[Federal Register Volume 83, Number 160 (Friday, August 17, 2018)]
[Rules and Regulations]
[Pages 41144-41784]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-16766]



[[Page 41143]]

Vol. 83

Friday,

No. 160

August 17, 2018

Part II

Book 2 of 3 Books

Pages 41143-41784





 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 Term Care Hospital Prospective 
Payment System and Policy Changes and Fiscal Year 2019 Rates; Quality 
Reporting Requirements for Specific Providers; 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; Final Rule

  Federal Register / Vol. 83 , No. 160 / Friday, August 17, 2018 / 
Rules and Regulations  

[[Page 41144]]


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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-F]
RIN 0938-AT27


Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System and Policy Changes and Fiscal Year 2019 Rates; Quality 
Reporting Requirements for Specific Providers; 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: Final rule.

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SUMMARY: We are revising the Medicare hospital inpatient prospective 
payment systems (IPPS) for operating and capital-related costs of acute 
care hospitals to implement changes arising from our continuing 
experience with these systems for FY 2019. Some of these 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 making changes relating to Medicare graduate medical 
education (GME) affiliation agreements for new urban teaching 
hospitals. In addition, we are providing the market basket update that 
will apply to the rate-of-increase limits for certain hospitals 
excluded from the IPPS that are paid on a reasonable cost basis, 
subject to these limits for FY 2019. We are updating the payment 
policies and the annual payment rates for the Medicare prospective 
payment system (PPS) for inpatient hospital services provided by long-
term care hospitals (LTCHs) for FY 2019.
    In addition, we are establishing new requirements or revising 
existing requirements for quality reporting by specific Medicare 
providers (acute care hospitals, PPS-exempt cancer hospitals, and 
LTCHs). We also are establishing new requirements or revising 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 finalizing modifications to the requirements that apply to 
States operating Medicaid Promoting Interoperability Programs. We are 
updating 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 making 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: This final rule is effective on October 1, 2018.

FOR FURTHER INFORMATION CONTACT: Donald Thompson, (410) 786-4487, and 
Michele Hudson, (410) 786-4487, Operating Prospective Payment, MS-DRGs, 
Wage Index, New Medical Service and Technology Add-On Payments, 
Hospital Geographic Reclassifications, Graduate Medical Education, 
Capital Prospective Payment, Excluded Hospitals, Sole Community 
Hospitals, Medicare Disproportionate Share Hospital (DSH) Payment 
Adjustment, Medicare-Dependent Small Rural Hospital (MDH) Program, and 
Low-Volume Hospital Payment Adjustment Issues.
    Michele Hudson, (410) 786-4487, Mark Luxton, (410) 786-4530, and 
Emily Lipkin, (410) 786-3633, Long-Term Care Hospital Prospective 
Payment System and MS-LTC-DRG Relative Weights Issues.
    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 and Hospital Value-Based Purchasing--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.
    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:

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 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 final rule are available 
through the internet on the CMS website at: http://www.cms.hhs.gov/
Medicare/Medicare-Fee-for-Service-Payment/

[[Page 41145]]

AcuteInpatientPPS/index.html. Click on the link on the left side of the 
screen titled, ``FY 2019 IPPS Final Rule Home Page'' or ``Acute 
Inpatient--Files for Download.'' The LTCH PPS tables for this FY 2019 
final 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-F. For further details on the contents of the tables 
referenced in this final rule, we refer readers to section VI. of the 
Addendum to this final rule.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS 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 Implemented in 
this Final Rule
    D. Issuance of Notice of Proposed Rulemaking
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG) 
Classifications and Relative Weights
    A. Background
    B. MS-DRG Reclassifications
    C. Adoption of the MS-DRGs in FY 2008
    D. FY 2019 MS-DRG Documentation and Coding Adjustment
    E. Refinement of the MS-DRG Relative Weight Calculation
    F. Changes to Specific MS-DRG Classifications
    G. Recalibration of the FY 2019 MS-DRG Relative Weights
    H. Add-On Payments for New Services and Technologies for FY 2019
III. Changes to the Hospital Wage Index for Acute Care Hospitals
    A. Background
    B. Worksheet S-3 Wage Data for the FY 2019 Wage Index
    C. Verification of Worksheet S-3 Wage Data
    D. Method for Computing the FY 2019 Unadjusted Wage Index
    E. Occupational Mix Adjustment to the FY 2019 Wage Index
    F. Analysis and Implementation of the Occupational Mix 
Adjustment and the FY 2019 Occupational Mix Adjusted Wage Index
    G. Application of the Rural, Imputed, and Frontier Floors
    H. FY 2019 Wage Index Tables
    I. Revisions to the Wage Index Based on Hospital Redesignations 
and Reclassifications
    J. Out-Migration Adjustment Based on Commuting Patterns of 
Hospital Employees
    K. Reclassification From Urban to Rural under Section 
1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103
    L. Process for Requests for Wage Index Data Corrections
    M. Labor-Related Share for the FY 2019 Wage Index
IV. Other Decisions and Changes to the IPPS for Operating System
    A. Changes to MS-DRGs Subject to Postacute Care Transfer and MS-
DRG Special Payment Policies
    B. Changes in the Inpatient Hospital Updates for FY 2019 (Sec.  
412.64(d))
    C. Rural Referral Centers (RRCs) Annual Updates to Case-Mix 
Index and Discharge Criteria (Sec.  412.96)
    D. Payment Adjustment for Low-Volume Hospitals (Sec.  412.101)
    E. Indirect Medical Education (IME) Payment Adjustment (Sec.  
412.105)
    F. 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: Updates and Changes 
(Sec. Sec.  412.150 Through 412.154)
    I. Hospital Value-Based Purchasing (VBP) Program: Policy Changes
    J. Changes to the 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. Revision of Hospital Inpatient Admission Orders Documentation 
Requirements Under Medicare Part A
V. Changes to the IPPS for Capital-Related Costs
    A. Overview
    B. Additional Provisions
    C. Annual Update for FY 2019
VI. Changes for Hospitals Excluded From the IPPS
    A. Rate-of-Increase in Payments to Excluded Hospitals for FY 
2019
    B. Revisions to Regulations Governing Satellite Facilities
    C. Revisions to Regulations Governing Excluded Units of 
Hospitals
    D. Report on Adjustment (Exceptions) Payments
    E. Critical Access Hospitals (CAHs)
VII. Changes to the Long-Term Care Hospital Prospective Payment 
System (LTCH PPS) for FY 2019
    A. Background of the LTCH PPS
    B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights for FY 2019
    C. Modifications to the Application of the Site Neutral Payment 
Rate (Sec.  412.522)
    D. Changes to the LTCH PPS Payment Rates and Other Proposed 
Changes to the LTCH PPS for FY 2019
    E. 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. Changes to the Medicare and Medicaid EHR Incentive Programs 
(Now Referred to as the Medicare and Medicaid Promoting 
Interoperability Programs)
IX. 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. 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--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
II. 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. Adjustments for Area Wage Levels and Cost-of-Living
    C. Calculation of the Prospective Payment Rates
III. Changes to Payment Rates for Acute Care Hospital Inpatient 
Capital-Related Costs for FY 2019
    A. Determination of Federal Hospital Inpatient Capital-Related 
Prospective Payment Rate Update
    B. Calculation of the Inpatient Capital-Related Prospective 
Payments for FY 2019
    C. Capital Input Price Index
IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2019
V. Changes to the Payment Rates for the LTCH PPS for FY 2019
    A. LTCH PPS Standard Federal Payment Rate for FY 2019
    B. Adjustment for Area Wage Levels Under the LTCH PPS for FY 
2019
    C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located 
in Alaska and Hawaii
    D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
    E. Update to the IPPS Comparable/Equivalent Amounts To Reflect 
the Statutory Changes to the IPPS DSH Payment Adjustment Methodology

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    F. Computing the Adjusted LTCH PPS Federal Prospective Payments 
for FY 2019
VI. Tables Referenced in This Rule Generally Available 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 Policy Changes Under the IPPS for 
Operating Costs
    H. Effects of Other Policy Changes
    I. Effects of Changes in the Capital IPPS
    J. Effects of Payment Rate Changes and Policy Changes Under the 
LTCH PPS
    K. Effects of Requirements for Hospital Inpatient Quality 
Reporting (IQR) Program
    L. Effects of Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program
    M. Effects of Requirements for the Long-Term Care Hospital 
Quality Reporting Program (LTCH QRP)
    N. Effects of Requirements Regarding the Medicare and Medicaid 
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. FY 2019 Inpatient Hospital Update
    B. Update for SCHs and MDHs for FY 2019
    C. FY 2019 Puerto Rico Hospital Update
    D. Update for Hospitals Excluded From the IPPS
    E. 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 final rule makes payment and policy changes under the Medicare 
inpatient prospective payment systems (IPPS) for operating and capital-
related costs of acute care hospitals as well as for certain hospitals 
and hospital units excluded from the IPPS. In addition, it makes 
payment and policy changes for inpatient hospital services provided by 
long-term care hospitals (LTCHs) under the long-term care hospital 
prospective payment system (LTCH PPS). This final rule also makes 
policy changes to programs associated with Medicare IPPS hospitals, 
IPPS-excluded hospitals, and LTCHs.
    We are establishing new requirements and revising existing 
requirements for quality reporting by specific providers (acute care 
hospitals, PPS-exempt cancer hospitals, and LTCHs) that are 
participating in Medicare. We also are establishing new requirements 
and revising existing requirements for eligible professionals (EPs), 
eligible hospitals, and CAHs participating in the Medicare and Medicaid 
Promoting Interoperability Programs. We are updating policies for the 
Hospital Value-Based Purchasing (VBP) Program, the Hospital 
Readmissions Reduction Program, and the Hospital-Acquired Condition 
(HAC) Reduction Program.
    We are making 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 making 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, Guam, the 
Northern Mariana Islands, and American Samoa). Religious nonmedical 
health care institutions (RNHCIs) are also excluded from the IPPS.
     Sections 123(a) and (c) of the BBRA (Pub. L. 106-113) and 
section 307(b)(1) of the BIPA (Pub. L. 106-554) (as codified under 
section 1886(m)(1) of the Act), which provide for the development and 
implementation of a prospective payment system for payment for 
inpatient hospital services of 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

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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 and FY 2019); and (3) 
a hospital's uncompensated care amount relative to the uncompensated 
care amount of all DSH hospitals expressed as a percentage.
     Section 1886(m)(6) of the Act, as added by section 
1206(a)(1) of the Pathway for Sustainable Growth Rate (SGR) Reform Act 
of 2013 (Pub. L. 113-67) 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) by 
adding new clause (iv), which specifies that the IPPS comparable amount 
defined in clause (ii)(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 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.
---------------------------------------------------------------------------

    \1\ Meaningful Measures web page: 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.
---------------------------------------------------------------------------

    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\ We refer readers to section VIII.A.9.c. of the preamble of 
this final rule where we discuss public comments 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.

[[Page 41148]]

 
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.
    We received numerous comments from stakeholders regarding the 
Meaningful Measures Initiative and the impact of its implementation in 
CMS' quality programs. Many of these comments pertained to specific 
program proposals, and are discussed in the appropriate program-
specific sections of this final rule. However, commenters also provided 
insights and recommendations for the ongoing development of the 
Meaningful Measures Initiative generally, including: ensuring 
transparency in public reporting and usability of publicly reported 
data; evaluating the benefit of individual measures to patients via use 
in quality programs weighed against the burden to providers of 
collecting and reporting that measure data; and identifying additional 
opportunities for alignment across CMS quality programs. We look 
forward to continuing to work with stakeholders to refine and further 
implement the Meaningful Measures Initiative, and will take commenters' 
insights and recommendations into account moving forward.
3. Summary of the Major Provisions
    Below we provide a summary of the major provisions in this final 
rule. In general, these major provisions are 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 that we included in the proposed rule issued prior to this 
final rule is presented in section I.D. of the preamble of this final 
rule.
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 making 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 making 
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 is 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 
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 FY 2019 IPPS/LTCH PPS final rule, we are updating 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

[[Page 41149]]

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 using 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 final rule, we are establishing 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 will 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. Changes to the LTCH PPS
    In this final rule, we set forth 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 eliminating the 25-percent 
threshold policy, and under this policy, we are applying a one-time 
adjustment of approximately 0.9 percent to the LTCH PPS standard 
Federal payment rate in FY 2019 to ensure this elimination of the 25-
percent threshold policy is budget neutral.
e. Reduction of Hospital Payments for Excess Readmissions
    We are making changes to policies for the Hospital Readmissions 
Reduction Program, which was 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 final rule, we are establishing the applicable periods 
for FY 2019, FY 2020, and FY 2021. We also are codifying 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 final rule, we 
are removing a total of 4 measures from the Hospital VBP Program, all 
of which will continue to be used in the Hospital IQR Program, in order 
to reduce the costs and complexity of tracking these measures in 
multiple programs. Specifically, we are removing one measure, beginning 
with the FY 2021 program year: (1) Elective Delivery (NQF #0469) (PC-
01). We also are removing three measures from the Hospital VBP Program, 
effective with the effective date of this FY 2019 IPPS/LTCH PPS final 
rule: (1) Hospital-Level, Risk-Standardized Payment Associated With a 
30-Day Episode-of-Care for Acute Myocardial Infarction (NQF #2431) (AMI 
Payment); (2) Hospital-Level, Risk-Standardized Payment Associated With 
a 30-Day Episode-of-Care for Heart Failure (NQF #2436) (HF Payment); 
and (3) Hospital-Level, Risk-Standardized Payment Associated With a 30-
Day Episode-of-Care for Pneumonia (PN Payment) (NQF #2579). In 
addition, we are renaming the Clinical Care domain as the Clinical 
Outcomes domain, beginning with the FY 2020 program year. We also are 
adopting measure removal factors for the Hospital VBP Program.
    We are not finalizing our proposals to remove of the following six 
patient safety measures: (1) National Healthcare Safety Network (NHSN) 
Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure 
(NQF #0138); (2) National Healthcare Safety Network (NHSN) Central 
Line-Associated Bloodstream Infection (CLABSI) Outcome Measure (NQF 
#0139); (3) American College of Surgeons-Centers for Disease Control 
and Prevention (ACS-CDC) Harmonized Procedure Specific Surgical Site 
Infection (SSI) Outcome Measure (NQF #0753); (4) National Healthcare 
Safety Network (NHSN) Facility-wide Inpatient Hospital-onset 
Methicillin-resistant Staphylococcus aureus Bacteremia (MRSA) Outcome 
Measure (NQF #1716); (5) National Healthcare Safety Network (NHSN) 
Facility-wide Inpatient Hospital-onset Clostridium difficile Infection 
(CDI) Outcome Measure (NQF #1717); and (6) Patient Safety and Adverse 
Events (Composite) (NQF #0531) (PSI 90). We are not finalizing our 
proposal to remove the Safety domain from the Hospital VBP Program, as 
we are not finalizing our proposals to remove all of the measures in 
this domain, and therefore we also are not finalizing changes to the 
domain weighting.
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 final rule, we are retaining the measures currently included in 
the HAC Reduction Program because the measures address a performance 
gap in patient safety and reduce harm caused in the delivery of care. 
In this final rule, we are: (1) Establishing 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, 2020 infectious events; (2) changing the scoring methodology 
by removing domains and assigning equal weighting to each measure for 
which a hospital has a measure; and (3) establishing the

[[Page 41150]]

applicable period for FY 2021. In addition, we are summarizing comments 
we received 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 final rule, we are making 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 final rule, we are adding a 
new measure removal factor and removing a total of 39 measures from the 
Hospital IQR Program. We are finalizing a modified version of our 
proposal to remove 5 of those measures such that removal is delayed by 
1 year. For a full list of measures being removed, we refer readers to 
section VIII.A.5.c. of the preamble of this final rule. Beginning with 
the CY 2018 reporting period/FY 2020 payment determination and 
subsequent years, we are removing 17 claims-based measures and two 
structural measures. Beginning with the CY 2019 reporting period/FY 
2021 payment determination and subsequent years, we are removing three 
chart-abstracted measures and two claims-based measures. Beginning with 
the CY 2020 reporting period/FY 2022 payment determination and 
subsequent years, we are removing six chart-abstracted measures, one 
claims-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 removing one claims-based measure.
    In addition, for the CY 2019 reporting period/FY 2021 payment 
determination, we are: (1) Requiring 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 data for 4 eCQMs in 
the Hospital IQR Program measure set; and (2) requiring that hospitals 
use the 2015 Edition certification criteria for CEHRT. These changes 
are in alignment with changes 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 summarizing public comments we received on two 
measures we are considering for potential future inclusion in the 
Hospital IQR Program, as well as on 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 final rule, we are removing three measures from the LTCH QRP. 
We also are adopting a new measure removal factor and are codifying the 
measure removal factors in our regulations. In addition, we are 
updating our regulations to expand the 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.
j. Medicare and Medicaid Promoting Interoperability Programs 
(Previously Referred to as Medicare and Medicaid EHR Incentive 
Programs)
    In this final rule, we are finalizing several changes to reduce 
burden, increase interoperability and improve patient electronic access 
to their health information under the Medicare and Medicaid Promoting 
Interoperability Programs (previously referred to as Medicare and 
Medicaid EHR Incentive Programs). Specifically, we are finalizing: (1) 
An EHR reporting period of a minimum of any continuous 90 days in CYs 
2019 and 2020 for new and returning participants attesting to CMS or 
their State Medicaid agency; (2) modifications to our proposed 
performance-based scoring methodology, which consists of a smaller set 
of objectives as well as a smaller set of new and modified measures; 
(3) the removal of certain CQMs beginning with the reporting period in 
CY 2020 as well as the CY 2019 reporting requirements we proposed to 
align the CQM reporting requirements for the Promoting Interoperability 
Programs with the Hospital IQR Program; (4) the codification of 
policies for subsection (d) Puerto Rico hospitals; (5) amendments to 
the prior approval policy applicable in the Medicaid Promoting 
Interoperability Program to align with the prior approval policy for 
MMIS and ADP systems and to minimize burden on States; and (6) 
deadlines for funding availability for States to conclude the Medicaid 
Promoting Interoperability Program.
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 making 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 making 
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 will 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.
     Medicare DSH Payment Adjustment and Additional Payment for 
Uncompensated Care. Under section 1886(r) of the Act (as added by 
section

[[Page 41151]]

3133 of the Affordable Care Act), DSH payments to hospitals under 
section 1886(d)(5)(F) of the Act are reduced and an additional payment 
for uncompensated care is made to eligible hospitals, beginning in FY 
2014. Hospitals that receive Medicare DSH payments receive 25 percent 
of the amount they previously would have received under the statutory 
formula for Medicare DSH payments in section 1886(d)(5)(F) of the Act. 
The remainder, equal to an estimate of 75 percent of what otherwise 
would have been paid as Medicare DSH payments, is the basis for 
determining the additional payments for uncompensated care after the 
amount is reduced for changes in the percentage of individuals that are 
uninsured and additional statutory adjustments. Each hospital that 
receives Medicare DSH payments will receive an additional payment for 
uncompensated care based on its share of the total uncompensated care 
amount reported by Medicare DSHs. The reduction to Medicare DSH 
payments is not budget neutral.
    For FY 2019, we are updating 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 using 
only the data regarding low-income insured days for FY 2013. In 
addition, in this final rule, we are establishing 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 will 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 project that the amount available to distribute as payments for 
uncompensated care for FY 2019 will increase by approximately $1.5 
billion, as compared to the estimate of overall payments, including 
Medicare DSH payments and uncompensated care payments, that will be 
distributed in FY 2018. The 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.
     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 changes to the payment rates and factors 
that we present in the preamble and Addendum of this final rule, which 
reflect 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 one-time permanent adjustment 
of approximately 0.9 percent to the LTCH PPS standard Federal payment 
rate to ensure the elimination of the 25-percent threshold policy is 
budget neutral, will result in an estimated increase in payments in FY 
2019 of approximately $39 million.
     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 final rule, we estimate that 2,610 hospitals 
will have their base operating DRG payments reduced by their determined 
proxy FY 2019 hospital-specific readmission adjustment. As a result, we 
estimate that the Hospital Readmissions Reduction Program will 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-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.
     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 HAC Reduction Program changes for FY 2019, including which 
hospitals will receive the adjustment, will depend on actual 
experience.
    The removal of NHSN HAI measures from the Hospital IQR Program and 
the subsequent cessation of its validation processes for NHSN HAI 
measures and the creation of a validation process for the HAC Reduction 
program represent no net change in reporting burden across CMS hospital 
quality programs. However, with the finalization of our proposal to 
remove HAI chart-abstracted measures from the Hospital IQR Program, 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.
     Changes to the Hospital Inpatient Quality Reporting (IQR) 
Program. Across 3,300 IPPS hospitals, we estimate that our finalized 
requirements for the Hospital IQR Program in this final rule will 
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 
1,046,138 hours and a total cost reduction of approximately $38.3 
million for the CY 2019 reporting period/FY 2021 payment determination, 
due to the removal of ED-1, IMM-2, and VTE-6 measures; and (2) a total 
collection of information burden reduction of 858,000 hours and a total 
cost reduction of $31.3 million for the CY 2020 reporting period/FY 
2022 payment determination due to the removal of ED-2; and (3) a total 
collection of information burden reduction of 43,200 hours and a total 
of $1.6 million for the CY 2021 reporting period/FY 2023 payment 
determination due to 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 discussed

[[Page 41152]]

in the preamble of this final rule for the HAC Reduction Program.
    Further, we anticipate that the removal of 39 measures will 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 finalized policies will reduce the 
above-described costs.
     Changes Related to the LTCH QRP. In this final rule, we 
are removing two measures beginning with the FY 2020 LTCH QRP and one 
measure beginning with the FY 2021 LTCH QRP, for a total of three 
measures. We also are adopting a new quality measure removal factor for 
the LTCH QRP. We estimate that the impact of these changes is a 
reduction in costs of approximately $1,148 per LTCH annually or 
approximately $482,469 for all LTCHs annually.
     Changes to the Medicare and Medicaid Promoting 
Interoperability Programs. We believe that, overall, the finalized 
proposals in this final rule will reduce burden, as described in detail 
in section XIV.B.9. of the preamble and Appendix A, section I.N. of 
this final rule.

