public comments on whether Plazomicin treats a new type of 
disease or a new patient population. We also are inviting public 
comments on whether Plazomicin is substantially similar to any existing 
technologies and whether it 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 potential 
cases representing

[[Page 20321]]

patients who have been diagnosed with the specific types of infections 
for which the technology has been proposed to be indicated for use in 
the treatment of and who may be potentially eligible for treatment 
involving Plazomicin may map to, the applicant identified all MS-DRGs 
in claims that included cases representing patients who have been 
diagnosed with UTI or Septicemia. The applicant searched the FY 2016 
MedPAR data for claims reporting 16 ICD-10-CM diagnosis codes for UTI 
and 45 ICD-10-CM diagnosis codes for Septicemia and identified a total 
of 2,046,275 cases assigned to 702 MS-DRGs. The applicant also 
performed a similar analysis based on 75 percent of identified claims, 
which spanned 43 MS-DRGs. MS-DRG 871 (Septicemia or Severe Sepsis 
without Mechanical Ventilation 96+ hours with MCC) accounted for 
roughly 25 percent of all cases in the first analysis of the 702 MS-
DRGs identified, and almost 35 percent of the cases in the second 
analysis of the 43 MS-DRGs identified. Other MS-DRGs with a high volume 
of cases based on mapping the ICD-10-CM diagnosis codes, in order of 
number of discharges, were: MS-DRG 872 (Septicemia or Severe Sepsis 
without Mechanical Ventilation 96+ hours without MCC); MS-DRG 690 
(Kidney and Urinary Tract Infections without MCC); MS-DRG 689 (Kidney 
and Urinary Tract Infections with MCC); MS-DRG 853 (Infectious and 
Parasitic Diseases with O.R. Procedure with MCC); and MS-DRG 683 (Renal 
Failure with CC).
    The applicant calculated an average unstandardized case-weighted 
charge per case using 2,046,275 identified cases (100 percent of all 
cases) and using 1,533,449 identified cases (75 percent of all cases) 
of $69,414 and $63,126, respectively. The applicant removed 50 percent 
of the charges associated with other drugs (associated with revenue 
codes 025x, 026x, and 063x) from the MedPAR data because the applicant 
anticipates that the use of Plazomicin would reduce the charges 
associated with the use of some of the other drugs, noting that this 
was a conservative estimate because other drugs would still be required 
for these patients during their hospital stay. The applicant then 
standardized the charges and applied the 2[dash]year inflation factor 
of 9.357 percent from the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38527) to inflate the charges from FY 2016 to FY 2018. No charges for 
Plazomicin were added in the analysis because the applicant explained 
that the anticipated price for Plazomicin has yet to be determined. 
Based on the FY 2018 IPPS/LTCH PPS Table 10 thresholds, the average 
case-weighted threshold amount was $56,996 in the first scenario 
utilizing 100 percent of all cases, and $55,363 in the second scenario 
utilizing 75 percent of all cases. The inflated average case-weighted 
standardized charge per case was $62,511 in the first scenario and 
$57,054 in the second analysis. Because the inflated average case-
weighted standardized charge per case exceeds the average case-weighted 
threshold amount in both scenarios, the applicant maintained that the 
technology meets the cost criterion. The applicant noted that the case-
weighted threshold amount is met before including the average per 
patient cost of the technology in both analyses. As such, the applicant 
anticipated that the inclusion of the cost of Plazomicin, at any price 
point, would further increase charges above the average case-weighted 
threshold amount.
    The applicant also supplied additional cost analyses, directing 
attention at each of the two proposed indications individually; the 
cost analyses considered potential cases representing patients who have 
been diagnosed with cUTI who may be eligible for treatment involving 
Plazomicin separately from potential cases representing patients who 
have been diagnosed with BSI/Bacteremia who may be eligible for 
treatment involving Plazomicin, with the cost analysis for each 
considering 100 percent and 75 percent of identified cases using the FY 
2016 MedPAR data and the FY 2018 GROUPER Version 36. The applicant 
reported that, for potential cases representing patients who have been 
diagnosed with Bacteremia and who may be eligible for treatment 
involving Plazomicin, 100 percent of identified cases spanned 539 MS-
DRGs, with 75 percent of the cases mapping to the following 4 MS-DRGs: 
871 (Septicemia or Severe Sepsis without Mechanical Ventilation 96+ 
hours with MCC), 872 (Septicemia or Severe Sepsis without Mechanical 
Ventilation 96+ hours without MCC), 853 (Infectious and Parasitic 
Diseases with O.R. Procedure with MCC), and 870 (Septicemia or Severe 
Sepsis with Mechanical Ventilation 96+ hours).
    According to the applicant, for potential cases representing 
patients who have been diagnosed with cUTI and who may be eligible for 
treatment involving Plazomicin, 100 percent of identified cases mapped 
to 702 MS-DRGs, with 75 percent of the cases mapping to 56 MS-DRGs. 
Potential cases representing patients who have been diagnosed with 
cUTIs and who may be eligible for treatment involving Plazomicin 
assigned to MS-DRG 871 (Septicemia or Severe Sepsis without Mechanical 
Ventilation 96+ hours with MCC) accounted for approximately 18 percent 
of all of the cases assigned to any of the identified 56 MS-DRGs (75 
percent of cases sensitivity analysis), followed by MS-DRG 690 (Kidney 
and Urinary Tract Infections without MCC), which comprised almost 13 
percent of all of the cases assigned to any of the identified 56 MS-
DRGs. Two other common MS-DRGs containing potential cases representing 
potential patients who may be eligible for treatment involving 
Plazomicin who have been diagnosed with the specific type of indicated 
infections for which the technology is intended to be used, using the 
applicant's analysis approach for UTI based on mapping the ICD-10-CM 
diagnosis codes were: MS-DRG 872 (Septicemia or Severe Sepsis without 
Mechanical Ventilation 96+ hours without MCC) and MS-DRG 689 (Kidney 
and Urinary Tract Infections with MCC).
    For potential cases representing patients who have been diagnosed 
with BSI and who may be eligible for treatment involving Plazomicin, 
the applicant calculated the average unstandardized case-weighted 
charge per case using 1,013,597 identified cases (100 percent of all 
cases) and using 760,332 identified cases (75 percent of all cases) of 
$87,144 and $67,648, respectively. The applicant applied the same 
methodology as the combined analysis above. Based on the FY 2018 IPPS/
LTCH PPS final rule Table 10 thresholds, the average case-weighted 
threshold amount for potential cases representing patients who have 
been diagnosed with BSI assigned to the MS-DRGs identified in the 
sensitivity analysis was $66,568 in the first scenario utilizing 100 
percent of all cases, and $61,087 in the second scenario utilizing 75 
percent of all cases. The inflated average case-weighted standardized 
charge per case was $77,004 in the first scenario and $60,758 in the 
second scenario; in the 100 percent of Bacteremia cases sensitivity 
analysis, the final inflated case-weighted standardized charge per case 
exceeded the average case[dash]weighted threshold amount for potential 
cases representing patients who have been diagnosed with BSI and who 
may be eligible for treatment involving Plazomicin assigned to the MS-
DRGs identified in the sensitivity analysis by $10,436 before including 
costs of Plazomicin. In the 75 percent of all cases sensitivity 
analysis scenario, the

[[Page 20322]]

final inflated case-weighted standardized charge per case did not 
exceed the average case[dash]weighted threshold amount for potential 
cases representing patients who have been diagnosed with BSI assigned 
to the MS-DRGs identified in the sensitivity analysis, at $329 less 
than the average case-weighted threshold amount. Because the applicant 
has not yet determined pricing for Plazomicin, however, it is possible 
that Plazomicin may also exceed the average case-weighted threshold 
amount for potential cases representing patients who have been 
diagnosed with BSI and who may be eligible for treatment involving 
Plazomicin assigned to the MS-DRGs identified in the 75 percent cases 
sensitivity analysis.
    For potential cases representing patients who have been diagnosed 
with cUTI and who may be eligible for treatment involving Plazomicin, 
the applicant calculated the average unstandardized case-weighted 
charge per case using 100 percent of all cases and 75 percent of all 
cases of $59,908 and $48,907, respectively. The applicant applied the 
same methodology as the combined analysis above. Based on the FY 2018 
IPPS/LTCH PPS final rule Table 10 thresholds, the average case-weighted 
threshold amount for potential cases representing patients who have 
been diagnosed with cUTI and who may be eligible for treatment 
involving Plazomicin assigned to the MS-DRGs identified in the first 
scenario utilizing 100 percent of all cases was $51,308, and $46,252 in 
the second scenario utilizing 75 percent of all cases. The inflated 
average case-weighted standardized charge per case was $53,868 in the 
first scenario and $45,185 in the second scenario. In the 100 percent 
of cUTI cases sensitivity analysis, the final inflated 
case[dash]weighted standardized charge per case exceeded the average 
case-weighted threshold amount for potential cases representing 
patients who have been diagnosed with cUTI and who may be eligible for 
treatment involving Plazomicin assigned to the MS-DRGs identified in 
the 100 percent of all cases sensitivity analysis by $2,560 before 
including costs of Plazomicin. In the 75 percent of all cases scenario, 
the final inflated case-weighted standardized charge per case did not 
exceed the average case-weighted threshold amount for potential cases 
representing patients who have been diagnosed with cUTI and who may be 
eligible for treatment involving Plazomicin assigned to the MS-DRGs 
identified in the 75 percent sensitivity analysis, at $1,067 less than 
the average case-weighted threshold amount. Because the applicant has 
not yet determined pricing for Plazomicin, however, it is possible that 
Plazomicin may also exceed the average case[dash]weighted threshold 
amount for potential cases representing patients who have been 
diagnosed with cUTI and who may be eligible for treatment involving 
Plazomicin assigned to the MS-DRGs identified in the 75 percent of all 
cases sensitivity analysis if charges for Plazomicin are more than 
$1,067. We are inviting public comments on whether Plazomicin meets the 
cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that Plazomicin is a next generation aminoglycoside 
that offers a treatment option for a patient population who have 
limited or no alternative treatment options. Patients who have been 
diagnosed with BSI or cUTI caused by MDR Enterobacteria, particularly 
CRE, are difficult to treat because carbapenem resistance is often 
accompanied by resistance to additional antibiotic classes. For 
example, CRE may be extensively drug resistant (XDR) or even pandrug 
resistant (PDR). CRE are resistant to most antibiotics, and sometimes 
the only treatment option available to health care providers is a last-
line antibiotic (such as colistin and tigecycline) with higher 
toxicity. According to the applicant, Plazomicin would give the 
clinician an alternative treatment option for patients who have been 
diagnosed with MDR bacteria like CRE because it has demonstrated 
activity against clinical isolates that possess a broad range of 
resistance mechanisms, including ESBLs, carbapenemases, and 
aminoglycoside modifying enzymes that limit the utility of different 
classes of antibiotics. Plazomicin also can be used to treat patients 
who have been diagnosed with BSI caused by resistant pathogens, such as 
ESBL[dash]producing Enterobacteriaceae, CRE, and aminoglycoside-
resistant Enterobacteriaceae. The applicant maintained that Plazomicin 
is a substantial clinical improvement because it offers a treatment 
option for patients who have been diagnosed with serious bacterial 
infections that are resistant to current antibiotics. We note that 
Plazomicin is not indicated exclusively for resistant bacteria, but 
rather for certain susceptible organisms of gram[dash]negative 
bacteria, including resistant and nonresistant strains for which 
existing antibiotics may be effective. We are concerned that the 
applicant focused solely on Plazomicin's activity for resistant 
bacteria and did not supply information demonstrating substantial 
clinical improvement in treating nonresistant strains in the bacteria 
families for which Plazomicin is indicated.
    The applicant stated that Plazomicin also meets the substantial 
clinical improvement criterion because it significantly improves 
clinical outcomes for a patient population compared to currently 
available treatment options. Specifically, the applicant asserted that 
Plazomicin has: (1) A mortality benefit and improved safety profile in 
treating patients who have been diagnosed with BSI due to CRE; and (2) 
statistically better outcomes at test-of-cure in patients who have been 
diagnosed with cUTI, including higher eradication rates for ESBL-
producing pathogens, and lower rate of subsequent clinical relapses. 
The applicant conducted two Phase III studies, CARE and EPIC. The CARE 
trial compared Plazomicin to colistin, a last-line antibiotic that is a 
standard of care agent for patients who have been diagnosed with BSI 
when caused by CRE. The EPIC trial compared Plazomicin to meropenem for 
the treatment of patients who have been diagnosed with cUTI/acute 
polynephritis.
    The CARE clinical trial was a randomized, open label, 
multi[dash]center Phase III study comparing the efficacy of Plazomicin 
against colistin in the treatment of patients who have been diagnosed 
with BSIs or hospital[dash]acquired bacterial pneumonia (HABP)/
ventilator-acquired bacterial pneumonia (VABP) due to CRE. Due to the 
small number of enrolled patients with HAPB/VABP, however, results were 
only analyzed for patients who had been diagnosed with BSI due to CRE. 
The primary endpoint was day 28 all-cause mortality or significant 
disease complications. Patients were randomized to receive 7 to 14 days 
of IV Plazomicin or colistin, along with an adjunctive therapy of 
meropenem or tigecycline. All-cause mortality and significant disease 
complications were consistent regardless of adjunctive antibiotics 
received, suggesting that the difference in outcomes was driven by 
Plazomicin and colistin, with little impact from meropenem and 
tigecycline. Follow[dash]up was done at test[dash]of[dash]cure (TOC; 7 
days after last dose of IV study drug), end of study (EOS; day 28), and 
long-term follow[dash]up (LFU; day 60). Safety analysis included all 
patients; microbiological modified intent-to-treat (mMITT) analysis 
included 17/18 Plazomicin and 20/21 colisitin patients. Baseline 
characteristics like age, gender, APACHE II score, infection type,

[[Page 20323]]

baseline pathogens, creatinine clearance, and adjunctive therapy with 
either meropenem or tigecycline were comparable in the Plazomicin and 
colistin groups.
    According to the applicant, the following results demonstrate a 
reduced mortality benefit in the patients who had been diagnosed with 
BSI subset. All-cause mortality at day 28 in the Plazomicin group was 
more than 5 times less than in the colistin group and all-cause 
mortality or significant complications at day 28 was reduced by 39 
percent in the Plazomicin group compared to the colistin group. There 
was a large sustained 60[dash]day survival benefit in the patients who 
had been diagnosed with BSI subset, with survival approximately 70 
percent in the Plazomicin group compared to 40 percent in the colistin 
group. Additionally, according to the applicant, faster median time to 
clearance of CRE bacteremia of 1.5 versus 6 days for Plazomicin versus 
colistin and higher rate of documented clearance by day 5 (86 percent 
versus 46 percent) supported the reduced mortality benefit due to 
faster and more sustained clearance of bacteremia and also demonstrated 
clinical improvement in terms of more rapid beneficial resolution of 
the disease.
    The applicant maintained that Plazomicin also represents a 
substantial clinical improvement in improved safety outcomes. Patients 
treated with Plazomicin had a lower incidence of renal events (10 
percent versus 41.7 percent when compared to colistin), fewer Treatment 
Emergent Adverse Events (TEAEs), specifically blood creatinine 
increases and acute kidney injury, and approximately 30 percent fewer 
serious adverse events were in the Plazomicin group. According to the 
applicant, other substantial clinical improvements demonstrated by the 
CARE study for use of Plazomicin in patients who had been diagnosed 
with BSI included lower rate of superinfections or new infections, 
occurring in half as many patients treated with Plazomicin versus 
colistin (28.6 percent versus 66.7 percent).
    According to the applicant, the CARE study demonstrates decreased 
all-cause mortality and significantly reduced disease complications at 
day 28 (EOS) and day 60 for patients who had been diagnosed with BSI, 
in addition to a superior safety profile to colistin. However, the 
applicant stated that, with the achieved enrollment, this study was not 
powered to support formal hypothesis testing and p-values and 90 
percent confidence intervals are provided for descriptive purposes. The 
total number of patients who had been diagnosed with BSI was 29, with 
14 receiving Plazomicin and 15 receiving colistin. While we understand 
the difficulty enrolling a large number of patients who have been 
diagnosed with BSI caused by CRE due to severity of the illness and the 
need for administering treatment promptly, we are concerned that 
results indicating reduced mortality and treatment advantages over 
existing standard of care for patients who have been diagnosed with BSI 
due to CRE are not statistically significant due to the small sample 
size. Therefore, we are concerned that the results from the CARE study 
cannot be used to support substantial clinical improvement.
    The EPIC clinical trial was a randomized, multi[dash]center, 
multi[dash]national, double[dash]blind study evaluating the efficacy 
and safety of Plazomicin compared with meropenem in the treatment of 
patients who have been diagnosed with cUTI based on composite cure 
endpoint (achieving both microbiological eradication and clinical cure) 
in the microbiological modified intent-to-treat (mMITT) population. 
Patients received between 4 to 7 days of IV therapy, followed by 
optional oral therapy like levofloxacin (or any other approved oral 
therapy) as step down therapy for a total of 7 to 10 days of therapy. 
Test[dash]of[dash]cure (TOC) was done 15 to 19 days and late 
follow[dash]up (LFU) 24 to 32 days after the first dose of IV therapy. 
Six hundred nine patients fulfilled inclusion criteria, and were 
randomized to receive either Plazomicin or meropenem, with 306 patients 
receiving Plazomicin and 303 patients receiving meropenem. Safety 
analysis included 303 (99 percent) Plazomicin patients and 301 (99.3 
percent) meropenem patients. mMITT analysis included 191 (62.4 percent) 
Plazomicin patients and 197 (65 percent) meropenem patients; exclusion 
from mMITT analysis was due to lack of study[dash]qualifying 
uropathogen, which were pathogens susceptible to both Plazomicin and 
meropenem. In the mMITT population, both groups were comparable in 
terms of gender, age, percentage of patients who had been diagnosed 
with cUTI/acute pyelonephritis (AP)/urosepsis/bacteremia/moderate renal 
impairment at baseline.
    According to the applicant, Plazomicin successfully achieved the 
primary efficacy endpoint of composite cure (combined microbiological 
eradication and clinical cure). At the TOC visit, 81.7 percent of 
Plazomicin patients versus 70.1 percent of meropenem patients achieved 
composite cure; this was statistically significant with a 95 percent 
confidence interval. Plazomicin also demonstrated higher eradication 
rates for key resistant pathogens than meropenem at both TOC (89.4 
percent versus 75.5 percent) and LFU (77 percent versus 60.4 percent), 
suggesting that the Plazomicin treatment benefit observed at TOC was 
sustained. Specifically, Plazomicin demonstrated higher eradication 
rates, defined as baseline uropathogen reduced to less than 104, 
against the most common gram-negative uropathogens, including ESBL 
producing (82.4 percent Plazomicin versus 75.0 percent meropenem) and 
aminoglycoside resistant (78.8 percent Plazomicin versus 68.6 percent 
meropenem) pathogens. This was statistically significant, although of 
note, as total numbers of Enterobacteriaceae exceeded population of 
mMITT (191 Plazomicin, 197 meropenem) this presumably included patients 
who were otherwise excluded from the mMITT population.
    According to the applicant, importantly, higher microbiological 
eradication rates at the TOC and LFU visits were associated with a 
lower rate of clinical relapse at LFU for Plazomicin treated patients 
(3 versus 14, or 1.8 percent Plazomicin versus 7.9 percent meropenem), 
with majority of the meropenem failures having had asymptomatic 
bacteriuria; that is, positive urine cultures without clinical 
symptoms, at TOC (21.1 percent), suggesting that the higher 
microbiological eradication rate at the TOC visit in Plazomicin-treated 
patients decreased the risk of subsequent clinical relapse. Plazomicin 
decreased recurrent infection by four-fold compared to meropenem, 
suggesting improved patient outcomes, such as reduced need for 
additional therapy and re-hospitalization for patients who have been 
diagnosed with cUTI. The safety profile of Plazomicin compared to 
meropenem was similar. The applicant noted that higher bacteria 
eradication results for Plazomicin were not due to meropenem 
resistance, as only patients with isolates susceptible to both drugs 
were included in the study. According to the applicant, the EPIC 
clinical trial results demonstrate clear differentiation of Plazomicin 
from meropenem, an agent considered by some as a gold-standard for 
treatment of patients who have been diagnosed with cUTI in cases due to 
resistant pathogens.
    While the EPIC clinical trial was a non-inferiority study, the 
applicant contended that statistically significant improved outcomes 
and lower clinical relapse rates for patients treated with Plazomicin 
demonstrate that Plazomicin meets the substantial clinical

[[Page 20324]]

improvement criterion for the cUTI indication. Specifically, according 
to the applicant, the efficacy results for Plazomicin combined with a 
generally favorable safety profile provide a compelling benefit-risk 
profile for patients who have been diagnosed with cUTI, and 
particularly those with infections due to resistant pathogens. Most 
patients enrolled in the EPIC clinical trial were from Eastern Europe. 
It is unclear how generalizable these results would be to patients in 
the United States as the susceptibilities of bacteria vary greatly by 
location. The applicant maintains that this is consistent with prior 
studies and is unlikely to have affected the results of the study 
because the pharmacokinetics of Plazomicin and meropenem are not 
expected to be affected by race or ethnicity. However, bacterial 
resistance can vary regionally and we are interested in how this data 
can be extrapolated to a majority of the U.S. population. It is also 
unknown how quickly resistance to Plazomicin might develop. 
Additionally, the microbiological breakdown of the bacteria is unknown 
without the full published results, and patients outside of the mMITT 
population were included when the applicant reported the statistically 
superior microbiological eradication rates of Enterobacteriaceae at 
TOC. We are concerned whether there is still statistical superiority of 
Plazomicin in the intended bacterial targets in the mMITT. Finally, 
because both Plazomicin and meropenem were also utilized in conjunction 
with levofloxacin, it is unclear to us whether combined antibiotic 
therapy will continue to be required in clinical practice, and how 
levofloxacin activity or resistance might affect the clinical outcome 
in both patient groups.
    We are inviting public comments on whether Plazomicin meets the 
substantial clinical improvement criterion for patients who have been 
diagnosed with BSI and cUTI, including with respect to whether 
Plazomicin constitutes a substantial clinical improvement for the 
treatment of patients who have been diagnosed with BSI who have limited 
or no alternative treatment options, and whether statistically better 
outcomes at test-of-cure visit, including higher eradication rates for 
ESBL-producing pathogens, and lower rate of subsequent clinical 
relapses constitute a substantial clinical improvement for patients who 
have been diagnosed with cUTI.
    We did not receive any public comments in response to the published 
notice in the Federal Register regarding the substantial clinical 
improvement criterion for Plazomicin or at the New Technology Town Hall 
meeting.
h. GIAPREZATM
    The La Jolla Pharmaceutical Company submitted an application for 
new technology add-on payments for GIAPREZATM for FY 2019. 
GIAPREZATM, a synthetic human angiotensin II, is 
administered through intravenous infusion to raise blood pressure in 
adult patients who have been diagnosed with septic or other 
distributive shock.
    The applicant stated that shock is a life-threatening critical 
condition characterized by the inability to maintain blood flow to 
vital tissues due to dangerously low blood pressure (hypotension). 
Shock can result in organ failure and imminent death, such that 
mortality is measured in hours and days rather than months or years. 
Standard therapy for shock currently uses fluid and vasopressors to 
raise the mean arterial pressure (MAP). The two classes of standard of 
care (SOC) vasopressors are catecholamines and vasopressins. Patients 
do not always respond to existing standard of care therapies. 
Therefore, a diagnosis of shock can be a difficult and costly condition 
to treat. According to the applicant, 35 percent of patients who are 
diagnosed with shock fail to respond to standard of care treatment 
options using catecholamines and go on to second-line treatment, which 
is typically vasopressin. Eighty percent of patients on vasopressin 
fail to respond and have no other alternative treatment options. The 
applicant estimated that CMS covered charges to treat patients who are 
diagnosed with vasodilatory shock who fail to respond to standard of 
care therapy are approximately 2 to 3 times greater than the costs of 
other conditions, such as acute myocardial infarction, heart failure, 
and pneumonia. According to the applicant, one[dash]third of patients 
in the intensive care unit are affected by vasodilatory shock, with 
745,000 patients who have been diagnosed with shock being treated 
annually, of whom approximately 80 percent are septic.
    With respect to the newness criterion, according to the applicant, 
the expanded access program (EAP), or FDA authorization for the 
``compassionate use'' of an investigational drug outside of a clinical 
trial, was initiated August 8, 2017. GIAPREZATM was granted 
Priority Review status and received FDA approval on December 21, 2017, 
for the use in the treatment of adults who have been diagnosed with 
septic or other distributive shock as an intravenous infusion to 
increase blood pressure. We note that the applicant has submitted a 
request for approval for a unique ICD[dash]10[dash]PCS code for the 
administration of GIAPREZATM beginning in FY 2019. 
Currently, there are no ICD-10-PCS procedure codes to uniquely identify 
procedures involving GIAPREZATM.
    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, GIAPREZATM is the first 
synthetic formulation of human angiotensin II, a naturally occurring 
peptide hormone in the human body. Angiotensin II is one of the major 
bioactive components of the renin-angiotensin-aldosterone system 
(RAAS), which serves as one of the body's central regulators of blood 
pressure. Angiotensin II increases blood pressure through 
vasoconstriction, increased aldosterone release, and renal control of 
fluid and electrolyte balance. Current therapies for the treatment of 
patients who have been diagnosed with shock do not leverage the RAAS. 
The applicant asserted that GIAPREZATM is a novel treatment 
with a unique mechanism of action relative to SOC treatments for 
patients who have been diagnosed with shock, which is adequate fluid 
resuscitation and vasopressors. Specifically, the two classes of SOC 
vasopressors are catecholamines like Norepinephrine, epinephrine, 
dopamine, and phenylephrine IV solutions, and vasopressins like 
Vasostrict[reg] and vasopressin-sodium chloride IV solutions. 
Catecholamines leverage the sympathetic nervous system and vasopressin 
leverages the arginine-vasopressin system to regulate blood pressure. 
However, the third system that works to regulate blood pressure, the 
RAAS, is not currently leveraged by any available therapies to raise 
mean arterial pressure in the treatment of patients who have been 
diagnosed with shock. The applicant maintained that 
GIAPREZATM is the first synthetic human angiotensin II 
approved by the FDA and the only FDA-approved vasopressor that 
leverages the RAAS and, therefore, GIAPREZATM utilizes a 
different mechanism of action than currently available treatment 
options.
    The applicant explained that GIAPREZATM leverages the 
RAAS, which is a body system not used by existing vasopressors to raise 
blood pressure through inducing

[[Page 20325]]

vasoconstriction. We are concerned that GIAPREZATM's general 
mechanism of action, increasing blood pressure by inducing 
vasoconstriction through binding to certain G[dash]protein receptors to 
stimulate smooth muscle contraction, may be similar to that of 
norepinephrine, albeit leveraging a different body system. We are 
inviting public comments on whether GIAPREZATM uses a 
different mechanism of action to achieve a therapeutic outcome with 
respect to currently available treatment options, including comments or 
additional information regarding whether the mechanism of action used 
by GIAPREZATM is different from that of other treatment 
methods of stimulating vasoconstriction.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, we believe that potential cases 
representing patients who may be eligible for treatment involving 
GIAPREZATM would be assigned to the same MS-DRGs as cases 
representing patients who receive SOC treatment for a diagnosis of 
shock. As explained below in the discussion of the cost criterion, the 
applicant believed that potential cases representing patients who may 
be eligible for treatment involving GIAPREZATM would be 
assigned to MS-DRGs that contain cases representing patients who have 
failed to respond to administration of fluid and vasopressor therapies.
    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, once patients have failed treatment using catecholamines, 
treatment options for patients who have been diagnosed with severe 
septic or other distributive shock are limited. Agents that were 
previously available are each associated with their own adverse events 
(AEs). The applicant noted that primary options that have been 
investigated include vasopressin, corticosteroids, methylene blue, and 
blood purification techniques. Of these options, the applicant stated 
that only vasopressin has a recommendation as add on vasopressor 
therapy in current treatment guidelines, but the recommendations are 
listed as weak with moderate quality of evidence. According to the 
applicant, there is uncertainty regarding vasopressin's effect on 
mortality due to mixed clinical trial results, and higher doses of 
vasopressin have been associated with cardiac, digital, and splanchnic 
ischemia. Therefore, the applicant asserted that there is a significant 
unmet medical need for treatments for patients who have been diagnosed 
with septic or distributive shock who remain hypotensive, despite 
adequate fluid and vasopressor therapy and for medications that can 
provide catecholamine-sparing effects.
    The applicant also noted that there is currently no standard of 
care for addressing the clinical state of septic or other distributive 
shock experienced by patients who fail to respond to fluid and 
available vasopressor therapy. Additionally, no clinical evidence or 
consensus for treatments is available.
    Based on the applicant's statements as summarized above, it appears 
that the applicant is asserting that GIAPREZATM provides a 
new therapeutic treatment option for critically[dash]ill patients who 
have been diagnosed with shock who have limited options and worsening 
prognosis. However, we are concerned that GIAPREZATM may not 
offer a treatment option to a new patient population, specifically 
because the FDA approval for GIAPREZATM does not reserve the 
use of GIAPREZATM only as a last-line drug or adjunctive 
therapy for a subset of the patient population who have been diagnosed 
with shock who have failed to respond to standard of care treatment 
options. According to the FDA labeling, GIAPREZATM is a 
vasoconstrictor to increase blood pressure in adult patients who have 
been diagnosed with septic or other distributive shock. Patients who 
have been diagnosed with septic or other distributive shock are not a 
new patient population. Therefore, it appears that 
GIAPREZATM is used to treat the same or similar type of 
disease (a diagnosis of shock) and a similar patient population 
receiving SOC therapy for the treatment of shock. We are inviting 
public comments on whether GIAPREZATM meets the substantial 
similarity criteria and the newness criterion.
    With regard to the cost criterion, the applicant conducted an 
analysis for a narrower indication, patients who have been diagnosed 
with refractory shock who have failed to respond to standard of care 
vasopressors, and an analysis for a broader indication of all patients 
who have been diagnosed with septic or other distributive shock. We 
believe that only this broader analysis, which reflects the patient 
population for which the applicant's technology is approved by the FDA, 
is relevant to demonstrate that the technology meets the cost criterion 
and, therefore, we are only summarizing this broader analysis below. In 
order to identify the range of MS-DRGs that potential cases 
representing potential patients who may be eligible for treatment using 
GIAPREZATM may map to, the applicant used two separate 
analyses to identify the MS-DRGs for patients who have been diagnosed 
with shock or related diagnoses. The applicant also performed three 
sensitivity analyses on the MS-DRGs for each of the two selections: 100 
Percent of the MS-DRGs, 80 percent of the MS-DRGs, and 25 percent of 
the MS-DRGs. Therefore, a total of six scenarios were included in the 
cost analysis.
    The first analysis (Scenario 1) selected the MS-DRGs most 
representative of the potential patient cases where treatment involving 
GIAPREZATM would have the greatest clinical impact and 
outcomes of improvement over present treatment options. The applicant 
searched for 28 different ICD-9-CM codes under this scenario. The 
second analysis (Scenario 2) used the 80 most relevant ICD-9-CM 
diagnosis codes based on the inclusion criteria of the 
GIAPREZATM Phase III clinical trial, ATHOS-3, and an 
additional 8 ICD-9-CM diagnosis codes for clinical presentation 
associated with vasodilatory or distributive shock patients failing 
fluid and standard of care therapy to capture any additional potential 
cases that may be applicable based on clinical presentations associated 
with this patient population.
    Among only the top quartile of potential patient cases, the single 
MS-DRG representative of most potential patient cases was MS-DRG 871 
(Septicemia or Severe Sepsis without Mechanical Ventilation >96 Hours 
with MCC) for both ICD-9-CM diagnosis code selection scenarios, and in 
both selections, it accounted for a potential patient case percentage 
surpassing 25 percent. Because GIAPREZATM is not reserved 
exclusively as a last-line drug based on the FDA indication, the 
applicant removed 50 percent of drug charges for prior technologies or 
other charges associated with prior technologies from the 
unstandardized charges before standardization in order to account for 
other drugs that may be replaced by the use of GIAPREZATM. 
The applicant has not yet supplied CMS with pricing for 
GIAPREZATM and did not include charges for the new 
technology when conducting this analysis. For all analyses' scenarios, 
the applicant standardized charges using the FY 2015 impact file and 
then inflated the charges to FY 2019 using an inflation factor of 
15.4181 percent (or 1.154181) by multiplying the inflation factor of 
1.098446 in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57286) by the 
inflation factor of 1.05074 in the FY 2018 IPPS/LTCH PPS final rule (82 
FR

[[Page 20326]]

38524). The final inflated average case[dash]weighted standardized 
charge per case was calculated for each scenario and compared with the 
average case-weighted threshold amount for each group of MS-DRGs based 
on the thresholds in Table 10.
    Results of the analyses for each of the two code selection 
scenarios, each with three sensitivity analyses for a total of six 
analyses, are summarized in the tables below:

----------------------------------------------------------------------------------------------------------------
                                                                                   Final average
                                   Number of MS-                  Case- weighted     inflated         Amount
                                   DRGs assessed     Number of    new technology   standardized      exceeded
                                                  Medicare cases  add-on payment    charge per       threshold
                                                                     threshold         case
----------------------------------------------------------------------------------------------------------------
                            Cost Analysis Based on ICD-9-CM Diagnosis Code Scenario 1
----------------------------------------------------------------------------------------------------------------
ICD-9-CM Diagnosis Code
 Selection (28 Codes):
    100 Percent.................             439         120,966         $77,427         $77,427         $34,095
    80 Percent..................              10          96,102          77,641         100,167          22,526
    25 Percent..................               1          66,980          53,499          71,951          18,452
----------------------------------------------------------------------------------------------------------------
                            Cost Analysis Based on ICD-9-CM Diagnosis Code Scenario 2
----------------------------------------------------------------------------------------------------------------
ICD-9-CM Diagnosis Code
 Selection (88 Codes):
    100 Percent.................             466         164,892          78,675         112,174          33,499
    80 Percent..................              52         131,690          79,732         108,396          28,664
    25 Percent..................               1          67,016          53,499          71,688          18,189
----------------------------------------------------------------------------------------------------------------

    The applicant maintained that, based on the Table 10 thresholds, 
the inflated average case-weighted standardized charge per case in the 
analyses exceeded the average case-weighted threshold amount. The 
applicant noted that the inflated average case[dash]weighted 
standardized charge per case exceeds the average case-weighted 
threshold amount by at least $18,189, without the average per patient 
cost of the technology. As such, the applicant anticipated that the 
inclusion of the cost of GIAPREZATM, at any price point, 
would further increase charges above the average case-weighted 
threshold amount. Therefore, the applicant stated that the technology 
meets the cost criterion. We note that we are unsure whether the 
selection in both scenarios fully captures the broader indication for 
which the FDA approved the use of GIAPREZATM. We are 
inviting public comments on whether GIAPREZATM meets the 
cost criterion, including with respect to the concern we have raised.
    With respect to the substantial clinical improvement criterion, the 
applicant summarized that it believes that GIAPREZATM 
represents a substantial clinical improvement because it: (1) Addresses 
an unmet medical need for patients who have been diagnosed with septic 
or distributive shock that, despite standard of care vasopressors, are 
unable to maintain adequate mean arterial pressure; (2) is the only 
agent shown in randomized clinical trial to rapidly and sustainably 
achieve or maintain target blood pressure in patients who do not 
respond adequately to fluid and vasopressor therapy; (3) although not 
powered for mortality, the ATHOS-3 trial demonstrated a strong trend to 
reduce the risk of death in adults from septic or distributive shock 
who remain hypotensive despite fluid therapy and vasopressor therapy, a 
severe, life-threatening condition, for which there are no other 
therapies; (4) provides a catecholamine-sparing effect; and (5) is 
generally safe and well-tolerated, with no significant differences in 
the percentages of patients with any grade adverse events or serious 
adverse events when compared to placebo.
    With regard to expanding on the statements above, the applicant 
believes that the use of GIAPREZATM offers clinicians a 
significant new tool to manage and treat severe hypotension in all 
adult patients who have been diagnosed with septic or other 
distributive shock who are unresponsive to existing vasopressor 
therapies. The applicant also stated that the use of 
GIAPREZATM provides a new therapeutic option for 
critically[dash]ill adult patients who have been diagnosed with septic 
or other distributive shock who have limited options and worsening 
prognoses.
    The applicant maintained that GIAPREZATM was shown to be 
an effective treatment option for critically[dash]ill patients who have 
been diagnosed with refractory shock. The applicant reported that a 
randomized, double-blind placebo controlled trial called ATHOS-3 \154\ 
examined the ability of GIAPREZATM to increase mean arterial 
pressure (MAP), with the primary endpoint being achievement of a MAP of 
greater than or equal to 75 mmHg (the research-backed guideline set by 
the Surviving Sepsis Campaign) or a 10 mmHg increase in baseline MAP. 
Significantly more patients in the treatment arm met the primary 
endpoint (69.9 percent versus 23.4 percent, P<0.001). The applicant 
asserted that this MAP improvement constitutes a significant 
substantial clinical improvement because patients treated with 
GIAPREZATM were three times more likely to achieve 
acceptable blood pressure than patients receiving the placebo. The MAP 
significantly and rapidly increased in patients treated with 
GIAPREZATM and was sustained over 48 hours consistent across 
subgroups and the treatment effect of GIAPREZATM was 
confirmed using multivariate analysis. The group treated with 
GIAPREZATM also experienced a greater mean increase in MAP; 
the MAP increased by a mean of 12.5 mmHg for the GIAPREZATM 
group compared to a mean of 2.9 mmHg for the placebo group.
---------------------------------------------------------------------------

    \154\ Khanna, A., English, S.W., Wang, X.S., et al., 
``Angiotensin II for the treatment of vasodilatory shock,'' 
[supplementary appendix] [published online ahead of print May 21, 
2017], N Engl J Med., 2017, doi: 10.1056/NEJMoa1704154.
---------------------------------------------------------------------------

    Second, the applicant maintained that GIAPREZATM 
demonstrated potential improvement in organ function by lowering the 
cardiovascular sequential organ failure assessment (SOFA) scores of 
patients at 48 hours (-1.75 GIAPREZATM group versus -1.28 
placebo group). However, we are concerned that lower cardiovascular 
SOFA scores may not demonstrate substantial clinical improvement 
because there was no difference in the improvement of other components 
of

[[Page 20327]]

the SOFA score or the overall SOFA score.
    Third, the applicant asserted that GIAPREZATM represents 
a substantial clinical improvement because the use of 
GIAPREZATM reduced the need to increase overall doses of 
catecholamine vasopressors. The applicant stated that patients 
receiving higher doses of catecholamine vasopressors suffer from 
cardiac toxicity, organ dysfunction, and other metabolic complications 
that are associated with higher mortality. By decreasing the overall 
dosage of catecholamine vasopressors, GIAPREZATM potentially 
reduces the adverse effects of vasopressors. The mean change in 
catecholamine vasopressors in patients receiving GIAPREZATM 
versus patients receiving the placebo at 3 hours was -0.03 versus 0.03 
(P<0.001), showing that GIAPREZATM allowed for 
catecholamines to be titrated down, while patients not receiving 
GIAPREZATM required additional catecholamine doses. The 
vasopressor mean doses were consistently lower in the 
GIAPREZATM group, and at 48 hours, vasopressors had been 
discontinued in 28.5 percent of patients in the placebo group versus 
40.5 percent of the GIAPREZATM group. We note that, while 
GIAPREZATM may potentially reduce certain adverse effects 
associated with SOC treatments, the FDA labeling cautions that the use 
of GIAPREZATM can cause dangerous blood clots with serious 
consequences (clots in arteries and veins, including deep venous 
thrombosis); according to the FDA label, prophylactic treatment for 
blood clots should be used.
    The applicant stated that while the study was not powered to detect 
mortality effects, there was a nonsignificant trend toward longer 
survival in the GIAPREZATM group. Overall mortality rates at 
7 days and 8 days in the modified intent to treat (MITT) population 
were 22 percent less in the GIAPREZATM group than in the 
placebo group. At 28 days, the mortality rate in the placebo group was 
54 percent versus 46 percent in the GIAPREZATM group. 
However, the p-values for the decrease in mortality with 
GIAPREZATM at 7 days, 8 days, and 28 days did not 
demonstrate statistical significance.
    The applicant concluded that GIAPREZATM is the first 
commercial product to increase blood pressure in adults who have been 
diagnosed with septic or other distributive shock that leverages the 
renin-angiotensin-aldosterone system. The applicant stated that the 
results of the ATHOS-3 study provide support for a well-tolerated new 
therapeutic agent that demonstrates significant improvements in mean 
arterial pressure. Additionally, the applicant noted that hypotension 
in adults who have been diagnosed with septic or other distributive 
shock is a prevalent life-threatening condition where therapeutic 
options are limited and a high unmet medical need exists. The applicant 
stated that the use of GIAPREZATM will represent a safe and 
effective new therapy that not only leverages a system that current 
therapies are not utilizing, but also offers a viable alternative where 
one does not exist.
    We understand that, in this heterogeneous and difficult to treat 
patient population, studies assessing mortality as a primary endpoint 
are difficult, and as such, surrogate endpoints (that is, achieving 
baseline MAP) have been explored to assess the efficacy of treatments. 
While the outcomes presented by the applicant, such as achieving target 
MAP, lower SOFA scores, and reduced catecholamine usage, could be 
surrogates for clinical outcomes in these patients, there is not a 
strong pool of evidence connecting these single data points directly 
with morbidity and mortality. Therefore, we are unsure whether 
achieving target MAP, lower SOFA scores, and reduced catecholamine 
usage represents a substantial clinical improvement or instead short-
term, temporary improvements without a change in overall patient 
prognosis.
    In response to this concern about MAP constituting a meaningful 
measure for substantial clinical improvement, the applicant supplied 
additional information from the current Surviving Sepsis guidelines, 
which recommend an initial target MAP of 65 mmHg. The applicant 
explained that as MAP falls below a critical threshold, inadequate 
tissue perfusion occurs, potentially resulting in multiple organ 
dysfunction and death. Therefore, early and adequate hemodynamic 
support and treatment of hypotension is critical to restore adequate 
organ perfusion and prevent worsening organ dysfunction and failure. In 
diagnoses of septic or distributive shock, the goal of treatment is to 
increase and maintain a threshold MAP in order to improve tissue 
perfusion. According to the applicant, tissue perfusion becomes 
linearly dependent on arterial pressure below a threshold MAP. In 
patients who have been diagnosed with septic shock requiring 
vasopressors, the current Surviving Sepsis guidelines are based on 
available evidence that demonstrates that adequate MAP is important to 
clinical outcomes and that prolonged decreases in MAP below 65 mmHg is 
associated with poor outcome. According to information supplied by the 
applicant, even short durations like less than 5 minutes of low MAP 
have been associated with severe outcomes, such as myocardial 
infarction, stroke, and acute kidney injury. The applicant stated that 
a retrospective study \155\ found that MAP was independently related to 
ICU and hospital mortality in patients with severe sepsis or septic 
shock.
---------------------------------------------------------------------------

    \155\ Walsh, M., Devereaux, P.J., Garg, A.X., et al., 
``Relationship between Intraoperative Mean Arterial Pressure and 
Clinical Outcomes after Noncardiac Surgery Toward an Empirical 
Definition of Hypotension,'' Anesthesiology, 2013, vol. 119(3), pp. 
507-515.
---------------------------------------------------------------------------

    Finally, we are concerned that the study results may demonstrate 
substantial clinical improvement only for patients who are unresponsive 
to the administration of fluids and vasopressors because patients were 
only included in the ATHOS-3 study if they failed fluids and 
vasopressors, rather than for the broader patient population of adult 
patients who have been diagnosed with septic or other distributive 
shock for which GIAPREZATM was approved by the FDA for use 
as an available treatment option. The applicant continues to maintain 
that the use of GIAPREZATM has significant efficacy in 
improving blood pressure for patients who have been diagnosed with 
distributive shock, while decreasing adrenergic vasopressor usage, 
thereby, providing another avenue for therapy in this difficult to 
treat patient population. However, we are still concerned that the 
results from the clinical trial may be too narrow to accurately 
represent the entire patient population that has been diagnosed with 
septic or other distributive shock and, therefore, we are concerned 
that the clinical trial's results may not adequately demonstrate that 
GIAPREZATM is a substantial clinical improvement over 
existing therapies for all the patients for whom the treatment option 
is indicated. We are inviting public comments on whether 
GIAPREZATM meets the substantial clinical improvement 
criterion.
    We did not receive any public comments in response to the published 
notice in the Federal Register regarding the substantial clinical 
improvement criterion for GIAPREZATM or at the New 
Technology Town Hall meeting.
i. GammaTileTM
    Isoray Medical, Inc. and GT Medical Technologies, Inc. submitted an 
application for new technology add-on payments for FY 2019 for the 
GammaTileTM. (We note that Isoray

[[Page 20328]]

Medical, Inc. and GammaTile, LLC previously submitted an application 
for new technology add[dash]on payments for GammaTileTM for 
FY 2018, which was withdrawn prior to the issuance of the FY 2018 IPPS/
LTCH PPS final rule.) The GammaTileTM is a brachytherapy 
technology for use in the treatment of patients who have been diagnosed 
with brain tumors, which uses 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 technology 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 the 
GammaTileTM technology 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 3 mm gap of a collagen matrix, the applicant asserted 
that the use of the GammaTileTM technology 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 requires 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 the GammaTileTM technology anticipates 
FDA clearance by the spring of 2018. In its application, the applicant 
indicated that it anticipated that the product would be cleared by the 
FDA for use in both the primary and salvage treatment of radiosensitive 
malignances of the brain. However, in discussions with the applicant, 
the applicant indicated that it is only anticipating FDA clearance for 
use in the salvage treatment of recurrent radiosensitive malignances of 
the brain. The applicant submitted a request for approval for a unique 
ICD-10-PCS code for the use of the GammaTileTM technology, 
which was approved effective October 1, 2017 (FY 2018). The ICD-10-PCS 
code used to identify procedures involving the use of the 
GammaTileTM technology is 00H004Z (Insertion of radioactive 
element, cesium-131 collagen implant into brain, open approach).
    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 technology 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 technology 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 
technology 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 technology 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, the GammaTileTM 
technology is a treatment option for patients who have been diagnosed 
with brain tumors that progress locally after initial treatment with 
external beam radiation therapy, and potential cases representing 
patients that may be eligible for treatment involving this technology 
are assigned to the same MS-DRG (MS-DRG 23 (Craniotomy with Major 
Device Implant/Acute Complex CNS PDX with MCC or Chemotherapy Implant)) 
as other current treatment forms of brachytherapy and external beam 
radiation therapy.
    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 
stated that the GammaTileTM technology offers a treatment 
option for a patient population with limited, or no other, available 
treatment options. The applicant explained that treatment options for 
patients who have been 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

[[Page 20329]]

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 stated that the technique 
of implanting cesium-131 seeds in a collagen matrix is currently only 
available to patients in one location, and requires a high degree of 
expertise to implant. The manufacturing process of the 
GammaTileTM will greatly expand the availability of 
treatment beyond research programs at highly specialized cancer 
treatment centers.
    Based on the above, the applicant concluded that the 
GammaTileTM technology is not substantially similar to other 
existing technologies and meets the newness criterion.
    However, we are concerned that the mechanism of action of the 
GammaTileTM may be the same or similar to current forms or 
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 the use in the salvage 
treatment of radiosensitive malignancies of the brain may not represent 
a new mechanism of action.
    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 from mid-2015 through mid-2016 for craniotomies 
that did not involve placement of the GammaTileTM 
technology. The cases were assigned to MS-DRGs 25 through 27 
(Craniotomy and Endovascular Intracranial Procedures with MCC, with CC, 
and without CC/MCC, respectively). For the 460 claims, the average 
case-weighted unstandardized charge per case was $143,831. The 
applicant standardized the 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 1.05074 by the age of each case (that is, 
the factor was applied to 2015 claims 3 times and 2016 claims 2 times). 
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 
inflated average case[dash]weighted standardized charge per case 
(including the charges associated with the GammaTileTM 
device) of $246,310 exceeds the average case-weighted threshold amount 
of $141,249 for MS-DRG 23, the MS-DRG that would be assigned for cases 
involving placement of the GammaTileTM device.
    The applicant also noted that its analysis does not include a 
reduction in costs due to reduced operating room times. The applicant 
stated that there is significant time and workload associated with 
assembling the device, and codes billed for this work are paid at a 
flat rate. We are inviting public comments on whether the 
GammaTileTM technology meets the cost criterion.
    With regard to substantial clinical improvement, the applicant 
stated that the GammaTileTM technology offers a treatment 
option for a patient population unresponsive to, or ineligible for, 
currently available treatments for recurrent CNS malignancies and 
significantly improves clinical outcomes when compared to currently 
available treatment options. The applicant explained that therapeutic 
options for patients who have been diagnosed with large or recurrent 
brain metastases are limited. However, according to the applicant, the 
GammaTileTM technology provides a treatment option for 
patients who have been diagnosed with radiosensitive recurrent brain 
tumors that are not eligible for treatment with any other currently 
available treatment option. Specifically, the applicant stated that the 
GammaTileTM device may provide the only radiation treatment 
option for patients who have been diagnosed with tumors located close 
to sensitive vital brain sites (for example, brain stem) and patients 
who have been diagnosed with recurrent brain tumors who 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 technology can also be used to treat tumors that 
are too large for treatment with external beam radiation therapy. 
Patients who have been diagnosed with 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 technology 
improves clinical outcomes compared to existing treatment options, 
including external beam radiation therapy and other forms of brain 
brachytherapy. To demonstrate that the GammaTileTM 
technology represents a substantial clinical improvement over existing 
technologies, the applicant submitted data from three abstracts 
(described below), 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 who were 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[dash]grade meningiomas, metastases from various primary cancers, 
high[dash]grade gliomas, and others; (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, the 
prototype GammaTileTM 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 the prototype 
GammaTileTM, at the time of this analysis, only 1 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 the prototype GammaTileTM 
was presented at the Society for Neuro-Oncology Conference on 
Meningioma in June 2016 (Brachman, David; Surgery and

[[Page 20330]]

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 the prototype GammaTileTM. 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; 2 of the 20 patients exhibited radiation necrosis 
(1 symptomatic, 1 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 the prototype GammaTileTM 
only 1 patient failed at 18.2 months. Therefore, the median treatment 
site progression-free survival time after the prototype 
GammaTileTM treatment has not yet been reached (average 
follow[dash]up of 16.7 months, range 1 to 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 who were diagnosed with recurrent 
high[dash]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[dash]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 to 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 1 
failure was seen at 18 months (local control 92 percent); and (2) with 
a median follow[dash]up time of 8.1 months (range 1 to 23 months) 1 
symptomatic patient (8 percent) and 2 asymptomatic patients (15 
percent) had radiation-related MRI changes. However, no patients 
required re-operation for radiation necrosis or wound breakdown. Dr. 
Youssef was accepted to present at the 2017 Society for Neuro-Oncology 
annual meeting, where he provided an update of 58 tumors treated with 
the GammaTileTM technology. At a median whole group 
follow[dash]up of 10.8 months, 12 patients (20 percent) had a local 
recurrence at an average of 11.33 months after implant. Six and 18 
month recurrence free survival was 90 percent and 65 percent, 
respectively. Five patients had complications, at a rate that was equal 
to or lower than rates previously published for patients without access 
to the GammaTileTM technology.
    The applicant also included discussion of a presentation by D.S. 
Pinnaduwage, Ph.D., at the August 2017 annual meeting of the American 
Association of Physicists in Medicine. Dr. Pinnaduwage compared the 
brain radiation dose of the GammaTileTM technology with 
other radioactive seed sources. Iodine-125 and palladium-103 were 
substituted in place of the cesium-131 seeds. The study reported 
findings that other radioactive sources reported higher rates of 
radiation necrosis and that ``hot spots'' increased with larger tumor 
size, further limiting the use of these isotopes. The study concluded 
that the larger high-dose volume with palladium-103 and iodine-125 
potentially increases the risk for radiation necrosis, and the 
inhomogeneity becomes more pronounced with increasing target volume.
    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 stated that the use of the GammaTileTM 
technology reduces rates of mortality compared to alternative treatment 
options. The applicant explained that studies on the 
GammaTileTM technology 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 the 
GammaTileTM technology 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 the GammaTileTM technology.
    The applicant also asserted that the use of GammaTileTM 
technology 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, the GammaTileTM technology 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 technology reduces the need for additional 
hospital visits and procedures compared to alternative treatment 
options. The applicant noted that the GammaTileTM technology 
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 whole brain radiotherapy (WBRT) is delivered over 2 to 3 
weeks, while the placement of the GammaTileTM technology 
occurs during the craniotomy and does not add any time to a patient's 
recovery.

[[Page 20331]]

    The applicant further summarized how the GammaTileTM 
technology is a substantial clinical improvement over existing 
treatment options as: (1) Providing a treatment option for patients 
with no other available treatment options; (2) reducing rate of 
mortality compared to alternative treatment options; (3) reducing rate 
of radiation necrosis; (4) reducing the need for re-operation; (5) 
reducing the need for additional hospital visits and procedures; and 
(6) providing more rapid beneficial resolution of the disease process 
treatment.
    Based on consideration of all of the data presented above, the 
applicant believed that the use of the GammaTileTM 
technology represents a substantial clinical improvement over existing 
technologies. The studies were limited to patients who have been 
diagnosed with recurrent tumors after previous surgical resection. As 
previously discussed, the applicant explained that it is anticipating 
FDA clearance for the use of the GammaTileTM only in the 
treatment of recurrent malignancies.
    We are concerned with the limited nature of the clinical efficacy 
and safety data provided by the applicant. The findings presented 
appear to be derived from relatively small case-studies. While the 
applicant described increases in median time to disease recurrence in 
support of improvement, we are concerned with regard to the lack of 
analysis, meta-analysis, or statistical tests that indicated that 
seeded brachytherapy procedures represented a statistically significant 
improvement over alternative treatments, as limited as they may be. We 
also are concerned with the lack of studies involving the actual 
manufactured device. In addition, we are concerned that the applicant 
referenced various findings in its application, but did not include 
relevant reference materials to substantiate those findings. For 
instance, the applicant made statements regarding the low complication 
rates with the use of GammaTileTM prototypes, without any 
discussion of average rates with comparison to other alternative 
treatments.
    We are inviting public comments on whether GammaTileTM 
meets the substantial clinical improvement criterion.
    We did not receive any public comments on the 
GammaTileTM technology in response to the published notice 
in the Federal Register or at the New Technology Town Hall Meeting.
j. Supersaturated Oxygen (SSO2) Therapy (DownStream[reg] 
System)
    TherOx, Inc. submitted an application for new technology add-on 
payments for the Supersaturated Oxygen (SSO2) Therapy (the 
DownStream[reg] System) for FY 2019. The DownStream[reg] System is an 
adjunctive therapy designed to ameliorate progressive myocardial 
necrosis by minimizing microvascular damage in patients who have 
received treatment for a diagnosis of acute myocardial infarction (AMI) 
following percutaneous intervention (PCI) with coronary artery stent 
placement. The applicant stated that, while contemporary therapies for 
patients who have received treatment for a diagnosis of AMI have 
focused on relieving blockages and improving blood flow to the diseased 
myocardium, little has been done to provide localized hyperbaric oxygen 
to ischemic tissue. According to the applicant, patients who have 
received treatment for a diagnosis of AMI are at high risk for reduced 
quality of life, heart failure, and higher mortality as a result of the 
extent of necrosis or infarct size experienced in the myocardium during 
the infarction. The applicant asserted that the net effect of the 
SSO2 Therapy is to reduce the infarct size and, therefore, 
preserve heart muscle.
    The SSO2 Therapy consists of three main components: the 
DownStream[reg] System; the DownStream cartridge; and the 
SSO2 delivery catheter. The DownStream[reg] System and 
cartridge function together to create an oxygen-enriched saline 
solution called SSO2 solution from hospital[dash]supplied 
oxygen and physiologic saline. A small amount of the patient's blood is 
then mixed with the SSO2 solution, producing oxygen-enriched 
hyperoxemic blood, which is then delivered to the left main coronary 
artery (LMCA) via the delivery catheter at a flow rate of 100 ml/min. 
The duration of the SSO2 Therapy is 60 minutes and the 
infusion is performed in the catheterization laboratory. The oxygen 
partial pressure (pO2) of the infusion is elevated to ~1,000 mmHg, 
therefore providing oxygen locally to the myocardium at a hyperbaric 
level for 1 hour. After the 60-minute SSO2 infusion is 
complete, the cartridge is unhooked from the patient and discarded per 
standard practice. Coronary angiography is performed as a final step 
before removing the delivery catheter and transferring the patient to 
the intensive care unit (ICU).
    According to the applicant, the SSO2 Therapy has been 
designated as a Class III medical device (high risk) by the FDA. The 
applicant indicated that it expects to receive pre-market approval from 
the FDA in the first quarter of 2018. The applicant asserted that use 
of the SSO2 Therapy can be identified by the ICD-10-PCS 
procedure codes 5A0512C (Extracorporeal supersaturated oxygenation, 
intermittent) and 5A0522C (Extracorporeal supersaturated oxygenation, 
continuous).
    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. According to the 
applicant, the SSO2 Therapy is administered adjunctively 
immediately following completion of successful PCI. The applicant 
maintained that currently available treatment options for patients who 
have been diagnosed and begun initial treatment for AMI involve the 
revascularization of the blocked coronary artery by means of either 
thrombolytic therapy or PCI with stent placement accompanied by the 
administration of adjunctive pharmacologic agents such as glycoprotein 
IIb/IIIa inhibitors, or via coronary artery bypass graft (CABG) 
surgery. The applicant asserted that because there are no other 
approved therapies for patients who have been diagnosed with AMI post-
PCI, the SSO2 Therapy meets the newness criterion. Below we 
evaluate the applicant's assertions with respect to whether the 
SSO2 Therapy meets each of the three substantial similarity 
criteria.
    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, the SSO2 Therapy employs two 
mechanisms of action: (1) First, the increased oxygen levels re-open 
the microcirculatory system within the infarct zone, which has 
experienced ischemia during the occlusion period; and (2) second, once 
reopened, the blood flow contains additional oxygen to restart the 
metabolic processes within the stunned myocardium. The applicant 
asserted that these mechanisms have been studied in preclinical 
investigations sponsored by the applicant, where controlled studies 
were performed in both porcine and canine AMI models to determine the 
safety, effectiveness, and mechanism of action of the SSO2 
Therapy. According to the applicant, the findings of these studies 
demonstrated improved left ventricular function, infarct size 
reduction, a microvascular mechanism of action, and that the 
SSO2 Therapy is nontoxic. Based on the information provided 
by the applicant, current

[[Page 20332]]

treatment options for patients who have been diagnosed and receive 
treatment for AMI function to restore coronary artery blood flow, which 
addresses macrovascular disease but not the underlying cellular changes 
resulting from hypoxia. The applicant maintains that currently 
available treatment options for patients who have been diagnosed and 
receive treatment for AMI do not treat hypoxemic damage at the 
microvascular or microcirculatory level, and that SSO2 
Therapy does not use the same or a similar mechanism of action as any 
existing treatment available for patients who have been diagnosed and 
receive treatment for a diagnosis of AMI.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, we believe that potential cases 
involving the SSO2 Therapy may be assigned to the same MS-
DRG(s) as other cases involving PCI with stent placement also used to 
treat patients who have been diagnosed with AMI.
    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, in spite of many advances and refinements in PCI for 
reopening the blocked coronary artery, patients who have been diagnosed 
and receiving treatment for AMI are at high risk for reduced quality of 
life, heart failure, and higher mortality, as a result of the extent of 
necrosis experienced in the myocardium during the infarction. According 
to the applicant, patients who have been diagnosed with and receiving 
treatment for AMI continue to experience elevated early and late Major 
Adverse Cardiac Events (MACE), as well as a higher risk for congestive 
heart failure (CHF) development. The applicant made the following 
assertions: The net effect of the SSO2 Therapy is to reduce 
the infarct size, or extent of necrosis, in the myocardium post-AMI 
and, therefore, improve left ventricular function, leading to improved 
patient outcomes; there are no other approved therapies for patients 
who have been diagnosed with and receive treatment for AMI post-PCI and 
submitted data evaluating the SSO2 Therapy directly as 
compared to the currently available standard of care, PCI with stenting 
alone; and SSO2 Therapy's emphasis is on treating patients 
who have been diagnosed with AMI at the microvascular level instead of 
reopening the blocked coronary artery at the macrovascular level as 
with other treatments and that it, therefore, treats a different type 
of disease than currently available treatment options for patients who 
have been diagnosed with and receive treatment for AMI.
    We are inviting public comments on whether the SSO2 
Therapy is substantially similar to existing technologies and whether 
it 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 to which potential 
cases representing potential patients who may be eligible for treatment 
involving the SSO2 Therapy may map, the applicant identified 
all MS-DRGs for cases of patients who have been diagnosed with anterior 
STEMI as a principal diagnosis. Specifically, the applicant searched 
the FY 2016 MedPAR file for claims reporting diagnoses of anterior 
STEMI by ICD-10-CM diagnosis codes I21.0 (ST elevation myocardial 
infarction of anterior wall), I21.01 (ST elevation (STEMI) myocardial 
infarction involving left main coronary artery), I21.02 (ST elevation 
(STEMI) myocardial infarction involving left anterior descending 
coronary artery), or I21.09 (ST elevation (STEMI) myocardial infarction 
involving other coronary artery of anterior wall) as a primary 
diagnosis. The applicant identified 11,030 potential cases across 4 MS-
DRGs, with approximately 86 percent of all potential cases mapping to 
the following 2 MS-DRGs: MS-DRG 246 (Percutaneous Cardiovascular 
Procedures with Drug-Eluting Stent with MCC or 4+ Vessels/Stents) and 
MS-DRG 247 (Percutaneous Cardiovascular Procedures with Drug-Eluting 
Stent without MCC). The remaining 14 percent of potential cases mapped 
to MS-DRG 248 (Percutaneous Cardiovascular Procedures with Non-Drug 
Eluting Stent with MCC or 4+ Vessels/Stents) and MS-DRG 249 
(Percutaneous Cardiovascular Procedures with Non-Drug-Eluting Stent 
without MCC).
    Using the 11,030 identified cases, the applicant determined that 
the average unstandardized case-weighted charge per case was $94,290. 
The applicant then standardized the charges. The applicant did not 
remove charges for the current treatment because, as discussed above, 
the SSO2 Therapy will be used as an adjunctive treatment 
option following successful PCI with stent placement. The applicant 
then applied the inflation factor of 1.05074 from the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38524) 3 times to inflate the charges from FY 
2016 to FY 2019. The applicant added charges related to the new 
technology, which accounts for the use of 1 cartridge per patient, as 
well as the 60 minutes of procedure time, to the average charges per 
case. Based on the FY 2018 IPPS/LTCH PPS final rule Table 10 threshold 
amounts, the average case[dash]weighted threshold amount was $91,064. 
The inflated average case-weighted standardized charge per case was 
$146,974. 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 comments on whether or not the SSO2 Therapy 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, 
according to the applicant, the preferred standard of care for the 
treatment of patients who have been diagnosed with AMI involves the 
revascularization of the blocked coronary artery by means of PCI with 
stent placement, accompanied by the administration of adjunctive 
pharmacologic agents such as antiplatelet drugs, including glycoprotein 
IIb/IIIa inhibitors. The applicant stated that the clinical unmet need 
for these patients, particularly patients who have been diagnosed with 
anterior wall STEMI with the greatest potential impact to their 
ventricle, is to provide incremental therapeutic benefit beyond PCI 
with stenting to reduce the damage to their myocardium. The applicant 
believed that SSO2 Therapy fulfills this unmet clinical need 
in the treatment of patients who have been diagnosed with ST-elevation 
AMI by reducing infarct size as compared to the standard of care, PCI 
with stenting alone.
    The applicant asserted that, as an adjunctive treatment, the 
SSO2 Therapy has demonstrated superiority over PCI with 
stenting alone in reducing the infarct size for high-risk patients 
diagnosed with anterior AMI treated within 6 hours of symptom onset. 
The applicant also noted that the SSO2 Therapy has been 
shown to preserve left ventricular integrity as compared to patients 
who receive treatment involving PCI with stenting alone, utilizing 
direct measurements of left ventricular volume over the 30-day post-
procedure period. The applicant noted that the quantification of the 
extent of necrosis or infarction in the muscle is the best physical 
measure of the consequences of AMI for patients in post-intervention, 
as the infarct size is the quantification of the extent of scarring of 
the left ventricle post-AMI and, therefore, provides a direct measure 
of the health of the

[[Page 20333]]

myocardium and indirectly on the heart's structure and function. A 
large infarct means the muscle cannot contract normally, leading to 
left ventricular enlargement, reduced ejection fraction, clinical heart 
failure, and death. The applicant highlighted the importance of the 
SSO2 Therapy's mechanism of action, which treats hypoxemic 
damage at the microvascular or microcirculatory level, by noting that 
the degree to which microvascular impairment in the myocardium is 
irreversible and unaffected by therapeutic intervention leads to a 
greater extent of infarction. Furthermore, the applicant noted that 
compromised microvascular flow remains a serious problem in STEMI care 
and leads to microvascular obstruction (MVO), which a recent study has 
shown to be an important independent predictor of mortality and heart 
failure (HF) hospitalization at 1 year. The applicant asserted that MVO 
is closely tied to the resultant damage or infarct size in patients 
diagnosed with acute STEMI and is of critical importance to address 
mechanistically in any treatment administered in conjunction to PCI, to 
effect an improved outcome in primary care.
    The applicant performed controlled studies in both porcine and 
canine AMI models to determine the safety, effectiveness, and mechanism 
of action of the SSO2 Therapy. The key summary points from 
these animal studies are:
     The SSO2 Therapy administration post-AMI 
acutely improves heart function as measured by left ventricular 
ejection fraction (LVEF) and regional wall motion as compared with non-
treated control subjects.
     The SSO2 Therapy administration post-AMI 
results in tissue salvage, as determined by post-sacrifice histological 
measurements of the infarct size. Control animals exhibit larger 
infarcts than the SSO2-treated animals.
     The SSO2 Therapy has been shown to be non-toxic 
to the coronary arteries, myocardium, and end organs in randomized, 
controlled swine studies with or without induced acute myocardial 
infarction.
     The SSO2 Therapy administration post-AMI has 
exhibited regional myocardial blood flow improvement in treated animals 
as compared to controls.
     A significant reduction in myeloperoxidase (MPO) levels 
was observed in the SSO2-treated animals versus controls, 
which indicate improvement in underlying myocardial hypoxia.
     Transmission electron microscopy (TEM) photographs have 
shown amelioration of endothelial cell edema and restoration of 
capillary patency in ischemic zone cross-sectional histological 
examination of the SSO2-treated animals, while nontreated 
controls exhibit significant edema and vessel constriction at the 
microvascular level.
    The applicant also submitted results from five clinical studies 
that it asserted demonstrate the substantial clinical benefit 
associated with the SSO2 Therapy. These studies include the 
Phase I/IA feasibility trial, the European OYSTER-AMI study, the AMIHOT 
I and AMIHOT II randomized trials, and the IC-HOT clinical study.
    The Phase I/IA and OYSTER-AMI studies demonstrated that the 
SSO2 Therapy held promise in improving left ventricular 
function, especially in the infarct zone, for patients who have been 
diagnosed with and receiving treatment for AMI. Specifically, an IDE-
sanctioned Phase I pilot study was conducted in the United States and 
Italy involving 29 patients who had been diagnosed with and receiving 
treatment involving the SSO2 Therapy for anterior AMI and 
found significant LV functional improvement over time as noted in the 
2-D echocardiography analysis of the combined Phase I/IA data. Baseline 
measurements of ejection fraction (EF) and wall motion score index 
(WMSI) were taken immediately post-PCI prior to SSO2 Therapy 
administration. An improving trend in EF and significant improvement in 
WMSI were observed at 24-hours after SSO2 Therapy 
administration, and further improvement in ventricular function was 
demonstrated at 1 and 3 months compared to baseline. The analysis 
demonstrated that these improvements in global LV functional measures 
were due to recovery of ventricular function in the infarct zone; 
regional WMSI assessments showed no change in the noninfarct zone. 
Similar results were found in the European OYSTER-AMI trial, which 
assessed supersaturated oxygen in reperfused ST-elevation AMI, 
directing attention to 41 patients receiving treatment involving the 
SSO2 Therapy versus untreated controls. The study showed 
that the supersaturated oxygen treatment group had a significantly 
faster cardiac enzyme and ST segment elevation reduction, therefore 
suggesting an improvement in microvascular reperfusion. The 
SSO2 Therapy treatment group also showed a significantly 
better improvement in left ventricular wall motion and ejection 
fraction,\156\ which a number of studies have shown to be directly 
related to mortality.\157\ The OYSTER-AMI study further suggested that 
the SSO2 Therapy reduces the infarct size, as demonstrated 
in reduced cardiac enzyme CK and CK-MB release.
---------------------------------------------------------------------------

    \156\ Bartorelli, A.L., ``Hyperoxemic Perfusion for Treatment of 
Reperfusion Microvascular Ischemia in Patients with Myocardial 
Infarction,'' Am J Cardivasc Drugs, 2003, vol. 3(4), pp. 253-6.
    \157\ Stone, G.W., et al., ``Relationship between infarct size 
and outcomes following primary PCI: Patient-level analysis from 10 
randomized trials,'' J Am Coll Cardio, vol. 67.14, 2016, pp. 1674-
1683.
---------------------------------------------------------------------------

    The AMIHOT I clinical trial was designed as a prospective, 
randomized evaluation of patients who had been diagnosed with and 
receiving treatment for AMI presenting within 24 hours of symptom 
onset, including both anterior and inferior patients diagnosed with 
AMI. The AMIHOT I trial was conducted with IDE approval from FDA. The 
study included 269 randomized patients, with 3 independent biomarkers 
(infarction size reduction, regional wall motion score improvement at 3 
months, and reduction in ST segment elevation) designated as co-primary 
endpoints to evaluate the effectiveness of the SSO2 Therapy. 
The study was designed to demonstrate superiority of the 
SSO2 Therapy group as compared to controls for each of these 
endpoints, and to demonstrate non-inferiority of the SSO2 
Therapy group as compared to control with respect to 30-day MACE. The 
study population was comprised of qualifying patients who had been 
diagnosed with AMI and receiving treatment with either PCI alone or 
with the SSO2 Therapy as an adjunct to successful PCI within 
24 hours of symptom onset. According to the applicant, results for the 
control/SSO2 Therapy group comparisons for the three co-
primary effectiveness endpoints demonstrated a nominal improvement in 
the test group, although this nominal improvement did not achieve 
clinical and statistical significance in the entire population. A pre-
specified analysis of the SSO2 Therapy patients who were 
revascularized within 6 hours of AMI symptom onset and who had anterior 
wall infarction showed a marked improvement in all three co-primary 
endpoints as compared to the control group. Key safety data revealed no 
statistically significant differences in the composite primary endpoint 
of 1-month (30 days) Major Adverse Cardiac Event (MACE) rates between 
the SSO2 Therapy and control groups. MACE includes the 
combined incidence of death, reinfarction, target vessel 
revascularization, and stroke. In total, 9/134 (6.7 percent) patients 
in the SSO2 Therapy group and 7/135 (5.2 percent) patients 
in the control group experienced 30-day MACE (p=0.62).

[[Page 20334]]

    Another pivotal trial in the evaluation of the SSO2 
Therapy, the AMIHOT II trial, randomized 301 patients who had been 
diagnosed with and receiving treatment for anterior AMI with either PCI 
plus the SSO2 therapy or PCI alone. The AMIHOT II trial had 
a Bayesian statistical design that allows for the informed borrowing of 
data from the previously completed AMIHOT I trial. The primary efficacy 
endpoint of the study required proving superiority of the infarct size 
reduction with the SSO2 Therapy as compared to patients who 
were receiving treatment involving PCI with stenting alone. The primary 
safety endpoint for the AMIHOT II trial required a determination of 
noninferiority in the 30-day MACE rate, comparing the SSO2 
Therapy group with the control group, within a safety delta of 6.0 
percent. Endpoint evaluation was performed using a Bayesian 
hierarchical model that evaluated the AMIHOT II result conditionally in 
consideration of the AMIHOT I 30-day MACE data. According to the 
applicant, the results of the AMIHOT II trial showed that the 
SSO2 therapy, together with PCI and stenting, demonstrated a 
relative reduction of 26 percent in the left ventricular infarct size 
and absolute reduction of 6.5 percent compared to PCI and stenting 
alone. We are interested in information regarding at what timeframe in 
the study was the reduction of infarct size measured. In addition, the 
applicant stated that the finding of device effectiveness was supported 
by additional analyses that showed a 53 percent increased likelihood of 
having a small infarct among the SSO2 therapy patients.\158\ 
In assessing 30-day Major Adverse Cardiac Events (MACE), while higher 
in the SSO2 Therapy group, the rates were statistically 
noninferior (5.4 percent versus 3.8 percent). However, given the higher 
30[dash]day MACE outcome among the SSO2 Therapy patients in 
both the AMIHOT I and AMIHOT II trials, we are concerned about the lack 
of long-term data on improvement in patient clinical outcomes, despite 
the lack of statistical significance.
---------------------------------------------------------------------------

    \158\ Stone, G.W., Martin, J.L., Boer, M.J., et al., ``Effect of 
Supersaturated Oxygen Deliver on Infarct Size After Percutaneous 
Coromary Intervention in Acute Myocardial Infarction,'' Cir 
Cardiovasc Interv, 2009, vol. 2, pp. 366-75.
---------------------------------------------------------------------------

    The applicant also submitted the IC-HOT clinical trial, which was 
designed to confirm the safety and efficacy of the use of the 
SSO2 Therapy in those individuals presenting with a 
diagnosis of anterior AMI who have undergone successful PCI with 
stenting of the proximal and/or mid left anterior descending artery 
within 6 hours of experiencing AMI symptoms. It is an IDE, 
nonrandomized, single arm study. The study was primarily focused on 
safety, utilizing a composite endpoint of 30-day Net Adverse Clinical 
Events (NACE). A maximum observed event rate of 10.7 percent was 
established based on a contemporary PCI trial of comparable patients 
who had been diagnosed with anterior wall STEMI. The IC-HOT trial 
exhibited a 7.1 percent observed NACE rate, meeting the study endpoint. 
Notably, no 30-day mortalities were observed, and the type and 
frequency of 30-day adverse events occurred at similar or lower rates 
than in contemporary STEMI studies of PCI-treated patients who had been 
diagnosed with anterior AMI. Furthermore, according to the applicant, 
the IC-HOT study supported the conclusions of effectiveness established 
in AMIHOT II with a measured 30-day median infarct size = 19.4 percent 
(as compared to the AMIHOT II SSO2 Therapy group infarct 
size = 20.0 percent). Notable measures include 4[dash]day microvascular 
obstruction (MVO), which has been shown to be an independent predictor 
of outcomes, 4[dash]day and 30[dash]day left ventricular end diastolic 
and end systolic volumes, and 30[dash]day infarct size. The IC-HOT 
study results exhibited a favorable MVO as compared to contemporary 
trial data, and decreasing left ventricular volumes at 30 days, 
compared to contemporary PCI populations that exhibit increasing left 
ventricular size. The applicant asserted that the IC-HOT clinical trial 
data continue to demonstrate substantial clinical benefit of the 
SSO2 Therapy as compared to the standard of care, PCI with 
stenting alone.
    We are inviting public comments on whether the SSO2 
Therapy meets the substantial clinical improvement criterion.
    Below we summarize and respond to written public comments we 
received regarding the DownStream[reg] System during the open comment 
period in response to the New Technology Town Hall meeting notice 
published in the Federal Register.
    Comment: A number of commenters supported the approval of new 
technology add-on payments for the DownStream[reg] System 
(SSO2 Therapy) for the treatment of patients diagnosed with 
AMI. The commenters asserted that SSO2 Therapy is effective 
at significantly reducing infarct size in patients diagnosed with 
anterior wall myocardial infarction who have been treated with primary 
percutaneous intervention. The commenters reiterated the results of the 
AMIHOT II randomized trial which demonstrated that treatment with 
SSO2 Therapy following successful PCI in patients diagnosed 
with an anterior wall myocardial infarction resulted in a 6.5 percent 
absolute reduction and a 26 percent relative reduction in infarct size, 
compared to treatment with PCI alone (the percentages above are based 
on a 26.5 percent median infarct size in the control PCI group versus 
20 percent infarct size in the SSO2 Therapy group). One 
commenter stated that the infarct size reduction of 6.5 percent 
documented in the AMIHOT II trial results is substantial when it comes 
to patient care. In addition, other commenters believed that 
SSO2 Therapy is a safe treatment option because there was no 
significant difference in Major Adverse Cardiac Events (MACE) between 
the treatment and control groups.
    The commenters also referenced the results from the IC-HOT 
confirmatory study. The commenters believed that the results of this 
study demonstrated stabilization of the left ventricular size with no 
dilatation at 30 days, which confirmed the efficacy and safety of 
SSO2 Therapy. The commenters stated that, in a sample 
patient population of 98 patients diagnosed with anterior wall 
myocardial infarction, to achieve a result in infarct size of 19.4 
percent of the left ventricular following use of SSO2 
Therapy is similar to the results achieved in the patients enrolled in 
the treatment group of the AMIHOT II trial and is also substantial to 
patient care. The commenters emphasized that patients diagnosed with 
anterior wall myocardial infarction are high[dash]risk patients with a 
high mortality rate, and patients who survive experiences with large 
infarct size and left ventricular dysfunction eventually suffer 
congestive heart failure, ultimately requiring a defibrillator and have 
poor quality of life. The commenters also noted that the MRI results 
documented from the IC-HOT trial have shown a reduction in left 
ventricular volumes, suggesting the left ventricular cavity did not 
dilate and the ventricle remained stable, which is consistent with the 
experience of many of the commenters that treated patients using 
SSO2 Therapy as part of the trial. Another commenter noted 
that 25 percent of the patients in the IC[dash]HOT trial had a normal 
ejection fraction at follow[dash]up MRI scan. The commenters believed 
that SSO2 Therapy should be a standard[dash]of[dash]care, 
given the low number of adverse events and the low instances of new 
heart failure admissions in their

[[Page 20335]]

experience with the use of SSO2 Therapy.
    Another commenter provided additional clinical studies in response 
to a question presented at the New Technology Town Hall meeting 
regarding the relationship between myocardial infarct size and clinical 
outcomes. The commenter stated that these clinical studies would 
provide further context to the research regarding the relationship 
between myocardial infarct size and clinical outcomes and emphasized 
that this relationship is not dependent on the type of treatment 
administered. The commenter opined that as long as infarct size is 
reduced, long-term clinical benefit follows. The commenter maintained 
that the strong correlation between the scarring of the left ventricle 
as a consequence of diagnoses of AMI and important long-term clinical 
outcomes has been well documented in large-scale thrombolytic therapy 
trials, one of which showed that a 5 percent reduction in medium 
infarct size was associated with improved clinical outcomes and 
established the superiority of primary PCI over thrombolysis as the 
standard[dash]of[dash]care for the treatment of AMI.\159\ The commenter 
indicated that, based on the results of the additional clinical 
studies, recognizing the significance of the relationship between 
infarct size and clinical outcomes, additional trials were performed to 
evaluate the effect of continued infarct size reduction, such as a 
pooled patient[dash]level analysis to evaluate myocardial infarct size 
measured within 30 days of STEMI and its relationship to mortality as 
well as hospitalization for heart failure during and up to 1-year 
follow up. The commenter stated that one trial demonstrated a highly 
significant relationship for mortality and hospitalization for heart 
failure, where every 5 percent increase in infarct size was associated 
with a 19 percent increase in mortality at 1 year.\160\ The commenter 
further stated that the results of this trial indicated that this 
relationship was independent of other high-risk clinical and 
angiographic features in patients with a large infarction, including 
age, sex, diabetes, hypertension, hyperlipidemia, current smoking, and 
symptom-to-first device time.\161\ The commenter believed that, given 
this established relationship, the 6.5 percent absolute reduction in 
median infarct size demonstrated with the use of SSO2 
Therapy in the AMIHOT II trial is clinically meaningful. The commenter 
concluded that SSO2 Therapy is the only therapy to date that 
has demonstrated a significant and clinically meaningful reduction in 
infarct size beyond that achieved with PCI alone.
---------------------------------------------------------------------------

    \159\ Sch[ouml]mig, A., Kastrati, A., Dirschinger, J., et al., 
``Coronary stenting plus platelet glycoprotein IIb/IIIa blockade 
compared with tissue plasminogen activator in acute myocardial 
infarction. Stent versus Thrombolysis for Occluded Coronary Arteries 
in Patients with Acute Myocardial Infarction Study Investigators,'' 
New England Journal of Medicine, 2000, vol. 343(6), pp. 385-91.
    \160\ Stone, G.W., Selker, H.P., Thiele, H., et al., 
``Relationship between infarct size and outcomes following primary 
PCI,'' JACC, 2016, vol. 67(14), pp. 1674-83.
    \161\ Ibid.
---------------------------------------------------------------------------

    Response: We appreciate all of the commenters' input. However, we 
are concerned whether the additional clinical studies presented 
regarding the relationship between myocardial infarct size and clinical 
outcomes can be applied to SSO2 Therapy and whether the 
applicant has provided enough information to demonstrate that the 
reduction of infarct size with use of SSO2 Therapy is a 
substantial clinical improvement. We are inviting public comments 
regarding these concerns.
k. Cerebral Protection System (Sentinel[reg] Cerebral Protection 
System)
    Claret Medical, Inc. submitted an application for new technology 
add-on payments for the Cerebral Protection System (Sentinel[reg] 
Cerebral Protection System) for FY 2019. According to the applicant, 
the Sentinel Cerebral Protection System is indicated for the use as an 
embolic protection (EP) device to capture and remove thrombus and 
debris while performing transcatheter aortic valve replacement (TAVR) 
procedures. The device is percutaneously delivered via the right radial 
artery and is removed upon completion of the TAVR procedure. The De 
Novo request for the Sentinel[reg] Cerebral Protection System was 
granted on June 1, 2017 (DEN160043).
    Aortic stenosis (AS) is a narrowing of the aortic valve opening. AS 
restricts blood flow from the left ventricle to the aorta and may also 
affect the pressure in the left atrium. The most common presenting 
symptoms of AS include dyspnea on exertion or decreased exercise 
tolerance, exertional dizziness (presyncope) or syncope and exertional 
angina. Symptoms experienced by patients who have been diagnosed with 
AS and normal left ventricular systolic function rarely occur until 
stenosis is severe (defined as valve area is less than 1.0 cm2, the jet 
velocity is over 4.0 m/sec, and/or the mean transvalvular gradient is 
greater than or equal to 40 mmHg).\162\ AS is a common valvular 
disorder in elderly patients. The prevalence of AS increases with age, 
and some degree of valvular calcification is present in 75 percent of 
patients who are 85 to 86 years old.\163\ TAVR procedures are the 
standard of care treatment for patients who have been diagnosed with 
severe AS. Patients undergoing TAVR procedures are often older, frail, 
and may be affected by multiple comorbidities, implying a significant 
risk for thromboembolic cerebrovascular events.\164\ Embolic ischemic 
strokes can occur in patients undergoing surgical and interventional 
cardiovascular procedures, such as stenting (carotid, coronary, 
peripheral), catheter ablation for atrial fibrillation, endovascular 
stent grafting, left atrial appendage closure (LAAO), patent formal 
ovale (PFO) closure, balloon aortic valvuloplasty, surgical valve 
replacement (SAVR), and TAVR. Clinically overt stroke, or silent 
ischemic cerebral infarctions, associated with the TAVR procedure, may 
result from a variety of causes, including mechanical manipulation of 
instruments or other interventional devices used during the procedure. 
These mechanical manipulations are caused by, but not limited to, the 
placement of a relatively large bore delivery catheter in the aortic 
arch, balloon valvuloplasty, valve positioning, valve re-positioning, 
valve expansion, and corrective catheter manipulation, as well as use 
of guidewires and guiding or diagnostic catheters required for proper 
positioning of the TAVR device. The magnitude and timing of embolic 
activity resulting from these manipulations was studied by Szeto, et 
al.,\165\ using a transcranial Doppler, and it was found that embolic 
material is liberated throughout the TAVR procedure with some of the 
emboli reaching the central nervous system leading to cerebral ischemic 
infarctions. Some of the cerebral ischemic infarctions lead to 
neurologic injury and clinically apparent stroke. Szeto, et al., also 
noted that the rate of

[[Page 20336]]

silent ischemic cerebral infarctions following TAVR procedures is 
estimated to be between 68 and 91 percent.166 167
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    \162\ Otto, C., Gaasch, W., ``Clinical manifestations and 
diagnosis of aortic stenosis in adults,'' In S. Yeon (Ed.), 2016, 
Available at: https://www.uptodate.com/contents/clinical-manifestations-and-diagnosis-of-aortic-stenosis-in-adults.
    \163\ Lindroos, M., et al., ``Prevalence of aortic valve 
abnormalities in the elderly: An echocardiographic study of a random 
population sample,'' J Am Coll Cardio, 1993, vol. 21(5), pp. 1220-
1225.
    \164\ Giustino, G., et al., ``Neurological Outcomes With Embolic 
Protection Devices in Patients Undergoing Transcatheter Aortic Valve 
Replacement,'' J Am Coll Cardio, CARDIOVASCULAR INTERVENTIONS, 2016, 
vol. 9(20).
    \165\ Szeto, W.Y., et al., ``Cerebral Embolic Exposure During 
Transfemoral and Transapical Transcatheter Aortic Valve 
Replacement,'' J Card Surg, 2011, vol. 26, pp. 348-354.
    \166\ Gupta, A., Giambrone, A.E., Gialdini, G., et al., ``Silent 
brain infarction and risk of future stroke: A systematic review and 
meta-analysis,'' Stroke, 2016, vol. 47, pp. 719-25.
    \167\ Mokin, M., Zivadinov, R., Dwyer, M.G., Lazar, R.M., 
Hopkins, L.N., Siddiqui, A.H., ``Transcatheter aortic valve 
replacement: perioperative stroke and beyond,'' Expert Rev 
Neurother, 2017, vol. 17, pp. 327-34.
---------------------------------------------------------------------------

    The TAVR procedure is a minimally invasive procedure that does not 
involve open heart surgery. During a TAVR procedure the prosthetic 
aortic valve is placed within the diseased native valve. The prosthetic 
valve then becomes the functioning aortic valve. As previously 
outlined, stroke is one of the risks associated with TAVR procedures. 
According to the applicant, the risk of stroke is highest in the early 
post[dash]procedure period and, as previously outlined, is likely due 
to mechanical factors occurring during the TAVR procedure.\168\ Emboli 
can be generated as wire-guided devices are manipulated within 
atherosclerotic vessels, or when calcified valve leaflets are traversed 
and then crushed during valvuloplasty and subsequent valve 
deployment.\169\ Stroke rates in patients evaluated 30 days after TAVR 
procedures range from 1.0 percent to 9.6 percent,\170\ and have been 
associated with increased mortality. Additionally, new ``silent 
infarcts,'' assessed via diffusion-weighted magnetic resonance imaging 
(DW-MRI), have been found in a majority of patients after TAVR 
procedures.\171\
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    \168\ Nombela-Franco, L., et al., ``Timing, predictive factors, 
and prognostic value of cerebrovascular events in a large cohort of 
patients undergoing transcatheter aortic valve implantation,'' 
Circulation, 2012, vol. 126(25), pp. 3041-53.
    \169\ Freeman, M., et al., ``Cerebral events and protection 
during transcatheter aortic valve replacement,'' Catheterization and 
Cardiovascular Interventions, 2014, vol. 84(6), pp. 885-896.
    \170\ Haussig, S., Linke, A., ``Transcatheter aortic valve 
replacement indications should be expanded to lower-risk and younger 
patients,'' Circulation, 2014. vol. 130(25), pp. 2321-31.
    \171\ Kahlert, P., et al., ``Silent and apparent cerebral 
ischemia after percutaneous transfemoral aortic valve implantation: 
a diffusion-weighted magnetic resonance imaging study,'' 
Circulation, 2010, vol. 121(7), pp. 870-8.
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    As stated earlier, the De Novo request for the Sentinel[reg] 
Cerebral Protection System was granted on June 1, 2017. The FDA 
concluded that this device should be classified into Class II (moderate 
risk). Effective October 1, 2016, ICD-10-PCS Section ``X'' code X2A5312 
(Cerebral embolic filtration, dual filter in innominate artery and left 
common carotid artery, percutaneous approach) was approved to identify 
cases involving TAVR procedures using the Sentinel[reg] Cerebral 
Protection System.
    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, 
according to the applicant, the Sentinel[reg] Cerebral Protection 
System device is inserted at the beginning of the TAVR procedure, via a 
small tube inserted through a puncture in the right wrist. Next, using 
a minimally invasive catheter, two small filters are placed in the 
brachiocephalic and left common carotid arteries. The filters collect 
debris, preventing it from becoming emboli, which can travel to the 
brain. These emboli, if left uncaptured, can cause cerebral ischemic 
lesions, often referred to as silent ischemic cerebral infarctions, 
potentially leading to cognitive decline or clinically overt stroke. At 
the completion of the TAVR procedure, the filters, along with the 
collected debris, are removed. The applicant stated that there are no 
other similar products for commercial sale available in the United 
States for cerebral protection during TAVR procedures. Two 
neuroprotection devices, the TriguardTM Cerebral Protection 
Device (Keystone Heart, Herzliya Pituach, Israel) and the Embrella 
Embolic DeflectorTM System (Edwards Lifesciences, Irvine, 
CA) are used in Europe. These devices work by deflecting embolic debris 
distally, rather than capturing and removing debris with filters.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, as stated earlier, the Sentinel[reg] 
Cerebral Protection System is an EP device used to capture and remove 
thrombus and debris while performing TAVR procedures. Therefore, 
potential cases representing patients who may be eligible for treatment 
involving this device would map to the same MS-DRGs as cases involving 
TAVR procedures.
    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, this technology will be used to treat patients who have been 
diagnosed with severe aortic valve stenosis who are eligible for a TAVR 
procedure. The applicant asserted that there are currently no approved 
alternative treatment options for cerebral protection during TAVR 
procedures, and the Sentinel[reg] Cerebral Protection System is the 
first and only embolic protection device for use during TAVR procedures 
and, therefore, meets the newness criterion. The applicant also 
asserted that the device meets the newness criterion, as evidenced by 
the FDA's granting of the De Novo request and there was no predicate 
device.
    Based on the above, it appears that the Sentinel[reg] Cerebral 
Protection System is not substantially similar to other existing 
technologies. We are inviting public comments on whether the 
Sentinel[reg] Cerebral Protection System is substantially similar to 
any existing technology and whether it meets the newness criterion.
    The applicant conducted the following analysis to demonstrate that 
the technology meets the cost criterion. The applicant searched the FY 
2016 MedPAR file for cases with the following ICD-10-CM procedure codes 
to identify cases involving TAVR procedures, which are potential cases 
representing patients who may be eligible for treatment involving use 
of the Sentinel[reg] Cerebral Protection System: 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); and 02RF3KH 
(Replacement of aortic valve with nonautologous tissue substitute, 
transapical, percutaneous approach). This process resulted in 26,012 
potential cases. The applicant limited its search to MS-DRG 266 
(Endovascular Cardiac Valve Replacement with MCC) and MS-DRG 267 
(Endovascular Cardiac Valve Replacement without MCC) because these two 
MS-DRGs accounted for 97.4 percent of the total cases identified.
    Using the 26,012 identified cases, the applicant determined that 
the average unstandardized case-weighted charge per case was $211,261. 
No charges were removed for the prior technology because the device is 
used to capture

[[Page 20337]]

and remove thrombus and debris while performing TAVR procedures. The 
applicant then standardized the charges, but did not inflate the 
charges. The applicant then added charges for the new technology to the 
average case-weighted standardized charges per case by taking the cost 
of the device and dividing the amount by the CCR of 0.332 for 
implantable devices from the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38103). The applicant calculated a final inflated average 
case[dash]weighted standardized charge per case of $187,707 and a Table 
10 average case[dash]weighted threshold amount of $170,503. Because the 
final inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount, the applicant 
maintained that the technology meets the cost criterion. We are 
inviting public comments on whether the Sentinel[reg] Cerebral 
Protection System meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that the Sentinel[reg] Cerebral Protection System 
represents a substantial clinical improvement over existing 
technologies because it is the first and only cerebral embolic 
protection device commercially available in the United States for use 
during TAVR procedures. The applicant stated that the data below shows 
that the Sentinel[reg] Cerebral Protection System effectively captures 
brain bound embolic debris and significantly improves clinical outcomes 
(that is, stroke) beyond the current standard of care, that is, TAVR 
procedures with no embolic protection.
    The applicant provided the results of four key studies: (1) The 
SENTINEL[reg] study \172\ conducted by Claret Medical, Inc.; (2) the 
CLEAN[dash]TAVI trial; \173\ (3) the Ulm real-world registry; \174\ and 
(4) the MISTRAL-C study.\175\
---------------------------------------------------------------------------

    \172\ Kapadia, S., Kodali, S., Makkar, R., et al., ``Protection 
against cerebral embolism during transcatheter aortic valve 
replacement,'' JACC, 2017, vol. 69(4), pp. 367-377.
    \173\ Haussig, S., Mangner, N., Dwyer, M.G., et al., ``Effect of 
a Cerebral Protection Device on Brain Lesions Following 
Transcatheter Aortic Valve Implantation in Patients With Severe 
Aortic Stenosis: The CLEAN-TAVI Randomized Clinical Trial,'' JAMA, 
2016, vol. 316, pp. 592-601.
    \174\ Seeger, J., et al., ``Cerebral Embolic Protection During 
Transfemoral Aortic Valve Replacement Significantly Reduces Death 
and Stroke Compared With Unprotected Procedures,'' JACC Cardiovasc 
Interv, 2017, in press.
    \175\ Mieghem, Van, et al., ``Filter-based cerebral embolic 
protection with transcatheter aortic valve implantation: the 
randomized MISTRAL-C trial,'' Eurointervention, 2016, vol. 12(4), 
pp. 499-507.
---------------------------------------------------------------------------

    The applicant reported that the SENTINEL[reg] study was a 
prospective, single blind, multi-center, randomized study using the 
Sentinel[reg] Cerebral Protection System which enrolled patients who 
had been diagnosed with severe symptomatic calcified native aortic 
valve stenosis indicated for a TAVR procedure. A total of 363 patients 
at 19 centers in the United States and Germany were randomized across 3 
arms (Safety, Test, and Control) in a 1:1:1 fashion. According to the 
applicant, evaluations performed for patients in each arm were as 
follows:
     Safety Arm patients who underwent a TAVR procedure 
involving the Sentinel[reg] Cerebral Protection System--Patients 
enrolled in this arm of the study received safety follow-up at 
discharge, at 30 days and 90 days post-procedure; and neurological 
evaluation at baseline, discharge, 30 days and 90 days (only in the 
case of a stroke experienced less than or equal to 30 days) post-
procedure. The Safety Arm patients did not undergo MRI or 
neurocognitive assessments.
     Test Arm patients who underwent a TAVR procedure involving 
the Sentinel[reg] Cerebral Protection System--Patients enrolled in this 
arm of the study underwent safety follow-up at discharge, at 30 days 
and 90 days post-procedure; MRI assessment for efficacy at baseline, 2 
to 7 days and 30 days post-procedure; neurological evaluation at 
baseline, discharge, 30 days and 90 days (only in the case of a stroke 
experienced less than or equal to 30 days) post-procedure; 
neurocognitive evaluation at baseline, 2 to 7 days (optional), 30 days 
and 90 days post-procedure; Quality of Life assessment at baseline, 30 
days and 90 days; and histopathological evaluation of debris captured 
in the Sentinel[reg] Cerebral Protection System's device filters.
     Control Arm patients who underwent a TAVR procedure only--
Patients enrolled in this arm of the study underwent safety follow-up 
at discharge, at 30 days and 90 days post-procedure; MRI assessment for 
efficacy at baseline, 2 to 7 days and 30 days post-procedure; 
neurological evaluation at baseline, discharge, 30 days and 90 days 
(only in the case of a stroke experienced less than or equal to 30 
days) post-procedure; neurocognitive evaluation at baseline, 2 to 7 
days (optional), 30 days and 90 days post[dash]procedure; and Quality 
of Life assessment at baseline, 30 days and 90 days.
    The primary safety endpoint was occurrence of major adverse cardiac 
and cerebrovascular events (MACCE) at 30 days compared with a 
historical performance goal. MACCE was defined as follows: All causes 
of death; all strokes (disabling and nondisabling, Valve Academic 
Research Consortium-2 (VARC-2)); and acute kidney injury (stage 3, 
VARC-2). The point estimate for the historical performance goal for the 
primary safety endpoint at 30 days post-TAVR procedure was derived from 
a review of published reports of 30-day TAVR procedure outcomes. The 
VARC-2 established an independent collaboration between academic 
research organizations and specialty societies (cardiology and cardiac 
surgery) in the United States and Europe to create consistent endpoint 
definitions and consensus recommendations for implementation in TAVR 
procedure clinical research.\176\
---------------------------------------------------------------------------

    \176\ Leon, M.B., Piazza, N., Nikolsky, E., et al., 
``Standardized endpoint definitions for transcatheter aortic valve 
implantation clinical trials: a consensus report from the Valve 
Academic Research Consortium,'' European Heart Journal, 2011, vol. 
32(2), pp. 205-217, doi:10.1093/eurheartj/ehq406.
---------------------------------------------------------------------------

    The applicant reported that results of the SENTINEL[reg] study 
demonstrated the following:
     The rate of MACCE was numerically lower than the control 
arm, 7.3 percent versus 9.9 percent, but was not statistically 
significant from that of the control group (p = 0.41).
     New lesion volume was 178.0 mm\3\ in control patients and 
102.8 mm\3\ in the Sentinel[reg] Cerebral Protection System device arm 
(p = 0.33). A post[dash]hoc multi[dash]variable analysis identified 
preexisting lesion volume and valve type as predictors of new lesion 
volume.
     Strokes experienced at 30 days were 9.1 percent in control 
patients and 5.6 percent in patients treated with the Sentinel[reg] 
Cerebral Protection System devices (p = 0.25). Neurocognitive function 
was similar in control patients and patients treated with the 
Sentinel[reg] Cerebral Protection System devices, but there was a 
correlation between lesion volume and neurocognitive decline (p = 
0.0022).
     Debris was found within filters in 99 percent of patients 
and included thrombus, calcification, valve tissue, artery wall, and 
foreign material.
     The applicant also noted that the post-hoc analysis of 
this data demonstrated that there was a 63 percent reduction in 72-hour 
stroke rate (compared to control), p = 0.05.
    According to the applicant, the CLEAN-TAVI (Claret Embolic 
Protection and TAVI) trial, was a small, randomized, double-blind, 
controlled trial. The trial consisted of 100 patients assigned to 
either EP (n = 50) with the Claret Medical, Inc. device (the 
Sentinel[reg] Cerebral Protection System) or to no EP (n = 50). 
Patients were all

[[Page 20338]]

treated with femoral access and self-expandable (SE) devices. The study 
endpoint was the number of brain lesions at 2 days post[dash]procedure 
versus baseline. Patients were evaluated with DW[dash]MRI at 2 and 7 
days post[dash]TAVR procedure. The mean age of patients was 80 years 
old; 43 percent were male. The study results showed that patients 
treated with the Sentinel[reg] Cerebral Protection System had a lower 
number of new lesions (4.00) than patients in the control group (10.0); 
(p<0.001).
    According to the applicant, the single-center Ulm study, a large 
propensity matched trial, with 802 consecutive patients, occurred at 
the University of Ulm between 2014 and 2016. The first 522 patients 
(65.1 percent of patients) underwent a TAVR procedure without EPs, and 
the subsequent 280 patients (34.9 percent of patients) underwent a TAVR 
procedure with EP involving the Sentinel[reg] Cerebral Protection 
System. For both arms of the study, a TAVR procedure was performed in 
identical settings except without cerebral EP, and neurological follow-
up was performed within 7 days post-procedure. The primary endpoint was 
a composite of all-cause mortality or all-stroke according to the VARC-
2 criteria within 7 days. The authors who documented the study noted 
the following:
     Patient baseline characteristics and aortic valve 
parameters were similar between groups, that both filters of the device 
were successfully positioned in 280 patients, all neurological follow-
up was completed by the 7th post-procedure date, and that propensity 
score matching was performed to account for possible confounders.
     Results indicated a decreased rate of disabling and 
nondisabling stroke at 7 days post[dash]procedure was seen in those 
patients who were treated with the Sentinel[reg] Cerebral Protection 
System device versus control patients (1.6 percent versus 4.6 percent, 
p = 0.03).
     At 48 hours, stroke rates were lower with patients treated 
with the Sentinel[reg] Cerebral Protection System device versus control 
patients (1.1 percent versus 3.6 percent, p = 0.03).
     In multi[dash]variate analysis, TAVR procedures performed 
without the use of a EP device was found to be an independent predictor 
of stroke within 7 days (p = 0.04).
    The aim of the MISTRAL-C study was to determine if the 
Sentinel[reg] Cerebral Protection System affects new brain lesions and 
neurocognitive performance after TAVR procedures. The study was 
designed as a multi-center, double-blind, randomized trial enrolling 
patients who were diagnosed with symptomatic severe aortic stenosis and 
1:1 randomization to TAVI patients treated with or without the 
Sentinel[reg] Cerebral Protection System. From January 2013 to August 
2015, 65 patients were enrolled in the study. Patients ranged in age 
from 77 years old to 86 years old, 15 (47 percent) were female and 17 
(53 percent) were male patients randomized to the Sentinel[reg] 
Cerebral Protection System group and 16 (49 percent) were female and 17 
(51 percent) were male patients randomized to the control group. There 
were 3 mortalities between 5 days and 6 months post[dash]procedure for 
the Sentinel[reg] Cerebral Protection System group. There were no 
strokes reported for the Sentinel[reg] Cerebral Protection System 
group. There were 7 mortalities between 5 days and 6 months 
post[dash]procedure for the control group. There were 2 strokes 
reported for the control group. Patients underwent DW-MRI and 
neurological examination, including neurocognitive testing 1 day before 
and 5 to 7 days after TAVI. Follow-up DW-MRI and neurocognitive testing 
was completed in 57 percent of TAVI patients treated with the 
Sentinel[reg] Cerebral Protection System and 80 percent for the group 
of TAVI patients treated without the Sentinel[reg] Cerebral Protection 
System. New brain lesions were found in 78 percent of the patients with 
follow-up MRI. According to the applicant, patients treated with the 
Sentinel[reg] Cerebral Protection System had numerically fewer new 
lesions and a smaller total lesion volume (95 mm3 versus 197 mm3). 
Overall, 27 percent of the patients treated with the Sentinel[reg] 
Cerebral Protection System and 13 percent of the patients treated in 
the control group had no new lesions. Ten or more new brain lesions 
were found only in the patients treated in the control group (20 
percent in the control group versus 0 percent in the Sentinel[reg] 
Cerebral Protection System group, p = 0.03). Neurocognitive 
deterioration was present in 4 percent of the patients treated with the 
Sentinel[reg] Cerebral Protection System versus 27 percent of the 
patients treated without (p=0.017). The filters captured debris in all 
of the patients treated with Sentinel[reg] Cerebral Protection System 
device.
    In the Ulm study, the primary outcome was a composite of all-cause 
mortality or stroke at 7 days, and occurred in 2.1 percent of the 
Sentinel[reg] Cerebral Protection System group versus 6.8 percent of 
the control group (p = 0.01, number needed to treat (NNT) = 21). Use of 
the Sentinel[reg] Cerebral Protection System device was associated with 
a 2.2 percent absolute risk reduction in mortality with NNT 45. 
Composite endpoint of major adverse cardiac and cerebrovascular events 
(MACCE) was found in 2.1 percent of those patients undergoing a TAVR 
procedure with the use of the Sentinel[reg] Cerebral Protection System 
device versus 7.9 percent in the control group (p = 0.01). Similar but 
statistically nonsignificant trends were found in the SENTINEL[reg] 
study, with rate of MACCE of 7.3 percent in the Sentinel[reg] Cerebral 
Protection System group versus 9.9 percent in the control group (p = 
0.41).
    The applicant reported that the four studies discussed above that 
evaluated the Sentinel[reg] Cerebral Protection System device have 
limitations because they are either small, nonrandomized and/or had 
significant loss to follow[dash]up. A meta-analysis of EP device 
studies, the majority of which included use of the Sentinel[reg] 
Cerebral Protection System device, found that use of cerebral EP 
devices was associated with a nonsignificant reduction in stroke and 
death.\177\
---------------------------------------------------------------------------

    \177\ Giustino, G., et al., ``Neurological Outcomes With Embolic 
Protection Devices in Patients Undergoing Transcatheter Aortic Valve 
Replacement,'' Journal of the American College of Cardiology: 
Cardiovascular Interventions, 2016, vol. 9(20), pp. 2124-2133.
---------------------------------------------------------------------------

    We are concerned that the use of cerebral protection devices may 
not be associated with a significant reduction in stroke and death. We 
note that the SENTINEL[reg] study, although a randomized study, did not 
meet its primary endpoint, as illustrated by nonstatistically 
significant reduction in new lesion volume on MRI or nondisabling 
strokes within 30 days (5.6 percent stroke rate in the Sentinel[reg] 
Cerebral Protection System device group versus a 9.1 percent stroke 
rate in the control group at 30 days; p = 0.25). We also note that only 
with a post[dash]hoc analysis of the SENTINEL[reg] study data were 
promising trends noted, where the device use was associated with a 63 
percent reduction in stroke events at 72 hours (p = 0.05). 
Additionally, although there was a statistically significant difference 
between the patients treated with and without cerebral embolic 
protection in the composite of all-cause mortality or stroke at 7 days, 
the Ulm study was a nonrandomized study and propensity matching was 
performed during analyses. We are concerned that studies involving the 
Sentinel[reg] Cerebral Protection System may be inconclusive regarding 
whether the device represents a substantial clinical improvement for 
patients undergoing TAVR procedures. We also are concerned that the 
SENTINEL[reg] studies did not show a substantial decrease in 
neurological

[[Page 20339]]

complications for patients undergoing TAVR procedures. We are inviting 
public comments on whether the Sentinel[reg] Cerebral Protection System 
meets the substantial clinical improvement criterion.
    Below we summarize and respond to a written public comment we 
received regarding the Sentinel[reg] Cerebral Protection System during 
the open comment period in response to the New Technology Town Hall 
meeting notice published in the Federal Register.
    Comment: One commenter noted that the TriGUARD device, a similar 
device to the Sentinel[reg] Cerebral Protection System device, has been 
commercially available throughout Europe and its member countries, 
including the United Kingdom since June 29, 2013. The commenter 
indicated that the TriGUARD device received its Israel Medical Device 
Registration and Approval (AMAR) on November 5, 2015. The commenter 
asserted that because the Sentinel[reg] Cerebral Protection System is 
the first and only cerebral EP device commercially available in the 
United States for use during TAVR procedures it represents a 
substantial clinical improvement over currently available and existing 
technologies.
    Response: We appreciate the information provided by the commenter. 
We will take this information into consideration when deciding whether 
to approve new technology add-on payments for the Sentinel[reg] 
Cerebral Protection System for FY 2019.
l. AZEDRA[reg] (Ultratrace[reg] Iobenguane Iodine-131) Solution
    Progenics Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for AZEDRA[reg] (Ultratrace[reg] iobenguane 
Iodine-131) for FY 2019. AZEDRA[reg] is a drug solution formulated for 
intravenous (IV) use in the treatment of patients who have been 
diagnosed with obenguane avid malignant and/or recurrent and/or 
unresectable pheochromocytoma and paraganglioma. AZEDRA[reg] contains a 
small molecule ligand consisting of meta-iodobenzylguanidine (MIBG) and 
\131\Iodine (\131\I) (hereafter referred to as ``\131\I-MIBG''). The 
applicant noted that iobenguane Iodine-131 is also known as \131\I-
MIBG).
    The applicant reported in its application that pheochromocytomas 
and paragangliomas are rare tumors with an incidence of approximately 2 
to 8 people per million per year.178 179 Both tumors are 
catecholamine[dash]secreting neuroendocrine tumors, with 
pheochromocytomas being the more common of the two and comprising 80 to 
85 percent of cases. While 10 percent of pheochromocytomas are 
malignant, whereby ``malignant'' is defined by the World Health 
Organization (WHO) as ``the presence of distant metastases,'' 
paragangliomas have a malignancy frequency of 25 
percent.180 181 Approximately one-half of malignant tumors 
are pronounced at diagnosis, while other malignant tumors develop 
slowly within 5 years.\182\ Pheochromocytomas and paragangliomas tend 
to be indistinguishable at the cellular level and frequently at the 
clinical level. For example catecholamine-secreting paragangliomas 
often present clinically like pheochromocytomas with hypertension, 
episodic headache, sweating, tremor, and forceful palpitations.\183\ 
Although pheochromocytomas and paragangliomas can share overlapping 
histopathology, epidemiology, and molecular pathobiology 
characteristics, there are differences between these two neuroendocrine 
tumors in clinical behavior, aggressiveness and metastatic potential, 
biochemical findings and association with inherited genetic syndrome 
differences, highlighting the importance of distinguishing between the 
presence of malignant pheochromocytoma and the presence of malignant 
paraganglioma. At this time, there is no curative treatment for 
malignant pheochromocytomas and paragangliomas. Successful management 
of these malignancies requires a multidisciplinary approach of 
decreasing tumor burden, controlling endocrine activity, and treating 
debilitating symptoms. According to the applicant, decreasing 
metastatic tumor burden would address the leading cause of mortality in 
this patient population, where the 5-year survival rate is 50 percent 
for patients with untreated malignant pheochromocytomas and 
paragangliomas.\184\ The applicant stated that controlling 
catecholamine hypersecretion (for example, severe paroxysmal or 
sustained hypertension, palpitations and arrhythmias) would also mean 
decreasing morbidity associated with hypertension (for example, risk of 
stroke, myocardial infarction and renal failure), and begin to address 
the 30-percent cardiovascular mortality rate associated with malignant 
pheochromocytomas and paragangliomas.
---------------------------------------------------------------------------

    \178\ Beard, C.M., Sheps, S.G., Kurland, L.T., Carney, J.A., 
Lie, J.T., ``Occurrence of pheochromocytoma in Rochester, 
Minnesota'', pp. 1950-1979.
    \179\ Stenstr[ouml]m, G., Sv[auml]rdsudd, K., ``Pheochromocytoma 
in Sweden 1958-1981. An analysis of the National Cancer Registry 
Data,'' Acta Medica Scandinavica, 1986, vol. 220(3), pp. 225-232.
    \180\ Fishbein, Lauren, ``Pheochromocytoma and Paraganglioma,'' 
Hematology/Oncology Clinics 30, no. 1, 2016, pp. 135-150.
    \181\ Lloyd, R.V., Osamura, R.Y., Kl[ouml]ppel, G., & Rosai, J. 
(2017). World Health Organization (WHO) Classification of Tumours of 
Endocrine Organs. Lyon, France: International Agency for Research on 
Center (IARC).
    \182\ Kantorovich, Vitaly, and Karel Pacak. ``Pheochromocytoma 
and paraganglioma.'' Progress in Brain Research., 2010, vol. 182, 
pp. 343-373.
    \183\ Carty, S.E., Young, W.F., Elfky, A., ``Paraganglioma and 
pheochromocytoma: Management of malignant disease,'' UpToDate. 
Available at: https://www.uptodate.com/contents/paraganglioma-and-pheochromocytoma-management-of-malignant-disease.
    \184\ Kantorovich, Vitaly, and Karel Pacak. ``Pheochromocytoma 
and paraganglioma.'' Progress in Brain Research., 2010, vol. 182, 
pp. 343-373.
---------------------------------------------------------------------------

    The applicant reported that, at this time, controlling 
catecholamine activity in pheochromocytomas and paragangliomas is 
medically achieved with administration of combined alpha and beta-
adrenergic blockade, and surgically with tumor tissue reduction. 
Because there is no curative treatment for malignant pheochromocytomas 
and paragangliomas, resecting both primary and metastatic lesions 
whenever possible to decrease tumor burden \185\ provides a methodology 
for controlling catecholamine activity and lowering cardiovascular 
mortality risk. Besides surgical removal of tumor tissue for lowering 
tumor burden, there are other treatment options that depend upon tumor 
type (that is, pheochromocytoma tumors versus paraganglioma tumors), 
anatomic location, and the number and size of the metastatic tumors. 
Currently, these treatment options include: (1) Radiation therapy; (2) 
nonsurgical local ablative therapy with radiofrequency ablation, 
cryoablation, and percutaneous ethanol injection; (3) transarterial 
chemoembolization for liver metastases; and (4) radionuclide therapy 
using metaiodobenzylguanidine (MIBG) or somatostatin. Regardless of the 
method to reduce local tumor burden, periprocedural medical care is 
needed to prevent massive catecholamine secretion and hypertensive 
crisis.\186\
---------------------------------------------------------------------------

    \185\ Noda, T., Nagano, H., Miyamoto, A., et al., ``Successful 
outcome after resection of liver metastasis arising from an 
extraadrenal retroperitoneal paraganglioma that appeared 9 years 
after surgical excision of the primary lesion,'' Int J Clin Oncol, 
2009, vol. 14, pp. 473.
    \186\ Carty, S.E., Young, W.F., Elfky, A., ``Paraganglioma and 
pheochromocytoma: Management of malignant disease,'' UpToDate. 
Available at: https://www.uptodate.com/contents/paraganglioma-and-pheochromocytoma-management-of-malignant-disease.

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[[Page 20340]]

    The applicant stated that AZEDRA[reg] specifically targets 
neuroendocrine tumors arising from chromaffin cells of the adrenal 
medulla (in the case of pheochromocytomas) and from neuroendocrine 
cells of the extra-adrenal autonomic paraganglia (in the case of 
paraganglioms).\187\ According to the applicant, AZEDRA[reg] is a more 
consistent form of \131\I-MIBG compared to compounded formulations of 
\131\I-MIBG that are not currently approved by the FDA. If approved by 
the FDA, the applicant asserted that AZEDRA[reg] would be the only drug 
indicated for use in the treatment of patients, who if left untreated, 
experience debilitating clinical symptoms and high mortality rates from 
iobenguane avid malignant and/or recurrent and/or unresectable 
pheochromocytoma and paraganglioma tumors.
---------------------------------------------------------------------------

    \187\ Ibid.
---------------------------------------------------------------------------

    Among local tumor tissue reduction options, use of external beam 
radiation therapy (ERBT) at doses greater than 40 Gy can provide local 
pheochromocytoma and paraganglioma tumor control and relief of symptoms 
for tumors at a variety of sites, including the soft tissues of the 
skull base and neck, abdomen, and thorax, as well as painful bone 
metastases.\188\ However, the applicant stated that ERBT irradiated 
tissues are unresponsive to subsequent treatment with \131\I-MIBG 
radionuclide.\189\ MIBG was initially used for the imaging of 
paragangliomas and pheochromocytomas because of its similarity to 
noradrenaline, which is taken up by chromaffin cells. Conventional MIBG 
used in imaging expanded to off-label compassionate use in patients who 
had been diagnosed with malignant pheochromocytomas and paragangliomas. 
Because \131\I-MIBG is sequestered within pheochromocytoma and 
paraganglioma tumors, subsequent malignant cell death occurs from 
radioactivity. Approximately 50 percent of tumors are eligible for 
\131\I-MIBG therapy based on having MIBG uptake with diagnostic 
imaging. According to the applicant, despite uptake by tumors, studies 
have also found that \131\I-MIBG therapy has been limited by total 
radiation dose, hematologic side effects, and hypertension. While the 
pathophysiology of total radiation dose and hematologic side effects 
are more readily understandable, hypertension is believed to be 
precipitated by large quantities of non[dash]iodinated MIBG or ``cold'' 
MIBG being introduced along with radioactive \131\I-MIBG therapy.\190\ 
The ``cold'' MIBG blocks synaptic reuptake of norepinephrine, which can 
lead to tachycardia and paroxysmal hypertension within the first 24 
hours, the majority of which occur within 30 minutes of administration 
and can be dose-limiting.\191\
---------------------------------------------------------------------------

    \188\ Ibid.
    \189\ Fitzgerald, P.A., Goldsby, R.E., Huberty, J.P., et al., 
``Malignant pheochromocytomas and paragangliomas: a phase II study 
of therapy with high-dose 131I-metaiodobenzylguanidine (131I-
MIBG),'' Ann N Y Acad Sci, 2006, vol. 1073, pp. 465.
    \190\ Loh, K.C., Fitzgerald, P.A., Matthay, K.K., Yeo, P.P., 
Price, D.C., ``The treatment of malignant pheochromocytoma with 
iodine-131 metaiodobenzylguanidine (\131\I-MIBG): a comprehensive 
review of 116 reported patients,'' J Endocrinol Invest, 1997, vol. 
20(11), pp. 648-658.
    \191\ Gonias, S, et al., ``Phase II Study of High-Dose 
[\131\I]Metaiodobenzylguanidine Therapy for Patients With Metastatic 
Pheochromocytoma and Paraganglioma,'' J of Clin Onc, July 27, 2009.
---------------------------------------------------------------------------

    The applicant asserted that its new proprietary manufacturing 
process called Ultratrace[reg] allows AZEDRA[reg] to be manufactured 
without the inclusion of unlabeled or ``cold'' MIBG in the final 
formulation. The applicant also noted that targeted radionuclide MIBG 
therapy to reduce tumor burden is one of two treatments that have been 
studied the most. The other treatment is cytotoxic chemotherapy and, 
specifically, Carboplatin, Vincristine, and Dacarbazine (CVD). The 
applicant stated that cytotoxic chemotherapy is an option for patients 
who experience symptoms with rapidly progressive, non-resectable, high 
tumor burden, or that cytoxic chemotherapy is another option for a 
large number of metatstatic bone lesions.\192\ According to the 
applicant, CVD was believed to have an effect on malignant 
pheochromocytomas and paragangliomas due to the embryonic origin being 
similar to neuroblastomas. The response rates to CVD have been variable 
between 25 percent and 50 percent.193 194 These patients 
experience side effects consistent with chemotherapeutic treatment with 
CVD, with the added concern of the precipitation of hormonal 
complications such as hypertensive crisis, thereby requiring close 
monitoring during cytotoxic chemotherapy.\195\ According to the 
applicant, use of CVD relative to other tumor burden reduction options 
is not an ideal treatment because of nearly 100 percent recurrence 
rates, and the need for chemotherapy cycles to be continually 
readministered at the risk of increased systemic toxicities and 
eventual development of resistance. Finally, there is a subgroup of 
patients that are asymptomatic and have slower progressing tumors where 
frequent follow-up is an option for care.\196\ Therefore, the applicant 
believed that AZEDRA[reg] offers cytotoxic radioactive therapy for the 
anticipated indicated population that avoids harmful side effects that 
typically result from use of low-specific activity products.
---------------------------------------------------------------------------

    \192\ Carty, S.E., Young, W.F., Elfky, A., ``Paraganglioma and 
pheochromocytoma: Management of malignant disease,'' UpToDate. 
Available at: https://www.uptodate.com/contents/paraganglioma-and-pheochromocytoma-management-of-malignant-disease.
    \193\ Niemeijer, N.D., Alblas, G., Hulsteijn, L.T., Dekkers, 
O.M. and Corssmit, E.P.M., ``Chemotherapy with cyclophosphamide, 
vincristine and dacarbazine for malignant paraganglioma and 
pheochromocytoma: systematic review and meta[hyphen]analysis,'' 
Clinical endocrinology, 2014, vol 81(5), pp. 642-651.
    \194\ Ayala-Ramirez, Montserrat, et al., ``Clinical Benefits of 
Systemic Chemotherapy for Patients with Metastatic Pheochromocytomas 
or Sympathetic Extra-Adrenal Paragangliomas: Insights from the 
Largest Single Institutional Experience,'' Cancer, 2012, vol. 
118(11), pp. 2804-2812.
    \195\ Wu, L.T., Dicpinigaitis, P., Bruckner, H., et al., 
``Hypertensive crises induced by treatment of malignant 
pheochromocytoma with a combination of cyclophosphamide, 
vincristine, and dacarbazine,'' Med Pediatr Oncol, 1994, vol. 22(6), 
pp. 389-392.
    \196\ Carty, S.E., Young, W.F., Elfky, A., ``Paraganglioma and 
pheochromocytoma: Management of malignant disease,'' UpToDate. 
Available at: https://www.uptodate.com/contents/paraganglioma-and-pheochromocytoma-management-of-malignant-disease.
---------------------------------------------------------------------------

    The applicant reported that the anticipated and recommended 
AZEDRA[reg] dosage and frequency for patients receiving treatment 
involving \131\I-MIBG therapy for a diagnosis of avid malignant and/or 
recurrent and/or unresectable pheochromocytoma and paraganglioma tumors 
is:
     Dosimetric Dosing--5 to 6 micro curies (mCi) (185 to 222 
MBq) for a patient weighing more than or equal to 50 kg, and 0.1 mCi/kg 
(3.7 MBq/kg) for patients weighing less than 50 kg. Each recommended 
dosimetric dose is administered as an IV injection.
     Therapeutic Dosing--500 mCi (18.5 GBq) for patients 
weighing more than 62.5 kg, and 8 mCi/kg (296 MBq/kg) for patients 
weighing less than or equal to 62.5 kg. Therapeutic doses are 
administered by IV infusion, in ~50 mL over a period of ~30 minutes 
(100 mL/hour), administered approximately 90 days apart.
    With respect to the newness criterion, the applicant indicated that 
FDA granted Orphan Drug designation for AZEDRA[reg] on January 18, 
2006, followed by Fast Track designation on March 8, 2006, and 
Breakthrough Therapy designation on July 26, 2015. The applicant's New 
Drug Application (NDA) proceeded on a rolling basis, and was completed 
on November 2, 2017.

[[Page 20341]]

However, at the time of the development of this proposed rule, the 
applicant indicated that it had not yet received FDA approval for the 
indicated use of AZEDRA[reg]. The applicant stated that it anticipates 
FDA approval by June 30, 2018. Currently, there are no approved ICD-10-
PCS procedure codes to uniquely identify procedures involving the 
administration of AZEDRA[reg].
    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 similar mechanism of action, the applicant stated that while 
AZEDRA[reg] and low[dash]specific activity conventional I-131 MIBG both 
target the same transporter sites on the tumor cell surface, the 
therapies' safety and efficacy outcomes are different. These 
differences in outcomes are because AZEDRA[reg] is manufactured using 
the proprietary Ultratrace[reg] technology, which maximizes the 
molecules that carry the tumoricidal component (I-131 MIBG, the 
warhead) and minimizes the extraneous unlabeled component (MIBG, free 
ligands), which could cause cardiovascular side effects. Therefore, 
according to the applicant, AZEDRA[reg] is designed to increase 
efficacy and decrease safety risks, whereas conventional I-131 MIBG 
uses existing technologies and results in a product that overwhelms the 
normal reuptake system with excess free ligands, which leads to safety 
issues as well as decreasing the probability of the warhead binding to 
the tumor cells.
    With regard to the second criterion, whether a product is assigned 
to the same or a different DRG, the applicant noted that there are no 
specific MS-DRGs for the assignment of cases involving the treatment of 
patients who have been diagnosed with pheochromocytoma and 
paraganglioma. We believe that potential cases representing patients 
who may be eligible for treatment involving the administration of 
AZEDRA[reg] would be assigned to the same MS-DRGs as cases representing 
patients who receive treatment for obenguane avid malignant and/or 
recurrent and/or unresectable pheochromocytoma and paraganglioma. We 
also refer readers to the cost criterion discussion below, which 
includes the applicant's list of the MS-DRGs that potential cases 
involving treatment with the administration of AZEDRA[reg] most likely 
would map.
    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, if approved, 
AZEDRA[reg] would be the only FDA-approved drug indicated for use in 
the treatment of patients who have been diagnosed with malignant 
pheochromocytoma and paraganglioma tumors that avidly take up \131\I-
MIBG and are recurrent and/or unresectable. The applicant stated that 
these patients face serious mortality and morbidity risks if left 
untreated, as well as potentially suffer from side effects if treated 
by available off-label therapies.
    The applicant also contended that AZEDRA[reg] can be distinguished 
from other currently available treatments because it potentially 
provides the following advantages:
     AZEDRA[reg] will have a very limited impact on normal 
norepinephrine reuptake due to the negligible amount of unlabeled MIBG 
present in the dose. Therefore, AZEDRA[reg] is expected to pose a much 
lower risk of acute drug-induced hypertension.
     There is minimal unlabeled MIBG to compete for the 
norepinephrine transporter binding sites in the tumor, resulting in 
more effective delivery of radioactivity.
     Current off-label therapeutic use of \131\I is compounded 
by individual pharmacies with varied quality and conformance standards.
     Because of its higher specific activity (the activity of a 
given radioisotope per unit mass), AZEDRA[reg] infusion times are 
significantly shorter than conventional \131\I administrations.
    Therefore, with these potential advantages, the applicant 
maintained that AZEDRA[reg] represents an effective option for the 
treatment of patients who have been diagnosed with malignant and/or 
recurrent and/or unresectable pheochromocytoma and paraganglioma 
tumors, where there is a clear, unmet medical need.
    For the reasons cited earlier, the applicant believed that 
AZEDRA[reg] is not substantially similar to other currently available 
therapies and/or technologies and meets the ``newness'' criterion. We 
are inviting public comments on whether AZEDRA[reg] is substantially 
similar to other currently available therapies and/or technologies and 
meets the ``newness'' criterion.
    The applicant reported that it conducted an analysis using FY 2015 
MedPAR data to demonstrate that AZEDRA[reg] meets the cost criterion. 
The applicant searched for potential cases representing patients who 
may be eligible for treatment involving AZEDRA[reg] that had one of the 
following ICD-9-CM diagnosis codes (which the applicant believed is 
indicative of diagnosis appropriate for treatment involving 
AZEDRA[reg]): 194.0 (Malignant neoplasm of adrenal gland), 194.6 
(Malignant neoplasm of aortic body and other paraganglia), 209.29 
(Malignant carcinoid tumor of other sites), 209.30 (Malignant poorly 
differentiated neuroendocrine carcinoma, any site), 227.0 (Benign 
neoplasm of adrenal gland), 237.3 (Neoplasm of uncertain behavior of 
paraganglia)--in combination with one of the following ICD-9-CM 
procedure codes describing the administration of a radiopharmaceutical: 
00.15 (High-dose infusion interleukin-2); 92.20 (Infusion of liquid 
brachytherapy radioisotope); 92.23 (Radioisotopic teleradiotherapy); 
92.27 (Implantation or insertion of radioactive elements); 92.28 
(Injection or instillation of radioisotopes). The applicant stated that 
the combination of these diagnosis and procedure codes in this process 
was intended to identify potential cases representing patients who had 
been diagnosed with a correlating condition relating to AZEDRA[reg]'s 
intended treatment use and who had received subsequent treatment with a 
predecessor radiopharmaceutical therapy (such as, for example, a 
potential off-label use of conventional I-131 MIBG therapy) for 
malignant and/or recurrent pheochromocytoma and paraganglioma tumors. 
The applicant reported that the potential cases used for the cost 
analysis mapped to MS-DRGs 054 and 055 (Nervous System Neoplasms with 
and without MCC, respectively), MS-DRG 271 (Other Major Cardiovascular 
Procedures with CC), MS-DRG 436 (Malignancy of Hepatobiliary System or 
Pancreas with CC), MS-DRG 827 (Myeloproliferated Disorder or Poorly 
Differentiated Neoplasm with Major O.R. Procedure with CC), and MS-DRG 
843 (Other Myeloproliferated Disorder or Poorly Differentiated Neoplasm 
Diagnosis with MCC). Due to patient privacy concerns, the applicant 
stated that the MedPAR data did not identify the exact number of cases 
assigned to the six identified MS-DRGs. For purposes of its analysis, 
the applicant assumed an equal distribution between these six MS-DRGs. 
The applicant noted in its application that potential cases that may be 
eligible for treatment involving the administration of AZEDRA[reg] 
would typically map to other MS-DRGs such as MS-DRGs 643, 644, and 645 
(Endocrine Disorders with MCC, with CC, and without CC/MCC, 
respectively), and MS-DRG 849 (Radiotherapy).

[[Page 20342]]

However, because data were not available for these MS-DRGs they were 
not included in the analysis. Using the identified cases, the applicant 
determined that the average unstandardized case[dash]weighted charge 
per case was $95,472. The applicant used a 3-year inflation factor of 
1.14359 (a yearly inflation factor of 1.04574 applied over 3 years), 
based on the FY 2018 IPPS/LTCH PPS final rule (82 FR 38527), to inflate 
the charges from FY 2015 to FY 2018. The applicant determined an 
inflated average case-weighted standardized charge per case of 
$103,833. Because the price of AZEDRA[reg] has yet to be determined, 
the applicant did not include the price of the drug in its analysis, 
nor did the applicant remove any charges associated with any 
predecessor radiopharmaceutical therapy use of MIBG agents. Based on 
the FY 2018 IPPS/LTCH PPS Table 10 thresholds, the average case-
weighted threshold amount was $58,352. The applicant contended that 
AZEDRA[reg] meets the cost criterion because the inflated average 
case[dash]weighted standardized charge per case exceeds the average 
case-weighted threshold amount before including the average per patient 
cost for the product.
    We are concerned with the limited number of cases the applicant 
analyzed, and the applicant's inability to determine the exact number 
of cases representing patients that potentially may be eligible for 
treatment involving AZEDRA[reg] for each MS-DRG. We also are concerned 
that the MS-DRGs identified by the applicant's search of the FY 2015 
MedPAR data do not match the MS-DRGs that the applicant noted that 
potential cases that may be eligible for treatment involving the 
administration of AZEDRA[reg] would typically map (MS-DRGs 643, 644, 
and 645, and MS-DRG 849). However, we acknowledge the difficulty in 
obtaining cost data for such a rare condition. We also note that, for 
the six identified MS-DRGs, the applicant's inflated average 
case[dash]weighted standardized charge per case of $103,833 exceeded 
all individual Table 10 average case[dash]weighted threshold amounts 
($97,188 for MS-DRG 271 being the greatest). We are inviting public 
comments on whether the AZEDRA[reg] technology meets the cost 
criterion.
    With regard to substantial clinical improvement, the applicant 
maintained that the use of AZEDRA[reg] has been shown to reduce the use 
of antihypertensive medications, reduce tumor size, improve blood 
pressure control, reduce secretion of tumor biomarkers, and demonstrate 
strong evidence of overall survival rates. In addition, the applicant 
asserted that AZEDRA[reg] provides a treatment option for those 
outlined in its anticipated indication patient population. The 
applicant asserted that AZEDRA[reg] meets the substantial clinical 
improvement criterion based on the results from two clinical studies: 
(1) MIP-IB12 (IB12): A Phase I Study of Iobenguane (MIBG) I-131 in 
Patients With Malignant Pheochromocytoma/Paraganglioma; \197\ and (2) 
MIP-IB12B (IB12B): A Study Evaluating Ultratrace[reg] Iobenguane I-131 
in Patients With Malignant Relapsed/Refractory Pheochromocytoma/
Paraganglioma. The applicant explained that the IB12B study is similar 
to the IB12 study in that both studies evaluated two open[dash]label, 
single[dash]arm studies. The applicant reported that both studies 
included patients who had been diagnosed with malignant and/or 
recurrent and/or unresectable pheochromocytoma and Paraganglioma 
tumors, and both studies assessed objective tumor response, biochemical 
tumor response, overall survival rates, occurrence of hypertensive 
crisis, and the long[dash]term benefit of AZEDRA[reg] treatment 
relative to the need for antihypertensives. According to the applicant, 
the study designs, however, differed in dose regimens (1 dose 
administered to patients in the IB12 study, and 2 doses administered to 
patients in the IB12B study) and primary study endpoints. Differences 
in the designs of the studies prevented direct comparison of study 
endpoints and pooling of the data. However, the applicant stated that 
results from safety data from the IB12 study and the IB12B study were 
pooled and used to support substantial clinical improvement assertions. 
We note that the results from neither the IB12 study nor the IB12B 
study compared the effects of AZEDRA[reg] to any of the other treatment 
options to decrease tumor burden (for example, cytotoxic chemotherapy, 
radiation therapy, and surgical debulking).
---------------------------------------------------------------------------

    \197\ Noto, Richard B., et al., ``Phase 1 Study of High-
Specific-Activity I-131 MIBG for Metastatic and/or Recurrent 
Pheochromocytoma or Paraganglioma (IB12 Phase 1 Study),'' J Clin 
Endocrinol Metab, vol. 103(1), pp. 213-220.
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    Regarding the data results from the IB12 study, the applicant 
asserted that, based on the reported safety and tolerability, and 
primary endpoint of radiological response at 12 months, high-specific-
activity I-131 MIBG may be an effective alternative therapeutic option 
for patients who have been diagnosed with iobenguane-avid, metastatic 
and/or recurrent pheochromocytoma and paraganglioma tumors for whom 
there are no approved therapies and for those patients who have failed 
available treatment options. In addition, the applicant used the 
exploratory finding of decreased or discontinuation of antihypertensive 
medications relative to baseline medications as evidence that 
AZEDRA[reg] has clinical benefit and positive impact on the 
long[dash]term effects of hypertension induced norepinephrine producing 
malignant pheochromocytoma and paraganlioma tumors. We understand that 
the applicant used antihypertensive medications as a proxy to assess 
the long-term effects of hypertension such as renal, myocardial, and 
cerebral end organ damage. The applicant reported that it studied 15 of 
the original IB12 study's 21-patient cohort, and found 33 percent (n=5) 
had decreased or discontinuation of antihypertensive medications during 
the 12 months of follow-up. The applicant did not provide additional 
data on the incidence of renal insufficiency/failure, myocardial 
ischemic/infarction events, or transient ischemic attacks or strokes. 
It was unclear to us if these five patients also had decreased urine 
metanephrines, changed their diet, lost significant weight, or if other 
underlying comorbidities that influence hypertension were resolved, 
making it difficult to understand the significance of this exploratory 
finding.
    Regarding the applicant's assertion that the use of AZEDRA[reg] is 
safer and more effective than alternative therapies, we note that the 
IB12 study was a dose-escalating study and did not compare current 
therapies with AZEDRA[reg]. We also note the following: (1) The average 
age of the 21 enrolled patients in the IB12 study was 50.4 years old (a 
range of 30 to 72 years old); (2) the gender distribution was 61.9 
percent (n=13) male and 38.1 percent (n=8) female; and (3) 76.2 percent 
(n=16) were white, 14.3 percent (n=3) were black or African American, 
and 9.5 percent (n=2) were Asian. We agree with the study's conductor 
\198\ that the size of the study is a limitation, and with a younger, 
predominately white, male patient population, generalization of study 
results to a more diverse population may be difficult. The applicant 
reported that one other aspect of the patient population indicated that 
all 21 patients received prior anti-cancer therapy for treatment of 
malignant

[[Page 20343]]

pheochromocytoma and paraganglioma tumors, which included the 
following: 57.1 Percent (n=12) received radiation therapy including 
external beam radiation and conventional MIBG; 28.6 percent (n=6) 
received cytotoxic chemotherapy (for example, CVD and other 
chemotherapeutic agents); and 14.3 percent (n=3) received 
Octreotide.\199\ Although this population illustrates a population that 
has failed some of the currently available therapy options, which may 
potentially support a finding of substantial clinical improvement for 
those with no other treatment options, we are unclear which patients 
benefited from treatment involving AZEDRA[reg], especially in view of 
the finding of a Fitzgerald et al. study cited earlier \200\ that 
tissues previously irradiated by ERBT were found to be unresponsive to 
subsequent treatment with \131\I-MIBG radionuclide. It was not clear in 
the application how previously ERBT-treated patients who failed ERBT 
fared with the RECIST scores, biotumor marker results, and reduction in 
antihypertensive medications. We also lacked information to draw the 
same correlation between previously CVD[dash]treated patients and their 
RECIST scores, biotumor marker results, and reduction in 
antihypertensive medications.
---------------------------------------------------------------------------

    \198\ Noto, Richard B., et. al., ``Phase 1 Study of High-
Specific-Activity I-131 MIBG for Metastatic and/or Recurrent 
Pheochromocytoma or Paraganglioma (IB12 Phase 1 Study),'' J Clin 
Endocrinol Metab, vol. 103(1), pp. 213-220.
    \199\ Ibid.
    \200\ Fitzgerald, P.A., Goldsby, R.E., Huberty, J.P., et al., 
``Malignant pheochromocytomas and paragangliomas: a phase II study 
of therapy with high-dose 131I-metaiodobenzylguanidine (131I-
MIBG).'' Ann N Y Acad Sci, 2006, vol. 1073, pp. 465.
---------------------------------------------------------------------------

    The applicant asserted that the use of AZEDRA[reg] reduces tumor 
size and reduces the secretion of tumor biomarkers, thereby providing 
important clinical benefits to patients. The IB12 study assessed the 
overall best tumor response based on Response Evaluation Criteria in 
Solid Tumors (RECIST).\201\ Tumor biomarker response was assessed as 
complete or partial response for serum chromogranin A and total 
metanephrines in 80 percent and 64 percent of patients, respectively, 
and the applicant noted that both the overall best tumor response based 
on RECIST and tumor biomarker response favorable results are at doses 
higher than 500 mCi. We noticed that tumor burden improvement, as 
measured by RECIST criteria, showed that none of the 21 patients 
achieved a complete response. In addition, although 4 patients showed 
partial response, these 4 patients also experienced dose[dash]limiting 
toxicity with hematological events, and that all 4 patients received 
administered doses greater than 18.5 GBq (500 mCi). We also note that, 
regardless of total administered activity (for example, greater than or 
less than 18.5 GBq (500 mCi)), 61.9 percent (n=13) of the 21 patients 
enrolled in the study had stable disease and 14.3 percent (n=2) of the 
14 patients who received greater than administered doses of 18.5 GBq 
(500 mCi) had progressive disease. Finally, we also noticed that, for 
most tumor markers, there were no dose relationship trends. While we 
recognize that there is no FDA-approved therapy for patients who have 
been diagnosed with \131\I-MIBG avid malignant and/or recurrent and/or 
unresectable pheochromocytoma and paraganglioma tumors, we have 
questions as to whether the overall tumor best response and overall 
best tumor marker data results from the IB12 study support a finding 
that the AZEDRA[reg] technology represents a substantial clinical 
improvement.
---------------------------------------------------------------------------

    \201\ Therasse, P., Arbuck, S.G., Eisenhauer, J.W., Kaplan, 
R.S., Rubinsten, L., Verweij, J., Van Blabbeke, M., Van Oosterom, 
A.T., Christian, M.D., and Gwyther, S.G., ``New guidelines to 
evaluate the response to treatment in solid tumors,'' J Natl Cancer 
Inst, 2000, vol. 92(3), pp. 205-16. Available at: http://www.eortc.be/Services/Doc/RECIST.pdf.
---------------------------------------------------------------------------

    Finally, regarding the applicant's assertion that, based on the 
IB12 study data, AZEDRA[reg] provides a safe alternative therapy for 
those patients who have failed other currently available treatment 
therapies, we note that none of the patients experienced hypertensive 
crisis, and that 76 percent (n=16) of the 21 patients enrolled in the 
study experienced Grade III or IV adverse events. Although the 
applicant indicated the adverse events were related to the study drug, 
the applicant also noted that there was no statistically significant 
difference between the greater than or less than 18.5 GBq administered 
doses; both groups had adverse events rates greater than 75 percent. 
Specifically, 5 of 7 patients (76 percent) who received less than or 
equal to 18.5 GBq administered doses, and 11 of 14 patients (79 
percent) who received greater than 18.5 GBq administered doses 
experienced Grade III or IV adverse advents. The most common (greater 
than or equal to 10 percent) Grade III and IV adverse events were 
neutropenia, leukopenia, thrombocytopenia, nausea, and vomiting. We 
also note that: (1) There were 5 deaths during the study that occurred 
from approximately 2.5 months up to 22 months after treatment and there 
was no detailed data regarding the 5 deaths, especially related to the 
total activity received during the study; (2) there was no information 
about which patients received prior radiation therapy with EBRT and/or 
conventional MIBG relative to those who experienced Grade III or IV 
adverse events; and (3) the total lifetime radiation dose was not 
provided by the applicant. We are inviting public comments on whether 
the safety data profile from the IB12 study supports a finding that 
AZEDRA[reg] represents a substantial clinical improvement for patients 
who received treatment with \131\I-MIBG for a diagnosis of avid 
malignant and/or recurrent and/or unresectable pheochromocytoma and 
paraganglioma tumors, given the risks for Grade III or IV adverse 
events.
    The applicant provided study data results from the IB12B study 
(MIP-IB12B), an open[dash]label, prospective 5[dash]year follow-up, 
single[dash]arm, multi[dash]center, Phase II pivotal study to evaluate 
the safety and efficacy of the use of AZEDRA[reg] for the treatment of 
patients who have been diagnosed with malignant and/or recurrent 
pheochromocytoma and paraganglioma tumors to support substantial 
clinical improvement. The applicant reported that IB12B's primary 
endpoint is the proportion of patients with a reduction (including 
discontinuation) of all antihypertensive medication by at least 50 
percent for at least 6 months. Seventy-four patients who received at 
least 1 dosimetric dose of AZEDRA[reg] were evaluated for safety and 68 
patients who received at least 1 therapeutic dose of AZEDRA[reg], each 
at 500 mCi (or 8 mCi/kg for patients weighing less than or equal to 
62.5 kg), were assessed for specific clinical outcomes. The applicant 
asserted that results from this prospective study met the primary 
endpoint (reduction or discontinuation of anti-hypertensive 
medications), as well as demonstrated strong supportive evidence from 
key secondary endpoints (overall tumor response, tumor biomarker 
response, and overall survival rates) that confers important clinical 
relevance to patients who have been diagnosed with malignant 
pheochromocytoma and paraganlioma tumors. The applicant also indicated 
that the use of AZEDRA[reg] was shown to be generally well tolerated at 
doses administered at 8 mCi/kg. We note that the data results from the 
IB12B study did not have a comparator arm, making it difficult to 
interpret the clinical outcome data relative to other currently 
available therapies.
    As discussed for the IB12 study, the applicant reported that 
antihypertension treatment was a proxy for effectiveness of AZEDRA[reg] 
on norepinephrine induced hypertension producing tumors. In the IB12B 
study, 25 percent (17/68) of patients met the primary

[[Page 20344]]

endpoint of having a greater than 50 percent reduction in 
antihypertensive agents for at least 6 months. The applicant further 
indicated that an additional 16 patients showed a greater than 50 
percent reduction in antihypertensive agents for less than 6 months, 
and pooling data results from these 33 patients, the applicant 
concluded that 49 percent (33/68) achieved a greater than 50 percent 
reduction at any time during the study 12-month follow-up period. The 
applicant further compared its data results from the IB12B study 
regarding antihypertension medication and the frequency of 
post[dash]infusion hypertension with published studies on MIBG and CVD 
therapy. The applicant noted a retrospective analysis of CVD therapy of 
52 patients who had been diagnosed with metastatic pheochromocytoma and 
paraganliom tumors that found only 15 percent of CVD[dash]treated 
patients achieved a 50-percent reduction in antihypertensive agents. 
The applicant also compared its results for post-infusion hypertension 
with literature reporting on MIBG and found 14 and 19 percent 
(depending on the study) of patients receiving MIBG experience 
hypertension within 24 hours of infusion. Comparatively, the applicant 
stated that the use of AZEDRA[reg] had no acute events of hypertension 
following infusion. We are inviting public comments on whether these 
data results regarding hypertension support a finding that the 
AZEDRA[reg] technology represents a substantial clinical improvement, 
and if antihypertensive medication reduction is an adequate proxy for 
improvement in renal, cerebral, and myocardial end organ damage.
    Regarding reduction in tumor burden (as defined by RECIST scores), 
the applicant indicated that at the conclusion of the IB12B 
12[dash]month follow-up period, 23.4 percent (n=15) of the 68 patients 
showed a partial response (PR), 68.8 percent (n=44) of the 68 patients 
achieved stable disease (SD), and 4.7 percent (n=3) of the 68 patients 
showed progressive disease. None of the patients showed completed 
response (CR). The applicant maintained that achieving SD is important 
for patients who have been treated for malignant pheochromocytoma and 
paraganglioma tumors because this is a progressive disease without a 
cure at this time. The applicant also indicated that literature shows 
that SD is maintained in approximately 47 percent of treatment 
na[iuml]ve patients who have been diagnosed with metastatic 
pheochromocytoma and paraganglioma tumors at 1 year due to the indolent 
nature of the disease.\202\ In the IB12B study, the data results 
equated to 23 percent of patients achieving partial response and 69 
percent of patients achieving stable disease. According to the 
applicant, this compares favorably to treatment with both conventional 
radiolabeled MIBG and CVD chemotherapy.
---------------------------------------------------------------------------

    \202\ Hescot, S., Leboulleux, S., Amar, L., Vezzosi, D., Borget, 
I., Bournaud-Salinas, C., de la Fouchardiere, C., Lib[eacute], R., 
Do Cao, C., Niccoli, P., Tabarin, A., ``One-year progression-free 
survival of therapy-naive patients with malignant pheochromocytoma 
and paraganglioma,'' The J Clin Endocrinol Metab, 2013, vol. 98(10), 
pp. 4006-4012.
---------------------------------------------------------------------------

    The applicant stated that the data results demonstrated effective 
tumor response rates. The applicant reported that the IB12 and IB12B 
study data showed overall tumor response rates of 80 percent and 92 
percent, respectively. In addition, the applicant contended that the 
study data across both trials show that patients demonstrated improved 
blood pressure control, reductions in tumor biomarker secretion, and 
strong evidence in overall survival rates. The overall median time to 
death from the first dose was 36.7 months in all treated patients. 
Patients who received 2 therapeutic doses had an overall median 
survival rate of 48.7 months, compared to 17.5 months for patients who 
only received a single dose.
    The applicant indicated that comparison of IB12B study data 
regarding overall survival rate with historical data is difficult due 
to the differences in the retrospective and heterogeneous nature of the 
published clinical studies and patient characteristics, especially when 
overall survival is calculated from the time of initial diagnosis. We 
agree with the applicant regarding the difficulties in comparing the 
results of the published clinical studies, and also believe that the 
differences in these studies may make it more difficult to evaluate 
whether the use of the AZEDRA[reg] technology improves overall survival 
rates relative to other therapies.
    We acknowledge the challenges with constructing robust clinical 
studies due to the extremely rare occurrence of patients who have been 
diagnosed with pheochromocytoma and paraganglioma tumors. However, we 
are concerned that because the data for both of these studies is mainly 
based upon retrospective studies and small, heterogeneous patient 
cohorts, it is difficult to draw strong conclusions regarding efficacy. 
Only very limited nonpublished data from two, single[dash]arm, 
noncomparative studies are available to evaluate the safety and 
effectiveness of Ultratrace[reg] I-131 MIBG, leading to a comparison of 
outcomes with historical controls. We are inviting public comments on 
whether the use of the AZEDRA[reg] technology meets the substantial 
clinical improvement criterion, including with respect to the specific 
concerns we have raised.
    Below we summarize and respond to two written public comments we 
received during the open comment period in response to the published 
notice in the Federal Register announcing the New Technology Town Hall 
Meeting regarding the substantial clinical improvement criterion aspect 
of AZEDRA[reg]'s application for new technology add-on payments for FY 
2019 below.
    Comment: One commenter supported the approval of the application of 
AZEDRA[reg] for new technology add-on payments for FY 2019 and its 
substantial clinical improvement in the treatment options available for 
Medicare beneficiaries. The commenter believed that AZEDRA[reg] 
demonstrates a substantial clinical improvement over other available 
therapies (as described previously) and meets a current unmet need for 
the treatment of patients who have been diagnosed with pheochromocytoma 
and paraganglioma. The commenter stated that AZEDRA[reg]'s structure is 
unlike the structure of any existing treatment option, given the use of 
the Ultratrace[reg] technology which has demonstrated resulting 
occurrences of reduced serious cardiovascular side effects and 
increased efficacy due to its unique ``carrier-free'' structure.
    Another commenter also supported the approval of new technology 
add-on payments for AZEDRA[reg] and its substantial clinical 
improvement in the treatment options available for Medicare 
beneficiaries. This commenter stated that AZEDRA[reg] is much simpler 
to administer than low[dash]specific activity I-131 MIBG, offers 
quicker and simpler infusions, and provides a rational, personalized, 
and effective therapy with promising and highly significant clinical 
benefits for patients who have been diagnosed with advanced 
pheochromocytoma and paraganglioma.
    Response: We appreciate the commenters' input. We will take these 
comments into consideration when deciding whether to approve new 
technology add-on payments for AZEDRA[reg] for FY 2019.
m. The AquaBeam System (Aquablation)
    PROCEPT BioRobotics Corporation submitted an application for new 
technology add-on payments for the

[[Page 20345]]

AquaBeam System (Aquablation) for FY 2019. According to the applicant, 
the AquaBeam System is indicated for the use in the treatment of 
patients experiencing lower urinary tract symptoms caused by a 
diagnosis of benign prostatic hyperplasia (BPH). The AquaBeam System 
consists of three main components: A console with two high-pressure 
pumps, a conformal surgical planning unit with trans-rectal ultrasound 
imaging, and a single-use robotic hand-piece.
    The applicant reported that The AquaBeam System provides the 
operating surgeon a multi-dimensional view, using both ultrasound image 
guidance and endoscopic visualization, to clearly identify the 
prostatic adenoma and plan the surgical resection area. Based on the 
planning inputs from the surgeon, the system's robot delivers 
Aquablation, an autonomous waterjet ablation therapy that enables 
targeted, controlled, heat-free and immediate removal of prostate 
tissue used for the purpose of treating lower urinary tract symptoms 
caused by a diagnosis of BPH. The combination of surgical mapping and 
robotically-controlled resection of the prostate is designed to offer 
predictable and reproducible outcomes, independent of prostate size, 
prostate shape or surgeon experience.
    In its application, the applicant indicated that benign prostatic 
hyperplasia (BPH) is one of the most commonly diagnosed conditions of 
the male genitourinary tract \203\ and is defined as the ``. . . 
enlargement of the prostate due to benign growth of glandular tissue . 
. .'' in older men.\204\ BPH is estimated to affect 30 percent of males 
that are older than 50 years old.205 206 BPH may compress 
the urethral canal possibly obstructing the urethra, which may cause 
symptoms that effect the lower urinary tract, such as difficulty 
urinating (dysuria), hesitancy, and frequent 
urination.207 208 209
---------------------------------------------------------------------------

    \203\ Bachmann, A., Tubaro, A., Barber, N., d'Ancona, F., Muir, 
G., Witzsch, U., Thomas, J., ``180-W XPS GreenLight Laser 
Vaporisation Versus Transurethral Resection of the Prostate for the 
Treatment of Benign Prostatic Obstruction: 6-month safety and 
efficacy results of a european multicentre randomised trial--the 
GOLIATH study,'' European Association of Urology, 2014, vol. 65, pp. 
931-942.
    \204\ Gilling, P., Anderson, P., and Tan, A., ``Aquablation of 
the Prostate for Symptomatic Benign Prostatic Hyperplasia: 1-Year 
results,'' The Journal of Urology, 2017, vol. 197, pp. 156-1572.
    \205\ Roehrborn, C., Gange, S., Shore, N., Giddens, J., Bolton, 
D., Cowan, B., Rukstalist, D., ``The Prostatic Urethral Lift for the 
Treatmentof Lower Urinary Tract Symptoms Associated with Prostate 
Enlargement Due to Benign Prostatic Hyperplasia: The LIFT study,'' 
The Journal of Urology, 2013, vol. 190, pp. 2161-2167.
    \206\ Sonksen, J., Barber, N., Speakman, M., Berges, R., 
Wetterauer, U., Greene, D., Gratzke, C., ``Prospective, Randomized, 
Multinational Study of Prostatic Urethral Lift Versus Transurethral 
Resection of the Prostate: 12-month results from the BPH6 study,'' 
European Association of Urology, 2015, vol. 68, pp. 643-652.
    \207\ Roehrborn, C., Gange, S., Shore, N., Giddens, J., Bolton, 
D., Cowan, B., Rukstalist, D., ``The Prostatic Urethral Lift for the 
Treatmentof Lower Urinary Tract Symptoms Associated with Prostate 
Enlargement Due to Benign Prostatic Hyperplasia: The LIFT study,'' 
The Journal of Urology, 2013, vol. 190, pp. 2161-2167.
    \208\ Sonksen, J., Barber, N., Speakman, M., Berges, R., 
Wetterauer, U., Greene, D., Gratzke, C., ``Prospective, Randomized, 
Multinational Study of Prostatic Urethral Lift Versus Transurethral 
Resection of the Prostate: 12-month results from the BPH6 study,'' 
European Association of Urology, 2015, vol. 68, pp. 643-652.
    \209\ Roehrborn, C., Gilling, P., Cher, D., andTemplin, B., 
``The WATER Study (Waterjet Ablation Therapy for Ednoscopic 
Resection of prostate tissue),'' Redwood City: PROCEPT BioRobotics 
Corporation, 2017.
---------------------------------------------------------------------------

    The initial treatment for a patient who has been diagnosed with BPH 
is watchful waiting and medications.\210\ Symptom severity, as measured 
by one test, the International Prostate Symptom Score (IPSS), is the 
primary measure by which surgery necessity is decided.\211\ Many 
techniques exist for the surgical treatment of patients who have been 
diagnosed with BPH, and these surgical treatments differ primarily by 
the method of resection: Electrocautery in the case of Transurethral 
Resection of the Prostate (TURP), laser enucleation, plasma 
vaporization, photoselective vaporization, radiofrequency ablation, 
microwave thermotherapy, and transurethral incision \212\ are among the 
primary methods. TURP is the primary reference treatment for patients 
who have been diagnosed with BPH.\213\ \214\ \215\ \216\ \217\
---------------------------------------------------------------------------

    \210\ Ibid.
    \211\ Cunningham, G. R., Kadmon, D., 2017, ``Clinical 
manifestations and diagnostic evaluation of benign prostatic 
hyperplasia,'' 2017. Available at: https://www.uptodate.com/
contents/clinical-manifestations-and-diagnostic-evaluation-of-
benign-prostatic-
hyperplasia?search=cunningham%20kadmon%202017%20benign%20prostatic&so
urce=search_result&selectedTitle=2~150&usage_type=default&display_ran
k=2.
    \212\ Ibid.
    \213\ Bachmann, A., Tubaro, A., Barber, N., d'Ancona, F., Muir, 
G., Witzsch, U., Thomas, J., ``180-W XPS GreenLight Laser 
Vaporisation Versus Transurethral Resection of the Prostate for the 
Treatment of Benign Prostatic Obstruction: 6-month safety and 
efficacy results of a european multicentre randomised trial--the 
GOLIATH study,'' European Association of Urology, 2014, vol. 65, pp. 
931-942.
    \214\ Cunningham, G. R., Kadmon, D., ``Clinical manifestations 
and diagnostic evaluation of benign prostatic hyperplasia,'' 2017. 
Available at: https://www.uptodate.com/contents/clinical-
manifestations-and-diagnostic-evaluation-of-benign-prostatic-
hyperplasia?search=cunningham%20kadmon%202017%20benign%20prostatic&so
urce=search_result&selectedTitle=2~150&usage_type=default&display_ran
k=2.
    \215\ Mamoulakis, C., Efthimiou, I., Kazoulis, S., 
Christoulakis, I., and Sofras, F., ``The Modified Clavien 
Classification System: A standardized platform for reporting 
complications in transurethral resection of the prostate,'' World 
Journal of Urology, 2011, vol. 29, pp. 205-210.
    \216\ Roehrborn, C., Gange, S., Shore, N., Giddens, J., Bolton, 
D., Cowan, B., Rukstalist, D., ``The Prostatic Urethral Lift for the 
Treatmentof Lower Urinary Tract Symptoms Associated with Prostate 
Enlargement Due to Benign Prostatic Hyperplasia: The LIFT study,'' 
The Journal of Urology, 2013, vol. 190, pp. 2161-2167.
    \217\ Sonksen, J., Barber, N., Speakman, M., Berges, R., 
Wetterauer, U., Greene, D., Gratzke, C., ``Prospective, Randomized, 
Multinational Study of Prostatic Urethral Lift Versus Transurethral 
Resection of the Prostate: 12-month results from the BPH6 study,'' 
European Association of Urology, 2015, vol. 68, pp. 643-652.
---------------------------------------------------------------------------

    According to the applicant, while the TURP procedure achieves 
alleviation of the symptoms that affect the lower urinary tract 
associated with a diagnosis of BPH, morbidity rates caused by adverse 
events are high following the procedure. The TURP procedure has a well-
documented history of associated adverse effects, such as hematuria, 
clot retention, bladder wall injury, hyponatremia, bladder neck 
contracture, urinary incontinence, and retrograde ejaculation.\218\ 
\219\ \220\ \221\ \222\ The likelihood of both adverse events and 
long[dash]term morbidity related to the TURP procedure increase with 
the size of the prostate.\223\
---------------------------------------------------------------------------

    \218\ Roehrborn, C., Gilling, P., Cher, D., and Templin, B., 
``The WATER Study (Waterjet Ablation Therapy for Ednoscopic 
Resection of prostate tissue),'' Redwood City: PROCEPT BioRobotics 
Corporation, 2017.
    \219\ Cunningham, G. R., & Kadmon, D., 2017, ``Clinical 
manifestations and diagnostic evaluation of benign prostatic 
hyperplasia,'' 2017. Available at: https://www.uptodate.com/
contents/clinical-manifestations-and-diagnostic-evaluation-of-
benign-prostatic-
hyperplasia?search=cunningham%20kadmon%202017%20benign%20prostatic&so
urce=search_result&selectedTitle=2~150&usage_type=default&display_ran
k=2.
    \220\ Mamoulakis, C., Efthimiou, I., Kazoulis, S., 
Christoulakis, I., Sofras, F., ``The Modified Clavien Classification 
System: A standardized platform for reporting complications in 
transurethral resection of the prostate,'' World Journal of Urology, 
2011, vol. 29, pp. 205-210.
    \221\ Roehrborn, C., Gange, S., Shore, N., Giddens, J., Bolton, 
D., Cowan, B., Rukstalist, D., ``The Prostatic Urethral Lift for the 
Treatmentof Lower Urinary Tract Symptoms Associated with Prostate 
Enlargement Due to Benign Prostatic Hyperplasia: The LIFT study,'' 
The Journal of Urology, 2013, vol. 190, pp. 2161-2167.
    \222\ Sonksen, J., Barber, N., Speakman, M., Berges, R., 
Wetterauer, U., Greene, D., Gratzke, C., ``Prospective, Randomized, 
Multinational Study of Prostatic Urethral Lift Versus Transurethral 
Resection of the prostate: 12-month results from the BPH6 study,'' 
European Association of Urology, 2015, vol. 68, pp. 643-652.
    \223\ Bachmann, A., Tubaro, A., Barber, N., d'Ancona, F., Muir, 
G., Witzsch, U., Thomas, J., ``180-W XPS GreenLight Laser 
Vaporisation Versus Transurethral Resection of the Prostate for the 
Treatment of Benign Prostatic Obstruction: 6-month safety and 
efficacy results of a european multicentre randomised trial--the 
GOLIATH study,'' European Association of Urology, 2014, vol. 65, pp. 
931-942.
---------------------------------------------------------------------------

    The applicant asserted that the AquaBeam System provides superior 
safety outcomes as compared to the

[[Page 20346]]

TURP procedure, while providing non-inferior efficacy in treating the 
symptoms that affect the lower urinary tract associated with a 
diagnosis of BPH. The applicant further stated that the AquaBeam System 
yields consistent and predictable procedure and resection times 
regardless of the size and shape of the prostate and the surgeon's 
experience. Lastly, according to the applicant, the AquaBeam System 
provides increased efficacy and safety for larger prostates as compared 
to the TURP procedure.
    With respect to the newness criterion, FDA granted the applicant's 
De Novo request on December 21, 2017, for use in the resection and 
removal of prostate tissue in males suffering from lower urinary tract 
symptoms (LUTS) due to benign prostatic hyperplasia. The applicant 
stated that the AquaBeam System was made available on the U.S. market 
immediately after the FDA granted the De Novo request. Therefore, if 
approved for new technology add-on payments, the newness period is 
considered to begin on December 21, 2017. There are currently no 
existing ICD-10-PCS procedure codes to specifically identify procedures 
involving the Aquablation method or technique for the treatment of 
symptoms that affect the lower urinary tract in patients who have been 
diagnosed with BPH. The applicant stated that it applied for approval 
for a distinct ICD[dash]10-PCS procedure code to uniquely identify 
procedures involving the AquaBeam System at the ICD-10 Maintenance and 
Coordination Committee March 2018 meeting.
    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 the 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 the AquaBeam System is the first technology to 
deliver treatment to patients who have been diagnosed with BPH for the 
symptoms that effect the lower urinary tract caused by BPH via 
Aquablation therapy. The AquaBeam System utilizes intra[dash]operative 
image guidance for surgical planning and then Aquablation therapy to 
robotically resect tissue utilizing a high-velocity waterjet. According 
to the applicant, all other BPH treatment procedures only utilize 
cystoscopic visualization, whereas the AquaBeam System utilizes 
Aquablation therapy, a combination of cystoscopic visualization and 
intra[dash]operative image guidance. According to the applicant, the 
AquaBeam System's use of Aquablation therapy qualifies it as the only 
technology to utilize a high-velocity room temperature waterjet for 
tissue resection, while most other BPH surgical procedures utilize 
thermal energy to resect prostatic tissue, or require the implantation 
of clips to pull back prostatic tissue blocking the urethra. Lastly, 
according to the applicant, all other surgical modalities are executed 
by the operating surgeon, while the AquaBeam System allows planning by 
the surgeon and utilization of Aquablation therapy ensures accurate and 
efficient tissue resection is autonomously executed by the robot.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant stated that potential 
cases representing potential patients who may be eligible for treatment 
involving the AquaBeam System's Aquablation therapy technique will 
ultimately map to the same MS-DRGs as cases for existing BPH 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, the applicant 
stated that the AquaBeam System's Aquablation therapy will ultimately 
treat the same patient population as other available BPH treatment 
options. The applicant asserted that the AquaBeam System's Aquablation 
therapy has been shown to be more effective and safer than the TURP 
procedure for patients with larger prostate sizes. The applicant stated 
that prostates 80 ml or greater in size are not appropriate for the 
TURP procedure and, therefore, more intensive procedures such as 
surgery are required. Furthermore, the applicant claimed that the 
AquaBeam System's Aquablation therapy is particularly appropriate for 
smaller prostate sizes, ~30 ml, due to increased accuracy provided by 
both the computer assistance and ultrasound visualization.
    We have the following concerns regarding whether the AquaBeam 
System meets the newness criterion. Currently, there are many treatment 
options that utilize varying forms of ablation, such as mono and 
bipolar TURP procedures, laser, microwave, and radiofrequency, to treat 
the symptoms associated with a diagnosis of BPH. We are concerned that, 
while this device utilizes water to perform any tissue removal, its 
mechanism of action may not be different from that of other forms of 
treatment for patients who have been diagnosed with BPH. Further, the 
use of water to perform tissue removal in the treatment of associated 
symptoms in patients who have been diagnosed with BPH has existed in 
other areas of surgical treatment prior to the introduction of this 
product (for example, endometrial ablation and wound debridement). In 
addition, the standard operative treatment, such as with the TURP 
procedure, for patients who have been diagnosed with BPH is to widen 
the urethra compressed by an enlarged prostate in an effort to 
alleviate the negative effects of an enlarged prostate. Like other 
existing methods, the AquaBeam System's Aquablation therapy also 
ablates tissue to enlarge compression of the urethra. Additionally, 
while the robotic arm and computer programing may result in different 
outcomes for patients, we are uncertain that the use of the robotic 
hand and computer programming result in a new mechanism of action. We 
are inviting public comments on this issue.
    We also are inviting public comments on whether the AquaBeam 
System's Aquablation therapy is substantially similar to existing 
technologies and whether it 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. Given that the AquaBeam System's Aquablation therapy 
procedure does not currently have a unique ICD-10-PCS procedure code, 
the applicant searched the FY 2016 MedPAR data file for cases with the 
following current ICD-10-PCS codes describing other BPH minimally 
invasive procedures to identify potential cases representing potential 
patients who may be eligible for treatment involving the AquaBeam 
System's Aquablation therapy: 0V507ZZ (Destruction of prostate, via 
natural or artificial opening), 0V508ZZ (Destruction of prostate, via 
natural or artificial opening endoscopic), 0VT07ZZ (Resection of 
prostate, via natural or artificial opening), and 0VT08ZZ (Resection of 
prostate, via natural or artificial opening endoscopic). The applicant 
identified a total of 133 MS-DRGs using these ICD-10-PCS codes.
    In order to calculate the standardized charges per case, the 
applicant conducted two analyses, based on 100 percent and 75 percent 
of identified claims in the FY 2016 MedPAR data file. The applicant 
based its analysis on 100 percent of claims mapping to 133 MS-DRGs, and 
75 percent of claims mapping to 6 MS-DRGs. The cases identified in the 
75 percent analysis mapped to MS-DRGs 665 (Prostatectomy with MCC), 666

[[Page 20347]]

(Prostatectomy with CC), 667 (Prostatectomy without CC/MCC), 713 
(Transurethral Prostatectomy with CC/MCC), 714 (Transurethral 
Prostatectomy without CC/MCC), and 988 (Non-Extensive O.R. Procedures 
Unrelated to Principal Diagnosis with CC). In situations in which there 
were fewer than 11 cases for individual MS-DRGs in the MedPAR data 
file, a value of 11 was imputed to ensure confidentiality for patients. 
When evaluating 100 percent of the cases identified, the applicant 
included low-volume MS-DRGs that had equal to or less than 11 total 
cases to represent potential patients who may be eligible for treatment 
involving the AquaBeam System's Aquablation therapy in order to 
calculate the average case-weighted unstandardized and standardized 
charge amounts. The 75 percent analysis removed those MS-DRGs with 11 
cases or less representing potential patients who may be eligible for 
treatment involving the AquaBeam System's Aquablation therapy, 
resulting in only 6 of the 133 MS-DRGs remaining for analysis. A total 
of 8,449 cases were included in the 100 percent analysis and 6,285 
cases were included in the 75 percent analysis.
    Using the 100 percent and 75 percent samples, the applicant 
determined that the average case-weighted unstandardized charge per 
case was $69,662 and $47,475, respectively. The applicant removed 100 
percent of total charges associated with the service category 
``Medical/Surgical Supply Charge Amount'' (which includes revenue 
centers 027x and 062x) because the applicant believed that it was the 
most conservative choice, as this amount varies by MS-DRG. The 
applicant stated that the financial impact of utilizing the AquaBeam 
System's Aquablation therapy on hospital resources other than on 
``Medical Supplies'' is unknown at this time. Therefore, a value of $0 
was used for charges related to the prior technology.
    The applicant standardized the charges, and inflated the charges 
using an inflation factor of 1.09357, from the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38524). The applicant then added the charges for the 
new technology. The applicant computed a final inflated average 
case[dash]weighted standardized charge per case of $69,588 for the 100 
percent sample, and $51,022 for the 75 percent sample. The average 
case-weighted threshold amount was $59,242 for the 100 percent sample, 
and $48,893 for the 75 percent sample. Because the final inflated 
average case-weighted standardized charge per case exceeds the average 
case-weighted threshold amount for both analyses, the applicant 
maintained that the technology meets the cost criterion.
    We are inviting public comment regarding whether the technology 
meets the cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that the Aquablation therapy provided by the 
AquaBeam System represents a substantial clinical improvement over 
existing treatment options for symptoms associated with the lower 
urinary tract for patients who have been diagnosed with BPH. 
Specifically, the applicant stated that the AquaBeam System's 
Aquablation therapy provides superior safety outcomes compared to the 
TURP procedure, while providing noninferior efficacy in treating the 
symptoms that effect the lower urinary tract associated with a 
diagnosis of BPH; the AquaBeam System's delivery of Aquablation therapy 
yields consistent and predictable procedure and resection times 
regardless of the size and shape of the prostate or the surgeon's 
experience; and the AquaBeam System's Aquablation therapy demonstrated 
superior efficacy and safety for larger prostates (that is, prostates 
sized 50 to 80 mL) as compared to the TURP procedure.
    The applicant provided the results of one Phase I and one Phase II 
trial published articles, the WATER Study Clinical Study Report, and a 
meta-analysis of current treatments with its application as evidence 
for the substantial clinical improvement criterion.
    According to the applicant, the first study \224\ enrolled 15 
nonrandomized patients with a prostate volume between 25 to 80 ml in a 
Phase I trial testing the safety and feasibility of the AquaBeam 
System's Aquablation therapy; all patients received the AquaBeam 
System's Aquablation therapy. This study, a prospective, nonrandomized 
study, enrolled men who were 50 to 80 years old who were affected by 
moderate to severe lower urinary tract symptoms, who did not respond to 
standard medical therapy.\225\ Follow-up assessments were conducted at 
1, 3, and 6 months and included information on adverse events, serum 
PSA level, uroflowmetry, PVR, quality of life, and the International 
Prostate Symptom Score (IPSS) and International Index of Erectile 
Function (IIEF) scores. The primary outcome was the assessment of 
safety as measured by adverse event reporting; secondary endpoints 
focused on alleviation of BPH symptoms.\226\
---------------------------------------------------------------------------

    \224\ Gilling P., Reuther, R., Kahokehr, A., Fraundorfer, M., 
``Aquablation--Image-guided Robot-assisted Waterjet Ablation of the 
Prostate: Initial clinical experience,'' British Journal of Urology 
International, 2016, vol. 117, pp. 923-929.
    \225\ Ibid.
    \226\ Ibid.
---------------------------------------------------------------------------

    The applicant indicated that 8 of the 15 patients who were enrolled 
in the trial had at least 1 procedure[dash]related adverse event (for 
example, catheterization, hematuria, dysuria, pelvic pain, bladder 
spasms), which the authors reported to be consistent with outcomes from 
minimally[dash]invasive transurethral procedures.\227\ There were no 
occurrences of incontinence, retrograde ejaculation, or erectile 
dysfunction at 30 days.\228\ Statistically significant improvement on 
all outcomes occurred over the 6[dash]month period. Average IPSS scores 
showed a negative slope with scores of 23.1, 11.8, 9.1, and 8.6 for 
baseline, 1 month, 3 months, and 6 months (p<0.01 in all cases). 
Average quality of life scores, which range from 1 to 5, where 1 is 
better and 5 is worse, decreased from 5.0 at baseline to 2.6 at 1 
month, 2.2 at 3 months, and 2.5 at 6 months. Average maximum urinary 
flow rate increased steadily across time points from 8.6 ml/s at 
baseline to 18.6 ml/s at 6 months. Lastly, average post[dash]void 
residual urine volume decreased from 91 ml at baseline to 38 ml at 1 
month, 60 ml at 3 months, and 30 ml at 6 months.\229\
---------------------------------------------------------------------------

    \227\ Gilling, P., Anderson, P., and Tan, A., ``Aquablation of 
the Prostate for Symptomatic Benign Prostatic Hyperplasia: 1-Year 
results,'' The Journal of Urology, 2017, vol. 197, pp. 156-1572.
    \228\ Ibid.
    \229\ Ibid.
---------------------------------------------------------------------------

    The second study \230\ presents results from a Phase II trial 
involving 21 men with a prostate volume between 30 to 102 ml who 
received treatment involving the AquaBeam System's Aquablation therapy 
with follow-up at 1 year. This prospective study enrolled men between 
the ages of 50 and 80 years old who were effected by moderate to severe 
symptomatic BPH.\231\ The primary end point was the rate of adverse 
events; the secondary end points measured alleviation of symptoms 
associated with a diagnosis of BPH. Data was collected at baseline and 
at 1 month, 3 months, 6 months, and 12 months; 1 patient withdrew at 3 
months. The authors asserted that the occurrence of post[dash]operative 
adverse events (urinary retention, dysuria, hematuria, urinary tract 
infection, bladder spasm, meatal stenosis) were consistent with other 
minimally[dash]invasive transurethral

[[Page 20348]]

procedures; \232\ 6 patients had at least 1 adverse event, including 
temporary urinary symptoms and medically[dash]treated urinary tract 
infections.\233\ The mean IPSS scores decreased from the baseline of 
22.8 with 11.5 at 1 month, 7 at 3 months, 7.1 at 6 months, and 6.8 at 
12 months and were statistically significantly different. Similarly, 
quality of life decreased from a mean score of 5 at baseline to 1.7 at 
12 months, all time points were statistically significantly different 
from the baseline.
---------------------------------------------------------------------------

    \230\ Ibid.
    \231\ Ibid.
    \232\ Gilling, P., Anderson, P., and Tan, A., ``Aquablation of 
the Prostate for Symptomatic Benign Prostatic Hyperplasia: 1-Year 
results,'' The Journal of Urology, 2017, vol. 197, pp. 156-1572.
    \233\ Ibid.
---------------------------------------------------------------------------

    The third document provided by the applicant is the Clinical Study 
Report: WATER Study,\234\ a prospective multi[dash]center, randomized, 
blinded study. The WATER Study compared the AquaBeam System's 
Aquablation therapy to the TURP procedure for the treatment of lower 
urinary tract symptoms associated with a diagnosis of BPH. One hundred 
eighty one (181) patients with prostate volumes between 30 and 80 ml 
were randomized, 65 patients to the TURP procedure group and the other 
116 to the AquaBeam System's Aquablation therapy group, with 176 (97 
percent of patients) continuing at 3 and 6 month follow[dash]up, where 
2 missing patients received treatment involving the AquaBeam System's 
Aquablation therapy and 3 received treatment involving the TURP 
procedure; randomization efficacy was assessed and confirmed with 
findings of no statistical differences between cases and controls among 
all characteristics measures, specifically prostate volume. Two primary 
endpoints were identified: (1) The safety endpoint was the proportion 
of patients with adverse events rates as ``probably or definitely 
related to the study procedure'' also classified as the Clavien-Dindo 
(CD) Grade 2 or higher or any Grade 1 resulting in persistent 
disability; and (2) the primary efficacy endpoint was a change in the 
IPSS score from baseline to 6 months. Three secondary endpoints were 
based on perioperative data and were: Length of hospital stay, length 
of operative time, and length of resection time. The occurrences of 
three secondary endpoints during the 6[dash]month follow[dash]up were: 
(1) Reoperation or reintervention within 6 months; (2) evaluation of 
proportion of sexually active patients; and (3) evaluation of 
proportion of patients with major adverse urologic events.
---------------------------------------------------------------------------

    \234\ Roehrborn, C., Gilling, P., Cher, D., Templin, B., ``The 
WATER Study (Waterjet Ablation Therapy for Ednoscopic Resection of 
prostate tissue),'' Redwood City: PROCEPT BioRobotics Corporation, 
2017.
---------------------------------------------------------------------------

    At 3 months, 25 percent of the patients in the AquaBeam System's 
Aquablation therapy group and 40 percent of the patients in the TURP 
group had an adverse event. The difference of -15 percent has a 95 
percent confidence interval of -29.2 and -1.0 percent. At 6 months, 
25.9 percent of the patients in the AquaBeam System's Aquablation 
therapy group and 43.1 percent of the patients in the TURP group had an 
adverse event. The difference of -17 percent has a 95 percent 
confidence interval of -31.5 to -3.0 percent. An analysis of safety 
events classified with the CD system as possibly, probably or 
definitely related to the procedure resulted in a CD Grade 1 persistent 
event difference between -17.7 percent (favoring the AquaBeam System's 
Aquablation therapy) with 95 percent confidence interval of -30.1 to -
7.2 percent and a CD Grade 2 or higher event difference of -3.3 percent 
with 95 percent confidence interval of -16.5 to 8.7 percent.
    The applicant indicated that the primary efficacy endpoint was 
assessed by a change in IPSS score over time. While change in score and 
change in percentages are generally higher for the AquaBeam System's 
Aquablation therapy, no statistically significant differences occurred 
between the AquaBeam System's Aquablation therapy and the TURP 
procedure over time. For example, the AquaBeam System's Aquablation 
therapy group experienced changes in IPSS mean score by visit of 0, -
3.8, -12.5, -16.0, and -16.9 at baseline, 1 week, 1 month, 3 months, 
and 6 months, respectively, while the TURP group had mean scores of 0, 
-3.6, -11.1, -14.6, and -15.1 at baseline, 1 week, 1 month, 3 months, 
and 6 months, respectively.
    Lastly, the applicant indicated that secondary endpoints were 
assessed. A mean length of stay for both the AquaBeam System's 
Aquablation therapy and the TURP procedure groups of 1.4 was achieved. 
While the mean operative times were similar, the hand piece in and out 
time was statistically significantly shorter for the AquaBeam System's 
Aquablation therapy group at 23.3 minutes as compared to 34.2 in the 
TURP procedure group. The mean resection time was 23 minutes shorter 
for the AquaBeam System's Aquablation therapy group at 3.9 minutes. No 
statistically significant difference was seen between the AquaBeam 
System's Aquablation therapy and the TURP procedure groups on the 
outcomes of re-intervention and worsening sexual function; 32.9 percent 
of the AquaBeam System's Aquablation therapy group had worsening sexual 
function as compared to 52.8 percent of the TURP procedure group. While 
statistically significant differences occurred across groups for change 
in ejaculatory function, the difference no longer remained at 6 months. 
While a greater proportion of the TURP procedure group patients 
experienced a negative change in erectile function as compared to the 
AquaBeam System's Aquablation therapy group patients (10 percent versus 
6.2 percent at 6 months), no statistically significant differences 
occurred. No statistically significant differences between groups 
occurred for major adverse urologic events.
    The applicant provided a meta-analysis of landmark studies 
regarding typical treatments for patients who have been diagnosed with 
BPH in order to provide supporting evidence for the assertion of 
superior outcomes achieved with the use of the AquaBeam System's 
Aquablation therapy. The applicant cited four ``landmark clinical 
trials,'' which report on the AquaBeam System's Aquablation 
therapy,\235\ the TURP procedure, Green light laser versus the TURP 
procedure,\236\ and Urolift.\237\ Comparisons are made between 
performance outcomes on three separate treatments for patients who have 
been diagnosed with BPH: The AquaBeam System's Aquablation therapy, the 
TURP procedure, and Urolift. The applicant stated that all three 
clinical trials included men with average IPSS baseline scores of 21 to 
23 points. The applicant stated that, while total procedure times are 
similar across all three treatment options, the AquaBeam System's 
Aquablation therapy has dramatically less time and variability 
associated with the tissue treatment. The applicant further stated that 
the differences between treatment options were not assessed for 
statistical significance. The applicant indicated

[[Page 20349]]

that the AquaBeam System's Aquablation therapy, with an approximate 
score of 17, had the largest improvement in IPSS scores at 6 months as 
compared to 16 for the TURP procedure and 11 for Urolift. Compared to 
46 percent in the TURP group, the applicant found that the AquaBeam 
System's Aquablation therapy and Urolift had much lower percentages, 4 
percent and 0 percent, respectively, of an ejaculation[dash]related 
consequence in patients. Lastly, the applicant stated that safety 
events, as measured by the percentage of CD Grade 2 or higher events, 
were lower in the AquaBeam System's Aquablation therapy (19 percent) 
and Urolift (14 percent) than in TURP (29 percent).
---------------------------------------------------------------------------

    \235\ Roehrborn, C., Gilling, P., Cher, D., Templin, B., ``The 
WATER Study (Waterjet Ablation Therapy for Ednoscopic Resection of 
prostate tissue),'' Redwood City: PROCEPT BioRobotics Corporation, 
2017.
    \236\ Bachmann, A., Tubaro, A., Barber, N., d'Ancona, F., Muir, 
G., Witzsch, U., Thomas, J., ``180-W XPS GreenLight Laser 
Vaporisation Versus Transurethral Resection of the Prostate for the 
Treatment of Benign Prostatic Obstruction: 6-month safety and 
efficacy results of a european multicentre randomised trial--the 
GOLIATH study,'' European Association of Urology, 2014, vol. 65, pp. 
931-942.
    \237\ Sonksen, J., Barber, N., Speakman, M., Berges, R., 
Wetterauer, U., Greene, D., Gratzke, C., ``Prospective, Randomized, 
Multinational Study of Prostatic Urethral Lift Versus Transurethral 
Resection of the Prostate: 12-month results from the BPH6 study,'' 
European Association of Urology, 2015, vol. 68, pp. 643-652.
---------------------------------------------------------------------------

    We have several concerns related to the substantial clinical 
improvement criterion. The applicant performed a meta-analysis 
comparing results from three separate studies, which tested the effects 
of three separate treatment options. According to the applicant, the 
results provided consistently show the AquaBeam System's Aquablation 
therapy and Urolift as being superior to the standard treatment of the 
TURP procedure. We have concerns with the interpretation of these 
results that the applicant provided. The comparison of multiple 
clinical studies is a difficult issue. It is not clear if the applicant 
took into account the varying study designs, sample techniques, and 
other study specific issues, such as physician skill and patient health 
status. For instance, the applicant stated that a comparison of Urolift 
and the AquaBeam System's Aquablation therapy may not be appropriate 
due to the differing indications of the procedures; the applicant 
indicated that Urolift is primarily used for the treatment of patients 
who have been diagnosed with BPH who have smaller prostate volumes, 
whereas the AquaBeam System's Aquablation therapy procedure may be used 
in all prostate sizes. Similarly, the applicant stated that the TURP 
procedure is generally not utilized in patients with prostates larger 
than 80ml, whereas such patients may be eligible for treatment 
involving the AquaBeam System's Aquablation therapy.
    We note that the applicant submitted a meta-analysis in an effort 
to compare currently available therapies to the AquaBeam System's 
Aquablation therapy. The possibility of the heterogeneity of samples 
and methods across studies leads to the possible introduction of bias, 
which results in the difficulty or inability to distinguish between 
bias and actual outcomes. We are inviting public comments on the 
applicability of this meta-analysis.
    Additionally, the differences between the AquaBeam System's 
Aquablation therapy and standard treatment options may not be as 
impactful and confined to safety aspects. It appears that the data on 
efficacy supported the equivalence of the AquaBeam System's Aquablation 
therapy and the TURP procedure based upon noninferiority analysis. We 
agree that the safety data were reported as showing superiority of the 
AquaBeam System's Aquablation therapy over the TURP procedure, although 
the data were difficult to track because adverse consequences were 
combined into categories; the AquaBeam System's Aquablation therapy was 
reportedly better in terms of ejaculatory function. It was noted in the 
application that, while the AquaBeam System's Aquablation therapy was 
statistically superior to the TURP procedure in the CD Grade 1 + 
adverse events, it was not statistically different in the CD Grade 2 or 
greater category. The applicant stated that regardless of the method, 
the urethra is typically used as the means for performing the BPH 
treatment procedure, which necessarily increases the likelihood of CD 
Grade 2 adverse events in all transurethral procedures.
    In addition, the applicant noted that the treatment option may 
depend on the size of the prostate. The applicant stated that the 
AquaBeam System's Aquablation therapy is appropriate for small and 
large prostate sizes as a BPH treatment procedure. The AquaBeam 
System's Aquablation therapy has been shown to have limited positive 
outcomes as compared to the TURP procedure for prostates sized greater 
than 50 grams to 80 grams in each of the studies provided by the 
applicant. However, the applicant noted that the TURP procedure would 
not be used for prostates larger than 80 grams in size. Therefore, we 
believe that another proper comparator for the AquaBeam System's 
Aquablation therapy may be laser or radical/open surgical procedures 
given their respective indication for small and large prostate sizes.
    Lastly, the applicant compared AquaBeam System's Aquablation 
therapy and the standard of care TURP procedure to support a finding of 
improved safety. There are other treatment modalities available that 
may have a similar safety profile as the AquaBeam System's Aquablation 
therapy and we are interested in information that compares the AquaBeam 
System's Aquablation therapy to other treatment modalities.
    We are inviting public comments on whether the AquaBeam System's 
Aquablation therapy meets the substantial clinical improvement 
criterion.
    We did not receive any public comments in response to the published 
notice in the Federal Register regarding the AquaBeam System's 
Aquablation therapy or at the New Technology Town Hall Meeting.
n. AndexXaTM (Andexanet alfa)
    Portola Pharmaceuticals, Inc. (Portola) submitted an application 
for new technology add-on payments for FY 2019 for the use of 
AndexXaTM (Andexanet alfa). (We note that the applicant 
previously submitted applications for new technology add-on payments 
for FY 2017 and FY 2018 for Andexanet alfa, which were withdrawn.)
    AndexXaTM is an antidote used to treat patients who are 
receiving treatment with an oral Factor Xa inhibitor who suffer a major 
bleeding episode and require urgent reversal of direct and indirect 
Factor Xa anticoagulation. Patients at high risk for thrombosis, 
including those who have been diagnosed with atrial fibrillation (AF) 
and venous thrombosis (VTE), typically receive treatment using long-
term oral anticoagulation agents. Factor Xa inhibitors are included in 
a new class of anticoagulants. Factor Xa inhibitors are oral 
anticoagulants used to prevent stroke and systemic embolism in patients 
who have been diagnosed with AF. These oral anticoagulants are also 
used to treat patients who have been diagnosed with deep-vein 
thrombosis (DVT) and its complications, pulmonary embolism (PE), and 
patients who have undergone knee, hip, or abdominal surgery. 
Rivarobaxan (Xarelto[reg]), apixaban (Eliqis[reg]), betrixaban 
(Bevyxxa[reg]), and edoxaban (Savaysa[reg]) also are included in the 
new class of Factor Xa inhibitors, and are often referred to as ``novel 
oral anticoagulants'' (NOACs) or ``non-vitamin K antagonist oral 
anticoagulants.'' Although these anticoagulants have been commercially 
available since 2011, there is no FDA-approved therapy used for the 
urgent reversal of any Factor Xa inhibitor as a result of serious 
bleeding episodes.
    AndexXaTM has not received FDA approval as of the time 
of the development of this proposed rule. The applicant indicated that 
it anticipates receipt of FDA approval for the use of the technology 
during the first quarter of 2018. The applicant received approval for 
two unique ICD-10-PCS procedure codes that became effective October 1,

[[Page 20350]]

2016 (FY 2017). The approved ICD-10-PCS procedure codes are: XW03372 
(Introduction of Andexanet alfa, Factor Xa inhibitor reversal agent 
into peripheral vein, percutaneous approach, new technology group 2); 
and XW04372 (Introduction of Andexanet alfa, Factor Xa inhibitor 
reversal agent into central vein, percutaneous approach, new technology 
group 2).
    With regard to the ``newness'' criterion, 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. The applicant asserted that, if approved, 
AndexXaTM would be the first and the only antidote available 
used to treat patients who are receiving treatment with an oral Factor 
Xa inhibitor who suffer a major bleeding episode and require urgent 
reversal of direct and indirect Factor Xa anticoagulation. Therefore, 
the applicant asserted that the technology is not substantially similar 
to any other currently approved and available treatment options for 
Medicare beneficiaries. Below we discuss the applicant's assertion in 
the context of the three substantial similarity criteria.
    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, AndexXaTM, if approved, would be 
the first anticoagulant reversal agent that binds to direct Factor Xa 
inhibitors with high affinity, thereby sequestering the inhibitors and 
consequently rapidly reducing free plasma concentration of Factor Xa 
inhibitors, and neutralizing the inhibitors' anticoagulant effect, 
which allows for the restoration of normal hemostasis. 
AndexXaTM also binds to and sequesters antithrombin III 
molecules that are complexed with indirect inhibitor molecules, which 
disrupts the capacity of the antithrombin complex to bind to native 
Factor Xa inhibitors. According to the applicant, AndexXaTM 
represents a significant therapeutic advance because it provides rapid 
reversal of anticoagulation therapy in the event of a serious bleeding 
episode. Other anticoagulant reversal agents, such as 
KcentraTM and Idarucizumab, do not reverse the effects of 
Factor Xa inhibitors.
    With regard to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, AndexXaTM would be the 
first FDA[dash]approved anticoagulant reversal agent for Factor Xa 
inhibitors. Therefore, the MS-DRGs do not contain cases that represent 
patients who have been treated with any anticoagulant reversal agents 
for Factor Xa inhibitors.
    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 
stated that AndexXaTM, if approved, would be the only 
anticoagulant reversal agent available for treating patients who are 
receiving direct or indirect Factor Xa therapy who experience serious, 
uncontrolled bleeding events or who require emergency surgery. 
Therefore, the applicant believed that AndexXaTM would be 
the first type of treatment option available to this patient 
population. As a result, we believe that it appears that 
AndexXaTM is not substantially similar to any existing 
technologies. We are inviting public comments on whether 
AndexXaTM meets the substantial similarity criteria, and 
whether AndexXaTM meets the newness criterion.
    With regard to the cost criterion, the applicant researched the FY 
2015 MedPAR claims data file for potential cases representing patients 
who may be eligible for treatment using AndexXaTM. The 
applicant used three sets of ICD-9-CM codes to identify these cases: 
(1) Codes identifying potential cases representing patients who were 
treated with an anticoagulant and, therefore, who are at risk of 
bleeding; (2) codes identifying potential cases representing patients 
with a history of conditions that were treated with Factor Xa 
inhibitors; and (3) codes identifying potential cases representing 
patients who experienced bleeding episodes as the reason for the 
current admission. The applicant included with its application the 
following table displaying a complete list of ICD-9-CM codes that met 
its selection criteria.