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-related costs of inpatient hospital services for these 
``subsection (d) hospitals.'' Under these PPSs, Medicare payment for 
hospital inpatient operating and capital-related costs is made at 
predetermined, specific rates for each hospital discharge. Discharges 
are classified according to a list of diagnosis-related groups (DRGs).
    The base payment rate is comprised of a standardized amount that is 
divided into a labor-related share and a nonlabor-related share. The 
labor-related share is adjusted by the wage index applicable to the 
area where the hospital is located. If the hospital is located in 
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the 
DRG relative weight.
    If the hospital treats a high percentage of certain low-income 
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the 
disproportionate share hospital (DSH) adjustment, provides for a 
percentage increase in Medicare payments to hospitals that qualify 
under either of two statutory formulas designed to identify hospitals 
that serve a disproportionate share of low-income patients. For 
qualifying hospitals, the amount of this adjustment varies based on the 
outcome of the statutory calculations. The Affordable Care Act revised 
the Medicare DSH payment methodology and provides for a new additional 
Medicare payment that considers the amount of uncompensated care 
beginning on October 1, 2013.
    If the hospital is training residents in an approved residency 
program(s), it receives a percentage add-on payment for each case paid 
under the IPPS, known as the indirect medical education (IME) 
adjustment. This percentage varies, depending on the ratio of residents 
to beds.
    Additional payments may be made for cases that involve new 
technologies or medical services that have been approved for special 
add-on payments. To qualify, a new technology or medical service must 
demonstrate that it is a substantial clinical improvement over 
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG 
payment.
    The costs incurred by the hospital for a case are evaluated to 
determine whether the hospital is eligible for an additional payment as 
an outlier case. This additional payment is designed to protect the 
hospital from large financial losses due to unusually expensive cases. 
Any eligible outlier payment is added to the DRG-adjusted base payment 
rate, plus any DSH, IME, and new technology or medical service add-on 
adjustments.
    Although payments to most hospitals under the IPPS are made on the 
basis of the standardized amounts, some categories of hospitals are 
paid in whole or in part based on their hospital-specific rate, which 
is determined from their costs in a base year. For example, sole 
community hospitals (SCHs) receive the higher of a hospital-specific 
rate based on their costs in a base year (the highest of FY 1982, FY 
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the 
standardized amount. SCHs are the sole source of care in their areas. 
Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a 
hospital that is located more than 35 road miles from another hospital 
or that, by reason of factors such as an 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-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.

[[Page 41153]]

    The existing regulations governing payments to hospitals under the 
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
    Under section 1886(d)(1)(B) of the Act, as amended, certain 
hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Inpatient rehabilitation facility (IRF) 
hospitals and units; long-term care hospitals (LTCHs); psychiatric 
hospitals and units; children's hospitals; cancer hospitals; 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-of-increase ceiling on inpatient operating costs. 
Similarly, extended neoplastic disease care hospitals are paid on a 
reasonable cost basis, subject to a rate-of-increase ceiling on 
inpatient operating costs.
    The existing regulations governing payments to excluded hospitals 
and hospital units are located in 42 CFR parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
    The Medicare prospective payment system (PPS) for LTCHs applies to 
hospitals described in section 1886(d)(1)(B)(iv) of the Act, effective 
for cost reporting periods beginning on or after October 1, 2002. The 
LTCH PPS was established under the authority of sections 123 of the 
BBRA and section 307(b) of the BIPA (as codified under section 
1886(m)(1) of the Act). During the 5-year (optional) transition period, 
a LTCH's payment under the PPS was based on an increasing proportion of 
the LTCH Federal rate with a corresponding decreasing proportion based 
on reasonable cost principles. Effective for cost reporting periods 
beginning on or after October 1, 2006 through September 30, 2015 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 Implemented in This 
Final 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, receive payment under a site neutral rate 
unless the discharge meets certain patient-specific criteria. In this 
final 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 final rule, we are continuing 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 
post-acute 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 41154]]

which we are continuing to implement in this final 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 final rule, we are 
continuing 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 implementing or continuing to implement 
in this final 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 
final rule, we are making 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 also 
qualify as a postacute care transfer and are subject to payment 
adjustments.

D. Issuance of a Notice of Proposed Rulemaking

    In the proposed rule that appeared in the Federal Register on May 
7, 2018 (83 FR 20164), we set 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 set 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 major changes that we proposed to 
make in the proposed rule.
1. Proposed Changes to MS-DRG Classifications and Recalibrations of 
Relative Weights
    In section II. of the preamble of the proposed rule, we included--
     Proposed changes to MS-DRG classifications based on our 
yearly review 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-on payments for high-cost new medical services and technologies 
(including public input, as directed by Pub. L. 108-173, obtained in a 
town hall meeting).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
    In section III. of the preamble to the proposed rule, we proposed 
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 the proposed rule, we discussed 
proposed changes or clarifications of a number of the provisions of the 
regulations in 42 CFR parts 412 and 413, including the following:
     Proposed changes to 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

[[Page 41155]]

Hospital Readmissions Reduction Program based on hospital readmission 
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 the proposed rule, we discussed 
the proposed payment policy requirements for capital-related costs and 
capital payments to hospitals for FY 2019.
5. Proposed Changes to the Payment Rates for Certain Excluded 
Hospitals: Rate-of-Increase Percentages
    In section VI. of the preamble of the proposed rule, we discussed--
     Proposed changes to payments to certain excluded hospitals 
for FY 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 the 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 the proposed rule, we discussed 
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 the 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 the proposed rule, we included a 
request for information on the 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-of-Increase Limits for Acute Care Hospitals
    In sections II. and III. of the Addendum to the proposed rule, we 
set forth the 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 
proposed to establish the threshold amounts for outlier cases. In 
addition, in section IV. of the Addendum to the proposed rule, we 
addressed the update factors for determining the rate-of-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 the 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 proposed to establish the adjustments for wage levels, the 
labor-related share, the cost-of-living adjustment, and high-cost 
outliers, including the applicable fixed-loss amounts and the LTCH 
cost-to-charge ratios (CCRs) for both payment rates.
14. Impact Analysis
    In Appendix A of the proposed rule, we set forth an analysis of the 
impact 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 the proposed rule, as required by sections 
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of 
the appropriate percentage changes for FY 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-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

[[Page 41156]]

policies addressed the update factor for hospital inpatient operating 
costs and capital-related costs for hospitals under the IPPS. We 
addressed these recommendations in Appendix B of the proposed rule. For 
further information relating specifically to the MedPAC March 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. 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. 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

[[Page 41157]]

adjustment for FY 2018 from a 0.5 percentage point to a 0.4588 
percentage point. As we discussed in the FY 2018 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. Adjustment for FY 2019
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20176 and 20177), 
consistent with the requirements of section 414 of the MACRA, we 
proposed to implement a positive 0.5 percentage point adjustment to the 
standardized amount for FY 2019. We indicated that this would be a 
permanent adjustment to payment rates. We stated in the proposed rule 
that we plan to propose future adjustments required under section 414 
of the MACRA for FYs 2020 through 2023 in future rulemaking.
    Comment: Several commenters stated that CMS has misinterpreted the 
Congressional directives regarding the level of positive adjustment 
required for FY 2018 and FY 2019. The commenters contended that, while 
the positive adjustments required under section 414 of the MACRA would 
only total 3.0 percentage points by FY 2023, the levels of these 
adjustments were determined using an estimated positive ``3.2 percent 
baseline'' adjustment that otherwise would have been made in FY 2018. 
The commenters believed that because CMS implemented an adjustment of -
1.5 percentage points instead of the expected -0.8 percentage points in 
FY 2017, totaling -3.9 percentage points overall, CMS has imposed a 
permanent -0.7 percentage point negative adjustment beyond its 
statutory authority, contravening what the commenters asserted was 
Congress' clear instructions and intent. A majority of the commenters 
requested that CMS reverse its previous position and implement 
additional 0.7 percentage point adjustments for both FY 2018 and FY 
2019. Some of the commenters requested that CMS use its statutory 
discretion to ensure that all 3.9 percentage points in negative 
adjustment be restored. In addition, some of the commenters, while 
acknowledging that CMS may be bound by law, expressed opposition to the 
permanent reductions and requested that CMS refrain from making any 
additional coding adjustments in the future.
    Response: As we discussed in the FY 2019 IPPS/LTCH PPS proposed 
rule, we believe section 414 of the MACRA and section 15005 of the 21st 
Century Cures Act clearly set forth the levels of positive adjustments 
for FYs 2018 through 2023. We are not convinced that the adjustments 
prescribed by MACRA were predicated on a specific ``baseline'' 
adjustment level. While we had anticipated making a positive adjustment 
in FY 2018 to offset the reductions required to recoup the $11 billion 
under section 631 of the ATRA, section 414 of the MACRA required that 
we implement a 0.5 percentage point positive adjustment for each of FYs 
2018 through 2023, and not the single positive adjustment we intended 
to make in FY 2018. As noted by the commenters, and discussed in the FY 
2017 IPPS/LTCH PPS final rule, by phasing in a total positive 
adjustment of only 3.0 percentage points, section 414 of the MACRA 
would not fully restore even the 3.2 percentage points adjustment 
originally estimated by CMS in the FY 2014 IPPS/LTCH PPS final rule (78 
FR 50515). Moreover, as discussed in the FY 2018 IPPS/LTCH PPS final 
rule, Public Law 114-255, which further reduced the positive adjustment 
required for FY 2018 from 0.5 percentage point to 0.4588 percentage 
point, was enacted on December 13, 2016, after CMS had proposed and 
finalized the final negative -1.5 percentage points adjustment required 
under section 631 of the ATRA. We see no evidence that Congress enacted 
these adjustments with the intent that CMS would make an additional 
+0.7 percentage point adjustment in FY 2018 to compensate for the 
higher than expected final ATRA adjustment made in FY 2017.
    After consideration of the public comments we received, we are 
finalizing the +0.5 percentage point adjustment to the standardized 
amount for FY 2019, as required under section 414 of the MACRA.

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background
    Beginning in FY 2007, we implemented relative weights for DRGs 
based on cost report data instead of charge information. We refer 
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed 
discussion of our final policy for calculating the cost-based DRG 
relative weights and to the FY 2008 IPPS final rule with comment period 
(72 FR 47199) for information on how we blended relative weights based 
on the CMS DRGs and MS-DRGs. We also refer readers to the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56785 through 56787) for a detailed 
discussion of the history of changes to the number of cost centers used 
in calculating the DRG relative weights. Since FY 2014, we have 
calculated 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 calculated the final 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 19 CCRs and the MS-DRG relative 
weights for FY 2019 is included in section II.G. of the preamble to 
this FY 2019 IPPS/LTCH PPS final rule. As we did with the FY 2018 IPPS/
LTCH PPS final rule, for this FY 2019 final rule, we are providing the 
version of the HCRIS from which we calculated these 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 Final Rule Home Page'' or 
``Acute Inpatient Files for Download.''
    Comment: One commenter requested that CMS use a single diagnostic 
radiology CCR to set weights, rather than using the separate CT and MRI 
cost centers. The commenter requested that if CMS maintains the 
separate CT and MRI cost centers, CMS not include cost reports from 
hospitals that use the ``square foot'' allocation methodology. The 
commenter provided an analysis to support its assertion that the CCRs 
for CT and MRI are incorrect and are inappropriately reducing payments 
under the IPPS. The commenter indicated that the charge compression 
hypothesis has been shown to be false with the use of the separate CT 
and MRI cost centers. The commenter discussed problems with cost 
allocation to the CT and MRI cost centers and referenced discussions in 
prior IPPS/LTCH PPS rules about this issue. The commenter acknowledged 
that CMS did not include a specific proposal in the FY 2019 proposed 
rule regarding this issue.

[[Page 41158]]

    Response: As the commenter noted, we did not make any proposal for 
FY 2019 relating to the number of cost centers used to calculate the 
relative weights. As noted previously and discussed in detail in prior 
rulemakings, and as noted in response to a similar public comment 
received last year, we have calculated the IPPS MS-DRG relative weights 
using 19 CCRs, including distinct CCRs for MRIs and CT scans, since FY 
2014. We refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 
56785) for a detailed discussion of the basis for establishing these 19 
CCRs. We further note that in the FY 2014 IPPS/LTCH PPS final rule (78 
FR 50518 through 50523), we presented data analyses using distinct CCRs 
for implantable devices, MRIs, CT scans, and cardiac catheterization.
    We will continue to explore ways in which we can improve the 
accuracy of the cost report data and calculated CCRs used in the cost 
estimation process.

F. Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for 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 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 final rule.
    Following are the changes that we proposed to the MS-DRGs for FY 
2019 in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20177 through 
20257). We invited 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 the proposed rule. In some cases, 
we proposed changes to the MS-DRG classifications based on our analysis 
of claims data and consultation with our clinical advisors. In other 
cases, we proposed to maintain the existing MS-DRG classifications 
based on our analysis of claims data and consultation with our clinical 
advisors. For the 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 referred to our analysis of claims data from the 
``September 2017 update of the FY 2017 MedPAR file.''
    In this FY 2019 IPPS/LTCH PPS final rule, we summarize the public 
comments we received on our proposals, present our responses, and state 
our final policies. For this FY 2019 final rule, we did not perform any 
further MS-DRG analysis of claims data. Therefore, all of the data 
analysis is based on claims data from the September 2017 update of the 
FY 2017 MedPAR file, which contains bills received through September 
30, 2017, for discharges occurring through September 30, 2017.
    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 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.
    We are making the FY 2019 ICD-10 MS-DRG GROUPER and Medicare Code 
Editor (MCE) Software Version 36, the ICD-10 MS-DRG Definitions Manual 
files Version 36 and the Definitions of Medicare Code Edits Manual 
Version 36 available to the public on our CMS website at: https://
www.cms.gov/Medicare/Medicare-Fee-for-Service-

[[Page 41159]]

Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html.
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.
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20178 through 20179), 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.
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.

[[Page 41160]]

 
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.

----------------------------------------------------------------------------------------------------------------
                                    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).

[[Page 41161]]

 
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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20180), we stated 
that 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 recommended 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, in 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20180), we provided 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.

                         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

[[Page 41162]]

 
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-DRGs 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.....................................
----------------------------------------------------------------------------------------------------------------


                         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)...............

[[Page 41163]]

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


                         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).....................................
----------------------------------------------------------------------------------------------------------------


[[Page 41164]]


                         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.
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). In the FY 2019 IPPS/LTCH PPS 
proposed rule, we agreed with the commenters' recommendation to 
maintain the structure of Pre-MDC MS-DRGs 001 and 002 for FY 2019 and 
stated that we would continue to analyze the claims data.
    Comment: Commenters supported CMS' proposal to maintain the current 
structure of Pre-MDC MS-DRGs 001 and 002 for FY 2019, and to continue 
to analyze claims data for consideration of

[[Page 41165]]

future modifications. The commenters agreed with CMS that current 
claims data do not yet reflect recent advice published in Coding Clinic 
for ICD-10-CM/PCS regarding the coding of procedures involving external 
heart assist devices or recent changes to ICD-10-PCS codes for these 
procedures.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
maintaining the current structure of Pre-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. As discussed in the FY 2019 
IPPS/LTCH PPS proposed rule (83 FR 20184), 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 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

[[Page 41166]]

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 of an 
implantable heart assist system.
    In the proposed rule, we stated that we agreed 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 noted 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.
------------------------------------------------------------------------

    In the proposed rule, we indicated that our clinical advisors also 
agreed that additional claims data are needed for analysis prior to 
proposing any changes to MS-DRG 215. Therefore, we did not propose to 
make any modifications to MS-DRG 215 for FY 2019.
    Comment: Commenters supported CMS' proposal to not make any 
modifications to MS-DRG 215 for FY 2019 and supported continued 
analysis of claims data for consideration of modifications in future 
rulemaking. The commenters noted that the proposal was reasonable, 
given the data, the ICD-10-PCS procedure codes, and information 
provided.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current structure of MS-DRG 215 
for FY 2019.
    As stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20185) 
and 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-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 final 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 41167]]

 
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.
    We stated in the proposed rule that, 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, in the FY 2019 IPPS/LTCH 
PPS proposed rule (83 FR 20186), we proposed to not reassign cases 
reporting procedure code 5A15223 when reported with procedure code 
02HA3RZ or procedure code 02HA4RZ for FY 2019. We stated in the 
proposed rule that our clinical advisors agreed 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.
    Comment: Commenters supported CMS' proposal to not reassign cases 
reporting the use of ECMO (procedure code 5A15223) in combination with 
the insertion of a percutaneous short-term external heart assist device 
(procedure code 02HA3RZ or procedure code 02HA4RZ) for FY 2019.
    Response: We appreciate the commenters' support.
    Comment: Other commenters acknowledged that new ICD-10-PCS 
procedure codes that identify percutaneous ECMO procedures were made 
publicly available in May 2018. The commenters suggested that the new 
procedure codes be assigned to MS-DRGs that reflect cases representing 
patients with similar clinical characteristics and whose treatment 
requires similar resource utilization, such as MS-DRG 215. Some 
commenters specifically requested that the new procedure code 
describing a percutaneous veno-arterial (VA) ECMO procedure be 
considered for assignment to MS-DRG 215 versus Pre-MDC MS-DRG 003 
because MS-DRG 215 is the primary MS-DRG for procedures involving the 
implantation of peripheral heart assist pumps, with similar cases 
representing patient conditions and clinical coherence. The commenters 
noted that the percutaneous ECMO procedure is less invasive and less 
expensive than the traditional ECMO procedure, and has the clinical 
similarities and requires similar resource utilization as procedures 
currently assigned to MS-DRG 215, such as the percutaneous ventricular 
assist devices procedure.
    Another commenter suggested that CMS should assign cases 
representing patients receiving treatment involving the peripheral VA 
ECMO procedure to MS-DRG 215 or another MS-DRG within MDC 5. The 
commenter stated that cases representing patients currently assigned to 
MS-DRG 215 are clinically coherent to the characteristics of the 
patients who undergo a peripheral VA ECMO procedure. Another commenter 
recommended that the new procedure code describing a percutaneous veno-
venous (VV) ECMO procedure be considered for assignment to MS-DRG 004 
or another MS-DRG within MDC 4 because the indication is to provide 
respiratory support.
    Response: The commenters are correct that the FY 2019 ICD-10-PCS 
procedure code files (which are available via the internet on the CMS 
website at: https://www.cms.gov/Medicare/Coding/ICD10/2019-ICD-10-PCS.html) include new ICD-10-PCS procedure codes that identify 
percutaneous ECMO procedures. In addition, the files also show that the 
current code for ECMO

[[Page 41168]]

procedures (ICD-10-PCS code 5A15223) has been revised. These new 
procedure codes, and the revised ECMO procedure code and description, 
effective October 1, 2018, are shown in the following table.

------------------------------------------------------------------------
           ICD-10-PCS code                     Code description
------------------------------------------------------------------------
5A1522F.............................  Extracorporeal Oxygenation,
                                       Membrane, Central.
5A1522G.............................  Extracorporeal Oxygenation,
                                       Membrane, Peripheral Veno-
                                       arterial.
5A1522H.............................  Extracorporeal Oxygenation,
                                       Membrane, Peripheral Veno-venous.
------------------------------------------------------------------------

    In response to the commenters' suggestions to assign the new 
procedure codes for percutaneous ECMO procedures to MS-DRG 215, we note 
that the new procedure codes created to describe percutaneous ECMO 
procedures were not finalized at the time of the proposed rule. In 
addition, the deletion of the current procedure code for ECMO (ICD-10-
PCS code 5A15223) and the creation of the new procedure code for 
central ECMO were not finalized at the time of the proposed rule. As 
these codes were not finalized at the time of the proposed rule, they 
were not reflected in Table 6B.--New Procedure Codes (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) associated with the FY 2019 IPPS/LTCH PPS 
proposed rule. Therefore, because these procedure codes were not yet 
approved, there were no proposed MDC, MS-DRG, or O.R. and non-O.R. 
designations for these new procedure codes.
    Consistent with our annual process of assigning new procedure codes 
to MDCs and MS-DRGs, and designating a procedure as an O.R. or non-O.R. 
procedure, we reviewed the predecessor procedure code assignments. The 
predecessor procedure code (ICD-10-PCS code 5A15223) for the new 
percutaneous ECMO procedure codes describes an open approach which 
requires an incision along the sternum (sternotomy) and is performed 
for open heart surgery. It is considered extremely invasive and carries 
significant risks for complications, including bleeding, infection, and 
vessel injury. For central ECMO, arterial cannulation typically occurs 
directly into the ascending aorta and venous cannulation occurs 
directly into the right atrium. Conversely, percutaneous (peripheral) 
ECMO does not require a sternotomy and can be performed in the 
intensive care unit or at the bedside. The cannulae are placed 
percutaneously and can utilize a variety of configurations, according 
to the indication (VA or VV) and patient age (adult vs. pediatric). 
While percutaneous ECMO also carries risks, they differ from those of 
central ECMO. For example, our clinical advisor note that patients 
receiving percutaneous ECMO are at a greater risk of suffering vascular 
complications.
    Upon review, our clinical advisors do not support assigning the new 
procedure codes for peripheral ECMO procedures to the same MS-DRG as 
the predecessor code for open (central) ECMO in Pre-MDC MS-DRG 003. Our 
clinical advisors also do not agree with designating percutaneous ECMO 
procedures as O.R. procedures because they are less resource intensive 
compared to open ECMO procedures. As shown in Table 6B.--New Procedure 
Codes associated with this final 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 new 
procedure codes for percutaneous ECMO procedures have been designated 
as non-O.R. procedures that will affect the MS-DRG assignment for 
specific medical MS-DRGs. Effective October 1, 2018, the MS-DRGs for 
which the percutaneous ECMO procedures will affect MS-DRG assignment 
are shown in the following table, along with the revised MS-DRG titles.

------------------------------------------------------------------------
            MDC                  MS-DRG              MS-DRG title
------------------------------------------------------------------------
4..........................             207  Respiratory System
                                              Diagnosis with Ventilator
                                              Support >96 Hours or
                                              Peripheral Extracorporeal
                                              Membrane Oxygenation
                                              (ECMO).
5..........................             291  Heart Failure and Shock
                                              with MCC or Peripheral
                                              Extracorporeal Membrane
                                              Oxygenation (ECMO).
5..........................             296  Cardiac Arrest, Unexplained
                                              with MCC or Peripheral
                                              Extracorporeal Membrane
                                              Oxygenation (ECMO).
18.........................             870  Septicemia or Severe Sepsis
                                              with MV >96 Hours or
                                              Peripheral Extracorporeal
                                              Membrane Oxygenation
                                              (ECMO).
------------------------------------------------------------------------

    Our clinical advisors support the designation of the peripheral 
ECMO procedures as a non-O.R. procedure affecting the MS-DRG assignment 
of MS-DRG 207 because they consider the procedure to be similar to 
providing mechanical ventilation greater than 96 hours in terms of both 
clinical severity and resource use. Because any respiratory diagnosis 
classified under MDC 4 with mechanical ventilation greater than 96 
hours is assigned to MS-DRG 207, it is reasonable to expect that any 
patient with a respiratory diagnosis who requires treatment involving a 
peripheral ECMO procedure should also be assigned to MS-DRG 207. The 
same rationale was applied for MS-DRG 870, which also includes 
mechanical ventilation greater than 96 hours. In addition, based on the 
common clinical indications for which a percutaneous ECMO procedure is 
utilized, such as cardiogenic shock and cardiac arrest, our clinical 
advisors determined that MS-DRGs 291 (Heart Failure and Shock with MCC) 
and 296 (Cardiac Arrest, Unexplained with MCC) also are appropriate for 
a percutaneous ECMO procedure to affect the MS-DRG assignment. The MS-
DRG assignment for a central ECMO procedure will remain in Pre-MDC MS-
DRG 003.
    In cases where a percutaneous external heart assist device is 
utilized, in combination with a percutaneous ECMO procedure, effective 
October 1, 2018, the ICD-10 MS-DRG Version 36 GROUPER logic results in 
a case assignment to MS-DRG 215 because the percutaneous external heart 
assist device procedure is designated as an O.R. procedure and assigned 
to MS-DRG 215.
    Because the procedure codes describing percutaneous ECMO procedures 
are new, becoming effective October 1, 2018, we do not yet have any 
claims data to analyze. Once claims data becomes available, we can 
examine the

[[Page 41169]]

volume, and length of stay and cost data to determine if modifications 
to the assignment of these procedure codes are warranted.
    After consideration of the public comments we received, we are 
finalizing our proposal to not reassign cases reporting ICD-10-PCS 
procedure code 5A15223 when reported with ICD-10-PCS procedure code 
02HA3RZ or ICD-10-PCS procedure code 02HA4RZ for FY 2019. Consistent 
with our policy for determining MS-DRG assignment for new codes and for 
the reasons discussed, the two new procedure codes describing 
percutaneous ECMO procedures discussed and displayed in the table 
above, under the ICD-10 MS-DRGs Version 36 GROUPER logic, effective 
October 1, 2018, are designated as non-O.R. procedures impacting the 
MS-DRG assignment of MS-DRGs 207, 291, 296, and 870. The MS-DRG 
assignment for the central ECMO procedure remains in Pre-MDC MS-DRG 
003.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20186), we also 
discussed that 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)......................................................
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

[[Page 41170]]

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). In the proposed rule, 
we stated that we agreed 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 
proposed to not make any changes to the structure of MS-DRGs 268 and 
269 for FY 2019.
    Comment: Commenters supported CMS' proposal to not make any changes 
to the structure of MS-DRGs 268 and 269 for FY 2019.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the structure of MS-DRGs 268 and 
269 for FY 2019.
b. Brachytherapy
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20188), we received a request to create a new Pre-MDC MS-DRG for all 
procedures involving the CivaSheet[supreg] 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[supreg] 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[supreg] 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 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 referred readers 
to Table 6P.--ICD-10-CM and ICD-10-PCS Codes for Proposed MS-DRG 
Changes associated with the 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 was shown in Table 6P.1.associated with the 
proposed rule. Our findings are reflected in the following table. As we 
note below in response to comments, there were errors in the table 
included in the proposed rule (83 FR 20188) with regard to an 
identified MS-DRG and procedure code. However, there were no errors in 
the data findings reported. In the proposed rule, we identified claims 
data for MS-DRG 129 with procedure code D710BBZ (Low dose rate (LDR) 
brachytherapy of bone marrow using Palladium-103 (Pd-103)). That entry 
was an inadventent error. The correct MS-DRG, that is, MS-DRG 054, and 
procedure code, that is, D010BBZ, are reflected in the table that 
follows. In addition, in the proposed rule we inadvertently identified 
MS-DRG 724 with procedure code DV10BBZ (Low dose rate (LDR) 
brachytherapy of prostate using Palladium 103 (Pd-103)). Upon review, 
this case was actually reported with MS-DRG 189. The data findings 
identified for each of these 4 cases are correctly reflected in the 
table that follows.

              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 054 (Nervous System Neoplasms with CC)--Cases with                      1               7         $10,357
 procedure code D010BBZ (Low dose rate (LDR) brachytherapy of
 brain using Palladium[dash]103 (Pd-103)).......................
MS-DRG 189 (Pulmonary Edema and Respiratory Failure)--Cases with               1               7          32,298
 procedure code DV10BBZ (Low dose rate (LDR) brachytherapy of
 prostate using Palladium[dash]103 (Pd-103))....................
MS-DRG 129 (Major Head and Neck Procedures with CC/MCC or Major                1               3          42,565
 Device)--Cases with procedure code DW11BBZ (Low dose rate (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))..........................................................
----------------------------------------------------------------------------------------------------------------


[[Page 41171]]

    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. In the proposed rule, we stated that 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 did not propose to create a new Pre-MDC 
MS-DRG for procedures involving the CivaSheet[supreg] technology for FY 
2019.
    Comment: Some commenters supported CMS' proposal not to create a 
new MS-DRG for assignment of procedures involving the CivaSheet[supreg] 
technology. Several commenters, including the manufacturer of the 
CivaSheet[supreg] technology, disagreed with CMS' proposal, and stated 
that the current payment for cases involving the CivaSheet[supreg] 
technology is inadequate and does not currently allow widespread 
adoption and use of the technology. One commenter noted that its 
contractor also identified four cases in the proposed rule, but raised 
some concerns regarding the procedure codes and costs associated with 
the cases identified in the proposed rule. Other commenters described 
the clinical benefits and potential cost-savings associated with the 
CivaSheet[supreg] technology, and requested that CMS reconsider its 
proposal to not create a new Pre- MDC MS-DRG for the assignment of 
cases involving the use of this technology. The commenters stated that 
they understood CMS' concern about the lack of volume, but indicated 
that the lack of adequate payment for procedures involving the 
CivaSheet[supreg] technology does not allow more widespread use. The 
manufacturer requested that, if CMS finalizes its proposal not to 
create a new MS-DRG for assignment of cases involving the 
CivaSheet[supreg] technology, CMS consider other payment mechanisms by 
which to ensure adequate payment for hospitals providing this service.
    Response: We appreciate the commenters' support and input. With 
respect to the commenters who disagreed with our proposal, we reiterate 
that our analysis of the claims data and our clinical advisors did not 
support the creation of a new MS-DRG based on the very small number of 
cases identified. As we noted in the proposed rule, only four cases 
were identified. The MS-DRGs are a classification system intended to 
group together those diagnoses and procedures with similar clinical 
characteristics and utilization of resources. As we discussed in the 
proposed rule, 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.
    We agree with the commenter that there were some inadvertent errors 
in the table included in the proposed rule in reference to certain 
procedure codes and MS-DRGs; the table in this final rule above now 
correctly reflects the procedure codes and MS-DRGs reflected in the FY 
2017 MedPAR file (as of the September 2017 update). We note that 
because our proposal was based on the small number of cases, and not 
the nature of those cases, these errors had no bearing on our proposal 
or our decision to finalize this proposal. We acknowledge the 
commenters' concerns about the adequacy of payment for these low volume 
services. Therefore, as part of our ongoing, comprehensive analysis of 
the MS-DRGs under ICD-10, we will continue to explore mechanisms 
through which to address rare diseases and low volume DRGs.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current MS-DRG structure for 
procedures involving the CivaSheet[supreg] technology for FY 2019.
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-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, in the FY 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20188), we proposed 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 proposed 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.
    Comment: Commenters supported CMS' proposal to reorder the lists of 
diagnoses and procedure codes for Pre-MDC MS-DRGs 11, 12 and 13 in the 
ICD-10 MS-DRG Definitions Manual to clarify the GROUPER logic. The 
commenters stated that the proposal was reasonable given the ICD-10-CM 
diagnosis codes, the ICD-10-PCS procedure codes, and the information 
provided. Commenters also supported the proposal to revise the titles 
for Pre-MDC MS-DRGs 11, 12 and 13.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to reorder the lists of diagnoses and procedure 
codes for Pre-MDC MS-DRGs 11, 12, and 13 in the ICD-10 MS-DRG 
Definitions Manual Version 36. We also are finalizing our proposal to 
revise the titles for Pre-MDC MS-DRGs 11, 12, and 13 as follows for the 
ICD-10 MS-DRGs Version 36, effective October 1, 2018:
     MS-DRG 11 (Tracheostomy for Face, Mouth and Neck Diagnoses 
or Laryngectomy with MCC);

[[Page 41172]]

     MS-DRG 12 (Tracheostomy for Face, Mouth and Neck Diagnoses 
or Laryngectomy with CC); and
     MS-DRG 13 (Tracheostomy for Face, Mouth and Neck Diagnoses 
or Laryngectomy without CC/MCC).
d. Chimeric Antigen Receptor (CAR) T-Cell Therapy
    Chimeric Antigen Receptor (CAR) T-cell therapy is a cell-based gene 
therapy in which T-cells are genetically engineered to express a 
chimeric antigen receptor that will bind to a certain protein on a 
patient's cancerous cells. The CAR T-cells are then administered to the 
patient to attack certain cancerous cells and the individual is 
observed for potential serious side effects that would require medical 
intervention.
    Two CAR T-cell therapies received FDA approval in 2017. 
KYMRIAH[supreg] (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. In May 2018, KYMRIAH received 
FDA approval for a second indication, treatment of adult patients with 
relapsed or refractory large B-cell lymphoma after two or more lines of 
systemic therapy, including diffuse large B-cell lymphoma (DLBCL), high 
grade B-cell lymphoma, and DLBCL arising from follicular lymphoma. 
YESCARTA[supreg] (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-cell therapies 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.
    As we discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20189), we have received many inquiries from the public regarding 
payment of CAR T-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-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-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 hematologic cancers 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, in 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20189), we proposed to 
assign ICD-10-PCS procedure codes XW033C3 and XW043C3 to Pre-MDC MS-DRG 
016 for FY 2019. In addition, we proposed 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 noted in the proposed rule that, as discussed in 
greater detail in section II.H.5.a. of the preamble of the proposed 
rule and this final rule, the manufacturer of KYMRIAH and the 
manufacturer of YESCARTA submitted applications for new technology add-
on payments for FY 2019. We stated that 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-cost of 
these CAR T-cell therapies, 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 therapies and 
cases representing patients receiving treatment involving CAR T-cell 
therapies. We stated in the proposed rule that we believed 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 therapies 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. We stated that, as noted in section II.H.5.a. of the 
preamble of the 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 invited 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 invited public comments on alternative approaches, 
including in the context of the pending KYMRIAH and YESCARTA new 
technology add-on payment applications, and the most appropriate way to 
establish payment for FY 2019 under any alternative approaches. We 
indicated that 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 KYMRIAH and 
YESCARTA CAR T-cell therapies, as discussed further in section 
II.A.4.g.2. of the Addendum of the proposed rule and this final rule. 
We further stated that 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 invited 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 stated that we are considering approaches and authorities 
to encourage value-based care and lower drug prices. We solicited 
comments on how the payment methodology alternatives may intersect and 
affect future participation in any such alternative approaches.
    We noted that, as stated in section II.F.1.b. of the preamble of 
the proposed rule, we described the criteria used to establish new MS-
DRGs. In particular,

[[Page 41173]]

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 
solicited comments on how the administration of the CAR T-cell 
therapies 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 
stated that 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 
solicited public comments on our concerns with the payment alternatives 
that we were considering for CAR T-cell therapies.
    Comment: Many commenters stated that the existing payment 
mechanisms under the IPPS do not allow for accurate payment of CAR T-
cell therapy due its unprecedented high cost. Commenters also asserted 
structural insufficiencies in the new technology add-on payments for 
the drug therapy, such as the maximum add-on payment of 50 percent; the 
inapplicability of the usual cost to charge ratios used in ratesetting 
and payment, including those used in determining new technology add-on 
payments, outlier payments, and payments to IPPS-excluded cancer 
hospitals; and a lack of sufficient historical data and experience 
related to a therapy with a cost of this magnitude. In addition, 
commenters stated that payment for CAR T-cell therapy should avoid 
inappropriate financial incentives for care to be provided in an 
outpatient instead of an inpatient setting. Many commenters requested a 
permanent and long-term solution to ensure accurate payment for CAR T-
cell therapy while concurrently ensuring any redistributive payment 
effects within the IPPS are limited.
    Some commenters recommended that, until a more permanent solution 
is developed, CMS finalize the proposed assignment of CAR T-cell 
therapy to MS-DRG 016, approve the NTAP application for CAR T-cell 
therapy, and/or allow for a CCR of 1.0 for CAR T-cell therapy. However, 
some commenters disagreed with CMS' proposed assignment of CAR T-cell 
therapy to MS-DRG 016 and requested a new separate MS-DRG. These 
commenters disagreed that patients receiving CAR T-cell therapy are 
sufficiently clinically similar to patients receiving autologous bone 
marrow transplants. Reasons cited by these commenters included 
differences in lengths of stay, the level and predictability of 
associated toxicity, and the overall disease burden. Some of these 
commenters suggested creating a new separate MS-DRG for CAR T-cell 
therapy and developing the FY 2019 weight for this MS-DRG not based 
only on historical claims data but also including alternative data on 
the cost of CAR T-cell therapy drugs, such as average sales price (ASP) 
data. Some commenters pointed to the establishment of a separate DRG 
for drug eluting stents under the IPPS as a possible payment model for 
CAR T-cell therapy.
    Other commenters did not support the creation of a new separate MS-
DRG for CAR T-cell therapy. Reasons cited by these commenters included 
the relative newness of the therapy, the limited number of providers 
delivering these treatments, the low volume of patients, redistributive 
effects, and the lack of long term data surrounding length of stay, 
treatment complexities, and costs. These commenters urged CMS to 
collect more comprehensive clinical and cost data before considering 
assignment of a new MS-DRG to these therapies.
    Some commenters requested that CMS carve out the cost of CAR T-cell 
therapy from the IPPS and pay for it on a pass-through basis reflecting 
the cost of the therapy to the hospital and indicated that this was the 
approach taken by some state Medicaid programs. These commenters 
believed that payment on a pass-through basis, for inpatient and/or 
outpatient care, provides the most accurate payment while minimizing 
inappropriate payment incentives across the inpatient and outpatient 
setting.
    Commenters also made technical and operational suggestions to CMS 
if we were to adopt changes to our existing payment mechanisms in the 
final rule as they apply to CAR T-cell therapy, including how a CCR of 
1.0 would be operationalized, or how CMS would collect data on the cost 
of CAR T-cell therapy for pass-through and other purposes.
    Response: Building on President Trump's Blueprint to Lower Drug 
Prices and Reduce Out-of-Pocket Costs, the CMS Center for Medicare and 
Medicaid Innovation (Innovation Center) is soliciting public comment in 
the CY 2019 OPPS/ASC proposed rule on key design considerations for 
developing a potential model that would test private market strategies 
and introduce competition to improve quality of care for beneficiaries, 
while reducing both Medicare expenditures and beneficiaries' out of 
pocket spending. CMS sought similar feedback in a previous solicitation 
of comments,\4\ and, most recently, in the President's Blueprint to 
Lower Drug Prices and Reduce Out-of-Pocket Costs.\5\
---------------------------------------------------------------------------

    \4\ CMS included a solicitation of comments on the Competitive 
Acquisition Program (CAP) for Part B Drugs and Biologicals (81 FR 
13247) in a proposed rule, on March 11, 2016, entitled ``Medicare 
Program; Part B Drug Payment Model'' (81 FR 13230). The solicitation 
of comments sought to help CMS determine if there was sufficient 
interest in the CAP program, and to gather public input if we were 
to consider developing and testing a future model that would be at 
least partly based on the authority for the CAP under section 1847B 
of the Act. The March 11, 2016 proposed rule was withdrawn on 
October 4, 2017 (82 FR 46182) to ensure agency flexibility in 
reexamining important issues related to the proposed payment model 
and exploring new options and alternatives with stakeholders as CMS 
develops potential payment models that support innovative approaches 
to improve quality, accessibility, and affordability, reduce 
Medicare program expenditures, and empower patients and doctors to 
make decisions about their health care.
    \5\ President Donald J. Trump's Blueprint to Lower Drug Prices 
and Reduce Out-of-Pocket Costs, May 11, 2018. Available at: https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-blueprint-lower-drug-prices/.
---------------------------------------------------------------------------

    Given the relative newness of CAR T-cell therapy, the potential 
model, including the reasons underlying our consideration of a 
potential model described in greater detail in the CY 2019 OPPS/ASC 
proposed rule, and our request for feedback on this model approach, we 
believe it would be premature to adopt changes to our existing payment 
mechanisms, either under the IPPS or for IPPS-excluded cancer 
hospitals, specifically for CAR T-cell therapy. Therefore, we disagree 
with commenters who have requested such changes under the IPPS for FY

[[Page 41174]]

2019, including, but not limited to, the creation of a pass-through 
payment; structural changes in new technology add-on payments for the 
drug therapy; changes in the usual cost-to-charge ratios (CCRs) used in 
ratesetting and payment, including those used in determining new 
technology add-on payments, outlier payments, and payments to IPPS 
excluded cancer hospitals; and the creation of a new MS-DRG 
specifically for CAR T-cell therapy prior to gaining more experience 
with the therapy.
    We agree with commenters who recommended that we finalize the 
proposed assignment of CAR-T therapy to MS-DRG 016 rather than consider 
the creation of a new MS-DRG for these therapies, given the relative 
newness of the therapy, the limited number of providers delivering 
these treatments, the low volume of patients, redistributive effects, 
and the lack of long-term data surrounding length of stay, treatment 
complexities, and costs. In addition to the potential model, we agree 
we should collect more comprehensive clinical and cost data before 
considering assignment of a new MS-DRG to these therapies.
    In response to the commenters who indicated that MS-DRG 016 is a 
poor clinical match for CAR T-cell therapy patients and would prefer 
that we create a new MS-DRG for CAR-T cell therapy, we acknowledge that 
there are differences between the treatment approaches, but we continue 
to believe that MS-DRG 016 is the most appropriate match of the 
existing MS-DRGs, given similarities between CAR-T cell therapy and 
autologous bone marrow transplant in harvesting and infusion of patient 
cells as well as post-infusion monitoring for and management of 
potentially severe adverse effects. We reiterate that, in light of the 
potential model and our request for feedback on this approach, it would 
be premature to create a new MS-DRG specifically for CAR T-cell 
therapy. We will consider requests for alternative MS-DRG assignments 
and/or the creation of a new MS-DRG for CAR T-cell therapy after we 
review the public feedback on a potential model and as we gain further 
experience with CAR T-cell therapy and can better evaluate the 
commenters' concerns.
    As described in more detail in section II.H. of the preamble of 
this final rule, we are approving new technology add-on payments for 
CAR T-cell therapy for FY 2019.
    In response to commenters who made technical and operational 
suggestions if CMS were to adopt changes to its existing payment 
mechanisms in the final rule as they apply to CAR T-cell therapy, 
because we are not adopting such changes, we are not addressing those 
technical and operational comments at the current time but will 
consider them for future rulemaking as appropriate.
    After consideration of the public comments we received, we are 
finalizing our proposed approach of assigning ICD-10-PCS procedure 
codes XW033C3 and XW043C3 to Pre-MDC MS-DRG 016 for FY 2019 and 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.''
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).
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20190), we stated 
that we agreed 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 agreed that adding the two additional 
epilepsy diagnosis codes is appropriate. Therefore, we proposed 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.
    Comment: Commenters agreed with CMS' proposal to add ICD-10-CM 
diagnosis codes G40.109 and G40.111 to the list of epilepsy diagnosis 
codes for assignment to MS-DRG 023. The commenters stated that the 
proposal was reasonable, given the ICD-10-CM diagnosis codes and the 
information provided.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add ICD-10-CM diagnosis codes G40.109 and 
G40.111 to the list of epilepsy diagnosis codes for assignment to MS-
DRG 023 in the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
b. Neurological Conditions With Mechanical Ventilation
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20190), 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

[[Page 41175]]

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

    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 in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20191) and 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.
------------------------------------------------------------------------


[[Page 41176]]

    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 the 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 
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-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

[[Page 41177]]

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 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 the 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 the 
proposed rule for our analysis. We noted 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..........................................

[[Page 41178]]

 
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.

                 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 19,471 cases 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.

[[Page 41179]]



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

    We stated in the proposed rule that 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-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-DRG 061 
($23,780 versus $20,097). For the 34 cases that reported mechanical 
ventilation <=996 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 
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).
    We stated in the proposed rule that, 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. We stated in the proposed rule that, 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..........................................

[[Page 41180]]

 
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........
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 noted 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 noted 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.........................