------------------------------------------------------------------------
 ICD-9-CM codes applicable      Applicable ICD-9-CM code description
------------------------------------------------------------------------
V12.50....................  Personal history of unspecified circulatory
                             disease.
V12.51....................  Personal history of venous thrombosis and
                             embolism.
V12.52....................  Personal history of thrombophlebitis.
V12.54....................  Personal history of transient ischemic
                             attack (TIA), and cerebral infarction
                             without residual deficits.
V12.55....................  Personal history of pulmonary embolism.
V12.59....................  Personal history of other diseases of
                             circulatory system.
V43.64....................  Hip joint replacement.
V43.65....................  Knee joint replacement.
V58.43....................  Aftercare following surgery for injury and
                             trauma.
V58.49....................  Other specified aftercare following surgery.
V58.73....................  Aftercare following surgery of the
                             circulatory system, NEC.
V58.75....................  Aftercare following surgery of the teeth,
                             oral cavity and digestive system, NEC.
V58.61....................  Long-term (current) use of anticoagulants.
E934.2....................  Anticoagulants causing adverse effects in
                             therapeutic use.
99.00.....................  Perioperative autologous transfusion of
                             whole blood or blood components.
99.01.....................  Exchange transfusion.
99.02.....................  Transfusion of previously collected
                             autologous blood.
99.03.....................  Other transfusion of whole blood.
99.04.....................  Transfusion of packed cells.
99.05.....................  Transfusion of platelets.
99.06.....................  Transfusion of coagulation factors.
99.07.....................  Transfusion of other serum.
------------------------------------------------------------------------

    The applicant identified a total of 51,605 potential cases that 
mapped to 683 MS-DRGs, resulting in an average case-weighted charge per 
case of $72,291. The applicant also provided an analysis that was 
limited to cases

[[Page 20351]]

representing 80 percent of all potential cases identified (41,255 
cases) that mapped to the top 151 MS-DRGs. Under this analysis, the 
average case-weighted charge per case was $69,020. The applicant 
provided a third analysis that was limited to cases representing 25 
percent of all potential cases identified (12,873 cases) that mapped to 
the top 9 MS-DRGs. This third analysis resulted in an average case-
weighted charge per case of $46,974.
    Under each of these analyses, the applicant also provided 
sensitivity analyses based on variables representing two areas of 
uncertainty: (1) Whether to remove 40 percent or 60 percent of blood 
and blood administration charges; and (2) whether to remove pharmacy 
charges based on the ceiling price of factor eight inhibitor bypass 
activity (FEIBA), a branded anti-inhibitor coagulant complex, or on the 
pharmacy indicator 5 (PI5) in the MedPAR data file, which correlates to 
potential cases utilizing generic coagulation factors. Overall, the 
applicant conducted twelve sensitivity analyses, and provided the 
following rationales:
     The applicant chose to remove 40 percent and 60 percent of 
blood and blood administration charges because potential patients who 
may be eligible for treatment using AndexXaTM for Factor Xa 
reversal may still require blood and blood products to treat other 
conditions. Therefore, the applicant believed that it would be 
inappropriate to remove all of the charges associated with blood and 
blood administration because all of the charges cannot be attributed to 
Factor Xa reversal. The applicant maintained that the amounts of blood 
and blood products required for treatment vary according to the 
severity of the bleeding. Therefore, the applicant stated that the use 
of AndexXaTM may replace 60 percent of blood and blood 
product administration charges for potential cases with less severity 
of bleeding, but only 40 percent of charges for potential cases with 
more severe bleeding.
     The applicant maintained that FEIBA is the highest priced 
clotting factor used for Factor Xa inhibitor reversal, and it is 
unlikely that pharmacy charges for Factor Xa reversal would exceed the 
FEIBA ceiling price of $2,642. Therefore, the applicant capped the 
charges to be removed at $2,642 to exclude charges unrelated to the 
reversal of Factor Xa anticoagulation. The applicant also considered an 
alternative scenario in which charges associated with pharmacy 
indicator 5 (PI5) were removed from the costs of potential cases that 
included this indicator in the MedPAR data. On average, charges removed 
from the costs of potential cases utilizing generic coagulation factors 
were much lower than the total pharmacy charges.
    The applicant noted that, in all 12 scenarios, the average case-
weighted standardized charge per case for potential cases representing 
patients who may be eligible for treatment using AndexXaTM 
would exceed the average case-weighted threshold amounts in Table 10 of 
the FY 2018 IPPS/LTCH PPS final rule by more than $855.
    The applicant's order of operations used for each analysis is as 
follows: (1) Removing 60 percent or 40 percent of blood and blood 
product administration charges and up to 100 percent of pharmacy 
charges for PI5 or FEIBA from the average case-weighted unstandardized 
charge per case; and (2) standardizing the charges per cases using the 
Impact File published with the FY 2015 IPPS/LTCH PPS final rule. After 
removing the charges for the prior technology and standardizing 
charges, the applicant applied an inflation factor of 1.154181, which 
is a combination of 9.8446 percent, the value used in the FY 2017 IPPS 
final rule as the 2-year outlier threshold inflation factor, and 5.074 
percent, the value used in the FY 2018 IPPS final rule as the 1-year 
outlier threshold inflation factor, to update the charges from FY 2015 
to FY 2018. The applicant did not add charges for AndexXaTM 
as the price had not been set at the time of conducting this analysis. 
Under each scenario, the applicant stated that the inflated average 
case-weighted standardized charge per case exceeded the average case-
weighted threshold amount (based on the FY 2018 IPPS Table 10 
thresholds). Below we provide a table for all 12 scenarios that the 
applicant indicated demonstrate that the technology meets the cost 
criterion.

------------------------------------------------------------------------
                                             Inflated
                                              average      Average case-
                                           standardized      weighted
                Scenario                  case- weighted     threshold
                                            charge per        amount
                                               case
------------------------------------------------------------------------
100 Percent of Cases, FEIBA, 60 Percent          $71,305         $60,209
 Removal of Blood and Blood Product
 Administration Costs...................
100 Percent of Cases, PI5, 60 Percent             73,108          60,209
 Removal of Blood and Blood Product
 Administration Costs...................
100 Percent of Cases, FEIBA, 40 Percent           72,172          60,209
 Removal of Blood and Blood Product
 Administration Costs...................
100 Percent of Cases, PI5, 40 Percent             73,740          60,209
 Removal of Blood and Blood Product
 Administration Costs...................
80 Percent of Cases, FEIBA, 60 Percent            68,400          58,817
 Removal of Blood and Blood Product
 Administration Costs...................
80 Percent of Cases, PI5, 60 Percent              70,184          58,817
 Removal of Blood and Blood Product
 Administration Costs...................
80 Percent of Cases, FEIBA, 40 Percent            69,279          58,817
 Removal of Blood and Blood Product
 Administration Costs...................
80 Percent of Cases, PI5, 40 Percent              70,826          58,817
 Removal of Blood and Blood Product
 Administration Costs...................
25 Percent of Cases, FEIBA, 60 Percent            46,127          45,272
 Removal of Blood and Blood Product
 Administration Costs...................
25 Percent of Cases, PI5, 60 Percent              47,730          45,272
 Removal of Blood and Blood Product
 Administration Costs...................
25 Percent of Cases, FEIBA, 40 Percent            47,089          45,272
 Removal of Blood and Blood Product
 Administration Costs...................
25 Percent of Cases, PI5, 40 Percent              48,403          45,272
 Removal of Blood and Blood Product
 Administration Costs...................
------------------------------------------------------------------------

    We are inviting public comments on whether AndexXaTM 
meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that AndexXaTM represents a substantial 
clinical improvement for the treatment of patients who are receiving 
direct or indirect Factor Xa therapy who experience serious, 
uncontrolled bleeding events or who require emergency surgery because 
the technology addresses an unmet medical need for a universal antidote 
to direct and indirect Factor Xa inhibitors; if approved, would be the 
only agent shown in prospective clinical trials to rapidly (within 2 to 
5 minutes) and sustainably reverse the anticoagulation activity of 
Factor Xa inhibitors; is potentially nonthrombogenic, as no serious 
adverse effects of thrombosis were observed in clinical trials; and 
could supplant currently available

[[Page 20352]]

treatments for bleeding from anti-Factor Xa therapy, which have not 
been shown to be effective in the treatment of all patients.
    With regard to addressing an unmet need for a universal antidote to 
direct and indirect Factor Xa inhibitors, the applicant asserted that 
the use of any anticoagulant is associated with an increased risk of 
bleeding, and bleeding complications can be life-threatening. Bleeding 
is especially concerning for patients treated with Factor Xa inhibitors 
because there are currently no antidotes to Factor Xa inhibitors 
available. As a result, when a patient anticoagulated with an oral 
direct Factor Xa inhibitor presents with life-threatening bleeding, 
clinicians often resort to using preparations of vitamin K dependent 
clotting factors, such as 4-factor prothrombin complex concentrates 
(PCCs). Despite the lack of any large, prospective, randomized study 
examining the efficacy and safety of these agents in this patient 
population, administration of 4-factor PCCs as a means to ``reverse'' 
the anticoagulant effect of Factor Xa inhibitors is commonplace in many 
hospitals due to the lack of any alternative in the setting of a 
serious or life[dash]threatening bleed.
    The applicant stated that AndexXaTM has a unique 
mechanism of action and represents a new biological approach to the 
treatment of patients who have been diagnosed with acute severe 
bleeding who require immediate reversal of the Factor Xa inhibitor 
therapy. The applicant explained that although AndexXaTM is 
structurally very similar to native Factor Xa inhibitors, the 
technology has undergone several modifications that restrict its 
biological activity to reversing the effects of Factor Xa inhibitors by 
binding with and sequestering direct or indirect Factor Xa inhibitors, 
which allows native Factor Xa inhibitors to dictate the normal 
coagulation and hemostasis process. As a result, the applicant 
maintained that AndexXaTM represents a safe and effective 
therapy for the management of severe bleeding in a fragile patient 
population and a substantial clinical improvement over existing 
technologies and reversal strategies.
    The applicant noted the following: (1) On average, patients with a 
bleeding complication were hospitalized for 6.3 to 8.5 days, and (2) 
the most common therapies currently used to manage severe bleeding 
events in patients undergoing anticoagulant treatment are blood and 
blood product transfusions, most frequently with packed red blood cells 
(RBC) or fresh frozen plasma (FFP).\238\ According to the applicant, 
the blood products that are currently being employed as reversal agents 
carry significant risks. For instance, no clinical studies have 
evaluated the safety and efficacy of FFP transfusions to treat bleeding 
associated with Factor Xa inhibitors.239 240 Furthermore, 
transfusions with packed RBCs carry a risk (1 to 4 per 50,000 
transfusions) of acute hemolytic reactions, in which the recipient's 
antibodies attack the transfused red blood cells, which is associated 
with clinically significant anemia, kidney failure, and death.\241\ The 
applicant asserted that a RBC transfusion in trauma patients with major 
bleeding is associated with an increased risk of nonfatal vascular 
events and death.\242\ The applicant noted that, although patients who 
are treated with AndexXaTM would receive RBC transfusions if 
their hemoglobin is low enough to warrant it, AndexXaTM 
reduces the need for RBC transfusion.
---------------------------------------------------------------------------

    \238\ Truven, ``2016 Truven Medicare Projected Bleeding 
Events'', MARKETSCAN[reg] Medicare Supplemental Database, January 1, 
2016 to December 31, 2016 Data pull, Data on File, Supplemental 
file.
    \239\ Siegal, D.M., ``Managing target-specific oral 
anticoagulant associated bleeding including an update on 
pharmacological reversal agents,'' J Thromb Thrombolysis, 2015 Apr, 
vol. 39(3), pp. 395-402.
    \240\ Kalus, J.S., ``Pharmacologic interventions for reversing 
the effects of oral anticoagulants,'' Am J Health Syst Pharm, 2013, 
vol. 70(10 Suppl 1), pp. S12-21.
    \241\ Sharma, S., Sharma, P., Tyler, L.N., ``Transfusion of 
Blood and Blood Products: Indications and Complications,'' Am Fam 
Physician, 2011, vol. 83(6), pp. 719-24.
    \242\ Perel, P., Clayton, T., Altman, D.G., et al., ``Red blood 
cell transfusion and mortality in trauma patients: risk-stratified 
analysis of an observational study,'' PLoS Med, 2014, vol. 11(6), 
pp. e1001664.
---------------------------------------------------------------------------

    The applicant asserted that laboratory studies have failed to 
provide consistent evidence of ``reversal'' of the anticoagulant effect 
of Factor Xa inhibitors across a range of different PCC products and 
concentrations. Results of thrombin generation assays have varied 
depending on the format of the assay. Despite years of experience with 
low molecular weight heparins and pentasaccharide anticoagulants, 
neither PCCs nor factor eight inhibitor bypassing activity are 
recognized as safe and effective reversal agents for these Factor Xa 
inhibitors.\243\ Unlike patients taking vitamin K antagonists, patients 
receiving treatment with oral Factor Xa inhibitor drugs have normal 
levels of clotting factors. Therefore, a strategy based on 
``repleting'' factor levels is of uncertain foundation and could result 
in supra-normal levels of coagulation factors after rapid metabolism 
and clearance of the oral anticoagulant.\244\
---------------------------------------------------------------------------

    \243\ Sarich, T.C., Seltzer, J.H., Berkowitz, S.D., et al., 
``Novel oral anticoagulants and reversal agents: Considerations for 
clinical development,'' Am Heart J, 2015, vol. 169(6), pp. 751-7.
    \244\ Siegal, D.M., ``Managing target-specific oral 
anticoagulant associated bleeding including an update on 
pharmacological reversal agents,'' J Thromb Thrombolysis, 2015 Apr, 
vol. 39(3), pp. 395-402.
---------------------------------------------------------------------------

    The applicant provided results from two randomized, double-blind, 
placebo-controlled Phase III studies,245 246 the ANNEXA-A 
(reversal of apixaban) and ANNEXA[dash]R (reversal of rivaroxaban) 
trials. The primary endpoint in both these studies was the percent 
change in anti-Factor Xa activity. Secondary endpoints included 
proportion of participants with an 80 percent or greater reduction in 
anti-Factor Xa activity, change in unbound Factor Xa inhibitor 
concentration, and change in endogenous thrombin potential (ETP). A 
total of 145 participants were enrolled in the study, with 101 
participants randomized to AndexXaTM and 44 participants 
randomized to placebo. The mean age of participants was 58 years old, 
and 39 percent were women. There was a mean of greater than 90 percent 
reduction in anti-Factor Xa activity in both parts of both studies in 
subjects receiving AndexXaTM. The studies also demonstrated 
the following: (1) Rapid and sustainable reversal of anticoagulation; 
(2) reduced Factor Xa inhibitor free plasma levels by at least 80 
percent below a calculated no-effect level; and (3) reduced anti-Factor 
Xa activity to the lowest level of detection within 2 to 5 minutes of 
infusion. The applicant noted that decreased Factor Xa inhibitor levels 
have been shown to correspond to decreased bleeding complications, 
reconstitution of activity of coagulation factors, and correction of 
coagulation.247 248 249
---------------------------------------------------------------------------

    \245\ Conners, J.M., ``Antidote for Factor Xa Anticoagulants,'' 
N Engl J Med, 2015 Nov 13.
    \246\ Siegal, D.M., Curnutte, J.T., Connolly, S.J., et al., 
``Andexanet Alfa for the Reversal of Factor Xa Inhibitor Activity,'' 
N Engl J Med, 2015 Nov 11.
    \247\ Lu, G., DeGuzman, F., Hollenbach, S., et al., ``Reversal 
of low molecular weight heparin and fondaparinux by a recombinant 
antidote,'' (r-Antidote, PRT064445), Circulation, 2010, vol. 122, 
pp. A12420.
    \248\ Rose, M., Beasley, B., ``Apixaban clinical review 
addendum,'' Silver Spring, MD: Center for Drug Evaluation and 
Research, 2012. Available at: http://www.accessdata.fda.gov/drugsatfda_docs/nda/2012/202155Orig1s000MedR.pdf.
    \249\ Beasley, N., Dunnmon, P., Rose, M., ``Rivaroxaban clinical 
review: FDA draft briefing document for the Cardiovascular and Renal 
Drugs Advisory Committee,'' 2011. Available at: http://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/drugs/CardiovascularandRenalDrugsAdvisoryCommittee/ucm270796.pdf.
---------------------------------------------------------------------------

    The applicant stated that the results from the two Phase III 
studies and previous proof-of-concept Phase II dose-finding studies 
showed that use of

[[Page 20353]]

AndexXaTM can rapidly reverse anticoagulation activity of 
Factor Xa inhibitors and sustain that reversal. Therefore, the 
applicant asserted that the use of AndexXaTM has the 
potential to successfully treat patients who only need short-duration 
reversal of the Factor Xa inhibitor anticoagulant, as well as patients 
who require longer duration reversal, such as patients experiencing a 
severe intracranial hemorrhage or requiring emergency surgery. 
Furthermore, the applicant noted that its technology's duration of 
action allows for a gradual return of Factor Xa inhibitor 
concentrations to placebo control levels within 2 hours following the 
end of infusion.
    With regard to AndexXaTM's nonthrombogenic nature, the 
applicant provided clinical trial data which revealed participants in 
Phase II and Phase III trials had no thrombotic events and there were 
no serious or severe adverse events reported. Results also showed that 
use of AndexXaTM has a much lower risk of thrombosis than 
typical procoagulants because the technology lacks the region 
responsible for inducing coagulation. Furthermore, the applicant 
asserted that the use of AndexXaTM is not associated with 
the known complications seen with RBC transfusions. The applicant 
asserted that, while the Phase II and Phase III trials and studies 
measured physiological hallmarks of reversal of NOACs, it is expected 
that the availability of a safe and reliable Factor Xa reversal will 
result in an overall better prognosis for patients--potentially leading 
to a reduction in length of hospital stay, fewer complications, and 
decreased mortality associated with unexpected bleeding episodes.
    The applicant also stated that use of AndexXaTM can 
supplant currently available treatments used for reversing severe 
bleeding from anti-Factor Xa therapy, which have not been shown to be 
effective in the treatment of all patients. With regard to PCCs and 
FFPs, the applicant stated that there is a lack of clinical evidence 
available for patients taking Factor Xa inhibitors that experience 
severe bleeding events. The applicant noted that the case reports 
provide a snapshot of emergent treatment of these often medically 
complex anti-Factor Xa-treated patients with major bleeds. However, the 
applicant stated that these analyses reveal the inconsistent approach 
in assessing the degree of anticoagulation in the patient and the 
variability in treatment strategy. The applicant explained that little 
or no assessment of efficacy in restoring coagulation in the patients 
was performed, and the major outcomes measures were bleeding cessation 
or mortality. The applicant concluded that overall, there is very 
little evidence for the efficacy suggested in some guidelines, and the 
evidence is insufficient to draw any conclusions.
    The applicant submitted interim data purporting to show substantial 
clinical improvement within its target patient population as part of an 
ongoing Phase IIIb/IV open[dash]label ANNEXA-4 study. The ANNEXA-4 
study is a multi[dash]center, prospective, open-label, single group 
study that evaluated 67 patients who had acute, major bleeding within 
18 hours of receipt of a Factor Xa inhibitor (32 patients receiving 
rivarobaxan, 31 receiving apixaban, and 4 receiving enoxaparin). The 
population in the study was reflective of a real-world population, with 
mean age of 77 years old, most patients with cardiovascular disease, 
and the majority of bleeds being intracranial or gastrointestinal. 
According to the applicant, the results of the ANNEXA-4 study 
demonstrate safe, reliable, and rapid reversal of Factor Xa levels in 
patients experiencing acute bleeding and are consistent with the 
results seen in the Phase II and Phase III trials, based on interim 
data. However, we are concerned that this interim data also indicate 18 
percent of patients experienced a thrombotic event and 15 percent of 
patients died following reversal during the 30-day follow-up period in 
the ANNEXA-4 study. For this reason, we are concerned that there is 
insufficient data to determine substantial clinical improvement over 
existing technologies.
    We are inviting public comments on whether AndexXaTM 
meets the substantial clinical improvement criterion.
    We did not receive any public comments on the AndexXaTM 
technology in response to the published notice in the Federal Register 
or at the New Technology Town Hall Meeting.

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 2019 hospital wage index based 
on the statistical areas appears under section III.A.2. 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[dash]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 2019 is discussed in section II.B. of the Addendum to this proposed 
rule.
    As discussed in section III.I. 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 2019 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 2019 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 2019 
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)

[[Page 20354]]

of the Act, beginning with FY 2005, we delineate hospital labor market 
areas based on OMB[dash]established Core[dash]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 provided updates to 
and superseded OMB Bulletin No. 13-01 that was issued on February 28, 
2013. The attachment to OMB Bulletin No. 15-01 provided detailed 
information on the update to statistical areas since February 28, 2013. 
The updates provided in OMB Bulletin No. 15-01 were 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. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38130), we continued to use the OMB delineations that were 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.
    On August 15, 2017, OMB issued OMB Bulletin No. 17-01, which 
provided updates to and superseded OMB Bulletin No. 15-01 that was 
issued on July 15, 2015. The attachments to OMB Bulletin No. 17-01 
provide detailed information on the update to statistical areas since 
July 15, 2015, 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, 2014 and July 1, 2015. 
In OMB Bulletin No. 17-01, OMB announced that one Micropolitan 
Statistical Area now qualifies as a Metropolitan Statistical Area. The 
new urban CBSA is as follows:
     Twin Falls, Idaho (CBSA 46300). This CBSA is comprised of 
the principal city of Twin Falls, Idaho in Jerome County, Idaho and 
Twin Falls County, Idaho.
    The OMB bulletin is available on the OMB Web site at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2017/b-17-01.pdf. We note that we did not have sufficient time to include this 
change in the computation of the proposed FY 2019 wage index, 
ratesetting, and Tables 2 and 3 associated with this proposed rule. 
This new CBSA may affect the budget neutrality factors and wage 
indexes, depending on whether the area is eligible for the rural floor 
and the impact of the overall payments of the hospital located in this 
new CBSA. We are providing below an estimate of this new area's wage 
index based on the average hourly wages for new CBSA 46300 and the 
national average hourly wages from the wage data for the proposed FY 
2019 wage index (described below in section III.B. of the preamble of 
this proposed rule). Currently, provider 130002 is the only hospital 
located in Twin Falls County, Idaho, and there are no hospitals located 
in Jerome County, Idaho. Thus, the proposed wage index for CBSA 46300 
is calculated using the average hourly wage data for one provider 
(provider 130002).
    Below in sections III.D. and E.2. of the preamble of this proposed 
rule, we provide the proposed FY 2019 unadjusted and occupational mix 
adjusted national average hourly wages. Taking the estimated average 
hourly wage of new CBSA 46300 and dividing by the proposed national 
average hourly wage results in the estimated wage indexes shown in the 
table below.

------------------------------------------------------------------------
                                                             Estimated
                                             Estimated     occupational
                                            unadjusted     mix adjusted
                                          wage index for  wage index for
                                          new CBSA 46300  new CBSA 46300
------------------------------------------------------------------------
Proposed National Average Hourly Wage...    42.990625267    42.948428861
Estimated CBSA Average Hourly Wage......    35.833564813    38.127590025
Estimated Wage Index....................          0.8335          0.8878
------------------------------------------------------------------------

    For FY 2019, we are using the OMB delineations that were adopted 
beginning with FY 2015 to calculate the area wage indexes, with updates 
as reflected in OMB Bulletin Nos. 13-01, 15-01, and 17-01. In the final 
rule, we will incorporate this change into the final FY 2019 wage 
index, ratesetting, and tables.
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. As we discussed in the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38129 through 38130), 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. We believe 
that using the latest FIPS codes will allow us to maintain a more 
accurate and up-to-date payment system

[[Page 20355]]

that reflects the reality of population shifts and labor market 
conditions.
    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. The Census Bureau maintains a complete list of 
changes to counties or county equivalent entities on the website at: 
https://www.census.gov/geo/reference/county-changes.html. 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 the FY 2018 IPPS/LTCH PPS final rule (82 FR 38129 through 38130) 
we adopted a policy to discontinue the use of the SSA county codes and 
began using only the FIPS county codes for purposes of crosswalking 
counties to CBSAs. In addition, in the same rule, we implemented the 
latest FIPS code updates which were effective October 1, 2017, 
beginning with the FY 2018 wage indexes. The updated changes were used 
to calculate the wage indexes in a manner generally consistent with the 
CBSA-based methodologies finalized in the FY 2005 IPPS final rule and 
the FY 2015 IPPS/LTCH PPS final rule.
    For FY 2019, we are continuing to use only the FIPS county codes 
for purposes of crosswalking counties to CBSAs. For FY 2019, 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 website reflect these county changes.

B. Worksheet S-3 Wage Data for the Proposed FY 2019 Wage Index

    The proposed FY 2019 wage index values are based on the data 
collected from the Medicare cost reports submitted by hospitals for 
cost reporting periods beginning in FY 2015 (the FY 2018 wage indexes 
were based on data from cost reporting periods beginning during FY 
2014).
1. Included Categories of Costs
    The proposed FY 2019 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 2018, the 
proposed wage index for FY 2019 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 2019 wage index also 
excludes the salaries, hours, and wage[dash]related costs of 
hospital[dash]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 2019 wage index were obtained 
from Worksheet S-3, Parts II and III of the Medicare cost report (Form 
CMS-2552-10, OMB Control Number 0938-0050) for cost reporting periods 
beginning on or after October 1, 2014, and before October 1, 2015. For 
wage index purposes, we refer to cost reports during this period as the 
``FY 2015 cost report,'' the ``FY 2015 wage data,'' or the ``FY 2015 
data.'' Instructions for completing the wage index sections of 
Worksheet S[dash]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 2019 wage index 
includes FY 2015 data submitted to us as of February 6, 2018. 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 2019 wage index, we 
identified and excluded 80 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 2019 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 the wage data no later 
than March 23, 2018. In addition, as a result of the April and May 
appeals processes, and posting of the April 27, 2018 PUF, we may make 
additional revisions to the FY 2019 wage data, as described further 
below. The revised data would be reflected in the FY 2019 IPPS/LTCH PPS 
final rule.
    In constructing the proposed FY 2019 wage index, we included the 
wage data for facilities that were IPPS hospitals in FY 2015, 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; that is, any 
hospital that is designated as a CAH by 7 days prior to the publication 
of the preliminary wage index public use file (PUF) is excluded from 
the calculation of the wage index). For this proposed

[[Page 20356]]

rule, we removed 8 hospitals that converted to CAH status on or after 
January 23, 2017, the cut-off date for CAH exclusion from the FY 2018 
wage index, and through and including January 26, 2018, the cut-off 
date for CAH exclusion from the FY 2019 wage index. After excluding 
CAHs and hospitals with aberrant data, we calculated the proposed wage 
index using the Worksheet S-3, Parts II and III wage data of 3,260 
hospitals.
    For the proposed FY 2019 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 2018 wage index (82 FR 38131 
through 38132); that is, using campus full-time equivalent (FTE) 
percentages as originally finalized in the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51591). Table 2, which contains the proposed FY 2019 wage 
index associated with this proposed rule (available via the internet on 
the CMS website), includes separate wage data for the campuses of 16 
multicampus hospitals. The following chart lists the multicampus 
hospitals by CSA certification number (CCN) and the FTE percentages on 
which the wages and hours of each campus were allotted to their 
respective labor market areas:

------------------------------------------------------------------------
                                                            Full-time
CSA certification number (CCN) of multicampus hospital  equivalent (FTE)
                                                           percentages
------------------------------------------------------------------------
050121................................................              0.81
05B121................................................              0.19
070022................................................              0.99
07B022................................................              0.01
070033................................................              0.92
07B033................................................              0.08
100029................................................              0.54
10B029................................................              0.46
100167................................................              0.37
10B167................................................              0.63
140010................................................              0.82
14B010................................................              0.18
220074................................................              0.89
22B074................................................              0.11
330234................................................              0.72
33B234................................................              0.28
360019................................................              0.95
36B019................................................              0.05
360020................................................              0.99
36B020................................................              0.01
390006................................................              0.95
39B006................................................              0.05
390115................................................              0.86
39B115................................................              0.14
390142................................................              0.83
39B142................................................              0.17
460051................................................              0.97
46B051................................................              0.03
510022................................................              0.95
51B022................................................              0.05
670062................................................              0.55
67B062................................................              0.45
------------------------------------------------------------------------

    We note that, in past years, in Table 2, we have placed a ``B'' to 
designate the subordinate campus in the fourth position of the hospital 
CCN. However, for this proposed rule and future rulemaking, we have 
moved the ``B'' to the third position of the CCN. Because all IPPS 
hospitals have a ``0'' in the third position of the CCN, we believe 
that placement of the ``B'' in this third position, instead of the 
``0'' for the subordinate campus, is the most efficient method of 
identification and interferes the least with the other, variable, 
digits in the CCN.

D. Method for Computing the Proposed FY 2019 Unadjusted Wage Index

1. Proposed Methodology for FY 2019
    The method used to compute the proposed FY 2019 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, 2014, through April 15, 
2016, 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 2019. The factors used to adjust the hospital's data were 
based on the midpoint of the cost reporting period, as indicated in the 
following table.

                    Midpoint of Cost Reporting Period
------------------------------------------------------------------------
         After                    Before             Adjustment factor
------------------------------------------------------------------------
       10/14/2014               11/15/2014                 1.02567
       11/14/2014               12/15/2014                 1.02413
       12/14/2014               01/15/2015                 1.02257
       01/14/2015               02/15/2015                 1.02100
       02/14/2015               03/15/2015                 1.01941
       03/14/2015               04/15/2015                 1.01784
       04/14/2015               05/15/2015                 1.01627
       05/14/2015               06/15/2015                 1.01471
       06/14/2015               07/15/2015                 1.01316
       07/14/2015               08/15/2015                 1.01161
       08/14/2015               09/15/2015                 1.01007
       09/14/2015               10/15/2015                 1.00849
       10/14/2015               11/15/2015                 1.00685
       11/14/2015               12/15/2015                 1.00516
       12/14/2015               01/15/2016                 1.00343
       01/14/2016               02/15/2016                 1.00171
       02/14/2016               03/15/2016                 1.00000
       03/14/2016               04/15/2016                 0.99824
------------------------------------------------------------------------

    For example, the midpoint of a cost reporting period beginning 
January 1, 2015, and ending December 31, 2015, is June 30, 2015. An 
adjustment factor of 1.01316 would be applied to the wages of a 
hospital with such a cost reporting period.
    Using the data as previously described, the proposed FY 2019 
national average hourly wage (unadjusted for occupational mix) is 
$42.990625267.
    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[dash]specific standardized amount. 
Section 601 of the Consolidated Appropriations Act, 2016 (Pub. L. 
114[dash]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 $42.990625267 for this FY 
2019 proposed rule) and the national wage index, which is applied to 
the national labor share of the national standardized amount. For FY 
2019, we

[[Page 20357]]

are not proposing a Puerto Rico-specific overall average hourly wage or 
wage index.
2. Proposed Update of Policies Related to Other Wage-Related Costs, 
Clarification of the Calculation of Other Wage-Related Costs, and 
Proposals for FY 2020 and Subsequent Years
    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 
clarified in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38132 through 
38136). In addition, the criteria for including other wage[dash]related 
costs in the wage index are listed in the Provider Reimbursement Manual 
(PRM), Part II, Chapter 40, Sections 4005.2 through 4005.4, Line 18 on 
W/S S-3 Part II and Line 25 and its subscripts on W/S S-3 Part IV of 
the Medicare cost report (Form CMS-2552-10, OMB control number 0938-
0050).
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38132 through 
38136), we clarified that 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 noted 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[dash]related costs on Line 18.
    The above instructions for calculating the 1-percent test 
inadvertently omitted Line 15 for Home Office Part A Administrator on 
Worksheet S-3, Part II from the denominator. Line 15 should be included 
in the denominator because Home Office Part A Administrator is added to 
Line 1 in the wage index calculation. Therefore, in this proposed rule, 
we are correcting the inadvertent omission of Line 15 from the 
denominator, and we are clarifying that, for calculating the 1-percent 
test, each individual category of the other wage-related cost (that is, 
the numerator) should be divided by the sum of Worksheet S-3, Part III, 
Lines 3 and 4, Column 4 (that is, the denominator). Line 4 sums the 
following lines from Worksheet S-3, Part II: Lines 11, 12, 13, 14, 
14.01, 14.02, and 15. We also direct readers to instructions for 
calculating the 1-percent test in the Provider Reimbursement Manual 
(PRM), Part II, Chapter 40, Section 4005.4, Line 25 and its subscripts 
on Worksheet S-3, Part IV of the Medicare cost report (Form CMS-2552-
10, OMB control number 0938-0050), which state: ``Calculate the 1-
percent test by dividing each individual category of the other wage-
related cost (that is, the numerator) by the sum of Worksheet S-3, Part 
III, Lines 3 and 4, Column 4, (that is, the denominator).''
    In addition to our discussion about calculating the 1-percent test 
and other criteria for including other-wage related costs in the wage 
index, we stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38133 
through 38166) that we would consider proposing to remove other wage-
related costs from the wage index entirely.
    In the FY 2018 IPPS/LTCH PPS proposed and final rules (82 FR 19901 
and 82 FR 38133, respectively), we stated that 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 stated in the FY 2018 IPPS/LTCH PPS proposed and final rules (82 FR 
19901 and 82 FR 38133, respectively) that we were reconsidering 
allowing other wage-related costs to be included in the wage index 
because internal reviews of the FY 2018 wage data showed that only a 
small minority of hospitals were reporting other wage-related costs 
that meet the 1-percent test described earlier.
    This year, as part of the wage index desk review process for FY 
2019, internal reviews showed that only 8 hospitals out of the more 
than 3,000 IPPS hospitals in the wage index had other wage-related 
costs that were correctly reported for inclusion in the wage index. 
Given the extremely limited number of hospitals nationally using 
Worksheet S-3, Part IV, Line 25 and subscripts, and Worksheet S-3, Part 
II, Line 18, to correctly report other wage-related costs in accordance 
with the criteria to be included in the wage index, we continue to 
believe that other wage-related costs do not constitute an appropriate 
and significant portion of wage costs in a particular labor market 
area. 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 (less than 0.003 percent) accurately reflect the 
economic conditions of the labor market area as a whole in which such 
an individual hospital is located. The fact that only 8 hospitals out 
of more than 3,000 IPPS hospitals included in the FY 2019 IPPS proposed 
wage index reported other wage-related costs correctly in accordance 
with the 1-percent test and related criteria indicates that, in fact, 
other wage-related costs are not a relative measure of the labor costs 
to be included in the IPPS wage index. Therefore, we believe 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 25 and its subscripts of 
Worksheet S-3 Part IV and Line 18 of Worksheet S-3 Part II, in contrast 
to the concrete list of core wage-related costs, may hinder consistent 
and proper reporting of fringe benefits. Our internal reviews indicate 
widely divergent types of costs that hospitals are reporting as other 
wage-related costs on these lines. We are concerned that inconsistent 
reporting of other wage-related costs further compromises the accuracy 
of the wage index as a representation of the relative average hourly 
wage for each labor

[[Page 20358]]

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 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 25 and 
its subscripts of Worksheet S-3 Part IV and Line 18 of Worksheet S-3 
Part II for reporting wage[dash]related costs other than the core list 
indicate that including other wage[dash]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, for the reasons discussed earlier, for the FY 2020 wage 
index and subsequent years, we are proposing 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. Under our proposal, we would no longer consider any other 
wage-related costs beginning with the FY 2020 wage index. Considering 
the extremely limited number of hospitals reporting other wage-related 
costs and the inconsistency in types of other wage-related costs being 
reported, we believe this proposal will help ensure a more consistent 
and more accurate wage index representative of the relative average 
hourly wage for each labor market area. In addition, we believe that 
this proposal to no longer include other wage-related costs in the wage 
index calculation benefits the vast majority of hospitals because most 
hospitals do not report other wage-related costs. Because the wage 
index is budget neutral, hospitals in an area without other wage-
related costs included in the wage index have their wage indexes 
reduced when other areas' wage indexes are raised by including other 
wage[dash]related costs in their wage index calculation. We also note 
that this proposal to exclude other wage[dash]related costs from the 
wage index, starting with the FY 2020 wage index, contributes to agency 
efforts to simplify hospital paperwork burden because it would 
eliminate the need for Line 18 on Worksheet S-3, Part II and Line 25 
and its subscripts on Worksheet S-3, Part IV of the Medicare cost 
report (Form CMS-2552-10, OMB control number 0938-0050). We note that 
we would include in the FY 2019 wage index the other wage-related costs 
of the eight hospitals that accurately reported those costs in 
accordance with the current criteria.
    In summary, we are clarifying that our current policy for 
calculating the 1-percent test includes Line 15 for Home Office Part A 
Administrator on Worksheet S-3, Part II in the denominator. In 
addition, we are proposing to eliminate other wage-related costs from 
the calculation of the wage index for the FY 2020 wage index and 
subsequent years, as discussed earlier. We are inviting public comments 
on this proposal.
3. Proposals To Codify Policies Regarding Multicampus Hospitals
    We have received an increasing number of inquiries regarding the 
treatment of multicampus hospitals as the number of multicampus 
hospitals has grown in recent years. While the regulations at Sec.  
412.230(d)(2)(iii) and (v) for geographic reclassification under the 
MGCRB include criteria for how multicampus hospitals may be 
reclassified, the regulations at Sec.  412.92 for sole community 
hospitals (SCHs), Sec.  412.96 for rural referral centers (RRC), Sec.  
412.103 for rural reclassification, and Sec.  412.108 for 
Medicare[dash]dependent, small rural hospitals (MDHs) do not directly 
address multicampus hospitals. Thus, in this proposed rule, we are 
proposing to codify in these regulations the policies for multicampus 
hospitals that we have developed in response to recent questions 
regarding CMS' treatment of multicampus hospitals for purposes other 
than geographic reclassification under the MGCRB.
    The proposals below apply to hospitals with a main campus and one 
or more remote locations under a single provider agreement where 
services are provided and billed under the IPPS and that meet the 
provider-based criteria at Sec.  413.65 as a main campus and a remote 
location of a hospital, also referred to as multicampus hospitals or 
hospitals with remote locations. We are proposing that a main campus of 
a hospital cannot obtain an SCH, RRC, or MDH status or rural 
reclassification independently or separately from its remote 
location(s), and vice versa. Rather, if the criteria are met in the 
regulations at Sec.  412.92 for SCHs, Sec.  412.96 for RRCs, Sec.  
412.103 for rural reclassification, or Sec.  412.108 for MDHs (as 
discussed later in this section), the hospital (that is, the main 
campus and its remote location(s)) would be granted the special 
treatment or rural reclassification afforded by the aforementioned 
regulations.
    We believe this is an appropriate policy for two reasons. First, 
each remote location of a hospital is included on the main campus's 
cost report and shares the same provider number. That is, the main 
campus and remote location(s) would share the same status or rural 
reclassification because the hospital is a single entity with one 
provider agreement. Second, it would not be administratively feasible 
for CMS and the MACs to track every hospital with remote locations 
within the same CBSA and to assign different statuses or rural 
reclassifications exclusively to the main campus or to its remote 
location. We note that, for wage index purposes only, CMS tracks 
multicampus remote locations located in different CBSAs in order to 
comply with the statutory requirement to adjust for geographic 
differences in hospital wage levels (section 1886(d)(3)(E) of the Act). 
However, for purposes of rural reclassification under Sec.  412.103, we 
do not believe it would be appropriate for a main campus and remote 
location(s) (whether located in the same or separate CBSAs) to be 
reclassified independently or separately from each other because, 
unlike MGCRB reclassifications which are used only for wage index 
purposes, Sec.  412.103 rural reclassifications have payment effects 
other than wage index (for example, payments to disproportionate share 
hospitals (DSHs), and non-Medicare payment provisions, such as the 340B 
Drug Pricing Program administered by HRSA).
    To qualify for rural reclassification or SCH, RRC, or MDH status, 
we are proposing that a hospital with remote locations must demonstrate 
that both the main campus and its remote location(s) satisfy the 
relevant qualifying criteria. A hospital with remote locations submits 
a joint cost report that includes data from its main campus and remote 
location(s), and its MedPAR data also combine data from the main campus 
and remote location(s). We believe that it would not be feasible to 
separate data by location, nor would it be appropriate, because we 
consider a main campus and remote location(s) to be one hospital. 
Therefore, where the regulations at Sec.  412.92, Sec.  412.96, Sec.  
412.103, and Sec.  412.108 require data, such as bed count, number of 
discharges, or case-mix index, for example, to demonstrate that the 
hospital meets the qualifying criteria, we are proposing to codify in 
our regulations that the combined data from the main campus and its 
remote location(s) are to be used.

[[Page 20359]]

    For example, if a hospital with a main campus with 200 beds and a 
remote location with 75 beds applies for RRC status, the combined count 
of 275 beds would be considered the hospital's bed count, and the main 
campus and its remote location would be granted RRC status if the 
hospital applies during the last quarter of its cost reporting period 
and both the main campus and the remote location are located in a rural 
area as defined in 42 CFR part 412, subpart D. This is consistent with 
the regulation at Sec.  412.96(b)(1), which states, in part, that the 
number of beds is determined under the provisions of Sec.  412.105(b). 
For Sec.  412.105(b), beds are counted from the main campus and remote 
location(s) of a hospital. We believe this is also consistent with 
Sec.  412.96(b)(1)(ii), which sets forth the criteria that the hospital 
is located in a rural area and the hospital has a bed count of 275 or 
more beds during its most recently completed cost reporting period, 
unless the hospital submits written documentation with its application 
that its bed count has changed since the close of its most recently 
completed cost reporting period for one or more of several reasons, 
including the merger of two or more hospitals.
    Similarly, combined data would be used for demonstrating the 
hospital meets criteria at Sec.  412.92 for SCH status. For example, 
the patient origin data, which are typically MedPAR data used to 
document the boundaries of the hospital's service area as required in 
Sec.  412.92(b)(1)(ii) and (iii), would be used from both locations. We 
reiterate that we believe this is the appropriate policy because the 
main campus and remote location are considered one hospital and that it 
is the only administratively feasible policy because there is currently 
no way to split the MedPAR data for each location.
    For Sec.  412.103 rural reclassification, a hospital with remote 
location(s) seeking to qualify under Sec.  412.103(a)(3), which 
requires that the hospital would qualify as an RRC or SCH if the 
hospital were located in a rural area, would similarly demonstrate that 
it meets the criteria at Sec.  412.92 or at Sec.  412.96, such as bed 
count, by using combined data from the main campus and its remote 
location(s) (with the exception of certain criteria discussed below 
related to location, mileage, travel time, and distance requirements). 
We refer readers to the portions of our discussion that explain how 
hospitals with remote locations would meet criteria for RRC or SCH 
status.
    A hospital seeking MDH status would also use combined data for bed 
count and discharges to demonstrate that it meets the criteria at Sec.  
412.108(a)(1). For example, if the main campus of a hospital has 75 
beds and its remote location has 30 beds, the bed count exceeds 100 
beds and the hospital would not satisfy the criteria at Sec.  
412.108(a)(1)(i) (which is proposed to be redesignated as 
412.108(a)(1)(ii)).
    We are reminding readers that, under Sec.  412.108(b)(4) and Sec.  
412.92(b)(3)(i), an approved MDH or SCH status determination remains in 
effect unless there is a change in the circumstances under which the 
status was approved. While we believe that this proposal is consistent 
with the policies for multicampus hospitals that we have developed in 
response to recent questions, current MDHs and SCHs should make sure 
that this proposal does not create a change in circumstance (such as an 
increase in the number of beds to more than 100 for MDHs or to more 
than 50 for SCHs), which an MDH or SCH is required to report to the MAC 
within 30 days of the event, in accordance with Sec.  412.108(b)(4)(ii) 
and (iii) and Sec.  412.92(b)(3)(ii) and (iii).
    With regard to other qualifying criteria set forth in the 
regulations at Sec. Sec.  412.92, 412.96, 412.103, and 412.108 that do 
not involve data that can be combined, specifically qualifying criteria 
related to location, mileage, travel time, and distance requirements, a 
hospital would need to demonstrate that the main campus and its remote 
location(s) each independently satisfy those requirements in order for 
the entire hospital, including its remote location(s), to be 
reclassified or obtain a special status.
    To qualify for SCH status, for example, it would be insufficient 
for only the main campus, and not the remote location, to meet distance 
criteria. Rather, the main campus and its remote location(s) would each 
need to meet at least one of the criteria at Sec.  412.92(a). 
Specifically, the main campus and its remote location must each be 
located more than 35 miles from other like hospitals, or if in a rural 
area (as defined in Sec.  412.64), be located between 25 and 35 miles 
from other like hospitals if meeting one of the criteria at Sec.  
412.92(a)(1) (and each meet the criterion at Sec.  412.92(a)(1)(iii) if 
applicable), or between 15 and 25 miles from other like hospitals if 
the other like hospitals are inaccessible for at least 30 days in each 
2 out of 3 years (Sec.  412.92(a)(2)), or travel time to the nearest 
like hospital is at least 45 minutes (Sec.  412.92(a)(3)). We believe 
that this is necessary to show that the hospital is indeed the sole 
source of inpatient hospital services reasonably available to 
individuals in a geographic area who are entitled to benefits under 
Medicare Part A, as required by section 1886(d)(5)(D)(iii)(II) of the 
Act. For hospitals with remote locations that apply for SCH 
classification under Sec.  412.92(a)(1)(i) and (ii), combined data are 
used to document the boundaries of the hospital's service area using 
data from across both locations, as discussed earlier, and all like 
hospitals within a 35-mile radius of each location are included in the 
analysis. To be located in a rural area to use the criteria in Sec.  
412.92(a)(1), (2), and (3), the main campus and its remote location(s) 
must each be either geographically located in a rural area, as defined 
in Sec.  412.64, or reclassified as rural under Sec.  412.103.
    Similarly, for RRC classification under Sec.  412.96 and MDH 
classification under Sec.  412.108, the main campus and its remote 
location(s) must each be either geographically located in a rural area, 
as defined in 42 CFR part 412, subpart D, or reclassified as rural 
under Sec.  412.103 to meet the rural requirement portion of the 
criteria at Sec.  412.96(b)(1), Sec.  412.96(c), or Sec.  412.108(a)(1) 
(or for MDH, be located in a State with no rural area and satisfy any 
of the criteria under Sec.  412.103(a)(1) or (a)(3) or under Sec.  
412.103(a)(2) as of January 1, 2018). For hospitals with remote 
locations that apply for RRC classification under Sec.  
412.96(b)(2)(ii) or Sec.  412.96(c)(4), 25 miles is calculated from 
each location (the main campus and its remote location(s)), and 
combined data from both the main campus and its remote location(s) are 
used to calculate the percentage of Medicare patients, services 
furnished to Medicare beneficiaries, and discharges.
    For hospitals seeking to reclassify as rural by meeting the 
criteria at Sec.  412.103(a)(1), (a)(2), or (a)(6), we also are 
proposing to codify in our regulations that it would not be sufficient 
for only the main campus, and not its remote location(s), to 
demonstrate that its location meets the aforementioned criteria. 
Rather, under Sec.  412.103(a)(1) and (2) (which also are incorporated 
in Sec.  412.103(a)(6)), we are proposing that the main campus and its 
remote location(s) must each either be located (1) in a rural census 
tract of an MSA as determined under the most recent version of the 
Goldsmith Modification, the Rural-Urban Commuting Area codes (Sec.  
412.103(a)(1)), or (2) in an area designated by any law or regulation 
of the State in which it is located as a rural area, or be designated 
as a rural hospital by State law or regulation (Sec.  412.103(a)(2)). 
For hospitals seeking to reclassify as rural

[[Page 20360]]

by meeting the criteria in Sec.  412.103(a)(3), which require that the 
hospital would qualify as an RRC or a SCH if the hospital were located 
in a rural area, we refer readers to our discussion presented earlier 
that explains how hospitals with remote locations would meet criteria 
for RRC or SCH status.
    We note that we have also received questions about how a hospital 
with remote locations that trains residents in approved medical 
residency training programs would be treated for IME adjustment 
purposes if it reclassifies as rural under Sec.  412.103. As we noted 
in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50114), the rural 
reclassification provision of Sec.  412.103 only applies to IPPS 
hospitals under section 1886(d) of the Act. Therefore, it applies for 
IME payment purposes, given that the IME adjustment under section 
1886(d)(5)(B) of the Act is an additional payment under IPPS. In 
contrast, sections 1886(a)(4) and (d)(1)(A) of the Act exclude direct 
GME costs from operating costs and these costs are not included in the 
calculation of the IPPS payment rates for inpatient hospital services. 
Payment for direct GME is separately authorized under section 1886(h) 
of the Act and, therefore, not subject to Sec.  412.103. Therefore, if 
a geographically urban teaching hospital reclassifies as rural under 
Sec.  412.103, such a reclassification would only affect the teaching 
hospital's IME adjustment, and not its direct GME payment. Accordingly, 
we are clarifying that in order for the IME cap adjustment regulations 
at Sec.  412.105(f)(1)(iv)(A), Sec.  412.105(f)(1)(vii), and Sec.  
412.105(f)(1)(xv) to be applicable to a teaching hospital with a main 
campus and a remote location(s), the main campus and its remote 
location(s), respectively, must each be either geographically located 
in a rural area as defined in 42 CFR part 412, subpart D, or 
reclassified as rural under Sec.  412.103. For direct GME purposes at 
Sec.  413.79, both the main campus and its remote location(s) are 
required to be geographically rural because a hospital's status for any 
direct GME payments or adjustments is unaffected by a Sec.  412.103 
rural reclassification.
    We are proposing to codify these policies regarding the application 
of the qualifying criteria for hospitals with remote locations in the 
regulations at Sec.  412.92 for SCHs, Sec.  412.96 for RRCs, Sec.  
412.103 for rural reclassification, or Sec.  412.108 for MDHs. 
Specifically, we are proposing to revise these regulations as follows:
    We are proposing to add paragraph (a)(4) to Sec.  412.92 to specify 
that, for a hospital with a main campus and one or more remote 
locations under a single provider agreement where services are provided 
and billed under the IPPS and that meets the provider-based criteria at 
Sec.  413.65 as a main campus and a remote location of a hospital, 
combined data from the main campus and its remote location(s) are 
required to demonstrate that the criteria at Sec.  412.92(a)(1)(i) and 
(ii) are met. For the mileage and rural location criteria at Sec.  
412.92(a) and the mileage, accessibility, and travel time criteria 
specified at Sec.  412.92(a)(1) through (a)(3), the hospital must 
demonstrate that the main campus and its remote location(s) each 
independently satisfy those requirements.
    In Sec.  412.96, we are proposing to redesignate paragraph (d) as 
paragraph (e) and add a new paragraph (d) to specify that, for a 
hospital with a main campus and one or more remote locations under a 
single provider agreement where services are provided and billed under 
the IPPS and that meets the provider-based criteria at Sec.  413.65 as 
a main campus and a remote location of a hospital, combined data from 
the main campus and its remote location(s) are required to demonstrate 
that the criteria at Sec.  412.96(b)(1) and (2) and (c)(1) through 
(c)(5) are met. For purposes of meeting the rural location criteria in 
Sec.  412.96(b)(1) and (c) and the mileage criteria in Sec.  
412.96(b)(2)(ii) and (c)(4), the hospital must demonstrate that the 
main campus and its remote location(s) each independently satisfy those 
requirements.
    We are proposing to add paragraph (a)(7) to Sec.  412.103 to 
specify that, for a hospital with a main campus and one or more remote 
locations under a single provider agreement where services are provided 
and billed under the IPPS and that meets the provider-based criteria at 
Sec.  413.65 as a main campus and a remote location of a hospital, the 
hospital must demonstrate that the main campus and its remote 
location(s) each independently satisfy the location criteria specified 
in Sec.  412.103(a)(1) and (2) (which criteria also are incorporated in 
Sec.  412.103(a)(6)).
    We are proposing to add paragraph (a)(3) to Sec.  412.108 to 
specify that, for a hospital with a main campus and one or more remote 
locations under a single provider agreement where services are provided 
and billed under the IPPS and that meets the provider-based criteria at 
Sec.  413.65 as a main campus and a remote location of a hospital, 
combined data from the main campus and its remote location(s) are 
required to demonstrate that the criteria in Sec.  412.108(a)(1) and 
(2) are met. For the location requirement specified at proposed amended 
paragraph (a)(1)(i) of this section, the hospital must demonstrate that 
the main campus and its remote location(s) each independently satisfy 
this requirement.
    We are inviting public comments on our proposals described above.

E. Proposed Occupational Mix Adjustment to the FY 2019 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 2016 Medicare Wage Index Occupational Mix Survey for the 
Proposed FY 2019 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 Medicare 
program. We collected data in 2013 to compute the occupational mix 
adjustment for the FY 2016, FY 2017, and FY 2018 wage indexes. As 
discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19903) and 
final rule (82 FR 38137), a new measurement of occupational mix is 
required for FY 2019.
    The FY 2019 occupational mix adjustment is based on a new calendar 
year (CY) 2016 survey. Hospitals were required to submit their 
completed 2016 surveys (Form CMS-10079, OMB number 0938-0907) to their 
MACs by July 3, 2017. The preliminary, unaudited CY 2016 survey data 
were posted on the CMS website on July 12, 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 revised or verified data elements in 
hospitals' occupational mix surveys that result in certain edit 
failures.

[[Page 20361]]

2. Calculation of the Proposed Occupational Mix Adjustment for FY 2019
    For FY 2019, 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 2019 wage index. 
Similar to the method we use for the calculation of the wage index 
without occupational mix, salaries and hours for a multicampus hospital 
are allotted among the different labor market areas where its campuses 
are located. Table 2 associated with this proposed rule (which is 
available via the Internet on the CMS website), which contains the 
proposed FY 2019 occupational mix adjusted wage index, includes 
separate wage data for the campuses of 16 multicampus hospitals. We 
refer readers to section III.C. of the preamble of this proposed rule 
for a chart listing the multicampus hospitals and the FTE percentages 
used to allot their occupational mix data.
    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 2019 wage index. For the proposed FY 2019 wage index, we are 
using the Worksheet S-3, Parts II and III wage data of 3,260 hospitals, 
and we are using the occupational mix surveys of 3,078 hospitals for 
which we also have Worksheet S-3 wage data, which represented a 
``response'' rate of 94 percent (3,078/3,260). For the proposed FY 2019 
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 2019 occupational mix 
adjusted national average hourly wage is $42.948428861.
    In summary, the proposed FY 2019 unadjusted national average hourly 
wage and the proposed FY 2019 occupational mix adjusted national 
average hourly wage is:

------------------------------------------------------------------------
    Proposed unadjusted national      Proposed occupational mix adjusted
        average hourly wage              national average hourly wage
------------------------------------------------------------------------
              $42.990625267                        $42.948428861
------------------------------------------------------------------------

F. Analysis and Implementation of the Proposed Occupational Mix 
Adjustment and the Proposed FY 2019 Occupational Mix Adjusted Wage 
Index

    As discussed in section III.E. of the preamble of this proposed 
rule, for FY 2019, we are proposing to apply the occupational mix 
adjustment to 100 percent of the FY 2019 wage index. We calculated the 
proposed occupational mix adjustment using data from the 2016 
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 2019 wage index results in a 
proposed national average hourly wage of $42.948428861.
    The proposed FY 2019 national average hourly wages for each 
occupational mix nursing subcategory as calculated in Step 2 of the 
occupational mix calculation are as follows:

------------------------------------------------------------------------
                                                          Average hourly
          Occupational mix nursing subcategory                 wage
------------------------------------------------------------------------
National RN.............................................    $41.67064907
National LPN and Surgical Technician....................     24.68950438
National Nurse Aide, Orderly, and Attendant.............     16.96671421
National Medical Assistant..............................      18.1339666
National Nurse Category.................................     35.05256013
------------------------------------------------------------------------

    The proposed national average hourly wage for the entire nurse 
category as computed in Step 5 of the occupational mix calculation is 
$35.05256013. 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 2016 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 42.3 percent, 
and the national percentage of hospital employees in the all other 
occupations category is 57.7 percent. At the CBSA level, the percentage 
of hospital employees in the nurse category ranged from a low of 26.6 
percent in one CBSA to a high of 82.0 percent in another CBSA.
    We compared the FY 2019 proposed occupational mix adjusted wage 
indexes for each CBSA to the proposed 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 232 (56.9 percent) 
urban areas and 23 (48.9 percent) rural areas would increase. The 
proposed wage index values for 113 (27.7 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 7 (1.7 percent) urban areas 
would increase by 5 percent or more. The proposed wage index values for 
9 (19.1 percent) rural areas would increase by greater than or equal to 
1 percent but less than 5 percent, and 1 rural area's proposed wage 
index value would increase by 5 percent or more. However, the proposed 
wage index values for 175 (42.9 percent) urban areas and 24 (51.1 
percent) rural areas would decrease. The proposed wage index values for 
81 (19.9 percent) urban areas would decrease by greater than or equal 
to 1 percent but less than 5 percent, and 1 urban area's proposed wage 
index value would decrease by 5 percent or more. The proposed wage 
index values of 6 (12.8 percent) rural areas would decrease by greater 
than or equal to 1 percent and less than 5 percent, and no rural areas' 
proposed wage index values would decrease by 5 percent or more. The 
largest proposed positive impacts would be 6.42 percent for an urban 
area and 5.25 percent for a rural area. The largest proposed negative 
impacts would be 5.84 percent for an urban area and 1.6 percent for a 
rural area. One urban area's proposed wage indexes, but no rural area 
proposed wage indexes, would remain unchanged by application of the 
occupational mix adjustment. These results indicate that a larger 
percentage of urban areas (56.9 percent) would benefit from the 
occupational mix adjustment than would rural areas (48.9 percent).
    We also compared the FY 2019 wage data adjusted for occupational 
mix from the 2016 survey to the FY 2019 wage data adjusted for 
occupational mix from the 2013 survey. This analysis illustrates the 
effect on area wage indexes of using the 2016 survey data compared to 
the 2013 survey data; that is, it shows whether hospitals' wage indexes 
would increase or decrease under the 2016 survey data as compared to 
the prior 2013 survey data. Of the 407

[[Page 20362]]

urban CBSAs and 47 rural CBSAs, our analysis shows that the FY 2019 
wage index values for 179 (43.9 percent) urban areas and 20 (42.6 
percent) rural areas would increase using the 2016 survey data. Ninety-
eight (24.0 percent) urban areas would increase by greater than or 
equal to 1 percent but less than 5 percent, and 27 (6.6 percent) urban 
areas would increase by 5 percent or more. Nine (19.1 percent) rural 
areas would increase by greater than or equal to 1 percent but less 
than 5 percent, and 4 (8.5 percent) rural areas would increase by 5 
percent or more. However, the wage index values for 229 (56.1 percent) 
urban areas and 27 (57.4 percent) rural areas would decrease using the 
2016 survey data. One hundred thirty three (32.6 percent) urban areas 
would decrease by greater than or equal to 1 percent but less than 5 
percent, and 24 (5.9 percent) urban areas would decrease by 5 percent 
or more. Eleven (23.4 percent) rural areas would decrease by greater 
than or equal to 1 percent but less than 5 percent, and 2 (4.3 percent) 
rural areas would decrease by 5 percent or more. The largest positive 
impacts using the 2016 survey data compared to the 2013 survey data are 
17.2 percent for an urban area and 13.8 percent for a rural area. The 
largest negative impacts are 13.0 percent for an urban area and 14.0 
percent for rural areas. No urban areas and no rural areas are 
unaffected. These results indicate that the wage indexes of more CBSAs 
overall (56.3 percent) would decrease due to application of the 2016 
occupational mix survey data as compared to the 2013 occupational mix 
survey data to the wage index. Further, a slightly larger percentage of 
urban areas (43.9 percent) would benefit from the use of the 2016 
occupational mix survey data as compared to the 2013 occupational mix 
survey data than would rural areas (42.6 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 2019 wage index associated with this proposed rule 
(which is available via the Internet on the CMS website), we estimated 
that 255 hospitals would receive an increase in their FY 2019 proposed 
wage index due to the application of the rural floor.
2. Proposed Expiration of 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[dash]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 eight times, 
the last of which was adopted in the FY 2018 IPPS/LTCH PPS final rule 
and is set to expire on September 30, 2018. (We refer readers to 
further discussions of the imputed floor in the IPPS/LTCH PPS final 
rules from FY 2014 through FY 2018 (78 FR 50589 through 50590, 79 FR 
49969 through 49970, 80 FR 49497 through 49498, 81 FR 56921 through 
56922, and 82 FR 38138 through 38142, 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.I. 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[dash]reclassified, pre-
floor area wage index and the post[dash]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 
website) included the CBSAs receiving a State's rural floor wage 
index.) The lowest post-reclassified wage index assigned to a hospital 
in an all-urban State having a range of such values then is increased 
by this factor, the result of which establishes the State's alternative 
imputed floor. We amended Sec.  412.64(h)(4) of the regulations to add 
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

[[Page 20363]]

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 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 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 the FY 2018 IPPS/LTCH PPS final rule (82 FR 38138 through 
38142), for FY 2018, we extended the imputed floor policy (under both 
the original methodology and the alternative methodology) for 1 
additional year, through September 30, 2018. In these three final 
rules, we revised the regulations at Sec.  412.64(h)(4) and (h)(4)(vi) 
to reflect the additional 1-year extensions.
    The imputed floor is set to expire effective October 1, 2018, and 
in this FY 2019 proposed rule, 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 the 
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 2019 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 2019 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 2019 IPPS/LTCH PPS proposed rule (which are 
available via the Internet on the CMS website) do not reflect the 
imputed floor policy, and there is no proposed national budget 
neutrality adjustment for the imputed floor for FY 2019.
    We are inviting public comments on our proposal not to extend the 
imputed floor for FY 2019 and subsequent years.
3. Proposed State Frontier Floor for FY 2019
    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).) In this FY 2019 IPPS/
LTCH PPS proposed rule, we are not proposing any changes to the 
frontier floor policy for FY 2019. In this proposed rule, 50 hospitals 
would receive the frontier floor value of 1.0000 for their FY 2019 wage 
index. These hospitals are located in Montana, Nevada, North Dakota, 
South Dakota, and Wyoming.
    The areas affected by the proposed rural and frontier floor 
policies for the proposed FY 2019 wage index are identified in Table 2 
associated with this proposed rule, which is available via the Internet 
on the CMS website.

H. Proposed FY 2019 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 website. 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). In 
addition, as discussed in section III.J. of the preamble of this 
proposed rule, we are adding a Table 4 associated with this proposed 
rule entitled ``List of Counties Eligible for the Out-Migration 
Adjustment under Section 1886(d)(13) of the Act--FY 2019'' (which is 
available via Internet on the CMS Website) We refer readers to section 
VI. of the Addendum to this proposed rule for a discussion of the 
proposed wage index tables for FY 2019.

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

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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 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 2019
a. FY 2019 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 2019 reclassification requests. Based on 
such reviews, there are 337 hospitals approved for wage index 
reclassifications by the MGCRB starting in FY 2019. Because MGCRB wage 
index reclassifications are effective for 3 years, for FY 2019, 
hospitals reclassified beginning in FY 2017 or FY 2018 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 259 hospitals approved for wage index reclassifications in 
FY 2017 that will continue for FY 2019, and 345 hospitals approved for 
wage index reclassifications in FY 2018 that will continue for FY 2019. 
Of all the hospitals approved for reclassification for FY 2017, FY 
2018, and FY 2019, based upon the review at the time of this proposed 
rule, 941 hospitals are in a MGCRB reclassification status for FY 2019 
(with 22 of these hospitals reclassified back to their geographic 
location).
    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 any time before 
the MGCRB issues a decision on the application, or after the MGCRB 
issues a decision, provided the request for withdrawal is received by 
the MGCRB within 45 days of the date that CMS' annual notice of 
proposed rulemaking is issued in the Federal Register concerning 
changes to the inpatient hospital prospective payment system and 
proposed payment rates for the fiscal year for which the application 
has been filed. For information about withdrawing, terminating, or 
canceling a previous withdrawal or termination of a 3[dash]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) and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148 through 
38150).
    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 2019 will be incorporated 
into the wage index values published in the FY 2019 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 2020 reclassifications (OMB control number 
0938-0573) are due to the MGCRB by September 4, 2018 (the first working 
day of September 2018). 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 
2018, via the Internet on the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB/index.html, or by calling 
the MGCRB at (410) 786[dash]1174. The mailing address of the MGCRB is: 
1508 Woodlawn Drive, Suite 100, Baltimore, MD 21207.
    Under regulations in effect prior to FY 2018 (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. Specifically, in the FY 
2017 IPPS/LTCH PPS final rule, 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

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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. Proposed Revision of Reclassification Requirements for a Provider 
That Is the Sole Hospital in the MSA
    Section 412.230 of the regulations sets forth criteria for an 
individual hospital to apply for geographic reclassification to a 
higher rural or urban wage index area. Specifically, under Sec.  
412.230(a)(1)(ii), an individual hospital may be redesignated from an 
urban area to another urban area, from a rural area to another rural 
area, or from a rural area to an urban area for the purpose of using 
the other area's wage index value. Such a hospital must also meet other 
criteria. One of these required criteria, under Sec.  
412.230(d)(1)(iii)(C), is that the hospital must demonstrate that its 
own average hourly wage is, in the case of a hospital located in a 
rural area, at least 106 percent, and in the case of a hospital located 
in an urban area, at least 108 percent of the average hourly wage of 
all other hospitals in the area in which the hospital is located. We 
refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48568) for 
further explanation as to how the 108/106 percent average hourly wage 
standards were determined. In cases in which a hospital wishing to 
reclassify is the only hospital in its MSA, that hospital is unable to 
satisfy this criterion because it cannot demonstrate that its average 
hourly wage is higher than that of the other hospitals in the area in 
which the hospital is located (because there are no other hospitals in 
the area).
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51600 through 
51601), we implemented a policy change to allow for waiver of the 
average hourly wage comparison criterion under Sec.  412.230(d)(1)(iii) 
for a hospital in a single hospital MSA for reclassifications beginning 
in FY 2013 if the hospital could document that it is the single 
hospital in its MSA that is paid under 42 CFR part 412, subpart D 
(Sec.  412.230(d)(5)). In that final rule, we stated that we agreed 
that the then-current policies for geographic reclassification were 
disparate for hospitals located in single hospital MSAs compared to 
hospitals located in multiple hospital MSAs. We also acknowledged 
commenters' views that this disparity was sometimes a disadvantage 
because hospitals in single hospital MSAs had fewer options for 
qualifying for geographic reclassification. In the years since we 
implemented this policy change, we have encountered questions and 
concerns regarding its implementation. Currently, to qualify under 
Sec.  412.230(d)(5) for the waiver of the average hourly wage criterion 
under Sec.  412.230(d)(1)(iii)(C), a hospital must document to the 
MGCRB that it is the only hospital in its geographic wage index area 
that is paid under 42 CFR part 412, subpart D. To do so, a hospital 
frequently is required to contact the appropriate CMS Regional Office 
or MAC for a statement certifying its status as the single hospital in 
its MSA. Hospitals have indicated that this process may be time-
consuming, inconsistent in its application nationally, and poses 
challenges with respect to accurately reflecting situations where 
hospitals have recently opened or ceased operations during the 
application process. In light of these questions and concerns and after 
reviewing the implementation of this reclassification provision, we 
believe that a revision of the policy is necessary to reduce 
unnecessary burden to affected hospitals and enhance consistency while 
achieving previously stated policy goals.
    The objective of the 108/106 percent average hourly wage criterion 
at Sec.  412.230(d)(1)(iii)(C) is to require a reclassifying hospital 
to document that it has significantly higher average hourly wages than 
other hospitals in its labor market area. The stated purpose of Sec.  
412.230(d)(5) was to provide additional reclassification options for 
hospitals that, due to their single hospital MSA status, could not 
mathematically meet the requirements of Sec.  412.230(d)(1)(iii). 
Therefore, in order to determine whether a hospital is the single 
hospital in the MSA under Sec.  412.230(d)(5), rather than require the 
hospital to obtain documentation from the CMS Regional Office or the 
MAC to prove its single hospital MSA status, we believe it would be 
appropriate to use the same data used to determine whether the 108/106 
percent criterion is met under Sec.  412.230(d)(1)(iii)(C): That is, 
the annually published 3-year average hourly wage data as provided in 
Sec.  412.230(d)(2)(ii). Specifically, in this proposed rule, we are 
proposing that, for reclassification applications for FY 2021 and 
subsequent fiscal years, a hospital would provide the wage index data 
from the current year's IPPS final rule to demonstrate that it is the 
only hospital in its labor market area with wage data listed within the 
3-year period considered by the MGCRB. Accordingly, we are proposing to 
revise the regulation text at Sec.  412.230(d)(5) to provide that the 
requirements of Sec.  412.230(d)(1)(iii) would not apply if a hospital 
is the single hospital in its MSA with published 3-year average hourly 
wage data included in the current fiscal year inpatient prospective 
payment system final rule. In proposing this revision, we would remove 
the language in this regulation requiring that the hospital be the 
single hospital ``paid under subpart D of this part'', as we believe 
the proposed revisions to the regulation above more accurately identify 
the universe of hospitals this policy was intended to address. That is, 
to meet the requirements of a single hospital MSA, we are proposing 
that a hospital applying for reclassification beginning in FY 2021 
(application that is due September 1, 2019) must only provide 
documentation from Table 2 of the Addendum to the FY 2020 IPPS/LTCH PPS 
final rule demonstrating it is the only CCN listed within the 
associated ``Geographic CBSA'' numbers (currently listed under column 
H) with a ``3[dash]Year Average Hourly Wage (2018, 2019, 2020)'' value 
(currently listed under column G).
    The purpose of the single hospital MSA provision was to address 
situations where a hospital essentially had no means of comparing wages 
to other hospitals in it labor market area. We believe this proposal 
would allow for a more straightforward and consistent implementation of 
the single hospital MSA exception and would reduce provider burden. We 
believe the proposed requirements above for meeting the single hospital 
MSA exception can be easily verified and validated by the applicant and 
the MGCRB, and would continue to address the concerns expressed by 
commenters included in the FY 2012 IPPS/LTCH PPS final rule.
    We are inviting public comments on this proposal, which, if 
finalized, would be effective for reclassifications beginning in FY 
2021.

[[Page 20366]]

c. Clarification of Group Reclassification Policies for Multicampus 
Hospitals
    Under current policy described in Sec. Sec.  412.230(d)(2)(v), 
412.232(d)(2)(iii), and 412.234(c)(2), and as discussed in the FY 2008 
IPPS/LTCH final rule (72 FR 47334 through 47335), remote locations of 
hospitals in a distinct geographic area from the main hospital campus 
are eligible to seek wage index reclassification. In Table 2 associated 
with this proposed rule (which is available via the Internet on the CMS 
website), such locations are indicated with a ``B'' in the third digit 
of the CCN. (As discussed in section III.C. of the preamble of this 
proposed rule, in past years, the ``B'' was instead placed in the 
fourth digit.) When CMS initially includes such a ``B'' hospital 
location in Table 2 for a particular fiscal year, it signifies that, 
for wage index purposes, the hospital indicated the presence of a 
remote location in a distinct geographic area on Worksheet S-2 of the 
cost report used to construct that current fiscal year's wage index, 
and hours and wages were allocated between the main campus and the 
remote location. For billing purposes, these ``B'' locations are 
assigned their own area wage index value, separate from the main 
hospital campus. Hospitals are eligible to seek both individual and 
county group reclassifications for these ``B'' locations through the 
MGCRB, using the wage data published for the most recent IPPS final 
rule for the ``B'' location. While we are not proposing any change to 
the multicampus hospital reclassification policy, it has come to our 
attention that the MGCRB has had difficulty processing certain county 
group reclassification applications that include multicampus locations 
that have not yet been assigned a ``B'' number in Table 2. Typically, 
this would occur when an inpatient hospital location has recently been 
opened or acquired, creating a new ``B'' location. Because the wage 
index development process utilizes cost reports that end up to 4 years 
prior to the upcoming IPPS fiscal year, the most recently published 
wage data for the hospital used to construct the wage index would not 
reflect the specific wage data for any new ``B'' location in a 
different labor market area. However, as specified in Sec. Sec.  
412.232(a)(2) and 412.234(a)(1) of the regulations, for county group 
reclassification applications, all hospitals in a county must apply for 
reclassification as a group. Thus, in order for hospitals in a county 
to obtain reclassification as a group, these new ``B'' locations are 
required under these regulations to be a party to any county group 
reclassification application, despite not having wage data published in 
Table 2. In a group reclassification involving a new ``B'' location, 
the ``B'' location would not yet have data included in the CMS hospital 
survey used to construct the wage index and to evaluate 
reclassification requests, and the most recently published wage data of 
the main hospital would encompass a time period well before the 
creation or acquisition of the new remote location. Therefore, the 
hospital could not submit composite average hourly wage data for the 
``B'' location with the county group reclassification application. 
Because the county group reclassification application must list all 
active hospitals located in the county of the hospital group, including 
any ``B'' locations, if a ``B'' number is not listed in Table 2 
associated with the IPPS final rule used to evaluate reclassification 
criteria, we are requesting that the county hospital group submit the 
application listing the remote location with a ``B'' in the third digit 
of the hospital's CCN to help facilitate the MGCRB's review. If the 
county group reclassification is approved by the MGCRB, CMS will 
include the hospital's ``B'' location in Table 2 of the subsequent IPPS 
final rule, and will instruct the MAC to adjust the payment for that 
remote location to the appropriate reclassified area. This ``B'' 
location designation would be included in subsequent rules, without 
composite wage data, until a time when the wage data of the new 
location are included in the cost report used to construct the wage 
index in effect for IPPS purposes, and a proper allocation can be 
determined.
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, in that rule, 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[dash]year period for which its out-
migration adjustment is effective. By doing so, such a Lugar hospital 
would no longer be required during the second and third years of 
eligibility for the out[dash]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]. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38147 through 38148), we finalized a policy revision 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. These revised notification 
timeframes were effective beginning October 1, 2017. In addition, in 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148), we clarified that 
both requests to waive and to reinstate ``Lugar'' status may be sent to 
[email protected]. 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.

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 Public Law 108-173, beginning with FY 2005, we 
established a process to make adjustments to the hospital wage index 
based on commuting patterns of hospital employees (the 
``out[dash]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

[[Page 20367]]

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 that 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 FYs 2016, 2017, and 
2018 IPPS/LTCH PPS final rules (80 FR 49501, 81 FR 56930, and 82 FR 
38150, respectively), the same policies, procedures, and computation 
that were used for the FY 2012 out[dash]migration adjustment were 
applicable for FY 2016, FY 2017 and FY 2018, and we are proposing to 
use them again for FY 2019. We have applied the same policies, 
procedures, and computations since FY 2012, and we believe they 
continue to be appropriate for FY 2019. 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 2019, the out-migration adjustment will continue to be based 
on the data derived from the custom tabulation of the ACS utilizing 
2008 through 2012 (5-year) Microdata. For future fiscal years, we may 
consider determining out-migration adjustments based on data from the 
next Census or other available data, as appropriate. For FY 2019, 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[dash]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 website) includes the proposed out-migration adjustments for 
the FY 2019 wage index.
    In addition, we are adding a new Table 4, ``List of Counties 
Eligible for the Out-Migration Adjustment under Section 1886(d)(13) of 
the Act--FY 2019,''associated with this proposed rule. This table 
consists of the following: a list of counties that would be eligible 
for the out-migration adjustment for FY 2019 identified by FIPS county 
code, the proposed FY 2019 out-migration adjustment, and the number of 
years the adjustment would be in effect. We believe this new table 
would make this information more transparent and provide the public 
with easier access to this information. We intend to make the 
information available annually via Table 4 in the IPPS/LTCH PPS 
proposed and final rules, and are including it among the tables 
associated with this FY 2019 IPPS/LTCH PPS proposed rule that are 
available via the Internet on the CMS website.

K. Reclassification From Urban to Rural Under Section 1886(d)(8)(E) of 
the Act, Implemented at 42 CFR 412.103 and Proposed Change to Lock-In 
Date

    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 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 stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931) that we 
believed 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 (the lock-in 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.
    In this FY 2019 IPPS/LTCH PPS proposed rule, we are proposing to 
change the lock-in date to provide for additional time in the 
ratesetting process and to match the lock-in date with another existing 
deadline. As we discussed in the FY 2017 IPPS/LTCH PPS proposed and 
final rules (81 FR 25071 and 56931, respectively), the IPPS ratesetting 
process that CMS undergoes each proposed and final rulemaking is 
complex and labor-intensive, and subject to a compressed timeframe in 
order to issue the final rule each year within the timeframes for 
publication. Accordingly, CMS must ensure that it receives, in a timely 
fashion, the necessary data, including, but not limited to, the list of 
hospitals that are reclassified from urban to rural status under Sec.  
412.103, in order to calculate the wage indexes and other IPPS rates.
    In order to allot more time to the ratesetting process, we are 
proposing to revise the lock-in date such that a hospital's application 
for rural reclassification under Sec.  412.103 must be approved by the 
CMS Regional Office

[[Page 20368]]

no later than 60 days after the public display date of the IPPS notice 
of proposed rulemaking at the Office of the Federal Register 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. Depending 
on the public display date of the proposed rule (which may be earlier 
in future years), this proposed revision to the lock-in date would 
potentially allow for additional time in the ratesetting process for 
CMS to incorporate rural reclassification data, which we believe would 
support efforts to eliminate errors and assist in ensuring a more 
accurate wage index.
    Under this proposed revision, there would no longer be a 
requirement that the hospital file its rural reclassification 
application by a specified date (which under the current policy is 70 
days prior to the second Monday in June). While we stated in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56930 through 56932) that a 
hospital would need to file its reclassification application with the 
CMS Regional Office not later than 70 days prior to the second Monday 
in June, that timeframe was a precautionary measure to ensure that CMS 
would receive the approval in time to include the reclassified 
hospitals in the wage index and budget neutrality calculations for the 
upcoming Federal fiscal year (60 days for the CMS Regional Office to 
approve an application, in accordance with Sec.  412.103(c), and an 
additional 10 days to process the approval and notify CMS Central 
Office). While we still believe that it would be prudent for hospitals 
to apply approximately 70 days prior to the proposed lock-in date, we 
believe that requiring hospitals to apply by a set date is unnecessary 
because the Regional Offices may approve a hospital's request to 
reclassify under Sec.  412.103 in less than 60 days, and CMS may be 
notified in a timeframe shorter than 10 days. Therefore, under our 
proposal, any hospital with an approved rural reclassification by the 
lock-in date proposed above (that is, 60 days after the public display 
date of the IPPS notice of proposed rulemaking at the Office of the 
Federal Register) would be included in the wage index and budget 
neutrality calculations for setting payment rates for the next Federal 
fiscal year, regardless of the date of filing.
    In addition, we note that CMS generally provides 60 days after the 
public display date of the IPPS notice of proposed rulemaking at the 
Office of the Federal Register for submitting public comments regarding 
the proposed rule for consideration in the final rule. Therefore, we 
believe that, in addition to providing for more time in the ratesetting 
process, which helps to ensure a more accurate wage index, this 
proposed revision would also provide clarity and simplify regulations 
by synchronizing the lock-in date for Sec.  412.103 redesignations with 
the usual public comment deadline for the IPPS proposed rule.
    Accordingly, we are proposing to revise Sec.  412.103(b)(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 application must be approved by the CMS Regional 
Office in accordance with the requirements of Sec.  412.103 no later 
than 60 days after the public display date at the Office of the Federal 
Register of the IPPS proposed rule for the next Federal fiscal year. We 
are inviting public comments on this proposal.
    We are reiterating 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. As we 
discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931), 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 beginning on the filing 
date (the effective date) of the reclassification, regardless of when 
the hospital applies.

L. Process for Requests 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 2019 wage index were made available on May 19, 2017, and 
the preliminary CY 2016 occupational mix data files were made available 
on July 12, 2017, through the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items-FY-2019-Wage-Index-Home-Page.html.
    On February 2, 2018, we posted a public use file (PUF) at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items-FY-2019-Wage-Index-Home-Page.html containing FY 2019 wage index data available as of February 
1, 2018. 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, 2014 through 
September 30, 2015; that is, FY 2015 wage data), a tab with the 
occupational mix data (which includes data from the CY 2016 
occupational mix survey, Form CMS-10079), a tab containing the 
Worksheet S-3 wage data of hospitals deleted from the February 2, 2018 
wage data PUF, and a tab containing the CY 2016 occupational mix data 
of the hospitals deleted from the February 2, 2018 occupational mix 
PUF. In a memorandum dated December 14, 2017, we instructed all MACs to 
inform the IPPS hospitals that they service of the availability of the 
February 2, 2018 wage index data PUFs, and the process and timeframe 
for requesting revisions in accordance with the FY 2019 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 the 
CMS website that reflects the actual data that are used in computing 
the proposed wage index. The release of this file does not alter the 
current wage index process or schedule. We notify the hospital 
community of the availability of these data as we do with the current 
public use wage data files through our Hospital Open Door Forum. We 
encourage hospitals to sign up for automatic notifications of 
information about hospital issues and about the dates of the Hospital 
Open Door Forums at the CMS Web site at: http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/index.html.
    In a memorandum dated April 28, 2017, we instructed all MACs to 
inform the IPPS hospitals that they service of the availability of the 
preliminary wage index data files posted on May 19, 2017, and the 
process and timeframe for requesting revisions. The preliminary CY 2016 
occupational mix survey data was posted on CMS' website on July 12, 
2017.
    If a hospital wished to request a change to its data as shown in 
the May 19, 2017 preliminary wage data files and the July 12, 2017 
preliminary occupational mix data files, the hospital had to submit 
corrections along with

[[Page 20369]]

complete, detailed supporting documentation to its MAC by September 1, 
2017. 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 
15, 2017 was the deadline for MACs to complete all desk reviews for 
hospital wage and occupational mix data and transmit revised Worksheet 
S-3 wage data and occupational mix data to CMS.
    November 4, 2017 was the date by when MACs notified State hospital 
associations regarding hospitals that failed to respond to issues 
raised during the desk reviews. Additional revisions made by the MACs 
were transmitted to CMS throughout January 2018. CMS published the wage 
index PUFs that included hospitals' revised wage index data on February 
2, 2018. Hospitals had until February 16, 2018, to submit requests to 
the MACs to correct errors in the February 2, 2018 PUF due to CMS or 
MAC mishandling of the wage index data, or to revise desk review 
adjustments to their wage index data as included in the February 2, 
2018 PUF. 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 23, 2018. Under our 
current policy as adopted in the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38153), the deadline for a hospital to request CMS intervention in 
cases where a hospital disagreed with a MAC's handling of wage data on 
any basis (including a policy, factual, or other dispute) was April 5, 
2018. Data that were incorrect in the preliminary or February 2, 2018 
wage index data PUFs, but for which no correction request was received 
by the February 16, 2018 deadline, are not considered for correction at 
this stage. In addition, April 5, 2018 is the deadline for hospitals to 
dispute data corrections made by CMS of which the hospital is notified 
after the February 2, 2018 PUF and at least 14 calendar days prior to 
April 5, 2018 (that is, March 22, 2018), that do not arise from a 
hospital's request for revisions. We note that, as we did for the FY 
2018 wage index, for the proposed FY 2019 wage index, in accordance 
with the FY 2019 wage index timeline posted on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items-FY-2019-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 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 website 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS-FY2019-IPPS-Proposed-Rule-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 
2015 data used to construct the proposed FY 2019 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 2018.
    We plan to post the final wage index data PUFs in late April 2018 
via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items-FY-2019-Wage-Index-Home-Page.html. The April 2018 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 (the 
process for disputing revisions submitted to CMS by the MACs by March 
23, 2018, and the process for disputing data corrections made by CMS 
that did not arise from a hospital's request for wage data revisions as 
discussed earlier).
    After the release of the April 2018 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 23, 2017.
     Requests for correction of errors that were not, but could 
have been, identified during the hospital's review of the February 2, 
2018 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 2018 final wage index data PUFs, a 
hospital believes that its wage or occupational mix data were incorrect 
due to a MAC or CMS error in the entry or tabulation of the final data, 
the hospital 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, 2018. May 30, 2018 
is also the deadline for hospitals to dispute data corrections made by 
CMS of which the hospital is notified on or after 13 calendar days 
prior to April 5, 2018 (that is, March 23, 2018), and at least 14 
calendar days prior to May 30, 2018 (that is, May 16, 2018), that do 
not arise from a hospital's request for revisions. (Data corrections 
made by CMS of which a hospital is notified on or after 13 calendar 
days prior to May 30, 2018 (that is, May 17, 2018) may be appealed to 
the Provider Reimbursement Review Board (PRRB)). Similar to the April 
appeals, beginning with the FY 2015 wage index, in accordance with the 
FY 2019 wage index timeline posted on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items-FY-2019-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 (that 
is, by May 30, 2018) by CMS and the MACs will be incorporated into the 
final FY 2019 wage index, which will be effective October 1, 2018.
    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 2019 payment rates. 
Accordingly, hospitals that do not meet the procedural deadlines set 
forth earlier 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

[[Page 20370]]

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. As finalized in the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38154 through 38156), this policy also applies to a 
hospital disputing corrections made by CMS that do not arise from a 
hospital's request for a wage index data revision. That is, a hospital 
disputing an adjustment made by CMS that did not arise from a 
hospital's request for a wage index data revision would be required to 
request a correction by the first applicable deadline. Hospitals that 
do not meet the procedural deadlines set forth earlier will not be 
afforded a later opportunity to submit wage index data corrections or 
to dispute CMS' decision with respect to requested changes.
    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 2018, 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 2019 wage index by August 
2018, and the implementation of the FY 2019 wage index on October 1, 
2018. 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, 
2018, 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, 2018 for the FY 2019 
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 
website 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, 2018 deadline for the 
FY 2019 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, 2018 deadline for the FY 2019 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 February 2 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 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 February 2 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

[[Page 20371]]

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 FY 2019 IPPS/LTCH PPS proposed rule, 
in the calculation of the proposed FY 2019 wage index, upon discovering 
that hospitals reported other wage-related costs on Line 18 of 
Worksheet S[dash]3, despite those other wage-related costs failing to 
meet the requirement that other wage[dash]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 of 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, in accordance with the policy finalized in the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156), starting 
with the FY 2019 wage index, we implemented a process for hospitals to 
request further review of a correction made by CMS that did not arise 
from a hospital's request for a wage index data correction. Instances 
where CMS makes a correction to a hospital's data after the February 2 
PUF based on a different understanding than the hospital about certain 
reported costs, for example, could potentially be resolved using this 
process before the final wage index is calculated. We believe this 
process and the timeline for requesting such corrections (as described 
earlier and in the FY 2018 IPPS/LTCH PPS final rule) bring additional 
transparency to instances where CMS makes data corrections after the 
February 2 PUF, and 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. These additional 
appeals opportunities are described earlier and in the FY 2019 Wage 
Index Development Time Table, as well as in the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38154 through 8156).

M. Proposed Labor-Related Share for the Proposed FY 2019 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[dash]percent labor-related share, 
or the labor[dash]related share estimated from time to time by the 
Secretary, depending on which labor-related share resulted in a higher 
payment.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38158 through 
38175), we rebased and revised the hospital market basket. We 
established a 2014-based IPPS hospital market basket to replace the FY 
2010-based IPPS hospital market basket, effective October 1, 2017. 
Using the 2014[dash]based IPPS market basket, we finalized a 
labor[dash]related share of 68.3 percent for discharges occurring on or 
after October 1, 2017. In addition, in FY 2018, we implemented this 
revised and rebased labor[dash]related share in a budget neutral manner 
(82 FR 38522). 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. In this 
proposed rule, for FY 2019, we are not proposing to make any further 
changes to 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. Therefore, for FY 2019, we are proposing to continue 
to use a labor[dash]related share of 68.3 percent for discharges 
occurring on or after October 1, 2018.
    As discussed in section IV.B. of the preamble of this proposed 
rule, 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[dash]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[dash]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

[[Page 20372]]

national standardized amount. Accordingly, for FY 2019, we are not 
proposing a Puerto Rico[dash]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 2019 IPPS/LTCH PPS proposed rule and available via 
the Internet on the CMS website, reflect the proposed national labor-
related share, which is also applicable to Puerto Rico hospitals. For 
FY 2019, 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[dash]related share of 62 percent of the 
national standardized amount. For all IPPS hospitals (including Puerto 
Rico hospitals) whose wage indexes are greater than 1.000, for FY 2019, 
we are proposing to apply the wage index to a proposed labor-related 
share of 68.3 percent of the national standardized amount.
    We are inviting public comments on our proposals discussed above.

N. Request for Public Comments on Wage Index Disparities

    CMS is committed to transforming the health care delivery system, 
including the Medicare program, by putting an additional focus on 
patient-centered care and working with providers, physicians, and 
patients to improve outcomes. We are seeking 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.
    One key to that transformation is ensuring that the Medicare 
payment rates are as accurate and appropriate as possible, consistent 
with the law. As described later in this section, there have been 
numerous studies, analyses, and reports on disparities between the wage 
index values for individual hospitals and the wage index values among 
different geographic areas and ways to improve the Medicare wage index. 
Given that some time has elapsed since these studies were performed, in 
this proposed rule, we are taking this opportunity to invite the public 
to submit further comments, suggestions, and recommendations for 
regulatory and policy changes to the Medicare wage index that address 
these issues. If practicable, we are requesting the public to submit 
appropriate supporting data and specific recommendations in their 
comments. For any suggestions or recommendations presented that involve 
novel legal questions, we welcome analysis regarding CMS' authority for 
our consideration.
1. General Background
    As we discussed earlier, section 1886(d)(3)(E) of the Act requires 
that, as part of the methodology for determining prospective payments 
to hospitals, the Secretary must 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. Section 1886(d)(3)(E) of the Act requires that we 
update the wage index annually. Furthermore, this section of the Act 
provides that the Secretary base the update on a survey of wages and 
wage[dash]related costs of short-term, acute care hospitals. Section 
1886(d)(3)(E) of the Act also requires us to make any updates or 
adjustments to the wage index for a fiscal year in a manner that 
ensures that aggregate payments to hospitals in a fiscal year are not 
greater or less than those that would have been made in the year 
without the wage index adjustment.
    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) 
and (C) and 1886(d)(10) of the Act are equal to the aggregate 
prospective payments that would have been made absent these provisions.
    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. 
For this purpose, the statute requires the exclusion of data with 
respect to the wages and wage-related costs incurred in furnishing 
skilled nursing facility services.
    The current wage index methodology relies on labor markets that are 
based on statistical area definitions (CBSAs) established by OMB. 
Hospitals are grouped by geographic location into either an urban labor 
market (that is, an MSA or metropolitan division) or a statewide rural 
labor market (any area of a State that is not defined as urban). The 
current system also relies on hospital wage data submitted by hospitals 
to CMS, rather than on data that reflect broader labor market wages 
such as data from the Bureau of Labor Statistics or data from the 
American Community Survey. In public comments received on prior 
rulemaking for FYs 2009, 2010, and 2011, many parties have argued that 
the current labor market definitions and wage data sources used by CMS, 
in many instances, are not reflective of the true cost of labor for any 
given hospital or are inappropriate to use for this purpose, or both. 
(These public comments (on proposed rules under file numbers CMS-1390-
P, CMS-1406-P, and CMS-1498-P) are available via the Internet on the 
website at: www.regulations.gov.) For responses to public comments 
received on the FY 2009 IPPS/LTCH PPS proposed rule, we refer readers 
to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48563 through 48567); 
for responses to public comments on the FY 2010 IPPS/LTCH PPS proposed 
rule, we refer readers to the FY 2010 IPPS/LTCH PPS final rule (74 FR 
43824 through 43826); and for responses to public comments on the FY 
2011 IPPS/LTCH PPS proposed rule, we refer readers to the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50157 through 50160).) With respect to the 
labor market definitions, multiple exceptions and adjustments (for 
example, provider reclassifications under the MGCRB and the rural floor 
adjustment) have been put into place in attempts to correct perceived 
inequities. However, many of these exceptions and adjustments may 
create or further exacerbate distortions in labor market values. The 
issue of ``cliffs,'' or significant differences in wage index values 
between proximate hospitals, can often be attributed to one hospital 
benefiting from such an exception and adjustment when another hospital 
cannot. With respect to the wage data sources, in public comments on 
prior proposed rulemakings cited earlier, many stakeholders have argued 
that the use of hospital reported data results in increasing wage index 
disparities over time between high wage index areas and low wage index 
areas. (These public comments are available via the Internet on the 
website at: www.regulations.gov.)
2. Prior Reports, Studies, and Analyses
a. MedPAC Report to Congress
    Section 106(b)(1) of the Medicare Improvements and Extension Act of 
2006, Division B of the Tax Relief and Health Care Act of 2006 (MIEA-
TRHCA), Public Law 109-432, required MedPAC to submit to Congress, not 
later than June 30, 2007, a report on the Medicare wage index 
classification system applied under the Medicare

[[Page 20373]]

prospective payment systems, including the IPPS under section 
1886(d)(3)(E) of the Act. Section 106(b) of MIEA-TRHCA required the 
report to include any alternatives that MedPAC recommends to the method 
to compute the wage index under section 1886(d)(3)(E) of the Act.
    In addition, section 106(b)(2) of the MIEA-TRHCA instructed the 
Secretary of Health and Human Services, taking into account MedPAC's 
recommendations on the Medicare wage index classification system, to 
include in the FY 2009 IPPS proposed rule one or more proposals to 
revise the wage index adjustment applied under section 1886(d)(3)(E) of 
the Act for purposes of the IPPS. The Secretary was also directed to 
consider each of the following:
     Problems associated with the definition of labor markets 
for the wage index adjustment;
     The modification or elimination of geographic 
reclassifications and other adjustments;
     The use of Bureau of Labor of Statistics (BLS) data or 
other data or methodologies to calculate relative wages for each 
geographic area;
     Minimizing variations in wage index adjustments between 
and within MSAs and statewide rural areas;
     The feasibility of applying all components of CMS' 
proposal to other settings;
     Methods to minimize the volatility of wage index 
adjustments while maintaining the principle of budget neutrality;
     The effect that the implementation of the proposal would 
have on health care providers and on each region of the country;
     Methods for implementing the proposal(s), including 
methods to phase in such implementations; and
     Issues relating to occupational mix, such as staffing 
practices, and any evidence on the effect on quality of care and 
patient safety, including any recommendation for alternative 
calculations to the occupational mix.
    In its June 2007 Report to Congress, ``Report to the Congress: 
Promoting Greater Efficiency in Medicare'' (Chapter 6 with Appendix), 
MedPAC made three broad recommendations regarding the wage index:
    (1) Congress should repeal the existing hospital wage index 
statute, including reclassifications and exceptions, and give the 
Secretary authority to establish a new wage index system.
    (2) The Secretary should establish a hospital compensation index 
that--
     Uses wage data from all employers and industry-specific 
occupational weights;
     Is adjusted for geographic differences in the ratio of 
benefits to wages;
     Is adjusted at the county level and smooths large 
differences between counties; and
     Is implemented so that large changes in wage index values 
are phased in over a transition period.
    (3) The Secretary should use the hospital compensation index for 
the home health and skilled nursing facility prospective payment 
systems and evaluate its use in the other Medicare fee-for-service 
prospective payment systems.
    Following are the highlights of the alternative wage index system 
recommended by MedPAC:
     The MedPAC recommended wage index generally retains the 
current labor market definitions but supplements the metropolitan areas 
with county-level adjustments and eliminates single wage index values 
for rural areas.
     In the MedPAC recommended wage index, the county-level 
adjustments, together with a smoothing process that constrains the 
magnitude of differences between and within contiguous wage areas, 
serve as a replacement for geographical reclassifications.
     The MedPAC recommended wage index uses BLS data instead of 
the CMS hospital wage data collected on the Medicare cost report. 
MedPAC adjusts the BLS data for geographic differences in the ratio of 
benefits to wages using Medicare cost report data.
     The BLS data are collected from a sample of all types of 
employers, not just hospitals. The MedPAC recommended wage index could 
be adapted for other providers, such as home health agencies and 
skilled nursing facilities by replacing hospital occupational weights 
with occupational weights appropriate for other types of providers.
     In the MedPAC recommended wage index, volatility over time 
is addressed by the use of BLS data, which is based on a 3-year rolling 
sample design.
     MedPAC recommended a phased implementation for its 
recommended wage index in order to cushion the effect of large wage 
index changes on individual hospitals.
     MedPAC suggested that using BLS data automatically 
addresses occupational mix differences because the BLS data are 
specific to health care occupations and national industry-wide 
occupational weights are applied to all geographic areas.
    The full June 2007 MedPAC Report to Congress is available at the 
MedPAC website site: http://medpac.gov/docs/default-source/reports/Jun07_EntireReport.pdf.
    During the FY 2009 IPPS rulemaking process, we received many public 
comments regarding MedPAC's recommendations for reforming the wage 
index (73 FR 48564 through 48566). The public comments varied greatly, 
and there was no consensus position among the commenters. A complete 
set of the public comments on the FY 2009 IPPS proposed rule (CMS-1390-
P) is available via the Internet on the website at: 
www.regulations.gov.
    In the FY 2009 IPPS final rule (73 FR 48564 through 48567), we also 
summarized an analysis of MedPAC's recommendations that was performed 
by our contractor, Acumen LLC. In that analysis, we used a variety of 
terminology to refer to the wage indexes recommended by MedPAC, as well 
as the wage indexes currently used by CMS:
     When we referred to MedPAC's ``hospital compensation 
index'' or ``compensation index'', we were discussing the wage index 
that MedPAC developed that includes an adjustment to account for 
differences in the ratio of benefits to wages in different labor market 
areas. MedPAC developed this ratio of benefits using Medicare cost 
report data.
     When we referred to MedPAC's recommended ``wage index'', 
we were discussing the MedPAC-developed index without any adjustment 
for nonwage benefits. This wage index was developed using BLS data.
     When we referred to CMS' ``pre-reclassification wage 
index'' or ``pre-reclassification, pre-floor wage index'', we were 
discussing the wage index developed by CMS but without any adjustments 
for geographic reclassifications or the rural floor. This wage index 
also does not include any adjustments for outmigration, section 508 
reclassifications, Lugar redesignations, section 401 urban-to-rural 
reclassifications, or for any special exceptions.
     When we referred to CMS' ``final wage index'', we were 
discussing the wage index developed by CMS that is the final wage index 
received by or to be received by a hospital. Thus, this wage index does 
account for all geographic reclassifications as well as the rural 
floor. This final wage index also includes any adjustments as a result 
of outmigration, section 508 reclassifications, Lugar redesignations, 
section 401 urban[dash]to[dash]rural

[[Page 20374]]

reclassifications, or any other special exceptions.
    Acumen analyzed and compared all four of the wage indexes cited 
above. In other words, Acumen compared (A) CMS' pre-reclassification, 
pre-floor wage index for FY 2008 (which was provided by CMS and is 
based on hospital cost reports from FY 2004) and CMS' final wage index 
for FY 2008 with (B) both the MedPAC recommended hospital compensation 
index and wage index for FY 2007. Acumen's comparisons of the CMS wage 
index to the MedPAC recommended indexes indicate the effects of various 
components of the alternative wage indexes. All of the comparisons 
reflect differences between the CMS and BLS wage data. The comparison 
of the CMS pre-reclassification index to the MedPAC hospital 
compensation index reflects the additional impact of MedPAC's method of 
using county-level adjustors to smooth differences in index values 
among the CMS wage areas. The comparison of the CMS pre-
reclassification index to the MedPAC recommended wage index includes 
the effect of county-level smoothing and indicates the incremental 
effect of removing the MedPAC adjustment for benefits. The comparison 
of the CMS final wage index to the MedPAC recommended wage index adds 
the incremental effect of geographic reclassifications and other wage 
index exceptions (for example, the rural and imputed floors) to the 
preceding comparison. Finally, the comparison of the CMS final wage 
index to the MedPAC recommended compensation index yields the combined 
effects of all the differences between the two indexes.
    First, Acumen analyzed the overall impacts of the MedPAC 
recommended indexes. Acumen conducted the analysis at two levels: The 
hospital level and the county level. At the hospital level, Acumen 
analyzed all four comparisons described above. However, at the county 
level, Acumen did not include comparisons using the CMS final wage 
index because it includes reclassifications and other changes that are 
granted to hospitals, not counties. As a result, hospitals in the same 
county or wage area can have different final wage index values. 
Acumen's analysis was based on 3,426 hospitals, for which all four wage 
index values were available (the CMS pre-reclassification wage index, 
the CMS final wage index, the MedPAC recommended hospital wage index, 
and the MedPAC recommended hospital compensation index), and on the 
1,595 counties in which these hospitals are located.
    Second, Acumen estimated the impact for several subgroups of 
hospitals and counties. At the hospital level, Acumen assessed the 
impact by geographic area (for example, urban hospitals and rural 
hospitals), hospital size (number of beds), geographic region, teaching 
status, DSH status, SCH status, RRC status, MDH status, type of 
ownership (government, proprietary, voluntary), and reclassification 
status. At the county level, Acumen presented results for metropolitan 
area counties and rural counties.
    Third, Acumen calculated the change in the wage index that each 
hospital (or county) could expect to experience from adopting the 
MedPAC recommendations and reported statistics on these expected 
differences (mean, median, standard deviation, minimum, and maximum). 
Acumen did not model changes in Medicare payments that would result 
from using different wage indexes. Instead, Acumen normalized all four 
wage indexes by setting their discharge weighted means equal to 1.00. 
Normalization puts all four wage indexes on the same scale so that 
differences in wage index values between one index and another index 
are directly comparable. As a result, the wage index differences 
reported by Acumen imply payment differences, but do not precisely 
measure the magnitude of those payment differences.
    The main findings of Acumen's impact analysis are summarized as 
follows:
     Adopting the MedPAC recommendations would reduce the 
differentials between wage index values across geographic areas. Both 
the MedPAC wage and compensation indexes are less dispersed than either 
the CMS pre-reclassification wage index or the final wage index.
     Under either of the MedPAC recommended indexes, 
differences between the highest wage index hospitals and the lowest 
wage index hospitals would be reduced. For example, the range or 
difference that exists from the highest wage index hospital to the 
lowest wage index hospital (the ``high-low range'') under the MedPAC 
compensation index (0.752 versus 1.499, or a difference of 0.747) is 
roughly 11 percent less than the high-low range under the CMS final 
wage index (0.732 versus 1.569, or a difference of 0.837). Using the 
CMS pre-reclassification wage index as a comparison (with a high-low 
range of 0.716 versus 1.600), the MedPAC recommended compensation index 
is roughly 16 percent less. The minimum value of the MedPAC recommended 
compensation index (0.752) is roughly 5 percent more than the minimum 
value of the CMS pre-reclassification wage index (0.716), and the 
maximum value of the MedPAC recommended compensation index (1.499) is 
roughly 6 percent less than the maximum value of the CMS pre-
reclassification index (1.600).
     Adopting the MedPAC recommendations would also lower the 
wage dispersion among both rural hospitals and urban hospitals (whether 
classified by geography or payment), among hospitals of all sizes, and 
among all hospitals categorized by teaching status, DSH status, 
ownership status, and Medicare utilization status. These findings are 
generally consistent, regardless of whether the MedPAC recommended 
compensation index is compared to the CMS final wage index or to the 
CMS pre[dash]reclassification wage index.
     Adopting the MedPAC recommendations would have a 
differential impact on urban hospitals across geographic regions of the 
country. In moving from the CMS final wage index to the MedPAC 
compensation index, the largest reduction in standard deviations would 
occur for urban hospitals in the New England region (-19.0 percent), 
the Middle Atlantic region (-27.8 percent), and the Pacific region (-
19.0 percent). However, for urban hospitals in the West North Central 
region, the standard deviation of wage index values would increase by 
11.7 percent.
     Adopting the MedPAC recommendations would decrease the 
standard deviation among hospitals with most types of 
reclassifications. For example, compared to the CMS final wage index, 
the MedPAC compensation index would reduce the standard deviation by 
11.6 percent.
     The adoption of the MedPAC recommended indexes would lead 
a substantial number of hospitals to experience a large change in their 
index values in the transition. If the MedPAC compensation index is 
compared to the CMS final wage index, 37 percent of all hospitals would 
experience either increases or decreases of more than 5 percent. For 
approximately 34 percent of the reclassified hospitals (or 278 
hospitals), wage index values would decrease by more than 5 percent. 
Reclassified hospitals comprise more than one-half of all hospitals 
that would likely experience wage index decreases greater than 5 
percent in moving from the CMS final wage index to the MedPAC 
compensation index.
     Under a move from the CMS pre-reclassification wage index 
to the MedPAC recommended compensation

[[Page 20375]]

index, counties in rural areas would experience fewer decreases and 
more increases in their wage index compared to counties in urban areas. 
(As noted earlier, county-level comparisons were not performed using 
the CMS final wage index.)
    The full Acumen analysis of the MedPAC recommendations (Impact 
Analysis for the 2009 Final Rule: Interim Report--Revision of Medicare 
Wage Index) is available via the Internet on the website at: http://www.acumenllc.com/reports/cms.
b. Acumen Report on Revision of the Medicare Wage Index
    In addition to the analysis of the MedPAC recommendation that 
Acumen performed, in the FY 2010 and FY 2011 IPPS rulemaking (74 FR 
43824 through 48325 and 75 FR 50158 through 50159, respectively), we 
discussed a separate report by Acumen on the wage index and methodology 
entitled ``Revision of the Medicare Wage Index'' (available on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html). The report was 
divided into two parts. The first part analyzed the strengths and 
weaknesses of the data sources used to construct the MedPAC and CMS 
indexes. The second part focused on the methodology of wage index 
construction and covered issues related to the definition of wage areas 
and methods of adjusting for differences among neighboring wage areas, 
as well as reasons for differential impacts of shifting to a new index.
    Specifically, in the first part of the report, Acumen examined the 
following issues:
     Differences between the BLS data and the CMS wage data--
Acumen assessed the strengths and weaknesses of the data used to 
construct the CMS wage index and the MedPAC compensation index by 
examining the differences between the BLS and the CMS wage data. Acumen 
also evaluated the importance of accounting for self-employed workers, 
part-time workers, and industry wage differences.
     Employee benefit (wage-related) cost--Acumen considered 
whether benefit costs need to be included in the hospital wage index 
and discussed the differences between the Medicare cost report 
Worksheet A benefits data (proposed by MedPAC to use with BLS wage 
data) and the Medicare cost report Worksheet S-3 benefit data. Acumen 
also analyzed the possibility of using BLS' Employer Costs for Employee 
Compensation (ECEC) series as an alternative to Worksheet A or 
Worksheet S-3 benefits data that would pose less of a data collection 
burden for providers.
     Impact of the fixed national occupational weights--Acumen 
assessed MedPAC's and CMS' methods for adjusting for occupational mix 
differences. While the MedPAC recommended compensation index uses fixed 
weights for occupations representative of the hospital industry 
nationally, the CMS wage index incorporates an occupational mix 
adjustment from a separate data collection.
     Year-to-year volatility in the CMS and BLS wage data--
Acumen calculated the extent of volatility in the CMS and BLS wage 
indexes using several measures of volatility. Acumen also explored 
potential causes of volatility, such as the number of hospitals and the 
annual change in the number of hospitals in a wage area. Finally, 
Acumen evaluated the impact on annual volatility of using a 2-year 
rolling average of CMS wage index values.
    Acumen concluded that MedPAC's recommended methods for revising the 
wage index represent an improvement over the existing methods, and that 
the BLS data should be used so that the MedPAC approach can be 
implemented.
    Several commenters during the FY 2010 and FY 2011 IPPS rulemakings 
(74 FR 43824 and 75 FR 50158, respectively) reiterated their concerns 
regarding the use of the BLS data for computing the Medicare wage index 
that they had expressed in public comments on the FY 2009 IPPS final 
rule (73 FR 48564 through 48565). The commenters stated that they still 
had significant concerns about the shortcomings of the BLS data, and 
they urged CMS to move cautiously in considering MedPAC's and Acumen's 
findings. Other commenters expressed support for MedPAC's and Acumen's 
findings and recommendations, although some commenters cautioned that a 
few refinements may still be needed before adopting these 
recommendations.
    The second part of Acumen's final report focused on the methodology 
of wage index construction and covered issues related to the definition 
of wage areas and methods of adjusting for differences among 
neighboring wage areas, as well as reasons for differential impacts of 
shifting to a new index. In particular, the second part of the report 
provides a more in-depth analysis of MedPAC's recommended method of 
improving upon the definition of the wage areas used in the current 
wage index. MedPAC's method first blends MSA and county-level wages and 
then implements a ``smoothing'' step that limits differences in wage 
index values between adjacent counties to no more than 10 percent. 
Acumen found MedPAC's method to be an improvement over the current wage 
index construction. Acumen recommended further exploration of labor 
market area definitions using a wage area framework based on 
hospital[dash]specific characteristics, such as commuting times from 
hospitals to population centers, to construct a more accurate hospital 
wage index. Acumen suggested that such an approach offers the greatest 
potential for replacing or greatly reducing the need for hospital 
reclassifications and exceptions.
    We received many public comments regarding the Acumen analysis (75 
FR 50158 through 50159). Again, the public comments varied greatly, and 
there was no consensus position among the commenters. One national 
hospital association in its comments recommended that CMS consider the 
following guiding principles as it evaluates options for improving the 
wage index system: Any new system should--
     Be fair and accurately reflect the labor marketplace for 
hospitals, for example, consider only hospital wage and benefit costs 
rather than broader labor market costs;
     Provide predictable payments;
     Be stable;
     Be transparent so that the data may be examined and 
verified;
     Minimize the administrative burden on hospitals;
     Utilize the most current information possible;
     Define boundaries that capture meaningful relationships 
between labor markets, to reduce the need for exceptions and 
reclassifications;
     Due to the imperfection of any current labor market 
definition that we are aware of, provide an exception process for 
hospitals with labor costs atypical for areas to which they have been 
assigned;
     Use consistent definitions, methodologies, rules, and 
interpretations across the nation for the acquisition and application 
of data;
     Include a transition from the old to the new system that 
is not disruptive; it should include a phased-in transition period if 
necessary to protect hospitals from abrupt reductions in payment 
levels; and
     Not let perfection be the enemy of the better.
    Commenters generally urged CMS to move forward cautiously and 
ensure a thorough process for evaluating changes to the existing wage 
index.

[[Page 20376]]

    The complete sets of the public comments on the FY 2010 IPPS/LTCH 
PPS proposed rule (CMS-1406-P) and the FY 2011 IPPS/LTCH PPS proposed 
rule (CMS-1498-P) are available via the Internet on the website at: 
www.regulations.gov.
c. Report to Congress--Plan To Reform the Medicare Hospital Wage Index
    Section 3137(b) of the Affordable Care Act required the Secretary 
of Health and Human Services to submit to Congress, not later than 
December 31, 2011, a report that includes a plan to reform the Medicare 
wage index applied under the Medicare IPPS. In developing the plan, the 
Secretary had to take into consideration the goals for reforming the 
wage index that were set forth by MedPAC in its June 2007 report, 
including establishing a new system that--
     Uses BLS data, or other data or methodologies, to 
calculate relative wages for each geographic area;
     Minimizes wage index adjustments between and within MSAs 
and statewide rural areas;
     Includes methods to minimize the volatility of wage index 
adjustments while maintaining budget neutrality in applying such 
adjustments;
     Takes into account the effect that implementation of the 
system would have on health care providers and on each region of the 
country;
     Addresses issues related to occupational mix, such as 
staffing practices and ratios, and any evidence on the effect on 
quality of care or patient safety as a result of the implementation of 
the system; and
     Provides for a transition.
    After we consulted with relevant parties during the development of 
the plan (which included an April 12, 2011 special wage index reform 
open door forum, along with a review of electronically submitted 
comments and concerns), the Secretary submitted a Report to Congress--
Plan to Reform the Medicare Hospital Wage Index on April 11, 2012 that 
describes the concept of a Commuting Based Wage Index (CBWI) as one 
potential replacement for the current Medicare wage index methodology. 
Acumen again assisted CMS is the analysis for the report. The following 
is a summary of the highlights of the report:
    The report included a potential change in the description and 
definition of labor market areas. The concept, referred to as the CBWI, 
would use commuting data to define hospital labor market areas. The 
CBWI is based on data on the number of hospital workers commuting from 
home to work to define a hospital's labor market. To derive the CBWI, 
commuting flows would be used to identify the specific areas (for 
example, zip code or census tracts) from which a hospital hires its 
workers and to determine the proportion of its workers hired from each 
area. A CBWI system could use either current hospital cost report data 
or other alternative sources, such as the BLS Occupational Employment 
Survey data, to calculate labor market area average wage values. While 
the current wage index system aggregates wage data within geographic 
CBSA[dash]based areas where hospitals are located, the CBWI would 
aggregate wage data based upon where the hospital workers reside.
    Once the hiring proportions by area and area wage levels are 
determined, the hospital's benchmark wage level would be calculated as 
the weighted average of these two elements. This value would then be 
divided by the national average. This calculation would result in a 
hospital[dash]specific value, which reflects wage levels in the areas 
from which a hospital hires, accounting for variation in the proportion 
of workers hired from each area.
    Using more precisely defined labor markets, the CBWI values can 
vary for hospitals within the same CBSA or county and, thus, more 
precisely reflect wage differences within and across CBSA boundaries 
and address intra-area variation more precisely than the current 
system. Although the CBWI would allow wage index values to vary within 
a CBSA, the CBWI is less likely to produce large differences--or 
``cliffs''--between wage index values for nearby hospitals in adjacent 
CBSAs because nearby hospitals likely hire workers from areas in 
similar proportions.
    Acumen found in its analysis that the CBWI system would more 
closely reflect hospitals' actual wages than the current CBSA-based 
system. Acumen suggested the CBWI has the potential to reduce the need 
for exceptions and adjustments and further manipulation of wage index 
values to prevent these ``cliffs'' between labor market areas.
    The April 12, 2012 Report to Congress detailed several findings 
relevant to implementation of a CBWI:
     Because the CBWI accounts for specific differences in 
hospitals' geographic hiring patterns, it would yield wage index values 
that more closely correlate to actual labor costs than either the 
current wage index system (with or without geographic reclassification) 
or a system that attempts to reduce wage index differences across 
geographic boundaries, such as MedPAC's proposed wage index based on 
BLS data for health care industry workers.
     While a CBWI could be constructed with the most recent 
Census commuting data, were the CBWI to be adopted, a more up-to-date 
reporting system for collecting commuting data from hospitals would 
potentially have to be established so that the wage index calculations 
would accurately reflect the commuting patterns of hospital employees.
     Concerns about a CBWI leading to hospitals altering hiring 
patterns and distorting labor markets do not appear to be worse than 
under the current system and could potentially be mitigated with policy 
adjustments.
     As current statutory provisions governing the Medicare 
wage index and exceptions to that wage index were designed for the 
current MSA-based wage index system, their applicability would need to 
be reviewed if a CBWI were to be adopted.
     The Medicare statute has traditionally applied payment 
changes in a budget neutral manner. If a CBWI were to be adopted in a 
budget neutral manner, payments to some providers would increase while 
payments to other providers would decrease.
    The complete report can be accessed on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html.
    We received many public comments regarding the April 2012 Report to 
Congress as part of the FY 2013 IPPS rulemaking (77 FR 53660 through 
53663). Again, the public comments varied greatly, and there was no 
consensus position among the commenters. The complete set of the public 
comments on the FY 2013 IPPS/LTCH PPS proposed rule (CMS-1588-P) is 
available via the Internet on the website at: www.regulations.gov.
d. Institute of Medicine (IOM) Study on Medicare's Approach to 
Measuring Geographic Variations in Hospitals' Wage Costs
    In addition to submitting the 2012 Report to Congress, in April 
2012, the Secretary commissioned the Institute of Medicine (IOM) to 
evaluate Medicare's approach for measuring geographic variation in the 
wage costs faced by hospitals. In the report, IOM's Committee on 
Geographic Adjustment Factors in Medicare Payment proposed a set of 
recommendations for modifying the hospital wage index in both the 
method used in its construction and the data used in its calculation.

[[Page 20377]]

    In constructing the wage index, the IOM recommended altering the 
current labor market definitions to account for the out-commuting 
patterns of health care workers who travel to a place of employment in 
an MSA other than the one in which they live. The IOM's recommendation 
is based on its theory that county-to-MSA commuting patterns reveal the 
degree of integration of labor markets across geographically drawn 
boundaries (that is, MSAs) and a commuting-based smoothing adjustment 
to the wage index would more accurately measure the market wage each 
hospital faces. The IOM model used workers' out-commuting patterns to 
smooth wage index values for hospitals in different counties, similar 
to the out-migration adjustment used in the current wage index system. 
The IOM also suggested that using out[dash]commuting shares in the 
smoothing adjustment creates an index based on the wage levels of 
workers living in that area in which a hospital is located, as opposed 
to wage levels of workers employed in that area, as in the CBWI model. 
In calculating its smoothed wage index, the IOM uses the following four 
steps:
     Step 1--Compute a wage index for each MSA, adhering to 
Medicare's current approach for calculating the average hourly wage 
(AHW) paid by all IPPS hospitals located in the MSA (this step 
replicates the current pre-reclassification wage index).
     Step 2--Compute an area wage for each county equal to a 
weighted average of MSA[dash]level AHWs, where the weight for each MSA 
measures the share of all hospital workers living in the county who 
commute to hospitals located in that MSA.
     Step 3--Assign all hospitals located in the county a 
hospital wage index value equal to the county area wage index.
     Step 4--Normalize wage indexes to ensure budget 
neutrality, similar to the approach currently implemented by Medicare.
    In addition, the IOM's wage index model uses hourly wage data from 
the BLS Occupational Employment Survey rather than from hospital cost 
reports. The IOM also recommended measuring hourly wages using data for 
all health care workers, rather than only hospital workers, and using a 
fuller set of occupations incorporated in the hospital wage index 
occupational mix adjustment. The IOM suggested that BLS data would 
reduce administrative burdens placed upon hospitals and, by broadening 
the array of reported occupations from what is currently covered in the 
hospital cost report, would achieve more accurate labor market 
definitions and reduce year-to-year volatility. The IOM encouraged CMS 
to establish an ongoing agreement with the BLS to use occupational 
survey data specific to health care workers to calculate average hourly 
wage values. The IOM suggested, for instance, that the 5-year American 
Community Survey is a potential source of the necessary commuting 
information.
    The findings indicated that the IOM hospital wage index method 
would result in the reduction in wage index ``cliffs,'' and would 
diminish the need to maintain current wage index exceptions and 
adjustments. The IOM also recommended that the hospital wage values 
should be applied to other nonhospital health care providers, shifting 
to a single measurement of geographic variation to be used in multiple 
Medicare provider payment systems.
    The IOM's Phase I report, published in September 2011, is available 
via the Internet on the website at: http://nationalacademies.org/hmd/Reports/2011/Geographic-Adjustment-in-Medicare-Payment-Phase-I-Improving-Accuracy.aspx.
    We received many public comments regarding the IOM Report as part 
of the FY 2013 IPPS rulemaking (77 FR 53660 through 53663). Again, the 
public comments varied greatly, and there was no consensus position 
among the commenters. The complete set of the public comments on the FY 
2013 IPPS/LTCH PPS proposed rule (CMS-1588-P) is available via the 
Internet on the website at: www.regulations.gov.
    As stated earlier, given that some time has elapsed since the 
MedPAC, Acumen, CMS, and the IOM examined disparities between the wage 
index values for individual hospitals and the wage index values among 
different geographic areas, and ways to improve the Medicare wage 
index, in this proposed rule, we are taking this opportunity to invite 
the public to submit further comments, suggestions, and recommendations 
for regulatory and policy changes to the Medicare wage index. For 
example, some stakeholders in recent years have expressed the belief 
that the existing wage index disparities between high and low wage 
index areas are too great, particularly for rural hospitals and/or 
financially struggling hospitals. They have suggested additional floors 
be created for low wage index areas, or that the portion of the IPPS 
payment adjusted by the wage index be lowered from the current 
statutory 62 percent for hospitals with a wage index value below 1.0 to 
a smaller percentage. Some stakeholders also have stated that the 
reporting lag from when hospitals raise wages and when those increased 
wages become reflected in the Medicare wage index is a barrier to 
addressing wage index disparities. Other stakeholders have echoed 
previous recommendations that the Medicare wage index should be based 
on a different source of data, such as data from the Bureau of Labor 
Statistics.
    If practicable, we are requesting commenters to submit supporting 
data and specific recommendations in their comments. For any 
suggestions or recommendations that would involve novel legal 
questions, we welcome analysis regarding CMS' authority for our 
consideration.

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

A. Proposed Changes to MS-DRGs Subject to Postacute Care Transfer 
Policy and MS-DRG Special Payments 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

[[Page 20378]]

the MS-DRG, and multiplied by the length of stay for the case, plus 1 
day.
    We established the criteria set forth in Sec.  412.4(d) for 
determining which DRGs qualify for postacute care transfer payments in 
the FY 2006 IPPS final rule (70 FR 47419 through 47420). The 
determination of whether a DRG is subject to the postacute care 
transfer policy was initially based on the Medicare Version 23.0 
GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a 
DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is 
revised, we use the current version of the Medicare GROUPER and the 
most recent complete year of MedPAR data to determine if the DRG is 
subject to the postacute care transfer policy. Specifically, if the MS-
DRG's total number of discharges to postacute care equals or exceeds 
the 55th percentile for all MS-DRGs and the proportion of short-stay 
discharges to postacute care to total discharges in the MS-DRG exceeds 
the 55th percentile for all MS-DRGs, CMS will apply the postacute care 
transfer policy to that MS-DRG and to any other MS-DRG that shares the 
same base MS-DRG. 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 2019
    As discussed in section II.F. of the preamble of this proposed 
rule, based on our analysis of FY 2017 MedPAR claims data, we are 
proposing to make changes to a number of MS-DRGs, effective for FY 
2019. Specifically, we are proposing to:
     Assign CAR-T therapy procedure codes to MS-DRG 016 
(proposed revised title: Autologous Bone Marrow Transplant with CC/MCC 
or T-Cell Immunotherapy);
     Delete MS-DRG 685 (Admit for Renal Dialysis) and reassign 
diagnosis codes from MS-DRG 685 to MS-DRGs 698, 699, and 700 (Other 
Kidney and Urinary Tract Diagnoses with MCC, with CC, and without CC/
MCC, respectively);
     Delete 10 MS-DRGs (MS-DRGs 765, 766, 767, 774, 775, 777, 
778, 780, 781, and 782) and create 18 new MS-DRGs relating to 
Pregnancy, Childbirth and the Puerperium (MS-DRGs 783 through 788, 794, 
796, 798, 805, 806, 807, 817, 818, 819, and 831 through 833);
     Assign two additional diagnosis codes to MS-DRG 023 
(Craniotomy with Major Device Implant or Acute Complex Central Nervous 
System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant 
or Epilepsy with Neurostimulator);
     Reassign 12 ICD-10-PCS procedure codes from MS-DRGs 329, 
330 and 331 (Major Small and Large Bowel Procedures with MCC, with CC, 
and without CC/MCC, respectively) to MS-DRGs 344, 345, and 346 (Minor 
Small and Large Bowel Procedures with MCC, with CC, and without CC/MCC, 
respectively); and
     Reassign ICD-10-CM diagnosis codes R65.10 and R65.11 from 
MS-DRGs 870, 871, and 872 (Septicemia or Severe Sepsis with and without 
Mechanical Ventilation 96 Hours with and without MCC, respectively) to 
MS-DRG 864 (proposed revised title: Fever and Inflammatory Conditions).
    In light of the proposed changes to these MS-DRGs for FY 2019, 
according to the regulations under Sec.  412.4(d), we have evaluated 
these MS-DRGs using the general postacute care transfer policy criteria 
and data from the FY 2017 MedPAR file. 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 codes or diagnosis codes 
that would result in material changes to an MS-DRG. MS-DRGs 023, 329, 
330, 331, 698, 699, 700, 870, 871, and 872 are currently subject to the 
postacute care transfer policy. As a result of our review, these MS-
DRGs, as proposed to be revised, would continue to qualify to be 
included on the list of MS-DRGs that are subject to the postacute care 
transfer policy.
    Using the March 2018 update of the FY 2017 MedPAR file, we have 
developed the following chart which sets forth the most recent analysis 
of the postacute care transfer policy criteria completed for this 
proposed rule with respect to each of these proposed new or revised MS-
DRGs. We note that this analysis does not take into account the 
proposed change relating to discharges to hospice care, effective 
October 1, 2018, discussed in section IV.A.3. of the preamble of this 
proposed rule. For the FY 2019 final rule, we will update this analysis 
using the most recent available data at that time.

                     List of Proposed New or Revised MS-DRGs Subject to Review of Postacute Care Transfer Policy Status for FY 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                Percent of
                                                                                                                short-stay
                                                                              Postacute care                  postacute care
 Proposed new or revised MS-                                                     transfers      Short-stay     transfers to     Postacute care transfer
             DRG                       MS-DRG title             Total cases        (55th      postacute care     all cases           policy status
                                                                                percentile:      transfers         (55th
                                                                                  1,372)                        percentile:
                                                                                                                7.977208%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
016.........................  Autologous Bone Marrow                   2,064           * 417             126            6.10  No.
                               Transplant with CC/MCC or
                               T[dash]Cell Immunotherapy
                               (Proposed Revised).

[[Page 20379]]

 
023.........................  Craniotomy with Major Device             9,436           4,990           1,264           13.40  Yes.
                               Implant or Acute CNS
                               Principal Diagnosis with MCC
                               or Chemotherapy Implant or
                               Epilepsy with Neurostimulator
                               (Proposed Revised).
329.........................  Major Small and Large Bowel             35,361          21,816           7,058           19.96  Yes.
                               Procedures with MCC (Proposed
                               Revised).
330.........................  Major Small and Large Bowel             52,702          23,575           6,178           11.72  Yes.
                               Procedures with CC (Proposed
                               Revised).
331.........................  Major Small and Large Bowel             2,9685           6,713             543          * 1.83  Yes.**
                               Procedures without CC/MCC
                               (Proposed Revised).
344.........................  Minor Small and Large Bowel              1,285           * 675             206           16.03  No.
                               Procedures with MCC (Proposed
                               Revised).
345.........................  Minor Small and Large Bowel              2,475           * 989             202            8.16  No.
                               Procedures with CC (Proposed
                               Revised).
346.........................  Minor Small and Large Bowel              1,274           * 328              71          * 5.58  No.
                               Procedures without CC/MCC
                               (Proposed Revised).
698.........................  Other Kidney and Urinary Tract          5,6925          34,672           8,351           14.67  Yes.
                               Diagnoses with MCC (Proposed
                               Revised).
699.........................  Other Kidney and Urinary Tract          33,945          15,263           3,132            9.23  Yes.
                               Diagnoses with CC (Proposed
                               Revised).
700.........................  Other Kidney and Urinary Tract           4,431           1,589             181          * 4.08  Yes.**
                               Diagnoses without CC/MCC
                               (Proposed Revised).
783.........................  Cesarean Section with                      191             * 6               0             * 0  No.
                               Sterilization with MCC
                               (Proposed New).
784.........................  Cesarean Section with                      548            * 19               0             * 0  No.
                               Sterilization with CC
                               (Proposed New).
785.........................  Cesarean Section with                      502             * 6               0             * 0  No.
                               Sterilization without CC/MCC
                               (Proposed New).
786.........................  Cesarean Section without                   739            * 34               5          ** 0.7  No.
                               Sterilization with MCC
                               (Proposed New).
787.........................  Cesarean Section without                 2,034            * 93               3          * 0.15  No.
                               Sterilization with CC
                               (Proposed New).
788.........................  Cesarean Section without                 1,854            * 41               0             * 0  No.
                               Sterilization without CC/MCC
                               (Proposed New).
794.........................  Vaginal Delivery with                        1             * 1               0             * 0  No.
                               Sterilization/D&C with MCC
                               (Proposed New).
796.........................  Vaginal Delivery with                       49             * 2               0             * 0  No.
                               Sterilization/D&C with CC
                               (Proposed New).
798.........................  Vaginal Delivery with                      162             * 1               0             * 0  No.
                               Sterilization/D&C without CC/
                               MCC (Proposed New).
805.........................  Vaginal Delivery without                   506            * 20               0             * 0  No.
                               Sterilization/D&C with MCC
                               Proposed New).
806.........................  Vaginal Delivery without                 2,128            * 72               2             * 0  No.
                               Sterilization/D&C with CC
                               (Proposed New).
807.........................  Vaginal Delivery without                 3,809            * 69               6             * 0  No.
                               Sterilization/D&C without CC/
                               MCC (Proposed New).
817.........................  Other Antepartum Diagnoses                  76            * 12               0             * 0  No.
                               with O.R. Procedure with MCC
                               (Proposed New).
818.........................  Other Antepartum Diagnoses                  85             * 5               1          * 1.18  No.
                               with O.R. Procedure with CC
                               (Proposed New).
819.........................  Other Antepartum Diagnoses                  49             * 0               0             * 0  No.
                               with O.R. Procedure without
                               CC/MCC (Proposed New).
831.........................  Other Antepartum Diagnoses                 857            * 30               1          * 0.12  No.
                               without O.R. Procedure with
                               MCC (Proposed New).
832.........................  Other Antepartum Diagnoses               1,241            * 52              13          * 1.05  No.
                               without O.R. Procedure with
                               CC (Proposed New).
833.........................  Other Antepartum Diagnoses                 659            * 11               0             * 0  No.
                               without O.R. Procedure
                               without CC/MCC (Proposed New).

[[Page 20380]]

 
864.........................  Fever and Inflammatory                  12,150           3,882             286          * 2.35  No.
                               Conditions (Proposed Revised).
870.........................  Septicemia or Severe Sepsis             34,335          15,099           4,988           14.53  Yes.
                               with Mechanical Ventilation
                               96 Hours (Proposed Revised).
871.........................  Septicemia or Severe Sepsis            592,110         281,401          43,504          * 7.35  Yes.**
                               without Mechanical
                               Ventilation 96 Hours with MCC
                               (Proposed Revised).
872.........................  Septicemia or Severe Sepsis            154,469          64,490           6,848          * 4.43  Yes.**
                               without Mechanical
                               Ventilation 96 Hours without
                               MCC (Proposed Revised).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* 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.

    Based on our annual review of proposed new or revised MS-DRGs and 
analysis of the March 2018 update of the FY 2017 MedPAR file, we have 
identified MS-DRGs that we are proposing to be included on the list of 
MS-DRGs subject to the special payment methodology policy. None of the 
proposed revised MS-DRGs that are listed in the table above as 
continuing to meet the criteria for postacute care transfer policy 
status (specifically, MS-DRGs 023, 330, 331, 698, 699, 700, 870, 871, 
and 872) are currently listed as being subject to the special payment 
methodology. Based on our analysis of proposed changes to MS-DRGs 
included in this proposed rule, we have determined that proposed 
revised MS-DRG 023 (Craniotomy with Major Device Implant or Acute 
Complex CNS Principal Diagnosis with MCC or Chemotherapy Implant or 
Epilepsy with Neurostimulator) would meet the criteria for the MS-DRG 
special payment methodology. Therefore, we are proposing that proposed 
revised MS-DRG 023 would be subject to the MS-DRG special payment 
methodology, effective FY 2019. As described in the regulations at 
Sec.  412.4(f)(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. Therefore, we are 
proposing that MS-DRG 024 (Craniotomy with Major Device Implant or 
Acute Complex CNS Principal Diagnosis without MCC or Chemotherapy 
Implant or Epilepsy with Neurostimulator) also would be subject to the 
MS-DRG special payment methodology, effective for FY 2019.

         List of Proposed Revised MS-DRGS Subject to Review of Special Payment Policy Status for FY 2019
----------------------------------------------------------------------------------------------------------------
                                                                                   50 percent of
                                                                      Average         average         Special
 Proposed revised MS-         MS-DRG title        Geometric mean   charges of 1-    charges for   payment policy
          DRG                                     length of stay  day discharges     all cases        status
                                                                                   within MS-DRG
----------------------------------------------------------------------------------------------------------------
023...................  Craniotomy with Major                7.3        $138,521         $96,268  Yes.
                         Device Implant or Acute
                         CNS Principal Diagnosis
                         with MCC or
                         Chemotherapy Implant or
                         Epilepsy with
                         Neurostimulator.
330...................  Major Small and Large                6.1          32,410          41,813  No.
                         Bowel Procedures with
                         CC.
331...................  Major Small and Large                3.7          34,430          28,931  No.
                         Bowel procedures
                         without CC/MCC.
698...................  Other Kidney and Urinary             4.9          17,966          24,920  No.
                         Tract Diagnoses with
                         MCC.
699...................  Other Kidney and Urinary             3.4          17,040          17,012  No.
                         Tract Diagnoses with CC.
700...................  Other Kidney and Urinary             2.5          14,592          12,954  No.
                         Tract Diagnoses without
                         CC/MCC.
870...................  Septicemia or Severe                12.4               0         102,333  No.
                         Sepsis with Mechanical
                         Ventilation <96 Hours.
871...................  Septicemia or Severe                 4.8          19,479          29,746  No.
                         Sepsis without
                         Mechanical Ventilation
                         <96 Hours with MCC.
872...................  Septicemia or Severe                 3.6          18,911          17,193  No.
                         Sepsis without
                         Mechanical Ventilation
                         <96 Hours without MCC.
----------------------------------------------------------------------------------------------------------------

    We are inviting public comments on this proposal.
    The proposed special payment policy status of these MS-DRGs is 
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 website.
3. Proposed Implementation of Changes Required by Section 53109 of the 
Bipartisan Budget Act of 2018
    Prior to the enactment of the Bipartisan Budget Act of 2018 (Pub. 
L.

[[Page 20381]]

115-123), under section 1886(d)(5)(J) of the Act, a discharge was 
deemed a ``qualified discharge'' if the individual was discharged to 
one of the following postacute care settings:
     A hospital or hospital unit that is not a subsection (d) 
hospital.
     A skilled nursing facility.
     Related home health services provided by a home health 
agency provided within a timeframe established by the Secretary 
(beginning within 3 days after the date of discharge).
    Section 53109 of the Bipartisan Budget Act of 2018 amended section 
1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care 
by a hospice program as a qualified discharge, effective for discharges 
occurring on or after October 1, 2018. Accordingly, effective for 
discharges occurring on or after October 1, 2018, if a discharge is 
assigned to one of the MS-DRGs subject to the postacute care transfer 
policy and the individual is transferred to hospice care by a hospice 
program, the discharge would be subject to payment as a transfer case. 
We are proposing to make conforming amendments to Sec.  412.4(c) of the 
regulation to include discharges to hospice care occurring on or after 
October 1, 2018 as qualified discharges. We are proposing that hospital 
bills with a Patient Discharge Status code of 50 (Discharged/
Transferred to Hospice--Routine or Continuous Home Care) or 51 
(Discharged/Transferred to Hospice, General Inpatient Care or Inpatient 
Respite) would be subject to the postacute care transfer policy in 
accordance with this statutory amendment. Consistent with our policy 
for other qualified discharges, CMS claims processing software will be 
revised to identify cases in which hospice benefits were billed on the 
date of hospital discharge without the appropriate discharge status 
code. Such claims will be returned as unpayable to the hospital and may 
be rebilled with a corrected discharge code.
    We are inviting public comments on our proposals.

B. Proposed Changes in the Inpatient Hospital Update for FY 2019 (Sec.  
412.64(d))

1. Proposed FY 2019 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 2019, we are setting the applicable percentage 
increase by applying the adjustments listed in this section in the same 
sequence as we did for FY 2018. 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[dash]of[dash]increase in the hospital market basket for IPPS 
hospitals in all areas, subject to--
    (a) A reduction of one[dash]quarter of the applicable percentage 
increase (prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate[dash]of[dash]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[dash]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 2019 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 the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38158 through 38175), we replaced 
the FY 2010[dash]based IPPS operating market basket with the rebased 
and revised 2014-based IPPS operating market basket, effective with FY 
2018.
    We are proposing to base the proposed FY 2019 market basket update 
used to determine the applicable percentage increase for the IPPS on 
IHS Global Inc.'s (IGI's) fourth quarter 2017 forecast of the 
2014[dash]based IPPS market basket rate[dash]of[dash]increase with 
historical data through third quarter 2017, which is estimated to be 
2.8 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 2019 market basket update and the MFP adjustment in 
the final rule.
    For FY 2019, 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 website 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 regression model. A complete description of the 
MFP projection methodology is available on the CMS website 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 website rather 
than in the annual rulemaking.

[[Page 20382]]

    For FY 2019, we are proposing an MFP adjustment of 0.8 percentage 
point. Similar to the market basket update, for this proposed rule, we 
used IGI's fourth quarter 2017 forecast of the MFP adjustment to 
compute the proposed MFP adjustment. As noted previously, we are 
proposing that if more recent data subsequently become available, we 
would use such data, if appropriate, to determine the FY 2019 market 
basket update and the 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 2019, as specified in the following table:

                          Proposed FY 2019 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 2019                         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                                       2.8             2.8             2.8             2.8
 Rate[dash]of[dash]Increase.....................
Proposed Adjustment for Failure to Submit                      0               0            -0.7            -0.7
 Quality Data under Section 1886(b)(3)(B)(viii)
 of the Act.....................................
Proposed Adjustment for Failure to be a                        0            -2.1               0            -2.1
 Meaningful EHR User under Section
 1886(b)(3)(B)(ix) of the Act...................
Proposed MFP Adjustment under Section                       -0.8            -0.8            -0.8            -0.8
 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                 1.25           -0.85            0.55           -1.55
     Applied 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 2019 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 2019 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.
    We are inviting public comments on our proposals.
    Section 1886(b)(3)(B)(iv) of the Act provides that the applicable 
percentage increase to the hospital-specific rates for SCHs and MDHs 
equals the applicable percentage increase set forth in section 
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all 
other hospitals subject to the IPPS). Therefore, the update to the 
hospital-specific rates for SCHs and MDHs also is subject to section 
1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 
10319(a) of the Affordable Care Act. (As discussed in section IV.G. of 
the preamble of this FY 2019 IPPS/LTCH PPS proposed rule, section 205 
of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) 
(Pub. L. 114[dash]10, enacted on April 16, 2015) extended the MDH 
program through FY 2017 (that is, for discharges occurring on or before 
September 30, 2017). Section 50205 of the Bipartisan Budget Act of 2018 
(Pub. L. 115-123), enacted February 9, 2018, extended the MDH program 
for discharges on or after October 1, 2017 through September 30, 2022.)
    For FY 2019, we are proposing the following updates to the 
hospital-specific rates applicable to SCHs and MDHs: A proposed update 
of 1.25 percent for a hospital that submits quality data and is a 
meaningful EHR user; a proposed update of 0.55 percent for a hospital 
that fails to submit quality data and is a meaningful EHR user; a 
proposed update of -0.85 percent for a hospital that submits quality 
data and is not a meaningful EHR user; and a proposed update of -1.55 
percent for a hospital that fails to submit quality data and is not a 
meaningful EHR user. As noted previously, for this FY 2019 IPPS/LTCH 
PPS proposed rule, we are using IGI's fourth quarter 2017 forecast of 
the 2014[dash]based IPPS market basket update with historical data 
through third quarter 2017. Similarly, we are using IGI's fourth 
quarter 2017 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.
    We are inviting public comments on our proposal.
2. Proposed FY 2019 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 determine 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 IV.B.1. of the preamble of this proposed rule. 
Accordingly, in this FY 2019 IPPS/LTCH PPS proposed rule, for FY 2019, 
we are proposing an applicable percentage increase of 1.25 percent 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 applicable percentage increase for 
``subsection (d)'' hospitals that do not submit quality data under the 
rules established by the Secretary, is not

[[Page 20383]]

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 2019.
    We are inviting public comments on our proposals.

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

    Under the authority of section 1886(d)(5)(C)(i) of the Act, the 
regulations at Sec.  412.96 set forth the criteria that a hospital must 
meet in order to qualify under the IPPS as a rural referral center 
(RRC). RRCs receive some special treatment under both the DSH payment 
adjustment and the criteria for geographic reclassification.
    Section 402 of Public Law 108-173 raised the DSH payment adjustment 
for RRCs such that they are not subject to the 12[dash]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[dash]mix index (CMI) and a minimum number 
of discharges), and at least one of three optional criteria (relating 
to specialty composition of medical staff, source of inpatients, or 
referral volume). (We refer readers to Sec.  412.96(c)(1) through 
(c)(5) and the September 30, 1988 Federal Register (53 FR 38513) for 
additional discussion.) With respect to the two mandatory 
prerequisites, a hospital may be classified as an RRC if--
     The hospital's CMI is at least equal to the lower of the 
median CMI for urban hospitals in its census region, excluding 
hospitals with approved teaching programs, or the median CMI for all 
urban hospitals nationally; and
     The hospital's number of discharges is at least 5,000 per 
year, or, if fewer, the median number of discharges for urban hospitals 
in the census region in which the hospital is located. The number of 
discharges criterion for an osteopathic hospital is at least 3,000 
discharges per year, as specified in section 1886(d)(5)(C)(i) of the 
Act.
1. Case-Mix Index (CMI)
    Section 412.96(c)(1) provides that CMS establish updated national 
and regional CMI values in each year's annual notice of prospective 
payment rates for purposes of determining RRC status. The methodology 
we used to determine the national and regional CMI values is set forth 
in the regulations at Sec.  412.96(c)(1)(ii). The proposed national 
median CMI value for FY 2019 is based on the CMI values of all urban 
hospitals nationwide, and the proposed regional median CMI values for 
FY 2019 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 2017 (October 1, 2016 through 
September 30, 2017), and include bills posted to CMS' records through 
December 2017.
    In this FY 2019 IPPS/LTCH PPS 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, 2018, they must have a CMI 
value for FY 2017 that is at least--
     1.66185 (national--all urban); or
     The median CMI value (not transfer[dash]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 table 
below. We intend to update these proposed CMI values in the FY 2019 
final rule to reflect the updated FY 2017 MedPAR file, which will 
contain data from additional bills received through March 2018.

------------------------------------------------------------------------
                                                          Case-mix index
                         Region                                value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).................          1.4071
2. Middle Atlantic (PA, NJ, NY).........................          1.4694
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)..          1.5486
4. East North Central (IL, IN, MI, OH, WI)..............          1.5765
5. East South Central (AL, KY, MS, TN)..................          1.5289
6. West North Central (IA, KS, MN, MO, NE, ND, SD)......          1.6387
7. West South Central (AR, LA, OK, TX)..................          1.6872
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............          1.7366
9. Pacific (AK, CA, HI, OR, WA).........................          1.6619
------------------------------------------------------------------------


[[Page 20384]]

    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.
    We are inviting public comments on our proposal.
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 FY 2019 IPPS/LTCH 
PPS proposed rule, for FY 2019, we are proposing to update the regional 
standards based on discharges for urban hospitals' cost reporting 
periods that began during FY 2016 (that is, October 1, 2015 through 
September 30, 2016), 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, 2018, must have, as the number of discharges for 
its cost reporting period that began during FY 2016, at least--
     5,000 (3,000 for an osteopathic hospital); or
     If less, the median number of discharges for urban 
hospitals in the census region in which the hospital is located, as 
reflected in the table below. We intend to update these numbers in the 
FY 2019 final rule based on the latest available cost report data.

------------------------------------------------------------------------
                                                             Number of
                         Region                             discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).................           8,431
2. Middle Atlantic (PA, NJ, NY).........................           9,762
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)..          10,643
4. East North Central (IL, IN, MI, OH, WI)..............           8,297
5. East South Central (AL, KY, MS, TN)..................           7,796
6. West North Central (IA, KS, MN, MO, NE, ND, SD)......           7,721
7. West South Central (AR, LA, OK, TX)..................           5,456
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............           8,819
9. Pacific (AK, CA, HI, OR, WA).........................           9,017
------------------------------------------------------------------------

    We note that because the median number of discharges for hospitals 
in each census region is greater than the national standard of 5,000 
discharges, 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.
    We are inviting public comments on our proposal.

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

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. 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 section 1886 of the Act. 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.
    Section 50204 of the Bipartisan Budget Act of 2018 (Pub. L. 115-
123) modified the definition of a low-volume hospital and the 
methodology for calculating the payment adjustment for low[dash]volume 
hospitals for FYs 2019 through 2022. (Section 50204 also extended prior 
changes to the definition of a low-volume hospital and the methodology 
for calculating the payment adjustment for low-volume hospitals through 
FY 2018, as discussed later in this section.). Beginning with FY 2023, 
the low[dash]volume hospital qualifying criteria and payment adjustment 
will revert to the statutory requirements that were in effect prior to 
FY 2011. (For additional information on the low-volume hospital payment 
adjustment prior to FY 2018, we refer readers to the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 56941 through 56943). For additional information 
on the low-volume hospital payment adjustment for FY 2018, we refer 
readers to the FY 2018 IPPS notice (CMS-1677-N) that appears elsewhere 
in this issue of the Federal Register.) In section IV.D.2.b. of the 
preamble of this proposed rule, we discuss the proposed low-volume 
hospital payment adjustment policies for FY 2019.
2. Proposed Implementation of Changes to the Low-Volume Hospital 
Definition and Payment Adjustment Methodology Made by the Bipartisan 
Budget Act of 2018
a. Extension of the Temporary Changes to the Low-Volume Hospital 
Definition and Payment Adjustment Methodology for FY 2018 and Proposed 
Conforming Changes to Regulations
    Section 50204 of the Bipartisan Budget Act of 2018 extended through 
FY 2018 certain changes to the low-volume hospital payment policy made 
by the Affordable Care Act and extended by subsequent legislation. We 
addressed this extension of the temporary changes to the low-volume 
hospital payment policy for FY 2018 in a notice (CMS-1677-N) that 
appears elsewhere in this issue of the Federal Register. However, in 
this FY 2019 IPPS/LTCH PPS proposed rule, we are proposing to make 
conforming changes to the regulations text in Sec.  412.101 to reflect 
the extension of the changes to the qualifying criteria and the payment 
adjustment methodology for low-volume hospitals through FY 2018, in 
accordance with section 50204 of the Bipartisan Budget Act of 2018. 
Specifically, we are proposing to make conforming changes to paragraphs 
(b)(2)(ii) and (c)(2) introductory text of Sec.  412.101 to reflect 
that the low-volume hospital payment adjustment policy in effect for FY 
2018 is the same

[[Page 20385]]

low[dash]volume hospital payment adjustment policy in effect for FYs 
2011 through 2017 (as described in the FY 2018 IPPS notice (CMS-1677-N) 
that appears elsewhere in this issue of the Federal Register).
b. Temporary Changes to the Low-Volume Hospital Definition and Payment 
Adjustment Methodology for FYs 2019 Through 2022
    As discussed earlier, section 50204 of the Bipartisan Budget Act of 
2018 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. Specifically, section 50204 
amended the qualifying criteria for low-volume hospitals under section 
1886(d)(12)(C)(i) of the Act to specify that, for FYs 2019 through 
2022, 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 3,800 total discharges during the fiscal year. Section 
50204 also amended section 1886(d)(12)(D) of the Act to provide that, 
for discharges occurring in FYs 2019 through 2022, the Secretary shall 
determine the applicable percentage increase using a continuous, linear 
sliding scale ranging from an additional 25 percent payment adjustment 
for low-volume hospitals with 500 or fewer discharges to a zero percent 
additional payment for low-volume hospitals with more than 3,800 
discharges in the fiscal year. Consistent with the requirements of 
section 1886(d)(12)(C)(ii) of the Act, the term ``discharge'' for 
purposes of these provisions refers to total discharges, regardless of 
payer (that is, Medicare and non-Medicare discharges).
    To implement this requirement, we are proposing a continuous, 
linear sliding scale formula to determine the low-volume hospital 
payment adjustment for FYs 2019 through 2022 that is similar to the 
continuous, linear sliding scale formula used to determine the 
low[dash]volume hospital payment adjustment originally established by 
the Affordable Care Act and implemented in the regulations at Sec.  
412.101(c)(2)(ii) in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50240 
through 50241). Consistent with the statute, we are proposing that 
qualifying hospitals with 500 or fewer total discharges would receive a 
low-volume hospital payment adjustment of 25 percent. For qualifying 
hospitals with fewer than 3,800 discharges but more than 500 
discharges, the low-volume payment adjustment would be calculated by 
subtracting from 25 percent the proportion of payments associated with 
the discharges in excess of 500. That proportion is calculated by 
multiplying the discharges in excess of 500 by a fraction that is equal 
to the maximum available add-on payment (25 percent) divided by a 
number represented by the range of discharges for which this policy 
applies (3,800 minus 500, or 3,300). In other words, for qualifying 
hospitals with fewer than 3,800 total discharges but more than 500 
total discharges, we are proposing the low-volume hospital payment 
adjustment for FYs 2019 through 2022 would be calculated using the 
following formula:

Low-Volume Hospital Payment Adjustment = 0.25-[0.25/3300] x (number of 
total discharges-500) = (95/330) x (number of total discharges/13,200).

    To reflect these changes for FYs 2019 through 2022, we are 
proposing to revise Sec.  412.101(b)(2) by adding paragraph (iii) to 
specify that a hospital must have fewer than 3,800 total discharges, 
which includes Medicare and non-Medicare discharges, during the fiscal 
year, based on the hospital's most recently submitted cost report, and 
be located more than 15 road miles from the nearest ``subsection (d)'' 
hospital, consistent with the amendments to section 1886(d)(12)(C)(i) 
of the Act as provided by section 50204(a)(2) of the Bipartisan Budget 
Act of 2018. We also are proposing to add paragraph (3) to Sec.  
412.101(c), consistent with section 1886(d)(12)(D) of the Act as 
amended by section 50204(a)(3) of the Bipartisan Budget Act of 2018, to 
specify that:
     For low-volume hospitals with 500 or fewer total 
discharges during the fiscal year, the low[dash]volume hospital payment 
adjustment is an additional 25 percent for each Medicare discharge.
     For low-volume hospitals with total discharges during the 
fiscal year of more than 500 and fewer than 3,800, the adjustment for 
each Medicare discharge is an additional percent calculated using the 
formula [(95/330) x (number of total discharges/13,200)].
    The ``number of total discharges'' would be determined as total 
discharges, which includes Medicare and non-Medicare discharges during 
the fiscal year, based on the hospital's most recently submitted cost 
report.
    In addition, in accordance with the provisions of section 50204(a) 
of the Bipartisan Budget Act of 2018, for FY 2023 and subsequent fiscal 
years, we are proposing to make conforming changes to paragraphs 
(b)(2)(i) and (c)(1) of Sec.  412.101 to reflect that the 
low[dash]volume payment adjustment policy in effect for these years is 
the same low-volume hospital payment adjustment policy in effect for 
FYs 2005 through 2010, as described earlier. Lastly, we are proposing 
to make conforming changes to paragraph (d) (which relates to 
eligibility of new hospitals for the adjustment), consistent with the 
provisions of section 50204(a) of the Bipartisan Budget Act of 2018, 
for FY 2019 and subsequent fiscal years, as total discharges are used 
under the low-volume hospital payment adjustment policy in effect for 
those years as described earlier.
3. Proposed Process for Requesting and Obtaining the Low-Volume 
Hospital Payment Adjustment
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275 
and 50414) and subsequent rulemaking (for example, the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38186 through 38188)), we discussed the 
process for requesting and obtaining the low-volume hospital payment 
adjustment. Under this previously established process, a hospital makes 
a written request for the low[dash]volume payment adjustment under 
Sec.  412.101 to its MAC. This request must contain sufficient 
documentation to establish that the hospital meets the applicable 
mileage and discharge criteria. The MAC will determine if the hospital 
qualifies as a low-volume hospital by reviewing the data the hospital 
submits with its request for low-volume hospital status in addition to 
other available data. Under this approach, a hospital will know in 
advance whether or not it will receive a payment adjustment under the 
low-volume hospital policy. The MAC and CMS may review available data, 
in addition to the data the hospital submits with its request for 
low[dash]volume hospital status, in order to determine whether or not 
the hospital meets the qualifying criteria. (For additional information 
on our existing process for requesting the low[dash]volume hospital 
payment adjustment, we refer readers to the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38185 through 38188).)
    As described earlier, for FY 2019 and subsequent fiscal years, the 
discharge determination is made based on the hospital's number of total 
discharges, that is, Medicare and non[dash]Medicare discharges, as was 
the case for FYs 2005 through 2010. Under Sec.  412.101(b)(2)(i) and 
proposed new Sec.  412.101(b)(2)(iii), a 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. We use cost report data to determine if a hospital meets 
the discharge criterion because this is the best available data

[[Page 20386]]

source that includes information on both Medicare and non-Medicare 
discharges. (For FYs 2011 through 2018, the most recently available 
MedPAR data were used to determine the hospital's Medicare discharges 
because non-Medicare discharges were not used to determine if a 
hospital met the discharge criterion for those years.) Therefore, 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.
    In addition to the discharge criterion, for FY 2019 and for 
subsequent fiscal years, eligibility for the low[dash]volume hospital 
payment adjustment is also dependent upon the hospital meeting the 
applicable mileage criterion specified in Sec.  412.101(b)(2)(i) or 
proposed new Sec.  412.101(b)(2)(iii) for the fiscal year. 
Specifically, to meet the mileage criterion to qualify for the low-
volume hospital payment adjustment for FY 2019, as noted earlier, a 
hospital must be located more than 15 road miles from the nearest 
subsection (d) hospital. We define in Sec.  412.101(a) the term ``road 
miles'' to mean ``miles'' as defined in Sec.  412.92(c)(1) (75 FR 50238 
through 50275 and 50414). For establishing that the hospital meets the 
mileage criterion, the use of a web[dash]based mapping tool as part of 
the documentation 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 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 applicable mileage 
criterion.
    In accordance with our previously established process, 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 applicable low-volume hospital 
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 applicable 
low-volume hospital 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 2019, we are proposing that a hospital must 
submit a written request for low-volume hospital status to its MAC that 
includes sufficient documentation to establish that the hospital meets 
the applicable mileage and discharge criteria (as described earlier). 
Consistent with historical practice, for FY 2019, we are proposing that 
a hospital's written request must be received by its MAC no later than 
September 1, 2018 in order for the low-volume hospital payment 
adjustment to be applied to payments for its discharges beginning on or 
after October 1, 2018. If a hospital's written request for low-volume 
hospital status for FY 2019 is received after September 1, 2018, and if 
the MAC determines the hospital meets the criteria to qualify as a low-
volume hospital, the MAC will apply the low-volume hospital payment 
adjustment to determine the payment for the hospital's FY 2019 
discharges, effective prospectively within 30 days of the date of the 
MAC's low-volume hospital status determination.
    Under this process, a hospital receiving the low-volume hospital 
payment adjustment for FY 2018 may continue to receive a low-volume 
hospital payment adjustment without reapplying if it continues to meet 
the mileage criterion (which remains unchanged for FY 2019) and it also 
meets the applicable discharge criterion as modified for FY 2019 (that 
is, 3,800 or fewer total discharges). In this case, a hospital's 
request can include a verification statement that it continues to meet 
the mileage criterion applicable for FY 2019. (Determination of meeting 
the discharge criterion is discussed earlier in this section.) We note 
that a hospital must continue to meet the applicable qualifying 
criteria as a low-volume hospital (that is, the hospital must meet the 
applicable discharge criterion and mileage criterion for the fiscal 
year) in order to receive the payment adjustment in that fiscal year; 
that is, low-volume hospital status is not based on a ``one-time'' 
qualification (75 FR 50238 through 50275).
    We are inviting public comments on our proposal.

E. Indirect Medical Education (IME) Payment Adjustment Factor (Sec.  
412.105)

1. IME Payment Adjustment Factor for FY 2019
    Under the IPPS, an additional payment amount is made to hospitals 
with residents in an approved graduate medical education (GME) program 
in order to reflect the higher indirect patient care costs of teaching 
hospitals relative to nonteaching hospitals. The payment amount is 
determined by use of a statutorily specified adjustment factor. The 
regulations regarding the calculation of this additional payment, known 
as the IME adjustment, are located at Sec.  412.105. We refer readers 
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full 
discussion of the IME adjustment and IME adjustment factor. Section 
1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges 
occurring during FY 2008 and fiscal years thereafter, the IME formula 
multiplier is 1.35. Accordingly, for discharges occurring during FY 
2019, the formula multiplier is 1.35. We estimate that application of 
this formula multiplier for the FY 2019 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.
2. Proposed Technical Correction to Regulations at 42 CFR 
412.105(f)(1)(vii)
    In the regulation governing the IME payment adjustment at Sec.  
412.105(f)(1)(vii), we have identified an inadvertent omission of a 
cross-reference relating to an adjustment to a hospital's full-time 
equivalent cap for a new medical residency training program. Section 
412.105(f)(1)(vii) states that if a hospital establishes a new medical 
residency training program, as defined in Sec.  413.79(l), the 
hospital's full-time equivalent cap may be adjusted in accordance with 
the provisions of Sec.  413.79(e)(1) through (e)(4). However, there is 
a paragraph (e)(5) under Sec.  413.79 that we have inadvertently 
omitted that applies to the regulation at Sec.  412.105(f)(1)(vii). In 
this proposed rule, we are proposing to correct this omission by 
removing the reference to ``Sec.  413.79(e)(1) through (e)(4)'' and 
adding in its place the reference ``Sec.  413.79(e)'' to make clear 
that the provisions of Sec.  413.79(e)(1) through (e)(5) apply. This 
proposed revision is intended to correct the omission and is not 
intended to substantially change the underlying regulation.

F. Proposed Payment Adjustment for Medicare Disproportionate Share 
Hospitals (DSHs) for FY 2019 (Sec.  412.106)

1. General Discussion
    Section 1886(d)(5)(F) of the Act provides for additional Medicare 
payments to subsection (d) hospitals

[[Page 20387]]

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 42 CFR 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 such 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 FY 2018 and subsequent fiscal years, 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

[[Page 20388]]

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 explained 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 would be paid under the 
Maryland All-Payer Model. The Maryland All-Payer Model was scheduled to 
end on December 31, 2018, but CMS and the State have agreed to extend 
it through December 31, 2019. Alternatively, CMS and the State may 
enter into an agreement to govern payments to Maryland hospitals under 
a new payment model. Under either scenario, Maryland hospitals would 
not be paid under the IPPS in FY 2019, and would remain ineligible to 
receive empirically justified Medicare DSH payments or uncompensated 
care payments under section 1886(r) of the Act.
     Sole community hospitals (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 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).
     Medicare-dependent, small rural hospitals (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 that is used in the MDH payment 
methodology is the same IPPS Federal rate that is used in the SCH 
payment methodology. Section 50205 of the Bipartisan Budget Act of 2018 
(Pub. L. 115-123), enacted on February 9, 2018, extended the MDH 
program for discharges on or after October 1, 2017, through September 
30, 2022. Because MDHs are paid based on the IPPS Federal rate, they 
continue to be eligible to receive empirically justified Medicare DSH 
payments and uncompensated care payments if their DPP is at least 15 
percent, and 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. Due to the extension of the MDH 
program, MDHs will 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, we will continue 
to make a determination concerning eligibility for interim 
uncompensated care payments based on each hospital's estimated DSH 
status for the applicable fiscal year (using the most recent data that 
are available). Our final determination on the hospital's eligibility 
for uncompensated care payments will be based on the hospital's actual 
DSH status at cost report settlement for that payment year. In 
addition, as we do for all IPPS hospitals, we will calculate a 
numerator for Factor 3 for all MDHs, regardless of whether they are 
projected to be eligible for Medicare DSH payments during the fiscal 
year, but the denominator for Factor 3 will be based on the 
uncompensated care data from the hospitals that we have projected to be 
eligible for Medicare DSH payments during the fiscal year.

[[Page 20389]]

     IPPS hospitals that elect to participate in the Bundled 
Payments for Care Improvement Advanced Initiative (BPCI Advanced) model 
starting October 1, 2018, will continue to be paid under the IPPS and, 
therefore, are eligible to receive empirically justified Medicare DSH 
payments and uncompensated care payments. For further information 
regarding the BPCI Advanced model, we refer readers to the CMS website 
at: https://innovation.cms.gov/initiatives/bpci-advanced/.
     IPPS hospitals that are participating in the 
Comprehensive Care for Joint Replacement Model (80 FR 73300) continue 
to be paid under the IPPS and, therefore, are eligible to receive 
empirically justified Medicare DSH payments and uncompensated care 
payments.
     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), therefore 
requiring an additional 5-year participation period for the 
demonstration program. Section 15003 of Public Law 114-255 also 
required a solicitation for applications for additional hospitals to 
participate in the demonstration program. As a result, there are 
currently 30 hospitals participating in the demonstration program. 
Under the payment methodology that applies during the second 5 years of 
the extension period under the demonstration program, these hospitals 
do not receive empirically justified Medicare DSH payments, and they 
are excluded from receiving interim and final uncompensated care 
payments.
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 website 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 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 2018, and our 
proposed policies for FY 2019.
a. Calculation of Proposed Factor 1 for FY 2019
    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 2018, in this FY 2019 IPPS/LTCH PPS proposed rule, 
in order to determine Factor 1 in the uncompensated care payment 
formula for FY 2019, 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

[[Page 20390]]

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 2019.
    Therefore, in order to determine the two elements of proposed 
Factor 1 for FY 2019 (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 the proposed Factor 1 and modeling the 
impact of this FY 2019 IPPS/LTCH PPS proposed rule, we used the Office 
of the Actuary's December 2017 Medicare DSH estimates, which were based 
on data from the December 2017 update of the Medicare Hospital Cost 
Report Information System (HCRIS) and the FY 2018 IPPS/LTCH PPS final 
rule IPPS Impact file, published in conjunction with the publication of 
the FY 2018 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 December 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, which are not 
eligible to receive DSH payments, were also excluded from the Office of 
the Actuary's December 2017 Medicare DSH estimates. The 30 hospitals 
participating in the Rural Community Hospital Demonstration Program 
were also excluded from these estimates because, under the payment 
methodology that applies during the second 5 years of the extension 
period, these hospitals are not eligible to receive empirically 
justified Medicare DSH payments or interim and final uncompensated care 
payments.
    For this proposed rule, using the data sources discussed above, the 
Office of the Actuary used the most recently submitted Medicare cost 
report data for FY 2015 to identify Medicare DSH payments and the most 
recent Medicare DSH payment adjustments provided in the Impact File 
published in conjunction with the publication of the FY 2018 IPPS/LTCH 
PPS final rule and applied update factors and assumptions for future 
changes in utilization and case-mix to estimate Medicare DSH payments 
for the upcoming fiscal year. The December 2017 Office of the Actuary 
estimate for Medicare DSH payments for FY 2019, without regard to the 
application of section 1886(r)(1) of the Act, was approximately $16.295 
billion. This estimate excluded Maryland hospitals participating in the 
Maryland All-Payer Model, hospitals participating in the Rural 
Community Hospital Demonstration, and SCHs paid under their 
hospital[dash]specific payment rate. Therefore, based on the December 
2017 estimate, the estimate of empirically justified Medicare DSH 
payments for FY 2019, with the application of section 1886(r)(1) of the 
Act, is approximately $4.074 billion (or 25 percent of the total amount 
of estimated Medicare DSH payments for FY 2019). 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 FY 2019 will be 
$12,221,027,954.62, which is equal to 75 percent of the total amount of 
estimated Medicare DSH payments for FY 2018 ($16,294,703,939.49 minus 
$4,073,675,984.87).
    The Office of the Actuary's estimates for FY 2019 for this proposed 
rule began with a baseline of $13.232 billion in Medicare DSH 
expenditures for FY 2015. The following table shows the factors applied 
to update this baseline through the current estimate for FY 2019:

                                    Factors Applied for FY 2016 Through FY 2019 To Estimate Medicare DSH Expenditures
                                                                 Using FY 2015 Baseline
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                           Estimated DSH
                           FY                                 Update        Discharges       Case-mix          Other           Total        payment (in
                                                                                                                                            billions) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016....................................................           1.009          0.9864           1.031           1.046        1.073333          14.202
2017....................................................          1.0015          0.9925           1.004          1.0657        1.063531          15.105
2018....................................................        1.018088          0.9921           1.005         1.02745         1.04296          15.754
2019....................................................          1.0175           1.011           1.005          1.0005        1.034353          16.295
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounded.

    In this table, the discharges column shows the increase in the 
number of Medicare fee-for-service (FFS) inpatient hospital discharges. 
The figure for FY 2016 is based on Medicare claims data that have been 
adjusted by a completion factor. The discharge figure for FY 2017 is 
based on preliminary data for 2017. The discharge figures for FYs 2018 
and 2019 are assumptions based on recent trends recovering back to the 
long[dash]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 2016 and FY 2017 are based on actual data adjusted by a 
completion factor. The FY 2018 increase is based on preliminary data. 
The FY 2018 and FY 2019 increases are estimates and 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[dash]midnight stay policy). In 
addition, the ``Other'' column includes a factor for the Medicaid 
expansion due to the Affordable Care Act. The factor for Medicaid 
expansion was developed

[[Page 20391]]

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 individuals 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
----------------------------------------------------------------------------------------------------------------
2016............................             2.4            -0.2            -0.5            -0.8             0.9
2017............................             2.7           -0.75            -0.3            -1.5            0.15
2018............................             2.7           -0.75            -0.6          0.4588          1.8088
2019............................             2.8           -0.75            -0.8             0.5            1.75
----------------------------------------------------------------------------------------------------------------
Note: All numbers are based on the FY 2019 President's Budget projections.

    We are inviting public comments on our proposed methodology for 
calculation of Factor 1 for FY 2019.
b. Calculation of Proposed Factor 2 for FY 2019
(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)(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.
(2) Proposed Methodology for Calculation of Factor 2 for FY 2019
    As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38197), 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) 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). As we 
explained in the FY 2018 IPPS/LTCH PPS final rule, 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 are proposing to use the 
same methodology as was used in FY 2018 to determine Factor 2 for FY 
2019.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197 and 38198), we 
explained that we determined 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 were

[[Page 20392]]

particularly relevant in estimating the percent change in the rate of 
uninsurance for FY 2018 and that we believe continue to be relevant in 
developing the estimate for FY 2019. A full description of the 
methodology used to develop the NHEA is available on the CMS website 
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, as we explained in the FY 2018 IPPS/LTCH PPS proposed and 
final rules, 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 2016, 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 2016. The NHEA data are publicly available 
on the CMS website 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 website 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). For both 2015 and 2016, OACT's 
estimates of the rate of uninsurance are derived by applying the NHIS 
data on the proportion of uninsured individuals to the total U.S. 
population as described above. 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 website at: https://www.cdc.gov/nchs/nhis/index.htm.
    The next metrics needed to compute Factor 2 are projections of the 
rate of uninsurance in both calendar years 2018 and 2019. On an annual 
basis, OACT projects enrollment and spending trends for the coming 10-
year period. Those projections (currently for years 2017 through 2026) 
use the latest NHEA historical data, which presently run through 2016. 
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 OACT. Projected rates of growth in enrollment for private 
health insurance and the uninsured are based largely on 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 website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
    As discussed in the FY 2018 IPPS/LTCH PPS final rule, 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 2018 and 2019 is 9.1 percent 
and 9.6 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,

[[Page 20393]]

many commenters noted that the uncompensated care payments are made for 
the fiscal year and not on 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. 
Accordingly, we are proposing to continue to apply the weighted average 
approach used in past fiscal years in order to estimate the rate of 
uninsurance for FY 2019. OACT has certified this estimate of the fiscal 
year rate of uninsurance to be reasonable and appropriate for purposes 
of section 1886(r)(2)(B)(ii) of the Act.
    The calculation of the proposed Factor 2 for FY 2019 using a 
weighted average of OACT's projections for CY 2018 and CY 2019 is as 
follows:
     Percent of individuals without insurance for CY 2013: 14 
percent.
     Percent of individuals without insurance for CY 2018: 9.1 
percent.
     Percent of individuals without insurance for CY 2019: 9.6 
percent.
     Percent of individuals without insurance for FY 2019 (0.25 
times 0.091) + (0.75 times 0.096): 9.48 percent.

1-[bond]((0.0948-0.14)/0.14)[bond] = 1-0.3229 = 0.6771 (67.71 percent)
0.6771 (67.71 percent)-.002 (0.2 percentage points for FY 2019 under 
section 1886(r)(2)(B)(ii) of the Act) = 0.6751 or 67.51 percent
0.6751 = Factor 2

    Therefore, the proposed Factor 2 for FY 2019 is 67.51 percent.
    The proposed FY 2019 uncompensated care amount is: 
$12,221,027,954.62 x 0.6751 = $8,250,415,972.16.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Proposed FY 2019 Uncompensated Care Amount.......     $8,250,415,972.16
------------------------------------------------------------------------

    We are inviting public comments on our proposed methodology for 
calculation of Factor 2 for FY 2019.
c. Calculation of Proposed Factor 3 for FY 2019
(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 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, the first year this provision was in 
effect, we considered defining the amount of uncompensated care for a 
hospital as the uncompensated care costs of that 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 use Worksheet S-10 data to determine Factor 3 for FY 
2014, or for FYs 2015, 2016, or 2017. Instead, we believed that the 
utilization of insured low-income patients, as measured by patient 
days, would be a better proxy for the costs of hospitals in treating 
the uninsured and therefore appropriate to use in calculating Factor 3 
for these years. Of particular importance in our decision-making was 
the relative newness of Worksheet S-10, which went into effect on May 
1, 2010. At the time of the rulemaking for FY 2014, 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

[[Page 20394]]

care payments. 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 
indicated our belief that Worksheet S-10 could ultimately serve as an 
appropriate source of more direct data regarding uncompensated care 
costs for purposes of determining Factor 3 once hospitals were 
submitting more accurate and consistent data through this reporting 
mechanism.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38202), we stated 
that 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. 
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. 
Analyses performed by MedPAC had already shown 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). In addition, a 2007 
MedPAC analysis of data from the Government Accountability Office (GAO) 
and the American Hospital Association (AHA) had suggested that Medicaid 
days and low-income Medicare days are not an accurate proxy for 
uncompensated care costs (80 FR 49525).
    Subsequent analyses from Dobson/DaVanzo, originally commissioned by 
CMS for the FY 2014 rulemaking and updated in later years, compared 
Worksheet S-10 and IRS Form 990 data and assessed the correlation in 
Factor 3s derived from each of the data sources. The most recent update 
of this analysis, which used IRS Form 990 data for tax years 2011, 
2012, and 2013 (the latest available years) as a benchmark, 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 this correlation 
continues to increase over time, from 0.80 in 2011 to 0.85 in 2013.
    This empirical evidence led us to believe that we had reached a 
tipping point in FY 2018 with respect to the use of the Worksheet S-10 
data. We refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38201 through 38203) for a complete discussion of these analyses.
    We found further evidence for this tipping point when we examined 
changes to the FY 2014 Worksheet S-10 data submitted by hospitals 
following 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 (LTCHs),'' 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. For the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19949 through 19950), we examined hospitals' FY 
2014 cost reports to see if the Worksheet S-10 data on those cost 
reports had 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[dash]10 information is available to be used in determining 
uncompensated care costs contributed to our belief that we could no 
longer conclude that alternative data are available that are a better 
proxy than the Worksheet S-10 data for the costs of subsection (d) 
hospitals for treating individuals who are uninsured.
    We also recognized commenters' concerns 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 used to 
calculate uncompensated care payments in FYs 2015, 2016, and 2017 are 
the latest available data on Medicaid utilization that do not reflect 
the effects of these Medicaid expansions. Accordingly, if we had used 
only low-income insured days to estimate uncompensated care in FY 2018, 
we would have needed 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 have been 
using older data that may provide a less accurate proxy for the level 
of uncompensated care being furnished by hospitals, contributing to our 
growing concerns regarding the continued use of low-income insured days 
as a proxy for uncompensated care costs in FY 2018.
    In summary, as we stated in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38203), when weighing the new information regarding the growing 
correlation between the Worksheet S-10 data and IRS 990 data that 
became available to us after the FY 2017 rulemaking in conjunction with 
the information regarding Worksheet S-10 data and the low-income days 
proxy that we had analyzed as part of our consideration of this issue 
in prior rulemaking, we determined that we

[[Page 20395]]

could 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 
also stated that we believe that continued use of Worksheet S-10 will 
improve the accuracy and consistency of the reported data, especially 
in light of CMS' concerted efforts to allow hospitals to review and 
resubmit their Worksheet S-10 data for past years and the use of select 
audit protocols to trim aberrant data and replace them with more 
reasonable amounts. We also committed to continue to work with 
stakeholders to address their concerns regarding the accuracy of the 
reporting of uncompensated care costs through provider education and 
refinement of the instructions to Worksheet S-10.
(2) Methodology Used To Calculate Factor 3 in Prior Fiscal Years
    Section 1886(r)(2)(C) of the Act governs both the selection of the 
data to be used in calculating Factor 3, and 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 on 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 data from a 
single cost reporting period as we did in FY 2014, FY 2015, and FY 
2016, we used data from three cost reporting periods (Medicaid data for 
FYs 2011, 2012, and 2013 and SSI days from the three most recent 
available years of SSI utilization data (FYs 2012, 2013, and 2014)) to 
compute Factor 3 for FY 2017. Furthermore, instead of determining a 
single Factor 3 as we had 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, consistent with the methodology used to calculate 
Factor 3 for FY 2017, we advanced the time period of the data used in 
the calculation of Factor 3 forward by one year and used data from FY 
2012, FY 2013, and FY 2014 cost reports. We believed it would not be 
appropriate to use Worksheet S-10 data for periods prior to FY 2014, as 
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. Rather, for cost reporting periods prior to 
FY 2014, we believed it would be appropriate to continue to use low-
income insured days. Accordingly, for the time period consisting of 
three cost reporting years, including FY 2014, FY 2013, and FY 2012, we 
used Worksheet S-10 data for the FY 2014 cost reporting period and the 
low-income insured days proxy data for the two earlier cost reporting 
periods. In order to perform this calculation, we drew 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. Accordingly, for FY 
2018, in addition to the Worksheet S-10 data for FY 2014, we used 
Medicaid days from FY 2012 and FY 2013 cost reports and FY 2014 and FY 
2015 SSI ratios. We also continued to use FY 2012 cost report data 
submitted to CMS by IHS and Tribal hospitals to determine FY 2012 
Medicaid days for those hospitals. (Cost report data from IHS and 
Tribal hospitals are included in HCRIS beginning in FY 2013 and are no 
longer submitted separately.) We continued 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).
    To limit the effect of aberrant reporting of Worksheet S-10 data, 
we identified those hospitals that had high levels of reported 
uncompensated care relative to the total operating costs reported on 
the cost report. Specifically, for those hospitals where the ratio of 
uncompensated care costs relative to total operating costs for the 
hospital's 2014 cost report exceeded 50 percent, we determined the 
ratio of uncompensated care costs relative to total operating costs 
from the hospital's 2015 cost report and applied that ratio to the 
hospital's total operating costs from the 2014 cost report to determine 
an adjusted amount of uncompensated care costs for FY 2014. We then 
substituted this amount for the FY 2014 Worksheet S-10 data when 
determining Factor 3 for FY 2018. We believed that this approach, which 
affected the data for three hospitals in FY 2018, balanced our desire 
to exclude potentially aberrant data from a small number of hospitals 
in the determination of Factor 3 with our concern regarding 
inappropriately reducing FY 2018 uncompensated care payments to a 
hospital that may have a legitimately high ratio. We stated our intent 
to consider in future rulemaking whether continued use of this 
adjustment or an

[[Page 20396]]

alternative adjustment is necessary for subsequent years.
    Due to concerns that the uncompensated care data reported by Puerto 
Rico hospitals and Indian Health Service and Tribal hospitals need to 
be examined further, we concluded that the Worksheet S-10 data for 
these hospitals should not be used to determine Factor 3 for FY 2018 
(82 FR 38209). We also determined that Worksheet S-10 data should not 
be used to determine Factor 3 for All[dash]Inclusive Rate Providers, 
whose CCRs were deemed to be potentially erroneous and in need of 
further examination (82 FR 38212). For the reasons described earlier 
related to the impact of the Medicaid expansion beginning in FY 2014, 
we did not believe it was appropriate to calculate a Factor 3 for these 
hospitals using FY 2014 low-income insured days. Because we did not 
believe it was appropriate to use the FY 2014 uncompensated care data 
for these hospitals and we also did not believe it was appropriate to 
use the FY 2014 low[dash]income insured days, we concluded that the 
best proxy for the costs of Puerto Rico, Indian Health Service and 
Tribal hospitals, and All-Inclusive Rate Providers for treating the 
uninsured is the low-income insured days data for FY 2012 and FY 2013. 
Accordingly, in order to determine the Factor 3 for FY 2018 for these 
hospitals, we calculated 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 believed it 
was 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 
stated that we would reexamine the use of the Worksheet S-10 data for 
Puerto Rico, Indian Health Service and Tribal hospitals, and All-
Inclusive Rate Providers as part of the FY 2019 rulemaking. In 
addition, for Puerto Rico hospitals, we continued to use a proxy for 
SSI days consisting of 14 percent of a hospital's Medicaid days, as was 
first applied in FY 2017 (82 FR 38209).
    Therefore, for FY 2018, we computed a 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, IHS/Tribal hospitals, and All[dash]Inclusive Rate 
Providers); 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 hospital, and dividing that amount by the number of cost 
reporting periods with data to compute an average Factor 3.
    We stated our belief that if we were to propose to continue this 
methodology for FY 2019 and FY 2020, this approach would have the 
effect of transitioning the incorporation of data from Worksheet S-10 
into the calculation of Factor 3 because 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[dash]income insured days would 
be phased out by FY 2020.
(3) Proposed Methodology for Calculating Factor 3 for FY 2019
    Since the publication of the FY 2018 IPPS/LTCH PPS final rule, we 
have continued to monitor the reporting of Worksheet S-10 data in 
anticipation of using Worksheet S-10 data from hospitals' FY 2014 and 
FY 2015 cost reports in the calculation of Factor 3. We acknowledge the 
concerns that have been raised regarding the instructions for Worksheet 
S-10. In particular, commenters have expressed concerns that the lack 
of clear and concise line level instructions prevents accurate and 
consistent data from being reported on Worksheet S-10. We note that, in 
November 2016, CMS issued Transmittal 10, which clarified and revised 
the instructions for the Worksheet S-10, including the instructions 
regarding the reporting of charity care charges. Transmittal 10 is 
available for download on the CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R10P240.pdf. 
In Transmittal 10, we clarified that hospitals may include discounts 
given to uninsured patients who meet the hospital's charity care 
criteria in effect for that cost reporting period. This clarification 
applied to cost reporting periods beginning prior to October 1, 2016, 
as well as cost reporting periods beginning on or after October 1, 
2016. As a result, nothing prohibits a hospital from considering a 
patient's insurance status as a criterion in its charity care policy. A 
hospital determines its own financial criteria as part of its charity 
care policy. The instructions for the Worksheet S-10 set forth that 
hospitals may include discounts given to uninsured patients, including 
patients with coverage from an entity that does not have a contractual 
relationship with the provider, who meet the hospital's charity care 
criteria in effect for that cost reporting period. In addition, we 
revised the instructions for the Worksheet S-10 for cost reporting 
periods beginning on or after October 1, 2016, to provide that charity 
care charges must be determined in accordance with the hospital's 
charity care criteria/policy and written off in the cost reporting 
period, regardless of the date of service.
    During the FY 2018 rulemaking, commenters pointed out that, in the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 56963), CMS agreed to institute 
certain additional quality control and data improvement measures prior 
to moving forward with incorporating Worksheet S-10 data into the 
calculation of Factor 3. However, the commenters indicated that, aside 
from a brief window in 2016 for hospitals to submit corrected data on 
their FY 2014 Worksheet S-10 by September 30, 2016, and the issuance of 
revised instructions (Transmittal 10) in November 2016 that are 
applicable to cost reports beginning on or after October 1, 2016, CMS 
has not implemented any additional quality control and data improvement 
measures. We stated in the FY 2018 IPPS/LTCH PPS final rule that we 
would continue to work with our stakeholders to address their concerns 
regarding the reporting of uncompensated care through provider 
education and refinement of the instructions to the Worksheet S-10 (82 
FR 38206).
    On September 29, 2017, we issued Transmittal 11, which clarified 
the definitions and instructions for uncompensated care, non-Medicare 
bad debt, nonreimbursed Medicare bad debt, and charity care, as well as 
modified the calculations relative to uncompensated care costs and 
added edits to ensure the integrity of the data reported on Worksheet 
S-10. Transmittal 11 is available for download on the CMS website at: 
https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R11p240.pdf. We further clarified that full or partial 
discounts given to uninsured patients who meet the hospital's charity 
care policy or financial assistance policy/uninsured discount policy 
(hereinafter referred to as Financial Assistance Policy or FAP) may be 
included on Line 20, Column 1 of Worksheet S-10. These clarifications 
apply to cost reporting periods beginning on or after October 1, 2013. 
We also modified the application of the CCR. We specified that the CCR 
will not be applied to the deductible and

[[Page 20397]]

coinsurance amounts for insured patients approved for charity care and 
nonreimbursed Medicare bad debt. The CCR will be applied to the charges 
for uninsured patients approved for charity care or an uninsured 
discount, non[dash]Medicare bad debt, and charges for noncovered days 
exceeding a length of stay limit imposed on patients covered by 
Medicaid or other indigent care programs.
    We also provided another opportunity for hospitals to submit 
revisions to their Worksheet S-10 data for FY 2014 and FY 2015 cost 
reports. We refer readers to Change Request 10378, Transmittal 1981, 
titled ``Fiscal Year (FY) 2014 and 2015 Worksheet S-10 Revisions: 
Further Extension for All Inpatient Prospective Payment System (IPPS) 
Hospitals,'' issued on December 1, 2017 (available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R1981OTN.pdf). In this transmittal, we instructed MACs to 
accept amended Worksheets S-10 for FY 2014 and FY 2015 cost reports 
submitted by hospitals (or initial submissions of Worksheet S-10 if 
none have been submitted previously) and to upload them to the Health 
Care Provider Cost Report Information System (HCRIS) in a timely 
manner. The transmittal states that hospitals must submit their amended 
FY 2014 and FY 2015 cost reports 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 January 2, 
2018. We note that this transmittal supersedes the previous deadline in 
Change Request 10026, which was issued on June 30, 2017, with respect 
to the dates by which hospitals must submit their revised or newly 
submitted Worksheet S-10 in order to be considered for purposes of this 
rulemaking, as well as the dates by which MACs must accept these data 
and upload a revised cost report to HCRIS. Under the deadlines 
established in Change Request 10378, in order for revisions to be 
guaranteed consideration for this FY 2019 proposed rule, hospitals had 
to submit their amended FY 2014 and FY 2015 cost reports 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 December 1, 2017. We also indicated that, all revised data 
received by December 1, 2017, would be considered for purposes of this 
FY 2019 IPPS/LTCH PPS proposed rule, and all revised data received by 
the January 2, 2018 deadline would be available to be considered for 
purposes of the FY 2019 IPPS/LTCH PPS final rule.
    However, for this FY 2019 IPPS/LTCH PPS proposed rule, we were able 
to include data updated in HCRIS through February 15, 2018. 
Specifically, in light of the impact of the hurricanes in 2017 (Harvey, 
Irma, Maria, and Nate) and the extension of the deadline for 
resubmitting Worksheets S-10 for FY 2014 and FY 2015 through January 2, 
2018, we believed it was appropriate to use data updated through 
February 15, 2018, rather than the December 2017 HCRIS update, which we 
typically use for the annual proposed rule. We believe that providing 
the additional time to allow cost reports that may have been delayed 
due to these unique circumstances to be included in our calculations 
for purposes of this FY 2019 proposed rule, enabled us to use more 
accurate uncompensated care cost data in calculating the proposed 
Factor 3 values.
    We examined hospitals' FY 2014 and FY 2015 cost reports to 
determine if the Worksheet S-10 data on those cost reports had changed 
as a result of the additional opportunity for hospitals to submit 
revised Worksheet S-10 data for FY 2014 and FY 2015. Specifically, we 
compared hospitals' FY 2014 and FY 2015 Worksheet S-10 data as reported 
in the fourth quarter of CY 2016 update of HCRIS to the February 15, 
2018 update of HCRIS. We examined hospitals' cost report data to 
determine if the Worksheet S-10 data had changed for any of the 
following lines: Total bad debt from Line 26, charity care for 
uninsured patients from Line 20, Column 1, or charity care for insured 
patients from Line 20, Column 2. Based on our review, we found that 
Worksheet S-10 data for both FY 2014 and FY 2015 had changed over that 
time period for approximately one-half of the hospitals that were 
eligible to receive Medicare DSH payments in FY 2018. The fact that the 
Worksheet S-10 data changed for such a significant number of hospitals 
following the opportunity to review their previously submitted cost 
report data and submit a revised Worksheet S-10, and that this revised 
Worksheet S-10 information is available to be used in determining 
uncompensated care costs, contributes to our determination that it is 
appropriate to continue to incorporate Worksheet S-10 data into the 
calculation of Factor 3 values for hospitals that are eligible to 
receive Medicare DSH payments.
    With the additional steps we have taken to ensure the accuracy and 
consistency of the data reported on Worksheet S-10 since the 
publication of the FY 2018 IPPS/LTCH PPS final rule, we continue to 
believe that we can no longer conclude that alternative data to the 
Worksheet S-10 are currently available for FY 2014 that are a better 
proxy for the costs of subsection (d) hospitals for treating 
individuals who are uninsured. Similarly, the actions that we have 
taken to improve the accuracy and consistency of the Worksheet S-10 
data, including the opportunity for hospitals to resubmit Worksheet S-
10 data for FY 2015, lead us to conclude that there are no alternative 
data to the Worksheet S-10 data currently available for FY 2015 that 
are a better proxy for the costs of subsection (d) hospitals for 
treating uninsured individuals. As such, we are proposing to advance 
the time period of the data used in the calculation of Factor 3 forward 
by 1 year and to use data from FY 2013, FY 2014, and FY 2015 cost 
reports to determine Factor 3 for FY 2019. For the reasons we described 
earlier, we continue to believe it is inappropriate to use Worksheet S-
10 data for periods prior to FY 2014. Rather, for cost reporting 
periods prior to FY 2014, we believe it is appropriate to continue to 
use low-income insured days. Accordingly, with a time period that 
includes 3 cost reporting years consisting of FY 2015, FY 2014, and FY 
2013, we are proposing to use Worksheet S-10 data for the FY 2014 and 
FY 2015 cost reporting periods and the low-income insured days proxy 
data for the earliest cost reporting period. As in previous years, in 
order to perform this calculation, we will draw three sets of data (1 
year of Medicaid utilization data and 2 years of Worksheet S-10 data) 
from the most recent available HCRIS extract, which, is the HCRIS data 
updated through February 15, 2018, for purposes of this FY 2019 
proposed rule. We expect to use the March 2018 update of HCRIS for the 
final rule. However, due to unique circumstances regarding the impact 
of the hurricanes in 2017 (Harvey, Irma, Maria, and Nate) and the 
extension of the deadline to resubmit Worksheet S-10 data through 
January 2, 2018, and the subsequent impact on the MAC review timeline, 
we may consider using data updated through May 31, 2018, in the final 
rule, if necessary.
    Accordingly, for FY 2019, in addition to the Worksheet S-10 data 
for FY 2014 and FY 2015, we are proposing to use Medicaid days from FY 
2013 cost reports and FY 2016 SSI ratios. We note that cost report data 
from Indian Health Service and Tribal hospitals are included in HCRIS 
beginning in FY 2013 and no longer need to be incorporated from a 
separate data source. We also are proposing to

[[Page 20398]]

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. In addition, we are proposing to continue the 
policies that were finalized in the FY 2018 IPPS/LTCH PPS final rule to 
address technical considerations related to the calculation of Factor 3 
and the incorporation of Worksheet S-10 data (82 FR 38213 through 
38220). With respect to the calculation of Factor 3, we adopted a 
policy under which we annualize Medicaid days data and uncompensated 
care cost data reported on the Worksheet S-10 if a hospital's cost 
report does not equal 12 months of data. As in FY 2018, for FY 2019, 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 include the information needed to determine 
if the data should be annualized. To address the effects of averaging 
Factor 3s calculated for 3 separate fiscal years, we apply a scaling 
factor to the Factor 3 values of all DSH eligible hospitals such that 
total uncompensated care payments are consistent with the estimated 
amount available to make uncompensated care payments for the applicable 
fiscal year. With respect to the incorporation of Worksheet S-10, we 
believe that the definition of uncompensated care adopted in FY 2018 is 
still appropriate because it incorporates the most commonly used 
factors within uncompensated care as reported by stakeholders, 
including charity care costs and non-Medicare bad debt costs, and 
correlates to Line 30 of Worksheet S-10. Therefore, we are again 
proposing that, for purposes of calculating Factor 3 and uncompensated 
care costs in FY 2019, ``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 and nonreimbursable 
Medicare bad debt (Line 29).
    We note that we are proposing to discontinue the policy finalized 
in the FY 2017 IPPS/LTCH PPS final rule concerning multiple cost 
reports beginning in the same fiscal year (81 FR 56957). Under this 
policy, we would first combine the data across the multiple cost 
reports before determining the difference between the start date and 
the end date to determine if annualization is needed. The policy was 
developed in response to commenters' concerns regarding the unique 
circumstances of hospitals that filed cost reports that are shorter or 
longer than 12 months. As we explained in the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 56957 through 56959) and in the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19953), we believed that, for hospitals that file 
multiple cost reports beginning in the same year, combining the data 
from these cost reports had 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. We now believe that concerns about the equitability of the 
data used as the basis of hospital uncompensated care payments are more 
thoroughly addressed by the policy finalized in the FY 2018 IPPS/LTCH 
PPS final rule, under which CMS annualizes the Medicaid days and 
uncompensated care cost data of hospital cost reports that do not equal 
12 months of data. Based on our experience, we believe that in many 
cases where a hospital files two cost reports beginning in the same 
fiscal year, combining the data across multiple cost reports before 
annualizing would yield a similar result to choosing the longer of the 
two cost reports and then annualizing the data if the cost report is 
shorter or longer than 12 months. Furthermore, even in cases where a 
hospital files more than one cost report beginning in the same fiscal 
year, it is not uncommon for one of those cost reports to span exactly 
12 months. In this case, if Factor 3 is determined using only the full 
12-month cost report, annualization would be unnecessary as there would 
already be 12 months of data. Therefore, for FY 2019, we believe it is 
appropriate to propose to eliminate the additional step of combining 
data across multiple cost reports if a hospital filed more than one 
cost report beginning in the same fiscal year. Instead, for purposes of 
calculating Factor 3, we would use data from the cost report that is 
equivalent to 12 months or, if no such cost report exists, the cost 
report that is closest to 12 months and annualize the data. 
Furthermore, we acknowledge that, in rare cases, a hospital may have 
more than one cost report beginning in one fiscal year, where one 
report also spans the entirety of the following fiscal year such that 
the hospital has no cost report beginning in that fiscal year. For 
instance, a hospital's cost reporting period may have started towards 
the end of FY 2012 but cover the duration of FY 2013. In these rare 
situations, we are proposing to use data from the cost report that 
spans both fiscal years in the Factor 3 calculation for the latter 
fiscal year as the hospital would already have data from the preceding 
cost report that could be used to determine Factor 3 for the previous 
fiscal year.
    We also are proposing to continue to apply statistical trims to 
anomalous hospital CCRs using the methodology adopted in the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38217 through 38219), where we stated 
our belief 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.
    Similar to the process used in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38217 through 38218) for trimming CCRs, we are proposing the 
following steps for FY 2019:
    Step 1: Remove Maryland hospitals. In addition, we would remove 
All[dash]Inclusive Rate Providers because they have charge structures 
that differ from other IPPS hospitals. For providers that did not 
report a CCR on Worksheet S-10, Line 1, we would assign them the 
statewide average CCR in step 5 below.
    Step 2: For each fiscal year (FY 2014 and FY 2015), calculate a CCR 
``ceiling'' with the following data: For each IPPS hospital that was 
not removed in Step 1 (including non-DSH eligible hospitals), we would 
use cost report data to calculate a CCR by dividing the total costs on 
Worksheet C, Part I, Line 202, Column 3 by the charges reported on 
Worksheet C, Part I, Line 202, Column 8. (Combining data from multiple 
cost reports from the same FY is no longer necessary in this step, as 
the longer cost report would be selected). The ceiling would be 
calculated as 3 standard deviations above the national geometric mean 
CCR for the applicable fiscal year. This approach is consistent with 
the methodology for calculating the CCR ceiling used for high-cost 
outliers. Remove all hospitals that exceed the

[[Page 20399]]

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 5 hospitals that have a CCR above the 
calculated ceiling of 1.031 for FY 2014 and 9 hospitals that have a CCR 
above the calculated ceiling of 0.93 for FY 2015.)
    Step 3: Using the CCRs for the remaining hospitals in Step 2, 
determine the urban and rural statewide average CCRs for FY 2014 and 
for FY 2015 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 4: Assign the appropriate statewide average CCR (urban or 
rural) calculated in Step 3 to all hospitals with a CCR for the 
applicable fiscal year greater than 3 standard deviations above the 
corresponding national geometric mean for that fiscal year (that is, 
the CCR ``ceiling''). The statewide average CCR would therefore be 
applied to 14 hospitals, of which 2 hospitals in FY 2014 have Worksheet 
S-10 data and 5 hospitals in FY 2015 have Worksheet S-10 data.
    After applying the applicable trims to a hospital's CCR as 
appropriate, we would calculate a hospital's uncompensated care costs 
for the applicable fiscal year as being equal to Line 30, which is the 
sum of Line 23, Column 3 and Line 29, as follows:

Hospital Uncompensated Care Costs = Line 30 (Line 23, Column 3 + Line 
29), which is equal to--
[(Line 1 CCR (as adjusted, if applicable) x Uninsured patient charity 
care Line 20, Column 1)-(Payments received from uninsured patient 
charity care Line 22, Column 1)] + [(Insured patient charity care Line 
20, Column 2)-Insured patient charges from days beyond length of stay 
limit * (1-(Line 1 CCR (as adjusted, if applicable)))-(Payments 
received from insured patient charity care Line 22, Column 2)] + [(Line 
1 CCR (as adjusted, if applicable) x Non-Medicare bad debt Line 28) + 
(Medicare allowable bad debts Line 27.01-Medicare reimbursable bad debt 
Line 27)].

    Similar in concept to the policy that we adopted for FY 2018, for 
FY 2019, we continue to believe that uncompensated care costs that 
represent an extremely high ratio of a hospital's total operating 
expenses (such as the ratio of 50 percent used in the FY 2018 IPPS/LTCH 
PPS final rule) may be potentially aberrant, and that using the ratio 
of uncompensated care costs to total operating costs to identify 
potentially aberrant data when determining Factor 3 amounts has merit. 
That is, we continue to believe that, in the rare situations where a 
hospital has a ratio of uncompensated care costs to total operating 
expenditures that is extremely high, the issue is most likely with the 
hospital's uncompensated care costs and not its total operating costs. 
We have instructed the MACs to review situations where a hospital has 
an extremely high ratio of uncompensated care costs to total operating 
costs with the hospital. We do not intend to make the MACs' review 
protocols public. As stated in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56964), for program integrity reasons, CMS desk review and audit 
protocols are confidential and are for CMS and MAC use only. If the 
hospital cannot justify its reported uncompensated care amount, we 
believe it would be appropriate to utilize data from another fiscal 
year to address the potentially aberrant Worksheet S-10 data for FY 
2014 or FY 2015. As we have previously indicated, we do not believe it 
would be appropriate to use Worksheet S-10 data from years prior to FY 
2014 in the determination of Factor 3. Therefore, the most widely 
available Worksheet S-10 data available to us if a hospital has an 
extremely high ratio of uncompensated care costs to total operating 
expenses based on its FY 2014 or FY 2015 Worksheet S-10 data are the FY 
2015 and FY 2016 Worksheet S-10 data. Accordingly, similar in concept 
to the approach we used in FY 2018, in cases where a hospital's 
uncompensated care costs for FY 2014 are an extremely high ratio of its 
total operating costs and the hospital cannot justify the amount it 
reported, we are proposing to determine the ratio of FY 2015 
uncompensated care costs to FY 2015 total operating expenses from the 
hospital's FY 2015 cost report and apply that ratio to the FY 2014 
total operating expenses from the hospital's FY 2014 cost report to 
determine an adjusted amount of uncompensated care costs for FY 2014. 
We would then use this adjusted amount to determine Factor 3 for FY 
2019. Similarly, if a hospital has uncompensated care costs for FY 2015 
that are an extremely high ratio of its total operating costs for that 
year and the hospital cannot justify its reported amount, we are 
proposing to follow the same methodology using data from the hospital's 
FY 2016 cost report to determine an adjusted amount of uncompensated 
care costs for FY 2015. That is, we would determine the ratio of FY 
2016 uncompensated care costs to FY 2016 total operating expenses from 
a hospital's FY 2016 cost report and apply that ratio to the FY 2015 
total operating expenses from the hospital's FY 2015 cost report to 
determine an adjusted amount of uncompensated care costs for FY 2015. 
We would then use this adjusted amount when determining Factor 3 for FY 
2019. We have tentatively included the data for hospitals that have a 
high ratio of uncompensated care costs to total operating expenses when 
calculating Factor 3 for this proposed rule. We note, however, that our 
calculation of Factor 3 for the final rule will be contingent on the 
results of the ongoing MAC reviews of these hospitals. In the event 
those reviews necessitate supplemental data edits, we would incorporate 
such edits in the final rule for the purpose of correcting aberrant 
data.
    For FY 2019, we also believe that situations where there were 
extremely large dollar increases or decreases in a hospital's 
uncompensated care costs when it resubmitted its FY 2014 Worksheet S-10 
or FY 2015 Worksheet S-10 data, or when the data it had previously 
submitted were reprocessed by the MAC, may reflect potentially aberrant 
data and warrant further review. For example, although we do not make 
our actual review protocols public, we might conclude that it would be 
appropriate to review hospitals with increases or decreases in 
uncompensated care costs in the top 1 percent of such changes. We have 
instructed our MACs to review these situations with each hospital. If 
it is determined after this review that an increase or decrease in 
uncompensated care costs cannot be justified by the hospital, we are 
proposing to follow the same approach that we are proposing to use to 
address situations when a hospital's ratio of its uncompensated care 
costs to its operating expenses is extremely high and the hospital 
cannot justify its reported amount. Specifically, if after review, the 
increase or decrease in uncompensated care costs for FY 2014 or FY 2015 
cannot be justified by the hospital, we would determine the ratio of 
the uncompensated care costs to total operating expenses from the 
hospital's cost report for the subsequent fiscal year and apply that 
ratio to the total operating expenses from the hospital's resubmitted 
cost report with the large increase or decrease in uncompensated care 
payments to determine an adjusted amount of uncompensated care costs 
for the applicable fiscal year. We have tentatively included the data 
for

[[Page 20400]]

hospitals where there was an extremely large increase or decrease in 
uncompensated care payments when calculating Factor 3 for this proposed 
rule. However, we note that our calculation of Factor 3 for the final 
rule will be contingent on the results of the ongoing MAC reviews of 
these hospitals. In the event those reviews necessitate supplemental 
data edits, we would incorporate such edits in the final rule for the 
purpose of correcting aberrant data.
    For Indian Health Service and Tribal hospitals, subsection (d) 
Puerto Rico hospitals, and All-Inclusive Rate Providers, we are 
proposing to continue the policy we first adopted for FY 2018 of 
substituting data regarding FY 2013 low-income insured days for the 
Worksheet S-10 data when determining Factor 3. As we discussed in the 
FY 2018 IPPS/LTCH PPS final rule (82 FR 38209), the use of data from 
Worksheet S-10 to calculate the uncompensated care amount for Indian 
Health Service and Tribal hospitals may jeopardize these hospitals' 
uncompensated care payments due to their unique funding structure. With 
respect to Puerto Rico hospitals, we continue to agree with concerns 
raised by commenters that the uncompensated care data reported by these 
hospitals need to be further examined before the data are used to 
determine Factor 3 (82 FR 38209). Finally, the CCRs for All-Inclusive 
Rate Providers are potentially erroneous and still in need of further 
examination before they can be used in the determination of 
uncompensated care amounts for purposes of Factor 3 (82 FR 38212). For 
the reasons described earlier related to the impact of the Medicaid 
expansion beginning in FY 2014, we also continue to believe that it is 
inappropriate to calculate a Factor 3 using FY 2014 and FY 2015 low-
income insured days. Because we do not believe it is appropriate to use 
the FY 2014 or FY 2015 uncompensated care data for these hospitals and 
we also do not believe it is appropriate to use the FY 2014 or FY 2015 
low-income insured days, the best proxy for the costs of Indian Health 
Service and Tribal hospitals, subsection (d) Puerto Rico hospitals, and 
All[dash]Inclusive Rate Providers for treating the uninsured continues 
to be the low-income insured days data for FY 2013. Accordingly, for 
these hospitals, we are proposing to determine Factor 3 only on the 
basis of low-income insured days for FY 2013. We believe this approach 
is appropriate as the FY 2013 data reflect the most recent available 
information regarding these hospitals' low-income insured days before 
any expansion of Medicaid. We are not making any proposals with respect 
to the calculation of Factor 3 for FY 2020 and will reexamine the use 
of the Worksheet S-10 data for Indian Health Service and Tribal 
hospitals, subsection (d) Puerto Rico hospitals, and All-Inclusive Rate 
Providers as part of the FY 2020 rulemaking. In addition, because we 
are continuing to use 1 year of insured low-income patient days as a 
proxy for uncompensated care and residents of Puerto Rico are not 
eligible for SSI benefits, 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 2019, 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 2013 cost report data and the FY 2016 SSI ratio (or, 
for Puerto Rico hospitals, 14 percent of the hospital's FY 2013 
Medicaid days);
    Step 2: Calculating Factor 3 based on the FY 2014 Worksheet S-10 
data;
    Step 3: Calculating Factor 3 based on the FY 2015 Worksheet S-10 
data; and
    Step 4: Averaging the Factor 3 values from Steps 1, 2, and 3; that 
is, adding the Factor 3 values from FY 2013, FY 2014, and FY 2015 for 
each hospital, and dividing that amount by the number of cost reporting 
periods with data to compute an average Factor 3 (or for Puerto Rico 
hospitals, Indian Health Service and Tribal hospitals, and All-
Inclusive Rate Providers using the Factor 3 value from Step 1).
    We also are proposing to amend the regulations at Sec.  
412.106(g)(1)(iii)(C) by adding a new paragraph (5) to reflect this 
proposed methodology for computing Factor 3 for FY 2019.
    We note that, if a hospital does not have both Medicaid days for FY 
2013 and SSI days for FY 2016 available for use in the calculation of 
Factor 3 in Step 1, we consider the hospital not to have data available 
for the fiscal year, and will remove that fiscal year from the 
calculation and divide by the number of years with data. A hospital 
will be considered to have both Medicaid days and SSI days data 
available if it reports zero days for either component of the Factor 3 
calculation in Step 1. However, if a hospital is missing data due to 
not filing a cost report in one of the applicable fiscal years, we will 
divide by the remaining number of fiscal years.
    Although we are not making any proposals with respect to the 
development of Factor 3 for FY 2020 and subsequent fiscal years, the 
above methodology would have the effect of fully transitioning the 
incorporation of data from Worksheet S-10 into the calculation of 
Factor 3 if used in FY 2020. Starting with 1 year of Worksheet S-10 
data in FY 2018, an additional year of Worksheet S-10 data could be 
incorporated into the calculation of Factor 3 in FY 2019 if our 
proposed methodology is finalized, and the use of low-income insured 
days would be phased out by FY 2020 if the same methodology is proposed 
and finalized for that year. It is also possible that when we examine 
the FY 2016 Worksheet S-10 data, we may determine that the use of 
multiple years of Worksheet S-10 data is no longer necessary in 
calculating Factor 3 for FY 2020.
    For new hospitals that do not have data for any of the three cost 
reporting periods used in the Factor 3 calculation, we are proposing to 
continue to apply the new hospital policy finalized in the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50643). That is, the hospital would 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 2019 cost report, the hospital would 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 2019 cost report, and the 
denominator is the sum of uncompensated care costs reported on 
Worksheet S-10 of all DSH eligible hospitals' FY 2015 cost reports. Due 
to the uncertainty regarding the completeness and accuracy of the FY 
2019 uncompensated care cost data at the time this calculation would 
need to be performed, we believe it would be more appropriate to use 
the sum of the uncompensated care costs reported on Worksheet S-10 of 
all DSH eligible hospitals' cost reports from FY 2015, the most recent 
year of the 3-year time period used in the development of Factor 3, to 
determine the denominator of Factor 3 for new hospitals. We note that, 
given the time period of the data used to calculate Factor 3, any 
hospitals with a CCN established after October 1, 2015 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 2019 IPPS/LTCH PPS proposed rule 
and final rule, we will publish on the CMS website a table listing 
Factor 3 for all

[[Page 20401]]

hospitals that we estimate would receive empirically justified Medicare 
DSH payments in FY 2019 (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, at the time of the development of this proposed rule, the FY 
2016 SSI ratios were available. Accordingly, for modeling purposes, we 
computed the proposed Factor 3 for each hospital using the most recent 
available data regarding SSI days from the FY 2016 SSI ratios.
    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 2019 IPPS/LTCH PPS proposed rule to review 
the table and supplemental data file published on the CMS website 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 will 
publish on the CMS website in conjunction with the publication of the 
FY 2019 IPPS/LTCH PPS final rule. After the publication of the FY 2019 
IPPS/LTCH PPS final rule, hospitals will have until August 31, 2018, 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, 2018, and any changes to 
Factor 3 will be posted on the CMS website prior to October 1, 2018.
    We are inviting public comments on our proposed methodology for 
calculating Factor 3 for FY 2019, including, but not limited to, our 
proposed use of the FY 2013 low[dash]income insured days proxy data, 
and the FY 2014 and FY 2015 Worksheet S-10 data.

G. Sole Community Hospitals (SCHs) and Medicare-Dependent, Small Rural 
Hospitals (MDHs) (Sec. Sec.  412.90, 412.92, and 412.108)

1. Background on SCHs and MDHs
    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[dash]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, or is located in an all-urban State 
but meets one of the specified statutory criteria for rural 
reclassification (as added by section 50205 of the Bipartisan Budget 
Act of 2018, Pub. L. 115-123), 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. 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. Implementation of Legislation Relating to the MDH Program
a. Legislative Extension of the MDH Program
    Since the extension of the MDH program through FY 2012 provided by 
section 3124 of the Affordable Care Act, the MDH program has been 
extended by subsequent legislation. Most recently, section 50205 of the 
Bipartisan Budget Act of 2018 (Pub. L. 115-123), enacted on February 9, 
2018, extended the MDH program for FYs 2018 through 2022 (that is, for 
discharges occurring before October 1, 2022). (Additional information 
on the extensions of the MDH program after FY 2012 and through FY 2017 
can be found in the FY 2016 interim final rule with comment period (80 
FR 49596).)
    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 to provide 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).
    We note that, consistent with the previous extensions of the MDH 
program, generally, a provider that was classified as an MDH as of 
September 30, 2017, was reinstated as an MDH effective October 1, 2017, 
with no need to reapply for MDH classification. However, if the MDH had 
classified as an SCH or cancelled its rural classification under Sec.  
412.103(g) effective on or after October 1, 2017, the effective date of 
MDH status may not be retroactive to October 1, 2017. We refer readers 
to the notice (CMS-1677-N) that appears elsewhere in this issue of the 
Federal Register for more information on the MDH extension in FY 2018.
b. MDH Classification for Hospitals in All-Urban States
    In addition to extending the MDH program, section 50205 amended 
section 1886(d)(5)(G)(iv) of the Act to include in the definition of an 
MDH a hospital that is located in a State with no rural area (as 
defined in paragraph (2)(D)) and satisfies any of the criteria in 
section 1886(d)(8)(E)(ii)(I), (II), or (III) of the Act, in addition to 
the other qualifying criteria.
    Section 50205 of the Bipartisan Budget Act of 2018 also amended 
section 1886(d)(5)(G)(iv) of the Act by adding a provision following 
section 1886(d)(5)(G)(iv)(IV), which specifies that new section 
1886(d)(5)(G)(iv)(I)(bb) of the Act applies for purposes of the MDH 
payment under sections 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 determination of MDH status made with respect to the hospital 
after the date of the enactment of this provision. We note that, under 
existing regulations, the effective date for a determination of MDH 
status is 30 days after the date the MAC provides written notification 
of MDH status. We

[[Page 20402]]

also note that we are proposing in section IV.G.3. of the preamble of 
this proposed rule to change the effective date for a determination of 
MDH status. If the proposal is finalized, the policy would not be 
effective until FY 2019 (October 1, 2018) and therefore would not apply 
to hospitals applying for MDH classification before October 1, 2018. 
Furthermore, this new provision also specifies that, for purposes of 
new section 1886(d)(5)(G)(iv)(I)(bb) of the Act, section 
1886(d)(8)(E)(ii)(II) of the Act shall be applied by inserting ``as of 
January 1, 2018,'' after ``such State'' each place it appears. Section 
50205 of the Bipartisan Budget Act also made conforming amendments to 
sections 1886(b)(3)(D) (in the language proceeding clause (i)) and 
1886(b)(3)(D)(iv) of the Act.
    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 section 1886(d)(8)(E)(ii)(I), (II), or 
(III) of the Act (these statutory criteria are implemented in the 
regulations at 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 the State in which it is located 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[dash]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.
    As noted earlier, prior to the enactment of the Bipartisan Budget 
Act of 2018, a hospital in an all-urban State was ineligible for MDH 
classification because it could not reclassify as rural. With the new 
provision added by section 50205 of the Bipartisan Budget Act of 2018, 
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.  412.108(a)(1)(i) through (iii), which, as amended, would be 
redesignated as Sec.  412.108(a)(1)(i) through (iv). We note that 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. 
We also note that we are not proposing any changes to the 
reclassification criteria under Sec.  412.103 and that 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) of the Act (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.
    We are proposing to make conforming changes to the regulations at 
Sec.  412.108(a)(1) and (c)(2)(iii) to reflect the extension of the MDH 
program for FY 2018 through FY 2022 and the additional MDH 
classification provision made for hospitals located in all-urban States 
by section 50205 of the Bipartisan Budget Act of 2018. We are proposing 
a similar conforming change to Sec.  412.90(j) to reflect the extension 
of the MDH program through FY 2022.
3. Proposal Regarding Change to SCH and MDH Classification Status 
Effective Dates
    The regulations at 42 CFR 412.92(b)(2)(i) set forth an effective 
date for SCH classification of 30 days after the date of CMS' written 
notification of approval. Similarly, Sec.  412.92(b)(2)(iv) specifies 
that a hospital classified as an SCH receives a payment adjustment 
effective with discharges occurring on or after 30 days after the date 
of CMS' approval of the classification.
    Section 401 of the Medicare, Medicaid, and SCHIP Balanced Budget 
Refinement Act (BBRA) of 1999 (Pub. L. 106-113, Appendix F) amended 
section 1886(d)(8) of the Act to add paragraph (E) which authorizes 
reclassification of certain urban hospitals as rural if the hospital 
applies for such status and meets certain criteria. The effective date 
for rural reclassification status under section 1886(d)(8)(E) of the 
Act is set forth at 42 CFR 412.103(d)(1) as the filing date, which is 
the date CMS receives the reclassification application (Sec.  
412.103(b)(5)). One way that an urban hospital can reclassify as rural 
under Sec.  412.103 (specifically, Sec.  412.103(a)(3)) is if the 
hospital would qualify as a rural referral center (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 geographically urban hospital 
may simultaneously apply for reclassification as rural under Sec.  
412.103(a)(3) by meeting the criteria for SCH status (other than being 
located in a rural area), and apply to obtain SCH status under Sec.  
412.92 based on that acquired rural reclassification. However, the 
rural reclassification is effective as of the filing date, while the 
SCH status is effective 30 days after approval. In addition, while 
Sec.  412.103(c) states that the CMS Regional Office will review the 
application and notify the hospital of its approval or disapproval of 
the request within 60 days of the filing date, the regulations do not 
set a timeframe by which CMS must decide on an SCH request. Therefore, 
geographically urban hospitals that obtain rural reclassification under 
Sec.  412.103 for the purposes of obtaining SCH status may face a 
payment disadvantage because they are paid as rural until the SCH 
application is approved and the SCH classification and payment 
adjustment become effective 30 days after approval.
    To minimize the lag between the effective date of rural 
reclassification under Sec.  412.103 and the effective date for SCH 
status, we are proposing to revise Sec.  412.92(b)(2)(i) and (b)(2)(iv) 
so that the effective date for SCH classification and for the payment 
adjustment would be the date that CMS receives the complete SCH 
application, effective for SCH applications received on or after 
October 1, 2018. A complete application includes a request and all 
supporting documentation needed to demonstrate that the hospital meets 
criteria for SCH status as of the date of application, which includes 
documentation of rural reclassification in the case of a geographically 
urban hospital. For an application to be complete, all criteria must be 
met as of the date CMS receives the SCH application. For example, a 
hospital applying for SCH status on the basis of a Sec.  412.103 rural 
reclassification must submit its Sec.  412.103 application no later 
than its SCH application in order to be considered rural as of the date 
CMS receives the SCH application.

[[Page 20403]]

    Similar to rural reclassification obtained under Sec.  412.103, the 
effective date for SCH status would be the date that CMS receives the 
complete application. We also are proposing conforming changes to the 
effective date at Sec.  412.92(b)(2)(ii) for instances when a court 
order or a determination by the Provider Reimbursement Review Board 
(PRRB) reverses a CMS denial of SCH status and no further appeal is 
made. In the interest of a clear and consistent policy, we are 
proposing that this change in the SCH effective date would also apply 
for hospitals not reclassifying as rural under Sec.  412.103, such as 
geographically rural hospitals obtaining SCH status. We believe that 
these proposals to update the regulations at Sec.  412.92 to provide an 
effective date for SCH status that is consistent with the effective 
date for rural reclassification under Sec.  412.103 would benefit 
hospitals by minimizing any payment disadvantage caused by the lag 
between the effective date of rural reclassification and the effective 
date of SCH status. We also believe this proposal to align the SCH 
effective date with the Sec.  412.103 effective date supports agency 
efforts to reduce regulatory burden because it would provide for a more 
uniform policy.
    In addition, we are proposing to make parallel changes to the 
effective date for an MDH status determination under Sec.  
412.108(b)(4). As discussed earlier, section 50205 of the Bipartisan 
Budget Act of 2018 extended the MDH program through FY 2022 by amending 
section 1886(d)(5)(G) of the Act. Similar to the proposed change in 
effective date for SCH status approvals, we are proposing that a 
determination of MDH status would be effective as of the date that CMS 
receives the complete application, for applications received on or 
after October 1, 2018, rather than the current effective date at Sec.  
412.108(b)(4) of 30 days after the date the MAC provides written 
notification to the hospital. Similar to applications for SCH status, a 
complete application includes a request and all supporting 
documentation needed to demonstrate that the hospital meets criteria 
for MDH status as of the date of application. For an application to be 
complete, all criteria must be met as of the date CMS receives the MDH 
application. For example, a cost report must be settled at the time of 
application for a hospital to use that cost report as one of the cost 
reports required in Sec.  412.108(a)(1)(iii)(C), and a hospital 
applying for MDH status on the basis of a Sec.  412.103 rural 
reclassification must submit its Sec.  412.103 application no later 
than its MDH application in order to be considered rural as of the date 
CMS receives the MDH application. (We note that a hospital in an all-
urban State that applies for MDH status under the expanded definition 
at section 50205 of the Bipartisan Budget Act of 2018 would need to 
submit its application for a determination that 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 (as discussed in the previous section) no later than 
its MDH application in order for the application to be considered 
complete.)
    We believe that concurrently changing the SCH and MDH status 
effective dates from 30 days after the date of approval to the date the 
complete application is received would allow for consistency in the 
regulations governing effective dates of special rural hospital status. 
In addition, this proposal would benefit urban hospitals that are 
requesting Sec.  412.103 rural reclassification at the same time as MDH 
status because it would synchronize effective dates to eliminate any 
payment consequences caused by a lag between effective dates for rural 
reclassification and MDH status.
4. Proposed Conforming Technical Changes to Regulations
    We note that, in this proposed rule, we also are proposing to make 
technical conforming changes to the regulations in Sec.  412.92 and 
Sec.  412.108 to reflect the change CMS made some time ago to identify 
fiscal intermediaries as Medicare administrative contractors (MACs).

H. 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 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, and further amended by section 15002 of the 21st Century Cures 
Act, establishes the Hospital Readmissions Reduction Program. Under the 
Program, Medicare payments under the acute inpatient prospective 
payment system for discharges from an applicable hospital, as defined 
under section 1886(d) of the Act, may be reduced to account for certain 
excess readmissions. Section 15002 of the 21st Century Cures Act 
requires the Secretary to compare peer groups of hospitals with respect 
to the number of their Medicare-Medicaid dual-eligible beneficiaries 
(dual-eligibles) in determining the extent of excess readmissions. We 
refer readers to section IV.E.1. of the preamble of the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49530 through 49531) and section V.I.1. of 
the preamble of the FY 2018 IPPS/LTCH PPS final rule (82 FR38221 
through 38240) for a detailed discussion of and additional information 
on the statutory history of the Hospital Readmissions Reduction 
Program.
2. Regulatory Background
    We refer readers to the following final rules for detailed 
discussions of the regulatory background and descriptions of the 
current policies for the Hospital Readmissions Reduction Program:
     FY 2012 IPPS/LTCH PPS final rule (76 FR 51660 through 
51676);
     FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 
53401);
     FY 2014 IPPS/LTCH PPS final rule (78 FR 50649 through 
50676);
     FY 2015 IPPS/LTCH PPS final rule (79 FR 50024 through 
50048);
     FY 2016 IPPS/LTCH PPS final rule (80 FR 49530 through 
49543);
     FY 2017 IPPS/LTCH PPS final rule (81 FR 56973 through 
56979); and
     FY 2018 IPPS/LTCH PPS final rule (82 FR 38221 through 
38240).
    These rules describe the general framework for the implementation 
of the Hospital Readmissions Reduction Program, including: (1) The 
selection of measures for the applicable conditions/procedures; (2) the 
calculation of the excess readmission ratio, which is used, in part, to 
calculate the payment adjustment factor; (3) beginning in FY 2018, the 
calculation of the proportion of ``dually eligible'' Medicare 
beneficiaries (described below) which is used to stratify hospitals 
into peer groups and establish the peer group median excess readmission 
ratios (ERRs); (4) the calculation of the payment adjustment factor, 
specifically addressing the base operating DRG payment amount, 
aggregate payments for excess readmissions (including calculating the 
peer group median ERRs), aggregate payments for all discharges, and the 
neutrality modifier; (5) the opportunity for hospitals to review and 
submit corrections using a process similar to what is currently used 
for posting results on Hospital Compare; (6) the adoption of an 
extraordinary circumstances exception policy to address hospitals that 
experience a disaster or other extraordinary circumstance; (7) the 
clarification that the public reporting of excess readmission ratios 
will be posted on an annual basis to the Hospital Compare website as 
soon as is feasible following the Review and Correction period; and (8) 
the specification that the definition

[[Page 20404]]

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.
    The Hospital Readmissions Reduction Program strives to put patients 
first by ensuring they are empowered to make decisions about their own 
healthcare along with their clinicians, using information from data-
driven insights that are increasingly aligned with meaningful quality 
measures. We support technology that reduces costs and allows 
clinicians to focus on providing high quality health care for their 
patients. We also support innovative approaches to improve quality, 
accessibility, and affordability of care, while paying particular 
attention to improving clinicians' and beneficiaries' experiences when 
interacting with CMS programs. In combination with other efforts across 
the Department of Health and Human Services, we believe the Hospital 
Readmissions Reduction Program incentivizes hospitals to improve health 
care quality and value, while giving patients the tools and information 
needed to make the best decisions for them.
3. Summary of Proposed Policies for the Hospital Readmissions Reduction 
Program
    In this proposed rule, we are proposing to: (1) Establish the 
applicable period for FY 2019, FY 2020 and FY 2021; (2) codify the 
previously adopted definition of ``dual[dash]eligible''; (3) codify the 
previously adopted definition of ``proportion of dual[dash]eligibles''; 
and (4) codify the previously adopted definition of ``applicable period 
for dual-eligibility.''
    These proposals are described in more detail below.
4. Current Measures for FY 2019 and Subsequent Years
    The Hospital Readmissions Reduction Program currently includes six 
applicable conditions/procedures: Acute myocardial infarction (AMI); 
heart failure (HF); pneumonia; total hip arthroplasty/total knee 
arthroplasty (THA/TKA); chronic obstructive pulmonary disease (COPD); 
and coronary artery bypass graft (CABG).
    By publicly reporting quality data, we strive to put patients 
first, ensuring they, along with their clinicians, are empowered to 
make decisions about their own healthcare using information aligned 
with a meaningful quality measures. The Hospital Readmissions Reduction 
Program, together with the Hospital VBP Program and the HAC Reduction 
Program, represents a key component of the way that we bring quality 
measurement, transparency, and improvement together with value-based 
purchasing to the inpatient care setting. We have undertaken efforts to 
review the existing measure set in the context of these other programs, 
to identify how to reduce costs and complexity across programs while 
continuing to incentivize improvement in the quality and value of care 
provided to patients. To that end, we have begun reviewing our 
programs' measures in accordance with the Meaningful Measures 
Initiative we described in section I.A.2. of the preamble of this 
proposed rule.
    As part of this review, we have taken a holistic approach to 
evaluating the appropriateness of the Hospital Readmissions Reduction 
Program's current measures in the context of the measures used in two 
other IPPS value-based purchasing programs (that is, the Hospital VBP 
Program and the HAC Reduction Program), as well as the Hospital IQR 
Program. We view the three value-based purchasing programs together as 
a collective set of hospital value-based purchasing programs. 
Specifically, we believe the goals of the three value-based purchasing 
programs (the Hospital VBP, Hospital Readmissions Reduction, and HAC 
Reduction Programs) and the measures used in these programs together 
cover the Meaningful Measures Initiative quality priorities of making 
care safer, strengthening person and family engagement, promoting 
coordination of care, promoting effective prevention and treatment, and 
making care affordable,--but that the programs should not add 
unnecessary complexity or costs associated with duplicative measures 
across programs. The Hospital Readmissions Reduction Program focuses on 
care coordination measures, which address the quality priority of 
promoting effective communication and care coordination within the 
Meaningful Measures Initiative. The HAC Reduction Program focuses on 
patient safety measures, which address the Meaningful Measures 
Initiative quality priority of making care safer by reducing harm 
caused in the delivery of care.
    As part of this holistic quality payment program strategy, we 
believe the Hospital VBP Program should focus on the measurement 
priorities not covered by the Hospital Readmissions Reduction Program 
or the HAC Reduction Program. The Hospital VBP Program would continue 
to focus on measures related to: (1) The clinical outcomes, such as 
mortality and complications (which address the Meaningful Measures 
Initiative quality priority of promoting effective treatment); (2) 
patient and caregiver experience, as measured using the HCAHPS survey 
(which addresses the Meaningful Measures Initiative quality priority of 
strengthening person and family engagement as partners in their care); 
and (3) healthcare costs, as measured using the Medicare Spending per 
Beneficiary measure (which addresses the Meaningful Measures Initiative 
priority of making care affordable). We believe this framework will 
allow hospitals and patients to continue to obtain meaningful 
information about hospital performance and incentivize quality 
improvement while also streamlining the measure sets to reduce 
duplicative measures and program complexity so that the costs to 
hospitals associated with participating in these programs does not 
outweigh the benefits of improving beneficiary care.
    Measures in the Hospital Readmissions Reduction Program are 
important markers of quality of care, particularly of the care of a 
patient in transition from an acute care setting to a non-acute care 
setting. By including these measures in the Program, we seek to 
encourage hospitals to address the serious problems indicated by the 
necessity of a hospital readmission and to reduce them and improve care 
coordination and communication. Therefore, after thoughtful review, we 
have determined that the six readmission measures in the Hospital 
Readmissions Reduction Program, which we are proposing for removal from 
the Hospital IQR Program in section VIII.A.5.b.(3) of the preamble of 
this proposed rule, are nevertheless appropriately included as part of 
the Hospital Readmissions Reduction Program.
    We continue to believe that the measures that we have adopted 
adequately address the conditions and procedures specified in the 
Hospital Readmissions Reduction Program statute. Therefore, we are not 
proposing to adopt any new measures at this time.
5. Maintenance of Technical Specifications for Quality Measures
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50039) for a discussion of the maintenance of technical specifications 
for quality measures for the Hospital Readmissions Reduction Program. 
Technical specifications of the readmission measures are provided on 
our website in

[[Page 20405]]

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 website on the Resources page at: 
http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772412995.
6. Proposed Applicable Periods for FY 2019, FY 2020, and FY 2021
    Under section 1886(q)(5)(D) of the Act, the Secretary has the 
authority to specify the applicable period with respect to a fiscal 
year under the Hospital Readmissions Reduction Program. In the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51671), we finalized our policy to use 
3 years of claims data to calculate the readmission measures. In the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53675), we codified the definition 
of ``applicable period'' in the regulations at 42 CFR 412.152 as the 3-
year period from which data are collected in order to calculate excess 
readmissions ratios and payment adjustment factors 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. The applicable period for dual-eligibles is the same as the 
applicable period that we otherwise adopt for purposes of the Program.
    In this proposed rule, for FY 2019, 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, 2014 through June 30, 2017. In other words, 
we are proposing that the proportion of dual-eligibles, excess 
readmissions ratios and the payment adjustment factors (including 
aggregate payments for excess readmissions and aggregate payments for 
all discharges) for FY 2019 would be calculated using data for 
discharges occurring during the 3-year time period of July 1, 2014 
through June 30, 2017.
    In this proposed rule, for FY 2020, 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, 2015 through June 30, 2018. As noted 
earlier, we define the applicable period for dual-eligibles as the 
applicable period that we otherwise adopted for purposes of the 
Program; therefore, for FY 2020, the applicable period for dual-
eligibles would be the 3-year period from July 1, 2015 through June 30, 
2018.
    In addition, in this proposed rule, for FY 2021, 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, 2016 through June 30, 2019. The 
applicable period for dual-eligibles for FY 2021 would similarly be the 
3-year period from July 1, 2016 through June 30, 2019.
    We are inviting public comments on these proposals.
7. Identification of Aggregate Payments for Each Condition/Procedure 
and All Discharges
    When calculating the numerator (aggregate payments for excess 
readmissions), we determine the base operating DRG payment amount for 
an individual hospital for the applicable period for such condition/
procedure, using Medicare inpatient claims from the MedPAR file with 
discharge dates that are within the 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.
    In identifying discharges for the applicable conditions/procedures 
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/
procedures. For the FY 2019 applicable period, this includes the 
discharge diagnoses for each applicable condition/procedure based on a 
list of specific ICD-9-CM or ICD-10-CM and ICD-10-PCS code sets, as 
applicable, for that condition/procedure, since diagnoses and procedure 
codes for discharges occurring prior to October 1, 2015 were reported 
under the ICD-9-CM code set, while discharges occurring on or after 
October 1, 2015 (FY 2016), were reported under the ICD-10-CM and ICD-
10-PCS code sets.
    We only identify Medicare Fee-for-Service (FFS) claims that meet 
the criteria described above for each applicable condition/procedure to 
calculate the aggregate payments for excess readmissions (that is, 
claims paid for under Medicare Part C or 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 2019, we are 
proposing to continue to exclude admissions for patients enrolled in 
Medicare Advantage as identified in the Medicare Enrollment Database.
    In this proposed rule, for FY 2019, we are proposing to determine 
aggregate payments for excess readmissions, aggregate payments for all 
discharges using data from MedPAR claims with discharge dates that are 
on or after July 1, 2014, and no later than June 30, 2017. As we stated 
in FY 2018 IPPS/LTCH PPS final rule (82 FR 38232), we will determine 
the neutrality modifier using the most recently available full year of 
MedPAR data. However, we note that, for the purpose of modeling the 
proposed FY 2019 readmissions payment adjustment factors for this 
proposed rule, we are using the proportion of dual-eligibles, excess 
readmissions ratios, and aggregate payments for each condition/
procedure and all discharges for applicable hospitals from the FY 2018 
Hospital Readmissions Reduction Program applicable period. For the FY 
2019 program year, applicable hospitals will have the opportunity to 
review and correct calculations based on the proposed FY 2019 
applicable period of July 1, 2014 to June 30, 2017, before they are 
made public under our policy regarding reporting of hospital-specific 
information. Again, we reiterate this period is intended to review the 
program calculations, and not the underlying data. For more information 
on the review and corrections process, we refer readers to the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53399 through 53401).
    In this proposed rule, for FY 2019, we are proposing to use MedPAR 
data from July 1, 2014 through June 30, 2017 for FY 2019 Hospital 
Readmissions Reduction Program calculations. Specifically--
     March 2015 update of the FY 2014 MedPAR file to identify 
claims within FY 2014 with discharges dates that are on or after July 
1, 2014;
     March 2016 update of the FY 2015 MedPAR file to identify 
claims within FY 2015;
     March 2017 update of the FY 2016 MedPAR file to identify 
claims within FY 2016;
     March 2018 update of the FY 2017 MedPAR file to identify 
claims within FY 2017.
    We are inviting public comments on this proposal.

[[Page 20406]]

8. Calculation of Payment Adjustment Factors for FY 2019 and Proposed 
Codification of Certain Definitions
    As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38226), 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 peer groups in determining a hospital's 
adjustment factor for payments applied to discharges beginning in FY 
2019.
    To implement this provision, in the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38226 through 38237), we finalized a number of changes to 
the payment adjustment methodology for FY 2019. First, we finalized 
that an individual would be counted as a full-benefit dual-eligible 
patient if the beneficiary was identified as full[dash]benefit dual 
status in the State Medicare Modernization Act (MMA) files for the 
month he/she was discharged from the hospital (82 FR 38226 through 
38228). Second, we finalized our policy 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 
(82 FR 38226 through 38228). Third, we finalized our policy to define 
the data period for determining dual[dash]eligibility as the 
3[dash]year data period corresponding to the Program's applicable 
period (82 FR 38229). Fourth, we finalized our policy to stratify 
hospitals into quintiles, or five peer groups, based on their 
proportion of dual-eligible patients (82 FR 38229 through 38231). 
Finally, we finalized our policy to use the median Excess Readmission 
Ratio (ERR) for the hospital's peer group in place of 1.0 in the 
payment adjustment formula and apply a uniform modifier to maintain 
budget neutrality (82 FR 38231 through 38237). The payment adjustment 
formula would then be:
[GRAPHIC] [TIFF OMITTED] TP07MY18.017

where dx is AMI, HF, pneumonia, COPD, THA/TKA or CABG and payments 
refers to the base operating DRG payments. The payment reduction (1-P) 
resulting from use of the median ERR for the peer group is scaled by a 
neutrality modifier (NM) to achieve budget neutrality. We refer readers 
to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38226 through 38237) for 
a detailed discussion of the changes to the payment adjustment 
methodology, including alternatives considered, for FY 2019. We are not 
proposing any changes to the methodology for FY 2019 or subsequent 
years. However, we are proposing to codify our previously finalized 
definitions of ``applicable period for dual-eligibility'', ``dual-
eligible'', and ``proportion of dual-eligibles'' at 42 CFR 412.152. The 
definitions which we are proposing to codify are as follows:
     Applicable period for dual-eligibility is the 3-year data 
period corresponding to the applicable period as established by the 
Secretary for the Hospital Readmissions Reduction Program.
     Dual-eligible is a patient beneficiary who has been 
identified as having full benefit status in both the Medicare and 
Medicaid programs in the State MMA files for the month the beneficiary 
was discharged from the hospital.
     Proportion of dual-eligibles is the number of dual-
eligible patients among all Medicare FFS and Medicare Advantage stays 
during the applicable period.
    We are inviting public comment on our proposal to codify these 
definitions.
9. Proposed Calculation of Payment Adjustment for FY 2019
    Section 1886(q)(3)(A) of the Act defines the payment 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, scaled by the neutrality modifier. 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 in our 
regulations at Sec.  412.154(c)(2), for FY 2019, the payment adjustment 
factor will be 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 2019, 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 comments on these proposals regarding the 
calculation of payment adjustment factors for FY 2019.
10. Accounting for Social Risk Factors in the Hospital Readmissions 
Reduction Program
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38237 through 
38239), we discussed the importance of improving beneficiary outcomes 
including reducing health disparities. We also discussed our commitment 
to ensuring that medically complex patients, as well as those with 
social risk factors, receive excellent care. We discussed how studies 
show that social risk factors, such as being near or below the poverty 
level as determined by HHS, belonging to a racial or ethnic minority 
group, or living with a disability, can be associated with poor health 
outcomes and how some of this disparity is related to the quality of 
health care.\250\ Among our core objectives, we aim to improve health 
outcomes, attain health equity for all beneficiaries, and ensure that 
complex patients as well as those with social risk factors receive 
excellent care. Within this context, reports by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) and the National 
Academy of Medicine have examined the influence of social risk factors 
in CMS value-based purchasing programs.\251\ As we noted in the FY

[[Page 20407]]

2018 IPPS/LTCH PPS final rule (82 FR 38404), ASPE's report to Congress 
found that, in the context of value-based purchasing programs, dual 
eligibility was the most powerful predictor of poor health care 
outcomes among those social risk factors that they examined and tested. 
In addition, as we noted in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38237), the National Quality Forum (NQF) undertook a 2[dash]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.\252\ The 
trial period ended in April 2017 and a final report is available at: 
http://www.qualityforum.org/SES_Trial_Period.aspx. The trial concluded 
that ``measures with a conceptual basis for adjustment generally did 
not demonstrate an empirical relationship'' between social risk factors 
and the outcomes measured. This discrepancy may be explained in part by 
the methods used for adjustment and the limited availability of robust 
data on social risk factors. NQF has extended the socioeconomic status 
(SES) trial,\253\ allowing further examination of social risk factors 
in outcome measures.
---------------------------------------------------------------------------

    \250\ See, for example United States Department of Health and 
Human Services. ``Healthy People 2020: Disparities. 2014.'' 
Available at: 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.
    \251\ 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.
    \252\ Available at: http://www.qualityforum.org/SES_Trial_Period.aspx.
    \253\ Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86357.
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    In the FY 2018 and CY 2018 proposed rules for our quality reporting 
and value-based purchasing programs, we solicited feedback on which 
social risk factors provide the most valuable information to 
stakeholders and the methodology for illuminating differences in 
outcomes rates among patient groups within a hospital or provider that 
would also allow for a comparison of those differences, or disparities, 
across providers. Feedback we received across our quality reporting 
programs included encouraging CMS to explore whether factors that could 
be used to stratify or risk adjust the measures (beyond dual 
eligibility); considering the full range of differences in patient 
backgrounds that might affect outcomes; exploring risk adjustment 
approaches; and offering careful consideration of what type of 
information display would be most useful to the public.
    We also sought public comment on confidential reporting and future 
public reporting of some of our measures stratified by patient dual 
eligibility. In general, commenters 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, and empower consumers to make informed decisions about 
health care. Commenters encouraged us to stratify measures by other 
social risk factors such as age, income, and educational attainment. 
With regard to value-based purchasing programs, commenters also 
cautioned to balance fair and equitable payment while avoiding payment 
penalties that mask health disparities or discouraging the provision of 
care to more medically complex patients. Commenters also noted that 
value-based payment program measure selection, domain weighting, 
performance scoring, and payment methodology must account for social 
risk.
    As a next step, CMS is considering options to improve health 
disparities among patient groups within and across hospitals by 
increasing the transparency of disparities as shown by quality 
measures. We also are considering how this work applies to other CMS 
quality programs in the future. We refer readers to the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38403 through 38409) for more details, where 
we discuss the potential stratification of certain Hospital IQR Program 
outcome measures. Furthermore, we continue to consider options to 
address equity and disparities in our value-based purchasing programs.
    We plan to continue working with ASPE, the public, and other key 
stakeholders on this important issue to identify policy solutions that 
achieve the goals of attaining health equity for all beneficiaries and 
minimizing unintended consequences.

I. 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 (80 FR 49544 through 49570); the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56979 through 57011); the CY 2017 
OPPS/ASC final rule with comment period (81 FR 79855 through 79862); 
and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38240 through 38269).
    We also have codified certain requirements for the Hospital VBP 
Program at 42 CFR 412.160 through 412.167.
b. FY 2019 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 we refer readers to that rule for further details.
    Under section 1886(o)(7)(C)(iv) of the Act, the applicable percent 
for the FY 2019 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 2019 is approximately $1.9 billion, based on 
the December 2017 update of the FY 2017 MedPAR file. We intend to 
update this estimate for the FY 2019 IPPS/LTCH PPS final rule using the 
March 2018 update of the FY 2017 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

[[Page 20408]]

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 2019, 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 
website). The proxy factors are based on the TPS from the FY 2018 
program year. These FY 2018 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 the proxy value-based incentive payment adjustment factors 
in Table 16 is 2.8888347029. This slope, along with the estimated 
amount available for value-based incentive payments is also published 
in Table 16 (which is available via the internet on the CMS website).
    We intend to update this table as Table 16A in the final rule 
(which will be available on the CMS website) to reflect changes based 
on the March 2018 update to the FY 2017 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 2019 will continue to be based on historic FY 2018 program year TPSs 
because hospitals will not have been given the opportunity to review 
and correct their actual TPSs for the FY 2019 program year until after 
the FY 2019 IPPS/LTCH PPS final rule is published.
    After hospitals have been given an opportunity to review and 
correct their actual TPSs for FY 2019, we will post Table 16B (which 
will be available via the internet on the CMS website) to display the 
actual value-based incentive payment adjustment factors, exchange 
function slope, and estimated amount available for the FY 2019 program 
year. We expect Table 16B will be posted on the CMS website in the fall 
of 2018.
2. Retention and Proposed Removal of Quality Measures
a. Retention of Previously Adopted Hospital VBP Program Measures and 
Proposal To Clarify the Relationship Between the Hospital IQR and 
Hospital VBP Program Measure Sets
    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. In 
this proposed rule, we are not proposing any changes to this policy.
    We are, however, proposing to revise our regulations at 42 CFR 
412.164(a) to clarify that once we have complied with the statutory 
prerequisites for adopting a measure for the Hospital VBP Program (that 
is, we have selected the measure from the Hospital IQR Program measure 
set and included data on that measure on Hospital Compare for at least 
one year prior to its inclusion in a Hospital VBP Program performance 
period), the Hospital VBP statute does not require that the measure 
continue to remain in the Hospital IQR Program. The proposed revision 
to the regulation text would clarify that Hospital VBP measures will be 
selected from the measures specified under the Hospital IQR Program, 
but the Hospital VBP Program measure set will not necessarily be a 
subset of the Hospital IQR Program measure set. As discussed in section 
I.A.2. of the preamble of this proposed rule, we are engaging in 
efforts aimed at evaluating and streamlining regulations with the goal 
to reduce unnecessary costs, increase efficiencies, and improve 
beneficiary experience. This proposal would reduce costs, such as those 
discussed in section IV.I.2.b. of the preamble of this proposed rule, 
by allowing us to remove duplicative measures from the Hospital IQR 
Program that are retained in the Hospital VBP Program.
    We are inviting comment on this proposal.
b. Proposed Measure Removal Factors for the Hospital VBP Program
    As discussed earlier, we have adopted a policy to generally retain 
measures from prior year's Hospital VBP Program for subsequent years' 
measure sets unless otherwise proposed and finalized. We have 
previously removed measures from the Hospital VBP Program for reasons 
such as being topped out (80 FR 49550), the measure does not align with 
current clinical guidelines or practices (78 FR 50680 through 50681), a 
more applicable measure was available (82 FR 38242 through 38244), 
there was insufficient evidence that the measure leads to better 
outcomes (78 FR 50680 through 50681), another measure was more closely 
linked to better outcomes (77 FR 53582 through 53584, and 53592), 
unintended consequences (82 FR 38242 through 38244), and impossibility 
of calculating a score (82 FR 38242 through 38244).
    The reasons we cited above to support the removal of measures from 
the Hospital VBP Program generally align with measure removal factors 
that have been adopted by the Hospital IQR Program. We believe that 
these factors are also applicable in evaluating Hospital VBP Program 
quality measures for removal, and that their adoption in the Hospital 
VBP Program will help ensure consistency in our measure evaluation 
methodology across our programs. Accordingly, we are proposing to adopt 
the Hospital IQR Program measure removal factors that we finalized in 
the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185) and further refined 
in the FY 2015 IPPS/LTCH PPS and FY 2016 IPPS/LTCH PPS final rules (79 
FR 50203 through 50204 and 80 FR 49641 through 49643, respectively) for 
use in determining whether to remove Hospital VBP Program measures:
     Factor 1. Measure performance among hospitals is so high 
and unvarying that meaningful distinctions and improvements in 
performance can no longer be made (``topped out'' measures), defined 
as: Statistically indistinguishable performance at the 75th and 90th 
percentiles; and truncated coefficient of variation <=0.10; \254\
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    \254\ We previously adopted the two criteria for determining the 
``topped-out'' status of Hospital VBP Program measures in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50055).
---------------------------------------------------------------------------

     Factor 2. A measure does not align with current clinical 
guidelines or practice;
     Factor 3. The availability of a more broadly applicable 
measure (across settings, populations, or the availability of a measure 
that is more proximal in time to desired patient outcomes for the 
particular topic);
     Factor 4. Performance or improvement on a measure does not 
result in better patient outcomes;
     Factor 5. The availability of a measure that is more 
strongly associated with desired patient outcomes for the particular 
topic;
     Factor 6. Collection or public reporting of a measure 
leads to negative unintended consequences other than patient harm; and
     Factor 7. It is not feasible to implement the measure 
specifications.
    We note that these removal factors would be considerations taken 
into account when deciding whether or not to remove measures, not firm 
requirements. We continue to believe that there may be circumstances in 
which a measure that meets one or more factors for removal should be 
retained regardless, because the drawbacks of removing a measure could 
be outweighed by other benefits to retaining the measure.

[[Page 20409]]

    Also in alignment with proposals being made for other quality 
reporting and value-based purchasing programs, we are proposing to 
adopt the following additional factor to consider when evaluating 
measures for removal from the Hospital VBP Program measure set: Factor 
8, the costs associated with a measure outweigh the benefit of its 
continued use in the program.
    As we discuss in section I.A.2. of the preamble of this proposed 
rule with respect to our new Meaningful Measures Initiative, we are 
engaging in efforts to ensure that the Hospital VBP Program measure set 
continues to promote improved health outcomes for beneficiaries while 
minimizing the overall costs associated with the program. We believe 
these costs are multifaceted and include not only the burden associated 
with reporting, but also the costs associated with implementing and 
maintaining the program. We have identified several different types of 
costs, including, but not limited to: (1) Provider and clinician 
information collection burden and related cost and burden associated 
with the submission/reporting of quality measures to CMS; (2) the 
provider and clinician cost associated with complying with other 
quality programmatic requirements; (3) the provider and clinician cost 
associated with participating in multiple quality programs, and 
tracking multiple similar or duplicative measures within or across 
those programs; (4) the CMS cost associated with the program oversight 
of the measure, including measure maintenance and public display; and 
(5) the provider and clinician cost associated with compliance with 
other federal and/or state regulations (if applicable). For example, it 
may be needlessly costly and/or of limited benefit to retain or 
maintain a measure which our analyses show no longer meaningfully 
supports program objectives (for example, informing beneficiary choice 
or payment scoring). It may also be costly for health care providers to 
track the confidential feedback, preview reports, and publicly reported 
information on a measure where we use the measure in more than one 
program. CMS may also have to expend unnecessary resources to maintain 
the specifications for the measure, as well as the tools needed to 
collect, validate, analyze, and publicly report the measure data. 
Furthermore, beneficiaries may find it confusing to see public 
reporting on the same measure in different programs.
    When these costs outweigh the evidence supporting the continued use 
of a measure in the Hospital VBP Program, we believe it may be 
appropriate to remove the measure from the program. Although we 
recognize that one of the main goals of the Hospital VBP Program is to 
improve beneficiary outcomes by incentivizing health care providers to 
focus on specific care issues and making public data related to those 
issues, we also recognize that those goals can have limited utility 
where, for example, the publicly reported data (including percentage 
payment adjustment data) are of limited use because they cannot be 
easily interpreted by beneficiaries to influence their choice of 
providers. In these cases, removing the measure from the Hospital VBP 
Program may better accommodate the costs of program administration and 
compliance without sacrificing improved health outcomes and beneficiary 
choice.
    We are proposing that we would remove measures based on this factor 
on a case-by-case basis. We might, for example, decide to retain a 
measure that is burdensome for health care providers to report if we 
conclude that the benefit to beneficiaries justifies the reporting 
burden. Our goal is to move the program forward in the least burdensome 
manner possible, while maintaining a parsimonious set of meaningful 
quality measures and continuing to incentivize improvement in the 
quality of care provided to patients.
    We are inviting public comment on our proposals to adopt for the 
Hospital VBP Program the measure removal factors currently adopted in 
the Hospital IQR Program, and a measure removal factor where ``the 
costs associated with a measure outweigh the benefit of its continued 
use in the program,'' beginning with FY 2019.
    In addition, to further align with policies adopted in the Hospital 
IQR Program (74 FR 43864), we are proposing that if we believe 
continued use of a measure in the Hospital VBP Program poses specific 
patient safety concerns, we may promptly remove the measure from the 
program without rulemaking and notify hospitals and the public of the 
removal of the measure along with the reasons for its removal through 
routine communication channels to hospital, vendors, and QIOs, 
including, but not limited to, issuing memos, emails, and notices on 
the QualityNet website. We would then confirm the removal of the 
measure from the Hospital VBP Program measure set in the next IPPS 
rulemaking. In circumstances where we do not believe that continued use 
of a measure raises specific patient safety concerns, we would use the 
regular rulemaking process to remove a measure.
    We are inviting public comment on our proposal to allow the 
Hospital VBP Program to promptly remove a measure without rulemaking if 
we believe the measure poses specific patient safety concerns.
c. Proposed Removal of Ten Measures From the Hospital VBP Program
    By publicly reporting quality data, we strive to put patients 
first, ensuring they, along with their clinicians, are empowered to 
make decisions about their own healthcare using information that are 
aligned with meaningful quality measures. The Hospital VBP Program, 
together with the Hospital Readmissions Reduction Program and the HAC 
Reduction Program, represents a key component of the way that we bring 
quality measurement, transparency, and improvement together with value-
based purchasing to the inpatient care setting. We have undertaken 
efforts to review the existing Hospital VBP Program measure set in the 
context of these other programs, to identify how to reduce costs and 
complexity across programs while continuing to incentivize improvement 
in the quality and value of care provided to patients. To that end, we 
have begun reviewing our programs' measures in accordance with the 
Meaningful Measures Initiative we describe in section I.A.2. of the 
preamble of this proposed rule.
    As part of this review, we have taken a holistic approach to 
evaluating the appropriateness of the Hospital VBP Program's current 
measures in the context of the measures used in two other IPPS value-
based purchasing programs (that is, the Hospital Readmissions Reduction 
Program and the HAC Reduction Program), as well as in the Hospital IQR 
Program. We view the three value-based purchasing programs together as 
a collective set of hospital value-based purchasing programs. 
Specifically, we believe the goals of the three value-based purchasing 
programs (the Hospital VBP, Hospital Readmissions Reduction, and HAC 
Reduction Programs) and the measures used in these programs together 
cover the Meaningful Measures Initiative quality priorities of making 
care safer, strengthening person and family engagement, promoting 
coordination of care, promoting effective prevention and treatment, and 
making care affordable, but that the programs should not add 
unnecessary complexity or costs associated with duplicative measures 
across programs. The Hospital Readmissions Reduction Program focuses on 
care coordination measures, which address the quality priority of 
promoting effective

[[Page 20410]]

communication and care coordination within the Meaningful Measures 
Initiative. The HAC Reduction Program focuses on patient safety 
measures, which address the Meaningful Measures Initiative quality 
priority of making care safer by reducing harm caused in the delivery 
of care.
    As part of this holistic quality payment program strategy, we 
believe the Hospital VBP Program should focus on the measurement 
priorities not covered by the Hospital Readmissions Reduction Program 
or the HAC Reduction Program. The Hospital VBP Program would continue 
to focus on measures related to: (1) The clinical outcomes, such as 
mortality and complications (which address the Meaningful Measures 
Initiative quality priority of promoting effective treatment); (2) 
patient and caregiver experience, as measured using the HCAHPS survey 
(which addresses the Meaningful Measures Initiative quality priority of 
strengthening person and family engagement as partners in their care); 
and (3) healthcare costs, as measured using the Medicare Spending per 
Beneficiary measure (which addresses the Meaningful Measures Initiative 
priority of making care affordable). We believe this framework will 
allow hospitals and patients to continue to obtain meaningful 
information about hospital performance and incentivize quality 
improvement while also streamlining the measure sets to reduce 
duplicative measures and program complexity so that the costs to 
hospitals associated with participating in these programs does not 
outweigh the benefits of improving beneficiary care.
    In this proposed rule, we are proposing to remove the following 10 
measures previously adopted for the Hospital VBP Program:
     Elective Delivery (NQF #0469) (PC-01);
     National Healthcare Safety Network (NHSN) Catheter-
Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138) 
(CAUTI);
     National Healthcare Safety Network (NHSN) Central Line-
Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139) 
(CLABSI);
     American College of Surgeons-Centers for Disease Control 
and Prevention (ACS-CDC) Harmonized Procedure Specific Surgical Site 
Infection (SSI) Outcome Measure (NQF #0753) (Colon and Abdominal 
Hysterectomy SSI);
     National Healthcare Safety Network (NHSN) Facility-wide 
Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus 
(MRSA) Bacteremia Outcome Measure (NQF #1716) (MRSA Bacteremia);
     National Healthcare Safety Network (NHSN) Facility-wide 
Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome 
Measure (NQF #1717) (CDI);
     Patient Safety and Adverse Events (Composite) (NQF #0531) 
(PSI 90); \255\
---------------------------------------------------------------------------

    \255\ We note that measure stewardship of the recalibrated 
version of the Patient Safety and Adverse Events Composite (PSI 90) 
is transitioning from AHRQ to CMS and, as part of the transition, 
the measure will be referred to as the CMS Recalibrated Patient 
Safety Indicators and Adverse Events Composite (CMS PSI 90) when it 
is used in CMS programs.
---------------------------------------------------------------------------

     Hospital-Level, Risk-Standardized Payment Associated With 
a 30-Day Episode-of-Care for Acute Myocardial Infarction (NQF #2431) 
(AMI Payment);
     Hospital-Level, Risk-Standardized Payment Associated With 
a 30-Day Episode-of-Care for Heart Failure (NQF #2436) (HF Payment); 
and
     Hospital-Level, Risk-Standardized Payment Associated With 
a 30-Day Episode-of-Care for Pneumonia (NQF #2579) (PN Payment).
(1) Proposed Removal of PC-01: Elective Delivery (NQF #0469)
    We are proposing to remove the Elective Delivery (NQF #0469) (PC-
01) measure beginning with the FY 2021 program year because the costs 
associated with the measure outweigh the benefit of its continued use 
in the program--proposed removal Factor 8. In the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38262), we finalized both the benchmark at 0.000000 
and the achievement threshold at 0.000000 for the PC-01 measure for the 
FY 2020 program year, meaning that at least 50 percent of hospitals 
that met the case minimum performed 0 elective deliveries for the 
measure during the baseline period of CY 2016. We refer readers to the 
FY 2013, FY 2014, and FY 2015 IPPS/LTCH PPS final rules (77 FR 53599 
through 53605; 78 FR 50694 through 50699; and 79 FR 50080 through 
50081, respectively) for a more detailed discussion of the general 
scoring methodology used in the Hospital VBP Program. Based on past 
performance on the measure, we anticipate that continued use of the PC-
01 measure in the Hospital VBP Program would result in more than half 
of hospitals with a calculable score for this measure earning the 
maximum 10 achievement points. We anticipate that the remaining 
hospitals with a calculable score would be awarded points based on 
improvement only because they will not have met the achievement 
threshold, earning zero to nine improvement points. Therefore, we 
believe the measure no longer meaningfully differentiates performance 
among most participating hospitals for scoring purposes in the Hospital 
VBP Program.
    We continue to believe that avoiding early elective delivery is 
important; however, because overall performance on the PC-01 measure 
has improved over time and we anticipate the measure will have little 
meaningful effect on the TPS for most hospitals, we believe the measure 
is no longer appropriate for the Hospital VBP Program. In order to 
continue tracking and reporting rates of elective deliveries to 
incentivize continued high performance on the measure, this measure 
would remain in the Hospital IQR Program. We believe that maintaining 
the measure in the Hospital IQR Program, which publicly reports measure 
performance, will be sufficient to incentivize continued high 
performance or improvement on the measure. At the same time, we believe 
that removing the measure from the Hospital VBP Program will reduce 
costs and potential confusion for providers and clinicians to track the 
measure in both the Hospital IQR and Hospital VBP Programs, which may 
include reviewing different reports and tracking slightly different 
measure rates across programs.
    Based on the reasons described above, we believe that under the 
measure removal Factor 8, the costs associated with a measure outweigh 
the benefit of its continued use in the program, which we are proposing 
in section IV.I.2.b. of the preamble of this proposed rule, the costs 
of keeping the PC-01 measure in the Hospital VBP Program outweigh the 
benefits because the measure is costly for health care providers and 
clinicians to review multiple reports on this measure that is being 
retained in the Hospital IQR Program and our analyses show that the 
measure no longer meaningfully differentiates performance among 
participating hospitals for scoring purposes in the Hospital VBP 
Program.
    Therefore, we are proposing to remove the PC-01 measure from the 
Hospital VBP Program beginning with the FY 2021 program year, with data 
collection on this measure for purposes of the Hospital VBP Program 
ending with December 31, 2018 discharges, based on proposed removal 
Factor 8--because the costs associated with the measure outweigh the 
benefit of its continued use in the program.
    We are inviting public comment on this proposal to remove the 
Elective Delivery (NQF #0469) (PC-01) measure from the Hospital VBP 
Program as well as feedback on whether there are

[[Page 20411]]

reasons to retain the measure in the Hospital VBP Program.
(2) Proposed Removal of Healthcare-Associated Infection (HAI) Measures 
and the Patient Safety and Adverse Events (Composite) Measure
    We are proposing to remove the following five measures of 
healthcare-associated infections (HAIs) from the Hospital VBP Program 
beginning with the FY 2021 program year because the costs associated 
with the measures outweigh the benefit of their continued use in the 
program--proposed removal Factor 8:
     National Healthcare Safety Network (NHSN) Catheter-
Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138) 
(CAUTI);
     National Healthcare Safety Network (NHSN) Central Line-
Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139) 
(CLABSI);
     American College of Surgeons-Centers for Disease Control 
and Prevention (ACS-CDC) Harmonized Procedure Specific Surgical Site 
Infection Outcome Measure (NQF #0753) (Colon and Abdominal Hysterectomy 
SSI);
     National Healthcare Safety Network (NHSN) Facility-wide 
Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus 
(MRSA) Bacteremia Outcome Measure (NQF #1716) (MRSA Bacteremia); and
     National Healthcare Safety Network (NHSN) Facility-wide 
Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome 
Measure (NQF #1717) (CDI).
    We are also proposing to remove the Patient Safety and Adverse 
Events (Composite) (PSI 90) (NQF #0531) because the costs associated 
with the measure outweigh the benefit of its continued use in the 
program--proposed removal Factor 8.
    As discussed in section IV.I.2.b. of the preamble of this proposed 
rule, one of the main goals of our Meaningful Measures Initiative is to 
apply a parsimonious set of the most meaningful measures available to 
track patient outcomes and impact. While we continue to consider 
patient safety and reducing HAIs as high priorities (as reflected in 
the Meaningful Measures Initiative quality priority of making care 
safer by reducing harms caused in the delivery of care), the six 
measures listed above are all used in the HAC Reduction Program, which 
specifically focuses on reducing hospital-acquired conditions and 
improving patient safety outcomes. While there are differences in the 
scoring methodology between the Hospital VBP Program and the HAC 
Reduction Program, the HAC Reduction Program's incentive payment 
structure, like the Hospital VBP Program, ties hospitals' payment 
adjustments on claims paid under the IPPS to their performance on 
selected measures, thereby incentivizing performance improvement on 
these measures among participating hospitals. We believe removing these 
measures from the Hospital VBP Program would reduce costs and 
complexity for hospitals to separately track the confidential feedback, 
preview reports, and publicly reported information on these measures in 
both the Hospital VBP and HAC Reduction Programs. We further believe 
retaining these measures in the HAC Reduction Program and removing them 
from the Hospital VBP Program would best support the holistic approach 
to the measures used in the three quality payment programs as described 
above, while continuing to keep patient safety and improvements in 
patient safety as high priorities. We refer readers to section IV.J.4 
b., d., and h. of the preamble of this proposed rule for how the same 
HAI measures in the HAC Reduction Program will continue to be reported 
by hospitals via the CDC's NHSN and posted on our Hospital Compare 
website. Therefore, we believe that removing these measures from the 
Hospital VBP Program, but retaining them in the HAC Reduction Program, 
strikes an appropriate balance of benefits and costs associated with 
these measures across payment programs. We also refer readers to 
section VIII.A.5.b.(2)(b) of the preamble of this proposed rule, where 
we are proposing to remove these same measures from the Hospital IQR 
Program.
    Therefore, we are proposing to remove the CAUTI, CLABSI, Colon and 
Abdominal Hysterectomy SSI, MRSA Bacteremia, and CDI measures from the 
Hospital VBP Program beginning with the FY 2021 program year, with data 
collection on these measures for purposes of the Hospital VBP Program 
ending with December 31, 2018 discharges, based on proposed removal 
Factor 8--because the costs associated with the measures outweigh the 
benefit of their continued use in the program. We are also proposing to 
remove the PSI 90 measure from the Hospital VBP Program effective with 
the effective date of the FY 2019 IPPS/LTCH PPS final rule based on 
proposed removal Factor 8--because the costs associated with the 
measure outweigh the benefit of its continued use in the program.\256\ 
As the PSI 90 measure would not be incorporated into TPS calculations 
until the FY 2023 program year, we can operationally remove the measure 
from the program sooner than the HAI measures. We also refer readers to 
section IV.I.4.a.(2) and b. of the preamble of this proposed rule, 
where we are proposing to remove the Safety domain from the Hospital 
VBP Program and to increase the weight of the Clinical Care domain 
(which we are proposing to rename as the Clinical Outcomes domain) if 
our proposals to remove all of the current Safety domain measures are 
adopted, beginning with the FY 2021 program year.
---------------------------------------------------------------------------

    \256\ In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38256), we 
finalized the adoption of the PSI 90 measure beginning with the FY 
2023 program year. We are proposing to remove this measure effective 
with the effective date of the FY 2019 IPPS/LTCH PPS final rule, 
meaning the measure would not be used in calculating hospitals' TPS 
for any program year.
---------------------------------------------------------------------------

    We are inviting public comment on these proposals to remove the 
five HAI measures and the PSI 90 measure from the Hospital VBP Program, 
as well as comments on whether the removal of these measures from this 
program and their retention in the HAC Reduction Program would continue 
to provide a strong incentive for performance on these patient safety 
measures.
(3) Proposed Removal of Condition-Specific Payment Measures
    We are proposing to remove the following three condition-specific 
payment measures from the Hospital VBP Program, effective with the 
effective date of the FY 2019 IPPS/LTCH PPS final rule, because the 
costs associated with the measures outweigh the benefit of their 
continued use in the program--proposed removal Factor 8:
     Hospital-Level, Risk-Standardized Payment Associated With 
a 30-Day Episode-of-Care for Acute Myocardial Infarction (NQF #2431) 
(AMI Payment);
     Hospital-Level, Risk-Standardized Payment Associated With 
a 30-Day Episode-of-Care for Heart Failure (NQF #2436) (HF Payment); 
and
     Hospital-Level, Risk-Standardized Payment Associated With 
a 30-Day Episode-of-Care for Pneumonia (NQF #2579) (PN Payment).
    As discussed in section IV.I.2.b. of the preamble of this proposed 
rule, one of the main goals of our Meaningful Measures Initiative is to 
apply a parsimonious set of the most meaningful measures. We also seek 
to reduce costs and complexity across the hospital quality programs.
    Currently, the Hospital IQR and Hospital VBP Programs both include 
the Medicare Spending Per Beneficiary (MSPB)--Hospital (NQF #2158) 
(MSPB)

[[Page 20412]]

measure, as well as the three condition-specific payment measures 
listed above. We continue to believe the condition-specific payment 
measures provide important data for patients and hospitals, and we will 
continue to use these measures in the Hospital IQR Program along with 
the Hospital-Level, Risk-Standardized Payment Associated with an 
Episode-of-Care for Primary Elective Total Hip and/or Total Knee 
Arthroplasty measure, to provide more granular information to hospitals 
for reducing costs and resource use while maintaining quality care. 
However, we believe that continuing to retain the AMI Payment, HF 
Payment, and PN Payment measures in both the Hospital VBP and Hospital 
IQR Programs no longer aligns with current CMS and HHS policy 
priorities for reducing program costs and complexity. We believe the 
Hospital IQR Program's public reporting of these condition-specific 
payment measures provide hospitals and patients with sufficient 
information to make decisions about care and to drive resource use 
improvement efforts, while removing them from the Hospital VBP Program 
would reduce the costs and complexity for hospitals to separately track 
the confidential feedback, preview reports, and publicly reported 
information on these measures in both programs. We note that the 
Hospital VBP Program would still retain the MSPB measure, which is an 
overall hospital efficiency measure required under section 
1886(o)(2)(B)(ii) of the Act. We also refer readers to section 
VIII.A.5.b.(6) of the preamble of this proposed rule, where we are 
proposing to remove the MSPB measure from the Hospital IQR Program.
    Therefore, we are proposing to remove the AMI Payment, HF Payment, 
and PN Payment measures from the Hospital VBP Program effective with 
the effective date of the FY 2019 IPPS/LTCH PPS final rule based on 
proposed removal Factor 8--because the costs associated with the 
measures outweigh the benefit of their continued use in the program. As 
the AMI Payment and HF Payment measures \257\ would not be incorporated 
into TPS calculations until the FY 2021 program year and the PN Payment 
measure \258\ would not be incorporated into TPS calculations until the 
FY 2022 program year, we can operationally remove these measures from 
the program sooner than the HAI measures.
---------------------------------------------------------------------------

    \257\ In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56987 
through 56992), we adopted the AMI Payment and HF Payment measures 
in the Hospital VBP Program beginning with the FY 2021 program year. 
We are proposing to remove these measures effective with the 
effective date of the FY 2019 IPPS/LTCH PPS final rule, meaning the 
measures would not be used in calculating hospitals' TPS for any 
program year.
    \258\ In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38251), we 
adopted the PN Payment measure in the Hospital VBP Program beginning 
with the FY 2022 program year. We are proposing to remove this 
measure effective with the effective date of the FY 2019 IPPS/LTCH 
PPS final rule, meaning the measure would not be used in calculating 
hospitals' TPS for any program year.
---------------------------------------------------------------------------

    We are inviting public comment on this proposal to remove the three 
condition-specific payment measures from the Hospital VBP Program, as 
well as comments on whether there are potential reasons to retain these 
condition-specific payment measures in the program.
d. Summary of Previously Adopted Measures for the FY 2020 Program Year
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38244), we finalized 
the following measure set for the Hospital VBP Program for the FY 2020 
program year. We note that we are not proposing any changes to this 
measure set in this proposed rule.

        Previously Adopted Measures for the FY 2020 Program Year
------------------------------------------------------------------------
     Measure short name           Domain/measure name          NQF #
------------------------------------------------------------------------
                 Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS......................  Hospital Consumer                     0166
                               Assessment of Healthcare           (0228)
                               Providers and Systems
                               (HCAHPS) (including Care
                               Transition Measure).
------------------------------------------------------------------------
                       Clinical Outcomes Domain *
------------------------------------------------------------------------
MORT-30-AMI.................  Hospital 30-Day, All-                 0230
                               Cause, Risk-Standardized
                               Mortality Rate Following
                               Acute Myocardial
                               Infarction (AMI)
                               Hospitalization.
MORT-30-HF..................  Hospital 30-Day, All-                 0229
                               Cause, Risk-Standardized
                               Mortality Rate Following
                               Heart Failure (HF)
                               Hospitalization.
MORT-30-PN..................  Hospital 30-Day, All-                 0468
                               Cause, Risk-Standardized
                               Mortality Rate Following
                               Pneumonia Hospitalization.
THA/TKA.....................  Hospital-Level Risk-                  1550
                               Standardized Complication
                               Rate Following Elective
                               Primary Total Hip
                               Arthroplasty (THA) and/or
                               Total Knee Arthroplasty
                               (TKA).
------------------------------------------------------------------------
                            Safety Domain **
------------------------------------------------------------------------
CAUTI.......................  National Healthcare Safety            0138
                               Network (NHSN)
                               Catheter[dash]Associated
                               Urinary Tract Infection
                               (CAUTI) Outcome Measure.
CLABSI......................  National Healthcare Safety            0139
                               Network (NHSN) Central
                               Line[dash]Associated
                               Bloodstream Infection
                               (CLABSI) Outcome Measure.
Colon and Abdominal           American College of                   0753
 Hysterectomy SSI.             Surgeons--Centers for
                               Disease Control and
                               Prevention Harmonized
                               Procedure Specific
                               Surgical Site Infection
                               (SSI) Outcome Measure.
MRSA Bacteremia.............  National Healthcare Safety            1716
                               Network (NHSN) Facility-
                               wide Inpatient Hospital-
                               onset Methicillin-
                               resistant Staphylococcus
                               aureus (MRSA) Bacteremia
                               Outcome Measure.
CDI.........................  National Healthcare Safety            1717
                               Network (NHSN)
                               Facility[dash]wide
                               Inpatient Hospital-onset
                               Clostridium difficile
                               Infection (CDI) Outcome
                               Measure.
PC-01.......................  Elective Delivery.........            0469
------------------------------------------------------------------------

[[Page 20413]]

 
                  Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB........................  Medicare Spending Per                 2158
                               Beneficiary (MSPB)--
                               Hospital.
------------------------------------------------------------------------
* We are proposing, in section IV.I.4.a.(1) of the preamble of this
  proposed rule, to change the name of this domain from the Clinical
  Care domain to the Clinical Outcomes domain beginning with the FY 2020
  program year.
** As discussed in sections IV.I.4.a.(2) and IV.I.2.c.(1) and (2) of the
  preamble of this proposed rule, respectively, we are proposing to
  remove the Safety domain and the measures in the Safety domain,
  beginning with the following program year (FY 2021).

e. Summary of Measures for the FY 2021, FY 2022, and FY 2023 Program 
Years if Proposals for Removal of Measures are Finalized
    For the FY 2021 program year, we are proposing to remove six 
measures from the Safety domain (PC-01, CAUTI, CLABSI, Colon and 
Abdominal Hysterectomy SSI, MRSA Bacteremia, and CDI), as all of the 
HAI measures will be retained in the HAC Reduction Program, and to 
remove the Safety domain itself, as there would be no measures 
remaining in the domain, along with proposing to remove two measures 
from the Efficiency and Cost Reduction domain (AMI Payment and HF 
Payment). If these measure removals are finalized as proposed, the 
Hospital VBP Program measure set for the FY 2021 program year would 
contain the following measures:

  Summary of Measures for the FY 2021 Program Year If Proposed Measure
                        Removals Are Finalized *
------------------------------------------------------------------------
     Measure short name           Domain/measure name         NQF No.
------------------------------------------------------------------------
                 Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS......................  Hospital Consumer                     0166
                               Assessment of Healthcare           (0228)
                               Providers and Systems
                               (HCAHPS) (including Care
                               Transition Measure).
------------------------------------------------------------------------
                       Clinical Outcomes Domain **
------------------------------------------------------------------------
MORT-30-AMI.................  Hospital 30-Day, All-                 0230
                               Cause, Risk-Standardized
                               Mortality Rate Following
                               Acute Myocardial
                               Infarction (AMI)
                               Hospitalization.
MORT-30-HF..................  Hospital 30-Day, All-                 0229
                               Cause, Risk-Standardized
                               Mortality Rate Following
                               Heart Failure (HF)
                               Hospitalization.
MORT-30-PN (updated cohort).  Hospital 30-Day, All-                 0468
                               Cause, Risk-Standardized
                               Mortality Rate Following
                               Pneumonia Hospitalization.
MORT-30-COPD................  Hospital 30-Day, All-                 1893
                               Cause, Risk-Standardized
                               Mortality Rate Following
                               Chronic Obstructive
                               Pulmonary Disease (COPD)
                               Hospitalization.
THA/TKA.....................  Hospital-Level Risk-                  1550
                               Standardized Complication
                               Rate Following Elective
                               Primary Total Hip
                               Arthroplasty (THA) and/or
                               Total Knee Arthroplasty
                               (TKA).
------------------------------------------------------------------------
                  Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB........................  Medicare Spending Per                 2158
                               Beneficiary (MSPB)--
                               Hospital.
------------------------------------------------------------------------
* As discussed in sections IV.I.2.c.(1) and (2) and IV.I.2.c.(3) of the
  preamble of this proposed rule, respectively, we are proposing to
  remove six measures in the Safety domain (PC-01, CAUTI, CLABSI, Colon
  and Abdominal Hysterectomy SSI, MRSA Bacteremia, and CDI) beginning
  with the FY 2021 program year, and two measures in the Efficiency and
  Cost Reduction domain (AMI Payment and HF Payment), which would have
  entered the program beginning with the FY 2021 program year. As
  discussed in section IV.I.4.a.(2) of the preamble of this proposed
  rule, we are also proposing to remove the Safety domain itself
  beginning with the FY 2021 program year. Therefore, we did not include
  these measures or the Safety domain in this summary table.
** We are proposing, in section IV.I.4.a.(1) of the preamble of this
  proposed rule, to change the name of this domain from the Clinical
  Care domain to the Clinical Outcomes domain beginning with the FY 2020
  program year.

    For the FY 2022 and FY 2023 program years, in addition to the eight 
measures we are proposing to remove for the FY 2021 program year (PC-
01, CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, MRSA 
Bacteremia, CDI, AMI Payment, and HF Payment), we are also proposing to 
remove the PN Payment measure, which would be entering the program 
beginning with the FY 2022 program year, and the PSI 90 measure, which 
would be entering the program beginning with the FY 2023 program year. 
If all of these measure removals are finalized as proposed, the 
Hospital VBP Program measure set for the FY 2022 and 2023 program years 
would contain the following measures:

[[Page 20414]]



    Summary of Measures for the FY 2022 and FY 2023 Program Years If
                Proposed Measure Removals Are Finalized *
------------------------------------------------------------------------
     Measure short name           Domain/measure name         NQF No.
------------------------------------------------------------------------
                 Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS......................  Hospital Consumer                     0166
                               Assessment of Healthcare           (0228)
                               Providers and Systems
                               (HCAHPS) (including Care
                               Transition Measure).
------------------------------------------------------------------------
                       Clinical Outcomes Domain **
------------------------------------------------------------------------
MORT-30-AMI.................  Hospital 30-Day, All-                 0230
                               Cause, Risk-Standardized
                               Mortality Rate Following
                               Acute Myocardial
                               Infarction (AMI)
                               Hospitalization.
MORT-30-HF..................  Hospital 30-Day, All-                 0229
                               Cause, Risk-Standardized
                               Mortality Rate Following
                               Heart Failure (HF)
                               Hospitalization.
MORT-30-PN (updated cohort).  Hospital 30-Day, All-                 0468
                               Cause, Risk-Standardized
                               Mortality Rate Following
                               Pneumonia Hospitalization.
MORT-30-COPD................  Hospital 30-Day, All-                 1893
                               Cause, Risk-Standardized
                               Mortality Rate Following
                               Chronic Obstructive
                               Pulmonary Disease (COPD)
                               Hospitalization.
MORT-30-CABG................  Hospital 30-Day, All-                 2558
                               Cause, Risk-Standardized
                               Mortality Rate Following
                               Coronary Artery Bypass
                               Graft (CABG) Surgery.
THA/TKA.....................  Hospital-Level Risk-                  1550
                               Standardized Complication
                               Rate Following Elective
                               Primary Total Hip
                               Arthroplasty (THA) and/or
                               Total Knee Arthroplasty
                               (TKA).
------------------------------------------------------------------------
                  Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB........................  Medicare Spending Per                 2158
                               Beneficiary (MSPB)--
                               Hospital.
------------------------------------------------------------------------
* As discussed in sections IV.I.2.c.(1) and (2) and IV.I.2.c.(3) of the
  preamble of this proposed rule, respectively, we are proposing to
  remove six measures in the Safety domain (PC-01, CAUTI, CLABSI, Colon
  and Abdominal Hysterectomy SSI, MRSA Bacteremia, and CDI) beginning
  with the FY 2021 program year, and two measures in the Efficiency and
  Cost Reduction domain (AMI Payment and HF Payment), which would have
  entered the program beginning with the FY 2021 program year; the PN
  Payment measure, which would have entered the program beginning with
  the FY 2022 program year; and the PSI 90 measure, which would have
  entered the program beginning with the FY 2023 program year. As
  discussed in section IV.I.4.a.(2) of the preamble of this proposed
  rule, we are also proposing to remove the Safety domain itself
  beginning with the FY 2021 program year. Therefore, we did not include
  these measures or the Safety domain in this summary table.
** We are proposing, in section IV.I.4.a.(1) of the preamble of this
  proposed rule, to change the name of this domain from the Clinical
  Care domain to the Clinical Outcomes domain beginning with the FY 2020
  program year.

3. Accounting for Social Risk Factors in the Hospital VBP Program
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38241 through 
38242), we discussed the importance of improving beneficiary outcomes 
including reducing health disparities. We also discussed our commitment 
to ensuring that medically complex patients, as well as those with 
social risk factors, receive excellent care. We discussed how studies 
show that social risk factors, such as being near or below the poverty 
level as determined by HHS, belonging to a racial or ethnic minority 
group, or living with a disability, can be associated with poor health 
outcomes and how some of this disparity is related to the quality of 
health care.\259\ Among our core objectives, we aim to improve health 
outcomes, attain health equity for all beneficiaries, and ensure that 
complex patients as well as those with social risk factors receive 
excellent care. Within this context, reports by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) and the National 
Academy of Medicine have examined the influence of social risk factors 
in CMS value-based purchasing programs.\260\ As we noted in the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38404), ASPE's report to Congress found 
that, in the context of value-based purchasing programs, dual 
eligibility was the most powerful predictor of poor health care 
outcomes among those social risk factors that they examined and tested. 
In addition, as we noted in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38241), the National Quality Forum (NQF) undertook 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.\261\ The 
trial period ended in April 2017 and a final report is available at: 
http://www.qualityforum.org/SES_Trial_Period.aspx. The trial concluded 
that ``measures with a conceptual basis for adjustment generally did 
not demonstrate an empirical relationship'' between social risk factors 
and the outcomes measured. This discrepancy may be explained in part by 
the methods used for adjustment and the limited availability of robust 
data on social risk factors. NQF has extended the socioeconomic status 
(SES) trial,\262\ allowing further examination of social risk factors 
in outcome measures.
---------------------------------------------------------------------------

    \259\ See, for example United States Department of Health and 
Human Services. ``Healthy People 2020: Disparities. 2014.'' 
Available at: 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.
    \260\ 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.
    \261\ Available at: http://www.qualityforum.org/SES_Trial_Period.aspx.
    \262\ Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86357.
---------------------------------------------------------------------------

    In the FY 2018 and CY 2018 proposed rules for our quality reporting 
and value-based purchasing programs, we solicited feedback on which 
social risk factors provide the most valuable information to 
stakeholders and the methodology for illuminating differences in 
outcomes rates among patient groups within a provider that would also 
allow for a comparison of those differences, or disparities, across 
providers. Feedback we received across our quality reporting programs 
included encouraging CMS: To explore whether

[[Page 20415]]

factors that could be used to stratify or risk adjust the measures 
(beyond dual eligibility); to consider the full range of differences in 
patient backgrounds that might affect outcomes; to explore risk 
adjustment approaches; and to offer careful consideration of what type 
of information display would be most useful to the public.
    We also sought public comment on confidential reporting and future 
public reporting of some of our measures stratified by patient dual 
eligibility. In general, commenters 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, and empower consumers to make informed decisions about 
health care. Commenters encouraged us to stratify measures by other 
social risk factors such as age, income, and educational attainment. 
With regard to value-based purchasing programs, commenters also 
cautioned CMS to balance fair and equitable payment while avoiding 
payment penalties that mask health disparities or discouraging the 
provision of care to more medically complex patients. Commenters also 
noted that value-based purchasing program measure selection, domain 
weighting, performance scoring, and payment methodology must account 
for social risk.
    As a next step, CMS is considering options to improve health 
disparities among patient groups within and across hospitals by 
increasing the transparency of disparities as shown by quality 
measures. We also are considering how this work applies to other CMS 
quality programs in the future. We refer readers to the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38403 through 38409) for more details, where 
we discuss the potential stratification of certain Hospital Inpatient 
Quality Reporting Program outcome measures. Furthermore, we continue to 
consider options to address equity and disparities in our value-based 
purchasing programs.
    We plan to continue working with ASPE, the public, and other key 
stakeholders on this important issue to identify policy solutions that 
achieve the goals of attaining health equity for all beneficiaries and 
minimizing unintended consequences.
4. Scoring Methodology and Data Requirements
a. Proposed Changes to the Hospital VBP Program Domains
(1) Proposed Domain Name Change for the FY 2020 Program Year and 
Subsequent Years
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49553 through 
49554), we renamed the Clinical Care--Outcomes subdomain as the 
Clinical Care domain beginning with the FY 2018 program year. As 
discussed in the section I.A.2. of the preamble of this proposed rule, 
we strive to have measures in our programs that can drive improvement 
in patients' health outcomes. We also strive to align quality 
measurement and value-based payment programs with other national 
strategies, such as the Meaningful Measures Initiative. As discussed in 
section IV.I.2.c. of the preamble of this proposed rule, we believe 
that one of the primary areas of focus for the Hospital VBP Program 
should be on measures of clinical outcomes, such as measures of 
mortality and complications, which address the Meaningful Measures 
Initiative quality priority of promoting effective treatment. The 
Clinical Care domain currently contains these types of measures; 
therefore, to better align the name of the domain with our priority 
area of focus, we are proposing to change the domain name from Clinical 
Care to Clinical Outcomes, beginning with the FY 2020 program year. We 
believe this proposed domain name better captures our goal of driving 
improvement in health outcomes and focusing on those outcomes that are 
most meaningful to patients and their providers.
    We are inviting public comment on this proposal.
(2) Proposed Removal of the Safety Domain for the FY 2021 Program Year 
and Subsequent Years
    We previously adopted five HAI measures and the PC-01 measure for 
the Safety domain (82 FR 38242 through 38244). We also previously 
adopted PSI 90 as a measure in the Safety domain beginning with the FY 
2023 program year (82 FR 38251 through 38256). However, as discussed in 
section IV.I.2.c.(1) and (2) of the preamble of this proposed rule, 
above, we are proposing to remove the PC-01 measure and the five HAI 
measures from the Hospital VBP Program beginning with the FY 2021 
program year and to remove the PSI 90 measure effective with the 
effective date of the FY 2019 IPPS/LTCH PPS final rule, as the PSI 90 
measure and all five of the HAI measures will be retained in the HAC 
Reduction Program. We are not proposing any new measures for the Safety 
domain in this proposed rule. In addition, as discussed in section 
IV.I.2.c. of the preamble of this proposed rule, by taking a holistic 
approach to evaluating the appropriateness of the measures used in the 
three hospital value-based purchasing programs--the Hospital VBP, 
Hospital Readmissions Reduction, and HAC Reduction Programs--we believe 
the HAC Reduction Program is the primary part of the quality payment 
framework that should focus on the safety aspect of care quality for 
the inpatient hospital setting (Meaningful Measures Initiative quality 
priority of making care safer by reducing harm caused in the delivery 
of care). We believe this framework will allow hospitals and patients 
to continue to obtain meaningful information about hospital performance 
and incentivize quality improvement while also streamlining the measure 
sets to reduce the costs of duplicative measures and program 
complexity.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50056) and FY 2016 
IPPS/LTCH PPS final rule (80 FR 49546), we noted that hospital acquired 
condition measures comprise some of the most critical patient safety 
areas, therefore justifying the use of the measures in more than one 
program. However, we have also stated that we will monitor the HAC 
Reduction and Hospital VBP Programs and analyze the impact of our 
measures selection, including any unintended consequences with having a 
measure in more than one program, and will revise the measure set in 
one or both programs if needed (79 FR 50056). We have continued to 
receive stakeholder feedback expressing concern about overlapping 
measures amongst different payment programs, such as the Hospital VBP 
and HAC Reduction Programs. For the Hospital VBP Program, specifically, 
we believe removing the measures in the Safety domain and retaining 
them in the HAC Reduction Program directly addresses the concerns 
expressed by stakeholders about the costs to hospitals participating in 
these programs so that the costs of participation do not outweigh the 
benefits of improving beneficiary care.
    In this proposed rule, we are proposing to remove the Safety domain 
from the Hospital VBP Program, beginning with the FY 2021 program year, 
because there would no longer be any measures in that domain if our 
measure removal proposals are finalized. We acknowledge that by 
removing the Safety domain and its

[[Page 20416]]

measures from the Hospital VBP Program, the overall effect would be to 
decrease the total percent of hospital payment at risk that is based on 
performance on these measures (by no longer tying performance on them 
to Hospital VBP Program reimbursement), and that it might reduce the 
current incentive for hospitals to perform as well on them. However, we 
believe hospitals will still be sufficiently incentivized to perform 
well on the measures even if they are only in one value-based 
purchasing program, and we intend to monitor the effects of this 
proposal, if finalized, as the patient safety measures would be 
maintained in the HAC Reduction Program, validated, and publicly 
reported on the Hospital Compare website.
    We also refer readers to section IV.I.4.b.(2) of the preamble of 
this proposed rule, where we discuss how we considered keeping the 
Safety domain and the current domain weighting of 25 percent weight for 
each of the four domains with proportionate reweighting if a hospital 
has sufficient data on only three domains, which would include 
retaining in the Hospital VBP Program one or more of the measures in 
the Safety domain (such as measures which are also used in the HAC 
Reduction Program). However, based on the considerations discussed 
above, we decided to propose removal of the Safety domain measures and 
the Safety domain from the Hospital VBP Program. If our proposals to 
remove the Safety domain measures (PC-01, the five HAI measures, and 
PSI 90) are adopted, there would be no measures left in the Safety 
domain beginning with the FY 2021 program year.
    Therefore, we are proposing to remove the Safety domain from the 
Hospital VBP Program beginning with the FY 2021 program year.
    We are inviting public comment on this proposal and whether we 
should keep the Safety domain along with one or more of its measures.
b. Proposed Domain Weighting With Increased Weight to Clinical Outcomes 
and Alternatives Considered for the FY 2021 Program Year and Subsequent 
Years
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38266), we finalized 
our proposal to retain the equal weight of 25 percent for each of the 
four domains in the FY 2020 program year and subsequent years for 
hospitals that receive a score in all 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).
    As discussed above, we are proposing to remove the Hospital VBP 
Program Safety domain beginning with the FY 2021 program year in 
connection with our proposal to remove all of the measures previously 
adopted for the Safety domain. We are also proposing to remove the 
three condition-specific payment measures (AMI Payment, HF Payment, and 
PN Payment) effective with the effective date of the FY 2019 IPPS/LTCH 
PPS final rule. If these proposals are adopted, there would be only 
three domains remaining in the Hospital VBP Program, beginning with the 
FY 2021 program year--Clinical Outcomes (proposed name change; 
currently referred to as the Clinical Care domain), Person and 
Community Engagement, and Efficiency and Cost Reduction. The Clinical 
Outcomes domain would have five measures of mortality and complications 
for the FY 2021 program year and 6 measures beginning with the FY 2022 
program year, the Person and Community Engagement domain would have the 
HCAHPS survey with its eight dimensions of patient experience, and the 
Efficiency and Cost Reduction domain would include only the MSPB 
measure. To account for these changes, we assessed the weighting of 
scores on the three remaining domains in constituting each hospital's 
TPS. Specifically, we considered: (1) Weighting the Clinical Outcomes 
domain at 50 percent of a hospital's TPS, and to weight the Person and 
Community Engagement and Efficiency and Cost Reduction at 25 percent 
each; and (2) weighting all three domains equally, each as one-third 
(\1/3\) of a hospital's TPS. Because there would be only three domains 
if our proposals to remove the Safety domain and all of the Safety 
domain measures are adopted, we are not proposing any changes to the 
requirement that a hospital must receive domain scores on at least 
three domains to receive a TPS. Historically, when the Hospital VBP 
Program had three domains, scores in all three were required to receive 
a TPS (76 FR 74534; 76 FR 74544). We also discuss in this section that 
we considered keeping the current domain weighting (25 percent for each 
of the four domains--Safety, Clinical Outcomes (proposed name change), 
Person and Community Engagement, and Efficiency and Cost Reduction--
with proportionate reweighting if a hospital has sufficient data on 
only three domains), which would require keeping at least one or more 
of the measures in the Safety domain and the Safety domain itself.
(1) Proposed Domain Weighting With Increased Weight to Clinical 
Outcomes
    For the reasons discussed below, in this proposed rule, we are 
proposing to weight the domains as follows beginning with the FY 2021 
program year:

   Proposed Domain Weights for the FY 2021 Program Year and Subsequent
                                  Years
------------------------------------------------------------------------
                                                              Weight
                         Domain                              (percent)
------------------------------------------------------------------------
Clinical Outcomes *.....................................              50
Person and Community Engagement.........................              25
Efficiency and Cost Reduction...........................             25
------------------------------------------------------------------------
* We are proposing, in section IV.I.4.a.(1) of the preamble of this
  proposed rule, to change the name of this domain from the Clinical
  Care domain to the Clinical Outcomes domain beginning with the FY 2020
  program year.

    We believe this proposed domain weighting best aligns with our 
emphasis on clinical outcomes, which address the Meaningful Measures 
Initiative quality priority of promoting effective treatment, and 
provides a greater weight for the domain with the greatest number of 
measures (Clinical Outcomes), while providing appropriate weighting to 
the domains that focus on patient experience and cost reduction 
commensurate with their continued importance. In proposing to increase 
the weight of the Clinical Outcomes domain from 25 percent to 50 
percent of hospitals' TPSs, we took into account that the Clinical 
Outcomes domain will include five outcome measures for the FY 2021 
program year (MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-PN 
(updated cohort), and THA/TKA) and six outcome measures for the FY 2022 
program year (MORT-30-CABG, MORT-30-AMI, MORT-30-HF, MORT-30-COPD, 
MORT-30-PN (updated cohort), and THA/TKA), while the Person and 
Community Engagement domain includes the HCAHPS survey measure, and the 
Efficiency and Cost Reduction domain would include only one measure 
(MSPB) if our proposals to remove the condition-specific payment 
measures, discussed in section IV.I.2.c.(3) of the preamble of this 
proposed rule, above, are adopted.
    Under this proposed domain weighting, each measure in the Clinical 
Outcomes domain (measures of mortality and complications) would

[[Page 20417]]

comprise 10 percent of each hospital's TPS for the FY 2021 program year 
and 8.33 percent for the FY 2022 program year and subsequent years, if 
a hospital meets the case minimum for each measure in the domain, and 
no more than 25 percent for each measure if a hospital can only meet 
the minimum two measure scores for the Clinical Outcomes domain. The 
MSPB measure would continue to be weighted at 25 percent, if our 
proposals to remove the condition specific payment measures are 
adopted; and each of the eight HCAHPS dimensions would continue to be 
weighted at 3.125 percent for a total of 25 percent for the Person and 
Community Engagement domain. We believe the proposed domain weighting 
better balances the contributing weights of each individual measure 
that would be retained in the Hospital VBP Program compared to the 
alternative weighting we considered of equal weights (one-third (\1/3\) 
for each domain), as discussed in more detail below.
    We also believe the proposal to increase the weight of the Clinical 
Outcomes domain would help address concerns expressed by the Government 
Accountability Office (GAO) in a June 2017 report.\263\ In the report, 
GAO observed that high scores in the Efficiency and Cost Reduction 
domain resulted in positive payment adjustments for some hospitals that 
had composite quality scores below the median (the GAO assessed each 
hospital's composite quality score as its TPS minus its weighted 
Efficiency and Cost Reduction domain score). GAO also expressed concern 
that proportionate reweighting of the Efficiency and Cost Reduction 
domain (for example, from 25 percent to one-third (\1/3\) of a 
hospital's TPS in FY 2016), due to a missing domain score for another 
domain, amplified the contribution of the Efficiency and Cost Reduction 
domain to the TPS. GAO recommended that CMS take action to avoid 
disproportionate impact of the Efficiency and Cost Reduction domain on 
the TPS, and to change the proportionate reweighting policy so it does 
not facilitate positive payment adjustments for hospitals with lower 
quality scores. Other stakeholders and researchers have expressed 
similar concerns.\264\
---------------------------------------------------------------------------

    \263\ Hospital Value-Based Purchasing: CMS Should Take Steps to 
Ensure Lower Quality Hospitals Do Not Quality for Bonuses: Report to 
Congressional Committees. (GAO Publication No. GAO-17-551) Retrieved 
from U.S. Government Accountability Office: Available at: https://www.gao.gov/assets/690/685586.pdf.
    \264\ For example, Ryan AM, Krinsky S, Maurer KA, Dimick JB. 
Changes in Hospital Quality Associated with Hospital Value-Based 
Purchasing. N Engl J Med. 2017 June 15;376(24):2358-2366.
---------------------------------------------------------------------------

    Using actual FY 2018 program data,\265\ we analyzed the estimated 
potential impacts to hospital TPSs and payment adjustment. Based on 
this analysis, we estimate that with the proposed domain weighting, 
approximately 200 hospitals with composite quality scores below the 
median composite quality score for all Hospital VBP Program-eligible 
hospitals would no longer receive a positive payment adjustment mainly 
driven by their high performance on the Efficiency and Cost Reduction 
domain. This represents an approximate 50 percent reduction in the 
percent of hospitals receiving positive payment adjustments that have 
composite quality scores below the median (from 21 percent of hospitals 
receiving payment adjustments to 11 percent). We refer readers to the 
table in the section IV.I.4.b.(3) below summarizing the results of this 
analysis.
---------------------------------------------------------------------------

    \265\ Only eligible hospitals were included in this analysis. 
Excluded hospitals (for example, hospitals not meeting the minimum 
domains required for calculation, hospitals receiving three or more 
immediate jeopardy citations in the FY 2018 performance period, 
hospitals subject to payment reductions under the Hospital IQR 
Program in FY 2018, and hospitals located in the State of Maryland) 
were removed from this analysis.
---------------------------------------------------------------------------

    In further analyzing the potential impacts of the proposed domain 
weighting on hospitals' TPSs using actual FY 2018 program data, our 
analysis showed that, on average, hospitals with large bed size, 
hospitals in urban areas, teaching hospitals, and safety net status 
hospitals,\266\ which have historically received lower overall TPSs on 
average (generally due to lower average performance on the Efficiency 
and Cost Reduction and Patient and Community Engagement domains), moved 
closer to the average TPS under the proposed domain weighting 
(generally due to their higher average performance on the Clinical 
Outcomes domain). With average scores for these types of hospitals 
moving closer to the average TPS for all hospitals, this would increase 
their TPSs, on average, and thereby increase their chances for a 
positive payment adjustment.
---------------------------------------------------------------------------

    \266\ For purposes of this analysis, ``safety net'' status is 
defined as those hospitals with top 10 percentile of 
Disproportionate Share Hospital (DSH) patient percentage from the FY 
2018 IPPS/LTCH PPS final rule impact file, available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2018-IPPS-Final-Rule-Home-Page-Items/FY2018-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending.
---------------------------------------------------------------------------

    On average, hospitals with small bed size, rural hospitals, and 
non-teaching hospitals, which were historically high scorers on average 
(generally due to higher average performance on the Efficiency and Cost 
Reduction and Patient and Community Engagement domains), also moved 
closer to the average TPS under the proposed domain weighting 
(generally due to lower average performance on the Clinical Outcomes 
domain). With average scores for these types of hospitals also moving 
closer to the average TPS for all hospitals, this would decrease their 
TPSs, on average, and thereby decrease their chances for a positive 
payment adjustment. This would also be consistent with our analysis 
discussed above that the proposed domain weighting would better address 
GAO's recommendations for the Hospital VBP Program by reducing the 
percent of hospitals receiving positive payment adjustments that have 
composite quality scores below the median.
    Our analysis also simulated that removing the Safety domain and 
increasing the weight of the Clinical Outcomes domain would have 
decreased the slope of the linear exchange function from 2.89 (actual 
FY 2018) to 2.78 (estimated using actual FY 2018 program data) and 
would have decreased the percent of hospitals receiving a positive 
payment adjustment from 57 percent to 45 percent. We believe this is 
mainly due to hospitals with greater total MS-DRGs payments (such as 
larger hospitals that generally have higher average performance on the 
Clinical Outcomes domain) earning higher TPSs relative to hospitals 
with smaller total MS-DRGs payments in this estimated budget-neutral 
program. We refer readers to the tables in section IV.I.4.b.(3) below 
summarizing the results of these analyses.
(2) Alternatives Considered
    As an alternative, we also considered weighting each of the three 
domains equally, meaning that each domain (Clinical Outcomes, Person 
and Community Engagement, and Efficiency and Cost Reduction) would be 
weighted as one-third (\1/3\) of a hospital's TPS, which is similar to 
the proportionate reweighting policy when a hospital is missing one 
domain score due to insufficient cases to score enough measures for the 
domain. Our analysis showed that, on average, hospitals with small bed 
size, rural hospitals, non-teaching hospitals, and non-safety net 
status hospitals would earn TPSs relatively closer to or better than 
historic levels of performance, particularly with increased weighting 
of the Patient and Community Engagement and Efficiency and Cost 
Reduction domains from 25 percent each to one-third (\1/3\) each, 
domains in which these

[[Page 20418]]

types of hospitals historically perform better than average compared to 
large bed size, hospitals in urban areas, teaching hospitals, and 
safety net status hospitals.\267\ In addition, our analysis showed that 
equally weighting the domains does not address the GAO's concern of 
positive payment adjustments for hospitals with composite quality 
scores below the median. Based on our analyses, we estimate that 
approximately 20 percent of hospitals with composite quality scores 
below the median composite quality score for all Hospital VBP Program-
eligible hospitals would receive a positive payment adjustment mainly 
driven by their high performance on the Efficiency and Cost Reduction 
domain, if we weighted the domains equally. This is approximately 
double the number of hospitals that we estimate would receive a 
positive payment adjustment with composite quality scores below the 
median as compared to our proposed domain weighting of increasing the 
Clinical Outcomes domain to 50 percent and keeping the Patient and 
Community Engagement and Efficiency and Cost Reduction domains at 25 
percent each. We refer readers to the tables in section IV.I.4.b.(3) of 
the preamble of this proposed rule summarizing the results of these 
analyses.
---------------------------------------------------------------------------

    \267\ For purposes of this analysis, `safety net' status is 
defined as those hospitals with top 10 percentile of 
Disproportionate Share Hospital (DSH) patient percentage from the FY 
2018 IPPS final rule impact file, available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2018-IPPS-Final-Rule-Home-Page-Items/FY2018-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending.
---------------------------------------------------------------------------

    We also considered keeping the Safety domain and the current domain 
weighting (25 percent weight for each of the four domains with 
proportionate reweighting if a hospital has sufficient data on only 
three domains), which would include retaining in the Hospital VBP 
Program one or more of the measures in the Safety domain (such as 
measures which are also used in the HAC Reduction Program). As 
discussed in section IV.I.2.c. of the preamble of this proposed rule, 
we continue to consider patient safety and reducing HAIs as high 
priorities, which is why the PSI 90 and five HAI measures being 
proposed for removal from the Hospital VBP Program will continue to be 
used in the HAC Reduction Program.
    As discussed earlier, we believe the more holistic quality payment 
program strategy we seek to undertake will allow hospitals and patients 
to continue to obtain meaningful information about hospital performance 
and incentivize quality improvement while also streamlining the measure 
sets to reduce duplicative measures and program complexity. For the 
Hospital VBP Program, specifically, we believe removing the measures in 
the Safety domain and retaining them in the HAC Reduction Program 
directly addresses the concerns expressed by provider stakeholders 
about the costs to hospitals participating in these programs so that 
the costs of participation do not outweigh the benefits of improving 
beneficiary care.
(3) Analysis
    Our priority is to adopt a domain weighting policy that 
appropriately reflects hospital performance under the Hospital VBP 
Program, aligns with CMS policy goals, including the more holistic 
quality payment program strategy for hospitals discussed above, and 
continues to incentivize quality improvement. As noted above, to 
understand the potential impacts of the proposed domain weighting on 
hospitals' TPSs, we conducted analyses using FY 2018 program data that 
estimated the potential impacts of our proposed domain weighting policy 
to increase the weight of the Clinical Outcomes domain from 25 percent 
to 50 percent of a hospital's TPS and an alternative weighting policy 
we considered of equal weights whereby each domain would constitute 
one-third (\1/3\) of a hospital's TPS. The table below provides an 
overview of the estimated impact on hospitals' TPS by certain hospital 
characteristics and as they would compare to actual FY 2018 TPSs, which 
include scoring on four domains, including the Safety domain, and 
applying proportionate reweighting if a hospital has sufficient data on 
only three domains.

                                           Comparison of Estimated Average TPSs and Unweighted Domain Scores *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Proposed
                                                                          Actual FY 2018  Actual FY 2018                     increased
                                                          Actual FY 2018  average person      average     Actual FY 2018   weighting of     Alternative
                 Hospital characteristic                      average      and community  efficiency and  average TPS (4   clinical care    weighting:
                                                           clinical care    engagement    cost reduction   domains) \+\       domain:        estimated
                                                           domain score    domain score    domain score                      estimated      average TPS
                                                                                                                            average TPS
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Hospitals **........................................            43.2            33.5            18.8            37.4            34.6            31.8
Bed Size:
    1-99................................................            33.4            46.0            35.7            44.6            37.2            38.4
    100-199.............................................            42.2            34.5            21.0            39.2            35.0            32.6
    200-299.............................................            44.5            27.9            12.9            34.4            32.4            28.4
    300-399.............................................            48.2            27.3            10.0            33.3            33.4            28.5
    400+................................................            50.9            26.9             7.6            31.9            34.1            28.5
Geographic Location:
    Urban...............................................            46.8            30.7            13.7            35.7            34.5            30.4
    Rural...............................................            33.7            40.5            31.7            41.9            34.9            35.3
Safety Net Status: ***
    Non-Safety Net......................................            42.7            35.4            19.0            37.9            34.9            32.4
    Safety Net..........................................            45.1            25.7            18.1            35.6            33.5            29.6
Teaching Status:
    Non-Teaching........................................            39.9            36.7            22.9            39.4            34.9            33.2
    Teaching............................................            48.7            27.9            11.8            34.1            34.3            29.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Analysis based on FY 2018 Hospital VBP Program data.
** Only eligible hospitals are included in this analysis. Excluded hospitals (for example, hospitals not meeting the minimum domains required for
  calculation, hospitals receiving three or more immediate jeopardy citations in the FY 2018 performance period, hospitals subject to payment reductions
  under the Hospital IQR Program in FY 2018, and hospitals located in the state of Maryland) were removed from this analysis.

[[Page 20419]]

 
\+\ Based on current policies, which includes the Safety domain, and proportionate reweighting for hospitals with sufficient data on only three domains.
*** For purposes of this analysis, `safety net' status is defined as those hospitals with top 10 percentile of Disproportionate Share Hospital (DSH)
  patient percentage from the FY 2018 IPPS/LTCH PPS final rule impact file: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2018-IPPS-Final-Rule-Home-Page-Items/FY2018-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending.

    The table below provides a summary of the estimated impacts on 
average TPSs and payment adjustments for all hospitals,\268\ including 
as they would compare to actual FY 2018 program results under current 
domain weighting policies.
---------------------------------------------------------------------------

    \268\ Only eligible hospitals are included in this analysis. 
Excluded hospitals (for example, hospitals not meeting the minimum 
domains required for calculation, hospitals receiving three or more 
immediate jeopardy citations in the FY 2018 performance period, 
hospitals subject to payment reductions under the Hospital IQR 
Program in FY 2018, and hospitals located in the state of Maryland) 
were removed from this analysis.

----------------------------------------------------------------------------------------------------------------
                                                                                     Proposed
                                                                                     increased         Equal
     Summary of estimated impacts on average TPS and payment         Actual (4      weight for       weighting
             adjustments using FY 2018 program data                domains) \+\      clinical     alternative (3
                                                                                    outcomes (3      domains)
                                                                                     domains)
----------------------------------------------------------------------------------------------------------------
Total number of hospitals with a payment adjustment.............           2,808           2,701           2,701
Number of hospitals receiving a positive payment adjustment          1,597 (57%)     1,209 (45%)     1,337 (50%)
 (percent)......................................................
Average positive payment adjustment percentage..................           0.60%           0.58%           0.70%
Estimated average positive payment adjustment...................        $128,161        $233,620        $204,038
Number of hospitals receiving a negative payment adjustment          1,211 (43%)     1,492 (55%)     1,364 (50%)
 (percent)......................................................
Average negative payment adjustment percentage..................          -0.41%          -0.60%          -0.57%
Estimated average negative payment adjustment...................        $169,011        $189,307        $200,000
Number of hospitals receiving a positive payment adjustment with       341 (21%)       134 (11%)       266 (20%)
 a composite quality score * below the median (percent).........
Average TPS.....................................................            37.4            34.6            31.8
Lowest TPS receiving a positive payment adjustment..............            34.6            35.9            30.9
Slope of the linear exchange function...........................    2.8908851882    2.7849297316    3.2405954322
----------------------------------------------------------------------------------------------------------------
\+\ Based on current policies, which includes the Safety domain, and proportionate reweighting for hospitals
  with sufficient data on only three domains.
* ``Composite quality score'' is defined as a hospital's TPS minus the hospital's weighted Efficiency and Cost
  Reduction domain score.

    The estimated total number of hospitals with a payment adjustment 
is lower under the proposed domain weighting and equal weighting 
alternative considered (2,701), compared to the current four domain 
policy (2,808), because under the proposed domain weighting and equal 
weighting alternative, scores would be required on all three domains 
(Clinical Care (proposed Clinical Outcomes), Person and Community 
Engagement, and Efficiency and Cost Reduction) to receive a TPS and 
hence, a payment adjustment, whereas under the current scoring policy, 
if a hospital has sufficient data on any three of the four domains it 
can receive a TPS and payment adjustment. For example, under the 
current scoring policy, if a hospital does not have sufficient data for 
a score on the Clinical Care (Clinical Outcomes) domain, but receives a 
score on the other three domains (Safety, Person and Community 
Engagement, and Efficiency and Cost Reduction), the hospital could have 
its domain scores proportionately reweighted and receive a TPS and 
payment adjustment, whereas under the proposed domain weighting and 
equal weighting alternative considered (which do not include the Safety 
domain and retain the requirement for at least three domain scores to 
receive a TPS), a hospital that does not have sufficient data for a 
score on the Clinical Care (Clinical Outcomes) domain would not receive 
a TPS or payment adjustment.
    We also refer readers to section I.H.6.b. of Appendix A of this 
proposed rule for a detailed discussion regarding the estimated impacts 
of the proposed domain weighting and equal weighting alternative on 
hospital percentage payment adjustments.
(4) Summary
    Based on our analyses and all of the other considerations discussed 
above, we believe our proposed domain weighting policy to increase the 
weight of the Clinical Outcomes domain from 25 percent to 50 percent of 
a hospital's TPS best aligns with the goal of the Hospital VBP Program 
to make value-based incentive payment adjustments based on hospitals' 
performance on quality and cost, as well as emphasizes the Meaningful 
Measures Initiative's focus on high impact areas that are meaningful to 
patients and providers. As discussed in sections IV.I.4.a.(2), 
IV.I.2.c.(1) and (2) of the preamble of this proposed rule, we believe 
removing the Safety domain and its measures from the Hospital VBP 
Program supports the holistic approach to the measures collectively 
used in the three quality payment programs. Patient safety and reducing 
HAIs continues to be a high priority for us, which is why we believe 
retaining the PSI 90 and HAI measures in the HAC Reduction Program is 
important and will continue to incentivize quality improvement in this 
area, directly addressing the Meaningful Measures Initiative quality 
priority of making care safer by reducing harm caused in the delivery 
of care. We believe removing the same measures from the Hospital VBP 
Program would also reduce program costs and complexity for hospitals, 
and directly address their concerns about high program costs and their 
feedback to reduce duplicative measures between programs.
    Because we are proposing to remove the Safety domain and its 
measures from the Hospital VBP Program, we considered the two options 
for weighting the three remaining domains. Increasing the weight of the 
Clinical Outcomes domain from 25 percent to 50 percent of each 
hospital's TPS emphasizes our priority and focus on improving patients' 
health outcomes, without decreasing the weight of the

[[Page 20420]]

Efficiency and Cost Reduction or Person and Communities Engagement 
domains. By contrast, equally weighting each of the three domains at 
one-third (\1/3\) of each hospital's TPS would result in the MSPB 
measure and the HCAHPS survey measure together accounting for two-
thirds (\2/3\) of each hospital's TPS.
    If our proposal to remove the Safety domain beginning with the FY 
2021 program year is adopted, we are proposing to weight the three 
remaining domains as follows: Clinical Outcomes domain--50 percent; 
Person and Community Engagement domain--25 percent; and Efficiency and 
Cost Reduction domain--25 percent--beginning with the FY 2021 program 
year.
    We are inviting comment on our proposal and alternatives 
considered.
c. Minimum Numbers of Measures for Hospital VBP Program Domains for the 
FY 2021 Program Year and Subsequent Years
    Based on previously finalized policies (82 FR 38266), for a 
hospital to receive a TPS for the FY 2021 program year and subsequent 
years:
     A hospital must report a minimum number of 100 completed 
HCAHPS surveys for a hospital to receive a Person and Community 
Engagement domain score.
     A hospital must receive a minimum of two measure scores 
within the Clinical Outcomes domain (currently referred to as the 
Clinical Care domain).
     A hospital must receive a minimum of one measure score 
within the Efficiency and Cost Reduction domain.
    As discussed in section IV.I.4.a.(2) of the preamble of this 
proposed rule, we are proposing to remove the Safety domain from the 
Hospital VBP Program beginning with the FY 2021 program year. We note 
that if our proposal to remove the condition-specific payment measures 
from the Hospital VBP Program is finalized as proposed, a hospital's 
Efficiency and Cost Reduction domain scores would be based solely on 
its MSPB measure score.
    In this proposed rule, we are not proposing any changes to this 
policy.
d. Minimum Numbers of Cases for Hospital VBP Program Measures for the 
FY 2021 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. 
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); the FY 2017 IPPS/LTCH PPS final rule (81 
FR 57011); and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38266 
through 38267).
(2) Clinical Care Domain (Proposed Clinical Outcomes Domain)
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 
53609), we adopted a minimum number of 25 cases for the MORT-30-AMI, 
MORT-30-HF, and MORT-30-PN measures. 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).
    In this proposed rule, we are not proposing any changes to these 
policies.
(3) 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.
    In this proposed rule, we are not proposing any changes to this 
policy.
(4) 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 2018 IPPS/
LTCH PPS final rule (82 FR 38267), we adopted a policy that hospitals 
must report a minimum number of 25 cases per measure in order to 
receive a measure score for the condition-specific payment measures 
(namely, the AMI Payment, HF Payment, and PN Payment measures), for the 
FY 2021 program year, FY 2022 program year, and subsequent years.
    In this proposed rule, we are not proposing any changes to these 
policies for the MSPB measure; however, as discussed in section 
IV.I.2.c.(3) of the preamble of this proposed rule, we are proposing to 
remove the three condition-specific payment measures (AMI Payment, HF 
Payment, and PN Payment) from the Hospital VBP Program effective with 
the effective date of the FY 2019 IPPS/LTCH PPS final rule.
(5) Summary of Previously Adopted Minimum Numbers of Cases for the FY 
2021 Program Year and Subsequent Years
    The previously adopted minimum numbers of cases for these measures 
are set forth in the table below.

   Previously Adopted Minimum Case Number Requirements for the FY 2021
                    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 Outcomes 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         Hospitals must report a minimum number of 25
 cohort).                    cases.

[[Page 20421]]

 
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.
------------------------------------------------------------------------
                  Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB......................  Hospitals must report a minimum number of 25
                             cases.
------------------------------------------------------------------------
* We are proposing, in section IV.I.4.a.(1) of the preamble of this
  proposed rule, to change the name of this domain from the Clinical
  Care domain to the Clinical Outcomes domain beginning with the FY 2020
  program year.

5. Previously Adopted 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 
2017 IPPS/LTCH PPS final rule (81 FR 56998 through 57003) for baseline 
and performance periods that we have adopted for the FY 2019, FY 2020, 
FY 2021, and FY 2022 program years. In the same rule, we finalized a 
schedule for all future baseline and performance periods for previously 
adopted measures. We refer readers to the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38256 through 38261) for additional baseline and 
performance periods that we have adopted for the FY 2022, FY 2023, and 
subsequent program years.
b. Person and Community Engagement Domain
    Since the FY 2015 program year, we have adopted a 12-month baseline 
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 2 years prior to the applicable program 
year and a 12-month baseline period that runs on the calendar year 4 
years prior to the applicable program year, for the FY 2019 program 
year and subsequent years.
    In this proposed rule, we are not proposing any changes to these 
policies.
c. Efficiency and Cost Reduction Domain
    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 2 years prior to the applicable program 
year and a 12-month baseline period that runs on the calendar year 4 
years prior to the applicable program year for the FY 2019 program year 
and subsequent years (81 FR 56998).
    In this proposed rule, we are not proposing any changes to these 
policies.
d. Clinical Care Domain (Proposed Clinical Outcomes Domain)
    For the FY 2020 and FY 2021 program years, we adopted a 36-month 
baseline period and 36-month performance period for measures in the 
Clinical Outcomes domain (currently referred to as the Clinical Care 
domain) (78 FR 50692 through 50694; 79 FR 50073; 80 FR 49563).\269\ 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 Outcomes domain--that is, the MORT-
30-AMI, MORT-30-HF, MORT-30-COPD, THA/TKA, and MORT-30-CABG measures. 
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57001), we also 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.
---------------------------------------------------------------------------

    \269\ 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).
---------------------------------------------------------------------------

    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38259), we adopted a 
36-month performance period and 36-month baseline period for the MORT-
30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-CABG, MORT-30-PN (updated 
cohort), and THA/TKA measures for the FY 2023 program year and 
subsequent years. Specifically, for the mortality measures (MORT-30-
AMI, MORT-30-HF, MORT-30-COPD, MORT-30-CABG, and MORT-30-PN (updated 
cohort)), the performance period runs for 36 months from July 1, five 
years prior to the applicable fiscal program year, to June 30, two 
years prior to the applicable fiscal program year, and the baseline 
period runs for 36 months from July 1, ten years prior to the 
applicable fiscal program year, to June 30, seven years prior to the 
applicable fiscal program year. For the THA/TKA measure, the 
performance period runs for 36 months from April 1, five years prior to 
the applicable fiscal program year, to March 31, two years prior to the 
applicable fiscal program year, and the baseline period runs for 36 
months from April 1, ten years prior to the applicable fiscal program 
year, to March 31, seven years prior to the applicable fiscal program 
year.
    In this proposed rule, we are not proposing any changes to the 
length of these performance or baseline periods.
e. Safety Domain
    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--that runs on the calendar 
year two 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

[[Page 20422]]

subsequent program years (81 FR 57000). In the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38242 through 38244, 38251 through 38256), we removed 
the former PSI 90 measure beginning with the FY 2019 program year, and 
adopted the Patient Safety and Adverse Events (Composite) (PSI 90) 
measure beginning with the FY 2023 program year, along with baseline 
and performance periods for the measure (80 FR 38258 through 38259).
    As discussed in sections IV.I.4.a.(2), IV.I.2.c.(1) and (2) of the 
preamble of this proposed rule, we are proposing to remove the Safety 
domain and remove the PC-01 and the HAI measures (CAUTI, CLABSI, Colon 
and Abdominal Hysterectomy SSI, CDI, and MRSA Bacteremia) beginning 
with the FY 2021 program year, and to remove the PSI 90 measure 
effective with the effective date of the FY 2019 IPPS/LTCH PPS final 
rule.
f. Summary of Previously Adopted Baseline and Performance Periods for 
the FY 2020 Through FY 2024 Program Years
    The tables below summarize the baseline and performance periods 
that we have previously adopted.

   Previously Adopted Baseline and Performance Periods for the FY 2020
    Program Year: Person and Community Engagement; Clinical Outcomes;
            Safety; and Efficiency and Cost Reduction Domains
------------------------------------------------------------------------
           Domain                Baseline period     Performance period
------------------------------------------------------------------------
Person and Community
 Engagement:
     HCAHPS.........   January 1,    January 1,
                               2016-December 31,     2018-December 31,
                               2016.                 2018.
Clinical Outcomes: *
     Mortality (MORT-  July 1,       July 1,
     30-AMI, MORT-30-HF,       2010-June 30, 2013.   2015-June 30, 2018.
     MORT-30-PN)       July 1,       July 1,
     THA/TKA.                  2010-June 30, 2013.   2015-June 30, 2018.
Safety: **
     PC-01 and NHSN    January 1,    January 1,
     measures (CAUTI,          2016-December 31,     2018-December 31,
     CLABSI, Colon and         2016.                 2018.
     Abdominal Hysterectomy
     SSI, CDI, MRSA
     Bacteremia).
Efficiency and Cost
 Reduction:
     MSPB...........   January 1,    January 1,
                               2016-December 31,     2018-December 31,
                               2016.                 2018.
------------------------------------------------------------------------
* We are proposing, in section IV.I.4.a.(1) of the preamble of this
  proposed rule, to change the name of this domain from the Clinical
  Care domain to the Clinical Outcomes domain beginning with the FY 2020
  program year.
** As discussed in sections IV.I.2.c.(1) and (2) of the preamble of this
  proposed rule, we are proposing to remove PC-01, CAUTI, CLABSI, Colon
  and Abdominal Hysterectomy SSI, CDI, and MRSA Bacteremia measures
  beginning with the FY 2021 program year.


   Previously Adopted Baseline and Performance Periods for the FY 2021
 Program Year: Person and Community Engagement; Clinical Outcomes; * and
                Efficiency and Cost Reduction Domains **
------------------------------------------------------------------------
           Domain                Baseline period     Performance Period
------------------------------------------------------------------------
Person and Community
 Engagement:
     HCAHPS.........   January 1,    January 1,
                               2017-December 31,     2019-December 31,
                               2017.                 2019.
Clinical Outcomes: *
     Mortality (MORT-  July 1,       July 1,
     30-AMI, MORT-30-HF,       2011-June 30, 2014.   2016-June 30, 2019.
     MORT-30-COPD).
     MORT-30-PN        July 1,       September
     (updated cohort).         2012-June 30, 2015.   1, 2017-June 30,
                                                     2019.
     THA/TKA........   April 1,      April 1,
                               2011-March 31, 2014.  2016-March 31,
                                                     2019.
Efficiency and Cost
 Reduction: ***
     MSPB...........   January 1,    January 1,
                               2017-December 31,     2019-December 31,
                               2017.                 2019.
------------------------------------------------------------------------
* We are proposing, in section IV.I.4.a.(1) of the preamble of this
  proposed rule, to change the name of this domain from the Clinical
  Care domain to the Clinical Outcomes domain beginning with the FY 2020
  program year.
** As discussed in section IV.I.2.c.(1) and (2) of the preamble of this
  proposed rule, we are proposing to remove PC-01, CAUTI, CLABSI, Colon
  and Abdominal Hysterectomy SSI, CDI, and MRSA Bacteremia measures
  beginning with the FY 2021 program year, which would leave no measures
  in the Safety domain. As a result, the Safety domain and the
  previously finalized performance and baseline periods for those six
  measures are not included in this table.
*** As discussed in section IV.I.2.c.(3) of the preamble of this
  proposed rule, we are proposing to remove AMI Payment and HF Payment
  measures effective with the effective date of the FY 2019 IPPS/LTCH
  PPS final rule. As a result, the previously finalized performance and
  baseline periods for those measures are not included in this table.


   Previously Adopted Baseline and Performance Periods for the FY 2022
 Program Year: Person and Community Engagement; Clinical Outcomes; * and
                Efficiency and Cost Reduction Domains **
------------------------------------------------------------------------
           Domain                Baseline period     Performance period
------------------------------------------------------------------------
Person and Community
 Engagement:
     HCAHPS.........   January 1,    January 1,
                               2018-December 31,     2020-December 31,
                               2018.                 2020.
Clinical Outcomes: *
     Mortality (MORT-  July 1,       July 1,
     30-AMI, MORT-30-HF,       2012-June 30, 2015.   2017-June 30, 2020.
     MORT-30-COPD, MORT-30-
     CABG).
     MORT-30-PN        July 1,       September
     (updated cohort).         2012-June 30, 2015.   1, 2017-June 30,
                                                     2020.
     THA/TKA........   April 1,      April 1,
                               2012-March 31, 2015.  2017-March 31,
                                                     2020.
Efficiency and Cost
 Reduction: ***

[[Page 20423]]

 
     MSPB...........   January 1,    January 1,
                               2018-December 31,     2020-December 31,
                               2018.                 2020.
------------------------------------------------------------------------
* We are proposing, in section IV.I.4.a.(1) of the preamble of this
  proposed rule, to change the name of this domain from the Clinical
  Care domain to the Clinical Outcomes domain beginning with the FY 2020
  program year.
** As discussed in section IV.I.2.c.(1) and (2) of the preamble of this
  proposed rule, we are proposing to remove PC-01, CAUTI, CLABSI, Colon
  and Abdominal Hysterectomy SSI, CDI, and MRSA Bacteremia measures
  beginning with the FY 2021 program year, which would leave no measures
  in the Safety domain. As a result, the Safety domain and the
  previously finalized performance and baseline periods for those six
  measures are not included in this table.
*** As discussed in section IV.I.2.c.(3) of the preamble of this
  proposed rule, we are proposing to remove AMI Payment, HF Payment, and
  PN Payment measures effective with the effective date of the FY 2019
  IPPS/LTCH PPS final rule. As a result, the previously finalized
  performance and baseline periods for these three measures are not
  included in this table.


   Previously Adopted Baseline and Performance Periods for the FY 2023
 Program Year: Person and Community Engagement; Clinical Outcomes; * and
                Efficiency and Cost Reduction Domains **
------------------------------------------------------------------------
           Domain                Baseline period     Performance period
------------------------------------------------------------------------
Person and Community
 Engagement:
     HCAHPS.........   January 1,    January 1,
                               2019-December 31,     2021-December 31,
                               2019.                 2021.
Clinical Outcomes: *
     Mortality (MORT-  July 1,       July 1,
     30-AMI, MORT-30-HF,       2013-June 30, 2016.   2018-June 30, 2021.
     MORT-30-COPD, MORT-30-
     CABG, MORT-30-PN
     (updated cohort).
     THA/TKA........   April 1,      April 1,
                               2013-March 31, 2016.  2018-March 31,
                                                     2021.
Efficiency and Cost
 Reduction: ***
     MSPB...........   January 1,    January 1,
                               2019-December 31,     2021-December 31,
                               2019.                 2021.
------------------------------------------------------------------------
* We are proposing, in section IV.I.4.a.(1) of the preamble of this
  proposed rule, to change the name of this domain from the Clinical
  Care domain to the Clinical Outcomes domain beginning with the FY 2020
  program year.
** As discussed in sections IV.I.2.c.(1) and (2) of the preamble of this
  proposed rule, we are proposing to remove PC-01 and the NHSN measures
  (CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, MRSA
  Bacteremia) beginning with the FY 2021 program year and we are
  proposing to remove the PSI 90 measure effective with the effective
  date of the FY 2019 IPPS/LTCH PPS final rule. If finalized these
  proposals would leave no measures in the Safety domain. As a result,
  the Safety Domain and these seven measures are not included in this
  table.
*** As discussed in section IV.I.2.c.(3) of the preamble of this
  proposed rule, we are proposing to remove AMI Payment, HF Payment, and
  PN Payment measures effective with the effective date of the FY 2019
  IPPS/LTCH PPS final rule. As a result, the previously finalized
  performance and baseline periods for these three measures are not
  included in this table.


   Previously Adopted Baseline and Performance Periods for the FY 2024
 Program Year: Person and Community Engagement; Clinical Outcomes; * and
                Efficiency and Cost Reduction Domains **
------------------------------------------------------------------------
           Domain                Baseline period     Performance period
------------------------------------------------------------------------
Person and Community
 Engagement:
     HCAHPS.........   January 1,    January 1,
                               2020-December 31,     2022-December 31,
                               2020.                 2022.
Clinical Outcomes: *
     Mortality (MORT-  July 1,       July 1,
     30-AMI, MORT-30-HF,       2014-June 30, 2017.   2019-June 30, 2022.
     MORT-30-COPD, MORT-30-
     CABG, MORT-30-PN
     (updated cohort).
     THA/TKA........   April 1,      April 1,
                               2014-March 31, 2017.  2019-March 31,
                                                     2022.
Efficiency and Cost
 Reduction: ***
     MSPB...........   January 1,    January 1,
                               2020-December 31,     2022-December 31,
                               2020.                 2022.
------------------------------------------------------------------------
* We are proposing, in section IV.I.4.a.(1) of the preamble of this
  proposed rule, to change the name of this domain from the Clinical
  Care domain to the Clinical Outcomes domain beginning with the FY 2020
  program year.
** As discussed in section IV.I.2.c.(1) and (2) of the preamble of this
  proposed rule, we are proposing to remove PC-01 and the NHSN measures
  (CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, MRSA
  Bacteremia) beginning with the FY 2021 program year and we are
  proposing to remove the PSI 90 effective with the effective date of
  the FY 2019 IPPS/LTCH PPS final rule. If finalized these proposals
  would leave no measures in the Safety domain. As a result, the Safety
  Domain and these seven measures are not included in this table.
*** As discussed in section IV.I.2.c.(3) of the preamble of this
  proposed rule, we are proposing to remove AMI Payment, HF Payment, and
  PN Payment measures effective with the effective date of the FY 2019
  IPPS/LTCH PPS final rule. As a result, the previously finalized
  performance and baseline periods for these three measures are not
  included in this table.

6. Previously Adopted and 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

[[Page 20424]]

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 53599 through 53605; 78 FR 50694 through 50699; and 
79 FR 50080 through 50081, respectively) for a more detailed discussion 
of the general scoring methodology used in the Hospital VBP Program.
b. Previously Adopted and Proposed Performance Standards for the FY 
2021 Program Year
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38263), we 
summarized the previously adopted performance standards for the FY 2021 
program year for the Clinical Care domain (proposed Clinical Outcome 
domain) measures (MORT-30-HF, MORT-30-AMI, MORT-30-COPD, THA/TKA, and 
MORT-30-PN (updated cohort)) and the Efficiency and Cost Reduction 
domain measure (MSPB). We note that the performance standards for the 
MSPB measure are based on performance period data; therefore, we are 
unable to provide numerical equivalents for the standards at this time. 
The previously adopted performance standards for the measures in the 
Clinical Care (proposed Clinical Outcome domain) and Efficiency and 
Cost Reduction domains for the FY 2021 program year are set out in the 
tables below.

 Previously Adopted Performance Standards for the FY 2021 Program Year:
  Clinical Outcomes [caret] and Efficiency and Cost Reduction Domains 
------------------------------------------------------------------------
                                   Achievement
     Measure short name             threshold             Benchmark
------------------------------------------------------------------------
                    Clinical Outcomes Domain [caret]*
------------------------------------------------------------------------
MORT-30-AMI.................  0.860355............  0.879714
MORT-30-HF..................  0.883803............  0.906144
MORT-30-PN (updated cohort).  0.836122............  0.870506
MORT-30-COPD................  0.923253............  0.938664
THA/TKA **..................  0.031157............  0.022418
------------------------------------------------------------------------
                  Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB **.....................  Median Medicare       Mean of the lowest
                               Spending per          decile Medicare
                               Beneficiary ratio     Spending per
                               across all            Beneficiary ratios
                               hospitals during      across all
                               the performance       hospitals during
                               period.               the performance
                                                     period.
------------------------------------------------------------------------
[caret] We are proposing, in section IV.I.4.a.(1) of the preamble of
  this proposed rule, to change the name of this domain from the
  Clinical Care domain to the Clinical Outcomes domain beginning with
  the FY 2020 program year.
 As discussed in section IV.I.2.c.(3) of the preamble of this proposed
  rule, we are proposing to remove the AMI Payment and HF Payment
  measures effective with the effective date of the FY 2019 IPPS/LTCH
  PPS final rule. As a result, the previously finalized performance
  standards for those measures are not included in this table.
* 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.
** Lower values represent better performance.

    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. 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.
    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 performance standards for the FY 2021 program year for the 
Person and Community Engagement domain. We note that the numerical 
values for the proposed performance standards displayed in this 
proposed rule represent estimates based on the most recently available 
data, and we intend to update the numerical values in the FY 2019 IPPS/
LTCH PPS final rule.

Proposed Performance Standards for the FY 2021 Program Year: Person and Community Engagement Domain 
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                     HCAHPS survey dimension                           Floor         threshold       Benchmark
                                                                     (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Communication with Nurses.......................................           55.75           79.05           87.27
Communication with Doctors......................................           56.94           80.11           88.17
Responsiveness of Hospital Staff................................           40.36           65.41           80.39
Communication about Medicines...................................           20.95           63.64           74.40
Hospital Cleanliness & Quietness................................           42.76           65.63           79.74
Discharge Information...........................................           68.87           87.49           92.18
Care Transition.................................................            6.65           51.68           63.24

[[Page 20425]]

 
Overall Rating of Hospital......................................           36.42           71.76           85.64
----------------------------------------------------------------------------------------------------------------
 The performance standards displayed in this table were calculated using one quarter (Q4) CY 2016
  data and three quarters (Q1, Q2, and Q3) CY 2017 data. We will update this table's performance standards using
  four quarters of CY 2017 data in the final rule.

    We are inviting public comments on these proposed performance 
standards for the FY 2021 program year.
c. Previously Adopted Performance Standards for Certain Measures for 
the FY 2022 Program Year
    We have adopted certain measures for the Clinical Care (proposed 
Clinical Outcome domain) 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 (proposed Clinical Outcome 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 
measure (MSPB). We note that the performance standards for the MSPB 
measure are based on performance 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 2022 Program Year
------------------------------------------------------------------------
                                   Achievement
     Measure short name             threshold             Benchmark
------------------------------------------------------------------------
                    Clinical Outcomes Domain [caret]*
------------------------------------------------------------------------
MORT-30-AMI.................  0.861793............  0.881305
MORT-30-HF..................  0.879869............  0.903608
MORT-30-PN (updated cohort).  0.836122............  0.870506
MORT-30-COPD................  0.920058............  0.936962
MORT-30-CABG [dagger].......  0.968210............  0.979000
THA/TKA **..................  0.029833............  0.021493
------------------------------------------------------------------------
                 Efficiency and Cost Reduction Domain #
------------------------------------------------------------------------
MSPB **.....................  Median Medicare       Mean of the lowest
                               Spending per          decile Medicare
                               Beneficiary ratio     Spending per
                               across all            Beneficiary ratios
                               hospitals during      across all
                               the performance       hospitals during
                               period.               the performance
                                                     period.
------------------------------------------------------------------------
[caret] We are proposing, in section IV.I.4.a.(1) of the preamble of
  this proposed rule, to change the name of this domain from the
  Clinical Care domain to the Clinical Outcomes domain beginning with
  the FY 2020 program year.
[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
  corrected this issue in the FY 2018 IPPS/LTCH PPS final rule, and the
  correct performance standards are displayed here in the table above.
* 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.
** Lower values represent better performance.
 As discussed in section IV.I.2.c.(3) of the preamble of this proposed
  rule, we are proposing to remove the AMI Payment, HF Payment, and PN
  Payment measures effective with the effective date of the FY 2019 IPPS/
  LTCH PPS final rule. As a result, the previously finalized performance
  standards for those three measures are not included in this table.

d. Previously Adopted Performance Standards for Certain Measures for 
the FY 2023 Program Year
    We have adopted certain measures for the Clinical Care (proposed 
Clinical Outcome domain) 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 2018 IPPS/LTCH PPS final rule (82 FR 38264 through 
38265), we adopted the following performance standards for the FY 2023 
program year for the Clinical Care domain (proposed Clinical Outcome 
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 measure (MSPB). In the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38264), we stated our intent to propose performance 
standards for the PSI 90 measure in this year's rulemaking. However, as 
discussed in section IV.I.2.c.(2) of the preamble of this proposed 
rule, we are proposing to remove the PSI 90 measure from the Hospital 
VBP Program effective with the effective date of the FY 2019 IPPS/LTCH 
PPS final rule. For this reason, we are not including proposed 
performance standards for this measure in this proposed rule. We note 
that the performance standards for the MSPB measure is based on 
performance 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.

[[Page 20426]]



  Previously Adopted Performance Standards for the FY 2023 Program Year
------------------------------------------------------------------------
                                   Achievement
     Measure short name             threshold             Benchmark
------------------------------------------------------------------------
                    Clinical Outcomes Domain [caret]*
------------------------------------------------------------------------
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
------------------------------------------------------------------------
                 Efficiency and Cost Reduction Domain #
------------------------------------------------------------------------
MSPB **.....................  Median Medicare       Mean of the lowest
                               Spending per          decile Medicare
                               Beneficiary ratio     Spending per
                               across all            Beneficiary ratios
                               hospitals during      across all
                               the performance       hospitals during
                               period.               the performance
                                                     period.
------------------------------------------------------------------------
[caret] We are proposing, in section IV.I.4.a.(1) of the preamble of
  this proposed rule, to change the name of this domain from the
  Clinical Care domain to the Clinical Outcomes domain beginning with
  the FY 2020 program year.
* 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.
** Lower values represent better performance.
# As discussed in section IV.I.2.c.(3) of the preamble of this proposed
  rule, we are proposing to remove the AMI Payment, HF Payment, and PN
  Payment measures effective with the effective date of the FY 2019 IPPS/
  LTCH PPS final rule. As a result, the previously finalized performance
  standards for those three measures are not included in this table.

e. Proposed Performance Standards for Certain Measures for the FY 2024 
Program Year
    We have adopted certain measures for the Clinical Care (proposed 
Clinical Outcome domain) 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 2024 program year for the Clinical Care domain (proposed Clinical 
Outcome domain) and the Efficiency and Cost Reduction domain. We note 
that the performance standards for the MSPB measure is 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 2024 Program Year
------------------------------------------------------------------------
                                   Achievement
     Measure short name             threshold             Benchmark
------------------------------------------------------------------------
                    Clinical Outcomes Domain [caret]*
------------------------------------------------------------------------
MORT-30-AMI.................  0.869247............  0.887868
MORT-30-HF..................  0.882308............  0.907733
MORT-30-PN (updated cohort).  0.840281............  0.872976
MORT-30-COPD................  0.916491............  0.934002
MORT-30-CABG................  0.969499............  0.980319
THA/TKA **..................  0.025396............  0.018159
------------------------------------------------------------------------
                  Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB **.....................  Median Medicare       Mean of the lowest
                               Spending per          decile Medicare
                               Beneficiary ratio     Spending per
                               across all            Beneficiary ratios
                               hospitals during      across all
                               the performance       hospitals during
                               period.               the performance
                                                     period.
------------------------------------------------------------------------
[caret] We are proposing, in section IV.I.4.a.(1) of the preamble of
  this proposed rule, to change the name of this domain from the
  Clinical Care domain to the Clinical Outcomes domain beginning with
  the FY 2020 program year.
* 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.
** Lower values represent better performance.

    We are inviting public comments on these proposed performance 
standards for the FY 2024 program year.

J. Hospital-Acquired Condition (HAC) Reduction Program

1. Background
    We refer readers to section V.I.1.a. of the preamble 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 preamble 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), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57011 through 
57026) and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38269 through 
38278). These policies describe the general framework for 
implementation of the HAC Reduction Program, including: (1) The 
relevant definitions applicable to

[[Page 20427]]

the program; (2) the payment adjustment under the program; (3) the 
measure selection process and conditions for the program, including a 
risk-adjustment and scoring methodology; (4) performance scoring; (5) 
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 (6) 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.
    By publicly reporting quality data, we strive to put patients first 
by ensuring they, along with their clinicians, are empowered to make 
decisions about their own healthcare using information aligned with 
meaningful quality measures. The HAC Reduction Program, together with 
the Hospital VBP Program and the Hospital Readmissions Reduction 
Program, represents a key component of the way that we bring quality 
measurement, transparency, and improvement together with value-based 
purchasing programs to the inpatient care setting. We have undertaken 
efforts to review the existing HAC Reduction Program measure set in the 
context of these other programs, to identify how to reduce costs and 
complexity across programs while continuing to incentivize improvement 
in the quality and value of care provided to patients. To that end, we 
have begun reviewing our programs' measures in accordance with the 
Meaningful Measures Initiative we described in section I.A.2. of the 
preamble of this proposed rule.
    As part of this review, we have taken a holistic approach to 
evaluating the appropriateness of the HAC Reduction Program's current 
measures in the context of the measures used in two other IPPS value-
based purchasing programs (that is, the Hospital VBP Program and the 
Hospital Readmissions Reduction Program), as well as in the Hospital 
IQR Program. We view the three value-based purchasing programs together 
as a collective set of hospital value-based purchasing programs. 
Specifically, we believe the goals of the three value-based purchasing 
programs (the Hospital VBP, Hospital Readmissions Reduction, and HAC 
Reduction Programs) and the measures used in these programs together 
cover the Meaningful Measures Initiative quality priorities of making 
care safer, strengthening person and family engagement, promoting 
coordination of care, promoting effective prevention and treatment, and 
making care affordable--but that the programs should not add 
unnecessary complexity or costs associated with duplicative measures 
across programs. The Hospital Readmissions Reduction Program focuses on 
care coordination measures, which address the quality priority of 
promoting effective communication and care coordination within the 
Meaningful Measures Initiative. The HAC Reduction Program focuses on 
patient safety measures, which address the Meaningful Measures 
Initiative quality priority of making care safer by reducing harm 
caused in the delivery of care. As part of this holistic quality 
payment program strategy, we believe the Hospital VBP Program should 
focus on the measurement priorities not covered by the Hospital 
Readmissions Reduction Program or the HAC Reduction Program. The 
Hospital VBP Program would continue to focus on measures related to: 
(1) The clinical outcomes, such as mortality and complications (which 
address the Meaningful Measures Initiative quality priority of 
promoting effective treatment); (2) patient and caregiver experience, 
as measured using the HCAHPS survey (which addresses the Meaningful 
Measures Initiative quality priority of strengthening person and family 
engagement as partners in their care); and (3) healthcare costs, as 
measured using the Medicare Spending per Beneficiary measure (which 
addresses the Meaningful Measures Initiative priority of making care 
affordable). We believe this framework will allow hospitals and 
patients to continue to obtain meaningful information about hospital 
performance and incentivize quality improvement while also streamlining 
the measure sets to reduce duplicative measures and program complexity 
so that the costs to hospitals associated with participating in these 
programs does not outweigh the benefits of improving beneficiary care.
    As previously stated, the HAC Reduction Program focuses on making 
care safer by reducing harm caused in the delivery of care. Measures in 
the HAC Reduction Program, generally represent ``never events'' \270\ 
and often, if not always, assess preventable conditions. By including 
these measures in the Program, we seek to encourage hospitals to 
address the serious harm caused by these adverse events and to reduce 
them. Therefore, after thoughtful review, we have determined that the 
Patient Safety and Adverse Events Composite (PSI 90) and the Centers 
for Disease Control and Prevention (CDC) National Healthcare Safety 
Network (NHSN) Healthcare-Associated Infection (HAI) measures (NHSN HAI 
measures) are most appropriately included as part of the HAC Reduction 
Program, and we are proposing to remove these measures from the 
Hospital IQR and VBP Programs. We believe this framework will allow 
hospitals and patients to continue to obtain meaningful information 
about hospital performance while streamlining the measure sets.
---------------------------------------------------------------------------

    \270\ ``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 7 categories: surgical, product or device, patient protection, 
care management, environmental, radiologic, and criminal.'' Never 
Events, Available at: https://psnet.ahrq.gov/primers/primer/3/never-events.
---------------------------------------------------------------------------

    The HAC Reduction Program has historically relied on Hospital IQR 
Program processes for administrative support; we therefore are 
proposing HAC Reduction Program-specific healthcare-associated 
infection measure data collection and validation requirements, and 
scoring associated with data completeness, timeliness, and accuracy. 
Contingent upon the Hospital IQR Program finalizing its proposal to 
remove NHSN HAI measures from its program (section VIII.A.5.b.(2)(b) of 
the preamble of this proposed rule), the HAC Reduction Program is 
proposing to formally adopt analogous processes and independently 
manage these administrative processes to receive CDC NHSN data and 
begin validation seamlessly with January 1, 2019 infectious events. We 
note that if the Hospital IQR Program does not finalize its proposal to 
remove NHSN HAI measures from its program, then the HAC Reduction 
Program would subsequently not finalize its proposals to manage the 
associated administrative processes.
    In this proposed rule, for the HAC Reduction Program, we are 
proposing to: (1) Establish administrative policies for the HAC 
Reduction Program to collect, validate, and publicly report quality 
measure data independently instead of conducting these activities 
through the Hospital IQR Program; (2) adjust the scoring methodology by 
removing domains and assigning equal weighting to each measure for 
which a hospital has a measure score in order to improve fairness 
across hospital types in the Program; (3) establish the data collection 
period for the FY 2021 Program Year; and (4) solicit

[[Page 20428]]

stakeholder feedback regarding the potential future inclusion of 
additional measures, including eCQMs.
2. Accounting for Social Risk Factors in the HAC Reduction Program
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38273 through 
38276), we discussed the importance of improving beneficiary outcomes 
including reducing health disparities. We also discussed our commitment 
to ensuring that medically complex patients, as well as those with 
social risk factors, receive excellent care. We discussed how studies 
show that social risk factors, such as being near or below the poverty 
level as determined by HHS, belonging to a racial or ethnic minority 
group, or living with a disability, can be associated with poor health 
outcomes and how some of this disparity is related to the quality of 
health care.\271\ Among our core objectives, we aim to improve health 
outcomes, attain health equity for all beneficiaries, and ensure that 
complex patients as well as those with social risk factors receive 
excellent care. Within this context, reports by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) and the National 
Academy of Medicine have examined the influence of social risk factors 
in CMS value-based purchasing programs.\272\ As we noted in the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38404), ASPE's report to Congress found 
that, in the context of value-based purchasing programs, dual 
eligibility was the most powerful predictor of poor health care 
outcomes among those social risk factors that they examined and tested. 
In addition, as we noted in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38274), the National Quality Forum (NQF) undertook 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.\273\ The 
trial period ended in April 2017 and a final report is available at: 
http://www.qualityforum.org/SES_Trial_Period.aspx. The trial concluded 
that ``measures with a conceptual basis for adjustment generally did 
not demonstrate an empirical relationship'' between social risk factors 
and the outcomes measured. This discrepancy may be explained in part by 
the methods used for adjustment and the limited availability of robust 
data on social risk factors. NQF has extended the socioeconomic status 
(SES) trial,\274\ allowing further examination of social risk factors 
in outcome measures.
---------------------------------------------------------------------------

    \271\ See, for example United States Department of Health and 
Human Services. ``Healthy People 2020: Disparities. 2014.'' 
Available at: 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.
    \272\ 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.
    \273\ Available at: http://www.qualityforum.org/SES_Trial_Period.aspx.
    \274\ Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86357.
---------------------------------------------------------------------------

    In the FY 2018 and CY 2018 proposed rules for our quality reporting 
and value-based purchasing programs, we solicited feedback on which 
social risk factors provide the most valuable information to 
stakeholders and the methodology for illuminating differences in 
outcomes rates among patient groups within a hospital or provider that 
would also allow for a comparison of those differences, or disparities, 
across providers. Feedback we received across our quality reporting 
programs included encouraging CMS to explore whether factors that could 
be used to stratify or risk adjust the measures (beyond dual 
eligibility); considering the full range of differences in patient 
backgrounds that might affect outcomes; exploring risk adjustment 
approaches; and offering careful consideration of what type of 
information display would be most useful to the public.
    We also sought public comment on confidential reporting and future 
public reporting of some of our measures stratified by patient dual 
eligibility. In general, commenters 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, and empower consumers to make informed decisions about 
health care. Commenters encouraged us to stratify measures by other 
social risk factors such as age, income, and educational attainment. 
With regard to value-based purchasing programs, commenters also 
cautioned to balance fair and equitable payment while avoiding payment 
penalties that mask health disparities or discouraging the provision of 
care to more medically complex patients. Commenters also noted that 
value-based purchasing program measure selection, domain weighting, 
performance scoring, and payment methodology must account for social 
risk.
    As a next step, CMS is considering options to improve health 
disparities among patient groups within and across hospitals by 
increasing the transparency of disparities as shown by quality 
measures. We also are considering how this work applies to other CMS 
quality programs in the future. We refer readers to the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38403 through 38409) for more details, where 
we discuss the potential stratification of certain Hospital IQR Program 
outcome measures. Furthermore, we continue to consider options to 
address equity and disparities in our value-based purchasing programs.
    We plan to continue working with ASPE, the public, and other key 
stakeholders on this important issue to identify policy solutions that 
achieve the goals of attaining health equity for all beneficiaries and 
minimizing unintended consequences.
3. Previously-Adopted Measures for FY 2019 and Subsequent Years
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57013 through 
57020), we finalized the Patient Safety and Adverse Events Composite 
(PSI 90) \275\ measure for use in the FY 2018 program and subsequent 
years for Domain 1. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50717), we finalized the use of 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. 
Currently, the Program utilizes five NHSN measures: CAUTI, CDI, CLABSI, 
Colon and Abdominal Hysterectomy SSI, and MRSA Bacteremia. These 
previously finalized measures, with their full measure names, are shown 
in the table below.
---------------------------------------------------------------------------

    \275\ We note that measure stewardship of the recalibrated 
version of the Patient Safety and Adverse Events Composite (PSI 90) 
is transitioning from AHRQ to CMS and, as part of the transition, 
the measure will be referred to as the CMS Recalibrated Patient 
Safety Indicators and Adverse Events Composite (CMS PSI 90) when it 
is used in CMS quality programs.

[[Page 20429]]



               HAC Reduction Program Measures for FY 2019
------------------------------------------------------------------------
           Short name                  Measure name           NQF No.
------------------------------------------------------------------------
Domain 1:
    CMS 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          American College of                0753
     Hysterectomy 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.
------------------------------------------------------------------------

4. Administrative Policies for the HAC Reduction Program for FY 2019 
and Subsequent Years
a. Measure Specifications
    As we stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 
through 53505) for the Hospital IQR Program and subsequently finalized 
for the HAC Reduction Program in the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50100 through 50101), we will use a subregulatory process to 
make nonsubstantive updates to measures used for the HAC Reduction 
Program and to use rulemaking to adopt substantive updates to measures. 
As with the Hospital IQR Program, we will determine what constitutes a 
substantive versus nonsubstantive change on a case-by-case basis. As we 
have stated in past rulemaking (79 FR 50100), examples of 
nonsubstantive changes to measures might include updated diagnosis or 
procedure codes, medication updates for categories of medications, 
broadening of age ranges, and exclusions for a measure (such as the 
addition of a hospice exclusion to the 30-day mortality measures). We 
believe nonsubstantive changes may also include nonsubstantive updates 
to NQF-endorsed measures based upon changes to the measures' underlying 
clinical guidelines.
    We will continue to use rulemaking to adopt substantive updates, 
and a subregulatory process to make nonsubstantive updates, to measures 
we have adopted for the HAC Reduction Program. As stated in past rules 
(78 FR 50776), examples of changes that we might consider to be 
substantive would be those in which the changes are so significant that 
the measure is no longer the same measure, or when a standard of 
performance assessed by a measure becomes more stringent (for example, 
changes in acceptable timing of medication, procedure/process, or test 
administration). Another example of a substantive change would be where 
the NQF has extended its endorsement of a previously endorsed measure 
to a new setting, such as extending a measure from the inpatient 
setting to hospice. These policies regarding what is considered 
substantive versus nonsubstantive would apply to all measures in the 
HAC Reduction Program.
    We also note that the NQF process incorporates an opportunity for 
public comment and engagement in the measure maintenance process, which 
is available through its website at: http://www.qualityforum.org/projectlisting.aspx. We believe this policy adequately balances our 
need to incorporate updates to HAC Reduction Program measures in the 
most expeditious manner possible while preserving the public's ability 
to comment on updates that so fundamentally change an endorsed measure 
that it is no longer the same measure that we originally adopted.
    Technical specifications for the CMS PSI 90 in Domain 1 can be 
found on the QualityNet website at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetBasic&cid=1228695355425. Technical specifications for the NHSN HAI measures in Domain 2 
can be found at CDC's NHSN website at: http://www.cdc.gov/nhsn/acute-care-hospital/index.html. Both websites provide measure updates and 
other information necessary to guide hospitals participating in the 
collection of HAC Reduction Program data.
b. Proposed Data Collection Beginning CY 2019
    We are proposing to adopt data collection processes for the HAC 
Reduction Program to receive CDC NHSN data beginning with January 1, 
2019 infection events to correspond with the Hospital IQR Program's 
calendar year reporting period and maintain the HAC Reduction Program's 
annual performance period start date. All reporting requirements, 
including quarterly frequency, CDC collection system, and deadlines 
would not change from current Hospital IQR Program requirements to aid 
continued hospital reporting through clear and consistent requirements. 
This proposed start date aligns with the effective date of the Hospital 
IQR Program's proposed removal of these measures beginning with CY 2019 
reporting period/FY 2021 payment determination as discussed in section 
VIII.A.5.b.(2)(b) of the preamble of this rule and should allow for a 
seamless transition.
    The HAC Reduction Program identifies the worst-performing quartile 
of hospitals by calculating a Total HAC Score derived from the CMS PSI 
90 and NHSN HAI measures, which require that we collect claims-based 
and chart-abstracted measures data, respectively. No additional 
collection mechanisms are required for the CMS PSI 90 measure because 
it is a claims-based measure calculated using data submitted to CMS by 
hospitals for Medicare payment, and therefore imposes no additional 
administrative or reporting requirements on participating hospitals. 
For the NHSN HAI measures, if the Hospital IQR Program finalizes its 
proposal to remove them from its program, we are proposing to adopt the 
HAI data collection process established in the Hospital IQR Program. We 
refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50190), 
where we finalized the CDC NHSN as the mechanism to submit data on the 
NHSN HAI measures to the Hospital IQR Program, and to the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50723), where the HAC Reduction Program 
stated that it would obtain HAI measure results that hospitals 
submitted to the CDC NHSN for the Hospital IQR Program. Hospitals would 
continue to submit data through the CDC NHSN portal located by 
selecting ``NHSN Reporting'' after

[[Page 20430]]

signing in at: https://sams.cdc.gov, and the HAC Reduction Program 
would receive the NHSN data directly from the CDC instead of through 
the Hospital IQR Program as an intermediary.
    We also are proposing to adopt the Hospital IQR Program's exception 
policy to reporting and data submission requirements for the CAUTI, 
CLABSI, and Colon and Abdominal Hysterectomy SSI measures. As noted in 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53539) and in FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50821 through 50822) for the Hospital IQR Program 
and in FY 2015 IPPS/LTCH PPS final rule (79 FR 50096) for the HAC 
Reduction Program, CMS acknowledges that some hospitals may not have 
locations that meet the NHSN criteria for CLABSI or CAUTI reporting and 
that some hospitals may perform so few procedures requiring 
surveillance under the Colon and Abdominal Hysterectomy SSI measure 
that the data may not be meaningful for public reporting nor 
sufficiently reliable to be utilized for a program year. If a hospital 
does not have adequate locations or procedures, it should submit the 
Measure Exception Form to the HAC Reduction Program beginning on 
January 1, 2019. The IPPS Quality Reporting Programs Measure Exception 
Form is located using the link located on the QualityNet website under 
the Hospitals - Inpatient > Hospital Inpatient Quality Reporting 
Program tab at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228760487021. As has been the case under the Hospital IQR Program, hospitals 
seeking an exception would submit this form at least annually to be 
considered.
    Beginning in FY 2019, the HAC Reduction Program would provide the 
same NHSN HAI measures quarterly reports that stakeholders are 
accustomed to under the Hospital IQR Program. However, some hospitals 
that elected not to participate in the Hospital IQR Program may be 
unfamiliar with them. These reports, provided via the QualityNet Secure 
Portal at: https://cportal.qualitynet.org/QNet/pgm_select.jsp, provide 
hospitals with their facility's quarterly measure data as well as 
facility-, State- and national-level results for the measures. To 
access their reports, hospitals must register for a QualityNet Secure 
Portal Account. We anticipate the transition to occur without 
interruption, with the only change to stakeholders being that they 
would receive reports from both the HAC Reduction Program and the 
Hospital IQR Program for the respective measures adopted in each 
program.
c. Review and Correction of Claims Data Used in the HAC Reduction 
Program for FY 2019 and Subsequent Years
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50726 through 
50727), we detailed the process for the review and correction of 
claims-based data, and we are not proposing any changes. We calculate 
the measure in Domain 1 using a static snapshot (data extract) taken 
after the 90-day period following the last date of discharge used in 
the applicable period. We create data extracts using claims in CMS' 
Common Working File (CWF) 90 days after the last discharge date in the 
applicable period which we will use for the calculations. For example, 
if the last discharge date in the applicable period for a measure is 
June 30, 2018, we would create the data extract on September 30, 2018, 
and use those data to calculate the claims based measures for that 
applicable period.
    Hospitals are not able to submit corrections to the underlying 
claims snapshot used for the Domain 1 measure calculations after the 
extract date, and are not be able to add claims to this data set. 
Therefore, hospitals are encouraged to ensure that their claims are 
accurate prior to the snapshot date. We consider hospitals' claims data 
to be complete for purposes of calculating the Domain 1 for the HAC 
Reduction Program after the 90-day period following the last date of 
discharge used in the applicable period.
    For more information, we refer readers to FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50726 through 50727). We reiterate that under this 
process, hospitals retain the ability to submit new claims and 
corrections to submitted claims for payment purposes in line with CMS' 
timely claims filing policies, but the administrative claims data used 
to calculate the Domain 1 measure and the resulting Domain Score 
reflect the state of the claims at the time of extraction from CMS' 
CWF.
    We are not proposing any change to our current administrative 
policy regarding the submission, review, and correction of claims data.
d. Review and Correction of Chart-Abstracted NHSN HAI Data Used in the 
HAC Reduction Program for FY 2019 and Subsequent Years
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50726), we stated 
that the HAC Reduction Program would use the same process as the 
Hospital IQR Program for hospitals to submit, review, and correct data 
for chart-abstracted NHSN HAI measures. In the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38270 through 38271), we clarified that hospitals had 
an opportunity to submit, review, and correct any of the chart-
abstracted information for the full 4 \1/2\ months after the end of the 
reporting quarter. We also noted that for the purposes of fulfilling 
CMS quality measurement reporting requirements, each facility's data 
must be entered into NHSN no later than 4 \1/2\ months after the end of 
the reporting quarter.
    For a detailed description of the process, we refer readers to FY 
2014 IPPS/LTCH PPS final rule (78 FR 50726) where we explained that 
hospitals can begin submitting data on the first discharge day of any 
reporting quarter. Hospitals are encouraged to submit data early in the 
submission schedule not only to allow them sufficient time to identify 
errors and resubmit data before the quarterly submission deadline, but 
also to identify opportunities for continued improvement. Users may 
view and make corrections to the data that they submit starting 
immediately following submission. The data are populated into reports 
that are updated immediately with all data that have been submitted 
successfully. We believe that 4\1/2\ months is sufficient time for 
hospitals to submit, review, and make corrections to their HAI data. We 
also balance the correction needs of hospitals with the need to 
publicly report and refresh measure information on Hospital Compare in 
a timely manner. Historically, CMS has generally refreshed HAI data on 
a quarterly basis on Hospital Compare in the Hospital IQR Program.
    We wish to clarify that this HAI review and correction process is 
intended to permit hospitals review of measure performance and data 
submission feedback. Hospitals can use the NHSN system during the 
quarterly data submission period to identify any errors made in the 
reporting of a patient's specific ``infection event,'' the denominator 
(that is, overall admissions data), and other NHSN protocol data used 
to calculate measure results before the quarterly submission deadline. 
The HAI review and correction process is different than and occurs 
prior to the annual Scoring Calculations Review and Correction Process, 
which is intended to ensure the accurate calculation of measure scoring 
used for payment, and is discussed in section IV.J.4.g. of the preamble 
of this proposed rule.
    We are not proposing any changes to our current administrative 
policy regarding the submission, review, and correction of chart-
abstracted HAI data.

[[Page 20431]]

e. Proposed Changes to Existing Validation Processes
    As discussed in above in section IV.J.1. of the preamble of this 
proposed rule, we are proposing to adopt processes to validate the NHSN 
HAI measure data used in the HAC Reduction Program if the Hospital IQR 
Program finalizes its proposals to remove NHSN HAI measures from its 
program. While the HAC Reduction Program cannot adopt the Hospital IQR 
Program's process as is for various reasons as discussed below, we 
intend for the HAC Reduction Program's processes to reflect, to the 
greatest extent possible, the current processes previously established 
the Hospital IQR Program. We refer readers to the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53539 through 53553), 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), the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49710 through 49712), the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57173 through 57181), and the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38398 through 38403) for detailed information on the Hospital IQR 
Program's validation processes.
    Currently, CMS estimates accuracy for the hospital-reported data 
submitted to the clinical warehouse and data submitted to NHSN as 
reproduced by a trained abstractor using a standardized NHSN HAI 
measure abstraction protocol created by CDC and CMS and posted on the 
QualityNet website at: https://www.qualitynet.org/dcs/ContentServer?cid=%201228776288808&pagename=QnetPublic%2FPage%2FQnetTier3&c=Page. We are proposing to adopt the validation processes into the 
HAC Reduction Program as previously established by the Hospital IQR 
Program (with some exceptions as discussed below) in this section as 
follows: Section IV.J.4.e.(1) of the preamble of this proposed rule 
(proposed measures subject to validation); section IV.J.4.e.(2) of the 
preamble of this proposed rule (proposed provider selection); section 
(IV.J.4.e.(3) of the preamble of this proposed rule (proposed targeting 
criteria); section IV.J.4.e.(4) of the preamble of this proposed rule 
(proposed calculation of the confidence period); section IV.J.4.e.(5) 
of the preamble of this proposed rule (proposed educational review 
process); section IV.J.4.e.(6) of the preamble of this proposed rule 
(proposed application of validation penalty); and section IV.J.4.e.(7) 
of the preamble of this proposed rule (proposed validation period).
(1) Proposed Measures Subject to Validation
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50828 through 50832) 
and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50264 through 50265), 
the Hospital IQR Program identified the following chart-abstracted NHSN 
HAI measures submitted via NHSN as being subject to validation: CAUTI, 
CDI, CLABSI, Colon and Abdominal Hysterectomy SSI, and MRSA Bacteremia.
    In this proposed rule, we are proposing that chart-abstracted NHSN 
HAI measures submitted via NHSN would be subject to validation in the 
HAC Reduction Program beginning with the Q3 2019 discharges for FY 
2022. As stated in section IV.J.3. of the preamble of this proposed 
rule, above, and as finalized in the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50717), the HAC Reduction Program currently includes five NHSN 
HAI measures: CAUTI, CDI, CLABSI, Colon and Abdominal Hysterectomy SSI, 
and MRSA Bacteremia.
    We are inviting public comment on our proposal.
(2) Proposed Provider Selection
    For chart-abstracted data validation in the Hospital IQR Program, 
CMS currently performs a random and targeted selection of participating 
hospitals on an annual basis, as initially set out in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50833 through 50834). For example, in 
December of 2017, CMS randomly selected 400 hospitals for validation 
for the FY 2020 payment determination. In April/May of 2018, an 
additional targeted provider sample of up to 200 hospitals are selected 
(78 FR 50833 through 50834). We intend to mirror these policies for the 
HAC Reduction Program, and thus, we are proposing annual random 
selection of 400 hospitals and the annual targeted selection of 200 
hospitals using the targeting criteria proposed below in section 
IV.J.4.e.(3) of the preamble of this proposed rule.
    Unlike the Hospital IQR Program, which includes only hospitals with 
active Notices of Participation (77 FR 53536), we intend to include all 
subsection (d) hospitals in these proposed validation procedures, since 
all subsection (d) hospitals are subject to the HAC Reduction Program. 
Therefore, for the HAC Reduction Program, we are proposing to include 
all subsection (d) hospitals in the provider sample for validation 
beginning with the Q3 2019 discharges for FY 2022. We believe this 
would be better representative of hospitals impacted by the Program. We 
note that for the FY 2018 HAC Reduction Program, which uses CY 2015 and 
2016 NHSN HAI data, 44 hospitals were subject to the HAC Reduction 
Program, but chose not to participate in the Hospital IQR Program. 
These hospitals would be included in the validation process.
    We are inviting public comment on our proposal.
(3) Proposed Targeting Criteria
    As stated above, the Hospital IQR Program currently performs a 
random and targeted selection of hospitals for validation on an annual 
basis (78 FR 50833 through 50834). In the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50227 through 50229), the Hospital IQR finalized that the 
targeted selection will include all hospitals that failed validation 
the previous year. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53552 
through 53553), the Hospital IQR Program finalized additional criteria 
for selecting targeted hospitals: Any hospital with abnormal or 
conflicting data patterns; any hospital with rapidly changing data 
patterns; any hospital that submits data to NHSN after the Hospital IQR 
Program data submission deadline has passed; any hospital that joined 
the Hospital IQR Program within the previous 3 years, and which has not 
been previously validated; any hospital that has not been randomly 
selected for validation in any of the previous 3 years; and any 
hospital that passed validation in the previous year, but had a two-
tailed confidence interval that included 75 percent. In the FY 2014 
IPPS/LTCH PPS final rule, the Hospital IQR Program expanded its 
targeting criteria to include any hospital which failed to report to 
NHSN at least half of actual HAI events detected as determined during 
the previous year's validation effort. We intend to propose similar 
policies for the HAC Reduction Program.
    Therefore, we are proposing the following targeting criteria for 
the HAC Reduction Program beginning with the Q3 2019 discharges for FY 
2022:
     Any hospital that failed validation the previous year;
     Any hospital that submits data to NHSN after the HAC 
Reduction Program data submission deadline has passed;
     Any hospital that not been randomly selected for 
validation in the past 3 years;
     Any hospital that passed validation in the previous year, 
but had a two-

[[Page 20432]]

tailed confidence interval that included 75 percent; \276\ and
---------------------------------------------------------------------------

    \276\ We will devise a two-tailed confidence interval formula 
using only NHSN HAI measures for the HAC Reduction Program. This 
will be posted to the QualityNet website.
---------------------------------------------------------------------------

     Any hospital which failed to report to NHSN at least half 
of actual HAI events detected as determined during the previous year's 
validation effort.
    We are inviting public comment on our proposals.
(4) Proposed Calculation of the Confidence Interval
    The Hospital IQR Program scores hospitals based on an agreement 
rate between hospital-reported infections compared to events identified 
as infections by a trained CMS abstractor using a standardized protocol 
(77 FR 53548). As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53550 through 53551), the Hospital IQR Program uses the upper bound 
of a two-tailed 90 percent confidence interval around the combined 
clinical process of care and HAI scores to determine if a hospital 
passes or fails validation; if this number is greater than or equal to 
75 percent, then the hospital passes validation.
    We believe that a similar computation of the confidence interval is 
appropriate for the HAC Reduction Program, but that it include only the 
NHSN HAI measures and not the clinical process of care measures, which 
are not a part of the Program's measure set. Therefore, we are 
proposing that for the HAC Reduction Program beginning in FY 2022: (1) 
We would score hospitals based on an agreement rate between hospital-
reported infections compared to events identified as infections by a 
trained CMS abstractor using a standardized protocol; (2) we would 
compute a confidence interval; (3) if the upper bound of this 
confidence interval is 75 percent or higher, the hospital would pass 
the HAC Reduction Program validation requirement; and (4) if the upper 
bound is below 75 percent, the hospital would fail the HAC Reduction 
Program validation requirement.
    We are inviting public comment on our proposals.
(5) Proposed Educational Review Process
    Under the Hospital IQR Program, within 30 days of validation 
results being posted on the QualityNet Secure Portal at: https://cportal.qualitynet.org/QNet/pgm_select.jsp, if a hospital has a 
question or needs further clarification on a particular outcome, the 
hospital may request an educational review (82 FR 38402 through 38403). 
Furthermore, if an educational review that is requested for any of the 
first three quarters of validation yields incorrect CMS validation 
results for chart-abstracted measures, the corrected quarterly score 
will be used to compute the final confidence interval (82 FR 38402 
through 38403).
    We plan to have similar procedures under the HAC Reduction Program. 
Therefore, for the HAC Reduction Program beginning with the Q3 2019 
data validation, we are proposing to have an educational review 
process, such that hospitals selected for validation would have a 30-
day period following the receipt of quarterly validation results to 
seek educational review. During this 30-day period, hospitals may 
review, seek clarification, and potentially identify a CMS validation 
error. In addition, like the Hospital IQR Program, we are proposing 
that if an educational review is timely requested for any of the first 
three quarters and the review yields an incorrect CMS validation 
result, the corrected quarterly score would be used to compute the 
final confidence interval. Unlike the Hospital IQR Program educational 
review process (82 FR 38402), we are also proposing that if an 
educational review is timely requested and an error is identified in 
the 4th quarter of review, we would use the corrected quarterly score 
to compute the final confidence interval.
    We are inviting public comment on our proposals.
(6) Proposed Application of Validation Penalty
    Currently, under the Hospital IQR Program, we randomly assign half 
of the hospitals selected for validation to submit CLABSI and CAUTI 
Validation Templates and the other half of hospitals to submit MRSA and 
CDI Validation Templates (78 FR 50826 through 50834). CMS selects up to 
four candidate NHSN HAI cases per hospital from each of the assigned 
Validation Templates (79 FR 50263 through 50265). CMS also selects up 
to two candidate Colon and Abdominal Hysterectomy SSI cases from 
Medicare claims data for patients who had colon surgeries or abdominal 
hysterectomies that appear suspicious of infection (78 FR 50826 through 
50834). The Hospital IQR Program applies a full payment reduction if a 
hospital fails to meet any part of the validation process (75 FR 50219 
through 50220; 81 FR 57180).
    For the HAC Reduction Program, if a hospital does not meet the 
overall validation requirement, we are proposing to penalize hospitals 
that fail validation by assigning the maximum Winsorized z-score only 
for the set of measures CMS validated. For example, if a hospital was 
in the half selected to submit CLABSI and CAUTI Validation Templates 
but failed the validation, we are proposing that hospital receive the 
maximum Winsorized z-score for CLABSI, CAUTI, and Colon and Abdominal 
Hysterectomy SSI. Although it would better align with the Hospital IQR 
Program's current ``all or nothing'' approach (75 FR 50219 through 
50220; 81 FR 57180) to penalize hospitals by assigning the maximum 
Winsorized z-scores for the entire domain, we believe that our chosen 
approach would be fairer to hospitals and would lessen the likelihood 
of their automatically ranking in the worst-performing quartile based 
on validation results. Furthermore, we believe our proposed approach 
better aligns with the current HAC Reduction Program policy of 
assigning the maximum Winsorized z-score if hospitals do not submit 
data to NHSN for a given NHSN HAI measure (81 FR 57013).
(7) Proposed Validation Period
    The Hospital IQR Program currently uses a calendar year reporting 
period for NHSN HAI measures (76 FR 51644). For example, the FY 2020 
measure reporting quarters include Q1 2018, Q2 2018, Q3 2018, and Q4 
2018. Under the Hospital IQR Program, FY 2020 data validation consists 
of the following quarters: Q3 2017, Q4 2017, Q1 2018, and Q2 2018, the 
Hospital IQR Program schedule is available on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?cid=%201228776288808&pagename=QnetPublic%2FPage%2FQnetTier3&c=Page. Currently, the HAC Reduction Program utilizes NHSN HAI data 
from two calendar years to calculate measure results. For example, the 
FY 2021 measure reporting quarters include Q1 2018 through Q4 2019.
    When determining the proposed validation period for the HAC 
Reduction Program, we considered the performance and validation cycles 
currently in place under the Hospital IQR Program, and we considered 
key public reporting dates for the HAC Reduction Program. HAC Reduction 
Program scores must be calculated in time for hospital specific reports 
(HSRs) to be issued annually, usually in July, and the 30-day Scoring 
Calculations Review and Correction period of the HSRs serves as the 
preview period for Hospital Compare. Then, HAC Reduction Program data 
published on Hospital Compare is refreshed annually as soon as feasible 
following the review period.

[[Page 20433]]

    After consideration, we are proposing that the HAC Reduction 
Program's performance period would remain 2 calendar years and that the 
validation period would include the four middle quarters in the HAC 
Reduction Program performance period (that is, third quarter through 
second quarter). This approach aligns with current the HAC Reduction 
Program performance period, it also aligns with current NHSN HAI 
validation quarters, and because we would continue to collect eight 
quarters of measure data, we anticipate no impact on the reliability of 
NHSN HAI results.
    Because our validation sample of hospitals is selected annually and 
because of the time needed to build the required infrastructure, we 
believe the earliest opportunity to seamlessly begin this work under 
the HAC Reduction Program is Q3 2019. Therefore, we are proposing that 
the HAC Reduction Program would begin validation of NHSN HAI measures 
data with July 2019 infection event data. The proposed commencement of 
validation, along with key validation dates, is shown in the table 
below.

                            Proposed Validation Period for the HAC Reduction Program
                                         [* Dates are subject to change]
----------------------------------------------------------------------------------------------------------------
                                   Current NHSN    Current NHSN                   Estimated date     Estimated
  Discharge quarters by fiscal    HAI submission  HAI validation  Estimated CDAC  records due to    validation
            year (FY)               deadline *      templates *   record request       CDAC         completion
----------------------------------------------------------------------------------------------------------------
FY 2022:
    Q1 2019.....................      08/15/2019
    Q2 2019.....................      11/15/2019
    Q3 2019[caret]..............      02/15/2020      02/01/2020      02/28/2020      03/30/2020      06/15/2020
    Q4 2019[caret]..............      05/15/2020      05/01/2020      05/30/2020      06/29/2020      09/15/2020
    Q1 2020[caret]..............      08/15/2020      08/01/2020      08/30/2020      09/29/2020      12/15/2020
    Q2 2020[caret]..............      11/15/2020      11/01/2020      11/29/2020      12/29/2020      03/15/2021
    Q3 2020.....................      02/15/2021
    Q4 2020.....................      05/15/2021
FY 2023:
    Q1 2020.....................      08/15/2020
    Q2 2020.....................      11/15/2020
    Q3 2020[caret]..............      02/15/2021      02/01/2021      02/28/2021      03/30/2021      06/15/2021
    Q4 2020[caret]..............      05/15/2021      05/01/2021      05/30/2021      06/29/2021      09/15/2021
    Q1 2021[caret]..............      08/15/2021      08/01/2021      08/30/2021      09/29/2021      12/15/2021
    Q2 2021[caret]..............      11/15/2021      11/01/2021      11/29/2021      12/29/2021      03/15/2022
    Q3 2021.....................      02/15/2022
    Q4 2021.....................      05/15/2022
----------------------------------------------------------------------------------------------------------------
Bolded rows with dates in each column, denoted with the [caret] symbol next to the date in the Discharge Quarter
  by Fiscal Year (FY) column, indicate the validation cycle for the FY.

    To maintain symmetry with the current Hospital IQR Program 
validation schedule as set forth on QualityNet at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1140537256076, we are proposing that for hospitals selected for validation, the 
NHSN HAI validation templates would be due before the HAC Reduction 
Program NHSN HAI data submission deadlines. To the greatest extent 
possible, we are proposing to keep the processes the same as they are 
currently implemented in the Hospital IQR Program. Because these 
deadlines would function in the same manner as the current policy under 
the Hospital IQR Program, we expect that most providers are familiar 
with this process. For more information, we refer readers to the Chart-
Abstracted Data Validation Resources information available at: https://www.qualitynet.org/dcs/ContentServer?cid=1140537256076&pagename=QnetPublic%2FPage%2FQnetTier3&c=Page.
    We are inviting public comment regarding our validation proposals.
f. Proposed Data Accuracy and Completeness Acknowledgement (DACA)
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53554) for DACA requirements previously adopted by the Hospital IQR 
Program. We are proposing that if the Hospital IQR Program finalizes 
its proposal to remove NHSN HAI measures from its program, then the HAC 
Reduction Program would adopt this same process. Hospitals would have 
to electronically acknowledge the data submitted are accurate and 
complete to the best of their knowledge. Hospitals would be required to 
complete and sign the DACA on an annual basis via the QualityNet Secure 
Portal: https://cportal.qualitynet.org/QNet/pgm_select.jsp. The 
submission period for signing and completing the DACA is April 1 
through May 15, with respect to the time period of January 1 through 
December 31 of the preceding year. The initial HAC Reduction Program 
proposed annual DACA signing and completing period would be April 1 
through May 15, 2020 for calendar year 2019 data.
    We are inviting public comment regarding our proposal to adopt DACA 
requirements.
g. Scoring Calculations Review and Correction Period
    Although we are not proposing any changes to the review and 
correction procedures for FY 2019, we intend to rename the annual 30-
day review and correction period to the ``Scoring Calculations Review 
and Correction Period.'' The purpose of the annual 30-day review and 
corrections period is to allow hospitals to review the calculation of 
their HAC Reduction Program scores, and the new name would more clearly 
convey both the intent and limitation. The naming convention would 
further distinguish this period from earlier opportunities during which 
hospitals can review and correct their underlying data.
    The HAC Reduction Program will continue to provide annual 
confidential hospital-specific reports and discharge level information 
used in the calculation of their Total HAC Scores

[[Page 20434]]

via the QualityNet Secure Portal. As noted in section IV.J.4.b. of the 
preamble of this proposed rule regarding quarterly reports, hospitals 
must also register at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1138115992011 for a QualityNet Secure Portal account in order to access their 
annual hospital-specific reports.
    As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50725 
through 50728), hospitals have a period of 30 days after the 
information is posted to the QualityNet Secure Portal to review their 
HAC Reduction Program scores, submit questions about the calculation of 
their results, and request corrections for their HAC Reduction Program 
scores prior to public reporting. Hospitals may use the 30-day Scoring 
Calculations Review and Correction Period to request corrections to the 
following information prior to public reporting:

 CMS PSI 90 measure score
 CMS PSI 90 measure result and Winsorized measure result
 Domain 1 score
 CLABSI measure score
 CAUTI measure score
 Colon and Abdominal Hysterectomy SSI measure score
 MRSA Bacteremia measure score
 CDI measure score
 Domain 2 score
 Total HAC Score

    As we clarified in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38270 through 38271), this 30-day period is not an opportunity for 
hospitals to submit additional corrections related to the underlying 
claims data for the CMS PSI 90, or to add new claims to the data 
extract used to calculate the results. Hospitals have an opportunity to 
review and correct claims data used in the HAC Reduction Program as 
described in section IV.J.4.c. of the preamble of this proposed rule, 
and detailed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50726 
through 50727).
    As we also clarified in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38270 through 38271), this 30-day period is not an opportunity for 
hospitals to submit additional corrections related to the underlying 
NHSN HAI data used to calculate the scores, including: Reported number 
of NSHN HAIs; Standardized Infection Ratios (SIRs); or reported 
central-line days, urinary catheter days, surgical procedures 
performed, or patient days. Hospitals would have an opportunity to 
review and correct chart-abstracted NHSN HAI data used in the HAC 
Reduction Program as described in section IV.J.4.d. of the preamble of 
this proposed rule.

h. Proposed Public Reporting of Hospital-Specific Data Beginning FY 
2019

(1) Proposed Public Reporting of Hospital-Specific Data Beginning FY 
2019
    Section 1886(p)(6)(A) of the Act requires the Secretary to ``make 
information available to the public regarding HAC rates of each 
subsection (d) hospital'' under the HAC Reduction Program. Section 
1886(p)(6)(B) of the Act also requires the Secretary to ``ensure that 
an applicable hospital has the opportunity to review, and submit 
corrections for, the HAC information to be made public for each 
hospital.'' Section 1886(p)(6)(C) of the Act requires the Secretary to 
post the HAC information for each applicable hospital on the Hospital 
Compare website in an easily understood format.
    Generally, data collected during the first quarter of a calendar 
year are publicly reported annually. As finalized in FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50725), we will make the following information 
public on the Hospital Compare website: (1) Hospital scores with 
respect to each measure; (2) each hospital's domain-specific score; and 
(3) the hospital's Total HAC Score. If the Hospital IQR Program 
finalizes its proposal to remove the CMS PSI 90 from the Program, the 
CMS PSI 90 individual indicator measure results (that is, the child 
measures) would be reported under the HAC Reduction Program. The CMS 
PSI 90 measure is reported on the Hospital Compare web pages; however, 
the child measures are reported in the downloadable database on 
Hospital Compare. Similarly, we believe the NHSN HAI measures represent 
important quality data consumers of healthcare can use to make informed 
decisions. Therefore, we intend to continue making NHSN HAI data 
available to the public on a quarterly basis. As we stated in FY 2018 
IPPS/LTCH PPS final rule (82 FR 38324), our current policy has been to 
report data under the Hospital IQR Program as soon as it is feasible on 
CMS websites such as the Hospital Compare website, http://www.medicare.gov/hospitalcompare, after a 30-day preview period. We are 
proposing to make data available in the same form and manner as 
currently displayed under the Hospital IQR Program.
    We intend to maintain as much consistency as possible in how the 
measures are currently reported on Hospital Compare, including how they 
are displayed and the frequency of reporting.
(2) Clarification of Location of Publicly-Reported HAC Reduction 
Program Information
    Section 1886(p)(6)(C) of the Act, as codified at 42 CFR 412.172(f), 
requires that HAC information is posted on the Hospital Compare website 
in an easily understandable format. Hospital Compare is the official 
website for the publication of the required HAC Reduction Program data, 
and the location where the HAC Reduction Program will continue to post 
data. We believe the above approach complies with the Act and provides 
hospitals and the public sufficient access to information.
i. Limitation on Administrative and Judicial Review
    Section 1886(p)(7) of the Act, as codified at 42 CFR 412.172(g), 
provides that there will be no administrative or judicial review under 
section 1869 of the Act, under section 1878 of the Act, or otherwise 
for any of the following:
     The criteria describing an applicable hospital in 
paragraph 1886(p)(2)(A) of the Act;
     The specification of hospital acquired conditions under 
paragraph 1886(p)(3) of the Act;
     The specification of the applicable period under paragraph 
1886(p)(4) of the Act;
     The provision of reports to applicable hospitals under 
paragraph 1886(p)(5) of the Act; and
     The information made available to the public under 
paragraph 1886(p)(6) of the Act.
    For additional information, we refer readers to FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50729) and FY 2015 IPPS/LTCH PPS final rule (79 
FR 50100).
5. Proposed Changes to the HAC Reduction Program Scoring Methodology
    We regularly examine the HAC Reduction Program's scoring 
methodology for opportunities for improvement. This year, we examined 
several alternative scoring options that would allow the scoring 
methodology to continue to fairly assess all hospitals.
a. Current Methodology
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57022 through 
57025), we adopted a Winsorized z-score scoring methodology for FY 2018 
in which we rank hospitals by calculating a Total HAC Score based on 
hospitals' performance on two domains: patient

[[Page 20435]]

safety (Domain 1) and NHSN HAIs (Domain 2). Domain 1 includes the CMS 
PSI 90 measure. Domain 2 includes the CLABSI, CAUTI, Colon and 
Abdominal Hysterectomy SSI,\277\ MRSA Bacteremia, and CDI measures. 
Under the current scoring methodology, hospitals' Total HAC Scores are 
calculated as a weighted average of Domain 1 (15 percent) and Domain 2 
(85 percent). Hospitals with a measure score for at least one Domain 2 
measure receive a Domain 2 score. Hospitals with 3 or more discharges 
for at least one component indicator for the CMS PSI 90 receive a 
Domain 1 score. The first table below illustrates the weight CMS 
applies to each measure for the roughly 99 percent of non-Maryland 
hospitals with a Domain 1 score and the second table below illustrates 
the weight CMS applies to each measure for the one percent of non-
Maryland hospitals without a Domain 1 score.
---------------------------------------------------------------------------

    \277\ Colon and Abdominal Hysterectomy SSI is reported as one 
score under the HAC Reduction Program.

 Weight Applied to Each Measure by Number of Domain 2 Measures With Measure Scores for Hospitals With a Domain 1
                                                Score in FY 2018
                                                   [N = 3,147]
----------------------------------------------------------------------------------------------------------------
                                                                      Number            Weight applied to:
                                                                   (percent) of  -------------------------------
         Number of Domain 2 measures with measure scores           hospitals in                    Each Domain 2
                                                                    FY 2018 \a\     CMS PSI 90        measure
----------------------------------------------------------------------------------------------------------------
0...............................................................      188 (5.9%)           100.0             N/A
1...............................................................      288 (9.1%)            15.0            85.0
2...............................................................      218 (6.9%)            15.0            42.5
3...............................................................      196 (6.2%)            15.0            28.3
4...............................................................      251 (7.9%)            15.0            21.3
5...............................................................   2,006 (63.0%)            15.0            17.0
----------------------------------------------------------------------------------------------------------------
\a\ The denominator for percentage calculations is all non-Maryland hospitals with a FY 2018 Total HAC Score.


Weight Applied to Each Measure by Number of Domain 2 Measures With Measure Scores for Hospitals Without a Domain
                                               1 Score in FY 2018
                                                    [N = 36]
----------------------------------------------------------------------------------------------------------------
                                                                      Number            Weight applied to:
                                                                   (percent) of  -------------------------------
         Number of Domain 2 measures with measure scores           hospitals in                    Each Domain 2
                                                                    FY 2018 \a\     CMS PSI 90        measure
----------------------------------------------------------------------------------------------------------------
1...............................................................        8 (0.3%)             N/A           100.0
2...............................................................        7 (0.2%)             N/A            50.0
3...............................................................        2 (0.1%)             N/A            33.3
4...............................................................        2 (0.1%)             N/A            25.0
5...............................................................       16 (0.5%)             N/A            20.0
----------------------------------------------------------------------------------------------------------------
\a\ The denominator for percentage calculations is all non-Maryland hospitals with a FY 2018 Total HAC Score.

    As shown in the first table above, under the currently methodology, 
the weight applied to the CMS PSI 90 and each Domain 2 measure is 
almost the same (15.0 and 17.0 percent, respectively) for hospitals 
with measure scores for all six program measures. However, for 
hospitals with between one and four Domain 2 measures, the weight 
applied to the CMS PSI 90 is lower (and in some cases much lower) than 
the weight applied to each Domain 2 measure. For hospitals with a 
measure score for only one or two Domain 2 measures (that is, low-
volume hospitals in particular), a disproportionately large weight is 
applied to each Domain 2 measure. Several stakeholders voiced concerns 
about the disproportionately large weight applied to the one or two 
Domain 2 measures for which low-volume hospitals have a measure score. 
As seen in the tables above; under the currently methodology, the 
weighting for the Domain 2 measures is dependent on the number of 
measures with data for those hospitals without a Domain 1 score.
    In this proposed rule, we are discussing two alternative scoring 
methodologies for calculating hospitals' Total HAC Scores. Our 
preferred approach, the Equal Measure Weights policy, involves removing 
domains and applying an equal weight to each measure for which a 
hospital has a measure score in Total HAC Score calculations. However, 
we are seeking public comment on an additional approach: applying a 
different weight to each domain depending on the number of measures for 
which a hospital has a measure score (Variable Domain Weights).
b. Equal Measure Weights
    In this proposed rule, our preferred approach is the Equal Measure 
Weights Policy. We would remove domains from the HAC Reduction Program 
and simply assign equal weight to each measure for which a hospital has 
a measure score. We would calculate each hospital's Total HAC Score as 
the equally weighted average of the hospital's measure scores. The 
table below displays the weights applied to each measure under this 
approach. All other aspects of the HAC Reduction Program scoring 
methodology would remain the same, including the calculation of measure 
scores as Winsorized z-scores, the determination of the 75th percentile 
Total HAC Score, and the determination of the worst-performing 
quartile.