[[Page 41181]]

 
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.........................
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 noted 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 
noted 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 acknowledged in the proposed rule 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

[[Page 41182]]

preliminary step in the transition from the CMS DRGs to MS-DRGs.
    We stated in the proposed rule that 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-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 did 
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, in the FY 2019 IPPS/LTCH PPS proposed rule, we did not 
propose 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.
    Comment: Commenters supported CMS' proposal to not create new MS-
DRGs, classified under MDC 1, for cases representing patients diagnosed 
with a neurological condition who require mechanical ventilation with 
or without a thrombolytic, and in the absence of an O.R. procedure. The 
commenters stated that the proposal was reasonable, given the data, the 
ICD-10-CM diagnosis codes, the ICD-10-PCS procedure codes, and the 
information provided. However, the commenters also recommended that CMS 
continue to conduct further analyses across all the MDCs for the subset 
of patients who require mechanical ventilation in an effort to better 
address the reporting and payment issues.
    Response: We appreciate the commenters' support and agree that 
further analyses are necessary to evaluate the development of potential 
proposals for the subset of patients requiring mechanical ventilation 
across all the MDCs.
    Comment: One commenter disagreed with CMS' proposal to not create 
new MS-DRGs for patients admitted with strokes and treated with 
mechanical ventilation. The commenter expressed appreciation for CMS' 
efforts in analyzing the cost and length of stay data for this subset 
of patients. However, the commenter believed that the results of the 
analysis identifying patients who receive mechanical ventilation >96 
hours and also have an MCC demonstrate that these cases require twice 
the cost of all cases in MS-DRG 61 (Ischemic Stroke, Precerebral 
Occlusion or Transient Ischemia with Thrombolytic Agent with MCC) and 
MS-DRG 64 (Intracranial Hemorrhage or Cerebral Infarction with MCC). 
The commenter requested that CMS reconsider alternative options for 
this subset of patients due to the cost and length of stay disparities.
    Response: We acknowledge the commenters' concern that the average 
length of stay and average costs for cases where mechanical ventilation 
>96 hours was reported with an MCC for MS-DRG 61 and MS-DRG 64 are 
greater when compared to the average length of stay and average costs 
for all cases in those MS-DRGs. However, as stated in the FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20195), our clinical advisors noted that 
patients requiring mechanical ventilation are known to be more resource 
intensive and it would not be practical to create new MS-DRGs for this 
subset of patients given the various other indications in which 
mechanical ventilation may be utilized for other patients. We will 
consider additional analysis in the future in our efforts toward a 
broader approach to refining the MS-DRGs for cases of patients 
requiring mechanical ventilation across the MDCs.
    Comment: One commenter suggested that, although CMS' analysis of 
the cases reporting a neurological condition with mechanical 
ventilation was acceptable, CMS consider creating a new MS-DRG for 
poisoning with mechanical ventilation in future rulemaking. The 
commenter believed that a patient who is in critical condition as a 
result of a poisoning and requires prolonged mechanical ventilation is 
not being recognized appropriately under the current MS-DRG relative 
payment weights.
    Response: We appreciate the commenter's input and suggestion. As 
noted earlier, we will consider additional analysis in our efforts 
toward a broader approach to refining the MS-DRGs for cases of patients 
requiring mechanical ventilation across the MDCs.
    After consideration of the public comments we received, we are 
finalizing our proposal to not create new MS-DRGs, classified under MDC 
1, for cases that identify patients requiring mechanical ventilation 
and are diagnosed with stroke or any other neurological condition with 
or without a thrombolytic, and in the absence of an O.R. procedure for 
FY 2019.
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-DRGs 258 and 259 (Cardiac Pacemaker Device Replacement with and 
without MCC, respectively) because assignment of cases to these MS-DRGs 
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

[[Page 41183]]

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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20198), we noted 
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 noted 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 referred the 
reader to the ICD-10 MS-DRG Definitions Manual Version 33, which is 
available via the internet on the CMS website 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.
    As discussed in the FY 2019 IPS/LTCH PPS proposed rule (83 FR 
20198), 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.

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


[[Page 41184]]

    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.

                      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).....................................
----------------------------------------------------------------------------------------------------------------


[[Page 41185]]

    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.

                             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).................................

[[Page 41186]]

 
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).........................................
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).................................

[[Page 41187]]

 
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.

                       MS-DRGs for 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.................................................
----------------------------------------------------------------------------------------------------------------

    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.

[[Page 41188]]



                               Pacemaker Insertion Procedures in Surgical 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 the 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 stated that 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, in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20203), we proposed 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.
    Comment: Commenters supported the proposal 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. 
One commenter specifically expressed its appreciation of CMS' efforts 
to update the MS-DRG GROUPER logic to better recognize the resources 
and complexity of pacemaker device and lead procedures. Another 
commenter disagreed with the proposal to use pacemaker code pairs for 
assignment to a surgical MS-DRG, stating it would be more appropriate 
to designate each pacemaker device and pacemaker lead procedure code as 
an O.R. procedure to allow initial insertions and replacement of 
individual components to group to surgical MS-DRGs within all MDCs. 
According to the commenter, this designation would compensate providers 
for the cost of the device and the resources utilized in the 
performance of initial insertions and the replacement of individual 
components.
    Response: We appreciate the commenters' support. With regard to the 
commenter who disagreed with the proposal to utilize pacemaker code 
pairs for assignment to a surgical MS-DRG and suggested that the 
GROUPER logic designate each pacemaker device and pacemaker lead 
procedure code as an O.R. procedure to allow initial insertions and 
replacement of individual components to group to surgical MS-DRGs 
within all MDCs, we note that, as displayed in Table 6P.1c. associated 
with the FY 2019 IPPS/LTCH PPS proposed rule (which is available via 
the internet on the CMS website), our claims analysis for cases 
reporting a procedure code describing the insertion of a pacemaker 
device only demonstrated a total of six cases across all the medical 
MS-DRGs, and for cases reporting a procedure code describing the 
insertion of a pacemaker lead only, the data demonstrated a total of 
four cases across all the medical MS-DRGs. As a result, there were a 
total of only 10 cases where a stand-alone code for insertion of a 
pacemaker device procedure or a stand-alone code for insertion of a 
pacemaker lead procedure was reported. Those 10 cases grouped to 10 
different medical MS-DRGs, of which 8 included a CC or MCC diagnosis. 
Therefore, it is not clear how much of the average costs, the average 
length of stay, the complexity of service, and resource utilization for 
those cases

[[Page 41189]]

are attributable to the insertion of the pacemaker device/lead 
procedure versus the severity of illness.
    After consideration of the public comments we received, we are 
finalizing our proposal 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 under the ICD-10 MS-
DRGs Version 36, effective October 1, 2018.
    We also proposed 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 in the proposed rule and earlier in this section and 
consistent with how these procedures were classified under the Version 
33 ICD-10 MS-DRG GROUPER logic.
    Comment: A number of commenters supported the proposal 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. However, other 
commenters opposed the proposal. One commenter acknowledged that the 
complexity of inserting a full pacemaker system is greater than when 
inserting a pacemaker lead or generator. However, this commenter 
asserted that the complexity does not increase significantly and that 
the placement of a lead or generator still requires the use of an 
operating room, sterile field, anesthesiology, and preparing the 
patient. The commenter believed that the placement of a pacemaker lead 
or device does require the use of an operating room and expressed 
concern that CMS would designate the procedures as a non-O.R. 
procedure.
    Response: We appreciate the commenters' support. With regard to the 
commenter who expressed concern that we proposed to designate 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, we note that historically, these 
procedures have been designated as non-O.R. procedures. As we noted in 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20203), our proposal 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 is 
consistent with how these procedures were classified under the Version 
33 ICD-10 MS-DRG GROUPER logic. In addition, our clinical advisors 
continue to support the non-O.R. designation because, as the commenter 
noted in its own comments, while these procedures may require a sterile 
field, anesthesia and preparing the patient, the complexity of 
inserting a pacemaker lead or generator alone is less than that of 
inserting a full pacemaker system and the former can be performed in 
settings such as cardiac catheterization laboratories.
    After consideration of the public comments we received, we are 
finalizing our proposal 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 outside of MDC 5 under the ICD-10 MS-DRGs Version 36, 
effective October 1, 2018.
    In the proposed rule, we referred readers to Table 6P.1d, Table 
6P.1e, and Table 6P.1f. associated with the 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 invited public comments on our lists of procedure 
codes that we proposed to include for restructuring the ICD-10 MS-DRG 
GROUPER logic for pacemaker insertion procedures.
    In addition, we proposed to maintain the current GROUPER logic for 
MS-DRGs 258 and 259 (Cardiac 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 proposed 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.
    Comment: Commenters agreed with the proposed lists of procedure 
codes for restructuring the ICD-10 MS DRG GROUPER logic for pacemaker 
insertion procedures. One commenter also suggested the addition of ICD-
10-PCS procedure code 02H63MZ (Insertion of cardiac lead into right 
atrium, percutaneous approach) and ICD-10-PCS procedure code 02H73MZ 
(Insertion of cardiac lead into left atrium, percutaneous approach) to 
Tables 6P.1d. and Table 6P.1f. that were associated with the proposed 
rule. The commenter noted that the tables included the open and 
percutaneous endoscopic approaches but did not include the percutaneous 
approach.
    Response: We appreciate the commenters' support. We agree with the 
commenter to add ICD-10-PCS procedure codes 02H63MZ and 02H73MZ to 
Table 6P.1d and as reflected in Table 6P.1f. associated with this final 
rule (which is available via the internet on the CMS website), to be 
included for the pacemaker insertion code pairs and as stand-alone 
codes for the insertion of a pacemaker lead. The codes are consistent 
with the other insertion of cardiac lead procedures and were 
inadvertently omitted from the initial list.
    After consideration of the public comments we received, we are 
finalizing the lists of the procedure codes in Tables 6P.1d., Table 
6P.1e., and Table 6P.1f associated with the proposed rule, with the 
addition of ICD-10-PCS procedure codes 02H63MZ and 02H73MZ to be 
included for the pacemaker insertion code pairs and as stand-alone 
codes for the insertion of a pacemaker lead, as reflected in Tables 
6P.1.d. and 6P.1.f. associated with this final rule. We also are 
finalizing our proposal to maintain the current GROUPER logic for MS-
DRGs 258 and 259 and for MS-DRGs 260, 261, and 262

[[Page 41190]]

under the ICD-10 Version 36, effective October 1, 2018.
    We noted in the proposed rule 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.
------------------------------------------------------------------------

    In the proposed rule, we solicited 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.
    Comment: One commenter recommended that CMS not finalize the 
proposed designation of the procedure codes listed in the above table 
describing the removal or revisions of a cardiac lead and the removal 
or revision of a cardiac rhythm related (pacemaker) device from O.R. 
procedures to non-O.R. procedures when reported as a single, individual 
stand-alone code when reported with a principal diagnosis outside of 
MDC 5. Another commenter expressed concern that the rationale for the 
proposal was not clear and warranted additional clarification about the 
data used to arrive at this recommendation. According to this 
commenter, regardless of the principal diagnosis, the resources for 
procedures involving insertion, removal or revision of a pacemaker 
generator or lead are the same. The commenter further noted that 
revisions are often more complex and require greater resources. The 
commenter recommended that CMS continue to designate the procedures as 
O.R. procedures and further explain the proposal.
    Response: We appreciate the commenter's feedback. We note that 
while we were soliciting comments on the procedure codes listed in the 
table above that describe the removal or revision of a cardiac lead and 
the removal or revision of a cardiac rhythm related (pacemaker) device, 
we did not specifically recommend a change to the designation of the 
procedure codes at this time. We agree with the commenter that the 
removal or revision of a cardiac lead or pacemaker generator can be 
more complex and require greater resources than an initial insertion 
procedure.
    After consideration of the public comments we received, we are 
maintaining the O.R. designation of the procedure codes listed in the 
above table under the ICD-10 MS-DRGs Version 36, effective October 1, 
2018. As additional claims data become available, we will continue to 
analyze these procedures.
    We also note in the proposed rule 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.

[[Page 41191]]

 
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.

                                        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, in the 
FY 2019 IPPS/LTCH PPS proposed rule, we solicited 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.
    Comment: Commenters supported classifying the procedure codes 
listed in the table above describing the insertion and revision of 
intracardiac pacemakers into all surgical unrelated MS-DRGs outside of 
MDC 5.
    Response: We appreciate the commenters' feedback. We note that 
while we solicited comments on the procedure codes listed in the table 
above that describe the insertion of an intracardiac pacemaker device, 
we did not specifically recommend a change to the designation of the 
procedure codes at this time. We also note that, currently, the 
procedures are already classified within the GROUPER logic as extensive 
O.R. procedures. Therefore, if one of the procedure codes is reported 
with a principal diagnosis outside of MDC 5, the case will group to one 
of the unrelated surgical MS-DRGs.
    After consideration of the public comments we received, we are 
maintaining the O.R. designation of the procedure codes listed in the 
above table under the ICD-10 MS-DRGs Version 36, effective October 1, 
2018. As additional claims data become available, we will continue to 
analyze these procedures.
b. Drug-Coated Balloons in Endovascular Procedures
    In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38111), we 
discontinued new technology add-on payments for the LUTONIX[supreg] 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''.
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20205), 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.

[[Page 41192]]

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

    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-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

[[Page 41193]]

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-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 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.
    We stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20207) 
that the results of our claims data analysis and the advice from our 
clinical advisors did 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. We further stated that, 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 stated 
that 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 proposed 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.
    Comment: A number of commenters supported maintaining the current 
classification of cases involving the use of a drug-coated balloon in 
the performance of endovascular procedures. The commenters stated that 
CMS' proposal was reasonable, given the data, ICD-10-PCS procedure 
codes, and information provided.
    Response: We appreciate the commenters' support.
    Comment: One commenter recommended that further data analysis be 
conducted after the new ICD-10-PCS procedure codes for endovascular 
procedures utilizing a drug-coated balloon in the upper extremity 
become effective on October 1, 2018, in order to determine if MS-DRG 
structure and assignment modifications are warranted in the future.
    Response: We agree with the commenter that continued monitoring of 
the cases reporting the use of a drug-coated balloon in the performance 
of endovascular procedures in the lower extremity, along with analysis 
of the new ICD-10-PCS procedure codes that identify the use of a drug-
coated balloon in the upper extremity, would be advantageous. As claims 
data become available, we will be able to evaluate the resource 
utilization of these procedures more effectively.
    Comment: One commenter believed that an analysis of the average 
costs of cases performed with and without the use of drug-coated 
balloons in MS-DRGs 252, 253, and 254 justified assigning cases, 
including cases involving the use of drug-coated balloons in the 
performance of the procedure, to MS-DRGs 252 or 253, and not to MS-DRG 
254. The commenter indicated that claims data showed the average costs 
of MS-DRG 253 for all cases is $18,986, while the average cost of cases 
utilizing drug-coated balloons in the performance of the procedure 
assigned to MS-DRG 254 is $17,445. The commenter believed that, while 
the average length-of-stay is lower for these cases, the average costs 
are consistent with that of MS-DRG 253. Therefore, the commenter 
suggested that CMS reassign these cases to MS-DRG 253 as a more 
appropriate reflection of the hospital resources utilized for these 
cases.
    Response: Our clinical advisors reviewed the data, and again 
determined that it would not be clinically appropriate to reassign 
cases for patients from the lowest severity level (without CC/MCC) MS-
DRG to the higher severity level (with CC) MS-DRG in the absence of 
additional data to better determine the resource utilization for this 
subset of patients. We reiterate that we believe as use of the drug-
coated balloon in the performance of endovascular procedures becomes 
more common, the costs will be reflected in the data. In addition, as 
noted above, new ICD-10-PCS procedure codes that describe the use of a 
drug-coated balloon in the upper extremity are effective with 
discharges occurring on or after October 1, 2018. As such, we will 
continue to monitor cases reporting the use of a drug-coated balloon in 
the performance of endovascular procedures and determine if future MS-
DRG structure and assignment modifications are supported.
    After consideration of the public comments we received, we are 
finalizing our proposal 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 for FY 2019.
    We noted in the proposed rule that because 24 of the 36 ICD-10-PCS 
procedure codes describing the use of a

[[Page 41194]]

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-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-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, as we stated in the proposed rule, 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
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20207), 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-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-DRGs to the 
ICD-10 MS-DRGs, there was not a specific code available that identified 
the kidney from which to 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-DRGs to 
the ICD-10 MS-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.
    In the proposed rule, we proposed 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

[[Page 41195]]

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 proposed 
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 agreed 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.
    Comment: Commenters agreed with CMS' proposals to reassign ICD-10-
CM diagnosis code D17.71 that describes benign lipomatous neoplasm of 
the kidney from MDC 6 to MDC 11, and to reassign ICD-10-CM diagnosis 
code D17.72 that describes benign lipomatous neoplasm of other 
genitourinary tract organ from MDC 9 to MDC 11. The commenters stated 
the proposals were reasonable, given the ICD-10-CM diagnosis codes and 
information provided.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposals to reassign ICD-10-CM diagnosis code D17.71 
from MS-DRGs 393, 394, and 395 under MDC 6 to MS-DRGs 686, 687, and 688 
under MDC 11, and to reassign ICD-10-CM diagnosis code D17.72 from MS-
DRGs 606 and 607 under MDC 9 to MS-DRGs 686, 687, and 688 under MDC 11 
in the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
b. Bowel Procedures
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20208), 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-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.

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


[[Page 41196]]

    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. We stated in the FY 2019 IPPS/LTCH PPS 
proposed rule that 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, in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20209), we proposed to maintain the current 
assignment of the 8 specific bowel repositioning procedures in MS-DRGs 
344, 345, and 346 for FY 2019.
    Comment: Commenters supported CMS' proposal to maintain the current 
assignment of the 8 specific bowel repositioning procedures in MS DRGs 
344, 345, and 346 for FY 2019.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current assignment of the 8 
specific bowel repositioning procedures in MS DRGs 344, 345, and 346 
for FY 2019.
    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
----------------------------------------------------------------------------------------------------------------

    We stated in the FY 2019 IPPS/LTCH PPS proposed rule that 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, in the proposed rule, we proposed 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.
    Comment: Commenters disagreed with CMS' proposal 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. The commenters recommended that changes 
to these MS-DRGs be delayed until a thorough data analysis is 
conducted. The commenters further recommended that any future analysis 
include a thorough review of the principal diagnoses for cases 
involving these ICD-10-PCS codes, as the associated diagnosis 
significantly impacts the resource utilization and complexity of the 
procedure performed and MS-DRG assignment. The commenters noted that 
the root operation of ``Reposition'' may be used for the takedown of a 
stoma, as well as to treat a specific medical condition such as 
malrotation of the intestine, and that ``Repair'' is the root operation 
of last resort when no other ICD-10-PCS root operation applies and, 
therefore, is used for a wide range of procedures of varying 
complexity.
    Commenters also noted that several questions and answers regarding 
these ICD-10-PCS procedure codes were published in Coding Clinic for 
ICD-10-CM/PCS between late 2016 and the end of 2017, and stated that 
because 2 full

[[Page 41197]]

years of data were not available subsequent to publication of this 
advice, CMS' analysis and proposed MS-DRG modifications may be based on 
unreliable data.
    Response: Upon further review, we agree with the commenters that 
the availability of a full 2 years of data would allow us to conduct a 
more comprehensive analysis upon which to consider potential 
modifications to these MS-DRGs. Therefore, we believe it would be 
preferable to wait until these data are available before finalizing 
changes to the MS-DRG assignment for these bowel procedures.
    After consideration of the public comments we received, we are not 
finalizing our proposal 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 for FY 2019.
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 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20210), we 
thanked 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 did not propose any changes 
to the MS-DRGs involving spinal fusion procedures for FY 2019. However, 
in response to the commenter's suggestion and findings, we provided the 
following 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 noted 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 the 
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 the 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

[[Page 41198]]

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 
the proposed rule and this final 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 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. We stated in the 
proposed rule that 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.

[[Page 41199]]

    With regard to possible future action, we indicated in the proposed 
rule that 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 the FY 2019 IPPS/LTCH 
PPS proposed rule will no longer be in the classification system, 
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 
agreed 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 and as stated in the proposed rule and 
earlier in our discussion, we proposed not to make any changes to the 
spinal fusion MS-DRGs for FY 2019.
    Comment: Commenters agreed with CMS' proposal not to make any 
changes to the MS-DRGs involving spinal fusion procedures for FY 2019.
    Response: We thank the commenters for their support.
    Comment: Some commenters noted that confusion has existed as to 
whether a spinal fusion code may be assigned when no bone graft or bone 
graft substitute is used (that is, instrumentation only) but the 
medical record documentation refers to the procedure as a spinal 
fusion. One commenter recommended that additional refinements be made 
to the ICD-10-PCS spinal fusion coding guidelines in order to further 
clarify appropriate reporting of spinal fusion codes. Another commenter 
asserted that the planned deletion of a total of 213 ICD-10-PCS fusion 
procedure codes with the device value ``Z'' for ``no device'', 
effective October 1, 2018, should help remedy the confusion regarding 
the correct coding of spinal procedures.
    Response: We agree with the commenters that accurate coding of 
spinal fusion procedures has been the subject of confusion in the past, 
and we will continue to monitor the claims data for spinal fusion 
procedures. As one of the four Cooperating Parties, we also will 
continue to collaborate with the American Hospital Association to 
provide guidance for coding spinal fusion procedures through the Coding 
Clinic for ICD-10-CM/PCS publication and to review the ICD-10-PCS 
spinal fusion coding guidelines to determine where further 
clarifications may be made.
    After consideration of the public comments we received, we are 
finalizing our proposal to not make any changes to the spinal fusion 
MS-DRGs for FY 2019.
7. MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue and 
Breast): Cellulitis With Methicillin Resistant Staphylococcus Aureus 
(MRSA) Infection
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20212), we received a request to reassign ICD-10-CM diagnosis codes 
reported with a principal 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.
    For the FY 2019 IPPS/LTCH PPS proposed rule, 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 principal 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 principal diagnosis             5,364             5.3           8,245
 of cellulitis and a secondary diagnosis of B95.62..............
MS-DRGs 602 and 603--Cases reported with a principal diagnosis               309             5.4           8,832
 of 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 principal 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 principal 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

[[Page 41200]]

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 
principal 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. We stated in the proposed rule that 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 principal 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, in the proposed rule, we stated that these cases are more 
clinically aligned with all cases in MS-DRGs 602 and 603. For these 
reasons, we did not propose 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 invited 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 principal diagnosis of 
cellulitis.
    Comment: One commenter supported CMS' 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 principal diagnosis of 
cellulitis.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current MS-DRG classification 
for cases reported with ICD-10-CM diagnosis codes B95.62 and A49.02 
when reported as secondary diagnoses with a principal diagnosis of 
cellulitis.
8. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and 
Disorders): Acute Intermittent Porphyria
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20212), we received a request to revise the MS-DRG classification for 
cases of 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[supreg] 
(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 642                                  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-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

[[Page 41201]]

 
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 stated in the FY 2019 IPPS/LTCH PPS proposed rule that 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. We further stated that 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 did 
not propose to revise the MS-DRG classification for porphyria cases.
    Comment: Some commenters supported CMS' proposal to maintain 
porphyria cases in MS-DRG 642.
    Response: We appreciate the commenters' support.
    Comment: Other commenters opposed CMS' proposal to not create a new 
MS-DRG for cases involving ICD-10-CM diagnosis code E80.21. These 
commenters described significant difficulties encountered by patients 
with acute porphyria attacks in obtaining Panhematin[supreg] when 
presenting to an inpatient hospital, which they attribute to the strong 
financial disincentives faced by facilities to treat these cases on an 
inpatient basis. The commenters asserted that the inpatient stays 
required for management of acute porphyria attacks are not clinically 
similar to inpatient stays for other inborn disorders of metabolism 
(which comprise the cases assigned to MS-DRG 642). The commenters 
stated that, based on the lower than expected average cost per case and 
longer than expected length of stay for acute porphyria attacks, it 
appears that facilities are frequently not providing Panhematin[supreg] 
to patients in this condition, and instead attempting to provide 
symptom relief and transferring patients to an outpatient setting to 
receive the drug where they can be adequately paid. The commenters 
stated that this is in contrast to the standard of care for acute 
porphyria attacks and can result in devastating long-term health 
consequences. The commenters suggested that CMS consider alternative 
mechanisms to ensure adequate payment for cases involving rare 
diseases. In summary, commenters asserted that creating a new MS-DRG 
would allow more accurate payment for the cases that remain in MS-DRG 
642 and facilitate access to the standard of care for patients with 
acute porphyria attacks.
    Response: We acknowledge the commenters' concerns. As we have 
stated in prior rulemaking, it is not appropriate for facilities to 
deny treatment to beneficiaries needing a specific type of therapy or 
treatment that involves increased costs. The MS-DRG system is a system 
of averages and it is expected that across the diagnostic related 
groups that within certain groups, some cases may demonstrate higher 
than average costs, while other cases may demonstrate lower than 
average costs.
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20212 through 20213), we recognize the average costs of the small 
number of porphyria cases are greater than the average costs of the 
cases in MS-DRG 642 overall. An averaged payment system depends on 
aggregation of similar cases with a range of costs, and it is therefore 
usually possible to define subsets with higher values and subsets with 
lower values. We seek to identify sufficiently large sets of claims 
data with a resource/cost similarity and clinical similarity in 
developing diagnostic-related groups rather than smaller subsets of 
diagnoses. In response to the commenters' assertion that these cases 
are not clinically similar to other cases within the MS-DRG, our 
clinical advisors continue to believe that MS-DRG 642 represents the 
most clinically appropriate placement within the current MS-DRG 
structure at this time because 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.
    We are sensitive to the commenters' concerns about access to 
treatment for beneficiaries who have been diagnosed with this 
condition. Therefore, as part of our ongoing, comprehensive analysis of 
the MS-DRGs under ICD-10, we will continue to explore mechanisms 
through which to address rare diseases and low volume DRGs. However, at 
this time, for the reasons summarized earlier, we are finalizing our 
proposal for FY 2019 to maintain the MS-DRG classification for 
porphyria cases.
9. MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract): 
Admit for Renal Dialysis
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20213 through 20214),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-10-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.

[[Page 41202]]

 
Z49.32....................  Encounter for adequacy testing for
                             peritoneal dialysis.
------------------------------------------------------------------------

    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 continued 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 stated in the FY 2019 IPPS/LTCH PPS proposed rule that we 
did not believe that it was appropriate to maintain a vestigial MS-DRG, 
particularly due to the fact that the transition to ICD-10 had resulted 
in three out of four codes that mapped to the MS-DRG being precluded 
from being used as principal diagnosis codes on the claim. In addition, 
our clinical advisors believed 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) was clinically appropriate because the reassignment would 
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 MCE, we proposed 
to 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, and to delete MS-
DRG 685.
    Comment: Commenters agreed with the proposal to 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, and to delete MS-DRG 685.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing our proposal 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 for FY 2019, without modification.
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.

[[Page 41203]]

    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.

                       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.

[[Page 41204]]



                                           Suggestions for MS-DRG 775
                                [Vaginal delivery without complicating diagnoses]
----------------------------------------------------------------------------------------------------------------
                                                                        Rationale for removing code from MS-DRG
          ICD-10-CM code                    Code description                              775
----------------------------------------------------------------------------------------------------------------
O66.41............................  Failed attempted vaginal birth    This code indicates that the attempt at
                                     after previous cesarean           vaginal delivery has failed.
                                     delivery.
O69.4XX0..........................  Labor and delivery complicated    According to the physicians consulted,
                                     by vasa previa, not applicable    vasa previa always results in C-section.
                                     or unspecified.                   Research indicates that when vasa previa
                                                                       is diagnosed, C-section before labor
                                                                       begins can save the baby's life.
O69.4XX2..........................  Labor and delivery complicated    According to the physicians consulted,
                                     by vasa 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 complicated    According to the physicians consulted,
                                     by vasa 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 complicated    According to the physicians consulted,
                                     by vasa 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 complicated    According to the physicians consulted,
                                     by vasa 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 complicated    According to the physicians consulted,
                                     by vasa 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 before onset    This code indicates that the uterus has
                                     of labor, unspecified trimester.  ruptured before onset of labor and
                                                                       therefore, a vaginal delivery would not
                                                                       be possible.
O82...............................  Encounter for cesarean delivery   This code indicates the encounter is for a
                                     without indication.               cesarean delivery.
----------------------------------------------------------------------------------------------------------------


                       Suggestions for MS-DRG 775
            [Vaginal delivery without complicating diagnoses]
------------------------------------------------------------------------
                                                  Rationale for removing
     ICD-10-PCS 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.
O15.02....................  Eclampsia complicating pregnancy, second
                             trimester.

[[Page 41205]]

 
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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20217), we 
thanked the commenters and stated that we appreciated 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 noted 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 indicated that 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 referred 
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-for-Service-Payment/

[[Page 41206]]

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 stated in the proposed rule that 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, Laparaoscopy 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, in the proposed rule, we stated we agreed 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 in 
the proposed rule and 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-DRG CC and MCC

[[Page 41207]]

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 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 stated in the proposed rule 
that we agreed there should be no changes. However, we noted 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 associated with the proposed 
rule and this final rule 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 noted 
that, as described in the proposed rule and 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 
stated in the proposed rule that 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 acknowledged that these procedures may be performed to 
treat obstetrical lacerations as discussed in prior rulemaking (81 FR 
56853), we stated that 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 stated in the 
proposed rule 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. In the proposed rule, we noted 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 in the 
proposed rule and 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

[[Page 41208]]

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), 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 
noted that, this working concept for MS-DRG 768 would eliminate vaginal 
delivery cases with an O.R. procedure grouping to the unrelated MS-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 in the proposed rule and 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 suggested deleting MS-DRGs 765 and 766. 
We also suggested 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 suggested deleting MS-DRGs 767, 774, and 
775. We also suggested 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. In the proposed 
rule, we stated 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 suggested deleting MS-DRGs 777, 778, 780, 
781, and 782. We also suggested 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...........................

[[Page 41209]]

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

    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.

[[Page 41210]]



                           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
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-way severity level split or the suggested Other 
Antepartum Diagnoses with O.R. Procedure 3-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-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
MS-DRG XXX (Vaginal Delivery without Sterilization/D&C without             4,105             2.3           4,601
 CC/MCC)........................................................
----------------------------------------------------------------------------------------------------------------


[[Page 41211]]


                                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 acknowledged that when the criteria to create subgroups was 
applied for the alternative 2-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, in the FY 
2019 IPPS/LTCH PPS proposed rule, we proposed the deletion of 10 MS-
DRGs and the creation of 18 new MS-DRGs (as shown below). This proposal 
was 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. We indicated in 
the proposed rule that 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. We stated that 
our proposals, as set forth below, would also simplify the vaginal 
delivery procedure logic that we identified and commenters acknowledged 
as technically complex by eliminating the extensive diagnosis and 
procedure code lists for several conditions that must be met for 
assignment to the vaginal delivery MS-DRGs. We stated that our 
proposals also are 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 proposed 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 proposed 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 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

[[Page 41212]]

non-delivery MS-DRGs as shown in Diagram 2.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR17AU18.000

    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 
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

[[Page 41213]]

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 proposed to add a new Questionable Obstetric Admission edit under 
the MCE. We invited public comments on this proposed MCE edit and we 
also invited 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] TR17AU18.001

BILLING CODE 4120-01-C
    We referred readers to Tables 6P.1h. through 6P.1k. associated with 
the proposed rule for the lists of the diagnosis and procedure codes 
that we proposed to assign to the GROUPER logic for the proposed new 
MS-DRGs and the existing MS-DRGs under MDC 14. We invited 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 noted 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

[[Page 41214]]

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 proposed to remove that logic. We invited public 
comments on this proposal, as well as our proposed list of procedure 
codes for the proposed revised MDC 14 MS-DRG logic, which would require 
a procedure code for case assignment. We also invited 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.
    Comment: Commenters agreed with CMS' proposal to restructure the 
MS-DRGs within MDC 14. A few commenters commended CMS on the proposed 
new structure and GROUPER logic for these MS-DRGs, and believed that 
the new structure and logic is clearer and clinically appropriate. 
Another commenter agreed with the proposed new GROUPER logic for MDC 14 
for deliveries with the 3-way severity level splits. The commenters 
anticipated that the new structure and logic will provide more clarity 
than the current structure.
    Response: We appreciate the commenters' support. We agree the 
proposed new structure and GROUPER logic of the MS-DRGs under MDC 14 
will provide more clarity than the current structure and logic.
    Comment: Another commenter stated that all of the diagnoses 
currently assigned to MS-DRG 774 (Vaginal Delivery with Complicating 
Diagnosis) in the GROUPER logic, along with some of the diagnoses that 
were noted to appear to be missing from the GROUPER logic (83 FR 20216 
through 20217), should be added to the Principal Diagnosis Is Its Own 
CC Or MCC logic for the proposed new vaginal delivery MS-DRGs 796 
(Vaginal Delivery with Sterilization/D&C with MCC), 797 (Vaginal 
Delivery with Sterilization/D&C with CC), 798 (Vaginal Delivery with 
Sterilization/D&C without CC/MCC), 805 (Vaginal Delivery without 
Sterilization/D&C with MCC), 806 (Vaginal Delivery without 
Sterilization/D&C with CC), and 807 (Vaginal Delivery without 
Sterilization/D&C without CC/MCC). The commenter provided the following 
list of diagnosis codes that were noted to appear to be missing from 
the GROUPER logic, and requested CMS consider adding these diagnosis 
codes to the Principal Diagnosis Is Its Own CC Or MCC Lists. The 
commenter believed that the current GROUPER logic for MS-DRG 774 
includes diagnoses that could change the MS-DRG assignment of a case 
from MS-DRG 775 to MS-DRG 774 based on the principal diagnosis. The 
commenter further expressed concern that these same diagnoses may group 
to the proposed new MS-DRGs 798 or 807 (without CC/MCC) under the 
proposed new structure and GROUPER logic for the vaginal delivery MS-
DRGs.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
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.
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.
------------------------------------------------------------------------

    Response: As discussed in the FY 2019 IPPS/LTCH PPS proposed rule 
(83 FR 20236 through 20239), we proposed 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. For the reasons stated 
in section II.F.15.c. of the preamble of this final rule, we are 
finalizing that proposal, and therefore this logic will no longer apply 
for FY 2019. We refer readers to section II.F.15.c. of the preamble of 
this final rule for further discussion of the specific proposal, 
including summaries of the public comments we received and our 
responses and our statement of final policy.
    With regard to the commenter's concern that the diagnosis codes 
listed above appear to be missing from the GROUPER logic, we note that, 
currently, all of the diagnoses codes are included in the MDC 14 
Assignment of Diagnosis Codes List. The diagnosis codes that include 
the terminology ``complicating the puerperium'' are listed under the 
``Second Condition--Principal or Secondary Diagnosis'' code list in the 
diagnosis code logic for MS-DRG 774, and the diagnosis codes that 
include the terminology ``complicating childbirth'' are listed under 
the ``Principal Diagnosis'' code list for the diagnosis code logic for 
MS-DRG 781 (Other Antepartum Diagnoses with Medical Complications). We 
acknowledge that the diagnosis codes that include the

[[Page 41215]]

terminology ``complicating childbirth'' that the commenter referenced 
were inadvertently omitted, and are not listed in the ICD-10 MS-DRG 
Definitions Manual Version 35 under the diagnosis code logic list for 
MS-DRG 774 (or for MS-DRGs 767 (Vaginal Delivery with Sterilization 
and/or D&C) and 768 (Vaginal Delivery with O.R. Procedure Except 
Sterilization and/or D&C)). However, if one of those diagnosis codes is 
reported with a procedure code from the vaginal delivery code list, the 
ICD-10 MS-DRG GROUPER Version 35 accurately groups the case to a 
vaginal delivery MS-DRG.
    As stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20220), 
in our proposal for restructuring the MDC 14 MS-DRGs under the ICD-10 
MS-DRGs Version 36, diagnoses described as occurring during pregnancy 
and diagnoses specifying a trimester or maternal care in the absence of 
a delivery procedure reported are considered antepartum conditions. 
Also, as shown in Table 6P.1j. associated with the proposed rule 
(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-Items/FY2019-IPPS-Proposed-Rule-Tables.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending), we did 
not propose to include any diagnosis codes describing a condition as 
``complicating childbirth'' in the list of diagnosis codes describing 
antepartum conditions. Therefore, the diagnosis codes described as 
``complicating childbirth'' would be applicable when a patient is 
admitted for a delivery episode and are subject to MS-DRG assignment to 
proposed MS-DRGs describing a cesarean or vaginal delivery.
    Comment: Another commenter agreed with CMS' initiative to 
restructure the MS-DRGs and GROUPER logic under MDC 14. However, the 
commenter expressed concerns with the proposed GROUPER logic, and 
requested CMS consider all of the issues prior to implementing the 
proposed new MS-DRGs and GROUPER logic. The commenter believed that 
grouping a vaginal delivery by procedure codes describing a delivery 
and a diagnosis code describing the outcome of delivery did not seem 
appropriate. The commenter stated that it is necessary to determine if 
a case should be assigned to a vaginal delivery MS-DRG based on the 
combination of principal diagnoses and procedure codes versus the 
combination of a procedure code with an outcome of delivery code. The 
commenter recommended that the first consideration should consist of 
identification of a principal diagnosis code within the O00-O08 code 
range (Pregnancy with Abortive Outcome) and then proceeding with 
grouping those cases to the Abortion MS-DRGs 770 (Abortion with D&C, 
Aspiration Curettage or Hysterotomy) and 779 (Abortion without D&C), 
prior to possibly grouping the cases to the cesarean or vaginal 
delivery MS-DRGs. The commenter provided the example of a blighted ovum 
that may be treated with ICD-10-PCS procedure codes 10D07Z6 (Extraction 
of products of conception, vacuum, via natural or artificial opening) 
or 10D07Z8 (Extraction of products of conception, other, via natural or 
artificial opening), which are reported for vaginal deliveries.
    Response: We appreciate the commenter's support for the effort to 
restructure the MS-DRGs and GROUPER logic under MDC 14. However, with 
respect to the commenter's concerns regarding the proposed new GROUPER 
logic for a vaginal delivery, we disagree with the commenter that it is 
necessary to determine if cases should be assigned to a vaginal 
delivery MS-DRG based on the combination of principal diagnoses and 
procedure codes versus the combination of a procedure code with an 
outcome of delivery code. One of the underlying purposes of the effort 
to restructure the vaginal delivery MS-DRGs was to simplify the complex 
logic currently associated with the vaginal delivery MS-DRGs, which 
includes multiple code lists for principal and secondary diagnoses. 
Based on the proposed new structure and GROUPER logic of the MS-DRGs 
under MDC 14, to identify that a vaginal delivery occurred, the logic 
does not have to consider or depend on the reason the patient was 
admitted. Rather, the GROUPER logic is structured to account for the 
fact that a delivery took place during that hospitalization. The 
delivery MS-DRGs (whether cesarean or vaginal) are specifically 
intended for that reason. With regard to the example provided by the 
commenter, we note that ICD-10-PCS procedure codes 10D07Z6 and 10D07Z8 
are designated as non-O.R. procedures that affect the MS-DRG assignment 
of specific MS-DRGs. ICD-10-PCS procedure codes 10D07Z6 and 10D07Z8 
impact the MS-DRG assignment of the vaginal delivery MS-DRGs. However, 
ICD-10-CM diagnosis code O02.0 (Blighted ovum and nonhydatidiform mole) 
is identified as a proposed antepartum condition, as shown in Table 
6P.1j. associated with the proposed rule (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-Items/FY2019-IPPS-Proposed-Rule-Tables.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending) and, 
therefore, as depicted in the commenter's example, if a patient has a 
principal diagnosis of a blighted ovum and either ICD-10-PCS procedure 
code 10D07Z6 or 10D07Z8 is reported, the proposed new GROUPER logic 
would result in an MS-DRG case assignment to one of the proposed new 
MS-DRGs 831, 832, or 833 (Other Antepartum Diagnoses without O.R. 
Procedure with MCC, with CC or without CC/MCC, respectively) and not a 
vaginal delivery MS-DRG. The diagnosis of a blighted ovum does not 
result in a viable pregnancy and, therefore, an outcome of delivery 
diagnosis code would not be reported. An illustration of how this 
proposed new GROUPER logic would apply for antepartum conditions was 
represented in Diagram 2 of the FY 2019 IPPS/LTCH PPS proposed rule (83 
FR 20225).
    Comment: One commenter expressed concern about the proposed 
relative weights for several of the proposed new MS-DRGs under MDC 14. 
The commenter stated that the low volume of the procedures assigned to 
these MS-DRGs accounted for volatility in the relative weights. With 
regard to proposed new MS-DRGs 817, 818, and 819 (Other Antepartum 
Diagnoses with O.R. Procedure with MCC, CC, and without CC/MCC, 
respectively), the commenter stated that the proposed relative weights 
for these MS-DRGs are significantly lower than the proposed relative 
weights of the surgical MS-DRGs to which the procedure codes proposed 
to be assigned to these proposed new MS-DRGs would map for non-
obstetrical patients. This commenter also stated that the relative 
weights for proposed new MS-DRGs 806 and 807 (Vaginal Delivery without 
Sterilization/D&C with CC and without CC/MCC, respectively) are lower 
than the current relative weights for MS-DRGs 774 and 775 (Vaginal 
Delivery with and without Complicating Diagnosis, respectively), and 
believed the relative weight for proposed new MS-DRG 805 (Vaginal 
Delivery without Sterilization/D&C with MCC) is likely inadequate for 
the resources required to care for patients with MCC severity level 
designations. The commenter suggested that CMS maintain the relative 
weights for proposed new MS-DRGs 806 and 807 at the same value of

[[Page 41216]]

the current MS-DRGs, and establish a relative weight for proposed new 
MS-DRG 805 that is more comparable with those values of medical MS-DRGs 
with MCC severity level designations. The commenter further noted that 
the relative weights for proposed new MS-DRGs 797 and 798 (Vaginal 
Delivery with Sterilization/D&C with CC and without CC/MCC, 
respectively) are the same value, but believed the relative weight 
should be greater for proposed new MS-DRG 797. The commenter also 
believed that the relative weight for proposed new MS-DRG 786 (Cesarean 
Section without Sterilization with MCC) is insufficient for the 
required resources necessary to perform these procedures and provide 
the appropriate care to patients, and requested CMS establish a 
relative weight with a value more consistent with values of surgical 
MS-DRGs with MCC severity level designations. The commenter also 
requested that CMS maintain the relative weights for MS-DRG 787 
(Cesarean Section without Sterilization with CC) at the same value of 
current MS-DRG 765 (Cesarean Section with CC/MCC), and the relative 
weight for proposed new MS-DRG 833 (Other Antepartum Diagnoses without 
O.R. Procedure without CC/MCC) at the same value of current MS-DRG 782 
(Other Antepartum Diagnoses without Medical Complications).
    Response: It is to be expected that when MS-DRGs are restructured, 
resulting in a different case-mix within the new MS-DRGs, the relative 
weights of the MS-DRGs will change as a result. With respect to the 
comment about the low volume of cases, as we have noted in the proposed 
rule, we were unable to use our usual criterion of ensuring that there 
are at least 500 cases in the MCC or CC group to refine the maternity 
MS-DRGs because of the extremely low volume of Medicare patients cases 
reflected in claims data for 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 continue to believe that the 
restructured MS-DRGs within MDC 14 serve important purposes to account 
for 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. We believe that even though some 
of the resulting MS-DRGs have relatively low volumes in the Medicare 
population, using our established methodology for developing DRG 
relative weights is the most appropriate approach for the new MS-DRGs 
within MDC 14. With regard to the comment about MS-DRGs 797 and 798, we 
note that the average cost per case for MS-DRG 797 was lower than the 
average cost per case for MS-DRG 798. Therefore, we blended the data 
for these two MS-DRGs to avoid nonmonotonocity, in which the lower 
severity MS-DRG has a higher relative weight than the higher severity 
MS-DRG. For these reasons, we are not finalizing a change to the 
calculation of the relative weights for the MS-DRGs under MDC 14.
    After consideration of the public comments we received, we are 
finalizing our proposals, without modification, including the list of 
diagnosis codes assigned to the MS-DRGs under the restructuring of the 
vaginal delivery MS-DRGs under MDC 14, which we note also addresses the 
list of diagnosis codes that a commenter identified and were noted in 
the proposed rule as appearing to be missing from the GROUPER logic.
    We also invited 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.
    Comment: Commenters supported CMS' proposal to reassign ICD-10-PCS 
procedure codes 0UDB7ZX, 0UDB7ZZ, 0UDB8ZX, and 0UDB8ZZ from MS-DRG 767 
to MS-DRGs 744 and 745.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing 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 the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
    After consideration of the public comments we received, we are 
finalizing our proposed list of diagnosis and procedure codes for 
assignment to the revised MDC 14 MS-DRGs including the deletion of 10 
MS-DRGs and the creation of 18 new MS-DRGs in the ICD-10 MS-DRGs 
Version 36, effective October 1, 2018.
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). As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20226), 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

[[Page 41217]]

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 noted in the FY 2019 IPPS/LTCH PPS proposed rule 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-
infectious disease processes, such as trauma, malignant neoplasm, or 
pancreatitis. When SIRS is documented with a non-infectious condition, 
and no subsequent infection 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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20227), we proposed 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.