[[Page 20436]]



 Weight Applied to Each Measure by Number of Measures With Measure Score
  for Hospitals With and Without a CMS PSI 90 Score Under Equal Measure
                            Weights Approach
------------------------------------------------------------------------
                                             Weight applied to:
 Number of NHSN HAI measures with  -------------------------------------
           measure score                                Each NHSN HAI
                                      CMS PSI 90           measure
------------------------------------------------------------------------
0.................................           100.0  N/A
1.................................            50.0  50.0
2.................................            33.3  33.3
3.................................            25.0  25.0
4.................................            20.0  20.0
5.................................            16.7  16.7
Any number........................             N/A  100.0 (equally
                                                     divided among each
                                                     NHSN HAI measure).
------------------------------------------------------------------------

    As shown in the table above, by applying an equal weight to each 
measure for all hospitals, the Equal Measure Weights approach addresses 
stakeholders' concerns about the disproportionately large weight 
applied to Domain 2 measures for certain hospitals under the current 
scoring methodology.
c. Alternative Methodology Considered: Variable Domain Weights
    We also analyzed a Variable Domain Weights approach. Under this 
approach, the weights applied to Domain 1 and Domain 2 depend upon the 
number of measure scores a hospital has in each domain. The table below 
displays the weights applied to each domain under this approach.

Weight Applied to Each Measure by Number of Domain 2 Measures With Measure Scores for Hospitals With and Without
                             a Domain 1 Score Under Variable Domain Weights Approach
----------------------------------------------------------------------------------------------------------------
                                                                   Weight applied to:
   Number of Domain 2 measures with    -------------------------------------------------------------------------
             measure score               Domain 1 (CMS
                                            PSI 90)        Domain 2               Each Domain 2 measure
----------------------------------------------------------------------------------------------------------------
0.....................................           100.0             N/A  N/A
1.....................................            40.0            60.0  60.0
2.....................................            30.0            70.0  35.0
3.....................................            20.0            80.0  26.7
4.....................................            15.0            85.0  21.3
5.....................................            15.0            85.0  17.0
Any number............................             N/A           100.0  Equally divided.
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, under the Variable Domain Weights 
approach, the difference in the weight applied to the CMS PSI 90 and 
each Domain 2 measure is smaller than the difference under the current 
scoring methodology for hospitals that have a Domain 1 score (the first 
table under the Equal Measure Weights approach discussion, above).
d. Analysis
    Our priority is to adopt a policy that improves the scoring 
methodology and increases fairness for all hospitals. Both proposed 
approaches address stakeholders' concerns about the disproportionate 
weight applied to Domain 2 measures for low-volume hospitals. We 
simulated results under each scoring approach using FY 2018 HAC 
Reduction Program data. We compared the percentage of hospitals in the 
worst-performing quartile in FY 2018 to the percentage that would be in 
the worst-performing quartile under each scoring approach. The table 
below provides a high-level overview of the impact of these approaches 
on several key groups of hospitals.

  Estimated Impact of Scoring Approaches on Percentage of Hospitals in
               Worst-Performing Quartile by Hospital Group
------------------------------------------------------------------------
                                      Equal measure     Variable domain
        Hospital group \a\               weights            weights
------------------------------------------------------------------------
Teaching hospitals: 100 or more                  2.4%               1.6%
 residents (N = 248)..............
Safety-net \b\ (N = 644)..........               0.6%               0.8%
Urban hospitals: 400 or more beds                2.2%               1.1%
 (N = 360)........................
Hospitals with 100 or fewer beds                -1.8%              -0.9%
 (N = 1,169)......................
Hospitals with a measure score
 for:
    Zero Domain 2 measures (N =                  0.0%               0.0%
     188).........................
    One Domain 2 measure (N = 269)              -4.2%              -1.9%
    Two Domain 2 measures (N =                  -0.8%              -0.4%
     225).........................
    Three Domain 2 measures (N =                -2.5%              -2.5%
     198).........................
    Four Domain 2 measures (N =                 -0.4%               0.4%
     253).........................
    Five Domain 2 measures (N =                  1.0%               0.5%
     2,022).......................
------------------------------------------------------------------------
\a\ The number of hospitals in the given hospital group for FY 2018 is
  specified in parenthesis in this column (for example, N = 248).
\b\ Hospitals are considered safety-net hospitals if they are in the top
  quintile for DSH percent.


[[Page 20437]]

    As shown in the table above, the Equal Measure Weights approach 
generally has a larger impact than the Variable Domain Weights 
approach. Under the Equal Measure Weights Approach, as compared to the 
current methodology using FY2018 HAC Reduction Program data, the 
percentage of hospitals in the worst-performing quartile decreases by 
1.8 percent for small hospitals (that is, 100 or fewer beds), 4.2 
percent for hospitals with one Domain 2 measure, 0.8 percent for 
hospitals with two Domain 2 measures, while it increases by 2.2 percent 
for large urban hospitals (that is, 400 or more beds) and 2.4 percent 
for large teaching hospitals (that is, 100 or more residents). The 
Variable Domain Weights approach changes the percentage of hospitals in 
the worst-performing quartile by less than two percent for these groups 
of hospitals.
    We prefer the Equal Measure Weights approach because it reduces the 
percentage of low-volume hospitals in the worst-performing quartile in 
the simplest manner to hospitals, while not greatly increasing the 
potential costs on other hospital groups. In addition, should we add 
measures or remove measures from the program in the future, we would 
not need to modify the weighting scheme under the Equal Measure Weights 
approach, unlike the current scoring methodology or the Variable Domain 
Weights approach.
    Finally, the Equal Measure Weights policy aligns with the intent of 
the original program design to apply a similar weight to each measure. 
That is, we applied a weight of 35 percent to Domain 1 and 65 percent 
to Domain 2 in FY 2015, so that the weight applied to each measure 
would be roughly the same for hospitals with measure scores for all 
measures. When we added Colon and Abdominal Hysterectomy SSI to Domain 
2 in FY 2016 and CDI and MRSA Bacteremia in FY 2017, we increased the 
weight of Domain 2 to 75 percent and 85 percent, respectively, so that 
the weight applied to each measure would be nearly the same for 
hospitals with measure scores for all measures. However, the static 
domain weights we applied for these program years led to a 
substantially lower weight being applied to the CMS PSI 90 compared 
with Domain 2 measures for hospitals with only one or two Domain 2 
measures. After assessing the results of our analysis and these 
additional considerations, we are proposing to adopt the Equal Measure 
Weights Policy starting in FY 2020.
    We also recognize that under this proposal the NHSN HAI portfolio 
of up to five measures would continue to be weighted much more highly 
than the CMS PSI 90 for the vast majority of hospitals with more than 
one NHSN HAI data meeting minimum precision criteria (MPC) of 1.0. For 
example, hospitals reporting five NHSN HAI measures meeting the MPC of 
1.0 and CMS PSI 90 would be weighted as 83.33 percent using the equal 
weighting proposal for the set of NHSN HAI measures and 16.67 percent 
for the CMS PSI 90. Hospitals reporting fewer NHSN HAIs meeting the MPC 
of 1.0 would receive lower total HAI weighting to account for the 
reduced number of NHSN HAI measures.
    This proposal is intended to address the impact of disproportionate 
weighting at the measure level for the subset of hospitals with 
relatively few NHSN HAI measures. Under the current weighting 
methodology, hospitals reporting on a single NHSN HAI measure receive 
85 percent measure level weight for that one measure.
    We are inviting public comment on our proposed preferred change to 
the HAC Reduction Program scoring methodology and the alternative 
considered.
6. Proposed Applicable Period for FY 2021
    Consistent with the definition specified at Sec.  412.170, we are 
proposing to adopt the applicable period for the FY 2021 HAC Reduction 
Program for the CMS PSI 90 as the 24-month period from July 1, 2017 
through June 30, 2019, and the applicable period for NHSN HAI measures 
as the 24-month period from January 1, 2018 through December 31, 2019.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38271), we finalized 
a return to a 24-month data collection period for the calculation of 
HAC Reduction Program measure results. As we stated then, we believe 
that using 24 months of data for the CMS PSI 90 and the NHSN HAI 
measures balances the Program's needs against the burden imposed on 
hospitals' data-collection processes, and allows for sufficient time to 
process the data for each measure and calculate the measure results.
    We are inviting public comment on this proposal.
7. Request for Comments on Additional Measures for Potential Future 
Adoption
    As we did in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19986 
through 19990), and as part of our ongoing efforts to evaluate and 
strengthen the HAC Reduction Program, we seek stakeholder feedback on 
the adoption of additional Program measures.
    We welcome public comment and suggestions for additional HAC 
Reduction Program measures, specifically on whether electronic clinical 
quality measures (eCQMs) would benefit the program at some point in the 
future. We first raised the potential future consideration of 
electronically specified measures in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50104), and stated that we would continue to review the 
viability of including electronic measures. We are now specifically 
interested in stakeholder comments regarding the potential for the 
Program's future adoption of eCQMs. These measures use data from 
electronic health records (EHRs) and/or health information technology 
systems to measure health care quality. We believe eCQMs will allow for 
the improved measurement of processes, observations, treatments and 
outcomes. Measuring and reporting eCQMs provide information on the 
safety, effectiveness, and timeliness of care. We are also interested 
in adopting eCQMs because we support technology that reduces burden and 
allows clinicians to focus on providing high-quality healthcare for 
their patients. We also support innovative approaches to improve 
quality, accessibility, and affordability of care while paying 
attention to improving clinicians' and beneficiaries' experience when 
interacting with CMS programs. We believe eCQMs offer many benefits to 
clinicians and quality reporting and are an improvement over 
traditional quality measures because they leverage the EHR to generate 
chart-abstracted data, which is less resource intensive and likely to 
produce fewer human errors than traditional chart-abstraction.
    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.
    We are inviting public comments and suggestions on future measures, 
including eCQMs, for the HAC Reduction Program.

[[Page 20438]]

K. Payments for Indirect and Direct Graduate Medical Education Costs 
(Sec. Sec.  412.105 and 413.75 Through 413.83)

1. Background
    Section 1886(h) of the Act, as added by section 9202 of the 
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L. 
99-272), establishes a methodology for determining payments to 
hospitals for the direct costs of approved graduate medical education 
(GME) programs. Section 1886(h)(2) of the Act sets forth a methodology 
for the determination of a hospital-specific base-period per resident 
amount (PRA) that is calculated by dividing a hospital's allowable 
direct costs of GME in a base period by its number of full-time 
equivalent (FTE) residents in the base period. The base period is, for 
most hospitals, the hospital's cost reporting period beginning in FY 
1984 (that is, October 1, 1983 through September 30, 1984). The base 
year PRA is updated annually for inflation. In general, Medicare direct 
GME payments are calculated by multiplying the hospital's updated PRA 
by the weighted number of FTE residents working in all areas of the 
hospital complex (and at nonprovider sites, when applicable), and the 
hospital's Medicare share of total inpatient days. The provisions of 
section 1886(h) of the Act are implemented in regulations at 42 CFR 
413.75 through 413.83.
    Section 1886(d)(5)(B) of the Act provides for a payment adjustment 
known as the indirect medical education (IME) adjustment under the IPPS 
for hospitals that have residents in an approved GME program, in order 
to account for the higher indirect patient care costs of teaching 
hospitals relative to nonteaching hospitals. The regulations regarding 
the calculation of this additional payment are located at 42 CFR 
412.105. The hospital's IME adjustment applied to the DRG payments is 
calculated based on the ratio of the hospital's number of FTE residents 
training in either the inpatient or outpatient departments of the IPPS 
hospital to the number of inpatient hospital beds.
    The calculation of both direct GME and IME payments is affected by 
the number of FTE residents that a hospital is allowed to count. 
Generally, the greater the number of FTE residents a hospital counts, 
the greater the amount of Medicare direct GME and IME payments the 
hospital will receive. Therefore, Congress, through the Balanced Budget 
Act of 1997 (Pub. L. 105-33), established a limit (that is, a cap) on 
the number of allopathic and osteopathic residents that a hospital may 
include in its FTE resident count for direct GME and IME payment 
purposes. Under section 1886(h)(4)(F) of the Act, for cost reporting 
periods beginning on or after October 1, 1997, a hospital's unweighted 
FTE count of residents for purposes of direct GME may not exceed the 
hospital's unweighted FTE count for direct GME in its most recent cost 
reporting period ending on or before December 31, 1996. Under section 
1886(d)(5)(B)(v) of the Act, a similar limit based on the FTE count for 
IME during that cost reporting period is applied effective for 
discharges occurring on or after October 1, 1997. Dental and podiatric 
residents are not included in this statutorily mandated cap.
2. Proposed Changes to Medicare GME Affiliated Groups for New Urban 
Teaching Hospitals
    Section 1886(h)(4)(H)(ii) of the Act authorizes the Secretary to 
prescribe rules that allow hospitals that form affiliated groups to 
elect to apply direct GME caps on an aggregate basis, and such 
authority applies for purposes of aggregating IME caps under section 
1886(d)(5)(B)(viii) of the Act. Under such authority, the Secretary 
promulgated rules to allow hospitals that are members of the same 
Medicare GME affiliated group to elect to apply their direct GME and 
IME FTE caps on an aggregate basis. As specified in Sec. Sec.  
412.105(f)(1)(vi) and 413.79(f) of the regulations, hospitals that are 
part of the same Medicare GME affiliated group are permitted to apply 
their IME and direct GME FTE caps on an aggregate basis, and to 
temporarily adjust each hospital's caps to reflect the rotation of 
residents among affiliated hospitals during an academic year. Sections 
413.75(b) and 413.79(f) specify the rules for Medicare GME affiliated 
groups. Generally, two or more hospitals may form a Medicare GME 
affiliated group if the hospitals are located in the same urban or 
rural area or in contiguous urban or rural areas, if they are under 
common ownership, or if they are jointly listed as program sponsors or 
major participating institutions in the same program. 
Sections[thinsp]413.75(b) and 413.79(f) also address emergency Medicare 
GME affiliation agreements, which can apply in the event of a section 
1135 waiver and if certain conditions are met.
    For a new urban teaching hospital that qualifies for an adjustment 
to its FTE cap under Sec.  412.105(f)(1)(vii) or Sec.  413.79(e)(1), or 
both, Sec.  413.79(e)(1)(iv) provides that the new urban hospital may 
enter into a Medicare GME affiliation agreement only if the resulting 
adjustment is an increase to its direct GME and IME FTE caps (for 
purposes of this discussion, the term ``urban'' is defined as that term 
is described at Sec.  412.64(b) of the regulations). We adopted this 
policy in the FY 2006 IPPS final rule (70 FR 47452 through 47454). 
Prior to that final rule, new urban teaching hospitals were not 
permitted to participate in a Medicare GME affiliation agreement (63 FR 
26333). In modifying our rules to allow new urban teaching hospitals to 
participate in Medicare GME affiliation agreements, we noted our 
concerns about such affiliation agreements (70 FR 47452). Specifically, 
we were concerned that hospitals with existing medical residency 
training programs could otherwise, with the cooperation of new teaching 
hospitals, circumvent the statutory FTE resident caps by establishing 
new medical residency programs in the new teaching hospitals solely for 
the purpose of affiliating with the new teaching hospitals to receive 
an upward adjustment to their FTE caps under an affiliation agreement. 
This would effectively allow existing teaching hospitals to achieve an 
increase in their FTE resident caps beyond the number allowed by their 
statutory caps (70 FR 47452). Accordingly, we adopted the restriction 
under Sec.  413.79(e)(1)(iv). We refer readers to the FY 2006 IPPS 
final rule for a discussion of the regulatory history of this provision 
(70 FR 47452 through 47454).
    We have received questions about whether two (or more) new urban 
teaching hospitals can form a Medicare GME affiliated group; that is, 
whether an affiliated group consisting solely of new urban teaching 
hospitals is permissible, considering that, under Sec.  
413.79(e)(1)(iv), a new urban teaching hospital may only enter into a 
Medicare GME affiliation agreement if the resulting adjustments to its 
direct GME and IME FTE caps are increases to those caps. The type of 
Medicare GME affiliated group contemplated under the regulation at 
Sec.  413.79(e)(1)(iv) involves an existing teaching hospital(s) (a 
hospital with cap(s) based on training occurring in 1996) and a new 
teaching hospital(s), and therefore, we do not believe a Medicare GME 
affiliation agreement consisting solely of new urban teaching hospitals 
is permissible under Sec.  413.79(e)(1)(iv). However, we believe it is 
important to provide flexibility with regard to Medicare GME 
affiliation agreements in light of the statutorily mandated caps on the 
number of FTE residents a hospital may

[[Page 20439]]

count for direct GME and IME payment purposes. As we noted in the FY 
2006 IPPS final rule, while the rules we established in Sec.  
413.79(e)(1)(iv) were meant to prevent gaming on the part of existing 
teaching hospitals, we did not wish to preclude affiliations that 
clearly are designed to facilitate additional training at a new 
teaching hospital. We believe allowing two (or more) new urban teaching 
hospitals to form a Medicare GME affiliated group will enable these 
hospitals to provide residents training at their facilities with both 
the required and more varied training experiences necessary to complete 
their residency training programs. Furthermore, we believe the proposed 
change would facilitate increased training within local, smaller-sized 
communities because generally new urban teaching hospitals are smaller-
sized, community-based hospitals compared with existing urban teaching 
hospitals, which are generally large academic medical centers. 
Accordingly, under our authority in section 1886(h)(4)(H)(ii) of the 
Act, we are proposing to revise the regulation to specify that new 
urban teaching hospitals (that is, hospitals that qualify for an 
adjustment under Sec.  412.105(f)(1)(vii) or Sec.  413.79(e)(1), or 
both) may form a Medicare GME affiliated group and therefore be 
eligible to receive both decreases and increases to their FTE caps.
    We emphasize that the existing restriction under Sec.  
413.79(e)(1)(iv) would still apply to Medicare GME affiliated groups 
composed of existing and new urban teaching hospitals, given our 
concerns about gaming. We do not share the same level of concern in 
regards to Medicare GME affiliated groups consisting solely of new 
urban teaching hospitals because we believe these teaching hospitals 
are similarly situated in terms of size and scope of residency training 
programs and, therefore, less likely to participate in a Medicare GME 
affiliated group where the outcome of that agreement would only provide 
advantages to one of the participating hospitals. However, we still 
believe it is important to ensure that Medicare GME affiliation 
agreements entered into between new urban teaching hospitals are 
consistent with the intent of the Medicare GME affiliation agreement 
provision; that is, to promote the cross-training of residents at the 
participating hospitals and not to provide for an unfair advantage of 
one participating hospital at the expense of another hospital.
    Therefore, we are proposing to revise Sec.  413.79(e)(1)(iv) by 
designating the existing provision of paragraph (iv) as paragraph (A) 
and adding proposed paragraph (B) to specify that an urban hospital 
that qualifies for an adjustment to its FTE cap under this section is 
permitted to be part of a Medicare GME affiliated group for purposes of 
establishing an aggregate FTE cap and receive an adjustment that is a 
decrease to the urban hospital's FTE cap only if the decrease results 
from a Medicare GME affiliated group consisting solely of two or more 
urban hospitals that qualify to receive adjustments to their FTE caps 
under this paragraph (e)(1). Because Medicare GME affiliation 
agreements can only be entered into at the start of an academic year 
(that is, July 1), we are proposing that this proposed change would be 
effective beginning with affiliation agreements entered into for the 
July 1, 2019 through June 30, 2020 residency training year. We note 
that, if adopted, the proposed change discussed in this proposed rule 
would apply to both Medicare GME affiliation agreements and emergency 
Medicare GME affiliation agreements.
3. Notice of Closure of Two Teaching Hospitals and Opportunity To Apply 
for Available Slots
a. Background
    Section 5506 of the Patient Protection and Affordable Care Act 
(Pub. L. 111-148), as amended by the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152) (collectively, the 
``Affordable Care Act''), authorizes the Secretary to redistribute 
residency slots after a hospital that trained residents in an approved 
medical residency program closes. Specifically, section 5506 of the 
Affordable Care Act amended the Act by adding subsection (vi) to 
section 1886(h)(4)(H) of the Act and modifying language at section 
1886(d)(5)(B)(v) of the Act, to instruct the Secretary to establish a 
process to increase the FTE resident caps for other hospitals based 
upon the FTE resident caps in teaching hospitals that closed ``on or 
after a date that is 2 years before the date of enactment'' (that is, 
March 23, 2008). In the CY 2011 Outpatient Prospective Payment System 
(OPPS) final rule (75 FR 72212), we established regulations (42 CFR 
413.79(o)) and an application process for qualifying hospitals to apply 
to CMS to receive direct GME and IME FTE resident cap slots from the 
hospital that closed. We made certain modifications to those 
regulations in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53434), and 
we made changes to the section 5506 application process in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50122 through 50134). The procedures we 
established apply both to teaching hospitals that closed on or after 
March 23, 2008, and on or before August 3, 2010, and to teaching 
hospitals that close after August 3, 2010.
b. Notice of Closure of Affinity Medical Center, Located in Massillon, 
OH, and the Application Process--Round 11
    CMS has learned of the closure of Affinity Medical Center, located 
in Massillon, OH (CCN 360151). Accordingly, this notice serves to 
notify the public of the closure of this teaching hospital and initiate 
another round of the section 5506 application and selection process. 
This round will be the 11th round (``Round 11'') of the application and 
selection process. The table below contains the identifying information 
and IME and direct FTE GME resident caps for the closed teaching 
hospital, which is part of the Round 11 application process under 
section 5506 of the Affordable Care Act.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                       Direct GME FTE
                                                                                                              IME FTE resident cap      resident cap
                                                                                 CBSA                          (including +/- MMA    (including +/- MMA
               CCN                     Provider name        City and state       code     Terminating date    Sec. 422 \1\ and ACA  Sec. 422 \1\ and ACA
                                                                                                                  Sec. 5503 \2\         Sec. 5503 \2\
                                                                                                                  adjustments)          adjustments)
--------------------------------------------------------------------------------------------------------------------------------------------------------
#151.............................  Affinity Medical      Massillon, OH.......    15940  February 11, 2018...  28.63-4.27 sec. 422   29.49-4.79 sec. 422
                                    Center.                                                                    reduction-2.00 sec.   reduction-2.22 sec.
                                                                                                               5503 reduction =      5503 reduction =
                                                                                                               22.36 \3\.            22.48 \4\.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Section 422 of the MMA, Public Law 108-173, redistributed unused IME and direct GME residency slots effective July 1, 2005.
\2\ Section 5503 of the Affordable Care Act of 2010, Public Law 111-148 and Public Law 111-152, redistributed unused IME and direct GME residency slots
  effective July 1, 2011.
\3\ Affinity Medical Center's 1996 IME FTE resident cap is 28.63. Under section 422 of the MMA, the hospital received a reduction of 4.27 to its IME FTE
  resident cap, and under section 5503 of the Affordable Care Act, the hospital received a reduction of 2.00 to its IME FTE resident cap: 28.63-4.27-
  2.00 = 22.36.

[[Page 20440]]

 
\4\ Affinity Medical Center's 1996 direct GME FTE resident cap is 29.49. Under section 422 of the MMA, the hospital received a reduction of 4.79 to its
  direct GME FTE resident cap, and under section 5503 of the Affordable Care Act, the hospital received a reduction of 2.22 to its direct GME FTE
  resident cap: 29.49-4.79-2.22 = 22.48.

c. Notice of Closure of Baylor Scott & White Medical Center--Garland, 
Located in Garland, TX, and the Application Process--Round 12
    CMS has learned of the closure of Baylor Scott & White Medical 
Center--Garland, located in Garland, TX (CCN 450280). Accordingly, this 
notice serves to notify the public of the closure of this teaching 
hospital and initiate another round of the section 5506 application and 
selection process. This round will be the 12th round (``Round 12'') of 
the application and selection process. The table below contains the 
identifying information and the IME and direct GME FTE resident caps 
for the closed teaching hospital, which is part of the Round 12 
application process under section 5506 of the Affordable Care Act:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                       Direct GME FTE
                                                                                                              IME FTE resident cap      resident cap
                                                                                 CBSA                          (including +/- MMA    (including +/- MMA
               CCN                     Provider name        City and state       code     Terminating date    Sec. 422 \1\ and ACA  Sec. 422 \1\ and ACA
                                                                                                                  Sec. 5503 \2\         Sec. 5503 \2\
                                                                                                                  Adjustments)          Adjustments)
--------------------------------------------------------------------------------------------------------------------------------------------------------
450280...........................  Baylor Scott & White  Garland, TX.........    19124  February 28, 2018...  3.91 + 12.96-0.05     3.91 + 14.09-1.88
                                    Medical Center                                                             sec. 422 reduction-   sec. 422 reduction-
                                    Garland.                                                                   4.30 sec. 5503        2.59 sec. 5503
                                                                                                               reduction = 12.52     reduction = 13.53
                                                                                                               \3\.                  \4\.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Section 422 of the MMA, Public Law 108-173, redistributed unused IME and direct GME residency slots effective July 1, 2005.
\2\ Section 5503 of the Affordable Care Act, Public Law 111-148 and Public Law 111-152, redistributed unused IME and direct GME residency slots
  effective July 1, 2011.
\3\ Baylor Scott & White Medical Center Garland's 1996 IME FTE resident cap is 3.91. The hospital received a new program IME FTE resident cap add-on of
  12.96. Under section 422 of the MMA, the hospital received a reduction of 0.05 to its IME FTE resident cap, and under section 5503 of the Affordable
  Care Act, the hospital received a reduction of 4.30 to its IME FTE resident cap: 3.91 + 12.96-0.05-4.30 = 12.52.
\4\ Baylor Scott & White Medical Center Garland's 1996 direct GME FTE resident cap is 3.91. The hospital received a new program direct GME FTE resident
  cap add-on of 14.09. Under section 422 of the MMA, the hospital received a reduction of 1.88 to its direct GME FTE resident cap, and under section
  5503 of the Affordable Care Act, the hospital received a reduction of 2.59 to its direct GME FTE resident cap: 3.91 + 14.09- 1.88-2.59 = 13.53.

d. Application Process for Available Resident Slots
    The application period for hospitals to apply for slots under 
section 5506 of the Affordable Care Act is 90 days following 
notification to the public of a hospital closure (77 FR 53436). 
Therefore, hospitals that wish to apply for and receive slots from the 
above hospitals' FTE resident caps must submit applications (Section 
5506 Application Form posted on Direct Graduate Medical Education 
(DGME) website as noted at the end of this section) directly to the CMS 
Central Office no later than July 23, 2018. The mailing address for the 
CMS Central Office is included on the application form. Applications 
must be received by the CMS Central Office by the July 23, 2018 
deadline date. It is not sufficient for applications to be postmarked 
by this date.
    We note that an applying hospital may apply for either or both of 
the two rounds of section 5506 slot applications that are being 
announced in this proposed rule. However, a separate application must 
be submitted for each round for which a hospital wishes to apply.
    After an applying hospital sends a hard copy of a section 5506 slot 
application to the CMS Central Office mailing address, the hospital is 
strongly encouraged to notify the CMS Central Office of the mailed 
application by sending an email to: [email protected]. In 
the email, the hospital should state: ``On behalf of [insert hospital 
name and Medicare CCN#], I, [insert your name], am sending this email 
to notify CMS that I have mailed to CMS a hard copy of a section 5506 
application under Round [11 or 12] due to the closure of [Affinity 
Medical Center or Baylor Scott & White Medical Center Garland]. If you 
have any questions, please contact me at [insert phone number] or 
[insert your email address].'' An applying hospital should not attach 
an electronic copy of the application to the email. The email will only 
serve to notify the CMS Central Office to expect a hard copy 
application that is being mailed to the CMS Central Office.
    We have not established a deadline by when CMS will issue the final 
determinations to hospitals that receive slots under section 5506 of 
the Affordable Care Act. However, we review all applications received 
by the deadline and notify applicants of our determinations as soon as 
possible.
    We refer readers to the CMS Direct Graduate Medical Education 
(DGME) website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME.html to download a copy of the 
section 5506 application form (Section 5506 CMS Application Form) that 
hospitals must use to apply for slots under section 5506 of the 
Affordable Care Act. Hospitals should also access this same website for 
a list of additional section 5506 guidelines for the policy and 
procedures for applying for slots, and the redistribution of the slots 
under sections 1886(h)(4)(H)(vi) and 1886(d)(5)(B)(v) of the Act.

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 must 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

[[Page 20441]]

proposed rule, we are providing a summary of the previous legislative 
provisions and their implementation; a description of the provisions of 
section 15003 of Public Law 114-255; our final policies for 
implementation; the finalized budget neutrality methodology for the 
extension period authorized by section 15003 of Public Law 114-255, 
including a discussion of the budget neutrality methodology used in 
previous final rules for periods prior to the extension period; and an 
update on the 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--
     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 withdrew from the demonstration program during CYs 
2009 and 2010. In CY 2011, one hospital among this original set of 
participating hospitals withdrew. These actions left 7 of the 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 the Secretary to provide for the continued participation 
of such rural community hospital in the demonstration program during 
the 5-year extension period, in the case of a rural community hospital 
participating in the demonstration program as of the last day of the 
initial 5-year period, unless the hospital made an election to 
discontinue participation.
    In addition, the Affordable Care Act required, during the 5-year 
extension period, that the Secretary 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 of 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 
hospitals that were selected in either 2004 or 2008 ended their 
scheduled 5-year periods of performance authorized by the Affordable 
Care Act on a rolling basis. 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 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 this 
group closed in October 2015.)
3. Provisions of the 21st Century Cures Act (Pub. L. 114-255) and 
Finalized Policies 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

[[Page 20442]]

and manner as the Secretary may specify, to discontinue participation. 
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).
    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 the Secretary issue a solicitation for applications no later than 
120 days after enactment of paragraph (g)(6), 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 (as amended by 
the Affordable Care Act). Paragraph 410A(g)(6)(B) provides that, in 
determining which hospitals submitting an application pursuant to this 
solicitation are to be selected for participation in the demonstration, 
the Secretary must 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. 
The Secretary may also 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 the 21st 
Century Cures Act (December 13, 2016), as well as the population 
density of the State in which the rural community hospital is located.
b. Solicitation for Additional Participants
    As required under section 15003 of Public Law 114-255, we issued a 
solicitation for additional hospitals to participate in the 
demonstration. We released this solicitation on April 17, 2017. As 
described in the FY 2018 IPPS/LTCH PPS proposed rule, the solicitation 
identified the 20 States with the lowest population density according 
to the population estimates from the Census Bureau for 2013, from the 
ProQuest Statistical Abstract of the United States, 2015. These 20 
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. 
Applications were due May 17, 2017. Applications were assessed in 
accordance with the information requested in the solicitation; that is, 
the problem description, plan for financial viability, goals for the 
demonstration, contributions to quality of care, and collaboration with 
other providers and organizations. In accordance with the authorizing 
statute, closure of hospitals within the State of the applicant 
hospital and population density were considered in assessing 
applications.
c. Terms of Participation for the Extension Period Authorized by Public 
Law 114-255
    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19994), we stated 
that our goal was to finalize the selection of participants for the 
extension period authorized by Public Law 114-255 by June 2017, in time 
to include in the FY 2018 IPPS/LTCH PPS 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 decided to participate in the extension period. (The 
specific method for ensuring budget neutrality under section 410A of 
Public Law 108-173 was described in the FY 2018 IPPS proposed rule, 
consistent with general policies adopted in previous years). We 
indicated that upon announcing the selection of new participants, we 
would confirm the start dates for the periods of performance for these 
newly selected hospitals and for previously participating hospitals. We 
stated, on the other hand, that if final selection were not to occur by 
June 2017, 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 these additional hospitals in the FY 2018 IPPS/LTCH PPS 
final rule.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38280), we finalized 
our policy with regard to the effective date for the application of the 
reasonable cost-based payment methodology under the demonstration for 
those previously participating hospitals choosing to participate in the 
second 5-year extension period. According to our finalized policy, each 
previously participating hospital began 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. However, by 
the time of the FY 2018 IPPS/LTCH PPS final rule, we had not been able 
to verify which among the previously participating hospitals would be 
continuing participation, and thus were not able to estimate the costs 
of the demonstration for that year's final rule. We stated in the final 
rule that we would instead include the estimated costs of the 
demonstration for all participating hospitals for FY 2018, along with 
those for FY 2019, in the budget neutrality offset amount for the FY 
2019 proposed and final rules.
    Seventeen of the 21 hospitals that completed their periods of 
participation under the extension period authorized by the Affordable 
Care Act have elected to continue in the second 5-year extension period 
for the full second 5-year extension period. Of the four hospitals that 
did not elect to continue participating, three hospitals converted to 
CAH status during the time period of the second 5-year extension 
period. Thus, the 5-year period of performance for each of these 
hospitals started on dates beginning May 1, 2015 and extending through 
January 1, 2017. On November 20, 2017, we announced that, as a result 
of the solicitation issued earlier in the year, 13 additional hospitals 
were selected to participate in the demonstration in addition to these 
17 hospitals continuing participation from the first 5-year extension 
period. (Hereafter, these two groups are referred to as ``newly 
participating'' and ``previously participating'' hospitals, 
respectively.) We announced, as well, that each of these newly 
participating hospitals would begin its 5-year period of participation 
effective the start of the first cost reporting period on or after 
October 1, 2017. Thus, 30 hospitals are participating in the 
demonstration during 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 we implement a demonstration program

[[Page 20443]]

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, 
made it extremely unlikely that this demonstration program could be 
held to budget neutrality under the methodology normally used to 
calculate it--that is, cost-based payments to participating small rural 
hospitals were 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. (A 
different methodology was applied for FY 2017.) As we discussed in the 
FYs 2005 through 2017 IPPS IPPS/LTCH PPS 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 for Periods Prior to the 
Extension Period Authorized by the 21st Century Cures Act (Pub. L. 114-
255)
    We have generally incorporated two components into the budget 
neutrality offset amounts identified in the final IPPS rules in 
previous years. First, we have 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 have been 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 have 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 have 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.)
c. Budget Neutrality Methodology for the Extension Period Authorized by 
the 21st Century Cures Act (Pub. L. 114-255)
(1) General Approach
    We finalized our budget neutrality methodology for periods of 
participation under the second 5 years of the 10-year extension period 
in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38285 through 38287). 
Similar to previous years, we will incorporate an estimate of the costs 
of the demonstration, generally determined from historical, ``as 
submitted'' cost reports for the participating hospitals and 
appropriate update factors, into a budget neutrality offset amount to 
be applied to the national IPPS rates for the upcoming fiscal year. In 
addition, we will continue to apply our general policy from previous 
years of including, 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. As we described in the FY 2018 final rule, we will be 
incorporating several distinct components into the budget neutrality 
offset amount for FY 2019:
     For each previously participating hospital that has 
decided to participate in the second 5 years of the 10-year extension 
period, the cost-based payment methodology under the demonstration 
began on the date immediately following the end date of its period of 
performance for the first 5-year extension period. In addition, for 
previously participating hospitals that converted to CAH status during 
the time period of the second 5-year extension period, the 
demonstration payment methodology has been applied to the date 
following the end date of its period of performance for the first 
extension period to the date of conversion. As we finalized in the FY 
2018 IPPS/LTCH PPS final rule, we are applying a specific methodology 
for ensuring that the budget neutrality requirement under section 410A 
of Public Law 108-173 is met. To reflect the costs of the demonstration 
for the previously participating hospitals, for their cost reporting 
periods starting in FYs 2015, 2016, and 2017, we will use available 
finalized cost reports that detail the actual costs of the 
demonstration for each of these fiscal years. We will then incorporate 
these amounts in the budget neutrality offset amount to be included in 
a future IPPS final rule. We expect to do this in either FY 2020 or FY 
2021, based on the availability of finalized reports.
     In addition, we will include a component to our overall 
methodology similar to previous years, according to which an estimate 
of the costs of the demonstration for both previously and newly 
participating hospitals for the upcoming fiscal year is incorporated 
into a budget neutrality offset amount to be applied to the national 
IPPS rates for the upcoming fiscal year. For FY 2019,

[[Page 20444]]

we will include the estimated costs of the demonstration for FYs 2018 
and 2019 in accordance with the methodology finalized in the FY 2018 
IPPS/LTCH PPS final rule.
     Similar to previous years, in order to meet the budget 
neutrality requirement in section 410A(c)(2) of Public Law 108-173 with 
respect to the second 5-year extension period, we will continue to 
implement the policy according to when finalized cost reports become 
available for each of the second 5 years of the 10-year extension 
period for the newly participating hospitals and for cost reporting 
periods starting in or after FY 2018 that occur during the second 5-
year extension period for the previously participating hospitals. We 
will 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.
    As described earlier, we have calculated this difference for FYs 
2005 through 2010 between the actual costs of the demonstration, as 
determined from finalized cost reports and estimated costs of the 
demonstration set forth in the applicable IPPS final rules for these 
years, and then incorporated that amount into the budget neutrality 
offset amount for an upcoming fiscal year. In this FY 2019 IPPS/LTCH 
PPS proposed rule, we are proposing to include this difference based on 
finalized cost reports for FYs 2011, 2012, and 2013 in the budget 
neutrality offset adjustment to be applied to the national IPPS rates 
for FY 2019. In future IPPS rules, we will continue this 
reconciliation, calculating the difference between actual and estimated 
costs for the remaining years of the first extension period (that is, 
FYs 2014 through 2016), and, as described above, the further years of 
the demonstration under the second extension period, applying this 
difference to the budget neutrality offset adjustments identified in 
future years' final rules.
(2) Methodology for the Budget Neutrality Adjustment for the Previously 
Participating Hospitals for FYs 2015 Through 2017
    As we finalized in the FY 2018 IPPS/LTCH PPS final rule, for each 
previously participating hospital, the cost-based payment methodology 
under the demonstration will be applied to the date immediately 
following the end date of its period of performance for the first 5-
year extension period. We are applying the same methodology as 
previously finalized to account for the costs of the demonstration and 
ensure that the budget neutrality requirement under section 410A of 
Public Law 108-173 is met for the previously participating hospitals 
for cost reporting periods starting in FYs 2015, 2016, and 2017. We 
believe it is appropriate to determine such a specific methodology 
applicable to these cost reporting periods because they are a component 
of the payment methodology for the demonstration under the second 
extension period, authorized by section 15003 of Public Law 114-255, 
yet encompass the provision of services and incurred costs occurring 
prior to the start of FY 2018, when the terms of continuation for these 
hospitals under this second extension period were finalized.
    To reflect the costs of the demonstration for the previously 
participating hospitals for their cost reporting periods under the 
second extension period starting before FY 2018 (that is, cost 
reporting periods starting in FYs 2015, 2016, and 2017), we will 
determine the actual costs of the demonstration for each of these 
fiscal years when finalized cost reports become available. Thus, for a 
hospital with an end date of June 30, 2015 for the first participation 
period, we will determine from finalized cost reports the specific 
amount contributing to the total costs of the demonstration for the 3 
cost reporting years from July 1, 2015 through June 30, 2018; for a 
hospital with an end date of June 30, 2016, we will determine from 
finalized cost reports the amount contributing to costs of the 
demonstration for the 2 cost reporting periods from July 1, 2016 
through June 30, 2018.
    We note that, for these hospitals, this last cost report period may 
include services occurring since the enactment of Public Law 114-255 
and also during FY 2018. 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. Under this 
approach, we will incorporate these amounts for the previously 
participating hospitals for cost reporting periods starting in FYs 
2015, 2016, and 2017 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. As noted above, we expect to do this in FY 2020 or FY 2021.
(3) Methodology for Estimating Demonstration Costs for FY 2018
    As discussed earlier, in this FY 2019 IPPS/LTCH PPS proposed rule, 
as a component of the overall budget neutrality methodology, we are 
using a methodology similar to previous years, according to which an 
estimate of the costs of the demonstration for the upcoming fiscal year 
is incorporated into a budget neutrality offset amount to be applied to 
the national IPPS rates for the upcoming fiscal year. As explained 
above, for FY 2019, we will be including the estimated costs of the 
demonstration for FYs 2018 and 2019.
    As described in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38286), 
we will incorporate a specific calculation to account for the fact that 
the cost reporting periods for the participating hospitals applicable 
to the estimate of the costs of the demonstration for FY 2018 would 
start at different points of time during FY 2018. That is, we will be 
prorating 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 within the hospital's cost reporting period 
starting in FY 2018 that fall within the total number of months in the 
fiscal year. For example, if a hospital started its cost reporting 
period on January 1, 2018, we will 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.'') 
The methodology for calculating the amount applicable to FY 2018 to be 
incorporated into the budget neutrality offset amount for FY 2019 was 
described in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38286) and 
proceeds according to the following steps:
    Step 1: For each of the 30 participating hospitals, we will 
identify the reasonable cost amount calculated under the reasonable 
cost methodology for covered inpatient hospital services, including 
swing beds, as indicated on the ``as submitted'' cost report for the 
most recent cost reporting period available. (For each of these 
hospitals, these ``as submitted'' cost reports are those with cost 
report period end dates in CY 2016.) We believe these most recent 
available cost reports to be an accurate predictor of the costs of the 
demonstration in FY 2018 because they give us a recent picture of the 
participating hospitals' costs.
    For each hospital, we will multiply each of these amounts by the FY 
2017

[[Page 20445]]

and 2018 IPPS market basket percentage increases, which are formulated 
by the CMS Office of the Actuary. For each of FYs 2017 and 2018, we 
would then multiply these products (for covered inpatient hospital 
services, including swing beds), of the estimated reasonable cost 
amounts for each participating hospital and the market basket 
percentage increases applicable to the years involved by a 3-percent 
annual volume adjustment. The result for each participating hospital 
would be the general estimated reasonable cost amount for covered 
inpatient hospital services for FY 2018.
    Consistent with our methods in previous years for formulating this 
estimate, we will apply the IPPS market basket percentage increases for 
FYs 2017 through 2018 to the applicable estimated reasonable cost 
amounts (described above) in order to model the estimated FY 2018 
reasonable cost amount under the demonstration. We believe that the 
IPPS market basket percentage increases 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 intended to reflect the tendency of hospitals' inpatient 
caseloads to increase. We acknowledge the possibility that inpatient 
caseloads for small hospitals may fluctuate, and therefore we are 
incorporating 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 will identify 
the estimated amount that would otherwise be paid in FY 2018 under 
applicable Medicare payment methodologies for covered inpatient 
hospital services, including swing beds (as indicated on the same set 
of ``as submitted'' cost reports as in Step 1), if the demonstration 
were not implemented. We then will multiply each of these hospital-
specific amounts (for covered inpatient hospital services including 
swing-bed services), by the FYs 2017 and 2018 (in accordance with the 
discussion above) IPPS applicable percentage increases. This 
methodology differs from Step 1, in which we will be applying the 
market basket percentage increases to the hospitals' applicable 
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. Then, for the same reasons discussed in Step 1, 
we would multiply these hospital-specific products of the applicable 
estimated 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 2017 through 2018.
    Step 3: We will subtract the amounts derived in Step 2 from the 
amount derived in Step 1. According to our methodology, each of these 
resulting amounts indicates the difference for the hospital (for 
covered inpatient hospital services, including swing beds), which would 
be the general estimated amount of the costs of the demonstration for 
FY 2018.
    Step 4: For each hospital, we will multiply the amount derived in 
Step 3 by the hospital-specific prorating factor. The resulting amount 
represents for each hospital the cost of the demonstration applicable 
to the cost reporting period beginning in FY 2018, on the basis of 
which the specific component of the budget neutrality offset amount 
applicable to FY 2018 will be derived.
    Step 5: We will then sum the hospital-specific amounts derived in 
Step 4 across all 30 hospitals participating in the demonstration in FY 
2018. This resulting sum will be the proposed estimated costs of the 
demonstration applicable to FY 2018 to be incorporated in the budget 
neutrality offset amount for rulemaking in FY 2019.
    For this proposed rule, the resulting amount applicable to FY 2018 
is $33,254,247, which we are proposing to include in the budget 
neutrality offset adjustment for FY 2019. This estimated amount is 
based on the specific assumptions regarding the data sources used, that 
is, ``as submitted'' recently available cost reports and historical and 
specific update factors described for cost, payment, and volume. If 
updated data become available prior to the FY 2019 IPPS/LTCH PPS final 
rule, we will use them to the extent appropriate to estimate the costs 
for the demonstration program applicable to FY 2018 in accordance with 
our methodology for determining the budget neutrality estimate. In 
particular, we are evaluating the appropriateness of the 3-percent 
annual volume adjustment in light of empirical trends specific to the 
participating hospitals. Therefore, the estimated budget neutrality 
offset amount may change in the final rule, depending on the 
availability of updated data.
(4) Methodology for Estimating Demonstration Costs for FY 2019
    To estimate the costs of the demonstration for FY 2019, we will 
apply two differences specific to the application of adjustment factors 
to the methodology described for FY 2018. We will use the same set of 
``as submitted'' cost reports in determining preliminary cost and 
payment amounts for covered inpatient hospital services. However, in 
updating these amounts to reflect increases in cost, payment, and 
volume, our methodology for determining the component of the budget 
neutrality offset amount applicable to FY 2019 entails applying the 
market basket percentage increase and applicable percentage increase 
for FY 2019, in addition to these update factors for FYs 2017 and 2018. 
The proposed amounts for FY 2019 for these respective update factors 
are found in sections IV.L.4.c.(2) and (3) of the preamble to this 
proposed rule. In addition, consistent with the methodology for FY 
2018, we would again apply the 3-percent volume adjustment to reflect 
possible increases for FY 2019, in addition to applying this factor for 
each of FYs 2017 and 2018. In addition, because we are expecting all of 
the participating hospitals to participate for the entire 12-month 
period encompassing FY 2019, there will be no application of any 
prorating factor in determining the estimated costs of the 
demonstration for FY 2019.
    For this proposed rule, the resulting amount for FY 2019 is 
$78,409,842, which we are likewise proposing to include in the budget 
neutrality offset adjustment for FY 2019. This estimated amount is 
based on the specific assumptions regarding the data sources used, that 
is, ``as submitted'' recently available cost reports and historical and 
proposed update factors for cost, payment, and volume. If updated data 
become available prior to the FY 2019 IPPS/LTCH PPS final rule, we will 
use them to the extent appropriate to estimate the costs for the 
demonstration program in FY 2019 in accordance with our finalized 
methodology. Again, we are considering the appropriateness of applying 
the 3-percent annual volume adjustment. Therefore, the estimated budget 
neutrality offset amount may change in the final rule, depending on the 
availability of updated data.

[[Page 20446]]

(5) Reconciling Actual and Estimated Costs for the Years of the 
Extension Period
    Similar to previous years, as finalized in the FY 2018 IPPS/LTCH 
PPS final rule, we plan to operationalize the second specific component 
to the budget neutrality requirement. That is, when finalized cost 
reports become available for each of the second 5 years of the 10-year 
extension period for the newly participating hospitals and for cost 
reporting periods starting in or after FY 2018 that occur during the 
second 5-year extension period for the previously participating 
hospitals, we will calculate 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.
    Therefore, in keeping with the methodologies used in previous final 
rules, we will 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.
d. 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 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.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38287), with the 
extension of the demonstration for another 5-year period, as authorized 
by section 15003 of Public Law 114-255, we modified the plan outlined 
in the FY 2017 IPPS/LTCH PPS final rule, and instead returned to the 
general procedure in previous final rules; that is, as finalized cost 
reports become available, we would 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. We finalized a policy that if the actual costs of the 
demonstration for the earlier fiscal year exceeded 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. Likewise, we finalized a policy that 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 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 would 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 reducing the possibility of both 
positive and negative adjustments to be applied in consecutive years, 
and enhancing administrative feasibility. Specifically, when finalized 
cost reports for FYs 2011, 2012, and 2013 are available, we stated that 
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 stated that we expected that this would 
occur in FY 2019. We also stated 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 stated that we plan to provide 
an update in a future final rule regarding the year that we would 
expect that this analysis would occur.
    Therefore, in this proposed rule, we are identifying the 
differences between the total cost of the demonstration as indicated on 
finalized FY 2011 and 2012 cost reports and the estimates for the costs 
of the demonstration for the corresponding year in each of these years' 
final rules, and we are proposing to adjust the current year's budget 
neutrality offset amount by the combined difference. If any information 
relevant to the determination of these amounts (for example, a cost 
report reopening) would necessitate a revision of these amounts, we 
will make the appropriate change and include the determination in the 
FY 2019 IPPS/LTCH PPS final rule. Furthermore, if the needed costs 
reports are available in time for the FY 2019 IPPS/LTCH PPS final rule, 
we will also identify the difference between the total cost of the 
demonstration based on finalized FY 2013 cost reports and the estimates 
for the costs of the demonstration for that year, and incorporate that 
amount into the budget neutrality offset amount for FY 2019.
    Currently, finalized cost reports are now available for the 16 
hospitals that completed a cost reporting period beginning in FY 2011 
according to the demonstration cost-based payment methodology. We note 
that the estimate of the costs of the demonstration for FY 2011 that 
was incorporated into the budget neutrality offset amount was 
formulated prior to the selection of hospitals under the expansion of 
the demonstration authorized by the Affordable Care Act. Accordingly, 
we based the estimate of the costs of the demonstration for FY 2011 on 
projected costs for 30 hospitals, the maximum number allowed by the 
authorizing statute in the Affordable Care Act. The actual costs of the 
demonstration for FY 2011 (that is, the amount from finalized cost 
reports for the 16 hospitals that were paid under the demonstration 
payment methodology for cost reporting periods with start dates during 
FY

[[Page 20447]]

2011), fell short of the estimated amount that was finalized in the FY 
2011 IPPS/LTCH PPS final rule for FY 2011 by $29,971,829.
    In addition, finalized cost reports for the 23 hospitals that 
completed a cost reporting period under the demonstration payment 
methodology beginning in FY 2012 are also now available. The actual 
costs of the demonstration as determined from these finalized cost 
reports fell short of the estimated amount that was finalized in the FY 
2012 final rule by $8,500,373.
    We note that, for this proposed rule, the amounts identified for 
the actual cost of the demonstration for each of FYs 2011 and 2012 
(determined from current finalized cost reports) is less than the 
amounts that were identified in the final rule for these fiscal years. 
Therefore, in keeping with previous policy finalized in similar 
situations when the costs of the demonstration fell short of the amount 
estimated in the corresponding year's final rule, we will be including 
this component as a negative adjustment to the budget neutrality offset 
amount for the current fiscal year.
e. Total Proposed Budget Neutrality Offset Amount for FY 2019
    Therefore, for this FY 2019 IPPS/LTCH PPS proposed rule, we are 
incorporating the following components into the calculation of the 
total budget neutrality offset for FY 2019:
    Step 1: The amount determined under subsection IV.4.c.(3) of the 
preamble of this proposed rule, representing the difference applicable 
to FY 2018 between the sum of the estimated reasonable cost amounts 
that would be paid under the demonstration to participating hospitals 
for covered inpatient hospital services and the sum of the estimated 
amounts that would generally be paid if the demonstration had not been 
implemented. The determination of this amount includes prorating to 
reflect for each participating hospital the fraction of the number of 
months for the cost report year starting in FY 2018 falling into the 
overall 12 months of the fiscal year. This estimated amount is 
$33,254,247.
    Step 2: The amount, determined under section IV.4.c.(4) of the 
preamble of this proposed rule representing the corresponding 
difference of these estimated amounts for FY 2019. No prorating is 
applied in the determination of this amount. This estimated amount is 
$78,409,842.
    Step 3: The amount determined under section IV.4.d. of the preamble 
of this proposed rule according to which the actual costs of the 
demonstration for FY 2011 for the 16 hospitals that completed a cost 
reporting period beginning in FY 2011 differ from the estimated amount 
that was incorporated into the budget neutrality offset amount for FY 
2011 in the FY 2011 IPPS/LTCH PPS final rule. Analysis of this set of 
cost reports shows that the actual costs of the demonstration fell 
short of the estimated amount finalized in the FY 2011 IPPS/LTCH PPS 
final rule by $29,971,829.
    Step 4: The amount, also determined under subsection IV.4.d. of the 
preamble of this proposed rule according to which the actual costs for 
the demonstration for FY 2012 for the 23 hospitals that completed a 
cost reporting period beginning in FY 2012 differ from the estimated 
amount in the FY 2012 final rule. Analysis of this set of cost reports 
shows that the actual costs of the demonstration for FY 2012 fell short 
of the estimated amount finalized in the FY 2012 IPPS/LTCH PPS final 
rule by $8,500,373.
    In keeping with previously finalized policy, we will be applying 
these differences, according to which the actual costs of the 
demonstration for each of FYs 2011 and 2012 fell short of the estimated 
amount determined in the final rule for each of these fiscal years, by 
reducing the budget neutrality offset amount to the national IPPS rates 
for FY 2019 by these amounts.
    Thus, for FY 2019, the total budget neutrality offset amount that 
we are proposing to apply is: The amount determined under Step 1 
($33,254,247) plus the amount determined under Step 2 ($78,409,842) 
minus the amount determined under Step 3 ($29,971,829) minus the amount 
determined under Step 4 ($8,500,373). This total is $73,191,887. If 
updated data become available prior to the FY 2019 IPPS/LTCH PPS final 
rule, we would use them to the extent appropriate to determine the 
budget neutrality offset amount for FY 2019. Therefore, the amount of 
the budget neutrality offset amount may change in the FY 2019 IPPS/LTCH 
PPS final rule. Furthermore, if the needed costs reports are available 
in time for the FY 2019 IPPS/LTCH PPS final rule, we will also identify 
the difference between the total cost of the demonstration based on 
finalized FY 2013 cost reports and the estimates for the costs of the 
demonstration for that year, and incorporate that amount into the 
budget neutrality offset amount for FY 2019.
    In addition, in accordance with the policy finalized in the FY 2018 
final IPPS/LTCH PPS final rule, we will incorporate the actual costs of 
the demonstration for the previously participating hospitals for cost 
reporting periods starting in FYs 2015, 2016, and 2017 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. We expect to do this in 
FY 2020 or FY 2021.

M. Proposed Revision of Hospital Inpatient Admission Orders 
Documentation Requirements Under Medicare Part A

1. Background
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68426 
through 68433), we solicited public comments for potential policy 
changes to improve clarity and consensus among providers, Medicare, and 
other stakeholders regarding the relationship between hospital 
admission decisions and appropriate Medicare payment, such as when a 
Medicare beneficiary is appropriately admitted to the hospital as an 
inpatient and the cost to hospitals associated with making this 
decision. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50938 through 
50942), we adopted a set of policies widely referred to as the ``2 
midnight'' payment policy. Among the finalized changes, we codified 
through regulations at 42 CFR 412.3 the longstanding policy that a 
beneficiary becomes a hospital inpatient if formally admitted pursuant 
to the order of a physician (or other qualified practitioner as 
provided in the regulations) in accordance with the hospital conditions 
of participation (CoPs). In addition, we required that a written 
inpatient admission order be present in the medical record as a 
specific condition of Medicare Part A payment. In response to public 
comments that the requirement of a written admission order as a 
condition of payment is duplicative and burdensome on hospitals, we 
responded that the physician order reflects affirmation by the ordering 
physician or other qualified practitioner that hospital inpatient 
services are medically necessary, and the ``order serves the unique 
purpose of initiating the inpatient admission and documenting the 
physician's (or other qualified practitioner as provided in the 
regulations) intent to admit the patient, which impacts its required 
timing.'' Therefore, we finalized the policy requiring a written 
inpatient order for all hospital admissions as a specific condition of 
payment. We acknowledged that in the extremely rare circumstance the 
order to admit is missing or defective, yet the intent, decision, and 
recommendation of the

[[Page 20448]]

ordering physician or other qualified practitioner to admit the 
beneficiary as an inpatient can clearly be derived from the medical 
record, medical review contractors are provided with discretion to 
determine that this information constructively satisfies the 
requirement that a written hospital inpatient admission order be 
present in the medical record.
2. Proposed Revisions Regarding Admission Order Documentation 
Requirements
    Despite the discretion granted to medical reviewers to determine 
that admission order information derived from the medical record 
constructively satisfies the requirement that a written hospital 
inpatient admission order is present in the medical record, as we have 
gained experience with the policy, it has come to our attention that 
some otherwise medically necessary inpatient admissions are being 
denied payment due to technical discrepancies with the documentation of 
inpatient admission orders. Common technical discrepancies consist of 
missing practitioner admission signatures, missing co-signatures or 
authentication signatures, and signatures occurring after discharge. We 
have become aware that, particularly during the case review process, 
these discrepancies have occasionally been the primary reason for 
denying Medicare payment of an individual claim. In looking to reduce 
unnecessary administrative burden on physicians and providers and 
having gained experience with the policy since it was implemented, we 
have concluded that if the hospital is operating in accordance with the 
hospital CoPs, medical reviews should primarily focus on whether the 
inpatient admission was medically reasonable and necessary rather than 
occasional inadvertent signature documentation issues unrelated to the 
medical necessity of the inpatient stay. It was not our intent when we 
finalized the admission order documentation requirements that they 
should by themselves lead to the denial of payment for otherwise 
medically reasonable necessary inpatient stay, even if such denials 
occur infrequently.
    Therefore, we are proposing to revise the admission order 
documentation requirements by removing the requirement that written 
inpatient admission orders are a specific requirement for Medicare Part 
A payment. Specifically, we are proposing to revise the inpatient 
admission order policy to no longer require a written inpatient 
admission order to be present in the medical record as a specific 
condition of Medicare Part A payment. Hospitals and physicians are 
already required to document relevant orders in the medical record to 
substantiate medical necessity requirements. If other available 
documentation, such as the physician certification statement when 
required, progress notes, or the medical record as a whole, supports 
that all the coverage criteria (including medical necessity) are met, 
and the hospital is operating in accordance with the hospital 
conditions of participation (CoPs), we believe it is no longer 
necessary to also require specific documentation requirements of 
inpatient admission orders as a condition of Medicare Part A payment. 
This proposal does not change the requirement that an individual is 
considered an inpatient if formally admitted as an inpatient under an 
order for inpatient admission. While this continues to be a 
requirement, as indicated earlier, technical discrepancies with the 
documentation of inpatient admission orders have led to the denial of 
otherwise medically necessary inpatient admission. To reduce this 
unnecessary administrative burden on physicians and providers, we are 
no longer requiring that the specific documentation requirements of 
inpatient admission orders be present in the medical record as a 
condition of Medicare Part A payment.
    Therefore, we are proposing to revise the regulations at 42 CFR 
412.3(a) to remove the language stating that a physician order must be 
present in the medical record and be supported by the physician 
admission and progress notes, in order for the hospital to be paid for 
hospital inpatient services under Medicare Part A. We note that we are 
not proposing any changes with respect to the ``2 midnight'' payment 
policy.

V. 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. 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

[[Page 20449]]

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.
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 2019

    The proposed annual update to the national capital Federal rate, as 
provided for in Sec.  412.308(c), for FY 2019 is discussed in section 
III. of the Addendum to 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 2019, in accordance with the 
amendments made to section 7(b)(1)(B) of Public Law 110-90 by section 
414 of the MACRA. Because these provisions require us to make an 
adjustment only to the operating IPPS standardized amount, we are not 
proposing to make a similar adjustment to the national capital Federal 
rate (or to the hospital-specific rates).

VI. Proposed Changes for Hospitals Excluded From the IPPS

A. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY 
2019

    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 applied 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. 
Furthermore, in accordance with Sec.  412.526(c)(3) of the regulations, 
extended neoplastic disease care hospitals 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 use the percentage increase in the 
IPPS operating market basket to update the target amounts for 
children's hospitals, cancer hospitals, and RNHCIs. Consistent with the 
regulations at Sec. Sec.  412.23(g), 413.40(a)(2)(ii)(A), and 
413.40(c)(3)(viii), we also use the percentage increase in the IPPS 
operating market basket to update 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 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, in the FY 2018 IPPS/LTCH 
PPS final rule, we rebased and revised the IPPS operating basket to a 
2014 base year, effective for FY 2018 and subsequent years (82 FR 38158 
through 38175), and finalized the use of 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 
years. Accordingly, for FY 2019, the rate-of-increase percentage to be 
applied to the target amount for these hospitals would be the FY 2019 
percentage increase in the 2014-based IPPS operating market basket. 
Based on IGI's 2017 fourth quarter forecast, for this proposed rule, we 
estimate that the 2014-based IPPS operating market basket update for FY 
2019 is 2.8 percent (that is, the estimate of the market basket rate-
of-increase). Therefore, the FY 2019 rate-of-increase percentage that 
would be applied to the FY 2018 target amounts in order to calculate 
the FY 2019 target amounts for children's hospitals, cancer hospitals, 
RNCHIs, and short-term acute care hospitals located in the U.S. Virgin 
Islands, Guam, the Northern Mariana Islands, and American Samoa would 
be 2.8 percent, in accordance with the applicable regulations at 42 CFR 
413.40. We are proposing that if more recent data become available for 
the final rule, we would use them to calculate the final IPPS operating 
market basket update for FY 2019.
    In addition, payment for inpatient operating costs for hospitals 
classified under section 1886(d)(1)(B)(vi) of the Act (which we refer 
to as ``extended neoplastic disease care hospitals'') for cost 
reporting periods beginning on or after January 1, 2015, is to be made 
as described in 42 CFR 412.526(c)(3), and payment for capital costs for 
these hospitals is to be made as described in

[[Page 20450]]

42 CFR 412.526(c)(4). (For additional information on these payment 
regulations, we refer readers to the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38321 through 38322).) 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 2019, in accordance with Sec.  412.22(i) and Sec.  
412.526(c)(2)(ii) of the regulations, for cost reporting periods 
beginning during FY 2019, the update to the target amount for long-term 
care neoplastic disease hospitals (that is, hospitals described under 
Sec.  412.22(i)) is the applicable annual rate-of-increase percentage 
specified in Sec.  413.40(c)(3) for FY 2019, which would be equal to 
the percentage increase in the hospital market basket index. As 
described earlier, for this proposed rule, the percentage increase in 
the hospital market basket index is estimated to be the percentage 
increase in the 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 an extended neoplastic disease 
care hospital's target amount for FY 2019 is 2.8 percent, which is 
based on IGI's 2017 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 2019.

B. Proposed Changes to Regulations Governing Satellite Facilities

    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38292 through 
38294), we finalized a change to our hospital-within-hospital (HwH) 
regulations at 42 CFR 412.22(e) to only require, as of October 1, 2017, 
that IPPS-excluded HwHs that are co-located with IPPS hospitals comply 
with the separateness and control requirements in those regulations. We 
adopted this change because we believe that the policy concerns that 
underlay the previous 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, in large part due to changes that have been 
made to the way most types of IPPS-excluded hospitals are paid under 
Medicare. In response to our proposal on this issue, we received some 
public comments requesting that CMS make analogous changes to the rules 
governing satellite facilities, and we responded in the FY 2018 IPPS/
LTCH PPS final rule that we would take that request under consideration 
for future rulemaking.
    Under 42 CFR 412.22(h), a satellite facility is defined as part of 
a hospital that provides inpatient services in a building also used by 
another hospital, or in one or more entire buildings located on the 
same campus as buildings used by another hospital.
    There are significant similarities between the definition of a 
satellite facility and the definition of an HwH as those definitions 
relate to their co-location with host hospitals. Our policies on 
satellite facilities have also been premised on many of the same 
concerns that formed the basis for our HwH policies. That is, the 
separateness and control policies for satellite facilities at 42 CFR 
412.22(h) were aimed at mitigating our concern that the co-location of 
a satellite facility and a host hospital raised a potential for 
inappropriate patient shifting that we believed could be guided more by 
attempts to maximize Medicare reimbursements than by patient welfare 
(71 FR 48107). However, just as changes to the way most types of IPPS-
excluded hospitals are paid under Medicare have sufficiently moderated 
this concern in situations where IPPS-excluded hospitals are co-located 
with each other, we believe that these payment changes also 
sufficiently moderate these concerns in situations where IPPS-excluded 
satellite facilities are co-located with IPPS-excluded host hospitals. 
Furthermore, we believe that there is no compelling policy rational for 
treating satellite facilities and HwHs differently on the issue of 
separateness and control because there is no meaningful distinction 
between these types of facilities that would justify a satellite 
facility having to comply with separateness and control requirements in 
a situation in which an HwH would not be required to comply (we note 
that the separateness and control requirements for satellite facilities 
are not the same as those for HwHs; however, they are similar). 
Therefore, we are proposing to revise our regulations at Sec.  
412.22(h)(2)(iii)(A) to only require IPPS-excluded satellite facilities 
that are co-located with IPPS hospitals to comply with the separateness 
and control requirements. Specifically, we are proposing to add a new 
paragraph (4) to Sec.  412.22(h)(2)(iii)(A) to specify that, effective 
on or after October 1, 2018, a satellite facility that is part of an 
IPPS-excluded hospital that provides inpatient services in a building 
also used by an IPPS-excluded hospital, or in one or more entire 
buildings located on the same campus as buildings used by an IPPS-
excluded hospital, is not required to meet the criteria in Sec.  
412.22(h)(2)(iii)(A)(1) through (3) in order to be excluded from the 
IPPS. Proposed new Sec.  412.22(h)(2)(iii)(A)(4) would also specify 
that a satellite facility that is part of an IPPS-excluded hospital 
which is located in a building also used by an IPPS hospital, or in one 
or more entire buildings located on the same campus as buildings used 
by an IPPS hospital, is still required to meet the criteria in Sec.  
412.22 (h)(2)(iii)(A)(1) through (3) in order to be excluded from the 
IPPS.
    As described in further detail in section VI.C. of the preamble of 
this proposed rule, we are proposing that, for cost reporting periods 
beginning on or after October 1, 2019, an IPPS excluded hospital would 
no longer be precluded from having an excluded psychiatric and/or 
rehabilitation unit. Consistent with our proposed changes to the 
regulations governing satellite facilities discussed earlier, we also 
are proposing to add new paragraph (iv) to Sec.  412.25(e)(2) to 
specify that an IPPS-excluded satellite facility of an IPPS-excluded 
unit of an IPPS-excluded hospital would not have to comply with the 
separateness and control requirements so long as the satellite of the 
excluded unit is not co-located with an IPPS hospital, and to make 
conforming revisions to Sec.  412.25(e)(2)(iii)(A) to subject that 
provision to paragraph (iv).
    It is important to point out that payment rules, such as the HwH or 
satellite facility rules, never waive or supersede the requirement that 
all hospitals must comply with the hospital conditions of participation 
(CoPs). All hospitals, regardless of payment status, must always 
demonstrate separate and independent compliance with the

[[Page 20451]]

hospital CoPs, even when an entire hospital or a part of a hospital is 
located in a building also used by another hospital, or in one or more 
entire buildings located on the same campus as buildings used by 
another hospital. We further note that this proposal would not affect 
IPPS-excluded satellite facilities that are co-located with IPPS 
hospitals that are currently grandfathered under Sec.  412.22 
(h)(2)(iii)(A)(2). Those satellite facilities would continue to 
maintain their IPPS-excluded status without complying with the 
separateness and control requirements so long as all applicable 
requirements at Sec.  412.22(h) are met.

C. Proposed Changes to Regulations Governing Excluded Units of 
Hospitals

    Under existing regulations at 42 CFR 412.25, an excluded 
psychiatric or rehabilitation unit cannot be part of an institution 
that is excluded in its entirety from the IPPS. These regulations were 
codified in the FY 1994 IPPS final rule (58 FR 46318). However, as we 
explained in that rule, while this prohibition was not explicitly 
stated in the regulations until that time, the prohibition had been our 
longstanding policy. This policy was adopted at that time because it 
would have been redundant to allow an IPPS-excluded hospital to have an 
IPPS-excluded unit because both the hospital and the unit would have 
been paid under the same Tax Equity and Fiscal Responsibility Act of 
1982 (TEFRA) payment system methodology, described in section VI.A. of 
this proposed rule. In addition, we were concerned about the 
possibility of IPPS-excluded hospitals artificially inflating their 
target amounts by operating IPPS-excluded units (58 FR 46318).
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38292 through 
38294), we finalized a change to the HwH regulations to only require, 
as of October 1, 2017, that IPPS-excluded HwHs that are co-located with 
IPPS hospitals comply with the separateness and control requirements in 
those regulations. In this proposed rule, we are proposing to make 
similar changes to the regulations governing satellite facilities, 
which would allow these facilities, including satellite facilities of 
hospital units, to maintain their IPPS-excluded status without 
complying with the separateness and control requirements so long as 
they are not co-located with an IPPS hospital. In conjunction with the 
HwH regulation changes and the proposed satellite facilities regulation 
changes, and as part of our continued efforts to reduce regulatory 
burden and achieve program simplification, we believe it is appropriate 
to propose changes to our regulations for the establishment of IPPS-
excluded units in IPPS-excluded hospitals. Given the introduction of 
prospective payment systems for both inpatient rehabilitation 
facilities and units (collectively IRFs) and psychiatric hospitals and 
units (collectively IPFs), we no longer believe it is redundant for an 
IPPS-excluded hospital to have an IPPS-excluded unit, nor is it 
possible for IPPS-excluded hospitals to use units to artificially 
inflate their target amounts, because Medicare payment for discharges 
from the units would not be based on reasonable cost. For example, 
under our proposal, an LTCH operating a psychiatric unit would receive 
payment under the IPF PPS for discharges from the psychiatric unit and 
payment under the LTCH PPS for discharges not from the psychiatric 
unit. Payment for discharges from the psychiatric unit would be made 
under the IPF PPS rather than the LTCH PPS because Medicare pays for 
services provided by an excluded hospital unit under a separate payment 
system from the hospital in which the unit is a part. For the purposes 
of payment, services furnished by a unit are considered to be inpatient 
hospital services provided by the unit and not inpatient hospital 
services provided by the hospital operating the unit.
    In this proposed rule, we are proposing to revise Sec.  
412.25(a)(1)(ii) to specify that the requirement that an excluded 
psychiatric or rehabilitation unit cannot be part of an IPPS-excluded 
hospital is only effective through cost reporting periods beginning on 
or before September 30, 2019. Under this proposal, effective with cost 
reporting periods beginning on or after October 1, 2019, an IPPS-
excluded hospital would be permitted to have an excluded psychiatric 
and/or rehabilitation unit. In addition, we are proposing to revise 
Sec.  412.25(d) to specify that an IPPS-excluded hospital may not have 
an IPPS-excluded unit of the same type (psychiatric or rehabilitation) 
as the hospital (for example, an IRF may not have an IRF unit). We 
believe that this proposed change would be consistent with the current 
preclusion in Sec.  412.25(d) that prevents one hospital from having 
more than one of the same type of IPPS-excluded unit. However, we note 
that if these proposed changes to the payment rules are finalized, an 
IPPS-excluded hospital operating an IPPS-excluded unit must continue to 
be in compliance with other Medicare regulations and CoPs applicable to 
the hospital or unit. An IPPS-excluded unit within a hospital is part 
of the hospital. Noncompliance with any of the hospital CoPs at 42 CFR 
482.1 through 482.58 at any part of a certified hospital is 
noncompliance for the entire Medicare-certified hospital. Therefore, 
noncompliance with the hospital CoPs in an IPPS excluded unit is CoP 
noncompliance for the entire certified hospital. For example, the CoPs 
that govern IPFs would apply to an IPF that operates an excluded 
rehabilitation unit, and those CoPs require that certain psychiatric 
treatment protocols apply to every IPF patient (including those in the 
rehabilitation unit).
    We are proposing cost reporting periods beginning on or after 
October 1, 2019 would be the effective date of these changes to allow 
sufficient time for both CMS and IPPS-excluded hospitals to make the 
necessary administrative and operational changes to fully implement the 
proposed changes. We believe this proposed effective date would, to the 
best of our ability, ensure that these units can begin to operate 
without unnecessary administrative issues and delays.

D. 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 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

[[Page 20452]]

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 
(81 FR 57064 through 57065) and FY 2018 IPPS/LTCH PPS final rule (82 FR 
38294 through 38296). 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 included in the RFA.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57064 through 57065) 
and FY 2018 IPPS/LTCH PPS final rule (82 FR 38294 through 38296), we 
finalized a policy to address the budget neutrality requirement for the 
demonstration. As explained in the FY 2018 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. As we 
estimated for the FY 2018 IPPS/LTCH PPS final rule, for this FY 2019 
IPPS/LTCH PPS proposed rule, we estimate 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 2018 
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 impact for any national payment system for FY 2019.

[[Page 20453]]

VII. Proposed Changes to the Long-Term Care Hospital Prospective 
Payment System (LTCH PPS) for FY 2019

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 (``subclause II'' LTCHs) also provided 
an alternative definition of LTCHs. However, section 15008 of the 21st 
Century Cures Act (Pub. L. 114-255) amended section 1886 of the Act to 
exclude former ``subclause II'' LTCHs from being paid under the LTCH 
PPS and created a new category of IPPS-excluded hospitals, which we 
refer to as ``extended neoplastic disease care hospitals''), to be paid 
as hospitals that were formally classified as ``subclause (II)'' LTCHs 
(82 FR 38298).
    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) and the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57068 through 57075).
    In the FY 2018 IPPS/LTCH PPS final rule, we implemented several 
provisions of the 21st Century Cures Act (``the Cures Act'') (Pub. L. 
114-255) that affected the LTCH PPS:
     Section 15004(a), which changed the moratorium on 
increasing the number of beds in existing LTCHs and LTCH satellite 
facilities. However, we note that this moratorium expired effective 
October 1, 2017.
     Section 15004(b), which specifies that, beginning in FY 
2018, the estimated aggregate amount of HCO payments in a given year is 
equal to 99.6875 percent of the 8 percent estimated aggregate payments 
for standard Federal payment rate cases (that is, 7.975 percent) while 
requiring that we adjust the standard Federal payment rate each year to 
ensure budget neutrality for HCO payments as if estimated aggregate HCO 
payments

[[Page 20454]]

made for standard Federal payment rate discharges remained at 8 percent 
as done through our previous regulatory requirement. (We note these 
provisions do not apply with respect to the computation of the 
applicable site neutral payment rate under section 1886(m)(6) of the 
Act.)
     Section 15006, which amended sections 114(c)(1)(A) and 
(c)(2) of the MMSEA, which provided a statutory extension on the 
moratoria on the full implementation of the 25-percent threshold policy 
on LTCH PPS discharges for LTCHs governed under Sec.  412.534, Sec.  
412.536, and Sec.  412.538 based on the LTCH's cost reporting period 
beginning dates. In addition to the statutory moratorium, in the FY 
2018 IPPS/LTCH PPS final rule, we also implemented a 1-year regulatory 
delay on the full implementation of the 25-percent threshold policy 
under Sec.  412.538 (82 FR 38318 through 38320).
     Section 15007, which extends the exclusion of Medicare 
Advantage plans' and site neutral payment rate discharges from the 
calculation of the average length of stay for all LTCHs, for discharges 
occurring in any cost reporting period beginning on or after October 1, 
2015.
     Section 15008, which changed the classification of certain 
hospitals. Specifically, section 15008 of Pub. L. 114-255 provided for 
the change in Medicare classification for ``subclause (II)'' LTCHs by 
redesignating such hospitals from section 1886(d)(1)(B)(iv)(II) of the 
Act to section 1886(d)(1)(B)(vi) of the Act, which is described 
earlier.
     Section 15009, which 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 2019 for LTCHs that meet specified statutory 
criteria to be excepted from the site neutral payment rate.
     Section 15010, which created a new 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.
    In this FY 2019 IPPS/LTCH PPS proposed rule, we are proposing to 
make conforming changes to our regulations to implement the provisions 
of section 51005 of the Bipartisan Budget Act of 2018, Pub. L. 115-123, 
which extends the transitional blended payment rate for site neutral 
payment rate cases for an additional 2 years.
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. In accordance with section 1206(a)(3) of the 
Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), as amended by 
section 15007 of Public Law 114-255, we amended our regulations to 
specify that Medicare Advantage plans' and site neutral payment rate 
discharges are excluded from the calculation of the average length of 
stay for all LTCHs, for discharges occurring in cost reporting period 
beginning on or after October 1, 2015.
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 the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57102), we 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.

B. Proposed Medicare Severity Long-Term Care Diagnosis-Related Group 
(MS-LTC-DRG) Classifications and Relative Weights for FY 2019

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

[[Page 20455]]

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 2019, there would be 761 MS-DRG groupings based on 
the proposed changes discussed in section II.F. of the preamble of this 
FY 2019 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 2019 MS-
LTC-DRG relative weights under the LTCH PPS.
    In this proposed rule, in general, for FY 2019, 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 
VII.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 proposing that the annual 
recalibration of the MS-LTC-DRG relative weights are 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 VII.B.3.c. of the preamble 
of this proposed rule). In addition, in this FY 2019 IPPS/LTCH PPS 
proposed rule, for FY 2019, 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 VII.B.3.c. of the preamble of this proposed rule.
    Furthermore, for FY 2019, 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 VII.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

[[Page 20456]]

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 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 2019
    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, in this FY 2019 IPPS/LTCH PPS proposed rule, we are proposing to 
update the MS-LTC-DRG classifications effective October 1, 2018, 
through September 30, 2019 (FY 2019), 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 2019 presented in this proposed rule are the same as 
the proposed MS-DRGs that are being used under the IPPS for FY 2019. In 
addition, because the MS-LTC-DRGs for FY 2019 are the same as the 
proposed MS-DRGs for FY 2019, the other proposed changes that affect 
MS-DRG (and by extension MS-LTC-DRG) assignments under proposed GROUPER 
Version 36 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 2019.
3. Development of the Proposed FY 2019 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

[[Page 20457]]

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.
b. Development of the Proposed MS-LTC-DRG Relative Weights for FY 2019
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38303 through 
38304), we presented our policies for the development of the MS-LTC-DRG 
relative weights for FY 2018.
    In this FY 2019 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 2019, 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 2019, and we discuss the effects of our proposals 
concerning the data used to determine the proposed FY 2019 MS-LTC-DRG 
relative weights on the various components of our existing methodology 
in the discussion that follows.
    In previous fiscal years, Table 13A--Composition of Low-Volume 
Quintiles for MS-LTC-DRGs (which was listed in section VI. of the 
Addendum to the proposed and final rules and available via the internet 
on the CMS website) listed the composition of the low-volume quintiles 
for MS-LTC-DRGs for the respective year, and Table 13B--No-Volume MS-
LTC-DRG Crosswalk (also listed in section VI. of the Addendum to the 
proposed rule final rules and available via the internet on the CMS 
website) listed the no-volume MS-LTC-DRGs and the MS-LTC-DRGs to which 
each was cross-walked (that is, the cross-walked MS-LTC-DRGs). The 
information contained in Tables 13A and 13B is used in the development 
Table 11--MS-LTC-DRGs, Relative Weights, Geometric Average Length of 
Stay, and Short-Stay Outlier (SSO) Threshold for LTCH PPS Discharges, 
which contains the proposed MS-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) for the 
respective fiscal year (and also is listed in section VI. of the 
Addendum to the proposed and final rules and is available via the 
internet on the CMS website). Because the information contained in 
Tables 13A and 13B does not contain proposed payment rates or factors 
for the applicable payment year, we are proposing to generally provide 
the data previously published in Tables 13A and 13B for each annual 
proposed and final rule as one of our supplemental IPPS/LTCH PPS 
related data files that are made available for public use via the 
internet on the CMS website for the respective rule and fiscal year 
(that is, FY 2019 and subsequent fiscal years) at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. To streamline the information made 
available to the public that is used in the annual development of Table 
11, we believe that this proposed change in the presentation of the 
information contained in Tables 13A and 13B will make it easier for the 
public to navigate and find the relevant data and information used for 
the development of proposed payment rates or factors for the applicable 
payment year while continuing to furnish the same information the 
tables provided in previous fiscal years.
c. Data
    For this proposed rule, consistent with our proposals regarding the 
calculation of the proposed MS-LTC-DRG relative weights for FY 2019, we 
obtained total charges from FY 2017 Medicare LTCH claims data from the 
December 2017 update of the FY 2017 MedPAR file, which are the best 
available data at this time, and we are proposing to use Version 36 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 36 of the GROUPER in 
establishing the FY 2019 MS-LTC-DRG relative weights in the final rule. 
To calculate the proposed FY 2019 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 2017 update of the FY 
2017 MedPAR file to determine which LTCH cases would meet the criteria 
for exclusion from the site neutral payment

[[Page 20458]]

rate under Sec.  412.522(b) had the dual rate LTCH PPS payment 
structure applied to those cases at the time of discharge. We 
identified the FY 2017 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 2017 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 2019 MS-LTC-DRG relative weights 
using our current methodology, we are not making 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 Public Law 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 meet the criteria to be excluded from 
the site neutral payment rate under those exceptions (or would have met 
the criteria for exclusion 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 Public Law 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 Public Law 90-248 or section 222(a) of Public Law 92-603. In 
addition, consistent with our historical practice and our policies, 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 2019.
    In summary, in general, we identified the claims data used in the 
development of the proposed FY 2019 MS-LTC-DRG relative weights in this 
proposed rule, as we are proposing, by trimming claims data that were 
paid the site neutral payment rate (or would have been paid the site 
neutral payment 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 
2017 update of the FY 2017 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 2017 update of the FY 2017 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 2019.
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 2019 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 2019. 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 2019, we are 
proposing to continue 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 VII.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

[[Page 20459]]

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 an 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 2019, 
we are proposing to continue to use applicable LTCH cases to establish 
the same volume-based categories to calculate the FY 2019 MS-LTC-DRG 
relative weights.
    In determining the proposed FY 2019 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 VII.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 VII.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 2017 update of the FY 2017 MedPAR files), we identified 
271 proposed MS-LTC-DRGs that contained between 1 and 24 applicable 
LTCH cases. This list of proposed MS-LTC-DRGs was then divided into 1 
of the proposed 5 low-volume quintiles, each containing at least 54 MS-
LTC-DRGs (271/5 = 54 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 data available for this 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. 
Specifically for this proposed rule, after organizing the proposed MS-
LTC-DRGs by ascending order by average charge, we would assign the 
first 54 (1st through 54th) of proposed low-volume MS-LTC-DRGs (with 
the lowest average charge) into Quintile 1. The 54 proposed MS-LTC-DRGs 
with the highest average charge cases would be assigned into Quintile 
5. Because the average charge of the 216th proposed low-volume MS-LTC-
DRG in the sorted list was closer to the average charge of the 215th 
proposed low-volume MS-LTC-DRG (assigned to Quintile 4) than to the 
average charge of the 217th proposed low-volume MS-LTC-DRG (assigned to 
Quintile 5), we assigned it to Quintile 4 (such that Quintile 4 
contains 55 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 54 proposed MS-LTC-DRGs 
(Quintiles 1, 2, 3, and 5) and 1 proposed low-volume quintile 
containing 55 MS-LTC-DRGs (Quintile 4). As discussed earlier, for this 
proposed rule, we are proposing to provide the list of the proposed 
composition of the low-volume quintiles for MS-LTC-DRGs for FY 2019 
(previously displayed in Table 13A, which was in previous fiscal years 
listed in section VI. of the Addendum to the respective proposed and 
final rules and available via the internet on the CMS website) in a 
supplemental data file for public use posted via the internet on the 
CMS website for this proposed rule at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html in order 
to streamline the information made available to the public that is used 
in the annual development of Table 11.
    In order to determine the proposed FY 2019 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 
VII.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

[[Page 20460]]

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 2019 MS-LTC-DRG Relative 
Weights
    In this proposed rule, we are proposing to continue to use our 
current methodology to determine the proposed FY 2019 MS-LTC-DRG 
relative weights.
    In summary, to determine the proposed FY 2019 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 2019 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 2019 
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 2019 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 2019 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 2019 
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 
2019 MS-LTC-DRG relative weights, consistent with our historical 
approach, we are proposing to adjust each LTCH's charges per discharge 
for those remaining cases (that is, trimmed applicable LTCH cases) for 
the effects of SSOs (as defined in Sec.  412.529(a) in conjunction with 
Sec.  412.503). Specifically, we 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 2019 MS-LTC-DRG relative weights would 
lower the proposed FY 2019 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 2019 MS-LTC-DRG relative weights 
on an iterative basis.
    Consistent with our historical relative weight methodology, we are 
proposing to calculate the proposed FY 2019 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 2019 
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

[[Page 20461]]

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 2019 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 2017 update of the FY 2017 
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 generally 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 his 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 761 proposed MS-LTC-DRGs for FY 2019, we identified 347 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 347 no-volume proposed MS-LTC-
DRGs that contained trimmed applicable LTCH cases based on clinical 
similarity and relative costliness to 1 of the remaining 414 (761 - 347 
= 414) proposed MS-LTC-DRGs for which we calculated proposed relative 
weights based on the trimmed applicable LTCH cases in the FY 2017 
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 347 ``no volume'' proposed MS-LTC-DRGs.) Then, we are generally 
proposing to assign the 347 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 2017 update of the FY 2017 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 proposed MS-LTC-DRGs in 
FY 2018, the proposed relative weights assigned based on the cross-
walked proposed 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 2019. We note that, if the cross-walked proposed 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 2019. (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.)
    As discussed earlier, for this proposed rule, we are proposing to 
provide the list of the no-volume proposed MS-LTC-DRGs and the proposed 
MS-LTC-DRGs to which each was cross-walked (that is, the cross-walked 
proposed MS-LTC-DRGs) for FY 2019 (previously displayed in Table 13B, 
which was in previous fiscal years listed in section VI. of the 
Addendum to the respective proposed and final rules and available via 
the internet on the CMS website) in a supplemental data file for public 
use posted via the internet on the CMS website for this proposed rule 
at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html in order to streamline the information 
made available to the public that is used in the annual development of 
Table 11.
    To illustrate this methodology for determining the proposed 
relative weights for the proposed FY 2019 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 2019 (which, as

[[Page 20462]]

previously stated, we are proposing to provide in a supplemental data 
file posted via the internet on the CMS website for this proposed 
rule).
    Example: There were no trimmed applicable LTCH cases in the FY 2017 
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 0.8881 for FY 2019 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 website).
    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 used 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 2019, 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 proposed transplant MS-LTC-
DRGs in the GROUPER program for administrative purposes only. Because 
we use the same GROUPER program for LTCHs as is used under the IPPS, 
removing these MS-LTC-DRGs would be administratively burdensome. (For 
additional information regarding our treatment of transplant MS-LTC-
DRGs, we refer readers to the RY 2010 LTCH PPS final rule (74 FR 
43964).) In addition, consistent with our historical policy, 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.
    As discussed in section VII.C. of the preamble of this proposed 
rule, section 51005 of the Bipartisan Budget Act of 2018 (Public Law 
115-123) extended the transitional blended payment rate for site 
neutral payment rate cases for an additional 2 years (that is, 
discharges occurring in cost reporting periods beginning in FYs 2018 
and 2019 will continue to be paid under the blended payment rate). 
Therefore, in this proposed rule, consistent with our practice in FYs 
2016 through 2018, we are proposing to establish a proposed relative 
weight for FY 2019 equal to the respective FY 2015 relative weight of 
the MS-LTC-DRGs for the following ``psychiatric or rehabilitation'' 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); 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 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, which was extended to include FYs 2018 and 2019 under 
Public Law 115-123. (We refer readers to section VII.C. of the preamble 
of this proposed rule for a detailed discussion of the extension of the 
transitional blended payment method provisions under Public Law 115-123 
and our proposals for FY 2019. 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, 2018, and on or 
before September 30, 2019, 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 2019, we assigned a 
proposed relative weight to these proposed MS-LTC-DRGs for FY 2019 that 
is the same as the FY 2018 relative weight (which is also the same as 
the FYs 2016 and 2017 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 MS-LTC-DRGs for which we are able to determine 
proposed relative weights based on applicable LTCH cases in the 
December 2017 update of the FY 2017 MedPAR file data using the steps

[[Page 20463]]

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 purposes of determining half of the 
transitional blended payment for site neutral payment rate cases during 
the transition period (80 FR 49631 through 49632) or payment for 
discharges from spinal cord specialty hospitals under Sec.  
412.522(b)(4).
    In summary, for FY 2019, 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 website, reflects this policy.
    Step 6--Adjust the proposed FY 2019 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 2019 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 website.
    Step 7-- Calculate the proposed FY 2019 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 2019 based on the most recent available 
LTCH data for applicable LTCH cases, and continue to apply a budget 
neutrality adjustment in determining the proposed FY 2019 MS-LTC-DRG 
relative weights.
    In this FY 2019 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 2019, we 
grouped applicable LTCH cases using the proposed FY 2019 Version 36 
GROUPER, and the recalibrated proposed FY 2019 MS-LTC-DRG relative 
weights to calculate the average case-mix index (CMI); we grouped the 
same applicable LTCH cases using the FY 2018 GROUPER Version 35 and MS-
LTC-DRG relative weights and calculated the average CMI; and computed 
the ratio by dividing the average CMI for FY 2018 by the average CMI 
for proposed FY 2019. 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 2019 LTCH PPS standard Federal payment 
rate payments for applicable LTCH cases using the proposed FY 2019 
normalized relative weights and proposed GROUPER Version 36; simulated 
estimated total FY 2018

[[Page 20464]]

LTCH PPS standard Federal payment rate payments for applicable LTCH 
cases using the FY 2018 MS-LTC-DRG relative weights and the FY 2018 
GROUPER Version 35; and calculated the ratio of these estimated total 
payments by dividing the simulated estimated total LTCH PPS standard 
Federal payment rate payments for FY 2018 by the simulated estimated 
total LTCH PPS standard Federal payment rate payments for FY 2019. 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 2019, 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 2019 (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 2017 MedPAR file) and grouped them using the 
proposed FY 2019 GROUPER (that is, Version 36 for FY 2019) and the 
recalibrated proposed FY 2019 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 2018 GROUPER (Version 35) and FY 2018 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 2018 (determined in Step 1.b.) by the average case-
mix index for FY 2019 (determined in Step 1.a.). As a result, in 
determining the proposed MS-LTC-DRG relative weights for FY 2019, each 
recalibrated proposed MS-LTC-DRG relative weight is multiplied by the 
proposed normalization factor of 1.27598 (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 2019 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 2019 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 2019, 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 2019 and GROUPER 
Version 35 (as described above); (2.b.) simulated estimated total FY 
2018 LTCH PPS standard Federal payment rate payments for applicable 
LTCH cases using the FY 2018 GROUPER (Version 35) and the FY 2018 MS-
LTC-DRG relative weights in Table 11 of the FY 2018 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 
2019 MS-LTC-DRG relative weights, each normalized proposed relative 
weight is then multiplied by a budget neutrality factor of 0.992183 
(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 2019 MS-LTC-DRG 
relative weights in this proposed rule, consistent with our existing 
methodology, we are proposing to apply a normalization factor of 
1.27598 and a budget neutrality factor of 0.992183. Table 11, which is 
listed in section VI. of the Addendum to this proposed rule and is 
available via the internet on the CMS website, lists the proposed MS-
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 2019.

C. Proposed Modifications to the Application of the Site Neutral 
Payment Rate (Sec.  412.522)

    Section 1206 of Pathway for SGR Reform Act (Public Law 113-67) 
mandated the new dual rate payment system under the LTCH PPS beginning 
with LTCH discharges occurring in cost reporting periods beginning on 
or after October 1, 2015. In addition, the statute established a 
transitional blended payment method for cases that would be paid the 
site neutral payment rate for LTCH discharges occurring in cost 
reporting periods beginning during FY 2016 or FY 2017. For those 
discharges, the applicable site neutral payment rate is the 
transitional blended payment rate specified in section 
1886(m)(6)(B)(iii) of the Act. Section 1886(m)(6)(B)(iii) of the Act 
specifies that the transitional blended payment rate is comprised of 50 
percent of the site neutral payment rate for the discharge under 
section 1886(m)(6)(B)(ii) of the Act and 50 percent of the LTCH PPS 
standard Federal payment rate that would have applied to the discharge 
if paragraph (6) of section 1886(m) of the Act had not been enacted.
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49610 through 
49612), we specified under Sec.  412.522(c)(3), for LTCH discharges 
occurring in cost reporting periods beginning on or after October 1, 
2015, and on or before September 30, 2017 (that is, discharges 
occurring in cost reporting periods beginning during FYs 2016 and 
2017),

[[Page 20465]]

that the 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 determined under Sec.  412.523. 
In addition, we established that the payment amounts determined under 
Sec.  412.522(c)(1) (the site neutral payment rate) and under Sec.  
412.523 (the LTCH PPS standard Federal rate) include any applicable 
adjustments, such as HCO payments, as applicable.
    Section 51005 of the Bipartisan Budget Act of 2018 (Public Law 115-
123) extended the transitional blended payment rate period for site 
neutral payment rate cases for 2 years, and provided for an adjustment 
to the payment for discharges paid under the site neutral payment rate 
through FY 2026. Specifically, section 51005(a) of Public Law 115-123 
amended section 1886(m)(6)(B)(i) of the Act to extend the transitional 
blended payment rate for site neutral payment rate cases for an 
additional 2 years; that is, discharges occurring in cost reporting 
periods beginning in FYs 2018 and 2019 will continue to be paid under 
the blended payment rate. To codify the provisions of section 51005(a) 
of Public Law 115-123, we are proposing to revise our regulations at 
Sec.  412.522(c)(3) to reflect the extension of the transitional 
blended payment rate period for discharges paid at the site neutral 
payment rate to include discharges occurring in cost reporting periods 
beginning on or before September 30, 2019.
    In addition, as initially enacted, section 1886(m)(6)(B)(iii) of 
the Act specified that, for LTCH discharges occurring in cost reporting 
periods beginning during FY 2018 or later, the applicable site neutral 
payment rate would be the site neutral payment rate as defined in 
section 1886(m)(6)(B)(ii) of the Act. Section 51005(b) of Public Law 
115-123 amended section 1886(m)(6)(B) by adding new clause (iv), which 
specifies that the IPPS comparable amount defined at section 
1886(m)(6)(B)(ii)(I) shall be reduced by 4.6 percent for FYs 2018 
through 2026. In order to implement section 51005(b) of Public Law 115-
123, we are proposing to revise Sec.  412.522(c)(1) by adding new 
paragraph (iii) to specify that, for discharges occurring in FYs 2018 
through 2026, the amount payable under Sec.  412.522(c)(1)(i) (that is, 
the IPPS comparable amount) will be reduced by 4.6 percent.
    We also are proposing to make a conforming amendment to Sec.  
412.500, which specifies the basis and scope of subpart O of 42 CFR 
part 412, by adding paragraph (a)(9) to reflect the provisions of 
section 51005 of the Bipartisan Budget Act of 2018.

D. Proposed Changes to the LTCH PPS Payment Rates and Other Proposed 
Changes to the LTCH PPS for FY 2019

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 412.538. 
In this section, we discuss the factors that we are proposing to use to 
update the LTCH PPS standard Federal payment rate for FY 2019, that is, 
effective for LTCH discharges occurring on or after October 1, 2018 
through September 30, 2019. 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); FY 2017 IPPS/LTCH PPS final rule (81 FR 57296 through 
57310); and the FY 2018 IPPS/LTCH PPS final rule (82 FR 58536 through 
58547).
    In this FY 2019 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 2019.
    The proposed update to the LTCH PPS standard Federal payment rate 
for FY 2019 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 2019 are discussed below, 
including the statutory reduction to the annual update for LTCHs that 
fail to submit quality reporting data for FY 2019 as required by the 
statute (as discussed in section VII.E.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 2019 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).
2. Proposed FY 2019 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 market basket for use under the LTCH PPS 
beginning in FY 2017 (81 FR 57100 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

[[Page 20466]]

preamble of the FY 2017 IPPS/LTCH PPS proposed and final rules (81 FR 
25153 through 25167 and 81 FR 57086 through 57099, respectively).
    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'' 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 2019
    CMS has used an estimated market basket increase to update the LTCH 
PPS. As noted above, we adopted the 2013-based LTCH market basket for 
use under the LTCH PPS beginning in FY 2017. The 2013-based LTCH 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 market basket, we refer readers to the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 57101 through 57102).) We continue to believe that the 
2013-based LTCH market basket appropriately reflects the cost structure 
of LTCHs for the reasons discussed when we adopted its use in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57100). Therefore, in this 
proposed rule, we are proposing to use the 2013-based LTCH market 
basket to update the LTCH PPS standard Federal payment rate for FY 
2019.
    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) of the Act 
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) of the Act 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 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.
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, the Secretary 
established the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP). The reduction in the annual update to the LTCH PPS standard 
Federal payment rate for failure to report quality data under the LTCH 
QRP for FY 2014 and subsequent fiscal years is codified under 42 CFR 
412.523(c)(4). 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. 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). These requirements are codified in the regulations at 
Sec.  412.523(c)(4). (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. of the preamble of this proposed 
rule.)
d. Proposed Annual Market Basket Update Under the LTCH PPS for FY 2019
    Consistent with our historical practice and our proposal, we 
estimate the market basket increase and the MFP adjustment based on 
IGI's forecast using the most recent available data. Based on IGI's 
fourth quarter 2017 forecast, the FY 2019 full market basket estimate 
for the LTCH PPS using the 2013-based LTCH market basket is 2.7 
percent. The current estimate of the MFP adjustment for FY 2019 based 
on IGI's fourth quarter 2017 forecast is 0.8 percent.
    For FY 2019, section 1886(m)(3)(A)(i) of the Act requires that any 
annual update to the LTCH PPS standard Federal payment rate be reduced 
by the productivity adjustment (``the MFP adjustment'') described in 
section 1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, 
we are proposing to reduce the full estimated FY 2019 market basket 
increase by the proposed FY 2019 MFP adjustment. To determine the 
proposed market basket increase for LTCHs for FY 2019, as reduced by 
the proposed MFP adjustment, consistent with our established 
methodology, we are subtracting the proposed FY 2019 MFP adjustment 
from the estimated FY 2019 market basket increase. Furthermore, 
sections 1886(m)(3)(A)(ii) and 1886(m)(4)(E) of the Act requires that 
any annual update to the LTCH PPS standard Federal payment rate for FY 
2019 be reduced by the ``other adjustment'' described in paragraph (4), 
which is 0.75 percent for FY 2019. Therefore, following application of 
the proposed productivity adjustment, we are proposing to further 
reduce the proposed adjusted market basket update (that is, the 
proposed full FY 2019 market basket increase less the proposed MFP 
adjustment) by the ``other adjustment'' specified by sections 
1886(m)(3)(A)(ii) and 1886(m)(4) of the Act. (For additional details on 
our established methodology for adjusting the market basket increase by 
the MFP adjustment and the ``other adjustment'' required by the 
statute, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51771).)
    For FY 2019, 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.

[[Page 20467]]

Therefore, the proposed update to the LTCH PPS standard Federal payment 
rate for FY 2019 for LTCHs that fail to submit quality reporting data 
under the LTCH QRP, the full LTCH PPS market basket increase estimate, 
subject to the MFP adjustment as required under section 
1886(m)(3)(A)(i) of the Act and an additional reduction required by 
sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, is also further 
reduced by 2.0 percentage points.
    In this FY 2019 IPPS/LTCH PPS proposed rule, in accordance with the 
statute, we are proposing to reduce the proposed FY 2019 full market 
basket estimate of 2.7 percent (based on IGI's fourth quarter 2017 
forecast of the 2013-based LTCH market basket) by the proposed FY 2019 
MFP adjustment of 0.8 percentage point (based on IGI's fourth quarter 
2017 forecast). Following application of the proposed MFP adjustment, 
we are proposing to reduce the proposed adjusted market basket update 
of 1.9 percent (2.7 percent minus 0.8 percentage point) by 0.75 
percentage point, as required by sections 1886(m)(3)(A)(ii) and 
1886(m)(4)(F) of the Act. Therefore, under the authority of section 123 
of the BBRA as amended by section 307(b) of the BIPA, we are proposing 
an annual market basket update to the LTCH PPS standard Federal payment 
rate for FY 2019 of 1.15 percent (that is, the most recent estimate of 
the proposed LTCH PPS market basket increase of 2.7 percent, less the 
proposed MFP adjustment of 0.8 percentage point, and less the 0.75 
percentage point required under section 1886(m)(4)(F) of the Act). 
Accordingly, we are proposing to revise Sec.  412.523(c)(3) by adding a 
new paragraph (xv), which would specify that the LTCH PPS standard 
Federal payment rate for FY 2019 is the LTCH PPS standard Federal 
payment rate for the previous LTCH PPS payment year updated by 1.15 
percent, and as further adjusted, as appropriate, as described in Sec.  
412.523(d) (including the proposed budget neutrality adjustment for the 
proposed elimination of the 25-percent threshold policy under proposed 
Sec.  412.523(d)(6) discussed in section VII.E. of the preamble of this 
proposed rule). For LTCHs that fail to submit quality reporting data 
under the LTCH QRP, under proposed Sec.  412.523(c)(3)(xv) 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. Accordingly, we are proposing an annual update 
to the LTCH PPS standard Federal payment rate of -0.85 percent (that 
is, 1.15 percent minus 2.0 percentage points) for FY 2019 for LTCHs 
that fail to submit quality reporting data as required under the LTCH 
QRP. As stated earlier, consistent with our historical practice, we are 
proposing to use a more recent estimate of the market basket and the 
MFP adjustment to establish an annual update to the LTCH PPS standard 
Federal payment rate for FY 2019 under Sec.  412.523(c)(3)(xv) in the 
FY 2019 IPPS/LTCH PPS final rule. (We note that, consistent with 
historical practice, we also are proposing to adjust the proposed FY 
2019 LTCH PPS standard Federal payment rate by an area wage level 
budget neutrality factor in accordance with Sec.  412.523(d)(4) (as 
discussed in section V.B.5. of the Addendum to this proposed FY 2019 
rule).)

E. Proposed Elimination 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 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 25-percent threshold policy. For more details on the various 
laws that delayed the full implementation of the 25-percent threshold 
policy, we refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38318 through 38319).
    In light of 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 the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38320), we adopted a 1-year regulatory moratorium on the 
implementation of the 25-percent threshold policy; that is, we imposed 
a regulatory moratorium on our implementation of the provisions of 
Sec.  412.538 until October 1, 2018.
    Since the introduction of the site neutral payment rate in FY 2016, 
many public commenters have asserted that the new site neutral payment 
rate would alleviate the policy concerns underlying the establishment 
of the 25-percent threshold policy. As we stated in our response to 
those comments in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57106) 
and in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38320), at that 
time, we were not convinced that this was the case. In addition, we 
received many public comments urging CMS to permanently rescind the 25-
percent threshold policy in response to the Request for Information on 
CMS Flexibilities and Efficiencies that was included in the FY 2018 
IPPS/LTCH PPS proposed rule (82 FR 20159). These public comments also 
asserted that this policy is no longer necessary in light of the new 
dual payment rate system.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed and final rules 
(82 FR 20028 and 82 FR 38318 through 38319, respectively), the best 
available LTCH claims data at the time of the development of both rules 
(FY 2016 discharges) included many LTCH discharges that occurred during 
FY 2016 that were not yet subject to the site neutral payment rate 
because 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 (that is, LTCH cost reporting periods beginning 
in FY 2016). Therefore, all FY 2016 discharges that occurred in a LTCH 
cost reporting period that began prior to October 1, 2016 were not 
subject to the site neutral payment rate.
    Given these widespread concerns, the longstanding statutory delays, 
and the limited experience under the new dual rate payment system, we 
implemented the 1-year regulatory moratorium for FY 2018 to allow for 
the opportunity to do an analysis of LTCH admission practices under the 
new dual payment rate under the LTCH PPS based on more complete data. 
This implementation plan was, in part, intended to avoid confusion and 
expending unnecessary resources in implementation should our analysis 
ultimately conclude that the policy concerns underlying the 25-percent

[[Page 20468]]

threshold policy have been moderated (82 FR 38320).
    Since establishing the current regulatory moratorium in the FY 2018 
IPPS/LTCH PPS rulemaking, we have continued to receive additional 
communications seeking an end to our 25-percent threshold policy. We 
have considered these requests, along with reconsidering the many 
requests and public comments received through rulemaking, as we have 
reviewed our policies in the context of our ongoing initiative to 
reduce unnecessary regulatory burden. Our review also took note of the 
significant changes to LTCH admission practices and the LTCH PPS 
payment structure since the advent of the 25-percent threshold policy's 
adoption, such as the introduction of the site neutral payment rate 
beginning in FY 2016. One effect of these changes is the creation of a 
financial incentive for LTCHs to limit admissions according to the 
criteria for payment at the LTCH PPS standard Federal payment rate. 
While these changes do not specifically address our regulatory 
requirement to ensure that an LTCH does not act as an IPPS step-down 
unit, we believe that the creation of these financial incentives likely 
results in LTCH providers closely considering the appropriateness of 
admitting a potential transfer to an LTCH setting, regardless of the 
referral source, thereby lessening the concerns that led to the 
introduction of the 25-percent threshold policy.
    In light of these factors, we recognize that the policy concerns 
that led to the 25-percent threshold policy may have been ameliorated, 
and that implementation of the 25-percent threshold policy would place 
a regulatory burden on providers. Therefore, we believe it is 
appropriate at this time to propose the removal of this payment 
adjustment policy. For these same reasons, we believe the specific 
regulatory framework of the 25-percent threshold policy at Sec.  
412.538 is no longer an appropriate mechanism to ensure that the 
statutory requirement that an LTCH does not act as a defacto unit of an 
IPPS hospital is not violated. Therefore, in this proposed rule, we are 
proposing to eliminate the 25-percent threshold policy under Sec.  
412.538.
    The goal of our proposal to eliminate the 25-percent threshold 
policy is to reduce unnecessary regulatory burden. Independent of this 
goal, we continue to believe aggregate LTCH PPS payments are 
sufficient. Therefore, we do not believe that it would be appropriate 
to change the aggregate amount of LTCH PPS payments on a permanent 
basis. As described earlier, the 25-percent threshold policy would have 
reduced the LTCH PPS payments for certain discharges, and if finalized, 
this proposal to eliminate the 25-percent threshold policy would be 
expected to result in an increase in aggregate LTCH PPS payments. As a 
result, we believe that this proposal should be accomplished in a 
budget-neutral manner.
    With respect to the issue about the adequacy of LTCH payment 
levels, we note that MedPAC, in each of its annual updates to Congress 
since 2011, has concluded that current LTCH PPS payment levels are 
appropriate, and thus has recommended since 2011 the elimination of the 
annual update to the LTCH payment rates. (For example, we refer readers 
to MedPAC's March 2011 ``Report to the Congress: Medicare Payment 
Policy,'' Chapter 10, page 246, and MedPAC's March 2018 ``Report to the 
Congress: Medicare Payment Policy,'' Chapter 11, page 315.) We believe 
application of this burden reduction-related proposal to eliminate the 
25-percent threshold policy would result in an unwarranted increase in 
aggregate payment levels. Therefore, if we finalize our proposal to 
eliminate the 25-percent threshold policy, under the broad authority of 
section 123 of the BBRA, as amended by section 307(b) of the BIPA, we 
also are proposing to make a one-time, permanent adjustment to the 
proposed FY 2019 LTCH PPS standard Federal payment rate. That 
adjustment would be set such that our projection of aggregate LTCH 
payments in FY 2019 that would have been paid if the 25-percent 
threshold policy had gone into effect (that is, as if the 25-percent 
threshold policy under Sec.  412.538 remained in effect during FY 2019) 
are equal to our projection of aggregate LTCH payments in FY 2019 
payments for such cases in the absence of that policy.
    To do this, we are proposing to remove the provisions of Sec.  
412.538, reserve this section, and add a new paragraph (d)(6) to Sec.  
412.523 to provide for a one-time permanent budget neutrality factor 
adjustment to the LTCH PPS standard Federal payment rate to ensure that 
removal of the 25-percent threshold policy at existing Sec.  412.538 is 
budget neutral. (We note that, in the proposed Sec.  412.523(d)(6), we 
refer to the 25-percent threshold policy as ``limitation on long-term 
care hospital admissions from referring hospitals'', which is the title 
of existing Sec.  412.538.) In addition, we are proposing to make 
conforming technical changes to remove paragraph (c)(2)(v) of Sec.  
412.522 and paragraph (d)(6) of Sec.  412.525.
    Under this proposal, the budget neutrality adjustment would only be 
applied to the LTCH PPS standard Federal payment rate (or such portion 
of a blended payment) because payments made under the site neutral 
payment rate would be unaffected by the 25-percent threshold policy. 
(Discharges in excess of the 25-percent threshold policy would be paid 
the lesser of the applicable LTCH payment or an IPPS equivalent 
payment. The site neutral payment rate would remain set at the lesser 
of the IPPS comparable amount or cost, neither of which would exceed 
the IPPS equivalent payment amount.) However, because the applicable 
site neutral payment rate for all LTCHs during all of FY 2019 is based 
on the transitional blended payment rate (that is, 50 percent of the 
site neutral payment rate and 50 percent of the LTCH PPS standard 
Federal payment rate), any adjustment applied to the LTCH PPS standard 
Federal payment rate would also need to be applied to the LTCH PPS 
standard Federal rate portion of payments that affect site neutral 
payment rate cases.
    Therefore, as noted earlier, we must account for the change in 
payments to both LTCH PPS standard Federal payment rate cases and site 
neutral payment rate cases when determining the proposed budget 
neutrality adjustment. To do so, we are proposing to use the following 
methodology to determine the proposed budget neutrality factor that 
would be applied to the proposed FY 2019 LTCH PPS standard Federal 
payment rate using the best available LTCH claims data (the December 
2017 update of the FY 2017 MedPAR files). 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 2019 LTCH PPS payments 
(that is, both LTCH PPS standard Federal payment rate payment cases and 
site neutral payment rate cases) without the 25-percent threshold 
policy at Sec.  412.538.
    Step 2--Estimate aggregate payments incorporating the payment 
reduction under the 25-percent threshold policy at Sec.  412.538 as 
follows:
     Step 2a--Determine the applicable percentage threshold for 
each LTCH. In general, the applicable percentage threshold is 25 
percent; however, the applicable percentage threshold is 50 percent for 
exclusively rural LTCHs, and LTCHs located in an MSA with an MSA-
dominant hospital get an adjusted threshold (Sec.  412.538(e)). To 
determine the applicable percentage threshold for LTCHs located in an 
MSA with an MSA-dominant hospital, we used IPPS claims data from the 
March 2017 update

[[Page 20469]]

of the FY 2016 MedPAR files to determine, for each CBSA, the highest 
discharge percentage among all IPPS providers within that CBSA. (As 
discussed in section V. of the Addendum to this proposed rule, the 
CBSA-based geographic classifications currently used under the LTCH PPS 
are based on the OMB labor market area delineations based on the 2010 
Decennial Census data (that is, are an MSA under Sec.  412.503). The 
applicable percentage threshold for a given CBSA is this highest 
discharge percentage unless this percentage is higher than 50 percent 
or lower than 25 percent. In those cases, the threshold is 50 percent 
or 25 percent, respectively (Sec.  412.538(e)(3)).
     Step 2b--For each LTCH, determine the percentage of 
Medicare discharges admitted from any single referring IPPS hospital, 
consistent with Sec.  412.538(d)(2). To do so, we used the March 2017 
update of the FY 2016 MedPAR files to determine the total discharges 
for each LTCH and the number of applicable transfers from each 
referring IPPS hospital. The referring IPPS hospital's applicable 
transfers are the LTCH's Medicare discharges that were admitted from 
that single referring IPPS hospital where an outlier payment was not 
made to that referring hospital and for whom payment was not made by a 
Medicare Advantage plan. The ratio of the referring IPPS hospital's 
applicable transfers to the LTCH's total Medicare discharges, 
multiplied by 100, is the percentage of Medicare discharges admitted 
from any single referring IPPS hospital.
     Step 2c--Estimate the aggregate payment reduction under 
the 25-percent threshold policy:
    (i) Determine the LTCH's discharges that are in excess of the 
applicable percentage threshold by comparing the LTCH's percentage of 
Medicare discharges admitted from each single referring IPPS hospital 
(Step 2b) to the LTCH's applicable percentage threshold (Step 2a).
    (ii) Estimate the aggregate payment reduction under the 25-percent 
threshold policy for the Medicare discharges that caused the LTCH to 
exceed or remain in excess of the threshold by summing the difference 
between:
     The original LTCH PPS payment amount (that is, the 
otherwise applicable LTCH PPS payment without an adjustment under the 
25-percent threshold policy); and
     The estimated adjusted payment amount under the 25-percent 
threshold policy. (We note that there is no payment adjustment under 
the 25-percent threshold policy for discharges that are not in excess 
of the LTCH's applicable percentage threshold.)
    Step 3--Calculate the ratio of the estimated aggregate FY 2019 LTCH 
PPS payments with and without the estimated aggregate payment reduction 
under the 25-percent threshold policy to determine the adjustment 
factor that would need to be applied to the proposed FY 2019 LTCH PPS 
standard Federal payment rate to achieve budget neutrality (that is, 
the adjustment that would have to be applied to the proposed FY 2019 
LTCH PPS standard Federal payment rate so that the estimated aggregate 
payments calculated in Step 1 are equal to the estimated aggregate 
payments with the reduction as calculated in Step 2). This ratio is 
calculated by dividing the estimated FY 2019 payments without 
incorporating the estimated aggregate payment reduction under the 25-
percent threshold policy at Sec.  412.538 (calculated in Step 1) by the 
estimated FY 2019 payments incorporating the estimated aggregate 
payment reduction under the 25-percent threshold policy at Sec.  
412.538 (calculated in Step 2). We note that, under Step 3, an 
iterative process is used to determine the adjustment factor that would 
need to be applied to the proposed FY 2019 LTCH PPS standard Federal 
payment rate to achieve budget neutrality because the portion of 
estimated FY 2019 payments that are not based on the LTCH PPS standard 
Federal payment rate (that is, the IPPS comparable amount portion under 
the SSO payment methodology and the site neutral payment rate portion 
of the transitional blended payment rate payment for site neutral 
payment rate discharges in FY 2019) are not affected by the application 
of budget neutrality factor.
    We also note that, under this step, the proposed budget neutrality 
factor is applied to the proposed FY 2019 LTCH PPS standard Federal 
payment rate after the application of the proposed FY 2019 annual 
update and the proposed FY 2019 area wage level adjustment budget 
neutrality factor (discussed in section V. of the Addendum to this 
proposed rule).
    Based on the FY 2017 LTCH claims data used for this proposed rule, 
we estimate that our proposed elimination of the 25-percent threshold 
policy would increase aggregate LTCH PPS payments by approximately $36 
million. For this proposed rule, using the steps in the proposed 
methodology described above, we have determined a proposed budget 
neutrality factor for the proposed elimination of the 25-percent 
threshold policy of 0.990535. Accordingly, in section V. of the 
Addendum to this proposed rule, to determine the proposed FY 2019 LTCH 
PPS standard Federal payment rate, we are proposing to apply a one-
time, permanent budget neutrality factor of 0.990535 for the proposed 
elimination of the 25-percent threshold policy. The proposed FY 2019 
LTCH PPS standard Federal payment rate shown in Table 1E reflects this 
proposed adjustment.
    As part of the reexamination and review of the 25-percent threshold 
policy described earlier, we also considered proposing an additional 1-
year regulatory moratorium on the full implementation of the 25-percent 
threshold policy. Such a policy would also have resulted in an 
unwarranted increase in LTCH payments for the reasons discussed 
earlier, and for these same reasons we also would have proposed to 
implement such a moratorium in a budget neutral manner. We calculated 
the budget neutrality factor that would have had to be applied to 
address such increases during that 1-year delay in implementation using 
the proposed methodology outlined above (that is, a factor of 0.990535) 
to the LTCH PPS standard Federal payment rate for 1 year, FY 2019. 
Furthermore, under such a proposal, we would have proposed to modify 
Sec.  412.538 by revising the effective date to apply to discharges 
occurring on or after October 1, 2019, and we would have proposed to 
amend Sec.  412.523(d) to specify that the LTCH PPS standard Federal 
payment rate would be adjusted for FY 2019 by a factor that would 
ensure the 1-year delay in the implementation of the 25-percent 
threshold policy at Sec.  412.538 for discharges occurring during FY 
2019 would be budget neutral.
    We are inviting public comments on our proposal to permanently 
eliminate the 25-percent threshold policy in a budget neutral manner, 
or, in the alternative, the adoption of an additional 1-year delay on 
the implementation of the policy with a budget neutrality adjustment. 
In addition, we are inviting public comments on whether the 25-percent 
threshold policy should be retained in FY 2019 and subsequent years.

VIII. Quality Data Reporting Requirements for Specific Providers and 
Suppliers

    In section VIII. of the preamble of this proposed rule, we are 
proposing changes to the following Medicare quality reporting systems:
     In section VIII.A., the Hospital IQR Program;
     In section VIII.B., the PCHQR Program; and

[[Page 20470]]

     In section VIII.C., the LTCH QRP Program.
    In addition, in section VIII.D. of the preamble of this proposed 
rule, we are proposing changes to the Medicare and Medicaid Promoting 
Interoperability Programs (previously known as the Medicare and 
Medicaid EHR Incentive Programs) for eligible hospitals and critical 
access hospitals (CAHs).
    We refer readers to section I.A.2. of the preamble of this proposed 
rule for a discussion of the Meaningful Measures Initiative.

A. Hospital Inpatient Quality Reporting (IQR) Program

1. Background
a. History of the Hospital IQR Program
    The Hospital IQR Program strives to put patients first by ensuring 
they are empowered to make decisions about their own healthcare along 
with their clinicians using information from data-driven insights that 
are increasingly aligned with meaningful quality measures. We support 
technology that reduces burden and allows clinicians to focus on 
providing high quality health care for their patients. We also support 
innovative approaches to improve quality, accessibility, and 
affordability of care, while paying particular attention to improving 
clinicians' and beneficiaries' experiences when interacting with CMS 
programs. In combination with other efforts across the Department of 
Health and Human Services, we believe the Hospital IQR Program 
incentivizes hospitals to improve health care quality and value, while 
giving patients the tools and information needed to make the best 
decisions for them.
    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 IQR Program, previously referred 
to as the Reporting 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), the FY 2017 IPPS/LTCH PPS final rule (81 FR 57148 through 
57150), and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38326 through 
38328 and 82 FR 38348) for the measures we have adopted for the 
Hospital IQR Program measure set through the FY 2019 and FY 2020 
payment determinations 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 websites 
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 website 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 Electronic Clinical 
Quality Improvement (eCQI) Resource Center web page 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. We refer readers 
to section VIII.A.11.d.(1) of the preamble of this proposed rule in 
which we discuss the transition to Clinical Quality Language (CQL) 
beginning with the Annual Update that will be published in the spring 
of 2018 and for implementation in CY 2019.
    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. For substantive 
measure updates, after submission to the Measures Under Consideration 
list and evaluation by the Measure Applications Partnership (MAP), we 
will continue to use rulemaking to adopt those substantive measure 
updates 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.
    We are not proposing any changes to our policies on the measure 
maintenance process in this proposed rule.
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 available to the public after ensuring that a 
hospital has the opportunity to review its data before they are made 
public. Our current policy is to report data from the Hospital IQR 
Program as soon as it is feasible on CMS websites such as the Hospital 
Compare website, 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 
website. Hospital Compare is an interactive web tool that assists 
beneficiaries and providers by providing information on hospital 
quality of care to those who need to select a hospital and to support 
quality improvement efforts. The Hospital IQR Program currently 
includes measures capturing performance data on many aspects of care 
provided in the acute inpatient hospital setting. For more information 
on measures reported to Hospital Compare, we refer readers to the

[[Page 20471]]

website 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 
the Hospital Compare website and may be made available on other CMS 
websites, such as https://data.medicare.gov. CMS also provides 
stakeholders access to archived data from the Hospital Compare website, 
which can be found at: https://data.medicare.gov/data/archives/hospital-compare. In this proposed rule, we are not proposing any 
changes to these policies.
    We note that in section VIII.A.10. of the preamble of this proposed 
rule, we discuss our efforts to provide stratified data in hospital 
confidential feedback reports and potentially making stratified data 
publicly available on the Hospital Compare website in the future.
d. Meaningful Measures Initiative and the Hospital IQR Program
    In this proposed rule, we are proposing a number of new policies 
for the Hospital IQR Program. We developed these proposals after 
conducting an overall review of the Program under our new ``Meaningful 
Measures Initiative,'' which is discussed in more detail in section 
I.A.2. of the preamble of this proposed rule. The proposals reflect our 
efforts to ensure that the Hospital IQR Program measure set continues 
to promote improved health outcomes for our beneficiaries while 
minimizing costs, which can consist of several different types of 
costs, including, but not limited to: (1) Provider and clinician 
information collection burden and related cost and burden associated 
with the submitting/reporting of quality measures to CMS; (2) the 
provider and clinician cost associated with complying with other 
quality programmatic requirements; (3) the provider and clinician cost 
associated with participating in multiple quality programs, and 
tracking multiple similar or duplicative measures within or across 
those programs; (4) the CMS cost associated with the program oversight 
of the measure, including measure maintenance and public display; and 
(5) the provider and clinician cost associated with compliance with 
other federal and/or State regulations (if applicable). They also 
reflect our efforts to improve the usefulness of the data that we 
publicly report in the Hospital IQR Program. Our goal is to improve the 
usefulness and usability of CMS quality program data by streamlining 
how providers are reporting and accessing data, while maintaining or 
improving consumer understanding of the data publicly reported on a 
Compare website.
    As part of this review, we have taken a holistic approach to 
evaluating the Hospital IQR Program's current measures in the context 
of the measures used in the other IPPS quality programs (that is, the 
Hospital Readmissions Reduction Program, the HAC Reduction Program, and 
the Hospital VBP Program). We view the value-based purchasing programs 
together as a collective set of hospital value-based programs. 
Specifically, we believe the goals of the three value-based purchasing 
programs (the Hospital VBP, Hospital Readmissions Reduction, and HAC 
Reduction Programs) and the measures used in these programs together 
cover the Meaningful Measures Initiative quality priorities of making 
care safer, strengthening person and family engagement, promoting 
coordination of care, promoting effective prevention and treatment of 
illness, and making care affordable--but that the programs should not 
add unnecessary complexity or costs associated with duplicative 
measures across programs.
    The Hospital Readmissions Reduction Program focuses on care 
coordination measures, which address the quality priority of promoting 
effective communication and care coordination within the Meaningful 
Measures Initiative. The HAC Reduction Program focuses on patient 
safety measures, which address the Meaningful Measures Initiative 
quality priority of making care safer by reducing harm caused in the 
delivery of care. As part of this holistic quality payment program 
strategy, we believe the Hospital VBP Program should focus on the 
measurement priorities not covered by the Hospital Readmissions 
Reduction Program or the HAC Reduction Program. The Hospital VBP 
Program would continue to focus on measures related to: (1) The 
clinical outcomes, such as mortality and complications (which address 
the Meaningful Measures Initiative quality priority of promoting 
effective treatment); (2) patient and caregiver experience, as measured 
using the HCAHPS Survey (which addresses the Meaningful Measures 
Initiative quality priority of strengthening person and family 
engagement as partners in their care); and (3) healthcare costs, as 
measured using the Medicare Spending Per Beneficiary (MSPB)--Hospital 
measure (which addresses the Meaningful Measures Initiative priority of 
making care affordable). As part of this larger quality program 
strategy, we believe the Hospital IQR Program should focus on measure 
topics not covered in the other programs' measures. Although new 
Hospital VBP measures will be selected from the measures specified 
under the Hospital IQR Program, the Hospital VBP Program measure set 
will no longer necessarily be a subset of the Hospital IQR Program 
measure set. As discussed in section I.A.2. of the preamble of this 
proposed rule, we are engaging in efforts aimed at evaluating and 
streamlining regulations with the goal to reduce unnecessary costs, 
increase efficiencies, and improve beneficiary experience. While there 
may be some overlap between the Hospital IQR Program measure set and 
the Hospital VBP measure set, allowing removal of duplicative measures 
from the Hospital IQR Program once they have been adopted into the 
Hospital VBP Program would further these goals. We believe this 
framework will allow hospitals and patients to continue to obtain 
meaningful information about hospital performance and incentivize 
quality improvement while also streamlining the measure sets to reduce 
duplicative measures and program complexity so that the costs to 
hospitals associated with participating in these programs does not 
outweigh the benefits of improving beneficiary care.
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 readopt 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. 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 previous considerations we 
have used to expand and update quality measures under the Hospital IQR 
Program. In this proposed rule, we are not proposing any changes to 
these policies. We also refer readers to section I.A.2. of the preamble 
of this proposed rule, in which we describe the quality topics that we 
have identified as high impact measurement

[[Page 20472]]

areas that are relevant and meaningful to both patients and providers.
    Furthermore, 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 under the Hospital IQR Program and 
publicly reported on the Hospital Compare website for at least one 
year, these two programs are linked. We view the value-based purchasing 
programs, including 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.
4. Removal Factors for Hospital IQR Program Measures
a. Current Policy
    We most recently updated our measure removal and retention factors 
in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49641 through 
49643).\278\ The previously adopted removal factors are:
---------------------------------------------------------------------------

    \278\ 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.''
---------------------------------------------------------------------------

     Factor 1. Measure performance among hospitals is so high 
and unvarying that meaningful distinctions and improvements in 
performance can no longer be made (that is, ``topped-out'' measures): 
statistically indistinguishable performance at the 75th and 90th 
percentiles; and truncated coefficient of variation <= 0.10.
     Factor 2. A measure does not align with the current 
clinical guidelines or practice.
     Factor 3. The availability of a more broadly applicable 
measure (across settings, populations, or the availability of a measure 
that is more proximal in time to desired patient outcomes for the 
particular topic).
     Factor 4. Performance or improvement on a measure does not 
result in better patient outcomes.
     Factor 5. The availability of a measure that is more 
strongly associated with desired patient outcomes for the particular 
topic.
     Factor 6. Collection or public reporting of a measure 
leads to negative unintended consequences other than patient harm.
     Factor 7. It is not feasible to implement the measure 
specifications.
    We are not proposing to modify any existing removal factors.
b. Proposed New Measure Removal Factor
    We are proposing to adopt an additional factor to consider when 
evaluating measures for removal from the Hospital IQR Program measure 
set: Factor 8, the costs associated with a measure outweigh the benefit 
of its continued use in the program.
    As we discuss in section I.A.2. of the preamble of this proposed 
rule with respect to our new ``Meaningful Measures Initiative,'' we are 
engaging in efforts to ensure that the Hospital IQR Program measure set 
continues to promote improved health outcomes for beneficiaries while 
minimizing the overall costs associated with the program. We believe 
these costs are multifaceted and include not only the burden associated 
with reporting, but also the costs associated with implementing and 
maintaining the program. We have identified several different types of 
costs, including, but not limited to: (1) Provider and clinician 
information collection burden and related cost and burden associated 
with the submission/reporting of quality measures to CMS; (2) the 
provider and clinician cost associated with complying with other 
quality programmatic requirements; (3) the provider and clinician cost 
associated with participating in multiple quality programs, and 
tracking multiple similar or duplicative measures within or across 
those programs; (4) the CMS cost associated with the program oversight 
of the measure, including measure maintenance and public display; and 
(5) the provider and clinician cost associated with compliance with 
other federal and/or State regulations (if applicable). For example, it 
may be needlessly costly and/or of limited benefit to retain or 
maintain a measure which our analyses show no longer meaningfully 
supports program objectives (for example, informing beneficiary choice 
or payment scoring). It may also be costly for health care providers to 
track confidential feedback preview reports and publicly reported 
information on a measure where we use the measure in more than one 
program. CMS may also have to expend unnecessary resources to maintain 
the specifications for the measure, as well as the tools needed to 
collect, validate, analyze, and publicly report the measure data. 
Furthermore, beneficiaries may find it confusing to see public 
reporting on the same measure in different programs.
    When these costs outweigh the evidence supporting the continued use 
of a measure in the Hospital IQR Program, we believe it may be 
appropriate to remove the measure from the Program. Although we 
recognize that one of the main goals of the Hospital IQR Program is to 
improve beneficiary outcomes by incentivizing health care providers to 
focus on specific care issues and making public data related to those 
issues, we also recognize that those goals can have limited utility 
where, for example, the publicly reported data (including payment 
determination data) are of limited use because they cannot be easily 
interpreted by beneficiaries to influence their choice of providers. In 
these cases, removing the measure from the Hospital IQR Program may 
better accommodate the costs of program administration and compliance 
without sacrificing improved health outcomes and beneficiary choice.
    We are proposing that we would remove measures based on this factor 
on a case-by-case basis. We might, for example, decide to retain a 
measure that is burdensome for health care providers to report if we 
conclude that the benefit to beneficiaries justifies the reporting 
burden. Our goal is to move the program forward in the least burdensome 
manner possible, while maintaining a parsimonious set of meaningful 
quality measures and continuing to incentivize improvement in the 
quality of care provided to patients.
    We are inviting public comment on our proposal to adopt an 
additional measure removal factor, ``the costs associated with a 
measure outweigh the benefit of its continued use in the program,'' 
beginning with the effective date of the FY 2019 IPPS/LTCH PPS final 
rule. We refer readers to section VIII.A.5.b. of the preamble of this 
proposed rule, where we are proposing to remove a number of measures 
based on this proposed removal factor.
5. Proposed Removal of Hospital IQR Program Measures
    We refer readers to section VIII.A.4. of the preamble of this 
proposed rule for a discussion of our current and proposed measure 
removal criteria. In this proposed rule, we are proposing to remove a 
total of 39 measures from the Hospital IQR Program across the FYs 2020, 
2021, 2022, and 2023 payment

[[Page 20473]]

determinations as further discussed below.
a. Proposed Removal of Measure--Removal Factor 4, Performance or 
Improvement on a Measure Does Not Result in Better Patient Outcomes: 
Hospital Survey on Patient Safety Culture
    We are proposing to remove the Hospital Survey on Patient Safety 
Culture measure beginning with the CY 2018 reporting period/FY 2020 
payment determination based on removal Factor 4, ``performance or 
improvement on a measure does not result in better patient outcomes.'' 
The Hospital Survey on Patient Safety Culture measure was adopted in 
the FY 2016 IPPS/LTCH PPS final rule (80 FR 49662 through 49664) for 
the FY 2018 payment determination and subsequent years, to allow us to 
assess whether and which patient safety culture surveys were being 
utilized by hospitals and the frequency of their use. In that rule, we 
stated our belief that this would be a time-limited measure that would 
assist us in assessing the feasibility of implementing a single survey 
on patient safety culture in the future (80 FR 49661). When we adopted 
the measure, we acknowledged that we had not yet determined for how 
many years we would keep the measure in the Hospital IQR Program (80 FR 
49664). By design, this structural measure does not provide information 
on patient outcomes, because hospitals are asked only whether they 
administer a patient safety culture survey, and therefore, does not 
result in better patient outcomes, removal Factor 4.
    Our data indicate that 98 percent of hospitals have reported they 
use some version of a patient safety culture survey; a large majority 
of hospitals (69.6 percent) that reported on the measure for the CY 
2016 reporting period/FY 2018 payment determination use the AHRQ 
Surveys on Patient Safety Culture (SOPS).\279\ While we are proposing 
to remove this measure, the data already collected would still help 
inform consideration of a potential future patient safety culture 
measure for the Hospital IQR Program. However, at this time, we believe 
that the burden of reporting this measure outweighs the benefits of 
continued data collection. Therefore, we are proposing to remove the 
Hospital Survey on Patient Safety Culture measure for the CY 2018 
reporting period/FY 2020 payment determination (for which the data 
submission period is April 1, 2019 through May 15, 2019) and subsequent 
years.
---------------------------------------------------------------------------

    \279\ The Agency for Healthcare Research and Quality (AHRQ) 
sponsored the development of patient safety culture assessment tools 
for various healthcare organizations which assess patient safety 
culture in a health care setting. Patient safety culture is the 
extent to which an organization's culture supports and promotes 
patient safety. The survey tools are measured by what is rewarded, 
supported, and accepted, expected, and accepted in an organization 
as it relates to patient safety. (https://www.ahrq.gov/sops/quality-patient-safety/patientsafetyculture/index.html).
---------------------------------------------------------------------------

    We are inviting public comment on our proposal.
b. Proposed Removal of Measures--Proposed Removal Factor 8, the Costs 
Associated With a Measure Outweigh the Benefit of Its Continued Use in 
the Program
    We are proposing to remove a number of measures under our proposed 
new removal Factor 8, the costs associated with a measure outweigh the 
benefit of its continued use in the program, across the FYs 2020, 2021, 
2022, and 2023 payment determinations. These proposals are presented by 
measure type: (1) Structural measure: safe surgery checklist use; (2) 
patient safety; (3) claims-based readmission; (4) claims-based 
mortality; (5) hip/knee complications; (6) Medicare Spending Per 
Beneficiary (MSPB)--Hospital (NQF #2158); (7) clinical episode-based 
payment; (8) chart-abstracted clinical process of care; and (9) eCQMs. 
These are discussed in detail below.
(1) Structural Measure: Safe Surgery Checklist Use
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule where we 
adopted the Safe Surgery Checklist Use measure (77 FR 53531 through 
53533). We are proposing to remove the Safe Surgery Checklist Use 
measure beginning with the CY 2018 reporting period/FY 2020 payment 
determination under proposed removal Factor 8, the costs associated 
with a measure outweigh the benefit of its continued use in the 
program.
    We refer readers to section VIII.A.4.b. of the preamble of this 
proposed rule, where we acknowledge that costs are multi-faceted and 
include not only the burden associated with reporting, but also the 
costs associated with implementing and maintaining the program. For 
example, we believe it may be unnecessarily costly for health care 
providers to report a measure for which our analyses show that there is 
no meaningful difference in performance or there is little room for 
continued improvement.
    Based on our review of reported data on this measure, there is no 
meaningful difference in performance or there is little room for 
continued improvement. Our analysis is captured by the table below:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Number of                         75th            90th
           Payment determination                     Encounters              hospitals         Rate         percentile      percentile     Truncated COV
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 2017...................................  CY 2015 Q1-Q4...............           3,201           0.961          100.00          100.00           0.201
FY 2018...................................  CY 2016 Q1-Q4...............           3,195           0.968          100.00          100.00           0.181
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Based on the analysis above, the national rate of ``Yes'' response 
for this measure is nearly 1.0, or 100 percent, nationwide, and has 
remained at this level for the last two years, such that there is no 
distinguishable difference in hospital performance between the 75th and 
90th percentiles. In addition, the truncated coefficient of variation 
has decreased such that it is trending towards 0.10. Our analysis 
indicates that performance on this measure is trending towards topped-
out status, that is to say, safe surgery checklists for surgical 
procedures are widely in use and there is little room for improvement 
on this structural measure.
    In addition, we believe this measure is of more limited utility for 
internal hospital quality improvement efforts. This structural measure 
of hospital process determines whether a hospital utilizes a safe 
surgery checklist that assesses whether effective communication and 
safe practices are performed during three distinct perioperative 
periods. For the measure, hospitals indicate by ``Yes'' or ``No'' 
whether or not they use a safe surgery checklist for surgical 
procedures that includes safe surgery practices during each of the 
aforementioned perioperative periods. The measure does not require a 
hospital to report whether it uses a checklist in connection with each 
individual inpatient procedure.
    Furthermore, removal of this measure would alleviate burden to 
hospitals associated with reporting on this measure. We anticipate a 
reduction in information collection burden because

[[Page 20474]]

reporting on this measure takes hospitals approximately two minutes 
each year (77 FR 53666). As such, we believe the costs associated with 
reporting on this measure outweigh the associated benefits of keeping 
it in the Hospital IQR Program because it no longer meaningfully 
supports the Program objective of informing beneficiary choice since 
safe surgery checklists are widely in use.
    Therefore, we are proposing to remove the Safe Surgery Checklist 
Use measure beginning with the CY 2018 reporting period/FY 2020 payment 
determination, for which the data submission period is April 1, 2019 
through May 15, 2019, under proposed removal Factor 8, the costs 
associated with a measure outweigh the benefit of its continued use in 
the program. We also refer readers to the CY 2018 OPPS/ASC PPS final 
rule in which the Hospital OQR and ASCQR Programs finalized removal of 
the Safe Surgery Checklist Use measure beginning with the CY 2018 
reporting period/CY 2020 payment determination for the Hospital OQR 
Program and with the CY 2019 payment determination for the ASCQR 
Program (82 FR 52363 through 52364; 82 FR 52571 through 52572; and 82 
FR 52588 through 52589). We note that if the proposed removal Factor 8 
is not finalized, removal of this measure would not be finalized.
    We are inviting public comment on our proposal.
(2) Patient Safety Measures
    We are proposing to remove the Patient Safety and Adverse Events 
Composite \280\ (PSI 90) beginning with the CY 2018 reporting period/FY 
2020 payment determination and five National Health and Safety Network 
(NHSN) hospital-acquired infection (HAI) measures beginning with the CY 
2019 reporting period/FY 2021 payment determination under the proposed 
removal Factor 8, the costs associated with a measure outweigh the 
benefit of its continued use in the program.
---------------------------------------------------------------------------

    \280\ We note that measure stewardship of the recalibrated 
version of the Patient Safety and Adverse Events Composite (PSI 90) 
is transitioning from AHRQ to CMS and, as part of the transition, 
the measure will be referred to as the CMS Recalibrated Patient 
Safety Indicators and Adverse Events Composite (CMS PSI 90) when it 
is used in CMS quality programs.
---------------------------------------------------------------------------

(a) Proposed Removal for CY 2018 Reporting Period/FY 2020 Payment 
Determination--Patient Safety and Adverse Events Composite (PSI 90) 
(NQF #0531) (Adopted at 73 FR 48602, Refined at 81 FR 57128 Through 
57133)
    We are proposing to remove PSI 90 beginning with the FY 2020 
payment determination (which would use a performance period of July 1, 
2016 through June 30, 2018). As PSI 90 is a claims-based measure, it 
uses claims and administrative data to calculate the measure without 
any additional data collection from hospitals. Thus, operationally, we 
would be able to remove the PSI 90 measure sooner than the NHSN HAI 
measures. Our reasons for proposing to remove this measure are 
discussed further below.
(b) Proposed Removals for the CY 2019 Reporting Period/FY 2021 Payment 
Determination
     National Healthcare Safety Network (NHSN) Facility-wide 
Inpatient Hospital-onset Clostridium difficile Infection (CDI) Outcome 
Measure (NQF #1717) (adopted at 76 FR 51630 through 51631);
     National Healthcare Safety Network (NHSN) Catheter-
Associated Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138) 
(adopted at 76 FR 51616 through 51618);
     National Healthcare Safety Network (NHSN) Central Line-
Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139) 
(adopted at 75 FR 50200 through 50202);
     National Healthcare Safety Network (NHSN) Facility-wide 
Inpatient Hospital-onset Methicillin-Resistant Staphylococcus Aureus 
Bacteremia (MRSA) Outcome Measure (NQF # 1716) (adopted at 76 FR 
51630); and
     American College of Surgeons--Centers for Disease Control 
and Prevention (ACS-CDC) Harmonized Procedure Specific Surgical Site 
Infection (SSI) Outcome Measure (NQF #0753) (Colon and Abdominal 
Hysterectomy SSIs) (adopted at 75 FR 50200 through 50202).
    We are proposing to remove the CDI, CAUTI, CLABSI, MRSA Bacteremia, 
and Colon and Abdominal Hysterectomy SSI measures from the Hospital IQR 
Program beginning with the CY 2019 reporting period/FY 2021 payment 
determination. These measures would remain in the Hospital IQR Program 
until that time, and their reporting would still be tied to FY 2019 and 
FY 2020 payment adjustments under the Hospital IQR Program. Although we 
are proposing to remove these measures from the Hospital IQR Program, 
we are not proposing to remove them from the HAC Reduction Program, and 
they will continue to be tied to the payment adjustment under that 
program (section IV.J.1. of the preamble of this proposed rule). After 
removal from the Hospital IQR Program, these measures would continue to 
be reported on the Hospital Compare website under the public reporting 
requirements of the HAC Reduction Program. We are proposing to remove 
these measures beginning with the FY 2021 payment determination because 
hospitals already would have collected and reported data for the first 
three quarters of the CY 2018 reporting period for the FY 2020 payment 
determination by the time of publication of the FY 2019 IPPS/LTCH PPS 
final rule. Removing these five NHSN HAI measures in the proposed 
timeline would allow us to use the data already reported by hospitals 
in the CY 2018 reporting period for purposes of the FY 2020 payment 
adjustment.
    We are proposing to remove these six measures under proposed 
removal Factor 8, the costs associated with a measure outweigh the 
benefit of its continued use in the program. We believe that removing 
the PSI 90, CDI, CAUTI, CLABSI, MRSA, and Colon and Abdominal 
Hysterectomy SSI measures from one program would eliminate development 
and release of duplicative and potentially confusing CMS confidential 
feedback reports provided to hospitals across multiple hospital quality 
and value-based purchasing programs. We refer readers to section 
VIII.A.4.b. of the preamble of this proposed rule where we discuss 
examples of the costs associated with implementing and maintaining 
these measures for the programs. For example, it may be costly for 
health care providers to track the confidential feedback, preview 
reports, and publicly reported information on a measure where we use 
the measure in more than one program. Health care providers incur 
additional cost to monitor measure performance in multiple programs for 
internal quality improvement and financial planning purposes when 
measures are used across value-based purchasing programs. Hospitals 
currently review multiple feedback reports for the NHSN HAI measures 
from three different hospital quality programs that use three different 
reporting periods, which result in interpreting slightly different 
measure rates for the same measures (under the Hospital IQR Program, a 
rolling four quarters of data are used to update the Hospital Compare 
website;

[[Page 20475]]

under the Hospital VBP Program, 1-year periods are used for each of the 
baseline period and the performance period; and under the HAC Reduction 
Program, a 2-year performance period is used). Beneficiaries may also 
find it confusing to see public reporting on the same measures in 
different programs. In addition, maintaining the specifications for the 
measures, as well as the tools we need to collect, validate, analyze, 
and publicly report the measure data result in costs to CMS.
    We believe the costs as discussed above outweigh the associated 
benefit to beneficiaries of receiving the same information from 
multiple programs, because that information can be captured through 
inclusion of these measures solely in the HAC Reduction Program. 
Although we are proposing to remove these six patient safety measures 
from the Hospital IQR Program, we continue to recognize that improving 
patient safety and reducing NHSN HAIs is an important quality area, and 
we still believe these measures provide significant data on patient 
safety outcomes during inpatient hospitalization. For these reasons, 
and as discussed below, we intend to continue to use these measures in 
the HAC Reduction Program. Unlike the Hospital IQR Program, performance 
data on measures maintained in the HAC Reduction Program are used both 
to assess the quality of care provided at a hospital and to calculate 
incentive payment adjustments for a given year of the Program based on 
performance. Also, the HAC Reduction Program's incentive payment 
structure ties hospitals' payment adjustments on claims paid under the 
IPPS to their performance on selected quality measures, including the 
above measures which are already included in the HAC Reduction Program, 
sufficiently incentivizing performance improvement on these measures 
among participating hospitals. By keeping the measures in the HAC 
Reduction Program, patients, hospitals, and the public continue to 
receive information about the quality of care provided with respect to 
these measures.
    We believe that removing these measures from the Hospital IQR 
Program, while keeping them in the HAC Reduction Program, strikes an 
appropriate balance of benefits in driving improvement on patient 
safety and costs associated with retaining these measures in more than 
one program, while continuing to keep patient safety improvement and 
reducing NHSN HAIs as high priorities. We refer readers to section 
IV.J.1. of the preamble of this proposed rule where we discuss safety 
measures included in the HAC Reduction Program. As discussed in section 
VIII.A.4.b. of the preamble of this proposed rule, one of our main 
goals is to move forward in the least burdensome manner possible, while 
maintaining a parsimonious set of the most meaningful quality measures 
and continuing to incentivize improvement in the quality of care 
provided to patients. We believe retaining these measures in the HAC 
Reduction Program addresses the Meaningful Measures Initiative quality 
priority of making care safer by reducing harm caused in the delivery 
of care.\281\ In addition, as discussed in section I.A.2. of the 
preamble of this proposed rule, we believe keeping these measures in 
both programs no longer aligns with our goal of not adding unnecessary 
complexity or cost with duplicative measures across programs.
---------------------------------------------------------------------------

    \281\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/MMF/General-info-Sub-Page.html.
---------------------------------------------------------------------------

    Therefore, we are proposing to remove the: (1) PSI 90 measure for 
the FY 2020 payment determination (which applies to the performance 
period of July 1, 2016 through June 30, 2018) and subsequent years; and 
(2) CDI, CAUTI, CLABSI, MRSA, and Colon and Abdominal Hysterectomy SSI 
measures for the CY 2019 reporting period/FY 2021 payment determination 
and subsequent years. We refer readers to section IV.I.2.c.(2) of the 
preamble of this proposed rule, where we also are proposing to remove 
these same measures from the Hospital VBP Program. We note that if the 
proposed removal Factor 8 is not finalized, removal of this measure 
would not be finalized.
    We are inviting public comment on our proposals.
(3) Claims-Based Readmission Measures
    We are proposing to remove the following seven claims-based 
readmission measures beginning with the FY 2020 payment determination:
     Hospital 30-Day, All-Cause, Risk-Standardized Readmission 
Rate (RSRR) Following Acute Myocardial Infarction (AMI) Hospitalization 
(NQF #0505) (READM-30-AMI) (adopted at 73 FR 68781);
     Hospital 30-Day, All-Cause, Risk-Standardized Readmission 
Rate (RSRR) Following Coronary Artery Bypass Graft (CABG) Surgery (NQF 
#2515) (READM-30-CABG) (adopted at 79 FR 50220 through 50224);
     Hospital 30-Day, All-Cause, Risk-Standardized Readmission 
Rate (RSRR) Following Chronic Obstructive Pulmonary Disease (COPD) 
Hospitalization (NQF #1891) (READM-30-COPD) (adopted at 78 FR 50790 
through 50792);
     Hospital 30-Day, All-Cause, Risk-Standardized Readmission 
Rate (RSRR) Following Heart Failure (HF) Hospitalization (NQF #0330) 
(READM-30-HF) (adopted at 73 FR 48606);
     Hospital 30-Day, All-Cause, Risk-Standardized Readmission 
Rate (RSRR) Following Pneumonia Hospitalization (NQF #0506) (READM-30-
PN) (adopted at 73 FR 68780 through 68781);
     Hospital-Level 30-Day, All-Cause, Risk-Standardized 
Readmission Rate (RSRR) Following Elective Primary Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1551) 
(READM-30-THA/TKA) (adopted at 77 FR 53519 through 53521); and
     30-Day Risk-Standardized Readmission Rate Following Stroke 
Hospitalization (READM-30-STK) (adopted at 78 FR 50794 through 50798).
    We are proposing to remove READM-30-AMI, READM-30-CABG, READM-30-
COPD, READM-30-HF, READM-30-PN, and READM-30-THA/TKA under proposed 
removal Factor 8, the costs associated with a measure outweigh the 
benefit of its continued use in the program. (The READM-30-STK measure 
is discussed further below.) We believe removing these measures from 
the Hospital IQR Program would eliminate costs associated with 
implementing and maintaining these measures for the program, and in 
particular, development and release of duplicative and potentially 
confusing CMS confidential feedback reports provided to hospitals 
across multiple hospital quality and value-based purchasing programs. 
We refer readers to section VIII.A.4.b. of the preamble of this 
proposed rule where we discuss examples of the costs associated with 
implementing and maintaining these measures for the programs. For 
example, it may be costly for health care providers to track the 
confidential feedback, preview reports, and publicly reported 
information on a measure where we use the measure in more than one 
program. Health care providers incur additional cost to monitor measure 
performance in multiple programs for internal quality improvement and 
financial planning purposes when measures are used across value-based 
purchasing programs. Beneficiaries may also find it confusing to see 
public reporting on the same measures in different programs. In 
addition, maintaining the specifications

[[Page 20476]]

for the measures, as well as the tools we need to analyze and publicly 
report the measure data result in costs to CMS. We believe the costs as 
described above outweigh the associated benefit to beneficiaries of 
receiving the same information from multiple programs, because that 
information can be captured through inclusion of these measures solely 
in the Hospital Readmissions Reduction Program. We believe the benefit 
to beneficiaries of keeping this measure in the Hospital IQR Program is 
limited because the public would continue to receive measure 
information via another CMS quality program.
    Because we continue to believe these measures provide important 
data on patient outcomes following inpatient hospitalization 
(addressing the Meaningful Measures Initiative quality priority of 
promoting effective communication and coordination of care), we will 
continue to use these measures in the Hospital Readmissions Reduction 
Program. By keeping the measures in the Hospital Readmissions Reduction 
Program, patients, hospitals, and the public would continue to receive 
information about the quality of care provided with respect to these 
measures.
    Unlike the Hospital IQR Program, performance data on measures 
maintained in the Hospital Readmissions Reduction Program are used both 
to assess the quality and value of care provided at a hospital and to 
calculate incentive payment adjustments for a given year of the program 
based on performance. The Hospital Readmissions Reduction Program's 
incentive payment structure ties hospitals' payment adjustments on 
claims paid under the IPPS to their performance on selected quality 
measures, including the above measures which are already in the 
Hospital Readmissions Reduction Program, sufficiently incentivizing 
performance improvement on these measures among participating 
hospitals. As discussed in section VIII.A.4.b. of the preamble of this 
proposed rule, one of our main goals is to move the program forward in 
the least burdensome manner possible, while maintaining a parsimonious 
set of the most meaningful quality measures and continuing to 
incentivize improvement in the quality of care provided to patients, 
and we believe removing these measures from the Hospital IQR Program is 
the best way to achieve this. In addition, as discussed in section 
I.A.2. of the preamble of this proposed rule, we believe keeping these 
measures in both programs no longer aligns with our goal of not adding 
unnecessary complexity or cost with duplicative measures across 
programs.
    Furthermore, we are proposing to remove the READM-30-STK measure 
under proposed removal Factor 8, the costs associated with a measure 
outweigh the benefit of its continued use in the program. The READM-30-
STK measure collects important hospital-level, risk-standardized 
readmission rates following inpatient hospitalizations for strokes (78 
FR 50794). However, these data also are captured in the Hospital-Wide 
All-Cause Unplanned Readmission Measure (HWR) adopted into the Hospital 
IQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53521 
through 53528), because that measure comprises a single summary score, 
derived from the results of different models for each of the following 
specialty cohorts: medicine; surgery/gynecology; cardiorespiratory; 
cardiovascular; and neurology (77 FR 53522). These cohorts cover 
conditions and procedures defined by the AHRQ CCS, which collapsed more 
than 17,000 different ICD-9-CM diagnoses and procedure codes into 285 
clinically-coherent, mutually-exclusive condition categories and 231 
mutually-exclusive procedure categories (77 FR 53525). Readmission 
rates following inpatient hospitalizations for strokes are captured in 
that information, specifically, the neurology cohort. We believe that 
the costs associated with interpreting the requirements for two 
measures with overlapping data points outweigh the benefit to 
beneficiaries of the additional information provided by this measure, 
because the measure data are already captured within another measure in 
the Hospital IQR Program. Also, maintaining the specifications for this 
measure, as well as the tools we need to analyze and publicly report 
the measure data result in costs to CMS. Thus, removing the READM-30-
STK measure would help to reduce duplicative data and produce a more 
harmonized and streamlined measure set. As discussed in section 
VIII.A.4.b. of the preamble of this proposed rule, one of our main 
goals is to move forward in the least burdensome manner possible, while 
maintaining a parsimonious set of the most meaningful quality measures 
and continuing to incentivize improvement in the quality of care 
provided to patients, and we believe removing this measure from the 
Hospital IQR Program is the best way to do that.
    We recognize, however, that including condition- and procedure-
specific clinical quality measure data can provide hospitals with 
actionable feedback to better equip them to implement targeted 
improvements in comparison to an overall quality measure. In addition, 
condition- and procedure-specific measures can provide valuable data to 
specialty societies by clearly assessing performance for their 
specialty, and may be valuable to persons and families who prefer 
information on certain conditions and procedures relevant to them. The 
Hospital-Wide Readmission measure, unlike condition- and procedure-
specific measures, also requires improvement in quality across multiple 
service lines to produce improvement in the overall rate, which may 
give the perception of slower or smaller gains in hospital quality. 
Conversely, hospitals would still have a strong motivation to improve 
stroke readmissions performance if they want to improve their overall 
performance on the Hospital-Wide Readmission measure posted on Hospital 
Compare.
    Therefore, we are proposing to remove the READM-30-AMI, READM-30-
CABG, READM-30-COPD, READM-30-HF, READM-30-PN, READM-30-THA/TKA, and 
READM-30-STK measures for the FY 2020 payment determination (which 
would apply to the performance period of July 1, 2015 through June 30, 
2018) and subsequent years. We note that if the proposed removal Factor 
8 is not finalized, removal of these measures would not be finalized.
    We are inviting public comment on our proposal to remove these 
measures from the Hospital IQR Program as well as feedback on whether 
there are reasons to retain one or more of the measures in the Hospital 
IQR Program.
(4) Claims-Based Mortality Measures
    We are proposing to remove five claims-based mortality measures 
across the FYs 2020, 2021, and 2022 payment determinations and 
subsequent years:
     Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate Following Acute Myocardial Infarction (AMI) Hospitalization (NQF 
#0230) (MORT-30-AMI) beginning with the FY 2020 payment determination 
(adopted at 71 FR 68206);
     Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate Following Heart Failure (HF) Hospitalization Surgery (NQF #0229) 
(MORT-30-HF) beginning with the FY 2020 payment determination (adopted 
at 71 FR 68206);
     Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate Following Chronic Obstructive Pulmonary Disease (COPD) (NQF #1893) 
(MORT-30-COPD) beginning with the FY 2021 payment determination 
(adopted at 78 FR 50792 through 50794);

[[Page 20477]]

     Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate Following Pneumonia Hospitalization (NQF #0468) (MORT-30-PN) 
beginning with the FY 2021 payment determination (adopted at 72 FR 
47351); and,
     Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate Following Coronary Artery Bypass Graft (CABG) Surgery (NQF #2515) 
(MORT-30-CABG) beginning with the FY 2022 payment determination 
(adopted at 79 FR 50224 through 50227).
    We are proposing to remove MORT-30-AMI, MORT-30-HF, MORT-30-COPD, 
MORT-30-PN, and MORT-30-CABG under proposed removal Factor 8, the costs 
associated with a measure outweigh the benefit of its continued use in 
the program. Removing these measures from the Hospital IQR Program 
would eliminate costs associated with implementing and maintaining 
these measures for the program, and in particular, development and 
release of duplicative and potentially confusing CMS confidential 
feedback reports provided to hospitals for both the Hospital IQR and 
Hospital VBP Programs. We refer readers to section VIII.A.4.b. of this 
proposed rule where we discuss examples of the costs associated with 
implementing and maintaining these measures for the programs. For 
example, it may be costly for health care providers to track the 
confidential feedback, preview reports, and publicly reported 
information on a measure where we use the measure in more than one 
program. Health care providers incur additional cost to monitor measure 
performance in multiple programs for internal quality improvement and 
financial planning purposes when measures are used across value-based 
purchasing programs. Beneficiaries may also find it confusing to see 
public reporting on the same measures using different reporting periods 
in different programs. In addition, maintaining the specifications for 
the measures, as well as the tools we need to analyze and publicly 
report the measure data result in costs to CMS. We believe the costs 
associated with reviewing multiple feedback reports on these measures 
for more than one program outweigh the associated benefit to 
beneficiaries of receiving the same information from multiple programs, 
because that information can be captured through inclusion of these 
measures solely in the Hospital VBP Program.
    We continue to believe these measures provide important data on 
patient outcomes following inpatient hospitalization (addressing the 
Meaningful Measures Initiative quality priority of promoting effective 
communication and coordination of care), which is why we will continue 
to use these measures in the Hospital VBP Program. Unlike the Hospital 
IQR Program, performance data on measures maintained in the Hospital 
VBP Program are used both to assess the quality and value of care 
provided at a hospital and to calculate incentive payment adjustments 
for a given year of the program based on performance. The Hospital VBP 
Program's incentive payment structure ties hospitals' payment 
adjustments on claims paid under the IPPS to their performance on 
selected quality measures, including the above listed measures, 
sufficiently incentivizing performance improvement on these measures 
among participating hospitals. By keeping the measures in the Hospital 
VBP Program, patients, hospitals, and the public continue to receive 
information about the quality of care provided with respect to these 
measures.
    As discussed in section VIII.A.4.b. of the preamble of this 
proposed rule, one of our main goals is to move forward in the least 
burdensome manner possible, while maintaining a parsimonious set of the 
most meaningful quality measures and continuing incentivize improvement 
in the quality of care provided to patients, and we believe removing 
these measures from the Hospital IQR Program is the best way to achieve 
that goal. In addition, as discussed in section I.A.2. of the preamble 
of this proposed rule, we believe keeping these measures in both 
programs no longer aligns with our goal of not adding unnecessary 
complexity or cost with duplicative measures across programs.
    We note that the Hospital VBP Program has adopted the MORT-30-COPD 
measure beginning with the FY 2021 program year (80 FR 49558), the 
MORT-30-PN measure (modified with the expanded cohort) beginning with 
the FY 2021 program year (81 FR 56996), and the MORT-30-CABG measure 
beginning with the FY 2022 program year (81 FR 56998). Therefore, we 
are proposing to stagger the beginning date of the removals of these 
measures from the Hospital IQR Program to avoid a gap in public 
reporting of measure data. For the Hospital IQR Program, we are 
proposing to remove the: (1) MORT-30-AMI and MORT-30-HF measures for 
the FY 2020 payment determination (which would use a performance period 
of July 1, 2015 through June 30, 2018) and subsequent years; (2) MORT-
30-COPD and MORT-30-PN measures for the FY 2021 payment determination 
(which would use a performance period of July 1, 2016 through June 30, 
2019) and subsequent years; and (3) MORT-30-CABG measure for the FY 
2022 payment determination (which would use a performance period of 
July 1, 2017 through June 30, 2020) and subsequent years. We note that 
if the proposed removal Factor 8 is not finalized, removal of these 
measures would not be finalized.
    We are inviting public comment on our proposal.
(5) Hospital-Level Risk-Standardized Complication Rate (RSCR) Following 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (NQF #1550) (Hip/Knee Complications) Measure
    We are proposing to remove one complications measure, Hospital-
level Risk-Standardized Complication Rate (RSCR) Following Elective 
Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty 
(TKA) (NQF #1550) (Hip/Knee Complications), beginning with the FY 2023 
payment determination, under proposed removal Factor 8, the costs 
associated with a measure outweigh the benefit of its continued use in 
the program. We refer readers to FY 2013 IPPS/LTCH PPS final rule (77 
FR 53516 through 53518), where we adopted this measure.
    We believe that removing this measure from the Hospital IQR Program 
would eliminate costs associated with implementing and maintaining the 
measure for the program, and in particular, development and release of 
duplicative and potentially confusing CMS confidential feedback reports 
provided to hospitals across multiple hospital quality and value-based 
purchasing programs. We refer readers to section VIII.A.4.b. of the 
preamble of this proposed rule where we discuss examples of the costs 
associated with implementing and maintaining these measures for the 
programs. For example, it may be costly for health care providers to 
track the confidential feedback, preview reports, and publicly reported 
information on this measure as we also use the measure in the Hospital 
VBP Program and the Comprehensive Care for Joint Replacement model (CJR 
model). Health care providers incur additional cost to monitor measure 
performance in multiple programs for internal quality improvement and 
financial planning purposes when measures are used across value-based 
purchasing programs. Beneficiaries may also find it confusing to see 
public reporting on the same measure in different programs. In 
addition, maintaining the specifications for the measure, as well as 
the tools we need to

[[Page 20478]]

analyze and publicly report the measure data result in cost to CMS. We 
believe the costs as discussed above outweigh the associated benefit to 
beneficiaries of receiving the same information from more than one 
program, because that information can be captured through inclusion of 
this measure in the Hospital VBP Program.
    As discussed in section VIII.A.4.b. of the preamble of this 
proposed rule, one of our main goals is to move the program forward in 
the least burdensome manner possible, while maintaining a parsimonious 
set of the most meaningful quality measures and continuing to 
incentivize improvement in the quality of care provided to patients, 
and we believe removing this measure from the Hospital IQR Program is 
the best way to achieve this goal. We believe retaining the Hip/Knee 
Complications measure in both the Hospital IQR Program and the Hospital 
VBP Program no longer aligns with our current goal of not adding 
unnecessary complexity or cost with duplicative measures across 
programs, as stated in section I.A.2. of the preamble of this proposed 
rule.
    We continue to believe this measure provides important data on 
patient outcomes following inpatient hospitalization (addressing the 
Meaningful Measures Initiative quality priority of promoting effective 
treatment), which is why we will continue to use this measure in the 
Hospital VBP Program. Unlike the Hospital IQR Program, performance data 
on measures maintained in the Hospital VBP Program are used both to 
assess the quality and value of care provided at a hospital and to 
calculate incentive payment adjustments for a given year of the program 
based on performance. The Hospital VBP Program's incentive payment 
structure ties hospitals' payment adjustments on claims paid under the 
IPPS to their performance on selected quality measures, including the 
Hip/Knee Complications measure, sufficiently incentivizing performance 
improvement on this measure among participating hospitals. By keeping 
the measure in the Hospital VBP Program, patients, hospitals, and the 
public continue to receive information about the quality of care 
provided with respect to this measure.
    Therefore, we are proposing to remove the Hip/Knee Complications 
measure from the Hospital IQR Program beginning with the FY 2023 
payment determination (which applies to the performance period of April 
1, 2018 through March 31, 2021) and subsequent years. We chose to 
propose this timeframe because the Comprehensive Care for Joint 
Replacement model (CJR model) previously adopted the same measure and 
requires use of data collected under the Hospital IQR Program through 
the FY 2022 payment determination (which would use a performance period 
of April 1, 2017 through March 31, 2020) (80 FR 73507). After removal 
from the Hospital IQR Program, we note that this measure would continue 
to be reported on the Hospital Compare website under the public 
reporting requirements of the Hospital VBP Program. In addition, if the 
proposed removal Factor 8 is not finalized, removal of this measure 
would not be finalized.
    We are inviting public comment on our proposal.
(6) Medicare Spending Per Beneficiary (MSPB)--Hospital Measure (NQF 
#2158) (MSPB)
    We are proposing to remove one resource use measure, Medicare 
Spending Per Beneficiary (MSPB)--Hospital (NQF #2158) (MSPB), from the 
Hospital IQR Program beginning with the FY 2020 payment determination, 
under the proposed removal Factor 8, the costs associated with a 
measure outweigh the benefit of its continued use in the program. We 
refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51619) 
where we adopted this measure.
    We believe that removing this measure from the Hospital IQR Program 
would eliminate costs associated with implementing and maintaining the 
measure, and in particular, development and release of duplicative and 
potentially confusing CMS confidential feedback reports provided to 
hospitals across multiple hospital quality and value-based purchasing 
programs. We refer readers to section VIII.A.4.b. of the preamble of 
this proposed rule where we discuss examples of the costs associated 
with implementing and maintaining these measures for the programs. For 
example, it may be costly for health care providers to track the 
confidential feedback, preview reports, and publicly reported 
information on this measure as we use the measure in the Hospital VBP 
Program. Health care providers incur additional cost to monitor measure 
performance in multiple programs for internal quality improvement and 
financial planning purposes when measures are used across value-based 
purchasing programs. Beneficiaries may also find it confusing to see 
public reporting on the same measure in different programs. In 
addition, maintaining the specifications for the measure, as well as 
the tools we need to analyze and publicly report the measure data 
result in costs to CMS. We believe the costs as discussed above 
outweigh the associated benefit to beneficiaries of receiving the same 
information from multiple programs, because that information can be 
captured through inclusion of this measure solely in the Hospital VBP 
Program.
    As discussed in section VIII.A.4.b. of the preamble of this 
proposed rule, one of our main goals is to move the program forward in 
the least burdensome manner possible, while maintaining a parsimonious 
set of the most meaningful quality measures and continuing to 
incentivize improvement in the quality of care provided to patients, 
and we believe removing this measure from the Hospital IQR Program 
helps achieve that goal. In addition, as discussed in section I.A.2. of 
the preamble of this proposed rule, we believe keeping this measure in 
both programs no longer aligns with our goal of not adding unnecessary 
complexity or cost with duplicative measures across programs.
    We continue to believe this measure provides important data on 
resource use (addressing the Meaningful Measures Initiative priority of 
making care affordable), which is why we will continue to use this 
measure in the Hospital VBP Program. Unlike the Hospital IQR Program, 
performance data on measures maintained in the Hospital VBP Program are 
used both to assess the quality and value of care provided at a 
hospital and to calculate incentive payment adjustments for a given 
year of the program based on performance. The Hospital VBP Program's 
incentive payment structure ties hospitals' payment adjustments on 
claims paid under the IPPS to their performance on selected quality 
measures, including the MSPB measure, sufficiently incentivizing 
performance improvement on this measure among participating hospitals. 
By keeping the measure in the Hospital VBP Program, patients, 
hospitals, and the public continue to receive information about the 
quality of care provided with respect to these measures.
    Therefore, we are proposing to remove the MSPB measure from the 
Hospital IQR Program beginning with the FY 2020 payment determination 
(which applies to the performance period of January 1, 2018 through 
December 31, 2018) and subsequent years. As a claims-based measure, 
which uses claims and administrative data to calculate the measure 
without any additional data collection from hospitals, we can 
operationally remove the MSPB measure sooner than certain

[[Page 20479]]

other measures we are proposing for removal in this proposed rule. We 
note that if proposed removal Factor 8 is not finalized, removal of 
this measure would not be finalized.
    We are inviting public comment on our proposal.
(7) Clinical Episode-Based Payment Measures
    We are proposing to remove six clinical episode-based payment 
measures from the Hospital IQR Program beginning with the FY 2020 
payment determination:
     Cellulitis Clinical Episode-Based Payment Measure 
(Cellulitis Payment) (adopted at 80 FR 49664 through 49674);
     Gastrointestinal Hemorrhage Clinical Episode-Based Payment 
Measure (GI Payment) (adopted at 80 FR 49664 through 49674);
     Kidney/Urinary Tract Infection Clinical Episode-Based 
Payment Measure (Kidney/UTI Payment) (adopted at 80 FR 49664 through 
49674);
     Aortic Aneurysm Procedure Clinical Episode-Based Payment 
Measure (AA Payment) (adopted at 81 FR 57133 through 57142);
     Cholecystectomy and Common Duct Exploration Clinical 
Episode-Based Payment Measure (Chole and CDE Payment) (adopted at 81 FR 
57133 through 57142); and
     Spinal Fusion Clinical Episode-Based Payment Measure 
(SFusion Payment) (adopted at 81 FR 57133 through 57142).
    We are proposing to remove the Cellulitis Payment, GI Payment, 
Kidney/UTI Payment, AA Payment, Chole and CDE Payment, and SFusion 
Payment measures under proposed removal Factor 8, the costs associated 
with a measure outweigh the benefit of its continued use in the 
program. We refer readers to section VIII.A.4.b. of the preamble of 
this proposed rule where we discuss examples of the costs associated 
with implementing and maintaining these measures for the programs. 
Specifically, maintaining the specifications for the measure, as well 
as the tools we need to analyze and publicly report the measure data 
result in costs to CMS. We believe the costs associated with 
interpreting the requirements for multiple measures with overlapping 
data points outweigh the benefit to beneficiaries and providers of the 
additional information provided by these measures, because the measure 
data are already captured within the overall hospital MSPB measure, 
which will be retained in the Hospital VBP Program.
    These measures are clinically coherent groupings of health care 
services that can be used to assess providers' resource use associated 
with the clinically coherent groupings (80 FR 49664). Specifically, 
these measures all use Part A and Part B Medicare administrative claims 
data from Medicare FFS beneficiaries hospitalized for a clinical issue 
associated with the respective clinical groupings (80 FR 49664 through 
49668; 81 FR 57133 through 57140). However, these data also are 
captured in the MSPB measure, which uses claims data for hospital 
discharges, including Medicare Part A and Part B payments for services 
rendered to Medicare beneficiaries during the Medicare spending per 
beneficiary episode surrounding an index hospitalization (76 FR 51618 
through 51627). Although the MSPB measure does not provide the same 
level of granularity that these individual measures do, the most 
essential data elements will be captured by and publicly reported under 
the MSPB measure in the Hospital VBP Program. We understand that some 
hospitals may appreciate receiving more granular payment measure data 
from individual episode-based payment measures, while other hospitals 
may not benefit from the use of individual measures in addition to MSPB 
because they do not have a sufficient number of cases for those 
measures to be calculated. We are proposing to remove these measures 
because we believe that in balancing the costs of keeping these 
measures in the program compared to the benefit, providers would prefer 
to focus their improvement efforts on total payment, rather than both 
total payment and the payments associated with these individual types 
of clinical episodes. While we are proposing to remove the MSPB measure 
from the Hospital IQR Program as discussed in the section above, the 
measure would continue to be included in the Hospital VBP Program 
(section IV.I.2.e. of the preamble of this proposed rule). We also note 
that the Hospital IQR Program will retain certain condition- and 
procedure-specific payment measures (specifically, focusing on patients 
hospitalized for heart failure, AMI, pneumonia, and elective hip and/or 
knee replacement procedures) with readmissions and mortality measure 
data for the same patient cohorts. Since the MSPB measure would still 
be reported for the Hospital VBP Program, patients, hospitals, and the 
public would continue to receive information about the data provided by 
these resource measures. Thus, removing these six measures from the 
Hospital IQR Program would help to reduce duplicative data and produce 
a more harmonized and streamlined measure set. Further, and as 
explained above, the Hospital VBP Program's incentive payment structure 
ties hospitals' payment adjustments on claims paid under the IPPS to 
their performance on selected quality measures, including the MSPB 
measure, sufficiently incentivizing performance improvement on this 
measure among participating hospitals.
    As discussed in section VIII.A.4.b. of the preamble of this 
proposed rule, above, one of our main goals is to move forward in the 
least burdensome manner possible, while maintaining a parsimonious set 
of the most meaningful quality measures and continuing to incentivize 
improvement in the quality of care provided to patients, and we believe 
that removing these measures from the Hospital IQR Program helps 
achieve that goal. We recognize, however, that including specific 
episode-based payment measure data can provide hospitals with 
actionable feedback to better equip them to implement targeted 
improvements in comparison to an overall payment measure. In addition, 
these measures were only recently implemented in the Hospital IQR 
Program in the FY 2017 IPPS/LTCH PPS final rule and data have not yet 
become publicly available on the Hospital Compare website. However, 
because these episode-based payment measures are not tied directly with 
other clinical quality measures that could contribute to the overall 
picture of providers' clinical effectiveness and efficiency, we believe 
that the data derived from these measures may be of lower utility to 
patients in deciding where to seek care, as well as to providers in 
gaining feedback to reduce cost and improve efficiency while 
maintaining high quality care; they address resource use which is not 
directly tied to clinical quality, unless combined with other clinical 
quality measures (81 FR 57133 through 57134).
    Therefore, we are proposing to remove the Cellulitis Payment, GI 
Payment, Kidney/UTI Payment, AA Payment, Chole and CDE Payment, and 
SFusion Payment measures for the FY 2020 payment determination (which 
applies to the performance period of January 1, 2018 through December 
31, 2018) and subsequent years. Because these are claims-based 
measures, operationally, we are able to remove them sooner than certain 
other measures we are proposing for removal in this proposed rule. We 
note that if the proposed removal Factor 8 is not

[[Page 20480]]

finalized, removal of these measures would not be finalized.
    We are inviting public comment on our proposal to remove these 
measures from the Hospital IQR Program as well as feedback on whether 
there are reasons to retain one or more of the measures in the Hospital 
IQR Program.
(8) Chart-Abstracted Clinical Process of Care Measures
    In this proposed rule, we are proposing to remove the Influenza 
Immunization, Incidence of Potentially Preventable Venous 
Thromboembolism, Median Time from ED Arrival to ED Departure for 
Admitted ED Patients, and Admit Decision Time to ED Departure Time for 
Admitted Patients measures as discussed in detail below. Manual 
abstraction of these chart-abstracted measures is highly burdensome. We 
have previously stated our intent to move away from chart-abstracted 
measures in order to reduce this information collection burden (78 FR 
50808; 79 FR 50242; 80 FR 49693). We refer readers to our discussion 
below and to section XIV.B.3.b. of the preamble of this proposed rule, 
where we discuss the information collection burden associated with each 
of these measures with greater specificity.
(a) Influenza Immunization Measure (NQF #1659) (IMM-2)
    We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50211) where we adopted the Influenza Immunization measure (NQF #1659) 
(IMM-2). In this proposed rule, we are proposing to remove IMM-2 
beginning with the CY 2019 reporting period/FY 2021 payment 
determination under removal Factor 1--topped-out measure and under 
proposed removal Factor 8, the costs associated with a measure outweigh 
the benefit of its continued use in the program.
    Hospital performance on IMM-2 is statistically ``topped-out''--
removal Factor 1. The Hospital IQR Program previously finalized two 
criteria for determining when a measure is ``topped out'': (1) When 
there is statistically indistinguishable performance at the 75th and 
90th percentiles; and (2) when the measure's truncated coefficient of 
variation is less than or equal to 0.10 (79 FR 50203). Our analysis 
indicates that performance on this measure has been topped-out for the 
past three payment determination years and also for Q1 and Q2 of 2017 
encounters. This analysis is captured by the table below:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Number of                         75th            90th
           Payment determination                     Encounters              hospitals         Mean         percentile      percentile     Truncated COV
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 2016...................................  2014 (Q1-Q4)................            3326          0.9292          0.9867          0.9965          0.0560
FY 2017...................................  2015 (Q1-Q4)................            3293          0.9372          0.9890          0.9970          0.0494
FY 2018...................................  2016 (Q1-Q4)................            3258          0.9370          0.9890          0.9970          0.0500
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Our topped-out analysis shows that administration of the influenza 
vaccination to admitted patients is widely in practice and there is 
little room for improvement. We believe that hospitals will continue 
this practice even after the measure is removed; thus, utility in the 
program is limited.
    Moreover, we are proposing to remove this measure under proposed 
removal Factor 8, ``the costs associated with a measure outweigh the 
benefit of its continued use in the program. We believe the information 
collection burden associated with manual chart abstraction, as 
discussed above, outweighs the associated benefit to beneficiaries of 
receiving this information, because: (1) It is topped out and there is 
little room for improvement (discussed above); and (2) it does not 
directly measure patient outcomes.
    As discussed in section I.A.2. of the preamble of this proposed 
rule, one of the goals of the Meaningful Measures Initiative is to 
reduce costs associated with payment policy, quality measures, 
documentation requirements, conditions of participation, and health 
information technology. Another goal of the Meaningful Measures 
Initiative is to utilize measures that are ``outcome-based where 
possible.'' IMM-2 is a process measure that tracks patients assessed 
and given an influenza vaccination with their consent, but does not 
directly measure patient outcomes.
    We recognize and agree that influenza prevention is an important 
public health issue. We note that the Influenza Vaccination Coverage 
Among Healthcare Personnel (HCP) measure (adopted at 76 FR 51631 
through 51633), which assesses the percentage of healthcare personnel 
at a facility who receive the influenza vaccination, remains in the 
Hospital IQR Program. Although the HCP measure is focused on 
vaccination of providers and other hospital personnel and not 
beneficiaries, it promotes improved health outcomes among beneficiaries 
because: (1) Health care personnel that have received the influenza 
vaccination are less likely to transmit influenza to patients under 
their care; and (2) vaccination of health care personnel reduces the 
probability that hospitals may experience staffing shortages as a 
result of illness that would impact ability to provide adequate patient 
care. Thus, we believe the costs associated with reporting this chart-
abstracted measure outweighs the associated benefits of keeping it in 
the Hospital IQR Program.
    We are proposing to remove the IMM-2 measure beginning with the CY 
2019 reporting period/FY 2021 payment determination (which applies to 
the performance period of January 1, 2019 through December 31, 2019) 
because hospitals already would have collected and reported data for 
the first three quarters of the CY 2018 reporting period for the FY 
2020 payment determination by the time of publication of the FY 2019 
IPPS/LTCH PPS final rule. In addition, there are operational 
limitations associated with updating CMS systems in time to remove this 
measure sooner for the CY 2018 reporting period/FY 2020 payment 
determination. This proposed timeline (that is, beginning with the CY 
2019 reporting period/FY 2021 payment determination) would subsequently 
allow us to use the data already reported by hospitals in the CY 2018 
reporting period for public reporting on our Hospital Compare website 
and for data validation.
    Therefore, we are proposing to remove the IMM-2 measure from the 
Hospital IQR Program for the CY 2019 reporting period/FY 2021 payment 
determination and subsequent years.
    We are inviting public comment on our proposal.
    (b) Incidence of Potentially Preventable Venous Thromboembolism 
Measure (VTE-6); Median Time From ED Arrival to ED Departure for 
Admitted ED Patients Measure (NQF #0495) (ED-1); and Admit Decision 
Time to ED Departure Time for Admitted Patients Measure (NQF #0497) 
(ED-2)
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51634 through 51636), where we adopted the Incidence of Potentially 
Preventable Venous Thromboembolism measure

[[Page 20481]]

(VTE-6), and to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50210 
through 50211), where we adopted both the chart-abstracted version of 
the Median Time from ED Arrival to ED Departure for Admitted ED 
Patients measure (NQF #0495) (ED-1) and the Admit Decision Time to ED 
Departure Time for Admitted Patients measure (NQF #0497) (ED-2). In 
this proposed rule, we are proposing to remove VTE-6 and the chart-
abstracted version of ED-1 beginning with the CY 2019 reporting period/
FY 2021 payment determination; in addition, we are proposing to remove 
the chart-abstracted version of ED-2 beginning with the CY 2020 
reporting period/FY 2022 payment determination. We are proposing to 
remove these three measures under proposed removal Factor 8, the costs 
associated with a measure outweigh the benefit of its continued use in 
the program.
    As discussed in section I.A.2. of the preamble of this proposed 
rule, one of the goals of our Meaningful Measures Initiative is to 
reduce costs associated with payment policy, quality measures, 
documentation requirements, conditions of participation, and health 
information technology. We believe the information collection burden 
associated with manual chart abstraction, as discussed above, outweighs 
the associated benefit to beneficiaries of receiving information 
provided by these measures because much of the information provided by 
these measures is available through other Program measure data (as 
further discussed below).
    Furthermore, in the case of ED-2, hospitals still would have the 
opportunity to submit data since the eCQM version will remain part of 
the Hospital IQR Program measure set. We note that in section 
VIII.A.5.b.(9)(c) of the preamble of this proposed rule, below, we are 
proposing to remove the eCQM version of ED-1, but to retain the eCQM 
version of ED-2 due to the continued importance of assessing ED wait 
times for admitted patients. Although ED-1 is an important metric for 
patients, ED-2 has greater clinical significance for quality 
improvement because it provides more actionable information such that 
hospitals have greater ability to allocate resources to consistently 
reduce the time between decision to admit and time of inpatient 
admission. Hospitals have somewhat less control to consistently reduce 
wait time between ED arrival and decision to admit, as measured by ED-
1, due to the need to triage and prioritize more complex or urgent 
patients. Also, the Hospital OQR Program includes an ED throughput 
measure, OP-18: Median Time from ED Arrival to ED Departure for 
Discharged ED Patients (81 FR 79755), which publicly reports similar 
data as captured by ED-1. Therefore, we believe the costs to providers 
for submitting data on the chart-abstracted ED-1 and ED-2 measures 
outweigh the associated benefits of keeping the measures in the program 
given that other measures in the Hospital IQR Program and in other CMS 
hospital quality programs are able to capture actionable data on ED 
wait times.
    Furthermore, although the eCQM version of VTE-6 is not included in 
the Hospital IQR Program, hospitals still would have the opportunity to 
submit data for two other VTE related measures (eCQMs), which were 
already adopted in the Hospital IQR Program measure set--Venous 
Thromboembolism Prophylaxis (VTE-1) (NQF #0371) eCQM (adopted at 78 FR 
50809) and Intensive Care Unit Venous Thromboembolism Prophylaxis (VTE-
2) (NQF #0372) eCQM (adopted at 78 FR 50809). The VTE-1 eCQM assesses 
the number of patients who received venous thromboembolism (VTE) 
prophylaxis or have documentation why no VTE prophylaxis was given the 
day of or day after hospital admission or surgery end date for 
surgeries that start the day of or the day after hospital admission; 
the VTE-2 eCQM assesses the number of patients who received VTE 
prophylaxis or have documentation why no VTE prophylaxis was given on 
the day of or the day after the initial admission (or transfer) to the 
Intensive Care Unit (ICU) or surgery end date for surgeries that start 
the day of or the day after ICU admission (or transfer). The VTE-1 and 
VTE-2 measures will be retained in the Hospital IQR Program to 
encourage best clinical practices to those patients in this high risk 
population by providing prophylactic steps which will decrease the 
incidence of preventable VTE. In contrast, the VTE-6 measure assesses 
the number of patients diagnosed with confirmed VTE during 
hospitalization (not present at admission) who did not receive VTE 
prophylaxis between hospital admission and the day before the VTE 
diagnostic testing order date. While awareness of the occurrence of 
preventable VTE is valuable knowledge, the prevention of the initial 
occurrence is more actionable and meaningful for both providers and 
beneficiaries. Therefore, we believe the costs to providers of 
submitting data on this chart-abstracted measure outweigh its limited 
clinical utility given other VTE measures in the Program are able to 
capture more actionable data on VTE.
    As discussed in section VIII.A.4.b. of the preamble of this 
proposed rule, one of our main goals is to move the program forward in 
the least burdensome manner possible, while maintaining a parsimonious 
set of the most meaningful quality measures and continuing to 
incentivize improvement in the quality of care provided to patients. 
Therefore, we believe removing the chart-abstracted versions of the 
VTE-6, ED-1, and ED-2 measures from the Hospital IQR Program measure 
set helps achieve that goal.
    We are proposing to remove the VTE-6 measure and chart-abstracted 
version of the ED-1 measure beginning with the CY 2019 reporting 
period/FY 2021 payment determination, because hospitals already would 
have collected and reported data for the first three quarters of the CY 
2018 reporting period for the FY 2020 payment determination by the time 
of publication of the FY 2019 IPPS/LTCH PPS final rule. Moreover, we 
would not be able to overcome operational limitations associated with 
updating our systems in time to support removal of the VTE-6 and chart-
abstracted version of the ED-1 measures for the CY 2018 reporting 
period/FY 2020 payment determination. In addition, we are proposing to 
remove the chart-abstracted version of the ED-2 measure beginning with 
the CY 2020 reporting period/FY 2022 payment determination, because the 
first results from validation of ED-2 eCQM data will be available 
beginning with the FY 2021 payment determination. We believe it is 
important to keep the chart-abstracted version of ED-2 in the program 
until after the validated data from the eCQM version of ED-2 is 
available for comparative analysis to evaluate the accuracy and 
completeness of the eCQM data. Further, removing these three measures 
on the proposed timelines would allow us to use the data already 
reported by hospitals in the CY 2018 reporting period for public 
reporting on our Hospital Compare website and for data validation.
    Therefore, we are proposing to remove: (1) VTE-6 and the chart-
abstracted version of ED-1 beginning with the CY 2019 reporting period/
FY 2021 payment determination; and (2) the chart-abstracted version of 
ED-2 beginning with the CY 2020 reporting period/FY 2022 payment 
determination. We note that if the proposed removal Factor 8 is not 
finalized, removal of these measures would not be finalized.
    We are inviting public comment on our proposals.
(9) Proposed Removal of Electronic Clinical Quality Measures (eCQMs)
    In alignment with the Medicare and Medicaid Promoting 
Interoperability

[[Page 20482]]

Programs (previously known as the Medicare and Medicaid EHR Incentive 
Programs) for eligible hospitals and CAHs, we are proposing to reduce 
the number of electronic Clinical Quality Measures (eCQMs) in the 
Hospital IQR Program eCQM measure set from which hospitals must select 
four to report, by proposing to remove seven eCQMs (of the 15 measures 
currently in the measure set) beginning with the CY 2020 reporting 
period/FY 2022 payment determination. The seven eCQMs we are proposing 
to remove are:
     Primary PCI Received Within 90 Minutes of Hospital Arrival 
(AMI-8a) (adopted at 79 FR 50246);
     Home Management Plan of Care Document Given to Patient/
Caregiver (CAC-3) (adopted at 79 FR 50243 through 50244);
     Median Time from ED Arrival to ED Departure for Admitted 
ED Patients (NQF #0495) (ED-1) (adopted at 78 FR 50807 through 50710);
     Hearing Screening Prior to Hospital Discharge (NQF #1354) 
(EHDI-1a) (adopted at 79 FR 50242);
     Elective Delivery (NQF #0469) (PC-01) (adopted at 78 FR 
50807 through 50810);
     Stroke Education (STK-08) (adopted at 78 FR 50807 through 
50810); and,
     Assessed for Rehabilitation (NQF #0441) (STK-10) (adopted 
at 78 FR 50807 through 50810).
    We are proposing to remove all seven eCQMs under proposed removal 
Factor 8, the costs associated with a measure outweigh the benefit of 
its continued use in the program. As discussed in section I.A.2. of the 
preamble of this proposed rule, two of the goals of our Meaningful 
Measures Initiative are to: (1) Reduce costs associated with payment 
policy, quality measures, documentation requirements, conditions of 
participation, and health information technology; and (2) to apply a 
parsimonious set of the most meaningful measures available to track 
patient outcomes and impact. In section VIII.A.11.d.(2) of the preamble 
of this proposed rule, for the CY 2019 reporting period/FY 2021 payment 
determination, we are proposing to extend the same eCQM reporting 
requirements finalized for the CY 2018 reporting period/FY 2020 payment 
determination, such that hospitals submit one, self-selected calendar 
quarter of data on four self-selected eCQMs. Thus, we anticipate the 
collection of information burden associated with eCQM data reporting 
for the CY 2019 reporting period/FY 2021 payment determination will be 
the same as for the CY 2018 reporting period/FY 2020 payment 
determination. However, in section VIII.A.4.b. of the preamble of this 
proposed rule, we discuss our belief that costs associated with program 
requirements are multi-faceted and include not only the burden 
associated with reporting, but also the costs associated with 
implementing and maintaining the measures for the Program, such as 
staying current on clinical guidelines and maintaining measure 
specifications in hospitals' EHR systems for all of the eCQMs available 
for use in the Hospital IQR Program. With respect to eCQMs, we believe 
that a coordinated reduction in the overall number of eCQMs in both the 
Hospital IQR and Medicare and Medicaid Promoting Interoperability 
Programs (previously known as the Medicare and Medicaid EHR Incentive 
Programs) would reduce costs and improve the quality of reported data 
by enabling hospitals to focus on a smaller, more specific subset of 
eCQMs, while still allowing hospitals some flexibility to select which 
eCQMs to report that best reflect their patient populations and support 
internal quality improvement efforts. We refer readers to the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57116 through 57120) where we 
previously removed 13 eCQMs from the eCQM measure set in order to 
develop a smaller, more specific subset of eCQMs.
    In order to move the program forward in the least burdensome manner 
possible, while maintaining a parsimonious set of the most meaningful 
quality measures and continuing to incentivize improvement in the 
quality of care provided to patients, we believe it is appropriate to 
propose to remove additional eCQMs at this time to develop an even more 
streamlined set of the most meaningful eCQMs for hospitals. In 
selecting which eCQMs to propose for removal, we considered the 
relative benefits and costs associated with each eCQM in the measure 
set. Individual eCQMs are discussed in more detail below.
(a) AMI-8a
    We are proposing to remove AMI-8a because the costs associated with 
implementing and maintaining this eCQM outweigh the associated benefit 
to beneficiaries because too few hospitals select to report on this 
measure. Only a single hospital reported on this measure for the CY 
2016 reporting period. Because we do not receive enough data to conduct 
meaningful, statistically significant analysis, we believe the costs of 
maintaining this measure in the Program outweigh any associated benefit 
to patients, consumers, and providers--proposed removal Factor 8.
(b) CAC-3, STK-08, and STK-10
    We are proposing to remove the CAC-3, STK-08, and STK-10 eCQMs, 
because we believe the costs associated with implementing and 
maintaining these eCQMs outweigh the benefit to beneficiaries because 
they do not provide information evaluating the clinical quality of the 
activity. Home Management Plan of Care Document Given to Patient/
Caregiver (CAC-3) assesses the proportion of pediatric asthma patients 
discharged from an inpatient hospital stay with a Home Management Plan 
of Care (HMPC) document given to the pediatric asthma patient/
caregiver. Stroke Education (STK-08) captures ischemic or hemorrhagic 
stroke patients or their caregivers who were given educational 
materials during the hospital stay and at discharge. Assessed for 
Rehabilitation (STK-10) captures ischemic or hemorrhagic stroke 
patients who were assessed for rehabilitation.
    We have issued guidance that measure developers should avoid 
selecting or constructing measures that can be met primarily through 
documentation without evaluating the clinical quality of the activity--
often satisfied with a checkbox, date, or code--for example, a 
completed assessment, care plan, or delivered instruction.\282\ CAC-3, 
STK-08, and STK-10 are examples of those types of measures. In our 
effort to create a more parsimonious measure set, we assessed which 
measures are the least costly to report and most effective in 
particular priority areas, including stroke, and we believe these 
measures provide less benefit to providers and Beneficiaries, relative 
to their costs.
---------------------------------------------------------------------------

    \282\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Downloads/Blueprint-120.pdf.
---------------------------------------------------------------------------

    Furthermore, if our proposals to remove the STK-08 and STK-10 eCQMs 
are finalized as proposed, we believe the resulting set of four stroke 
eCQMs (STK-02, STK-03, STK-05, and STK-06) will be more meaningful to 
both patients and providers because they capture the proportion of 
ischemic stroke patients who are prescribed a statin medication,\283\ 
specific anti-thrombolytic therapy,\284\ and/or

[[Page 20483]]

anticoagulation therapy \285\ at hospital discharges, which would 
address follow-up care and promote future preventative actions. 
Moreover, these remaining stroke eCQMs continue to be meaningful 
because ischemic strokes account for 87 percent of all strokes, and 
strokes are the fifth leading cause of death and disability.\286\ We 
also note that the STK-08 and STK-10 eCQMs already have been removed 
from The Joint Commission's eCQM measure set.\287\
---------------------------------------------------------------------------

    \283\ Measure specifications for STK-06 available at: https://ecqi.healthit.gov/ecqm/measures/cms105v6.
    \284\ Measure specifications for STK-02 and STK-05 available at: 
https://ecqi.healthit.gov/ecqm/measures/cms104v6 and https://ecqi.healthit.gov/ecqm/measures/cms072v6.
    \285\ Measure specifications for STK-03 available at: https://ecqi.healthit.gov/ecqm/measures/cms071v7.
    \286\ http://www.strokassociation.org/STROKEORG/AboutStroke/Impact-of-Stroke-Stroke-statistics_UCM_310728_Article.jsp#.WtDzy42Wzg9.
    \287\ https://www.jointcommission.org/the_joint_commission_measures_effective_january_1_2018/.
---------------------------------------------------------------------------

(c) ED-1
    We are proposing to remove the Median Time from ED Arrival to ED 
Departure for Admitted ED Patients (ED-1) eCQM because we believe that 
among the ED measures in the eCQM measure set, Median Time from ED 
Arrival to ED Departure for Admitted ED Patients (ED-2) is more 
effective at driving quality improvement. We note that in section 
VIII.A.5.b.(8)(b) of the preamble of this proposed rule, above, we are 
proposing to remove the chart-abstracted versions of ED-1 and ED-2. As 
stated above, we believe that although ED-1 is an important metric for 
patients, ED-2 has greater clinical significance for quality 
improvement because it provides more actionable information--hospitals 
have greater ability to allocate resources and align inter-departmental 
communication to consistently reduce the time between decision to admit 
and time of inpatient admission. Hospitals have somewhat less ability 
to consistently reduce wait time between ED arrival and decision to 
admit, as measured by ED-1, due to the need to triage and prioritize 
more complex or urgent patients, which might inadvertently prolong ED 
wait times for less urgent patients. Also, the Hospital OQR Program 
includes an ED throughput measure, OP-18: Median Time from ED Arrival 
to ED Departure for Discharged ED Patients (81 FR 79755), which 
publicly reports similar data as captured by ED-1. Therefore, we 
believe the costs of implementing and maintaining the eCQM, as 
discussed above, outweigh the limited benefits of keeping the measure 
in the Program given that other measures in the Hospital IQR Program 
and in other CMS hospital quality programs are able to capture 
actionable data on ED wait times.
(d) EHDI-1a
    We are proposing to remove the EHDI-1a eCQM because we believe the 
costs associated with implementing and maintaining the measure, as 
discussed above, outweigh the benefits to beneficiaries because newborn 
hearing screening is already widely practiced by hospitals as the 
standard of care and already mandated by many State laws. Forty-three 
States currently have statutes or rules related to newborn hearing 
screening and 28 of the 43 States require babies to be screened.\288\ 
Thus, this measure may be duplicative with local regulations for most 
hospitals. Therefore, we believe the costs associated with the measure 
outweigh the associated benefits of keeping the measure in the Hospital 
IQR Program.
---------------------------------------------------------------------------

    \288\ http://www.infanthearing.org/ehdi-ebook/2017_ebook/1b%20Chapter1Evolution EHDI2017.pdf.
---------------------------------------------------------------------------

(e) PC-01
    We are proposing to remove the eCQM version of PC-01. Due to the 
importance of child and maternal health, we are not proposing to also 
remove the chart-abstracted version of the measure because we believe 
all hospitals with a sufficient number of cases should be required to 
report data on this measure (adopted at 77 FR 53530). Although we have 
expressed in section XIII.A.4.b.ii.(8) of the preamble of this proposed 
rule our intent to move away from the use of chart-abstracted measures 
in quality reporting programs, our previously adopted policy requires 
that hospitals should need less time to submit data for this measure 
because, unlike the other chart-abstracted measures, hospitals are only 
required to submit several aggregate counts instead of potentially 
numerous patient-level charts. We note that submission of this measure 
places less information collection burden on hospitals than the other 
chart-abstracted measures because of the ease with which hospitals can 
simply submit their aggregate counts using our Web-Based Measure Tool 
through the QualityNet website (77 FR 53537). In addition, if the 
chart-abstracted version of this measure were removed from the Program, 
and hospitals could only elect to report the eCQM version of this 
measure as one of four required eCQMs, we believe that due to the low 
volume of patients relative to total adult hospital population, we 
would not receive enough data to produce meaningful analyses. Also, PC-
01 is one of only two measures of child and maternal health in the 
Hospital IQR Program measure set (PC-05 eCQM being the other) and since 
eCQM data are not currently publicly reported, the chart-abstracted 
version of PC-01 is currently the only publicly reported measure of 
child and maternal health in the Program. However, retaining this 
measure in both eCQM and chart-abstracted form may be duplicative and 
costly. Consequently, we are proposing to remove the eCQM version of 
PC-01 while retaining the chart-abstracted version of PC-01.
    Therefore, we believe the costs associated with implementing and 
maintaining the eCQM, as discussed above, outweigh the associated 
benefit to beneficiaries because the information is already collected 
and publicly reported in the chart-abstracted form of this measure for 
the Hospital IQR Program.
    Thus, we are proposing to remove seven eCQMs as discussed above 
beginning with the CY 2020 reporting period/FY 2022 payment 
determination. If our proposals are finalized as proposed, the eCQMs 
remaining in the eCQM measure set would focus on: (a) ED wait times for 
admitted patients (ED-2), which addresses the Meaningful Measures 
Initiative quality priority of promoting effective communication and 
coordination of care; (b) Exclusive Breast Milk Feeding (PC-05), which 
addresses the Meaningful Measures Initiative quality priority that care 
is personalized and aligned with patients' goals; and (c) stroke care 
(STK-02, STK-03, STK-05, and STK-06) and VTE care (VTE-1 and VTE-2), 
which address the Meaningful Measures Initiative quality priority of 
promoting effective prevention and treatment.
    In crafting our proposals to remove these seven eCQMs from the 
Hospital IQR Program for the CY 2020 reporting period/FY 2022 payment 
determination and subsequent years, we also considered proposing to 
remove these seven eCQMs one year earlier, beginning with the CY 2019 
reporting period/FY 2021 payment determination. We establish program 
requirements considering all hospitals that participate in the Hospital 
IQR Program at a national level, which involves a wide spectrum of 
capabilities and resources with respect to eCQM reporting. In 
establishing our eCQM policies, we must balance the needs of hospitals 
with variable preferences and capabilities. Overall, across the range 
of capabilities and resources for eCQM reporting, stakeholders have 
expressed that they want more time to prepare for eCQM changes. 
Specifically, as noted in

[[Page 20484]]

the FY 2018 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 health IT vendors 
about ongoing challenges of implementing eCQM reporting, including, ``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 (82 FR 38355).''
    We recognize that some hospitals and health IT vendors may prefer 
earlier removal in order to forgo maintenance on those eCQMs proposed 
for removal. In preparation for this proposed rule, we weighed the 
relative burdens and costs associated with removing these measures 
beginning with the CY 2019 reporting period/FY 2021 payment 
determination or beginning with the CY 2020 reporting period/FY 2021 
payment determination. Ultimately, in order to be responsive to the 
previous stakeholder feedback we have received, we are proposing to 
remove these seven eCQMs beginning with the CY 2020 reporting period/FY 
2022 payment determination and subsequent years, even if as a result 
some hospitals may have to perform measure maintenance on measures that 
would be removed the following year. We believe our proposal to remove 
these eCQMs would spare hospitals that have already allocated and 
expended resources in 2018 in preparation for the CY 2019 reporting 
period that begins January 1, 2019 from the burden of unnecessarily 
expended resources or expending additional time and resources to update 
their EHR systems or adjust the eCQMs they selected to report for the 
CY 2019 reporting period/FY 2021 payment determination.
    In this proposed rule, we are striving to establish program 
requirements that reflect the wide range of capabilities and resources 
of hospitals for eCQM reporting. Our proposal would allow more advanced 
notice of eCQMs that would and would not be available to report for the 
CY 2020 reporting period/FY 2022 payment determination. Therefore, we 
are proposing to remove the AMI-8a, CAC-3, ED-1, EHDI-1a, PC-01, STK-
08, and STK-10 eCQMs from the Hospital IQR Program for the CY 2020 
reporting period/FY 2022 payment determination and subsequent years. We 
refer readers to section VIII.A.5.b.(9) of the preamble of this 
proposed rule for our proposals to remove these seven eCQMs from the 
Medicare and Medicaid Promoting Interoperability Programs (previously 
known as the Medicare and Medicaid EHR Incentive Programs). We also 
refer readers to sections VIII.A.11.d. of the preamble of this proposed 
rule for our proposals on the eCQM reporting requirements for the CY 
2019 reporting period/FY 2021 payment determination, including further 
discussion on the 2015 Edition of CEHRT.
    We are inviting public comment on our proposal as discussed above, 
including the specific measures proposed for removal and the timing of 
removal from the Program.
c. Summary of Hospital IQR Program Measures Proposed for Removal
    In this proposed rule, we are proposing to remove a total of 39 
measures from the program, as summarized in the table below:

                          Summary of Hospital IQR Program Measures Proposed for Removal
----------------------------------------------------------------------------------------------------------------
                                                                     First payment determination
             Short name                       Measure name            year proposed for removal        NQF #
----------------------------------------------------------------------------------------------------------------
                                       Structural Patient Safety Measures
----------------------------------------------------------------------------------------------------------------
Safe Surgery Checklist..............  Safe Surgery Checklist Use..  FY 2020.....................             N/A
Patient Safety Culture..............  Hospital Survey on Patient    FY 2020.....................             N/A
                                       Safety Culture.
----------------------------------------------------------------------------------------------------------------
                                             Patient Safety Measures
----------------------------------------------------------------------------------------------------------------
PSI 90..............................  Patient Safety and Adverse    FY 2020.....................            0531
                                       Events Composite.
CAUTI...............................  National Healthcare Safety    FY 2021.....................            0138
                                       Network (NHSN) Catheter-
                                       associated Urinary Tract
                                       Infection (CAUTI) Outcome
                                       Measure.
CDI.................................  National Healthcare Safety    FY 2021.....................            1717
                                       Network (NHSN) Facility-
                                       wide Inpatient Hospital-
                                       onset Clostridium difficile
                                       Infection (CDI) Outcome
                                       Measure.
CLABSI..............................  National Healthcare Safety    FY 2021.....................            0139
                                       Network (NHSN) Central Line-
                                       Associated Bloodstream
                                       Infection (CLABSI) Outcome
                                       Measure.
Colon and Abdominal Hysterectomy SSI  American College of           FY 2021.....................            0753
                                       Surgeons--Centers for
                                       Disease Control and
                                       Prevention (ACS-CDC)
                                       Harmonized Procedure
                                       Specific Surgical Site
                                       Infection (SSI) Outcome
                                       Measure.
MRSA Bacteremia.....................  National Healthcare Safety    FY 2021.....................            1716
                                       Network (NHSN) Facility-
                                       wide Inpatient Hospital-
                                       onset Methicillin-resistant
                                       Staphylococcus aureus
                                       (MRSA) Bacteremia Outcome
                                       Measure.
----------------------------------------------------------------------------------------------------------------
                                   Claims-Based Coordination of Care Measures
----------------------------------------------------------------------------------------------------------------
READM-30-AMI........................  Hospital 30-Day All-Cause     FY 2020.....................            0505
                                       Risk[dash]Standardized
                                       Readmission Rate Following
                                       Acute Myocardial Infarction
                                       (AMI) Hospitalization.
READM-30-CABG.......................  Hospital 30-Day, All-Cause,   FY 2020.....................            2515
                                       Unplanned, Risk-
                                       Standardized Readmission
                                       Rate Following Coronary
                                       Artery Bypass Graft (CABG)
                                       Surgery.
READM-30-COPD.......................  Hospital 30-Day, All-Cause,   FY 2020.....................            1891
                                       Risk[dash]Standardized
                                       Readmission Rate Following
                                       Chronic Obstructive
                                       Pulmonary Disease (COPD)
                                       Hospitalization.
READM-30-HF.........................  Hospital 30-Day, All-Cause,   FY 2020.....................            0330
                                       Risk[dash]Standardized
                                       Readmission Rate Following
                                       Heart Failure (HF)
                                       Hospitalization.
READM-30-PNA........................  Hospital 30-Day, All-Cause,   FY 2020.....................            0506
                                       Risk[dash]Standardized
                                       Readmission Rate Following
                                       Pneumonia Hospitalization.