[[Page 41218]]



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

    Comment: Commenters supported the proposal 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''.
    Response: We thank the commenters for their support.
    Comment: One commenter questioned the proposed logic for ICD-10-CM 
diagnosis codes R65.10 and R65.11 within MS-DRG 864. The commenter 
noted that the diagnosis codes are included on the unacceptable 
principal diagnoses code edit list in the MCE and specifically inquired 
if cases reporting diagnosis code R65.10 or R65.11 as a secondary 
diagnosis would result in assignment to MS-DRG 864.
    Response: The GROUPER logic assignment for each diagnosis code as a 
principal diagnosis is for grouping purposes only. The GROUPER was not 
designed to account for coding guidelines or coverage policies. The MCE 
is designed to identify cases that require further review before 
classification into an MS-DRG. Therefore, the MS-DRG logic must 
specifically require a condition to group based on whether it is 
reported as a principal diagnosis or a secondary diagnosis, and 
consider any procedures that are reported, in addition to consideration 
of the patient's age, sex and discharge status in order to affect the 
MS-DRG assignment.
    As noted in the ICD-10 MS-DRG Definitions Manual Version 35, 
Appendix B--Diagnosis Code/MDC/MS-DRG Index, each diagnosis code is 
listed with the MDC and the MS-DRGs to which the diagnosis is used to 
define the logic of the DRG either as a principal diagnosis or a 
secondary diagnosis. For diagnosis codes R65.10 and R65.11, the ICD-10 
MS DRG Definitions Manual displays MDC 18 and MS-DRGs 870-872, as 
described previously. As discussed in the proposed rule, because the 
diagnosis are codes listed under the heading of ``Principal Diagnosis'' 
in the ICD-10 MS DRG Definitions Manual, it may appear to indicate that 
these codes are to be reported as a principal diagnosis for assignment 
to these MS-DRGs. However, the Definitions Manual display of the 
GROUPER logic assignment for each diagnosis code is for grouping 
purposes only and does not correspond to coding guidelines for 
reporting the principal diagnosis. In other words, cases will group 
according to the GROUPER logic, regardless of any coding guidelines or 
coverage policies. It is the MCE and other payer specific edits that 
identify inconsistencies in the coding guidelines or coverage policies. 
Under our proposed change to the ICD-10 MS-DRGs Version 36, cases 
reporting diagnosis code R65.10 or R65.11 as a secondary diagnosis 
would result in assignment to MS-DRG 864 when one of the other listed 
diagnosis codes in the MS-DRG 864 logic is reported as the principal 
diagnosis.
    After consideration of the public comments we received, we are 
finalizing our proposal 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''.
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 principal 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). As discussed in 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20227), 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-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 principal diagnosis of corrosive burn, which group to MS-
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 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 principal diagnosis 
of toxic effect with secondary diagnosis of corrosive burn. We noted in 
the proposed rule that we found no cases from this subset in MS-DRGs 
903, 907, 908, and 909 and, therefore, did not include the results for 
these MS-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 principal diagnosis of corrosive burn. Our findings are 
shown in the following two tables.

[[Page 41219]]



                             MDC 21 Injuries, Poisonings and Toxic Effects of Drugs
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRGs                                   cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
All Cases with principal 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 principal 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 principal 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 principal 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 principal 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 principal 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 principal 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 principal 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 
principal 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 the 
proposed rule and this final 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. We 
stated in the proposed rule that 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 principal 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 did 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 principal 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 principal diagnosis of corrosive burn....               1              41          75,985
MS-DRG 928--All cases...........................................           1,021            15.1          42,868
MS-DRG 928--Cases with principal diagnosis of corrosive burn....              13            13.2          31,118
MS-DRG 929--All cases...........................................             295             7.9          21,600
MS-DRG 929--Cases with principal diagnosis of corrosive burn....               4            12.5          18,527
MS-DRG 933--All cases...........................................             121             4.6          21,291
MS-DRG 933--Cases with principal diagnosis of corrosive burn....               1               7          91,779
MS-DRG 934--All cases...........................................             503             6.1          13,286
MS-DRG 934--Cases with principal 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 principal diagnosis of corrosive burn....              29               5           9,822
----------------------------------------------------------------------------------------------------------------

    To address the request of reassigning cases with a principal 
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 principal diagnosis of corrosive burn. 
We found a total of 60 cases reporting a principal diagnosis of 
corrosive burn, with an average length of stay of 8.5 days and average 
costs of $19,456. We stated in the proposed rule that our clinical 
advisors believe that these cases reporting a principal diagnosis of 
corrosive burn are appropriately placed in MDC 22 as they are 
clinically aligned with other patients in this MDC. We further stated 
that, in

[[Page 41220]]

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 principal diagnosis of 
toxic effect and a secondary diagnosis of corrosive burn to MS-DRGs 
927, 928, 929, 933, 934 and 935. Therefore, we did not propose to 
reassign these cases.
    Comment: One commenter supported the proposal to maintain the 
current MS-DRG structure for cases reporting a principal 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). 
Another commenter suggested that the 60 identified cases that CMS used 
in its analysis were incorrectly coded. The commenter noted that ICD-
10-CM coding guidelines under each code for corrosion burn state ``Code 
first (T51-T65) to identify chemical and intent.'' The commenter stated 
that corrosive burns cannot be sequenced as the principal diagnosis 
because the coding guidelines must be followed. The commenter stated 
that the toxic effect codes T51-T65 must be sequenced first, which 
causes these cases to group to MS-DRGs 901 through 905 and 917 and 918 
instead of the more appropriate burn MS-DRGs. The commenter stated that 
it appears that when codes T51-T65 are the principal diagnosis, the 
cases group to MDC 21 (Injuries, Poisoning. and Toxic Effects of 
Drugs), and then to MS-DRGs 901 through 905 and 917 and 918.
    Response: We appreciate the commenter's support. With regard to the 
commenter who raised concerns about the coding guidelines and display 
of codes in the ICD-10 MS-DRG Definitions Manual, we note that the 
GROUPER logic was not designed to account for coding guidelines. With 
regard to the display of code lists in the ICD-10 MS-DRG Definitions 
Manual, the MS-DRG logic must specifically require a condition to group 
based on whether it is reported as a principal diagnosis or a secondary 
diagnosis and consider any procedures that are reported in order to 
affect the MS-DRG assignment. However, as stated previously, the 
GROUPER logic is not dependent on coding guidelines. The purpose of the 
GROUPER is to group cases into particular MS-DRGs. We recognize that, 
over time, the desire to create or modify existing GROUPER logic in 
response to coding guidelines has become more common. As we continue 
our efforts to refine the ICD-10 MS-DRGs, we will consider alternate 
approaches to ensure the integrity of both the GROUPER logic and coding 
guidelines. Based on the data available at this time, we do not believe 
that it is appropriate to change the MS-DRG assignment for the 
procedures identifying corrosive burns identified earlier.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current MS-DRG structure for 
cases reporting a principal 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).
13. 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20229), we 
addressed the MCE requests we received by the November 1, 2017 
deadline. We also discussed the proposals we were making based on our 
internal review and analysis. In this FY 2019 IPPS/LTCH PPS final rule, 
we present a summation of the comments we received in response to the 
MCE requests and proposals presented based on internal reviews and 
analyses in the proposed rule, our responses to those comments, and our 
finalized policies.
    In addition, as a result of new and modified code updates approved 
after the annual spring ICD-10 Coordination and Maintenance Committee 
meeting, we routinely make changes to the MCE. In the past, in both the 
IPPS proposed and final rules, we only provided the list of changes to 
the MCE that were brought to our attention after the prior year's final 
rule. We historically have not listed the changes we have made to the 
MCE as a result of the new and modified codes approved after the annual 
spring ICD-10 Coordination and Maintenance Committee meeting. These 
changes are approved too late in the rulemaking schedule for inclusion 
in the proposed rule. Furthermore, although our MCE policies have been 
described in our proposed and final rules, we have not provided the 
detail of each new or modified diagnosis and procedure code edit in the 
final rule. However, we make available the finalized Definitions of 
Medicare Code Edits (MCE) file. Therefore, we are making available the 
FY 2019 ICD-10 MCE Version 36 Manual file, along with the link to the 
mainframe and computer software for the MCE Version 36 (and ICD-10 MS 
DRGs), on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html.
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

[[Page 41221]]

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 FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20229), we 
indicated that, 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.
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 proposed 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 proposed to continue to 
include the existing diagnosis codes currently listed under the 
Perinatal/Newborn Diagnoses Category edit code list.
    Comment: Commenters agreed with CMS' proposal to add the diagnosis 
codes listed in the table above to the Age Conflict edit under the 
Perinatal/Newborn Diagnoses Category edit code list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal 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 finalizing our proposal 
to continue to include the existing list of codes on the Perinatal/
Newborn Diagnoses Category edit code list under the ICD-10 MCE Version 
36, effective October 1, 2018.
(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 the proposed 
rule, Table 6C.--Invalid Diagnosis Codes associated with the proposed 
rule and this final (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 will no 
longer be 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). In the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20230), we proposed to remove 
this code from the Pediatric Diagnoses Category edit code list. We also 
proposed to continue to include the other existing diagnosis codes 
currently listed under the Pediatric Diagnoses Category edit code list.
    Comment: Commenters agreed with the proposal to remove ICD-10-CM 
diagnosis code Z13.4 from the Pediatric Diagnoses Category edit code 
list because this code will no longer be effective as of October 1, 
2018.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove ICD-10-CM diagnosis code Z13.4 from 
the Pediatric Diagnoses Category edit code list. We also are finalizing 
our proposal to maintain the other existing codes on the Pediatric 
Diagnoses Category edit code list under the ICD-10 MCE Version 36, 
effective October 1, 2018.
(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 the proposed 
rule, Table 6A.--New Diagnosis Codes associated with the 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) listed the new diagnoses codes that had 
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 stated we believe are appropriate 
to add to the Maternity Diagnoses Category edit code list under the Age 
Conflict edit. Therefore, in the proposed rule, we proposed to add 
these codes to the Maternity Diagnoses Category edit code list under 
the Age Conflict edit.

[[Page 41222]]



------------------------------------------------------------------------
      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 
the proposed rule, Table 6C.--Invalid Diagnosis Codes associated with 
the 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) listed the diagnosis codes that 
will no longer be 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). In the proposed rule, we proposed to remove these codes from 
the Maternity Diagnoses Category Edit code list. We also proposed to 
continue to include the other existing diagnosis codes currently listed 
under the Maternity Diagnoses Category edit code list.
    Comment: Commenters agreed with the proposal to add the diagnosis 
codes listed in the table above to the Maternity Diagnoses Category 
edit code list. Commenters also agreed with the proposal to remove ICD-
10-CM diagnosis codes F53 and O86.0 from the Maternity Diagnoses 
Category edit code list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the diagnosis codes listed in the table 
above to the Maternity Diagnoses Category edit code list and our 
proposal to remove ICD-10-CM diagnosis codes F53 and O86.0 from the 
Maternity Diagnoses Category edit code list. We also are finalizing our 
proposal to maintain the other existing codes on the Maternity 
Diagnoses Category edit code list under the ICD-10 MCE Version 36, 
effective October 1, 2018.
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
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20231), we 
indicated that 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 agreed 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 
the proposed rule, Table 6A.--New Diagnosis Codes associated with the 
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) listed

[[Page 41223]]

the new diagnosis codes that had 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 proposed 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.
------------------------------------------------------------------------

    Comment: Commenters supported the proposals to add ICD-10-CM 
diagnosis codes Z30.015, Z31.7 and Z98.891 and the ICD-10-CM diagnosis 
codes listed in the table above to the Diagnoses for Females Only edit 
code list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposals to add ICD-10-CM diagnosis codes Z30.015, 
Z31.7 and Z98.891 and the ICD-10-CM diagnosis codes listed in the table 
above to the Diagnoses for Females Only edit code list under the ICD-10 
MCE Version 36, effective October 1, 2018.
    In addition, as discussed in section II.F.15. of the preamble of 
the proposed rule, Table 6C.--Invalid Diagnosis Codes associated with 
the 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) listed the diagnosis codes that 
are no longer effective as of October 1, 2018. Included in this table 
were 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.
O86.0.....................  Infection of obstetric surgical wound.
Q51.2.....................  Other doubling of uterus, unspecified.
------------------------------------------------------------------------

    Because these three ICD-10-CM diagnosis codes will no longer be 
effective as of October 1, 2018, we proposed to remove them from the 
Diagnoses for Females Only edit code list under the Sex Conflict edit.
    Comment: Commenters supported the proposal to remove ICD-10-CM 
diagnosis codes F53, O86.0, and Q51.2, from the Diagnoses for Females 
Only edit code list, as they are no longer valid effective October 1, 
2018. One commenter also noted that there were typographical errors in 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20232) for diagnosis 
codes O86.0 and Q51.2, where an extra zero was inadvertently included 
as a fifth digit.
    Response: We appreciate the commenters' support. We agree with the 
commenter that there were typographical errors in the FY 2019 IPPS/LTCH 
PPS proposed rule (83 FR 20232) for diagnosis codes O86.0 and Q51.2, 
where an extra zero was inadvertently included as a fifth digit, and 
have corrected these errors in the table presented in this final rule 
preamble.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove ICD-10-CM diagnosis codes F53, O86.0, 
and Q51.2, from the Diagnoses for Females Only edit code list under the 
ICD-10 MCE Version 36, effective October 1, 2018.

[[Page 41224]]

(2) Procedures for Females Only Edit
    As discussed in section II.F.15. of the preamble of the FY 2019 
IPPS/LTCH PPS proposed rule, Table 6B.--New Procedure Codes associated 
with the 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) listed the procedure codes that 
had been approved to date, which will be effective with discharges 
occurring on and after October 1, 2018. In the proposed rule, we 
proposed 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-PCS 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 proposed to continue to include the existing procedure 
codes currently listed under the Procedures for Females Only edit code 
list.
    Comment: Commenters supported the proposal to add ICD-10-PCS 
procedure codes 0UY90Z0, 0UY90Z1 and 0UY90Z2 to the Procedures for 
Females Only edit code list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add ICD-10-PCS procedure codes 0UY90Z0, 
0UY90Z1 and 0UY90Z2 to the Procedures for Females Only edit code list. 
We also are finalizing our proposal to maintain the existing list of 
codes on the Procedures for Females Only edit code list under the ICD-
10 MCE Version 36, effective October 1, 2018.
(3) Diagnoses for Males Only Edit
    As discussed in section II.F.15. of the preamble of the proposed 
rule, Table 6A.--New Diagnosis Codes associated with the 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) listed the new diagnosis codes that had 
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. In the proposed rule, we proposed 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 proposed to continue to include the existing diagnosis 
codes currently listed under the Diagnoses for Males Only edit code 
list.
    Comment: Commenters supported the proposal to add the ICD-10-CM 
diagnosis codes listed in the table above to the Diagnoses for Males 
Only edit code list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the ICD-10-CM diagnosis codes listed in 
the table above to the Diagnoses for Males Only edit code list. We also 
are finalizing our proposal to maintain the existing list of codes on 
the Diagnoses for Males Only edit code list under the ICD-10 MCE 
Version 36, effective October 1, 2018.
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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20232), we noted 
that, as discussed in section II.F.15. of the preamble of the proposed 
rule, Table 6A.--New Diagnosis Codes associated with the 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) listed the new diagnosis codes that had 
been approved to date which will be effective with discharges

[[Page 41225]]

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 proposed 
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 proposed to continue to 
include the existing diagnosis codes currently listed under the 
Manifestation Code as Principal Diagnosis edit code list. We invited 
public comments on our proposals.
    Comment: Commenters supported the proposal to add ICD-10-CM 
diagnosis codes K82.A1 and K82.A2 to the Manifestation Code as 
Principal Diagnosis edit code list and to continue to include the 
existing diagnosis codes currently listed under the Manifestation Code 
as Principal Diagnosis edit code list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add ICD-10-CM diagnosis codes K82.A1 and 
K82.A2 to the Manifestation Code as Principal Diagnosis edit code list 
and to continue to include the existing diagnosis codes currently 
listed under the Manifestation Code as Principal Diagnosis edit code 
list under the ICD-10 MCE Version 36, effective October 1, 2018.
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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20233), we noted 
that, as discussed in section II.F.10. of the preamble of the proposed 
rule, we were proposing several modifications to the MS-DRGs under MDC 
14 (Pregnancy, Childbirth and the Puerperium). We stated in the 
proposed rule that one aspect of these proposed modifications involves 
the GROUPER logic for the cesarean section and vaginal delivery MS-
DRGs. We referred readers to section II.F.10. of the preamble of the 
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 proposed 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 proposed 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-PCS 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 proposed 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

[[Page 41226]]

Admission edit logic for vaginal delivery.

   ICD-10-PCS Procedure Codes for Vaginal Delivery Under the Proposed
       Questionable Obstetric Admission Edit Code List in the MCE
------------------------------------------------------------------------
      ICD-10-PCS 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 proposed 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.
------------------------------------------------------------------------

    Comment: Commenters supported creating the new Questionable 
Obstetric Admission edit. Commenters also supported the list of 
diagnoses and procedure codes that we proposed to include for the 
proposed new edit. However, a few commenters expressed concern with 
several of the procedure codes that were proposed for inclusion under 
the vaginal delivery procedure code list. Specifically, the commenters 
identified that ICD-10-PCS procedure codes 10D17Z9 and 10D18Z9 may be 
reported for other clinical indications, in the absence of an outcome 
of delivery diagnosis code. Therefore, the commenter stated that the 
edit would be triggered erroneously for those case scenarios.
    Response: We appreciate the commenters' support. We reviewed the 
procedure codes for which the commenters expressed concern under the 
vaginal delivery procedure code list (ICD-10-PCS procedure codes 
10D17Z9 and 10D18Z9) and agree that there may be instances in which the 
procedure codes could be reported in the absence of an outcome of 
delivery diagnosis code. Therefore, we believe it is appropriate to 
remove these two procedure codes from the vaginal delivery procedure 
code list for the edit. In addition, we reviewed ICD-10-PCS procedure 
codes 10D07Z6 and 10D07Z8 and believe the procedures could potentially 
be performed for other clinical indications, in the absence of an 
outcome of delivery code, and erroneously trigger the proposed edit if 
reported.
    After consideration of the public comments we received, we are 
finalizing our proposal to create the new Questionable Obstetric 
Admission edit. We also are finalizing our proposal to include ICD-10-
PCS procedure codes 10D00Z0, 10D00Z1, and 10D00Z2 listed above for the 
``Procedure code list for cesarean section'' portion of the edit. We 
are finalizing our proposal to include the procedure codes listed above 
for vaginal delivery with modifications. Specifically, we are not 
including ICD-10-PCS procedure codes 10D07Z6, 10D07Z87, 10D17Z9 and 
10D18Z9 in the ``Procedure code list for vaginal delivery'' portion of 
the edit and finalizing the inclusion of the remaining

[[Page 41227]]

procedure codes listed above. In addition, we are finalizing our 
proposal to include the diagnosis codes listed above under the 
``Secondary diagnosis code list for outcome of delivery'' portion of 
the edit. We are finalizing these changes as described above under the 
ICD-10 MCE Version 36, effective October 1, 2018.
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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20234), we noted 
that, as discussed in section II.F.9. of the preamble of the 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 proposed 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.
    Comment: Some commenters supported the proposal to add ICD-10-CM 
diagnosis code Z49.01 to the Unacceptable Principal Diagnosis edit code 
list. However, some commenters recommended that CMS reconsider the 
proposal. These commenters did not dispute the fact that this code is 
more likely to be reported in the outpatient setting. However, they 
stated that the proposal to add it to the edit appeared to conflict 
with the proposal that was discussed in section II.F.9. for MDC 11 
(Diseases and Disorders of the Kidney and Urinary Tract) and MS-DRG 685 
(Admit for Renal Dialysis). According to the commenters, CMS proposed 
to only reassign diagnosis code Z49.01 as a principal diagnosis in the 
proposal to delete MS-DRG 685 and reassign diagnosis code Z49.01 to MS-
DRGs 698, 699 and 700.
    Response: We appreciate the commenters' support. With regard to the 
commenters who recommended that we reconsider the proposal to add 
diagnosis code Z49.01 to the Unacceptable Principal Diagnoses edit code 
list, we believe there is some confusion with respect to the proposal 
that was discussed in section II.F.9. of the preamble of the proposed 
rule. The proposal was to reassign diagnosis codes Z49.01, Z49.02, 
Z49.31 and Z49.32 to MS-DRGs 698, 699 and 700 (Other Kidney and Urinary 
Tract Diagnoses with MCC, with CC and without CC/MCC, respectively) 
with the proposed deletion of MS-DRG 685. We are unable to determine 
what aspect of the proposal that was discussed in section II.F. 9. of 
the preamble of the proposed rule was unclear. For example, it is not 
clear if the commenters' confusion relates to the GROUPER logic for MS-
DRGs 698, 699, and 700 as shown in the ICD-10 MS-DRG Definitions 
Manual. As discussed elsewhere in this final rule, in the ICD-10 MS-DRG 
Definitions Manual, diagnosis codes listed under the heading of 
``Principal Diagnosis'' may appear to indicate that those codes are to 
be reported as a principal diagnosis for assignment to the respective 
MS-DRG. However, the Definitions Manual display of the GROUPER logic 
assignment for each diagnosis code is for grouping purposes only and 
does not correspond to coding guidelines for reporting the principal 
diagnosis. In other words, cases will group according to the GROUPER 
logic, regardless of any coding guidelines or coverage policies. It is 
the MCE and other payer-specific edits that identify inconsistencies in 
the coding guidelines or coverage policies.
    We also noted in the proposed rule that, as discussed in section 
II.F.15. of the preamble of the proposed rule, Table 6C.--Invalid 
Diagnosis Codes associated with the 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) 
listed the diagnosis codes that will no longer be 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 edit code list. We proposed to remove 
this code from the Unacceptable Principal Diagnosis edit code list.
    We also proposed to continue to include the other existing 
diagnosis codes currently listed under the Unacceptable Principal 
Diagnosis edit code list.
    Comment: Commenters supported the proposal to remove ICD-10-CM 
diagnosis code Z13.4 from the Unacceptable Principal diagnoses category 
edit code list because it will be an invalid code effective October 1, 
2018.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add ICD-10-CM diagnosis code Z49.01 to the 
Unacceptable Principal Diagnosis edit code list. We also are finalizing 
our proposal to remove ICD-10-CM diagnosis code Z13.4 from the 
Unacceptable Principal Diagnosis edit code list. In addition, we are 
finalizing our proposal to maintain the other existing codes on the 
Unacceptable Principal Diagnosis edit code list under the ICD-10 MCE 
Version 36, effective October 1, 2018.
    Comment: One commenter requested that CMS review a coverage edit in 
the MCE manual and software. According to the commenter, CMS began 
covering multiple myeloma on January 1, 2016 under the condition of 
coverage with evidence development (CED) as shown in guidance located 
at: https://www.cms.gov/Medicare/Coverage/Coverage-with-Evidence-Development/allo-MM.html. The commenter noted that the applicable 
procedure codes along with diagnosis codes C90.00 (Multiple myeloma not 
having achieved remission) and C90.01 (Multiple myeloma in remission) 
are listed as ``non-covered'' in the MCE manual and encouraged CMS to 
review further and make any necessary updates as needed to ensure 
claims are processed appropriately.
    Response: We thank the commenter for bringing this to our 
attention. Upon review, guidance was issued on January 27, 2016 for 
allogeneic hematopoietic stem cell transplant (HSCT) for certain 
Medicare beneficiaries with multiple myeloma under CED. This guidance 
is available via the internet on the CMS website at: https://www.cms.gov/Medicare/Coverage/Coverage-with-Evidence-Development/allo-MM.html. We agree with the commenter and, therefore, are removing the 
following noncovered procedure edit from the ICD-10 MCE Version 36 
manual, effective October 1, 2018:

``E. Non-covered procedure codes

    The procedures shown below are identified as non-covered procedures 
only when any code from the diagnoses list shown below is present as 
either a principal or secondary diagnosis.

[[Page 41228]]

Procedures
30230G2 Transfuse Allo Rel Bone Marrow in Periph Vein, Open
30230G3 Transfuse Allo Unr Bone Marrow in Periph Vein, Open
30230G4 Transfuse Allo Unsp Bone Marrow in Periph Vein, Open
30230Y2 Transfuse Allo Rel Hemat Stem Cell in Periph Vein, Open
30230Y3 Transfuse Allo Unr Hemat Stem Cell in Periph Vein, Open
30230Y4 Transfuse Allo Unsp Hemat Stem Cell in Periph Vein, Open
30233G2 Transfuse Allo Rel Bone Marrow in Periph Vein, Perc
30233G3 Transfuse Allo Unr Bone Marrow in Periph Vein, Perc
30233G4 Transfuse Allo Unsp Bone Marrow in Periph Vein, Perc
30233Y2 Transfuse Allo Rel Hemat Stem Cell in Periph Vein, Per
30233Y3 Transfuse Allo Unr Hemat Stem Cell in Periph Vein, Perc
30233Y4 Transfuse Allo Unsp Hemat Stem Cell in Periph Vein, Perc
30240G2 Transfuse Allo Rel Bone Marrow in Central Vein, Open
30240G3 Transfuse Allo Unr Bone Marrow in Central Vein, Open
30240G4 Transfuse Allo Unsp Bone Marrow in Central Vein, Open
30240Y2 Transfuse Allo Rel Hemat Stem Cell in Central Vein, Open
30240Y3 Transfuse Allo Unr Hemat Stem Cell in Central Vein, Open
30240Y4 Transfuse Allo Unsp Hemat Stem Cell in Central Vein, Open
30243G2 Transfuse Allo Rel Bone Marrow in Central Vein, Perc
30243G3 Transfuse Allo Unr Bone Marrow in Central Vein, Perc
30243G4 Transfuse Allo Unsp Bone Marrow in Central Vein, Perc
30243Y2 Transfuse Allo Rel Hemat Stem Cell in Central Vein, Perc
30243Y3 Transfuse Allo Unr Hemat Stem Cell in Central Vein, Perc
30243Y4 Transfuse Allo Unsp Hemat Stem Cell in Central Vein, Perc
30250G1 Transfuse Nonaut Bone Marrow in Periph Art, Open
30250Y1 Transfuse Nonaut Hemat Stem Cell in Periph Art, Open
30253G1 Transfuse Nonaut Bone Marrow in Periph Art, Perc
30253Y1 Transfuse Nonaut Hemat Stem Cell in Periph Art, Perc
30260G1 Transfuse Nonaut Bone Marrow in Central Art, Open
30260Y1 Transfuse Nonaut Hemat Stem Cell in Central Art, Open
30263G1 Transfuse Nonaut Bone Marrow in Central Art, Perc
30263Y1 Transfuse Nonaut Hemat Stem Cell in Central Art, Perc
Diagnoses
C9000 Multiple myeloma not having achieved remission
C9001 Multiple myeloma in remission''

    This update will also be reflected in the ICD-10 MCE software 
Version 36 effective October 1, 2018.
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. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20235), we indicated that 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. Changes to Surgical Hierarchies
    Some inpatient stays entail multiple surgical procedures, each one 
of which, occurring by itself, could result in assignment of the case 
to a different MS-DRG within the MDC to which the principal diagnosis 
is assigned. Therefore, it is necessary to have a decision rule within 
the GROUPER by which these cases are assigned to a single MS-DRG. The 
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function. 
Application of this hierarchy ensures that cases involving multiple 
surgical procedures are assigned to the MS-DRG associated with the most 
resource-intensive surgical class.
    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 final rule.
    This methodology may occasionally result in assignment of a case 
involving multiple procedures to the lower-weighted MS-DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER search for the procedure in the 
most resource-intensive surgical class, in

[[Page 41229]]

cases involving multiple procedures, this result is sometimes 
unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average cost is 
ordered above a surgical class with a higher average cost. For example, 
the ``other O.R. procedures'' surgical class is uniformly ordered last 
in the surgical hierarchy of each MDC in which it occurs, regardless of 
the fact that the average costs for the MS-DRG or MS-DRGs in that 
surgical class may be higher than those for other surgical classes in 
the MDC. The ``other O.R. procedures'' class is a group of procedures 
that are only infrequently related to the diagnoses in the MDC, but are 
still occasionally performed on patients with cases assigned to the MDC 
with these diagnoses. Therefore, assignment to these surgical classes 
should only occur if no other surgical class more closely related to 
the diagnoses in the MDC is appropriate.
    A second example occurs when the difference between the average 
costs for two surgical classes is very small. We have found that small 
differences generally do not warrant reordering of the hierarchy 
because, as a result of reassigning cases on the basis of the hierarchy 
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered 
below it.
    Based on the changes that we proposed to make in the FY 2019 IPPS/
LTCH PPS proposed rule, as discussed in section II.F.10. of the 
preamble of this final rule, in the FY 2019 IPPS/LTCH PPS proposed rule 
(83 FR 20235), we proposed to revise the surgical hierarchy for MDC 14 
(Pregnancy, Childbirth & the Puerperium) as follows: In MDC 14, we 
proposed 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 proposed 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 
proposed 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 proposed 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 proposed to sequence proposed new MS-DRGs 
817, 818, and 819 (Other Antepartum Diagnoses with O.R. procedure with 
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.
------------------------------------------------------------------------

    Comment: Commenters supported the proposed additions, deletions, 
and sequencing for the surgical hierarchy under MDC 14.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposed changes to Appendix D MS-DRG Surgical Hierarchy 
by MDC and MS-DRG of the ICD-10 MS-DRG Definitions Manual Version 36 as 
illustrated in the table above effective October 1, 2018.
    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-DRG Classification Change Request Mailbox 
located at: [email protected] by November 1, 2018 
for FY 2020 consideration.
15. 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-DRGs we adopted for FY 2008 
(72 FR 47152 through 47171).
b. Additions and Deletions to the Diagnosis Code Severity Levels for FY 
2019
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20236), we 
indicated that 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 were 
available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.

[[Page 41230]]

    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 invited public comments on our proposed severity level 
designations for the diagnosis codes listed in Table 6I.1. and Table 
6J.1. We noted 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 referred readers to the Tables 6I.1, 6I.2, 6J.1, and 6J.2 
associated with the 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.
    Comment: Commenters supported the proposed additions and deletions 
for the diagnosis codes, and their corresponding severity level 
designations that were listed in Tables 6I.1, 6I.2, 6J.1, and 6J.2. 
associated with the FY 2019 IPPS/LTCH PPS proposed rule. However, a few 
commenters expressed concern with the proposed severity level 
designation change to diagnosis code B20, and recommended CMS conduct 
further analysis prior to finalizing any proposals.
    Response: We appreciate the commenters' support. We refer readers 
to section II.F.16.b. of the preamble of this final rule for the 
detailed discussion of public comments related to the proposals and 
final statement of policy involving diagnosis codes B20 and J80.
    Comment: One commenter disagreed with CMS' proposal to designate 
diagnosis codes K35.20 (Acute appendicitis with generalized 
peritonitis, without abscess) and T81.44XA (Sepsis following a 
procedure, initial encounter) as CC severity levels, and recommended 
CMS reconsider the conditions and classify the severity levels as MCCs. 
The commenter noted that the predecessor code for diagnosis code K35.20 
is diagnosis code K35.2 (Acute appendicitis with generalized 
peritonitis), which is classified as a MCC severity level designation. 
Therefore, the commenter also believed that diagnosis code K35.20 
should be designated as a MCC severity level. Additionally, the 
commenter stated that diagnosis code T81.44XA should be classified as 
an MCC severity level because sepsis is defined as a life-threatening 
organ dysfunction caused by a host response to infection.
    Response: While we acknowledge that our process in assigning a 
severity level designation for a diagnosis code generally begins with 
identifying the designation of the predecessor code assignment, we 
believe that any new or revised clinical concepts included in the new 
diagnosis codes should also be considered when making a severity level 
designation. We reviewed diagnosis codes K35.20 and T81.44XA and our 
clinical advisors continue to support the CC severity level designation 
of these diagnosis codes. The commenter is correct that, effective 
October 1, 2018, diagnosis code K35.20 has been expanded from the 
current diagnosis code K35.2. However, we also note that, effective 
October 1, 2018, diagnosis code K35.2 has been expanded to create new 
diagnosis code K35.21 (Acute appendicitis with generalized peritonitis, 
with abscess). In addition, effective October 1, 2018, diagnosis code 
K35.3 (Acute appendicitis with localized peritonitis) has been expanded 
to create new diagnosis codes K35.30 (Acute appendicitis with localized 
peritonitis, without perforation or gangrene), K35.31 (Acute 
appendicitis with localized peritonitis and gangrene, without 
perforation), K35.32 (Acute appendicitis with perforation and localized 
peritonitis, without abscess) and K35.33 (Acute appendicitis with 
perforation and localized peritonitis, with abscess). Consistent with 
our usual process, in reviewing all of these newly expanded conditions, 
our clinical advisors considered the additional clinical concepts now 
included with each diagnosis code in evaluating the appropriate 
proposed severity level assignments. Our clinical advisors believed 
that the new diagnosis codes for acute appendicitis described as ``with 
abscess'' or ``with perforation'' were clinically qualified for the MCC 
severity level designation, while acute appendicitis ``without 
abscess'' or ``without perforation'' were clinically qualified for the 
CC severity level designation because cases with abscess or perforation 
would be expected to require more clinical resources and time to treat 
while those cases ``without abscess'' or ``without perforation'' are 
not as severe clinical conditions. As such, we disagree with the 
commenter that, based on the designation of its predecessor code alone, 
diagnosis code K35.20 should be designated as an MCC severity level 
instead of a CC for FY 2019. With regard to diagnosis code T81.44XA, 
our clinical advisors maintain that a CC severity level designation is 
most appropriate because the new code is clinically consistent with the 
predecessor code, T81.4XXA (Infection following a procedure, initial 
encounter), which also has a CC severity level designation. Currently, 
under Version 35 of the ICD-10 MS-DRGs, diagnosis code T81.4XXA 
contains several inclusion terms (conditions for which the code may be 
reported), one of which is ``sepsis following a procedure''. Our 
clinical advisors do not believe that the creation of a unique 
diagnosis code to specifically identify this condition within the 
classification introduces a new clinical concept requiring a higher 
level of resources. The new diagnosis code provides additional detail 
as to the type of infection following a procedure. However, it is 
considered to be clinically similar to the current diagnosis code 
describing an infection following a procedure. We also note that an 
additional five new diagnosis codes describing infections of varying 
degrees following a procedure were created for FY 2019 based on the 
other inclusion terms that currently exist at diagnosis code T81.4XXA.
    As shown in the table below and in Table 6J.1. associated with the 
proposed rule, a total of six new diagnosis codes were proposed to be 
designated at the CC severity level based on review of the predecessor 
code (T81.4XXA), clinical coherence, and resource considerations.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
T81.40XA..................  Infection following a procedure,
                             unspecified, initial encounter.
T81.41XA..................  Infection following a procedure, superficial
                             incisional surgical site, initial
                             encounter.
T81.42XA..................  Infection following a procedure, deep
                             incisional surgical site, initial
                             encounter.
T81.43XA..................  Infection following a procedure, organ and
                             space surgical site, initial encounter.
T81.44XA..................  Sepsis following a procedure, initial
                             encounter.
T81.49XA..................  Infection following a procedure, other
                             surgical site, initial encounter.
------------------------------------------------------------------------


[[Page 41231]]

    Therefore, for the reasons discussed above, our clinical advisors 
continue to support the proposed CC severity level designation for 
diagnosis code T81.44XA for FY 2019.
    In addition, because these diagnosis codes identified by the 
commenter are new, we do not have any claims data for further analysis. 
Once we have additional claims data to allow us to conduct further 
review, we can continue to examine these conditions to determine if 
their impact on resource use is equal to or above the expected value of 
a CC severity level designation.
    After consideration of the public comments we received, we are 
finalizing our proposal to designate diagnosis codes K35.20 and 
T81.44XA as CC severity levels. We also are finalizing our other 
proposed additions and deletions with their corresponding severity 
level designations for FY 2019. We refer readers to Tables 6I.1., 6I.2, 
6J.1, and 6J.2. associated with this final 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 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-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. In the FY 2019 
IPPS/LTCH PPS proposed rule (83 FR 20237), to evaluate the 
effectiveness of the special logic, we 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-DRG.
    In the proposed rule, 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 final rule for further 
information regarding the methodology for calculation of the 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-

[[Page 41232]]

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 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-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

[[Page 41233]]

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
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 stated that 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 in 
the proposed rule and 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 proposed 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 proposed 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 invited public comments on our 
proposals.
    Comment: Commenters supported the proposed deletion of the 
Principal Diagnosis Is Its Own CC or MCC logic. One commenter stated 
that the lists were created to facilitate replication of the ICD-9 
based MS-DRGs and are an artifact of the ICD-10 transitions. Another 
commenter recommended removing some of the conditions that are 
currently on the lists but expressed concern that eliminating the logic 
completely could impact the ability to measure a patient's severity of 
illness. One commenter noted that CMS described its internal 
comprehensive review and analysis that were conducted, which provided 
some level of insight for the proposal; however, the overarching 
comment was that CMS believed there were more effective indicators of 
resource utilization. Other commenters disagreed with CMS' proposal to 
``globally'' remove the Principal Diagnosis Is Its Own CC or MCC logic. 
A few commenters stated that a more detailed analysis, consistent with 
the comprehensive CC/MCC analysis approach conducted for severity level 
changes, should occur. One commenter recommended that the logic 
described as part of the MS-DRG Conversion Project with the MCC and CC 
translations from ICD-9 to ICD-10 be considered. Another commenter 
acknowledged that CMS is no longer attempting to replicate the ICD-9 
based MS-DRG GROUPER logic. However, this commenter noted that the 
conditions represented by the ICD-10-CM combination codes are 
clinically the

[[Page 41234]]

same conditions that were CCs or MCCs under ICD-9-CM.
    Response: We appreciate the commenters' support. With regard to the 
commenter who recommended removing some of the conditions that are 
currently on the lists but expressed concern that eliminating the logic 
completely could impact the ability to measure a patient's severity of 
illness, we disagree because, in general, the description of a 
diagnosis code itself describes or implies a certain level of severity. 
In addition, there are other factors to consider besides the principal 
diagnosis when determining severity of illness and resource 
utilization. In response to the other commenters who disagreed with our 
proposal to remove the Principal Diagnosis Is Its Own CC or MCC logic 
and recommended that we perform an analysis consistent with the 
comprehensive CC/MCC analysis, we note that such an analysis would not 
be conclusive because the purpose of the comprehensive CC/MCC analysis 
is to evaluate the impact in resource use for patients with conditions 
reported as secondary diagnoses. We believe that the analysis that was 
performed and discussed in the proposed rule was appropriate for 
assessing if we should maintain the special logic that currently exists 
for assigning a severity level to a principal diagnosis, as well as to 
assess whether it would be appropriate to propose removing the special 
logic and utilize alternate methods to evaluate what should be 
considered a complex principal diagnosis for MS-DRG assignment 
purposes. As stated in the proposed rule (83 FR 20237), CMS has 
historically used clinical judgment combined with data analysis to 
assign a principal diagnosis describing a complex or severe condition 
to the appropriate MS-DRG. We also note that, as stated in the proposed 
rule (83 FR 20238), the findings from our analysis of 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 demonstrated that 556 of the 588 subsets had fewer than 100 
cases. The low number of cases means that if the special logic had been 
proposed for the first time under ICD-10, 95 percent of the diagnosis 
codes that were responsible for 95 percent of the cases using the 
special logic would not have met the criteria for proposing a change to 
their severity level. With regard to the commenter who stated that the 
conditions represented by the ICD-10-CM combination codes are 
clinically the same conditions that were CCs or MCCs under ICD-9-CM, we 
note that combination diagnosis codes are a feature of the 
classification of both ICD-9-CM and ICD-10-CM. The majority of the 
combination diagnosis codes in ICD-9-CM are also combination codes in 
ICD-10-CM. The current list of ICD-10-CM codes that are included in the 
special logic is a result of the fact that the codes were classified 
differently in ICD-9-CM than in ICD-10-CM. Diagnoses represented as two 
separate codes under ICD-9-CM were represented in a combination code 
under ICD-10-CM. Codes that were combination codes in both ICD-9-CM and 
ICD-10-CM do not have any special severity logic applied, regardless of 
the clinical severity of the conditions described, or the increased use 
of resources that could be associated with a particular combination 
principal diagnosis. As a result, the categorization of ICD-10-CM codes 
into lists wherein the principal diagnosis is its own CC or MCC is 
based not on a systematic clinical evaluation of the severity of 
illness of patients with these combination diagnosis codes, or on a 
systematic evaluation of data containing these combination diagnosis 
codes used as principal diagnosis, but on a collection of codes 
selected exclusively because there were structural differences between 
the classification scheme in ICD-9-CM versus ICD-10-CM. Now that ICD-10 
coded data are available, it can be used to evaluate other indicators 
of resource utilization, along with clinical judgment.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the special logic in the GROUPER for 
processing claims containing a code on the Principal Diagnosis Is Its 
Own CC or MCC Lists as an initial step in our first phase of the 
comprehensive review of the CC and MCC lists. We also are finalizing 
our proposal 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 Version 36, effective October 1, 2018.
d. 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.
    The ICD-10 MS-DRGs Version 35 CC Exclusion List is included as 
Appendix C in 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/index.html, and 
includes two lists identified as Part 1 and Part 2. Part 1 is the list 
of all diagnosis codes that are defined as a CC or MCC when reported as 
a secondary diagnosis. If the code designated as a CC or MCC is allowed 
with all principal diagnoses, the phrase ``NoExcl'' (for no exclusions) 
follows the CC or MCC designation. For example, ICD-10-CM diagnosis 
code A17.83 (Tuberculous neuritis) has this ``NoExcl'' entry. For all 
other diagnosis codes on the list, a link is provided to a collection 
of diagnosis codes which, when used as the principal diagnosis, would 
cause the CC or MCC diagnosis to be considered as a non-CC. Part 2 is 
the list of diagnosis codes designated as a MCC only for

[[Page 41235]]

patients discharged alive; otherwise, they are assigned as a non-CC.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20239), for FY 
2019, we proposed 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 the 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 the proposed rule and this 
final rule.
    These tables are not published in the Addendum to the proposed rule 
or the final rule but are available via the internet on the CMS 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 final rule. As discussed in section II.F.18. of the 
preamble of this final 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 the FY 2019 IPPS/LTCH PPS proposed rule, we invited 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 invited 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.
    Comment: One commenter addressed the proposed MS-DRG assignment for 
ICD-10-CM diagnosis code K35.20 (Acute appendicitis with generalized 
peritonitis, without abscess) that was included in Table 6A.--New 
Diagnosis Codes associated with the proposed rule. The commenter 
included the following codes that describe conditions involving 
appendicitis with peritonitis, abscess, perforation and gangrene.