[[Page 20485]]

 
READM-30-THA/TKA....................  Hospital-Level 30-Day, All-   FY 2020.....................            1551
                                       Cause
                                       Risk[dash]Standardized
                                       Readmission Rate Following
                                       Elective Primary Total Hip
                                       Arthroplasty (THA) and/or
                                       Total Knee Arthroplasty
                                       (TKA).
READM-30-STK........................  30-Day Risk Standardized      FY 2020.....................             N/A
                                       Readmission Rate Following
                                       Stroke Hospitalization.
----------------------------------------------------------------------------------------------------------------
                                         Claims-Based Mortality Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI.........................  Hospital 30-Day, All-Cause,   FY 2020.....................            0230
                                       Risk[dash]Standardized
                                       Mortality Rate Following
                                       Acute Myocardial Infarction
                                       (AMI) Hospitalization.
MORT-30-HF..........................  Hospital 30-Day, All-Cause,   FY 2020.....................            0229
                                       Risk[dash]Standardized
                                       Mortality Rate Following
                                       Heart Failure (HF)
                                       Hospitalization.
MORT-30-COPD........................  Hospital 30-Day, All-Cause,   FY 2021.....................            1893
                                       Risk[dash]Standardized
                                       Mortality Rate Following
                                       Chronic Obstructive
                                       Pulmonary Disease (COPD)
                                       Hospitalization.
MORT-30-PN..........................  Hospital 30-Day, All-Cause,   FY 2021.....................            0468
                                       Risk[dash]Standardized
                                       Mortality Rate Following
                                       Pneumonia Hospitalization.
MORT-30-CABG........................  Hospital 30-Day, All-Cause,   FY 2022.....................            2558
                                       Risk[dash]Standardized
                                       Mortality Rate Following
                                       Coronary Artery Bypass
                                       Graft (CABG) Surgery.
----------------------------------------------------------------------------------------------------------------
                                       Claims-Based Patient Safety Measure
----------------------------------------------------------------------------------------------------------------
Hip/Knee Complications..............  Hospital-Level Risk-          FY 2023.....................            1550
                                       Standardized Complication
                                       Rate Following Elective
                                       Primary Total Hip
                                       Arthroplasty (THA) and/or
                                       Total Knee Arthroplasty
                                       (TKA).
----------------------------------------------------------------------------------------------------------------
                                          Claims-Based Payment Measures
----------------------------------------------------------------------------------------------------------------
MSPB................................  Medicare Spending Per         FY 2020.....................            2158
                                       Beneficiary (MSPB)--
                                       Hospital Measure.
Cellulitis Payment..................  Cellulitis Clinical Episode-  FY 2020.....................             N/A
                                       Based Payment Measure.
GI Payment..........................  Gastrointestinal Hemorrhage   FY 2020.....................             N/A
                                       Clinical Episode-Based
                                       Payment Measure.
Kidney/UTI Payment..................  Kidney/Urinary Tract          FY 2020.....................             N/A
                                       Infection Clinical Episode-
                                       Based Payment Measure.
AA Payment..........................  Aortic Aneurysm Procedure     FY 2020.....................             N/A
                                       Clinical Episode-Based
                                       Payment Measure.
Chole and CDE Payment...............  Cholecystectomy and Common    FY 2020.....................             N/A
                                       Duct Exploration Clinical
                                       Episode-Based Payment
                                       Measure.
SFusion Payment.....................  Spinal Fusion Clinical        FY 2020.....................             N/A
                                       Episode-Based Payment
                                       Measure.
----------------------------------------------------------------------------------------------------------------
                               Chart-Abstracted Clinical Process of Care Measures
----------------------------------------------------------------------------------------------------------------
IMM-2...............................  Influenza Immunization......  FY 2021.....................            1659
VTE-6...............................  Incidence of Potentially      FY 2021.....................               +
                                       Preventable VTE [Venous
                                       Thromboembolism].
ED-1................................  Median Time from ED Arrival   FY 2021.....................            0495
                                       to ED Departure for
                                       Admitted ED Patients.
ED-2 *..............................  Admit Decision Time to ED     FY 2022.....................            0497
                                       Departure Time for Admitted
                                       Patients.
----------------------------------------------------------------------------------------------------------------
       EHR-Based Clinical Process of Care Measures (that is, Electronic Clinical Quality Measures (eCQMs))
----------------------------------------------------------------------------------------------------------------
AMI-8a..............................  Primary PCI Received Within   FY 2022.....................               +
                                       90 Minutes of Hospital
                                       Arrival.
CAC-3...............................  Home Management Plan of Care  FY 2022.....................               +
                                       Document Given to Patient/
                                       Caregiver.
ED-1................................  Median Time from ED Arrival   FY 2022.....................            0495
                                       to ED Departure for
                                       Admitted ED Patients.
EHDI-1a.............................  Hearing Screening Prior to    FY 2022.....................            1354
                                       Hospital Discharge.
PC-01...............................  Elective Delivery...........  FY 2022.....................            0469
STK-08..............................  Stroke Education............  FY 2022.....................               +
STK-10..............................  Assessed for Rehabilitation.  FY 2022.....................            0441
----------------------------------------------------------------------------------------------------------------
* Measure is proposed for removal in chart-abstracted form, but will be retained in eCQM form.
+ NQF endorsement removed.

6. Summary of Previously Adopted Hospital IQR Program Measures for the 
FY 2020 Payment Determination
    The table below summarizes the Hospital IQR Program measure set for 
the FY 2020 payment determination (including previously adopted 
measures, but not including measures proposed for removal beginning 
with the FY 2020 payment determination in this proposed rule):
---------------------------------------------------------------------------

    \289\ We note that measure stewardship of the recalibrated 
version of the Death Rate among Surgical Inpatients with Serious 
Treatable Complications measure is transitioning from AHRQ to CMS 
and, as part of the transition, the measure will be referred to as 
the CMS Recalibrated Death Rate among Surgical Inpatients with 
Serious Treatable Complications (CMS PSI 04) when it is used in CMS 
quality programs.

[[Page 20486]]



   Previously Adopted Measures for the FY 2020 Payment Determination *
------------------------------------------------------------------------
          Short name                  Measure name             NQF #
------------------------------------------------------------------------
                Healthcare-Associated Infection Measures
------------------------------------------------------------------------
CAUTI........................  National Healthcare                  0138
                                Safety Network Catheter-
                                associated Urinary Tract
                                Infection (CAUTI)
                                Outcome Measure.
CDI..........................  National Healthcare                  1717
                                Safety Network Facility-
                                wide Inpatient Hospital-
                                onset Clostridium
                                difficile Infection
                                (CDI) Outcome Measure.
CLABSI.......................  National Healthcare                  0139
                                Safety Network Central
                                Line-Associated
                                Bloodstream Infection
                                (CLABSI) Outcome Measure.
Colon and Abdominal            American College of                  0753
 Hysterectomy SSI.              Surgeons--Centers for
                                Disease Control and
                                Prevention Harmonized
                                Procedure Specific
                                Surgical Site Infection
                                (SSI) Outcome Measure.
HCP..........................  Influenza Vaccination                0431
                                Coverage Among
                                Healthcare Personnel.
MRSA Bacteremia..............  National Healthcare                  1716
                                Safety Network 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
                                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
                                \289\.
------------------------------------------------------------------------
                     Claims-Based Mortality Measures
------------------------------------------------------------------------
MORT-30-CABG.................  Hospital 30-Day, All-                2558
                                Cause,
                                Risk[dash]Standardized
                                Mortality Rate Following
                                Coronary Artery Bypass
                                Graft (CABG) Surgery.
MORT-30-COPD.................  Hospital 30-Day, All-                1893
                                Cause, Risk Standardized
                                Mortality Rate Following
                                Chronic Obstructive
                                Pulmonary Disease (COPD)
                                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-HWR.................  Hospital-Wide All-Cause              1789
                                Unplanned Readmission
                                Measure (HWR).
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.
------------------------------------------------------------------------
           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.

[[Page 20487]]

 
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 (0228)
                                Assessment of Healthcare
                                Providers and Systems
                                Survey (including Care
                                Transition Measure).
------------------------------------------------------------------------
* As discussed in section VIII.A.5. of the preamble of this proposed
  rule, we are proposing to remove 19 measures--17 claims-based measures
  and two structural measures--beginning with the FY 2020 payment
  determination. These measures, which had previously been finalized for
  the FY 2020 payment determination are not included in this summary
  table.
** Measure listed twice, as both chart-abstracted and eCQM versions.
\+\ NQF endorsement has been removed.

7. Summary of Previously Adopted Hospital IQR Program Measures for the 
FY 2021 Payment Determination
    The table below summarizes the Hospital IQR Program measure set for 
the FY 2021 payment determination (including previously adopted 
measures, but not including measures proposed for removal beginning 
with the FY 2021 payment determination in this proposed rule):

    Previously Adopted Measures for the FY 2021 Payment Determination
------------------------------------------------------------------------
          Short name                  Measure name             NQF #
------------------------------------------------------------------------
                Healthcare-Associated Infection Measures
------------------------------------------------------------------------
HCP..........................  Influenza Vaccination                0431
                                Coverage Among
                                Healthcare Personnel.
------------------------------------------------------------------------
                  Claims-Based Patient Safety Measures
------------------------------------------------------------------------
Hip/Knee Complications.......  Hospital-Level Risk-                 1550
                                Standardized
                                Complication Rate
                                Following Elective
                                Primary Total Hip
                                Arthroplasty (THA) and/
                                or Total Knee
                                Arthroplasty (TKA).
PSI 04.......................  Death Rate among Surgical             \+\
                                Inpatients with Serious
                                Treatable Complications.
------------------------------------------------------------------------
                     Claims-Based Mortality Measures
------------------------------------------------------------------------
MORT-30-STK..................  Hospital 30-Day, All-                 N/A
                                Cause,
                                Risk[dash]Standardized
                                Mortality Rate Following
                                Acute Ischemic Stroke *.
------------------------------------------------------------------------
               Claims-Based Coordination of Care Measures
------------------------------------------------------------------------
READM-30-HWR.................  Hospital-Wide All-Cause              1789
                                Unplanned Readmission
                                Measure (HWR).
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.
------------------------------------------------------------------------
           Chart-Abstracted Clinical Process of Care Measures
------------------------------------------------------------------------
ED-2 *.......................  Admit Decision Time to ED            0497
                                Departure Time for
                                Admitted Patients.
PC-01 *......................  Elective Delivery........            0469
Sepsis.......................  Severe Sepsis and Septic             0500
                                Shock: Management Bundle
                                (Composite Measure).
------------------------------------------------------------------------

[[Page 20488]]

 
    EHR-Based Clinical Process of Care Measures (that is, Electronic
                   Clinical Quality Measures (eCQMs))
------------------------------------------------------------------------
AMI-8a.......................  Primary Percutaneous                  \+\
                                Coronary Intervention
                                Received within 90
                                minutes of Hospital
                                Arrival.
CAC-3........................  Home Management and Plan              \+\
                                of Care Document Given
                                to Patient/Caregiver.
ED-1.........................  Median Time From ED                  0495
                                Arrival to ED Departure
                                for Admitted ED Patients
                                (ED-1).
ED-2 *.......................  Admit Decision Time to ED            0497
                                Departure Time for
                                Admitted Patients (ED-2).
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                 0438
                                Medication.
STK-08.......................  Stroke Education.........             \+\
STK-10.......................  Assessed for                         0441
                                Rehabilitation.
VTE-1........................  Venous Thromboembolism               0371
                                Prophylaxis.
VTE-2........................  Intensive Care Unit                  0372
                                Thromboembolism
                                Prophylaxis.
------------------------------------------------------------------------
               Patient Experience of Care Survey Measures
------------------------------------------------------------------------
HCAHPS.......................  Hospital Consumer            0166 (0228)
                                Assessment of Healthcare
                                Providers and Systems
                                Survey (including Care
                                Transition Measure).
------------------------------------------------------------------------
* Measure listed twice, as both chart-abstracted and eCQM versions.
\+\ NQF endorsement has been removed.

8. Summary of Previously Adopted Hospital IQR Program Measures for the 
FY 2022 Payment Determination and Subsequent Years

    The table below summarizes the Hospital IQR Program measure set for 
the FY 2022 payment determination (including previously adopted 
measures, but not including measures proposed for removal beginning 
with the FY 2022 payment determination in this proposed rule) and 
subsequent years:

  Previously Adopted Measures for the FY 2022 Payment Determination and
                            Subsequent Years
------------------------------------------------------------------------
          Short name                  Measure name             NQF #
------------------------------------------------------------------------
                Healthcare-Associated Infection Measures
------------------------------------------------------------------------
HCP..........................  Influenza Vaccination                0431
                                Coverage Among
                                Healthcare Personnel.
------------------------------------------------------------------------
                  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.
------------------------------------------------------------------------
                     Claims-Based Mortality Measures
------------------------------------------------------------------------
MORT-30-STK..................  Hospital 30-Day, All-                 N/A
                                Cause,
                                Risk[dash]Standardized
                                Mortality Rate Following
                                Acute Ischemic Stroke.
------------------------------------------------------------------------
               Claims-Based Coordination of Care Measures
------------------------------------------------------------------------
READM-30-HWR.................  Hospital-Wide All-Cause              1789
                                Unplanned Readmission
                                Measure (HWR).
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.
------------------------------------------------------------------------

[[Page 20489]]

 
           Chart-Abstracted Clinical Process of Care Measures
------------------------------------------------------------------------
PC-01........................  Elective Delivery........            0469
Sepsis.......................  Severe Sepsis and Septic             0500
                                Shock: Management Bundle
                                (Composite Measure).
------------------------------------------------------------------------
    EHR-based Clinical Process of Care Measures (that is, Electronic
                   Clinical Quality Measures (eCQMs))
------------------------------------------------------------------------
ED-2.........................  Admit Decision Time to ED            0497
                                Departure Time for
                                Admitted Patients.
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.
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 (0228)
                                Assessment of Healthcare
                                Providers and Systems
                                Survey (including Care
                                Transition Measure).
------------------------------------------------------------------------
* Proposed for removal from the Hospital IQR Program beginning with the
  FY 2023 payment determination, as discussed in section VIII.A.5.b.(5)
  of the preamble of this proposed rule.

9. Possible New Quality Measures, Measure Topics, and Other Future 
Considerations
    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. We also refer readers 
to section I.A.2. of the preamble of this proposed rule where we 
describe the Meaningful Measures Initiative--quality priorities that we 
have identified as high impact measurement areas that are relevant and 
meaningful to both patients and providers.
    In keeping with these considerations, we are inviting public 
comment on the potential future inclusion of a hospital-wide mortality 
measure in the Hospital IQR Program, specifically whether to propose to 
adopt a Claims-Only, Hospital-Wide, All-Cause, Risk-Standardized 
Mortality measure or a Hybrid Hospital-Wide, All-Cause, Risk-
Standardized Mortality measure. We are also considering a newly 
specified eCQM for possible concurrent inclusion in future years of the 
Hospital IQR and Medicare and Medicaid Promoting Interoperability 
Programs (previously known as the Medicare and Medicaid EHR Incentive 
Programs), the Opioid Harm Electronic Clinical Quality Measure (eCQM). 
We also seek public input on the future development and adoption of 
eCQMs more generally (for example, burdens, incentives). These topics 
are discussed in more detail below.
a. Potential Inclusion of Claims-Only Hospital-Wide Mortality Measure 
and/or Hybrid Hospital-Wide Mortality Measure With Electronic Health 
Record Data
(1) Background
    Mortality is an important health outcome that is meaningful to 
patients and providers, and the vast majority of patients admitted to 
the hospital have survival as a primary goal. However, estimates using 
data from 2002 to 2008 suggest that more than 400,000 patients die each 
year from preventable harm in hospitals.\290\ While we do not expect 
mortality rates to be zero, studies have shown that mortality within 30 
days of hospital admission is related to quality of care, and that high 
and variable mortality rates across hospitals indicate opportunities 
for improvement.291 292 In addition to the harm to 
individuals, their families, and caregivers resulting from preventable 
death, there are also significant financial costs to the healthcare 
system associated with high and variable mortality rates. While 
capturing monetary savings for preventable mortality events is 
challenging, using two recent estimates of the number of deaths due to 
preventable medical errors and assuming an average of ten lost years of 
life per death (valued at $75,000 per year in lost quality adjusted 
life years), the annual direct and indirect cost of potentially 
preventable deaths could be as much as $73.5 to $735 
billion.293 294 295
---------------------------------------------------------------------------

    \290\ James JT. A new, evidence-based estimate of patient harms 
associated with hospital care. Journal of patient safety. 
2013;9(3):122-128.
    \291\ Peterson ED, Roe MT, Mulgund J, et al. Association between 
hospital process performance and outcomes among patients with acute 
coronary syndromes. JAMA. 2006;295(16):1912-1920.
    \292\ Writing Group for the Checklist- I.C.U. Investigators, 
Brazilian Research in Intensive Care Network. Effect of a quality 
improvement intervention with daily round checklists, goal setting, 
and clinician prompting on mortality of critically ill patients: A 
randomized clinical trial. JAMA. 2016;315(14):1480-1490.
    \293\ Institute of Medicine. To Err is Human: Building a Safer 
Health System. 1999; Available at: https://
iom.nationalacademies.org/~/media/Files/Report%20Files/1999/To-Err-
is-Human/To%20Err%20is%20Human%201999%20%20report%20brief.pdf.
    \294\ Classen DC, Resar R, Griffin F, et al. `Global trigger 
tool' shows that adverse events in hospitals may be ten times 
greater than previously measured. Health Affairs. 2011;30(4):581-
589.
    \295\ Andel C, Davidow SL, Hollander M, Moreno DA. The economics 
of health care quality and medical errors. Journal of health care 
finance. 2012;39(1):39-50.
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    Existing condition-specific mortality measures adopted into the 
Hospital IQR Program support quality improvement work targeted toward 
patients with a set of common medical conditions, such as heart 
failure, acute myocardial infarction, or pneumonia. The use of these 
measures may have contributed to national declines in hospital 
mortality rates for the measured conditions and/or procedures.\296\ 
However, a measure of hospital-wide mortality captures a hospital's 
performance across a broader set of patients and across more areas of 
the hospital. Because more patients are included in the measure, a 
hospital-

[[Page 20490]]

wide mortality measure also captures the performance for smaller volume 
hospitals that would otherwise not have sufficient cases to calculate 
condition- or procedure-specific mortality measures.
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    \296\ Suter LG, Li SX, Grady JN, et al. National patterns of 
risk-standardized mortality and readmission after hospitalization 
for acute myocardial infarction, heart failure, and pneumonia: 
update on publicly reported outcomes measures based on the 2013 
release. Journal of general internal medicine. 2014;29(10):1333-
1340.
---------------------------------------------------------------------------

    We developed two versions of a hospital-wide, all-cause, risk-
standardized mortality measure: one that is calculated using only 
claims data (the Claims-Only Hospital-Wide All-Cause Risk Standardized 
Mortality Measure (hereinafter referred to as the ``Claims-Only HWM 
measure'')); and a hybrid version that uses claims data to define the 
measure cohort and a combination of data from electronic health records 
(EHRs) and claims for risk adjustment (Hybrid Hospital-Wide All-Cause 
Risk Standardized Mortality Measure (hereinafter referred to as the 
``Hybrid HWM measure'')). The goal of developing hospital-wide 
mortality measures is to assess hospital performance on patient 
outcomes among patients for whom mortality is likely to present an 
important quality signal and those where the hospital can positively 
influence the outcome for the patient. Both versions of the measure 
address the Meaningful Measures Initiative quality priority of 
promoting effective treatment to reduce risk-adjusted mortality.
    Several stakeholder groups were engaged throughout the development 
process, including a Technical Work Group and a Patient and Family Work 
Group, as well as a national, multi-stakeholder Technical Expert Panel 
consisting of a diverse set of stakeholders, including providers and 
patients. These groups were convened by the measure developer under 
contract with us and provided feedback on the measure concept, outcome, 
cohort, risk model variables, and reporting results. The measure 
developer also solicited stakeholder feedback during measure 
development as required in the Measures Management System (MMS) 
Blueprint.\297\
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    \297\ CMS Measures Management System Blueprint (Blueprint v 
13.0). CMS. 2017. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Downloads/Blueprint-130.pdf.
---------------------------------------------------------------------------

    We developed a Hybrid HWM measure in addition to a Claims-Only HWM 
measure in order to move toward greater use of EHR data for quality 
measurement, and in response to stakeholder feedback that is important 
to include clinical data in outcome measures (80 FR 49702 through 
49703). The Hybrid HWM measure is harmonized with the Claims-Only HWM 
measure. Both measures use the same cohort definition, outcome 
assessment, and claims-based risk variables (discussed in more detail 
below). The Hybrid HWM measure builds upon prior efforts to 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, as 
outlined in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49698). The 
core clinical data elements are data which are routinely collected on 
hospitalized adults, extraction from hospital EHRs is feasible, and the 
data can be utilized as part of specific quality outcome measures. The 
Hybrid HWM measure's core clinical data elements are very similar to, 
but not precisely that same as, those used in the Hybrid Hospital-Wide 
Readmission Measure with Claims and Electronic Health Record Data 
measure (NQF #2879), for which we are currently collecting data from 
hospitals on a voluntary basis and are considering proposing as a 
required measure as early as the FY 2023 payment determination (82 FR 
38350 through 38355). For more detail about the core clinical data 
elements used in the Hybrid Hospital-Wide Readmission Measure with 
Claims and Electronic Health Record Data measure (NQF #2879), we refer 
readers to our discussion in the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49698 through 49704) and the Hybrid Hospital-Wide Readmission 
Measure with Electronic Health Record Extracted Risk Factors report 
(available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
    The Claims-Only Hospital-Wide All-Cause Risk Standardized Mortality 
Measure (MUC17-195) and the Hybrid Hospital-Wide All-Cause Risk 
Standardized Mortality Measure (MUC17-196) were included in a publicly 
available document entitled ``2017 Measures Under Consideration List'' 
(available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367) and have been reviewed by the 
NQF MAP Hospital Workgroup. The MAP conditionally supported both 
measures pending NQF review and endorsement, as referenced in the 2017-
2018 Spreadsheet of Final Recommendations to HHS and CMS (available at: 
https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86972). The MAP also recommended 
the Hybrid HWM measure have a voluntary reporting period before 
mandatory implementation.\298\
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    \298\ Measure Application Partnership. MAP 2018 Considerations 
for Implementing Measures in Federal Programs: Hospitals. 
Washington, DC: NQF; 2018. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=87083.
---------------------------------------------------------------------------

    The MAP noted both measures are important measures for patient 
safety, and that these measures could help reduce deaths due to medical 
errors.\299\ We agree with MAP stakeholder concerns regarding the need 
for the NQF endorsement process to ensure the measures have appropriate 
clinical and social risk factors in the risk adjustment models and 
address necessary exclusions to ensure the measure does not 
disproportionately penalize facilities that may treat more complex 
patients.\300\ The MAP also expressed concern regarding the potential 
unintended consequences of unnecessary interventions for patients at 
the end of life; \301\ however, this issue was carefully addressed 
during measure development by excluding patients at the end of life and 
for whom survival is unlikely to be the goal of care from the measure 
cohort based upon the TEP and patient work group input. Specifically, 
the measure does not include patients enrolled in hospice in the 12 
months prior to admission, on admission, or within 2 days of admission; 
the measure also does not include patients admitted primarily for 
cancer that are enrolled in hospice at any time during the admission, 
those admitted primarily for metastatic cancer, and those admitted for 
specific diagnoses with limited chances of survival.
---------------------------------------------------------------------------

    \299\ Ibid.
    \300\ Ibid.
    \301\ Ibid.
---------------------------------------------------------------------------

    The MAP further suggested that condition-specific mortality 
measures may be more actionable for providers and informative for 
consumers.\302\ While service-line divisions may not be as granular as 
condition-specific measures, we believe a single comprehensive marker 
of hospital quality encourages organization-wide improvement, allows 
more hospitals to meet volume requirements for inclusion, offers more 
rapid detection of changes in performance due to performance being 
based on the most recent year of data available, and aligns with to the 
Meaningful Measures Initiative by creating the framework for 
stakeholders to have fewer measures to track and a single score to 
reference. We plan to submit both measures to NQF for endorsement 
proceedings as part of the Patient Safety Committee as early as

[[Page 20491]]

FY 2019, after the measures have been fully specified for use with ICD-
10 data.
---------------------------------------------------------------------------

    \302\ Ibid.
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(2) Overview of Measures
    Both the Claims-Only HWM measure and the Hybrid HWM measure capture 
hospital-level, risk-standardized mortality within 30 days of hospital 
admission for most conditions or procedures. The measures are reported 
as a single summary score, derived from the results of risk-adjustment 
models for 13 mutually exclusive service-line divisions (categories of 
admissions grouped based on discharge diagnoses or procedures), with a 
separate risk model for each of the 13 service-line divisions. The 13 
service-line divisions include: 8 non-surgical divisions and 5 surgical 
divisions. The non-surgical divisions are: Cancer; cardiac; 
gastrointestinal; infectious disease; neurology; orthopedics; 
pulmonary; and renal. The surgical divisions are: Cancer; 
cardiothoracic; general; neurosurgery; and orthopedics. 
Hospitalizations are eligible for inclusion in the measure if the 
patient was hospitalized at a non-Federal, short-stay acute care 
hospital. To compare mortality performance across hospitals, the 
measure accounts for differences in patient characteristics (patient 
case mix) as well as differences in the medical services provided and 
procedures performed by hospitals (hospital service mix). In addition, 
the Hybrid HWM Measure employs a combination of administrative claims 
data and clinical EHR data to enhance clinical case mix adjustment with 
additional clinical data.
    Our goal is to more comprehensively measure the mortality rates of 
hospitals, including to improve the ability to measure mortality rates 
in smaller volume hospitals. The cohort definition attempts to capture 
as many admissions as possible for which survival would be a reasonable 
indicator of quality and for which adequate risk adjustment is 
possible. We assume survival would be a reasonable indicator of quality 
for admissions fulfilling two criteria: (1) Survival is most likely the 
primary goal of the patient when they enter the hospital; and (2) the 
hospital can reasonably influence the patient's chance of survival 
through quality of care. These measures would provide information to 
hospitals that can facilitate quality improvement efforts for hospital 
settings, types of care, and types of patients not included in 
currently available condition-and procedure-specific mortality 
measures. Also, these measures would provide more transparency about 
the quality of care in clinical areas not captured in the current 
condition- and procedure-specific measures.
    Additional information on the development of both the Claims-Only 
and Hybrid versions of the HWM measure can be found on the CMS website 
at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods.html.
(3) Data Sources
    Both the Claims-Only and Hybrid versions of the HWM measure use 
Part A Medicare administrative claims data from Medicare FFS 
beneficiaries aged between 65 and 94 years, and use one year of data. 
Part A data from the 12 months prior to the index admission are used 
for risk adjustment.
    The Hybrid HWM measure uses two sources of data for the calculation 
of the measure: Medicare Part A claims and a set of core clinical data 
elements from hospitals' EHRs. Claims and enrollment data are used to 
identify index admissions included in the measure cohort, in the risk-
adjustment model, and to assess the 30-day mortality outcome. These 
data are merged with the core clinical data elements for eligible 
patient admissions from each hospital's EHR. The data elements are the 
values for a set of vital signs and common laboratory tests collected 
at presentation and used for risk-adjustment of patients' severity of 
illness (for Medicare FFS beneficiaries who are aged between 65 and 94 
years), in addition to data from claims.
(4) Outcome
    The outcome of interest for both the Claims-Only and Hybrid 
versions of the HWM measure is the same, all-cause 30-day mortality. We 
define all-cause mortality as death from any cause within 30 days of 
the index hospital admission date.
(5) Cohort
    The cohorts for both the Claims-Only HWM and Hybrid versions of the 
HWM measure are the same. The measure cohorts consist of Medicare FFS 
beneficiaries, aged between 65 and 94 years, discharged from non-
federal acute care hospitals.
    The Claims-Only HWM measure and Hybrid HWM measure were developed 
using ICD-9 codes. The measures are currently being updated for use 
with ICD-10 codes; ICD-10 updates will be completed prior to NQF 
submission and potential future implementation. Similar to the existing 
Hospital-Wide All-Cause Unplanned Readmission measure (NQF #1789), 
which was adopted into the Hospital IQR Program in the FY 2013 IPPS/
LTCH PPS final rule beginning with the FY 2015 payment determination 
(77 FR 53521 through 53528), the Claims-Only HWM measure and Hybrid HWM 
measure include a large and diverse number of admissions represented by 
thousands of included ICD-9 codes. We used the AHRQ Clinical 
Classification Software (CCS) \303\ to group numerous diagnostic and 
procedural ICD-9 codes into the clinically meaningful categories 
defined by the AHRQ grouper. Both the Claims-Only and Hybrid versions 
of the HWM measure use those CCS categories as part of cohort 
specification and risk-adjustment, including the 13 service-line risk 
models.
---------------------------------------------------------------------------

    \303\ Clinical Classifications Software (CCS) for ICD-9-CM Fact 
Sheet. Accessed at: https://www.hcup-us.ahrq.gov/toolssoftware/ccs/ccsfactsheet.jsp.
---------------------------------------------------------------------------

    For the AHRQ CCSs and individual ICD-9-CM codes that define the 
measure development cohort, we refer readers to the measure methodology 
reports on our website at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods.html.
(6) Inclusion and Exclusion Criteria
    The inclusion and exclusion criteria for both the Claims-Only and 
Hybrid versions of the HWM measure are the same. For both versions of 
the HWM measure, the cohort currently includes Medicare FFS patients 
who: (1) Were enrolled in Medicare FFS Part A for the 12 months prior 
to the date of admission and during the index admission; (2) have not 
been transferred from another inpatient facility; (3) were admitted for 
acute care (do not have a principal discharge diagnosis of a 
psychiatric disease or do not have a principal discharge diagnosis of 
``rehabilitation care; fitting of prostheses and adjustment devices''); 
(4) are aged between 65 and 94 years; (5) are not enrolled in hospice 
at the time of or in the 12 months prior to their index admission; (6) 
are not enrolled in hospice within two days of admission; (7) are 
without a principal diagnosis of cancer and enrolled in hospice during 
their index admission; (8) are without any diagnosis of metastatic 
cancer; and (9) are without a principal discharge diagnosis of a 
condition which hospitals have limited ability to influence survival, 
including: Anoxic brain damage; persistent vegetative state; prion 
diseases such as Creutzfeldt-Jakob disease, Cheyne-Stokes respiration; 
brain death; respiratory arrest; or

[[Page 20492]]

cardiac arrest without a secondary diagnosis of acute myocardial 
infarction.
    Both the Claims-Only and Hybrid versions of the HWM measure 
currently exclude the following index admissions for patients: (1) With 
inconsistent or unknown vital status; (2) discharged against medical 
advice; (3) with an admission for crush injury, burn, intracranial 
injury, or spinal cord injury; (4) with specific principal discharge 
diagnosis codes for which mortality may not be a quality signal; (5) 
with an admission in a CCS condition or procedure categorized as in the 
service-line divisions: Other Surgical Procedures or Other Non-Surgical 
Conditions (this exclusion is being reassessed to include these 
patients in the final measure); and (6) with an admission in a low-
volume CCS (within a particular service-line division), defined as 
equal to or less than 100 patients with that principle diagnosis across 
all hospitals.
    For both the Claims-Only and Hybrid versions of the HWM measure, 
each index admission is assigned to one of 13 mutually exclusive 
service-line divisions. For details on how each admission is assigned 
to a specific service-line division, and for a complete description and 
rationale of the inclusion and exclusion criteria, we refer readers to 
the methodology reports found on the CMS website at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods.html.
(7) Risk-Adjustment
    Both the Claims-Only and Hybrid versions of the HWM measure adjust 
for both case mix differences (clinical status of the patient, 
accounted for by adjusting for age and comorbidities) and service-mix 
differences (the types of conditions and procedures cared for and 
procedures conducted by the hospital, accounted for by the discharge 
condition category), and use the same patient comorbidities in the risk 
models. Patient comorbidities are based on inpatient hospital 
administrative claims during the 12 months prior to and including the 
index admission derived from ICD-9 codes grouped into the CMS condition 
categories (CMS-CCs). The measures are currently being updated for use 
with ICD-10 codes; ICD-10 updates will be completed prior to NQF 
submission and potential future adoption.
    The Hybrid HWM measure also includes the core clinical data 
elements from patients' EHRs in the case mix adjustment. The core 
clinical data elements are derived from information captured in the EHR 
during the index admission only, and are listed below.

                            Currently Specified Core Clinical Data Element Variables
----------------------------------------------------------------------------------------------------------------
                                                                               Time window for first captured
              Data elements                     Units of measurement                       values
----------------------------------------------------------------------------------------------------------------
Heart Rate..............................  Beats per minute................  0-2 hours.
Systolic Blood Pressure.................  mmHg............................  0-2 hours.
Temperature.............................  Degrees (Fahrenheit or Celsius).  0-2 hours.
Oxygen Saturation.......................  Percent.........................  0-2 hours.
Hemoglobin..............................  g/dL............................  0-24 hours.
Platelet................................  Count...........................  0-24 hours.
White Blood Cell Count..................  Cells/mL........................  0-24 hours.
Sodium..................................  mEq/L...........................  0-24 hours.
Bicarbonate.............................  mmol/L..........................  0-24 hours.
Creatinine..............................  mg/dL...........................  0-24 hours.
----------------------------------------------------------------------------------------------------------------

    The core clinical data elements are clinical information meant to 
reflect a patient's clinical status upon arrival to the hospital. For 
more details on how the risk variables in each measure were chosen, we 
refer readers to the methodology reports found on the CMS website at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods.html.
(8) Calculating the Risk-Standardized Mortality Rate (RSMR)
    The method for calculating the RSMR for both the Claims-Only and 
the Hybrid versions of the HWM measure is the same. Index admissions 
are assigned to one of 13 mutually exclusive service-line divisions 
consisting of related conditions or procedures. For each service-line 
division, the standardized mortality ratio (SMR) is calculated as the 
ratio of the number of ``predicted'' deaths to the number of 
``expected'' deaths at a given hospital. For each hospital, the 
numerator of the ratio is the number of deaths 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 deaths 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 service-line SMRs are then pooled for each hospital using an 
inverse variance-weighted mean to create a hospital-wide composite SMR. 
The inverse variance-weighted mean can be interpreted as a weighted 
average of all SMRs that takes into account the precision of SMRs. The 
composite SMR is multiplied by the national observed mortality rate to 
produce the RSMR. For additional details regarding the measure 
specifications to calculate the RSMR, we refer readers to the Claims-
Only Hospital-Wide (All-Condition, All-Procedure) Risk-Standardized 
Mortality Measure: Measure Methodology for Public Comment report and 
Hybrid Hospital-Wide (All-Condition, All-Procedure) Risk-Standardized 
Mortality Measure with Electronic Health Record Extracted Risk Factors: 
Measure Methodology for Public Comment report, which are posted on the 
CMS website at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    We are inviting public comment on the possible future inclusion of 
one or both hospital-wide mortality measures in the Hospital IQR 
Program simultaneously. We are also considering possible future 
inclusion of the Hybrid HWM measure in the Medicare and Medicaid 
Promoting Interoperability Programs (previously known as the Medicare 
and Medicaid EHR Incentive Programs) for Clinical Quality Measures 
(CQM) electronic reporting by eligible hospitals and CAHs. We are also 
inviting public comment on other aspects of the measure. Specifically, 
we are seeking public comment on the following: (1) Feedback about the

[[Page 20493]]

service-line division structure of the measure; (2) input on the 
measure testing approach, particularly if there is any additional 
validity testing that would be meaningful; and (3) how the measure 
results might be presented to the public, including ways that we could 
present supplemental hospital performance information in public 
reporting, such as service-line division-level results, to create a 
more meaningful and usable measure and ways that we could report more 
information about hospitals in a No Different From National Average 
group (defined using 95 percent confidence intervals) to help 
clinicians and patients use the measure results to improve patient care 
and make informed choices.
b. Potential Future Inclusion of the Hospital Harm--Opioid-Related 
Adverse Events Electronic Clinical Quality Measure (eCQM)
(1) Background
    Opioids are among the most frequently implicated medications in 
adverse drug events among hospitalized patients. The most serious 
opioid-related adverse events include those with respiratory 
depression, which can lead to brain damage and death. Opioid-related 
adverse events have both negative patient impacts and financial 
implications. These patients have been noted to have 55 percent longer 
lengths of stay, 47 percent higher costs, 36 percent higher risk of 30-
day readmission, and 3.4 times higher payments than patients without 
these adverse events.\304\ While noting that data are limited, The 
Joint Commission suggested that opioid-induced respiratory arrest may 
contribute substantially to the 350,000-750,000 in-hospital cardiac 
arrests annually.\305\
---------------------------------------------------------------------------

    \304\ Kessler ER, Shah M, Gruschkkus SK, et al. Cost and quality 
implications of opioid-based postsurgical pain control using 
administrative claims data from a large health system: opioid-
related adverse events and their impact on clinical and economic 
outcomes. Pharmacotherapy. 2013; 33(4):383-391.
    \305\ Overdyk FJ. Postoperative respiratory depression and 
opioids. Initiatives in Safe Patient Care. 2009; Available at: 
http://files.sld.cu/anestesiologia/files/2012/01/postoperative-respiratory-depression-opioids.pdf.
---------------------------------------------------------------------------

    Most opioid-related adverse events are preventable. Of the opioid-
related adverse drug events reported to The Joint Commission's Sentinel 
Event database,\306\ 47 percent were due to a wrong medication dose, 29 
percent to improper monitoring, and 11 percent to other causes (for 
example, medication interactions and/or drug reactions). In addition, 
in an analysis of a malpractice claims database, a review of cases in 
which there was opioid-induced respiratory depression among post-
operative surgical patients, 97 percent of these adverse events were 
judged preventable with better monitoring and response.\307\ While 
hospital quality interventions such as, proper dosing, adequate 
monitoring, and attention to potential drug interactions that can lead 
to overdose are key to prevention of opioid-related respiratory events, 
the use of these practices can vary substantially across hospitals.
---------------------------------------------------------------------------

    \306\ The Joint Commission. Safe use of opioids in hospitals. 
The Joint Commission Sentinel Event Alert. 2012; 49:1-5. https://www.jointcommission.org/assets/1/18/SEA_49_opioids_8_2_12_final.pdf.
    \307\ Lee LA, Caplan RA, Stephens LS, et al. Postoperative 
opioid-induced respiratory depression: a closed claims analysis. 
Anesthesiology. 2015; 122(3):659-665.
---------------------------------------------------------------------------

    Administration of opioids also varies widely by hospital, ranging 
from 5 percent in the lowest-use hospital to 72 percent in the highest-
use hospital.\308\ Notably, hospitals that use opioids most frequently 
have increased adjusted risk of severe opioid-related adverse 
events.\309\ Surgical patients are at particular risk of these adverse 
events because opioid administration is common in this population. For 
example, among a diverse group of surgical patients undergoing common 
surgical procedures at a large medical center, 98.6 percent received 
opioids and 13.6 percent of those patients experienced an opioid-
related adverse drug event.\310\ Reduction of adverse events in 
surgical and non-surgical patients receiving opioids, may be enhanced 
by measuring the rates of these events at each hospital in a 
systematic, comparable way. We have developed the Hospital Harm--
Opioid-Related Adverse Events eCQM to assess the rates of these adverse 
events as well as the variation in rates among hospitals.
---------------------------------------------------------------------------

    \308\ Herzig SJ, Rothberg MB, Cheung M, et al. Opioid 
utilization and opioid-related adverse events in nonsurgical 
patients in US hospitals. J Hosp Med. 2014; 9(2):73-81.
    \309\ Ibid.
    \310\ Kessler ER, Shah M, Gruschkkus SK, et al. Cost and quality 
implications of opioid-based postsurgical pain control using 
administrative claims data from a large health system: opioid-
related adverse events and their impact on clinical and economic 
outcomes. Pharmacotherapy. 2013; 33(4):383-391.
---------------------------------------------------------------------------

(2) Overview of Measure
    The Hospital Harm--Opioid-Related Adverse Events eCQM outcome 
measure assesses, by hospital, the proportion of patients who had an 
opioid-related adverse event. This measure addresses the Meaningful 
Measures Initiative quality priority of making care safer by reducing 
harm caused in the delivery of care. The measure uses the 
administration of naloxone, an opioid reversal agent that has been used 
in a number of studies as an indicator of opioid-related adverse 
respiratory events, to indicate a harm to a patient.311 312 
The intent of this measure is for hospitals to track and improve their 
monitoring and response to patients administered opioids during 
hospitalization, and to avoid harm, such as respiratory depression, 
which can lead to brain damage and death. This measure focuses 
specifically on in-hospital opioid-related adverse events, rather than 
opioid overdose events that happen in the community and may bring a 
patient into the emergency department. We acknowledge that some 
stakeholders have expressed concern that some providers could withhold 
the use of naloxone, believing that may help those providers avoid poor 
performance on this quality measure. This measure is not intended to 
incentivize hospitals to not administer naloxone to patients who are in 
respiratory depression, but rather incentivize hospitals to closely 
monitor patients who receive opioids during their hospitalization to 
prevent respiratory depression. In addition, the aim of this measure is 
not to identify preventability of an individual harm instance or 
whether each instance of harm was an error, but rather to assess the 
overall rate of the harm within a hospital incorporating a definition 
of harm that is likely to be reduced as a result of hospital best 
practice.
---------------------------------------------------------------------------

    \311\ Eckstrand JA, Habib AS, Williamson A, et al. Computerized 
surveillance of opioid-related adverse drug events in perioperative 
care: a cross-sectional study. Patient Saf Surg. 2009; 3:18.
    \312\ Nwulu U, Nirantharakumar K, Odesanya R, et al. Improvement 
in the detections of adverse drug events by the use of electronic 
health and prescription records: an evaluation of two trigger tools. 
Eur J Clin Pharmacol. 2013; 69(2):255-259.
---------------------------------------------------------------------------

    As with all quality measures we develop, testing was performed to 
establish the feasibility of the measure, data elements, and validity 
of the numerator. Clinical adjudicators reviewed medical records on 
each instance of a harm identified through query of the EHR data to 
confirm naloxone was in fact administered to reverse symptoms of opioid 
overdose. Additional testing is currently being performed to establish 
the data element validity using output from the Measure Authoring Tool 
(MAT) \313\ in multiple hospitals, using multiple EHR systems. The MAT 
is a web-based tool used to develop the electronic measure

[[Page 20494]]

specifications, which expresses complicated measure logic in several 
formats including a human-readable document. The electronically 
extracted data would be validated by comparison to medical chart 
abstracted data.
---------------------------------------------------------------------------

    \313\ The Measure Authoring Tool (MAT) is a web-based tool used 
by measure developers in the creation of eMeasures. For additional 
information, we refer readers to: https://www.emeasuretool.cms.gov/.
---------------------------------------------------------------------------

    This measure addresses the Meaningful Measures Initiative quality 
priority of making care safer by reducing harm caused in the delivery 
of care discussed in section I.A.2. of the preamble of this proposed 
rule. The Hospital Harm--Opioid-related Adverse Events (MUC17-210) was 
included in a publicly available document entitled ``2017 Measures 
Under Consideration List'' (available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367). This measure was reviewed by 
the NQF MAP Hospital Workgroup in December 2017 and received the 
recommendation to refine and resubmit for consideration for 
programmatic inclusion, as referenced in the 2017-2018 Spreadsheet of 
Final Recommendations to HHS and CMS (available at: https://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86972). For additional information 
and discussion of concerns and considerations raised by the MAP related 
to this measure, we refer readers to the December 2017 NQF MAP Hospital 
Workgroup meeting transcript (available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=87148).
    MAP stakeholders acknowledged the significant health risks 
associated with opioid-related adverse events, but recommended 
adjusting the numerator to consider the impact on chronic opioid 
users.\314\ Accordingly, we will address this issue in upcoming testing 
and NQF review. Regarding MAP stakeholder concern that the measure 
needs to be tested in more facilities to demonstrate reliability and 
validity, as stated previously, we are currently testing the MAT output 
for this measure in multiple hospitals that use a variety of EHR 
systems.\315\ We plan to submit this measure for NQF endorsement as 
part of the Patient Safety Committee in November 2018.
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    \314\ Measure Application Partnership. MAP 2018 Considerations 
for Implementing Measures in Federal Programs: Hospitals. 
Washington, DC: NQF; 2018. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=87083.
    \315\ Ibid.
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(3) Cohort
    The measure denominator includes all patients 18 years or older 
discharged from an inpatient hospital encounter during the 1-year 
measurement period. The measure includes inpatient admissions that were 
initially seen in the emergency department or in observational status 
and then admitted to the hospital.
(4) Outcome
    The numerator for this electronic outcome measure is the number of 
patients who received naloxone outside of the operating room either: 
(1) After 24 hours from hospital arrival; or (2) during the first 24 
hours after hospital arrival with evidence of hospital opioid 
administration prior to the naloxone administration. We narrowed cases 
to exclude naloxone use in the operating room where it could be part of 
the sedation plan as administered by an anesthesiologist. Use of 
naloxone for procedures outside of the operating room (such as bone 
marrow biopsy) are counted in the numerator as it would indicate the 
patient was over sedated. These criteria exist to ensure patients are 
not considered to have experienced harm if they receive naloxone in the 
first 24 hours due to an opioid overdose that occurred in the community 
prior to hospital arrival. We do not require the administration of an 
opioid prior to naloxone after 24 hours from hospital arrival because 
an event occurring 24 hours after admission is most likely due to 
hospitals' administration of opioids. By limiting the requirement of 
documented opioid administration to the first 24 hours of the 
encounter, we are reducing the complexity of the measure logic and 
therefore the burden of implementation for hospitals. For more 
information about the measure specifications, we refer readers to our 
MAT Header (measure specs) and framing document (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Public-Comments.html).
    We are inviting public comment on the possible future inclusion of 
the Hospital Harm--Opioid-related Adverse Events eCQM in the Hospital 
IQR Program. Specifically, we are seeking public comment on whether to: 
(1) Initially introduce this measure as voluntary; (2) adopt the 
measure into the existing eCQM measure set from which hospitals 
currently select four to report; or (3) adopt the measure as mandatory 
for all hospitals to report. In addition, we are seeking public comment 
on ways to address any potential unintended consequences resulting from 
future implementation of this measure. We are also considering future 
adoption of this measure in the Medicare and Medicaid Promoting 
Interoperability Programs (previously known as the Medicare and 
Medicaid EHR Incentive Programs) for Clinical Quality Measures (CQM) 
electronic reporting by eligible hospitals and CAHs.
c. Potential Future Development and Adoption of eCQMs Generally
    Stakeholders continue to identify areas for improvement in the 
implementation of eCQMs under a variety of CMS programs, including the 
Hospital IQR Program and the Medicare and Medicaid Promoting 
Interoperability Programs (previously known as the Medicare and 
Medicaid EHR Incentive Programs). While effective utilization of eCQMs 
promises greater efficiency and more timely access to data to support 
quality improvement activities, various types of costs associated with 
these measurement approaches detract from these benefits. Moreover, 
some providers may have low awareness of the resources and tools 
available to help address issues that arise in utilizing eCQMs.
    Program design and operations associated with measurement aspects 
of these programs can be a significant source of cost for providers. 
Uncertainty around rapidly shifting timelines and requirements can pose 
significant financial and operational planning challenges for 
organizations, while lack of alignment across programs results in 
further complexity. In addition, the implementation of eCQMs within the 
EHR is a significant source of cost. Health IT products vary widely in 
the eCQMs they offer, and incorporating new measure specifications into 
a product, along with validation and testing of the updates, can be 
challenging and time-consuming. Lack of transparency from developers 
around data sources within the EHR, mapping, measure calculations, and 
reporting schemas, can hinder providers' ability to implement eCQMs and 
ensure the accuracy of results. Moreover, challenges in extracting data 
from the EHR and integrating with other applications can serve as a 
source of cost for providers seeking to bring together different 
technology solutions and work with other third party services to 
complete reporting and quality improvement activities.
    Stakeholders have expressed support for increasing the availability 
of new eCQMs, developing eCQMs that focus on patient outcomes and 
higher impact measurement areas, and exploring how eCQMs can reduce the 
costs and information collection burden associated with chart-
abstracted

[[Page 20495]]

measures. However, they have also identified barriers which may 
contribute to a lack of adequate development of eCQMs and limit their 
potential, including long development timelines, lack of guidelines/
prioritization of and participation in eCQM development, limited field 
testing, and program policies that limit innovation by focusing on 
``least common denominator'' approaches.
    We are seeking stakeholder feedback on ways that we could address 
these and other challenges related to eCQM use. Specifically, we are 
inviting comment on the following questions: (1) What aspects of the 
use of eCQMs are most costly to hospitals and health IT vendors?; (2) 
What program and policy changes, such as improved regulatory alignment, 
would have the greatest impact on addressing eCQM costs?; (3) What are 
the most significant barriers to the availability and use of new eCQMs 
today?; (4) What specifically would stakeholders like to see us do to 
reduce costs and maximize the benefits of eCQMs?; (5) How could we 
encourage hospitals and health IT vendors to engage in improvements to 
existing eCQMs?; (6) How could we encourage hospitals and health IT 
vendors to engage in testing new eCQMs?; (7) Would hospitals and health 
IT vendors be interested in or willing to participate in pilots or 
models of alternative approaches to quality measurement that would 
explore less burdensome ways of approaching quality measurement, such 
as sharing data with third parties that use machine learning and 
natural language processing to classify quality of care or other 
approaches?; (8) What ways could we incentivize or reward innovative 
uses of health IT that could reduce costs for hospitals?; and (9) What 
additional resources or tools would hospitals and health IT vendors 
like to have publicly available to support testing, implementation, and 
reporting of eCQMs?
10. Accounting for Social Risk Factors in the Hospital IQR Program
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38324 through 
38326), we discussed the importance of improving beneficiary outcomes 
including reducing health disparities. We also discussed our commitment 
to ensuring that medically complex patients, as well as those with 
social risk factors, receive excellent care. We discussed how studies 
show that social risk factors, such as being near or below the poverty 
level as determined by HHS, belonging to a racial or ethnic minority 
group, or living with a disability, can be associated with poor health 
outcomes and how some of this disparity is related to the quality of 
health care.\316\ Among our core objectives, we aim to improve health 
outcomes, attain health equity for all beneficiaries, and ensure that 
complex patients as well as those with social risk factors receive 
excellent care. Within this context, reports by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) and the National 
Academy of Medicine have examined the influence of social risk factors 
in our value-based purchasing programs.\317\ As we noted in the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38404), ASPE's report to Congress, 
which was required by the IMPACT Act of 2014, found that, in the 
context of value-based purchasing programs, dual eligibility was the 
most powerful predictor of poor health care outcomes among those social 
risk factors that they examined and tested. ASPE is continuing to 
examine this issue in its second report required by the IMPACT Act of 
2014, which is due to Congress in the fall of 2019. In addition, as we 
noted in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38324), the 
National Quality Forum (NQF) undertook 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.\318\ The trial period ended in April 
2017 and a final report is available at: http://www.qualityforum.org/SES_Trial_Period.aspx. The trial concluded that ``measures with a 
conceptual basis for adjustment generally did not demonstrate an 
empirical relationship'' between social risk factors and the outcomes 
measured. This discrepancy may be explained in part by the methods used 
for adjustment and the limited availability of robust data on social 
risk factors. NQF has extended the socioeconomic status (SES) 
trial,\319\ allowing further examination of social risk factors in 
outcome measures.
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    \316\ See, for example, United States Department of Health and 
Human Services. ``Healthy People 2020: Disparities. 2014.'' 
Available at: 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.
    \317\ 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.
    \318\ Available at: http://www.qualityforum.org/SES_Trial_Period.aspx.
    \319\ Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86357.
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    In the FY 2018 and CY 2018 proposed rules for our quality reporting 
and value-based purchasing programs, we solicited feedback on which 
social risk factors provide the most valuable information to 
stakeholders and the methodology for illuminating differences in 
outcomes rates among patient groups within a provider that would also 
allow for a comparison of those differences, or disparities, across 
providers. Feedback we received across our quality reporting programs 
included encouraging CMS: To explore other factors that could be used 
to stratify or risk adjust the measures (beyond dual eligibility); to 
consider the full range of differences in patient backgrounds that 
might affect outcomes; to explore risk adjustment approaches; and to 
offer careful consideration of what type of information display would 
be most useful to the public. We also sought public comment on 
confidential reporting and future public reporting of some of our 
measures stratified by patient dual eligibility. In general, commenters 
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, and empower consumers to make 
informed decisions about health care. Commenters encouraged us to 
stratify measures by other social risk factors such as age, income, and 
educational attainment. With regard to value-based purchasing programs, 
commenters also cautioned us to balance fair and equitable payment 
while avoiding payment penalties that mask health disparities or 
discouraging the provision of care to more medically complex patients. 
Commenters also noted that value-based purchasing program measure 
selection, domain weighting, performance scoring, and payment 
methodology must account for social risk.
    Specifically, in the FY 2018 IPPS/LTCH PPS proposed and final rules 
for the Hospital Inpatient Quality Reporting (IQR) Program, we invited 
and received public comment on: (1) Which social risk factors provide 
the most valuable information to stakeholders; (2) providing hospitals 
with confidential feedback reports containing stratified results for 
certain Hospital IQR Program measures, specifically the Pneumonia 
Readmission measure (NQF #0506) and

[[Page 20496]]

the Pneumonia Mortality measure (NQF #0468); (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 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 the Hospital Compare website (82 FR 38407). For 
the Hospital IQR Program in general, commenters 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, and empower consumers to make informed 
decisions about health care (82 FR 38404). Commenters encouraged us to 
stratify measures by other social risk factors such as age, income, and 
educational attainment (82 FR 38404).
    As a next step, we are considering options to reduce health 
disparities among patient groups within and across hospitals by 
increasing the transparency of disparities as shown by quality 
measures. We are considering implementing the two above-mentioned 
methods to promote health equity and improve healthcare quality for 
patients with social risk factors. The first method (the hospital-
specific disparity method) would promote quality improvement by 
calculating differences in outcome rates among patient groups within a 
hospital while accounting for their clinical risk factors. This method 
would also allow for a comparison of those differences, or disparities, 
across hospitals, so hospitals could assess how well they are closing 
disparities gaps compared to other hospitals. The second methodological 
approach is complementary and would assess hospitals' outcome rates for 
subgroups of patients, such as dual eligible patients, across 
hospitals, allowing for a comparison among hospitals on their 
performance caring for their patients with social risk factors.
    We acknowledge the complexity of interpreting stratified outcome 
measures. As we discussed in the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38404 through 38409), due to this complexity, and prior to any 
future public reporting of stratified measure data, we plan to stratify 
the Pneumonia Readmission measure (NQF #0506) data by highlighting both 
hospital-specific disparities and readmission rates specific for dual-
eligible beneficiaries across hospitals for dual-eligible patients in 
hospitals' confidential feedback reports beginning Fall 2018. In FY 
2018 IPPS/LTCH PPS final rule (82 FR 38402 through 38409), we explained 
that we believe the Pneumonia Readmission measure and the Pneumonia 
Mortality measure are appropriate first measures to stratify, because 
we currently publicly report the results of both measures for a large 
cohort of hospitals. In addition, both measures include a large number 
of admissions per hospital and therefore have sufficiently large sample 
sizes for most hospitals to support adequate reliability of stratified 
calculations. As a first step, in the interest of simplicity and to 
minimize confusion for hospitals, we are planning to provide 
confidential feedback reports for the Pneumonia Readmission measure 
only, using both methodologies.
    For the future, we are considering: (1) Expanding our efforts to 
provide stratified data in hospital confidential feedback reports for 
other measures; (2) including other social risk factors beyond dual-
eligible status in hospital confidential feedback reports; and (3) 
eventually, making stratified data publicly available on the Hospital 
Compare website, as mentioned in previous rules, to allow consumers and 
other stakeholders to view critical information about the care and 
outcomes of subgroups of patients with social risk factors. We believe 
the stratified results will provide hospitals with information that 
could illuminate disparities in care or outcome, which could 
subsequently be targeted through quality improvement efforts. We 
further believe that public display of this information could drive 
consumer choice and spark additional improvement efforts. A CMS 
contractor will convene a Technical Expert Panel (TEP) in the spring of 
2018 to solicit feedback from stakeholders on approaches to consider 
for stratification for the Hospital IQR Program. We anticipate 
receiving additional input from hospitals when they receive 
confidential feedback reports of the stratified results and will 
encourage stakeholders to submit comments during this process. We are 
also considering how these methodologies may be adapted to apply to 
other CMS quality programs in the future. We refer readers to the FY 
2018 IPPS/LTCH PPS final rule (82 FR 38403 through 38409) for more 
details, where we discuss the potential stratification of certain 
Hospital IQR Program outcome measures. Furthermore, we continue to 
consider options to address equity and disparities in our value-based 
purchasing programs.
    We plan to continue working with ASPE, the public, and other key 
stakeholders on this important issue to identify policy solutions that 
achieve the goals of attaining health equity for all beneficiaries and 
minimizing unintended consequences.
    We are inviting public comments on these considerations for the 
future.
11. 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 2019 payment determination will begin the 
fifth 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 website at: http://
www.QualityNet.org/. The annual update of electronic clinical quality 
measure (eCQM) specifications and implementation guidance documents are 
available on the Electronic Clinical Quality Improvement (eCQI) 
Resource Center website at: https://ecqi.healthit.gov/. Hospitals must 
register and submit quality data through the secure portion of the 
QualityNet website. There are safeguards in place in accordance with 
the HIPAA Security

[[Page 20497]]

Rule to protect patient information submitted through this website.
b. Procedural Requirements
    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 in this proposed rule.
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 in this 
proposed rule.
d. Reporting and Submission Requirements for eCQMs
    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), the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 57150 through 57161; and 57169 through 57172), and the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38355 through 38361; 38386 through 
38394; 38474 through 38485; and 38487 through 38493).
    In this proposed rule, we are: Clarifying measure logic used in 
eCQM development; proposing to extend previously established eCQM 
reporting and submission requirements for the CY 2019 reporting period/
FY 2021 payment determination; and proposing to require hospitals to 
use the 2015 Edition certification criteria for CEHRT beginning with 
the CY 2019 reporting period/FY 2021 payment determination. These 
matters are discussed in detail below.
(1) Clarification of the Measure Logic Used in eCQM Development--
Transition to Clinical Quality Language (CQL)
    Although the measure logic, which represents the lines of logic 
that comprise a single AND/OR statement composing each population, used 
in eCQM development is not generally specified through notice and 
comment rulemaking, we wish to notify the public that all eCQM 
specifications published in CY 2018 for the CY 2019 reporting period/FY 
2021 payment determination and subsequent years (beginning with the 
Annual Update that will be published in Spring 2018 and for 
implementation in CY 2019) will use the Clinical Quality Language 
(CQL). CQL is a Health Level Seven (HL7) International standard \320\ 
and aims to unify the expression of logic for eCQMs and Clinical 
Decision Support (CDS).\321\ CQL provides the ability to better express 
logic defining measure populations to improve the accuracy and clarity 
of eCQMs. In addition, CQL is a high-level authoring language that is 
intended to be human-readable and allows measure developers to express 
data criteria and represent it in a manner suitable for language 
processing.
---------------------------------------------------------------------------

    \320\ Additional details about HL7 are available at: http://www.hl7.org/about/index.cfm?ref=nav. In addition, readers may learn 
more under ``Where can I find more information on CQL'' on the eCQI 
Resource Center website at: https://ecqi.healthit.gov/cql.
    \321\ Additional details about CDS is available on the eCQI 
Resource Center website at: https://ecqi.healthit.gov/cds.
---------------------------------------------------------------------------

    Prior to CY 2017, eCQM logic was defined by ``Quality Data Model 
(QDM) Logic,'' an information model that defines relationships between 
patients and clinical concepts in a standardized format to enable 
electronic quality performance measurement.\322\ We believe that 
compared to CQL, QDM logic is more complex and difficult to compute. 
QDM logic limits a measure developer's ability to express the type of 
comparisons needed to truly evaluate outcomes of care because QDM logic 
cannot request patient results that indicate outcomes and assess 
improvement over time; in contrast, CQL's mathematical expression logic 
allows this type of comparison over time and is independent of the 
model.\323\ Moreover, CQL: (1) Offers improved expressivity; (2) is 
more precise/unambiguous; (3) can share logic between measures; (4) 
allows for measure logic to be shared with CDS tools; (5) can be used 
with multiple information data models (for example, QDM, Fast 
Healthcare Interoperability Resources (FHIR) \324\); and (6) simplifies 
calculation engine implementation.\325\ CQL replaces the logic 
expressions defined in the QDM, and QDM (beginning with v5.3 \326\) 
includes only the conceptual model for defining the data elements.
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    \322\ Additional details about QDM Logic are available at: 
https://ecqi.healthit.gov/qdm.
    \323\ Additional details about how CQL Logic is Different from 
QDM Logic are available at: https://ecqi.healthit.gov/qdm/qdm-Qs%26As#QualityDataModelQDMforusewithClinicalQualityLanguageCQL.
    \324\ FHIR, developed by Health Level Seven International (HL7), 
is designed to enable information exchange to support the provision 
of healthcare in a wide variety of settings. The specification 
builds on and adapts modern, widely used RESTful practices to enable 
the provision of integrated healthcare across a wide range of teams 
and organizations. Additional information available at: http://hl7.org/fhir/overview-dev.html.
    \325\ Additional details on the benefits of Clinical Quality 
Language (CQL) are available at: https://ecqi.healthit.gov/system/files/Benefits_of_CQL_May2017-508.pdf.
    \326\ Additional details about QDM v5.3 available at: https://ecqi.healthit.gov/qdm/qdm-news-0/now-available-quality-data-model-qdm-v53.
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    Measure developers successfully tested CQL for expressing eCQMs 
from 2016 through 2017.\327\ Based on the results, the Measure 
Authoring Tool (MAT) \328\ and the Bonnie \329\ tool have been updated 
to use CQL. We believe replacing the measure logic used in eCQM 
development from QDM to CQL will enable measure developers to engineer 
more precise, more interoperable measures that interface with CDS 
tools, which in turn, will result in availability of better measures of 
patient outcomes for use in the Hospital IQR Program and other CMS 
programs. We note that utilization of CQL for the eCQMs currently 
available for reporting in the Hospital IQR Program measure set would 
not affect the intent of the measure, the numerator, denominator, or 
any measure exclusions or exceptions.
---------------------------------------------------------------------------

    \327\ Additional details about the Timeline for the Transition 
to CQL are available at: https://ecqi.healthit.gov/cql.
    \328\ The Measure Authoring Tool (MAT) is a web-based tool that 
allows measure developers to author electronic Clinical Quality 
Measures (eCQMs). Using the tool, authors create Clinical Quality 
Language (CQL) expressions, which have the conceptual portion of the 
Quality Data Model (QDM) as their foundation (https://www.emeasuretool.cms.gov/).
    \329\ Bonnie is a tool for testing electronic clinical quality 
measures (eCQMs) designed to support streamlined and efficient pre-
testing of eCQMs, particularly those used in the CMS quality 
programs (https://bonnie.healthit.gov/).
---------------------------------------------------------------------------

    For additional information about the CQL transition and its impact 
on eCQM development, we refer readers to the eCQI Resource Center 
website at: https://ecqi.healthit.gov/cql.

[[Page 20498]]

(2) Reporting and Submission Requirements for eCQMs for the CY 2019 
Reporting Period/FY 2021 Payment Determination
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38361), we finalized 
eCQM reporting and submission requirements such that hospitals are 
required to report only one, self-selected calendar quarter of data for 
four self-selected eCQMs for the CY 2018 reporting period/FY 2020 
payment determination. In this proposed rule, in alignment with the 
Medicare and Medicaid Promoting Interoperability Programs (previously 
known as the Medicare and Medicaid EHR Incentive Programs), we are 
proposing to extend the same eCQM reporting and submission 
requirements, such that hospitals would be required to report one, 
self-selected calendar quarter of data for four self-selected eCQMs for 
the CY 2019 reporting period/FY 2021 payment determination. We believe 
continuing the same eCQM reporting and submission requirements is 
appropriate because doing so continues to offer hospitals reporting 
flexibility and does not increase the information collection burden on 
data submitters, allowing them to shift resources to support system 
upgrades, data mapping, and staff training related to eCQM 
documentation and reporting. We also refer readers to section VIII.D.9. 
of the preamble of this proposed rule where similar proposals are 
discussed for the Medicare and Medicaid Promoting Interoperability 
Programs (previously known as the Medicare and Medicaid EHR Incentive 
Programs).
    We are inviting public comment on our proposal.
(3) Changes to the Certification Requirements for eCQM Reporting 
Beginning With the CY 2019 Reporting Period/FY 2021 Payment 
Determination
    In the FY 2018 IPPS/LTCH PPS final rule, we finalized a policy to 
allow flexibility for hospitals to use the 2014 Edition certification 
criteria, the 2015 Edition certification criteria, or a combination of 
both for the CY 2018 reporting period/FY 2020 payment determination 
only (82 FR 38388). This was a change to the policy previously 
finalized in the FY 2017 IPPS/LTCH PPS final rule that required 
hospitals to use the 2015 Edition certification criteria for CEHRT for 
the CY 2018 reporting period/FY 2020 payment determination and 
subsequent years (81 FR 57171).
    In this proposed rule, to align with the Medicare and Medicaid 
Promoting Interoperability Programs (previously known as the Medicare 
and Medicaid EHR Incentive Programs), for the Hospital IQR Program, we 
are proposing to require hospitals to use only the 2015 Edition 
certification criteria for CEHRT beginning with the CY 2019 reporting 
period/FY 2021 payment determination. We refer readers to section 
VIII.D.3. of the preamble of this proposed rule in which the Medicare 
and Medicaid Promoting Interoperability Programs discuss more broadly 
the reasons for and benefits of requiring hospitals to use the 2015 
Edition certification criteria for CEHRT, beginning with the CY 2019 
reporting period/FY 2021 payment determination. There are certain 
functionalities in the 2015 Edition of certified electronic health 
record technology that were not available in the 2014 Edition that we 
believe will increase interoperability and the flow of information 
between providers and patients.
    In addition, as we discussed in the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38387 through 38388), specifically as to eCQM reporting, 
the 2015 Edition includes updates to standards for structured data 
capture as well as data elements in the common clinical data set which 
can be captured in a structured format. We continue to believe the use 
of relevant, up-to-date, standards-based structured data capture with 
an EHR certified to the 2015 Edition supports electronic clinical 
quality measurement.
    The 2015 Edition certification criteria (that make up CEHRT) within 
the certification testing process includes features that are designed 
to improve the functionality and quality of eCQM data.\330\ 
Specifically, systems must demonstrate they can import and allow a user 
to export one or more QRDA files. This allows systems to share files 
and extract data for reporting into another system or send to another 
system. In addition, testing coverage is much more robust; all measures 
have >80 percent of test pathways tested in the test bundle with most 
>95 percent. In addition, the 2015 Edition includes a revised 
requirement that products must be able to export data from one patient, 
a set of patients, or a subset of patients, which is responsive to 
health care provider feedback that their data is unable to carry over 
from a previous EHR. The 2014 Edition did not include a requirement 
that the vendor allow the provider to export the data themselves. In 
the 2015 Edition, the provider has the autonomy to export data 
themselves without intervention by their vendor, resulting in increased 
interoperability and data exchange between the two Editions. This 
includes a new function that supports increased patient access to their 
health information through email transmission. The increased 
interoperability in this requirement provides patients more control of 
their health data to inform the decisions that they make regarding 
their health.
---------------------------------------------------------------------------

    \330\ For CEHRT definition, see 42 CFR 495.4. For additional 
details about the updates to the 2015 Edition, we refer readers to 
ONC's Common Clinical Data Set resource, available at: https://www.healthit.gov/sites/default/files/commonclinicaldataset_ml_11-4-5.pdf.
---------------------------------------------------------------------------

    The 2015 Edition certification criteria for CEHRT also includes 
optional certification criteria and program specific testing which can 
also support electronic clinical quality reporting. The filter criteria 
ensure a product can filter an electronic file based on demographics 
like sex or race, based on provider or site characteristics like TIN/
NPI, and based on a diagnosis or problem. The testing for this function 
checks that patients are appropriately aggregated and calculated for 
this new function which supports flexibility, specificity, and more 
robust analysis of eCQM data. Finally, the 2015 Edition provides 
optional testing to CMS requirements for reporting, such as form and 
manner specifications and implementation guides. For these reasons, in 
this proposed rule, we are proposing to require hospitals to use the 
2015 Edition certification criteria for CEHRT beginning with the CY 
2019 reporting period/FY 2021 payment determination.
    We note that the Medicare and Medicaid Promoting Interoperability 
Programs (previously known as the Medicare and Medicaid EHR Incentive 
Programs) previously finalized a requirement that hospitals use the 
2015 Edition certification criteria for CEHRT beginning with the CY 
2019 reporting period/FY 2021 payment determination (80 FR 62873 
through 62875), such that hospitals participating in both the Hospital 
IQR Program and the Medicare and Medicaid Promoting Interoperability 
Programs already would be required to use the 2015 Edition 
certification criteria for CEHRT beginning with the CY 2019 reporting 
period/FY 2021 payment determination.
    We are inviting public comment on our proposal to require hospitals 
to use the 2015 Edition certification criteria for CEHRT beginning with 
the CY 2019 reporting period/FY 2021 payment determination.
e. Electronic Submission Deadlines
    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

[[Page 20499]]

adopted policies to align eCQM data reporting periods and submission 
deadlines for both the Hospital IQR Program and the Medicare Promoting 
Interoperability Program (previously known as the Medicare EHR 
Incentive Program). 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 in this proposed rule.
f. Sampling and Case Thresholds
    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 in this proposed 
rule.
g. HCAHPS Administration and Submission Requirements
    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 
website at: http://www.hcahpsonline.org for new information and program 
updates regarding the HCAHPS Survey, its administration, oversight, and 
data adjustments. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38328 
through 38342), we finalized refinements to the three questions of the 
Pain Management measure in the HCAHPS Survey (now referred to as the 
Communication About Pain measure). We are not proposing any changes to 
the HCAHPS Survey administration and submission requirements in this 
proposed rule.
h. Data Submission Requirements for Structural Measures
    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 those 
requirements in this proposed rule; however, we refer readers to 
sections VIII.A.5.a. and VIII.A.5.b.(1) of the preamble of this 
proposed rule, in which we are proposing to remove two structural 
measures from the Hospital IQR Program. If our proposals to remove two 
structural measures are adopted, no structural measures would remain in 
the Hospital IQR Program and hospitals would not be required to submit 
any data for structural measures for the CY 2019 reporting period/FY 
2021 payment determination or subsequent years.
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 website, 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 website at: http://
www.QualityNet.org/.
    While we are not proposing any changes to these requirements, we 
refer readers to section VIII.A.5.b.(2)(b) of the preamble of this 
proposed rule, in which we are proposing to remove five HAI measures 
reported via NHSN from the Hospital IQR Program. If our proposals to 
remove these five measures are adopted, there would be no HAI measures 
reported via NHSN and hospitals would not be required to submit any 
data for HAI measures via NHSN for the Hospital IQR Program for the CY 
2019 reporting period/FY 2021 payment determination or subsequent 
years. We note that the HCP measure remains in the Hospital IQR Program 
and will continue to be reported via NHSN. In addition, we note that 
the five HAI measures being proposed for removal in the Hospital IQR 
Program will still remain in the HAC Reduction Program. We refer 
readers to section IV.J. of the preamble of this proposed rule for more 
information about how those measures will be collected and validated 
under the HAC Reduction Program.
12. 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. We are not proposing any changes to the existing 
processes for validation of either eCQM or chart-abstracted measure 
data in this proposed rule.
b. Existing Processes for Validation of Hospital IQR Program eCQM Data
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57173 through 
57181), we finalized updates to the validation procedures in order to 
incorporate a process for validating eCQM data for the FY 2020 payment 
determination and subsequent years (starting with the validation of CY 
2017 eCQM data that would impact FY 2020 payment determinations). We 
also refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38398 
through 38403), in which we finalized several proposals regarding 
processes and procedures for validation of CY 2017 eCQM data for the FY 
2020 payment determination, validation of CY 2018 eCQM data for the FY 
2021 payment determination, and eCQM data validation for subsequent 
years. We are not proposing any changes to the existing processes for 
validation of Hospital IQR Program eCQM data in this proposed rule.
c. Existing Process for Chart-Abstracted Measures Validation
    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 refer readers to the 
FY 2018 IPPS/LTCH PPS final rule (82 FR 38402 through 38403) for more 
details on the formalized Educational Review Process for Chart-
Abstracted Measures Validation. We are not proposing any changes to the 
validation of chart-abstracted measures, including the educational 
review process.
    While we are not proposing any changes to our previously 
established validation procedures in this proposed rule, we refer 
readers to: (1) Section VIII.A.5.b.(8) of the preamble of this proposed 
rule, in which we are

[[Page 20500]]

proposing to remove three clinical process of care measures beginning 
with the CY 2019 reporting period/FY 2021 payment determination, and 
one clinical process of care measure beginning with the CY 2020 
reporting period/FY 2022 payment determination; and (2) section 
VIII.A.5.b.(2)(b) of the preamble of this proposed rule, in which we 
are proposing to remove five Hospital-Acquired Infection (HAI) chart-
abstracted measures from the Hospital IQR Program beginning with the CY 
2019 reporting period/FY 2021 payment determination. If our proposals 
to remove these measures are adopted, only two chart-abstracted 
clinical process of care measures would remain in the Hospital IQR 
Program that would require validation for the FY 2022 payment 
determination (ED-2 and Sepsis measures), and only one chart-abstracted 
clinical process of care measure would remain in the program that would 
require validation for the FY 2023 payment determination and subsequent 
years (Sepsis measure). As our validation processes remain unchanged, 
we will continue to sample up to 8 cases for each selected chart-
abstracted clinical process of care measure. We plan to evaluate our 
existing validation scoring methodology to ensure that there will be no 
significant impact to the estimated reliability (ER) of Hospital IQR 
Program chart-abstracted data validation activities despite any measure 
removals.
    In addition, the CY 2019 reporting period/FY 2021 payment 
determination would be the last year for which validation would occur 
under the Hospital IQR Program with respect to the CDI, CAUTI, CLABSI, 
MRSA Bacteremia, and Colon and Abdominal Hysterectomy SSI measures, if 
our proposed measure removals are finalized in section 
VIII.A.5.b.(2)(b) of the preamble of this proposed rule. Beyond the FY 
2021 payment determination, we intend for validation of those measures 
to occur under the HAC Reduction Program, as further discussed in 
section IV.J.4.e. of the preamble of this proposed rule.
13. Data Accuracy and Completeness Acknowledgement (DACA) Requirements
    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 in this proposed rule.
14. Public Display Requirements
    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), the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49712 through 49713), and the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38403 through 38409) for details on public 
display requirements. The Hospital IQR Program quality measures are 
typically reported on the Hospital Compare website at: http://www.medicare.gov/hospitalcompare, but on occasion are reported on other 
CMS websites such as: https://data.medicare.gov.
    We are not proposing any changes to the public display requirements 
in this proposed rule. However, we note that in section VIII.A.10. of 
the preamble of this proposed rule, we discuss our efforts to provide 
stratified data by patient dual eligibility status in hospital 
confidential feedback reports and considerations to make stratified 
data publicly available on the Hospital Compare website in the future.
15. Reconsideration and Appeal Procedures
    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.
16. Hospital IQR Program Extraordinary Circumstances Exceptions (ECE) 
Policy
    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), the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38409 through 38411), and 42 CFR 412.140(c)(2) for 
details on the current Hospital IQR Program ECE policy. We also refer 
readers to the QualityNet website at: http://www.QualityNet.org/ for 
our current requirements for submission of a request for an exception. 
We are not proposing any changes to the ECE policy in this proposed 
rule.

B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

1. Background
    Section 1866(k) of the Act establishes a quality reporting program 
for hospitals described in section 1886(d)(1)(B)(v) of the Act 
(referred to as ``PPS-Exempt Cancer Hospitals'' or ``PCHs'') that 
specifically applies to PCHs that meet the requirements under 42 CFR 
412.23(f). Section 1866(k)(1) of the Act states that, for FY 2014 and 
each subsequent fiscal year, a PCH must submit data to the Secretary in 
accordance with section 1866(k)(2) of the Act with respect to such 
fiscal year.
    The PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program 
strives to put patients first by ensuring they, along with their 
clinicians, are empowered to make decisions about their own health care 
using data-driven insights that are increasingly aligned with 
meaningful quality measures. To this end, we support technology that 
reduces burden and allows clinicians to focus on providing high quality 
health care to their patients. We also support innovative approaches to 
improve quality, accessibility, and affordability of care, while paying 
particular attention to improving clinicians' and beneficiaries' 
experiences when participating in CMS programs. In combination with 
other efforts across the Department of Health and Human Services, we 
believe the PCHQR Program incentivizes PCHs to improve their health 
care quality and value, while giving patients the tools and information 
needed to make the best decisions.
    For additional background information, including previously 
finalized measures and other policies for the PCHQR Program, we refer 
readers to the following final rules: The FY 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); the FY 2017 IPPS/LTCH PPS final rule (81 FR 57182 
through 57193); and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38411 
through 38425).
    In this proposed rule, we are proposing a number of new policies 
for the PCHQR Program. We developed these proposals after conducting an 
overall review of the program under our new Meaningful Measures 
Initiative, which is discussed in more detail in section I.A.2. of the 
preamble of this proposed rule. The proposals reflect our efforts to 
ensure that the PCHQR

[[Page 20501]]

Program measure set continues to promote improved health outcomes for 
our beneficiaries while minimizing the following: (1) The reporting 
burden associated with submitting/reporting quality measures; (2) the 
burden associated with complying with other programmatic requirements; 
and/or (3) the burden associated with compliance with other Federal 
and/or State regulations (if applicable). In addition, we aim to reduce 
beneficiary confusion by reducing duplicative reporting, thereby 
streamlining the process of analyzing publicly reported quality 
measures data. They also reflect our efforts to improve the usefulness 
of the data that we publicly report in the PCHQR Program, which are 
guided by the following two goals: (1) To improve the usefulness of CMS 
quality program data by providing providers with adequate measure 
information from one program; and (2) to improve consumer understanding 
of the data publicly reported on a Compare other website by eliminating 
the reporting of duplicative measure data in more than one program that 
applies to the same provider setting.
2. Factors for Removal and Retention of PCHQR Program Measures
a. Background and Current Measure Removal Factors
    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 factors \331\ for the PCHQR Program, which 
are based on factors adopted for the Hospital IQR Program (80 FR 49641 
through 49642):
---------------------------------------------------------------------------

    \331\ We note that we previously referred to these factors as 
``criteria'' (for example, 81 FR 57182 through 57183); we now use 
the term ``factors'' in order to align the PCHQR Program terminology 
with the terminology we use in other CMS quality reporting and pay 
for performance value-based purchasing programs.
---------------------------------------------------------------------------

     Factor 1. Measure performance among PCHs is so high and 
unvarying that meaningful distinctions and improvements in performance 
can no longer be made (``topped-out'' measures);
     Factor 2. A measure does not align with current clinical 
guidelines or practice;
     Factor 3. 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;
     Factor 4. Performance or improvement on a measure does not 
result in better patient outcomes;
     Factor 5. The availability of a measure that is more 
strongly associated with desired patient outcomes for the particular 
topic;
     Factor 6. Collection or public reporting of a measure 
leads to negative unintended consequences other than patient harm; and
     Factor 7. 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.
b. Measure Retention Factors
    We have also 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 have adopted the 
following factors for consideration in determining whether to retain a 
measure in the PCHQR 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;
     Measure aligns with other CMS programs, including other 
quality reporting programs; and
     Measure supports efforts to move PCHs towards reporting 
electronic measures.
c. Proposed New Measure Removal Factor
    We are proposing to adopt an additional factor to consider when 
evaluating potential measures for removal from the PCHQR measure set: 
Factor 8, the costs associated with the measure outweigh the benefit of 
its continued use in the program.
    As we discussed in section I.A.2. of the preamble of this proposed 
rule, with respect to our new Meaningful Measures Initiative, we are 
engaging in efforts to ensure that the PCHQR measure set continues to 
promote improved health outcomes for beneficiaries while minimizing the 
overall costs associated with the program. We believe these costs are 
multifaceted and include not only the burden associated with reporting, 
but also the costs associated with implementing and maintaining the 
program. We have identified several different types of costs, 
including, but not limited to: (1) Provider and clinician information 
collection burden and burden associated with the submission/reporting 
of quality measures to CMS; (2) the provider and clinician cost 
associated with complying with other programmatic requirements; (3) the 
provider and clinician cost associated with participating in multiple 
quality programs, and tracking multiple similar or duplicative measures 
within or across those programs; (4) the cost to CMS associated with 
the program oversight of the measure including measure maintenance and 
public display; and (5) the provider and clinician cost associated with 
compliance with other Federal and/or State regulations (if applicable). 
For example, it may be needlessly costly and/or of limited benefit to 
retain or maintain a measure which our analyses show no longer 
meaningfully supports program objectives (for example, informing 
beneficiary choice or payment scoring). It may also be costly for 
health care providers to track the confidential feedback, preview 
reports, and publicly reported information on a measure where we use 
the measure in more than one program. CMS may also have to expend 
unnecessary resources to maintain the specifications for the measure, 
as well as the tools we need to collect, validate, analyze, and 
publicly report the measure data. Furthermore, beneficiaries may find 
it confusing to see public reporting on the same measure in different 
programs.
    When these costs outweigh the evidence supporting the continued use 
of a measure in the PCHQR Program, we believe it may be appropriate to 
remove the measure from the program. Although we recognize that one of 
the main goals of the PCHQR Program is to improve beneficiary outcomes 
by incentivizing health care providers to focus on specific care issues 
and making public data related to those issues, we also recognize that 
those goals can have limited utility where, for example, the publicly 
reported data is of limited use because it cannot be easily interpreted 
by beneficiaries and used to influence their choice of providers. In 
these cases, removing the measure from the PCHQR Program may better 
accommodate the costs of program administration and compliance without 
sacrificing improved health outcomes and beneficiary choice.
    We are proposing that we would remove measures based on this factor 
on a case-by-case basis. We might, for example, decide to retain a 
measure that is burdensome for health care providers to report if we 
conclude that the benefit to beneficiaries justifies the reporting

[[Page 20502]]

burden. Our goal is to move the program forward in the least burdensome 
manner possible, while maintaining a parsimonious set of meaningful 
quality measures and continuing to incentivize improvement in the 
quality of care provided to patients.
    We are inviting public comment on our proposal to adopt an 
additional measure removal factor, ``the costs associated with a 
measure outweigh the benefit of its continued use in the program,'' 
beginning with the effective date of the FY 2019 IPPS/LTCH PPS final 
rule.
3. Retention and Proposed Removal of Previously Finalized Quality 
Measures for PCHs Beginning With the FY 2021 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 Centers for Disease Control and Prevention (CDC) 
National Healthcare Safety Network (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), for the FY 2019 program year and subsequent 
years, we finalized one additional quality measure and updated the 
Oncology: Radiation Dose Limits to Normal Tissues (NQF #0382) measure. 
In the FY 2018 IPPS/LTCH PPS final rule, we finalized four new quality 
measures (82 FR 38414 through 38420), for the FY 2020 program year and 
subsequent years, and finalized the removal of three previously 
finalized measures (82 FR 38412 through 38414).
b. Proposed Removal of Measures From the PCHQR Program Beginning With 
the FY 2021 Program Year
    We are proposing to remove four web-based, structural measures from 
the PCHQR Program beginning with the FY 2021 program year because they 
are topped-out:
     Oncology: Radiation Dose Limits to Normal Tissues (PCH-14/
NQF #0382);
     Oncology: Medical and Radiation--Pain Intensity Quantified 
(PCH-16/NQF #0384);
     Prostate Cancer: Adjuvant Hormonal Therapy for High Risk 
Patients (PCH-17/NQF #0390); and
     Prostate Cancer: Avoidance of Overuse of Bone Scan for 
Staging Low-Risk Patients (PCH-18/NQF #0389).
    We also are proposing to apply the newly proposed measure removal 
factor to two National Healthcare Safety Network (NHSN) chart-
abstracted measures and, if that factor is finalized, to remove both 
measures from the PCHQR Program beginning with the FY 2021 program year 
because we have concluded that the costs associated with these measures 
outweigh the benefit of their continued use in the program.
     NHSN Catheter-Associated Urinary Tract Infection (CAUTI) 
Outcome Measure (PCH-5/NQF #0138); and
     NHSN Central Line-Associated Bloodstream Infection 
(CLABSI) Outcome Measure (PCH-4/NQF #0139).
(1) Proposed Removal of Web-Based Structural Measures
    We are proposing to remove the following web-based, structural 
measures beginning with the FY 2021 program year because they are 
topped-out: (1) Oncology: Radiation Dose Limits to Normal Tissues (PCH-
14/NQF #0382); (2) Oncology: Medical and Radiation--Pain Intensity 
Quantified (PCH-16/NQF #0384); (3) Prostate Cancer: Adjuvant Hormonal 
Therapy for High Risk Patients (PCH-17/NQF #0390); and (4) Prostate 
Cancer: Avoidance of Overuse of Bone Scan for Staging Low-Risk Patients 
(PCH-18/NQF #0389). We first adopted these measures for the FY 2016 
program year in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50841 
through 50844). We refer readers to that rule for a detailed discussion 
of the measures.
    Based on an analysis of data from January 1, 2015 through December 
31, 2016, we have determined that these three measures meet our topped-
out criteria. This analysis evaluated data sets 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 multiplying the 
result 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 
each 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 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 percent 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 2015 and 2016 are set out in the tables below.

                                                  Topped-Out Analysis Results for PCHQR Measures (2015)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               75th            90th          Relative
                         Measure                               Mean           Median        Percentile      Percentile    difference (%)    Topped-out
--------------------------------------------------------------------------------------------------------------------------------------------------------
PCH-14..................................................            98.4            99.6             100             100               0             Yes
PCH-16..................................................            92.5            92.3            93.1            94.3             1.2             Yes
PCH-17..................................................            99.7             100             100             100               0             Yes
PCH-18..................................................            98.9            99.4             100             100               0             Yes
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 20503]]


                                                  Topped-Out Analysis Results for PCHQR Measures (2016)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               75th            90th          Relative
                         Measure                               Mean           Median        Percentile      Percentile    difference (%)    Topped--out
--------------------------------------------------------------------------------------------------------------------------------------------------------
PCH-14..................................................            99.8             100             100             100               0             Yes
PCH-16..................................................            96.8            96.8            97.3            97.4             0.1             Yes
PCH-17..................................................            99.4            99.6             100             100               0             Yes
PCH-18..................................................            99.0             100             100             100               0             Yes
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Based on this analysis, we have concluded that these four measures 
are topped-out and, as discussed below, we believe that collecting PCH 
data on these measures does not further program goals.
    We also believe that continuing to collect PCH data on these 
measures does not further program goals of improving quality, given 
that performance on the measures 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 the HHS and CMS policy goal to focus our measure set on outcome 
measures; do not align with measures used in other CMS programs; and do 
not support our efforts to develop electronic clinical quality measure 
reporting for PCHs. If we determine at a subsequent point in the future 
that PCH adherence to the aforementioned HHS and CMS policy goals, the 
aforementioned program efforts, and the standard of care established by 
the measure has unacceptably declined, we may propose to readopt these 
measures in future rulemaking.
    We are inviting public comment on our proposal to remove these four 
measures from the PCHQR Program beginning with the FY 2021 program 
year.
(2) Proposed Removal of National Healthcare Safety Network (NHSN) 
Chart-Abstracted Measures
    We are proposing to remove two measures from the PCHQR Program 
beginning with the FY 2021 program year if the measure removal factor 
``the costs associated with the measure outweigh the benefit of its 
continued use in the program'' proposed for adoption in section 
VIII.B.2.c. of the preamble of this proposed rule, is finalized because 
we have concluded that the costs associated with these measures 
outweigh the benefit of their continued use in the PCHQR Program. These 
measures are: (1) Catheter-Associated Urinary Tract Infection (CAUTI) 
Outcome Measure (PCH-5/NQF #0138); and (2) Central Line-Associated 
Bloodstream Infection (CLABSI) Outcome Measure (PCH-4/NQF #0139). We 
first adopted the CAUTI and CLABSI measures for the FY 2014 program 
year in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53557 through 
53559); we refer readers to this rule for a detailed discussion of the 
measures.
    As discussed in section I.A.2. of the preamble of this proposed 
rule, above, our Meaningful Measures Initiative is intended to reduce 
costs and minimize burden. We continue to believe the CAUTI and CLABSI 
measures provide important data for patients and hospitals in making 
decisions about care and informing quality improvement efforts. 
However, we believe that removing these measures in the PCHQR Program 
will reduce program costs and complexity. We believe the costs, coupled 
with the high technical and administrative burden on PCHs, associated 
with collecting and reporting this measure data outweigh the benefits 
to continued use in the program. As a result of these costs, it has 
become difficult to publicly report these measures due to the low 
volume of data produced and reported by the small number of facilities 
participating in the PCHQR Program and the corresponding lack of an 
appropriate methodology to publicly report this data. Consequently, we 
have been unable to offer beneficiaries the benefit of pertinent 
information on how these measures assess hospital-acquired infections 
and impact patient safety.
    As we state in section I.A.2. of the preamble of this proposed 
rule, we strive to ensure that patients are empowered to make decisions 
about their health care along using information from data-driven 
insights. We continue to believe that these measures evaluate important 
aspects of patient safety. However, as discussed earlier, we believe 
the high costs, reporting burden, and difficulties associated with 
publicly reporting this data for use by patients in making decisions 
about their care outweigh the benefit associated with the measures' 
continued use in the PCHQR Program. Therefore, if our proposal to adopt 
the new measure removal factor described in section VIII.B.2.c. of the 
preamble of this proposed rule is finalized as proposed, we are 
proposing that under that factor, we would remove the CAUTI and CLABSI 
measures from the PCHQR Program beginning with the FY 2021 program 
year.
    We are inviting public comment on our proposal to remove these two 
measures from the PCHQR Program beginning with the FY 2021 program 
year.
4. Proposed New Quality Measures Beginning With the FY 2021 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 many 
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 section I.A.2. of the preamble of this proposed rule, 
we also discuss our Meaningful Measures Initiative, and its relation to 
how we will assess and select quality 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 these principles for measure selection in the PCHQR Program, 
we are

[[Page 20504]]

proposing one new measure, described below.
b. Proposed New Quality Measure Beginning With the FY 2021 Program 
Year: 30-Day Unplanned Readmissions for Cancer Patients (NQF #3188)
    In an effort to expand the PCHQR measure set to include measures 
that are less burdensome to report to CMS, but provide valuable 
information for beneficiaries, we are proposing to adopt the 30-Day 
Unplanned Readmissions for Cancer Patients measure (NQF #3188) for the 
FY 2021 program year and subsequent years. This measure meets the 
requirement under section 1866(k)(3)(A) of the Act that measures 
specified for the PCHQR Program be endorsed by the entity with a 
contract under section 1890(a) of the Act (currently the NQF). This 
measure aligns with recent initiatives to incorporate more outcome 
measures in quality reporting programs. This measure also aligns with 
the Promote Effective Communication and Coordination of Care domain of 
our Meaningful Measures Initiative,\332\ and would fill an existing gap 
area of risk-adjusted readmission measures in the PCHQR Program.
---------------------------------------------------------------------------

    \332\ Overview of the CMS Meaningful Measures Initiative 
available at: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases-items/2017-10-30.html.
---------------------------------------------------------------------------

    In compliance with section 1890A(a)(2) of the Act, the proposed 
measure was included on a publicly available document entitled ``2017 
Measures under Consideration Spreadsheet,'' \333\ a list of quality and 
efficiency measures under consideration for use in various Medicare 
programs, and was reviewed by the Measures Application Partnership 
(MAP) Hospital Workgroup.
---------------------------------------------------------------------------

    \333\ 2017 Spreadsheet of Measures Under Consideration. 
Available at: http://www.qualityforum.org/Show_Content.aspx?id=30279.
---------------------------------------------------------------------------

(1) Background
    Cancer is the second leading cause of death in the United States, 
with nearly 600,000 cancer-related deaths expected this year. It is 
estimated roughly 1.7 million Americans will be diagnosed with cancer 
in 2016, and the number of Americans living with a cancer diagnosis 
reached nearly 14.5 million in 2014.\334\ Cancer disproportionately 
affects older Americans, with 86 percent of all cancers diagnosed in 
people 50 years of age and older.\335\ It is now the leading cause of 
death among adults age 40 to 79 years nationwide, and the leading cause 
of death among all adults in 21 States.\336\ Oncology care contributes 
greatly to Medicare spending, and accounted for an estimated $125 
billion in health care spending in 2010.\337\ This figure is projected 
to rise to between $173 billion and $207 billion by 2020.\338\ A 2012 
audit from the US Government Accountability Office (GAO) revealed that 
the estimated differences in Medicare payment between PCHs and local 
PPS teaching hospitals varied greatly across the PCHs; with the largest 
payment difference at 90.9 percent and the smallest payment difference 
at 6.7 percent. Overall, the difference between the amount Medicare 
paid PCHs and the estimated amount Medicare would have paid PPS 
hospitals for treating comparable cancer patients suggests that 
Medicare would have saved approximately $166 million in 2012.\339\ 
Further, GAO calculated that, if PCHs were paid for outpatient services 
in the same way as PPS teaching hospitals, Medicare would have saved 
approximately $303 million in 2012.\340\
---------------------------------------------------------------------------

    \334\ NIH's National Cancer Institute Statistics. Available at: 
https://www.cancer.gov/about-cancer/understanding/statistics.
    \335\ American Cancer Society. Cancer facts and figures 2016. 
2016. Available at: http://www.cancer.org/acs/groups/content/@research/documents/document/acspc-047079.pdf.
    \336\ Siegel RL, Miller KD, Jemal A. Cancer statistics, 2016. CA 
Cancer J Clin. 2016;66(1):7-30.
    \337\ Mariotto AB, Yabroff KR, Shao Y, Feuer EJ, Brown ML. 
Projections of the cost of cancer care in the United States: 2010-
2020. J Natl Cancer Inst. 2011;103(2):117-128.
    \338\ Ibid.
    \339\ US Government Accountability Office. ``Medicare Payments 
to Certain Cancer Hospitals.'' Accessed on March 9, 2018. Available 
at: https://www.gao.gov/modules/ereport/handler.php?1=1&path=/ereport/GAO-15-404SP/data_center_savings/Health/19._Medicare_Payments_to_Certain_Cancer_Hospitals.
    \340\ Ibid.
---------------------------------------------------------------------------

    Given the current and projected increases in cancer prevalence and 
costs of care, it is essential that health care providers look for 
opportunities to lower the costs of cancer care. Reducing readmissions 
after hospital discharge has been proposed as an effective means of 
lowering health care costs and improving the outcomes of care.\341\ 
Research suggests that between 9 percent and 48 percent of all hospital 
readmissions are preventable, owing to inadequate treatment during the 
patient's original admission or after discharge.\342\ It is estimated 
that all-cause, unplanned readmissions cost the Medicare program $17.4 
billion in 2004.\343\ Unnecessary hospital readmissions also negatively 
impact cancer patients by compromising their quality of life, placing 
them at risk for health-acquired infections, and increasing the costs 
of their care.\344\ Furthermore, unplanned readmissions during 
treatment can delay treatment completion and, potentially, worsen 
patient prognosis.\345\
---------------------------------------------------------------------------

    \341\ Benbassat J, Taragin M. Hospital readmissions as a measure 
of quality of health care: advantages and limitations. Arch Intern 
Med. 2000;160(8):1074-108.
    \342\ Ibid.
    \343\ Jencks SF, Williams MV, Coleman EA. Rehospitalizations 
among patients in the Medicare fee-for-service program. N Engl J 
Med. 2009;360(14):1418-1428.
    \344\ Ibid.
    \345\ Ibid.
---------------------------------------------------------------------------

    Preventing these readmissions improves the quality of care for 
cancer patients. Existing studies in cancer patients have largely 
focused on postoperative readmissions, reporting readmission rates of 
between 6.5 percent and 25 percent.\346\ One study noted that surgical 
cancer patients were most often readmitted for surgical complications, 
while nonsurgical patients were typically readmitted for the same 
condition treated during the index admission.\347\ Together, these 
studies suggest that certain readmissions in cancer patients are 
preventable and should be routinely measured for purposes of quality 
improvement and accountability.
---------------------------------------------------------------------------

    \346\ Rochefort MM, Tomlinson JS. Unexpected readmissions after 
major cancer surgery: an evaluation of readmissions as a quality-of-
care indicator. Surg Oncol Clin N Am. 2012;21(3):397-405, viii.
    \347\ Ji H, Abushomar H, Chen XK, Qian C, Gerson D. All-cause 
readmission to acute care for cancer patients. Healthc Q. 
2012;15(3):14-16.
---------------------------------------------------------------------------

(2) Overview of Measure
    Readmission rates have been developed for pneumonia, acute 
myocardial infarction, and heart failure. However, the development of 
validated readmission rates for cancer patients has lagged. In 2012, 
the Comprehensive Cancer Center Consortium for Quality Improvement, or 
C4QI (a group of 18 academic medical centers that collaborate to 
measure and improve the quality of cancer care in their centers), began 
development of a cancer-specific unplanned readmissions measure: 30-Day 
Unplanned Readmissions for Cancer Patients. This measure incorporates 
the unique clinical characteristics of oncology patients and results in 
readmission rates that more accurately reflect the quality of cancer 
care delivery, when compared with broader readmissions measures. 
Likewise, this measure addresses gaps in existing readmissions measures 
(such as the Hospital-Wide All-Cause Unplanned Readmission Measure 
(HWR) stewarded by CMS) related to the evaluation of hospital 
readmissions associated cancer patients. The 30-Day Unplanned 
Readmissions for Cancer

[[Page 20505]]

Patients measure can be used by PCHs to inform their quality 
improvement efforts. Through adoption in the PCHQR Program, it can 
increase transparency around the quality of care delivered to patients 
with cancer.
    The 30-Day Unplanned Readmissions for Cancer Patients measure is 
NQF-endorsed (NQF #3188). The MAP Hospital Workgroup reviewed this 
measure on December 14, 2017 and supported the inclusion of this 
measure in the PCHQR Program. The MAP acknowledged that this measure is 
fully developed and tested and further noted this measure fills a 
current gap in the PCHQR Program by addressing unplanned readmissions 
of cancer patients.348 349
---------------------------------------------------------------------------

    \348\ 2018 Considerations for Implementing Measures Draft 
Report-Hospitals. Available at: http://www.qualityforum.org/Show_Content.aspx?id=30279.
    \349\ 2017-2018 Spreadsheet of Final Recommendations to HHS and 
CMS. Available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367.
---------------------------------------------------------------------------

    The proposed readmission measure fits within the Promote Effective 
Communication and Coordination of Care measurement domain (categorical 
area), and specifically applies to the associated clinical topic of 
``Admissions and Readmissions to Hospitals'' of our Meaningful Measures 
Initiative. This measure is intended to assess the rate of unplanned 
readmissions among cancer patients treated at PCHs and to support 
improved care delivery and quality of life for this patient population. 
By providing an accurate and comprehensive assessment of unplanned 
readmissions within 30 days of discharge, PCHs can better identify and 
address preventable readmissions. Through routine monitoring of these 
performance data by PCHs, this measure can be used to improve patient 
outcomes and quality of care.
(3) Data Sources
    The proposed 30-Day Unplanned Readmissions for Cancer Patients 
measure is claims-based. Therefore, PCHs would not be required to 
submit any new data for purposes of reporting this measure. We are 
proposing that we would calculate this measure on a yearly basis using 
Medicare administrative claims data. Specifically, we are proposing 
that the data collection period for each program year would span from 
July 1 of the year 3 years prior to the program year to June 30 of the 
year 2 years prior to the program year. Therefore, for the FY 2021 
program year, we would calculate measure rates using PCH claims data 
from July 1, 2018 through June 30, 2019.
    We assessed the measure's reliability, and set a minimum case count 
of 50 index admissions (25 per subset) per PCH. There were 3,502 
facilities \350\ included in the 100 split-half simulations for CY 2013 
through CY 2015. In our reliability assessment, we examined the 
reliability of the measure by testing the hypothesis that the mean S-B 
statistic from each year was greater than 0.5. The S-B statistic allows 
us to project what the reliability would be if the entire sample were 
used instead of the split sample.
---------------------------------------------------------------------------

    \350\ We note that hospital testing occurred prior to our 
proposal for PCHQR Program inclusion. As such, the sample size is 
far greater than the number of applicable PCHs for which 
implementation this measure is being proposed for use to ensure data 
reliability.
---------------------------------------------------------------------------

    Overall, the consistent calculations between the two data randomly-
split subsets for each period provided evidence that performance 
variations between PCHs were attributable to hospital-level factors, 
rather than patient-level factors. Regarding the validity of this 
measure, global sensitivity and specificity scores of 0.879 and 0.896, 
respectively, confirmed the validity of the Type of Admission/Visit 
reported via the UB-04 Uniform Bill Locator 14 (Claim Inpatient 
Admission Type Code \351\ in the Medicare SAF) to accurately identify 
planned and unplanned readmissions, as validated by chart review. 
Together, these statistics indicate that there are opportunities to 
utilize this measure to reduced unplanned readmissions in cancer 
patients, making it useful for performance improvement and public 
reporting. Additional details on the testing results for this measure 
are provided in the testing attachment, which is available at: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=86089.
---------------------------------------------------------------------------

    \351\ Claim Inpatient Admission Type Code available at: https://www.resdac.org/cms-data/variables/Claim-Inpatient-Admission-Type-Code.
---------------------------------------------------------------------------

(4) Measure Calculation
    This outcome measure utilizes claims data to demonstrate the rate 
at which adult cancer patients have unplanned readmissions within 30 
days of discharge from an eligible index admission. The numerator 
includes all eligible unplanned readmissions to the PCH within 30 days 
of the discharge date from an index admission to the PCH that is 
included in the measure denominator. The denominator includes inpatient 
admissions for all adult Medicare fee-for-service (FFS) beneficiaries 
where the patient is discharged from a short-term acute care hospital 
(PCH, short-term acute care PPS hospital, or CAH) with a principal or 
secondary diagnosis (that is, not admitting diagnosis) of malignant 
cancer within the defined measurement period. The measure excludes 
readmissions for patients readmitted for chemotherapy or radiation 
therapy treatment or with disease progression. The measure will be 
calculated as the numerator divided by the denominator. Measure 
specifications for the proposed measure can be accessed on the NQF's 
website at: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=86089.
(5) Cohort
    This measure includes inpatient admissions for all adult Medicare 
FFS beneficiaries where the patient is discharged from a short-term 
acute care hospital (PCH, short-term acute care PPS hospital, or CAH) 
with a principal or secondary diagnosis (that is, not admitting 
diagnosis) of malignant cancer within the defined measurement period. 
Additional methodology and measure development details are available on 
the NQF's website at: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=86089.
(6) Risk Adjustment
    This measure is risk-adjusted based on a comparison of observed 
versus expected readmission rates. Logistic regression analysis is used 
to estimate the probability of an unplanned readmission, based on the 
measure specifications and risk factors described herein. The 
probability of unplanned readmission is then summed over the index 
admissions for each hospital to calculate the expected unplanned 
readmission rate. Subsequently, the actual or observed unplanned 
readmissions for each hospital are summed and used to calculate the 
ratio of observed unplanned readmissions to expected unplanned 
readmissions for each hospital. Each hospital's ratio was then 
multiplied by the national or standard unplanned readmissions rate to 
generate the risk-adjusted 30-Day Unplanned Readmissions for Cancer 
Patients rate (as specified in the following formula):

[[Page 20506]]

[GRAPHIC] [TIFF OMITTED] TP07MY18.018

    We are inviting public comment on our proposal to adopt the 30-Day 
Unplanned Readmissions for Cancer Patients measure (NQF #3188) for the 
FY 2021 program year and subsequent years.
c. Summary of Previously Finalized and Proposed PCHQR Program Measures 
for the FY 2021 Program Year and Subsequent Years
    The table below summarizes what the PCHQR Program measure set would 
look like for the FY 2021 program year if we finalized our measure 
removal proposals and our proposal to adopt the 30-Day Unplanned 
Readmissions for Cancer Patients measure (NQF #3188):

 FY 2021 PCHQR Program Measure Set if Proposals To Remove Four Measures and Adopt a New Readmissions Measure Are
                                                    Finalized
----------------------------------------------------------------------------------------------------------------
                  Short name                        NQF No.                       Measure name
----------------------------------------------------------------------------------------------------------------
                                Safety and Healthcare-Associated Infection (HAI)
----------------------------------------------------------------------------------------------------------------
Colon and Abdominal Hysterectomy 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.
MRSA..........................................            1716  National Healthcare Safety Network (NHSN)
                                                                 Facility[dash]wide Inpatient Hospital-onset
                                                                 Methicillin[dash]resistant Staphylococcus
                                                                 aureus Bacteremia Outcome Measure.
HCP...........................................            0431  National Healthcare Safety Network (NHSN)
                                                                 Influenza Vaccination Coverage Among Healthcare
                                                                 Personnel.
----------------------------------------------------------------------------------------------------------------
                                     Clinical Process/Oncology Care Measures
----------------------------------------------------------------------------------------------------------------
N/A...........................................            0383  Oncology: Plan of Care for Pain--Medical
                                                                 Oncology and Radiation Oncology.
EOL-Chemo.....................................            0210  Proportion of Patients Who Died from Cancer
                                                                 Receiving Chemotherapy in the Last 14 Days of
                                                                 Life.
EOL-Hospice...................................            0215  Proportion of Patients Who Died from Cancer Not
                                                                 Admitted to Hospice.
----------------------------------------------------------------------------------------------------------------
                                     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.
EOL-3DH.......................................            0216  Proportion of Patients Who Died from Cancer
                                                                 Admitted to Hospice for Less Than Three Days.
----------------------------------------------------------------------------------------------------------------
                                      Patient Engagement/Experience of Care
----------------------------------------------------------------------------------------------------------------
HCAHPS........................................            0166  HCAHPS.
----------------------------------------------------------------------------------------------------------------
                                         Clinical Effectiveness Measure
----------------------------------------------------------------------------------------------------------------
EBRT..........................................            1822  External Beam Radiotherapy for Bone Metastases.
----------------------------------------------------------------------------------------------------------------
                                          Claims Based Outcome Measures
----------------------------------------------------------------------------------------------------------------
N/A...........................................             N/A  Admissions and Emergency Department (ED) Visits
                                                                 for Patients Receiving Outpatient Chemotherapy.
N/A *.........................................            3188  30-Day Unplanned Readmissions for Cancer
                                                                 Patients.
----------------------------------------------------------------------------------------------------------------
* Measure proposed for adoption for the FY 2021 program year and subsequent years.

5. Accounting for Social Risk Factors in the PCHQR Program
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38428 through 
38429), we discussed the importance of improving beneficiary outcomes 
including reducing health disparities. We also discussed our commitment 
to ensuring that medically complex patients, as well as those with 
social risk factors, receive excellent care. We discussed how studies 
show that social risk factors, such as being near or below the poverty 
level as determined by HHS, belonging to a racial or ethnic minority 
group, or living with a disability, can be associated with poor health 
outcomes and how some of this disparity is related to the quality of 
health care.\352\ Among our core objectives, we aim to improve health 
outcomes, attain health equity for all beneficiaries, and ensure that 
complex patients as well as those with social risk factors receive 
excellent care. Within this context, reports by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) and the National 
Academy of Medicine have examined the influence of social risk factors 
in CMS value-based purchasing

[[Page 20507]]

programs.\353\ As we noted in the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38428 through 38429), ASPE's report to Congress found that, in the 
context of value-based purchasing programs, dual eligibility was the 
most powerful predictor of poor health care outcomes among those social 
risk factors that they examined and tested. In addition, as we noted in 
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38428), the National 
Quality Forum (NQF) undertook 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.\354\ The trial period ended in April 
2017 and a final report is available at: http://www.qualityforum.org/SES_Trial_Period.aspx. The trial concluded that ``measures with a 
conceptual basis for adjustment generally did not demonstrate an 
empirical relationship'' between social risk factors and the outcomes 
measured. This discrepancy may be explained in part by the methods used 
for adjustment and the limited availability of robust data on social 
risk factors. NQF has extended the socioeconomic status (SES) 
trial,\355\ allowing further examination of social risk factors in 
outcome measures.
---------------------------------------------------------------------------

    \352\ See, for example United States Department of Health and 
Human Services. ``Healthy People 2020: Disparities. 2014.'' 
Available at: 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.
    \353\ 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.
    \354\ Available at: http://www.qualityforum.org/SES_Trial_Period.aspx.
    \355\ Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86357.
---------------------------------------------------------------------------

    In the FY 2018/CY 2018 proposed rules for our quality reporting and 
value-based purchasing programs, we solicited feedback on which social 
risk factors provide the most valuable information to stakeholders and 
the methodology for illuminating differences in outcomes rates among 
patient groups within a hospital or provider that would also allow for 
a comparison of those differences, or disparities, across providers. 
Feedback we received across our quality reporting programs included 
encouraging CMS to explore whether factors that could be used to 
stratify or risk adjust the measures (beyond dual eligibility); 
considering the full range of differences in patient backgrounds that 
might affect outcomes; exploring risk adjustment approaches; and 
offering careful consideration of what type of information display 
would be most useful to the public. We also sought public comment on 
confidential reporting and future public reporting of some of our 
measures stratified by patient dual eligibility. In general, commenters 
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, and empower consumers to make 
informed decisions about health care. Commenters encouraged us to 
stratify measures by other social risk factors such as age, income, and 
educational attainment. With regard to value-based purchasing programs, 
commenters also cautioned to balance fair and equitable payment while 
avoiding payment penalties that mask health disparities or discouraging 
the provision of care to more medically complex patients. Commenters 
also noted that value-based purchasing program measure selection, 
domain weighting, performance scoring, and payment methodology must 
account for social risk.
    As a next step, CMS is considering options to improve health 
disparities among patient groups within and across hospitals by 
increasing the transparency of disparities as shown by quality 
measures. We also are considering how this work applies to other CMS 
quality programs in the future. We refer readers to the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38403 through 38409) for more details, where 
we discuss the potential stratification of certain Hospital IQR Program 
outcome measures. Furthermore, we continue to consider options to 
address equity and disparities in our value-based purchasing programs.
    We plan to continue working with ASPE, the public, and other key 
stakeholders on this important issue to identify policy solutions that 
achieve the goals of attaining health equity for all beneficiaries and 
minimizing unintended consequences.
6. Possible New Quality Measure Topics for Future Years
a. Background
    As discussed in sections section I.A.2. of the preamble of this 
proposed rule, we have begun analyzing our programs' measures using the 
framework we developed for the Meaningful Measures Initiative. We have 
also 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), the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 25211), and the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38421 through 38423). Specifically, we discussed public comment and 
suggestions for measure topics addressing: (1) Making care affordable; 
(2) communication and care coordination; and (3) working with 
communities to promote best practices of healthy living. In addition, 
in the FY 2018 IPPS/LTCH PPS final rule, we welcomed 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.
    In this proposed rule, we are again seeking public comment on the 
types of measure topics we should consider for future rulemaking. We 
also are seeking public comment on two measures for potential future 
inclusion in the PCHQR Program:
     Risk-Adjusted Morbidity and Mortality for Lung Resection 
for Lung Cancer (NQF #1790); and
     Shared Decision Making Process (NQF #2962).
    We discuss these measures and measurement topic areas in more 
detail below.
b. Risk-Adjusted Morbidity and Mortality for Lung Resection for Lung 
Cancer (NQF #1790)
    The Risk-Adjusted Morbidity and Mortality for Lung Resection for 
Lung Cancer (NQF #1790) measure is an outcome measure. It assesses 
postoperative complications and operative mortality, which are 
important negative outcomes associated with lung cancer resection 
surgery. Specifically, the measure assesses the number of patients 18 
years of age or older undergoing elective lung resection (Open or 
video-assisted thoracoscopic surgery (VATS) wedge resection, 
segmentectomy, lobectomy, bilobectomy, sleeve lobectomy, pneumonectomy) 
for lung cancer who developed one of the listed postoperative 
complications described in the measure's specifications.\356\ The lung 
cancer resection risk model utilized in this measure identifies 
predictors of these outcomes, including patient age, smoking status, 
comorbid medical conditions, and other patient characteristics, as well 
as operative approach and the extent of pulmonary resection. Knowledge 
of these predictors informs clinical decision-making by

[[Page 20508]]

enabling physicians and patients to understand the associations between 
individual patient characteristics and outcomes. Further, with 
continuous feedback of performance data over time, knowledge of these 
predictors and their relationship with patient outcomes also will 
foster quality improvement.
---------------------------------------------------------------------------

    \356\ Risk-Adjusted Morbidity and Mortality for Lung Resection 
for Lung Cancer (NQF #1790) Measure Specifications. Available at: 
http://www.qualityforum.org/Projects/Cancer_Endorsement_Maintenance_2011.aspx#t=2&s=&p=3%7C.
---------------------------------------------------------------------------

    This measure aligns with recent initiatives to incorporate more 
outcome measures in quality reporting programs. This measure also 
aligns with the Promote Effective Prevention and Treatment of Chronic 
Disease domain of our Meaningful Measures Initiative,\357\ and would 
fill an existing gap area of risk-adjusted mortality measures in the 
PCHQR Program. This measure has not yet been reviewed by the MAP. 
Additional information on this measure is available at: http://www.qualityforum.org/Projects/Cancer_Endorsement_Maintenance_2011.aspx#t=2&s=&p=3%7C, under the 
``Candidate Consensus Standards Review: Phase-1'' section.
---------------------------------------------------------------------------

    \357\ Overview of CMS ``Meaningful Measures'' Initiative 
available at: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases-items/2017-10-30.html.
---------------------------------------------------------------------------

    We are requesting public comment on the possible inclusion of this 
measure in future years of the program.
c. Shared Decision-Making Process (NQF #2962)
    The Shared Decision-Making Process (NQF #2962) measure is a 
patient-reported outcome measure. This measure asks patients who had 
any of seven preference-sensitive surgical interventions to report on 
the interactions they had with their providers when the decision was 
made to have the surgery. Specifically, this measure assesses patient 
answers to four questions about whether three essential elements of 
shared decision-making: (1) Laying out options; (2) discussing the 
reasons to have the intervention and not to have the intervention; and 
(3) asking for patient input--were part of the patient's interactions 
with providers when the decision was made to have the procedure. When 
faced with a medical problem for which there is more than one 
reasonable approach to treatment or management, shared decision-making 
means providers should outline for patients that there is a choice to 
be made, discuss the pros and cons of the available options, and make 
sure that patients have input into the final decision. The result will 
be decisions that align better with patient goals, concerns, and 
preferences.
    This measure 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. 
This measure also aligns with the Strengthen Person and Family 
Engagement as Partners in Their Care domain of our Meaningful Measures 
Initiative,\358\ and would fill an existing gap area of care aligned 
with the person's goals in the PCHQR Program. This measure has not yet 
been reviewed by the MAP. Additional information on this measure is 
available at: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=80842.
---------------------------------------------------------------------------

    \358\ Ibid.
---------------------------------------------------------------------------

    We are requesting public comment on the possible inclusion of this 
measure in future years of the program.
d. Future Measurement Topic Areas
    As discussed in section I.A.2. of the preamble of this proposed 
rule, we intend to review and assess the quality measures that we 
collect and score in our quality programs. As a part of the review 
process, we are continually evaluating the existing PCHQR measures 
portfolio and identifying gap areas for future measure adoption and/or 
development. In tandem with this portfolio evaluation, we have 
conducted a measure environmental scan. We believe that staying abreast 
of the cancer measurement environment and staying in communication with 
the cancer measure development community are vital to the ensure that 
the PCHQR Program measure portfolio remains aligned with current CMS 
and HHS goals. As a part of our efforts to include a comprehensive set 
of cancer measures in the PCHQR Program, we are currently assessing 
whether we should redefine the scope of new quality metrics we 
implement in the PCHQR Program in future years. Specifically, we are 
trying to determine whether the PCHQR Program would most benefit from 
the inclusion of more quality measures that examine general cancer care 
(that is, outcome measures that assess cancer care) or more measures 
that examine cancer-specific clinical conditions (such as prostate 
cancer, esophageal cancer, colon cancer, or uterine cancer).
    We welcome public comment and specific suggestions on the inclusion 
of quality measures that examine general cancer care versus the 
inclusion of quality measures that examine cancer-specific clinical 
conditions in future rulemaking.
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 website at: https://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228774479863.
    We also refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50281), where we adopted a policy under which we use a subregulatory 
process to make nonsubstantive updates to measures used for the PCHQR 
Program.
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 website.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57191 through 
57192), we finalized that although we would continue to use rulemaking 
to establish what year we would first publicly report data on each 
measure, we would actually publish the data as soon as feasible during 
that year. We also stated that our intent is to make the data available 
on at least a yearly basis, and that the time period for PCHs to review 
their data before the data are made public would be approximately 30 
days in length. We announce the exact data review and public reporting 
timeframes on a CMS website and/or on our applicable Listservs.
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38422 through 
38424), we listed our finalized public display requirements for the FY 
2020 program year.

[[Page 20509]]



Previously Finalized Public Display Requirements for the FY 2020 Program
                                  Year
------------------------------------------------------------------------
       Summary of previously finalized public display requirements
-------------------------------------------------------------------------
                  Measures                         Public reporting
------------------------------------------------------------------------
 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: Avoidance of
 Overuse of Bone Scan for Staging Low Risk
 Prostate Cancer Patients (NQF #0389). *
 Prostate Cancer: Adjuvant Hormonal
 Therapy for High Risk Prostate Cancer
 Patients (NQF #0390). *
 HCAHPS (NQF #0166)................  2016 and subsequent years.
 CLABSI (NQF #0139). *
 CAUTI (NQF #0138). *..............  Deferred.
 External Beam Radiotherapy for      Beginning when feasible in
 Bone Metastases (NQF #1822).                 2017 and for subsequent
                                              years.
------------------------------------------------------------------------
* Measure proposed for removal beginning with the FY 2021 program year.

    We recognize the importance of being transparent with stakeholders 
and keeping them abreast of any changes that arise with the PCHQR set. 
As such, we provide a discussion of some recent changes affecting the 
timetable for the public displaying of data for specific PCHQR measures 
in the section below.
b. Proposed Deferment of Public Display of Four Measures
    We adopted the Colon and Abdominal Hysterectomy SSI (NQF #0753) 
measure in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50839 through 
50840) and the MRSA measure (NQF #1716), the CDI measure (NQF #1717) 
and the HCP measure (NQF #0431) in the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49715 through 49718).
    At present, all PCHs are reporting Colon and Abdominal Hysterectomy 
SSI, MRSA, CDI, and HCP data to the NHSN under the PCHQR Program. 
However, performance data for these measures are new, and do not span a 
long enough measurement period to draw conclusions about their 
statistical significance at this point. Specifically, in 2016, the 
Centers for Disease Control and Prevention (CDC) announced that HAI 
data reported to NHSN for 2015 will be used as the new baseline, 
serving as a new ``reference point'' for comparing progress.\359\ These 
current rebaselining efforts make year-to-year data comparisons 
inappropriate at this time. However, in FY 2019, we will have 2 years 
of comparable data to properly assess trends.\360\ Therefore, we are 
proposing to delay the public reporting of data for the SSI, MRSA, CDI, 
and HCP measures until CY 2019.
---------------------------------------------------------------------------

    \359\ Centers for Disease Control and Prevention. ``Paving Path 
Forward: 2015 Rebase line.'' Available at: https://www.cdc.gov/nhsn/2015rebaseline/index.html.
    \360\ Rebase line Timeline FAQ Document. Available at: https://www.cdc.gov/nhsn/pdfs/rebaseline/faq-timeline-rebaseline.pdf.
---------------------------------------------------------------------------

    We are inviting public comment on our proposal to delay public 
reporting of these four measures until CY 2019.
c. Clarification of Public Display of External Beam Radiotherapy for 
Bone Metastases (EBRT) (NQF #1822) Measure
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50282 through 
50283), we finalized that PCHs would begin reporting the External Beam 
Radiotherapy for Bone Metastases (EBRT) (NQF #1822) measure beginning 
with January 1, 2015 discharges and for subsequent years. We finalized 
that PCHs would report this measure to us via a CMS web-based tool on 
an annual basis (July 1 through August 15 of each respective year). 
Lastly, we finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57192) that we would begin to display the measure data during CY 2017, 
and that we would use a CMS website and/or our applicable Listservs to 
announce the exact timeframe.
    We publicly reported data on this measure in December of 2017, and 
that data can be accessed on Hospital Compare at: https://www.medicare.gov/hospitalcompare/cancer-measures.html. We note that 
this measure is updated on an annual basis, and that new Hospital 
Compare data is published four times each year: April, July, October, 
and December. As such, we anticipate an update of EBRT measure data to 
be available in December of 2018.
d. Summary of Proposed Public Display Requirements for the FY 2021 
Program Year
    Our proposed public display requirements for the FY 2021 program 
year are shown in the following table:

    Proposed Public Display Requirements for the FY 2021 Program Year
------------------------------------------------------------------------
          Summary of newly proposed public display requirements
-------------------------------------------------------------------------
                  Measures                         Public reporting
------------------------------------------------------------------------
 HCAHPS (NQF #0166)................  2016 and subsequent years.
 Oncology: Plan of Care for Pain--
 Medical Oncology and Radiation Oncology
 (NQF #0383).
 American College of Surgeons--      * Deferred Until Calendar
 Centers for Disease Control and Prevention   Year 2019.
 (ACS-CDC) Harmonized Procedure Specific
 Surgical Site Infection (SSI) Outcome
 Measure [currently includes SSIs following
 Colon Surgery and Abdominal Hysterectomy
 Surgery] (NQF #0753).
 National Healthcare Safety Network
 (NHSN) Facility[dash]wide Inpatient
 Hospital-onset Methicillin[dash]resistant
 Staphylococcus aureus Bacteremia Outcome
 Measure (NQF #1716).
 National Healthcare Safety Network
 (NHSN) Facility[dash]wide Inpatient
 Hospital-onset Clostridium difficile
 Infection (CDI) Outcome Measure (NQF
 #1717).
 National Healthcare Safety Network
 (NHSN) Influenza Vaccination Coverage
 Among Healthcare Personnel (NQF #0431).

[[Page 20510]]

 
 External Beam Radiotherapy for      2017 and subsequent years.
 Bone Metastases (EBRT) (NQF #1822).
------------------------------------------------------------------------
* Newly proposed in this FY 2019 IPPS/LTCH PPS proposed rule.

9. Form, Manner, and Timing of Data Submission
a. Background
    Data submission requirements and deadlines for the PCHQR Program 
are generally posted on the QualityNet website at: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772864228.
b. Proposed Reporting Requirements for the Newly Proposed 30-Day 
Unplanned Readmissions for Cancer Patients Measure
    As further described in section VIII.B.4.b. of the preamble of this 
proposed rule, we are proposing the adoption of a new measure beginning 
with the FY 2021 program year, the 30-Day Unplanned Readmissions for 
Cancer Patients measure. This is a claims-based measure, therefore, 
there will be no separate data submission requirements for PCHs related 
to this measure as CMS will calculate measure rates from PCH claims 
data. We are proposing that the data collection period would be from 
July 1 of the year 3 years prior to the program year to June 30 of the 
year 2 years prior to the program year. Therefore, for the FY 2021 
program year, we would collect data from October 1, 2018 through 
September 30, 2019.
    We are inviting public comment on this proposal.
10. Extraordinary Circumstances Exceptions (ECE) Policy Under the PCHQR 
Program
    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) \361\ 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. In the 
FY 2018 IPPS/LTCH PPS final rule (82 FR 38424 through 38425), we 
finalized modifications to the extraordinary circumstances exceptions 
(ECE) policy to extend 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 to allow CMS to grant an 
exception or extension due to CMS data system issues which affect data 
submission. In addition, to ensure transparency and understanding of 
our process, we have clarified that we will strive to provide our 
response to an ECE request within 90 days of receipt.
---------------------------------------------------------------------------

    \361\ 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).
---------------------------------------------------------------------------

C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

1. Background
    The LTCH QRP is authorized by section 1886(m)(5) of the Act, and it 
applies to all hospitals certified by Medicare as long-term care 
hospitals (LTCHs). Under the LTCH QRP, the Secretary reduces by two 
percentage points the annual update to the LTCH PPS standard Federal 
rate for discharges for an LTCH during a fiscal year if the LTCH has 
not complied with the LTCH QRP requirements specified for that fiscal 
year. For more detailed information on the requirements we have adopted 
for the LTCH QRP, we refer readers to the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51743 through 51744), the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53614), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50853), the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50286), the FY 2016 IPPS/LTCH 
PPS final rule (80 FR 49723 through 49725), the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57193), and the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38425 through 38426).
    Although we have historically used the preamble to the IPPS/LTCH 
PPS proposed and final rules each year to remind stakeholders of all 
previously finalized program requirements, we have concluded that 
repeating the same discussion each year is not necessary for every 
requirement, especially if we have codified it in our regulations. 
Accordingly, the following discussion is limited as much as possible to 
a discussion of our proposals for future years of the LTCH QRP, and 
represents the approach we intend to use in our rulemakings for this 
program going forward.
2. General Considerations Used for the Selection of Measures for the 
LTCH QRP
a. Background
    For a detailed discussion of the considerations we historically 
used for the selection of LTCH QRP quality, resource use, and other 
measures, we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 
FR 49728).
b. Accounting for Social Risk Factors in the LTCH QRP
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38428 through 
38429), we discussed the importance of improving beneficiary outcomes 
including reducing health disparities. We also discussed our commitment 
to ensuring that medically complex patients, as well as those with 
social risk factors, receive excellent care. We discussed how studies 
show that social risk factors, such as being near or below the poverty 
level as determined by HHS, belonging to a racial or ethnic minority 
group, or living with a disability, can be associated with poor health 
outcomes and how some of this disparity is related to the quality of 
health care.\362\ Among our core objectives, we aim to improve health 
outcomes, attain health

[[Page 20511]]

equity for all beneficiaries, and ensure that complex patients as well 
as those with social risk factors receive excellent care. Within this 
context, reports by the Office of the Assistant Secretary for Planning 
and Evaluation (ASPE) and the National Academy of Medicine have 
examined the influence of social risk factors in our value-based 
purchasing programs.\363\ As we noted in the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38404), ASPE's report to Congress, which was required 
by the IMPACT Act, found that, in the context of value-based purchasing 
programs, dual eligibility was the most powerful predictor of poor 
health care outcomes among those social risk factors that they examined 
and tested. ASPE is continuing to examine this issue in its second 
report required by the IMPACT Act, which is due to Congress in the fall 
of 2019. In addition, as we noted in the FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38428), the National Quality Forum (NQF) undertook 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.\364\ The 
trial period ended in April 2017 and a final report is available at: 
http://www.qualityforum.org/SES_Trial_Period.aspx. The trial concluded 
that ``measures with a conceptual basis for adjustment generally did 
not demonstrate an empirical relationship'' between social risk factors 
and the outcomes measured. This discrepancy may be explained in part by 
the methods used for adjustment and the limited availability of robust 
data on social risk factors. NQF has extended the socioeconomic status 
(SES) trial,\365\ allowing further examination of social risk factors 
in outcome measures.
---------------------------------------------------------------------------

    \362\ See, for example United States Department of Health and 
Human Services. ``Healthy People 2020: Disparities. 2014.'' 
Available at: 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.
    \363\ 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.
    \364\ Available at: http://www.qualityforum.org/SES_Trial_Period.aspx.
    \365\ Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86357.
---------------------------------------------------------------------------

    In the FY 2018/CY 2018 proposed rules for our quality reporting and 
value-based purchasing programs, we solicited feedback on which social 
risk factors provide the most valuable information to stakeholders and 
the methodology for illuminating differences in outcomes rates among 
patient groups within a provider that would also allow for a comparison 
of those differences, or disparities, across providers. Feedback we 
received across our quality reporting programs included encouraging 
CMS: To explore whether factors that could be used to stratify or risk 
adjust the measures (beyond dual eligibility); to consider the full 
range of differences in patient backgrounds that might affect outcomes; 
to explore risk adjustment approaches; and to offer careful 
consideration of what type of information display would be most useful 
to the public.
    We also sought public comment on confidential reporting and future 
public reporting of some of our measures stratified by patient dual 
eligibility. In general, commenters 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, and empower consumers to make informed decisions about 
health care. Commenters encouraged us to stratify measures by other 
social risk factors such as age, income, and educational attainment. 
With regard to value-based purchasing programs, commenters also 
cautioned CMS to balance fair and equitable payment while avoiding 
payment penalties that mask health disparities or discouraging the 
provision of care to more medically complex patients. Commenters also 
noted that value-based payment program measure selection, domain 
weighting, performance scoring, and payment methodology must account 
for social risk.
    As a next step, we are considering options to improve health 
disparities among patient groups within and across hospitals by 
increasing the transparency of disparities as shown by quality 
measures. We also are considering how this work applies to other CMS 
quality programs in the future. We refer readers to the FY 2018 IPPS/
LTCH PPS final rule (82 FR 38403 through 38409) for more details, where 
we discuss the potential stratification of certain Hospital IQR Program 
outcome measures. Furthermore, we continue to consider options to 
address equity and disparities in our value-based purchasing programs.
    We plan to continue working with ASPE, the public, and other key 
stakeholders on this important issue to identify policy solutions that 
achieve the goals of attaining health equity for all beneficiaries and 
minimizing unintended consequences.
3. Proposed New Measure Removal Factor for Previously Adopted LTCH QRP 
Measures
    As a part of our Meaningful Measures Initiative, discussed in 
section I.A.2. of the preamble of this proposed rule, we strive to put 
patients first, ensuring that they, along with their clinicians, are 
empowered to make decisions about their own healthcare using data-
driven information that is increasingly aligned with a parsimonious set 
of meaningful quality measures. We began reviewing the LTCH QRP's 
measures in accordance with the Meaningful Measures Initiative, and we 
are working to identify how to move the LTCH QRP forward in the least 
burdensome manner possible, while continuing to incentivize improvement 
in the quality of care provided to patients.
    Specifically, we believe the goals of the LTCH QRP and the measures 
used in the program cover most of the Meaningful Measures Initiative 
priorities, including making care safer, strengthening person and 
family engagement, promoting coordination of care, promoting effective 
prevention and treatment, and making care affordable.
    We also evaluated the appropriateness and completeness of the LTCH 
QRP's current measure removal factors. We have previously finalized 
that we would use notice and comment rulemaking to remove measures from 
the LTCH QRP based on the following factors (77 FR 53614 through 
53615): \366\
---------------------------------------------------------------------------

    \366\ We refer readers to the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53614 through 53615) for more information on the factors we 
consider for removing measures.
---------------------------------------------------------------------------

     Factor 1. Measure performance among LTCHs is so high and 
unvarying that meaningful distinctions in improvements in performance 
can no longer be made.
     Factor 2. Performance or improvement on a measure does not 
result in better patient outcomes.
     Factor 3. A measure does not align with current clinical 
guidelines or practice.
     Factor 4. A more broadly applicable measure (across 
settings, populations, or conditions) for the particular topic is 
available.
     Factor 5. A measure that is more proximal in time to 
desired patient outcomes for the particular topic is available.
     Factor 6. A measure that is more strongly associated with 
desired patient outcomes for the particular topic is available.
     Factor 7. Collection or public reporting of a measure 
leads to negative

[[Page 20512]]

unintended consequences other than patient harm.
    We continue to believe that these measure removal factors are 
appropriate for use in the LTCH QRP. However, even if one or more of 
the measure removal factors applies, we may nonetheless choose to 
retain the measure for certain specified reasons. Examples of such 
instances could include when a particular measure addresses a gap in 
quality that is so significant that removing the measure could, in 
turn, result in poor quality, or in the event that a given measure is 
statutorily required. We note further that, consistent with other 
quality reporting programs, we apply these factors on a case-by-case 
basis.
    We are proposing to adopt an additional factor to consider when 
evaluating potential measures for removal from the LTCH QRP measure 
set: Factor 8, the costs associated with a measure outweigh the benefit 
of its continued use in the program.
    As we discussed in section I.A.2. of the preamble of this proposed 
rule, with respect to our new Meaningful Measures Initiative, we are 
engaging in efforts to ensure that the LTCH QRP measure set continues 
to promote improved health outcomes for beneficiaries while minimizing 
the overall costs associated with the program. We believe these costs 
are multi-faceted and include not only the burden associated with 
reporting, but also the costs associated with implementing and 
maintaining the program. We have identified several different types of 
costs, including, but not limited to: (1) The provider and clinician 
information collection burden and burden associated with the 
submission/reporting of quality measures to CMS; (2) the provider and 
clinician cost associated with complying with other programmatic 
requirements; (3) the provider and clinician cost associated with 
participating in multiple quality programs, and tracking multiple 
similar or duplicative measures within or across those programs; (4) 
the cost to CMS associated with the program oversight of the measure 
including measure maintenance and public display; and (5) the provider 
and clinician cost associated with compliance with other federal and/or 
state regulations (if applicable).
    For example, it may be needlessly costly and/or of limited benefit 
to retain or maintain a measure which our analyses show no longer 
meaningfully supports program objectives (for example, informing 
beneficiary choice). It may also be costly for health care providers to 
track the confidential feedback, preview reports, and publicly reported 
information on a measure where we use the measure in more than one 
program. CMS may also have to expend unnecessary resources to maintain 
the specifications for the measure, as well as the tools we need to 
collect, validate, analyze, and publicly report the measure data. 
Furthermore, beneficiaries may find it confusing to see public 
reporting on the same measure in different programs.
    When these costs outweigh the evidence supporting the continued use 
of a measure in the LTCH QRP, we believe it may be appropriate to 
remove the measure from the program. Although we recognize that one of 
the main goals of the LTCH QRP is to improve beneficiary outcomes by 
incentivizing health care providers to focus on specific care issues 
and making public data related to those issues, we also recognize that 
those goals can have limited utility where, for example, the publicly 
reported data is of limited use because it cannot be easily interpreted 
by beneficiaries and used to influence their choice of providers. In 
these cases, removing the measure from the LTCH QRP may better 
accommodate the costs of program administration and compliance without 
sacrificing improved health outcomes and beneficiary choice.
    We are proposing that we would remove measures based on this factor 
on a case-by-case basis. We might, for example, decide to retain a 
measure that is burdensome for health care providers to report if we 
conclude that the benefit to beneficiaries justifies the reporting 
burden. Our goal is to move the program forward in the least burdensome 
manner possible, while maintaining a parsimonious set of meaningful 
quality measures and continuing to incentivize improvement in the 
quality of care provided to patients.
    We are inviting public comment on our proposal to adopt an 
additional measure removal Factor 8, the costs associated with a 
measure outweigh the benefit of its continued use in the program.
    We also are proposing to codify both the removal factors we 
previously finalized for the LTCH QRP, as well as the new the measure 
removal factor that we are proposing to adopt in this rule, at Sec.  
412.560(b)(3) of our regulations.
    We are inviting public comment on these proposals.
4. Quality Measures Currently Adopted for the FY 2020 LTCH QRP
    The LTCH QRP currently has 19 measures for the FY 2020 program 
year, which are outlined in the following table:

       Quality Measures Currently Adopted for the FY 2020 LTCH QRP
------------------------------------------------------------------------
          Short name                  Measure name and data source
------------------------------------------------------------------------
                           LTCH CARE Data Set
------------------------------------------------------------------------
Pressure Ulcer...............  Percent of Residents or Patients With
                                Pressure Ulcers That Are New or Worsened
                                (Short Stay) (NQF #0678). *
Pressure Ulcer/Injury........  Changes in Skin Integrity Post-Acute
                                Care: Pressure Ulcer/Injury.
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).
Compliance with SBT..........  Compliance with Spontaneous Breathing
                                Trial (SBT) by Day 2 of the LTCH Stay.

[[Page 20513]]

 
Ventilator Liberation........  Ventilator Liberation Rate.
------------------------------------------------------------------------
                                  NHSN
------------------------------------------------------------------------
CAUTI........................  National Healthcare Safety Network (NHSN)
                                Catheter-Associated Urinary Tract
                                Infection (CAUTI) Outcome Measure (NQF
                                #0138).
CLABSI.......................  National Healthcare Safety Network (NHSN)
                                Central Line-associated Bloodstream
                                Infection (CLABSI) 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
------------------------------------------------------------------------
MSPB LTCH....................  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).
PPR..........................  Potentially Preventable 30-Day Post-
                                Discharge Readmission Measure for Long-
                                Term Care Hospital (LTCH) Quality
                                Reporting Program (QRP).
------------------------------------------------------------------------
* The measure will be replaced with the Changes in Skin Integrity Post-
  Acute Care: Pressure Ulcer/Injury measure, effective July 1, 2018.

5. Proposed Removal of Three LTCH QRP Measures
    We are proposing to remove three measures from the LTCH QRP measure 
set. Beginning with the FY 2020 LTCH QRP, we are proposing to remove 
two measures: (1) National Healthcare Safety Network (NHSN) Facility-
wide Inpatient Hospital-onset Methicillin-resistant Staphylococcus 
aureus (MRSA) Bacteremia Outcome Measure (NQF #1716); and (2) National 
Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) 
Outcome Measure. We are proposing to remove one measure beginning with 
the FY 2021 LTCH QRP: Percent of Residents or Patients Who Were 
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short 
Stay) (NQF #0680). We discuss these proposals below.
a. Proposed Removal of the National Healthcare Safety Network (NHSN) 
Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant 
Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716)
    We are proposing to remove the measure, National Healthcare Safety 
Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-
Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF 
#1716), from the LTCH QRP beginning with the FY 2020 LTCH QRP.
    As discussed in section VIII.C.3. of the preamble of this proposed 
rule, one of the main goals of our Meaningful Measures Initiative is to 
apply a parsimonious set of the most meaningful measures available to 
track patient outcomes and impact. We currently collect data on two 
measures of healthcare-associated bacteremia infections in the LTCH 
QRP: (1) NHSN Central line-associated Bloodstream Infection (CLABSI) 
Outcome Measure (NQF #0139); and (2) NHSN Facility-wide Inpatient 
Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) 
Bacteremia Outcome Measure (NQF #1716).
    In our review of these measures used in the LTCH QRP, we believe 
that it is appropriate to remove the NHSN Facility-wide Inpatient 
Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) 
Bacteremia Outcome Measure (NQF #1716) based on: (1) Factor 6, a 
measure that is more strongly associated with desired patient outcomes 
for the particular topic is available; and (2) proposed Factor 8, the 
costs associated with a measure outweigh the benefit of its continued 
use in the program.
    We believe that the NHSN CLABSI Outcome Measure (NQF #0139) is more 
strongly associated with the desired patient outcome for bloodstream 
infections than the NHSN Facility-wide Inpatient Hospital-Onset MRSA 
Bacteremia Outcome Measure (NQF #1716). Bloodstream infections are 
serious infections typically causing a prolongation of hospital stay 
and increased cost and risk of mortality. The NHSN CLABSI Outcome 
Measure (NQF #0139) assesses the results of the quality of care 
provided to patients, and it is risk-adjusted to compare the infection 
rate for a particular location or locations in a hospital with an 
expected infection rate for those locations (which is calculated using 
national NHSN data for those locations in a predictive model). The NHSN 
CLABSI Outcome Measure (NQF #0139) is more strongly associated with the 
desired patient outcome of better results in the quality of care 
provided to patients because it covers a wide range of blood-stream 
infections, while the NHSN Facility-wide Inpatient Hospital-Onset MRSA 
Bacteremia Outcome Measure (NQF #1716) only covers MRSA observed 
hospital-onset unique blood source MRSA laboratory-identified events. 
The NHSN CLABSI Outcome Measure (NQF #0139) also captures the MRSA 
blood-stream events, creating potential duplicative collection and 
reporting.
    We also believe that the costs associated with the NHSN Facility-
wide Inpatient Hospital-Onset MRSA Bacteremia Outcome Measure (NQF 
#1716) outweigh the benefit of its continued use in the LTCH QRP. The 
NHSN Facility-wide Inpatient Hospital-Onset MRSA Bacteremia Outcome 
Measure (NQF #1716) was adopted to assess MRSA infections caused by a 
strain of MRSA bacteremia that has become resistant to antibiotics 
commonly used to treat MRSA infections. The NHSN Facility-wide 
Inpatient Hospital-Onset MRSA Bacteremia Outcome Measure (NQF #1716) 
and NHSN CLABSI Outcome Measure (NQF #0139) capture the same

[[Page 20514]]

type of MRSA infection. This overlap results in the data submission on 
two measures that cover the same quality issue. We believe that this 
results in redundant efforts on the part of LTCHs that are costly and 
burdensome. In addition, the maintenance of these two measures in the 
LTCH QRP is costly for CMS. Lastly, we believe that the removal of the 
NHSN Facility-wide Inpatient Hospital-Onset MRSA Bacteremia Outcome 
Measure (NQF #1716) would benefit the public by eliminating the 
potential confusion of seeing two different measure rates on LTCH 
Compare that capture MRSA bacteremia.
    If finalized, LTCHs would continue to report MRSA bacteremia events 
associated with central line use as part of the NHSN CLABSI Outcome 
Measure (NQF #0139), and LTCHs would additionally report as part of 
that measure other acquired central line-associated bloodstream 
infections. As a result, duplication of data submission of the same 
MRSA bacteremia event for these two measures would be eliminated and 
only a single bacteremia outcome measure would be publicly reported on 
LTCH Compare.
    Therefore, we are proposing to remove the NHSN Facility-wide 
Inpatient Hospital-onset MRSA Bacteremia Outcome Measure (NQF #1716) 
from the LTCH QRP beginning with the FY 2020 LTCH QRP under: (1) Factor 
6, a measure that is more strongly associated with desired patient 
outcomes for the particular topic is available; and (2) proposed 
measure removal Factor 8, the costs associated with a measure outweigh 
the benefit of its continued use in the program.
    If finalized as proposed, LTCHs would no longer be required to 
submit data on this measure for the purposes of the LTCH QRP beginning 
with October 1, 2018 admissions and discharges.
    We are inviting public comment on this proposal.
b. Proposed Removal of the National Healthcare Safety Network (NHSN) 
Ventilator-Associated-Event (VAE) Outcome Measure
    We are proposing to remove the National Healthcare Safety Network 
(NHSN) Ventilator-Associated Event (VAE) Outcome Measure from the LTCH 
QRP beginning with the FY 2020 LTCH QRP based on Factor 6, a measure 
that is more strongly associated with desired patient outcomes for the 
particular topic is available.
    We finalized the National Healthcare Safety Network (NHSN) 
Ventilator-Associated Event (VAE) Outcome Measure in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50301 through 50305) to assess whether LTCHs 
monitor ventilator use and identify improvements in preventing 
complications associated with mechanical ventilation. We have also 
adopted for the LTCH QRP three other assessment-based quality measures 
on the topic of ventilator support: (1) Functional Outcome Measure: 
Change in Mobility among Long-Term Care Hospital Patients Requiring 
Ventilator Support (NQF #2632) (79 FR 50298 through 50301); (2) 
Compliance with Spontaneous Breathing Trials (SBT) by Day 2 of the LTCH 
Stay (82 FR 38439 through 38443); and (3) Ventilator Liberation Rate 
(82 FR 38443 through 38446).
    We believe that these three other assessment-based quality measures 
are more strongly associated with desired patient outcomes than the 
National Healthcare Safety Network (NHSN) Ventilator-Associated Event 
(VAE) Outcome Measure that we are proposing to remove. The three 
assessment-based measures assess activities that reduce the potential 
for serious complications and other adverse events as a result of 
mechanical ventilation. Specifically, the Functional Outcome Measure: 
Change in Mobility among Long-Term Care Hospital Patients Requiring 
Ventilator Support (NQF #2632) focuses on improvement in functional 
mobility for patients requiring mechanical ventilation. The Compliance 
with SBT by Day 2 of the LTCH Stay measure focuses on successfully 
liberating patients from mechanical ventilation as soon as possible, 
which reduces the risk associated with events as a result of prolonged 
ventilator support. The Ventilator Liberation Rate measure assesses 
whether the patient was fully liberated from mechanical ventilation at 
discharge. Together, these three ventilator-related assessment-based 
quality measures assess positive outcomes and track patient goals of 
avoiding adverse outcomes associated with mechanical ventilation and 
successful ventilator weaning.
    The inclusion in the LTCH QRP measure set of these three 
ventilator-related assessment-based measures, which focus on quality of 
care through promotion of positive outcomes, have reduced poor outcomes 
associated with the complications of ventilator care, which is the same 
focus of the National Healthcare Safety Network (NHSN) Ventilator-
Associated Event (VAE) Outcome Measure (for example, worsening 
oxygenation, infection or inflammation, ventilator-associated 
pneumonia, or even death). As a result, we do not believe that it is 
necessary to retain all four of these measures in the LTCH QRP. By 
retaining the three ventilator-related assessment-based measures but 
removing the National Healthcare Safety Network (NHSN) Ventilator-
Associated Event (VAE) Outcome Measure, we believe that we can focus 
our mechanical ventilation topic measures on measures that promote 
positive outcomes while indirectly promoting a reduction in ventilator 
support complications.
    For these reasons, we are proposing to remove the National 
Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) 
Outcome Measure from the LTCH QRP beginning with the FY 2020 LTCH QRP 
under Factor 6, the measure that is more strongly associated with 
desired patient outcomes for the particular topic is available.
    If finalized as proposed, LTCHs would no longer be required to 
submit data on this measure for the purposes of the LTCH QRP beginning 
with October 1, 2018 admissions and discharges.
c. Proposed Removal of the Percent of Residents or Patients Who Were 
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short 
Stay) (NQF #0680) Measure
    We are proposing to remove the process measure, Percent of 
Residents or Patients Who Were Assessed and Appropriately Given the 
Seasonal Influenza Vaccine (Short Stay) (NQF #0680), beginning with the 
FY 2021 LTCH QRP under proposed measure removal Factor 8, the costs 
associated with a measure outweigh the benefit of its continued use in 
the program.
    This process measure reports the percentage of stays in which a 
patient was assessed and appropriately given the influenza vaccine for 
the most recent influenza vaccination season and was adopted in the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53624 through 53627) to assess 
vaccination rates among older adults with the goal of reducing the 
incidence of influenza in this population. Specifically, adoption of 
the measure in the LTCH QRP was intended to act as a safeguard for 
patients who did not receive vaccinations prior to admission to an 
LTCH, since many patients receiving care in the LTCH setting are older 
adults, those 65 years and older, considered to be the target 
population for the influenza vaccination.
    In our evaluation of the LTCH QRP measure set, our analysis of this 
particular measure revealed that for the 2016-2017 influenza season, 
nearly every patient was assessed by the LTCH upon admission and that 
less than 0.04 percent of patients were not assessed for

[[Page 20515]]

the vaccination. Of those assessed, the data show that most patients 
who could receive the vaccine had already received the vaccine outside 
of the LTCH facility, prior to admission.
    In addition, we have heard from stakeholders that the data 
collection associated with this measure is administratively costly and 
burdensome for LTCHs, and that the process of assessing whether 
vaccination is needed is often a duplicative process for patients who 
were already screened during their proximal stay at an acute care 
facility. We believe that removing this measure would reduce provider 
costs and burden by eliminating duplicative patient assessments across 
healthcare settings, minimizing data collection and reporting, and 
avoiding potentially confusing public reporting of other influenza-
related quality measures, such as the Influenza Vaccination Coverage 
Among Healthcare Personnel (NQF #0431) measure.
    We recognize that influenza is a major public health issue. 
However, based on our analysis of the Percent of Residents or Patients 
Who Were Assessed and Appropriately Given the Seasonal Influenza 
Vaccine (Short Stay) (NQF #0680) measure, including data showing that 
most LTCH patients are vaccinated before they are admitted to the LTCH, 
we believe that LTCH patients will continue to be assessed and 
immunized when appropriate in the absence of this measure. As a result, 
removal of this measure would alleviate the operational costs and 
burden that LTCHs currently incur with respect to collecting the data 
necessary to report this measure.
    Therefore, we are proposing to remove this measure from the LTCH 
QRP beginning with the FY 2021 LTCH QRP under proposed measure removal 
Factor 8, the costs associated with a measure outweigh the benefit of 
its continued use in the program.
    If finalized as proposed, LTCHs would no longer be required to 
report the data elements necessary to calculate this measure beginning 
with October 1, 2018 \367\ admissions and discharges. We plan to remove 
the data elements from the LTCH CARE Data Set as soon as feasible. 
Beginning with October 1, 2018 admissions and discharges, LTCHs should 
enter a dash ( - ) for O0250A, O0250B, and O0250C until the next LTCH 
CARE Data Set is released.
---------------------------------------------------------------------------

    \367\ The October 1, 2018 date is proposed as the date in which 
LTCHs would no longer be required to report the data elements 
necessary to calculate this measure because the influenza 
vaccination season for the Percent of Residents or Patients Who Were 
Assessed and Appropriately Given the Seasonal Influenza Vaccine 
(Short Stay) (NQF #0680) measure begins October 1, 2018 and ends 
March 31, 2019, and includes all patients who were in an LTCH for 
one or more days during the influenza vaccination season.
---------------------------------------------------------------------------

    We are inviting public comment on this proposal.
6. IMPACT Act Implementation Update
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38449), we stated 
that we intended to specify two measures that would satisfy the domain 
of accurately communicating the existence and provision of the transfer 
of health information and care preferences under section 1899B(c)(1)(E) 
of the Act no later than October 1, 2018, and intended to propose to 
adopt them for the FY 2021 LTCH QRP with data collection beginning on 
or about April 1, 2019.
    As a result of the input provided during a public comment period 
initiated by our contractor between November 10, 2016 and December 11, 
2016, input provided by a technical expert panel (TEP) convened by our 
contractor, and pilot measure testing conducted in 2017, we are 
engaging in continued development work on these two measures, including 
supplementary measure testing and providing the public with an 
opportunity for comment in 2018. Further, we expect to reconvene a TEP 
for these measures in mid-2018. We now intend to specify the measures 
under section 1899B(c)(1)(E) of the Act no later than October 1, 2019 
and intend to propose to adopt the measures for the FY 2022 LTCH QRP, 
with data collection beginning with April 1, 2020 admissions and 
discharges. For more information on the pilot testing, we refer readers 
to: 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.
7. Form, Manner, and Timing of Data Submission Under the LTCH QRP
    Under our current policy, LTCHs report data on LTCH QRP assessment-
based measures and standardized patient assessment data by reporting 
the designated data elements for each applicable patient on the LTCH 
CARE Data Set patient assessment instrument and then submitting the 
completed instruments to CMS using the Quality Improvement and 
Evaluation System (QIES) Assessment and Submission Processing (ASAP) 
system. Data on LTCH QRP measures that are also collected by the 
Centers for Disease Control and Prevention (CDC) for other purposes are 
reported by LTCHs to the CDC through the NHSN, and the CDC then 
transmits the relevant data to CMS. We refer readers to the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38454 through 38456) for the data 
collection and submission timeframes that we finalized for the LTCH 
QRP.
    We are seeking input on whether we should move the implementation 
date of any new version of the LTCH CARE Data Set from the usual 
release date of April to October in the future.
    We are inviting public comment on this topic.
8. Proposed Changes to the LTCH QRP Reconsideration Requirements
    Section 412.560(d)(1) of our regulations states that CMS will send 
an LTCH written notification of a decision of noncompliance with the 
measures data and standardized patient assessment data reporting 
requirements for a particular fiscal year. It also states that CMS will 
use the QIES ASAP system to provide notification of noncompliance to 
the LTCH.
    We are proposing to revise Sec.  412.560(d)(1) to expand the 
methods by which we would notify an LTCH of noncompliance with the LTCH 
QRP requirements for a program year. Revised Sec.  412.560(d)(1) would 
state that we would notify LTCHs of noncompliance with the LTCH QRP 
requirements via a letter sent through at least one of the following 
notification methods: The QIES ASAP system, the United States Postal 
Service, or via an email from the Medicare Administrative Contractor 
(MAC). We believe this change will address the feedback from providers 
requesting additional methods for notification.
    We are also proposing to revise Sec.  412.560(d)(3) to clarify that 
we will notify LTCHs, in writing, of our final decision regarding any 
reconsideration request using the same notification process.
    We are inviting public comments on these proposals.

D. Proposed Changes to the Medicare and Medicaid EHR Incentive Programs 
(Now Referred to as the Medicare and Medicaid Promoting 
Interoperability 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 technology (CEHRT). Incentive 
payments under Medicare are available to eligible hospitals and CAHs 
for certain payment years (as authorized under sections 1886(n) and 
1814(l) of

[[Page 20516]]

the Act, respectively) if they successfully demonstrate meaningful use 
of CEHRT, which includes reporting on clinical quality measures (CQMs 
or eCQMs) using CEHRT. Incentive payments are available to Medicare 
Advantage (MA) organizations under section 1853(m)(3) of the Act for 
certain affiliated hospitals that meaningfully use CEHRT.
    Sections 1886(b)(3)(B)(ix) and 1814(l)(4) 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 1853(m)(4) of the Act establishes a negative payment adjustment 
to the monthly prospective payments of a qualifying MA organization if 
its affiliated eligible hospitals are not meaningful users of certified 
EHR technology, beginning in 2015. 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.
2. Renaming the EHR Incentive Program
    The Medicare and Medicaid EHR Incentive Programs has historically 
been broken into three stages primarily focused on data capture and 
sharing, advanced clinical processes, and improved outcomes. In this 
proposed rule, we are proposing scoring and measurement policies to 
move beyond the three stages of meaningful use to a new phase of EHR 
measurement with an increased focus on interoperability and improving 
patient access to health information. To better reflect this focus, we 
are renaming the Medicare and Medicaid EHR Incentive Programs to the 
Promoting Interoperability (PI) Programs, and the new name will apply 
for Medicare fee-for-service, Medicare Advantage, and Medicaid. We 
believe this change will help highlight the enhanced goals of the 
program and better contextualize the program changes discussed in the 
following sections. We also note that the former name, Medicare and 
Medicaid EHR Incentive Programs, does not adequately reflect the 
current status of the programs, as the incentive payments under 
Medicare generally have ended (with the exception of subsection (d) 
Puerto Rico hospitals as discussed in section VIII.D.10. of the 
preamble of this proposed rule) and will end under Medicaid in 2021.
3. Certification Requirements Beginning in 2019
    In the October 16, 2015 final rule titled ``Medicare and Medicaid 
Programs; Electronic Health Record Incentive Program--Stage 3 and 
Modifications to Meaningful Use in 2015 Through 2017; Final Rule'' (80 
FR 62761 through 62955) (hereafter referred to as the ``2015 EHR 
Incentive Programs final rule''), we adopted a final policy regarding 
which Edition of CEHRT must be used by EPs, eligible hospitals, and 
CAHs for the EHR Incentive Programs, which was reflected in the 
definition of CEHRT under Sec.  495.4 (80 FR 62871 through 62875). 
Under this policy, 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 subsequently finalized 
in the FY 2018 IPPS/LTCH PPS final rule certain changes to the policy 
that would allow for CEHRT flexibility in 2018, allowing health care 
providers in the Medicare and Medicaid EHR Incentive Programs to use 
either the 2014 or 2015 Edition of CEHRT, or a combination of both 
Editions, in 2018 (82 FR 38490 through 38493). This flexibility would 
give additional time to health care providers who may need to update, 
implement, and optimize the technology certified to the 2015 Edition 
and was only allowed for 2018. Beginning with the EHR reporting period 
in CY 2019, the 2015 Edition of CEHRT is required pursuant to the 
definition of CEHRT under Sec.  495.4. We are not proposing to change 
this policy, and, as discussed below, we continue to believe it is 
appropriate to require the use of 2015 Edition CEHRT beginning in CY 
2019. In reviewing the state of health information technology, it is 
clear the 2014 Edition certification criteria are out of date and 
insufficient for provider needs in the evolving health IT industry. It 
would be beneficial to health IT developers and health care providers 
to move to more up-to-date standards and functions that better support 
interoperable exchange of health information and improve clinical 
workflows.
    The 2014 Edition CEHRT, which was first issued in regulations in 
2012, now includes standards that are significantly out of date, which 
can impose artificial limits on interoperability and the access, 
exchange, and use of health information. Moving from certifying to the 
2014 Edition to certifying to the 2015 Edition would also eliminate the 
inconsistencies that are inherent with maintaining and implementing two 
separate certification programs. In the last calendar year, the number 
of new and unique 2014 Edition products have been declining, showing 
that the market acknowledges the shift toward newer and more effective 
technologies. The vast majority of 2014 Edition certifications are for 
inherited certified status. The resulting legacy systems, while 
certified to the 2014 Edition, are not the most up-to-date and detract 
from health information technology's (IT's) goal of increasing 
interoperability and increasing the access, exchange, and use of health 
data.
    Prolonging backwards compatibility of newer products to legacy 
systems causes market fragmentation. Health IT stakeholders noted the 
impact of system fragmentation on the cost to develop and maintain 
health IT connectivity to support data exchange, develop products to 
support specialty clinical care, and integrate software supporting 
administrative and clinical processes. As previously stated, a large 
proportion of the sector is ready to solely use the 2015 Edition; 
maintaining a requirement to keep both certification editions 
contributes to market fragmentation, which heightens implementation 
costs for health IT developers, hospitals, and health care providers. 
Developers and consumers that are required to maintain two different 
certification editions, spend large amounts of money on the 
recertification of older products, which diverts resources from the 
development, maintenance, and implementation of more advanced 
technologies, including the 2015 Edition of CEHRT.
    In addition to the monetary savings of the 2015 Edition, there will 
also be an impactful reduction of burden across many settings. Eligible 
hospitals and CAHs will see a reduction in burden through relief from 
being required to certify to a legacy system, and can use the 2015 
Edition to better streamline workflows and utilize more comprehensive 
functions to meet patient safety goals and improve care coordination 
across the continuum. Maintaining only one edition of certification 
requirements would also reduce the burden for health IT developers as 
well as ONC-authorized testing laboratories and certification bodies 
because they would no longer have to support two, increasingly distant 
sets of requirements.
    One of the major improvements in the 2015 Edition is the 
application programming interface (API) functionality. The API 
functionality supports health care providers and patient electronic 
access to health information. These functions allow for

[[Page 20517]]

patient data to move between systems and assist patients with making 
key decisions about their health care. The functions also contribute to 
quality improvement and greater interoperability between systems. The 
API has the ability to 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). Furthermore, the API 
allows for third-party application usage with more flexibility and 
smoother workflow from various systems than what is often found in many 
current patient portals.
    The 2015 Edition also includes certification criterion specifying a 
core set of data that health care providers have noted are critical to 
interoperable exchange and can be exchanged across a wide variety of 
other settings and use cases, known as the Common Clinical Data Set (C-
CDS) (80 FR 62603). The US Core Data for Interoperability (USCDI) 
builds off the Common Clinical Data Set definition adopted for the 2015 
Edition of certified health IT and referenced in the EHR Incentive 
Program, for instance as the data which must be included in a summary 
care record. The USCDI aims to support the goals set forth in the 21st 
Century Cures Act by specifying a common set of data classes that are 
required for interoperable exchange and identifying a predictable, 
transparent, and collaborative process for achieving those goals. The 
USCDI is referenced by the Draft Trusted Exchange Framework,\368\ which 
is intended to enable HINs and Qualified HINs to securely exchange 
electronic health information in support of a range permitted purposes, 
including treatment, payment, operations, individual access, public 
health, and benefits determination.
---------------------------------------------------------------------------

    \368\ https://www.healthit.gov/sites/default/files/draft-trusted-exchange-framework.pdf.
---------------------------------------------------------------------------

    We also note that the Provide Patient Access measure's technical 
requirements are updated in the 2015 Edition and support health care 
providers' interest in providing patients with access to their data in 
a manner that is helpful to the patient and aligns with the API 
requirement in the Promoting Interoperability Program. This includes a 
new function that supports patient access to their health information 
through email transmission to any third party the patient chooses and 
through a second encrypted method of transmission. As discussed above 
the increased interoperability in this requirement provides patients 
more control of their health data to inform the decisions that they 
make regarding their health.
    The 2015 Edition also includes a revised requirement that products 
must be able to export data from one patient, a set of patients, or a 
subset of patients, which is responsive to health care provider 
feedback that their data is unable to carry over from a previous EHR. 
The 2014 Edition did not include a requirement that the vendor allow 
the health care provider to export the data themselves. In the 2015 
Edition, the health care provider has the autonomy to export data 
themselves without intervention by their vendor, resulting in increased 
interoperability and data exchange in the 2015 Edition.
    In efforts to track certification readiness for the 2015 Edition, 
the Office of the National Coordinator for Health Information 
Technology (ONC) considers the number of health care providers likely 
to be served by the developers seeking certification under the ONC 
Health IT Certification Program in real time as the testing and 
certification process progresses. The ONC considers trends within the 
industry when projecting for 2015 Edition readiness. This is based on 
the major developers who have a major share of the market. In working 
with ONC we are able to identify the percent of eligible clinicians, 
eligible hospitals and CAHs that have a 2015 Edition available to them 
based on vendor readiness and information. As of the beginning of the 
first quarter of CY 2018, ONC confirmed that at least 66 percent of 
eligible clinicians and 90 percent of eligible hospitals and CAHs have 
2015 Edition available based on previous EHR Incentive Programs 
attestation data. Based on the data, and as compared to the transition 
from 2011 Edition to 2014 Edition, it appears that the transition from 
the 2014 Edition to the 2015 Edition is on schedule for the EHR 
reporting period in CY 2019.
    We note that this information is current as of the beginning of CY 
2018, and based on historical data, we expect readiness to continue to 
improve as developers and health care providers prepare for program 
participation using the 2015 Edition in CY 2019.
    We continue to recognize there is a burden associated with 
development and deployment of new technology, but we believe requiring 
use of the most recent version of CEHRT is important in ensuring health 
care providers use technology that has improved interoperability 
features and up-to-date standards to collect relevant patient health 
information. The 2015 Edition includes key updates to functions and 
standards that support improved interoperability and clinical 
effectiveness through the use of health IT.
4. Proposed Revisions to the EHR Reporting Period in 2019 and 2020
    We continue to receive feedback from EPs, eligible hospitals, 
hospital associations, and other clinical associations indicating that 
additional time will be necessary for testing and implementation of the 
new API functionality requirement for Stage 3. These organizations cite 
both an inability to meet the required timeframe for implementation of 
Stage 3 and the 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.
    API functionality supports health care providers and patient 
electronic access to health information, which is key to improving the 
free flow of health information, interoperability, quality improvement, 
and patient engagement. 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), and we believe that the access APIs permit may 
prove valuable in many ways. For example, APIs may be enabled by a 
health care provider or organization to facilitate their own use of 
third party applications within 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 care providers have the opportunity to thoroughly test their 
systems and make adjustments in order to successfully attest for the 
EHR reporting periods in CYs 2019 and 2020. 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 2019, as well as the current proposal to require use of

[[Page 20518]]

an API to incorporate patient data in the Provide Patients Electronic 
Access to Their Health Information measure discussed in section 
VIII.D.6.d.(1) of the preamble of this proposed rule.
    We also are proposing in section VIII.D.5. of the preamble of this 
proposed rule an updated scoring methodology for eligible hospitals and 
CAHs that would begin in 2019, as well as two new opioid measures and 
one new health information exchange measure that we believe eligible 
hospitals and CAHs will want to report on as soon as those measures are 
available in their CEHRT. We want to provide flexibility to health care 
providers as they are becoming familiar with the new scoring 
methodology and measures that we are proposing, as well as adequate 
development time for EHR developers and vendors to test and incorporate 
the new scoring system and measures for deployment and implementation. 
Therefore, we are proposing changes to the EHR reporting periods in 
2019 and 2020 and believe the changes would result in a reduction in 
burden on health care providers and EHR developers and vendors. We are 
proposing these changes for 2019 and 2020 as we believe it may take 
more than one year for eligible hospitals and CAHs to adjust to the new 
scoring methodology proposed in section VIII.D.5. of the preamble of 
this proposed rule.
    For the reasons discussed earlier, we are proposing the EHR 
reporting periods in 2019 and 2020 for new and returning participants 
attesting to CMS or their State Medicaid agency would be a minimum of 
any continuous 90-day period within each of the calendar years 2019 and 
2020. This would mean that EPs that attest to a State for the State's 
Medicaid Promoting Interoperability Program and eligible hospitals and 
CAHs attesting to CMS or the State's Medicaid Promoting 
Interoperability 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, 2019 through December 31, 2019 and from January 1, 2020 
through December 31, 2020, respectively.
    The applicable incentive payment year and payment adjustment years 
for the EHR reporting periods in 2019 and 2020, 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.
5. Proposed Scoring Methodology for Eligible Hospitals and CAHs 
Attesting Under the Medicare Promoting Interoperability Program
a. Background
    Section 1886(n)(3) of the Act establishes criteria for an eligible 
hospital or CAH to be considered a meaningful EHR user for the Medicare 
Promoting Interoperability Program. Prior to the enactment of the 
Bipartisan Budget Act of 2018 (Pub. L. 115-123), section 1886(n)(3)(A) 
of the Act required the Secretary to seek to improve the use of 
electronic health records and health care quality over time by 
requiring more stringent measures of meaningful use. This resulted in 
three separate stages of meaningful use requirements, each with 
increasing stringency of reporting requirements. The July 28, 2010 
final rule titled, ``Medicare and Medicaid Programs; Electronic Health 
Record Incentive Program'' (75 FR 44313 through 44588), hereafter 
referred to as the ``Stage 1 final rule,'' established the foundation 
for the Medicare and Medicaid EHR Incentive Programs by outlining the 
applicable meaningful use criteria and finalizing core and menu 
objectives for EPs, eligible hospitals, and CAHs, including 
establishing requirements for the electronic capture of clinical data, 
and providing patients with electronic copies of their health 
information (75 FR 44313 through 44588). In the September 4, 2012 final 
rule titled ``Medicare and Medicaid Programs; Electronic Health Record 
Incentive Program--Stage 2'' (77 FR 53967 through 54162), hereafter 
referred to as the ``Stage 2 final rule,'' we focused on the next goal: 
The exchange of essential health data among health care providers and 
patients to improve care coordination. Lastly, the 2015 EHR Incentive 
Programs final rule established a single set of objectives and measures 
that increased stringency by requiring patient action measures and 
increasing measure thresholds, which contributed to the goal of 
widespread adoption and advanced use of electronic health record 
technology for Stage 3 in 2017 and subsequent years (80 FR 62762 
through 62915). The provision in section 1886(n)(3)(A) of the Act 
requiring more stringent measures of meaningful use over time was 
subsequently removed by section 50413 of the Bipartisan Budget Act of 
2018.
    As we considered the future direction of EHR reporting for the 
Promoting Interoperability Program, we considered how to increase the 
focus of EHR reporting on interoperability and sharing data with 
patients. We also considered the history of the program stages, as well 
as the increased flexibility provided by the Bipartisan Budget Act of 
2018. In light of these considerations, we are proposing a new scoring 
methodology that reduces burden and provides greater flexibility to 
hospitals while focusing on increased interoperability and patient 
access.
    We have received feedback from hospitals and hospital associations 
that the current meaningful use requirements are not always meaningful 
to them and detract from their ability to provide care to their 
patients. They have further suggested, through inquiries and listening 
sessions, that the requirement to meet all of the measures has been 
administratively burdensome, particularly those that require patient 
action. These stakeholders believe there is a critical need for 
interoperability and have expressed a desire to use CEHRT to further 
patient outcomes, but believe the current program structure constrains 
their ability to implement more interoperable practices and deliver 
quality care. An example of this feedback came from hospitals and 
hospital associations regarding the View, Download or Transmit (VDT) 
measure which requires at least one unique patient (or their authorized 
representative) discharged from the eligible hospital or CAH to access 
their health information through the use of an API, view, download or 
transmit their health information to a third party or a combination of 
both. These hospitals and hospital associations have indicated that, 
although they can encourage their patients to access their data 
electronically and through this type of platform, it is beyond their 
control to require such action. They further indicated that they are 
unable to require patients to perform actions that patients do not feel 
accustomed to, and that certain patient populations are not comfortable 
with such actions.
    In addition, through our listening sessions we found that certain 
rural hospitals find it more challenging to meet all of the measure 
thresholds and requirements due to financial limitations. Many of these 
rural hospitals expressed an interest in fully participating in the 
Medicare EHR Incentive Program, but stated they are only able to meet a 
subset of the objectives and measures. They stated that a new scoring 
and reporting structure that would allow them to focus on their patient 
population would help them successfully participate in the program.

[[Page 20519]]

    Based on this feedback and the recent statutory changes, we are 
proposing a new performance-based scoring methodology with fewer 
measures, and moving away from the threshold-based methodology that we 
currently use. We believe this change would provide a more flexible, 
less burdensome structure, allowing eligible hospitals and CAHs to put 
their focus back on patients. The introduction of a performance-based 
scoring methodology would continue to encourage hospitals to push 
themselves on measures that we continue to hear are most applicable to 
how they deliver care to patients, instead of increasing thresholds on 
measures that may not be as applicable to an individual hospital. Our 
goal is to provide increased flexibility to eligible hospitals and CAHs 
without compromising the integrity of the Medicare Promoting 
Interoperability Program and enable them to focus more on patient care 
and health data exchange through interoperability.
    We are proposing the performance-based scoring methodology would 
apply to eligible hospitals and CAHs that submit an attestation to CMS 
under the Medicare Promoting Interoperability Program beginning with 
the EHR reporting period in CY 2019. This would include ``Medicare-
only'' eligible hospitals and CAHs (those that are eligible for an 
incentive payment under Medicare for meaningful use of CEHRT and/or 
subject to the Medicare payment reduction for failing to demonstrate 
meaningful use) as well as ``dual-eligible'' eligible hospitals and 
CAHs (those that are eligible for an incentive payment under Medicare 
for meaningful use of CEHRT and/or subject to the Medicare payment 
reduction for failing to demonstrate meaningful use, and are also 
eligible to earn a Medicaid incentive payment for meaningful use).
    We are not proposing to apply the performance-based scoring 
methodology to ``Medicaid-only'' eligible hospitals (those that are 
only eligible to earn a Medicaid incentive payment for meaningful use 
of CEHRT, and are not eligible for an incentive payment under Medicare 
for meaningful use and/or subject to the Medicare payment reduction for 
failing to demonstrate meaningful use) that submit an attestation to 
their State Medicaid agency for the Medicaid Promoting Interoperability 
Program. Instead, as discussed in section VIII.D.7. of the preamble of 
this proposed rule, we are proposing to give States the option to adopt 
the performance-based scoring methodology along with the measure 
proposals discussed in section VIII.D.6. of the preamble of this 
proposed rule for their Medicaid Promoting Interoperability Programs 
through their State Medicaid HIT Plans.
    To accomplish our goal of a performance-based program that reduces 
burden while promoting interoperability, and taking into account the 
feedback from our stakeholders, we outline a proposal using a 
performance-based scoring methodology in the following sections of this 
proposed rule. We believe the proposal promotes interoperability, helps 
to maintain a focus on patients, reduces burden and provides greater 
flexibility. The proposal takes an approach that weighs each measure 
based on performance, and allows eligible hospitals and CAHs to 
emphasize measures that are most applicable to their care delivery 
methods, while putting less emphasis on those measures that may be less 
applicable.
    If we do not finalize a new scoring methodology, we would maintain 
the current Stage 3 methodology with the same objectives, measures and 
requirements, but we would include the two new opioid measures proposed 
in section VIII.D.6.b. of the preamble of this proposed rule, if 
finalized. The current structure of the Stage 3 objectives and measures 
under Sec.  495.24(c) for eligible hospitals and CAHs attesting to CMS 
requires them to report on six objectives that include 16 measures. 
This structure requires the eligible hospital or CAH to report on all 
measures and meet the thresholds for most of the measures or claim an 
exclusion as part of demonstrating meaningful use to avoid the payment 
adjustment, or to earn an incentive in the case of subsection (d) 
Puerto Rico hospitals. A general summary overview of the current 
objectives, measures, and reporting requirements is included in the 
table below.

Existing Stage 3 Objectives, Measures and Reporting Requirements for the
     Medicare EHR Incentive Program for Eligible Hospitals and CAHs
------------------------------------------------------------------------
                                   Measure (stage 3         Reporting
           Objective                  threshold)           requirement
------------------------------------------------------------------------
Protect Patient Health          Security Risk Analysis  Report.
 Information.                    (Yes/No).
Electronic Prescribing........  e-Prescribing (>25%)..  Report and meet
                                                         threshold.
Patient Electronic Access to    Provide Patient Access  Report and meet
 Health Information.             (>50%).                 thresholds.
                                Patient Specific
                                 Education (>10%).
Coordination of Care Through    View, Download or       Report all, but
 Patient Engagement.             Transmit (at least      only meet the
                                 one patient).           threshold for
                                Secure Messaging (>5%)   two.
                                Patient Generated
                                 Health Data (>5%).
Health Information Exchange...  Send a Summary of Care  Report all, but
                                 (>10%).                 only meet the
                                Request/Accept Summary   threshold for
                                 of Care (>10%).         two.
                                Clinical Information
                                 Reconciliation (>50%).
Public Health and Clinical      Immunization Registry   Report Yes/No to
 Data Registry Reporting.        Reporting.              Three
                                Syndromic Surveillance   Registries.
                                 Reporting.
                                Electronic Case
                                 Reporting.
                                Public Health Registry
                                 Reporting.
                                Clinical Data Registry
                                 Reporting.
                                Electronic Reportable
                                 Laboratory Result
                                 Reporting.
------------------------------------------------------------------------

b. Proposed Performance-Based Scoring Methodology
    We are proposing a new scoring methodology to include a combination 
of new measures, as well as the existing Stage 3 measures of the EHR 
Incentive Program, broken into a smaller set of four objectives and 
scored based on performance and participation. We believe this is a 
significant overhaul of the existing program requirements which include 
six objectives, scored on a pass/fail basis. The smaller set of 
objectives would include e-Prescribing, Health Information Exchange, 
Provider to Patient Exchange, and Public Health and Clinical Data 
Exchange. We are

[[Page 20520]]

proposing these objectives to promote specific HHS priorities. We 
include the e-Prescribing and Health Information Exchange objectives in 
part to capture what we believe are core goals for the 2015 Edition in 
line with section 1886(n)(3)(A) of the Act. These core goals promote 
interoperability between health care providers and health IT systems to 
support safer, more coordinated care. The Provider to Patient Exchange 
objective promotes patient awareness and involvement in their health 
care through the use of APIs, and ensures patients have access to their 
medical data. Finally, the Public Health and Clinical Data Exchange 
objective supports the ongoing systematic collection, analysis, and 
interpretation of data that may be used in the prevention and 
controlling of disease through the estimation of health status and 
behavior. The integration of health IT systems into the national 
network of health data tracking and promotion improves the efficiency, 
timeliness, and effectiveness of public health surveillance. We believe 
it is important to keep these core goals, primarily because these 
objectives promote interoperability between health care providers and 
health IT systems to support safer, more coordinated care while 
ensuring patients have access to their medical data.
    Under the proposed scoring methodology, eligible hospitals and CAHs 
would be required to report certain measures from each of the four 
objectives, with performance-based scoring occurring at the individual 
measure-level. Each measure would be scored based on the eligible 
hospital or CAH's performance for that measure, except for the Public 
Health and Clinical Data Exchange objective, which requires a yes/no 
attestation. Each measure would contribute to the eligible hospital or 
CAH's total Promoting Interoperability (PI) score. The scores for each 
of the individual measures would be added together to calculate the 
total Promoting Interoperability score of up to 100 possible points for 
each eligible hospital or CAH. A total score of 50 points or more would 
satisfy the requirement to report on the objectives and measures of 
meaningful use under Sec.  495.24, which is one of the requirements for 
an eligible hospital or CAH to be considered a meaningful EHR user 
under Sec.  495.4 and thus earn an incentive payment and/or avoid a 
Medicare payment reduction. Eligible hospitals and CAHs scoring below 
50 points would not be considered meaningful EHR users.
    While this approach maintains some of the same requirements of the 
EHR Incentive Program, we note that we are proposing to reduce the 
overall number of required measures from 16 to 6. We also note that the 
measures we are proposing to include contribute to the goal of 
increased interoperability and patient access, and no longer require 
the burdensome predefined thresholds of the EHR Incentive Program, and 
thus allow new flexibility for eligible hospitals and CAHs in how they 
are scored. We believe this proposal allows eligible hospitals and CAHs 
to achieve high performance in one area where they excel, in order to 
offset performance in an area where they may need additional 
improvement. In this manner we believe eligible hospitals and CAHs 
could still be considered meaningful EHR users while continuing to 
monitor their progress on each of the measures. This approach also 
helps further promote interoperability by requiring all measures and 
thus all forms of interoperability across the three objectives.
    We also considered an alternative approach in which scoring would 
occur at the objective level, instead of the individual measure level, 
and eligible hospitals or CAHs would be required to report on only one 
measure from each objective to earn a score for that objective. Under 
this scoring methodology, instead of six required measures, the 
eligible hospital or CAH's total Promoting Interoperability score would 
be based on only four measures, one measure from each objective. Each 
objective would be weighted similarly to how the objectives are 
weighted in our proposed methodology, and bonus points would be awarded 
for reporting any additional measures beyond the required four. We are 
seeking public comment on this alternative approach, and whether 
additional flexibilities should be considered, such as allowing 
eligible hospitals and CAHs to select which measures to report on 
within an objective and how those objectives should be weighted, as 
well as whether additional scoring approaches or methodologies should 
be considered.
    In our proposed scoring methodology, the e-Prescribing objective 
would contain three measures each weighted differently to reflect their 
potential availability and applicability to the hospital community. In 
addition to the existing e-Prescribing measure, we are proposing to add 
two new measures to the e-Prescribing objective: Query of Prescription 
Drug Monitoring Program (PDMP) and Verify Opioid Treatment Agreement. 
For more information about these two proposed measures, we refer 
readers to section VIII.D.6.b. of the preamble of this proposed rule. 
The e-Prescribing measure would be required for reporting and weighted 
at 10 points because we believe it would be applicable to most eligible 
hospitals and CAHs. In the event that an eligible hospital or CAH meets 
the criteria and claims the exclusion for the e-Prescribing measure in 
2019, the 10 points available for that measure would be redistributed 
equally among the measures under the Health Information Exchange 
objective:
     Support Electronic Referral Loops By Sending Health 
Information Measure (25 points)
     Support Electronic Referral Loops By Receiving and 
Incorporating Health Information (25 points)
    We are seeking public comment on whether this redistribution is 
appropriate for 2019, or whether the points should be distributed 
differently.
    The Query of Prescription Drug Monitoring Program (PDMP) and Verify 
Opioid Treatment Agreement measures would be optional for EHR reporting 
periods in 2019. These new measures may not be available to all 
eligible hospitals and CAHs for an EHR reporting period in 2019 as they 
may not have been fully developed by their health IT vendor, or not 
fully implemented in time for data capture and reporting. Therefore, we 
are not proposing to require these two new measures in 2019, although 
eligible hospitals and CAHs may choose to report them and earn up to 5 
bonus points for each measure. We are proposing to require these 
measures beginning with the EHR reporting period in 2020, and we are 
seeking public comment on this proposal. We note that due to varying 
State requirements, not all eligible hospitals and CAHs would be able 
to e-prescribe controlled substances, and thus these measures would not 
be available to them. For these reasons, we are proposing an exclusion 
for these two measures beginning with the EHR reporting period in 2020. 
The exclusion would provide that any eligible hospital or CAH that is 
unable to report the measure in accordance with applicable law would be 
excluded from reporting the measure, and the 5 points assigned to that 
measure would be redistributed to the e-Prescribing measure.
    As the two new opioid measures become more broadly available in 
CEHRT, we are proposing each of the three measures within the e-
Prescribing objective would be worth 5 points beginning in 2020. We 
note that requiring these two measures would add 10 points to the 
maximum total score as these measures would no longer be eligible for 
optional bonus points. To

[[Page 20521]]

maintain a maximum total score of 100 points, beginning with the EHR 
reporting period in 2020, we are proposing to reweight the e-
Prescribing measure from 10 points down to 5 points, and reweight the 
Provide Patients Electronic Access to Their Health Information measure 
from 40 points down to 35 points as illustrated in the table below. We 
are proposing that if the eligible hospital or CAH qualifies for the e-
Prescribing exclusion and is excluded from reporting all three of the 
measures associated with the e-Prescribing objective as described in 
section VIII.D.6.b. of the preamble of this proposed rule, the 15 
points for the e-Prescribing objective would be redistributed evenly 
among the two measures associated with the Health Information Exchange 
objective and the Provide Patients Electronic Access to their Health 
Information measure by adding 5 points to each measure.
    We are seeking public comment on the proposed distribution of 
points beginning with the EHR reporting period in 2020.
    For the Health Information Exchange objective, we are proposing to 
change the name of the existing Send a Summary of Care measure to 
Support Electronic Referral Loops by Sending Health Information, and 
proposing a new measure which combines the functionality of the 
existing Request/Accept Summary of Care and Clinical Information 
Reconciliation measures into a new measure, Support Electronic Referral 
Loops by Receiving and Incorporating Health Information. For more 
information about the proposed measure and measure changes, we refer 
readers to section VIII.D.6.c. of the preamble of this proposed rule. 
Eligible hospitals and CAHs would be required to report both of these 
measures, each worth 20 points toward their total Promoting 
Interoperability score. These measures are weighted heavily to 
emphasize the importance of sharing health information through 
interoperable exchange in an effort to promote care coordination and 
better patient outcomes. Similar to the two new measures in the e-
Prescribing objective, the new Support Electronic Referral Loops by 
Receiving and Incorporating Health Information measure may not be 
available to all eligible hospitals and CAHs as it may not have been 
fully developed by their health IT vendor, or not fully implemented in 
time for an EHR reporting period in 2019. For these reasons, we are 
proposing an exclusion for the Support Electronic Referral Loops by 
Receiving and Incorporating Health Information measure: Any eligible 
hospital or CAH that is unable to implement the measure for an EHR 
reporting period in 2019 would be excluded from having to report this 
measure.
    In the event that an eligible hospital or CAH claims an exclusion 
for the Support Electronic Referral Loops by Receiving and 
Incorporating Health Information measure, the 20 points would be 
redistributed to the Support Electronic Referral Loops by Sending 
Health Information measure, and that measure would then be worth 40 
points. We are seeking public comment on whether this redistribution is 
appropriate, or whether the points should be redistributed to other 
measures instead.
    We are proposing to weigh the one measure in the Provider to 
Patient Exchange objective, Provide Patients Electronic Access to Their 
Health Information, at 40 points toward the total Promoting 
Interoperability score in 2019 and 35 points beginning in 2020. We are 
proposing that this measure would be weighted at 35 points beginning in 
2020 to account for the two new opioid measures, which would be worth 5 
points each beginning in 2020 as proposed above. We believe this 
objective and its associated measure get to the core of improved access 
and exchange of patient data in promoting interoperability and are the 
crux of the Medicare Promoting Interoperability Program. This exchange 
of data between health care provider and patient is imperative in order 
to continue to improve interoperability, data exchange and improved 
health outcomes. We believe that it is important for patients to have 
control over their own health information, and through this highly 
weighted objective we are aiming to show our dedication to this effort.
    The measures under the Public Health and Clinical Data Exchange 
objective are reported using yes/no responses and thus cannot be scored 
based on performance. We are proposing that for this objective, the 
eligible hospital or CAH would be required to meet this objective in 
order to receive a score and be considered a meaningful user of EHR. We 
are proposing that the eligible hospital or CAH will be required to 
report the Syndromic Surveillance Reporting measure and one additional 
measure of the eligible hospital or CAH's choosing from the following: 
Immunization Registry Reporting, Electronic Case Reporting, Public 
Health Registry Reporting, Clinical Data Registry Reporting, Electronic 
Reportable Laboratory Result Reporting. We are proposing an eligible 
hospital or CAH would receive 10 points for the objective if they 
attest a ``yes'' response for both the Syndromic Surveillance Reporting 
measure and one additional measure of their choosing. If the eligible 
hospital or CAH fails to report either one of the two measures required 
for this objective, the eligible hospital or CAH would receive a score 
of zero for the objective, and a total score of zero for the Promoting 
Interoperability Program. We understand that some hospitals may not be 
able to report the Syndromic Surveillance Reporting measure, or may not 
be able to report some of the other measures under this objective. 
Therefore, we are proposing to maintain the current exclusions for 
these measures that were finalized in previous rulemaking. If an 
eligible hospital or CAH claims an exclusion for one or both measures 
required for this objective, we are proposing the 10 points for this 
objective would be redistributed to the Provide Patients Electronic 
Access to their Health Information measure under the proposed Provider 
to Patient Exchange objective, making that measure worth 50 points in 
2019 and 45 points beginning in 2020. Reporting more than two measures 
for this objective would not earn the eligible hospital or CAH any 
additional points. We refer readers to section VIII.D.6.e. of the 
preamble of this proposed rule in regards to the proposals for the 
current Public Health and Clinical Data Exchange objective and its 
associated measures.
    The Stage 3 objective, Protect Patient Health Information, and its 
associated measure, Security Risk Analysis, would remain part of the 
program, but would no longer be scored as part of the objectives and 
measures, and would not contribute to the hospital's total score for 
the objectives and measures. To earn any score in the Promoting 
Interoperability Program, we are proposing eligible hospitals and CAHs 
would have to attest that they completed the actions included in the 
Security Risk Analysis measure at some point during the calendar year 
in which the EHR reporting period occurs. We believe the Security Risk 
Analysis measure involves critical tasks and note that the Health 
Insurance Portability and Accountability Act (HIPAA) Security Rule 
requires covered entities to conduct a risk assessment of their health 
care organization. This risk assessment will help eligible hospitals 
and CAHs comply with HIPAA's administrative, physical, and technical 
safeguards.\369\ Therefore, we believe that

[[Page 20522]]

every eligible hospital and CAH should already be meeting the 
requirements for this objective and measure as they are required by 
HIPAA. We still believe this objective and its associated measure is 
imperative in ensuring the safe delivery of patient health data. As a 
result, we would maintain the Security Risk Analysis measure as part of 
the Promoting Interoperability Program, but we would not score the 
measure. We are seeking public comment on whether the Security Risk 
Analysis measure should remain part of the program as an attestation 
with no associated score, or whether there should be points associated 
with this measure.
---------------------------------------------------------------------------

    \369\ https://www.hhs.gov/hipaa/for-professionals/security/guidance/index.html.
---------------------------------------------------------------------------

    Similar to how eligible hospitals and CAHs currently submit data, 
the eligible hospital or CAH would submit their numerator and 
denominator data for each performance measure, and a yes/no response 
for each of the two reported measures under the proposed Public Health 
and Clinical Data Exchange objective. To earn a score greater than 
zero, in addition to completing the activities required by the Security 
Risk Analysis measure, the hospital would submit their complete 
numerator and denominator or yes/no data for all required measures. The 
numerator and denominator for each performance measure would then 
translate to a performance rate for that measure and would be applied 
to the total possible points for that measure. For example, the e-
Prescribing measure is worth 10 points. A numerator of 200 and 
denominator of 250 would yield a performance rate of (200/250) = 80 
percent. This 80 percent would be applied to the 10 total points 
available for the e-Prescribing measure to determine the performance 
score. A performance rate of 80 percent for the e-Prescribing measure 
would equate to a measure score of 8 points (performance rate * total 
possible measure points = points awarded toward the total PI score; 80 
percent*10 = 8 points). These calculations and application to the total 
Promoting Interoperability score, as well as an example of how they 
would apply, are set out in the tables below.
    When calculating the performance rates and measure and objective 
scores, we would generally round to the nearest whole number. For 
example if an eligible hospital or CAH received a score of 8.53 the 
nearest whole number would be 9. Similarly, if the eligible hospital or 
CAH received a score of 8.33 the nearest whole number would be 8. In 
the event that the eligible hospital or CAH receives a performance rate 
or measure score of less than 0.5, as long as the eligible hospital or 
CAH reported on at least one patient for a given measure, a score of 1 
would be awarded for that measure. We believe this is the best method 
for the issues that might arise with the decimal points and is the 
easiest for computations.
    In order to meet statutory requirements and HHS priorities, the 
eligible hospital or CAH would need to report on all of the required 
measures across all objectives in order to earn any score at all. 
Failure to report any required measure, or reporting a ``no'' response 
on a yes/no response measure, unless an exclusion applies would result 
in a score of zero. We acknowledge that, in this way, the program still 
maintains a certain ``all-or-nothing'' element. However, we are 
proposing to reduce the total number of required measures from 16 to 6, 
which we believe reduces burden, and to introduce a performance-based 
scoring methodology, which provides flexibility not provided under the 
existing Stage 3 scoring methodology. We are seeking public comment on 
the proposed requirement to report on all required measures, or whether 
reporting on a smaller subset of optional measures would be 
appropriate.
    As stated earlier, an eligible hospital or CAH would need to earn a 
total Promoting Interoperability score of 50 points or more in order to 
satisfy the requirement to report on the objectives and measures of 
meaningful use under Sec.  495.4. Our aim is that every patient has 
control of and access to their health data, and we believe that the 
proposed minimum Promoting Interoperability score is consistent with 
the current goals of the program that focus on interoperability and 
providing patients access to their health information. Our vision is 
for every eligible hospital and CAH to perform at 100 percent for all 
of the objectives and associated measures. However, we understand the 
constraints that health care providers face in providing care to 
patients and seek to provide flexibility for hospitals to create their 
own score using measures that are best suited to their practice. We 
also believe it is important to be realistic about what can be 
achieved. This required score may be adjusted over time as eligible 
hospitals and CAHs adjust to the new focus and scoring methodology of 
the Medicare Promoting Interoperability Program. We believe that the 
50-point minimum Promoting Interoperability score provides the 
necessary benchmark to encourage progress in interoperability and also 
allows us to continue to adjust this benchmark as eligible hospitals 
and CAHs progress in health IT. We believe that this approach allows 
eligible hospitals and CAHs to achieve high performance in one area to 
offset performance in an area where a participant may need additional 
improvement. We are seeking public comment on whether this minimum 
score is appropriate, or whether a higher or lower minimum score would 
be better suited for the first year of this new scoring methodology.
    We believe our proposal would increase flexibility and help to ease 
the burden on eligible hospitals and CAHs as well as provide additional 
options for meeting the required objectives. The proposed changes would 
allow the eligible hospital or CAH to focus on the measures that are 
more appropriate for the ways in which they deliver care to patients 
and types of services that they provide and improve on areas in which 
an eligible hospital or CAH might need some support. We believe that 
with this new proposed approach we are reducing administrative burden 
and allowing health care providers to focus more on their patients. The 
tables below illustrate our proposal for the new scoring methodology 
and an example of application of the proposed scoring methodology.

Proposed Performance-Based Scoring Methodology for EHR Reporting Periods
                                 in 2019
------------------------------------------------------------------------
          Objectives                   Measures          Maximum points
------------------------------------------------------------------------
e-Prescribing.................  e-Prescribing.........  10 points.
                                Bonus: Query of         5 points bonus.
                                 Prescription Drug
                                 Monitoring Program
                                 (PDMP).
                                Bonus: Verify Opioid    5 points bonus.
                                 Treatment Agreement.
Health Information Exchange...  Support Electronic      20 points.
                                 Referral Loops by
                                 Sending Health
                                 Information.
                                Support Electronic      20 points.
                                 Referral Loops by
                                 Receiving and
                                 Incorporating Health
                                 Information.
Provider to Patient Exchange..  Provide Patients        40 points.
                                 Electronic Access to
                                 Their Health
                                 Information.

[[Page 20523]]

 
Public Health and Clinical      Syndromic Surveillance  10 points.
 Data Exchange.                  Reporting (Required).
                                Choose one or more
                                 additional:.
                                Immunization Registry
                                 Reporting.
                                Electronic Case
                                 Reporting..
                                Public Health Registry
                                 Reporting..
                                Clinical Data Registry
                                 Reporting..
                                Electronic Reportable
                                 Laboratory Result
                                 Reporting..
------------------------------------------------------------------------


    Proposed Performance-Based Scoring Methodology Beginning With EHR
                        Reporting Periods in 2020
------------------------------------------------------------------------
          Objectives                   Measures          Maximum points
------------------------------------------------------------------------
e-Prescribing.................  e-Prescribing.........  5 points.
                                Query of Prescription   5 points.
                                 Drug Monitoring
                                 Program (PDMP).
                                Verify Opioid           5 points.
                                 Treatment Agreement.
Health Information Exchange...  Support Electronic      20 points.
                                 Referral Loops by
                                 Sending Health
                                 Information.
                                Support Electronic      20 points.
                                 Referral Loops by
                                 Receiving and
                                 Incorporating Health
                                 Information.
Provider to Patient Exchange..  Provide Patients        35 points.
                                 Electronic Access to
                                 Their Health
                                 Information.
Public Health and Clinical      Syndromic Surveillance  10 points.
 Data Exchange.                  Reporting (Required).
                                Choose one or more
                                 additional:.
                                Immunization Registry
                                 Reporting.
                                Electronic Case
                                 Reporting..
                                Public Health Registry
                                 Reporting..
                                Clinical Data Registry
                                 Reporting..
                                Electronic Reportable
                                 Laboratory Result
                                 Reporting..
------------------------------------------------------------------------

    We are seeking public comment on whether these measures are 
weighted appropriately, or whether a different weighting distribution, 
such as equal distribution across all measures would be better suited 
to this program and this proposed scoring methodology. We are also 
seeking public comment on other scoring methodologies such as the 
alternative we considered and described earlier in this section.

                                      Proposed Scoring Methodology Example
----------------------------------------------------------------------------------------------------------------
                                                         Numerator/        Performance
          Objective                  Measures            denominator          rate                Score
----------------------------------------------------------------------------------------------------------------
e-Prescribing................  e-Prescribing.......  200/250...........             80%  8 points.
                               Query of              150/175...........             86%  5 bonus points.
                                Prescription Drug
                                Monitoring Program.
                               Verify Opioid         N/A...............             N/A  0 points.
                                Treatment Agreement.
Health Information Exchange..  Support Electronic    135/185...........             73%  15 points.
                                Referral Loops by
                                Sending Health
                                Information.
                               Support Electronic    145/175...........             83%  17 points.
                                Referral Loops by
                                Receiving and
                                Incorporating
                                Health Information.
Provider to Patient Exchange.  Provide Patients      350/500...........             70%  28 points.
                                Electronic Access
                                to Their Health
                                Information.
Public Health and Clinical     Syndromic             Yes...............             N/A  10 points.
 Data Exchange.                 Surveillance
                                Reporting
                                (Required).
                               Choose one or more
                                additional:.
                               Immunization
                                Registry Reporting.
                               Electronic Case
                                Reporting..
                               Public Health
                                Registry Reporting..
                               Clinical Data
                                Registry Reporting..
                               Electronic
                                Reportable
                                Laboratory Result
                                Reporting..
                              ----------------------------------------------------------------------------------
    Total Score..............  ....................  ..................  ..............  83 points.
----------------------------------------------------------------------------------------------------------------

    As discussed earlier, if we do not finalize a new scoring 
methodology, we would maintain the current Stage 3 methodology with the 
same objectives, measures and requirements. However, we would include 
the 2 new opioid measures, if finalized. We refer readers to section 
VIII.D.6.b. and c. of the preamble of this proposed rule for a 
discussion of the measure proposals. The table below provides a general 
summary overview of what the Stage 3 objectives, measures, and 
reporting requirements would be if we do not finalize a new scoring 
methodology but we do finalize the two new opioid measures.

[[Page 20524]]



 Stage 3 Objectives, Measures, and Reporting Requirements if New Scoring
   Methodology Is Not Finalized But Two Opioid Measures Are Finalized
------------------------------------------------------------------------
                                   Measure (stage 3         Reporting
           Objective                  threshold)           requirement
------------------------------------------------------------------------
Protect Patient Health          Security Risk Analysis  Report.
 Information.                    (Yes/No).
Electronic Prescribing........  e-Prescribing (>25%)..  Report all, but
                                Verify Opioid            only meet the
                                 Treatment Agreement     threshold for
                                 (at least one           one.
                                 patient) *.
                                Query of Prescription
                                 Drug Monitoring
                                 Program (at least one
                                 patient). *
Patient Electronic Access to    Provide Patient Access  Report and meet
 Health Information.             (>50%).                 thresholds.
                                Patient Specific
                                 Education (>10%).
Coordination of Care Through    View, Download or       Report all, but
 Patient Engagement.             Transmit (at least      only meet the
                                 one patient).           threshold for
                                Secure Messaging         two.
                                 (>5%)..
                                Patient Generated
                                 Health Data (>5%)..
Health Information Exchange...  Send a Summary of Care  Report all, but
                                 (>10%).                 only meet the
                                Request/Accept Summary   threshold for
                                 of Care (>10%)..        two.
                                Clinical Information
                                 Reconciliation
                                 (>50%).
Public Health and Clinical      Immunization Registry   Report Yes/No to
 Data Registry Reporting.        Reporting.              Three
                                Syndromic Surveillance   Registries.
                                 Reporting..
                                Case Reporting........
                                Public Health Registry
                                 Reporting.
                                Clinical Data Registry
                                 Reporting..
                                Electronic Reportable
                                 Laboratory Result
                                 Reporting..
------------------------------------------------------------------------
* These measures included only if finalized.

    We also are seeking public comment on the feasibility of the new 
scoring methodology in 2019 and whether eligible hospitals and CAHs 
would be able to implement the new measures and reporting requirements 
under this performance-based scoring methodology. In addition, we note 
that in section VIII.D.8. of the preamble of this proposed rule, we are 
seeking public comment on how the Promoting Interoperability Program 
should evolve in future years regarding the future of the new scoring 
methodology and related aspects of the program.
    We are proposing to codify the proposed new scoring methodology in 
a new paragraph (e) under Sec.  495.24. We also are proposing to revise 
the introductory text of Sec.  495.24 and the heading to paragraph (c) 
of this section to provide that the criteria specified in proposed new 
paragraph (e) would be applicable for eligible hospitals and CAHs 
attesting to CMS for 2019 and subsequent years. Further, we are 
proposing to revise the introductory text of Sec.  495.24 and the 
heading to paragraph (d) of this section to provide that the criteria 
specified in paragraph (d) would be applicable for eligible hospitals 
and CAHs attesting to a State for the Medicaid Promoting 
Interoperability Program for 2019 and subsequent years.
    We are inviting public comments on our proposals.
6. Proposed Measures for Eligible Hospitals and CAHs Attesting Under 
the Medicare Promoting Interoperability Program
a. Measure Proposal Summary Overview
    As we noted in the preceding section in our discussion of the 
proposed scoring methodology for eligible hospitals and CAHs, in 
proposed Sec.  495.24(e) we are proposing to make a number of changes 
to the Stage 3 measures under Sec.  495.24(c) beginning in CY 2019 and 
subsequent years. As indicated in the scoring methodology section 
VIII.D.5. of the preamble of this proposed rule, we are proposing three 
new measures (Query of PDMP, Verify Opioid Treatment Agreement, and 
Support Electronic Referral Loops by Receiving and Incorporating Health 
Information) beginning with the EHR reporting period in CY 2019. We are 
proposing that the Query of PDMP and Verify Opioid Treatment agreement 
measures would be optional for EHR reporting periods in 2019 for 
eligible hospitals and CAHs and bonus points may be earned for 
reporting on them. We are proposing that the Support Electronic 
Referral Loops by Receiving and Incorporating Health Information would 
be required beginning in 2019 with an exclusion available. We are 
proposing to require the Query of PDMP and Verify Opioid Treatment 
Agreement measures beginning with the EHR reporting period in 2020, and 
we are seeking public comment on this proposal. Our intent is to ensure 
the measures better focus on the effective use of health IT, 
particularly for interoperability, and to address concerns stakeholders 
have raised through public forums and in public comments related to the 
perceived burden associated with the current measures in the program.
    In addition, we continue to evaluate and consider broader HHS and 
CMS initiatives and priorities to advance health IT when considering 
and proposing new measures or changes to existing measures. CMS has 
identified certain priorities which align with the broader HHS 
initiatives encouraging increased use of prescription drug monitoring 
programs (PDMPs) to reduce inappropriate prescriptions, improve patient 
outcomes and allow for more informed prescribing practices.\370\
---------------------------------------------------------------------------

    \370\ https://www.hhs.gov/opioids/about-the-epidemic/index.html; 
https://www.healthit.gov/opioids.
---------------------------------------------------------------------------

    As we noted above, section 50413 of the Bipartisan Budget Act of 
2018 amended section 1886(n)(3)(A) of the Act to eliminate the 
provision requiring more stringent measures of meaningful use. As a 
result, we can now offer additional flexibilities and burden reduction 
through various proposed methods including through combining, removing 
and/or adding measure options that are applicable to other care 
settings.
    We are proposing to remove six measures. Two of the measures we are 
proposing to remove--Request/Accept Summary of Care and Clinical 
Information Reconciliation--would be replaced by the Support Electronic 
Referral Loops by Receiving and Incorporating Health Information 
measure, which combines the functionalities and goals of the two

[[Page 20525]]

Stage 3 measures it is replacing. Four of the measures--Patient-
Specific Education; Secure Messaging; View, Download or Transmit; and 
Patient Generated Health Data--would be removed because they have 
proven burdensome to health care providers in ways that were unintended 
and detract from health care providers' progress on current program 
priorities.
    While the measures would no longer need to be attested to if we 
finalize the proposal to remove them, health care providers may still 
continue to use the standards and functions of those measures based on 
their preferences and practice needs. We believe that this burden 
reduction would enable health care providers to focus on measures that 
further interoperability, the exchange of health care information, and 
advances of innovation in the use of CEHRT.
    We also are proposing to add three new measures. For the e-
Prescribing objective, we are proposing to add two new measures: Query 
of Prescription Drug Monitoring Program (PDMP) and Verify Opioid 
Treatment Agreement, both of which support HHS initiatives related to 
the treatment of opioid and substance use disorders by helping health 
care providers avoid inappropriate prescriptions, improving 
coordination of prescribing amongst health care providers and focusing 
on the advanced use of CEHRT. For the Health Information Exchange 
objective, we are proposing to add a new measure: Support Electronic 
Referral Loops by Receiving and Incorporating Health Information, which 
builds upon and replaces the existing Request/Accept Summary of Care 
and Clinical Information Reconciliation measures, while furthering 
interoperability and the exchange of health information.
    We are also proposing to rename some of the existing Stage 3 
measures and objectives. We are proposing to rename the remaining 
Health Information Exchange measure, Send a Summary of Care, to Support 
Electronic Referral Loops by Sending Health Information. In addition, 
we are proposing to change the name of the Patient Electronic Access to 
Health Information objective to Provider to Patient Exchange, and 
proposing to rename the remaining measure, Provide Patient Access to 
Provide Patients Electronic Access to Their Health Information. We are 
proposing to eliminate the Coordination of Care Through Patient 
Engagement objective and all of its associated measures as described 
above. Finally, we are proposing to rename the Public Health and 
Clinical Data Registry Reporting objective to the Public Health and 
Clinical Data Exchange objective and are proposing to require 
attestation to the Syndromic Surveillance Reporting measure and at 
least one additional measure of the eligible hospital or CAH's choosing 
from the following: Immunization Registry Reporting; Electronic Case 
Reporting; Public Health Registry Reporting; Clinical Data Registry 
Reporting; and Electronic Reportable Laboratory Result Reporting.
    Lastly, in connection with the scoring methodology proposed in 
section VIII.D.5. of the preamble of this proposed rule, we are 
proposing to remove the exclusion criteria from all of the Stage 3 
measures we are retaining, except for the measures associated with the 
e-Prescribing objective, Public Health and Clinical Data Exchange 
objective and the new measures, which would include exclusion criteria. 
We are proposing to remove the exclusion criteria related to broadband 
availability because the Fixed Broadband Deployment Data from Federal 
Communications Commission (FCC) form 477 indicate no counties have less 
than 4 Mbps of broadband availability.\371\ In addition, upon review of 
the 2016 Modified Stage 2 attestation data for eligible hospitals and 
CAHs, we found that no eligible hospital or CAH claimed an exclusion 
based on broadband availability. In addition, we do not believe that an 
exclusion based on the number of transitions or referrals received and 
patient encounters in which the provider has never previously 
encountered the patient is warranted for any of the measures associated 
with Health Information Exchange objective. This exclusion applies for 
the Stage 3 Request/Accept Summary of Care measure and the Clinical 
Information Reconciliation measure. We reviewed the 2016 Modified Stage 
2 attestation data for the Medication Reconciliation measure, which the 
Clinical Information Reconciliation measure is based on and found that 
all eligible hospitals and CAHs who attested successfully reported this 
measure, although we note an exclusion was not available for this 
measure.\372\
---------------------------------------------------------------------------

    \371\ https://www.fcc.gov/general/broadband-deployment-data-fcc-form-477.
    \372\ https://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/PUF.html.
---------------------------------------------------------------------------

    In addition, we are seeking public comment on a potential new 
measure Health Information Exchange Across the Care Continuum under the 
Health Information Exchange objective. Under this proposed measure, an 
eligible hospital or CAH would send an electronic summary of care 
record, or receive and incorporate an electronic summary of care 
record, for transitions of care and referrals with a provider of care 
other than an eligible hospital or CAH. The measure would include 
health care providers in care settings including but not limited to 
long term care facilities, and post-acute care providers such as 
skilled nursing facilities, home health, and behavioral health 
settings.
    We are proposing that all of the measure proposals in this section 
VIII.D.6. of the preamble of this proposed rule would apply to eligible 
hospitals and CAHs that submit an attestation to CMS under the Medicare 
Promoting Interoperability Program beginning with the EHR reporting 
period in CY 2019, including Medicare-only and dual-eligible eligible 
hospitals and CAHs. We are not proposing to apply these measure 
proposals to Medicaid-only eligible hospitals that submit an 
attestation to their State Medicaid agency for the Medicaid Promoting 
Interoperability program. Instead, as discussed in section VIII.D.7. of 
the preamble of this proposed rule, we are proposing to give States the 
option to adopt these measure proposals along with the proposed 
performance-based scoring methodology discussed in section VIII.D.5. of 
the preamble of this proposed rule for their Medicaid Promoting 
Interoperability Program through their State Medicaid HIT Plans.
    The table below provides a summary of these measures proposals.

[[Page 20526]]



                      Summary of Measures Proposals
------------------------------------------------------------------------
             Measure status                          Measure
------------------------------------------------------------------------
Measures retained from Stage 3 with no   e-Prescribing.
 modifications *.                        Immunization Registry
                                          Reporting.
                                         Syndromic Surveillance
                                          Reporting.
                                         Electronic Case Reporting.
                                         Public Health Registry
                                          Reporting.
                                         Clinical Data Registry
                                          Reporting.
                                         Electronic Reportable
                                          Laboratory Result Reporting.
Measures retained from Stage 3 with      Send a Summary of Care
 modifications.                           (Proposed Name: Supporting
                                          Electronic Referral Loops by
                                          Sending Health Information).
                                         Provide Patient Access
                                          (Proposed Name: Provide
                                          Patients Electronic Access to
                                          Their Health Information).
Removed measures.......................  Request/Accept Summary of Care.
                                         Clinical Information
                                          Reconciliation.
                                         Patient-Specific Education.
                                         Secure Messaging.
                                         View, Download or Transmit.
                                         Patient Generated Health Data.
New measures...........................  Query of Prescription Drug
                                          Monitoring Program (PDMP).
                                         Verify Opioid Treatment
                                          Agreement.
                                         Support Electronic Referral
                                          Loops by Receiving and
                                          Incorporating Health
                                          Information.
------------------------------------------------------------------------
* Security Risk Analysis is retained, but not included as part of the
  proposed scoring methodology.

    We note the proposals under the Health Information Exchange 
objective require only consolidation of existing workflows and actions, 
while certification criteria and standards remain the same as finalized 
in the October 16, 2015 final rule titled ``2015 Edition Health 
Information Technology (Health IT) Certification Criteria, 2015 Edition 
Base Electronic Health Record (EHR) Definition, and ONC Health IT 
Certification Program Modifications'' (80 FR 62601 through 62759), 
hereafter referred to as the ``ONC 2015 Edition final rule.'' 
Therefore, we believe it would not take the full 18 to 24 months of 
development and implementation time to transition as indicated in the 
2015 EHR Incentive Programs final rule (80 FR 62875) and could 
potentially be implemented for an EHR reporting period in 2019.
    As we discussed in section VIII.D.5. of the preamble of this 
proposed rule, we are proposing that if we do not finalize a new 
scoring methodology, we would maintain the current Stage 3 methodology 
with the same objectives, measures and requirements, but we would 
include the two new opioid measures, if they are finalized. In 
addition, if we do not finalize a new scoring methodology, the 
proposals to remove objectives and measures as well as proposals to 
change objective and measure names would no longer be applicable.
    We are seeking public comment on these proposals.
b. Measure Proposals for the e-Prescribing Objective
    In the 2015 EHR Incentive Programs final rule, since electronic 
prescribing of controlled substances had further matured and was 
feasible in many States, we allowed eligible hospitals and CAHs to 
include controlled substances under the definition of permissible 
prescriptions for the e-Prescribing objective, as long as they were 
included uniformly across patients and all available schedules and in 
accordance with applicable law (80 FR 62834).
    We believe it is important to consider other requirements specific 
to electronic prescribing of controlled substances for health care 
providers to take into account and how this may interact with the 
proposals under this rulemaking. CMS is committed to combatting the 
opioid epidemic by making it a top priority for the agency and aligning 
its efforts with the HHS opioid initiative to combat misuse and promote 
programs that support treatment and recovery support services. The HHS 
five-point Opioid Strategy aims to:
     Improve access to prevention, treatment, and recovery 
support services to prevent the health, social, and economic 
consequences associated with opioid addiction and to enable individuals 
to achieve long-term recovery;
     Target the availability and distribution of overdose-
reversing drugs to ensure the provision of these drugs to people likely 
to experience or respond to an overdose, with a particular focus on 
targeting high-risk populations;
     Strengthen public health data reporting and collection to 
improve the timeliness and specificity of data and to inform a real-
time public health response;
     Support cutting-edge research that advances our 
understanding of pain and addiction, leads to the development of new 
treatments, and identifies effective public health interventions to 
reduce opioid-related health harms; and
     Advance the practice of pain management to enable access 
to high-quality, evidence-based pain care that reduces the burden of 
pain for individuals, families, and society while also reducing the 
inappropriate use of opioids and opioid-related harms.
    CMS' strategy includes reducing the risk of opioid use disorders, 
overdoses, inappropriate prescribing practices and drug diversion. We 
have identified two new measures which align with the broader HHS 
efforts to increase the use of PDMPs to reduce inappropriate 
prescriptions, improve patient outcomes and promote more informed 
prescribing practices.
    We are proposing to add two new measures to the e-Prescribing 
objective under Sec.  495.24(5)(iii) that are based on electronic 
prescribing for controlled substances (EPCS): Query of PDMP, and Verify 
Opioid Treatment Agreement. These measures build upon the meaningful 
use of CEHRT as well as the security of electronic prescribing of 
Schedule II controlled substances while preventing diversion. For both 
measures, we are proposing to define opioids as Schedule II controlled 
substances under 21 CFR 1308.12, as

[[Page 20527]]

they are recognized as having a high potential for abuse with potential 
for severe psychological or physical dependence. We are also proposing 
to apply the same policies for the existing e-Prescribing measure under 
Sec.  495.24(e)(5)(iii) to both the Query of the PDMP and Verify Opioid 
Treatment Agreement measures, including the requirement to use CEHRT as 
the sole means of creating the prescription and for transmission to the 
pharmacy. Eligible hospitals and CAHs have the option to include or 
exclude controlled substances in the e-Prescribing measure denominator 
as long as they are treated uniformly across patients and all available 
schedules and in accordance with applicable law (80 FR 62834; 81 FR 
77227). However, because the intent of these two new measures is to 
improve prescribing practices for controlled substances, eligible 
hospitals and CAHs would have to include Schedule II opioid 
prescriptions in the numerator and denominator or claim the applicable 
exclusion.
    In the event we finalize the new scoring methodology we are 
proposing in section VIII.D.5. of the preamble of this proposed rule, 
that eligible hospitals and CAHs that claim the broader exclusion under 
the e-Prescribing measure would automatically receive an exclusion for 
all three of the measures under the e-Prescribing objective; they would 
not have to also claim exclusions for the other two measures Query of 
PDMP and Verify Opioid Treatment Agreement.
    In the event we do not finalize the new scoring methodology we are 
proposing in section VIII.D.5. of the preamble of this proposed rule, 
but we do finalize the proposed measures of Query of Prescription Drug 
Monitoring Program and Verify Opioid Treatment Agreement under the e-
Prescribing objective, we would continue to apply the Stage 3 
requirements finalized in previous rulemaking, and we are proposing 
that eligible hospitals and CAHs would be required to report all three 
measures under the e-Prescribing objective, but would only be required 
to meet the threshold for the e-Prescribing measure, or claim an 
exclusion. In addition, in the event the new scoring methodology we are 
proposing is not finalized, we would retain the existing e-Prescribing 
measure threshold of 25 percent under Sec.  495.24(c)(2)(ii).
    We are requesting public comments on these proposals.
(1) Proposed Measure: Query of Prescription Drug Monitoring Program 
(PDMP)
    A PDMP is an electronic database that tracks prescriptions of 
controlled substances at the State level. PDMPs play an important role 
in patient safety by assisting in the identification of patients who 
have multiple prescriptions for controlled substances or may be 
misusing or overusing them. Querying the PDMP is important for tracking 
the prescribed controlled substances and improving prescribing 
practices. The ONC, the Centers for Disease Control and Prevention 
(CDC), the Department of Justice (DOJ), and the Substance Abuse and 
Mental Health Services Administration (SAMHSA) have had integral roles 
in the integration and expansion of PMDPs with health information 
technology systems. For example, the ONC and the SAMHSA collaboratively 
led the ``Enhancing Access'' project to improve health care provider 
access to PDMP data utilizing health IT.\373\ Likewise, the CDC 
conducted a process and outcome evaluation of the PDMP EHR Integration 
and Interoperability Expansion (PEHRIIE) program funded by SAMHSA for 
nine States between FY 2012 and 2016. The PEHRIIE program goals were to 
integrate PDMPs into health IT and improve the comprehensiveness of 
PDMPs through initiating and/or improving interstate data 
exchange.\374\ In addition, the Bureau of Justice Assistance's Harold 
Rogers Prescription Monitoring Program supports Prescription Drug 
Monitoring Program Information Exchange (PMIX) through funding, and the 
goal of PMIX is to help States implement a cost-effective solution to 
facilitate interstate data sharing among PDMPs.\375\ Integration of the 
PDMP with health information technology systems supports improves 
access to PDMP data, minimizes changes to current workflow and overall 
burden and optimizes prescribing practices. The intent of the Query of 
the PDMP measure is to build upon the current PDMP initiatives from 
Federal partners focusing on prescriptions generated and dispensing of 
opioids.
---------------------------------------------------------------------------

    \373\ https://www.healthit.gov/PDMP and https://www.healthit.gov/sites/default/files/work_group_document_integrated_paper_final_0.pdf.
    \374\ https://www.cdc.gov/drugoverdose/pdf/pehriie_report-a.pdf.
    \375\ https://www.bja.gov/funding/Category-5-awards.pdf.
---------------------------------------------------------------------------

    Proposed Measure Description: For at least one Schedule II opioid 
electronically prescribed using CEHRT during the EHR reporting period, 
the eligible hospital or CAH uses data from CEHRT to conduct a query of 
a Prescription Drug Monitoring Program (PDMP) for prescription drug 
history is conducted, except where prohibited and in accordance with 
applicable law.
    CMS recognizes both the utility and value of addressing PDMP EHR 
integration and further recognizes the majority of States mandate use 
of State prescription monitoring programs (PMPs) requiring prescribers/
dispensers to access PMP.\376\ According to the CDC, State-level 
policies that enhance PDMPs or regulate pain clinics helped several 
States drive down opioid prescriptions and overdose deaths.\377\ We are 
also further aware of the varying integration approaches underway 
including efforts to integrate a State PDMP into a health information 
exchange or electronic health record (EHR) or other efforts to enhance 
a user interface of some type, such as risk assessment tools or red 
flags. We note Federal evaluation resources available to inform 
integration efforts \378\ and believe integration is critical for 
enhancing provider workflow, access to critical PDMP data, and 
improving clinical care including prescription management.
---------------------------------------------------------------------------

    \376\ http://www.namsdl.org/library/14D3122C-96F5-F53E-E8F23E906B4DE09D/.
    \377\ https://www.cdc.gov/drugoverdose/policy/successes.html.
    \378\ https://www.cdc.gov/drugoverdose/pdf/pehriie_report-a.pdf.
---------------------------------------------------------------------------

    We are proposing that the query of the PDMP for prescription drug 
history must be conducted prior to the electronic transmission of the 
Schedule II opioid prescription. Eligible hospitals and CAHs would have 
flexibility to query the PDMP using CEHRT in any manner allowed under 
their State law.
    Although the query of the PDMP may currently be burdensome for some 
health care providers as part of their current workflow practice, we 
believe the query of a PDMP is beneficial to optimal prescribing 
practices and foresee progression toward fully automated queries of the 
PDMP building upon the current initiatives at the State level.
    We are proposing to include in this measure all permissible 
prescriptions and dispensing of Schedule II opioids regardless of the 
amount prescribed during an encounter in order for eligible hospitals 
and CAHs to identify multiple provider episodes (physician shopping), 
prescriptions of dangerous combinations of drugs, prescribing rates and 
controlled substances prescribed in high quantities. However, we are 
proposing that multiple Schedule II opioid prescriptions prescribed on 
the same date by the same eligible hospital or CAH would not require 
multiple

[[Page 20528]]

queries of the PDMP. For example, if more than one opioid is prescribed 
by the eligible hospital or CAH, only one query would have to be 
performed for this measure. We have also considered that in most cases, 
only one instance of querying the PDMP may be necessary or appropriate 
for each hospital stay, and querying the PDMP on each day a medication 
is prescribed may be burdensome for providers. We are requesting 
comment on whether we should further refine the measure to limit 
queries of the PDMP to once during the stay regardless of whether 
multiple eligible medications are prescribed during this time.
    Denominator: Number of Schedule II opioids electronically 
prescribed using CEHRT by the eligible hospital or CAH during the EHR 
reporting period.
    Numerator: The number of Schedule II opioid prescriptions in the 
denominator for which data from CEHRT is used to conduct a query of a 
PDMP for prescription drug history except where prohibited and in 
accordance with applicable law.
    Exclusion: Any eligible hospital or CAH that does not have an 
internal pharmacy that can accept electronic prescriptions for 
controlled substances and is not located within 10 miles of any 
pharmacy that accepts electronic prescriptions for controlled 
substances at the start of their EHR reporting period.
    We are proposing that the exclusion criteria would be limited to 
prescriptions of controlled substances as the measure action is 
specific to prescriptions of Schedule II opioids only and does not 
include any other types of electronic prescriptions. In the event we 
finalize the new scoring methodology we are proposing in section 
VIII.D.5. of the preamble of this proposed rule, an additional 
exclusion would be available beginning in 2020 for eligible hospitals 
and CAHs that could not report on this measure in accordance with 
applicable law.
    We also understand that PDMP integration is not currently in 
widespread use for CEHRT, and many eligible hospitals and CAHs may 
require additional time and workflow changes at the point of care 
before they can meet this measure without experiencing significant 
burden. For instance, many eligible hospitals and CAHs will likely need 
to manually enter data into CEHRT to document the completion of the 
query of the PDMP action. In addition, some eligible hospitals and CAHs 
may also need to conduct manual calculation of the measure. Even for 
those eligible hospitals and CAHs that have achieved successful 
integration of a PDMP with their EHR, this measure may not be machine 
calculable, for instance, in cases where the eligible hospital or CAH 
follows a link within the EHR to a separate PDMP system. For the 
purposes of meeting this measure, we also understand that there are no 
existing certification criteria for the query of a PDMP. However, we 
believe that the use of structured data captured in the CEHRT, can 
support querying a PDMP through the broader use of health IT. We are 
seeking public comment on whether ONC should consider adopting 
standards and certification criteria to support the query of a PDMP, 
and if such criteria were to be adopted, on what timeline should CMS 
require their use to meet this measure.
    We note that the NCPDP SCRIPT 2017071 standard for e-prescribing is 
now available and can help to support PDMP and EHR integration. We are 
seeking public comment especially from health care providers and health 
IT developers on whether they believe use of this standard can support 
eligible hospitals and CAHs seeking to report on this measure, and 
whether HHS should encourage use of this standard through separate 
rulemaking.
    We are seeking public comment on the challenges associated with 
querying the PDMP with and without CEHRT integration and whether this 
proposed measure should require certain standards, methods or 
functionalities to minimize burden.
    In including EPCS as a component of the measure we are proposing, 
we acknowledge and are seeking input on perceived and real 
technological barriers as part of its effective implementation 
including but not limited to input on two-factor authentication and on 
the effective and appropriate uses of technology, including the use of 
telehealth modalities to support established patient provider 
relationships subsequent to in-person visit(s) and for prescribing 
purposes.
    We also are requesting comment on limiting the exclusion criteria 
to electronic prescription for controlled substances and whether there 
are circumstances which may justify any additional exclusions for the 
Query of PDMP measure and what those circumstances might be.
    We note that under the new scoring methodology we are proposing in 
section VIII.D.5. of the preamble of this proposed rule, measures would 
not have required thresholds for reporting. Therefore, if the proposed 
scoring methodology and this measure were finalized, this measure would 
not have a reporting threshold. In the event we do not finalize the 
proposed scoring methodology, we are proposing a threshold of at least 
one prescription for this new measure. We believe a threshold of at 
least one prescription is appropriate because varying State laws 
related to integration of the PDMP into CEHRT can lead to differing 
standards for querying.
    We are also proposing that in order to meet this measure, an 
eligible hospital or CAH must use the capabilities and standards as 
defined for CEHRT at 45 CFR 170.315(b)(3) and 170.315(a)(10)(ii).
    We are proposing to codify the Query of the PDMP measure at Sec.  
495.24(e)(5)(iii)(B).
    We are inviting public comment on the proposals.
(2) Proposed Measure: Verify Opioid Treatment Agreement
    The intent of this measure is for eligible hospitals and CAHs to 
identify whether there is an existing opioid treatment agreement when 
they electronically prescribe a Schedule II opioid using CEHRT if the 
total duration of the patient's Schedule II opioid prescriptions is at 
least 30 cumulative days. We believe seeking to identify an opioid 
treatment agreement will further efforts to coordinate care between 
health care providers and foster a more informed review of patient 
therapy. The intent of the treatment agreement is to clearly outline 
the responsibilities of both patient and health care provider in the 
treatment plan. Such a treatment plan can be integrated into care 
coordination and care plan activities and documents as discussed and 
agreed upon by the patient and health care provider. An opioid 
treatment agreement is intended to support and to enable further 
coordination and the sharing of substance use disorder (SUD) data with 
consent, as may be required of the individual.
    According to the American Journal of Psychiatry article 
Prescription Opioid Misuse, Abuse, and Treatment in the United States: 
An Update,\379\ patient provider treatment agreements are part of the 
recommendations to enhance efforts to prevent opioid abuse per the 
Office of the National Drug Control Policy's National Drug Control 
Strategy.\380\ The article further indicates that the treatment 
agreement can be

[[Page 20529]]

beneficial as it provides clear information for the agreed upon pain 
management plan, preventing misconceptions.
---------------------------------------------------------------------------

    \379\ Brady KT, McCauley JL, Back SE. Prescription Opioid 
Misuse, Abuse, and Treatment in the United States: An Update 
American Journal of Psychiatry, Volume 173, Issue 1, January 01, 
2016, pp. 18-26. Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4782928/.
    \380\ https://obamawhitehouse.archives.gov/ondcp/policy-and-research/ndcs.
---------------------------------------------------------------------------

    An article in Pain Medicine, Universal Precautions in Pain 
Medicine: A Rational Approach to the Treatment of Chronic Pain also 
includes treatment agreements as part of the ``Ten Steps of Universal 
Precautions in Pain Medicine'' which are stated to be recommended 
starting points for discussion in the treatment of chronic pain.\381\
---------------------------------------------------------------------------

    \381\ Gourlay DL, Heit HA, Almahrezi A. ``Universal Precautions 
in Pain Medicine: A Rational Approach to the Treatment of Chronic 
Pain.'' Pain Medicine, Volume 6, Issue 2, 1 March 2005, pp. 107-112. 
Available at: https://academic.oup.com/painmedicine/article/6/2/107/1819946.
---------------------------------------------------------------------------

    We also understand from stakeholder feedback during listening 
sessions that there are varied opinions regarding opioid treatment 
agreements amongst health care providers. Some are supportive of their 
use, indicating that treatment agreements are an important part of the 
prescription of opioids for pain management, and help patients 
understand their role and responsibilities for maintaining compliance 
with terms of the treatment. Other health care providers object to 
their use citing ethical concerns, and creation of division and trust 
issues in the health care provider-patient relationship. Other concerns 
stem from possible disconnect between the language and terminology used 
in the agreement and the level of comprehension on the part of the 
patient. Because of the debate among practitioners, we are requesting 
comment on the challenges this proposed measure may create for health 
care providers, how those challenges might be mitigated, and whether 
this measure should be included as part of the Promoting 
Interoperability Program. We also acknowledge challenges related to 
prescribing practices and multiple State laws which may present 
barriers to the uniform implementation of this proposed measure. We are 
seeking public comment on the challenges and concerns associated with 
opioid treatment agreements and how they could impact the feasibility 
of the proposal.
    Proposed Measure Description: For at least one unique patient for 
whom a Schedule II opioid was electronically prescribed by the eligible 
hospital or CAH using CEHRT during the EHR reporting period, if the 
total duration of the patient's Schedule II opioid prescriptions is at 
least 30 cumulative days within a 6-month look-back period, the 
eligible hospital or CAH seeks to identify the existence of a signed 
opioid treatment agreement and incorporates it into CEHRT.
    We understand from listening sessions with stakeholders that 
eligible hospitals and CAHs typically do not prescribe opioid 
medications for more than a few days if at all. In consideration of 
this low volume of opioid prescriptions, we are proposing this measure 
would include all Schedule II opioids prescribed for a patient 
electronically using CEHRT by the eligible hospital or CAH during the 
EHR reporting period, as well as any Schedule II opioid prescriptions 
identified in the patient's medication history request and response 
transactions during a 6 month look-back period, where the total number 
of days for which a Schedule II opioid was prescribed for the patient 
is at least 30 days.
    There also may be burdens specific to identifying the existence of 
a treatment agreement which could require additional time and changes 
to existing workflows, determining what constitutes a treatment 
agreement due to a lack of a definition, standard or electronic format 
and manual calculation of the measure. In addition, limitations in the 
completeness of care team information may limit the ability of an 
eligible hospital and CAH to identify all potential sources for 
querying and obtaining information on a treatment agreement for a 
specific patient. There are currently pilots in development focused on 
increasing connectivity and data exchange among health care providers 
to better integrate behavioral health information, for instance, pilots 
taking place as part of the Federal Demonstration Program for Certified 
Community Behavioral Health Clinics (CCBHCs) \382\ includes criteria on 
how CCBHCs should use health IT to coordinate services and track data 
on quality measures. Participants in such pilots would potentially have 
the means necessary to leverage health IT connectivity to query 
behavioral health data resources and health care providers within their 
region to identify the existence of an opioid treatment agreement and 
to seamlessly integrate patient information received into the care plan 
for the patient. We are seeking public comment on other similar 
pathways to facilitate the identification and exchange of treatment 
agreements and opioid abuse treatment planning.
---------------------------------------------------------------------------

    \382\ https://www.samhsa.gov/section-223.
---------------------------------------------------------------------------

    We are proposing that the 6-month look-back period would begin on 
the date on which the eligible hospital or CAH electronically transmits 
its Schedule II opioid prescription using CEHRT. For example, all of 
the following prescriptions would be counted for this measure: A 
Schedule II opioid electronically prescribed for a patient for a 
duration of five days by the eligible hospital or CAH using CEHRT 
during the EHR reporting period, and four prior prescriptions for any 
Schedule II opioid prescribed by the patient's physician (each for a 
duration of seven days) as identified in the patient's medication 
history request and response transactions during the 6-month period 
preceding the date on which the eligible hospital or CAH electronically 
transmits its Schedule II opioid prescription using CEHRT. In this 
example, the total number of days for which a Schedule II opioid was 
prescribed for the patient would equal 33 cumulative days.
    We are proposing a 6-month look-back period in order to identify 
more egregious cases of potential overutilization of opioids and to 
cover timeframes for use outside the EHR reporting period. In addition, 
we are proposing that the 6-month look-back period would utilize at a 
minimum the industry standard NCDCP SCRIPT v10.6 medication history 
request and response transactions codified at 45 CFR 170.205(b)(2). As 
ONC has stated (80 FR 62642), adoption of the requirements for NCDCP 
SCRIPT v10.6 does not preclude developers from incorporating and using 
technology standards or services not required by regulation in their 
health IT products.
    We are not proposing to define an opioid treatment agreement as a 
standardized electronic document; nor are we proposing to define the 
data elements, content structure, or clinical purpose for a specific 
document to be considered a ``treatment agreement.'' For this measure, 
we are seeking public comment on what characteristics should be 
included in an opioid treatment agreement and incorporated into CEHRT, 
such as clinical data, information about the patient's care team, and 
patient goals and objectives, as well as which functionalities could be 
utilized to accomplish the incorporation of this information. We note 
that a variety of standards available in CEHRT might support the 
electronic exchange of opioid abuse related treatment data, such as use 
of the Consolidated Clinical Document Architecture (CCDA) care plan 
template that is currently optional in CEHRT. We are also seeking 
public comment on methods or processes for incorporation of the 
treatment agreement into CEHRT, including which functionalities could

[[Page 20530]]

be utilized to accomplish this. We are seeking public comment on 
whether there are specific data elements that are currently 
standardized that should be incorporated via reconciliation and if the 
``patient health data capture'' functionality could be used to 
incorporate a treatment plan that is not a structured document with 
structured data elements.
    Denominator: Number of unique patients for whom a Schedule II 
opioid was electronically prescribed by the eligible hospital or CAH 
using CEHRT during the EHR reporting period and the total duration of 
Schedule II opioid prescriptions is at least 30 cumulative days as 
identified in the patient's medication history request and response 
transactions during a 6-month look-back period.
    Numerator: The number of unique patients in the denominator for 
whom the eligible hospital or CAH seeks to identify a signed opioid 
treatment agreement and, if identified, incorporates the agreement in 
CEHRT.
    Exclusion: Any eligible hospital or CAH that does not have an 
internal pharmacy that can accept electronic prescriptions for 
controlled substances and is not located within 10 miles of any 
pharmacy that accepts electronic prescriptions for controlled 
substances at the start of their EHR reporting period.
    We are proposing that the exclusion criteria would be limited to 
prescriptions of controlled substances as the measure action is 
specific to electronic prescriptions of Schedule II opioids only and 
does not include any other types of electronic prescriptions. In the 
event we finalize the new scoring methodology we are proposing in 
section VIII.D.5. of the preamble of this proposed rule, an additional 
exclusion would be available beginning in 2020 for eligible hospitals 
and CAHs that could not report on this measure in accordance with 
applicable law. We are requesting public comment on limiting the 
exclusion criteria to electronic prescriptions for controlled 
substances and whether there are circumstances which may require an 
additional exclusion for the Verify Opioid Treatment Agreement measure 
and what those circumstances might be.
    We note that under the new scoring methodology we are proposing in 
section VIII.D.5. of the preamble of this proposed rule, measures would 
not have required thresholds for reporting. Therefore, if the proposed 
scoring methodology and measure were finalized, this measure would not 
have a reporting threshold. In the event we do not finalize the 
proposed scoring methodology, but we finalize this proposed measure, we 
are proposing a threshold of at least one unique patient for this new 
measure. We believe a threshold of at least one unique patient is 
appropriate to account for the varying support for the use of opioid 
treatment agreements and acknowledging that not all patients who 
receive at least 30 cumulative days of Schedule II opioids would have a 
treatment agreement in place. We also note there are medical diagnoses 
and conditions that could necessitate prescribing Schedule II opioids 
for a cumulative period of more than 30 days.
    We are also proposing that, in order to meet this measure, an 
eligible hospital or CAH must use the capabilities and standards as 
defined for CEHRT at 45 CFR 170.315(b)(3), 170.315(a)(10) and 
170.205(b)(2).
    As discussed above, we recognize that many providers are only 
beginning to adopt EPCS at this time. While we are proposing two new 
measures which combine EPCS with other actions, we are requesting 
comment on whether we should explore adoption of a measure focused only 
on the number of Schedule II opioids prescribed and the successful use 
of EPCS for permissible prescriptions electronically prescribed. We are 
seeking public comment about the feasibility of such a measure, and 
whether stakeholders believe this would help to encourage broader 
adoption of EPCS.
    We are proposing to codify the Verify Opioid Treatment Agreement 
measure at Sec.  495.24(e)(5)(iii)(C).
    We are seeking public comment on the proposals for this measure.
c. Measure Proposals for the Health Information Exchange (HIE) 
Objective
    The Health Information Exchange measures for eligible hospitals and 
CAHs hold particular importance because of the role they play within 
the care continuum. In addition, these measures encourage and leverage 
interoperability on a broader scale and promote health IT-based care 
coordination. However, through our review of existing measures, we 
determined that we could potentially improve the measures to further 
reduce burden and better focus the measures on interoperability in 
provider to provider exchange. Such modifications would address a 
number of concerns raised by stakeholders including:
     Supporting the implementation of effective health IT 
supported workflows based on a specific organization's needs;
     Reducing complexity and burden associated with the manual 
tracking of workflows to support health IT measures; and
     Emphasizing within these measures the importance of using 
health IT to support closing the referral loop to improve care 
coordination.
    The Health Information Exchange objective includes three measures 
under Sec.  495.24(e)(6)(ii), and we believe we can potentially improve 
each to streamline measurement, remove redundancy, reduce complexity 
and burden, and address stakeholders' concerns about the focus and 
impact of the measures on the interoperable use of health IT.
    As discussed in section VIII.D.6.a. of the preamble of this 
proposed rule, we are proposing to remove the exclusions from all three 
of the measures associated with the Health Information Exchange 
objective under Sec.  495.24(c)(7)(iii) in proposed Sec.  495.24(e)(6). 
However, in the event we finalize the new scoring methodology we are 
proposing, eligible hospitals and CAHs would be able to claim an 
exclusion under the Support Electronic Referral Loops by Receiving and 
Incorporating Health Information measure as indicated in section 
VIII.D.6.c.(4) of the preamble of this proposed rule.
    We are proposing several changes to the current measures under the 
Stage 3 Health Information Exchange objective. First, we are proposing 
to change the name of Send a Summary of Care measure to Support 
Electronic Referral Loops by Sending Health Information. We also are 
proposing to remove the current Stage 3 Clinical Information 
Reconciliation measure and combine it with the Request/Accept Summary 
of Care measure to create a new measure, Support Electronic Referral 
Loops by Receiving and Incorporating Health Information. This proposed 
new measure would include actions from both the current Request/Accept 
Summary of Care measure and Clinical Information Reconciliation measure 
and focus on the exchange of the health care information while reducing 
the administrative burden of reporting on two separate measures.
    As discussed earlier in the proposed rule, in the event we do not 
finalize the new scoring methodology we are proposing in section 
VIII.D.5. of the preamble of this proposed rule, we would maintain the 
current Health Information Exchange objective, associated measures and 
exclusions under Sec.  495.24(c)(7) as described in section VIII.D.5. 
of the preamble of this proposed rule and as outlined in the table in 
that section which describes Stage 3 objectives and measures if new 
scoring methodology is not finalized.

[[Page 20531]]

    We are seeking public comment on these proposals.
(1) Proposed Modifications To Send a Summary of Care Measure
    We are proposing to change the name of the Send a Summary of Care 
measure at 42 CFR 495.24(c)(7)(ii)(A) to Support Electronic Referral 
Loops by Sending Health Information at 42 CFR 495.24(e)(6)(ii)(A), to 
better reflect the emphasis on completing the referral loop and 
improving care coordination. We are proposing to change the measure 
description only to remove the previously defined threshold from Stage 
3, in alignment with our proposed implementation of a performance-based 
scoring system, to require that the eligible hospital or CAH create a 
summary of care record using CEHRT and electronically exchange the 
summary of care record for at least one transition of care or referral.
    Proposed name and measure description: Support Electronic Referral 
Loops by Sending Health Information: For at least one transition of 
care or referral, the eligible hospital or CAH that transitions or 
refers their patient to another setting of care or provider of care: 
(1) Creates a summary of care record using CEHRT; and (2) 
electronically exchanges the summary of care record.
    Through public comment and stakeholder correspondence, we have 
become aware that, in the health care industry, there is some 
misunderstanding of the scope of transitions and referrals which must 
be included in the denominator of this measure. In the rulemaking for 
Stages 2 and 3 (77 FR 54013 through 54021, 80 FR 62852 through 62862), 
we noted the denominator for this measure includes all transitions of 
care and referrals from an inpatient setting and all transitions or 
referrals from an emergency department where follow up care is ordered 
by an authorized provider. In the event that an eligible hospital or 
CAH is the recipient of a transition of care or referral, and 
subsequent to providing care the eligible hospital or CAH transitions 
or refers the patient back to the referring provider of care, this 
transition of care should be included in the denominator of the measure 
for the eligible hospital or CAH. We expect this will help build upon 
the current provider to provider communication via electronic exchange 
of summary of care records created by CEHRT required under this 
measure, further promote interoperability and care coordination with 
additional health care providers, and prevent redundancy in creation of 
a separate measure.
    In the past, stakeholders have raised concerns that the summary 
care records shared according to the CCDA standard included excessive 
information not relevant to immediate care needs, which increased 
burden on health care providers. Under the ONC Health IT Certification 
Program, certified EHR technology must have the capability to exchange 
all of the information in the Common Clinical Data Set (CCDS) as part 
of a summary care record structured according to the CCDA standard. We 
previously finalized in the Stage 2 final rule (77 FR 53991 through 
53993) that health care providers must transmit all of the CCDS 
information as part of this summary care record, if known, and that 
health care providers must always transmit information about the 
problem list, medications, and medication allergies, or validate that 
this information is not known.
    As finalized in the 2015 EHR Incentive Programs final rule (80 FR 
62852 through 62861), our policy allows health care providers to 
constrain the information in the summary care record to support 
transitions of care. For instance, we encouraged health care providers 
to send a list of items that he or she believes to be pertinent and 
relevant to the patient's care, rather than a list of all problems, 
whether active or resolved, that have ever populated the problem list. 
While a current problem list must always be included, the health care 
provider can use his or her judgment in deciding which items 
historically present on the problem list, medical history list (if it 
exists in CEHRT), or surgical history list are relevant given the 
clinical circumstances.
    We also wish to encourage eligible hospitals and CAHs to use the 
document template available within the CCDA which contains the most 
clinically relevant information that may be required by the recipient 
of the transition or referral. Accordingly, we are proposing that 
eligible hospitals and CAHs may use any document template within the 
CCDA standard for purposes of the measures under the Health Information 
Exchange objective. While eligible hospitals' and CAHs' CEHRT must be 
capable of sending the full CCDA upon request, we believe this 
additional flexibility will help support efforts to ensure the 
information supporting a transition is relevant.
    For instance, when the eligible hospital or CAH is referring to 
another health care provider, the recommended document is the 
``Referral Note,'' which is designed to communicate pertinent 
information from a health care provider who is requesting services of 
another health care provider of clinical or nonclinical services. When 
the receiving health care provider sends back the information, the most 
relevant CCDA document template may be the ``Consultation Note,'' which 
is generated by a request from a clinician for an opinion or advice 
from another clinician. However, eligible hospitals and CAHs may choose 
to utilize other documents within the CCDA to support transitions, for 
instance the ``Discharge Summary'' document. For more information about 
the CCDA and associated templates, we refer readers to: http://www.hl7.org/documentcenter/public/standards/dstu/CDAR2_IG_CCDA_CLINNOTES_R1_DSTUR2.1_2015AUG.zip.
    We note that under the new scoring methodology we are proposing in 
section VIII.D.5. of the preamble of this proposed rule, measures would 
not have required thresholds for reporting; therefore, if the new 
scoring methodology and measure were finalized, this measure would not 
have a reporting threshold. In the event we do not finalize the 
proposed scoring methodology, we would maintain the current Stage 3 
requirements finalized in previous rulemaking. Therefore, eligible 
hospitals and CAHs would be required report on the Stage 3 Send a 
Summary of Care measure under the Health Information Exchange objective 
codified at Sec.  495.24(c)(7)(ii)(A).
    We are inviting public comment on the measure proposals.
(2) Proposed Removal of the Request/Accept Summary of Care Measure
    We are proposing to remove the Request/Accept Summary of Care 
measure at Sec.  495.24(c)(7)(ii)(B) under the proposed Sec.  
495.24(e)(6) based on our analysis of the existing measure and in 
response to stakeholder input.
    Through review of implementation practices based on stakeholder 
feedback, we believe that the existing Request/Accept Summary of Care 
measure is not feasible for machine calculation in the majority of 
cases. The intent of the measure is to identify when health care 
providers are engaging with other providers of care or care team 
members to obtain up-to-date patient health information and to 
subsequently incorporate relevant data into the patient record. 
However, stakeholders have noted the measure specification does not 
effectively further this purpose. Specifically, the existing measure 
specification results in unintended consequences where health care 
providers implement either:
     A burdensome workflow to document the manual action to 
request

[[Page 20532]]

or obtain an electronic record, for example, clicking a check box to 
document each phone call or similar manual administrative task, or
     A workflow which is limited to only querying internal 
resources for the existence of an electronic document.
    Neither of these two implementation options is desirable when the 
intent of the measure is to incentivize and encourage eligible 
hospitals and CAHs to implement effective workflows to identify, 
receive, and incorporate patient health information from other 
providers of care into the patient record.
    In addition, our analysis identified that the definition of 
``incorporate'' within the Request/Accept Summary of Care measure is 
insufficient to ensure an interoperable result. In the 2015 EHR 
Incentive Programs final rule at 80 FR 62860, we did not define 
``incorporate'' as we believed it would vary based on an eligible 
hospital's or CAH's workflows, patient population, and the referring 
provider of care. In addition, we noted that the information could be 
included as an attachment, as a link within the EHR, as imported 
structured data or reconciled within the record and not exclusively 
performed through use of CEHRT. Further, stakeholder feedback 
highlights the fact that the requirement to incorporate data is 
insufficiently clear regarding what data must be incorporated.
    Our intention was that ``incorporate'' would relate to the 
workflows undertaken in the process of clinical information 
reconciliation further defined in the Clinical Information 
Reconciliation measure (80 FR 62852 through 62862). Taken together, the 
three measures under the Health Information Exchange objective were 
intended to support the referral loop through sending, receiving, and 
incorporating patient health data into the patient record. However, 
stakeholder feedback on the measures suggests that the separation 
between receiving and reconciling patient health information is not 
reflective of clinical and care coordination workflows. Further, 
stakeholders noted that when approached separately, the incorporate 
portion of the Request/Accept Summary of Care measure is both 
inconsistent with and redundant to the Clinical Information 
Reconciliation measure which causes unnecessary burden and duplicative 
measure calculation.
    We are requesting public comments on our proposal to remove the 
Request/Accept Summary of Care measure.
(3) Proposed Removal of the Clinical Information Reconciliation Measure
    We are proposing to remove the Clinical Information Reconciliation 
measure at Sec.  495.24(c)(7)(ii)(C) from the new measures at proposed 
Sec.  495.24(e)(6) to reduce redundancy, complexity, and provider 
burden.
    As discussed in the prior subsection, we believe the Clinical 
Information Reconciliation measure is redundant in regard to the 
requirement to ``incorporate'' electronic summaries of care in light of 
the requirements of the Request/Accept Summary of Care measure. In 
addition, the measure is not fully health IT based as the exchange of 
health care information is not required to complete the measure action 
and the measure specification is not limited to only the reconciliation 
of electronic information in health IT supported workflows. We stated 
in the 2015 EHR Incentive Programs final rule at 80 FR 62861 that the 
clinical information reconciliation process could involve both 
automated and manual reconciliation to allow the receiving health care 
provider to work with both electronic data received as well as the 
patient to reconcile their health information. Further, stakeholder 
feedback from hospitals, clinicians, and health IT developers indicates 
that because the measure is not fully based on the use of health IT to 
meet the measurement requirements, eligible hospitals and CAHs must 
engage in burdensome tracking of manual workflows. While the overall 
activity of clinical information reconciliation supports quality 
patient care and should be a part of effective clinical workflows, the 
process to record and track each individual action places unnecessary 
burden on eligible hospitals and CAHs.
    We are inviting public comment on our proposal to remove the 
Clinical Information Reconciliation measure.
(4) Proposed New HIE Measure: Support Electronic Referral Loops by 
Receiving and Incorporating Health Information
    We are proposing to add the following new measure for inclusion in 
the Health Information Exchange objective at Sec.  495.24(e)(6)(ii)(B): 
Support Electronic Referral Loops by Receiving and Incorporating Health 
Information. This measure would build upon and replace the existing 
Request/Accept Summary of Care and Clinical Information Reconciliation 
measures.
    Proposed measure name and description: Support Electronic Referral 
Loops by Receiving and Incorporating Health Information: For at least 
one electronic summary of care record received for patient encounters 
during the EHR reporting period for which an eligible hospital or CAH 
was the receiving party of a transition of care or referral, or for 
patient encounters during the EHR reporting period in which the 
eligible hospital or CAH has never before encountered the patient, the 
eligible hospital or CAH conducts clinical information reconciliation 
for medication, mediation allergy, and current problem list.
    We are proposing to combine two existing measures, the Request/
Accept Summary of Care measure and the Clinical Information 
Reconciliation measure, in this new Support Electronic Referral Loops 
by Receiving and Incorporating Health Information measure to focus on 
the exchange of health care information as the current Clinical 
Information Reconciliation measure is not reliant on the exchange of 
health care information nor use of CEHRT to complete the measure 
action. We are not proposing to change the actions associated with the 
existing measures; rather, we are proposing to combine the two measures 
to focus on the exchange of the health care information, reduce 
administrative burden, and streamline and simplify reporting.
    CMS and ONC worked together to define the following for this 
measure:
    Denominator: Number of electronic summary of care records received 
using CEHRT for patient encounters during the EHR reporting period for 
which an eligible hospital or CAH was the receiving party of a 
transition of care or referral, and for patient encounters during the 
EHR reporting period in which the eligible hospital or CAH has never 
before encountered the patient.
    Numerator: The number of electronic summary of care records in the 
denominator for which clinical information reconciliation is completed 
using CEHRT for the following three clinical information sets: (1) 
Medication--Review of the patient's medication, including the name, 
dosage, frequency, and route of each medication; (2) Medication 
allergy--Review of the patient's known medication allergies; and (3) 
Current Problem List--Review of the patient's current and active 
diagnoses.
    For the proposed measure, the denominator would increment on the 
receipt of an electronic summary of care record after the eligible 
hospital or CAH engages in workflows to obtain an electronic summary of 
care record for a transition, referral or patient encounter in which 
the health care provider has never before encountered the patient. The 
numerator would increment upon

[[Page 20533]]

completion of clinical information reconciliation of the electronic 
summary of care record for medications, medication allergies, and 
current problems. The eligible hospital or CAH would no longer be 
required to manually count each individual non-health-IT-related action 
taken to engage with other providers of care and care team members to 
identify and obtain the electronic summary of care record. Instead, the 
proposed measure would focus on the result of these actions when an 
electronic summary of care record is successfully identified, received, 
and reconciled with the patient record. We believe this approach would 
allow eligible hospitals and CAHs to determine and implement 
appropriate workflows supporting efforts to receive the electronic 
summary of care record consistent with the implementation of effective 
health IT information exchange at an organizational level.
    Finally, we are proposing to apply our existing policy for cases in 
which the eligible hospital or CAH determines no update or modification 
is necessary within the patient record based on the electronic clinical 
information received, and the eligible hospital or CAH may count the 
reconciliation in the numerator without completing a redundant or 
duplicate update to the record. We welcome public comment on methods by 
which this specific action could potentially be electronically measured 
by the provider's health IT system--such as incrementing on electronic 
signature or approval by an authorized provider--to mitigate the risk 
of burden associated with manual tracking of the action.
    We welcome public comment on these proposals. In addition, we are 
seeking public comment on methods and approaches to quantify the 
reduction in burden for eligible hospitals and CAHs implementing 
streamlined workflows for this proposed measure. We also are seeking 
public comment on the impact these proposals may have for health IT 
developers in updating, testing, and implementing new measure 
calculations related to these proposed changes. Specifically, we are 
seeking public comment on whether ONC should require developers to 
recertify their EHR technology as a result of the changes proposed, or 
whether they should be able to make the changes and engage in testing 
without recertification. Finally, we are seeking public comment on 
whether this proposed new measure that combines the Request/Accept 
Summary of Care and Clinical Information Reconciliation measures should 
be adopted, or whether either or both of the existing Request/Accept 
Summary of Care and Clinical Information Reconciliation measures should 
be retained in lieu of this proposed new measure.
    In the event we finalize the new scoring methodology we are 
proposing in section VIII.D.5. of the preamble of this proposed rule, 
above, an exclusion would be available for eligible hospitals and CAHs 
that could not implement the Support Electronic Referral Loops by 
Receiving and Incorporating Health Information measure for an EHR 
reporting period in CY 2019.
    We note that under the new scoring methodology we are proposing in 
section VIII.D.5. of the preamble of this proposed rule, measures would 
not have required thresholds for reporting. Therefore, if the proposed 
scoring methodology and measure were finalized, this measure would not 
have a reporting threshold. In the event we do not finalize the 
proposed new scoring methodology, we would maintain the current Stage 3 
requirements finalized in previous rulemaking. Therefore, eligible 
hospitals and CAHs would be required report on the Stage 3 Request/
Accept Summary of Care measure and Clinical Information Reconciliation 
measures under the Health Information Exchange objective codified at 
Sec.  495.24(c)(7)(ii)(B) and (C).
    We also are proposing that, in order to meet this measure, an 
eligible hospital or CAH must use the capabilities and standards as 
defined for CEHRT at 45 CFR 170.315(g)(1) and (g)(2).
d. Measure Proposals for the Provider to Patient Exchange Objective
    The Provider to Patient Exchange objective for eligible hospitals 
and CAHs builds upon the goal of improved access and exchange of 
patient health information, patient centered communication and 
coordination of care using CEHRT. We are proposing a new scoring 
methodology in section VIII.D.5. of the preamble of this proposed rule, 
under which (in section VIII.D.6. of the preamble of this proposed 
rule) which we are proposing to rename the Patient Electronic Access to 
Health Information objective to Provider to Patient Exchange, remove 
the Patient Specific Education measure and rename the Provide Patient 
Access measure to Provide Patients Electronic Access to Their Health 
Information. In addition, we are proposing to remove the Coordination 
of Care through Patient Engagement objective and all associated 
measures. The existing Stage 3 Patient Electronic Access to Health 
Information objective includes two measures under Sec.  
495.24(c)(5)(ii) and the existing Stage 3 Coordination of Care through 
Patient Engagement objective includes three measures under Sec.  
495.24(c)(6)(ii).
    We reviewed the existing Stage 3 requirements and determined that 
the proposals for the Patient Electronic Access to Health Information 
objective and Coordination of Care through Patient Engagement objective 
could reduce program complexity and burden and better focus on 
leveraging the most current health IT functions and standards for 
patient flexibility of access and exchange of health information. We 
are proposing the Provider to Patient Exchange objective would include 
one measure, the existing Stage 3 Provide Patient Access measure, which 
are proposing to rename to Provide Patients Electronic Access to Their 
Health Information. In addition, we are proposing to revise the measure 
description for the Provide Patients Electronic Access to Their Health 
Information measure to change the threshold from more than 50 percent 
to at least one unique patient in accordance with the proposed scoring 
methodology proposed in section VIII.D.5. of the preamble of this 
proposed rule. As discussed in section VIII.D.6.a. of the preamble of 
this proposed rule, we are proposing to remove the exclusion for the 
Provide Patients Electronic Access to Their Health Information measure.
    As discussed below, if we finalize the new scoring methodology we 
are proposing in section VIII.D.5. of the preamble of this proposed 
rule, we are proposing to remove all of the other measures currently 
associated with the Patient Electronic Access to Health Information 
objective and the Coordination of Care through Patient Engagement 
objective.
    If we do not finalize the new scoring methodology we are proposing 
in section VIII.D.5. of the preamble of this proposed rule, we would 
maintain the existing Stage 3 requirements finalized in previous 
rulemaking as outlined in the table in that section which describes 
Stage 3 objectives and measures if new scoring methodology is not 
finalized. Therefore, we would retain the existing Patient Electronic 
Access to Health Information objective, associated measures and 
exclusions under Sec.  495.24(c)(5) and the existing Coordination of 
Care through Patient Engagement objective, associated measures and 
exclusions under Sec.  495.24(c)(6).

[[Page 20534]]

(1) Proposed Modifications To Provide Patient Access Measure
    We are proposing to change the name of the Provide Patient Access 
measure at 42 CFR 495.24(c)(5)(ii)(A) to Provide Patients Electronic 
Access to Their Health Information at proposed 42 CFR 
495.24(e)(7)(ii)(A) to better reflect the emphasis on patient 
engagement in their health care and patient's electronic access of 
their health information through use of APIs. We are proposing to 
change the measure description only to remove the previously 
established threshold from Stage 3, in alignment with our proposed 
implementation of a performance-based scoring methodology, to require 
that the eligible hospital or CAH provide timely access for viewing, 
downloading or transmitting their health information for at least one 
unique patient discharged using any application of the patient's 
choice.
    Proposed name and measure description: Provide Patients Electronic 
Access to Their Health Information: For at least one unique patient 
discharged from the eligible hospital or CAH inpatient or emergency 
department (POS 21 or 23):
     The patient (or the patient authorized representative) is 
provided timely access to view online, download, and transmit his or 
her health information; and
     The eligible hospital or CAH ensures the patient's health 
information is available for the patient (or patient-authorized 
representative) to access using any application of their choice that is 
configured to meet the technical specifications of the API in the 
eligible hospital or CAH's CEHRT.
    We are proposing to change the measure name to emphasize electronic 
access of patient health information as opposed to use of paper based 
actions in accordance with the 2015 EHR Incentive Programs final rule 
policy for Stage 3 to discontinue inclusion of paper based formats and 
limit the focus to only health IT solutions to encourage adoption and 
innovation in use of CEHRT (80 FR 62783 through 62784). In addition, we 
are committed to promoting patient engagement with their health care 
information and ensuring access in an electronic format upon discharge 
from the eligible hospital or CAH.
    We note that under the new scoring methodology we are proposing in 
section VIII.D.5. of the preamble of this proposed rule, measures would 
not have required thresholds for reporting. Therefore, if the new 
scoring methodology and measure were finalized, this measure would not 
have a reporting threshold. In the event we do not finalize the 
proposed scoring methodology, we would maintain the existing Stage 3 
requirements finalized in previous rulemaking. Therefore, eligible 
hospitals and CAHs would be required report on the Stage 3 Provide 
Patient Access measure under the Patient Electronic Access to Health 
Information objective codified at Sec.  495.24(c)(5)(ii)(A).
    We are inviting public comment on the measure proposal.
(2) Proposed Removal of the Patient Generated Health Data Measure
    We are proposing to remove the Patient Generated Health Data (PGHD) 
measure at 42 CFR 495.24(c)(6)(ii)(C) at proposed Sec.  495.24(e)(7) to 
reduce complexity and focus on the goal of using advanced EHR 
technology and functionalities to advance interoperability and health 
information exchange.
    As finalized in the 2015 EHR Incentive Programs final rule at 80 FR 
62851, the measure is not fully health IT based as we did not specify 
the manner in which health care providers would incorporate the data 
received. Instead, we finalized that health care providers could work 
with their EHR developers to establish the methods and processes that 
work best for their practice and needs. We indicated that this could 
include incorporation of the information using a structured format 
(such as an existing field in the EHR or maintaining an isolation 
between the data and the patient record such as incorporation as an 
attachment, link or text reference which would not require the advanced 
use of CEHRT. We note that although this measure requires use of the 
2015 Edition, it does not require key updates to functions and 
standards of health IT, therefore, it does not align with the current 
program goals of improving interoperability, prioritizing actions 
completed electronically and use of advanced CEHRT functionalities.
    We are seeking public comment on our proposal to remove the Patient 
Generated Health Data measure.
(3) Proposed Removal of the Patient-Specific Education Measure
    We are proposing to remove the Patient-Specific Education measure 
at Sec.  495.24(c)(5)(ii)(B) at proposed Sec.  495.24(e)(7) as it has 
proven burdensome to eligible hospitals and CAHs in ways that were 
unintended and detract from health care providers' progress on current 
program priorities.
    The Patient-Specific Education measure was finalized as a Stage 3 
measure for eligible hospitals and CAHs in the 2015 EHR Incentive 
Programs final rule with the intent to build upon the Stage 2 policy 
goals of using CEHRT for provider-patient communication (80 FR 62841 
through 62846).
    We believe that the Patient-Specific Education measure does not 
align with the current emphasis of the Medicare Promoting 
Interoperability Program to increase interoperability, leverage the 
most current health IT functions and standards or reduce burden for 
eligible hospitals and CAHs. For example, the Patient-Specific 
Education measure's primary focus is on use of CEHRT for patient 
resources specific to their health care and diagnosis as well as 
patient centered care. However, the education resources do not need to 
be maintained within or generated by CEHRT. Therefore, even though the 
CEHRT identifies the patient educational resources, the process to 
generate them could take additional time and interrupt health care 
provider's workflows. In addition, there could be redundancy in 
providing educational materials based on resources identified by the 
CEHRT as CEHRT identifies educational resources using the patient's 
medication list and problem list but can also include other elements as 
well. If there are no changes to a patient's health status or treatment 
based on his or her health care information, there would likely be many 
resources and materials that present the same type of information and 
could increase burden to the health care provider in seeking additional 
resources to provide.
    We are inviting public comment on our proposal to remove the 
Patient-Specific Education measure.
(4) Proposed Removal of the Secure Messaging Measure
    We are proposing to remove the Secure Messaging measure at Sec.  
495.24(c)(6)(ii)(B) at proposed Sec.  495.24(e)(7) as it has proven 
burdensome to eligible hospitals and CAHs in ways that were unintended 
and detract from health care providers' progress on current program 
priorities.
    Secure Messaging was finalized as a Stage 3 measures for eligible 
hospitals and CAHs in the 2015 EHR Incentive Programs final rule with 
the intent to build upon the Stage 2 policy goals of using CEHRT for 
provider-patient communication (80 FR 62841 through 62849). As 
mentioned above, we believe that Secure Messaging does not align with 
the current emphasis of the Medicare Promoting Interoperability Program 
to increase interoperability or reduce burden for eligible hospitals 
and CAHs.

[[Page 20535]]

    In addition, we believe there is burden associated with tracking 
secure messages, including the unintended consequences of workflows 
designed for the measure rather than for clinical and administrative 
effectiveness. We note that Secure Messaging is not part of the EHR 
Incentive Programs requirements for eligible hospitals and CAHs under 
Modified Stage 2. This measure was finalized in the 2015 EHR Incentive 
Programs final rule for Stage 3 (80 FR 62846 through 62852) under the 
Coordination of Care Through Patient Engagement objective which allows 
health care providers flexibility by requiring them to report on all 
three measures but only require them to meet the thresholds of two 
measures. This allows health care providers the option to choose 
measure options that best fit their organizational needs and patient 
population. We believe that because this measure is not currently 
required, removal would not negatively impact patient engagement nor 
care coordination and serve to decrease burden.
    In addition, after further review, we believe that this measure may 
not be practical for eligible hospitals and CAHs as the patient would 
likely receive follow up care from another health care provider such as 
the patient's primary care physician, a rehabilitation facility, or 
home health after discharge. The patient would communicate with those 
health care providers instead of the hospital for information related 
to their health post-discharge.
    We are inviting public comment on our proposal to remove the Secure 
Messaging measure.
(5) Proposed Removal of the View, Download or Transmit Measure
    We are proposing to remove the View, Download or Transmit measure 
at Sec.  495.24(c)(6)(ii)(A) at proposed Sec.  495.24(e)(7) as it has 
proven burdensome to eligible hospitals and CAHs in ways that were 
unintended and detract from eligible hospitals and CAHs progress on 
current program priorities.
    We received health care provider and stakeholder feedback through 
correspondence, public forums, and listening sessions indicating there 
is ongoing concern with measures which require patient action for 
successful attestation. We have noted that data analysis on the patient 
action measures supports stakeholder concerns that barriers exist which 
impact a provider's ability to meet them. Health care providers have 
noted that the demographics of their patient populations which may 
include low-income, location in remote, rural areas and an aging 
population contribute to the barriers as the patients do not have 
access to computers, internet and/or email. They have also noted that 
this particular population is concerned with having their health 
information online. In addition, stakeholders have indicated that 
successful attestation of the measure is reliant upon the patient, and 
patient education and engagement may not be enough to overcome the 
barriers. In the 2015 EHR Incentive Programs final rule at 80 FR 62789, 
we reduced the thresholds for both patient action measures of VDT and 
Secure Messaging based on concerns from health care providers and to 
increase successful attestation on this measure. After additional 
review, we note that successful attestation predicated solely on a 
patient's action has inadvertently created burdens to health care 
providers and detracts from progress on the Promoting Interoperability 
Program's measure goals of focusing on patient care, interoperability 
and leveraging advanced used of health IT. Therefore, we are proposing 
to remove the View, Download or Transmit measure.
    We are inviting public comment on our proposal to remove the View, 
Download or Transmit measure.
e. Proposed Modifications to the Public Health and Clinical Data 
Registry Reporting Objective and Measures
    In connection with the new scoring methodology we are proposing in 
section VIII.D.5. of the preamble of this proposed rule, we are 
proposing changes to the Public Health and Clinical Data Registry 
Reporting objective and six associated measures under 42 CFR 
495.24(c)(8)(ii)(A) through (F) in proposed 42 CFR 495.24(e)(7). We 
believe that public health reporting through EHRs will extend the use 
of electronic reporting solutions to additional events and care 
processes, increase timeliness and efficiency of reporting and replace 
manual data entry.
    We are proposing to change the name of the objective to Public 
Health and Clinical Data Exchange. Under the new scoring methodology 
proposed in section VII.D.5. of the preamble of this proposed rule, in 
aligning with our goal to increase flexibility, improve value, and 
focus on burden reduction, we are proposing that eligible hospitals and 
CAHs would be required to attest to the Syndromic Surveillance 
Reporting measure and at least one additional measure from the 
following options: Immunization Registry Reporting; Clinical Data 
Registry Reporting; Electronic Case Reporting; Public Health Registry 
Reporting; and Electronic Reportable Laboratory Result Reporting.
    We are proposing to require the Syndromic Surveillance Reporting 
measure under the Public Health and Clinical Data Exchange objective 
because the CDC indicates the primary source of data for syndromic 
surveillance comes from EHRs in emergency care settings. Typically, EHR 
data transmitted from health care facilities to public health agencies 
for syndromic surveillance are not filtered or categorized. As a 
result, public health agencies can use the same data that support 
delivery of care for an all-hazards surveillance approach.
    The EHR Incentive Program has enabled the growth of syndromic 
surveillance across the country and in a number of States, such as 
Illinois and Wisconsin, nearly all of the hospitals with emergency 
departments are participating. More complete coverage allows public 
health agencies to monitor trends in emergency department visits with 
more precision, detect smaller increases in morbidity, identify 
emerging health threats in smaller geographic areas, and collaborate 
with healthcare and other State agencies to respond quickly to emerging 
health threats.
    In addition, syndromic surveillance reporting via CEHRT leverages 
the wealth and depth of clinical information that has not been captured 
before to study emerging health conditions like the rising opioid 
overdose epidemic. The data will also provide a unique opportunity to 
examine rare conditions and new procedures. We are seeking public 
comment on the proposal to require reporting on this measure.
    We stated in the 2015 EHR Incentive Programs final rule at 80 FR 
62771 that one of the program goals was to increase interoperability 
through public health registry exchange of data. We continue to believe 
that public health reporting is valuable in terms of health information 
exchange between health care providers and public health and clinical 
data registries. For example, when immunization information is directly 
exchanged between EHRs and registries, patient information may be 
accessed by all of a patient's health care providers for improved 
continuity of care and reduced provider burden, as well as supporting 
population health monitoring. While we believe that it is important to 
leverage health IT through advanced use of CEHRT, for public health and 
clinical data registries reporting, we also want to reduce burden. 
Through stakeholder feedback, we understand that some of the existing 
active engagement requirements are

[[Page 20536]]

complicated and confusing, and contributed to unintended burden due to 
issues related to readiness or onboarding for electronic exchange with 
registries. Therefore, under the new scoring methodology proposed in 
section VII.D.5. of the preamble of this proposed rule, we are 
proposing to require attestation to only two measures under the Public 
Health and Clinical Data Exchange objective instead of three, which is 
currently required under Stage 3.
    In addition, we intend to propose in future rulemaking to remove 
the Public Health and Clinical Data Exchange objective and measures no 
later than CY 2022, and are seeking public comment on whether hospitals 
will continue to share such data with public health entities once the 
Public Health and Clinical Data Exchange objective and measures are 
removed, as well as other policy levers outside of the Promoting 
Interoperability Program that could be adopted for continued reporting 
to public health and clinical data registries, if necessary. As noted 
above, while we believe that these registries provide the necessary 
monitoring of public health nationally and contribute to the overall 
health of the nation, we are also focusing on reducing burden and 
identifying other appropriate venues in which reporting to public 
health and clinical data registries could be reported. We are seeking 
public comment on the role that each of the public health and clinical 
data registries should have in the future of the Promoting 
Interoperability Programs and whether the submission of this data 
should still be required when the incentive payments for meaningful use 
of CEHRT will end in 2021.
    Lastly, we are seeking public comment on whether the Promoting 
Interoperability Programs are the best means for promoting the sharing 
of clinical data with public health entities.
    In the event we do not finalize the new scoring methodology we are 
proposing in section VIII.D.5. of the preamble of this proposed rule, 
we would maintain the existing Stage 3 requirements finalized in 
previous rulemaking and outlined in the table in that section which 
describes Stage 3 objectives and measures if new scoring methodology is 
not finalized. Therefore, we would retain the existing Public Health 
and Clinical Data Registry Reporting objective and associated measures 
and exclusions under Sec.  495.24(c)(8).
f. Request for Comment--Potential New Measures for HIE Objective: 
Health Information Exchange Across the Care Continuum
    We are working to introduce additional flexibility to allow 
providers a wider range of options in selecting measures that are most 
appropriate to their setting, patient population, and clinical practice 
improvement goals. For this reason, we are seeking public comment on a 
potential concept for two additional measure options for the Health 
Information Exchange objective for eligible hospitals and CAHs.
    The Stage 3 program requirements for health information exchange 
primarily focused on the exchange between and among eligible hospitals, 
CAHs and eligible professionals. While these use cases represent a 
significant portion of the health care industry, the care continuum is 
much broader and includes a wide range of health care providers and 
settings of care that have adopted and implemented health IT systems to 
support patient care and electronic information exchange. Specifically, 
health care providers in long-term care and post-acute care settings, 
skilled nursing facilities, and behavioral health settings have made 
significant advancements in the adoption and use of health IT. Many 
current Promoting Interoperability Program participants are now engaged 
in bi-directional exchange of patient health information with these 
health care providers and settings of care and many more are seeking to 
incorporate these workflows as part of efforts to improve care team 
coordination or to support alternative payment models.
    For these reasons, we are seeking public comment on two potential 
new measures for inclusion in the program to enable eligible hospitals 
and CAHs to exchange health information through health IT supported 
care coordination across a wide range of settings.
    New Measure Description for Support Electronic Referral Loops by 
Sending Health Information Across the Care Continuum: For at least one 
transition of care or referral to a provider of care other than an 
eligible hospital or CAH, the eligible hospital or CAH creates a 
summary of care record using CEHRT; and electronically exchanges the 
summary of care record.
    New Measure Denominator: Number of transitions of care and 
referrals during the EHR reporting period for which the eligible 
hospital or CAH inpatient or emergency department (POS 21 or 23) was 
the transitioning or referring provider to a provider of care other 
than an eligible hospital or CAH.
    New Measure Numerator: The number of transitions of care and 
referrals in the denominator where a summary of care record was created 
and exchanged electronically using CEHRT.
    New Measure Description for Support Electronic Referral Loops By 
Receiving and Incorporating Health Information Across the Care 
Continuum: For at least one electronic summary of care record received 
by an eligible hospital or CAH from a transition of care or referral 
from a provider of care other than an eligible hospital or CAH, the 
eligible hospital or CAH conducts clinical information reconciliation 
for medications, mediation allergies, and problem list.
    New Measure Denominator: The number of electronic summary of care 
records received for a patient encounter during the EHR reporting 
period for which an eligible hospital or CAH was the recipient of a 
transition of care or referral from a provider of care other than an 
eligible hospital or CAH.
    New Measure Numerator: The number of electronic summary of care 
records in the denominator for which clinical information 
reconciliation was completed using CEHRT for the following three 
clinical information sets: (1) Medication--Review of the patient's 
medication, including the name, dosage, frequency, and route of each 
medication; (2) Medication allergy--Review of the patient's known 
medication allergies; and (3) Current Problem List--Review of the 
patient's current and active diagnoses.
    We are seeking public comment on whether these two measures should 
be combined into one measure so that an eligible hospital or CAH that 
is engaged in exchanging health information across the care continuum 
may include any such exchange in a single measure. We are seeking 
public comment on whether the denominators should be combined to a 
single measure including both transitions of care from a hospital and 
transitions of care to a hospital. We also are seeking public comment 
on whether the numerators should be combined to a single measure 
including both the sending and receiving of electronic patient health 
information. We are seeking public comment on whether the potential new 
measures should be considered for inclusion in a future program year or 
whether stakeholders believe there is sufficient readiness and interest 
in these measures to adopt them as early as 2019. For the purposes of 
focusing the denominator, we are seeking public comment regarding 
whether the potential new measures should be limited to transitions of 
care and referrals specific to long-term and post-acute care, skilled 
nursing care,

[[Page 20537]]

and behavioral health care settings. We also are seeking public comment 
on whether additional settings of care should be considered for 
inclusion in the denominators and if a provider should be allowed to 
limit the denominators to a specific type of care setting based on 
their organizational needs, clinical improvement goals, or 
participation in an alternative payment model. Finally, we are seeking 
public comment on the impact the potential new measures may have for 
health IT developers to develop, test, and implement a new measure 
calculation for a future program year.
7. Proposed Application of Proposed Scoring Methodology and Measures 
Under the Medicaid Promoting Interoperability Program
    As indicated in sections VIII.D.5. and VIII.D.6. of the preamble of 
this proposed rule, we are not proposing to require States to adopt the 
new scoring methodology and measures that we are proposing. Instead, we 
are proposing to give States the option to adopt the new scoring 
methodology we are proposing in section VIII.D.5. of the preamble of 
this proposed rule together with the measures proposals included in 
section VIII.D.6. of the preamble of this proposed rule for their 
Medicaid Promoting Interoperability Programs. Any State that wishes to 
exercise this option must submit a change to its State Medicaid HIT 
Plan (SMHP) for CMS' approval, as specified in Sec.  495.332. If a 
State chooses not to submit such a change, or if the change is not 
approved, the objectives, measures, and scoring would remain the same 
as currently specified under Sec.  495.24. We believe that States are 
unlikely to choose this option due to concerns with burden, time 
constraints and costs associated with implementing updates to 
technology and reporting systems, as very few eligible hospitals will 
be eligible to receive an incentive payment under the Medicaid 
Promoting Interoperability Program in 2019 and subsequent years. 
However, our proposal to extend this option to States would allow them 
flexibility to benefit from the improvements to meaningful use scoring 
outlined in this proposed rule, if they so choose. Similarly, we also 
request public comment on whether we should modify the objectives and 
measures for eligible professionals (EPs) in the Medicaid Promoting 
Interoperability Program in order to encourage greater interoperability 
for Medicaid EPs. We are interested in policy options that should be 
considered, including the benefits of greater alignment with the Merit-
Based Incentive Payment System requirements for Eligible Clinicians. We 
also are inviting comments on the burdens and hurdles that such policy 
changes might create for EPs and States.
    In connection with these proposals regarding the scoring 
methodology and measures, we are proposing to require under Sec.  
495.40(b)(2)(vii) ``dual-eligible'' eligible hospitals and CAHs (those 
that are eligible for an incentive payment under Medicare for 
meaningful use of CEHRT and/or subject to the Medicare payment 
reduction for failing to demonstrate meaningful use, and are also 
eligible to earn a Medicaid incentive payment for meaningful use) to 
demonstrate meaningful use for the Promoting Interoperability Program 
to CMS, and not to their respective State Medicaid agency, beginning 
with the EHR reporting period in CY 2019. This includes all attestation 
requirements, including the objectives and measures of meaningful use, 
in addition to reporting clinical quality measures. In the past, we 
have generally adopted a common definition of meaningful use under 
Medicare and Medicaid (for example, 77 FR 44324 through 44326). If we 
adopt the proposals made in this rule, there would not be a common 
definition of meaningful use, unless a State chooses to exercise the 
option described above and receives approval from CMS. In light of 
these changes, we believe it would be more efficient and 
straightforward in terms of program administration and operations if 
all dual-eligible eligible hospitals and CAHs demonstrate meaningful 
use to CMS. If a dual-eligible eligible hospital or CAH instead 
demonstrates meaningful use to its State Medicaid agency, it would only 
qualify for an incentive payment under Medicaid (assuming it meets all 
eligibility and other program requirements), and it would not qualify 
for an incentive payment under Medicare and/or avoid the Medicare 
payment reduction. The proposals in this rule would not change the 
deeming policy under the definition of meaningful EHR user under Sec.  
495.4, under which an eligible hospital or CAH that successfully 
demonstrates meaningful use to CMS would be deemed a meaningful EHR 
user for purposes of the Medicaid incentive payment.
    We also are proposing to amend the requirements for State reporting 
to CMS under the Medicaid Promoting Interoperability Program under 
Sec.  495.316(g), so that States would not be required to report, for 
program years after 2018, provider-level attestation data for each 
eligible hospital that attests to the State to demonstrate meaningful 
use.
    We are seeking public comments on these proposals.
8. Promoting Interoperability Program Future Direction
    In future years of the Promoting Interoperability Program, we will 
continue to consider changes which support a variety of HHS goals, 
including: Reducing administrative burden, supporting alignment with 
the Quality Payment Program, advancing interoperability and the 
exchange of health information, and promoting innovative uses of health 
IT. We believe a focus on interoperability and simplification will 
reduce health care provider burden while allowing flexibility to pursue 
innovative applications that improve care delivery. One strategy we are 
exploring is creating a set of priority health IT activities that would 
serve as alternatives to the traditional EHR Incentive Program 
measures.
    For example, we are seeking public comment on whether participation 
in the Trusted Exchange Framework and Common Agreement (TEFCA) should 
be considered a health IT activity that could count for credit within 
the Health Information Exchange objective in lieu of reporting on 
measures for this objective. The 21st Century Cures Act (Pub. L. 114-
255), enacted in 2016, requires HHS to take steps to enable the 
electronic sharing of health information ensuring interoperability for 
health care providers and settings across the care continuum. Congress 
directed ONC to ``develop or support a trusted exchange framework, 
including a common agreement among health information networks 
nationally.'' In January 2018, ONC released a draft version of the 
Trusted Exchange Framework.\383\ ONC will revise the draft TEF based on 
public comment and ultimately release a final version of the Trusted 
Exchange Framework that will subsequently be available for adoption by 
HINs and their participants seeking to participate in nationwide health 
information exchange. By participating in, or serving as, a health 
information network, health IT developers and other stakeholders can 
ensure that health care providers have the ability to seamlessly share 
and receive a core set of data from other network participants in 
accordance with a set of permitted purposes and

[[Page 20538]]

applicable privacy and security requirements.
---------------------------------------------------------------------------

    \383\ The draft version of the Trusted Exchange Framework may be 
accessed at: https://beta.healthit.gov/topic/interoperability/trusted-exchange-framework-and-common-agreement.
---------------------------------------------------------------------------

    To qualify for this activity, an eligible hospital or CAH would 
demonstrate that they are using CEHRT from a developer who participates 
in or serves as a health information network which has adopted the 
TEFCA. Eligible hospitals and CAHs could also be required to 
demonstrate that they are active participants in a health information 
network and routinely sharing health information to support care 
transitions. They could also be required to demonstrate that their 
CEHRT enables the use of an open API to exchange information with the 
network.
    We also are considering a health IT activity in which eligible 
hospitals and CAHs could obtain credit if they maintain an open API 
which allows patients to access their health information through a 
preferred third party. This could be the open API maintained to comply 
with the terms of the TEFCA or a standalone offering as long as the API 
offers ongoing persistent access to outside parties. Under this 
approach, an eligible hospital or CAH that attests to making such an 
open API available for the purposes of ensuring patients have access to 
their health information would receive full credit for the Provide 
Patient Access measure under this objective.
    Finally, we are considering developing a health IT activity which 
would allow eligible hospitals and CAHs to obtain credit under the 
Public Health and Clinical Data Exchange objective for piloting 
emerging technology standards. A priority outcome for the draft Trusted 
Exchange Framework is enabling bulk data queries which health care 
providers and other stakeholders can utilize to conduct effective 
population health management across their entire attributed population. 
However, technical infrastructure to support this use case on a 
widespread basis is still in development.
    HHS could develop a health IT activity under which an eligible 
hospital or CAH would participate in a pilot, and eventually implement 
in production, use of an API based on the emerging update to the FHIR 
standard which would allow population level data access through an API 
in lieu of reporting on measures under the Public Health and Clinical 
Data Exchange objective.
    We welcome stakeholder comments on the concept of adopting health 
IT activities, and specifically on the health IT activities described 
above. We also welcome recommendations for other health IT activities 
through which eligible hospitals and CAHs could earn credit in lieu of 
reporting on specific measures, and which add value for patients and 
health care providers, are relevant to patient care and clinical 
workflows, support alignment with existing objectives, promote 
flexibility, are feasible for implementation, are innovative in the use 
of health IT and promote interoperability.
    Finally, we specifically are seeking public comments on the 
following questions:
     What health IT activities should CMS consider recognizing 
in lieu of reporting on objectives that would most effectively advance 
priorities for nationwide interoperability and spur innovation? What 
principles should CMS employ to identify health IT activities?
     Do stakeholders believe that introducing health IT 
activities in lieu of reporting on measures would decrease burden 
associated with the Promoting Interoperability Programs?
     If additional measures were added to the program, what 
measures would be beneficial to add to promote our goals of care 
coordination and interoperability?
     How can the Promoting Interoperability Program for 
eligible hospitals and CAHs further align with the Quality Payment 
Program (for example, requirements for eligible clinicians under MIPS 
and Advanced APMs) to reduce burden for health care providers, 
especially hospital-based MIPS eligible clinicians?
     What other steps can HHS take to further reduce the 
administrative burden associated with the Promoting Interoperability 
Program?
    9. Clinical Quality Measurement for Eligible Hospitals and Critical 
Access Hospitals (CAHs) Participating in the Medicare and Medicaid 
Promoting Interoperability Programs
a. Background and Current CQMs
    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 
clinical quality measures (referred to as CQMs or eCQMs) selected by 
CMS using CEHRT, as part of being a meaningful EHR user under the 
Medicare and Medicaid Promoting Interoperability Programs.
    The table below lists the 16 CQMs available for eligible hospitals 
and CAHs to report under the Medicare and Medicaid PI Programs 
beginning in CY 2017 (81 FR 57255).

                           CQMs for Eligible Hospitals and CAHs Beginning With CY 2017
----------------------------------------------------------------------------------------------------------------
                Short name                                      Measure name                          NQF No.
----------------------------------------------------------------------------------------------------------------
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.
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/                 0436
                                            Flutter.
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                       0372
                                            Prophylaxis.
----------------------------------------------------------------------------------------------------------------
+ NQF endorsement has been removed.

[[Page 20539]]

 
* Measure name has been shortened. We refer readers to annually updated measure specifications on the CMS eCQI
  Resource Center web page for further information at: https://www.healthit.gov/newsroom/ecqi-resource-center.

b. Proposed CQMs for Reporting Periods Beginning With CY 2020
    As we have stated previously in rulemaking (82 FR 38479), we plan 
to continue to align the CQM reporting requirements for the PI Programs 
with the Hospital IQR Program. In order to move the program forward in 
the least burdensome manner possible, while maintaining a set of the 
most meaningful quality measures and continuing to incentivize 
improvement in the quality of care provided to patients, we believe it 
is appropriate to propose to remove certain eCQMs at this time to 
develop an even more streamlined set of the most meaningful eCQMs for 
hospitals. To align with the Hospital IQR Program, we are proposing to 
reduce the number of eCQMs in the Medicare and Medicaid Promoting 
Interoperability Programs eCQM measure set from which eligible 
hospitals and CAHs report, by proposing to remove eight eCQMs (from the 
16 eCQMs currently in the measure set) beginning with the reporting 
period in CY 2020. The eight eCQMs we are proposing to remove are:
     Primary PCI Received Within 90 Minutes of Hospital Arrival 
(NQF #0163) (AMI-8a);
     Home Management Plan of Care Document Given to Patient/
Caregiver (CAC-3);
     Median Time from ED Arrival to ED Departure for Admitted 
ED Patients (NQF #0495) (ED-1);
     Hearing Screening Prior to Hospital Discharge (NQF #1354) 
(EHDI-1a);
     Elective Delivery (NQF #0469) (PC-01);
     Stroke Education (STK-08) (adopted at 78 FR 50807;
     Assessed for Rehabilitation (NQF #0441) (STK-10); and
     Median Time from ED Arrival to ED Departure for Discharged 
ED Patients (NQF 0496) (ED-3).
    We note that the first seven eCQMs on this list are currently 
included in the Hospital IQR Program, and in section VIII.A.5.(b)(9), 
we are proposing to remove them from the Hospital IQR Program beginning 
in CY 2020. For more information on the first seven eCQMs selected for 
removal, we refer readers to section VIII.A.5.(b)(9) of the preamble of 
this proposed rule.
    We believe that a coordinated reduction in the overall number of 
eCQMs in both the Hospital IQR Program and Medicare and Medicaid EHR 
Promoting Interoperability will reduce certification burden on 
hospitals, improve the quality of reported data by enabling eligible 
hospitals and CAHs to focus on a smaller, more specific subset of CQMs 
while still allowing eligible hospitals and CAHs some flexibility to 
select which eCQMs to report that best reflect their patient 
populations and support internal quality improvement efforts. With 
respect to the Median Time from ED Arrival to ED Departure for 
Discharged ED Patients measure (NQF 0496) (ED-3), this is an outpatient 
measure and is not included as an eCQM in the Hospital IQR Program. We 
are proposing to remove it so the eCQMs would align completely between 
the two programs in order to reduce burden and enable eligible 
hospitals and CAHs to easily report electronically through the Hospital 
IQR Program submission mechanism.
    As we stated in section VIII.A.5.(b)(9) with regard to the Hospital 
IQR Program proposal for the CY 2020 reporting period and subsequent 
years, we also considered proposing to remove these eCQMs one year 
earlier, beginning with the CY 2019 reporting period/FY 2021 payment 
determination. In establishing our eCQM policies, we must balance the 
needs of eligible hospitals and CAHs with variable preferences and 
capabilities. Overall, across the range of capabilities and resources 
for eCQM reporting, stakeholders have expressed that they want more 
time to prepare for eCQM changes.
    We recognize that some hospitals and health IT vendors may prefer 
earlier removal in order to forgo maintenance on those eCQMs proposed 
for removal. In preparation for this proposed rule, we weighed the 
relative burdens associated with removing these measures beginning with 
the CY 2019 reporting period or beginning with the CY 2020 reporting 
period. In the event we finalize our proposal to remove these eCQMs, we 
intend to align the timing of the removal for the Medicare and Medicaid 
Promoting Interoperability Programs with the Hospital IQR Program.
    We are inviting public comment on our proposal, including the 
specific measures proposed for removal and the timing of removal from 
the Medicare and Medicaid Promoting Interoperability Programs.
d. Proposed CQM Reporting Periods and Criteria for the Medicare and 
Medicaid Promoting Interoperability Programs in CY 2019
    For CY 2019, we are proposing the same CQM reporting periods and 
criteria as established in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38479 through 38483) for the Medicare and Medicaid EHR Incentive 
Programs in CY 2018, which would be as follows:
    For CY 2019, for eligible hospitals and CAHs that report CQMs 
electronically, we are proposing the reporting period for the Medicare 
and Medicaid Promoting Interoperability Programs would be one, self-
selected calendar quarter of CY 2019 data, and the submission period 
for the Medicare Promoting Interoperability Program would be the 2 
months following the close of the calendar year, ending February 29, 
2020. For eligible hospitals and CAHs that report CQMs by attestation 
under the Medicare Promoting Interoperability 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 
Promoting Interoperability Program, we previously established a CQM 
reporting period of the full CY 2019 (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 2019 (80 FR 62893). We 
are proposing that 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 2019 CQM 
reporting period, ending February 29, 2020. 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.
    For the CY 2019 reporting period, we are proposing that the 
reporting criteria under the Medicare and Medicaid Promoting 
Interoperability Program for eligible hospitals and CAHs reporting CQMs 
electronically would be as follows: For eligible hospitals and CAHs 
participating only in the Promoting

[[Page 20540]]

Interoperability Program, or participating in both the Promoting 
Interoperability Program and the Hospital IQR Program, report on at 
least 4 self-selected CQMs from the set of 16 available CQMs listed in 
the table above.
    We are proposing the following reporting criteria for eligible 
hospitals and CAHs that report CQMs by attestation under the Medicare 
Promoting Interoperability 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 Promoting 
Interoperability Program, for the reporting period in CY 2019--report 
on all 16 available CQMs listed in the table in section VIII.D.9.a. of 
the preamble of this proposed rule, above.
    We are requesting public comments on these proposals.
e. CQM Reporting Form and Method for the Medicare Promoting 
Interoperability Program in CY 2019
    As we stated in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49759 
through 49760), for the reporting periods in 2016 and future years, we 
are requiring QRDA-I for CQM electronic submissions for the Medicare 
EHR Incentive (now Promoting Interoperability) 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.
    The form and method of electronic submission are further explained 
in sub-regulatory 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 (now Promoting Interoperability Program) website 
where guides and tip sheets are located at: http://www.cms.gov/ehrincentiveprograms. For the reporting period in CY 2019 reporting 
period, we are proposing the following for CQM submission under the 
Medicare Promoting Interoperability Program:
     Eligible hospitals and CAHs participating in the Medicare 
Promoting Interoperability Program (single program participation)--
electronically report CQMs through QualityNet Portal.
     Eligible hospital and CAH options for electronic reporting 
for multiple programs (that is, Promoting Interoperability 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 Promoting Interoperability 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 2019, we are proposing to continue our policy regarding the 
electronic submission of CQMs, which requires the use of the most 
recent version of the CQM electronic specification for each CQM to 
which the EHR is certified. For the CY 2019 electronic reporting of 
CQMs, this means eligible hospitals and CAHs are 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 that eligible 
hospitals or CAHs must have their EHR technology certified to all 16 
available CQMs listed in the table above. As discussed in section 
VIII.D.3. of the preamble of this proposed rule, eligible hospitals and 
CAHs are required to use 2015 Edition CEHRT for the Medicare and 
Medicaid Promoting Interoperability Programs in CY 2019. We reiterate 
that an EHR certified for CQMs under the 2015 Edition certification 
criteria does not have to be recertified each time it is updated to a 
more recent version of the CQMs (82 FR 38485).
    We are requesting public comments on these proposals.
f. Request for Comment
    Stakeholders continue to identify areas for improvement in the 
implementation of eCQMs under a variety of CMS programs, including the 
Hospital IQR Program and the Medicare and Medicaid EHR Incentive (now 
Promoting Interoperability) Programs. While effective utilization of 
eCQMs promises greater efficiency and more timely access to data to 
support quality improvement activities, various types of burden 
associated with these measurement approaches detracts from these 
benefits. Moreover, some providers may have low awareness of the 
resources and tools available to help address issues that arise in 
utilizing eCQMs.
    Program design and operations associated with measurement aspects 
of these programs can be a significant source of burden for providers. 
Uncertainty around rapidly shifting timelines and requirements can pose 
significant financial and operational planning challenges for 
organizations, while lack of alignment across programs results in 
further complexity. In addition, the implementation of eCQMs within the 
EHR is a significant source of burden. Health IT products vary widely 
in the eCQMs they offer, and incorporating new measure specifications 
into a product, along with validation and testing of the updates, can 
be challenging and time-consuming. Lack of transparency from developers 
around data sources within the EHR, mapping, measure calculations, and 
reporting schemas, can hinder providers' ability to implement eCQMs and 
ensure the accuracy of results. Moreover, challenges in extracting data 
from the EHR and integrating with other applications can serve as a 
source of burden for providers seeking to bring together different 
technology solutions and work with other third party services to 
complete reporting and quality improvement activities.
    Stakeholders have expressed support for increasing the availability 
of new eCQMs, developing eCQMs that focus on patient outcomes and 
higher impact measurement areas, and exploring how eCQMs can reduce the 
burden associated with chart-abstracted measures. However, they have 
also identified barriers which may contribute to a lack of adequate 
development of eCQMs and limit their potential, including long 
development timelines, lack of guidelines/prioritization of and 
participation in eCQM development, limited field testing, and program 
policies that limit innovation by focusing on ``least common 
denominator'' approaches.
    We are seeking stakeholder feedback on ways that we could address 
these and other challenges related to eCQM use. Specifically, we are 
inviting comment on the following:

[[Page 20541]]

     What aspects of the use of eCQMs are most burdensome to 
hospitals and health IT vendors?
     What program and policy changes, such as improved 
regulatory alignment, would have the greatest impact on addressing eCQM 
burden?
     What are the most significant barriers to the availability 
and use of new eCQMs today?
     What specifically would stakeholders like to see us do to 
reduce burden and maximize the benefits of eCQMs?
     How could we encourage hospitals and health IT vendors to 
engage in improvements to existing eCQMs?
     How could we encourage hospitals and health IT vendors to 
engage in testing new eCQMs?
     Would hospitals and health IT vendors be interested in or 
willing to participate in pilots or models of alternative approaches to 
quality measurement that would explore less burdensome ways of 
approaching quality measurement, such as sharing data with third 
parties that use machine learning and natural language processing to 
classify quality of care or other approaches?
     What ways could we incentivize or reward innovative uses 
of health IT that could reduce burden for hospitals?
     What additional resources or tools would hospitals and 
health IT vendors like to have publicly available to support testing, 
implementation, and reporting of eCQMs?
10. Participation in the Medicare Promoting Interoperability Program 
for Subsection (d) Puerto Rico Hospitals
a. Background
    In the Stage 1 final rule (77 FR 44448), we noted that subsection 
(d) Puerto Rico hospitals as defined in section 1886(d)(9)(A) of the 
Act were not ``eligible hospitals'' as defined in section 1886(n)(6)(B) 
of the Act, and therefore were not eligible for the incentive payments 
for the meaningful use of CEHRT under section 1886(n) of the Act. 
Section 602(a) of the Consolidated Appropriations Act, 2016 (Pub. L. 
114-113) subsequently amended section 1886(n)(6)(B) of the Act to 
include subsection (d) Puerto Rico hospitals in the definition of 
``eligible hospital,'' which made subsection (d) Puerto Rico hospitals 
eligible for the incentive payments under section 1886(n) of the Act 
for hospitals that are meaningful EHR users and subject to the payment 
reductions under section 1886(b)(3)(B)(ix) of the Act for hospitals 
that are not meaningful EHR users. In order to take into account delays 
in implementation, section 602(d) of the Consolidated Appropriations 
Act, 2016 adjusted the existing timelines for the incentive payments by 
five years and payment reductions by 7 years for subsection (d) Puerto 
Rico hospitals, as further discussed in the sections below.
    As authorized under section 602(c) of the Consolidated 
Appropriations Act, 2016, we have previously elected to implement the 
amendments made by section 602 as applied to subsection (d) Puerto Rico 
hospitals through program instruction. In doing so we have sought to 
align the policies for subsection (d) Puerto Rico hospitals with our 
existing policies for eligible hospitals under the Medicare Promoting 
Interoperability Program to the greatest extent possible, while taking 
into account the unique circumstances applicable to hospitals on Puerto 
Rico. In the following sections of the proposed rule, we are proposing 
to codify the program instructions we have issued to subsection (d) 
Puerto Rico hospitals and to amend our regulations under Parts 412 and 
495 such that the provisions that apply to eligible hospitals would 
include subsection (d) Puerto Rico hospitals unless otherwise 
indicated.
    We are requesting public comments on the proposals made in the 
following sections.
b. Definitions
(1) Eligible Hospital: Subsection (d) Puerto Rico Hospitals
    We are proposing to define a ``Puerto Rico eligible hospital'' 
under Sec.  495.100 as a subsection (d) Puerto Rico hospital as defined 
in section 1886(d)(9)(A) of the Act.
    We are proposing to amend the definition of ``eligible hospital'' 
under Sec.  495.100 to include Puerto Rico eligible hospitals unless 
otherwise indicated.
    We are proposing to amend the general provisions under Sec.  
412.200 as related to prospective payment rates for inpatient operating 
costs for subsection (d) Puerto Rico hospitals.
(2) EHR Reporting Period: Subsection (d) Puerto Rico Hospitals
    Section 602(d) of the Consolidated Appropriations Act, 2016 
provides that for subsection (d) Puerto Rico hospitals, FY 2016 is the 
first payment year under section 1886(n)(2)(G)(i) of the Act for which 
an incentive payment could be made to a hospital that is a meaningful 
EHR user. The definition of ``EHR reporting period'' under Sec.  495.4 
specifies for eligible hospitals for the FY 2016 payment year an EHR 
reporting period of any continuous 90-day period in CY 2016, which is 
consistent with the program instructions we issued to subsection (d) 
Puerto Rico hospitals, so we do not believe any amendment is necessary. 
We are proposing to amend the definition of ``EHR reporting period'' 
under Sec.  495.4 to specify for Puerto Rico eligible hospitals for the 
FY 2017 payment year an EHR reporting period of a minimum of any 
continuous 14-day period in CY 2017, which is consistent with the 
program instructions we issued to subsection (d) Puerto Rico hospitals. 
We allowed for a 14-day EHR reporting period in CY 2017 to acknowledge 
and account for the devastation to Puerto Rico caused by Hurricane 
Maria. We have not issued program instructions to subsection (d) Puerto 
Rico hospitals concerning the EHR reporting periods for the payment 
years after FY 2017. For the FY 2018, 2019, and 2020 payment years, we 
are proposing an EHR reporting period of a minimum of any continuous 
90-day period in CYs 2018, 2019, and 2020 respectively for Puerto Rico 
eligible hospitals, and we are proposing corresponding amendments to 
the definition of ``EHR reporting period'' under Sec.  495.4.
(3) EHR Reporting Period for a Payment Adjustment Year for Eligible 
Hospitals: Subsection (d) Puerto Rico Hospitals
    Section 602(d) of the Consolidated Appropriations Act, 2016 
provides that the payment reductions under section 1886(b)(3)(B)(ix) of 
the Act would apply beginning with FY 2022 for subsection (d) Puerto 
Rico hospitals that are not meaningful EHR users for the applicable EHR 
reporting period for the payment adjustment year. Because Puerto Rico 
eligible hospitals would be considered eligible hospitals, the EHR 
reporting periods for payment adjustment years and related policies, 
including deadlines and requests for significant hardship exceptions, 
that we establish for eligible hospitals would also apply to Puerto 
Rico eligible hospitals beginning with the FY 2022 payment adjustment 
year.
(4) Payment Year for Subsection (d) Puerto Rico Hospitals
    Section 602(d) of the Consolidated Appropriations Act, 2016 
provides that for subsection (d) Puerto Rico hospitals, FY 2016 is the 
first payment year under section 1886(n)(2)(G)(i) of the Act for which 
an incentive payment could be made to a hospital that is a meaningful 
EHR user. We are proposing to amend the definition of ``payment year'' 
under Sec.  495.4 to specify for Puerto Rico eligible hospitals, 
payment year means a Federal FY beginning with 2016.

[[Page 20542]]

(5) Payment Adjustment Year for Subsection (d) Puerto Rico Hospitals
    Section 602(d) of the Consolidated Appropriations Act, 2016 
provides that the payment reductions under section 1886(b)(3)(B)(ix) of 
the Act will apply beginning with FY 2022 for subsection (d) Puerto 
Rico hospitals that are not meaningful EHR users for the applicable EHR 
reporting period for the payment adjustment year. We are proposing to 
amend the definition of ``payment adjustment year'' under Sec.  495.4 
to specify for Puerto Rico eligible hospitals, payment adjustment year 
means a Federal fiscal year beginning with 2022.
c. Duration and Timing of Incentive Payments for Subsection (d) Puerto 
Rico Hospitals--Transition Periods and Transition Factors
    Section 602(d) of the Consolidated Appropriations Act, 2016 
provides for a phase down under section 1886(n)(2)(E)(ii) of the Act 
for subsection (d) Puerto Rico hospitals whose first payment year is 
after 2018. We are proposing to amend Sec.  495.104(b) to specify the 
following years for which Puerto Rico eligible hospitals may receive 
incentive payments under section 1886(n) of the Act:
     Puerto Rico eligible hospitals whose first payment year is 
FY 2016 may receive such payments for FYs 2016 through 2019.
     Puerto Rico eligible hospitals whose first payment year is 
FY 2017 may receive such payments for FYs 2017 through 2020.
     Puerto Rico eligible hospitals whose first payment year is 
FY 2018 may receive such payments for FYs 2018 through 2021.
     Puerto Rico eligible hospitals whose first payment year is 
FY 2019 may receive such payments for FY 2019 through 2021.
     Puerto Rico eligible hospitals whose first payment year is 
FY 2020 may receive such payments for FY 2020 through 2021.
    We are proposing to amend Sec.  495.104(c)(5) to specify the 
following transition factors under section 1886(n)(2)(E)(i) of the Act 
for Puerto Rico eligible hospitals:

                      Proposed Transition Factors for Subsection (d) Puerto Rico Hospitals
----------------------------------------------------------------------------------------------------------------
                                                              First Payment Year (FY)
                                 -------------------------------------------------------------------------------
                                       2016            2017            2018            2019            2020
----------------------------------------------------------------------------------------------------------------
2016............................            1.00
2017............................            0.75            1.00
2018............................            0.50            0.75            1.00
2019............................            0.25            0.50            0.75            0.75
2020............................  ..............            0.25            0.50            0.50            0.50
2021............................  ..............  ..............            0.25            0.25            0.25
----------------------------------------------------------------------------------------------------------------

d. Market Basket Adjustment for Subsection (d) Puerto Rico Hospitals
    Section 602(d) of the Consolidated Appropriations Act, 2016 
provides that the payment reductions under section 1886(b)(3)(B)(ix) of 
the Act would apply beginning with FY 2022 for subsection (d) Puerto 
Rico hospitals. We are proposing for a subsection (d) Puerto Rico 
hospital that is not a meaningful EHR user for the EHR reporting period 
for the FY, three-quarters of the applicable percentage increase 
otherwise applicable for such FY shall be reduced by 33 1/3 percent for 
FY 2022, 66 2/3 percent for FY 2023, and 100 percent for FY 2024 and 
each subsequent FY. We are proposing to amend Sec.  412.64(d)(3) to 
reflect these proposed reductions.
11. Proposed Modifications to the Medicare Advantage Promoting 
Interoperability Program
a. Participation in the Medicare Advantage Promoting Interoperability 
Program for Subsection (d) Puerto Rico Hospitals
    Section 1853(m) of the Act provides for incentive payments to 
qualifying Medicare Advantage (MA) organizations for certain affiliated 
eligible hospitals (as defined in section 1886(n)(6)(B)) that 
meaningfully use certified EHR technology, and for application of 
downward payment adjustments to qualifying MA organizations for their 
affiliated hospitals that are not meaningful users of certified EHR 
technology, beginning in FY 2015. As noted in section D.8 of this 
proposed rule, section 602(a) of the Consolidated Appropriations Act, 
2016 amended section 1886(n)(6)(B) of the Act to include subsection (d) 
Puerto Rico hospitals in the definition of ``eligible hospital.'' We 
note that the definition of ``qualifying MA-affiliated hospital'' in 
Sec.  495.200 means an eligible hospital under section 1866(n)(6) that 
meets certain other criteria. Therefore, the amendment to section 
1866(n)(6) by the Consolidated Appropriations Act to include subsection 
(d) Puerto Rico hospitals renders such hospitals potentially eligible 
as qualifying MA-affiliated hospitals for purposes of the Medicare 
Advantage EHR/PI incentives and payment adjustments. We are proposing 
certain changes to our regulations under 42 CFR part 495 so that the 
incentive payment and payment adjustment provisions that apply to MA-
affiliated eligible hospitals are applicable to MA-affiliated eligible 
hospitals in Puerto Rico.
b. Definitions
(1) Payment Year for MA-Affiliated Eligible Hospitals in Puerto Rico
    Section 602(d) of the Consolidated Appropriations Act, 2016 
provides that for subsection (d) Puerto Rico hospitals, FY 2016 is the 
first payment year for which an EHR incentive payment could be made to 
an eligible hospital that is a meaningful EHR user. We are proposing to 
amend the definition of ``payment year'' under Sec.  495.200 to specify 
that, with respect to MA-affiliated eligible hospitals in Puerto Rico, 
payment year means a Federal FY beginning with 2016.
(2) MA Payment Adjustment Year for MA-Affiliated Eligible Hospitals in 
Puerto Rico
    Section 602(d) of the Consolidated Appropriations Act, 2016 
provides for payment reductions to subsection (d) Puerto Rico hospitals 
that are not meaningful EHR users for the applicable EHR reporting 
period for the payment adjustment year, beginning with FY 2022. We are 
proposing to amend the definition of ``MA payment adjustment year'' 
under Sec.  495.200 to specify that, for qualifying MA organizations 
that first receive an MA EHR incentive payment for at least 1 payment 
year for

[[Page 20543]]

an MA-affiliated eligible hospital in Puerto Rico, payment adjustment 
year means a calendar year starting with 2022.
    We are soliciting feedback on whether we should amend the 
definition of ``MA payment adjustment year'' to specify that the 
duration of the reporting period for MA-affiliated eligible hospitals 
for purposes of determining whether a qualifying MA organization is 
subject to a payment adjustment should be other than the full federal 
fiscal year ending in the MA payment adjustment year. We also are 
requesting comments on an alternative approach under which we would use 
the same reporting period that is used for the Medicare Promoting 
Interoperability Program.
c. Payment Adjustments Effective for 2015 and Subsequent MA Payment 
Years With Respect to MA-Affiliated Eligible Hospitals
    Under Sec.  495.211, beginning for MA payment adjustment year 2015, 
payment adjustments set are made to prospective payments (issued under 
section 1853(a)(1)(A) of the Act) of qualifying MA organizations that 
previously received incentive payments under the MA EHR Incentive (now 
Promoting Interoperability) Program, if all or a portion of the MA-
affiliated eligible hospitals that would meet the definition of 
qualifying MA-affiliated eligible hospitals (but for their 
demonstration of meaningful use) are not meaningful EHR users. Section 
495.211(e) sets forth the formula for calculating payment adjustments 
for 2015 and subsequent years with respect to MA-affiliated eligible 
hospitals. We are proposing to amend paragraph (e) by adding a new 
subparagraph (4), which specifies that, prior to payment adjustment 
year 2022, subsection (d) Puerto Rico hospitals are neither qualifying 
nor potentially qualifying MA-affiliated eligible hospitals for 
purposes of applying the payment adjustments under Sec.  495.211.
    We are soliciting comment on whether further regulatory amendments 
are necessary or appropriate so that the EHR incentive payment and 
payment adjustment provisions that apply to MA-affiliated eligible 
hospitals are applicable to MA-affiliated eligible hospitals in Puerto 
Rico in a manner that is consistent with the Consolidated 
Appropriations Act, 2016.
12. Proposed Modifications to the Medicaid Promoting Interoperability 
Program
    The policies proposed in this section would apply only in the 
Medicaid EHR Incentive (now Promoting Interoperability) Program.
a. Proposed Requirements Regarding Prior Approval of Requests for 
Proposals (RFPs) and Contracts in Support of the Medicaid Promoting 
Interoperability Program
    Section 1903(a)(3)(F)(ii) of the Act establishes an enhanced 
federal matching rate of 90 percent for State expenditures related to 
the administration of Medicaid Promoting Interoperability Program 
payments. On July 28, 2010, in the Stage 1 final rule (75 FR 44313, 
44507), we established prior approval requirements for State funding, 
planning documents, proposed budgets, project schedules, and certain 
implementation activities that a State may wish to pursue in support of 
the Medicaid Promoting Interoperability Program, as a condition of 
receipt of the 90 percent FFP available to States under section 
1903(a)(3)(F)(ii) of the Act. To minimize the burden on States, we 
designed the prior approval conditions and prior approval process to 
mirror what was at the time used in support of acquiring automated data 
processing (ADP) equipment and services in conjunction with development 
and operation of States' Medicaid Management Information Systems 
(MMIS), which are the States' automated mechanized claims processing 
and information retrieval systems approved by CMS. Specifically, at 
Sec.  495.324(b)(2) we established that, as a condition of receiving 90 
percent FFP for administration of their Medicaid Promoting 
Interoperability programs, States must receive prior approval for 
requests for proposals and contracts used to complete activities under 
42 CFR part 495 subpart D, unless specifically exempted by HHS, before 
release of the request for proposal or execution of the contract. This 
was consistent with the requirement then in place for MMIS at 45 CFR 
95.611(a)(2). At section 495.324(b)(3) we established that unless 
specifically exempted by HHS, States must receive prior approval for 
contract amendments involving contract cost increases exceeding 
$100,000 or contract time extensions of more than 60 days, prior to 
execution of the contract amendment. This was consistent with the 
requirement then in place at 45 CFR 95.611(b)(2)(iv).
    Subsequently, in the final rule titled ``State Systems Advance 
Planning Document (APD) Process'' (75 FR 66319, October 28, 2010), HHS 
amended 45 CFR 95.611(b)(2)(iii) to establish a $500,000 threshold for 
prior HHS approval of acquisition solicitation documents and contracts 
for ADP equipment or services for which States would seek enhanced 
federal matching funds (75 FR 66331). In the same rule, HHS also 
established at 45 CFR 95.611(b)(2)(iv) a $500,000 prior approval 
threshold for contract amendments for which States would seek enhanced 
Federal match (75 FR 66324). In the final rule titled ``Medicaid 
Program; Mechanized Claims Processing and Information Retrieval Systems 
(90/10)'' (80 FR 75817, 75836 through 75837, December 4, 2015), 45 CFR 
95.611(a)(2) was amended to establish a $500,000 threshold for prior 
approval of acquisitions related to ADP equipment and services matched 
at the enhanced rate for MMIS authorized under 42 CFR part 433, subpart 
C. There was previously no threshold dollar amount for prior approvals 
related to such acquisitions in 45 CFR 95.611(a)(2).
    We are now proposing to amend 42 CFR 495.324(b)(2) and 
495.324(b)(3) to align with current prior approval policy for MMIS and 
ADP systems at 45 CFR 95.611(a)(2)(ii), and (b)(2)(iii) and (iv), and 
to minimize burden on States. Specifically, we are proposing that the 
prior approval dollar threshold in Sec.  495.324(b)(3) would be 
increased to $500,000, and that a prior approval threshold of $500,000 
would be added to Sec.  495.324(b)(2). We also are proposing minor 
amendments to the language of 495.324(b)(2) and (3) to better align it 
with the language of 45 CFR 95.611(b)(2)(iii) and (iv). In addition, in 
light of these proposed changes, we are proposing a conforming 
amendment to amend the threshold in Sec.  495.324(d) for prior approval 
of justifications for sole source acquisitions to be the same $500,000 
threshold. That threshold is currently aligned with the $100,000 
threshold in current Sec.  495.324(b)(3). We believe that amending 
Sec.  495.324(d) to preserve alignment with Sec.  495.324(b)(3) would 
reduce burden on States and maintain the consistency of our prior 
approval requirements. This proposal would not affect the other 
requirements that States must comply with when making acquisitions in 
support of the Medicaid Promoting Interoperability Program under the 
Federal provisions contained in 42 CFR part 495, subpart D, and 
specifically 42 CFR 495.348, regardless of conditions for prior 
approval.
    We believe that this proposal would reduce burden on States by 
raising the prior approval thresholds and generally aligning them with 
the thresholds for prior approval of MMIS and ADP acquisitions costs. 
We are inviting public comments on this proposal.

[[Page 20544]]

b. Funding Availability to States To Conclude the Medicaid Promoting 
Interoperability Program
    Under section 1903(a)(3)(F) and (t) of the Act, State Medicaid 
programs may receive FFP in expenditures for incentive payments to 
certain Medicaid providers to adopt, implement, upgrade, and 
meaningfully use CEHRT. In addition, FFP is available to States for 
reasonable administrative expenses related to administration of those 
incentive payments as long as the State meets certain conditions. 
Specifically, section 1903(a)(3)(F)(i) of the Act establishes 100 
percent FFP to States for incentive payments to eligible Medicaid 
providers (described in section 1903(t)(1) and (2) of the Act) to 
adopt, implement, upgrade, and meaningfully use CEHRT. Section 
1903(a)(3)(F)(ii) of the Act establishes 90 percent FFP to States for 
administrative expenses related to administration of the incentive 
payments.
    In Sec.  495.320 and Sec.  495.322, we provide the general rule 
that States may receive: (1) 100 Percent FFP in State expenditures for 
EHR incentive payments; and (2) 90 percent FFP in State expenditures 
for administrative activities in support of implementing incentive 
payments to Medicaid eligible providers. Section 495.316 establishes 
State monitoring and reporting requirements regarding activities 
required to receive an incentive payment. Subject to Sec.  495.332, the 
State is responsible for tracking and verifying the activities 
necessary for a Medicaid EP or eligible hospital to receive an 
incentive payment for each payment year, as described in Sec.  495.314.
    To date, we have not established a date beyond which 90 percent FFP 
is no longer available to States for their expenditures related to 
administering the Medicaid Promoting Interoperability Program. In the 
Stage 1 final rule (75 FR 44319), we established that, in accordance 
with sections 1903(t)(4)(A)(iii) and (5)(D) of the Act, in no case may 
any Medicaid EP or eligible hospital receive an incentive payment after 
2021 (42 CFR 495.310(a)(2)(v) and 495.310(f)).
    Because December 31, 2021 is the last date that States could make 
Medicaid Promoting Interoperability incentive payments to Medicaid EPs 
and eligible hospitals (other than pursuant to a successful appeal 
related to 2021 or a prior year), we believe it is reasonable for 
States to conclude most administrative activities related to the 
Medicaid Promoting Interoperability Program, including submitting final 
required reports to CMS, by September 30, 2022. Therefore, we are 
proposing to amend Sec.  495.322 to provide that the 90 percent FFP for 
Medicaid Promoting Interoperability Program administration would no 
longer be available for most State expenditures incurred after 
September 30, 2022.
    We are proposing a later sunset date for the availability of 90 
percent enhanced match for State administrative costs related to 
Medicaid Promoting Interoperability Program audit and appeals 
activities, as well as costs related to administering incentive payment 
disbursements and recoupments that might result from those activities. 
We acknowledge that States have a responsibility to conduct audits of 
the payments made to Medicaid providers participating in the Medicaid 
Promoting Interoperability Program, in accordance with Sec.  495.368, 
in order to combat fraud and abuse, and that States also must provide a 
process for EHR incentive payment appeals in accordance with Sec.  
495.370. We expect that these activities will require administration 
for some time after, but at most a year, beyond September 30, 2022. 
Because provider incentive payments could be disbursed up until 
December 31, 2021, we anticipate that States would need additional time 
to review provider risk factors, select samples, and conduct audits. 
Once post-payment audits are completed, States would also need time to 
work with any providers who choose to appeal their audit findings. 
Collectively, the post-payment audit process and/or appeals process 
could take several months, and in some cases might take more than one 
year. Therefore, we are proposing that the 90 percent FFP would 
continue to be available for State administrative expenditures related 
to Medicaid Promoting Interoperability Program audit and appeals 
activities until September 30, 2023. States would not be able to claim 
any Medicaid Promoting Interoperability Program administrative match 
for expenditures incurred after September 30, 2023.
    States should be aware that under this proposal, they would need to 
incur the expenditures for which they would claim the 90 percent FFP 
for Medicaid Promoting Interoperability Program administrative 
activities no later than the sunset dates of September 30, 2022 or 
September 30, 2023, as applicable. This means that for States to claim 
the 90 percent FFP for goods and services related to Medicaid Promoting 
Interoperability Program administrative activities, States would have 
to ensure that the goods and services are provided no later than close 
of business September 30, 2022 or close of business September 30, 2023, 
as applicable. Thus, for example, if an amount that is related to 
administration of a Medicaid Promoting Interoperability Program audit 
or appeal has been obligated by September 30, 2023, but the good or 
service has not yet been furnished by that date, then the expenditure 
could not be claimed at the enhanced 90 percent FFP.
    We are inviting public comments on this proposal, especially on 
whether the timelines proposed provide States with a reasonable amount 
of time to wind down their Medicaid Promoting Interoperability Program.

IX. Proposed Revisions of the Supporting Documentation Required for 
Submission of an Acceptable Medicare Cost Report

A. Background

    Sections 1815(a) and 1833(e) of the Act provide that no Medicare 
payments will be made to a provider unless it has furnished the 
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 
\384\ that cover a 12-month period of time. Under the regulations at 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 years 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 requirement was later imposed for other types of 
providers.
---------------------------------------------------------------------------

    \384\ There are currently nine Medicare cost reports: The 
Hospital and Health Care Complex Cost Report, Form CMS-2552, OMB No. 
0938-0050; the Skilled Nursing Facility and Skilled Nursing Facility 
Health Care Complex Cost Report, Form CMS-2540, OMB No. 0938-0463; 
the Home Health Agency Cost Report, Form CMS-1728, OMB No. 0938-
0022; the Outpatient Rehabilitation Provider Cost Report, Form CMS-
2088, OMB No. 0938-0037; the Independent Rural Health Clinic and 
Freestanding Federally Qualified Health Center Cost Report (prior to 
October 1, 2014), Form CMS-222, OMB No. 0938-0107; the Federally 
Qualified Health Center Cost Report (beginning on or after October 
1, 2014), Form CMS-224, OMB No. 0938-1298; the Organ Procurement 
Organizations and Histocompatibility Laboratory, Form CMS-216, OMB 
No. 0938-0102; the Independent Renal Dialysis Facility Cost Report, 
Form CMS-265, OMB No. 0938-0236; and the Hospice Cost and Data 
Report, Form CMS-1984, OMB No. 0938-0758.
---------------------------------------------------------------------------

    All providers participating in the Medicare program are required 
under Sec.  413.20(a) to maintain sufficient financial records and 
statistical data for proper determination of costs payable under the 
program. Moreover, providers

[[Page 20545]]

must use standardized definitions and follow accounting, statistical, 
and reporting practices that are widely accepted in the hospital and 
related fields. Upon receipt of a provider's cost report, the Medicare 
Administrative Contractor (herein referred to as ``contractor'') 
reviews the cost report to determine its acceptability in accordance 
with Sec.  413.24(f)(5). Each cost report submission by a provider to 
its contractor, including an amended cost report, is considered to be a 
separate cost report submission under Sec.  413.24(f)(5). Each cost 
report submission requires the supporting documentation specified in 
Sec.  413.24(f)(5)(i). A cost report submitted without the required 
supporting documentation is rejected under Sec.  413.24(f)(5)(i). Under 
Sec.  413.24(f)(5)(iii), when the cost report is rejected, it is deemed 
an unacceptable submission and treated as if it had never been filed.
    Several provisions in the regulations requiring supporting 
documentation for the Medicare cost report to be acceptable need to be 
updated to reflect current practices, to improve the accuracy of these 
reports, and to facilitate more efficient contractor review of cost 
reports. The regulations at Sec.  413.24(f)(5)(i) provides that a 
provider's cost report is rejected if the provider does not complete 
and submit the Provider Cost Reimbursement Questionnaire (a 
questionnaire independent of the cost report, OMB No. 0938-0301, also 
known as Form CMS-339). The Form CMS-339 requires the provider to 
submit supporting documents, as applicable, for items such as Medicare 
bad debt, approved educational activities, and cost allocation from a 
home office or chain organization.
    Beginning in 2011, as cost report forms were updated for various 
provider types, the Form CMS-339 was incorporated as a worksheet in the 
Medicare cost report (the worksheet title and placement within the cost 
report vary by provider type), and is no longer submitted as a separate 
supporting document. The Form CMS-339 has been incorporated into all 
Medicare cost reports except for the Organ Procurement Organization 
(OPO) and Histocompatibility Laboratory cost report, Form CMS-216. In 
section IX.B. of the preamble of this proposed rule, we are proposing 
to incorporate the Form CMS-339 into the OPO and Histocompatibility 
cost report, Form CMS-216.
    The cost report worksheet that incorporated the Form CMS-339 
continues to require the provider to submit supporting documents for 
Medicare bad debt, approved educational activities, and certain cost 
allocation information from a home office or chain organization, as 
applicable. However, our regulations at Sec.  413.24(f)(5)(i) do not 
reflect that the Provider Cost Reimbursement Questionnaire, Form CMS-
339, has been incorporated into the Medicare cost report as a worksheet 
because the regulations require the Form CMS-339 to be submitted as a 
supporting document to the cost report.
    Section 413.24(f)(5)(i) also provides that a cost report is 
rejected for a teaching hospital if a copy of the Intern and Resident 
Information System (IRIS) diskette is not included as supporting 
documentation. However, diskettes are no longer used by providers to 
furnish this data to contractors.
    Section 413.20 of the regulations requires providers to maintain 
sufficient financial records and statistical data for the proper 
determination of costs payable under the program as well as an adequate 
ongoing system for furnishing records needed to provide accurate cost 
data and other information capable of verification by qualified 
auditors. In accordance with Sec.  413.20(d), the provider must furnish 
such information to the contractor as may be necessary to assure proper 
payment. Information from the provider relating to Medicaid days used 
in the calculation of DSH payments, charity care charges, uninsured 
discounts, and home office cost allocations are necessary to assure 
proper payment. While our regulations require that these supporting 
documents be maintained by the provider and furnished to the contractor 
to assure proper payment, Sec.  413.24(f)(5) does not require 
submission of supporting documentation for Medicaid days used in the 
calculation of DSH payments, charity care charges, uninsured discounts, 
or home office cost allocations reported on a provider's cost report 
for the provider to have an acceptable cost report submission. These 
supporting documents are often subsequently requested by the 
contractor, and must be submitted by the provider in order to assure 
proper payment, which can delay payments and prolong audits.
    Our specific proposals for revising our regulations are discussed 
below.

B. Proposed Revisions to Regulations

1. Provider Cost Reimbursement Questionnaire
    Section 413.24(f)(5)(i) of the regulations provides that a 
provider's Medicare cost report is rejected for lack of supporting 
documentation if it does not include the Provider Cost Reimbursement 
Questionnaire (also known as Form CMS-339). As discussed in section 
IX.A. of the preamble of this proposed rule, beginning in 2011, as cost 
report forms were updated, the Provider Cost Reimbursement 
Questionnaire, Form CMS-339, was incorporated into all Medicare cost 
reports as a worksheet, except the OPO and Histocompatibility 
Laboratory cost report, Form CMS-216. In this proposed rule, we are 
proposing to incorporate the Provider Cost Reimbursement Questionnaire, 
Form CMS-339, into the OPO and Histocompatibility Laboratory cost 
report, Form CMS-216. The incorporation of the Form CMS-339 into the 
Form CMS-216 will complete our incorporation of the Form CMS-339 into 
all Medicare cost reports.
    In addition, in this proposed rule, we are proposing to revise 
Sec.  413.24(f)(5)(i) by removing the reference to the Provider Cost 
Reimbursement Questionnaire so that Sec.  413.24(f)(5)(i) no longer 
states that a cost report will be rejected for lack of supporting 
documentation if it does not include a Provider Cost Reimbursement 
Questionnaire (Form CMS-339). Furthermore, we are proposing to add 
language to the first sentence of Sec.  413.24(f)(5)(i) to clarify that 
a provider must submit all necessary supporting documents for its cost 
report. We believe this proposal is consistent with the recordkeeping 
requirements in Sec. Sec.  413.20 and 413.24.
2. Intern and Resident Information System (IRIS) Data
    Section 413.24(f)(5)(i) also provides that a Medicare cost report 
for a teaching hospital is rejected for lack of supporting 
documentation if the cost report does not include a copy of the Intern 
and Resident Information System (IRIS) diskette.
    Section 1886(h) of the Act, as added by section 9202 of the 
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), Public 
Law 99-272, establishes a methodology for determining payments to 
hospitals for the GME programs (which is currently implemented in the 
regulations at 42 CFR 413.75 through 413.83). To account for the higher 
indirect patient care costs of teaching hospitals relative to 
nonteaching hospitals, section 1886(d)(5)(B) of the Act provides for a 
payment adjustment known as the IME adjustment under the IPPS for 
hospitals that have residents in an approved GME program. The 
regulation regarding the calculation of this additional payment is 
located at 42 CFR 412.105. (We refer

[[Page 20546]]

readers to section IV.E. of the preamble of this proposed rule for 
additional background on direct GME and IME payments.)
    In accordance with Sec.  413.78(b) for direct GME and Sec.  
412.105(f)(1)(iii)(A) for IME, no individual may be counted as more 
than one full-time equivalent (FTE). A hospital cannot claim the time 
spent by residents training at another hospital; if a resident spends 
time in more than one hospital or in a nonprovider setting, the 
resident counts as a partial FTE based on the proportion of time worked 
at the hospital to the total time worked. A part-time resident counts 
as a partial FTE based on the proportion of allowable time worked 
compared to the total time necessary to fill a full-time internship or 
residency slot.
    In 1990, we established the IRIS, under the authority of sections 
1886(d)(5)(B) and 1886(h) of the Act, in order to facilitate proper 
counting of FTE residents by hospitals that rotate their FTE residents 
from one hospital or nonprovider setting to another. Teaching hospitals 
use the IRIS to collect and report information on residents training in 
approved residency programs. Section 413.24(f)(5)(i) requires teaching 
hospitals to submit the IRIS data along with their Medicare cost 
reports in order to have an acceptable cost report submission. The IRIS 
can be downloaded from CMS' website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Computer-Data-and-Systems/IRIS/index.html?redirect=/iris. We are currently in the process of producing 
a new Extensible Markup Language (XML)-based IRIS file format that 
captures FTE resident count data consistent with the manner in which 
FTEs are reported on the Medicare cost report.
    After receiving the IRIS data along with each teaching hospital's 
cost report, the contractors upload the data to a national database 
housed at CMS, which can be used to identify ``duplicates,'' that is, 
FTE residents being claimed by more than one hospital for the same 
rotation. Identifying duplicates allows the contractors to approach the 
hospitals that simultaneously claimed the same FTE, and correct the 
duplicate reporting on the respective hospitals' cost reports for 
direct GME and IME payment purposes.
    Historically, we would collect the IRIS data from hospitals on a 
diskette, as referenced in Sec.  413.24(f)(5)(i). Because diskettes are 
no longer used by providers to furnish these data to contractors, in 
this proposed rule, we are proposing to remove the reference in the 
regulations to a diskette and instead reference ``Intern and Resident 
Information System data.'' Specifically, we are proposing to amend 
Sec.  413.24(f)(5)(i) by adding a new paragraph (A) to include this 
proposed revised language.
    In addition, to enhance the contractors' ability to review 
duplicates and to ensure residents are not being double-counted, we 
believe it is necessary and appropriate to require that the total 
unweighted and weighted FTE counts on the IRIS for direct GME and IME 
respectively, for all applicable allopathic, osteopathic, dental, and 
podiatric residents that a hospital may train, must equal the same 
total unweighted and weighted FTE counts for direct GME and IME 
reported on Worksheet E-4 and Worksheet E, Part A. The need to verify 
and maintain the integrity of the IRIS data has been the subject of 
reviews by the Office of the Inspector General (OIG) over the years. An 
August 2014 OIG report cited the need for CMS to develop procedures to 
ensure that no resident is counted as more than one FTE in the 
calculation of Medicare GME payments (OIG Report No. A-02-13-01014, 
August 2014). More recently, a July 2017 OIG report recommended that 
procedures be developed to ensure that no resident is counted as more 
than one FTE in the calculation of Medicare GME payments (OIG Report 
No. A-02-15-01027, July 2017).
    Therefore, effective for cost reports filed on or after October 1, 
2018, we are proposing to add the requirement that IRIS data contain 
the same total counts of direct GME FTE residents (unweighted and 
weighted) and of IME FTE residents as the total counts of direct GME 
and IME FTE residents reported in the cost report. Specifically, we are 
proposing to specify in a new paragraph (A) of Sec.  413.24(f)(5)(i) 
that, effective for cost reports filed on or after October 1, 2018, the 
IRIS data must contain the same total counts of direct GME FTE 
residents (unweighted and weighted) and of IME FTE residents as the 
total counts of direct GME FTE and IME FTE residents reported in the 
hospital's cost report, or the cost report will be rejected for lack of 
supporting documentation.
3. Medicare Bad Debt Reimbursement
    Under section 1861(v)(1) of the Act and the regulations at Sec.  
413.89, Medicare may reimburse a portion of the uncollectible 
deductible and coinsurance amounts to those entities eligible to 
receive reimbursement for Medicare bad debt. The Medicare Provider 
Reimbursement Manual (PRM-1, CMS Pub. 15-1), Chapter 3, provides 
guidance to providers that claim Medicare bad debt reimbursement.
    Section 413.24(f)(5)(i) provides that an acceptable cost report 
submission requires the provider to submit a Provider Cost 
Reimbursement Questionnaire, Form CMS-339. The Form CMS-339, which has 
been incorporated into all Medicare cost reports (except the OPO and 
Histocompatibility Laboratory cost report, Form CMS-216, which we are 
now proposing to incorporate into the cost report, as discussed in 
section IX.B.1. of the preamble of this proposed rule), requires the 
provider to submit supporting documentation with the cost report to 
substantiate its claims for Medicare bad debt reimbursement. For 
example, the hospital cost report, which incorporated the Form CMS-339, 
instructs hospitals to submit a ``completed Exhibit 2 or internal 
schedules duplicating the documentation requested on Exhibit 2 to 
support the bad debts claimed'' (Section 4004.2 of CMS Pub. 15-2). This 
``completed Exhibit 2 or internal schedules duplicating the 
documentation requested on Exhibit 2 to support the bad debts claimed'' 
is also known as the Medicare bad debt listing and requires information 
such as the patient's name, dates of service, the beneficiary's 
Medicaid status, if applicable, the date that collection effort ceased, 
and the deductible and coinsurance amounts.
    Because the Provider Cost Reimbursement Questionnaire is 
incorporated into the cost report as a worksheet, the bad debt listing 
continues to be required for an acceptable cost report under Sec.  
413.24(f)(5). In this proposed rule, we are proposing to require that 
the Medicare bad debt listing correspond to the bad debt amount claimed 
in the provider's cost report, in order for the provider to have an 
acceptable cost report submission under Sec.  413.24(f)(5). This is 
also consistent with a provider's recordkeeping and cost reporting 
requirements of Sec. Sec.  413.20 and 413.24, and will facilitate the 
contractor's review and verification of the cost report. Specifically, 
we are proposing to amend Sec.  413.24(f)(5)(i) by adding a new 
paragraph (B) to specify that, effective for cost reporting periods 
beginning on or after October 1, 2018, for providers claiming Medicare 
bad debt reimbursement, a cost report would be rejected for lack of 
supporting documentation if it does not include a detailed bad debt 
listing that

[[Page 20547]]

corresponds to the bad debt amounts claimed in the provider's cost 
report.
4. Disproportionate Share Hospital (DSH) Payment Adjustment
    The DSH payment adjustment provision under section 1886(d)(5)(F) of 
the Act was enacted by section 9105 of COBRA and became effective for 
discharges occurring on or after May 1, 1986. Under section 
1886(d)(5)(F) of the Act, the primary method by which a hospital 
qualifies for a Medicare DSH payment is based on the hospital's 
disproportionate patient percentage, which is determined using a 
statutory formula. This statutory formula incorporates the hospital's 
number of patient days for patients who are eligible for Medicaid, but 
were not entitled to benefits under Medicare Part A (``Medicaid 
eligible days''), which hospitals are required to submit on their cost 
reports.
    Currently, in order for a DSH eligible hospital to have an 
acceptable cost report submission, there is no requirement for the 
hospital to also submit a listing of its Medicaid eligible days that 
corresponds to the Medicaid eligible days claimed in the hospital's 
cost report, as a supporting document. DSH eligible hospitals have 
always been required to collect and maintain this data for completion 
of the cost report, and to submit it when requested. However, we are 
proposing that in order to have an acceptable cost report submission, 
DSH eligible hospitals must submit this supporting data with their cost 
reports. To ensure accurate DSH payments, additional information 
regarding Medicaid eligible days is required in order to validate the 
number of Medicaid eligible days the hospital reports in its cost 
report. Currently, when this information regarding Medicaid eligible 
days is not submitted by the DSH eligible hospitals with the cost 
report, contractors must request it. An audit may reveal an 
overstatement of a hospital's Medicaid eligible days. However, an audit 
of these data may not take place for more than a year after the cost 
report has been submitted, and tentative program reimbursement payments 
are often issued to a provider upon the submission of the cost report. 
Because the existing burden estimate for a DSH eligible hospital's cost 
report already reflects the requirement that these hospitals collect, 
maintain, and submit this data when requested, there is not additional 
burden.
    Requiring a provider to submit, as a supporting document with its 
cost report, a listing of the provider's Medicaid eligible days that 
corresponds to the Medicaid eligible days claimed in the DSH eligible 
hospital's cost report would provide contractors with the DSH eligible 
hospital's source document listing the Medicaid eligible days claimed 
on its cost report and would be consistent with the recordkeeping and 
cost reporting requirements of Sec. Sec.  413.20 and 413.24, which 
require a provider to substantiate its costs. A requirement to submit 
this supporting documentation also would facilitate the contractor's 
review and verification of the cost report without the need to request 
additional data from the provider. This proposal would not affect a 
hospital's ability to submit an amended cost report, within 12 months 
after the hospital's cost report is due, that reflects updated 
information on Medicaid eligible patient days after the hospital 
receives updated Medicaid eligibility information from the State (CY 
2016 OPPS/ASC final rule with comment period (80 FR 70560)).
    Therefore, in this proposed rule, we are proposing that, effective 
for cost reporting periods beginning on or after October 1, 2018, in 
order for a hospital eligible for a Medicare DSH payment adjustment to 
have an acceptable cost report submission in accordance with Sec.  
413.24(f)(5), the provider must submit a detailed listing of its 
Medicaid eligible days that corresponds to the Medicaid eligible days 
claimed in the provider's cost report, as a supporting document with 
the provider's cost report. In addition, we are proposing that if the 
provider submits an amended cost report that changes its Medicaid 
eligible days, an amended listing or an addendum to the original 
listing of the provider's Medicaid eligible days that corresponds to 
the Medicaid eligible days claimed in the provider's amended cost 
report would also need to be submitted as a supporting document with 
the amended cost report.
    Consistent with this proposal, we are proposing to amend Sec.  
413.24(f)(5)(i) by adding a new paragraph (C) to specify that, 
effective for cost reporting periods beginning on or after October 1, 
2018, for hospitals claiming a DSH payment adjustment, a cost report 
will be rejected for lack of supporting documentation if it does not 
include a detailed listing of the hospital's Medicaid eligible days 
that corresponds to the Medicaid eligible days claimed in the 
hospital's cost report. If the hospital submits an amended cost report 
that changes its Medicaid eligible days, an amended listing or an 
addendum to the original listing of the hospital's Medicaid eligible 
days that corresponds to the Medicaid eligible days claimed in the 
hospital's amended cost report would be required.
5. Charity Care and Uninsured Discounts
    Section 3133 of the Affordable Care Act amended the Medicare DSH 
payment adjustment provision at section 1886(d)(5)(F) of the Act, and 
established section 1886(r) of the Act which provides for an additional 
payment that reflects a hospital's uncompensated care (which includes 
charity care and discounts given to uninsured patients who qualify 
under the hospital's charity care policy or financial assistance 
policy). In accordance with the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38201 through 38208), starting in FY 2018, Worksheet S-10 of the cost 
report is used as a data source for calculating uncompensated care 
payments.
    Currently there is no requirement for a DSH eligible hospital to 
submit supporting documentation with its cost report, to substantiate 
its charity care or discounts given to uninsured patients who qualify 
under the hospital's charity care policy or financial assistance 
policy, in order for its cost report submission to be acceptable in 
accordance with Sec.  413.24(f)(5). Uncompensated care data reported on 
a hospital's cost report did not have an impact on the determination of 
uncompensated care payments before FY 2018 when the agency first began 
using Worksheet S-10 data to calculate uncompensated care payments. 
However, because the Worksheet S-10 data are now utilized to make 
uncompensated care payments to DSH-eligible hospitals, documentation to 
substantiate charity care or discounts given to uninsured patients who 
qualify under the hospital's charity care or financial assistance 
policy is needed to complete the cost report and to ensure there is no 
duplication when hospitals report Medicare bad debt, charity care, and 
uninsured discounts. All hospitals, including DSH eligible hospitals, 
have always been required to collect and maintain this data for 
completion of the cost report, and submit it when requested. However, 
we are now proposing that in order to have an acceptable cost report 
submission, DSH eligible hospitals must submit this supporting data 
with their cost reports. To ensure accurate uncompensated care 
payments, additional supporting information regarding charity care and 
uninsured discounts is required in order to validate the amounts 
reported in the cost report. Currently, when the documentation to 
support the charity care charges and uninsured discounts is not 
submitted by DSH eligible hospitals with the cost report, contractors 
must

[[Page 20548]]

request it. Because the existing burden estimate for a DSH eligible 
hospital's cost report already reflects the requirement that these 
hospitals collect, maintain, and submit this data when requested, there 
is no additional burden.
    We believe that requiring a DSH eligible hospital to submit, with 
its cost report, a detailed listing of its charity care and uninsured 
discounts that corresponds to the amount claimed in the hospital's cost 
report would be consistent with the recordkeeping and cost reporting 
requirements of Sec. Sec.  413.20 and 413.24, which require a provider 
to substantiate its costs. This supporting documentation also would 
facilitate the contractor's review and verification of the cost report 
without the need to request additional data from the provider.
    Therefore, in this proposed rule, we are proposing that, effective 
for cost reporting periods beginning on or after October 1, 2018, in 
order for hospitals reporting charity care and/or uninsured discounts 
to have an acceptable cost report submission under Sec.  413.24(f)(5), 
the provider must submit a detailed listing of charity care and/or 
uninsured discounts that contains information such as the patient name, 
dates of service, insurer (if applicable), and the amount of charity 
care and/or uninsured discount given that corresponds to the amount 
claimed in the hospital's cost report as a supporting document with the 
hospital's cost report.
    Consistent with this proposal, we are proposing to amend Sec.  
413.24(f)(5)(i) by adding a new paragraph (D) to specify that, 
effective for cost reporting periods beginning on or after October 1, 
2018, for hospitals reporting charity care and/or uninsured discounts, 
a cost report will be rejected for lack of supporting documentation if 
it does not include a detailed listing of charity care and/or uninsured 
discounts that corresponds to the amounts claimed in the provider's 
cost report.
6. Home Office Allocations
    A chain organization consists of a group of two or more health care 
facilities which are owned, leased, or through any other device, 
controlled by one organization (Provider Reimbursement Manual 1 (PRM-
1), CMS Pub. 15-1, Chapter 21, Section 2150). Chain organizations 
include, but are not limited to, chains operated by proprietary 
organizations and chains operated by various religious, charitable, and 
governmental organizations. A chain organization may also include 
business organizations which are engaged in other activities not 
directly related to health care.
    When a provider claims costs on its cost report that are allocated 
from a home office (also known as a chain home office or chain 
organization), the Home Office Cost Statement constitutes the 
documentary support required of the provider to be reimbursed for home 
office costs in the provider's cost report as set forth in Section 
2153, Chapter 21, of the PRM-1. Section 2153 states that each 
contractor servicing a provider in a chain must be furnished with a 
detailed Home Office Cost Statement as a basis for reimbursing the 
provider for cost allocations from a home office or chain organization. 
However, many cost reports that have home office costs allocated to 
them are submitted without a Home Office Cost Statement as a supporting 
document. In addition, there are home offices or chain organizations 
that are not completing a Home Office Cost Statement to support the 
costs they are allocating to the provider cost reports. Lack of this 
documentation should result in a disallowance of costs. It is our 
understanding that some providers paid under a PPS mistakenly believe 
that a Home Office Cost Statement is no longer required. However, the 
home office costs reported in the provider's cost report may have an 
impact on future ratesetting and payment refinement activities. We 
believe that requiring a home office or chain organization to complete 
a Home Office Cost Statement and a provider to submit, with its cost 
report, a copy of the Home Office Cost Statement completed by the home 
office or chain organization that corresponds to the amounts allocated 
from the home office or chain organization to the provider's cost 
report, is consistent with Section 2153 of the PRM-1 and would be 
consistent with a provider's recordkeeping and cost reporting 
requirements of Sec. Sec.  413.20 and 413.24, which require a provider 
to substantiate its costs.
    Therefore, in this proposed rule, we are proposing that, effective 
for cost reporting periods beginning on or after October 1, 2018, in 
order for a provider claiming costs on its cost report that are 
allocated from a home office or chain organization to have an 
acceptable cost report submission under Sec.  413.24(f)(5), a Home 
Office Cost Statement completed by the home office or chain 
organization that corresponds to the amounts allocated from the home 
office or chain organization to the provider's cost report must be 
submitted as a supporting document with the provider's cost report. 
This proposal would facilitate the contractor's review and verification 
of the cost report without needing to request additional data from the 
provider. With our proposal, we anticipate more providers will submit 
the Home Office Cost Statement to support the amounts reported in their 
cost reports, in order to have an acceptable cost report submission. 
Because the existing burden estimate for a provider's cost report 
already reflects the requirement that providers collect, maintain, and 
submit this data, there is no additional burden.
    Consistent with this proposal, we are proposing to amend Sec.  
413.24(f)(5)(i) by adding a new paragraph (E) to specify that, 
effective for cost reporting periods beginning on or after October 1, 
2018, for providers claiming costs on their cost report that are 
allocated from a home office or chain organization, a cost report will 
be rejected for lack of supporting documentation if it does not include 
a Home Office Cost Statement completed by the home office or chain 
organization that corresponds to the amounts allocated from the home 
office or chain organization to the provider's cost report.
    We are seeking public comment on all of our proposals.

X. Requirements for Hospitals To Make Public a List of Their Standard 
Charges via the Internet

    In the FY 2015 IPPS/LTCH proposed rule and final rule (79 FR 28169 
and 79 FR 50146, respectively), we discussed the implementation of 
section 2718(e) of the Public Health Service Act, which aims to improve 
the transparency of hospital charges. We noted that section 2718(e) of 
the Public Health Service Act, which was enacted as part of the 
Affordable Care Act, requires that each hospital operating within the 
United States, for each year, establish (and update) and make public 
(in accordance with guidelines developed by the Secretary) a list of 
the hospital's standard charges for items and services provided by the 
hospital, including for diagnosis-related groups established under 
section 1886(d)(4) of the Social Security Act. We reminded hospitals of 
their obligation to comply with the provisions of section 2718(e) of 
the Public Health Service Act and provided guidelines for its 
implementation. We stated that hospitals are required to either make 
public a list of their standard charges (whether that be the 
chargemaster itself or in another form of their choice) or their 
policies for allowing the public to view a list of those charges in 
response to an inquiry.
    We encouraged hospitals to undertake efforts to engage in consumer 
friendly communication of their charges to help patients understand 
what their potential

[[Page 20549]]

financial liability might be for services they obtain at the hospital, 
and to enable patients to compare charges for similar services across 
hospitals. We also stated that we expect that hospitals will update the 
information at least annually, or more often as appropriate, to reflect 
current charges. We further noted that we are confident that hospital 
compliance with this statutory transparency requirement will greatly 
improve the public accessibility of charge information. Finally, we 
stated that we would continue to review and post relevant charge data 
in a consumer-friendly way, as we previously have done by posting 
hospital and physician charge information on the CMS website.
    We are concerned that challenges continue to exist for patients due 
to insufficient price transparency. Such challenges include patients 
being surprised by out-of-network bills for physicians, such as 
anesthesiologists and radiologists, who provide services at in-network 
hospitals, and patients being surprised by facility fees and physician 
fees for emergency room visits. We also are concerned that chargemaster 
data are not helpful to patients for determining what they are likely 
to pay for a particular service or hospital stay. In order to promote 
greater price transparency for patients, we are considering ways to 
improve the accessibility and usability of the charge information that 
hospitals are required to disclose under section 2718(e) of the Public 
Health Service Act.
    As one step to further improve the public accessibility of charge 
information, effective January 1, 2019, we are updating our guidelines 
to require hospitals to make available a list of their current standard 
charges via the internet in a machine readable format and to update 
this information at least annually, or more often as appropriate. This 
could be in the form of the chargemaster itself or another form of the 
hospital's choice, as long as the information is in machine readable 
format.
    We also are considering other potential actions that would be 
appropriate, either under the authority of section 2718(e) of the 
Public Health Service Act or under other authority, to further our 
objective of having hospitals undertake efforts to engage in consumer-
friendly communication of their charges to help patients understand 
what their potential financial liability might be for services they 
obtain at the hospital, and to enable patients to compare charges for 
similar services across hospitals. Therefore, we are seeking public 
comment on the following:
     Should ``standard charges'' be defined to mean: average or 
median rates for the items on the chargemaster; average or median rates 
for groups of services commonly billed together (such as for an MS-
DRG), as determined by the hospital based on its billing patterns; or 
the average discount off the chargemaster amount across all payers, 
either for each item on the chargemaster or for groups of services 
commonly billed together? Should ``standard charges'' be defined and 
reported for both some measure of the average contracted rate and the 
chargemaster? Or is the best measure of a hospital's standard charges 
its chargemaster?
     What types of information would be most beneficial to 
patients, how can hospitals best enable patients to use charge and cost 
information in their decision-making, and how can CMS and providers 
help third parties create patient-friendly interfaces with these data?
     Should health care providers be required to inform 
patients how much their out-of- pocket costs for a service will be 
before those patients are furnished that service? What changes would be 
needed to support greater transparency around patient obligations for 
their out-of-pocket costs? What can be done to better inform patients 
of these obligations? Should health care providers play any role in 
helping to inform patients of what their out-of- pocket obligations 
will be?
     Should we require health care providers to provide 
patients with information on what Medicare pays for a particular 
service performed by a health care provider? If CMS were to finalize a 
requirement that this information be made available to beneficiaries by 
health care providers, what changes would need to be made by health 
care providers? What corresponding regulatory changes would be 
necessary?
    CMS is considering making information regarding noncompliance with 
section 2718(e) of the Public Health Service Act public and intends to 
consider this as well as additional enforcement mechanisms in future 
rulemaking. Therefore, we are seeking comment on the following:
     What is the most appropriate mechanism for CMS to enforce 
price transparency requirements? Should CMS require hospitals to attest 
to meeting requirements in the provider agreement or elsewhere? How 
should CMS assess hospital compliance? Should CMS publicize complaints 
regarding access to price information or review hospital compliance and 
post results? What is the most effective way for CMS to publicize 
information regarding hospitals that fail to comply? Should CMS impose 
civil money penalties on hospitals that fail to make standard charges 
publically available as required by section 2718(e) of the Public 
Health Service Act? Should CMS use a framework similar to the Federal 
civil penalties under 45 CFR 158.601, et seq. that apply to issuers 
that fail to report information and pay rebates related to medical loss 
ratios, as required by sections 2718(a) and (b) of the Public Health 
Service Act, or would a different framework be more appropriate?
    In addition, we are seeking public comment on improving our 
understanding of out-of-pocket costs for patients with Medigap 
coverage, especially with respect to the following particular 
questions:
     How does Medigap coverage affect patients' understanding 
of their out-of-pocket costs before they receive care? What challenges 
do providers face in providing information about out-of-pocket costs to 
patients with Medigap? What changes would be needed to support 
providers sharing out-of-pocket cost information with patients that 
reflects the patient's Medigap coverage? Who is best situated to 
provide patients with Medigap coverage clear information on their out-
of-pocket costs prior to receipt of care? What State-specific 
requirements or programs help educate Medigap patients about their out-
of-pocket costs prior to receipt of care?
    We also note that, in the interest of public accessibility, we 
continue to post charge data for services furnished to Medicare 
beneficiaries covered under Medicare fee-for-service by diagnosis-
related group for each IPPS hospital on our website. These charge data 
are based on the MEDPAR short-stay inpatient data and augmented with 
the provider-of-service data and hospital referral regions data to 
include provider characteristics and hospital referral region. For each 
hospital-DRG record, the charge data include total discharges for 
Medicare beneficiaries, average covered charges, average total 
payments, and average Medicare payments. Data are currently available 
for FYs 2011 through 2015 for the more than 3,000 IPPS hospitals within 
the 50 United States and District of Columbia. These data are available 
at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Inpatient.html.

[[Page 20550]]

XI. Proposed Revisions Regarding Physician Certification and 
Recertification of Claims

    Our Medicare regulations at 42 CFR 424.11, which implement sections 
1814(a)(2) and 1835(a)(2) of the Act, specify the requirements for 
physician statements that certify and periodically recertify as to the 
medical necessity of certain types of covered services provided to 
Medicare beneficiaries. The regulation provision under Sec.  424.11(c) 
specifies that when supporting information for the required physician 
statement is available elsewhere in the records (for example, in the 
physician's progress notes), the information need not be repeated in 
the statement itself. The last sentence of Sec.  424.11(c) further 
provides that it will suffice for the statement to indicate where the 
information is to be found.
    As part of our ongoing initiative to identify Medicare regulations 
that are unnecessary, obsolete, or excessively burdensome on health 
care providers and suppliers--and thereby free up resources that could 
be used to improve or enhance patient care--we have been made aware 
that the provisions of Sec.  424.11(c) which state that it will suffice 
for the statement to indicate where the information is to be found may 
be resulting in unnecessary denials of Medicare claims. As currently 
worded, this last sentence of Sec.  424.11(c) can result in a claim 
being denied merely because the physician statement technically fails 
to identify a specific location in the file for the supporting 
information, even when that information nevertheless may be readily 
apparent to the reviewer. We believe that continuing to require the 
location to be specified in this situation is unnecessary. 
Certifications and recertifications continue to be based on the 
criteria for the service being certified, and the medical record must 
contain adequate documentation of the relevant criteria for which the 
physician is providing certification or recertification, even if the 
precise location of the information within the medical record is not 
included. Moreover, the need for the precise location is becoming 
increasingly obsolete with the growing utilization of electronic health 
records (EHRs)--which, by their nature, are readily searchable. 
Accordingly, in this proposed rule, we are proposing to delete the last 
sentence of Sec.  424.11(c). In addition, we are proposing to relocate 
the second sentence of Sec.  424.11(c) (indicating that supporting 
information contained elsewhere in the provider's records need not be 
repeated in the certification or recertification statement itself) to 
the end of the immediately preceding paragraph (b), which describes 
similar kinds of flexibility that are currently afforded in terms of 
completing the required statement.
    We are inviting public comments on our proposals.

XII. Request for Information on Promoting Interoperability and 
Electronic Healthcare Information Exchange Through Possible Revisions 
to the CMS Patient Health and Safety Requirements for Hospitals and 
Other Medicare- and Medicaid-Participating Providers and Suppliers

    Currently, Medicare- and Medicaid-participating providers and 
suppliers are at varying stages of adoption of health information 
technology (health IT). Many hospitals have adopted electronic health 
records (EHRs), and CMS has provided incentive payments to eligible 
hospitals, critical access hospitals (CAHs), and eligible professionals 
who have demonstrated meaningful use of certified EHR technology 
(CEHRT) under the Medicare EHR Incentive Program. As of 2015, 96 
percent of Medicare- and Medicaid-participating non-Federal acute care 
hospitals had adopted certified EHRs with the capability to 
electronically export a summary of clinical care.\385\ While both 
adoption of EHRs and electronic exchange of information have grown 
substantially among hospitals, significant obstacles to exchanging 
electronic health information across the continuum of care persist. 
Routine electronic transfer of information post-discharge has not been 
achieved by providers and suppliers in many localities and regions 
throughout the Nation.
---------------------------------------------------------------------------

    \385\ These statistics can be accessed at:
    https://dashboard.healthit.gov/quickstats/pages/FIG-Hospital-EHR-Adoption.php.
---------------------------------------------------------------------------

    CMS is firmly committed to the use of certified health IT and 
interoperable EHR systems for electronic healthcare information 
exchange to effectively help hospitals and other Medicare- and 
Medicaid-participating providers and suppliers improve internal care 
delivery practices, support the exchange of important information 
across care team members during transitions of care, and enable 
reporting of electronically specified clinical quality measures 
(eCQMs). The Office of the National Coordinator for Health Information 
Technology (ONC) acts as the principal Federal entity charged with 
coordination of nationwide efforts to implement and use health 
information technology and the electronic exchange of health 
information on behalf of the Department of Health and Human Services.
    In 2015, ONC finalized the 2015 Edition health IT certification 
criteria (2015 Edition), the most recent criteria for health IT to be 
certified to under the ONC Health IT Certification Program. The 2015 
Edition facilitates greater interoperability for several clinical 
health information purposes and enables health information exchange 
through new and enhanced certification criteria, standards, and 
implementation specifications. CMS requires eligible hospitals and CAHs 
in the Medicare and Medicaid EHR Incentive Programs and eligible 
clinicians in the Quality Payment Program (QPP) to use EHR technology 
certified to the 2015 Edition beginning in CY 2019.
    In addition, several important initiatives will be implemented over 
the next several years to provide hospitals and other participating 
providers and suppliers with access to robust infrastructure that will 
enable routine electronic exchange of health information. Section 4003 
of the 21st Century Cures Act (Pub. L. 114-255), enacted in 2016, and 
amending section 3000 of the Public Health Service Act (42 U.S.C. 
300jj), requires HHS to take steps to advance the electronic exchange 
of health information and interoperability for participating providers 
and suppliers in various settings across the care continuum. 
Specifically, Congress directed that ONC ``. . . for the purpose of 
ensuring full network-to-network exchange of health information, 
convene public-private and public-public partnerships to build 
consensus and develop or support a trusted exchange framework, 
including a common agreement among health information networks 
nationally.'' In January 2018, ONC released a draft version of its 
proposal for the Trusted Exchange Framework and Common Agreement,\386\ 
which outlines principles and minimum terms and conditions for trusted 
exchange to enable interoperability across disparate health information 
networks (HINs). The Trusted Exchange Framework (TEF) is focused on 
achieving the following four important outcomes in the long-term:
---------------------------------------------------------------------------

    \386\ The draft version of the trusted Exchange Framework may be 
accessed at: https://beta.healthit.gov/topic/interoperability/trusted-exchange-framework-and-common-agreement.
---------------------------------------------------------------------------

     Professional care providers, who deliver care across the 
continuum, can access health information about their patients, 
regardless of where the patient received care.

[[Page 20551]]

     Patients can find all of their health information from 
across the care continuum, even if they do not remember the name of the 
professional care provider they saw.
     Professional care providers and health systems, as well as 
public and private health care organizations and public and private 
payer organizations accountable for managing benefits and the health of 
populations, can receive necessary and appropriate information on 
groups of individuals without having to access one record at a time, 
allowing them to analyze population health trends, outcomes, and costs; 
identify at-risk populations; and track progress on quality improvement 
initiatives.
     The health IT community has open and accessible 
application programming interfaces (APIs) to encourage entrepreneurial, 
user-focused innovation that will make health information more 
accessible and improve EHR usability.
    ONC will revise the draft TEF based on public comment and 
ultimately release a final version of the TEF that will subsequently be 
available for adoption by HINs and their participants seeking to 
participate in nationwide health information exchange. The goal for 
stakeholders that participate in, or serve as, a HIN is to ensure that 
participants will have the ability to seamlessly share and receive a 
core set of data from other network participants in accordance with a 
set of permitted purposes and applicable privacy and security 
requirements. Broad adoption of this framework and its associated 
exchange standards is intended to both achieve the outcomes described 
above while creating an environment more conducive to innovation.
    In light of the widespread adoption of EHRs along with the 
increasing availability of health information exchange infrastructure 
predominantly among hospitals, we are interested in hearing from 
stakeholders on how we could use the CMS health and safety standards 
that are required for providers and suppliers participating in the 
Medicare and Medicaid programs (that is, the Conditions of 
Participation (CoPs), Conditions for Coverage (CfCs), and Requirements 
for Participation (RfPs) for Long Term Care Facilities) to further 
advance electronic exchange of information that supports safe, 
effective transitions of care between hospitals and community 
providers. Specifically, CMS might consider revisions to the current 
CMS CoPs for hospitals such as: Requiring that hospitals transferring 
medically necessary information to another facility upon a patient 
transfer or discharge do so electronically; requiring that hospitals 
electronically send required discharge information to a community 
provider via electronic means if possible and if a community provider 
can be identified; and requiring that hospitals make certain 
information available to patients or a specified third-party 
application (for example, required discharge instructions) via 
electronic means if requested.
    On November 3, 2015, we published a proposed rule (80 FR 68126) to 
implement the provisions of the IMPACT Act and to revise the discharge 
planning CoP requirements that hospitals (including short-term acute 
care hospitals, long-term care hospitals (LTCHs), inpatient 
rehabilitation hospitals (IRFs), inpatient psychiatric hospitals 
(IPFs), children's hospitals, and cancer hospitals), critical access 
hospitals (CAHs), and home health agencies (HHAs) must meet in order to 
participate in the Medicare and Medicaid programs. This proposed rule 
has not been finalized yet. However, several of the proposed 
requirements directly address the issue of communication between 
providers and between providers and patients, as well as the issue of 
interoperability:
     Hospitals and CAHs would be required to transfer certain 
necessary medical information and a copy of the discharge instructions 
and discharge summary to the patient's practitioner, if the 
practitioner is known and has been clearly identified;
     Hospitals and CAHs would be required to send certain 
necessary medical information to the receiving facility/post-acute care 
providers, at the time of discharge; and
     Hospitals, CAHs and HHAs, would need to comply with the 
IMPACT Act requirements that would require hospitals, CAHs, and certain 
post-acute care providers to use data on quality measures and data on 
resource use measures to assist patients during the discharge planning 
process, while taking into account the patient's goals of care and 
treatment preferences.
    We published another proposed rule (81 FR 39448), on June 16, 2016, 
that updated a number of CoP requirements that hospitals and CAHs must 
meet in order to participate in the Medicare and Medicaid programs. 
This proposed rule has not been finalized yet. One of the proposed 
hospital CoP revisions in that rule directly addresses the issues of 
communication between providers and patients, patient access to their 
medical records, and interoperability. We proposed that patients have 
the right to access their medical records, upon an oral or written 
request, in the form and format requested by such patients, if it is 
readily producible in such form and format (including in an electronic 
form or format when such medical records are maintained 
electronically); or, if not, in a readable hard copy form or such other 
form and format as agreed to by the facility and the individual, 
including current medical records, within a reasonable timeframe. The 
hospital must not frustrate the legitimate efforts of individuals to 
gain access to their own medical records and must actively seek to meet 
these requests as quickly as its record keeping system permits.
    We also published a final rule (81 FR 68688), on October 4, 2016, 
that revised the requirements that LTC facilities must meet to 
participate in the Medicare and Medicaid programs, where we made a 
number of revisions based on the importance of effective communication 
between providers during transitions of care, such as transfers and 
discharges of residents to other facilities or providers, or to home. 
Among these revisions was a requirement that the transferring LTC 
facility must provide all necessary information to the resident's 
receiving provider, whether it is an acute care hospital, a LTC 
hospital, a psychiatric facility, another LTC facility, a hospice, a 
health agency, or another community-based provider or practitioner. We 
specified that necessary information must include the following:
     Contact information of the practitioner responsible for 
the care of the resident;
     Resident representative information including contact 
information;
     Advance directive information;
     Special instructions or precautions for ongoing care;
     The resident's comprehensive care plan goals; and
     All other necessary information, including a copy of the 
resident's discharge or transfer summary and any other documentation to 
ensure a safe and effective transition of care.
    We note that the discharge summary mentioned above must include 
reconciliation of the resident's medications, as well as a 
recapitulation of the resident's stay, a final summary of the 
resident's status, and the post-discharge plan of care. In the preamble 
to the rule, we encouraged LTC facilities to electronically exchange 
this information if possible and to identify opportunities to 
streamline the collection and exchange of resident information by using 
information that the facility is already capturing electronically.
    Additionally, we specifically invite stakeholder feedback on the 
following

[[Page 20552]]

questions regarding possible new or revised CoPs/CfCs/RfPs for 
interoperability and electronic exchange of health information:
     If CMS were to propose a new CoP/CfC/RfP standard to 
require electronic exchange of medically necessary information, would 
this help to reduce information blocking as defined in section 4004 of 
the 21st Century Cures Act?
     Should CMS propose new CoPs/CfCs/RfPs for hospitals and 
other participating providers and suppliers to ensure a patient's or 
resident's (or his or her caregiver's or representative's) right and 
ability to electronically access his or her health information without 
undue burden? Would existing portals or other electronic means 
currently in use by many hospitals satisfy such a requirement regarding 
patient/resident access as well as interoperability?
     Are new or revised CMS CoPs/CfCs/RfPs for interoperability 
and electronic exchange of health information necessary to ensure 
patients/residents and their treating providers routinely receive 
relevant electronic health information from hospitals on a timely basis 
or will this be achieved in the next few years through existing 
Medicare and Medicaid policies, HIPAA, and implementation of relevant 
policies in the 21st Century Cures Act?
     What would be a reasonable implementation timeframe for 
compliance with new or revised CMS CoPs/CfCs/RfPs for interoperability 
and electronic exchange of health information if CMS were to propose 
and finalize such requirements? Should these requirements have delayed 
implementation dates for specific participating providers and 
suppliers, or types of participating providers and suppliers (for 
example, participating providers and suppliers that are not eligible 
for the Medicare and Medicaid EHR Incentive Programs)?
     Do stakeholders believe that new or revised CMS CoPs/CfCs/
RfPs for interoperability and electronic exchange of health information 
would help improve routine electronic transfer of health information as 
well as overall patient/resident care and safety?
     Under new or revised CoPs/CfCs/RfPs, should non-electronic 
forms of sharing medically necessary information (for example, printed 
copies of patient/resident discharge/transfer summaries shared directly 
with the patient/resident or with the receiving provider or supplier, 
either directly transferred with the patient/resident or by mail or fax 
to the receiving provider or supplier) be permitted to continue if the 
receiving provider, supplier, or patient/resident cannot receive the 
information electronically?
     Are there any other operational or legal considerations 
(for example, HIPAA), obstacles, or barriers that hospitals and other 
providers and suppliers would face in implementing changes to meet new 
or revised interoperability and health information exchange 
requirements under new or revised CMS CoPs/CfCs/RfPs if they are 
proposed and finalized in the future?
     What types of exceptions, if any, to meeting new or 
revised interoperability and health information exchange requirements, 
should be allowed under new or revised CMS CoPs/CfCs/RfPs if they are 
proposed and finalized in the future? Should exceptions under the QPP 
including CEHRT hardship or small practices be extended to new 
requirements? Would extending such exceptions impact the effectiveness 
of these requirements?
    We would also like to directly address the issue of communication 
between hospitals (as well as the other providers and suppliers across 
the continuum of patient care) and their patients and caregivers. 
MyHealthEData is a government-wide initiative aimed at breaking down 
barriers that contribute to preventing patients from being able to 
access and control their medical records. Privacy and security of 
patient data will be at the center of all CMS efforts in this area. CMS 
must protect the confidentiality of patient data, and CMS is completely 
aligned with the Department of Veterans Affairs (VA), the National 
Institutes of Health (NIH), ONC, and the rest of the Federal 
Government, on this objective.
    While some Medicare beneficiaries have had, for quite some time, 
the ability to download their Medicare claims information, in pdf or 
Excel formats, through the CMS Blue Button platform, the information 
was provided without any context or other information that would help 
beneficiaries understand what the data was really telling them. For 
beneficiaries, their claims information is useless if it is either too 
hard to obtain or, as was the case with the information provided 
through previous versions of Blue Button, hard to understand. In an 
effort to fully contribute to the Federal Government's MyHealthEData 
initiative, CMS developed and launched the new Blue Button 2.0, which 
represents a major step toward giving patients meaningful control of 
their health information in an easy-to-access and understandable way. 
Blue Button 2.0 is a developer-friendly, standards-based API that 
enables Medicare beneficiaries to connect their claims data to secure 
applications, services, and research programs they trust. The 
possibilities for better care through Blue Button 2.0 data are 
exciting, and might include enabling the creation of health dashboards 
for Medicare beneficiaries to view their health information in a single 
portal, or allowing beneficiaries to share complete medication lists 
with their doctors to prevent dangerous drug interactions.
    To fully understand all of these health IT interoperability issues, 
initiatives, and innovations through the lens of its regulatory 
authority, CMS invites members of the public to submit their ideas on 
how best to accomplish the goal of fully interoperable health IT and 
EHR systems for Medicare- and Medicaid-participating providers and 
suppliers, as well as how best to further contribute to and advance the 
MyHealthEData initiative for patients. We are particularly interested 
in identifying fundamental barriers to interoperability and health 
information exchange, including those specific barriers that prevent 
patients from being able to access and control their medical records. 
We also welcome the public's ideas and innovative thoughts on 
addressing these barriers and ultimately removing or reducing them in 
an effective way, specifically through revisions to the current CMS 
CoPs, CfCs, and RfPs for hospitals and other participating providers 
and suppliers. We have received stakeholder input through recent CMS 
Listening Sessions on the need to address health IT adoption and 
interoperability among providers that were not eligible for the 
Medicare and Medicaid EHR Incentives program, including long-term and 
post-acute care providers, behavioral health providers, clinical 
laboratories and social service providers, and we would also welcome 
specific input on how to encourage adoption of certified health IT and 
interoperability among these types of providers and suppliers as well.
    We note that this is a Request for Information only. Respondents 
are encouraged to provide complete but concise and organized responses, 
including any relevant data and specific examples. However, respondents 
are not required to address every issue or respond to every question 
discussed in this Request for Information to have their responses 
considered. In accordance with the implementing regulations of the 
Paperwork Reduction Act at 5 CFR 1320.3(h)(4), all responses will be 
considered, provided they contain information CMS can use to identify 
and contact the commenter, if needed.
    This Request for Information is issued solely for information and 
planning

[[Page 20553]]

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. 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 2019 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.

XIII. 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 2018 ``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 2019 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 website at: http://www.medpac.gov.

XIV. Other Required Information

A. Publicly Available Files

    IPPS-related data are available on the internet for public use. The 
data can be found on the CMS website at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. 
Following is a listing of the IPPS-related data files that are 
available.
    Commenters interested in discussing any data files used in 
construction of this proposed rule should contact Michael Treitel at 
(410) 786-4552.
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 2015 Medicare cost reports used to create 
the proposed FY 2019 IPPS wage index. Multiple versions of this file 
are created each year. For a discussion of the release of different 
versions of this file, we refer readers to section III.L. of the 
preamble of this proposed rule.

------------------------------------------------------------------------
    Processing year           Wage data year          PPS fiscal year
------------------------------------------------------------------------
             2018                     2015                    2019
             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 2019 IPPS Update.
2. CMS Occupational Mix Data Public Use File
    This file contains the CY 2016 occupational mix survey data to be 
used to compute the occupational mix adjusted wage indexes. Multiple 
versions of this file are created each year. For a discussion of the 
release of different versions of this file, we refer readers to section 
III.L. of the preamble of this proposed rule.
    Media: Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Period Available: FY 2019 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-Service-Payment/AcuteInpatientPPS/Wage-Index-Files.html.
    Period Available: FY 2019 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 2019 IPPS Update.
5. FY 2019 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 2019 IPPS Update.
6. HCRIS Cost Report Data
    The data included in this file contain cost reports with fiscal 
years ending on

[[Page 20554]]

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 website.)
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 2019.
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 2019 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 2019 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 2019 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 2019 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 2019 IPPS Update.
14. Medicare Disproportionate Share Hospital (DSH) Supplemental File
    This file contains information on the calculation of the 
uncompensated care payments for FY 2019. 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 2019 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

[[Page 20555]]

approval. In order to fairly evaluate whether an information collection 
should be approved by OMB, section 3506(c)(2)(A) of the Paperwork 
Reduction Act of 1995 requires that we solicit comment on the following 
issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In 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 Application for GME Resident Slots
    The information collection requirements associated with the 
preservation of resident cap positions from close hospitals, addressed 
in section IV.L.2. of the preamble of this proposed rule, are not 
subject to the Paperwork Reduction Act, as stated in section 5506 of 
the Affordable Care Act.
3. 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. 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. OMB has currently approved 
3,637,282 hours of burden and approximately $133 million under OMB 
control number 0938-1022, accounting for information collection burden 
experienced by 3,300 IPPS hospitals and 1,100 non-IPPS hospitals for 
the FY 2020 payment determination.\387\ We no longer use OMB control 
number 0938-0918. Below, we describe the burden changes with regards to 
collection of information under OMB control number 0938-1022 for IPPS 
hospitals due to the proposals in this proposed rule.
---------------------------------------------------------------------------

    \387\ The information collection burden associated with 
submitting data for the HCP and HAI measures (CDI, CAUTI, CLABSI, 
MRSA Bacteremia, and Colon and Abdominal Hysterectomy SSI) via the 
CDC's NHSN system is captured under a separate OMB control number, 
0920-0666. The information collection burden associated with 
submitting data for the HCAHPS Survey measure is captured under OMB 
control number 0938-0981.
---------------------------------------------------------------------------

    In section VIII.A. of the preamble of this proposed rule, we 
discuss the following proposals that we expect to affect our collection 
of information burden estimates: (1) eCQM reporting and submission 
requirements for the CY 2019 reporting period/FY 2021 payment 
determination; (2) removal of eight chart-abstracted measures beginning 
with the CY 2019 reporting period/FY 2021 payment determination; and 
(3) removal of one chart-abstracted measure beginning with the CY 2020 
reporting period/FY 2022 payment determination. Details on these 
proposals, as well as the expected burden changes, are discussed below.
    This proposed rule also includes proposals with respect to claims-
based measures to: (1) Remove 17 claims-based measures beginning with 
the CY 2018 reporting period/FY 2020 payment determination; (2) remove 
two claims-based measures beginning with the CY 2019 reporting period/
FY 2021 payment determination; (3) remove one claims-based measure 
beginning with CY 2020 reporting period/FY 2022 payment determination; 
(4) remove one claims-based measure beginning with the CY 2021 
reporting period/FY 2023 payment determination; (5) remove two 
structural measures beginning with the CY 2018 reporting period/FY 2020 
payment determination; and (6) remove seven eCQMs beginning with CY 
2020 reporting period/FY 2022 payment determination. As discussed 
further below, we do not expect these proposals to affect our 
information collection burden estimates.
b. Information Collection Burden Estimate for the Proposed Removal of 
Chart-Abstracted Measures
(1) Information Collection Burden Estimate for the Proposed Removal of 
Eight Chart-Abstracted Measures Beginning With the CY 2019 Reporting 
Period/FY 2021 Payment Determination
    In sections VIII.A.5.b(2)(b) and VIII.A.5.b.(8)(b) of the preamble 
of this proposed rule, we are proposing to remove eight chart-
abstracted measures (five National Healthcare Safety Network (NHSN)) 
hospital-acquired infection (HAI) measures and three clinical process 
of care measures) beginning with the CY 2019 reporting period/FY 2021 
payment determination:
     National Healthcare Safety Network Facility-Wide Inpatient 
Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure 
(NQF #1717);
     National Healthcare Safety Network Catheter-Associated 
Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138);
     National Healthcare Safety Network Central Line-Associated 
Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139);
     National Healthcare Safety Network Facility-Wide Inpatient 
Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) 
Bacteremia Outcome Measure (NQF #1716);
     American College of Surgeons--Centers for Disease Control 
and Prevention Harmonized Procedure-Specific Surgical Site Infection 
(SSI) Outcome Measure (Colon and Abdominal Hysterectomy SSI) (NQF 
#0753);
     Median Time from ED Arrival to ED Departure for Admitted 
ED Patients (ED-1) (NQF #0495);
     Influenza Immunization (IMM-2) (NQF #1659); and
     Incidence of Potentially Preventable Venous 
Thromboembolism (VTE-6).
    Because the burden associated with submitting data for the NHSN HAI 
measures (CDI, CAUTI, CLABSI, MRSA Bacteremia, and Colon and Abdominal 
Hysterectomy SSI) is captured under separate OMB control number 0920-
0666, we do not provide an independent estimate of the information 
collection burden associated with these measures for the Hospital IQR 
Program. Because the NHSN HAI measures will be retained in the HAC 
Reduction Program, we do not anticipate a reduction in data collection 
and reporting burden associated with the CDC NHSN's OMB control number 
0920-0666. We note, however, that we anticipate a reduction in burden 
associated with the Hospital IQR Program validation activities we 
conduct for these NHSN HAI measures, as discussed further below.
    We anticipate a reduction in information collection burden for all 
IPPS hospitals of 741,074 hours, or 225 hours per hospital, as a result 
of our proposals to remove the ED-1 and IMM-2 chart-abstracted measures 
beginning with the CY 2019 reporting period/FY 2021 payment 
determination. This estimate was calculated by considering the 
previously approved information collection burden estimate for 
reporting the combined global population set (ED-1, ED-2, and IMM-2) of 
1,599,074 hours, minus the estimated information collection reporting 
burden for only the ED-2

[[Page 20556]]

measure \388\ ([15 minutes per record x 260 records per hospital per 
quarter x 4 quarters]/60 minutes per hour x 3,300 IPPS hospital = 
858,000 hours). Through these calculations (1,599,074 hours - 858,000 
hours), we estimate a reduction of 741,074 hours, or 225 hours per 
hospital per year (741,074 hours/3,300 hospitals) across all IPPS 
hospitals for the CY 2019 reporting period/FY 2021 payment 
determination if our proposals to remove the ED-1 and IMM-2 measures 
from the Hospital IQR Program are finalized as proposed.
---------------------------------------------------------------------------

    \388\ Estimated 15 minutes per case for reporting ED-2 measure 
based on average Clinical Data Abstraction Center abstraction times 
for 3Q 2016, 4Q 2016, and 1Q 2017 discharge data.
---------------------------------------------------------------------------

    We also anticipate our proposal to remove the VTE-6 measure would 
result in an information collection burden reduction of 304,997 hours 
for all IPPS hospitals, or 92 hours per hospital, for the CY 2019 
reporting period/FY 2021 payment determination. We have previously 
estimated a reporting burden of 92 hours (7 minutes per record x 198 
records per hospital per quarter x 4 quarters/60 minutes) per hospital 
per year, or 304,997 hours (92 hours per hospital x 3,300 hospitals) 
across all hospitals associated with abstracting and reporting VTE-6. 
Therefore, we estimate an information collection burden decrease of 
304,997 hours for the CY 2019 reporting period/FY 2021 payment 
determination if our proposal to remove this measure from the Hospital 
IQR Program is finalized as proposed.
    In summary, if our proposals in section VIII.A.5.b.(8) of the 
preamble of this proposed rule to remove IMM-2, ED-1, and VTE-6 are 
finalized as proposed, we estimate an information collection burden 
reduction of 1,046,071 hours (-741,074 hours for ED-1 and IMM-2 removal 
+ -304,997 hours for VTE-6 removal) and approximately $38.3 million 
(1,046,071 hours x $36.58 per hour \389\) across all 3,300 IPPS 
hospitals participating in the Hospital IQR Program for the CY 2019 
reporting period/FY 2021 payment determination.
---------------------------------------------------------------------------

    \389\ In the FY 2017 IPPS/LTCH PPS final rule (82 FR 38501), we 
finalized an hourly wage estimate of $18.29 per hour, plus 100 
percent overhead and fringe benefits, for the Hospital IQR Program. 
Accordingly, we calculate cost burden to hospitals using a wage plus 
benefits estimate of $36.58 per hour.
---------------------------------------------------------------------------

(2) Information Collection Burden Estimate for the Proposed Removal of 
One Chart-Abstracted Measure Beginning With the CY 2020 Reporting 
Period/FY 2022 Payment Determination
    In section VIII.A.5.b.(8)(b) of the preamble of this proposed rule, 
we are proposing to remove the ED-2 measure (NQF #0497) beginning with 
the CY 2020 reporting period/FY 2022 payment determination. We 
anticipate removing this chart-abstracted measure would reduce the 
reporting burden for all IPPS hospitals by a total of 858,000 hours, or 
260 hours per hospital. As discussed above, we estimate reporting the 
ED-2 measure takes approximately 260 hours (15 minutes per record x 260 
records per hospital per quarter x 4 quarters/60 minutes = 260 hours) 
per hospital per year, or 858,000 hours (260 hours x 3,300 hospitals) 
across all IPPS hospitals. We, therefore, estimate an 858,000 hour 
information collection burden decrease for the CY 2020 reporting 
period/FY 2022 payment determination as a result of our proposal to 
remove this measure from the Hospital IQR Program.
    In summary, if our proposal in section VIII.A.5.b.(8)(b) of the 
preamble of this proposed rule to remove ED-2 is finalized as proposed, 
we estimate an information collection burden reduction of 858,000 hours 
and approximately $31.4 million (858,000 hours x $36.58 per hour \390\) 
across all 3,300 IPPS hospitals participating in the Hospital IQR 
Program for the CY 2020 reporting period/FY 2022 payment determination.
---------------------------------------------------------------------------

    \390\ In the FY 2017 IPPS/LTCH PPS final rule (82 FR 38501), we 
finalized an hourly wage estimate of $18.29 per hour, plus 100 
percent overhead and fringe benefits, for the Hospital IQR Program. 
Accordingly, we calculate cost burden to hospitals using a wage plus 
benefits estimate of $36.58 per hour.
---------------------------------------------------------------------------

(3) Information Collection Impacts on Data Validation Resulting From 
Chart-Abstracted Measure Removal
    While we are not proposing any changes to our validation 
requirements related to chart-abstracted measures, if our proposals in 
section VIII.A.5.b.(2)(b) and section VIII.A.5.b.(8) of the preamble of 
this proposed rule to remove five NHSN HAIs and four clinical process 
of care measures are finalized as proposed, we believe that hospitals 
would experience an overall reduction in information collection burden 
associated with chart-abstracted measure validation beginning with the 
FY 2022 payment determination.
    As noted in the FY 2016 IPPS/LTCH IPPS final rule (80 FR 49762 and 
49763), we reimburse hospitals directly for expenses associated with 
submission of charts for clinical process of care measure data 
validation (we reimburse hospitals at 12 cents per photocopied page; 
for hospitals providing charts digitally via a re-writable disc, such 
as encrypted CD-ROMs, DVDs, or flash drives, we reimburse hospitals at 
a rate of 40 cents per disc); we do not believe any additional 
information collection burden is associated with submitting this 
information via Web portal or PDF (79 FR 50346). Therefore, because we 
directly reimburse, we do not anticipate any net change in burden 
associated with the cost of submission of validation charts as a result 
of our proposals to remove four clinical process of care measures. 
Hospitals would no longer be required to submit, or be reimbursed for 
submitting, these data to CMS.
    Because we are proposing to remove all of the NHSN HAI measures 
from the Hospital IQR Program and because hospitals selected for 
validation currently are required to submit validation templates for 
the NHSN HAI measures, we anticipate a reduction in information 
collection burden under the Hospital IQR Program associated with the 
NHSN HAI data validation effort. We note that the burden associated 
with data collection for the NHSN HAI measures (CDI, CAUTI, CLABSI, 
MRSA Bacteremia, and Colon and Abdominal Hysterectomy SSI) is accounted 
for under the CDC NHSN OMB control number 0920-0666. Because the NHSN 
HAI measures will be retained in the HAC Reduction Program, we do not 
anticipate a change in data collection and reporting burden associated 
with this OMB control number due to our proposals. The data validation 
activities, however, are conducted by CMS. Since the measures were 
adopted into the Hospital IQR Program, CMS has validated the data for 
purposes of the Program. Therefore, this burden has been captured under 
the Hospital IQR Program's OMB control number 0938-1022. We have 
previously estimated a reporting burden of 80 hours (1,200 minutes per 
record x 1 record per hospital per quarter x 4 quarters/60 minutes) per 
hospital selected for chart-abstracted measure validation per year to 
submit the CLABSI and CAUTI templates, and 64 hours (960 minutes per 
record x 1 record per hospital per quarter x 4 quarters/60 minutes) per 
hospital selected for chart-abstracted measure validation per year to 
submit the MRSA and CDI templates. We, therefore, estimate a total 
validation burden decrease of 43,200 hours ([-80 hours per hospital to 
submit CLABSI and CAUTI templates + -64 hours per hospital to submit 
MRSA and CDI templates] x 300 hospitals selected for validation) and 
approximately $1.6 million (43,200 hours x $36.58 per hour \391\) for 
the FY 2022 payment

[[Page 20557]]

determination because of the removal of these measures from the 
Hospital IQR Program and the secondary effects on validation. We note 
that we are proposing that the HAC Reduction Program will begin 
validation of these NHSN HAI measures as discussed in section IV.J. of 
the preamble of this proposed rule.
---------------------------------------------------------------------------

    \391\ In the FY 2017 IPPS/LTCH PPS final rule (82 FR 38501), we 
finalized an hourly wage estimate of $18.29 per hour, plus 100 
percent overhead and fringe benefits, for the Hospital IQR Program. 
Accordingly, we calculate cost burden to hospitals using a wage plus 
benefits estimate of $36.58 per hour.
---------------------------------------------------------------------------

c. Information Collection Burden Estimate for Proposed Removal of Two 
Structural Measures
    In sections VIII.A.5.a. and b.(1) of the preamble of this proposed 
rule, we are proposing to remove two structural measures (Hospital 
Survey on Patient Safety Culture and Safe Surgery Checklist Use) 
beginning with the CY 2018 reporting period/FY 2020 payment 
determination. We anticipate removing these measures will result in a 
minimal information collection burden reduction for hospitals. 
Specifically, we do anticipate a very slight reduction in information 
collection burden associated with the proposed removal of the Safe 
Surgery Checklist measure because completion of this measure takes 
hospitals approximately two minutes each year (77 FR 53666). Similarly, 
we anticipate a very slight reduction in information collection burden 
associated with the proposed removal of the Patient Safety Checklist 
measure (80 FR 49762 through 49873). Consistent with previous years (80 
FR 49762), we estimate a collection of information burden of 15 minutes 
per hospital to report all four previously finalized structural 
measures and to complete other forms (such as the Extraordinary 
Circumstances Extension/Exemption Request Form). Therefore, our 
information collection burden estimate of 15 minutes per hospital 
remains unchanged because we believe the reduction in information 
collection burden associated with removing these two structural 
measures is sufficiently minimal that it will not substantially impact 
this estimate, and we want to retain a conservative estimate of the 
information collection burden associated with the use of our forms.
d. Burden Estimate for Proposed Removal of Claims-Based Measures
    In section VIII.A.5.b.(2)(a), (3), (4), (6), and (7) of the 
preamble of this proposed rule, we are proposing to remove the 
following 17 claims-based measures beginning with the CY 2018 reporting 
period/FY 2020 payment determination:
     Patient Safety and Adverse Events Composite Measure (PSI 
90) (NQF #0531);
     Hospital 30-Day All-Cause Risk-Standardized Readmission 
Rate Following Acute Myocardial Infarction (AMI) Hospitalization (NQF 
#0505) (READM-30-AMI);
     Hospital 30-Day, All-Cause, Risk-Standardized Readmission 
Rate Following Chronic Obstructive Pulmonary Disease (COPD) 
Hospitalization (NQF #1891) (READM-30-COPD);
     Hospital 30-Day, All-Cause, Unplanned, Risk-Standardized 
Readmission Rate Following Coronary Artery Bypass Graft (CABG) Surgery 
(NQF #2515) (READM-30-CABG);
     Hospital 30-Day, All-Cause, Risk-Standardized Readmission 
Rate Following Heart Failure Hospitalization (NQF #0330) (READM-30-HF);
     Hospital 30-Day, All-Cause, Risk-Standardized Readmission 
Rate Following Pneumonia Hospitalization (NQF #0506) (READM-30-PN);
     30-day Risk-Standardized Readmission Rate Following Stroke 
Hospitalization (READ-30-STK;
     Hospital-Level 30-Day, All-Cause Risk-Standardized 
Readmission Rate Following Elective Primary Total Hip Arthroplasty and/
or Total Knee Arthroplasty (NQF #1551) (READM-30-THA/TKA);
     Hospital 30-day, All-Cause, Risk-Standardized Mortality 
Rate Following Acute Myocardial Infarction (AMI) Hospitalization for 
Patients 18 and Older (NQF #0230) (MORT-30-AMI);
     Hospital 30-Day, All-Cause, Risk-Standardized Mortality 
Rate Following Heart Failure Hospitalization (NQF #0229) (MORT-30-HF);
     Medicare Spending Per Beneficiary (MSPB)--Hospital (NQF 
#2158);
     Cellulitis Clinical Episode-Based Payment Measure 
(Cellulitis Payment);
     Gastrointestinal Hemorrhage Clinical Episode-Based Payment 
Measure (GI Payment);
     Kidney/Urinary Tract Infection Clinical Episode-Based 
Payment Measure (Kidney/UTI Payment);
     Aortic Aneurysm Procedure Clinical Episode-Based Payment 
Measure (AA Payment);
     Cholecystectomy and Common Duct Exploration Clinical 
Episode-Based Payment Measure (Chole and CDE Payment); and
     Spinal Fusion Clinical Episode-Based Payment Measure 
(SFusion Payment).
    In addition, we are proposing to remove two claims-based measures 
beginning with the CY 2019 reporting period/FY 2021 payment 
determination: (1) Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate Following Chronic Obstructive Pulmonary Disease (COPD) 
Hospitalization (NQF #1893); and (2) Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate Following Pneumonia Hospitalization (NQF 
#0468). We also are proposing to remove one claims-based measure, 
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 
Coronary Artery Bypass Graft (CABG) Surgery measure (NQF #2558), 
beginning with the CY 2020 reporting period/FY 2022 payment 
determination, and one claims-based measure, Hospital-Level Risk-
Standardized Complication Rate (RSCR) Following Elective Primary Total 
Hip Arthroplasty and/or Total Knee Arthroplasty, beginning with the CY 
2021 reporting period/FY 2023 payment determination.
    Because these claims-based measures are calculated using only data 
already reported to the Medicare program for payment purposes, we do 
not anticipate that removing these measures will affect information 
collection burden on hospitals. However, we refer readers to section 
VIII.A.5.b.(2)(a), (3), (4), (6) and (7) of the preamble of this 
proposed rule for a discussion of the reduction in costs associated 
with these measures unrelated to the information collection burden.
e. Information Collection Burden Estimate for Proposed Removal of eCQMs
    In section VIII.A.5.b.(9) of the preamble of this proposed rule, we 
are proposing to remove the following seven eCQMs from the eCQM measure 
set beginning with the CY 2020 reporting period/FY 2022 payment 
determination:
     Primary PCI Received within 90 Minutes of Hospital Arrival 
(AMI-8a);
     Home Management and Plan of Care Document Given to 
Patient/Caregiver (CAC-3);
     Median Time from ED Arrival to ED Departure for Admitted 
ED Patients (ED-1) (NQF #0495); \392\
---------------------------------------------------------------------------

    \392\ Median Time from ED Arrival to ED Departure for Admitted 
ED Patients (ED-1) is proposed for removal in both chart-abstracted 
and eCQM forms.
---------------------------------------------------------------------------

     Hearing Screening Prior to Hospital Discharge (EHDI-1a) 
(NQF# 1354);
     Elective Delivery (PC-01) (NQF #0469);
     Stroke Education (STK-08); and
     Assessed for Rehabilitation (STK-10) (NQF #0441).
    Because these eCQMs being proposed for removal were among a set of 
15 eCQMs available for reporting, we believe that reducing the number 
of

[[Page 20558]]

eCQMs from which hospitals choose would enable hospitals to focus on 
and maintain a smaller subset of measures (8 instead of 15), but this 
would not have an effect on the burden of submitting information to 
CMS. Hospitals will still be required to submit 4 eCQMs of their choice 
from the eCQM measure set. While the information collection burden 
would not change, we refer readers to section VIII.A.4.b. of the 
preamble of this proposed rule where we acknowledge that costs are 
multi-faceted and include not only the burden associated with 
reporting, but also the costs associated with implementing and 
maintaining Program requirements.
f. Information Collection Burden Estimates for the Proposed Updates to 
the eCQM Reporting Requirements
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38355 through 
38361), we finalized eCQM reporting requirements, such that hospitals 
submit one, self-selected calendar quarter of data for 4 eCQMs in the 
Hospital IQR Program measure set for the CY 2018 reporting period/FY 
2020 payment determination. In section VIII.A.10.d.(2) of the preamble 
of this proposed rule, we are proposing to require that hospitals 
continue to submit one, self-selected calendar quarter of data for 4 
eCQMs in the Hospital IQR Program measure set for the CY 2019 reporting 
period/FY 2021 payment determination. Therefore, we believe the burden 
estimate of 40 minutes per hospital per year (10 minutes per record x 4 
eCQMs x 1 quarter) associated with eCQM reporting requirements 
finalized for the CY 2018 reporting period/FY 2020 payment 
determination will also apply to the CY 2019 reporting period/FY 2021 
payment determination.
g. Information Collection Burden Estimate for the Proposed 
Modifications to EHR Certification Requirements
    In section VIII.A.10.d.(3) of the preamble of this proposed rule, 
we are proposing to update the EHR certification requirements by 
requiring the use of EHR technology certified to the 2015 Edition 
beginning with the CY 2019 reporting period/FY 2021 payment 
determination, to align with the Medicare and Medicaid Promoting 
Interoperability Programs (previously known as the Medicare and 
Medicaid EHR Incentive Programs) for eligible hospitals and CAHs. We do 
not expect this proposal to affect our information collection burden 
estimates because this proposal does not require hospitals to submit 
new data to CMS. With respect to any costs unrelated to data 
submission, we refer readers to Appendix I.K. of the preamble of this 
proposed rule.
h. Summary of Information Collection Burden Estimates for the Hospital 
IQR Program
    In summary, under OMB control number 0938-1022, we estimate: (1) A 
total information collection burden reduction of 1,046,138 hours (-
1,046,071 hours due to the proposed removal of ED-1, IMM-2, and VTE-6 
measures for the CY 2019 reporting period/FY 2021 payment determination 
and -67 hours for no longer collecting data for the voluntary Hybrid 
HWR measure \393\) and a total cost reduction related to information 
collection of approximately $38.3 million (-1,046,138 hours x $36.58 
per hour \394\) for the CY 2019 reporting period/FY 2021 payment 
determination; and (2) a total information collection burden reduction 
of 901,200 hours (-858,000 hours due to the proposed removal of ED-2--
43,200 hours due to no longer needing to validate NHSN HAI measures 
under the Hospital IQR Program) and a total information collection cost 
reduction of approximately $33 million (-901,200 hours x $36.58 per 
hour \395\) for the CY 2020 reporting period/FY 2022 payment 
determination. These are the total information collection burden 
reduction estimates for which we are requesting OMB approval under OMB 
number 0938-1022.
---------------------------------------------------------------------------

    \393\ In the FY 2017 IPPS/LTCH PPS final rule (82 FR 38350 
through 38355), we finalized our proposal to collect data on a 
voluntary basis for the Hybrid HWR measure for the CY 2018 reporting 
period/FY 2020 payment determination. We estimated that 
approximately 100 hospitals would voluntarily report data for this 
measure, resulting in a total burden of 67 hours across all 
hospitals for the CY 2018 reporting period/FY 2020 payment 
determination (82 FR 38504). Because we only finalized voluntary 
collection of data for one year, voluntary collection of this data 
would no longer occur, beginning with the CY 2019 reporting period/
FY 2021 payment determination and subsequent years, resulting in a 
reduction in burden of 67 hours across all hospitals.
    \394\ In the FY 2017 IPPS/LTCH PPS final rule (82 FR 38501), we 
finalized an hourly wage estimate of $18.29 per hour, plus 100 
percent overhead and fringe benefits, for the Hospital IQR Program. 
Accordingly, we calculate cost burden to hospitals using a wage plus 
benefits estimate of $36.58 per hour.
    \395\ In the FY 2017 IPPS/LTCH PPS final rule (82 FR 38501), we 
finalized an hourly wage estimate of $18.29 per hour, plus 100 
percent overhead and fringe benefits, for the Hospital IQR Program. 
Accordingly, we calculate cost burden to hospitals using a wage plus 
benefits estimate of $36.58 per hour.

                   Hospital IQR Program CY 2019 Reporting Period/FY 2021 Payment Determination Information Collection Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Annual recordkeeping and reporting requirements under OMB control No. 0938-1022 for CY 2019
                                                                                  reporting period/FY 2021 payment Determination
                                                         -----------------------------------------------------------------------------------------------
                                                                                                                         Newly    Previously
                                                                                                Average                proposed    finalized
                        Activity                           Estimated    Number     Number of    number      Annual      annual      annual        Net
                                                           time per    reporting     IPPS       records     burden      burden      burden    difference
                                                            record     quarters    hospitals      per       (hours)     (hours)     (hours)    in annual
                                                           (minutes)   per year    reporting   hospital       per       across      across      burden
                                                                                                  per      hospital      IPPS        IPPS        hours
                                                                                                quarter                hospitals   hospitals
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reporting on Emergency department throughput (ED-1)/              13           4       3,300         260         225     858,000   1,599,074    -741,074
 Immunizations (IMM-2)..................................
Venous thromboembolism (VTE)............................           7           4       3,300         198          92           0     304,997    -304,997
Voluntary HWR Reporting \396\...........................          10           4         100           1        0.67           0          67         -67
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Change in Information Collection Burden Hours: -1,046,138.
Total Cost Estimate: Updated Hourly Wage ($36.58) x Change in Burden Hours (-1,046,138) = -$38,267,728.
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 20559]]


                   Hospital IQR Program CY 2020 Reporting Period/FY 2022 Payment Determination Information Collection Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Annual recordkeeping and reporting requirements under OMB control No. 0938-1022 for CY 2020
                                                                                  reporting period/FY 2022 payment determination
                                                         -----------------------------------------------------------------------------------------------
                                                                                                                         Newly    Previously
                                                                                                Average                proposed    finalized
                        Activity                           Estimated    Number     Number of    number      Annual      annual      annual        Net
                                                           time per    reporting     IPPS       records     burden      burden      burden    difference
                                                            record     quarters    hospitals      per       (hours)     (hours)     (hours)    in annual
                                                           (minutes)   per year    reporting   hospital       per       across      across      burden
                                                                                                  per      hospital      IPPS        IPPS        hours
                                                                                                quarter                hospitals   hospitals
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reporting on Emergency department throughput (ED-2 only)          15           4       3,300         260         260           0     858,000    -858,000
HAI Validation Templates (CLABSI, CAUTI)................       1,200           4         300           1          80           0      24,000     -24,000
HAI Validation Templates (MRSA, CDI)....................         960           4         300           1          64           0      19,200     -19,200
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Change in Information Collection Burden Hours:-901,200
Total Cost Estimate: Updated Hourly Wage ($36.58) x Change in Burden Hours (-901,200) = $32,965,896
--------------------------------------------------------------------------------------------------------------------------------------------------------

4. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
a. Background
    As discussed in sections VIII.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 payment if a PCH does not participate. Below we discuss only 
changes in burden that would result from the proposals in this proposed 
rule.
---------------------------------------------------------------------------

    \396\ In the FY 2017 IPPS/LTCH PPS final rule (82 FR 38350 
through 38355), we finalized our proposal to collect data on a 
voluntary basis for the Hybrid HWR measure for the CY 2018 reporting 
period/FY 2020 payment determination. We estimated that 
approximately 100 hospitals would voluntarily report data for this 
measure, resulting in a total burden of 67 hours across all 
hospitals for the CY 2018 reporting period/FY 2020 payment 
determination (82 FR 38504). Because we only finalized voluntary 
collection of data for one year, voluntary collection of this data 
would no longer occur beginning with the CY 2019 reporting period/FY 
2021 payment determination and subsequent years resulting in a 
reduction in burden of 67 hours across all hospitals.
---------------------------------------------------------------------------

b. Proposed Revision of Time Estimate for Structural and Web-Based Tool 
Measures for the FY 2021 Program Year and Subsequent Years
    In this proposed rule, we are proposing a revision to our burden 
calculation methodology. With all the parameters considered when PCHs 
submit data on PCHQR Program measures (training of appropriate staff 
members on National Healthcare Safety Network (NHSN) reporting and the 
CMS Web Measures Tool for the reporting of the clinical process/
oncology care measures; the time required for collection and 
aggregation of data; and the time required for reporting of the data by 
the PCH's representative), we strive to achieve continuity in how we 
calculate and analyze burden data. In prior years, we have based our 
burden estimates on the notion that all 11 PCHs would report on all 
measures for all cases (78 FR 50958). These assumptions were made in 
order to be as comprehensive as possible given a lack of PCH-specific 
data available at the time. However, we believe it is more appropriate 
to use estimates developed using data available in other quality 
reporting programs wherever possible, because we believe these 
estimates will provide a more accurate estimate of burden associated 
with data collection and reporting. Our proposal to update the estimate 
the time required to collect and report data for structural measures 
and measures that use a web-based tool is discussed below.
    We initially adopted five clinical process/cancer specific 
treatment measures that utilized a web-based tool for the FY 2016 
program year in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50841 
through 50844). In that rule, we did not specify burden estimates based 
on the measure type, but instead provided estimates ``for submitting 
all quality measure data'' (78 FR 50958). Since then, we have been able 
to better understand and differentiate the various levels of effort 
associated with data abstraction and submission for specific types of 
measures. Moreover, in understanding that certain measure types prove 
more burdensome than others (that is, chart-abstracted measures), we 
believe it is necessary to provide burden estimates that better reflect 
with the type of measure being discussed.
    Using historical data from its validation contractor, the Hospital 
IQR Program has previously estimated that it takes 15 minutes per 
hospital to report on four structural measures (80 FR 49762). We 
believe this estimate is appropriate for the PCHQR Program because data 
submission for measures that utilize a web-based tool is similar to the 
data submission for a structural measure, in that both types of 
measures use the same reporting mechanism, the QualityNet Secure 
Portal. In addition, we wish to account for the time associated with 
data collection and aggregation for individual measures when 
considering burden, and believe 15 minutes per measure is an 
appropriately conservative estimate for the measures submitted via a 
web-based tool in the PCHQR Program. Therefore, we are proposing to 
apply this burden estimate to four measures that utilize a web-based 
tool: (1) Oncology: Radiation Dose Limits to Normal Tissues (PCH-14/NQF 
#0382); (2) Oncology: Medical and Radiation--Pain Intensity Quantified 
(PCH-16/NQF #0384); (3) Prostate Cancer: Adjuvant Hormonal Therapy for 
High Risk Patients (PCH-17/NQF #0390); and (4) Prostate Cancer: 
Avoidance of Overuse of Bone Scan for Staging Low-Risk Patients (PCH-
18/NQF #0389).
    We are inviting public comment on our proposal to utilize a burden 
estimate of 15 minutes per measure, per PCH, with respect to the burden 
estimates we discuss below for the FY 2021 program year and subsequent 
years.

[[Page 20560]]

c. Estimated Burden of PCHQR Program Proposals for the FY 2021 Program 
Year
    In section VIII.B.3. of the preamble of this proposed rule, we are 
proposing to remove six measures beginning with the FY 2021 program 
year--four web-based, structural measures: (1) Oncology: Radiation Dose 
Limits to Normal Tissues (PCH-14/NQF #0382); (2) Oncology: Medical and 
Radiation--Pain Intensity Quantified (PCH-16/NQF #0384); (3) Prostate 
Cancer: Adjuvant Hormonal Therapy for High Risk Patients (PCH-17/NQF 
#0390); (4) Prostate Cancer: Avoidance of Overuse of Bone Scan for 
Staging Low-Risk Patients (PCH-18/NQF #0389), and two chart-abstracted, 
NHSN measures: (5) NHSN Catheter-Associated Urinary Tract Infection 
(CAUTI) Outcome Measure (PCH-5/NQF #0138) and (6) NHSN Central Line-
Associated Bloodstream Infection (CLABSI) Outcome Measure (PCH-4/NQF 
#0139). In addition, in section VIII.B.4.b. of the preamble of this 
proposed rule, we are proposing to adopt one claims-based measure, 30-
Day Unplanned Readmissions for Cancer Patients (NQF #3188), beginning 
with the FY 2021 program year. If these proposals are finalized, the 
PCHQR Program measure set would consist of 13 measures for the FY 2021 
program year.
    We anticipate our proposal to remove four web-based, structural 
measures will reduce the burden associated with quality reporting on 
PCHs. If our proposal to apply the burden estimate of 15 minutes per 
measure to the four web-based, structural measures is finalized as 
proposed, we estimate a reduction of 1 hour (or 60 minutes) per PCH (15 
minutes per measure x 4 measures = 60 minutes), and a total annual 
reduction of approximately 11 hours for all 11 PCHs (60 minutes x 11 
PCHs/60 minutes per hour), due to the proposed removal of these four 
measures.
    We anticipate that the proposed removal of the two NHSN measures: 
(1) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure 
(PCH-5/NQF #0138) and (2) Central Line-Associated Bloodstream Infection 
(CLABSI) Outcome Measure (PCH-4/NQF #0139) will result in a burden 
decrease. Historically, we have accounted for the burden associated 
with collecting and reporting data for the Catheter-Associated Urinary 
Tract Infections (CAUTI) and Central Line-Associated Bloodstream 
Infection (CLABSI) National Healthcare Safety Network measures as 
though they were standalone chart-abstracted measures.\397\ 
Specifically, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53667), we 
originally estimated the burden for reporting 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. Using this estimate, we estimated 1,259 
burden hours per measure (6,294 hours/5 measures = 1,258.8 hours per 
measure). As such, if our proposal to remove the CAUTI and CLABSI 
measures is finalized as proposed, we estimate an annual burden 
reduction of 2,518 hours per PCH (1,259 hours x 2 measures = 2,518 
hours) and an annual burden reduction of 27,698 hours across all eleven 
PCHs (2,518 hours per PCH x 11 PCHs = 27,698 hours).
---------------------------------------------------------------------------

    \397\ We note that the Centers for Disease Control and 
Prevention (CDC), the owner of the NHSN system, maintains its own 
OMB control number, 0920-0666, that estimates the burden associated 
with reporting data for the measures retained in the PCHQR program, 
that utilize the NHSN system. We have not independently accounted 
for the burden associated with adopting subsequent measures 
utilizing the NHSN system (that is, Colon and Abdominal Hysterectomy 
SSI; CDI; MRSA Bacteremia; and Influenza Vaccination Coverage Among 
Healthcare Personnel (HCP) measures) because the burden associated 
with reporting these measures is captured under the aforementioned 
OMB control number.
---------------------------------------------------------------------------

    We do not anticipate any increase in burden on PCHs related to our 
proposal to adopt the claims-based 30-Day Unplanned Readmissions for 
Cancer Patients measure (NQF #3188) beginning with the FY 2021 program 
year. Because this measure is claims-based and therefore does not 
require facilities to submit any additional data, we do not believe 
there is any increase in burden associated with this proposal.
    In summary, if our proposals to remove six measures and to modify 
our burden estimation methodology for measures that utilize a web-based 
submission tool are finalized as proposed, we estimate a total 
reduction of 27,709 hours of burden per year for all 11 PCHs (-27,698 
hours for the removal of the CAUTI & CLABSI measures-11 hours for the 
removal of the four web-based, structural measures = 27,709 total 
hours) beginning with the FY 2021 program year. Coupled with our 
estimated salary costs, we estimate that these proposed changes would 
result in a reduction in annual labor costs of $1,013,595 (27,709 hours 
x $36.58 hourly labor cost \398\) across the 11 PCHs beginning with the 
FY 2021 PCHQR Program. The burden associated with these reporting 
requirements is currently approved under OMB control number 0938-1175. 
The information collection will be revised and submitted to OMB.
---------------------------------------------------------------------------

    \398\ In the FY 2017 IPPS/LTCH PPS final rule (82 FR 38504 
through 38505), we finalized an hourly wage estimate of $18.29 per 
hour, plus 100 percent overhead and fringe benefits, for the 
Hospital IQR Program. Accordingly, we calculate cost burden to 
hospitals using a wage plus benefits estimate of $36.58 per hour.
---------------------------------------------------------------------------

5. ICRs for the Hospital Value-Based Purchasing (VBP) Program
    In section IV.I. 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 remove four claims-based measures effective with the effective date 
of the FY 2019 IPPS/LTCH PPS final rule. Because these claims-based 
measures are calculated using only data already reported to the 
Medicare program for payment purposes, we do not anticipate removing 
these measures will increase or decrease the reporting burden on 
hospitals. However, we believe removal of these measures from the 
Hospital VBP Program will reduce other costs associated with the 
program, such as: (1) Costs for health care providers and clinicians to 
track the confidential feedback preview reports and publicly reported 
information on the measures in more than one program; (2) costs for CMS 
to analyze, and publicly report the measure data in multiple programs; 
and (3) confusion for beneficiaries to see public reporting on the same 
measures in different programs.
    In addition, in this proposed rule, we are proposing to remove six 
chart-abstracted measures beginning with the FY 2021 program year. 
Because these chart-abstracted measures used data required for and 
collected under the Hospital IQR Program (OMB control number 0938-
1022), there was no additional data collection burden associated these 
measures under the Hospital VBP Program. Therefore, we do not 
anticipate removing these measures will increase or decrease the 
reporting burden on hospitals. However, we believe removal of these 
measures from the Hospital VBP Program will reduce other costs 
associated with the program, such as: (1) Costs for health care 
providers and clinicians to track the confidential feedback preview 
reports and publicly reported information on the measures in more than 
one program; (2) costs for CMS to analyze, and publicly report the 
measures' data in multiple programs; and (3) confusion for 
beneficiaries to see public reporting on the same measures in different 
programs. We note that we are proposing to remove seven claims-based 
measures from the Hospital IQR

[[Page 20561]]

Program, which have been finalized previously for, and will remain in, 
the Hospital VBP Program. However, we do not believe retaining these 
claims-based measures in the Hospital VBP Program will create any 
additional burden for hospitals because the measure data will continue 
to be collected using Medicare FFS claims hospitals are already 
submitting to the Medicare program for payment purposes.
6. ICRs for the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP)
    As discussed in section VIII.C.5. of the preamble of this proposed 
rule, we are proposing to remove two measures from the LTCH QRP 
beginning with the FY 2020 LTCH QRP and to remove one measure from the 
LTCH QRP beginning with the FY 2021 LTCH QRP.
    In section VIII.C.5.a. and b. of the preamble of this proposed 
rule, we are proposing to remove two CDC NHSN measures: National 
Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-Onset 
Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome 
Measure (NQF #1716) and National Healthcare Safety Network (NHSN) 
Ventilator-Associated Event (VAE) Outcome Measure--beginning with the 
FY 2020 LTCH QRP. LTCHs would no longer be required to submit data on 
these measures beginning with October 1, 2018 admissions and 
discharges. As a result, the burden and cost specifically for LTCHs for 
complying with the requirements of the LTCH QRP would be reduced. While 
the overall burden estimates are accounted for under OMB control number 
(0920-0666), to specifically account for burden reductions, the CDC 
provided more detailed estimates for LTCH reporting on the data for the 
measures we are proposing to remove.
    Based on estimates provided by the CDC, which is based on the 
frequency of actual reporting on such data, we estimate that the 
removal of the National Healthcare Safety Network (NHSN) Facility-wide 
Inpatient Hospital-onset Methicillin-resistant Staphylococcus aureus 
(MRSA) Bacteremia Outcome Measure (NQF #1716) would result in a 3-hour 
(15 minutes per MRSA submission x 12 estimated submissions per LTCH per 
year) reduction in clinical staff time annually to report data, which 
equates to a decrease of 1,260 hours (3 hours burden per LTCH per year 
x 420 total LTCHs) in burden for all LTCHs. Given 10 minutes of 
registered nurse time at $69.40 per hour, and 5 minutes of medical 
records or health information technician time at $39.86 per hour, for 
the submission of MRSA data to the NHSN per LTCH per year, we estimate 
that the total cost of complying with the requirements of the LTCH QRP 
would be reduced by $178.66 per LTCH annually, or $75,037.20 for all 
LTCHs annually.
    Applying the same approach on burden reduction estimations, we 
estimate that the removal of the National Healthcare Safety Network 
(NHSN) Ventilator-Associated Event (VAE) Outcome Measure from the LTCH 
QRP would result in a 4.4 hour (22 minutes per VAE submission x 12 
estimated submissions per LTCH per year) reduction in clinical staff 
time to report data, which equates to a decrease of 1,848 hours (4.4 
hours burden per LTCH per year x 420 total LTCHs) in burden for all 
LTCHs. Given the registered nurse hourly rate of $69.40 per hour, and 
medical records or health information technician rate of $39.86 per 
hour for the submission of VAE data to the NHSN per LTCH per year, we 
estimate that the total cost of complying with the LTCH QRP would be 
reduced by $293.54 per LTCH annually, or $123,288.48 for all LTCHs 
annually.
    In addition, in section VIII.C.5.c. of the preamble of this 
proposed rule, we are proposing to remove the measure, Percent of 
Residents or Patients Who Were Assessed and Appropriately Given the 
Seasonal Influenza Vaccine (Short Stay) (NQF #0680), beginning with the 
FY 2021 LTCH QRP. LTCHs would no longer be required to submit data on 
this measure beginning with October 1, 2018 admissions and discharges. 
As a result, the estimated burden and cost for LTCHs for complying with 
requirements of the LTCH QRP would be reduced. Specifically, we believe 
that there would be a 1.8 minute reduction in clinical staff time to 
report data per patient stay. We estimate 136,476 discharges from 420 
LTCHs annually. This equates to a decrease of 4,094 hours in burden for 
all LTCHs (0.03 hours per assessment x 136,476 discharges). Given 1.8 
minutes of registered nurse time at $69.40 per hour completing an 
average of 325 sets of LTCH CARE Data Set assessments per LTCH per 
year, we estimate that the total cost would be reduced by $676.53 per 
LTCH annually, or $284,143.03 for all LTCHs annually. This decrease in 
burden will be accounted for in the information collection under OMB 
control number 0938-1163.
    Overall, the cost associated with the proposed changes to the LTCH 
QRP is estimated at a reduction of $1,148.73 per LTCH annually or 
$482,468.71 for all LTCHs.
7. ICRs Relating to the Hospital-Acquired Condition (HAC) Reduction 
Program
    In section IV.J. of the preamble of this proposed rule, we discuss 
proposed requirements for the HAC Reduction Program. In this proposed 
rule, we are not proposing to adopt any new measures into the HAC 
Reduction Program. However, the Hospital IQR Program is proposing to 
remove the claims-based Patient Safety and Adverse Events Composite 
(PSI 90) and five NHSN HAI measures (CDI, CAUTI, CLABSI, MRSA, and 
SSI). These measures had been previously adopted for, and will remain 
in, the HAC Reduction Program.
    We do not believe that retaining the claims-based PSI 90 measure in 
the HAC Reduction Program will create any additional burden for 
hospitals because it will continue to be collected using Medicare FFS 
claims hospitals are already submitting to the Medicare program for 
payment purposes.
    We note the burden associated with collecting and submitting data 
for the HAI measures (CDI, CAUTI, CLABSI, MRSA, and Colon and Abdominal 
Hysterectomy SSI) via the NHSN system is captured under a separate OMB 
control number, 0920-0666, and therefore will not impact our burden 
estimates.
    We anticipate the proposed discontinuation of the HAI measure 
validation process under the Hospital IQR Program will result in a net 
burden decrease to the Hospital IQR Program, but will result in an off-
setting net burden increase to the HAC Reduction Program because 
hospitals selected for validation will continue to be required to 
submit validation templates for the HAI measures. Therefore, if our 
proposals in section VIII.A.5.b.(2)(b) of the preamble of this proposed 
rule to remove the HAI chart-abstracted measures from the Hospital IQR 
Program are adopted, data validation for the measures will transfer to 
the HAC Reduction Program, and this is will result in a net neutral 
transfer of 43,200 hours and approximately $1.6 million with no overall 
net increase in burden.
    Under the Hospital IQR Program, we have previously estimated a 
reporting burden of 80 hours (1,200 minutes per record x 1 record per 
hospital per quarter x 4 quarters/60 minutes) per hospital selected for 
validation per year to submit the CLABSI and CAUTI templates, and 64 
hours (960 minutes per record x 1 record per hospital per quarter x 4 
quarters/60 minutes) per hospital selected for validation per year to 
submit the MRSA and CDI templates.

[[Page 20562]]

We therefore estimate a total burden shift of 43,200 hours ([80 hours 
per hospital to submit CLABSI and CAUTI templates + 64 hours per 
hospital to submit MRSA and CDI templates] x 300 hospitals selected for 
validation) and approximately $1.6 million (43,200 hours x $36.58 per 
hour \399\) as a result of our proposals to discontinue HAI validation 
under the Hospital IQR Program and begin a validation process under the 
HAC Reduction Program.
---------------------------------------------------------------------------

    \399\ In the FY 2017 IPPS/LTCH PPS final rule (82 FR 38501), we 
finalized an hourly wage estimate of $18.29 per hour, plus 100 
percent overhead and fringe benefits, for the Hospital IQR Program. 
Accordingly, we calculate cost burden to hospitals using a wage plus 
benefits estimate of $36.58 per hour.
---------------------------------------------------------------------------

8. ICRs Relating to the Hospital Readmissions Reduction Program
    In section IV.H. of the preamble of this proposed rule, we discuss 
proposed requirements for the Hospital Readmissions Reduction Program. 
In this proposed rule, we are not proposing to adopt any new measures 
into the Hospital Readmissions Reduction Program. However, we are 
proposing to remove six claims-based measures from the Hospital IQR 
Program, which have been finalized previously for, and will remain in, 
the Hospital Readmissions Reduction Program. We do not believe that 
these claims-based measures remaining in the Hospital Readmissions 
Reduction Program will create any additional burden for hospitals 
because they will continue to be collected using Medicare FFS claims 
hospitals are already submitting to the Medicare program for payment 
purposes.
9. ICRs for the Promoting Interoperability Programs
a. Background and Proposed Update to Hourly Wage Rate
    In section VIII.D. of the preamble of this proposed rule, we are 
proposing a new performance-based scoring methodology and changes to 
the Stage 3 objectives and measures for eligible hospitals and CAHs 
that attest to CMS for the Medicare Promoting Interoperability Program. 
We are also proposing: To change the EHR reporting period in CYs 2019 
and 2020; to establish the CQM reporting period and criteria for CY 
2019, proposing the removal of eight CQMs beginning in CY 2020; and to 
codify the policies for subsection (d) Puerto Rico hospitals to 
participate in the Medicare Promoting Interoperability Program for 
eligible hospitals, including policies previously implemented through 
program instruction. We are retaining the requirement for the 2015 
Edition of CEHRT to be used beginning in CY 2019.
    In prior rules (81 FR 57260), we have estimated that the electronic 
reporting of CQM data could be accomplished by staff with a mean hourly 
wage of $16.42 per hour.\400\ Because this wage rate is based on Bureau 
of Labor Statistics (BLS) data dating to 2012, we are proposing to 
update the wage rate to the most recent data available from the BLS, 
which is the 2016 wage rate of $19.93.\401\ We are calculating the cost 
of overhead, including fringe benefits, at 100 percent of the mean 
hourly wage. This is an estimated adjustment, since both fringe 
benefits and overhead costs vary significantly from employer-to-
employer and the methods of estimating such costs vary widely from 
study-to-study. Nonetheless, we believe that doubling the hourly wage 
rate ($19.44 x 2 = $39.86) to estimate total cost is a reasonably 
accurate estimation method and allows for a conservative estimate of 
hourly costs. We refer readers to the Hospital IQR Program discussion 
in section XIV.B.3. of the preamble of this proposed rule, above, for 
more information regarding the information collection burden related to 
reporting of CQMs.
---------------------------------------------------------------------------

    \400\ Occupational Outlook Handbook. Available at: http://www.bls.gov/oes/2012/may/oes292071.htm.
    \401\ Occupational Outlook Handbook. Available at: https://www.bls.gov/oes/current/oes292071.htm.
---------------------------------------------------------------------------

b. Burden Estimates
    In sections VIII.D.5. and 6. of the preamble of this proposed rule, 
we are proposing a new scoring methodology for eligible hospitals and 
CAHs that attest to CMS for the Promoting Interoperability Program, and 
the addition of two new opioid measures that would be optional in 2019. 
This scoring approach would require eligible hospitals and CAHs to 
report by attestation on only six measures. We consider this scoring 
methodology to be based more on performance and not solely on whether 
an eligible hospital or CAH meets the thresholds for measures. We 
estimate that the new scoring methodology would reduce the necessary 
response time by .25 hours. This is a reduction to the previous burden 
estimate provided in the 2015 EHR Incentive Programs final rule (80 FR 
62928). We are updating the burden estimate to take into account the 
reduced burden associated with the proposed new requirements for 
eligible hospitals and CAHs for Stage 3 of meaningful use. We believe 
the burden would be different for eligible hospitals that attest to a 
State for purposes of receiving a Medicaid incentive payment because 
the existing Stage 3 requirements would continue to apply to them. We 
note that under section 101(b)(1) of the Medicare Access and CHIP 
Reauthorization Act of 2015 (Pub. L. 114-10), the Medicare EHR 
Incentive Program was sunset for EPs in 2018, and now many of these EPs 
are subject to the requirements of the Quality Payment Program (QPP). 
Currently the burden is estimated at $388,408,189 annually. We estimate 
the burden for all participants in the Medicare and Medicaid Promoting 
Interoperability Programs represents a total cost of $61,113,527.80, 
which is a reduction of $327,294,661 annually. We also note that the 
currently approved burden in hours are 4,230,155 and as a result of 
this proposal we believe it will be reduced to 623,562.19 hours. This 
burden reduction would occur as a result of the reduced numbers of EPs 
and the new scoring methodology for eligible hospitals and CAHs 
proposed in this proposed rule. The burden estimate includes subsection 
(d) Puerto Rico hospitals. Below is the burden table where we take into 
account these changes and the burden that would ensue as a result of 
the changes. Please note that the information collection request (OMB 
Control number 0938-1278) is being revised and will be submitted to 
OMB.

                                            Burden and Cost Estimates Associated With Information Collection
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Burden per                     Hourly labor
                      Reg section                          Number of       Number of       response      Total annual       cost of      Total cost ($)
                                                          respondents      responses        (hours)     burden (hours)   reporting ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   495.24(d)--Objectives/Measures (Medicaid EPs)..          80,000          80,000            7.43         594,400             100       $59,440,000

[[Page 20563]]

 
Sec.   495.24(d)--Objectives/Measures Medicaid                     133             133            7.43          988.19           67.25         66,455.78
 (eligible hospitals/CAHs)............................
Sec.   495.24(e)--Objectives/Measures Medicare                    3300            3300            7.18          23,694           67.25      1,593,421.50
 (eligible hospitals/CAHs)............................
Sec.   495.316--Quarterly Reporting (Medicaid)........              56             224              20           4,480           3.047         13,650.56
                                                       -------------------------------------------------------------------------------------------------
    Totals............................................          83,489          83,489  ..............      623,562.19  ..............    $61,113,527.80
--------------------------------------------------------------------------------------------------------------------------------------------------------

    There are 3,300 eligible hospitals and CAHs that attest to CMS 
(Medicare-only and dual-eligible) under the Medicare Promoting 
Interoperability Program. Therefore, the total estimated annual cost 
burden for all eligible hospitals and CAHs in the Medicare Promoting 
Interoperability Program to attest to meaningful use would be 
$,1,593,421.5 (3,300 eligible hospitals and CAHs x 7 hours 18 minutes x 
$67.25).\402\
---------------------------------------------------------------------------

    \402\ https://www.bls.gov/oes/current/oes231011.htm.
---------------------------------------------------------------------------

    We are proposing that the new scoring methodology and changes to 
the Stage 3 objectives and measures for eligible hospitals and CAHs 
that attest to CMS would be optional for States to implement through 
changes to their State Medicaid HIT Plans approved by CMS for eligible 
hospitals participating in their Medicaid Promoting Interoperability 
Program. If States choose not to align, eligible hospitals in those 
States would continue to attest to the objectives and measures as 
currently specified under Sec.  495.24(d). Extending this option to 
States would allow them flexibility to benefit from the improvements to 
meaningful use scoring outlined in this proposed rule, if they so 
choose. If States choose to take this option, we anticipate the same 
burden reduction for Medicaid eligible hospitals as discussed above, 
but a significant burden increase for States that would have to 
overhaul their systems to collect data. If States do not take the 
option, they would face no burden increase or decrease.
    In section VIII.D.7. of the preamble of this proposed rule, we are 
proposing the EHR reporting periods in CYs 2019 and 2020 for new and 
returning participants attesting to CMS or their State Medicaid agency 
would be a minimum of any continuous 90-day period within each of the 
CYs 2019 and 2020. This would mean that EPs that attest to a State for 
the State's Medicaid Promoting Interoperability Program and eligible 
hospitals and CAHs attesting to CMS or the State's Medicaid Promoting 
Interoperability 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, 2019 through December 31, 2019 and from January 1, 2020 
through December 31, 2020, respectively. The applicable incentive 
payment year and payment adjustment years for the EHR reporting periods 
in 2019 and 2020, 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 do not expect these 
proposals to affect our burden estimates because we have never required 
a different EHR reporting period.
    In section VIII.D.9. of the preamble of this proposed rule we are 
proposing that the reporting period for Medicare and Medicaid eligible 
hospitals and CAHs that report CQMs electronically would be one, self-
selected calendar quarter of CY 2019 data. We are proposing that 
eligible hospitals and CAHs participating in only the EHR Program, or 
participating in both the Promoting Interoperability Programs and the 
Hospital IQR Program, report on at least 4 self-selected CQMs. We are 
also proposing to remove eight CQMs beginning in 2020. We believe to 
report on the 4 self-selected CQMs electronically would cost ($39.86 x 
40 min) 1,594.4 per hospital times 3,300 hospitals results in a total 
burden of $5,261,520 for all eligible hospitals and CAHs.
    In section VIII.D.10. of the preamble of this proposed rule, we are 
proposing to incorporate into our regulations program guidance 
regarding subsection (d) Puerto Rico hospitals. Because we are not 
proposing any new requirements, we do not believe that these proposals 
will affect burden.
    In section VIII.D.12.a. of the preamble of this proposed rule, we 
are proposing to amend 45 CFR 495.324(b)(2) and 495.324(b)(3) to align 
with current prior approval policy for MMIS and ADP systems at 45 CFR 
95.611(a)(2)(ii), and (b)(2)(iii) and (iv), and to minimize burden on 
States. Specifically, we are proposing that the prior approval dollar 
threshold in Sec.  495.324(b)(3) would be increased to $500,000, and 
that a prior approval threshold of $500,000 would be added to Sec.  
495.324(b)(2). In addition, in light of these proposed changes, we are 
proposing a conforming amendment to amend the threshold in Sec.  
495.324(d) for prior approval of justifications for sole source 
acquisitions to be the same $500,000 threshold. That threshold is 
currently aligned with the $100,000 threshold in current Sec.  
495.324(b)(3). Amending Sec.  495.324(d) to preserve alignment with 
Sec.  495.324(b)(3) would reduce burden on States and maintain the 
consistency of our prior approval requirements. We believe that this 
proposal would reduce burden on States by raising the prior approval 
thresholds and generally aligning them with the thresholds for prior 
approval of MMIS and ADP acquisitions costs.
    In section VIII.D.12.b. of the preamble of this proposed rule, we 
are proposing that the 90 percent FFP for Medicaid Promoting 
Interoperability Program administration would no longer be available 
for most State expenditures incurred after September 30, 2022. We are 
proposing a later sunset date, September 30, 2023, for the availability 
of 90 percent enhanced match for State administrative costs related to 
Medicaid Promoting Interoperability Program audit and appeals 
activities, as well as costs related to administering incentive payment 
disbursements and recoupments that might result from those activities. 
States would not be able to claim any Medicaid Promoting 
Interoperability Program administrative match for expenditures incurred 
after September 30, 2023. We do not believe that these proposals would 
impose any

[[Page 20564]]

additional burdens on States, because they only affect the timing of 
State expenditures.
    We are requesting public comments on these information collection 
and recordkeeping requirements.
10. ICRs for Proposed Revisions to the Supporting Documentation 
Requirements for Medicare Cost Reports
    In section IX.B.1. of the preamble of this proposed rule, we are 
proposing to incorporate the Provider Cost Reimbursement Questionnaire, 
Form CMS-339 (OMB No. 0938-0301) into the Organ Procurement 
Organization (OPO) and Histocompatibility Laboratory cost report, Form 
CMS-216 (OMB No. 0938-0102), which would complete our incorporation of 
the Form CMS-339 into all Medicare cost reports. We also are proposing 
to update Sec.  413.24(f)(5)(i) to reflect that an acceptable cost 
report would no longer require the provider to separately submit a 
Provider Cost Reimbursement Questionnaire, Form CMS-339, by removing 
the reference to the questionnaire.
    There are 58 OPOs and 47 histocompatibility laboratories. This 
proposal would not require additional data collection from OPOs or 
histocompatibility laboratories. This proposal would benefit OPOs and 
histocompatibility laboratories because they would no longer be 
required to complete and submit the Form CMS-339 as a separate form 
independent of the Medicare cost report in order to have an acceptable 
cost report submission under Sec.  413.24(f)(5)(i).
    Currently, all OPOs and histocompatibility laboratories are 
required to complete Form CMS-339. The proposal to incorporate the 
Provider Cost Reimbursement Questionnaire, Form CMS-339, into the OPO 
and Histocompatibility Laboratory cost report would eliminate the 
requirement to complete the Form CMS-339. The estimated annual burden 
associated with Form CMS-339 is 3 hours per respondent. The time 
required by an OPO or a histocompatibility laboratory to complete the 
Form CMS-339 would be reduced if it is incorporated into the cost 
report. The incorporation of the Form CMS-339 into the cost report as a 
cost report worksheet would decrease burden upon OPOs and 
histocompatibility laboratories. These entities would no longer be 
required to review multiple pages of questions not applicable to them. 
This proposal would result in an overall burden reduction to the 58 
OPOs and 47 histocompatibility laboratories of a total of 289 hours.
    Instead, these entities would be required to respond to 5 
questions, which we estimate would take 15 minutes per entity. The 
total estimated burden across all respondents would be 26 hours ((105 
respondents) x (0.25 hours/response)). By eliminating the requirement 
to complete the inapplicable parts of the Form CMS-339, each OPO or 
histocompatibility laboratory would experience a net burden decrease of 
2.75 hours.
    Based on the most recent Bureau of Labor Statistics (BLS) 2016 
Occupational Outlook Handbook, the mean hourly wage for Category 43-
3031 (bookkeeping, accounting, and auditing clerk) is $19.34. We added 
100 percent of the mean hourly wage to account for fringe benefits and 
overhead, which calculates to a total hourly wage of $38.68 ($19.34 + 
$19.34). The overall decrease in costs to the 58 OPOs and 47 
histocompatibility laboratories is $11,178.52 ($38.68 x 289 hours).
    In section IX.B.6. of the preamble of this proposed rule, we are 
proposing that, effective for cost reporting periods beginning on or 
after October 1, 2018, in order for a provider claiming costs on its 
cost report that are allocated from a home office or chain organization 
to have an acceptable cost report submission under Sec.  413.24(f)(5), 
a Home Office Cost Statement completed by the home office or chain 
organization that corresponds to the amounts allocated from the home 
office or chain organization to the provider's cost report must be 
submitted as a supporting document with the provider's cost report. 
With our proposal, we anticipate that more providers claiming costs on 
their cost reports that are allocated from a home office or chain 
organization will submit a Home Office Cost Statement with their cost 
reports in order to have an acceptable cost report submission. Based on 
the most recent available FY 2016 data in CMS' System for Tracking 
Audit and Reimbursement, there were approximately 94 providers that 
claimed costs on their cost reports that were allocated from 
approximately 13 home offices or chain organizations, but did not 
submit a Home Office Cost Statement with their cost reports to 
substantiate these allocated costs.
    Because the existing burden estimate for a provider's cost report 
already reflects the requirement that providers collect, maintain, and 
submit this data, there is no additional burden placed upon providers 
as a result of our proposal to require them to submit these supporting 
documents along with their cost report in order to have an acceptable 
cost report submission. To account for the anticipated increase in home 
office cost statement submissions, we will adjust the number of 
respondents in the Home Office Cost Statement (OMB Control number 0938-
0202) information collection request that is currently being developed 
for reinstatement.

C. Response to 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 comments we receive 
by the date and time specified in the DATES section of this proposed 
rule, and, when we proceed with a subsequent document(s), we will 
respond to those comments in the preamble to that document.

List of Subjects

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 424

    Emergency medical services, Health facilities, Health professions, 
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 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
1. 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); secs. 123 and 124 of subtitle A of Title I 
of Pub. L. 106-113 (113 Stat. 1501A-332); sec. 307 of Subtitle A of 
Title III of Pub. L. 106-554; sec. 114 of 110-173; sec. 4302 of Pub. 
L. 111-5; secs. 3106 and 10312 of Pub. L. 111-148; sec. 1206 of Pub. 
L. 113-67; sec. 112 of Pub. L. 113-93; sec. 231 of Pub. L.

[[Page 20565]]

114-113; secs. 15004, 15006, 15007, 15008, 15009, and 15010 of Pub. 
L. 114-255; and sec. 51005 of Division E of Title X of Pub. L. 115-
123.

0
2. Section 412.3 is amended by revising paragraph (a) to read as 
follows:


Sec.  412.3  Admissions.

    (a) For purposes of payment under Medicare Part A, an individual is 
considered an inpatient of a hospital, including a critical access 
hospital, if formally admitted as an inpatient pursuant to an order for 
inpatient admission by a physician or other qualified practitioner in 
accordance with this section and Sec. Sec.  482.24(c), 482.12(c), and 
485.638(a)(4)(iii) of this chapter for a critical access hospital. In 
addition, inpatient rehabilitation facilities also must adhere to the 
admission requirements specified in Sec.  412.622.
* * * * *
0
3. Section 412.4 is amended by adding paragraph (c)(4) to read as 
follows:


Sec.  412.4  Discharges and transfers.

* * * * *
    (c) * * *
    (4) For discharges occurring on or after October 1, 2018, to 
hospice care by a hospice program.
* * * * *
0
4. Section 412.22 is amended by adding paragraph (h)(2)(iii)(A)(4) to 
read as follows:


Sec.  412.22  Excluded hospitals and hospital units: General rules.

* * * * *
    (h) * * *
    (2) * * *
    (iii) * * *
    (A) * * *
    (4) On or after October 1, 2018, a satellite facility that is part 
of a hospital excluded from the prospective payment systems specified 
in Sec.  412.1(a)(1) that provides inpatient services in a building 
also used by another hospital that is excluded from the prospective 
payment systems specified in Sec.  412.1(a)(1), or in one or more 
entire buildings located on the same campus as buildings used by 
another hospital that is excluded from the prospective payment systems 
specified in Sec.  412.1(a)(1), is not required to meet the criteria 
specified in paragraphs (h)(2)(iii)(A)(1) through (3) of this section 
in order to be excluded from the inpatient prospective payment system. 
A satellite facility that is part of a hospital excluded from the 
prospective payment systems specified in Sec.  412.1(a)(1) which is 
located in a building also used by another hospital that is not 
excluded from the prospective payment systems specified in Sec.  
412.1(a)(1), or in one or more entire buildings located on the same 
campus as buildings used by another hospital that is not excluded from 
the prospective payment systems specified in Sec.  412.1(a)(1), is 
required to meet the criteria specified in paragraphs (h)(2)(iii)(A)(1) 
through (3) of this section in order to be excluded from the 
prospective payment systems specified in Sec.  412.1(a)(1).
* * * * *
0
5. Section 412.25 is amended by--
0
a. Revising paragraphs (a)(1)(ii), (d), and (e)(2)(iii)(A); and
0
b. Adding paragraph (e)(2)(iv).
    The revisions and addition read as follows:


Sec.  412.25  Excluded hospital units: Common requirements.

    (a) * * *
    (1) * * *
    (ii) Prior to October 1, 2019, is not excluded in its entirety from 
the prospective payment systems; and
* * * * *
    (d) Number of excluded units. Each hospital may have only one unit 
of each type (psychiatric or rehabilitation) excluded from the 
prospective payment systems specified in Sec.  412.1(a)(1). A hospital 
excluded from the prospective payment systems as specified in Sec.  
412.1(a)(1) may not have an excluded unit (psychiatric or 
rehabilitation) that is excluded on the same basis as the hospital.
    (e) * * *
    (2) * * *
    (iii) * * *
    (A) Except as provided in paragraph (e)(2)(iv) of this section, it 
is not under the control of the governing body or chief executive 
officer of the hospital in which it is located, and it furnishes 
inpatient care through the use of medical personnel who are not under 
the control of the medical staff or chief medical officer of the 
hospital in which it is located.
* * * * *
    (iv) Effective for cost reporting periods beginning on or after 
October 1, 2019, the requirements of paragraph (e)(2)(iii)(A) of this 
section do not apply to a satellite facility of a unit that is part of 
a hospital excluded from the prospective payment systems specified in 
Sec.  412.1(a)(1) that does not furnish services in a building also 
used by another hospital that is not excluded from the prospective 
payment systems specified in Sec.  412.1(a)(1), or in one or more 
entire buildings located on the same campus as buildings used by 
another hospital that is not excluded from the prospective payment 
systems specified in Sec.  412.1(a)(1).
* * * * *
0
6. Section 412.64 is amended by revising paragraphs (d)(1)(vii) and 
(d)(3) to read as follows:


Sec.  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, 2018, and 2019, 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.
* * * * *
    (3)(i) Beginning fiscal year 2015, in the case of a ``subsection 
(d) hospital,'' as defined under section 1886(d)(1)(B) of the Act, that 
is not a meaningful electronic health record (EHR) user as defined in 
part 495 of this chapter for the applicable EHR reporting period and 
does not receive an exception, three-fourths of the percentage increase 
in the market basket index (as defined in Sec.  413.40(a)(3) of this 
chapter) for prospective payment hospitals is reduced--
    (A) For fiscal year 2015, by 33 1/3 percent;
    (B) For fiscal year 2016, by 66 2/3 percent; and
    (C) For fiscal year 2017 and subsequent fiscal years, by 100 
percent.
    (ii) Beginning fiscal year 2022, in the case of a ``subsection (d) 
Puerto Rico hospital,'' as defined under section 1886(d)(9)(A) of the 
Act, that is not a meaningful EHR user as defined in part 495 of this 
chapter for the applicable EHR reporting period and does not receive an 
exception, three-fourths of the percentage increase in the market 
basket index (as defined in Sec.  413.40(a)(3) of this chapter) for 
prospective payment hospitals is reduced--
    (A) For fiscal year 2022, by 33 1/3 percent;
    (B) For fiscal year 2023, by 66 2/3 percent; and
    (C) For fiscal year 2024 and subsequent fiscal years, by 100 
percent.
* * * * *
0
7. 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

[[Page 20566]]

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, 2022, 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.
* * * * *


Sec.  412.92  [Amended]

0
8. Section 412.92 is amended--
0
a. In paragraph (a)(1)(ii) by removing the term ``intermediary'' and 
adding the term ``MAC'' is its place;
0
 b. By adding paragraph (a)(4);
0
 c. In paragraph (b)(1)(i) by removing the term ``fiscal intermediary'' 
and adding the term ``MAC'' in its place;
0
d. In paragraphs (b)(1)(iii)(B) and ((b)(1)(iv) by removing the term 
``intermediary'' and adding the term ``MAC'' in its place;
0
e. In paragraph (b)(1)(v) by removing the term ``intermediary's'' and 
adding the term ``MAC's'' in its place, and removing the term 
``intermediary'' and adding the term ``MAC'' in its place;
0
f. By revising paragraphs (b)(2)(i) and (ii) introductory text and 
(b)(2)(ii)(B);
0
g. By adding paragraph (b)(2)(ii)(C);
0
h. By revising paragraph (b)(2)(iv);
0
i. In paragraphs (b)(3)(i), (ii) and (iii) by removing the term 
``fiscal intermediary'' and adding the term ``MAC'' in its place;
0
j. In paragraph (b)(3)(iv) by removing the phrase ``fiscal intermediary 
or'';
0
k. In paragraph (d)(2) introductory text, (e)(1) and (e)(3) 
introductory text by removing the term ``intermediary'' wherever it 
appears and adding the term ``MAC'' in its place;
0
l. In paragraph (e)(2) introductory text by removing the term 
``intermediary's'' and adding the term ``MAC's'' in its place;
0
m. In paragraph (e)(2)(i) by removing the term ``intermediary'' and 
adding the term ``MAC'' in its place; and
0
n. In paragraphs (e)(3)(i) introductory text, and (e)(3)(ii) and (iii) 
by removing the term ``intermediary'' and adding the term ``MAC'' in 
its place.
    The revisions and addition read as follows:


Sec.  412.92  Special treatment: sole community hospitals.

    (a) * * *
    (4) For a hospital with a main campus and one or more remote 
locations under a single provider agreement where services are provided 
and billed under the inpatient hospital prospective payment system and 
that meets the provider-based criteria at Sec.  413.65 of this chapter 
as a main campus and a remote location of a hospital, combined data 
from the main campus and its remote location(s) are required to 
demonstrate that the criteria specified in paragraphs (a)(1)(i) and 
(ii) of this section are met. For the mileage and rural location 
criteria in paragraph (a) of this section and the mileage, 
accessibility, and travel time criteria specified in paragraphs (a)(1) 
through (3) of this section, the hospital must demonstrate that the 
main campus and its remote location(s) each independently satisfy those 
requirements.
    (b) * * *
    (2) * * *
    (i) For applications received on or before September 30, 2018, sole 
community hospital status is effective 30 days after the date of CMS' 
written notification of approval, except as provided in paragraph 
(b)(2)(v) of this section. For applications received on or after 
October 1, 2018, sole community hospital status is effective as of the 
date CMS receives the complete application, except as provided in 
paragraph (b)(2)(v) of this section.
    (ii) When a court order or a determination by the Provider 
Reimbursement Review Board (PRRB) reverses a CMS denial of sole 
community hospital status and no further appeal is made, the sole 
community hospital status is effective as follows:
* * * * *
    (B) If the hospital's application for sole community hospital 
status was received on or after October 1, 1983 and on or before 
September 30, 2018, the effective date is 30 days after the date of 
CMS' original written notification of denial.
    (C) If the hospital's application for sole community hospital 
status was received on or after October 1, 2018, the effective date is 
the date CMS receives the complete application.
* * * * *
    (iv) For applications received on or before September 30, 2018, a 
hospital classified as a sole community hospital receives a payment 
adjustment, as described in paragraph (d) of this section, effective 
with discharges occurring on or after 30 days after the date of CMS' 
approval of the classification. For applications received on or after 
October 1, 2018, a hospital classified as a sole community hospital 
receives a payment adjustment, as described in paragraph (d) of this 
section, effective with discharges occurring on or after the date CMS 
receives the complete application.
* * * * *
0
9. Section 412.96 is amended by redesignating paragraph (d) as 
paragraph (e) and adding a new paragraph (d) to read as follows:


Sec.  412.96  Special treatment: Referral centers.

* * * * *
    (d) Criteria for hospitals that have remote location(s). For a 
hospital with a main campus and one or more remote locations under a 
single provider agreement where services are provided and billed under 
the inpatient hospital prospective payment system and that meets the 
provider-based criteria at Sec.  413.65 of this chapter as a main 
campus and a remote location of a hospital, combined data from the main 
campus and its remote location(s) are required to demonstrate that the 
criteria specified in paragraphs (b)(1) and (2) and (c)(1) through (5) 
of this section are met. For the rural location criteria specified in 
paragraphs (b)(1) and (c) of this section and the mileage criteria 
specified in paragraphs (b)(2)(ii) and (c)(4) of this section, the 
hospital must demonstrate that the main campus and its remote locations 
each independently satisfy those requirements.
* * * * *
0
10. Section 412.101 is amended by--
0
a. Revising paragraph (b)(2);
0
b. Revising paragraphs (c)(1) and (2) introductory text;
0
c. Adding paragraph (c)(3); and
0
d. Revising paragraph (d).
    The revisions and addition 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:
    (i) For FY 2005 through FY 2010 and FY 2023 and subsequent fiscal 
years, a hospital must have fewer than 200 total discharges, which 
includes Medicare and non-Medicare discharges, during the fiscal year, 
based on the hospital's most recently submitted cost report, and be 
located more than 25 road miles (as defined in paragraph (a) of this 
section) from the nearest ``subsection (d)'' (section 1886(d) of the 
Act) hospital.
    (ii) For FY 2011 through FY 2018, a hospital must have fewer than 
1,600 Medicare discharges, as defined in paragraph (a) of this section, 
during the

[[Page 20567]]

fiscal year, based on the hospital's Medicare discharges from the most 
recently available MedPAR data as determined by CMS, and be located 
more than 15 road miles, as defined in paragraph (a) of this section, 
from the nearest ``subsection (d)'' (section 1886(d) of the Act) 
hospital.
    (iii) For FY 2019 through FY 2022, a hospital must have fewer than 
3,800 total discharges, which includes Medicare and non-Medicare 
discharges, during the fiscal year, based on the hospital's most 
recently submitted cost report, and be located more than 15 road miles 
(as defined in paragraph (a) of this section) from the nearest 
``subsection (d)'' (section 1886(d) of the Act) hospital.
* * * * *
    (c) * * *
    (1) For FY 2005 through FY 2010 and FY 2023 and subsequent fiscal 
years, the adjustment is an additional 25 percent for each Medicare 
discharge.
    (2) For FY 2011 through FY 2018, the adjustment is as follows:
* * * * *
    (3) For FY 2019 through FY 2022, the adjustment is as follows:
    (i) For low-volume hospitals with 500 or fewer total discharges, 
which includes Medicare and non-Medicare discharges, during the fiscal 
year, based on the hospital's most recently submitted cost report, the 
adjustment is an additional 25 percent for each Medicare discharge.
    (ii) For low-volume hospitals with more than 500 and fewer than 
3,800 total discharges, which includes Medicare and non-Medicare 
discharges, during the fiscal year, based on the hospital's most 
recently submitted cost report, the adjustment for each Medicare 
discharge is an additional percent calculated using the formula [(95/
330)--(number of total discharges/13,200)]. ``Total discharges'' is 
determined as described in paragraph (b)(2)(iii) of this section.
    (d) Eligibility of new hospitals for the adjustment. For FYs 2005 
through 2010 and FY 2019 and subsequent fiscal years, a new hospital 
will be eligible for a low-volume adjustment under this section once it 
has submitted a cost report for a cost reporting period that indicates 
that it meets discharge requirements during the applicable fiscal year 
and has provided its Medicare administrative contractor with sufficient 
evidence that it meets the distance requirement, as specified in 
paragraph (b)(2) of this section.
* * * * *
0
11. Section 412.103 is amended by adding paragraph (a)(7) and revising 
paragraph (b)(6) to read as follows:


Sec.  412.103   Special treatment: Hospitals located in urban areas and 
that apply for reclassification as rural.

    (a) * * *
    (7) For a hospital with a main campus and one or more remote 
locations under a single provider agreement where services are provided 
and billed under the inpatient hospital prospective payment system and 
that meets the provider-based criteria at Sec.  413.65 of this chapter 
as a main campus and a remote location of a hospital, the hospital is 
required to demonstrate that the main campus and its remote location(s) 
each independently satisfy the location conditions specified in 
paragraphs (a)(1), (2), and (6) of this section.
    (b) * * *
    (6) Lock-in date for the wage index calculation and budget 
neutrality. 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), 
(2), and (4) and (h) for the payment rates for the next Federal fiscal 
year, the hospital's application must be approved by the CMS Regional 
Office in accordance with the requirements of this section no later 
than 60 days after the public display date at the Office of the Federal 
Register of the inpatient prospective payment system proposed rule for 
the next Federal fiscal year.
* * * * *


Sec.  412.105  [Amended]

0
12. Section 412.105 is amended in paragraph (f)(1)(vii) by removing the 
reference ``Sec. Sec.  413.79(e)(1) through (e)(4)'' and adding in its 
place the reference ``Sec.  413.79(e)''.
0
13. Section 412.106 is amended by adding paragraph (g)(1)(iii)(C)(5) to 
read as follows:


Sec.  412.106   Special treatment: Hospitals that serve a 
disproportionate share of low-income patients.

* * * * *
    (g) * * *
    (1) * * *
    (iii) * * *
    (C) * * *
    (5) For fiscal year 2019, 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 2013 cost reports from the most recent HCRIS database 
extract and the most recent available year of data on Medicare SSI 
utilization (or, for Puerto Rico hospitals, a proxy for Medicare SSI 
utilization data), and for hospitals other than Puerto Rico hospitals, 
IHS or Tribal hospitals, and all-inclusive rate providers, data on 
uncompensated care costs, defined as charity care costs plus non-
Medicare bad debt costs from 2014 and 2015 cost reports from the most 
recent HCRIS database extract.
* * * * *


Sec.  412.108   [Amended]

0
14. Section 412.108 is amended--
0
a. By revising paragraph (a)(1);
0
b. By adding paragraph (a)(3);
0
c. By revising paragraph (b)(4) introductory text;
0
d. In paragraphs (b)(1) and (3), and (b)(4)(i), (ii), and (iii), 
(b)(5), (6), (7), (8), and (9), and (d)(1), (d)(2)(i), (d)(3) 
introductory text, and (d)(3)(i), (ii), and (iii) by removing the terms 
``fiscal intermediary'' and ``intermediary'' wherever they appear and 
adding the term ``MAC'' in their place;
0
e. In paragraph (b)(8) and (9) and (d)(2) introductory text by removing 
the terms ``fiscal intermediary's'' and ``intermediary's'' and adding 
the term ``MAC's'' in their place; and
0
f. By revising paragraph (c)(2)(iii) introductory text.
    The revisions and additions read as follows:


Sec.  412.108   Special treatment: Medicare-dependent, small rural 
hospitals.

    (a) * * *
    (1) General considerations. For cost reporting periods beginning on 
or after April 1, 1990, and ending before October 1, 1994, or for 
discharges occurring on or after October 1, 1997, and before October 1, 
2022, a hospital is classified as a Medicare-dependent, small rural 
hospital if it meets all of the following conditions:
    (i) It is located in a rural area (as defined in subpart D of this 
part) or it is located in a State with no rural area and satisfies any 
of the criteria under Sec.  412.103(a)(1) or (3) or under Sec.  
412.103(a)(2) as of January 1, 2018.
    (ii) The hospital has 100 or fewer beds as defined in Sec.  
412.105(b) during the cost reporting period.
    (iii) The hospital is not also classified as a sole community 
hospital under Sec.  412.92.
    (iv) At least 60 percent of the hospital's inpatient days or 
discharges were attributable to individuals entitled to Medicare Part A 
benefits during the hospital's cost reporting period or periods as 
follows, subject to the provisions of paragraph (a)(1)(v) of this 
section:

[[Page 20568]]

    (A) The hospital's cost reporting period ending on or after 
September 30, 1987 and before September 30, 1988.
    (B) If the hospital does not have a cost reporting period that 
meets the criterion set forth in paragraph (a)(1)(iv)(A) of this 
section, the hospital's cost reporting period beginning on or after 
October 1, 1986, and before October 1, 1987.
    (C) At least two of the last three most recent audited cost 
reporting periods for which the Secretary has a settled cost report.
    (v) If the cost reporting period determined under paragraph 
(a)(1)(iv) of this section is for less than 12 months, the hospital's 
most recent 12-month or longer cost reporting period before the short 
period is used.
* * * * *
    (3) Criteria for hospitals that have remote location(s). For a 
hospital with a main campus and one or more remote locations under a 
single provider agreement where services are provided and billed under 
the inpatient hospital prospective payment system and that meets the 
provider-based criteria at Sec.  413.65 as a main campus and a remote 
location of a hospital, combined data from the main campus and its 
remote location(s) are required to demonstrate that the criteria in 
paragraphs (a)(1) and (2) of this section are met. For the location 
requirement specified in paragraph (a)(1)(i) of this section, the 
hospital must demonstrate that the main campus and its remote locations 
each independently satisfy this requirement.
    (b) * * *
    (4) For applications received on or before September 30, 2018, a 
determination of MDH status made by the MAC is effective 30 days after 
the date the MAC provides written notification to the hospital. For 
applications received on or after October 1, 2018, a determination of 
MDH status made by the MAC is effective as of the date CMS receives the 
complete application. An approved MDH status determination remains in 
effect unless there is a change in the circumstances under which the 
status was approved.
* * * * *
    (c) * * *
    (2) * * *
    (iii) For discharges occurring during cost reporting periods (or 
portions thereof) beginning on or after October 1, 2006, and before 
October 1, 2022, 75 percent of the amount that the Federal rate 
determined under paragraph (c)(1) of this section is exceeded by the 
highest of the following:
* * * * *
0
15. Section 412.152 is amended by adding, in alphabetical order, 
definitions of ``Applicable period for dual-eligibility'', ``Dual-
eligible'', and ``Proportion of dual-eligibles'' to read as follows:


Sec.  412.152   Definitions for the Hospital Readmissions Reduction 
Program.

* * * * *
    Applicable period for dual-eligibility is the 3-year data period 
corresponding to the applicable period as established by the Secretary 
for the Hospital Readmissions Reduction Program.
* * * * *
    Dual-eligible is a patient beneficiary who has been identified as 
having full benefit status in both the Medicare and Medicaid programs 
in the State Medicare Modernization Act (MMA) files for the month the 
beneficiary was discharged from the hospital.
* * * * *
    Proportion of dual-eligibles is the number of dual-eligible 
patients among all Medicare Fee-for-Service and Medicare Advantage 
stays during the applicable period.
* * * * *
0
16. Section 412.164 is amended by revising paragraph (a) to read as 
follows:


Sec.  412.164   Measure selection under the Hospital Value-Based 
Purchasing (VBP) Program.

    (a) CMS will select measures, other than measures of readmissions, 
for purposes of the Hospital VBP Program. The measures will be selected 
from the measures specified under section 1886(b)(3)(B)(viii) of the 
Act (the Hospital Inpatient Quality Reporting Program).
* * * * *
0
17. Section 412.200 is revised to read as follows:


Sec.  412.200  General provisions.

    Beginning with discharges occurring on or after October 1, 1987, 
hospitals located in Puerto Rico are subject to the rules governing the 
prospective payment system for inpatient operating costs. Except as 
provided in this subpart, the provisions of subparts A, B, C, F, G, and 
H of this part apply to hospitals located in Puerto Rico. Except for 
Sec.  412.60, which deals with DRG classification and weighting 
factors, or as otherwise specified, the provisions of subparts D and E, 
which describe the methodology used to determine prospective payment 
rates for inpatient operating costs for hospitals, do not apply to 
hospitals located in Puerto Rico. Instead, the methodology for 
determining prospective payment rates for inpatient operating costs for 
these hospitals is set forth in Sec. Sec.  412.204 through 412.212.
0
18. Section 412.230 is amended by revising paragraph (d)(5) to read as 
follows:


Sec.  412.230   Criteria for an individual hospital seeking 
redesignation to another rural area or an urban area.

* * * * *
    (d) * * *
    (5) Single hospital MSA exception. The requirements of paragraph 
(d)(1)(iii) of this section do not apply if a hospital is the single 
hospital in its MSA with published 3-year average hourly wage data 
included in the current fiscal year inpatient prospective payment 
system final rule.
0
19. Section 412.500 is amended by adding paragraphs (a)(9) and (10) to 
read as follows:


Sec.  412.500   Basis and scope of subpart.

    (a) * * *
    (9) Section 51005(a) of Public Law 115-123 which extended the 
blended payment rate for the site neutral payment rate cases to apply 
to discharges occurring in cost reporting periods beginning in FYs 2018 
and 2019.
    (10) Section 51005(b) of Public Law which reduces the IPPS 
comparable amount for the site neutral payment rate cases by 4.6 
percent for FYs 2018 through 2026.
* * * * *
0
20. Section 412.522 is amended by--
0
a. Adding paragraph (c)(1)(iii);
0
b. Removing paragraph (c)(2)(v); and
0
c. Revising paragraph (c)(3) introductory text.
    The addition and revision read as follows:


Sec.  412.522   Application of site neutral payment rate.

* * * * *
    (c) * * *
    (1) * * *
    (iii) For discharges occurring in fiscal years 2018 through 2026, 
the amount in paragraph (c)(1)(i) of this section is reduced by 4.6 
percent.
* * * * *
    (3) Transition. For discharges occurring in cost reporting periods 
beginning on or after October 1, 2015 and on or before September 30, 
2019, payment for discharges under paragraph (c)(1) of this section are 
made using a blended payment rate, which is determined as--
* * * * *
0
21. Section 412.523 is amended by adding paragraphs (c)(3)(xv) and 
(d)(6) to read as follows:


Sec.  412.523   Methodology for calculating the Federal prospective 
payment rates.

* * * * *

[[Page 20569]]

    (c) * * *
    (3) * * *
    (xv) For long-term care hospital prospective payment system fiscal 
year beginning October 1, 2018, and ending September 30, 2019. The LTCH 
PPS standard Federal payment rate for the long-term care hospital 
prospective payment system beginning October 1, 2018, and ending 
September 30, 2019, is the standard Federal payment rate for the 
previous long-term care hospital prospective payment system fiscal year 
updated by 1.15 percent and further adjusted, as appropriate, as 
described in paragraph (d) of this section.
* * * * *
    (d) * * *
    (6) Adjustment for the elimination of the limitation on long-term 
care hospital admissions from referring hospitals. The standard Federal 
payment rate determined in paragraph (c)(3) of this section for 
discharges occurring on or after October 1, 2018 is permanently 
adjusted by a one-time factor so that estimated aggregate payments to 
LTCH PPS standard Federal rate cases in FY 2019 are projected to equal 
estimated aggregate payments that would have been paid for such cases 
without regard to the elimination of the limitation on long-term care 
hospital admissions from referring hospitals.
* * * * *


Sec.  412.525  [Amended]

0
22. Section 412.525 is amended by removing paragraph (d)(6).


Sec.  412.538  [Removed and reserved]

0
23. Section 412.538 is removed and reserved.
0
24. Section 412.560 is amended by--
0
a. Adding paragraph (b)(3); and
0
b. Revising paragraphs (d)(1) and (3).
    The addition and revisions read as follows:


Sec.  412.560   Requirements under the Long-Term Care Hospital Quality 
Reporting Program (LTCH QRP).

* * * * *
    (b) * * *
    (3) CMS may remove a quality measure from the LTCH QRP based on one 
or more of the following factors:
    (i) Measure performance among long-term care hospitals is so high 
and unvarying that meaningful distinctions in improvements in 
performance can no longer be made.
    (ii) Performance or improvement on a measure does not result in 
better patient outcomes.
    (iii) A measure does not align with current clinical guidelines or 
practice.
    (iv) A more broadly applicable measure (across settings, 
populations, or conditions) for the particular topic is available.
    (v) A measure that is more proximal in time to desired patient 
outcomes for the particular topic is available.
    (vi) A measure that is more strongly associated with desired 
patient outcomes for the particular topic is available.
    (vii) Collection or public reporting of a measure leads to 
negative, unintended consequences other than patient harm.
    (viii) The costs associated with a measure outweigh the benefit of 
its continued use in the program.
* * * * *
    (d) * * *
    (1) Written letter of noncompliance decision. Long-term care 
hospitals that do not meet the requirement in paragraph (b) of this 
section for a program year will receive a notification of noncompliance 
sent through at least one of the following methods: Quality Improvement 
and Evaluation System (QIES) Assessment Submission and Processing 
(ASAP) system, the United States Postal Service, or via an email from 
the MAC.
* * * * *
    (3) CMS decision on reconsideration request. CMS will notify long-
term care hospitals, in writing, of its final decision regarding any 
reconsideration request through at least one of the following methods: 
The QIES ASAP system, the United States Postal Service, or via an email 
from the MAC.
* * * * *

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT 
RATES FOR SKILLED NURSING FACILITIES; PAYMENT FOR ACUTE KIDNEY 
INJURY DIALYSIS

0
25. The authority citation for part 413 continues 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
26. Section 413.24 is amended by revising paragraph (f)(5)(i) to read 
as follows:


Sec.  413.24   Adequate cost data and cost finding.

* * * * *
    (f) * * *
    (5) * * *
    (i) All providers--The provider must accurately complete and submit 
the required cost reporting forms, including all necessary signatures 
and supporting documents. A cost report is rejected for lack of 
supporting documentation if it does not include the following:
    (A) Teaching hospitals--For teaching hospitals, the Intern and 
Resident Information System (IRIS) data. Effective for cost reports 
filed on or after October 1, 2018, the IRIS data must contain the same 
total counts of direct GME FTE residents (unweighted and weighted) and 
IME FTE residents as the total counts of direct GME FTE and IME FTE 
residents reported in the provider's cost report.
    (B) Bad debt--Effective for cost reporting periods beginning on or 
after October 1, 2018, for providers claiming Medicare bad debt 
reimbursement, a detailed bad debt listing that corresponds to the 
amount of bad debt claimed in the provider's cost report.
    (C) DSH eligible hospitals--Effective for cost reporting periods 
beginning on or after October 1, 2018, for hospitals claiming a 
disproportionate share hospital payment adjustment, a detailed listing 
of the hospital's Medicaid eligible days that corresponds to the 
Medicaid eligible days claimed in the hospital's cost report. If the 
hospital submits an amended cost report that changes its Medicaid 
eligible days, the hospital must submit an amended listing or an 
addendum to the original listing of the hospital's Medicaid eligible 
days that corresponds to the Medicaid eligible days claimed in the 
hospital's amended cost report.
    (D) Charity care and uninsured discounts--Effective for cost 
reporting periods beginning on or after October 1, 2018, for DSH 
eligible hospitals reporting charity care and/or uninsured discounts, a 
detailed listing of charity care and/or uninsured discounts that 
corresponds to the amounts claimed in the DSH eligible hospital's cost 
report.
    (E) Home office cost allocation--Effective for cost reporting 
periods beginning on or after October 1, 2018, for providers claiming 
costs on their cost report that are allocated from a home office or 
chain organization, a home office cost statement completed by the home 
office or chain organization that corresponds to the amounts allocated 
from the home office or chain organization to the provider's cost 
report.
* * * * *

[[Page 20570]]

0
27. Section 413.79 is amended by revising paragraph (e)(1)(iv) to read 
as follows:


Sec.  413.79   Direct GME Payments: Determination of the weighted 
number of FTE residents.

* * * * *
    (e) * * *
    (1) * * *
    (iv)(A) Effective for Medicare GME affiliation agreements entered 
into on or after October 1, 2005, an urban hospital that qualifies for 
an adjustment to its FTE cap under paragraph (e)(1) of this section is 
permitted to be part of a Medicare GME affiliated group for purposes of 
establishing an aggregate FTE cap only if the adjustment that results 
from the affiliation is an increase to the urban hospital's FTE cap.
    (B) Effective for Medicare GME affiliation agreements entered into 
on or after July 1, 2019, an urban hospital that qualifies for an 
adjustment to its FTE cap under paragraph (e)(1) of this section is 
permitted to be part of a Medicare GME affiliated group for purposes of 
establishing an aggregate FTE cap and receive an adjustment that is a 
decrease to the urban hospital's FTE cap only if the decrease results 
from a Medicare GME affiliated group consisting solely of two or more 
urban hospitals that qualify to receive adjustments to their FTE caps 
under paragraph (e)(1) of this section.
* * * * *

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
28. The authority citation for part 424 continues to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

0
29. Section 424.11 is amended by revising paragraphs (b) and (c) to 
read as follows:


Sec.  424.11  General procedures.

* * * * *
    (b) Obtaining the certification and recertification statements. No 
specific procedures or forms are required for certification and 
recertification statements. The provider may adopt any method that 
permits verification. The certification and recertification statements 
may be entered on forms, notes, or records that the appropriate 
individual signs, or on a special separate form. Except as provided in 
paragraph (d) of this section for delayed certifications, there must be 
a separate signed statement for each certification or recertification. 
If supporting information for the signed statement is contained in 
other provider records (such as physicians' progress notes), it need 
not be repeated in the statement itself.
    (c) Required information. The succeeding sections of this subpart 
set forth specific information required for different types of 
services.
* * * * *

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD TECHNOLOGY 
INCENTIVE PROGRAM

0
30. 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
31. Section 495.4 is amended--
0
a. In the definition of ``EHR reporting period'' by revising paragraph 
(1)(iii), adding paragraph (1)(iv), revising paragraphs (2)(ii)(C) and 
(D) and (2)(iii), and adding paragraph (2)(iv);
0
b. In the definition of ``EHR reporting period for a payment adjustment 
year'' by revising paragraph (2)(iii) and adding paragraph (2)(iv), 
revising paragraph (3)(iii), and adding paragraph (3)(iv); and
0
c. By revising the definitions of ``Payment adjustment year'' and 
``Payment year''.
    The revisions and additions read as follows:


Sec.  495.4   Definitions.

* * * * *
    EHR reporting period. * * *
    (1) * * *
    (iii) For the CY 2019 payment year under the Medicaid Promoting 
Interoperability Program:
    (A) For the EP first demonstrating he or she is a meaningful EHR 
user, any continuous 90-day period within CY 2019.
    (B) 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 2019.
    (iv) For the CY 2020 payment year under the Medicaid Promoting 
Interoperability Program:
    (A) For the EP first demonstrating he or she is a meaningful EHR 
user, any continuous 90-day period within CY 2020.
    (B) 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 2020.
    (2) * * *
    (ii) * * *
    (C) For the FY 2017 payment year as follows:
    (1) Under the Medicaid EHR Incentive Program:
    (i) For the eligible hospital or CAH first demonstrating it is a 
meaningful EHR user, any continuous 90-day period within CY 2017.
    (ii) 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 2017.
    (iii) For the eligible hospital or CAH demonstrating the Stage 3 
objectives and measures at Sec.  495.24, any continuous 90-day period 
within CY 2017.
    (2) Under the Medicare EHR Incentive Program, for a Puerto Rico 
eligible hospital, any continuous 14-day period within CY 2017.
    (D) For the FY 2018 payment year as follows:
    (1) Under the Medicaid Promoting Interoperability Program:
    (i) For the eligible hospital or CAH first demonstrating it is a 
meaningful EHR user, any continuous 90-day period within CY 2018.
    (ii) 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.
    (2) Under the Medicare Promoting Interoperability Program, for a 
Puerto Rico eligible hospital, any continuous 90-day period within CY 
2018.
    (iii) For the FY 2019 payment year as follows:
    (A) Under the Medicaid Promoting Interoperability Program:
    (1) For the eligible hospital or CAH first demonstrating it is a 
meaningful EHR user, any continuous 90-day period within CY 2019.
    (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 2019.
    (B) Under the Medicare Promoting Interoperability Program, for a 
Puerto Rico eligible hospital, any continuous 90-day period within CY 
2019.
    (iv) For the FY 2020 payment year as follows:
    (A) Under the Medicaid Promoting Interoperability Program:
    (1) For the eligible hospital or CAH first demonstrating it is a 
meaningful EHR user, any continuous 90-day period within CY 2020.
    (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 2020.
    (B) Under the Medicare Promoting Interoperability Program, for a 
Puerto

[[Page 20571]]

Rico eligible hospital, any continuous 90-day period within CY 2020.
* * * * *
    EHR reporting period for a payment adjustment year. * * *
    (2) * * *
    (iii) The following are applicable for 2019:
    (A) 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 2019 and applies for the FY 2020 and 
2021 payment adjustment years. For the FY 2020 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, 2019.
    (B) 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 2019 and applies for the FY 2021 
payment adjustment year.
    (iv) The following are applicable for 2020:
    (A) 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 2020 and applies for the FY 2021 and 
2022 payment adjustment years. For the FY 2021 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, 2020.
    (B) 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 2020 and applies for the FY 
2022 payment adjustment year.
    (3) * * *
    (iii) The following are applicable for 2019:
    (A) 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 2019 and applies for the FY 2019 payment 
adjustment year.
    (B) 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 2019 and applies for the FY 2019 payment adjustment 
year.
    (iv) The following are applicable for 2020:
    (A) 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 2020 and applies for the FY 2020 payment 
adjustment year.
    (B) 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 2020 and applies for the FY 2020 payment adjustment 
year.
* * * * *
    Payment adjustment year means the following:
    (1) For an EP, a calendar year beginning with CY 2015.
    (2) For a CAH or an eligible hospital, a Federal fiscal year 
beginning with FY 2015.
    (3) For a Puerto Rico eligible hospital, a Federal fiscal year 
beginning with FY 2022.
    Payment year means the following:
    (1) For an EP, a calendar year beginning with CY 2011.
    (2) For a CAH or an eligible hospital, a Federal fiscal year 
beginning with FY 2011.
    (3) For a Puerto Rico eligible hospital, a Federal fiscal year 
beginning with FY 2016.
* * * * *
0
32. Section 495.24 is amended by revising the introductory text, 
paragraphs (c) and (d) headings and adding paragraph (e) to read as 
follows:


Sec.  495.24   Stage 3 meaningful use objectives and measures for EPs, 
eligible hospitals and CAHs for 2019 and subsequent years.

    The criteria specified in paragraphs (c) and (d) of this section 
are optional for 2017 and 2018 for EPs, eligible hospitals, and CAHs 
that have successfully demonstrated meaningful use in a prior year. The 
criteria specified in paragraph (d) of this section are applicable for 
all EPs for 2019 and subsequent years, and for eligible hospitals and 
CAHs attesting to a State for the Medicaid Promoting Interoperability 
Program for 2019 and subsequent years. The criteria specified in 
paragraph (e) of this section are applicable for eligible hospitals and 
CAHs attesting to CMS for 2019 and subsequent years.
* * * * *
    (c) Stage 3 objectives and measures for eligible hospitals and CAHs 
attesting to CMS--
* * * * *
    (d) Stage 3 objectives and measures for all EPs for 2019 and 
subsequent years, and for eligible hospitals and CAHs attesting to a 
State for the Medicaid Promoting Interoperability Program for 2019 and 
subsequent years--
* * * * *
    (e) Stage 3 objectives and measures for eligible hospitals and CAHs 
attesting to CMS for 2019 and subsequent years--(1) General rule. 
Except as specified in paragraph (e)(2) of this section, eligible 
hospitals and CAHs must meet all objectives and associated measures of 
the Stage 3 criteria specified in this paragraph (e) and earn a total 
score of at least 50 points to meet the definition of a meaningful EHR 
user.
    (2) Exclusion for nonapplicable measures. (i) An eligible hospital 
or CAH may exclude a particular measure that includes an option for 
exclusion contained in this paragraph (e) if the eligible hospital or 
CAH meets the following requirements:
    (A) Meets the criteria in the applicable measure that would permit 
the exclusion.
    (B) Attests to the exclusion.
    (ii) Distribution of points for nonapplicable measures. For 
eligible hospitals or CAHs that claim such exclusion, the points 
assigned to the excluded measure will be distributed to other measures 
as outlined in this paragraph (e).
    (3) Objectives and associated measures in this paragraph (e) that 
rely on measures that count unique patients or actions. (i) If a 
measure (or associated objective) in this paragraph (e) references 
paragraph (e)(3) of this section, the measure may be calculated by 
reviewing only the actions for patients whose records are maintained 
using CEHRT. A patient's record is maintained using CEHRT if sufficient 
data were entered in the CEHRT to allow the record to be saved, and not 
rejected due to incomplete data.
    (ii) If the objective and associated measure does not reference 
this paragraph (e)(3), the measure must be calculated by reviewing all 
patient records, not just those maintained using CEHRT.
    (4) Protect patient health information--(i) Objective. Protect 
electronic protected health information (ePHI) created or maintained by 
the CEHRT through the implementation of appropriate technical, 
administrative, and physical safeguards.
    (ii) Measure scoring. Eligible hospitals and CAHs are required to 
report on the security risk analysis measure in paragraph (e)(4)(iii) 
of this section, but no points are available for this measure.
    (iii) Security risk analysis measure. Conduct or review a security 
risk analysis in accordance with the requirements under 45 CFR 
164.308(a)(1), including addressing the security (including encryption) 
of data created or maintained by CEHRT in accordance with requirements 
under 45

[[Page 20572]]

CFR 164.312(a)(2)(iv) and 45 CFR 164.306(d)(3), implement security 
updates as necessary, and correct identified security deficiencies as 
part of the provider's risk management process.
    (5) Electronic prescribing--(i) Objective. Generate and transmit 
permissible discharge prescriptions electronically (eRx).
    (ii) Measures scoring. (A) In 2019, eligible hospitals and CAHs 
must meet the e-Prescribing measure in paragraph (e)(5)(iii)(A) of this 
section and have the option to report on the query of PDMP measure and 
verify opioid treatment agreement measure in paragraphs (e)(5)(iii)(B) 
and (C) of this section. The electronic prescribing objective in 
paragraph (e)(5)(i) of this section is worth up to 20 points.
    (B) In 2020 and subsequent years, eligible hospitals and CAHs must 
meet each of the measures in paragraphs (e)(5)(iii)(A), (B) and (C) of 
this section. The electronic prescribing objective in paragraph 
(e)(5)(i) of this section is worth up to 15 points.
    (iii) Measures. (A) e-Prescribing measure. Subject to paragraph 
(e)(3) of this section, at least one hospital discharge medication 
order for permissible prescriptions (for new and changed prescriptions) 
is queried for a drug formulary and transmitted electronically using 
CEHRT. This performance-based measure is worth up to 10 points in 2019 
and up to 5 points in 2020 and subsequent years.
    (B) Query of prescription drug monitoring program (PDMP) measure. 
Subject to paragraph (e)(3) of this section, for at least one Schedule 
II opioid electronically prescribed using CEHRT during the EHR 
reporting period, the eligible hospital or CAH uses data from CEHRT to 
conduct a query of a Prescription Drug Monitoring Program (PDMP) for 
prescription drug history, except where prohibited and in accordance 
with applicable law. This performance-based measure is worth up to 5 
bonus points in 2019 and up to 5 points in 2020 and subsequent years.
    (C) Verify opioid treatment agreement measure. Subject to paragraph 
(e)(4) of this section, f or at least one unique patient for whom a 
Schedule II opioid was electronically prescribed by the eligible 
hospital or CAH using CEHRT during the EHR reporting period, if the 
total duration of the patient's Schedule II opioid prescriptions is at 
least 30 cumulative days within a 6-month look-back period, the 
eligible hospital or CAH seeks to identify the existence of a signed 
opioid treatment agreement and incorporates it into the patient's 
electronic health record using CEHRT. This performance-based measure is 
worth up to 5 bonus points in 2019 and up to 5 points in 2020 and 
subsequent years.
    (iv) Exclusion for an EHR reporting period in CY 2019 in accordance 
with paragraph (e)(2) of this section. An exclusion claimed under 
paragraph (e)(5)(vi)(A) of this section will redistribute 10 points 
equally among the measures associated with the health information 
exchange objective under paragraph (e)(6) of this section.
    (v) Exclusions beginning with an EHR reporting period in CY 2020 in 
accordance with paragraph (e)(2) of this section. An exclusion claimed 
under paragraph (e)(5)(vi)(A) of this section will redistribute 15 
points equally among the measures associated with the health 
information exchange objective under paragraph (e)(6) of this section 
and the provide patients electronic access to their health information 
measure under paragraph (e)(7)(ii) of this section. An exclusion 
claimed under paragraph (e)(5)(vi)(B) or (C) of this section will 
redistribute 5 points for each excluded measure to the e-Prescribing 
measure under paragraph (e)(5)(iii)(A) of this section.
    (vi) Exclusions in accordance with paragraph (e)(2) of this 
section. (A) Any eligible hospital or CAH that does not have an 
internal pharmacy that can accept electronic prescriptions and there 
are no pharmacies that accept electronic prescriptions within 10 miles 
at the start of the eligible hospital or CAH's EHR reporting period may 
be excluded from the measure specified in paragraph (e)(5)(iii)(A) of 
this section for an EHR reporting period in CY 2019 and may be excluded 
from the measures specified in paragraphs (e)(5)(iii)(A) through (C) of 
this section beginning with an EHR reporting period in CY 2020.
    (B) Any eligible hospital or CAH that does not have an internal 
pharmacy that can accept electronic prescriptions for controlled 
substances and is not located within 10 miles of any pharmacy that 
accepts electronic prescriptions for controlled substances at the start 
of their EHR reporting period may be excluded from the measures 
specified in paragraphs (e)(5)(iii)(B) and (C) of this section 
beginning with an EHR reporting period in CY 2020.
    (C) Any eligible hospital or CAH that is unable to report the 
measure in accordance with applicable law may be excluded from the 
measures specified in paragraphs (e)(5)(iii)(B) and (C) of this section 
beginning with an EHR reporting period in CY 2020.
    (6) Health information exchange--(i) Objective. The eligible 
hospital or CAH provides a summary of care record when transitioning or 
referring their patient to another setting of care, receives or 
retrieves a summary of care record upon the receipt of a transition or 
referral or upon the first patient encounter with a new patient, and 
incorporates summary of care information from other providers into 
their EHR using the functions of CEHRT.
    (ii) Measures. Eligible hospitals and CAHs must meet both of the 
following measures (each worth up to 20 points), and could receive up 
to 40 points for this objective.
    (A) Support electronic referral loops by sending health information 
measure: Subject to paragraph (e)(3) of this section, for at least one 
transition of care or referral, the eligible hospital or CAH that 
transitions or refers its patient to another setting of care or 
provider of care--
    (1) Creates a summary of care record using CEHRT; and
    (2) Electronically exchanges the summary of care record.
    (B) Support electronic referral loops by receiving and 
incorporating health information measure: Subject to paragraph (e)(3) 
of this section, for at least one electronic summary of care record 
received for patient encounters during the EHR reporting period for 
which an eligible hospital or CAH was the receiving party of a 
transition of care or referral, or for patient encounters during the 
EHR reporting period in which the eligible hospital or CAH has never 
before encountered the patient, the eligible hospital or CAH conducts 
clinical information reconciliation for medication, mediation allergy, 
and current problem list.
    (iii) Exclusions in accordance with paragraph (e)(2) of this 
section. Claiming the exclusion will redistribute 20 points to the 
support electronic referral loops by sending health information measure 
under paragraph (e)(6)(ii)(A). Any eligible hospital or CAH that is 
unable to implement the measure for an EHR reporting period in 2019 may 
be excluded from the measure specified in paragraph (e)(6)(ii)(B) of 
this section.
    (7) Provider to Patient Exchange--(i) Objective. The eligible 
hospital or CAH provides patients (or patient-authorized 
representative) with timely electronic access to their health 
information.
    (ii) Provide patients electronic access to their health information 
measure. Eligible hospitals and CAHs must meet the following measure, 
and could receive up to 40 points for this objective in 2019 and up to 
35 points for this objective in 2020 and subsequent years.

[[Page 20573]]

For at least one unique patient discharged from the eligible hospital 
or CAH inpatient or emergency department (POS 21 or 23)--
    (A) The patient (or patient-authorized representative) is provided 
timely access to view online, download, and transmit his or her health 
information; and
    (B) The eligible hospital or CAH ensures the patient's health 
information is available for the patient (or patient-authorized 
representative) to access using any application of their choice that is 
configured to meet the technical specifications of the API in the 
eligible hospital or CAH's CEHRT. This performance-based measure is 
worth up to 40 points in 2019 and up to 35 points in 2020 and 
subsequent years.
    (8) Public health and clinical data exchange--(i) Objective. The 
eligible hospital or CAH is in active engagement with a public health 
agency (PHA) or clinical data registry (CDR) to submit electronic 
public health data in a meaningful way using CEHRT, except where 
prohibited, and in accordance with applicable law and practice.
    (ii) Measures. In order to meet the objective under paragraph 
(e)(8)(i) of this section, an eligible hospital or CAH must meet the 
syndromic surveillance reporting measure in paragraph (e)(8)(ii)(A) of 
this section and one additional measure from paragraphs (e)(8)(ii)(B) 
through (F) of this section. Eligible hospitals and CAHs could receive 
a total of 10 points for this objective.
    (A) Syndromic surveillance reporting measure. The eligible hospital 
or CAH is in active engagement with a public health agency to submit 
syndromic surveillance data from an urgent care setting.
    (B) Immunization registry reporting measure. The eligible hospital 
or CAH is in active engagement with a public health agency to submit 
immunization data and receive immunization forecasts and histories from 
the public health immunization registry/immunization information system 
(IIS).
    (C) Electronic case reporting measure. The eligible hospital or CAH 
is in active engagement with a public health agency to submit case 
reporting of reportable conditions.
    (D) Public health registry reporting measure. The eligible hospital 
or CAH is in active engagement with a public health agency to submit 
data to public health registries.
    (E) Clinical data registry reporting measure. The eligible hospital 
or CAH is in active engagement to submit data to a clinical data 
registry.
    (F) Electronic reportable laboratory result reporting measure. The 
eligible hospital or CAH is in active engagement with a public health 
agency to submit electronic reportable laboratory results.
    (iii) Exclusions in accordance with paragraph (e)(2) of this 
section. An exclusion claimed under paragraphs (e)(8)(iii)(A) through 
(F) of this section will redistribute 10 points to the provide patients 
electronic access to their health information measure under paragraph 
(e)(7)(ii) of this section.
    (A) Any eligible hospital or CAH meeting one or more of the 
following criteria may be excluded from the syndromic surveillance 
reporting measure specified in paragraph (e)(8)(ii)(A) of this section 
if the eligible hospital or CAH--
    (1) Does not have an emergency or urgent care department.
    (2) Operates in a jurisdiction for which no public health agency is 
capable of receiving electronic syndromic surveillance data in the 
specific standards required to meet the CEHRT definition at the start 
of the EHR reporting period.
    (3) Operates in a jurisdiction where no public health agency has 
declared readiness to receive syndromic surveillance data from eligible 
hospitals or CAHs as of 6 months prior to the start of the EHR 
reporting period.
    (B) Any eligible hospital or CAH meeting one or more of the 
following criteria may be excluded from to the immunization registry 
reporting measure specified in paragraph (e)(8)(ii)(B) of this section 
if the eligible hospital or CAH--
    (1) Does not administer any immunizations to any of the populations 
for which data is collected by its jurisdiction's immunization registry 
or immunization information system during the EHR reporting period.
    (2) Operates in a jurisdiction for which no immunization registry 
or immunization information system is capable of accepting the specific 
standards required to meet the CEHRT definition at the start of the EHR 
reporting period.
    (3) Operates in a jurisdiction where no immunization registry or 
immunization information system has declared readiness to receive 
immunization data as of 6 months prior to the start of the EHR 
reporting period.
    (C) Any eligible hospital or CAH meeting one or more of the 
following criteria may be excluded from the electronic case reporting 
measure specified in paragraph (e)(8)(ii)(C) of this section if the 
eligible hospital or CAH--
    (1) Does not treat or diagnose any reportable diseases for which 
data is collected by their jurisdiction's reportable disease system 
during the EHR reporting period.
    (2) Operates in a jurisdiction for which no public health agency is 
capable of receiving electronic case reporting data in the specific 
standards required to meet the CEHRT definition at the start of their 
EHR reporting period.
    (3) Operates in a jurisdiction where no public health agency has 
declared readiness to receive electronic case reporting data as of 6 
months prior to the start of the EHR reporting period.
    (D) Any eligible hospital or CAH meeting at least one of the 
following criteria may be excluded from the public health registry 
reporting measure specified in paragraph (e)(8)(ii)(D) of this section 
if the eligible hospital or CAH--
    (1) Does not diagnose or directly treat any disease or condition 
associated with a public health registry in its jurisdiction during the 
EHR reporting period.
    (2) Operates in a jurisdiction for which no public health agency is 
capable of accepting electronic registry transactions in the specific 
standards required to meet the CEHRT definition at the start of the EHR 
reporting period.
    (3) Operates in a jurisdiction where no public health registry for 
which the eligible hospital or CAH is eligible has declared readiness 
to receive electronic registry transactions as of 6 months prior to the 
start of the EHR reporting period.
    (E) Any eligible hospital or CAH meeting at least one of the 
following criteria may be excluded from the clinical data registry 
reporting measure specified in paragraph (e)(8)(ii)(E) of this section 
if the eligible hospital or CAH--
    (1) Does not diagnose or directly treat any disease or condition 
associated with a clinical data registry in their jurisdiction during 
the EHR reporting period.
    (2) Operates in a jurisdiction for which no clinical data registry 
is capable of accepting electronic registry transactions in the 
specific standards required to meet the CEHRT definition at the start 
of the EHR reporting period.
    (3) Operates in a jurisdiction where no clinical data registry for 
which the eligible hospital or CAH is eligible has declared readiness 
to receive electronic registry transactions as of 6 months prior to the 
start of the EHR reporting period.
    (F) Any eligible hospital or CAH meeting one or more of the 
following

[[Page 20574]]

criteria may be excluded from the electronic reportable laboratory 
result reporting measure specified in paragraph (e)(8)(ii)(F) of this 
section if the eligible hospital or CAH--
    (1) Does not perform or order laboratory tests that are reportable 
in its jurisdiction during the EHR reporting period.
    (2) Operates in a jurisdiction for which no public health agency 
that is capable of accepting the specific ELR standards required to 
meet the CEHRT definition at the start of the EHR reporting period.
    (3) Operates in a jurisdiction where no public health agency has 
declared readiness to receive electronic reportable laboratory results 
from an eligible hospital or CAH as of 6 months prior to the start of 
the EHR reporting period.
0
33. Section 495.40 is amended by adding paragraph (b)(2)(vii) to read 
as follows:


Sec.  495.40   Demonstration of meaningful use criteria.

* * * * *
    (b) * * *
    (2) * * *
    (vii) Exception for dual-eligible eligible hospitals and CAHs 
beginning in CY 2019. (A) Beginning with the EHR reporting period in CY 
2019, dual-eligible eligible hospitals and CAHs (those that are 
eligible for an incentive payment under Medicare for meaningful use of 
CEHRT and/or subject to the Medicare payment reduction for failing to 
demonstrate meaningful use, and are also eligible to earn a Medicaid 
incentive payment for meaningful use) must satisfy the requirements 
under paragraph (b)(2) of this section by attestation and reporting 
information to CMS, not to their respective state Medicaid agency.
    (B) Dual-eligible eligible hospitals and CAHs that demonstrate 
meaningful use to their state Medicaid agency may only qualify for an 
incentive payment under Medicaid and will not qualify for an incentive 
payment under Medicare and/or avoid the Medicare payment reduction.
* * * * *
0
34. Section 495.100 is amended by revising the definition of ``Eligible 
hospital'' and adding a definition of ``Puerto Rico eligible hospital'' 
in alphabetical order to read as follows:


Sec.  495.100   Definitions.

* * * * *
    Eligible hospital means a hospital subject to the prospective 
payment system specified in Sec.  412.1(a)(1) of this chapter, 
excluding those hospitals specified in Sec.  412.23 of this chapter, 
excluding those hospital units specified in Sec.  412.25 of this 
chapter, and including Puerto Rico eligible hospitals unless otherwise 
indicated.
* * * * *
    Puerto Rico eligible hospital means a subsection (d) Puerto Rico 
hospital as defined in section 1886(d)(9)(A) of the Social Security 
Act.
* * * * *
0
35. Section 495.104 is amended by adding paragraphs (b)(6) through (10) 
and (c)(5)(vi) through (x) to read as follows:


Sec.  495.104   Incentive payments to eligible hospitals.

* * * * *
    (b) * * *
    (6) Puerto Rico eligible hospitals whose first payment year is FY 
2016 may receive such payments for FYs 2016 through 2019.
    (7) Puerto Rico eligible hospitals whose first payment year is FY 
2017 may receive such payments for FYs 2017 through 2020.
    (8) Puerto Rico eligible hospitals whose first payment year is FY 
2018 may receive such payments for FYs 2018 through 2021.
    (9) Puerto Rico eligible hospitals whose first payment year is FY 
2019 may receive such payments for FYs 2019 through 2021.
    (10) Puerto Rico eligible hospitals whose first payment year is FY 
2020 may receive such payments for FYs 2020 through 2021.
    (c) * * *
    (5) * * *
    (vi) For Puerto Rico eligible hospitals whose first payment year is 
FY 2016--
    (A) 1 for FY 2016;
    (B) 3/4 for FY 2017;
    (C) 1/2 for FY 2018; and
    (D) 1/4 for FY 2019.
    (vii) For Puerto Rico eligible hospitals whose first payment year 
is FY 2017--
    (A) 1 for FY 2017;
    (B) 3/4 for FY 2018;
    (C) 1/2 for FY 2019; and
    (D) 1/4 for FY 2020;
    (viii) For Puerto Rico eligible hospitals whose first payment year 
is FY 2018--
    (A) 1 for FY 2018;
    (B) 3/4 for FY 2018;
    (C) 1/2 for FY 2019; and
    (D) 1/4 for FY 2020.
    (ix) For Puerto Rico eligible hospitals whose first payment year is 
FY 2019--
    (A) 3/4 for FY 2019;
    (B) 1/2 for FY 2020; and
    (C) 1/4 for FY 2021.
    (x) For Puerto Rico eligible hospitals whose first payment year is 
FY 2020--
    (A) 1/2 for FY 2020; and
    (B) 1/4 for FY 2021.
* * * * *
0
36. Section 495.200 is amended by revising the definitions of ``MA 
payment adjustment year'' and ``Payment year'' to read as follows:


Sec.  495.200   Definitions.

* * * * *
    MA payment adjustment year means--
    (1) Except as provided in paragraph (2) of this definition, for 
qualifying MA organizations that receive an MA EHR incentive payment 
for at least 1 payment year, calendar years beginning with CY 2015.
    (2) For qualifying MA organizations that receive an MA EHR 
incentive payment for a qualifying MA-affiliated eligible hospital in 
Puerto Rico for at least 1 payment year, and that have not previously 
received an MA EHR incentive payment for a qualifying MA-affiliated 
eligible hospital not in Puerto Rico, calendar years beginning with CY 
2022.
    (3) For MA-affiliated eligible hospitals, the applicable EHR 
reporting period for purposes of determining whether the MA 
organization is subject to a payment adjustment is the Federal fiscal 
year ending in the MA payment adjustment year.
    (4) For MA EPs, the applicable EHR reporting period for purposes of 
determining whether the MA organization is subject to a payment 
adjustment is the calendar year concurrent with the payment adjustment 
year.
* * * * *
    Payment year means--
    (1) For a qualifying MA EP, a calendar year beginning with CY 2011 
and ending with CY 2016; and
    (2) For an eligible hospital, a Federal fiscal year beginning with 
FY 2011 and ending with FY 2016; and
    (3) For an eligible hospital in Puerto Rico, a Federal fiscal year 
beginning with FY 2016 and ending with FY 2021.
* * * * *
0
37. Section 495.211 is amended by adding paragraph (e)(4) to read as 
follows:


Sec.  495.211   Payment adjustments effective for 2015 and subsequent 
MA payment years with respect to MA EPs and MA-affiliated eligible 
hospitals.

* * * * *
    (e) * * *
    (4) For MA payment adjustment years prior to 2022, subsection (d) 
Puerto Rico hospitals are neither potentially qualifying MA-affiliated 
eligible hospitals nor qualifying MA-affiliated eligible hospitals for 
purposes of

[[Page 20575]]

applying the payment adjustments under paragraph (e) of this section.
0
38. Section 495.316 is amended by revising paragraph (g)(2) to read as 
follows:


Sec.  495.316   State monitoring and reporting regarding activities 
required to receive an incentive payment.

* * * * *
    (g) * * *
    (2) Subject to paragraph (h)(2) of this section, provider-level 
attestation data for each eligible hospital that attests to 
demonstrating meaningful use for each payment year beginning with 2013 
and ending after 2018.
* * * * *
0
39. Section 495.322 is revised to read as follows:


Sec.  495.322   FFP for reasonable administrative expenses.

    (a) Subject to prior approval conditions at Sec.  495.324, FFP is 
available at 90 percent in State expenditures for administrative 
activities in support of implementing incentive payments to Medicaid 
eligible providers.
    (b) FFP available under paragraph (a) of this section is available 
only for expenditures incurred on or before September 30, 2022, except 
for expenditures related to audit and appeal activities required under 
this subpart, which must be incurred on or before September 30, 2023.
0
40. Section 495.324 is amended by revising paragraphs (b)(2) and (3) 
and (d) to read as follows:


Sec.  495.324   Prior approval conditions.

* * * * *
    (b) * * *
    (2) For the acquisition solicitation documents and any contract 
that a State may utilize to complete activities under this subpart, 
unless specifically exempted by the Department of Health and Human 
Services, prior to release of the acquisition solicitation documents or 
prior to execution of the contract, when the contract is anticipated to 
or will exceed $500,000.
    (3) For contract amendments, unless specifically exempted by the 
Department of Health and Human Services, prior to execution of the 
contract amendment, involving contract cost increases exceeding 
$500,000 or contract time extensions of more than 60 days.
* * * * *
    (d) A State must obtain prior written approval from HHS of its 
justification for a sole source acquisition, when it plans to acquire 
noncompetitively from a nongovernmental source HIT equipment or 
services, with proposed FFP under this subpart if the total State and 
Federal acquisition cost is more than $500,000.

    Dated: March 29, 2018.
Seema Verma,
Administrator, Centers for Medicare and Medicaid Services.
    Dated: April 2, 2018.
Alex M. Azar II,
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, 2018, and Payment Rates for LTCHs 
Effective for Discharges Occurring on or After October 1, 2018

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 2019 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 2019. 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 will be effective for cost 
reporting periods beginning on or after October 1, 2018.
    In addition, we are setting forth a description of the methods 
and data we used to determine the proposed LTCH PPS standard Federal 
payment rate that would be applicable to Medicare LTCHs for FY 2019.
    In general, except for SCHs and MDHs, for FY 2019, 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. 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). 
Section 50205 of the Bipartisan Budget Act of 2018, enacted February 
9, 2018, extended the MDH program for discharges on or after October 
1, 2017 through September 30, 2022.
    SCHs are paid based on whichever of the following rates yields 
the greatest aggregate payment: The Federal national rate 
(including, as discussed in section IV.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.
    Under section 1886(d)(5)(G) of the Act, MDHs historically were 
paid based on the Federal national rate or, if higher, the Federal 
national rate plus 50 percent of the difference between the Federal 
national rate and the updated hospital-specific rate based on FY 
1982 or FY 1987 costs per discharge, whichever was higher. However, 
section 5003(a)(1) of Public Law 109-171 extended and modified the 
MDH special payment provision that was previously set to expire on 
October 1, 2006, to include discharges occurring on or after October 
1, 2006, but before October 1, 2011. Under section 5003(b) of Public 
Law 109-171, if the change results in an increase to an MDH's target 
amount, we must rebase an MDH's hospital specific rates based on its 
FY 2002 cost report. Section 5003(c) of Public Law 109-171 further 
required that MDHs be paid based on the Federal national rate or, if 
higher, the Federal national rate plus 75 percent of the difference 
between the Federal national rate and the updated hospital specific 
rate. Further, based on the provisions of section 5003(d) of Public 
Law 109-171, MDHs are no longer subject to the 12-percent cap on 
their DSH payment adjustment factor.
    As discussed in section IV.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 2019, 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 2019. 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 2019. 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 2019. In section V. 
of this Addendum, we discuss

[[Page 20576]]

proposed policy changes for determining the LTCH PPS standard 
Federal rate for LTCHs paid under the LTCH PPS for FY 2019. 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 website.

II. Proposed Changes to Prospective Payment Rates for Hospital 
Inpatient Operating Costs for Acute Care Hospitals for FY 2019

    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 2019.
    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 website) 
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 2019, depending on whether a hospital submits 
quality data under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital 
that submits quality data) and is a meaningful EHR user under 
section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as a 
hospital that is a meaningful EHR user), there are four possible 
applicable percentage increases that can be applied to the national 
standardized amount. We refer readers to section IV.B. of the 
preamble of this proposed rule for a complete discussion on the 
proposed FY 2019 inpatient hospital update. Below is a table with 
these four options:

----------------------------------------------------------------------------------------------------------------
                                                     Hospital        Hospital      Hospital did    Hospital did
                                                     submitted       submitted      NOT submit      NOT submit
                                                   quality data    quality data    quality data    quality data
                     FY 2019                         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                                       2.8             2.8             2.8             2.8
 Rate[dash]of[dash]Increase.....................
Proposed Adjustment for Failure to Submit                    0.0             0.0            -0.7            -0.7
 Quality Data under Section 1886(b)(3)(B)(viii)
 of the Act.....................................
Proposed Adjustment for Failure to be a                      0.0            -2.1             0.0            -2.1
 Meaningful EHR User under Section
 1886(b)(3)(B)(ix) of the Act...................
Proposed MFP Adjustment under Section                       -0.8            -0.8            -0.8            -0.8
 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             1.25           -0.85            0.55           -1.55
 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 2019.
     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 (depending on the fiscal year) 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.
     A positive adjustment of 0.5 percent in FYs 2019 
through 2023 as required under section 414 of the MACRA.
     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, as amended by section 15003 of Public Law 114-
255 which amended section 410A of Public Law 108-173 to provide for 
a 10-year extension of the demonstration program (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, are budget neutral 
as required under section 410A(c)(2) of Public Law 108-173.
     An adjustment to remove the FY 2018 outlier offset and 
apply an offset for FY 2019, as provided for in section 
1886(d)(3)(B) of the Act.
    For FY 2019, 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 2019 wage index for 
the rural floor. We note that, in section III.H.2.b. of the preamble 
to this proposed rule, we are proposing not to extend the imputed 
floor policy (both the original methodology and alternative 
methodology) for FY 2019. Therefore, for FY 2019, in this proposed 
rule, we are proposing to not include the imputed floor (calculated 
under the original methodology and alternative methodology) in 
calculating the uniform, national rural floor budget neutrality 
adjustment, which is reflected in the proposed FY 2019 wage index.

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 20577]]

and Hawaii, IME costs, and costs to hospitals serving a 
disproportionate share of low-income patients.
    For FY 2019, we are proposing to continue to use the national 
labor-related and nonlabor-related shares (which are based on the 
2014-based hospital market basket) that were used in FY 2018. 
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 2019, as discussed in section III. of the 
preamble of this proposed rule, we are proposing to continue to use 
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 website.

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 2019 
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 2014-based IPPS operating and capital 
market baskets for FY 2019. As discussed in section IV.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 2019 
applicable percentage increase (which is based on IGI's fourth 
quarter 2017 forecast of the 2014-based IPPS market basket) by the 
MFP adjustment (the 10-year moving average of MFP for the period 
ending FY 2019) of 0.8 percentage point, which is also calculated 
based on IGI's fourth quarter 2017 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 2019 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 2017 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 
2019 for this proposed rule is 2.8 percent. As discussed earlier, 
for FY 2019, 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 can be applied to the 
standardized amount. We refer readers to section IV.B. of the 
preamble of this proposed rule for a complete discussion on the FY 
2019 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 website 
reflect these differential amounts.
    Although the update factors for FY 2019 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 
2019 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 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 2019 
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 website 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 2019 
standardized amount to remove the effects of the FY 2018 geographic 
reclassifications and outlier payments before applying the FY 2019 
updates. We then apply budget neutrality offsets for outliers and 
geographic reclassifications to the standardized amount based on 
proposed FY 2019 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 pharmacy charges for anti-
hemophilic blood

[[Page 20578]]

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.
     For FY 2019, the Bundled Payments for Care Improvement 
(BPCI) Initiative will have ended and a new model, the BPCI Advanced 
model will have begun. The BPCI Advanced model, tested under the 
authority of section 3021 of the Affordable Care Act (codified at 
section 1115A of the Act), is comprised of a single payment and risk 
track, which bundles payments for multiple services beneficiaries 
receive during a Clinical Episode. Acute care hospitals may 
participate in the BPCI Advanced model in one of two capacities: As 
a model Participant or as a downstream Episode Initiator. Regardless 
of the capacity in which they participate in the BPCI Advanced 
model, participating acute care hospitals will continue to receive 
IPPS payments under section 1886(d) of the Act. Acute care hospitals 
that are Participants also assume financial and quality performance 
accountability for Clinical Episodes in the form of a reconciliation 
payment. For additional information on the BPCI Advanced model, we 
refer readers to the BPCI Advanced web page on the CMS Center for 
Medicare and Medicaid Innovation's website at: https://innovation.cms.gov/initiatives/bpci-advanced/.
    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 2019, consistent with how we have treated 
hospitals that participated in the BPCI Initiative, we are proposing 
to include all applicable data from subsection (d) hospitals 
participating in the BPCI Advanced model in our IPPS payment 
modeling and ratesetting calculations. We believe it is appropriate 
to include all applicable data from the subsection (d) hospitals 
participating in the BPCI Advanced model in our IPPS payment 
modeling and ratesetting calculations because these hospitals are 
still receiving IPPS payments under section 1886(d) of the Act.
     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, consistent with the approach we have taken in 
prior years, for FY 2019 and subsequent years, we are proposing to 
continue to apply a proxy hospital readmissions payment adjustment 
and a proxy 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 a proposed proxy readmissions payment 
adjustment factor and a proposed proxy 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 proxy FY 2019 
readmissions payment adjustment factors, for both this proposed rule 
and the final rule, as discussed in section IV.H. of the preamble of 
this proposed rule, we are proposing to use the proportion of 
dually-eligible Medicare beneficiaries, excess readmission ratios, 
and aggregate payments for excess readmissions from the prior fiscal 
year's applicable period because, at this time and at the time of 
the development of the final rule, hospitals will not yet have had 
the opportunity to review and correct the data (program calculations 
based on the proposed FY 2019 applicable period of July 1, 2014 to 
June 30, 2017) before the data are made public under our policy 
regarding the reporting of hospital-specific readmission rates, 
consistent with section 1886(q)(6) of the Act. (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) and section IV.H. of the preamble of 
this proposed rule.)
    In addition, for FY 2019, 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 2019 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 2019 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 
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 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 2019 (as we did for the last 5 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 IV.F. of the preamble to this proposed rule and below, we 
are proposing to continue to use the FY 2014 finalized methodology 
under which we take into consideration uncompensated care payments 
in the comparison of payments under the Federal rate and the 
hospital-specific rate for SCHs. Therefore, we are proposing to 
include estimated uncompensated care payments in this comparison.
    Similarly, for MDHs, as discussed in section IV.F. of the 
preamble of this proposed rule, when computing payments under the 
Federal national rate plus 75 percent of the difference between the 
payments under the Federal national rate and the payments under the 
updated hospital-specific rate, we are proposing to continue to take 
into consideration uncompensated care payments in the computation of 
payments under the

[[Page 20579]]

Federal rate and the hospital-specific rate for MDHs.
     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 2019. Similar to FY 2018, we are including this adjustment 
based on data on the prior year's performance. Payments for 
hospitals will be estimated based on the proposed applicable 
standardized amount in Tables 1A and 1B for discharges occurring in 
FY 2019.
     In our determination of all proposed budget neutrality 
factors described in section II.A.4. of this Addendum, we use 
transfer-adjusted discharges. Specifically, we calculated the 
transfer-adjusted discharges using the statutory expansion of the 
postacute care transfer policy to include discharges to hospice care 
by a hospice program as discussed in section IV.A.2.b. of the 
preamble of this proposed rule.

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 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 2019, 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 2017 discharge data to simulate payments and compared the 
following:
     Aggregate payments using the FY 2018 labor-related 
share percentages, the FY 2018 relative weights, and the FY 2018 
pre-reclassified wage data, and applied the proposed FY 2019 
hospital readmissions payment adjustments and estimated FY 2019 
hospital VBP payment adjustments; and
     Aggregate payments using the FY 2018 labor-related 
share percentages, the proposed FY 2019 relative weights, and the FY 
2018 pre-reclassified wage data, and applied the proposed FY 2019 
hospital readmissions payment adjustments and estimated FY 2019 
hospital VBP payment adjustments applied above.
    Based on this comparison, we computed a proposed budget 
neutrality adjustment factor equal to 0.997896 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 
0.997896 to the hospital-specific rates that are effective for cost 
reporting periods beginning on or after October 1, 2018.

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 2019, 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 
2017 discharge data to simulate payments and compared the following:
     Aggregate payments using the proposed FY 2019 relative 
weights and the FY 2018 pre-reclassified wage indexes, applied the 
FY 2018 labor-related share of 68.3 percent to all hospitals 
(regardless of whether the hospital's wage index was above or below 
1.0000), and applied the proposed FY 2019 hospital readmissions 
payment adjustment and the estimated FY 2019 hospital VBP payment 
adjustment; and
     Aggregate payments using the proposed FY 2019 relative 
weights and the proposed FY 2019 pre-reclassified wage indexes, 
applied the proposed labor-related share for FY 2019 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 2019 
hospital readmissions payment adjustments and estimated FY 2019 
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 proposed payment rates that were used to simulate 
payments for this comparison of aggregate payments from FY 2018 to 
FY 2019. By applying this methodology, we determined a proposed 
budget neutrality adjustment factor of 1.001182 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 
2019, we used FY 2017 discharge data to simulate payments and 
compared the following:
     Aggregate payments using the proposed FY 2019 labor-
related share percentages, the proposed FY 2019 relative weights, 
and the proposed FY 2019 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 2019 hospital readmissions payment 
adjustments and the estimated FY 2019 hospital VBP payment 
adjustments; and
     Aggregate payments using the proposed FY 2019 labor-
related share percentages, the proposed FY 2019 relative weights, 
and the proposed FY 2019 wage data after such reclassifications, and 
applied the same proposed FY 2019 hospital readmissions payment 
adjustments and the estimated FY 2019 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 website. This table reflects reclassification crosswalks 
proposed for FY 2019, and apply the proposed policies explained in 
section III. of the preamble of this proposed rule. Based on these 
simulations, we calculated a proposed budget neutrality adjustment 
factor of 0.987084 to ensure that the effects of these provisions 
are budget neutral, consistent with the statute.
    The proposed FY 2019 budget neutrality adjustment factor was 
applied to the proposed standardized amount after removing the 
effects of the FY 2018 budget

[[Page 20580]]

neutrality adjustment factor. We note that the proposed FY 2019 
budget neutrality adjustment reflects FY 2019 wage index 
reclassifications approved by the MGCRB or the Administrator at the 
time of development of this proposed rule.

d. 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.G. 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.G.2. of the 
preamble of this proposed rule, the imputed floor is set to expire 
effective October 1, 2018, 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 2019, we are proposing to 
calculate a national rural Puerto Rico wage index. Because there are 
no rural Puerto Rico hospitals with established wage data, our 
calculation of the proposed FY 2019 rural Puerto Rico wage index is 
based on the policy adopted in the FY 2008 IPPS final rule with 
comment period (72 FR 47323). That is, we use the unweighted average 
of the wage indexes from all CBSAs (urban areas) that are contiguous 
(share a border with) to the rural counties to compute the rural 
floor (72 FR 47323; 76 FR 51594). Under the 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 2019 rural 
Puerto Rico wage index is calculated based on the average of the 
proposed FY 2019 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 proposed national rural floor budget neutrality 
adjustment factor, we used FY 2017 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 0.994733. The 
national adjustment was applied to the national wage indexes to 
produce a proposed national rural floor budget neutral wage index.

e. Proposed Rural Community Hospital Demonstration Program Adjustment

    In section IV.L. of the preamble of this proposed rule, we 
discuss the Rural Community Hospital Demonstration program, which 
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). We make an adjustment to the 
standardized amount to ensure the effects of the Rural Community 
Hospital Demonstration program are budget neutral as required under 
section 410A(c)(2) of Public Law 108-173. We refer the reader to 
section IV.L. of the preamble of this proposed rule for complete 
details regarding the Rural Community Hospital Demonstration.
    With regard to budget neutrality, as mentioned earlier, we make 
an adjustment to the standardized amount to ensure the effects of 
the Rural Community Hospital Demonstration are budget neutral, as 
required under section 410A(c)(2) of Public Law 108-173. For FY 
2019, the total amount that we are proposing to apply to make an 
adjustment to the standardized amounts to ensure the effects of the 
Rural Community Hospital Demonstration program are budget neutral is 
$73,191,887. Accordingly, using the most recent data available to 
account for the estimated costs of the demonstration program, for FY 
2019, we computed a proposed factor of 0.999325 for the Rural 
Community Hospital Demonstration budget neutrality adjustment that 
will be applied to the IPPS standard Federal payment rate. We refer 
readers to section IV.L. of the preamble of this proposed rule on 
complete details regarding the calculation of the amount we are 
applying to make an adjustment to the standardized amount.
    We note, as discussed in section IV.L. of the preamble of this 
proposed rule, if updated or additional data become available prior 
to issuance of the FY 2019 IPPS/LTCH PPS final rule, we would use 
those data to the extent appropriate to determine the budget 
neutrality offset amount for FY 2019. We refer readers to section 
IV.L. of the preamble of this proposed rule on complete details 
regarding the availability of additional data prior to the FY 2019 
IPPS/LTCH PPS final rule.

f. Proposed Adjustment for FY 2019 Required Under Section 414 of Public 
Law 114-10 (MACRA)

    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. (As noted in 
the FY 2018 IPPS/LTCH PPS proposed and final rules, section 15005 of 
the 21st Century Cures Act (Pub. L. 114-255), which was enacted 
December 13, 2016, reduced the adjustment for FY 2018 from 0.5 
percentage points to 0.4588 percentage points.) Therefore, for FY 
2019, we are proposing to implement the required +0.5 percent 
adjustment to the standardized amount. This is a permanent 
adjustment to the payment rates.

g. 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 2019 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 website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/outlier.htm.

(1) Proposed FY 2019 Outlier Fixed-Loss Cost Threshold

    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977 through 
50983), in response to

[[Page 20581]]

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 a detailed discussion of the changes.
    As we have done in the past, to calculate the proposed FY 2019 
outlier threshold, we simulated payments by applying proposed FY 
2019 payment rates and policies using cases from the FY 2017 MedPAR 
file. As noted in section II.C. of this Addendum, we specify the 
formula used for actual claim payment which 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 below) 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).
    In order to determine the proposed FY 2019 outlier threshold, we 
inflated the charges on the MedPAR claims by 2 years, from FY 2017 
to FY 2019. 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 PPS final rule (81 
FR 57282), we are using the following methodology to calculate the 
charge inflation factor for FY 2019:
     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 
website 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 PPS final rule (80 FR 49779 through 
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 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, FY 
2017, and FY 2018, for FY 2019, 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, 2017, that are available under the current limited 
data set (LDS) structure. In order to provide even more information 
in response to the commenters' request, similar to FY 2016, FY 2017, 
and FY 2018, for FY 2019, we are making available on the CMS website 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (click on the links on the left titled 
``FY 2019 IPPS Proposed Rule Home Page'' and then click the link 
``FY 2019 Proposed Rule Data Files'') more detailed summary tables 
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                             Covered charges
                                                                    (January 1, 2016,     Cases (January 1,     (January 1, 2017,     Cases (January 1,
                             Quarter                              through December 31,      2016, through     through December 31,      2017, through
                                                                          2016)          December 31, 2016)           2017)          December 31, 2017)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...............................................................      $140,753,065,878             2,506,525      $149,358,509,178             2,551,065
2...............................................................       135,409,469,345             2,414,710       140,445,911,726             2,397,110
3...............................................................       132,239,610,957             2,356,131       135,004,161,478             2,293,958
4...............................................................       138,440,787,173             2,412,708       108,175,925,297             1,821,225
                                                                 ---------------------------------------------------------------------------------------
    Total.......................................................       546,842,933,353             9,690,074       532,984,507,679             9,063,358
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Under this methodology, to compute the 1-year average annualized 
rate-of-change in charges per case for FY 2019, we compared the 
average covered charge per case of $56,433 ($546,842,933,353/
9,690,074) from the second quarter of FY 2016 through the first 
quarter of FY 2017 (January 1, 2016, through December 31, 2016) to 
the average covered charge per case of $58,806.52 ($532,984,507,679/
9,063,358) from the second quarter of FY 2017 through the first 
quarter of FY 2018 (January 1, 2017, through December 31, 2017). 
This rate-of-change was 4.2 percent (1.04205) or 9.5 percent 
(1.085868) 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 2019 outlier threshold using 
hospital CCRs from the December 2017 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 2019, 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 became available, we would use that data to calculate 
the final FY 2019 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.

[[Page 20582]]

    Therefore, as we have done since FY 2014, we are proposing to 
adjust the CCRs from the December 2017 update of the PSF by 
comparing the percentage change in the national average case-
weighted operating CCR and capital CCR from the December 2016 update 
of the PSF to the national average case-weighted operating CCR and 
capital CCR from the December 2017 update of the PSF. We note that 
we used total transfer-adjusted cases from FY 2017 to determine the 
national average case-weighted CCRs for both sides of the 
comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50979), we believe that it is appropriate to use the same case count 
on both sides of the comparison because this will produce the true 
percentage change in the average case-weighted operating and capital 
CCR from one year to the next without any effect from a change in 
case count on different sides of the comparison.
    Using the proposed methodology above, for the proposed rule, we 
calculated a proposed December 2016 operating national average case-
weighted CCR of 0.266065 and a proposed December 2017 operating 
national average case-weighted CCR of 0.262830. We then calculated 
the percentage change between the two national operating case-
weighted CCRs by subtracting the December 2016 operating national 
average case-weighted CCR from the December 2017 operating national 
average case-weighted CCR and then dividing the result by the 
December 2016 national operating average case-weighted CCR. This 
resulted in a proposed national operating CCR adjustment factor of 
0.987842.
    We used the same methodology proposed above to adjust the 
capital CCRs. Specifically, we calculated a December 2016 capital 
national average case-weighted CCR of 0.023104 and a December 2017 
capital national average case-weighted CCR of 0.022076. We then 
calculated the percentage change between the two national capital 
case-weighted CCRs by subtracting the December 2016 capital national 
average case-weighted CCR from the December 2017 capital national 
average case-weighted CCR and then dividing the result by the 
December 2016 capital national average case-weighted CCR. This 
resulted in a proposed national capital CCR adjustment factor of 
0.955517.
    As discussed in section III.B.3. of the preamble of the FY 2011 
IPPS/LTCH PPS final rule (75 FR 50160 and 50161) and in section 
III.G.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 
were applied after rural floor budget neutrality adjustments were 
applied 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 2019, 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 2019. If we did 
not take the above into account, our estimate of total FY 2019 
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 2019 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 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 IV.H. and IV.I., 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 proposed hospital VBP payment adjustments 
and the estimated 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 
proposed hospital VBP payment adjustments and the estimated 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, for FY 2019, we also are 
proposing 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 2019, we are proposing to 
include estimated FY 2019 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 
$27,545 and calculated total operating Federal payments of 
$92,908,351,672 and total outlier payments of $4,738,377,622. 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 2019 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 $27,545.

(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

[[Page 20583]]

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 2019 will result in outlier payments that will 
equal 5.1 percent of operating DRG payments and 5.06 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 2019 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 2019 outlier 
threshold are as follows:

------------------------------------------------------------------------
                                             Operating
                                           standardized       Capital
                                              amounts      federal rate
------------------------------------------------------------------------
National................................       0.948999        0.949367
------------------------------------------------------------------------

    We are proposing to apply the outlier adjustment factors to the 
proposed FY 2019 payment rates after removing the effects of the FY 
2018 outlier adjustment factors on the standardized amount.
    To determine whether a case qualifies for outlier payments, we 
currently 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 1.167 or capital CCRs greater than 0.154, 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 website) 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, 2018 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 website) contains the comparable 
proposed statewide average capital CCRs. As previously stated, the 
proposed CCRs in Tables 8A and 8B would be used during FY 2019 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 website) 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 at any time as long as the guidelines of Change Request 
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 website: http://www.cms.hhs.gov/manuals/downloads/clm104c03.pdf.

(3) Alternative Considered for a Potential Change to the CCRs Used for 
Outliers, New Technology Add-On Payments, and Payments to IPPS-Excluded 
Cancer Hospitals for Chimeric Antigen Receptor (CAR) T-Cell Therapy

    As discussed in section II.F.2.d. of the preamble of this 
proposed rule, we have received many inquiries from the public 
regarding payment of CAR T-cell therapy. For FY 2019, one suggestion 
from the public was to allow hospitals to utilize a CCR specific to 
the ICD-10-PCS procedure codes used to report the performance of 
procedures involving the use of CAR T-cell therapy drugs, for 
example a CCR of 1.0, when determining whether an individual case 
qualifies for FY 2019 outlier payments and to determine the cost of 
an individual case for FY 2019 for purposes of a new technology add-
on payment, if approved. As previously discussed, procedures 
involving the use of CAR T-cell therapy drugs are currently 
identified with ICD-10-PCS procedure codes XW033C3 (Introduction of 
engineered autologous chimeric antigen receptor t-cell immunotherapy 
into peripheral vein, percutaneous approach, new technology group 3) 
and XW043C3 (Introduction of engineered autologous chimeric antigen 
receptor t-cell immunotherapy into central vein, percutaneous 
approach, new technology group 3), which both became effective 
October 1, 2017.
    Two CAR T-cell therapy drugs received FDA approval in 2017. 
KYMRIAHTM (manufactured by Novartis Pharmaceuticals 
Corporation) was approved for the use in the treatment of patients 
up to 25 years of age with B-cell precursor acute lymphoblastic 
leukemia (ALL) that is refractory or in second or later relapse. 
YESCARTATM (manufactured by Kite Pharma, Inc.) was 
approved for the use in the treatment of adult patients with certain 
types of large B-cell lymphoma and who have not responded to or who 
have relapsed after at least two other kinds of treatment.
    As discussed in greater detail in section II.H.5.a. of the 
preamble of this proposed rule, the manufacturer of 
KYMRIAHTM and the manufacturer of YESCARTATM 
submitted separate applications for new technology add-on payments 
for FY 2019. We believe that, in the context of these pending new 
technology add-on payment applications, there may also be merit in 
the suggestion from the public to allow hospitals to utilize a CCR 
specific to procedures involving the ICD-10-PCS procedures codes 
describing CAR T-cell therapy drugs for FY 2019 as part of the 
determination of the cost of a case for purposes of calculating 
outlier payments for individual FY 2019 cases, new technology add-on 
payments, if approved, for individual FY 2019 cases, and payments to 
IPPS-excluded cancer hospitals beginning in FY 2019. For example, a 
CCR of 1.0 could be used for charges associated with ICD-10-PCS 
procedure codes XW033C3 and XW043C3, as many public inquirers 
believed hospitals would be unlikely to set charges different from 
costs for the use of KYMRIAHTM and YESCARTATM. 
Such a change would result in a higher outlier payment, higher new 
technology add-on payment, or the determination of higher costs for 
IPPS-excluded cancer hospital cases. For example, if a hospital 
charged $400,000 for the procedure described by ICD-10-PCS procedure 
code XW033C3, the application of a hypothetical CCR of 0.25 results 
in a cost of $100,000 (= $400,000 * 0.25) while the application of a 
hypothetical CCR of 1.00 results in a cost of $400,000 (= $400,000 * 
1.0).
    We are inviting public comments on this alternative approach for 
FY 2019.
    We also are inviting comments on how this payment alternative 
would affect access to care, as well as how it affects incentives to 
encourage lower drug prices, which is a high priority for this 
Administration. In addition, we are considering alternative 
approaches and authorities to encourage value-based care and lower 
drug prices. We solicit comments on how the payment methodology 
alternatives may intersect and affect future participation in any 
such alternative approaches.

(4) FY 2017 Outlier Payments

    Our current estimate, using available FY 2017 claims data, is 
that actual outlier payments for FY 2017 were approximately 5.53 
percent of actual total MS-DRG payments. Therefore, the data 
indicate that, for FY 2017, the percentage of actual outlier 
payments relative to actual total payments is higher than we 
projected for FY 2017. 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

[[Page 20584]]

to ensure that total outlier payments for FY 2017 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 states that outlier 
payments be 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 
2018 will not be available until after September 30, 2018, we are 
unable to provide an estimate of actual outlier payments for FY 2018 
based on FY 2018 claims data in this proposed rule. We will provide 
an estimate of actual FY 2018 outlier payments in the FY 2020 IPPS/
LTCH PPS proposed rule.

5. Proposed FY 2019 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 website) contain the national standardized amounts that we 
are proposing to apply to all hospitals, except hospitals located in 
Puerto Rico, for FY 2019. 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 website). 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 2019.
    The proposed labor-related and nonlabor-related portions of the 
national average standardized amounts for Puerto Rico hospitals for 
FY 2019 are set forth in Table 1C listed and published in section 
VI. of this Addendum (and available via the internet on the CMS 
website). 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 2018 
national standardized amount to the proposed FY 2019 national 
standardized amount. The second through fifth columns display the 
changes from the FY 2018 standardized amounts for each applicable 
proposed FY 2019 standardized amount. The first row of the table 
shows the updated (through FY 2018) average standardized amount 
after restoring the FY 2018 offsets for outlier payments and the 
geographic reclassification budget neutrality. The MS-DRG 
reclassification and recalibration and wage index budget neutrality 
adjustment factors are cumulative. Therefore, those FY 2018 
adjustment factors are not removed from this table.

             Changes From FY 2018 Standardized Amounts to the Proposed FY 2019 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 2018 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 (0.987985).        1.0000:             1.0000:             1.0000:             1.0000:
    2. FY 2018 Operating Outlier  Labor (68.3%):      Labor (68.3%):      Labor (68.3%):      Labor (68.3%):
     Offset (0.948998).            $4,059.36           $4,059.36           $4,059.36           $4,059.36
                                  Nonlabor (30.4%):   Nonlabor (30.4%):   Nonlabor (30.4%):   Nonlabor (30.4%):
                                   $1,884.07.          $1,884.07.          $1,884.07.          $1,884.07
                                  If Wage Index is    If Wage Index is    If Wage Index is    If Wage Index is
                                   less Than or        less Than or        less Than or        less Than or
                                   Equal to 1.0000:    Equal to 1.0000:    Equal to 1.0000:    Equal to 1.0000:
                                  Labor (62%):        Labor (62%):        Labor (62%):        Labor (62%):
                                   $3,684.92.          $3,684.92.          $3,684.92.          $3,684.92
                                  Nonlabor (38%):     Nonlabor (38%):     Nonlabor (38%):     Nonlabor (38%):
                                   $2,258.50.          $2,258.50.          $2,258.50.          $2,258.50
Proposed FY 2019 Update Factor..  1.0125............  0.9915............  1.0055............  0.9845
Proposed FY 2019 MS-DRG           0.997896..........  0.997896..........  0.997896..........  0.997896
 Recalibration Budget Neutrality
 Factor.
Proposed FY 2019 Wage Index       1.001182..........  1.001182..........  1.001182..........  1.001182
 Budget Neutrality Factor.
Proposed FY 2019                  0.987084..........  0.987084..........  0.987084..........  0.987084
 Reclassification Budget
 Neutrality Factor.
Proposed FY 2019 Operating        0.948999..........  0.948999..........  0.948999..........  0.948999
 Outlier Factor.
Proposed FY 2019 Rural            0.999325..........  0.999325..........  0.999325..........  0.999325
 Demonstration Budget Neutrality
 Factor.
Adjustment for FY 2019 Required   1.005.............  1.005.............  1.005.............  1.005
 under Section 414 of Public Law
 114-10 (MACRA).
Proposed National Standardized    Labor: $3,863.17    Labor: $3,783.04    Labor: $3,836.46    Labor: $3,756.34
 Amount for FY 2019 if Wage       Nonlabor:           Nonlabor:           Nonlabor:           Nonlabor:
 Index is Greater Than 1.0000;     $1,793.01.          $1,755.82.          $1,780.61.          $1,743.43
 Labor/Non-Labor Share
 Percentage (68.3/31.7).
Proposed National Standardized    Labor: $3,506.83    Labor: $3,434.09    Labor: $3,482.58    Labor: $3,409.86
 Amount for FY 2019 if Wage       Nonlabor:           Nonlabor:           Nonlabor:           Nonlabor:
 Index is Less Than or Equal to    $2,149.35.          $2,104.77.          $2,134.49.          $2,089.91
 1.0000; Labor/Non-Labor Share
 Percentage (62/0;38).
----------------------------------------------------------------------------------------------------------------


[[Page 20585]]

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 website), 
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 2019. 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 2019, 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 2019 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.
    In the FY 2013 IPPS/LTCH PPS final rule, we established a 
methodology to update the COLA factors for Alaska and Hawaii that 
were published by the U.S. Office of Personnel Management (OPM) 
every 4 years (at the same time as the update to the labor-related 
share of the IPPS market basket), beginning in FY 2014. We refer 
readers to the FY 2013 IPPS/LTCH PPS proposed and final rules for 
additional background and a detailed description of this methodology 
(77 FR 28145 through 28146 and 77 FR 53700 through 53701, 
respectively).
    For FY 2018, in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38530 through 38531), we updated the COLA factors published by OPM 
for 2009 (as these are the last COLA factors OPM published prior to 
transitioning from COLAs to locality pay) using the methodology that 
we finalized in the FY 2013 IPPS/LTCH PPS final rule.
    Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final 
rule, we are proposing to continue to use the same COLA factors in 
FY 2019 that were used in FY 2018 to adjust the nonlabor-related 
portion of the standardized amount for hospitals located in Alaska 
and Hawaii. Below is a table listing the proposed COLA factors for 
FY 2019.

  Proposed FY2019 Cost-of-Living Adjustment Factors: Alaska and Hawaii
                                Hospitals
------------------------------------------------------------------------
                                                          Cost of living
                          Area                              adjustment
                                                              factor
------------------------------------------------------------------------
Alaska:
    City of Anchorage and 80-kilometer (50-mile) radius             1.25
     by road............................................
    City of Fairbanks and 80-kilometer (50-mile) radius             1.25
     by road............................................
    City of Juneau and 80-kilometer (50-mile) radius by             1.25
     road...............................................
    Rest of Alaska......................................            1.25
 
    City and County of Honolulu.........................            1.25
    County of Hawaii....................................            1.21
    County of Kauai.....................................            1.25
    County of Maui and County of Kalawao................            1.25
------------------------------------------------------------------------

    Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final 
rule, the next update to the COLA factors for Alaska and Hawaii 
would occur at the same time as the update to the labor-related 
share of the IPPS market basket (no later than FY 2022).

C. Calculation of the Proposed Prospective Payment Rates

General Formula for Calculation of the Prospective Payment Rates for FY 
2019

    In general, the operating prospective payment rate for all 
hospitals (including hospitals in Puerto Rico) paid under the IPPS, 
except SCHs and MDHs, for FY 2019 equals the Federal rate (which 
includes uncompensated care payments).
    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). Section 50205 
of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), enacted 
February 9, 2018, extended the MDH program for discharges on or 
after October 1, 2017 through September 30, 2022.
    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 2019 equals the 
higher of the applicable Federal rate, or the hospital-specific rate 
as described below. The prospective payment rate for MDHs for FY 
2019 equals the higher of the Federal rate, or the Federal rate plus 
75 percent of the difference between the Federal rate and the 
hospital-specific rate as described below. For MDHs, the updated 
hospital-specific rate is based on FY 1982, FY 1987, or FY 2002 
costs per discharge, whichever yields the greatest aggregate 
payment.

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

[[Page 20586]]

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 and MDHs)

a. Calculation of Hospital-Specific Rate

    Section 1886(b)(3)(C) of the Act provides that SCHs are paid 
based on whichever of the following rates yields the greatest 
aggregate payment: The Federal rate; 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, as discussed in section IV.G. of the preamble of 
this FY 2019 IPPS/LTCH PPS 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). Section 50205 of the Bipartisan 
Budget Act of 2018, enacted February 9, 2018, extended the MDH 
program for discharges on or after October 1, 2017 through September 
30, 2022. For MDHs, the updated hospital-specific rate is based on 
FY 1982, FY 1987, or FY 2002 costs per discharge, whichever yields 
the greatest aggregate payment.
    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 2019

    Section 1886(b)(3)(B)(iv) of the Act provides that the 
applicable percentage increase applicable to the hospital-specific 
rates for SCHs and MDHs equals the applicable percentage increase 
set forth in section 1886(b)(3)(B)(i) of the Act (that is, the same 
update factor as for all other hospitals subject to the IPPS). 
Because the Act sets the update factor for SCHs and MDHs equal to 
the update factor for all other IPPS hospitals, the update to the 
hospital-specific rates for SCHs and MDHs is subject to the 
amendments to section 1886(b)(3)(B) of the Act made by sections 
3401(a) and 10319(a) of the Affordable Care Act. Accordingly, the 
proposed applicable percentage increases to the hospital-specific 
rates applicable to SCHs and MDHs are the following:

----------------------------------------------------------------------------------------------------------------
                                                     Hospital        Hospital      Hospital did    Hospital did
                                                     submitted       submitted      NOT submit      NOT submit
                                                   quality data    quality data    quality data    quality data
                     FY 2019                         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.........             2.8             2.8             2.8             2.8
Proposed Adjustment for Failure to Submit                    0.0             0.0            -0.7            -0.7
 Quality Data under Section 1886(b)(3)(B)(viii)
 of the Act.....................................
Proposed Adjustment for Failure to be a                      0.0            -2.1             0.0            -2.1
 Meaningful EHR User under Section
 1886(b)(3)(B)(ix) of the Act...................
Proposed MFP Adjustment under Section                       -0.8            -0.8            -0.8            -0.8
 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             1.25           -0.85            0.55           -1.55
 to Standardized Amount.........................
----------------------------------------------------------------------------------------------------------------

    For a complete discussion of the applicable percentage increase 
applied to the hospital-specific rates for SCHs and MDHs, we refer 
readers to section IV.B. of the preamble of this proposed rule.
    In addition, because SCHs and MDHs use the same MS-DRGs as other 
hospitals when they are paid based in whole or in part on the 
hospital-specific rate, the hospital-specific rate is adjusted by a 
budget neutrality factor to ensure that changes to the MS-DRG 
classifications and the recalibration of the MS-DRG relative weights 
are made in a manner so that aggregate IPPS payments are unaffected. 
Therefore, the proposed hospital-specific rate for an SCH or an MDH 
is adjusted by the proposed MS-DRG reclassification and 
recalibration budget neutrality factor of 0.997896, as discussed in 
section III. of this Addendum. The resulting rate is used in 
determining the payment rate that an SCH or MDH would receive for 
its discharges beginning on or after October 1, 2018. We note that, 
in this proposed rule, for FY 2019, we are not making a 
documentation and coding adjustment to the hospital-specific rate. 
We refer readers to section II.D.

[[Page 20587]]

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.

III. Proposed Changes to Payment Rates for Acute Care Hospital 
Inpatient Capital-Related Costs for FY 2019

    The PPS for acute care hospital inpatient capital-related costs 
was implemented for cost reporting periods beginning on or after 
October 1, 1991. The basic methodology for determining Federal 
capital prospective rates is set forth in the regulations at 42 CFR 
412.308 through 412.352. Below we discuss the factors that we used 
to determine the proposed capital Federal rate for FY 2019, which 
would be effective for discharges occurring on or after October 1, 
2018.
    All hospitals (except ``new'' hospitals under Sec.  
412.304(c)(2)) are paid based on the capital Federal rate. We 
annually update the capital standard Federal rate, as provided in 
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, which currently specifies capital IPPS 
payments to hospitals located in Puerto Rico are based on 100 
percent of the Federal rate.

A. Determination of the Federal Hospital Inpatient Capital-Related 
Prospective Payment Rate Update for FY 2019

    In the discussion that follows, we explain the factors that we 
used to determine the proposed capital Federal rate for FY 2019. In 
particular, we explain why the proposed FY 2019 capital Federal rate 
would increase approximately 1.28 percent, compared to the FY 2018 
capital Federal rate. As discussed in the impact analysis in 
Appendix A to this proposed rule, we estimate that capital payments 
per discharge will increase approximately 1.7 percent during that 
same period. Because capital payments constitute approximately 10 
percent of hospital payments, a 1-percent change in the capital 
Federal rate yields only approximately a 0.1 percent change in 
actual payments to hospitals.

1. Projected Capital Standard Federal Rate Update

a. Description of the Update Framework

    Under Sec.  412.308(c)(1), the capital standard Federal rate is 
updated on the basis of an analytical framework that takes into 
account changes in a capital input price index (CIPI) and several 
other policy adjustment factors. Specifically, we adjust the 
projected CIPI rate of 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 2019 under that 
framework is 1.2 percent based on a projected 1.2 percent increase 
in the 2014-based CIPI, a proposed 0.0 percentage point adjustment 
for intensity, a proposed 0.0 percentage point adjustment for case-
mix, a proposed 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 FY 
2019 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 2019.
    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 2019, we are projecting a 0.5 percent total increase in 
the case-mix index. We estimated that the real case-mix increase 
would equal 0.5 percent for FY 2019. 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 2019 is 0.0 
percentage point.
    The capital update framework also contains an adjustment for the 
effects of DRG reclassification and recalibration. This adjustment 
is intended to remove the effect on total payments of prior year's 
changes to the DRG classifications and relative weights, in order to 
retain budget neutrality for all case-mix index-related changes 
other than those due to patient severity of illness. Due to the lag 
time in the availability of data, there is a 2-year lag in data used 
to determine the adjustment for the effects of DRG reclassification 
and recalibration. For example, we have data available to evaluate 
the effects of the FY 2017 DRG reclassification and recalibration as 
part of our proposed update for FY 2019. We assume, for purposes of 
this adjustment, that the estimate of FY 2017 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 2019.
    The capital update framework also contains an adjustment for 
forecast error. The input price index forecast is based on 
historical trends and relationships ascertainable at the time the 
update factor is established for the upcoming year. In any given 
year, there may be unanticipated price fluctuations that may result 
in differences between the actual increase in prices and the 
forecast used in calculating the update factors. In setting a 
prospective payment rate under the framework, we make an adjustment 
for forecast error only if our estimate of the change in the capital 
input price index for any year is off by 0.25 percentage point or 
more. There is a 2-year lag between the forecast and the 
availability of data to develop a measurement of the forecast error. 
Historically, when a forecast error of the CIPI is greater than 0.25 
percentage point in absolute terms, it is reflected in the update 
recommended under this framework. A forecast error of 0.0 percentage 
point was calculated for the FY 2017 update, for which there are 
historical data. That is, current historical data indicate that the 
forecasted FY 2017 CIPI (1.2 percent) used in calculating the FY 
2017 update factor was 0.0 percentage point higher than actual 
realized price increases (1.2 percent). As this does not exceed the 
0.25 percentage point threshold, we are not proposing to make an 
adjustment for forecast error in the update for FY 2019.
    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

[[Page 20588]]

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 2019 (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 2019, 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 2012 and extending through FY 
2016. Based on these data, we estimated that case-mix constant 
intensity declined during FYs 2012 through 2016. 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 2019. Therefore, we are 
proposing to make a 0.0 percentage point adjustment for intensity in 
the update for FY 2019.
    Above, we described the basis of the components we used to 
develop the proposed 1.2 percent capital update factor under the 
capital update framework for FY 2019 as shown in the following 
table.

     Proposed CMS FY 2019 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 2017 Reclassification and Recalibration.........        0.0
Forecast Error Correction....................................        0.0
                                                              ----------
  Proposed Total Update......................................        1.2
------------------------------------------------------------------------
* The capital input price index represents the 2014-based CIPI.

b. Comparison of CMS and MedPAC Update Recommendation

    In its March 2018 Report to Congress, MedPAC did not make a 
specific update recommendation for capital IPPS payments for FY 
2019. (We refer readers to MedPAC's Report to the Congress: Medicare 
Payment Policy, March 2018, Chapter 3, available on the website 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 2018, we estimated that outlier payments for capital 
would equal 5.17 percent of inpatient capital-related payments based 
on the capital Federal rate in FY 2018. 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 5.06 percent 
for inpatient capital-related payments based on the proposed capital 
Federal rate in FY 2019. Therefore, we are proposing to apply an 
outlier adjustment factor of 0.9494 in determining the capital 
Federal rate for FY 2019. Thus, we estimate that the percentage of 
capital outlier payments to proposed total capital Federal rate 
payments for FY 2019 would be lower than the percentage for FY 2018.
    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 2019 outlier 
adjustment of 0.9494 is a 0.12 percent change from the FY 2018 
outlier adjustment of 0.9483. Therefore, the proposed net change in 
the outlier adjustment to the capital Federal rate for FY 2019 is 
1.0012(0.9494/0.9483) so that the proposed outlier adjustment would 
increase the FY 2019 capital Federal rate by 0.12 percent compared 
to the FY 2018 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 factors for FY 2019, we compared 
estimated aggregate capital Federal rate payments based on the FY 
2018 MS-DRG classifications and relative weights and the FY 2018 GAF 
to estimated aggregate capital Federal rate payments based on the FY 
2018 MS-DRG classifications and relative weights and the proposed FY 
2019 GAFs. To achieve budget neutrality for the changes in the GAFs, 
based on calculations using updated data, we are proposing to apply 
an incremental budget neutrality adjustment factor of 1.000094 for 
FY 2019 to the previous cumulative FY 2018 adjustment factor.
    We then compared estimated aggregate capital Federal rate 
payments based on the FY 2018 MS-DRG relative weights and the 
proposed FY 2019 GAFs to estimate aggregate capital Federal rate 
payments based on the cumulative effects of the proposed FY 2019 MS-
DRG classifications and relative weights and the proposed FY 2019 
GAFs. The proposed incremental adjustment factor for DRG 
classifications and changes in relative weights is 0.9996. The 
proposed incremental adjustment factors for MS-DRG classifications 
and proposed changes in relative weights and for proposed changes in 
the GAFs through FY 2019 is 0.9997. 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 incremental adjustment factor of 0.9997 (the 
product of the proposed incremental national GAF budget neutrality

[[Page 20589]]

adjustment factor of 1.00009 and the proposed incremental DRG budget 
neutrality adjustment factor of 0.9996) accounts for the MS-DRG 
reclassifications and recalibration and for changes in the GAFs. It 
also incorporates the effects on the GAFs of FY 2019 geographic 
reclassification decisions made by the MGCRB compared to FY 2018 
decisions. However, it does not account for changes in payments due 
to changes in the DSH and IME adjustment factors.

4. Proposed Capital Federal Rate for FY 2019

    For FY 2018, we established a capital Federal rate of $453.95 
(82 FR 46144 through 46145). We are proposing to establish an update 
of 1.2 percent in determining the FY 2019 capital Federal rate for 
all hospitals. As a result of this proposed update and the proposed 
budget neutrality factors discussed earlier, we are proposing to 
establish a national capital Federal rate of $459.78 for FY 2019. 
The proposed national capital Federal rate for FY 2019 was 
calculated as follows:
     The proposed FY 2019 update factor is 1.012; that is, 
the proposed update is 1.2 percent.
     The proposed FY 2019 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 0.9997.
     The proposed FY 2019 outlier adjustment factor is 
0.9494.
    We are providing the following chart that shows how each of the 
proposed factors and adjustments for FY 2019 affects the computation 
of the proposed FY 2019 national capital Federal rate in comparison 
to the FY 2018 national capital Federal rate as presented in the FY 
2018 IPPS/LTCH PPS Correction Notice (82 FR 46144 through 46145). 
The proposed FY 2019 update factor has the effect of increasing the 
capital Federal rate by 1.2 percent compared to the FY 2018 capital 
Federal rate. The proposed GAF/DRG budget neutrality adjustment 
factor has the effect of decreasing the capital Federal rate by 0.03 
percent. The proposed FY 2019 outlier adjustment factor has the 
effect of increasing the capital Federal rate by 0.12 percent 
compared to the FY 2018 capital Federal rate. The combined effect of 
all the proposed changes would increase the national capital Federal 
rate by approximately 1.28 percent compared to the FY 2018 national 
capital Federal rate.

  Comparison of Factors and Adjustments: Fy 2018 Capital Federal Rate and Proposed FY 2019 Capital Federal Rate
----------------------------------------------------------------------------------------------------------------
                                                                    Proposed FY      Proposed        Proposed
                                                      FY 2018          2019           change      percent change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\...............................          1.0130           1.012           1.012            1.20
GAF/DRG Adjustment Factor \1\...................          0.9987          0.9997          .09997           -0.03
Outlier Adjustment Factor \2\...................          0.9483          0.9494          1.0012            0.12
Capital Federal Rate............................         $453.95         $459.78          1.0128        \3\ 1.28
----------------------------------------------------------------------------------------------------------------
\1\ The update factor and the GAF/DRG budget neutrality adjustment factors are built permanently into the
  capital Federal rates. Thus, for example, the incremental change from FY 2018 to FY 2019 resulting from the
  application of the proposed 0.9997 GAF/DRG budget neutrality adjustment factor for FY 2019 is a net change of
  0.9997 (or -0.03 percent).
\2\ The outlier reduction factor is not built permanently into the capital Federal rate; that is, the factor is
  not applied cumulatively in determining the capital Federal rate. Thus, for example, the net change resulting
  from the application of the proposed FY 2019 outlier adjustment factor is 0.9494/0.9483 or 1.0012 (or 0.12
  percent).
\3\ Percent change may not sum due to rounding.

B. Calculation of the Inpatient Capital-Related Prospective 
Payments for FY 2019

    For purposes of calculating payments for each discharge during 
FY 2019, 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 
2019 are in section II.A. of this Addendum. For FY 2019, 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 
proposed fixed-loss amount of $27,545.
    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 2019 IPPS/
LTCH PPS proposed rule, we are using the rebased and revised IPPS 
operating and capital market baskets that reflect a 2014 base year. 
For a complete discussion of this rebasing, we refer readers to 
section IV. of the preamble of the FY 2018 IPPS/LTCH PPS final rule.

2. Forecast of the CIPI for FY 2019

    Based on IGI's fourth quarter 2017 forecast, for this proposed 
rule, we are forecasting the 2014-based CIPI to increase 1.2 percent 
in FY 2019. This reflects a projected 1.6 percent increase in 
vintage-weighted depreciation prices (building and fixed equipment, 
and movable equipment), and a projected 3.0 percent increase in 
other capital expense prices in FY 2019, partially offset by a 
projected 1.3 percent decline in vintage-weighted interest expense 
prices in FY 2019. The weighted average of these three factors 
produces the forecasted 1.2 percent increase for the 2014-based CIPI 
in FY 2019.

IV. Proposed Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2019

    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 specified in Sec.  
413.40(c)(3). In addition, as

[[Page 20590]]

specified in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38536), 
effective for cost reporting periods beginning during FY 2018, the 
annual update to the target amount for extended neoplastic disease 
care hospitals (hospitals described in Sec.  412.22(i) of the 
regulations) also is the rate-of-increase percentage specified in 
Sec.  413.40(c)(3). (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.)
    The proposed FY 2019 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, RNHCIs, and extended neoplastic disease care hospitals is the 
estimated percentage increase in the IPPS operating market basket 
for FY 2019, in accordance with applicable regulations at Sec.  
413.40. Based on IGI's 2017 fourth quarter forecast, we estimated 
that the 2014-based IPPS operating market basket update for FY 2019 
is 2.8 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 2019. 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), 
extended neoplastic disease care hospitals, and RNHCIs, the FY 2019 
rate-of-increase percentage that would be applied to the FY 2018 
target amounts, in order to determine the proposed FY 2019 target 
amounts is 2.8 percent.
    The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. 
We refer readers to section VII. of the preamble of this 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 2019. 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 2019

A. Proposed LTCH PPS Standard Federal Payment Rate for FY 2019

1. Overview

    In section VII. 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 2019.
    Under Sec.  412.523(c)(3) of the regulations, for LTCH PPS 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)). (For 
a summary of the payment rate development prior to FY 2012, we refer 
readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38310 through 
38312).) Sections 1886(m)(3)(A) and 1886(m)(3)(C) of the Act specify 
that, for rate year 2010 and each subsequent rate year, except FY 
2018, 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 VII.D.2. of the preamble 
of this proposed rule.
    This section of the Act further provides that the application of 
section 1886(m)(3) of the Act may result in the annual update being 
less than zero for a rate year, and may result in payment rates for 
a rate year being less than such payment rates for the preceding 
rate year. (As noted in section VII.D.2.a. of the preamble of this 
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.)
    For LTCHs that fail to submit the required quality reporting 
data 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.

2. Development of the Proposed FY 2019 LTCH PPS Standard Federal 
Payment Rate

    Consistent with our historical practice, for FY 2019, 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 2019, we also are proposing to make certain regulatory 
adjustments, consistent with past practices. Specifically, in 
determining the proposed FY 2019 LTCH PPS standard Federal payment 
rate, we are proposing to apply a budget neutrality adjustment 
factor for the changes related to the area wage adjustment (that is, 
changes to the wage data and labor-related share) in accordance with 
Sec.  412.523(d)(4) and a proposed budget neutrality adjustment 
factor for the proposed elimination of the 25-percent threshold 
policy (discussed in VII.D. of the preamble of this proposed rule).
    In this FY 2019 IPPS/LTCH PPS proposed rule, we are proposing an 
annual update to the LTCH PPS standard Federal payment rate of 1.15 
percent. Accordingly, under proposed Sec.  412.523(c)(3)(xv), we are 
proposing to apply a factor of 1.0115 to the FY 2018 LTCH PPS 
standard Federal payment rate of $41,415.11 to determine the 
proposed FY 2019 LTCH PPS standard Federal payment rate. Also, under 
proposed Sec.  412.523(c)(3)(xv), applied in conjunction with the 
provisions of Sec.  412.523(c)(4), we are proposing an annual update 
to the LTCH PPS standard Federal payment rate of -0.85 percent (that 
is, a proposed update factor of 0.9915) for FY 2019 for LTCHs that 
fail to submit the required quality reporting data for FY 2019 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 2019 LTCH PPS standard Federal payment 
rate of 0.999713 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 to apply a one-time, permanent 
budget neutrality adjustment of 0.990535 for our proposed 
elimination of the 25-percent threshold policy (discussed in VII.E. 
of the preamble of this proposed rule). Accordingly, we are 
proposing an LTCH PPS standard Federal payment rate of $41,482.98 
(calculated as $41,415.11 x 1.0115 x 0.999713 x 0.990535) for FY 
2019 (calculations performed on rounded numbers). For LTCHs that 
fail to submit quality reporting data for FY 2019, in accordance 
with the requirements of the LTCH QRP under section 1866(m)(5) of 
the Act, we are proposing an LTCH PPS standard Federal payment rate 
of $40,662.75 (calculated as $41,415.11 x 0.9915 x 0.999713 x 
0.990535) (calculations performed on rounded numbers) for FY 2019.

B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS for 
FY 2019

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.

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

[[Page 20591]]

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://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. On July 15, 2015, OMB issued OMB Bulletin No. 15-01, which 
provided updates to and superseded OMB Bulletin No. 13-01 that was 
issued on February 28, 2013. The attachment to OMB Bulletin No. 15-
01 provided detailed information on the update to statistical areas 
since February 28, 2013. We adopted the updates contained in OMB 
Bulletin No. 15-01, as discussed in the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 56913 through 56914). On August 15, 2017, OMB issued OMB 
Bulletin No. 17-01 that updated and superseded Bulletin No. 15-01. 
As discussed in section III.A.2. of the preamble of this proposed 
rule, OMB Bulletin No. 17-01 and its attachments provide detailed 
information on the update to statistical areas since the July 15, 
2015 release of Bulletin No. 15-01 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, 
2014, and July 1, 2015. A copy of this bulletin may be obtained on 
the website at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2017/b-17-01.pdf.
    OMB Bulletin No. 17-01 made the following change that is 
relevant to the LTCH PPS CBSA-based labor market area (geographic 
classification) delineations:
     Twin Falls, ID, with principal city Twin Falls, ID and 
consisting of counties Jerome County, ID and Twin Falls County, ID, 
which was a Micropolitan (geographically rural) area, now qualifies 
as an urban area under new CBSA 46300 entitled Twin Falls, ID.
    This change affects all providers located in CBSA 46300, but our 
database shows no LTCHs located in CBSA 46300.
    We believe that this revision 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 adopt 
this revision under the LTCH PPS, effective October 1, 2018. 
Accordingly, the proposed FY 2019 LTCH PPS wage index values in 
Tables 12A and 12B listed in section VI. of the Addendum to this 
proposed rule (which are available via the internet on the CMS 
website) reflect the revision 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 revision to the 
CBSA-based delineations also is being proposed under the IPPS.

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 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 rebased and revised the market basket used under 
the LTCH PPS by adopting a 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 VII.D. of the preamble of this FY 2019 IPPS/
LTCH PPS proposed rule, we are proposing to establish that the LTCH 
PPS labor-related share for FY 2019 is the sum of the FY 2019 
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 2019 includes the sum of the labor-related 
portion of operating costs from the 2013-based LTCH market basket 
(that is, the sum of the FY 2019 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 2017 forecast 
of the 2013-based LTCH market basket, we are proposing to establish 
a labor-related share under the LTCH PPS for FY 2019 of 66.2 
percent. This labor-related share is determined using the same 
methodology as employed in calculating all previous LTCH 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 2019 labor-
related share in the final rule. (We note that a labor-related share 
of 66.2 percent is the same as the labor-related share for FY 2018. 
Although the relative importance of some components of the market 
basket have changed, the proposed labor-related share remains at 
66.2 percent when aggregating these components and rounding to one 
decimal.)
    The proposed labor-related share for FY 2019 is the sum of the 
FY 2019 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 2019. The sum of the 
relative importance for FY 2019 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 62.0 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 9.1 percent of the 2013-based LTCH market 
basket in FY 2019, we are proposing to take 46 percent of 9.1 
percent to determine the labor-related share of capital-related 
costs for FY 2019 (0.46 x 9.1). The result is 4.2 percent, which we 
added to 62.0 percent for the operating cost amount to determine the 
total proposed labor-related share for FY 2019. Therefore, we are 
proposing that the labor-related share under the LTCH PPS for FY 
2019 is 66.2 percent.

4. Proposed Wage Index for FY 2019 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

[[Page 20592]]

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 2018 IPPS/LTCH PPS final rule (82 FR 38538 through 
38539), we calculated the FY 2018 LTCH PPS area wage index values 
using the same data used for the FY 2018 acute care hospital IPPS 
(that is, data from 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, as these were the 
most recent complete data available at that time. In that same final 
rule, we indicated that we computed the FY 2018 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 2019 IPPS/LTCH PPS proposed rule, to determine the applicable 
area wage index values for the FY 2019 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 2015, 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 2019 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 2019 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 2019, 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 2015 IPPS wage data that we are proposing to use 
to determine the proposed FY 2019 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 2019 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 website). 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 2015 IPPS wage data that we are proposing to use 
to determine the proposed FY 2019 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 2019. 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 2019 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, 2018, through September 
30, 2019, are presented in Table 12A (for urban areas) and Table 12B 
(for rural areas), which are listed in section VI. of the Addendum 
to this proposed rule and available via the internet on the CMS 
website.

5. Proposed Budget Neutrality Adjustment for Changes to the LTCH PPS 
Standard Federal Payment Rate Area Wage Level Adjustment

    Historically, the LTCH PPS wage index and labor-related share 
are updated annually based on the latest available data. Under Sec.  
412.525(c)(2), any changes to the area wage index values or labor-
related share are to be made in a budget neutral manner such that 
estimated aggregate LTCH PPS payments are unaffected; that is, will 
be neither greater than nor less than estimated aggregate LTCH PPS 
payments without such changes to the area wage level adjustment. 
Under this policy, we determine an area wage-level adjustment budget 
neutrality factor that will be applied to the standard Federal 
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 2019 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 budget neutrality factor that would be applied to 
the LTCH PPS standard Federal payment rate under Sec.  412.523(d)(4) 
for FY 2019 using the following methodology:
    Step 1--We simulated estimated aggregate LTCH PPS standard 
Federal payment rate payments using the FY 2018 wage index values 
and the FY 2018 labor-related share of 66.2 percent (as established 
in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38314 and 38315)).
    Step 2--We simulated estimated aggregate LTCH PPS standard 
Federal payment rate payments using the proposed FY 2019 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 
website) and the proposed FY 2019 labor-related share of 66.2 
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 
2018 area wage level adjustments (calculated in Step 1) by the 
estimated total LTCH PPS standard Federal payment rate payments 
using the proposed FY 2019 area wage level adjustments (calculated 
in Step 2) to determine the proposed area wage level adjustment 
budget neutrality factor for FY 2019 LTCH PPS standard Federal 
payment rate payments.
    Step 4--We then applied the proposed FY 2019 area wage level 
adjustment budget neutrality factor from Step 3 to determine the 
proposed FY 2019 LTCH PPS standard Federal payment rate after the 
application of the proposed FY 2019 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

[[Page 20593]]

provisions 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 2019 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 2019 LTCH PPS 
standard Federal payment rate area wage level adjustment budget 
neutrality factor of 0.999713. Accordingly, in section V.A. of the 
Addendum to this proposed rule, to determine the proposed FY 2019 
LTCH PPS standard Federal payment rate, we are proposing to apply an 
area wage level adjustment budget neutrality factor of 0.999713, in 
accordance with Sec.  412.523(d)(4). The proposed FY 2019 LTCH PPS 
standard Federal payment rate shown in Table 1E of the Addendum to 
this proposed rule reflects this adjustment factor.

C. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs 
Located in Alaska and Hawaii

    Under Sec.  412.525(b), a cost-of-living adjustment (COLA) is 
provided for LTCHs located in Alaska and Hawaii to account for the 
higher costs incurred in those States. Specifically, we apply a COLA 
to payments to LTCHs located in Alaska and Hawaii by multiplying the 
nonlabor-related portion of the standard Federal payment rate by the 
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into 
account in the adjustment for area wage levels previously described. 
The methodology used to determine the COLA factors for Alaska and 
Hawaii 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 (at the same time as the update to the labor-related share 
of the IPPS market basket), and we last updated the COLA factors for 
Alaska and Hawaii published by OPM for 2009 in FY 2018 (82 FR 38539 
through 38540).
    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. Therefore, in this proposed rule 
for FY 2019, under the broad authority conferred upon the Secretary 
by section 123 of the BBRA, as amended by section 307(b) of the 
BIPA, to determine appropriate payment adjustments under the LTCH 
PPS, we are proposing to continue to use the COLA factors based on 
the 2009 OPM COLA factors updated through 2016 by the comparison of 
the growth in the CPIs for Anchorage, Alaska, and Honolulu, Hawaii, 
relative to the growth in the CPI for the average U.S. city as 
established in the FY 2018 IPPS/LTCH PPS final rule. (For additional 
details on our current methodology for updating the COLA factors for 
Alaska and Hawaii and for a discussion on the FY 2018 COLA factors, 
we refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38539 through 38540).) Consistent with our historical practice, we 
are proposing to establish that the COLA factors shown in the 
following table will be used to adjust the nonlabor-related portion 
of the LTCH PPS standard Federal payment rate for LTCHs located in 
Alaska and Hawaii under Sec.  412.525(b).

 Proposed Cost-of-Living Adjustment Factors for Alaska and Hawaii Under
                        the LTCH PPS for FY 2019
------------------------------------------------------------------------
                                                            FY 2018 and
                          Area                              proposed FY
                                                               2019
------------------------------------------------------------------------
Alaska:
  City of Anchorage and 80-kilometer (50-mile) radius by            1.25
   road.................................................
  City of Fairbanks and 80-kilometer (50-mile) radius by            1.25
   road.................................................
  City of Juneau and 80-kilometer (50-mile) radius by               1.25
   road.................................................
  Rest of Alaska........................................            1.25
  City and County of Honolulu...........................            1.25
  County of Hawaii......................................            1.21
  County of Kauai.......................................            1.25
  County of Maui and County of Kalawao..................            1.25
------------------------------------------------------------------------

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 FY 2016 IPPS/LTCH PPS final 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 payment 
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 
used to determine payments for site neutral payment rate cases. As 
noted earlier, in determining HCO and the site neutral payment rate 
payments (regardless of whether the case is also an HCO), 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

[[Page 20594]]

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, 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 and Sec.  412.522(c)(1)(ii) for the site neutral 
payment rate.)
    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 
2019 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 2017 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 1.28 under the LTCH PPS for FY 2019 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. (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 2017 update of the PSF, we are proposing to establish LTCH 
PPS statewide average total CCRs for urban and rural hospitals that 
will be effective for discharges occurring on or after October 1, 
2018, through September 30, 2019, in Table 8C listed in section VI. 
of the Addendum to this proposed rule (and available via the 
internet on the CMS website). 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 2019 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 2017. 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 1.215. Because this is much higher than the statewide 
urban average 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 Payments

    Under the HCO policy for cases paid under either payment rate at 
Sec.  412.525(a)(4)(iv)(D), the payments for HCO cases are subject 
to reconciliation. Specifically, any such payments are reconciled at 
settlement based on the CCR that was calculated based on the cost 
report coinciding with the discharge. 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

    Under the regulations at Sec.  412.525(a)(2)(ii) and as required 
by section 1886(m)(7) of the Act, the fixed-loss amount for HCO 
payments is set each year so that the estimated aggregate HCO 
payments for LTCH PPS standard Federal payment rate cases are 
99.6875 percent of 8 percent (that is, 7.975 percent) of estimated 
aggregate LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases. (For more details on the requirements for high-cost 
outlier payments in FY 2018 and subsequent years under section 
1886(m)(7) of the Act and additional information regarding high-cost 
outlier payments prior to FY 2018, we refer readers to the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38542 through 38544).)

b. Establishment of the Proposed Fixed-Loss Amount for LTCH PPS 
Standard Federal Payment Rate Cases for FY 2019

    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). 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 would 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 would be 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

[[Page 20595]]

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. In accordance with Sec.  412.525(a)(2)(ii), 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 7.975 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.
    In this FY 2019 IPPS/LTCH PPS 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 2019 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 at this time (that is, 
LTCH claims data from the December 2017 update of the FY 2017 MedPAR 
file and CCRs from the December 2017 update of the PSF), we are 
proposing to determine a proposed fixed-loss amount for LTCH PPS 
standard Federal payment rate cases for FY 2019 of $30,639 that 
would result in estimated outlier payments projected to be equal to 
7.975 percent of estimated FY 2019 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 $30,639).
    We note that the proposed fixed-loss amount for HCO cases paid 
under the LTCH PPS standard Federal payment rate in FY 2019 of 
$30,639 is higher than the FY 2018 fixed-loss amount of $27,381 for 
LTCH PPS standard Federal payment rate cases. However, based on the 
most recent available data at the time of the development of this FY 
2019 IPPS/LTCH PPS proposed rule, we found that the current FY 2018 
HCO threshold of $27,381 results in estimated HCO payments for LTCH 
PPS standard Federal payment rate cases of approximately 7.988 
percent of the estimated total LTCH PPS payments in FY 2018, which 
exceeds the 7.975 percent target by 0.01 percentage points. We 
continue to believe, as discussed in detail in the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38542 through 38543), this increase is largely 
attributable to the rate-of-change (that is, increase) in the 
Medicare allowable charges on the claims data in addition to updates 
to CCRs from the December 2016 update of the PSF to the March 2017 
update of the PSF. 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 2019 in the final rule, we would use the most recent 
available LTCH claims data and CCR data at the time.

3. 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 through FY 2019 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 
LTCH PPS standard Federal payment rate amount for the discharge 
(Sec.  412.522(c)(3)). As such, for FY 2019 discharges paid under 
the transitional payment method, the discussion below pertains only 
to the site neutral payment rate portion of the blended payment rate 
under Sec.  412.522(c)(3)(i).
    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 and FY 2018 because the 
historical claims data available in each of these years were not all 
subject to the LTCH PPS dual rate payment system. Similarly, for FY 
2019, we continue to rely on these considerations and actuarial 
projections because, due to the transitional blended payment policy 
for site neutral payment rate cases, FY 2017 claims for these cases 
were not subject to the full effect of the site neutral payment 
rate.
    For FYs 2016 through 2018, 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 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 FYs 2016 through 2018 would 
be equal to the IPPS fixed-loss amount for that particular fiscal 
year. Therefore, we established the fixed-loss amount for site 
neutral payment rate cases as the corresponding IPPS fixed-loss 
amounts for FYs 2016 through 2018. In particular, in FY 2018, we 
established the fixed-loss amount for site neutral payment rate 
cases as the FY 2018 IPPS fixed-loss amount of $26,537 (82 FR 
46145).
    As noted earlier, because not all claims in the data used for 
this proposed rule were subject to the site neutral payment rate, we 
continue to rely on the same considerations and actuarial 
projections used in FYs 2016 through 2018 when developing a proposed 
fixed-loss amount for site neutral payment rate cases for FY 2019. 
Because our actuaries continue to project that site neutral payment 
rate cases in FY 2019 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 
FYs 2016 through 2018, our actuaries project that the costs and 
resource use for FY 2019 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

[[Page 20596]]

historical data. (Based on the most recent FY 2017 LTCH claims data, 
approximately 64 percent of LTCH cases would have been paid the LTCH 
PPS standard Federal payment rate and approximately 36 percent of 
LTCH cases would have been paid the site neutral payment rate for 
discharges occurring in FY 2017.)
    For these reasons, we continue to believe that the most 
appropriate proposed fixed-loss amount for site neutral payment rate 
cases for FY 2019 is the proposed IPPS fixed-loss amount for FY 
2019. Therefore, consistent with past practice, in this FY 2019 
IPPS/LTCH PPS proposed rule, for FY 2019, 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 proposed 
IPPS fixed-loss amount. That is, we are proposing a fixed-loss 
amount for site neutral payment rate cases of $27,545, which is the 
same proposed FY 2019 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 2019, we are proposing to calculate a 
HCO payment for site neutral payment rate cases with costs that 
exceed 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 site neutral payment rate payment 
and the proposed fixed-loss amount for site neutral payment rate 
cases of $27,545).
    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 is 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 2019 would not result in any increase in 
estimated aggregate FY 2019 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 2019. In order to achieve this, for FY 2019, in 
general, we are proposing to continue to use the policy adopted for 
FY 2018.
    As discussed earlier, consistent with the IPPS HCO payment 
threshold, we estimate our proposed fixed-loss threshold of $27,545 
results in HCO payments for site neutral payment rate cases to equal 
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 2019 
would not result in any increase in estimated aggregate FY 2019 LTCH 
PPS payments, under the budget neutrality requirement at 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 2019. In order to achieve this, for 
FY 2019, we are proposing to apply a budget neutrality factor of 
0.949 (that is, the decimal equivalent of a 5.1 percent reduction, 
determined as 1.0-5.1/100 = 0.949) 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 2018, this proposed HCO budget neutrality adjustment would 
not be applied to the HCO portion of the site neutral payment rate 
amount (81 FR 57309).

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 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 2019, as discussed in greater detail in section IV.F.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 67.51 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 50.63 percent (the product of 75 percent and 67.51 
percent) and the resulting amount will be used to calculate the 
uncompensated care payments to eligible hospitals. As a result, for 
FY 2019, we project that the reduction in the amount of Medicare DSH 
payments pursuant to section 1886(r)(1) of the Act, along with the 
payments for uncompensated care under section 1886(r)(2) of the Act, 
will result in overall Medicare DSH payments of 75.63 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 + 50.63 percent = 75.63 percent).
    In this FY 2019 IPPS/LTCH PPS proposed rule, for FY 2019, we are 
proposing to establish that the calculation of the ``IPPS comparable 
amount'' under Sec.  412.529 would include an applicable operating 
Medicare DSH payment amount that is equal to 75.63 percent of the 
operating Medicare DSH payment amount that would have been paid 
based on the statutory Medicare DSH payment formula absent the 
amendments made by the Affordable Care Act. Furthermore, consistent 
with our historical practice, we are proposing that if more recent 
data became available, if appropriate, we will use that data to 
determine this factor in the final rule.

[[Page 20597]]

F. Computing the Proposed Adjusted LTCH PPS Federal Prospective 
Payments for FY 2019

    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 
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 rate for a case by 
the applicable LTCH PPS wage index (the proposed FY 2019 values are 
shown in Tables 12A through 12B listed in section VI. of the 
Addendum to this proposed rule and are available via the internet on 
the CMS website). The 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 2019 
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 2019 of $41,482.98, 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 2019 in the 
following example:
    Example:
    During FY 2019, 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 2019 LTCH PPS 
wage index value for CBSA 16974 is 1.0511 (obtained from Table 12A 
listed in section VI. of the Addendum to this proposed rule and 
available via the internet on the CMS website). The Medicare patient 
case is classified into MS-LTC-DRG 189 (Pulmonary Edema & 
Respiratory Failure), which has a proposed relative weight for FY 
2019 of 0.9595 (obtained from Table 11 listed in section VI. of the 
Addendum to this proposed rule and available via the internet on the 
CMS website). The LTCH submitted quality reporting data for FY 2019 
in accordance with the LTCH QRP 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 2019, we computed the 
wage-adjusted proposed Federal prospective payment amount by 
multiplying the unadjusted proposed FY 2019 LTCH PPS standard 
Federal payment rate ($41,482.98) by the proposed labor-related 
share (66.2 percent) and the wage index value (1.0511). This wage-
adjusted amount was then added to the proposed nonlabor-related 
portion of the unadjusted proposed LTCH PPS standard Federal payment 
rate (33.8 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 (0.9595) to calculate the total adjusted proposed LTCH PPS 
standard Federal prospective payment for FY 2019 ($41,149.38). The 
table below illustrates the components of the calculations in this 
example.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Proposed Unadjusted LTCH PPS Standard Federal                 $41,482.98
 Prospective Payment Rate...............................
Proposed Labor-Related Share............................         x 0.662
Proposed Labor-Related Portion of the LTCH PPS Standard     = $27,461.73
 Federal Payment Rate...................................
Proposed Wage Index (CBSA 16974)........................        x 1.0511
Proposed Wage-Adjusted Labor Share of LTCH PPS Standard     = $28,865.02
 Federal Payment Rate...................................
Proposed Nonlabor-Related Portion of the LTCH PPS           + $14,021.25
 Standard Federal Payment Rate ($41,482.98 x 0.338).....
Proposed Adjusted LTCH PPS Standard Federal Payment         = $42,886.27
 Amount.................................................
Proposed MS-LTC-DRG 189 Relative Weight.................        x 0.9595
Proposed Total Adjusted LTCH PPS Standard Federal           = $41,149.38
 Prospective Payment....................................
------------------------------------------------------------------------

VI. Tables Referenced in This Proposed Rule Generally Available Only 
Through the Internet on the CMS Website

    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 2018, for the FY 2019 rulemaking cycle, the IPPS and 
LTCH PPS 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 generally only be available through the 
internet. IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E are 
displayed at the end of this section and will continue to be 
published in the Federal Register as part of the annual proposed and 
final rules.
    As discussed in 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 section III.J. of the preamble to this proposed 
rule, we are adding a new Table 4, ``List of Counties Eligible for 
the Out-Migration Adjustment under Section 1886(d)(13) of the Act--
FY 2019,'' associated with this proposed rule. This table consists 
of the following: A list of counties that would be eligible for the 
out-migration adjustment for FY 2019 identified by FIPS county code, 
the proposed FY 2019 out-migration adjustment, and the number of 
years the adjustment would be in effect. We believe this new table 
would make this information more transparent and provide the public 
with easier access to this information. We intend to make the 
information available annually via Table 4 in the IPPS/LTCH PPS 
proposed and final rules, and are including it among the tables 
associated with this FY 2019 IPPS/LTCH PPS proposed rule that are 
available via the internet on the CMS website.
    As discussed in sections II.F.13., II.F.15.b. and d., II.F.16., 
and II.F.18. of the preamble of this proposed rule, we developed the 
following ICD-10-CM and ICD-10-PCS code tables for FY 2019: 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.-- ICD-10-CM and 
ICD-10-PCS Codes for Proposed MS-DRG Changes. Table 6P contains 
multiple tables, 6P.1 through 6P.1k, that include the ICD-10-CM and 
ICD-10-PCS code lists relating to specific proposed MS-DRG changes. 
In addition, under the HAC Reduction Program established by section 
3008 of the Affordable Care Act, a hospital's total payment may be 
reduced by 1 percent if it is in the lowest HAC performance 
quartile. However, as discussed in section IV.K. 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 2019 HAC Reduction Program will be made publicly 
available once it has undergone the review and corrections process.
    As discussed in section II.H.1. of the preamble of this proposed 
rule, Table 10 that we have released in prior fiscal years contained 
the thresholds that we use to evaluate applications for new medical 
service and technology add-on payments for the fiscal year that 
follows the fiscal year that is otherwise the subject of the 
rulemaking. In an effort to clarify for the public that the listed 
thresholds will be used for new technology add-on payment 
applications for the next fiscal year (in this case, for FY 2020) 
rather than the fiscal year that is otherwise the subject of the 
rulemaking (in this case, for FY 2019), we are proposing to provide 
the thresholds previously included in Table 10 as one of our 
publicly available data files

[[Page 20598]]

posted via the internet on the CMS website for the rulemaking for 
the upcoming fiscal year at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html, which 
is the same URL where the impact data files associated with the 
rulemaking for the applicable fiscal year are posted. We refer 
readers to section II.H.1. of the preamble of this proposed rule 
regarding our proposal to include the thresholds previously included 
in Table 10 as one of our public data files.
    As discussed in section VII.B of the preamble of this proposed 
rule, in previous fiscal years, Table 13A.--Composition of Low-
Volume Quintiles for MS-LTC-DRGs (which was listed in section VI. of 
the Addendum to the proposed and final rules and available via the 
internet on the CMS website) listed the composition of the low-
volume quintiles for MS-LTC-DRGs for the respective year, and Table 
13B.--No Volume MS-LTC-DRG Crosswalk (also listed in section VI. of 
the Addendum to the proposed and final rules and available via the 
internet on the CMS website) listed the no-volume MS-LTC-DRGs and 
the MS-LTC-DRGs to which each was cross-walked (that is, the cross-
walked MS-LTC-DRGs). The information contained in Tables 13A and 13B 
is used in the development of Table 11.--MS-LTC-DRGs, Relative 
Weights, Geometric Average Length of Stay, and Short-Stay Outlier 
(SSO) Threshold for LTCH PPS Discharges, which contains the proposed 
MS-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) for the respective 
fiscal year (and also is listed in section VI. of the Addendum to 
this proposed rule and available via the internet on the CMS 
website). Because the information contained in Tables 13A and 13B 
does not contain proposed payment rates or factors for the 
applicable payment year, we are proposing to generally provide the 
data previously published in Tables 13A and 13B for each annual 
proposed rule and final rule as one of our supplemental data files 
via the internet on the CMS website for the respective rule and 
fiscal year (that is, FY 2019 and subsequent fiscal years) at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html (that is, the same URL address 
where the impact data files associated with the rule are posted). To 
streamline the information made available to the public that is used 
in the annual development of Table 11, we believe that this proposed 
change in the presentation of the information contained in Tables 
13A and 13B will make it easier for the public to navigate and find 
the relevant data and information used for the development of 
proposed payment rates or factors for the applicable payment year, 
while continuing to furnish the same information contained in the 
tables provided in previous fiscal years.
    In addition, Table 18 associated with this proposed rule 
contains the proposed Factor 3 for purposes of determining the FY 
2019 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 2019. 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 websites identified below should contact 
Michael Treitel at (410) 786-4552.
    The following IPPS tables for this FY 2019 proposed rule are 
generally only available through the internet on the CMS website 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 2019 IPPS Proposed Rule Home Page'' or 
``Acute Inpatient--Files for Download.''

Table 2.--Proposed Case-Mix Index and Wage Index Table by CCN--FY 
2019
Table 3.--Proposed Wage Index Table by CBSA--FY 2019
Table 4.--Proposed List of Counties Eligible for the Out-Migration 
Adjustment under Section 1886(d)(13) of the Act--FY 2019
Table 5.--Proposed List of Medicare Severity Diagnosis-Related 
Groups (MS-DRGs), Relative Weighting Factors, and Geometric and 
Arithmetic Mean Length of Stay--FY 2019
Table 6A.--New Diagnosis Codes--FY 2019
Table 6B.--New Procedure Codes--FY 2019
Table 6C.--Invalid Diagnosis Codes--FY 2019
Table 6D.--Invalid Procedure Codes--FY 2019
Table 6E.--Revised Diagnosis Code Titles--FY 2019
Table 6F.--Revised Procedure Code Titles--FY 2019
Table 6G.1.--Proposed Secondary Diagnosis Order Additions to the CC 
Exclusions List--FY 2019
Table 6G.2.--Proposed Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2019
Table 6H.1.--Proposed Secondary Diagnosis Order Deletions to the CC 
Exclusions List--FY 2019
Table 6H.2.--Proposed Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2019
Table 6I.1.--Proposed Additions to the MCC List--FY 2019
Table 6I.2.--Proposed Deletions to the MCC List--FY 2019
Table 6J.1.--Proposed Additions to the CC List--FY 2019
Table 6J.2.--Proposed Deletions to the CC List--FY 2019
Table 6P.--ICD-10-CM and ICD-10-PCS Codes for Proposed MS-DRG 
Changes--FY 2019
Table 7A.--Proposed Medicare Prospective Payment System Selected 
Percentile Lengths of Stay: FY 2017 MedPAR Update--September 2017 
GROUPER V35.0 MS-DRGs
Table 7B.--Proposed Medicare Prospective Payment System Selected 
Percentile Lengths of Stay: FY 2017 MedPAR Update-- September 2017 
GROUPER V36.0 MS-DRGs
Table 8A.--Proposed FY 2019 Statewide Average Operating Cost-to-
Charge Ratios (CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--Proposed FY 2019 Statewide Average Capital Cost-to-Charge 
Ratios (CCRs) for Acute Care Hospitals
Table 15.--Proposed Proxy FY 2019 Readmissions Adjustment Factors
Table 16.--Proposed Proxy Hospital Value-Based Purchasing (VBP) 
Program Adjustment Factors for FY 2019
Table 18.--Proposed FY 2019 Medicare DSH Uncompensated Care Payment 
Factor 3

    The following LTCH PPS tables for this FY 2019 proposed rule are 
available only through the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for 
Regulation Number CMS-1694-P:

Table 8C.--Proposed FY 2019 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, 2018 through September 30, 2019
Table 12A.--Proposed LTCH PPS Wage Index for Urban Areas for 
Discharges Occurring from October 1, 2018 through September 30, 2019
Table 12B.--Proposed LTCH PPS Wage Index for Rural Areas for 
Discharges Occurring from October 1, 2018 through September 30, 2019

[[Page 20599]]



                                   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 2019]
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 = 1.25   is NOT a meaningful EHR user (update  and is a meaningful EHR user (update    and is NOT a meaningful EHR user
               Percent)                           = -0.85 percent)                      = 0.550 percent)                  (update = -1.55 percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
       Labor             Nonlabor             Labor             Nonlabor            Labor             Nonlabor            Labor             Nonlabor
--------------------------------------------------------------------------------------------------------------------------------------------------------
       $3,863.17           $1,793.01          $3,783.04          $1,755.82          $3,836.46          $1,780.61          $3,756.34          $1,743.43
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                   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 2019]
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 = 1.25   is NOT a meaningful EHR user (update  and is a meaningful EHR user (update    and is NOT a meaningful EHR user
               percent)                           = -0.85 percent)                      = 0.550 percent)                  (update = -1.55 percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
       Labor             Nonlabor             Labor             Nonlabor            Labor             Nonlabor            Labor             Nonlabor
--------------------------------------------------------------------------------------------------------------------------------------------------------
       $3,506.83           $2,149.35          $3,434.09          $2,104.77          $3,482.58          $2,134.49          $3,409.86          $2,089.91
--------------------------------------------------------------------------------------------------------------------------------------------------------


     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
                                                      2019]
----------------------------------------------------------------------------------------------------------------
                                        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.......       $3,506.83       $2,149.35
----------------------------------------------------------------------------------------------------------------
1 For FY 2019, there are no CBSAs in Puerto Rico with a national wage index greater than 1.


        Table 1D--Proposed Capital Standard Federal Payment Rate
                                [FY 2019]
------------------------------------------------------------------------
                                                               Rate
------------------------------------------------------------------------
National................................................         $459.78
------------------------------------------------------------------------


        Table 1E--Proposed LTCH PPS Standard Federal Payment Rate
                                [FY 2019]
------------------------------------------------------------------------
                                   Full update (1.15  Reduced update * (-
                                       percent)          0.85 percent)
------------------------------------------------------------------------
Standard Federal Rate...........         $41,482.98          $40,662.75
------------------------------------------------------------------------
* For LTCHs that fail to submit quality reporting data for FY 2019 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. 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.

B. Overall Impact

    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

[[Page 20600]]

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 2019 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 $4.1 
billion increase in FY 2019 payments, primarily driven by a combined 
$4.0 billion increase in FY 2019 operating payments and 
uncompensated care payments, and a combined $0.1 billion increase in 
FY 2019 capital payments and low-volume hospital payments. These 
proposed changes are relative to payments made in FY 2018. 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 $5 million in FY 2019 relative to FY 2018.
    Our operating impact estimate includes the proposed 0.5 percent 
adjustment required under section 414 of the MACRA 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 1.25 percent hospital update 
to the standardized amount (which includes the estimated 2.8 percent 
market basket update less 0.8 percentage point for the proposed 
multifactor productivity adjustment and less 0.75 percentage point 
required under the Affordable Care Act). The estimates of proposed 
IPPS operating payments to acute care hospitals do not reflect any 
changes in hospital admissions or real case-mix intensity, which 
would also affect overall 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.

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 policies, we 
refer readers to the section of the proposed rule where each policy 
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 2019, 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 proposed policies in the discussion of 
those proposed policies 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 29 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 2018, there were 3,257 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 1,395 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, extended neoplastic disease care 
hospitals, and 5 short-term acute care hospitals located in the 
Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa. Changes in the prospective payment systems for IPFs and IRFs 
are made through separate rulemaking. Payment impacts of proposed 
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 policy changes to the LTCH PPS for 
FY 2019 is discussed in section I.J. of this Appendix.

F. Effects on Hospitals and Hospital Units Excluded From the IPPS

    As of March 2018, 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, 1 
extended neoplastic disease care hospital, 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, 280 rehabilitation hospitals and 844 rehabilitation 
units, and approximately 409 LTCHs, are paid the Federal prospective 
per discharge rate under the IRF PPS and the LTCH PPS, respectively, 
and 538 psychiatric hospitals and 1,098 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 proposed 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, extended neoplastic 
disease care hospitals, and RNHCIs, the update of the rate-of-
increase limit (or target amount) would be the estimated FY 2019 
percentage increase in the 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. Consistent with current 
law, based on IGI's 2017 fourth quarter forecast of the 2014-based 
IPPS market basket increase, we are estimating the FY 2019 update to 
be 2.8 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 2019. However, the 
Affordable Care Act requires an adjustment for multifactor 
productivity (currently proposed at 0.8 percentage point for FY 
2019) and a 0.75 percentage point reduction to the market basket 
update, resulting in a proposed 1.25 percent applicable percentage 
increase for IPPS hospitals that submit quality data and are 
meaningful EHR users, as discussed in

[[Page 20601]]

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, extended neoplastic disease care 
hospitals, 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 proposed update is the percentage increase in the 
2014-based IPPS operating market basket for FY 2019, estimated at 
2.8 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.

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 payment rate updates for the IPPS for FY 2019 for operating 
costs of acute care hospitals. The proposed FY 2019 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 
proposed total FY 2019 operating payments would increase by 2.1 
percent, compared to FY 2018. In addition to the applicable 
percentage increase, this amount reflects the proposed 0.5 percent 
permanent adjustment to the standardized amount required under 
section 414 of the MACRA. The impacts do not reflect changes in the 
number of hospital admissions or real case-mix intensity, which 
would also affect overall 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 proposed 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 2017 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 2017 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 
impact of proposed payments under the capital IPPS, and the impact 
of proposed payments for costs other than inpatient operating costs, 
are not analyzed in this section. Estimated payment impacts of the 
capital IPPS for FY 2019 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 414 of the MACRA 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 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 2015, compared to the FY 2014 
wage data, to calculate the proposed FY 2019 wage index.
     The effects of the geographic reclassifications by the 
MGCRB (as of publication of this proposed rule) that would be 
effective for FY 2019.
     The effects of the proposed rural floor with the 
application of the national budget neutrality factor to the wage 
index, and the proposed expiration of the imputed floor.
     The effects of the proposed frontier State wage index 
adjustment under the statutory provision that requires 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 proposed 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 for FY 2019. This provision is not budget neutral.
     The total estimated change in proposed payments based 
on the proposed FY 2019 policies relative to payments based on FY 
2018 policies that include the proposed applicable percentage 
increase of 1.25 percent (or proposed 2.8 percent market basket 
update with a proposed reduction of 0.8 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 2019 changes, our 
analysis begins with a FY 2018 baseline simulation model using: The 
FY 2018 applicable percentage increase of 1.35 percent, the 0.4588 
percent adjustment to the Federal standardized amount, and the 
adjustment factor of (1/1.006) to both the national standardized 
amount and the hospitals specific rate; the FY 2018 MS-DRG GROUPER 
(Version 35); the FY 2018 CBSA designations for hospitals based on 
the OMB definitions from the 2010 Census; the FY 2018 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 Pub. L. 109-171, as amended by section 
4102(b)(1)(A) of the ARRA (Public Law 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 2019, 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 0.55 percent. At the time this impact was 
prepared, 54 hospitals are estimated to not receive the full market 
basket rate-of-increase for FY 2019 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

[[Page 20602]]

payment changes for FY 2019 using a reduced update for these 
hospitals.
    For FY 2019, in accordance with section 1886(b)(3)(B)(ix) of the 
Act, a hospital that has been identified as not a meaningful EHR 
user will 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 
2019, 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 
percentage increase of -0.85 percent. At the time this impact 
analysis was prepared, 148 hospitals are estimated to not receive 
the full market basket rate-of-increase for FY 2019 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 2019 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 a 
proposed applicable percentage increase of -1.55 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 this impact was prepared, 43 hospitals are 
estimated to not receive the full market basket rate-of-increase for 
FY 2019 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 2019 
model incorporating all of the proposed changes. This simulation 
allows us to isolate the effects of each proposed change.
    Our comparison illustrates the proposed percent change in 
payments per case from FY 2018 to FY 2019. 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 2019 using a proposed applicable 
percentage increase of 1.25 percent. This includes our forecasted 
IPPS operating hospital market basket increase of 2.8 percent with a 
proposed 0.8 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 0.55 
percent. This proposed 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 a proposed update of -0.85 
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 proposed update of -1.55 percent. Under 
section 1886(b)(3)(B)(iv) of the Act, the proposed update to the 
hospital-specific amounts for SCHs and MDHs is also equal to the 
applicable percentage increase, or 1.25 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 2018 to FY 2019 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 2018 that would no longer be reclassified in FY 
2019. Conversely, payments may increase for hospitals not 
reclassified in FY 2018 that were reclassified in FY 2019.

2. Analysis of Table I

    Table I displays the results of our analysis of the proposed 
changes for FY 2019. 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 proposed overall impact on the 3,257 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 2,480 
hospitals located in urban areas included in our analysis. Among 
these, there are 1,310 hospitals located in large urban areas 
(populations over 1 million), and 1,170 hospitals in other urban 
areas (populations of 1 million or fewer). In addition, there are 
777 hospitals in rural areas. The next two groupings are by bed-size 
categories, shown separately for urban and rural hospitals. The last 
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 2019 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 2,281, 
1,325, 956, and 976, 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 2,162 nonteaching hospitals in our 
analysis, 846 teaching hospitals with fewer than 100 residents, and 
249 teaching hospitals with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their 
DSH payment status, and whether they are considered urban or rural 
for DSH purposes. The next category groups together hospitals 
considered urban or rural, in terms of whether they receive the IME 
adjustment, the DSH adjustment, both, or neither.
    The next three rows examine the impacts of the proposed changes 
on rural hospitals by special payment groups (SCHs, MDHs and RRCs). 
There were 328 RRCs, 311 SCHs, 135 MDHs, 133 hospitals that are both 
SCHs and RRCs, and 14 hospitals that are both MDHs and RRCs.
    The next series of groupings are based on the type of ownership 
and the hospital's Medicare utilization expressed as a percent of 
total patient days. These data were taken from the FY 2015 or FY 
2014 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 2019. The second grouping 
shows the MGCRB rural reclassifications.
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a. Effects of the Proposed Hospital Update and Other Proposed 
Adjustments (Column 1)

    As discussed in section IV.B. of the preamble of this proposed 
rule, this column includes the proposed hospital update, including 
the proposed 2.8 percent market basket update, the reduction of 
proposed 0.8 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 +0.5 percent adjustment required under section 414 of 
the MACRA. As a result, we are proposing to make a 1.75 percent 
update to the national standardized amount. This column also 
includes the proposed update to the hospital-specific rates which 
includes the proposed 2.8 percent market basket update, the proposed 
reduction of 0.8 percentage point for the multifactor productivity 
adjustment, and the 0.75 percentage point reduction in accordance 
with the Affordable Care Act. As a result, we are proposing to make 
a 1.25 percent update to the hospital-specific rates.
    Overall, hospitals would experience a 1.7 percent increase in 
payments primarily due to the combined effects of the proposed 
hospital update to the national standardized amount and the proposed 
hospital update to the hospital-specific rate. Hospitals that are 
paid under the hospital-specific rate would experience a 1.25 
percent increase in payments; therefore, hospital categories 
containing hospitals paid under the hospital specific rate would 
experience a lower than average increase 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 proposed 
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 calculated a proposed 
recalibration budget neutrality factor to account for the changes in 
MS-DRGs and relative weights to ensure that the overall payment 
impact is budget neutral.
    As discussed in section II.E. of the preamble of this proposed 
rule, the proposed FY 2019 MS-DRG relative weights would be 100 
percent cost-based and 100 percent MS-DRGs. For FY 2019, the MS-DRGs 
are calculated using the FY 2017 MedPAR data grouped to the Version 
36 (FY 2019) MS-DRGs. The methodology to calculate the proposed 
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 0.997896 to the 
standardized amount. Hospital categories that generally treat more 
medical cases than surgical cases would experience a decrease in 
their payments under the relative weights. For example, rural 
hospitals would experience a 0.3 percent decrease in payments in 
part because rural hospitals tend to treat fewer surgical cases than 
medical cases. Conversely, teaching hospitals with more than 100 
residents would experience an increase in payments of 0.1 percent as 
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 2015 
cost report data, with the application of the proposed 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 2019 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 Nos. 15-01 and 17-01. (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, 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, and to section III.A.2. of this proposed rule for a 
discussion of our proposed adoption of the CBSA update in OMB 
Bulletin No. 17-01 for the FY 2019 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 2019 is based on data 
submitted for hospital cost reporting periods, beginning on or after 
October 1, 2014 and before October 1, 2015. The estimated impact of 
the updated wage data using the FY 2015 cost report data and the OMB 
labor market area delineations on hospital payments is isolated in 
Column 3 by holding the other proposed payment parameters constant 
in this simulation. That is, Column 3 shows the proposed percentage 
change in payments when going from a model using the FY 2018 wage 
index, based on FY 2014 wage data, the labor-related share of 68.3 
percent, under the OMB delineations and having a 100-percent 
occupational mix adjustment applied, to a model using the proposed 
FY 2019 pre-reclassification wage index based on FY 2015 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 payment parameters, such as use of the 
Version 36 MS-DRG GROUPER constant. The proposed FY 2019 
occupational mix adjustment is based on the CY 2016 occupational mix 
survey.
    In addition, the column shows the impact of the application of 
the proposed 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 2019, 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 2019 wage budget neutrality factor is 1.001182, and 
the overall proposed payment change is 0 percent.
    Column 3 shows the impacts of updating the wage data using FY 
2015 cost reports. Overall, the proposed 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 national average hourly 
wage would increase 1.02 percent compared to FY 2018. Therefore, the 
only manner in which to maintain or exceed the previous year's wage 
index was to match or exceed the proposed 1.02 percent increase in 
the national average hourly wage. Of the 3,226 hospitals with wage 
data for both FYs 2018 and 2019, 1,445 or 44.8 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 2019 relative to FY 2018. Among urban hospitals, 10 would 
experience a decrease of 10 percent or more, and 6 urban hospitals 
would experience an increase of 10 percent or more. One hundred 
urban hospitals would experience an increase or decrease of at least 
5 percent or more but less than 10 percent. Among rural hospitals, 5 
would experience an increase of increase of 10 percent or more, and 
2 would experience a decrease of 10 percent or more. Nine rural 
hospitals would experience an increase or decrease of at least 5 
percent or more but less than 10 percent. However, 748 rural 
hospitals would experience increases or decreases of less than 5 
percent, while 2,346 urban hospitals would experience increases or 
decreases of less than 5 percent. No urban hospitals and no rural 
hospitals would experience no change to their wage index. These 
figures reflect proposed changes in the

[[Page 20610]]

``pre-reclassified, occupational mix-adjusted wage index,'' that is, 
the wage index before the application of geographic 
reclassification, the rural floor, the out-migration adjustment, and 
other 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 
proposed wage index.) We note that the ``post-reclassified wage 
index'' or ``payment wage index,'' which is the wage index that 
includes all such exceptions and adjustments (as reflected in Tables 
2 and 3 associated with this proposed rule, which are available via 
the internet on the CMS website) 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 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 2019 percentage change in  -------------------------------
         area wage index values                Urban           Rural
------------------------------------------------------------------------
Increase 10 percent or more.............               6               5
Increase greater than or equal to 5                   55               3
 percent and less than 10 percent.......
Increase or decrease less than 5 percent           2,346             748
Decrease greater than or equal to 5                   45               6
 percent and less than 10 percent.......
Decrease 10 percent or more.............              10               2
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 2019.
    By spring of each year, the MGCRB makes reclassification 
determinations that will be effective for the next fiscal year, 
which begins on October 1. The MGCRB may approve a hospital's 
reclassification request for the purpose of using another area's 
wage index value. Hospitals may appeal denials of MGCRB decisions to 
the CMS Administrator. Further, hospitals have 45 days from the date 
the IPPS proposed rule is issued 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 clarification of 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 0.987084 to ensure that the effects of the 
reclassifications under sections 1886(d)(8)(B) and (C) and 
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 website reflects the 
reclassifications for FY 2019.

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 through 2018 IPPS/LTCH PPS final rules, and this FY 2019 
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.G. 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 2019 rural floor budget neutrality factor 
to be applied to the wage index of 0.994733, which would reduce wage 
indexes by 0.53 percent.
    Column 5 shows the projected impact of the 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 2019 wage index of 
providers before the proposed rural floor adjustment and the post-
reclassification FY 2019 wage index of providers with the rural 
floor adjustment based on the OMB labor market area delineations. 
Only urban hospitals can benefit from the rural floors. Because the 
provision is budget neutral, all other hospitals (that is, all rural 
hospitals and those urban hospitals to which the adjustment is not 
made) would experience a decrease in payments due to the budget 
neutrality adjustment that is applied nationally to their wage 
index.
    We estimate that 255 hospitals would receive the rural floor in 
FY 2019. All IPPS hospitals in our model would have their wage index 
reduced by the proposed rural floor budget neutrality adjustment of 
0.994733. We project that, in aggregate, rural hospitals would 
experience a -0.2 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 proposed 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 2.2 percent 
increase in payments primarily due to the application of the rural 
floor in Massachusetts. Thirty-five urban providers in Massachusetts 
are expected to receive the rural floor wage index value, including 
the proposed rural floor budget neutrality adjustment, increasing 
payments overall to Massachusetts by an estimated $49 million. We 
estimate that Massachusetts hospitals would receive approximately a 
1.4 percent increase in IPPS payments due to the application of the 
proposed rural floor in FY 2019.
    Urban Puerto Rico hospitals are expected to experience a 0 
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 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 rural floor wage 
index for FY 2019. 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 2019 wage index of providers 
before the rural floor adjustment and the proposed post-
reclassification FY 2019 wage index of providers with the rural 
floor adjustment. Column 4 displays the estimated payment amount 
that each State

[[Page 20611]]

would gain or lose due to the application of the rural floor with 
national budget neutrality.

      Proposed FY 2019 IPPS Estimated Payments Due to Proposed Rural Floor With National Budget Neutrality
----------------------------------------------------------------------------------------------------------------
                                                                                     Proposed
                                                                                  percent change
                                                                     Number of      in payments
                                                     Number of    hospitals that      due to      Difference (in
                                                     hospitals     would receive  application of    $ millions)
                                                                     the rural      rural floor
                                                                       floor        with budget
                                                                                    neutrality
                                                             (1)             (2)             (3)             (4)
----------------------------------------------------------------------------------------------------------------
Alabama.........................................              84               2            -0.3             -$4
Alaska..........................................               6               1            -0.2               0
Arizona.........................................              56               4            -0.2              -3
Arkansas........................................              45               0            -0.3              -3
California......................................             297              63             0.4              48
Colorado........................................              46               9             0.6               8
Connecticut.....................................              30              17             5.5              90
Delaware........................................               6               1            -0.3              -1
Washington, DC..................................               7               0            -0.3              -2
Florida.........................................             168               8            -0.2             -17
Georgia.........................................             101               0            -0.3              -7
Hawaii..........................................              12               0            -0.2              -1
Idaho...........................................              14               0            -0.2              -1
Illinois........................................             125               2            -0.3             -12
Indiana.........................................              85               0            -0.3              -7
Iowa............................................              34               0            -0.3              -3
Kansas..........................................              51               0            -0.2              -2
Kentucky........................................              64               0            -0.2              -4
Louisiana.......................................              90               0            -0.3              -4
Maine...........................................              17               0            -0.3              -1
Massachusetts...................................              56              35             1.4              49
Michigan........................................              94               0            -0.3             -12
Minnesota.......................................              49               0            -0.2              -5
Mississippi.....................................              59               0            -0.3              -3
Missouri........................................              72               0            -0.2              -6
Montana.........................................              13               2            -0.2              -1
Nebraska........................................              23               0            -0.2              -2
Nevada..........................................              22               3             0.4               4
New Hampshire...................................              13               4             0.7               4
New Jersey......................................              64              10            -0.4             -13
New Mexico......................................              25               2            -0.2              -1
New York........................................             149              18            -0.2             -16
North Carolina..................................              84               0            -0.2              -9
North Dakota....................................               6               5             1.2               4
Ohio............................................             129               7            -0.2              -9
Oklahoma........................................              79               1            -0.3              -4
Oregon..........................................              34               1            -0.2              -2
Pennsylvania....................................             150               3            -0.3             -14
Puerto Rico.....................................              51              11             0.2               0
Rhode Island....................................              11              10            -0.3              -1
South Carolina..................................              54               6               0              -1
South Dakota....................................              17               0            -0.2              -1
Tennessee.......................................              90               6            -0.3              -6
Texas...........................................             311              14            -0.2             -12
Utah............................................              31               0            -0.2              -1
Vermont.........................................               6               0            -0.2               0
Virginia........................................              74               1            -0.2              -5
Washington......................................              48               4            -0.3              -6
West Virginia...................................              29               2            -0.1              -1
Wisconsin.......................................              66               1            -0.3              -5
Wyoming.........................................              10               2             0.4               1
----------------------------------------------------------------------------------------------------------------

f. Effects of the Application of Proposed the Frontier State Wage Index 
and Proposed 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

[[Page 20612]]

not budget neutral and would 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) 
are considered frontier States and 50 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 $61 million. Rural and urban 
hospitals located in the West North Central region would experience 
an increase in payments by 0.2 and 0.6 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 would 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 
220 providers that would receive the out-migration wage adjustment 
in FY 2019. Rural hospitals generally would qualify for the 
adjustment, resulting in a 0.1 percent increase in payments. This 
provision appears to benefit section 401 hospitals and RRCs in that 
they would each experience a 0.1 and 0.2 percent increase in 
payments, respectively. (We note that there has been an increase in 
the number of RRCs as a result of the decision by the Court of 
Appeals for the Third Circuit in Geisinger Community Medical Center 
vs. Secretary, United States Department of Health and Human 
Services, 794 F.3d 383 (3d Cir. 2015) and subsequent regulatory 
changes (81 FR 23428).) This out-migration wage adjustment also is 
not budget neutral, and we estimate the impact of these providers 
receiving the proposed out-migration increase would be approximately 
$36 million.

g. Effects of All Proposed FY 2019 Changes (Column 7)

    Column 7 shows our estimate of the proposed changes in payments 
per discharge from FY 2018 and FY 2019, resulting from all proposed 
changes reflected in this proposed rule for FY 2019. 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 2.1 percent for FY 2019 relative to FY 
2018 and for this row is primarily driven by the proposed changes 
reflected in Column 1. Column 7 includes the proposed annual 
hospital update of 1.25 percent to the national standardized amount. 
This proposed annual hospital update includes the proposed 2.8 
percent market basket update, the proposed 0.8 percentage point 
reduction 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 +0.5 percent adjustment required 
under section 414 of the MACRA. Hospitals paid under the hospital-
specific rate would receive a 1.25 percent hospital update. As 
described in Column 1, the proposed annual hospital update with the 
proposed +0.5 percent adjustment for hospitals paid under the 
national standardized amount, combined with the proposed annual 
hospital update for hospitals paid under the hospital-specific 
rates, would result in a 2.1 percent increase in payments in FY 2019 
relative to FY 2018. 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 2018 and FY 2019 in Column 7.
    Overall payments to hospitals paid under the IPPS due to the 
proposed applicable percentage increase and changes to policies 
related to MS-DRGs, geographic adjustments, and outliers are 
estimated to increase by 2.1 percent for FY 2019. Hospitals in urban 
areas would experience a 2.1 percent increase in payments per 
discharge in FY 2019 compared to FY 2018. Hospital payments per 
discharge in rural areas are estimated to increase by 1.1 percent in 
FY 2019.

3. Impact Analysis of Table II

    Table II presents the projected impact of the proposed changes 
for FY 2019 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 2018 with the estimated 
proposed average payments per discharge for FY 2019, 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 estimated percentage 
changes shown in the last column of Table II equal the estimated 
percentage changes in average payments per discharge from Column 7 
of Table I.

                   Table II--Impact Analysis of Proposed Changes for FY 2019 Acute Care Hospital Operating Prospective Payment System
                                                                [Payments per discharge]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               Estimated proposed
                                                                                        Estimated average FY     average FY 2019      Proposed FY 2019
                                                                   Number of hospitals    2018 payment per         payment per             changes
                                                                                              discharge             discharge
                                                                                   (1)                   (2)                   (3)                   (4)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Hospitals...................................................                 3,257                12,167                12,418                   2.1
By Geographic Location..........................................                     0                     0                     0                     0
    Urban hospitals.............................................                 2,480                12,514                12,782                   2.1
    Large urban areas...........................................                 1,310                13,078                13,356                   2.1
    Other urban areas...........................................                 1,170                11,958                12,215                   2.1
    Rural hospitals.............................................                   777                 9,115                 9,215                   1.1
Bed Size (Urban)................................................                     0                     0                     0                     0
    0-99 beds...................................................                   638                 9,985                10,129                   1.4
    100-199 beds................................................                   763                10,422                10,598                   1.7
    200-299 beds................................................                   438                11,356                11,598                   2.1
    300-499 beds................................................                   427                12,635                12,902                   2.1
    500 or more beds............................................                   214                15,498                15,887                   2.5
Bed Size (Rural)................................................                     0                     0                     0                     0
    0-49 beds...................................................                   299                 7,793                 7,853                   0.8
    50-99 beds..................................................                   279                 8,630                 8,717                     1
    100-149 beds................................................                   116                 9,057                 9,149                     1
    150-199 beds................................................                    44                 9,611                 9,712                     1
    200 or more beds............................................                    39                10,713                10,876                   1.5

[[Page 20613]]

 
Urban by Region.................................................                     0                     0                     0                     0
    New England.................................................                   113                13,465                13,843                   2.8
    Middle Atlantic.............................................                   310                14,104                14,369                   1.9
    South Atlantic..............................................                   401                11,125                11,338                   1.9
    East North Central..........................................                   385                11,828                12,055                   1.9
    East South Central..........................................                   147                10,527                10,759                   2.2
    West North Central..........................................                   158                12,238                12,487                     2
    West South Central..........................................                   378                11,327                11,569                   2.1
    Mountain....................................................                   163                12,940                13,090                   1.2
    Pacific.....................................................                   374                15,865                16,354                   3.1
    Puerto Rico.................................................                    51                 9,113                 9,161                   0.5
Rural by Region.................................................                     0                     0                     0                     0
    New England.................................................                    20                12,473                12,564                   0.7
    Middle Atlantic.............................................                    53                 9,046                 9,155                   1.2
    South Atlantic..............................................                   122                 8,448                 8,545                   1.1
    East North Central..........................................                   114                 9,332                 9,428                     1
    East South Central..........................................                   150                 8,111                 8,242                   1.6
    West North Central..........................................                    94                 9,900                 9,969                   0.7
    West South Central..........................................                   147                 7,786                 7,876                   1.2
    Mountain....................................................                    54                10,907                10,993                   0.8
    Pacific.....................................................                    23                12,555                12,669                   0.9
By Payment Classification.......................................                     0                     0                     0                     0
    Urban hospitals.............................................                 2,281                12,348                12,600                     2
    Large urban areas...........................................                 1,325                13,065                13,343                   2.1
    Other urban areas...........................................                   956                11,375                11,591                   1.9
    Rural areas.................................................                   976                11,541                11,786                   2.1
Teaching Status.................................................                     0                     0                     0                     0
    Nonteaching.................................................                 2,162                10,041                10,215                   1.7
    Fewer than 100 residents....................................                   846                11,630                11,856                   1.9
    100 or more residents.......................................                   249                17,766                18,227                   2.6
Urban DSH.......................................................                     0                     0                     0                     0
    Non-DSH.....................................................                   520                10,534                10,698                   1.6
    100 or more beds............................................                 1,483                12,717                12,983                   2.1
    Less than 100 beds..........................................                   365                 9,273                 9,429                   1.7
Rural DSH.......................................................                     0                     0                     0                     0
    SCH.........................................................                   258                 9,830                 9,899                   0.7
    RRC.........................................................                   367                12,346                12,653                   2.5
    100 or more beds............................................                    27                11,231                11,409                   1.6
    Less than 100 beds..........................................                   127                 7,161                 7,298                   1.9
Urban teaching and DSH..........................................                     0                     0                     0                     0
    Both teaching and DSH.......................................                   818                13,863                14,165                   2.2
    Teaching and no DSH.........................................                    88                11,427                11,633                   1.8
    No teaching and DSH.........................................                 1,030                10,372                10,565                   1.9
    No teaching and no DSH......................................                   345                 9,983                10,138                   1.6
Special Hospital Types..........................................                     0                     0                     0                     0
    RRC.........................................................                   328                12,447                12,798                   2.8
    SCH.........................................................                   311                10,970                11,064                   0.9
    MDH.........................................................                   135                 7,604                 7,672                   0.9
    SCH and RRC.................................................                   133                11,324                11,449                   1.1
    MDH and RRC.................................................                    14                 9,606                 9,708                   1.1
Type of Ownership...............................................                     0                     0                     0                     0
    Voluntary...................................................                 1,901                12,315                12,574                   2.1
    Proprietary.................................................                   854                10,643                10,821                   1.7
    Government..................................................                   501                13,411                13,710                   2.2
Medicare Utilization as a Percent of Inpatient Days.............                     0                     0                     0                     0
    0-25........................................................                   546                15,419                15,705                   1.9
    25-50.......................................................                 2,121                12,023                12,287                   2.2
    50-65.......................................................                   477                 9,798                 9,922                   1.3
    Over 65.....................................................                    73                 7,321                 7,465                     2
    Invalid/Missing Data........................................                    39                 9,508                 9,867                   3.8
FY 2019 Reclassifications by the Medicare Geographic                                 0                     0                     0                     0
 Classification Review Board....................................

[[Page 20614]]

 
    All Reclassified Hospitals..................................                   911                12,230                12,514                   2.3
    Non-Reclassified Hospitals..................................                 2,346                12,137                12,371                   1.9
    Urban Hospitals Reclassified................................                   633                12,818                13,134                   2.5
    Urban Nonreclassified Hospitals.............................                 1,795                12,382                12,632                     2
    Rural Hospitals Reclassified Full Year......................                   278                 9,469                 9,596                   1.3
    Rural Nonreclassified Hospitals Full Year...................                   452                 8,662                 8,723                   0.7
    All Section 401 Reclassified Hospitals:.....................                   246                13,340                13,694                   2.7
    Other Reclassified Hospitals (Section 1886(d)(8)(B))........                    47                 8,579                 8,665                     1
--------------------------------------------------------------------------------------------------------------------------------------------------------

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 15 technologies for which we received applications for add-
on payments for new medical services and technologies for FY 2019, 
as well as the status of the new technologies that were approved to 
receive new technology add-on payments in FY 2018. 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 the 15 technologies for which we received 
applications for consideration for new technology add-on payments 
for FY 2019 will meet the specified criteria. Consequently, it is 
premature to estimate the potential payment impact of these 15 
technologies for any potential new technology add-on payments for FY 
2019. We note that if any of the 15 technologies are found to be 
eligible for new technology add-on payments for FY 2019, in the FY 
2019 IPPS/LTCH PPS final rule, we would discuss the estimated 
payment impact for FY 2019.
    In section II.H.5. of the preamble of this proposed rule, we are 
proposing to discontinue new technology add-on payments for 
Idarucizumab, GORE[reg] EXCLUDER[reg] Iliac Branch Endoprosthesis 
(IBE), Edwards/Perceval Sutureless Valves, and 
VistogardTM (Uridine Triacetate) for FY 2019 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[reg] (Defibrotide), Ustekinumab 
(Stelara[reg]) and Bezlotoxumab (ZinplavaTM) in FY 2019 
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 2019 as if every claim that would qualify for a new 
technology add-on payment would receive the maximum add-on payment. 
The following are estimates for FY 2019 for the three technologies 
for which we are proposing to continue to make new technology add-on 
payments in FY 2019:
     Based on the applicant's estimate from FY 2017, we 
currently estimate that new technology add-on payments for 
Defitelio[reg] would increase overall FY 2019 payments by $5,161,200 
(maximum add-on payment of $75,900 * 68 patients).
     Based on the applicant's estimate from FY 2018, we 
currently estimate that new technology add-on payments for 
Ustekinumab (Stelara[reg]) would increase overall FY 2019 payments 
by $400,800 (maximum add-on payment of $2,400 * 167 patients).
     Based on the applicant's estimate for FY 2018, we 
currently estimate that new technology add-on payments for 
Bezlotoxumab (ZinplavaTM) would increase overall FY 2019 
payments by $2,857,600 (maximum add-on payment of $1,900 * 1,504 
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 IV.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 MS-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 website), using criteria set forth in regulations at 42 
CFR 412.4, we evaluated MS-DRG charge, discharge, and transfer data 
to determine which proposed new or revised MS-DRGs would qualify for 
the postacute care transfer and MS-DRG special payment policies. As 
a result of our proposals to revise the MS-DRG classifications for 
FY 2019, which are discussed in section II.F. of the preamble of 
this proposed rule, we are proposing additions to the list of MS-
DRGs subject to 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 proposed relative payment weights and the 
application of the proposed recalibration budget neutrality factor 
to the standardized amounts. Section 1886(d)(4)(C)(i) of the Act 
requires us annually to make appropriate DRG classification changes 
in order to reflect changes in treatment patterns, technology, and 
any other factors that may change the relative use of hospital 
resources. The analysis and methods for determining the changes due 
to the MS-DRGs and relative payment weights account for and include 
changes 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 2019.
    In section IV.A.2.b. of the preamble of this proposed rule, we 
discuss our proposed conforming changes to the regulations at Sec.  
412.4(c) to reflect the amendments to section 1886(d)(5)(J) of the 
Act made by section 53109 of the Bipartisan Budget Act of 2018. 
Section 53109 of the Bipartisan Budget Act of 2018 amended section 
1886(d)(5)(J) of the Act to include discharges to hospice services 
provided by a hospice program as a ``qualified discharge'' under the 
postacute

[[Page 20615]]

care transfer policy, effective for discharges occurring on or after 
October 1, 2018. To implement this change, we are proposing that 
discharges using Patient Discharge Status code of 50 (Discharged/
Transferred to Hospice--Routine or Continuous Home Care) or 51 
(Discharged/Transferred to Hospice, General Inpatient Care or 
Inpatient Respite) would be subject to the postacute care transfer 
policy, effective for discharges occurring on or after October 1, 
2018. Our actuaries estimate that this change in the postacute care 
transfer policy would generate an annual savings of approximately 
$240 million in Medicare payments in FY 2019, and up to $540 million 
annually by FY 2028.

3. Effects of Proposed Changes to Low-Volume Hospital Payment 
Adjustment Policy

    In section IV.D. of the preamble of this proposed rule, we 
discuss the proposed changes to the low-volume hospital payment 
policy for FY 2019 to implement the provisions of section 50204 of 
the Bipartisan Budget Act of 2018. Specifically, for FY 2019, 
qualifying hospitals must have less than 3,800 combined Medicare and 
non-Medicare discharges (instead of 1,600 Medicare discharges) and 
must be located more than 15 road miles from another subsection (d) 
hospital. Section 50204 of the Bipartisan Budget Act of 2018 also 
modified the methodology for calculating the payment adjustment for 
low-volume hospitals for FYs 2019 through 2022. To implement these 
requirements, we are proposing that the low-volume hospital payment 
adjustment would be determined as follows:
     For low-volume hospitals with 500 or fewer total 
discharges during the fiscal year, an additional 25 percent for each 
Medicare discharge.
     For low-volume hospitals with total discharges during 
the fiscal year of more than 500 and fewer than 3,800, an additional 
percent calculated using the formula [(95/330) x (number of total 
discharges/13,200)] for each Medicare discharge.
    Based upon the best available data at this time, we estimate the 
changes to the low-volume hospital payment adjustment policy that we 
are proposing to implement in accordance with section 50204 of the 
Bipartisan Budget Act of 2018 would increase Medicare payments by 
$72 million in FY 2019 as compared to FY 2018. More specifically, in 
FY 2019, we estimate that 622 providers would receive approximately 
$417 million compared to our estimate of 606 providers receiving 
approximately $345 million in FY 2018. 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 2019 (that is, are located at least 15 miles from the 
nearest subsection (d) hospital and have less than 3,800 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.

4. Effects of the Proposed Changes to Medicare DSH and Uncompensated 
Care Payments for FY 2019

    As discussed in section IV.F. 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 
amount of uncompensated care relative to the aggregate amount of 
uncompensated care of all hospitals eligible for Medicare DSH 
payments (Factor 3). The change 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 2019 is $8,250,415,972.16. This figure 
represents 75 percent of the amount that otherwise would have been 
paid for Medicare DSH payment adjustments adjusted by a proposed 
Factor 2 of 67.51 percent. For FY 2018, the amount available to be 
distributed for uncompensated care was $6,766,695,163.56, or 75 
percent of the amount that otherwise would have been paid for 
Medicare DSH payment adjustments adjusted by a Factor 2 of 58.01 
percent. To calculate proposed Factor 3 for FY 2019, we used an 
average of data computed using Medicaid days from hospitals' 2013 
cost reports from the HCRIS database as updated through February 15, 
2018, uncompensated care costs from hospitals' 2014 and 2015 cost 
reports from the same extract of HCRIS, and SSI days from the FY 
2016 SSI ratios. For each eligible hospital, with the exception of 
Puerto Rico hospitals, all-inclusive rate providers, and Indian 
Health Service and Tribal hospitals, we calculated a proposed Factor 
3 using information from cost reports for FYs 2013, 2014, and 2015. 
To calculate Factor 3 for Puerto Rico hospitals, all-inclusive rate 
providers, and Indian Health Service and Tribal hospitals, we used 
data regarding low-income insured days for FY 2013. For a complete 
discussion of the proposed methodology for calculating Factor 3, we 
refer readers to section IV.F.4. of the preamble of this proposed 
rule.
    To estimate the impact of the combined effect of proposed 
changes in Factors 1 and 2, as well as the proposed changes to the 
data used in determining Factor 3, on the calculation of Medicare 
uncompensated care payments (UCP), we compared total UCP estimated 
in the FY 2018 IPPS/LTCH PPS final rule to total UCP estimated in 
this FY 2019 IPPS/LTCH PPS proposed rule. For FY 2018, for each 
hospital, we calculated 75 percent of the estimated amount that 
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 
58.01 percent and multiplied by a Factor 3 calculated, as described 
in the FY 2018 IPPS/LTCH PPS final rule. For FY 2019, we calculate 
75 percent of the estimated amount that would be paid as Medicare 
DSH payments absent section 3133 of the Affordable Care Act, 
adjusted by a Factor 2 of 67.51 percent and multiplied by a Factor 3 
calculated using the methodology described previously.
    Our analysis included 2,485 hospitals that are projected to be 
eligible for DSH in FY 2019. It did not include hospitals that 
terminated their participation from the Medicare program as of 
January 1, 2018, Maryland hospitals, new hospitals, MDHs, and SCHs 
that are expected to be paid based on their hospital-specific rates. 
Hospitals participating in the Rural Community Hospital 
Demonstration Program were inadvertently included in the current 
impact analysis, but will be excluded in the final rule, as 
participating hospitals are not eligible to receive empirically 
justified Medicare DSH payments and uncompensated care payments. 
Roughly $6.6 million in total uncompensated care payments was 
estimated for 13 of the 30 participating hospitals. However, in the 
final rule, uncompensated care payments will be distributed only to 
eligible hospitals projected to receive Medicare DSH payments. In 
addition, low-income insured days and uncompensated care costs from 
merged or acquired hospitals were combined into the surviving 
hospital's CMS certification number (CCN), and the nonsurviving CCN 
was excluded from the analysis. The estimated impact of the proposed 
changes in Factors 1, 2, and 3 on uncompensated care payments across 
all hospitals projected to be eligible for DSH payments in FY 2019, 
by hospital characteristic, is presented in the following table.

[[Page 20616]]



 Modeled Uncompensated Care Payments for Estimated FY 2019 DSHs by Hospital Type: Model UCP $ (in Millions) From
                                               FY 2018 to FY 2019
----------------------------------------------------------------------------------------------------------------
                                                   FY 2018 final      FY 2019
                                                      rule CN      proposed rule      Dollar
                                     Number of     estimated UCP   estimated UCP  difference: FY  Percent change
                                  estimated DSHs       $ (in           $ (in       2019- FY 2018        **
                                                     millions)       millions)     (in millions)
                                             (1)             (2)             (3)             (4)             (5)
----------------------------------------------------------------------------------------------------------------
Total...........................           2,485          $6,767          $8,250          $1,484           21.93
By Geographic Location:
    Urban Hospitals.............           1,962           6,422           7,793           1,371           21.35
    Large Urban Areas...........           1,050           3,847           4,624             777           20.20
    Other Urban Areas...........             912           2,575           3,169             594           23.06
    Rural Hospitals.............             522             345             457             112           32.50
Bed Size (Urban):
    0 to 99 Beds................             351             177             246              68           38.53
    100 to 249 Beds.............             860           1,519           1,862             343           22.59
    250+ Beds...................             751           4,726           5,685             959           20.30
Bed Size (Rural):
    0 to 99 Beds................             388             164             232              67           41.01
    100 to 249 Beds.............             121             146             185              39           26.77
    250+ Beds...................              13              34              40               6           16.21
Urban by Region:
    New England.................              92             259             289              30           11.65
    Middle Atlantic.............             247           1,004           1,057              53            5.30
    South Atlantic..............             316           1,343           1,829             486           36.17
    East North Central..........             325             864           1,019             155           17.96
    East South Central..........             134             389             464              75           19.36
    West North Central..........             104             312             379              67           21.46
    West South Central..........             257             981           1,396             415           42.28
    Mountain....................             125             313             365              52           16.58
    Pacific.....................             320             874             894              20            2.29
    Puerto Rico.................              42              82              99              17           21.23
Rural by Region:
    New England.................              12              14              18               4           30.09
    Middle Atlantic.............              26              19              20               1            3.55
    South Atlantic..............              90              79             109              30           38.63
    East North Central..........              72              40              55              15           37.19
    East South Central..........             135              93             101               8            8.80
    West North Central..........              39              16              32              16           99.17
    West South Central..........             112              66              91              25           38.01
    Mountain....................              29              14              24              10           73.48
    Pacific.....................               7               4               6               3           67.46
By Payment Classification:
    Urban Hospitals.............           1,879           5,917           7,245           1,328           22.44
    Large Urban Areas...........           1,062           3,855           4,634             780           20.23
    Other Urban Areas...........             817           2,062           2,610             548           26.59
    Rural Hospitals.............             605             850           1,005             155           18.25
Teaching Status:
    Nonteaching.................           1,545           2,020           2,522             503           24.90
    Fewer than 100 residents....             695           2,246           2,695             448           19.96
    100 or more residents.......             244           2,501           3,033             532           21.27
Type of Ownership:
    Voluntary...................           1,468           4,137           4,813             676           16.35
    Proprietary.................             566           1,015           1,258             243           23.98
    Government..................             450           1,615           2,179             564           34.93
Medicare Utilization Percent:
    0 to 25.....................             470           2,255           2,663             408           18.07
    25 to 50....................           1,691           4,290           5,299           1,009           23.53
    50 to 65....................             281             215             279              63           29.42
    Greater than 65.............              39               7               9               3           40.26
----------------------------------------------------------------------------------------------------------------
Source: Dobson  DaVanzo analysis of 2013-2015 Hospital Cost Reports.
* Dollar UCP calculated by [0.75 * estimated section 1886(d)(5)(F) payments * Factor 2 * Factor 3]. When summed
  across all hospitals projected to receive DSH payments, uncompensated care payments are estimated to be $6,767
  million in FY 2018 and $8,250 million in FY 2018.
** Percentage change is determined as the difference between Medicare UCP payments modeled for the FY 2019 IPPS/
  LTCH PPS proposed rule (column 3) and Medicare UCP payments modeled for the FY 2018 IPPS/LTCH PPS final rule
  correction notice (column 2) divided by Medicare UCP payments modeled for the FY 2018 final rule correction
  notice (column 2) times 100 percent.
*** Hospitals with Missing or Unknown Medicare Utilization are not shown in table.

    Changes in projected FY 2019 uncompensated care payments from 
payments in FY 2018 are driven by increases in Factor 1 and Factor 
2, as well as by an increase in the number of hospitals eligible to 
receive DSH in FY 2019 relative to FY 2018. Factor 1 has increased 
from $11.665 billion to $12.221 billion, and the percent change in 
the percent of individuals who are

[[Page 20617]]

uninsured (Factor 2) has increased from 58.01 percent to 67.51 
percent. Based on the proposed increases in these two factors, the 
proposed impact analysis found that, across all projected DSH 
eligible hospitals, FY 2019 uncompensated care payments are 
estimated at approximately $8.250 billion, or an increase of 
approximately 21.9 percent from FY 2018 uncompensated care payments 
(approximately $6.767 billion). While these proposed changes would 
result in a net increase in the amount available to be distributed 
in uncompensated care payments, the projected payment increases vary 
by hospital type. This redistribution of uncompensated care payments 
is caused by changes in Factor 3.
    As seen in the above table, percent increases smaller than 21.93 
percent indicate that hospitals within the specified category are 
projected to experience a smaller increase in uncompensated care 
payments, on average, compared to the universe of projected FY 2019 
DSH hospitals. Conversely, percent increases that are greater than 
21.93 percent indicate a hospital type is projected to have a larger 
increase than the overall average. The variation in the distribution 
of payments by hospital characteristic is largely dependent on a 
given hospital's number of Medicaid days and SSI days, as well as 
its uncompensated care costs as reported in the Worksheet S-10, used 
in the Factor 3 computation.
    Many rural hospitals are projected to experience a larger 
increase in uncompensated care payments than their urban 
counterparts. Overall, rural hospitals are projected to receive a 
32.50 percent increase in uncompensated care payments, while urban 
hospitals are projected to receive a 21.35 percent increase in 
uncompensated care payments.
    By bed size, smaller hospitals are projected to receive larger 
increases in uncompensated care payments than larger hospitals, in 
both rural and urban settings. Rural hospitals with 0-99 beds are 
projected to receive a 41.01 percent payment increase, and rural 
hospitals with 100-249 beds are projected to see a 26.77 percent 
increase. Larger rural hospitals with 250+ beds are projected to 
experience a 16.21 percent payment increase, which is smaller than 
the overall average. This trend is consistent with urban hospitals, 
in which the smallest urban hospitals (0-99 beds) are projected to 
receive an increase in uncompensated care payments of 38.53 percent. 
Urban hospitals with 100-250 beds are projected to receive an 
increase of 22.59 percent, which is consistent with the overall 
average, while larger urban hospitals with and 250+ beds are 
projected to receive a 20.30 percent increase in uncompensated care 
payments, which is somewhat smaller than the overall average but 
larger than the increase projected for their rural counterparts.
    By region, rural hospitals in the West North Central region are 
expected to receive a large increase in uncompensated care payments, 
as are rural hospitals in the Mountain, Pacific, South Atlantic, 
West South Central, East North Central, and New England regions. 
Rural hospitals in the Middle Atlantic and East South Central 
regions are projected to receive smaller than average payment 
increases. Regionally, urban hospitals are projected to receive a 
wide range of payment changes. Small increases in uncompensated care 
payments are projected in the Pacific and Middle Atlantic regions. 
Smaller than average increases in payments are also projected in the 
New England, Mountain, East North Central, and East South Central 
regions. Hospitals in the South Atlantic and West South Central 
regions are projected to receive a larger than average increase in 
uncompensated payments, while the projected increase in the West 
North Central region and in Puerto Rico is generally consistent with 
the overall average increase of 21.93 percent.
    Nonteaching hospitals are projected to receive a larger than 
average payment increase of 24.90 percent. Teaching hospitals with 
fewer than 100 residents are projected to receive payment increases 
of 19.96 percent, which is slightly below average, while those 
teaching hospitals with 100+ residents have a projected payment 
increase of 21.27 percent, consistent with the overall average. 
Government and proprietary hospitals are projected to receive larger 
than average increases (34.93 percent and 23.98 percent, 
respectively), while voluntary hospitals are expected to receive 
increases lower than the overall average at 16.35 percent. Hospitals 
with 0 to 25 percent Medicare utilization are projected to receive 
increases in uncompensated care payments slightly below the overall 
average, while all other hospitals are projected to receive larger 
increases.

5. Effects of Proposed Reduction Under the Hospital Readmissions 
Reduction Program for FY 2019

    In section IV.H. of the preamble of this proposed rule, we 
discuss proposed requirements for the Hospital Readmissions 
Reduction Program. This program requires a reduction to a hospital's 
base operating DRG payment to account for excess readmissions of 
selected applicable conditions. The table and analysis below 
illustrate the estimated financial impact of the Hospital 
Readmissions Reduction Program payment adjustment methodology, as 
outlined in this FY 2019 IPPS/LTCH PPS proposed rule. In this table, 
we are presenting the estimated impact of the FY 2019 Hospital 
Readmissions Reduction Program on hospitals by hospital 
characteristic.
    The table presents results of hospitals stratified into 
quintiles based on the proportion of dual-eligible stays among 
Medicare fee-for-service (FFS) and managed care stays between July 
1, 2013 and June 30, 2016 (that is, the FY 2018 Hospital 
Readmissions Reduction Program performance period). Hospitals' 
performance on the excess readmission ratios (ERRs) are assessed 
relative to their peer group median and a neutrality modifier is 
applied in the payment adjustment factor calculation to maintain 
budget neutrality. To analyze the results by hospital 
characteristic, we used the FY 2018 Inpatient Prospective Payment 
System (IPPS) Final Rule Impact File.
    This table includes 3,064 non-Maryland hospitals eligible to 
receive a penalty during the performance period. Hospitals are 
eligible to receive a penalty if they have 25 or more eligible 
discharges for at least one measure between July 1, 2013 and June 
30, 2016. The second column in the table indicates the total number 
of penalty eligible non-Maryland hospitals (that is, have an 
estimated payment adjustment factor less than 1) with available data 
for each characteristic.
    The third column in the table indicates the percentage of 
penalized hospitals among those eligible to receive a penalty for 
each characteristic. For example, with regards to teaching status, 
81.90 percent of eligible hospitals characterized as non-teaching 
hospitals would be penalized. Among teaching hospitals, 90.05 
percent of eligible hospitals with fewer than 100 residents and 
96.37 percent of eligible hospitals with 100 or more residents would 
be penalized.
    The fourth column in the table estimates the financial impact on 
hospitals by hospital characteristics. The table shows the share of 
payment adjustments as a percentage of all base operating DRG 
payments for each characteristic. This is calculated as the sum of 
penalties for all hospitals with that characteristic over the sum of 
all base operating DRG payments for those hospitals between October 
1, 2015 and September 30, 2016 (FY 2016). For example, the penalty 
as a share of payments for urban hospitals is 0.69 percent. This 
means that total penalties for all urban hospitals are 0.69 percent 
of total payments for urban hospitals. Measuring the financial 
impact on hospitals as a proportion of total base operating DRG 
payments allows us to account for differences in the amount of base 
operating DRG payments for hospitals within the characteristic when 
comparing the financial impact of the program on different groups of 
hospitals.

[[Page 20618]]



  Estimated Percentage of Hospitals Penalized and Penalty as Share of Payment for FY 2019 Hospital Readmissions
                                                Reduction Program
                                          [By hospital characteristic]
----------------------------------------------------------------------------------------------------------------
                                                                                   Percentage of   Penalty as a
                                                     Number of       Number of       hospitals       share of
             Hospital characteristic                 eligible        penalized     penalized \c\   payments \d\
                                                   hospitals \a\   hospitals \b\        (%)             (%)
----------------------------------------------------------------------------------------------------------------
All Hospitals...................................           3,064           2,610           85.18            0.70
By Geographic Location (n=3,064): \e\
    Urban hospitals.............................           2,291           1,991           86.91            0.69
        1-99 beds...............................             530             375           70.75            0.80
        100-199 beds............................             711             645           90.72            0.81
        200-299 beds............................             419             387           92.36            0.77
        300-399 beds............................             273             255           93.41            0.69
        400-499 beds............................             145             137           94.48            0.55
        500 or more beds........................             213             192           90.14            0.62
    Rural hospitals.............................             773             619           80.08            0.71
        1-49 beds...............................             292             208           71.23            0.61
        50-99 beds..............................             283             231           81.63            0.67
        100-149 beds............................             115             104           90.43            0.76
        150-199 beds............................              44              40           90.91            0.59
        200 or more beds........................              39              36           92.31            0.86
By Teaching Status \f\ (n=3,064):
    Non-teaching................................           2,022           1,656           81.90            0.80
    Fewer than 100 Residents....................             794             715           90.05            0.70
    100 or more Residents.......................             248             239           96.37            0.53
By Ownership Type (n=3,064):
    Government..................................             481             397           82.54            0.58
    Proprietary.................................             768             616           80.21            0.96
    Voluntary...................................           1,815           1,597           87.99            0.66
By Safety-net Status \g\ (n=3,064):
    Safety-net hospitals........................             619             541           87.40            0.57
    Non-safety-net hospitals....................           2,445           2,069           84.62            0.73
By DSH Patient Percentage \h\ (n=3,064):
    0-24........................................           1,246           1,021           81.94            0.78
    25-49.......................................           1,452           1,269           87.40            0.66
    50-64.......................................             200             182           91.00            0.64
    65 and over.................................             166             138           83.13            0.59
By Medicare Cost Report (MCR) Percent: \i\
 (n=3,061):
    0-24........................................             433             368           84.99            0.46
    25-49.......................................           2,100           1,819           86.62            0.71
    50-64.......................................             468             381           81.41            0.89
    65 and over.................................              60              41           68.33            1.25
By Region (n=3,064):
    New England.................................             129             114           88.37            0.82
    Middle Atlantic.............................             352             327           92.90            0.85
    South Atlantic..............................             511             469           91.78            0.84
    East North Central..........................             480             417           86.88            0.65
    East South Central..........................             288             258           89.58            0.87
    West North Central..........................             247             196           79.35            0.46
    West South Central..........................             476             373           78.36            0.63
    Mountain....................................             218             163           74.77            0.56
    Pacific.....................................             363             293           80.72            0.42
----------------------------------------------------------------------------------------------------------------
Source: Results based on July 1, 2013 through June 30, 2016 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 since Maryland hospitals are not
  eligible for a penalty under the program. Hospitals are stratified into five peer groups based on the
  proportion of FFS and managed care dual-eligible stays for the 3-year FY 2018 performance period. Hospital
  characteristics are from the FY 2018 Hospital Inpatient Prospective Payment System (IPPS) Final Rule Impact
  File.
\a\ This column is the number of applicable hospitals within the characteristic that are eligible for a penalty
  (that is, they have 25 or more eligible discharges for at least one measure).
\b\ This column is the number of applicable hospitals that are penalized (i.e., they have 25 or more eligible
  discharges for at least one measure and an estimated payment adjustment factor less than 1) within the
  characteristic.
\c\ This column is the percentage of applicable hospitals that are penalized among hospitals that are eligible
  to receive a penalty.
\d\ The penalty as a share of payments is calculated as the sum of all penalties for the group of hospitals with
  that characteristic divided by total base operating DRG payments for all hospitals with that characteristic.
  MedPAR data from October 1, 2015 through September 30, 2016 (FY 2016), are used to calculate the total base
  operating DRG payments, which are used to estimate total penalties.
\e\ The total number of hospitals with hospital characteristics data may not add up to the total number of
  hospitals because not all hospitals have data for all characteristics. All hospitals had information for:
  Geographic location, bed size, teaching status, ownership type, safety-net status, DSH patient percentage, and
  region (n=3,064). Not all hospitals had data for MCR percent (n=3,061).
\f\ A hospital is considered a teaching hospital if it has an IME adjustment factor for Operation PPS (TCHOP)
  greater than zero.
\g\ A hospital is considered a safety-net hospital if they are in the top DSH quintile.
\h\ DSH [Disproportionate Share Hospital] patient percentage is the sum of the percentage of Medicare inpatient
  days attributable to patients eligible for both Medicare Part A and Supplemental Security Income (SSI), and
  the percentage of total inpatient days attributable to patients eligible for Medicaid but not Medicare Part A.
\i\ MCR [Medicare Cost Report] percent is the percentage of total inpatient stays from Medicare patients.


[[Page 20619]]

6. Effects of Proposed Changes Under the FY 2019 Hospital Value-Based 
Purchasing (VBP) Program

a. Effects of Proposed Changes for FY 2019

    In section IV.I. 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 
2019 through a reduction to the FY 2019 base operating DRG payment 
amount for the discharge for the hospital for such fiscal year, as 
required by section 1886(o)(7)(B) of the Act. The applicable 
percentage for FY 2019 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 IV.I.1.b. of the preamble of this proposed rule, we 
estimate the available pool of funds for value-based incentive 
payments in the FY 2019 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. 
This estimated available pool for FY 2019 is based on the historical 
pool of hospitals that were eligible to participate in the FY 2018 
program year and the payment information from the December 2017 
update to the FY 2017 MedPAR file.
    The proposed estimated impacts of the FY 2019 program year by 
hospital characteristic, found in the table below, are based on 
historical TPSs. We used the FY 2018 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 2017 update to the FY 2017 MedPAR 
file. The proxy adjustment factors can be found in Table 16 
associated with this proposed rule (available via the internet on 
the CMS website).
    The impact analysis shows that, for the FY 2019 program year, 
the number of hospitals that would receive an increase in their base 
operating DRG payment amount is higher than the number of hospitals 
that would receive a decrease. On average, urban hospitals in the 
West North Central region and rural hospitals in Mountain region 
would have the highest positive percent change in base operating 
DRG. Urban Middle Atlantic, urban South Atlantic, and urban East 
South Central regions would experience an average decrease in base 
operating DRG. All other regions, both urban and rural, would have 
an average increase in base operating DRG.
    As DSH percent increases, the average percent change in base 
operating DRG would decrease. With respect to hospitals' Medicare 
utilization as a percent of inpatient days (MCR), as the MCR percent 
increases, the percent change in base operating DRG would tend to 
increase. On average, teaching hospitals would have a decrease in 
base operating DRG, while non-teaching hospitals would have an 
increase in base operating DRG.

Impact Analysis of Base Operating DRG Payment Amounts Resulting From the
                      FY 2019 Hospital VBP Program
------------------------------------------------------------------------
                                                            Average net
                                             Number of      percentage
                                             hospitals        payment
                                                            adjustment
------------------------------------------------------------------------
By Geographic Location:
    All Hospitals.......................           2,808           0.163
        Large Urban.....................           1,146           0.067
        Other Urban.....................             994           0.070
        Rural Area......................             668           0.465
            Urban hospitals.............           2,140           0.068
                0-99 beds...............             375           0.475
                100-199 beds............             708           0.120
                200-299 beds............             429          -0.037
                300-499 beds............             416          -0.185
                500 or more beds........             212          -0.117
            Rural hospitals.............             668           0.465
                0-49 beds...............             201           0.675
                50-99 beds..............             272           0.526
                100-149 beds............             114           0.306
                150-199 beds............              43           0.048
                200 or more beds........              38          -0.125
By Region:
    Urban By Region.....................           2,140           0.068
        New England.....................             107           0.191
        Middle Atlantic.................             288          -0.101
        South Atlantic..................             376          -0.024
        East North Central..............             348           0.178
        East South Central..............             131          -0.101
        West North Central..............             137           0.315
        West South Central..............             265           0.011
        Mountain........................             144           0.027
        Pacific.........................             344           0.189
    Rural By Region.....................             668           0.465
        New England.....................              20           0.739
        Middle Atlantic.................              51           0.397
        South Atlantic..................             108           0.489
        East North Central..............             108           0.489
        East South Central..............             123           0.214
        West North Central..............              82           0.628
        West South Central..............             109           0.349
        Mountain........................              46           0.785
        Pacific.........................              21           0.562
By MCR Percent:
    0-25................................             434           0.122

[[Page 20620]]

 
    25-50...............................           1,958           0.152
    50-65...............................             389           0.250
    Over 65.............................              27           0.350
    Missing.............................  ..............  ..............
By DSH Percent:
    0-25................................           1,082           0.254
    25-50...............................           1,381           0.126
    50-65...............................             196           0.005
    Over 65.............................             149           0.046
By Teaching Status:
    Non-Teaching........................           1,763           0.278
    Teaching............................           1,045          -0.032
------------------------------------------------------------------------

    Actual FY 2019 program year's TPSs will not be reviewed and 
corrected by hospitals until after the FY 2019 IPPS/LTCH PPS final 
rule has been published. Therefore, the same historical universe of 
eligible hospitals and corresponding TPSs from the FY 2018 program 
year will be used for the updated impact analysis in that final 
rule.

b. Effects of Proposed Domain Weighting and Alternative Considered 
Beginning With the FY 2021 Program Year

    In section IV.I.4.b. of the preamble of this proposed rule, we 
discuss our proposed changes to the Hospital VBP Program domain 
weighting beginning with the FY 2021 program year. We note that we 
are not proposing to make any changes to the domain weighting for 
the FY 2019 or FY 2020 program years. The estimated impacts of the 
proposed domain weighting and alternative considered for three 
domains beginning with the FY 2021 program year, by hospital 
characteristic found in the table below, are based on historical 
TPSs. This analysis uses the same data set as the proposed estimated 
impacts for the FY 2019 program year above, and is intended to 
expand upon the analysis of the proposed domain weighting and 
alternative considered discussed in section IV.I.4.b. of the 
preamble of this proposed rule.
    This impact analysis shows that under the proposed domain 
weighting to increase the Clinical Outcomes domain (proposed domain 
name; previously referred to as the Clinical Care domain) from 25 
percent to 50 percent of each hospital's TPS, we estimate that on 
average, urban hospitals in the East South Central region and rural 
hospitals in New England region would have the highest positive 
percent change in base operating DRG. We estimate that four of the 
urban regions would have a decrease in base operating DRG, on 
average. We estimate that rural hospitals in East South Central and 
West South Central would have a decrease in base operating DRG, on 
average, while rural hospitals in the other regions would have an 
increase. We estimate that hospitals with a DSH percent 0-25 would 
have a positive percent change in base operating DRG, while 
hospitals with higher DSH percentages would have negative percent 
change in base operating DRG, on average. We estimate that hospitals 
with MCR percent over 65 would have a positive percent change in 
base operating DRG, while hospitals with lower MCR percentages would 
have negative percent change in base operating DRG, on average. We 
estimate that both teaching and non-teaching hospitals would have a 
negative percent change in base operating DRG.
    Under the alternative domain weighting we considered of equally 
weighting each of the three domains to constitute one-third of each 
hospital's TPS, we estimate that rural hospitals in New England 
region would have the highest positive percent change in base 
operating DRG, with all rural hospitals estimated to have a positive 
percent change in base operating DRG. We estimate that on average 
urban hospitals in four regions would have a positive percent change 
in base operating DRG, while urban hospitals in five of the regions 
would have a negative percent change in base operating DRG. We 
estimate that hospitals with a DSH percent of 0-25 and 25-50 would 
have a positive percent change in base operating DRG, while 
hospitals with higher DSH percentages would have negative percent 
change in base operating DRG, on average. We estimate that hospitals 
with MCR percent 0-25 would have a negative percent change in base 
operating DRG, while hospitals with higher MCR percentages would 
have positive percent change in base operating DRG, on average. We 
estimate that teaching hospitals would have a negative percent 
change in base operating DRG, on average, while nonteaching 
hospitals would have a positive percent change in base operating 
DRG.

 Impact Analysis of Base Operating DRG Payment Amounts Resulting From Proposed and Alternative Domain Weighting
                  Considered for Three Domains Beginning With the FY 2021 Hospital VBP Program
----------------------------------------------------------------------------------------------------------------
                                                                                      Average         Average
                                                                                    percentage      percentage
                                                                                      payment         payment
                                                                     Number of      adjustment      adjustment
                                                                     hospitals       (proposed     (alternative
                                                                                      domain          domain
                                                                                    weighting)      weighting)
----------------------------------------------------------------------------------------------------------------
By Geographic Location:
    All Hospitals...............................................           2,701          -0.071           0.059
        Large Urban.............................................           1,087          -0.019          -0.015
        Other Urban.............................................             963          -0.152          -0.032
        Rural Area..............................................             651          -0.040          -0.318
    Urban hospitals.............................................           2,050          -0.081          -0.023
        0-99 beds...............................................             341           0.051           0.379
        100-199 beds............................................             682          -0.106          -0.040
        200-299 beds............................................             407          -0.118          -0.120
        300-499 beds............................................             409          -0.186          -0.233

[[Page 20621]]

 
        500 or more beds........................................             211           0.058          -0.026
    Rural hospitals.............................................             651          -0.040          -0.318
        0-49 beds...............................................             188           0.044           0.573
        50-99 beds..............................................             268           0.024           0.379
        100-149 beds............................................             114          -0.155           0.105
        150-199 beds............................................              43          -0.298          -0.148
        200 or more beds........................................              38          -0.262          -0.203
By Region:
    Urban By Region.............................................           2,050          -0.081          -0.023
        New England.............................................             105           0.203           0.172
        Middle Atlantic.........................................             284          -0.166          -0.191
        South Atlantic..........................................             373          -0.178          -0.119
        East North Central......................................             342           0.061           0.109
        East South Central......................................             127           0.384          -0.248
        West North Central......................................             133           0.127           0.344
        West South Central......................................             248          -0.189          -0.148
        Mountain................................................             137          -0.147          -0.074
        Pacific.................................................             301           0.013           0.093
    Rural By Region.............................................             651          -0.040           0.318
        New England.............................................              19           0.317           0.661
        Middle Atlantic.........................................              51           0.066           0.314
        South Atlantic..........................................             106           0.039           0.379
        East North Central......................................             108           0.011           0.398
        East South Central......................................             122          -0.283           0.031
        West North Central......................................              82           0.088           0.557
        West South Central......................................             102          -0.219           0.077
        Mountain................................................              40           0.185           0.658
        Pacific.................................................              21           0.079           0.563
By MCR Percent:
    0-25........................................................             350          -0.189          -0.119
    25-50.......................................................           1,937          -0.063           0.058
    50-65.......................................................             387          -0.029           0.188
    Over 65.....................................................              27           0.238           0.579
    Missing.....................................................  ..............  ..............  ..............
By DSH Percent:
    0-25........................................................           1,031           0.021           0.182
    25-50.......................................................           1,359          -0.127           0.012
    50-65.......................................................             185          -0.184          -0.156
    Over 65.....................................................             126          -0.058          -0.119
By Teaching Status:
    Non-Teaching................................................           1,702          -0.056           0.151
    Teaching....................................................             999          -0.097          -0.098
----------------------------------------------------------------------------------------------------------------

7. Effects of Proposed Changes to the HAC Reduction Program for FY 2019

    In section IV.J. of the preamble of this proposed rule, we 
discuss proposed requirements for the HAC Reduction Program. In this 
proposed rule, we are not proposing to adopt any new measures into 
the HAC Reduction Program. However, the Hospital IQR Program is 
proposing to remove the claims-based Patient Safety and Adverse 
Events Composite (PSI-90) and five NHSN HAI measures. These measures 
had been previously adopted for, and will remain in, the HAC 
Reduction Program. We are proposing to begin validation of these HAI 
measures under the HAC Reduction Program beginning in FY 2020.
    We note the burden associated with collecting and submitting 
data via the NHSN system is captured under a separate OMB control 
number, 0920-0666, and therefore will not impact our burden 
estimates. We anticipate the proposed removal of the NHSN HAI 
measures from the Hospital IQR Program will result in a net burden 
decrease to the Hospital IQR Program, but will result in an off-
setting net burden increase to the HAC Reduction Program because 
hospitals selected for validation will continue to be required to 
submit validation templates for the HAI measures. Therefore, if the 
proposals found in section VIII.A.5.b.(1) and IV.J.4.e. of the 
preamble of this proposed rule to remove HAI chart-abstracted 
measures from the Hospital IQR Program and adopt validation process 
for the HAC Reduction Program are finalized, then we anticipate a 
shift in burden associated with this data validation effort to the 
HAC Reduction Program beginning in FY 2020. We discuss the 
associated burden hours in section XV.B.7. of this proposed rule, 
and note the burden associated with these requirements is captured 
in an information collection request currently available for review 
and comment, OMB control number 0938--NEW.
    The table below presents the estimated proportion of hospitals 
in the FY 2019 worst-performing quartile of the Total HAC Scores by 
hospital characteristic. These FY 2019 HAC Reduction Program results 
were calculated using the Winsorized z-score methodology finalized 
in the 2017 IPPS/LTCH PPS final rule (80 FR 57022 through 57025). 
Each hospital's Total HAC Score was calculated as the weighted 
average of the hospital's Domain 1 score (15 percent) and

[[Page 20622]]

Domain 2 score (85 percent). Non-Maryland hospitals with a Total HAC 
Score above the 75th percentile Total HAC Score were identified as 
being in the worst-performing quartile.
    We used the modified Recalibrated Patient Safety Indicator (PSI) 
90 Composite measure results based on Medicare fee-for-service (FFS) 
discharges from October 1, 2015 through June 30, 2017 and ICD-10 
recalibrated version 8.0 of the CMS PSI software to estimate the 
impact of the FY 2019 HAC Reduction Program. For the CDC Central 
Line-Associated Bloodstream Infection (CLABSI), Catheter-Associated 
Urinary Tract Infection (CAUTI), Colon and Abdominal Hysterectomy 
Surgical Site Infection (SSI), Methicillin-resistant Staphylococcus 
aureus (MRSA) bacteremia, and Clostridium difficile Infection (CDI) 
measure results, we used standardized infection ratios (SIRs) 
calculated with hospital surveillance data reported to the National 
Healthcare Safety Network (NHSN) for infections occurring between 
January 1, 2015 through December 31, 2016.\403\
---------------------------------------------------------------------------

    \403\ Updated FY 2019 data for the CDC NHSN measures (1/1/2016 
through 12/31/2017) was not available at the time of publishing this 
proposed rule.
---------------------------------------------------------------------------

    To analyze the results by hospital characteristic, we used the 
FY 2018 Final Rule Impact File. This table includes 3,216 non-
Maryland hospitals with an FY 2019 Total HAC Score. Of these, 3,201 
hospitals had information for geographic location and bed size, 
Disproportionate Share Hospital (DSH) percent, teaching status, 
ownership status, and safety-net status; \404\ 3,188 had information 
for Medicare Cost Report (MCR) percent; and 3,214 had information 
for their geographic region. Maryland hospitals and hospitals 
without a Total HAC Score are not included in the table below.
---------------------------------------------------------------------------

    \404\ A hospital is considered a Safety-net hospital if it is in 
the top quintile for DSH percent.
---------------------------------------------------------------------------

    The second column in the table indicates the total number of 
non-Maryland hospitals with available data for each characteristic 
that have a Total HAC Score for the FY 2019 HAC Reduction Program. 
For example, with regard to teaching status, 2,131 hospitals are 
characterized as non-teaching hospitals, 822 are characterized as 
teaching hospitals with fewer than 100 residents, and 248 are 
characterized as teaching hospitals with at least 100 residents. 
This only represents a total of 3,201 hospitals because the other 15 
hospitals have missing data for teaching status. The third column in 
the table indicates the number of hospitals for each characteristic 
that would be in the worst-performing quartile of Total HAC Scores. 
These hospitals would receive a payment reduction under the FY 2019 
HAC Reduction Program. For example, with regard to teaching status, 
475 out of 2,131 hospitals characterized as non-teaching hospitals 
would be subject to a payment reduction. Among teaching hospitals, 
199 out of 822 hospitals with fewer than 100 residents and 116 out 
of 248 hospitals with 100 or more residents would be subject to a 
payment reduction.
    The fourth column in the table indicates the proportion of 
hospitals for each characteristic that would be in the worst-
performing quartile of Total HAC Scores and would receive a payment 
reduction under the FY 2019 HAC Reduction Program. For example, 22.3 
percent of the 2,131 hospitals characterized as non-teaching 
hospitals, 24.2 percent of the 822 teaching hospitals with fewer 
than 100 residents, and 46.8 percent of the 248 hospitals with 100 
or more residents would be subject to a payment reduction.

  Estimated Proportion of Hospitals in the Worst-Performing Quartile (>75th Percentile) of the Total HAC Scores
                                      for the FY 2019 HAC Reduction Program
                                          [By hospital characteristic]
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of      Percent of
                                                                                   hospitals in    hospitals in
                     Hospital characteristic                         Number of      the worst-      the worst-
                                                                     hospitals      performing      performing
                                                                                   quartile \a\    quartile \b\
----------------------------------------------------------------------------------------------------------------
Total \c\.......................................................           3,216             804            25.0
By Geographic Location (n=3,201): \d\
    Urban hospitals.............................................           2,415             630            26.1
        1-99 beds...............................................             624             125            20.0
        100-199 beds............................................             724             190            26.2
        200-299 beds............................................             432             116            26.9
        300-399 beds............................................             275              77            28.0
        400-499 beds............................................             147              48            32.7
        500 or more beds........................................             213              74            34.7
    Rural hospitals.............................................             786             160            20.4
        1-49 beds...............................................             304              56            18.4
        50-99 beds..............................................             283              68            24.0
        100-149 beds............................................             116              21            18.1
        150-199 beds............................................              44               8            18.2
        200 or more beds........................................              39               7            17.9
By Safety-Net Status \e\ (n=3,201):
    Non-safety net..............................................           2,557             570            22.3
    Safety-net..................................................             644             220            34.2
By DSH Percent \f\ (n=3,201):
    0-24........................................................           1,340             285            21.3
    25-49.......................................................           1,472             358            24.3
    50-64.......................................................             210              76            36.2
    65 and over.................................................             179              71            39.7
By Teaching Status \g\ (n=3,201):
    Non-teaching................................................           2,131             475            22.3
    Fewer than 100 residents....................................             822             199            24.2
    100 or more residents.......................................             248             116            46.8
By Ownership (n=3,201):
    Voluntary...................................................           1,866             474            25.4
    Proprietary.................................................             838             166            19.8
    Government..................................................             497             150            30.2
By MCR Percent \h\ (n=3,188):
    0-24........................................................             515             148            28.7
    25-49.......................................................           2,128             513            24.1
    50-64.......................................................             471             109            23.1

[[Page 20623]]

 
    65 and over.................................................              74              15            20.3
By Region (n=3,214): \i\
    New England.................................................             133              36            27.1
    Mid-Atlantic................................................             364             119            32.7
    South Atlantic..............................................             524             140            26.7
    East North Central..........................................             497             101            20.3
    East South Central..........................................             299              75            25.1
    West North Central..........................................             256              50            19.5
    West South Central..........................................             516              98            19.0
    Mountain....................................................             227              61            26.9
    Pacific.....................................................             398             122            30.7
----------------------------------------------------------------------------------------------------------------
Source: FY 2019 HAC Reduction Program Proposed Rule Results are based on Recalibrated PSI 90 Composite data from
  October 2015 through June 2017 and CDC CLABSI, CAUTI, SSI, CDI, and MRSA results from January 2015 through
  December 2016. Hospital Characteristics are based on the FY 2018 Hospital Inpatient Prospective Payment System
  (IPPS) Final Rule Impact File.
\a\ 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.
\b\ This column is the percent of non-Maryland 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.
\c\ The number of non-Maryland hospitals with a FY 2019 Total HAC Score (N=3,216). Note that not all hospitals
  have data for all hospital characteristics.
\d\ The number of hospitals that had information for geographic location with bed size, Safety-net status,
  Disproportionate Share Hospital (DSH) percent, teaching status, and ownership status (n=3,201).
\e\ A hospital is considered a Safety-net hospital if it is in the top quintile for DSH percent.
\f\ The DSH patient percentage is equal to the sum of (1) the percentage of Medicare inpatient days attributable
  to patients eligible for both Medicare Part A and Supplemental Security Income and (2) the percentage of total
  inpatient days attributable to patients eligible for Medicaid but not Medicare Part A.
\g\ A hospital is considered a teaching hospital if it has an IME adjustment factor for Operation PPS (TCHOP)
  greater than zero.
\h\ Not all hospitals had data for MCR percent (n=3,188).
\i\ Not all hospitals had data for Region (n=3,214).

8. Effects of Proposed Changes Relating to Medicare GME Agreements for 
New Urban Teaching Hospitals

    In section IV.K.2. of the preamble of this proposed rule, we 
discuss our proposal to provide new urban teaching hospitals with 
greater flexibility under the regulation governing Medicare GME 
affiliation agreements. Currently, if a new urban teaching hospital 
participates in a Medicare GME affiliation agreement, it can only 
receive an increase in its cap(s) as part of that agreement. That 
is, if a hospital with IME or direct GME FTE resident caps 
established under Sec.  412.105(f)(1)(iv) or Sec.  413.79(c)(2), or 
both, based on training occurring in 1996, is part of the Medicare 
GME affiliated group, Sec.  413.79(e)(1)(iv) provides that the new 
urban teaching hospital(s) would only be permitted to receive in 
increase in its cap(s). We are proposing to revise the regulation to 
specify that, effective for Medicare GME affiliation agreements 
entered into on or after July 1, 2019, a new urban teaching hospital 
(that is, a hospital that qualifies for an adjustment under Sec.  
412.105(f)(1)(vii) or Sec.  413.79(e)(1), or both) may participate 
in a Medicare GME affiliated group composed solely of new urban 
teaching hospitals and be eligible to receive a decrease to its FTE 
caps as a result of participation in that affiliated group. Rather 
than create new FTE cap slots to cross train residents, Medicare GME 
affiliation agreements use existing cap slots to allow residents to 
rotate to various hospitals. Because Medicare GME affiliation 
agreements use existing FTE cap slots, we do not anticipate any 
significant cost impact associated with this proposal.

9. Effects of Proposed Implementation of the Rural Community Hospital 
Demonstration Program in FY 2019

    In section IV.L. of the preamble of this proposed rule for FY 
2019, we discussed our implementation and budget neutrality 
methodology for 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 would modify payments for inpatient 
services for up to 30 rural hospitals.
    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 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. In the preamble to this proposed 
rule, we described the terms of participation for the extension 
period authorized by Public Law 114-255. In the FY 2018 IPPS/LTCH 
PPS final rule, we finalized our policy with regard to the effective 
date for the application of the reasonable cost-based payment 
methodology under the demonstration for those among the hospitals 
that had previously participated and were choosing to participate in 
the second 5-year extension period. According to our finalized 
policy, each of these previously participating hospitals began the 
second 5 years of the 10-year extension period on the date 
immediately after the date the period of performance under the 5-
year extension period ended. However, by the time of the FY 2018 
IPPS/LTCH PPS final rule, we had not been able to verify which among 
the previously participating hospitals would be continuing 
participation, and thus were not able to estimate the costs of the 
demonstration for that year's final rule. We stated in the final 
rule that we would instead include the estimated costs of the 
demonstration for all participating hospitals for FY 2018, along 
with those for FY 2019, in the budget neutrality offset amount for 
the FY 2019 proposed and final rules.
    Seventeen of the 21 hospitals that completed their periods of 
participation under the extension period authorized by the 
Affordable Care Act have elected to continue in the second 5-year 
extension period, while 13 additional hospitals have been selected 
to participate. Each of these newly participating hospitals will 
begin its 5-year period of participation effective the start of the 
first cost reporting period on or after October 1, 2017. Thus, 30 
hospitals are participating in the demonstration during FY 2018.

[[Page 20624]]

    In the FY 2018 IPPS/LTCH PPS final rule, we finalized the budget 
neutrality methodology in accordance with our policies for 
implementing the demonstration, adopting the general methodology 
used in previous years, whereby we estimated the additional payments 
made by the program for each of the participating hospitals as a 
result of the demonstration. In order to achieve budget neutrality, 
we 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.
    Because we were unable to confirm the hospitals that would be 
participating in the second extension period in time for including 
the estimates of the cost of the demonstration in FY 2018 in the FY 
2018 final rule, we indicated that we will include this estimate in 
the FY 2019 IPPS/LTCH proposed and final rules. For this proposed 
rule, the resulting amounts applicable to FYs 2018 and 2019, 
respectively, are $33,254,247 and $78,409,842, which we are 
proposing to include in the budget neutrality offset adjustment for 
FY 2019. These estimated amounts are based on the specific 
assumptions regarding the data sources used, that is, recently 
available ``as submitted'' cost reports and historical and proposed 
update factors for cost, payment, and volume. If updated data become 
available prior to the FY 2019 IPPS/LTCH PPS final rule, we will use 
them to the extent appropriate to estimate the costs of the 
demonstration program. In addition, we will determine the costs of 
the demonstration for the previously participating hospitals for the 
period from when their period of performance ended for the first 5-
year extension period and the start of the cost report year in FY 
2018 when finalized cost reports for this period are available. We 
will include these costs for the demonstration in future rulemaking.
    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 
will continue this general procedure. Currently, finalized cost 
reports are now available for the 16 hospitals that completed a cost 
reporting period beginning in FY 2011 according to the demonstration 
cost-based payment methodology, as well as for the 23 hospitals that 
completed such a cost reporting period beginning in FY 2012. The 
actual costs of the demonstration for FY 2011 as determined from the 
finalized cost reports fell short of the estimated amount that was 
finalized in the FY 2011 IPPS/LTCH PPS final rule for FY 2011 by 
$29,971,829; the actual costs of the demonstration for FY 2012 fell 
short of the amount that was finalized in the FY 2012 final rule by 
$8,500,373.
    We note that, for this proposed rule, the amounts identified for 
the actual costs of the demonstration for each of FYs 2011 and 2012 
(determined from current finalized cost reports) are less than the 
amounts that were identified in the final rule for each these fiscal 
years. Therefore, in keeping with previous policy finalized in 
similar situations when the costs of the demonstration fell short of 
the amount estimated in the corresponding year's final rule, we will 
be including this component as a negative adjustment to the budget 
neutrality offset amount for the current fiscal year.
    Therefore, for FY 2019, the total amount that we are proposing 
to apply to the national IPPS rates is $73,191,887. If updated data 
become available prior to the FY 2019 IPPS/LTCH PPS final rule, we 
would use them to the extent appropriate to determine the budget 
neutrality offset amount for FY 2019. Furthermore, if the needed 
cost reports are available in time for the FY 2019 IPPS/LTCH PPS 
final rule, we will also identify the difference between the total 
cost of the demonstration based on finalized FY 2013 cost reports 
and the estimate of the costs of the demonstration for that year, 
and incorporate that amount into the budget neutrality offset amount 
for FY 2019. In addition, when finalized cost reports for FYs 2014 
through 2016 are available, we will 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.

10. Effect of Proposed Revision of the Hospital Inpatient Admission 
Order Documentation Requirements

    In section IV.M. of the preamble of this proposed rule, we 
discuss our proposal to revise the admission order documentation 
requirements. Specifically, we are proposing to revise the inpatient 
admission order policy to no longer require the presence of a 
written inpatient admission order in the medical record as a 
specific condition of Medicare Part A payment. Our actuaries 
estimate that any increase in Medicare payments due to the proposed 
change would be negligible, given the anticipated low volume of 
claims that would be payable under this proposed policy that would 
not have been paid under the current policy.

11. Effect of Proposed Policy Changes Relating to Satellite Facilities 
and Excluded Units

    In section VI.B. of the preamble of this proposed rule, we 
discuss our proposal to revise the regulations applicable to 
satellite facilities so that the separateness and control 
requirements would only apply to IPPS-excluded satellite facilities 
that are co-located with IPPS hospitals beginning in FY 2019. This 
proposed policy change is premised on the belief that the policy 
concerns that underlie our existing satellite facility 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, the requirements in the hospital conditions of 
participation (CoPs) (which are still present regardless of these 
proposed changes), and because such changes would be consistent with 
the revisions to our HwH policy that were finalized in the FY 2018 
IPPS/LTCH PPS final rule, which was estimated to have a de minimus 
effect on Medicare payments due to the administrative nature of the 
changes. We also are proposing to revise our regulations to allow 
IPPS-excluded hospitals to operate as IPPS-excluded units, as 
discussed in section VI.C. of the preamble to this proposed rule, 
effective with cost reporting periods beginning on or after October 
1, 2019. We believe that this proposal is also consistent with the 
revisions to our HwH policy that were finalized in the FY 2018 IPPS/
LTCH PPS final rule and the proposed changes to the satellite 
regulation discussed previously. We do not expect any significant 
payment impact as a result of either of these proposed policies 
because these policies are primarily administrative in nature and 
are not expected to result in additional Medicare expenditures that 
would have been made, regardless of our changes, because IPPS 
hospital co-location is already allowed under existing regulations.

12. Effects of Continued Implementation of the Frontier Community 
Health Integration Project (FCHIP) Demonstration

    In section VI.D.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. 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

[[Page 20625]]

this demonstration in the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57064 through 57065).)
    We specified the 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 program and 
uncertainty associated with projected Medicare utilization and 
costs, in the FY 2017 IPPS/LTCH PPS final rule we adopted a 
contingency plan (81 FR 57064 through 57065) 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 2019.

13. Effects of Proposed Revisions of the Supporting Documentation 
Required for Submission of an Acceptable Medicare Cost Report

    In section IX.B.1. of the preamble of this proposed rule, we are 
proposing to incorporate the Provider Cost Reimbursement 
Questionnaire, Form CMS-339 (OMB No. 0938-0301), into the Organ 
Procurement Organization (OPO) and Histocompatibility Laboratory 
cost report, Form CMS-216 (OMB No. 0938-0102), which would complete 
our incorporation of the Form CMS-339 into all Medicare cost 
reports. We also are proposing to update Sec.  413.24(f)(5)(i) to 
reflect that an acceptable cost report will no longer require the 
provider to separately submit a Provider Cost Reimbursement 
Questionnaire, Form CMS-339, by removing the reference to the 
questionnaire. There are 58 OPOs and 47 histocompatibility 
laboratories. This proposal would not require additional data 
collection from OPOs or histocompatibility laboratories. This 
proposal would benefit OPOs and histocompatibility laboratories 
because they would no longer be required to complete and submit the 
Form CMS-339 as a separate form independent of the Medicare cost 
report in order to have an acceptable cost report submission under 
Sec.  413.24(f)(5)(i). As discussed in detail in section IX.B.10. of 
the preamble of this proposed rule, this proposal would decrease 
overall costs to the 58 OPOs and 47 histocompatibility laboratories 
by $11,178.52.
    In section IX.B.2. of the preamble of this proposed rule, we 
also are proposing that, effective for cost reports filed on or 
after October 1, 2018, a cost report is rejected for teaching 
hospitals for lack of supporting documentation if it does not 
include the IRIS data that contains the same total counts of direct 
GME FTE residents (unweighted and weighted) and of IME FTE residents 
as the total counts of direct GME FTE and IME FTE residents reported 
in the teaching hospital's cost report. This proposal would continue 
to require all teaching hospitals to submit the IRIS data under 
Sec.  413.24(f)(5) to have an acceptable cost report submission. 
However, this proposal would require that this data must correspond 
to the same total counts of direct GME FTE residents (unweighted and 
weighted) and of IME FTE residents as the total counts of direct GME 
FTE and IME FTE residents reported in the teaching hospital's cost 
report. Providers are required under Sec. Sec.  413.20 and 413.24 to 
maintain data that substantiates their costs. IRIS is the source 
document for reporting FTEs in all teaching hospitals' cost reports. 
To enhance the contractors' ability to review duplicates and to 
ensure residents are not being double-counted, we believe it is 
necessary and appropriate to require that the total unweighted and 
weighted FTE counts on the IRIS for direct GME and IME respectively, 
for all applicable allopathic, osteopathic, dental, and podiatric 
residents that a hospital may train, must equal the same total 
unweighted and weighted FTE counts for direct GME and IME reported 
on Worksheet E-4 and Worksheet E, Part A. Because all teaching 
hospitals are already required to submit the IRIS data under Sec.  
413.24(f)(5) to have an acceptable cost report submission, there are 
no additional burdens or expenses placed upon teaching hospitals as 
a result of our proposal to require that the supporting documents 
submitted (the IRIS data) correspond to the amounts reported in the 
cost report in order to have an acceptable cost report submission.
    In section IX.B.3. of the preamble of this proposed rule, we are 
proposing that, effective for cost reporting periods beginning on or 
after October 1, 2018, for providers claiming Medicare bad debt 
reimbursement, a cost report is rejected for lack of supporting 
documentation if it does not include a Medicare bad debt listing 
that corresponds to the bad debt amounts claimed in the provider's 
Medicare cost report. This proposal would not require providers 
claiming Medicare bad debt reimbursement to collect additional data. 
Providers are required under Sec. Sec.  413.20 and 413.24 to 
maintain data that substantiates their costs. The cost report 
worksheet that incorporated Form CMS-339 continues to require 
providers who claim Medicare bad debt reimbursement to submit a bad 
debt listing with the cost report in order to have an acceptable 
cost report submission. Because of the existing requirement, there 
are no additional burdens or expenses placed upon providers to 
ensure that the supporting documentation, the bad debt listing, 
corresponds to the amounts reported in the cost report in order to 
have an acceptable cost report submission.
    In section IX.B.4. of the preamble of this proposed rule, we are 
proposing that, effective for cost reporting periods beginning on or 
after October 1, 2018, for hospitals claiming a disproportionate 
share hospital payment adjustment, a cost report is rejected for 
lack of supporting documentation if it does not include a detailed 
listing of the hospital's Medicaid eligible days that corresponds to 
the Medicaid eligible days claimed in the hospital's cost report. 
Providers are required under Sec. Sec.  413.20 and 413.24 to 
maintain data that substantiates their costs. The provider must 
furnish such information to the contractor as may be necessary to 
assure proper payment by the program. Currently, when the supporting 
documentation regarding Medicaid eligible days is not submitted by 
DSH eligible hospitals with their cost report, contractors must 
request it. Tentative program reimbursement payments are often 
issued to providers upon the submission of the cost report, and a 
subsequent submission of supporting documentation may reveal an 
overstatement of a hospital's Medicaid eligible days with a 
resulting overpayment to the provider.
    Requiring a provider to submit, as a supporting document with 
its cost report, a listing of the provider's Medicaid eligible days 
that corresponds to the Medicaid eligible days claimed in the DSH 
eligible hospital's cost report would be consistent with the 
recordkeeping and cost reporting requirements of Sec. Sec.  413.20 
and 413.24, which require providers to maintain data that 
substantiates their costs. This proposal to require providers to 
submit the supporting documentation with the cost report would also 
facilitate accurate provider payment and

[[Page 20626]]

the contractor's review and verification of the cost report.
    This proposal would not require hospitals claiming a DSH payment 
adjustment to collect additional data. Hospitals claiming a DSH 
payment adjustment are already collecting the data in order to 
report the hospital's Medicaid eligible days in the hospital's cost 
report. Because the existing burden estimate for a DSH eligible 
hospital's cost report already reflects the requirement that these 
hospitals collect, maintain, and submit this data when requested, 
there is no additional burden placed upon hospitals as a result of 
our proposal to require them to submit these supporting documents 
along with their cost report, and to ensure the supporting 
documentation corresponds to the amounts reported in the cost report 
in order to have an acceptable cost report submission.
    In section IX.B.5. of the preamble of this proposed rule, we are 
proposing that, effective for cost reporting periods beginning on or 
after October 1, 2018, for DSH eligible hospitals reporting charity 
care and/or uninsured discounts, a cost report is rejected for lack 
of supporting documentation if it does not include a detailed 
listing of charity care and/or uninsured discounts that corresponds 
to the amounts claimed in the provider's cost report. Providers are 
required under Sec. Sec.  413.20 and 413.24 to maintain data that 
substantiates their costs. The provider must furnish such 
information to the contractor as may be necessary to assure proper 
payment by the program. Contractors regularly request that hospitals 
claiming charity care and/or uninsured discounts submit 
documentation to support their charity care and/or uninsured 
discounts reported in their cost report. This proposal to require 
providers to submit this supporting documentation with the cost 
report would facilitate accurate payment to the provider and the 
contractor's review and verification of the cost report.
    This proposal would not require DSH eligible hospitals reporting 
charity care and/or uninsured discounts to collect additional data 
but would require them to submit the supporting documentation with 
the cost report rather than at a later time. Because the existing 
burden estimate for a DSH eligible hospital's cost report already 
reflects the requirement that these hospitals collect, maintain, and 
submit this data when requested, there is no additional burden 
placed upon DSH eligible hospitals as a result of our proposal to 
require them to submit these supporting documents along with their 
cost report and to ensure the supporting documentation corresponds 
to the amounts reported in the cost report in order to have an 
acceptable cost report submission.
    In section IX.B.6. of the preamble of this proposed rule, we are 
proposing that, effective for cost reporting periods beginning on or 
after October 1, 2018, for a provider reporting costs on its cost 
report that are allocated from a home office or chain organization, 
a cost report is rejected for lack of supporting documentation if it 
does not include a copy of the Home Office Cost Statement completed 
by the home office or chain organization that corresponds to the 
amounts allocated from the home office or chain organization to the 
provider's cost report. This proposal would not require providers 
reporting costs on their cost report that are allocated from a home 
office or chain organization to collect additional data. Instead, 
this proposal would codify our longstanding policy requiring costs 
allocated from a home office or chain organization to a provider be 
substantiated on the provider's cost report. Providers are required 
under Sec. Sec.  413.20 and 413.24 to maintain data that 
substantiates their costs. With our proposal, we anticipate more 
providers will submit the Home Office Cost Statement to support the 
amounts reported in their cost reports, in order to have an 
acceptable cost report submission. Because the existing burden 
estimate for a provider's cost report already reflects the 
requirement that providers collect, maintain, and submit this data, 
there is no additional burden placed upon providers as a result of 
our proposal to require them to submit these supporting documents 
along with their cost report, in order to have an acceptable cost 
report submission.

14. Effect of Proposed Revisions Regarding Physician Certification and 
Recertification of Claims

    In section XI. of the preamble of this proposed rule, we discuss 
our proposal to remove from the regulations the requirement that a 
physician statement of certification or recertification must itself 
indicate where that supporting information is to be found in the 
medical record. While moving this provision would have no 
substantive impact, we have examined the impact of eliminating the 
provision pertaining to where the supporting information is to be 
found and believe that substantial time and money would be saved by 
physicians when completing both certification and recertification 
statements. On average, we estimate that it requires approximately 9 
minutes for the precise location of the various elements to be 
identified and recorded in the statements. This time currently is 
expended not only with the completion of an initial certification 
statement but each time a recertification statement is completed.
    While the proposed elimination of this provision would benefit 
physicians in terms of reducing the amount of time expended in 
completing certification and recertification statements, it would 
also benefit physicians whose claims have been denied either because 
the physician failed to include this information in the 
certification and/or recertification statement or failed to 
accurately account for the information in the statements. In fact, 
these claims are routinely denied even in situations where the 
location of the information within a paper medical record is readily 
apparent to the reviewer. Given the improved capabilities of 
searchable electronic health records, these types of denials are 
increasingly unnecessary. We also expect a positive impact for 
beneficiaries because beneficiaries would no longer receive notices 
that these claims were denied, which inevitably caused confusion 
given the nature of these denials. Moreover, the denial of claims 
due to the failure to include the location of information within a 
paper medical record results in appeals. As an example, these 
denials are significant for skilled nursing facility (SNF) claims. 
In the SNF setting, a required element of the certification and 
recertification statement is the required estimated length of need 
(ELON) element. The table below shows in Row 1 the SNF improper 
payment rates for claims in error (certification statement does not 
indicate where in the medical record the required information of 
ELON is to be found; however the medical record contains the missing 
information); and in Row 2, the error rate if these claims are no 
longer considered to be erroneous (due to removal of the provision 
in the regulations). The data shown in the table are from the 2017 
CERT reporting period and includes claims from July 1, 2015 through 
June 30, 2016.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Improper       95 percent
                 Provider type                                  Label                Projected dollars      Projected      payment rate     confidence
                                                                                          in error        dollars paid          (%)          interval
--------------------------------------------------------------------------------------------------------------------------------------------------------
SNF............................................  ELON Claims in Error..............     $3,259,219,132   $34,949,922,572             9.3        7.6-11.0
SNF............................................  ELON Claims Not in Error..........      2,776,135,742    34,949,922,572             7.9         6.3-9.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Overall, there is a 1.4 percentage point reduction in the 
improper payment rate in the SNF setting alone. The impact on the 
SNF setting is significant. Yet, if this 1.4 percentage point is 
considered uniformly across all provider settings, the magnitude of 
this provision and its impact on the Medicare Trust funds is 
extensive. Moreover, by eliminating these denials and subsequent 
appeals, MACS would have more time to dedicate to other more 
pertinent appeal issues.

I. Effects of Proposed Changes in the Capital IPPS

1. General Considerations

    For the impact analysis presented below, we used data from the 
December 2017 update of the FY 2017 MedPAR file and the December 
2017 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 2017 update of the most recently available 
hospital cost report data (FYs 2015 and 2016) to categorize

[[Page 20627]]

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 2017 update of the FY 2017 MedPAR 
file, we simulated payments under the capital IPPS for FY 2018 and 
proposed payments for FY 2019 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 2019 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 would 
increase by 0.5 percent in both FYs 2018 and 2019.
     We estimate that Medicare discharges would be 
approximately 11.0 million in FY 2018 and 11.1 million in FY 2019.
     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 2019.
     In addition to the proposed FY 2019 update factor, the 
proposed FY 2019 capital Federal rate was calculated based on a 
proposed GAF/DRG budget neutrality adjustment factor of 0.9997 and a 
proposed outlier adjustment factor of 0.9494.

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 2019 on total capital payments per 
case, using a universe of 3,257 hospitals. As previously described, 
the individual hospital payment parameters are taken from the best 
available data, including the December 2017 update of the FY 2017 
MedPAR file, the December 2017 update to the PSF, and the most 
recent cost report data from the December 2017 update of HCRIS. In 
Table III, we present a comparison of estimated total payments per 
case for FY 2018 and estimated proposed total payments per case for 
FY 2019 based on the proposed FY 2019 payment policies. Column 2 
shows estimates of payments per case under our model for FY 2018. 
Column 3 shows estimates of proposed payments per case under our 
model for FY 2019. Column 4 shows the total percentage change in 
payments from FY 2018 to FY 2019. 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, capital payments 
per case in FY 2019 are expected to increase as compared to capital 
payments per case in FY 2018. This expected increase overall is 
largely due to the proposed 1.2 percent update to the capital 
Federal rate for FY 2019. 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 1.7 
percent change in capital payments per case from FY 2018 to FY 2019 
for all hospitals (as shown in Table III).
    The geographic comparison shows that, on average, hospitals in 
urban classifications would experience an increase in capital IPPS 
payments per case in FY 2019 as compared to FY 2018, while those 
hospitals in rural classifications would experience a decrease in 
capital IPPS payments. Capital IPPS payments per case would increase 
by an estimated 2.9 percent for hospitals in large urban areas and 
by 1.0 for hospitals in other urban areas, while payments to 
hospitals in rural areas would decrease by 1.4 percent, from FY 2018 
to FY 2019.
    The comparisons by region show that the estimated increases in 
capital payments per case from FY 2018 to FY 2019 in urban areas 
would range from a 0.3 percent increase for the Mountain urban 
region to a 3.7 percent increase for the Pacific urban region. For 
rural regions, the Mountain rural region is projected to experience 
the largest increase in capital IPPS payments per case of 0.9 
percent, while the East South Central rural region is projected to 
experience a decrease in capital IPPS payments per case of 2.9 
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 2018 to FY 2019. The proposed increase in capital payments for 
voluntary hospitals is estimated to be 1.5 percent. Government 
hospitals and proprietary hospitals are expected to experience an 
increase in capital IPPS payments of 2.9 and 1.8 percent, 
respectively.
    Section 1886(d)(10) of the Act established the MGCRB. Hospitals 
may apply for reclassification for purposes of the wage index for FY 
2019. 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 2019, we show the average 
capital payments per case for reclassified hospitals for FY 2019. 
Urban reclassified hospitals are expected to experience an increase 
in capital payments of 0.7 percent; urban nonreclassified hospitals 
are expected to experience an increase in capital payments of 2.7 
percent. The estimated percentage decrease for rural reclassified 
hospitals is 2.3 percent, and for rural nonreclassified hospitals, 
the estimated percentage decrease in capital payments is 0.1 
percent.

                                Table III--Comparison of Total Payments per Case
                            [FY 2018 payments compared to proposed FY 2019 payments]
----------------------------------------------------------------------------------------------------------------
                                                                                     Proposed
                                                     Number of      Average FY      average FY
                                                     hospitals    2018 payments/  2019 payments/      Change
                                                                       case            case
----------------------------------------------------------------------------------------------------------------
By Geographic Location:
    All hospitals...............................           3,257             948             964             1.7
    Large urban areas (populations over 1                  1,310           1,021           1,051             2.9
     million)...................................
    Other urban areas (populations of 1 million            1,170             938             947             1.0
     of fewer)..................................

[[Page 20628]]

 
    Urban hospitals.............................           2,480             979             999             2.0
        0-99 beds...............................             638             795             818             2.9
        100-199 beds............................             763             843             860             2.0
        200-299 beds............................             438             903             918             1.7
        300-499 beds............................             427             989           1,008             1.9
        500 or more beds........................             214           1,175           1,200             2.1
    Rural hospitals.............................             777             669             660            -1.4
        0-49 beds...............................             299             548             559             2.0
        50-99 beds..............................             279             605             616             1.8
        100-149 beds............................             116             680             655            -3.7
        150-199 beds............................              44             731             705            -3.5
        200 or more beds........................              39             815             786            -3.6
By Region:
    Urban by Region.............................           2,480             979             999             2.0
        New England.............................             113           1,070           1,093             2.1
        Middle Atlantic.........................             310           1,074           1,091             1.6
        South Atlantic..........................             401             871             886             1.7
        East North Central......................             385             942             953             1.1
        East South Central......................             147             825             843             2.1
        West North Central......................             158             963             980             1.8
        West South Central......................             378             887             912             2.8
        Mountain................................             163           1,021           1,024             0.3
        Pacific.................................             374           1,244           1,291             3.7
        Puerto Rico.............................              51             448             452             1.0
    Rural by Region.............................             777             669             660            -1.4
        New England.............................              20             927             919            -0.9
        Middle Atlantic.........................              53             643             637            -0.9
        South Atlantic..........................             122             622             609            -2.1
        East North Central......................             114             679             672            -1.0
        East South Central......................             150             623             605            -2.9
        West North Central......................              94             710             704            -0.9
        West South Central......................             147             594             588            -1.0
        Mountain................................              54             741             748             0.9
        Pacific.................................              23             865             858            -0.8
By Payment Classification:
    All hospitals...............................           3,257             948             964             1.7
    Large urban areas (populations over 1                  1,325           1,020           1,050             2.9
     million)...................................
    Other urban areas (populations of 1 million              956             903             924             2.3
     of fewer)..................................
    Rural areas.................................             976             869             852            -1.9
Teaching Status:
    Non-teaching................................           2,162             804             816             1.5
    Fewer than 100 Residents....................             846             916             930             1.5
    100 or more Residents.......................             249           1,316           1,346             2.4
    Urban DSH:
        Non-DSH.................................             520             870             888             2.1
        100 or more beds........................           1,483             993           1,020             2.7
        Less than 100 beds......................             365             724             748             3.4
    Rural DSH:
        Sole Community (SCH/EACH)...............             258             663             660            -0.5
        Referral Center (RRC/EACH)..............             367             941             919            -2.4
        Other Rural:
            100 or more beds....................              27             892             855            -4.2
            Less than 100 beds..................             127             537             550             2.5
    Urban teaching and DSH:
        Both teaching and DSH...................             818           1,064           1,095             2.9
        Teaching and no DSH.....................              88             917             933             1.7
        No teaching and DSH.....................           1,030             842             861             2.3
        No teaching and no DSH..................             345             852             874             2.6
Rural Hospital Types:
    RRC/EACH....................................             328             975             964            -1.1
    SCH/EACH....................................             311             750             752             0.2
    SCH, RRC and EACH...........................             133             807             792            -1.9
Hospitals Reclassified by the Medicare
 Geographic Classification Review Board:
    FY2018 Reclassifications:...................
        All Urban Reclassified..................             633             999           1,006             0.7
        All Urban Non-Reclassified..............           1,795             972             998             2.7

[[Page 20629]]

 
        All Rural Reclassified..................             278             708             692            -2.3
        All Rural Non-Reclassified..............             452             612             611            -0.1
        All Section 401 Reclassified Hospitals..             246           1,018             996            -2.1
        Other Reclassified Hospitals (Section                 47             654             660             0.9
         1886(d)(8)(B)).........................
    Type of Ownership:
        Voluntary...............................           1,901             963             978             1.5
        Proprietary.............................             854             856             872             1.8
        Government..............................             501             985           1,013             2.9
    Medicare Utilization as a Percent of
     Inpatient Days:
        0-25....................................             546           1,105           1,128             2.0
        25-50...................................           2,121             948             965             1.8
        50-65...................................             477             781             786             0.6
        Over 65.................................              73             547             558             2.2
        Invalid/Missing Data....................              39           1,108           1,311            18.4
----------------------------------------------------------------------------------------------------------------

J. Effects of Proposed Payment Rate Changes and Proposed Policy 
Changes Under the LTCH PPS

1. Introduction and General Considerations

    In section VII. 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 
2019. 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 409 LTCHs included in this impact analysis. We note 
that, although there are currently approximately 417 LTCHs, for 
purposes of this impact analysis, we excluded the data of all-
inclusive rate providers consistent with the development of the 
proposed FY 2019 MS-LTC-DRG relative weights (discussed in section 
VII.B.3.c. of the preamble of this proposed rule. Moreover, in the 
claims data used for this proposed rule, 1 of these 409 LTCHs only 
have claims for site neutral payment rate cases and are thus 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, 
the proposed 1.0115 percent annual update to the LTCH PPS standard 
Federal payment rate, 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 elimination 
of the 25-pecent threshold policy and corresponding proposed one-
time permanent budget neutrality adjustment (discussed in VII.E. of 
the preamble of this proposed rule), and the best available claims 
and CCR data to estimate the proposed change in payments for FY 
2019.
    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 through FY 2019. 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.
    Based on the best available data for the 409 LTCHs in our 
database that were considered in the analyses used for this proposed 
rule, we estimate that overall LTCH PPS payments in FY 2019 would 
decrease by approximately 0.1 percent (or approximately $5 million) 
based on the proposed rates and factors presented in section VII. of 
the preamble and section V. of the Addendum to this proposed rule.
    Based on the FY 2017 LTCH cases that were used for the analyses 
in this proposed rule, approximately 36 percent of those cases were 
classified as site neutral payment rate cases (that is, 36 percent 
of LTCH cases did not meet 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 most recent historical data. Taking into 
account the transitional blended payment rate and other changes that 
will apply to the site neutral payment rate cases in FY 2019, we 
estimate that aggregate LTCH PPS payments for these site neutral 
payment rate cases will decrease by approximately 1.1 percent (or 
approximately $11 million).
    Approximately 64 percent of LTCH cases are expected to meet the 
patient-level criteria for exclusion from the site neutral payment 
rate in FY 2019, and would be paid based on the LTCH PPS standard 
Federal payment rate for the full year. We estimate that total LTCH 
PPS payments for these LTCH PPS standard Federal payment rate cases 
in FY 2019 would increase approximately 0.2 percent (or 
approximately $6 million). This estimated increase in LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases in FY 2019 
is primarily due to the proposed 1.15 percent annual update to the 
LTCH PPS standard Federal payment rate for FY 2019 (discussed in 
section V.A. of the Addendum to this proposed rule) and the proposed 
-0.9 percent one-time permanent budget neutrality adjustment under 
our proposal to eliminate the 25-percent threshold policy.
    Based on the 409 LTCHs that were represented in the FY 2017 LTCH 
cases that were used for the analyses in this proposed rule 
presented in this Appendix, we estimate that aggregate FY 2019 LTCH 
PPS payments would be approximately $4.510 billion, as compared to 
estimated aggregate FY 2018 LTCH PPS payments of approximately 
$4.515 billion, resulting in an estimated overall decrease in LTCH 
PPS payments of approximately $5 million. We note that the estimated 
$5 million decrease in LTCH PPS payments in FY 2019 does not reflect 
changes in LTCH admissions or case-mix intensity, which would also 
affect the overall payment effects of the proposed policies in this 
proposed rule.
    The LTCH PPS standard Federal payment rate for FY 2018 is 
$41,415.11. For FY 2019, we are proposing to establish an LTCH PPS

[[Page 20630]]

standard Federal payment rate of $41,482.98 which reflects the 
proposed 1.15 percent annual update to the LTCH PPS standard Federal 
payment rate, the proposed area wage budget neutrality factor of 
0.999713 to ensure that the changes in the wage indexes and labor-
related share do not influence aggregate payments, and the proposed 
one-time permanent budget neutrality adjustment of 0.990535 to 
ensure that our proposed elimination of the 25-percent threshold 
policy (discussed in VII.E. of the preamble of this proposed rule) 
do not influence aggregate LTCH PPS 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 $40,662.75. This proposed 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 2019 LTCH PPS standard Federal payment 
rate are applied to the FY 2018 LTCH PPS standard Federal rate set 
forth under Sec.  412.523(c)(3)(xiv) (that is, $41,415.11).
    Table IV shows the estimated impact for LTCH PPS standard 
Federal payment rate cases. The estimated change attributable solely 
to the proposed annual update of 1.15 percent to the LTCH PPS 
standard Federal payment rate is projected to result in an increase 
of 1.1 percent in payments per discharge for LTCH PPS standard 
Federal payment rate cases from FY 2018 to FY 2019, on average, for 
all LTCHs (Column 6). In addition to the proposed annual update to 
the LTCH PPS standard Federal payment rate for FY 2019, the 
estimated increase of 1.1 percent shown in Column 6 of Table IV also 
includes estimated payments for SSO cases that would be paid using 
methodologies that are not affected by the annual update to the LTCH 
PPS standard Federal payment rate, as well as the 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 1.15 percent annual update for 
FY 2019.
    For FY 2019, 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 maintain the labor-
related share at 66.2 percent under the LTCH PPS for FY 2019, 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 0.999713 to ensure that the 
changes to the wage data and labor-related share do not result in 
any change in estimated aggregate LTCH PPS payments to LTCH PPS 
standard Federal payment rate cases.
    As we discuss in VII.E. of the preamble of this proposed rule, 
we are proposing to eliminate the 25-percent threshold policy in a 
budget neutral manner. Therefore, for FY 2019, we are proposing to 
apply a one-time permanent budget neutrality factor of 0.990535 to 
ensure the proposed elimination of the 25-percent threshold policy 
does not result in any change in estimated aggregate LTCH PPS 
payments.
    We currently estimate total HCO payments for LTCH PPS standard 
Federal payment rate cases would decrease from FY 2018 to FY 2019. 
Based on the FY 2017 LTCH cases that were used for the analyses in 
this proposed rule, we estimate that the FY 2018 HCO threshold of 
$27,381 (as established in the FY 2018 IPPS/LTCH PPS final rule) 
would result in estimated HCO payments for LTCH PPS standard Federal 
payment rate cases in FY 2018 that are above the 7.975 percent 
target. Specifically, we currently estimate that HCO payments for 
LTCH PPS standard Federal payment rate cases would be approximately 
7.988 percent of the estimated total LTCH PPS standard Federal 
payment rate payments in FY 2018. Combined with our estimate that FY 
2019 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 2019, this would result in a negligible 
estimated decrease in HCO payments of less than 0.1 percent between 
FY 2018 and FY 2019. We note that, consistent with past practice, in 
calculating these estimated HCO payments, we increased estimated 
costs by our actuaries' projected market basket percentage increase 
factor.
    Table IV shows the estimated impact of the proposed payment rate 
and proposed policy changes on LTCH PPS payments for LTCH PPS 
standard Federal payment rate cases for FY 2019 by comparing 
estimated FY 2018 LTCH PPS payments to estimated FY 2019 LTCH PPS 
payments. (As noted earlier, our analysis does not reflect changes 
in LTCH admissions or case-mix intensity.) 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 no change in estimated payments for LTCH PPS standard 
Federal payment rate cases for LTCHs located in a rural area. This 
estimated impact is based on the FY 2017 data for the 21 rural LTCHs 
(out of 409 LTCHs) that were used for the impact analyses shown in 
Table IV.

3. 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 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 through FY 2019, 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 section I.J. of this Appendix, we project a 
decrease in aggregate LTCH PPS payments in FY 2019 of approximately 
$5 million. This estimated decrease in payments reflects the 
projected increase in payments to LTCH PPS standard Federal payment 
rate cases of approximately $6 million and the projected decrease in 
payments to site neutral payment rate cases of approximately $11 
million under the dual rate LTCH PPS payment rate structure required 
by the statute beginning in FY 2016.
    As discussed in section V.D. of the Addendum to 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 2019

[[Page 20631]]

LTCH PPS payments (that is, FY 2017 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

    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. 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 2019, 
it is necessary to estimate payments per discharge for FY 2018 using 
the rates, factors, and the policies established in the FY 2018 
IPPS/LTCH PPS final rule and estimate payments per discharge for FY 
2019 using the proposed rates, factors, and the policies in this FY 
2019 IPPS/LTCH PPS proposed rule (as discussed in section VII. 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 2018 and proposed FY 2019 payments on a case-by-case 
basis using historical LTCH claims from the FY 2017 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 2017 MedPAR files. For modeling FY 2018 LTCH PPS payments, 
we used the FY 2018 standard Federal payment rate of $41,415.11 (or 
$ 40,595.02 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 2019 
LTCH PPS standard Federal payment rate, we used the proposed FY 2019 
standard Federal payment rate of $41,482.98 (or $40,662.75 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 COLA for LTCHs 
located in Alaska and Hawaii. Specifically, for modeling FY 2018 
LTCH PPS payments, we used the current FY 2018 labor-related share 
(66.2 percent), the wage index values established in the Tables 12A 
and 12B listed in the Addendum to the FY 2018 IPPS/LTCH PPS final 
rule (which are available via the internet on the CMS website), the 
FY 2018 HCO fixed-loss amount for LTCH PPS standard Federal payment 
rate cases of $27,381 (as discussed in section V.D. of the Addendum 
to that final rule), and the FY 2018 COLA factors (shown in the 
table in section V.C. of the Addendum to that final rule) to adjust 
the FY 2018 nonlabor-related share (33.8 percent) for LTCHs located 
in Alaska and Hawaii.
    Similarly, for modeling proposed FY 2019 LTCH PPS payments, we 
used the proposed FY 2019 LTCH PPS labor-related share (66.2 
percent), the proposed FY 2019 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 website), the 
proposed FY 2019 fixed-loss amount for LTCH PPS standard Federal 
payment rate cases of $30,639 (as discussed in section V.D.3. of the 
Addendum to this proposed rule), and the proposed FY 2019 COLA 
factors (shown in the table in section V.C. of the Addendum to this 
proposed rule) to adjust the FY 2019 nonlabor-related share (33.8 
percent) for LTCHs located in Alaska and Hawaii.
    The impacts that follow reflect the estimated ``losses'' or 
``gains'' among the various classifications of LTCHs from FY 2018 to 
FY 2019 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 2018 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 2019 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 2018 to FY 
2019 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 2018 to FY 2019 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 from FY 2018 (Column 4) to FY 2019 (Column 5) for 
all proposed changes.

[[Page 20632]]



 Table IV--Impact of Proposed Payment Rate and Proposed Policy Changes to LTCH PPS Payments for LTCH PPS Standard Federal Payment Rate Cases for FY 2019
                                           [Estimated FY 2018 payments compared to estimated FY 2019 payments]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             Proposed        Proposed
                                                                                                          percent change  percent change
                                                                                              Average      due to change      due to         Proposed
                                                          Number of LTCH    Average FY      proposed FY       to the         proposed     percent change
                                             Number of     PPS standard    2018 LTCH PPS   2019 LTCH PPS     proposed       changes to      due to all
           LTCH classification                 LTCHS       payment rate     payment per     payment per    annual update     area wage       proposed
                                                               cases         standard        standard         to the        adjustment       standard
                                                                           payment rate    payment rate      standard        with wage     payment rate
                                                                                                \1\        federal rate       budget        changes \4\
                                                                                                                \2\       neutrality \3\
(1)                                                  (2)             (3)             (4)             (5)             (6)             (7)             (8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Providers...........................             409          74,978         $47,125         $47,205             1.1             0.0             0.2
By Location:
    Rural...............................              21           2,494          39,412          39,405             1.1            -0.2             0.0
    Urban...............................             388          72,484          47,390          47,473             1.1             0.0             0.2
        Large...........................             196          40,272          50,584          50,738             1.1             0.0             0.3
        Other...........................             192          32,212          43,398          43,392             1.1             0.0             0.0
By Participation Date:
    Before Oct. 1983....................              11           1,910          43,040          42,764             1.1            -0.5            -0.6
    Oct. 1983-Sept. 1993................              42           9,584          52,189          52,476             1.1             0.2             0.5
    Oct. 1993-Sept. 2002................             169          31,176          45,745          45,783             1.1             0.0             0.1
    After October 2002..................             187          32,308          47,195          47,276             1.1             0.0             0.2
By Ownership Type:
    Voluntary...........................              77          10,529          49,341          49,513             1.1             0.2             0.3
    Proprietary.........................             319          62,700          46,608          46,670             1.1             0.0             0.1
    Government..........................              13           1,749          52,316          52,503             1.1             0.0             0.4
By Region:
    New England.........................              12           2,684          43,020          42,791             1.1            -0.3            -0.5
    Middle Atlantic.....................              24           5,929          50,944          51,276             1.1             0.1             0.7
    South Atlantic......................              66          13,670          48,296          48,379             1.1            -0.2             0.2
    East North Central..................              68          11,782          46,537          46,446             1.1            -0.4            -0.2
    East South Central..................              36           6,335          45,480          45,581             1.1            -0.1             0.2
    West North Central..................              28           4,390          45,904          45,807             1.1            -0.2            -0.2
    West South Central..................             120          18,278          41,768          41,750             1.1             0.1             0.0
    Mountain............................              29           4,048          48,082          48,022             1.1            -0.3            -0.1
    Pacific.............................              26           7,862          58,460          59,090             1.2             0.8             1.1
By Bed Size:
    Beds: 0-24..........................              43           5,094          47,085          47,049             1.1            -0.2            -0.1
    Beds: 25-49.........................             187          26,483          44,734          44,782             1.1             0.0             0.1
    Beds: 50-74.........................             105          19,580          48,176          48,274             1.1             0.0             0.2
    Beds: 75-124........................              42          10,938          50,444          50,649             1.1             0.1             0.4
    Beds: 125-199.......................              23           7,944          47,519          47,442             1.1            -0.3            -0.2
    Beds: 200+..........................               9           4,939          47,834          48,112             1.1             0.5             0.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimated FY 2019 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 2018 to FY 2019 for the proposed annual
  update to the LTCH PPS standard Federal payment rate.
\3\ Proposed percent change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2018 to FY 2019 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\ Proposed percent change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2018 (shown in Column 4) to FY
  2019 (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 estimated payments to 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 2017 LTCH cases (from 409 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 0.2 percent, on average, for all LTCHs from FY 
2018 to FY 2019 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 
0.2 percent increase in LTCH PPS payments per discharge was 
determined by comparing estimated FY 2019 LTCH PPS payments (using 
the proposed payment rates and factors discussed in this proposed 
rule) to estimated FY 2018 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 2019 by 1.15 percent. 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 2019 LTCH PPS standard 
Federal payment rate of 0.999713, 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 to make a 
budget neutrality adjustment of 0.990535 for our proposed 
elimination of the 25-percent threshold

[[Page 20633]]

policy (discussed in VII.E. 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 1.15 percent annual update to the LTCH 
PPS standard Federal payment rate is projected to result in 
approximately a 1.1 percent increase in estimated payments per 
discharge for LTCH PPS standard Federal payment rate cases for all 
LTCHs from FY 2018 to FY 2019. 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 a methodology that is not entirely 
affected by the update to the LTCH PPS standard Federal payment 
rate. Consequently, for certain hospital categories, we estimate 
that payments to LTCH PPS standard Federal payment rate cases may 
increase by less than 1.1 percent due to the proposed annual update 
to the LTCH PPS standard Federal payment rate for FY 2019.

(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 2018 to FY 
2019 for all hospitals is 0.2 percent. However, for rural LTCHs, 
estimated payments for LTCH PPS standard Federal payment rate cases 
are expected to remain constant. This is primarily driven by a 
projected decrease resulting from changes to the proposed changes to 
the area wage index adjustment. For urban LTCHs, we estimate an 
increase of 0.2 percent from FY 2018 to FY 2019. Among the urban 
LTCHs, large urban LTCHs are projected to experience an increase of 
0.3 percent in estimated payments per discharge for LTCH PPS 
standard Federal payment rate cases from FY 2018 to FY 2019, and 
such payments for the remaining urban LTCHs are projected to remain 
constant from FY 2018 to FY 2019, 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 43 percent) are 
in LTCHs that began participating in the Medicare program after 
October 2002, and they are projected to experience a 0.2 percent 
increase in estimated payments per discharge for LTCH PPS standard 
Federal payment rate cases from FY 2018 to FY 2019, as shown in 
Table IV.
    Approximately 3 percent of LTCHs began participating in the 
Medicare program before October 1983, and these LTCHs are projected 
to experience an average percent decrease of 0.6 percent in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2018 to FY 2019. Approximately 10 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 0.5 percent in estimated payments for LTCH PPS 
standard Federal payment rate cases from FY 2018 to FY 2019. LTCHs 
that began participating in the Medicare program between October 
1993 and October 1, 2002, which treat approximately 41 percent of 
all LTCH PPS standard Federal payment rate cases, are projected to 
experience a 0.1 percent increase in estimated payments from FY 2018 
to FY 2019.

(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 19 percent of LTCHs 
are identified as voluntary (Table IV). The majority (approximately 
78 percent) of LTCHs are identified as proprietary, while government 
owned and operated LTCHs represent approximately 3 percent of LTCHs. 
Based on ownership type, voluntary LTCHs are expected to experience 
a 0.3 percent increase in payments to LTCH PPS standard Federal 
payment rate cases, while proprietary LTCHs are expected to 
experience an average increase of 0.1 percent in payments to LTCH 
PPS standard Federal payment rate cases. Government owned and 
operated LTCHs, meanwhile, are expected to experience a 0.4 percent 
increase in payments to LTCH PPS standard Federal payment rate cases 
from FY 2018 to FY 2019.

(4) Census Region

    Estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases for FY 2019 are projected to increase across 4 of 
the 9 census regions. LTCHs located in the East and West North 
Central regions and the Mountain region are projected to experience 
a slight decrease of 0.1 and 0.2 percent, respectively, while LTCHs 
located New England are expected to experience a 0.5 decrease in 
payments. All other regions are projected to experience constant or 
increased payments per discharge for FY 2019 in comparison to FY 
2018. Of the 9 census regions, we project that the increase in 
estimated payments per discharge to LTCH PPS standard Federal 
payment rate cases will have the largest positive impact on LTCHs in 
the Pacific region (1.1 percent) and the Middle Atlantic region (0.7 
percent) as shown in Table IV. These regional variations are largely 
due to proposed updates in the wage index.

(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 0.1 percent, while LTCHs with 125-199 beds are expected to 
experience a decrease of 0.2 percent. We expect the remaining 
categories to experience an increase in payments of 0.1 and 0.2 
percent for LTCHs with 25-49 and 50-74 beds, respectively, a 0.4 
percent increase in payments for LTCHs with 75-124 beds, and a 0.6 
increase for LTCHs with 200 or more beds.

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 2019 relative to FY 2018 of approximately 6 million (or 
approximately 0.2 percent) for the 409 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 2019 relative to FY 2018 of approximately $11 million 
(or approximately 1.1 percent) for the 409 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 2019 relative to FY 2018 of approximately $5 
million (or approximately 0.1 percent) for the 409 LTCHs in our 
database.

5. Effect on Medicare Beneficiaries

    Under the LTCH PPS, hospitals receive payment based on the 
average resources consumed by patients for each diagnosis. We do not 
expect any changes in the quality of care or access to services for 
Medicare beneficiaries as a result of this proposed rule, but we 
continue to expect that paying prospectively for LTCH services will 
enhance the efficiency of the Medicare program. As discussed above, 
we do not expect the continued implementation of the site neutral 
payment system to have a negative impact access to or quality of 
care, as demonstrated in areas where there is little or no LTCH 
presence, general short-term acute care hospitals are effectively 
providing treatment for the same types of patients that are treated 
in LTCHs.

K. Effects of Proposed Requirements for the Hospital Inpatient 
Quality Reporting (IQR) Program

1. Background

    In section VIII.A. of the preamble of this proposed rule, we 
discuss our current and proposed requirements for hospitals to 
report quality data under the Hospital IQR Program in order to 
receive the full annual percentage increase for the FY 2021 payment 
determination.
    In this proposed rule, we are proposing to: (1) Extend eCQM 
reporting requirements to the CY 2019 reporting period/FY 2021 
payment determination; (2) require the 2015 Edition of CEHRT for 
eCQMs beginning with the CY 2019 reporting period/FY 2021 payment 
determination; (3) remove 17 claims-based measures beginning with 
the CY 2018 reporting period/FY 2020 payment determination; (4) 
remove two structural

[[Page 20634]]

measures beginning with the CY 2018 reporting period/FY 2020 payment 
determination; (5) remove two claims-based measures beginning with 
the CY 2019 reporting period/FY 2021 payment determination; (6) 
remove eight chart-abstracted measures beginning with the CY 2019 
reporting period/FY 2021 payment determination; (7) remove one 
claims-based measure beginning with the CY 2020 reporting period/FY 
2022 payment determination; (8) remove one chart-abstracted measure 
beginning with the CY 2020 reporting period/FY 2022 payment 
determination; (9) remove seven eCQMs beginning with CY 2020 
reporting period/FY 2022 payment determination; (10) remove one 
claims-based measure beginning with the CY 2021 reporting period/FY 
2023 payment determination; and (11) adopt a new measure removal 
factor.
    We do not believe our proposal to adopt a new measure removal 
factor will directly affect burden. However, as further explained in 
section XIV.B.3. of the preamble of this proposed rule, we believe 
that there will be an overall decrease in the estimated information 
collection burden for hospitals due to the other proposed policies. 
We refer readers to section XIV.B.3. of the preamble of this 
proposed rule for a summary of our information collection burden 
estimate calculations. The effects of these proposals are discussed 
in more detail below.

2. Impact of Proposed Extension of eCQM Reporting Requirements

    In the FY 2018 IPPS/LTCH PPS final rule, we finalized policies 
to require hospitals to submit one, self-selected calendar quarter 
of data for four eCQMs in the Hospital IQR Program measure set for 
the CY 2018 reporting period/FY 2020 payment determination (82 FR 
38355 through 38361). In section VIII.A.11.d.(2) of the preamble of 
this proposed rule, we are proposing to extend those reporting 
requirements for the CY 2019 reporting period/FY 2021 payment 
determination, such that hospitals would be required to submit one, 
self-selected calendar quarter of data for four eCQMs in the 
Hospital IQR Program measure set. Therefore, we believe our burden 
estimate of 40 minutes per hospital per year (10 minutes per record 
x 4 eCQMs x 1 quarter) associated with eCQM reporting requirements 
finalized for the CY 2018 reporting period/FY 2020 payment 
determination will also apply to the CY 2019 reporting period/FY 
2021 payment determination.

3. Impact of Proposed Requirement To Certify EHR to the 2015 Edition

    In section VIII.A.11.d.(3) of the preamble of this proposed 
rule, we discuss our proposal to require use of EHR technology 
certified to the 2015 Edition beginning with the CY 2019 reporting 
period/FY 2021 payment determination, which aligns with previously 
established requirements in the Medicare and Medicaid Promoting 
Interoperability Programs (previously known as the Medicare and 
Medicaid EHR Incentive Programs). As described in section XIV.B.3.g. 
of the preamble of this proposed rule, we expect this proposal to 
have no impact on information collection burden for the Hospital IQR 
Program because this proposal does not require hospitals to submit 
new data to CMS.
    With respect to any costs unrelated to data submission, although 
this proposal would require some investment in systems updates, the 
Medicare and Medicaid Promoting Interoperability Programs 
(previously known as the Medicare and Medicaid EHR Incentive 
Programs) previously finalized a requirement that hospitals use the 
2015 Edition of CEHRT beginning with the CY 2019 reporting period/FY 
2021 payment determination (80 FR 62761 through 62955). Because all 
hospitals participating in the Hospital IQR Program are subsection 
(d) hospitals that also participate in the Medicare and Medicaid 
Promoting Interoperability Programs (previously known as the 
Medicare and Medicaid EHR Incentive Programs), we do not anticipate 
any additional costs as a result of this proposal.

4. Impact of Proposed Removal of Chart-Abstracted Measures

    In sections VIII.A.5.b.(2)(b) and VIII.A.5.b.(8) of the preamble 
of this proposed rule, beginning with the CY 2019 reporting period/
FY 2021 payment determination, we are proposing to remove eight 
chart-abstracted measures--five National Health and Safety Network 
(NHSN) hospital-acquired infection (HAI) measures (CDI (NQF #1717), 
CAUTI (NQF #0138), CLABSI (NQF #0139), MRSA Bacteremia (NQF #1716), 
Colon and Abdominal Hysterectomy SSI (NQF #0753)) and three clinical 
process of care measures (ED-1 (NQF #0495), IMM-2 (NQF #1659), VTE-6 
\405\). In section VIII.A.5.b.(8)(b) of the preamble of this 
proposed rule, beginning with the CY 2020 reporting period/FY 2022 
payment determination, we also are proposing to remove one chart-
abstracted clinical process of care measure (ED-2).
---------------------------------------------------------------------------

    \405\ NQF endorsement has been removed.
---------------------------------------------------------------------------

    As described in detail in section XIV.B.3. of the preamble of 
this proposed rule, we expect our proposals to remove the clinical 
process of care chart-abstracted measures would reduce the 
information collection burden by 1,046,071 hours and approximately 
$38.3 million for the CY 2019 reporting period/FY 2021 payment 
determination, and an additional 901,200 hours and approximately $33 
million for the CY 2020 reporting period/FY 2022 payment 
determination for the Hospital IQR Program. We note that the burden 
of data collection for the NHSN HAI measures (CDI, CAUTI, CLABSI, 
MRSA Bacteremia, and Colon and Abdominal Hysterectomy SSI) is 
accounted for under the Centers for Disease Control and Prevention 
(CDC) National Health and Safety Network (NHSN) OMB control number 
0920-0666. Because burden associated with submitting data for the 
NHSN HAI measures is captured under a separate OMB control number, 
we do not provide an independent estimate of the information 
collection burden associated with these measures for the Hospital 
IQR Program.
    The data validation activities, however, are conducted by CMS. 
Since the measures were adopted into the Hospital IQR Program, CMS 
has validated the data for purposes of the Program. Therefore, this 
burden has been captured under the Hospital IQR Program's OMB 
control number 0938-1022. While we did not propose any changes 
directly to the validation process related to chart-abstracted 
measures, if our proposals to remove five NHSN HAI and four clinical 
process of care chart-abstracted measures (in section 
VIII.A.5.b.(2)(b) and section VIII.A.5.b.(8) of the preamble of this 
proposed rule) are finalized as proposed, we believe that hospitals 
will experience an overall reduction in burden associated with 
validation of chart-abstracted measures beginning with the FY 2022 
payment determination because hospitals selected for validation are 
currently required to submit validation templates for the NHSN HAI 
measures for the Hospital IQR Program. In addition, if our proposals 
to remove the NHSN HAI measures are finalized, the information 
collection burden associated with submission of these validation 
templates would be eliminated from the Hospital IQR Program. As 
described in detail in section XIV.B.3. of the preamble of this 
proposed rule, we estimate a total decrease of 43,200 hours and 
approximately $1.6 million as a result of discontinuing submission 
of NHSN HAI validation templates under the Hospital IQR Program as 
described in section IV.K.4.e. of the preamble of this proposed 
rule. The proposed removal of NHSN HAI measures from the Hospital 
IQR Program, the subsequent cessation of validation processes for 
the NHSN HAI measures, the retention of these measures in the HAC 
Reduction Program, and the proposed implementation of a validation 
process for these measures under the HAC Reduction Program, 
represent no net change in information collection burden for the 
NHSN HAI measures across CMS hospital quality programs. Therefore, 
we do not anticipate any change under the CDC NHSN's OMB control 
number 0920-0666 due to our proposals.
    Furthermore, we anticipate that the costs to hospitals 
participating in the Hospital IQR Program, beyond that associated 
with information collection, will be reduced because hospitals would 
no longer need to review multiple feedback reports for the NHSN HAI 
measures from three different hospital quality programs (the 
Hospital IQR, Hospital VBP, and HAC Reduction Programs) that use 
three different reporting periods, which result in interpreting 
slightly different measure rates for the same measures (under the 
Hospital IQR Program, a rolling four quarters of data are used to 
update the Hospital Compare website; under the Hospital VBP Program, 
1-year periods are used for each of the baseline period and the 
performance period; and under the HAC Reduction Program, a 2-year 
performance period is used).

5. Impact of Proposed Removal of Two Structural Measures

    In section VIII.A.5.a. and VII.A.5.b.(1) of the preamble of this 
proposed rule, we are proposing to remove two structural measures, 
Hospital Survey on Patient Safety Culture and Safe Surgery 
Checklist, beginning with the CY 2018 reporting period/FY 2020 
payment determination. We believe these

[[Page 20635]]

proposals will result in a minimal information collection burden 
reduction, which is addressed in section XIV.B.3. of the preamble of 
this proposed rule. In addition, we refer readers to VIII.A.4.b. of 
the preamble of this proposed rule, where we acknowledge that costs 
are multi-faceted and include not only the burden associated with 
reporting, but also the costs associated with implementing and 
maintaining Program requirements. We believe it may be unnecessarily 
costly and/or of limited benefit to retain or maintain a measure 
which our analyses show no longer meaningfully supports program 
objectives (for example, informing beneficiary choice or payment 
scoring). As discussed in sections VIII.A.5.a. and VIII.A.5.b.(1) of 
the preamble of this proposed rule, we believe these measure are of 
limited utility for internal hospital quality improvement efforts 
because they do not provide individual patient level data or any 
information on patient outcomes. In addition, our analyses show that 
use of patient safety culture surveys and safe surgery checklists is 
widely in practice among hospitals. Therefore, we do not believe 
that these measures support the program objectives of facilitating 
internal hospital quality improvement efforts or informing 
beneficiary choice.

6. Impact of the Proposed Removal of Claims-Based Measures

    In sections VIII.A.5.b.(2)(a), (3), (4), (6), and (7) of the 
preamble of this proposed rule, we are proposing to remove 17 
claims-based measures PSI-90 (NQF #0531), READM-30-AMI (NQF #0505), 
READM-30-CABG (NQF #2515), READM-30-COPD (NQF #1891), READM-30-HF 
(NQF #0330), READM-30-PN (NQF #0506), READM-30-THA/TKA (NQF #1551), 
READM-30-STK, MORT-30-AMI (NQF #0230), MORT-30-HF (NQF #0229), MSPB 
(NQF #2158), Cellulitis Payment, GI Payment, Kidney/UTI Payment, AA 
Payment, Chole and CDE Payment, and SFusion Payment) beginning with 
the CY 2018 reporting period/CY 2020 payment determination. In 
addition, in section VIII.A.5.b.(4) of the preamble of this proposed 
rule, we are proposing to remove two claims-based measures (MORT-30-
COPD (NQF #1893) and MORT-30-PN (NQF #0468)) beginning with the CY 
2019 reporting period/FY 2021 payment determination. Furthermore, in 
sections VIII.A.5.b.(4) and VIII.A.5.b.(5), respectively, of the 
preamble of this proposed rule, we are proposing to remove one-
claims based measure (MORT-30-CABG (NQF #2558)) beginning with the 
CY 2020 reporting period/FY 2022 payment determination and one 
claims-based measure (Hip/Knee Complications (NQF #1550)) beginning 
with the CY 2021 reporting period/FY 2023 payment determination.
    These claims-based measures are calculated using only data 
already reported to the Medicare program for payment purposes, 
therefore, we do not believe removing these measures will impact the 
information collection burden on hospitals. Nonetheless, we 
anticipate that hospitals will experience a general cost reduction 
associated with these proposals stemming from no longer having to 
review and track various program requirements or measure information 
in multiple confidential feedback and preview reports from multiple 
programs that reflect multiple measure rates due to varying scoring 
methodologies and reporting periods.

7. Impact of the Proposed Removal of eCQMs

    In section VIII.A.5.b.(9) of the preamble of this proposed rule, 
we are proposing to remove seven eCQMs from the Hospital IQR Program 
eCQM measure set beginning with the CY 2020 reporting period/FY 2022 
payment determination. As described in section XIV.B.3. of this 
proposed rule, we do not anticipate that removal of these seven 
eCQMs will affect the information collection burden for hospitals. 
However, as discussed in section VIII.A.4.b. of the preamble of this 
proposed rule, we believe costs are multifaceted and include not 
only the burden associated with reporting, but also the costs 
associated with implementing and maintaining Program requirements, 
such as maintaining measure specifications in hospitals' EHR systems 
for all of the eCQMs available for use in the Hospital IQR Program. 
We further discuss costs unrelated to information collection 
associated with eCQM removal in section VIII.A.5.b.(9) of the 
preamble of this proposed rule.

8. Summary of Effects

    In summary, we estimate: (1) A total information collection 
burden reduction of 1,046,138 hours (-1,046,071 hours due to the 
proposed removal of ED-1 (NQF #0495), IMM-2 (NQF #1659), and VTE-6 
\406\ measures for the CY 2019 reporting period/FY 2021 payment 
determination and -67 hours for no longer collecting data for the 
voluntary Hybrid HWR measure \407\) and a total cost reduction 
related to information collection of approximately $38.3 million (-
1,046,138 hours x $36.58 per hour \408\) for the CY 2019 reporting 
period/FY 2021 payment determination; and (2) a total information 
collection burden reduction of 901,200 hours (-858,000 hours due to 
the proposed removal of ED-2 -43,200 hours due to the proposed 
discontinuation of the NHSN HAI measure validation process under the 
Hospital IQR Program) and a total cost reduction related to 
information collection of approximately $33 million (-901,200 hours 
x $36.58 per hour \409\) for the CY 2020 reporting period/FY 2022 
payment determination. As stated earlier, we also anticipate 
additional cost reductions unrelated to the information collection 
burden associated with our proposals, including, for example, no 
longer having to review and track measure information in multiple 
feedback reports from multiple programs and maintaining measure 
specifications in hospitals' EHR systems for all eCQMs available for 
use in the program.
---------------------------------------------------------------------------

    \406\ NQF Endorsement has been removed.
    \407\ In the FY 2017 IPPS/LTCH PPS final rule (82 FR 38350 
through 38355), we finalized our proposal to collect data on a 
voluntary basis for the Hybrid HWR measure for the CY 2018 reporting 
period/FY 2020 payment determination. We estimated that 
approximately 100 hospitals would voluntarily report data for this 
measure, resulting in a total burden of 67 hours across all 
hospitals for the CY 2018 reporting period/FY 2020 payment 
determination (82 FR 38504). Because we only finalized voluntary 
collection of data for one year, voluntary collection of this data 
would no longer occur beginning with the CY 2019 reporting period/FY 
2021 payment determination and subsequent years resulting in a 
reduction in burden of 67 hours across all hospitals.
    \408\ In the FY 2017 IPPS/LTCH PPS final rule (82 FR 38501), we 
finalized an hourly wage estimate of $18.29 per hour, plus 100 
percent overhead and fringe benefits, for the Hospital IQR Program. 
Accordingly, we calculate cost burden to hospitals using a wage plus 
benefits estimate of $36.58 per hour.
    \409\ Ibid.
---------------------------------------------------------------------------

    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 failure to meet all 
requirements of this Program. We anticipate that the number of 
hospitals not receiving the full annual percentage increase will be 
approximately the same as in past years or slightly decrease. We 
believe that reducing the number of chart-abstracted measures used 
in the Hospital IQR Program would, at least in part, help increase 
hospitals' chances to meet all Program requirements and receive 
their full annual percentage increase.
    We refer readers to section XIV.B.3. of the preamble of this 
proposed rule (information collection requirements) for a detailed 
discussion of the burden of the requirements for submitting data to 
the Hospital IQR Program.

L. Effects of Proposed Requirements for the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program

    In section VIII.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 VIII.B.3.b. of the preamble of this proposed rule, we 
are proposing to remove four web-based, structural measures: (1) 
Oncology: Radiation Dose Limits to Normal Tissues (PCH-14/NQF 
#0382); (2) Oncology: Medical and Radiation--Pain Intensity 
Quantified (PCH-16/NQF #0384); (3) Prostate Cancer: Adjuvant 
Hormonal Therapy for High Risk Patients (PCH-17/NQF #0390); and (4) 
Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low-
Risk Patients (PCH-18/NQF #0389), and two chart-abstracted, NHSN 
measures: (5) Catheter-Associated Urinary Tract Infection (CAUTI) 
Outcome Measure (PCH-5/NQF #0138) and (6) Central Line-Associated 
Bloodstream Infection (CLABSI) Outcome Measure (PCH-4/NQF #0139) 
beginning with the FY 2021 program year. In addition, in section 
VIII.B.4. of the preamble of this proposed rule, we are proposing to 
adopt one claims-based measure for the FY 2021 program year and 
subsequent years: 30-Day Unplanned Readmissions for Cancer Patients 
measure (NQF #3188). If

[[Page 20636]]

finalized, the PCHQR Program measure set would consist of 13 
measures for the FY 2021 program. Further, in section XIV.B.4.b. of 
the preamble of this proposed rule, we are proposing to adopt a new 
time burden estimate, to be applied to structural and web-based tool 
measures for the FY 2021 program year and subsequent years. 
Specifically, we are proposing to adopt the estimate of 15 minutes 
for reporting these types of measures, which is the time estimate 
utilized by the Hospital IQR Program (80 FR 49762).
    As explained in section XIV.B.4.c. of the preamble of this 
proposed rule, we anticipate that these proposed new requirements 
would reduce the overall burden on participating PCHs. If our 
proposal to apply 15 minutes per measure as a burden estimate for 
structural measures and web-based tool measures and our proposal to 
remove the following web-based structural measures: (1) Oncology: 
Radiation Dose Limits to Normal Tissues (PCH-14/NQF #0382); (2) 
Oncology: Medical and Radiation--Pain Intensity Quantified (PCH-16/
NQF #0384); (3) Prostate Cancer: Adjuvant Hormonal Therapy for High 
Risk Patients (PCH-17/NQF #0390); and (4) Prostate Cancer: Avoidance 
of Overuse of Bone Scan for Staging Low-Risk Patients (PCH-18/NQF 
#0389)) are finalized as proposed, we estimate a reduction of 1 hour 
(or 60 minutes) per PCH (15 minutes per measure x 4 measures = 60 
minutes), and a total annual reduction of approximately 11 hours for 
all 11 PCHs (60 minutes x 11 PCHs/60 minutes per hour), as a result 
of the proposed removal of these four measures.
    We further anticipate that the proposed removal of the two NHSN 
measures: (1) Catheter-Associated Urinary Tract Infection (CAUTI) 
Outcome Measure (PCH-5/NQF #0138) and (2) Central Line-Associated 
Bloodstream Infection (CLABSI) Outcome Measure (PCH-4/NQF #0139) 
will result in a net burden decrease. If our proposal to remove the 
CAUTI and CLABSI measures is finalized as proposed, we estimate an 
annual burden reduction of 2,518 hours per PCH (1,259 hours x 2 
measures = 2,518 hours) and an annual burden reduction of 27,698 
hours across all 11 PCHs (2,518 hours x 11 PCHs = 27,698 hours).
    We do not anticipate any increase in burden on the PCHs 
associated with our proposal to adopt a claims-based measure into 
the PCHQR Program beginning with the FY 2021 program year. This 
measure is claims-based and does not require facilities to report 
any additional data beyond that already submitted on Medicare 
administrative claims for payment purposes. Therefore, we do not 
believe that there is any associated burden with this proposal.
    In summary, if our proposals to remove 6 measures are finalized 
as proposed, we estimate a total burden reduction of 27,709 hours of 
burden per year for all 11 PCHs (27,698 hours for the removal of the 
CAUTI & CLABSI measures + 11 hours for the removal of the 4 web-
based, structural measures = 27,709 total hours), beginning with the 
FY 2021 program year.

M. Effects of Proposed Requirements for the Long-Term Care Hospital 
Quality Reporting Program (LTCH QRP)

    Under the LTCH QRP, the Secretary reduces by 2 percentage points 
the annual update to the LTCH PPS standard Federal rate for 
discharges for an LTCH during a fiscal year if the LTCH has not 
complied with the LTCH QRP requirements specified for that fiscal 
year. Information is not available to determine the precise number 
of LTCHs that will not meet the requirements to receive the full 
annual update for the FY 2019 payment determination.
    We believe that the burden and costs associated with the LTCH 
QRP is the time and effort associated with complying with the 
requirements of the LTCH QRP. We intend to closely monitor the 
effects of this quality reporting program on LTCHs and to help 
facilitate successful reporting outcomes through ongoing stakeholder 
education, national trainings, and help desks.
    We refer readers to section XIV.B.6. of the preamble of this 
proposed rule for details discussing information collection 
requirements for the LTCH QRP.

N. Effects of Proposed Requirements Regarding the Promoting 
Interoperability Programs

    In section VIII.D. of the preamble of this proposed rule, we are 
proposing a new performance-based scoring methodology and changes to 
the Stage 3 objectives and measures for eligible hospitals and CAHs 
that attest to CMS under the Medicare Promoting Interoperability 
Program. We also are proposing changes to the EHR reporting period 
in CYs 2019 and 2020; the CQM reporting period and criteria for CY 
2019; and to codify the policies for subsection (d) Puerto Rico 
hospitals to participate in the Medicare Promoting Interoperability 
Program for eligible hospitals, including policies previously 
implemented through program instruction. We believe that, overall, 
these proposals would reduce burden. We refer readers to section 
XIV.B.9. of the preamble of this proposed rule for additional 
discussion on the information collection effects associated with 
these proposals.
    In section VIII.D.12.a. of the preamble of this proposed rule, 
we are proposing to amend 42 CFR 495.324(b)(2) and 495.324(b)(3) to 
align with current prior approval policy for MMIS and ADP systems at 
45 CFR 95.611(a)(2)(ii), and (b)(2)(iii) and (iv), and to minimize 
burden on States. Specifically, we are proposing that the prior 
approval dollar threshold in Sec.  495.324(b)(3) would be increased 
to $500,000, and that a prior approval threshold of $500,000 would 
be added to Sec.  495.324(b)(2). In addition, in light of these 
proposed changes, we are proposing a conforming amendment to amend 
the threshold in Sec.  495.324(d) for prior approval of 
justifications for sole source acquisitions to be the same $500,000 
threshold. That threshold is currently aligned with the $100,000 
threshold in current 495.324(b)(3). Amending Sec.  495.324(d) to 
preserve alignment with Sec.  495.324(b)(3) maintain the consistency 
of our prior approval requirements. We believe that these proposals 
also would reduce burden on States by raising the prior approval 
thresholds and generally aligning them with the thresholds for prior 
approval of MMIS and ADP acquisitions costs.
    In section VIII.D.12.b. of the preamble of this proposed rule, 
we are proposing to amend 42 CFR 495.322 to provide that the 90 
percent FFP for Medicaid Promoting Interoperability Program 
administration would no longer be available for most State 
expenditures incurred after September 30, 2022. We are proposing a 
later sunset date, September 30, 2023, for the availability of 90 
percent enhanced match for State administrative costs related to 
Medicaid Promoting Interoperability Program audit and appeals 
activities, as well as costs related to administering incentive 
payment disbursements and recoupments that might result from those 
activities. States would not be able to claim any Medicaid Promoting 
Interoperability Program administrative match for expenditures 
incurred after September 30, 2023. We do not believe that these 
proposals would impose any additional burdens on States. We refer 
readers to section XIV.B.9. of the preamble of this proposed rule 
for additional discussion on the information collection effects 
associated with these proposals.

O. Alternatives Considered

    This proposed rule contains a range of 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.
    For example, as discussed in section II.F.2.d. of the preamble 
of this proposed rule, section II.H.5.a. of the preamble of this 
proposed rule, and section II.A.4.g. of the Addendum to this 
proposed rule, we believe that, in the context of the pending new 
technology add-on payment applications for two CAR T-cell therapy 
drugs, there may be merit in the suggestions from the public to 
create a new MS-DRG for the assignment of procedures involving the 
utilization of CAR T-cell therapy drugs and cases representing 
patients who receive treatment involving CAR T-cell therapy as an 
alternative to our proposed MS-DRG assignment to MS-DRG 016 for FY 
2019, or the suggestions to allow hospitals to utilize an 
alternative CCR specific to procedures involving CAR T-cell therapy 
drugs for purposes of outlier payments, new technology add-on 
payments, if approved, and payments to IPPS excluded cancer 
hospitals. We are considering these alternatives for FY 2019 and are 
seeking public comment on them.
    We also are inviting comments on how these payment alternatives 
would affect access to care, as well as how they affect incentives 
to encourage lower drug prices, which is a high priority for this 
Administration. In addition, we are considering alternative 
approaches and authorities to encourage value-based care and lower 
drug prices. We solicit comments on how the payment methodology 
alternatives may intersect and affect future participation in any 
such alternative approaches.
    As discussed in section II.A.4.g. of the Addendum to this 
proposed rule, the impact

[[Page 20637]]

of an alternative CCR specific to procedures involving CAR T-cell 
therapy drugs is dependent on the relationship between the CCR that 
would otherwise be used and the alternative CCR used. For 
illustrative purposes, we discussed an example where if a hospital 
charged $400,000 for a procedure involving the utilization of the 
CAR T-cell therapy drug described by ICD-10-PCS code XW033C3, the 
application of a hypothetical CCR of 0.25 results in a cost of 
$100,000 (=$400,000 * 0.25), while the application of a hypothetical 
CCR of 1.00 results in a cost of $400,000 (=$400,000 * 1.0).
    The impact of the creation of a separate MS-DRG for procedures 
involving the utilization of CAR T-cell therapy drugs and cases 
representing patients receiving treatment involving CAR T-cell 
therapy would be dependent on the relative weighting factor 
determined for the separate MS-DRG. We are inviting public comments 
on the most appropriate approach for determining the relative 
weighting factor under this alternative, such as an approach based 
on taking into account an appropriate portion of the average sales 
price (ASP) for these drugs, or other approaches. We note that our 
proposed relative weighting factor for MS-DRG 016 for FY 2019 can be 
found in Table 5 associated with this proposed rule (which is 
available via the internet on the CMS website).
    As discussed in section VIII.A.5.b.(9) of the preamble of this 
proposed rule, in the context of removing seven eCQMs from the 
Hospital IQR Program for the CY 2020 reporting period/FY 2022 
payment determination and subsequent years, we considered proposing 
to remove these seven eCQMs 1 year earlier, beginning with the CY 
2019 reporting period/FY 2021 payment determination. Our analyses 
indicated no estimated change in average reporting burden between 
these two options. We interpret the lack of difference is due to 
very few hospitals choosing the seven eCQMs proposed for removal. 
Because the alternatives considered do not impact the collection of 
information for hospitals, we do not expect these alternatives to 
affect the reporting burden on hospitals associated with the 
Hospital IQR Program. We considered these alternatives and are 
seeking public comment on them.
    As discussed in section IV.I.4.b. of the preamble of this 
proposed rule, in the context of scoring hospitals for purposes of 
the Hospital VBP Program for the FY 2021 program year and subsequent 
years, we analyzed two domain weighting options based on our 
proposals to remove 10 measures and the Safety domain from the 
Hospital VBP Program. As an alternative to our proposal to weight 
the three remaining domains as Clinical Outcomes domain (proposed 
name change)--50 percent; Person and Community Engagement domain--25 
percent; and Efficiency and Cost Reduction domain--25 percent, we 
considered weighting each of the three remaining domains equally, 
meaning each of the three domains would be weighted as one-third of 
a hospital's Total Performance Score (TPS), beginning with the FY 
2021 program year. As discussed in section IV.I.4.b. of the preamble 
of this proposed rule, we also considered keeping the current domain 
weighting (25 percent for each of the four domains--Safety, Clinical 
Outcomes (proposed name change), Person and Community Engagement, 
and Efficiency and Cost Reduction--with proportionate reweighting if 
a hospital has sufficient data on only three domains), which would 
require keeping at least one or more of the measures in the Safety 
domain and the Safety domain itself. As summarized in section 
IV.I.4.b.(3) of the preamble of this proposed rule, to understand 
the potential impacts of the proposed domain weighting on hospitals' 
TPSs, we conducted analyses using FY 2018 program data that 
estimated the potential impacts of our proposed domain weighting 
policy to increase the weight of the Clinical Outcomes domain from 
25 percent to 50 percent of a hospital's TPS and an alternative 
weighting policy we considered of equal weights whereby each domain 
would constitute one-third (1/3) of a hospital's TPS. The table 
below provides an overview of the estimated impact on hospitals' TPS 
by certain hospital characteristics and as they would compare to 
actual FY 2018 TPSs, which include scoring on four domains, 
including the Safety domain, and applying proportionate reweighting 
if a hospital has sufficient data on only three domains.

                                           Comparison of Estimated Average TPSs and Unweighted Domain Scores *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                             Proposed
                                                                         Actual FY 2018  Actual FY 2018                      increased
                                                         Actual FY 2018  average person      average      Actual FY 2018   weighting of     Alternative
                Hospital characteristic                      average      and community  efficiency and   average TPS (4   clinical care    weighting:
                                                          clinical care    engagement    cost reduction    domains) \+\       domain:        estimated
                                                          domain score    domain score    domain score                       estimated      average TPS
                                                                                                                            average TPS
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Hospitals **.......................................            43.2            33.5            18.8             37.4            34.6            31.8
Bed Size:
    1-99...............................................            33.4            46.0            35.7             44.6            37.2            38.4
    100-199............................................            42.2            34.5            21.0             39.2            35.0            32.6
    200-299............................................            44.5            27.9            12.9             34.4            32.4            28.4
    300-399............................................            48.2            27.3            10.0             33.3            33.4            28.5
    400+...............................................            50.9            26.9             7.6             31.9            34.1            28.5
Geographic Location:
    Urban..............................................            46.8            30.7            13.7             35.7            34.5            30.4
    Rural..............................................            33.7            40.5            31.7             41.9            34.9            35.3
Safety Net Status ***:
    Non-Safety Net.....................................            42.7            35.4            19.0             37.9            34.9            32.4
    Safety Net.........................................            45.1            25.7            18.1             35.6            33.5            29.6
Teaching Status:
    Non-Teaching.......................................            39.9            36.7            22.9             39.4            34.9            33.2
    Teaching...........................................            48.7            27.9            11.8             34.1            34.3            29.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Analysis based on FY 2018 Hospital VBP Program data.
** Only eligible hospitals are included in this analysis. Excluded hospitals (for example, hospitals not meeting the minimum domains required for
  calculation, hospitals receiving three or more immediate jeopardy citations in the FY 2018 performance period, hospitals subject to payment reductions
  under the Hospital IQR Program in FY 2018, and hospitals located in the state of Maryland) were removed from this analysis.
+ Based on current policies, which includes the Safety domain, and proportionate reweighting for hospitals with sufficient data on only three domains.
*** For purposes of this analysis, `safety net' status is defined as those hospitals with top 10 percentile of Disproportionate Share Hospital (DSH)
  patient percentage from the FY 2018 IPPS/LTCH PPS final rule impact file: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2018-IPPS-Final-Rule-Home-Page-Items/FY2018-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending.


[[Page 20638]]

    The table below provides a summary of the estimated impacts on 
average TPSs and payment adjustments for all hospitals,\410\ 
including as they would compare to actual FY 2018 program results 
under current domain weighting policies.
---------------------------------------------------------------------------

    \410\ Only eligible hospitals are included in this analysis. 
Excluded hospitals (for example, hospitals not meeting the minimum 
domains required for calculation, hospitals receiving three or more 
immediate jeopardy citations in the FY 2018 performance period, 
hospitals subject to payment reductions under the Hospital IQR 
Program in FY 2018, and hospitals located in the state of Maryland) 
were removed from this analysis.

--------------------------------------------------------------------------------------------------------------------------------------------------------
    Summary of estimated impacts on
  average TPS and payment adjustments           Actual (4 domains) +              Proposed increased weight for        Equal weighting alternative (3
      using FY 2018 program data                                                  clinical outcomes (3 domains)                   domains)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total number of hospitals with a        2,808...............................  2,701...............................  2,701.
 payment adjustment.
Number of hospitals receiving a         1,597 (57 percent)..................  1,209 (45 percent)..................  1,337 (50 percent).
 positive payment adjustment (percent).
Average positive payment adjustment     0.60 percent........................  0.58 percent........................  0.70 percent.
 percentage.
Estimated average positive payment      $128,161............................  $233,620............................  $204,038.
 adjustment.
Number of hospitals receiving a         1,211 (43 percent)..................  1,492 (55 percent)..................  1,364 (50 percent).
 negative payment adjustment (percent).
Average negative payment adjustment     -0.41 percent.......................  -0.60 percent.......................  -0.57 percent.
 percentage.
Estimated average negative payment      $169,011............................  $189,307............................  $200,000.
 adjustment.
Number of hospitals receiving a         341 (21 percent)....................  134 (11 percent)....................  266 (20 percent).
 positive payment adjustment with a
 composite quality score * below the
 median (percent).
Average TPS...........................  37.4................................  34.6................................  31.8.
Lowest TPS receiving a positive         34.6................................  35.9................................  30.9.
 payment adjustment.
Slope of the linear exchange function.  2.8908851882........................  2.7849297316........................  3.2405954322.
--------------------------------------------------------------------------------------------------------------------------------------------------------
+ Based on current policies, which includes the Safety domain, and proportionate reweighting for hospitals with sufficient data on only three domains.
* ``Composite quality score'' is defined as a hospital's TPS minus the hospital's weighted Efficiency and Cost Reduction domain score.

    We also refer readers to section I.H.6.b. of Appendix A of this 
proposed rule for a detailed discussion regarding the estimated 
impacts of the proposed domain weighting and equal weighting 
alternative on hospital percentage payment adjustments. Because the 
alternatives considered do not impact the collection of information 
for hospitals, we do not expect these alternatives to affect the 
reporting burden on hospitals. We considered these alternatives and 
are seeking public comment on them.
    As discussed in section IV.J.5. of the preamble of this proposed 
rule, in the context of scoring hospitals for the purposes of the 
HAC Reduction Program, we analyzed two alternative scoring options 
to the current methodology for the FY 2020 program year and 
subsequent years. The alternative scoring methodologies considered 
are an Equal Measure Weights methodology, which would remove the 
domains and assign equal weight to each measure for which a hospital 
has a score, and a Variable Domain Weighting methodology, which 
would vary the weighting of Domain 1 and 2 based on the number of 
measures in each domain. We are considering these alternative 
approaches to allow the HAC Reduction Program to continue to fairly 
assess all hospitals' performance under the Program.
    We simulated results under each scoring approach using FY 2018 
HAC Reduction Program data. We compared the percentage of hospitals 
in the worst-performing quartile in FY 2018 to the percentage that 
would be in the worst-performing quartile under each scoring 
approach. The table below provides a high-level overview of the 
estimated impact of these approaches on several key groups of 
hospitals.

------------------------------------------------------------------------
                                           Equal measure     Variable
           Hospital group \a\                 weights     domain weights
                                             (percent)       (percent)
------------------------------------------------------------------------
Teaching hospitals: 100 or more                      2.4             1.6
 residents (N=248)......................
Safety-net \b\ (N=644)..................             0.6             0.8
Urban hospitals: 400 or more beds                    2.2             1.1
 (N=360)................................
Hospitals with 100 or fewer beds                    -1.8            -0.9
 (N=1,169)..............................
Hospitals with a measure score for:
    Zero Domain 2 measures (N=188)......             0.0             0.0
    One Domain 2 measure (N=269)........            -4.2            -1.9
    Two Domain 2 measures (N=225).......            -0.8            -0.4
    Three Domain 2 measures (N=198).....            -2.5            -2.5
    Four Domain 2 measures (N=253)......            -0.4             0.4
    Five Domain 2 measures (N=2,022)....             1.0            0.5
------------------------------------------------------------------------
\a\ The number of hospitals in the given hospital group for FY 2018 is
  specified in parenthesis in this column (for example, N=248).
\b\ Hospitals are considered safety-net hospitals if they are in the top
  quintile for DSH percent.

    As shown in the table above, the Equal Measure Weights approach 
generally has a larger impact than the Variable Domain Weights 
approach. Under the Equal Measure Weights Approach, as compared to 
the current methodology using FY2018 HAC Reduction Program data, the 
percentage of hospitals in the worst-performing quartile decreases 
by 1.8 percent for small hospitals (that is, 100 or fewer beds), 4.2 
percent for hospitals with one Domain 2 measure, 0.8 percent for 
hospitals with two Domain 2 measures, while it increases by 2.2 
percent for large urban hospitals (that is, 400 or more beds) and 
2.4 percent for large teaching hospitals (that is, 100 or more 
residents). The Variable Domain Weights approach changes the 
percentage of hospitals in the worst-performing quartile by less 
than two percent for these groups of hospitals.
    To understand the potential impacts of these alternatives on 
hospitals' Total HAC Reduction Program Penalty Amount, we conducted 
an analysis that estimated the potential impacts of these 
alternatives using FY 2013 payment data annualized by a factor to 
estimate in FY 2019 payment dollars. Based on this analysis, we 
expect that aggregate penalty amounts would slightly increase under 
both alternative methodologies proposed in this rule. We also expect 
an increase in the penalty amount under both methodologies because 
some larger hospitals may move into the worst-performing quartile 
and smaller hospitals may move out of the worst-performing quartile. 
Because the 1 percent penalty applies uniformly to hospitals in the 
worst-performing quartile, we anticipate that overall program 
penalties would rise slightly if more larger hospitals move into the 
penalty quartile. The alternative weighting approach considered, 
variable weighting, would increase estimated total penalties by 
approximately $7,585,812. The proposed

[[Page 20639]]

weighting approach would increase estimated total penalties by 
$19,061,086, over $11 million more than the alternative weighting 
approach considered. The table below displays the results of our 
analysis in FY 2013 dollars, FY 2019 dollars, and as a percentage 
difference.

----------------------------------------------------------------------------------------------------------------
                                                 Total HAC reduction
                                                   program penalty         Percentage        Difference from FY
                   Scenario                        amount (FY 2019     difference from FY       2018 (FY 2019
                                                     dollars) *               2018               dollars) *
----------------------------------------------------------------------------------------------------------------
FY 2018 HAC Reduction Program--Before Proposed          $441,684,337                   N/A                   N/A
 Weighting Change.............................
Variable Domain Weights.......................           449,270,149                   1.7            $7,585,812
Equal Measure Weights.........................           460,745,424                   4.3            19,061,086
----------------------------------------------------------------------------------------------------------------
* Estimated change in total penalties applied using FY 2013 payments annualized to FY 2019 payment dollars.

    After consideration of the current policy, Equal Measure Weights 
and Variable Domain Weighting methodologies, we are seeking public 
comment on these approaches. Because the alternatives considered do 
not impact the collection of information for hospitals, we do not 
expect these alternatives to affect the reporting burden on 
hospitals associated with the HAC Reduction Program.

P. Reducing Regulation and Controlling Regulatory Costs

    Executive Order 13771, titled Reducing Regulation and 
Controlling Regulatory Costs, was issued on January 30, 2017. This 
proposed rule, if finalized, is considered an E.O. 13771 
deregulatory action. We estimate that this rule generates $72 
million in annualized cost savings, discounted at 7 percent relative 
to fiscal year 2016, over a perpetual time horizon. We discuss the 
estimated burden and cost reductions for the Hospital IQR Program in 
section XIV.B.3. of the preamble of the proposed rule, and estimate 
that the impact of these proposed changes is a reduction in costs of 
approximately $21,585 per hospital annually or approximately 
$71,233,624 for all hospitals annually. We note that in section 
VIII.A.5.c.(1). of the preamble of this proposed rule, we are 
proposing to remove the hospital-acquired infection (HAI) measures 
from the Hospital IQR Program and, therefore, discontinue validation 
of these measures under the Hospital IQR Program. However, these 
measures will remain in the HAC Reduction Program and, therefore, we 
are proposing to begin validation of these measures under the HAC 
Reduction Program using the same processes and information 
collection requirements previously used under the Hospital IQR 
Program. As a result, the net costs reflected in the table below for 
the HAC Reduction Program do not constitute a new information 
collection requirement on participating hospitals, but a transition 
of the HAI measure validation process from one program to another 
based on our efforts to reduce measure duplication across programs. 
We discuss the estimated burden and cost impacts for the proposed 
transition of HAI data validation from the Hospital IQR Program to 
the HAC Reduction Program in section XIV.B.7. of the preamble of the 
proposed rule. We discuss the estimated burden and cost reductions 
for the PCHQR Program in section XIV.B.4. of the preamble of this 
proposed rule, and estimate that the impact of these proposed 
changes is a reduction in costs of approximately $92,145 per PCH 
annually or approximately $1,013,595 for all participating PCHs 
annually. We discuss the estimated burden and cost reductions for 
the proposed LTCH QRP measure removals in section XIV.B.6. of the 
preamble of this proposed rule, and estimate that the impact of 
these proposed changes is a reduction in costs of approximately 
$1,148 per LTCH annually or approximately $482,469 for all LTCHs 
annually. Also, as noted in section I.R. of this Appendix, the 
regulatory review cost for this proposed rule is $8,809,182.

------------------------------------------------------------------------
                                                        Amount of costs
 Section of the proposed rule        Description           or savings
------------------------------------------------------------------------
Section XIV.B.3. of the         ICRs for the Hospital      ($71,233,624)
 preamble.                       IQR Program.
Section XIV.B.4. of the         ICRs for the PCHQR           (1,013,595)
 preamble.                       Program.
Section XIV.B.6. of the         ICRs for the LTCH QRP          (482,469)
 preamble.
Section XIV.B.7. of the         ICRs for the HAC               1,580,256
 preamble.                       Reduction Program *.
                                                      ------------------
    Total.....................  .....................       (72 million)
------------------------------------------------------------------------
* We note that the net costs reflected in this table for the HAC
  Reduction Program do not constitute a new information collection
  requirement on participating hospitals, but a transition of the HAI
  measure validation process from one program to another based on our
  efforts to reduce measure duplication across programs.

Q. Overall Conclusion

1. Acute Care Hospitals

    Overall, acute care hospitals are estimated to experience an 
increase of 3.4 percent, or approximately $4.1 billion, in their 
combined operating and capital payments as modeled for this proposed 
rule. Approximately 3.2 percentage points of this estimated increase 
is due to the proposed change in operating payments, including 
uncompensated care payments (discussed in sections I.G. and I.H. of 
this Appendix), approximately 0.1 percentage points is due to the 
proposed change in capital payments (discussed in section I.I of 
this Appendix), and approximately 0.1 percentage points is due to 
the proposed change in low-volume hospital payments (discussed in 
section I.H of this Appendix).
    Table I of section I.G. of this Appendix also demonstrates the 
estimated redistributional impacts of the IPPS budget neutrality 
requirements for the proposed MS-DRG and wage index changes, and for 
the proposed wage index reclassifications under the MGCRB.
    We estimate that hospitals would experience a 1.7 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 $146 
million increase in capital payments in FY 2019 compared to FY 2018.
    The discussions presented in the previous pages, in combination 
with the remainder 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 2019. 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 2019. 
Accordingly, based on the best available data for the 409 LTCHs in 
our database, we estimate that overall FY 2019 LTCH PPS payments 
would decrease approximately $5 million relative to FY 2018 as a 
result of the proposed payment rates and factors presented in this 
proposed rule.

[[Page 20640]]

R. Regulatory Review Costs

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret a rule, we should 
estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of 
entities that would review the proposed rule, we assumed that the 
total number of timely pieces of correspondence on last year's 
proposed rule would be the number of reviewers of the proposed rule. 
We acknowledge that this assumption may understate or overstate the 
costs of reviewing the 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 those 
reasons, and consistent with our approach in the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38585), we believe that the number of past 
commenters would be a fair estimate of the number of reviewers of 
the proposed rule. We welcome any public comments on the approach in 
estimating the number of entities that will review this proposed 
rule.
    We also recognized that different types of entities are in many 
cases affected by mutually exclusive sections of the proposed rule. 
Therefore, for the purposes of our estimate, and consistent with our 
approach in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38585), we 
assume that each reviewer read approximately 50 percent of the 
proposed rule. We welcome public comments on this assumption.
    We have used the number of timely pieces of correspondence on 
the FY 2018 proposed rule as our estimate for the number of 
reviewers of this proposed rule. We continue to acknowledge the 
uncertainty involved with using this number, but we believe it is a 
fair estimate due to the variety of entities affected and the 
likelihood that some of them choose to rely (in full or in part) on 
press releases, newsletters, fact sheets, or other sources rather 
than the comprehensive review of preamble and regulatory text. Using 
the wage information from the BLS for medical and health service 
managers (Code 11-9111), we estimate that the cost of reviewing the 
proposed rule is $105.16 per hour, including overhead and fringe 
benefits (https://www.bls.gov/oes/current/oes_nat.htm). Assuming an 
average reading speed, we estimate that it would take approximately 
19 hours for the staff to review half of the proposed rule. For each 
IPPS hospital or LTCH that reviews this proposed rule, the estimated 
cost is $1,998 (19 hours x $105.16). Therefore, we estimate that the 
total cost of reviewing this proposed rule is $8,809,182 ($1,998 x 
4,409 reviewers).

II. Accounting Statements and Tables

A. Acute Care Hospitals

    As required by OMB Circular A-4 (available at https://
obamawhitehouse. archives.gov/omb/circulars_a-004_a-4/ and https://
georgewbush-whitehouse.archives.gov/omb/circulars/a004/a-4.html), 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.
    As shown below in Table V., the net costs to the Federal 
Government associated with the proposed policies in this proposed 
rule are estimated at $4.1 billion.

 Table V--Accounting Statement: Classification of Estimated Expenditures
                 Under the IPPS From FY 2018 to FY 2019
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $4.1 billion.
From Whom to Whom.........................  Federal Government to IPPS
                                             Medicare Providers.
------------------------------------------------------------------------

B. LTCHs

    As discussed in section I.J. of this Appendix, the impact 
analysis of the 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 2019 
relative to FY 2018 of approximately $5 million based on the data 
for 409 LTCHs in our database that are subject to payment under the 
LTCH PPS. Therefore, as required by OMB Circular A-4 (available at 
https://obamawhitehouse. archives.gov/omb/circulars_a004_a-4/ and 
https://georgewbush-whitehouse. archives.gov/omb/circulars/a004/a-4.html), 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 409 LTCHs in our 
database. All expenditures are classified as transfers to Medicare 
providers (that is, LTCHs).
    As shown in Table VI. below, the net savings to the Federal 
Government associated with the policies for LTCHs in this proposed 
rule are estimated at $5 million.

Table VI--Accounting Statement: Classification of Estimated Expenditures
            From the FY 2018 LTCH PPS to the FY 2019 LTCH PPS
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  -$5 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 website 
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, because all hospitals are 
considered to be small entities for purposes of the RFA, the 
hospital impacts described in this proposed rule are impacts on 
small entities. For example, we refer readers to ``Table I.--Impact 
Analysis of Proposed Changes to the IPPS for Operating Costs for FY 
2019.'' 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 they do not meet the SBA 
definition of a small business. 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 throughout 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 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 define a small rural 
hospital as a hospital that is

[[Page 20641]]

located outside of an urban area and has fewer than 100 beds. 
Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 
98-21) designated hospitals in certain New England counties as 
belonging to the adjacent urban area. Thus, for purposes of the IPPS 
and the LTCH PPS, we continue to classify these hospitals as urban 
hospitals. (We refer readers to Table I in section I.G. of this 
Appendix for the quantitative effects of the policy changes under 
the IPPS for operating costs.)

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 2019, 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. 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 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 2019, consistent 
with our approach for FY 2018, 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 2019

A. Proposed FY 2019 Inpatient Hospital Update

    As discussed in section IV.B. of the preamble to this proposed 
rule, for FY 2019, consistent with section 1886(b)(3)(B) of the Act, 
as amended by sections 3401(a) and 10319(a) of the Affordable Care 
Act, we are setting the applicable percentage increase by applying 
the following adjustments in the following sequence. Specifically, 
the applicable percentage increase under the IPPS is equal to the 
rate-of-increase in the hospital market basket for IPPS hospitals in 
all areas, subject to a reduction of one-quarter of the applicable 
percentage increase (prior to the application of other statutory 
adjustments; also referred to as the market basket update or rate-
of-increase (with no adjustments)) for hospitals that fail to submit 
quality information under rules established by the Secretary in 
accordance with section 1886(b)(3)(B)(viii) of the Act and a 
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 2019 
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 the 
FY 2018 IPPS/LTCH PPS final rule (82 FR 38587), we replaced the FY 
2010-based IPPS operating and capital market baskets with the 
rebased and revised 2014-based IPPS operating and capital market 
baskets effective with FY 2018.
    In this FY 2019 IPPS/LTCH PPS proposed rule, in accordance with 
section 1886(b)(3)(B) of the Act, we are proposing to base the 
proposed FY 2019 market basket update used to determine the 
applicable percentage increase for the IPPS on IGI's fourth quarter 
2017 forecast of the 2014-based IPPS market basket rate-of-increase 
with historical data through third quarter 2017, which is estimated 
to be 2.8 percent. In accordance with section 1886(b)(3)(B) of the 
Act, as amended by section 3401(a) of the Affordable Care Act, in 
section IV.B. of the preamble of this FY 2019 IPPS/LTCH PPS proposed 
rule, based on IGI's fourth quarter 2017 forecast, we are proposing 
an MFP adjustment of 0.8 percent for FY 2019. We also are proposing 
that if more recent data subsequently become available, we would use 
such data, if appropriate, to determine the FY 2019 market basket 
update and MFP adjustment for the final rule. Therefore, based on 
IGI's fourth quarter 2017 forecast of the 2014-based IPPS market 
basket and the MFP adjustment, depending on whether a hospital 
submits quality data under the rules established in accordance with 
section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a 
hospital that submits quality data) and is a meaningful EHR user 
under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as 
a hospital that is a meaningful EHR user), we are proposing four 
possible applicable percentage increases that could be applied to 
the standardized amount, as shown in the table below.

----------------------------------------------------------------------------------------------------------------
                                                  Hospital         Hospital       Hospital did     Hospital did
                                                 submitted        submitted        NOT submit       NOT submit
                                                quality data     quality data     quality data     quality data
                   FY 2019                        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                                    2.8              2.8              2.8              2.8
 Rate[dash]of[dash]Increase.................
Proposed Adjustment for Failure to Submit                 0.0              0.0             -0.7             -0.7
 Quality Data under Section
 1886(b)(3)(B)(viii) of the Act.............
Proposed Adjustment for Failure to be a                   0.0             -2.1              0.0             -2.1
 Meaningful EHR User under Section
 1886(b)(3)(B)(ix) of the Act...............
Proposed MFP Adjustment under Section                    -0.8             -0.8             -0.8             -0.8
 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                  1.25            -0.85             0.55            -1.55
 Applied to Standardized Amount.............
----------------------------------------------------------------------------------------------------------------


[[Page 20642]]

B. Proposed Update for SCHs and MDHs for FY 2019

    Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2019 
applicable percentage increase in the hospital-specific rate for 
SCHs and MDHs equals the applicable percentage increase set forth in 
section 1886(b)(3)(B)(i) of the Act (that is, the same update factor 
as for all other hospitals subject to the IPPS). As discussed in 
section IV.G. of the preamble of this proposed rule, section 205 of 
the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) 
(Pub. L. 114-10) extended the MDH program through FY 2017 (that is, 
for discharges occurring on or before September 30, 2017). Section 
50205 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123), 
enacted on February 9, 2018, extended the MDH program for discharges 
on or after October 1, 2017 through September 30, 2022.
    As previously mentioned, the update to the hospital specific 
rate for SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the 
Act, as amended by sections 3401(a) and 10319(a) of the Affordable 
Care Act. Accordingly, depending on whether a hospital submits 
quality data and is a meaningful EHR user, we are proposing the same 
four possible applicable percentage increases in the table above for 
the hospital-specific rate applicable to SCHs and MDHs.

C. Proposed FY 2019 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 make 
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 IV.B.1. of the 
preamble of this proposed rule. Accordingly, for FY 2019, we are 
proposing an applicable percentage increase of 1.25 percent to the 
standardized amount for hospitals located in Puerto Rico.

D. Proposed Update for Hospitals Excluded From the IPPS for FY 2019

    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. In addition, in accordance with Sec.  412.526(c)(3) of the 
regulations, extended neoplastic disease care hospitals (described 
in Sec.  412.22(i) of the regulations) also are subject to the rate-
of-increase limits. As discussed in section VI. of the preamble of 
this proposed rule, in the FY 2018 IPPS/LTCH PPS final rule, we 
finalized the use of 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. In addition, as discussed in section IV.A. 
of the preamble of this proposed rule, the update to the target 
amount for extended neoplastic disease care hospitals for FY 2019 
would be the percentage increase in the 2014-based IPPS operating 
market basket. Accordingly, for FY 2019, the rate-of-increase 
percentage to be applied to the target amount for these children's 
hospitals, cancer hospitals, RNHCIs, neoplastic disease care 
hospitals, 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 2019 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 2019 is 2.8 percent.

E. Proposed Update for LTCHs for FY 2019

    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 1.15 percent for FY 2019, 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 establish an update factor of 1.0115 in 
determining the LTCH PPS standard Federal rate for FY 2019. For 
LTCHs that fail to submit quality data for FY 2019, we are proposing 
to apply an annual update to the LTCH PPS standard Federal rate of -
0.85 percent (that is, the proposed annual update for FY 2019 of 
1.15 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 
0.9915 in determining the LTCH PPS standard Federal rate for FY 
2019. (We note that, as discussed in section VII.D. of the preamble 
of this proposed rule, the proposed update to the LTCH PPS standard 
Federal payment rate of 1.15 percent for FY 2019 does not reflect 
any proposed budget neutrality factors, such as the proposed offset 
for the elimination of the LTCH PPS 25-percent threshold policy.)

III. Secretary's Recommendations

    MedPAC is recommending an inpatient hospital update in the 
amount specified in current law for FY 2019. MedPAC's rationale for 
this update recommendation is described in more detail below. As 
mentioned above, section 1886(e)(4)(A) of the Act requires that the 
Secretary, taking into consideration the recommendations of MedPAC, 
recommend update factors for inpatient hospital services for each 
fiscal year that take into account the amounts necessary for the 
efficient and effective delivery of medically appropriate and 
necessary care of high quality. Consistent with current law, 
depending on whether a hospital submits quality data and is a 
meaningful EHR user, we are recommending the four applicable 
percentage increases to the standardized amount listed in the table 
under section II. of this Appendix B. We are recommending that the 
same applicable percentage increases apply to SCHs and MDHs.
    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, short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa and extended neoplastic 
disease care hospitals of 2.8 percent.
    For FY 2019, consistent with policy set forth in section VII. of 
the preamble of this proposed rule, for LTCHs that submit quality 
data, we are recommending an update of 1.15 percent to the LTCH PPS 
standard Federal rate. For LTCHs that fail to submit quality data 
for FY 2019, we are recommending an annual update to the LTCH PPS 
standard Federal rate of -0.85 percent.

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

    In its March 2018 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 readers to

[[Page 20643]]

the March 2018 MedPAC report, which is available for download at 
www.medpac.gov, for a complete discussion on this recommendation.
    Response: We agree with MedPAC, and consistent with current law, 
we are proposing to apply an applicable percentage increase for FY 
2019 of 1.25 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 proposing to continue to use 
separate updates for operating and capital payments. The proposed 
update to the capital rate is discussed in section III. of the 
Addendum to this proposed rule.

[FR Doc. 2018-08705 Filed 4-24-18; 4:15 pm]
 BILLING CODE 4120-01-P