------------------------------------------------------------------------
       ICD-10-CM code             Code description       Proposed MS-DRG
------------------------------------------------------------------------
K35.20.....................  Acute appendicitis with       371, 372, 373
                              generalized peritonitis,
                              without abscess.
K35.21.....................  Acute appendicitis with       338, 339, 340
                              generalized peritonitis,     371, 372, 373
                              with abscess.
K35.30.....................  Acute appendicitis with       371, 372, 373
                              localized peritonitis,
                              without perforation or
                              gangrene.
K35.31.....................  Acute appendicitis with       371, 372, 373
                              localized peritonitis
                              and gangrene, without
                              perforation.
K35.32.....................  Acute appendicitis with       338, 339, 340
                              perforation and              371, 372, 373
                              localized peritonitis,
                              without abscess.
K35.33.....................  Acute appendicitis with       338, 339, 340
                              perforation and              371, 372, 373
                              localized peritonitis,
                              with abscess.
K35.890....................  Other acute appendicitis      371, 372, 373
                              without perforation or
                              gangrene.
K35.891....................  Other acute appendicitis      371, 372, 373
                              without perforation,
                              with gangrene.
------------------------------------------------------------------------

    The commenter stated that the proposed MS-DRG assignment for 
diagnosis code K35.20 is inappropriate and urged CMS to assign 
additional MS-DRGs and revise Table 6A. Specifically, the commenter 
expressed concern that MS-DRGs 371, 372, and 373 (Major 
Gastrointestinal Disorders and Peritoneal Infections with MCC, with CC, 
and without CC/MCC, respectively) were the only MS-DRGs assigned to 
diagnosis code K35.20 and requested that MS-DRGs 338, 339, and 340 
(Appendectomy with Complicated Principal Diagnosis with MCC, with CC, 
and without CC/MCC, respectively) also be assigned. The commenter 
questioned why CMS only assigned MS-DRGs 371, 372, and 373 for 
diagnosis code K35.20 when diagnosis code K35.32 was assigned to MS-
DRGs 338, 339, and 340 in addition to MS-DRGs 371, 372, and 373. The 
commenter stated that the FY 2019 ICD-10-CM Tabular List of Diseases 
and Injuries indicates that codes at the new subcategory K35.2 include 
a ruptured or perforated appendix, which is a complicating diagnosis 
and requires additional resources. The commenter expressed concern that 
the proposed MS-DRG assignment for diagnosis code K35.20 does not 
appropriately reflect the complications of the underlying disease or 
resources associated with acute appendicitis with generalized 
peritonitis. The commenter also noted that studies of patients admitted 
with appendicitis define complicated appendicitis as the presence of 
either generalized peritonitis due to perforated appendicitis or 
appendicular abscess. The commenter further noted that an appendix may 
perforate and cause generalized peritonitis without abscess if the 
perforation is walled off from the remainder of the peritoneal cavity 
because of its retroperitoneal location or by loops of small intestine 
or omentum.
    Response: We note that the predecessor code for new diagnosis code 
K35.20 is diagnosis code K35.2 (Acute appendicitis with generalized 
peritonitis), which is currently assigned

[[Page 41236]]

to MS-DRGs 338, 339, 340, 371, 372, and 373. Diagnosis code K35.2 was 
subdivided into diagnosis codes K35.20 and K35.21. In assigning the 
proposed MS-DRGs for these new diagnosis codes, we considered the 
predecessor code MS-DRG assignment and the descriptions of the new 
diagnosis codes. Our clinical advisors determined that diagnosis code 
K35.21 ``with abscess'' was more appropriate to assign to MS-DRGs 338, 
339, and 340 in addition to MS-DRGs 371, 372, and 373 versus diagnosis 
code K35.20 ``without abscess''. The degree and severity of the 
peritonitis in a patient with acute appendicitis can vary greatly. 
However, not all patients with peritonitis develop an abscess. While we 
agree that peritonitis is a serious condition when it develops in a 
patient with acute appendicitis, we also believe that, clinically, an 
abscess presents an even greater risk of complications that requires 
more resources as discussed in section II.F.15.b. of the preamble of 
this final rule with regard to the severity level designation.
    We also consulted with the staff at the Centers for Disease 
Control's (CDC's) National Center for Health Statistics (NCHS) because 
NCHS has the lead responsibility for maintaining the ICD-10-CM 
diagnosis codes. The NCHS' staff acknowledged the clinical concerns of 
the commenter based on the manner in which diagnosis codes K35.2 and 
K35.3 were expanded and confirmed that they will consider further 
review of these newly expanded codes with respect to the clinical 
concepts.
    Therefore, we maintain that the proposed MS-DRG assignment for 
diagnosis code K35.20 as shown in Table 6A is appropriate. Because the 
diagnosis codes that the commenter submitted in its comments are new, 
effective October 1, 2018, we do not yet have any claims data. We will 
continue to monitor these codes as data become available.
    After consideration of the public comments we received, we are 
finalizing our proposal to assign diagnosis code K35.20 to MS-DRGs 371, 
372, and 373 under the ICD-10 MS-DRGs Version 36, effective October 1, 
2018.
    Comment: One commenter recommended that the following new diagnosis 
codes that were included in Table 6A.--New Diagnosis Codes--FY 2019, be 
designated as a CC in the ICD-10-CM classification.

------------------------------------------------------------------------
         ICD-10-CM code                      Code description
------------------------------------------------------------------------
K61.31.........................  Horseshoe abscess.
K61.39.........................  Other ischiorectal abscess.
K61.5..........................  Supralevator abscess.
K82.A1.........................  Gangrene of gallbladder in
                                  cholecystitis.
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.
O86.09.........................  Infection of obstetric surgical wound,
                                  other surgical site.
------------------------------------------------------------------------

    According to the commenter, abscesses, postoperative infections, 
and gangrene of gallbladder warrant the CC designation because they are 
acute conditions and require antibiotics or surgical treatment and 
impact the length of stay. The commenter noted that, currently, 
diagnosis codes K61.3 (Ischiorectal abscess) and K61.4 
(Intrasphincteric abscess) are designated as CCs. The commenter also 
noted that gangrene of gallbladder classifies to acute cholecystitis, 
which is a CC, and recommended that the codes listed in the above table 
all be designated as CCs.
    Response: We appreciate the commenter's feedback on the proposed 
severity level designations of the diagnosis codes that were included 
in Table 6A.--New Diagnosis Codes--FY 2019. The commenter is correct 
that, currently, diagnosis codes K61.3 and K61.4 are designated as CCs. 
However, our clinical advisors reviewed diagnosis codes K61.31, K61.39, 
and K61.5 and continue to support maintaining the proposed non-CC 
designation because they do not agree from a clinical perspective that 
these conditions warrant a CC designation or significantly impact 
resource utilization as a secondary diagnosis. Specifically, our 
clinical advisors believe that these diagnosis codes described 
conditions that can range in severity and subsequently, the treatment 
that is rendered. With regard to the commenter's statement that 
abscesses, postoperative infections, and gangrene of gallbladder 
warrant the CC designation because they are acute conditions and 
require antibiotics or surgical treatment and impact the length of 
stay, we note that there are various types of abscesses and 
postoperative infections with varying levels of severity that do not 
always warrant surgical intervention.
    With regard to the commenter's statement that gangrene of 
gallbladder classifies to acute cholecystitis which is a CC, we 
acknowledge that, currently, diagnosis code K81.0 (Acute cholecystitis) 
is a CC and has an inclusion term for gangrene of gallbladder. However, 
the new code description does not include the term ``acute''. Upon 
review of code K82.A1, our clinical advisors continue to support 
maintaining the proposed non-CC designation because they do not agree 
from a clinical perspective that this condition warrants a CC 
designation or significantly impacts resource utilization as a 
secondary diagnosis as the primary diagnosis likely is a more 
significant contributor to resource utilization. With regard to the 
codes describing infection of obstetrical wound of varying degrees and 
depths, the predecessor code O86.0 (Infection of obstetric wound) is 
currently classified as a non-CC and our clinical advisors agreed that, 
in the absence of data for the new codes, they are appropriately 
designated as non-CCs.
    After consideration of the public comments we received, we are 
finalizing our proposed severity level assignments for the above listed 
diagnosis codes under the ICD-10 MS-DRGs Version 36, effective October 
1, 2018.
    We also are making available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html the following final tables associated with 
this final rule:
     Table 6A.--New Diagnosis Codes--FY 2019;
     Table 6B.--New Procedure Codes--FY 2019;
     Table 6C.--Invalid Diagnosis Codes--FY 2019;

[[Page 41237]]

     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.--Secondary Diagnosis Order Additions to the CC 
Exclusions List--FY 2019;
     Table 6G.2.--Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2019;
     Table 6H.1.--Secondary Diagnosis Order Deletions to the CC 
Exclusions List--FY 2019;
     Table 6H.2.--Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2019;
     Table 6I.1.--Additions to the MCC List--FY 2019;
     Table 6I.2.-Deletions to the MCC List--FY 2019;
     Table 6J.1.--Additions to the CC List--FY 2019; and
     Table 6J.2.--Deletions to the CC List--FY 2019.
    We note that, as discussed in section II.F.15.c. of the preamble of 
this final rule, we proposed, and in this final rule are finalizing, 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, a CC, or a non-CC was accomplished using an 
iterative approach in which each diagnosis was evaluated to determine 
the extent to which its presence as a secondary diagnosis resulted in 
increased hospital resource use. We 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-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-CCs, the impact on resource use of the secondary diagnoses is 
greater than the expected value for a non-CC by an amount equal to 80 
percent of the difference between the expected value of a CC and a non-
CC (that is, the impact on resource use of the secondary diagnosis is 
closer to a CC than a non-CC).
    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
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20241), 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.

[[Page 41238]]



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

    We stated in the proposed rule that 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 proposed to change the severity level of ICD-10-
CM diagnosis code B20 from an MCC to a CC.
    Comment: Commenters opposed the proposal to change the severity 
level for ICD-10-CM diagnosis code B20 from an MCC to a CC. The 
commenters stated that the change should not be made without strong 
supporting empirical data, referencing the language in the proposed 
rule that indicated that the data did not strongly suggest that the 
categorization of HIV as an MCC was inaccurate. One commenter indicated 
that patients with CD4 counts of less than 100, or elevated viral 
loads, would need more laboratory tests, more imaging, and a higher 
level of care even if they are in the hospital for a non-HIV related 
condition. This commenter suggested that if diagnosis code B20 is 
changed to a CC, CMS develop distinct codes for patients with AIDS 
based on their level of CD4 and whether viral loads are suppressed.
    Response: While we stated in the proposed rule that the data did 
not strongly suggest correlation of a secondary diagnosis code of B20 
with a severity level of an MCC was inaccurate, the data also did not 
definitively support maintaining a severity level of an MCC. While we 
understand that HIV is a serious disease that causes significant 
chronic illness and can lead to serious complications, we note that 
when a patient is admitted for a non-HIV related condition, our 
clinical advisors do not believe that the secondary diagnosis of HIV 
would be expected to result in the additional resources associated with 
an MCC. As explained in the proposed rule, our clinical advisors 
believe that, for many patients with HIV disease, symptoms are well 
controlled by medications, and if these patients have an HIV-related 
complicating disease, that complicating disease would serve as a CC or 
an MCC. For these reasons, our clinical advisors continue to believe 
that ICD-10-CM diagnosis code B20 is more accurately characterized as a 
CC.
    As discussed in section II.F.18. of the preamble of this final 
rule, requests for new ICD-10-CM diagnosis codes are discussed at the 
ICD-10 Coordination and Maintenance Committee meetings. We refer the 
commenter to the National Center for Health Statistics (NCHS) website 
at https://www.cdc.gov/nchs/icd/icd10_maintenance.html for further 
information regarding these meetings and the process for how to request 
code updates.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the severity level of diagnosis code 
of B20 from an MCC to a CC.
(2) Acute Respiratory Distress Syndrome
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20241), 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
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We stated in the proposed rule that 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-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 agreed that the resources required to care for a patient with 
this secondary diagnosis are consistent with those of an MCC. 
Therefore, we proposed to change the severity level of ICD-10-CM 
diagnosis code J80 from a CC to an MCC.
    Comment: Commenters supported the proposal to change the severity 
level of ICD-10-CM diagnosis code J80 from a CC to an MCC.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the severity level of ICD-10-CM 
diagnosis code J80 from a CC to an MCC.
(3) Encephalopathy
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20241), 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.

[[Page 41239]]



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

    We stated in the proposed rule that 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-CCs. We stated in the proposed rule that the resources 
are 15 percent lower than expected when reported in conjunction with 
another secondary diagnosis that is a CC, and 49 percent lower than 
expected when reported in conjunction with another secondary diagnosis 
code that is an MCC. The sentence should have read as follows: The 
resources are 15 percent lower than expected when reported in 
conjunction with another secondary diagnosis that is a CC, and 51 
percent lower than expected when reported in conjunction with another 
secondary diagnosis code that is an MCC. We noted 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 agreed 
that, from a clinical standpoint, the resources involved in caring for 
a patient with this condition are aligned with those of an MCC. 
Therefore, we did not propose a change to the severity level for ICD-
10-CM diagnosis code G93.40.
    Comment: Several commenters supported the proposal to maintain the 
severity level for ICD-10-CM diagnosis code G93.40 as an MCC. One 
commenter opposed the proposal, stating that unspecified encephalopathy 
is poorly defined, not all specified encephalopathies are MCCs, and the 
MCC status creates an incentive for coding personnel to not pursue 
specificity of encephalopathy which could lead to a lower relative 
weight.
    Response: We appreciate the commenters' support. After reviewing 
the rationale provided by the commenter who opposed our proposal, we 
concur with the commenter that unspecified encephalopathy is poorly 
defined, not all encephalopathies are MCCs, and the MCC status creates 
an incentive for coding personnel to not pursue specificity of 
encephalopathy. For these reason, our clinical advisors agree that it 
is appropriate to change the severity level from an MCC to a CC.
    After consideration of the public comments we received, we are 
changing the severity level for ICD-10-CM diagnosis code G93.40 from an 
MCC to a CC.
(4) End-Stage Heart Failure and Hepatic Encephalopathy
    Comment: One commenter stated that ICD-10-CM code I50.84 (End-stage 
heart failure) should be assigned the severity level of a CC and that 
hepatic encephalopathy should be assigned the severity level of an MCC. 
The commenter did not provide the specific ICD-10-CM diagnosis codes 
that describe hepatic encephalopathy.
    Response: Because ICD-10-CM code I50.84 and the codes that describe 
hepatic encephalopathy referred to by the commenter are newly created 
codes, we do not yet have data with which to evaluate the commenter's 
request. We will consider these diagnosis codes during our ongoing 
comprehensive CC/MCC analysis once data become available.
    After consideration of the public comment received, we are not 
changing the severity level of ICD-10-CM code I50.84 or the ICD-10-CM 
codes describing hepatic encephalopathy for FY 2019.
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 
(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, in the FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20242), we did not propose 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.
    Comment: One commenter identified two scenarios that involve some 
cases that are grouping to MS-DRGs 981 through 983 and MS-DRGs 987 
through 989. The commenter stated that these grouping issues should be 
addressed by CMS and provided specific examples with a combination of 
several codes.
    Response: We appreciate the commenter bringing these issues to our 
attention. However, we were unable to fully evaluate these scenarios 
for consideration in FY 2019. We intend to review and consider these 
items for FY 2020 as part of our ongoing analysis of the unrelated 
procedure MS-DRGs. As stated in section II.F.1.b. of the preamble of 
this final rule, we encourage individuals with comments about MS-DRG 
classification issues to submit these comments no later than November 1 
of each year so that they can be considered for possible inclusion in 
the annual proposed rule.
    After consideration of the public comments we received, we are not

[[Page 41240]]

moving 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 for FY 2019.
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 also proposed to maintain the current 
structure of MS-DRGs 981 through 983 and MS-DRGs 987 through 989.
    Comment: One commenter recommended that CMS classify the insertion 
and revision of intracardiac pacemakers as discussed in section 
II.F.4.a. of the proposed rule (83 FR 20204) as extensive O.R. 
procedures (MS-DRG 981 through 983). The commenter performed its own 
analysis where the results demonstrated the average costs of the 
intracardiac pacemakers were higher than the average costs of cases in 
MS-DRGs 981 through 983.
    Response: We are unclear as to the nature of the commenter's 
request, as the intracardiac pacemaker procedure codes are already 
designated as extensive O.R. procedures in the GROUPER logic, as 
discussed in section II.F.4.a. of the preamble of this final rule
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current structure of MS-DRGs 
981 through 983 and MS-DRGs 987 through 989 under the ICD-10 MS-DRGs 
Version 36, effective October 1, 2018.
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.
------------------------------------------------------------------------

    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20243), we 
proposed 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.

[[Page 41241]]



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

[[Page 41242]]

 
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 proposed 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 agreed 
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. We stated in the propsed rule that 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 proposed 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).
    Comment: Commenters supported the proposal to reassign the seven 
ICD-10-CM diagnosis codes describing congenital musculoskeletal 
conditions from MDC 4 to MDC 8 into MS-DRGs 564, 565 and 566. The 
commenters stated that the proposal was reasonable, given the ICD-10-CM 
codes and the information provided.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing the proposal 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 under the ICD-10 MS-DRGs Version 36, effective 
October 1, 2018.
    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 noted 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, 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

[[Page 41243]]

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 agreed 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.
------------------------------------------------------------------------

    We stated in the proposed rule that 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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20245), we proposed 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 invited public comments on our proposals.
    Comment: Commenters supported the proposal to reassign the 10 ICD-
10-CM diagnosis codes describing sternal fractures with an initial 
encounter from MDC 4 to MDC 8 into MS-DRGs 564, 565 and 566. The 
commenters stated that the proposal was reasonable, given

[[Page 41244]]

the ICD-10-CM codes and the information provided.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing the proposal 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 MDC 4 to MDC 8 to MS-DRGs 564, 565, and 566 
under the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
    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 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-CM 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.
------------------------------------------------------------------------


[[Page 41245]]

    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 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) and              40            11.4          43,094
 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) and              10             6.7          30,617
 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) and               4               2          21,501
 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 agreed 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 noted 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

[[Page 41246]]

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), in the FY 2019 IPPS/LTCH PPS proposed rule, we proposed 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.

------------------------------------------------------------------------
      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 agreed 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.
    We stated in the proposed rule that 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.
    Comment: Commenters supported the proposal to add the eight ICD-10-
PCS procedure codes describing repositioning of the ribs to MDC 4 in 
MS-DRGs 166, 167 and 168. The commenters stated that the proposal was 
reasonable, given the data, the ICD-10-PCS codes and the information 
provided.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing the proposal to add ICD-10-PCS procedure codes 0PS104Z, 
0PS10ZZ, 0PS134Z, 0PS144Z, 0PS204Z, 0PS20ZZ, 0PS234Z and 0PS244Z 
currently assigned to MDC 8 into MDC 4 in MS-DRGs 166, 167 and 168 
under the ICD-10 MS-DRGs Version 36, effective October 1, 2018.
18. Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
    In September 1985, the ICD-9-CM Coordination and Maintenance 
Committee was formed. This is a Federal interdepartmental committee, 
co-chaired by the National Center for Health Statistics (NCHS), the 
Centers for Disease Control and Prevention (CDC), and CMS, charged with 
maintaining and updating the ICD-9-CM system. The final update to ICD-
9-CM codes was made on October 1, 2013. Thereafter, the name of the 
Committee was changed to the ICD-10 Coordination and Maintenance 
Committee, effective with the March 19-20, 2014 meeting. The ICD-10 
Coordination and Maintenance Committee addresses updates to the ICD-10-
CM and ICD-10-PCS coding systems. The Committee is jointly responsible 
for approving coding changes, and developing errata, addenda, and other 
modifications to the coding systems to reflect newly developed 
procedures and technologies and newly identified diseases. The 
Committee is also responsible for promoting the use of Federal and non-
Federal educational programs and other communication techniques with a 
view toward standardizing coding applications and upgrading the quality 
of the classification system.
    The official list of ICD-9-CM diagnosis and procedure codes by 
fiscal year can be found on the CMS 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 was 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 this final 
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 final 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

[[Page 41247]]

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. Because of the length of these tables, they were not published in 
the Addendum to the proposed rule. Rather, they are available via the 
internet as discussed in section VI. of the Addendum to the 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/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-Chairperson, ICD-10 
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo 
Road, Hyattsville, MD 20782. Comments may be sent by Email to: 
[email protected].
    Questions and comments concerning the procedure codes should be 
submitted via Email to: [email protected].
    In the September 7, 2001 final rule implementing the IPPS new 
technology add-on payments (66 FR 46906), we indicated we would attempt 
to include proposals for procedure codes that would describe new 
technology discussed and approved at the Spring meeting as part of the 
code revisions effective the following October.
    Section 503(a) of Public Law 108-173 included a requirement for 
updating diagnosis and procedure codes twice a year instead of a single 
update on October 1 of each year. This requirement was included as part 
of the amendments to the Act relating to recognition of new technology 
under the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act 
by adding a clause (vii) which states that the Secretary shall provide 
for the addition of new diagnosis and procedure codes on April 1 of 
each year, but the addition of such codes shall not require the 
Secretary to adjust the payment (or diagnosis-related group 
classification) until the fiscal year that begins after such date. This 
requirement improves the recognition of new technologies under the IPPS 
by providing information on these new technologies at an earlier date. 
Data will be available 6 months earlier than would be possible with 
updates occurring only once a year on October 1.
    While section 1886(d)(5)(K)(vii) of the Act states that the 
addition of new diagnosis and procedure codes on April 1 of each year 
shall not require the Secretary to adjust the payment, or DRG 
classification, under section 1886(d) of the Act until the fiscal year 
that begins after such date, we have to update the DRG software and 
other systems in order to recognize and accept the new codes. We also 
publicize the code changes and the need for a mid-year systems update 
by providers to identify the new codes. Hospitals also have to obtain 
the new code books and encoder updates, and make other system changes 
in order to identify and report the new codes.
    The ICD-10 (previously the ICD-9-CM) Coordination and Maintenance 
Committee holds its meetings in the spring and fall in order to update 
the codes and the applicable payment and reporting systems by October 1 
of each year. Items are placed on the agenda for the Committee meeting 
if the request is received at least 2 months prior to the meeting. This 
requirement allows time for staff to review and research the coding 
issues and prepare material for discussion at the meeting. It also 
allows time for the topic to be publicized in meeting announcements in 
the Federal Register as well as on the CMS 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-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-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 1, 2018 implementation of 
a code at the September 12-13, 2017 Committee meeting. Therefore, there 
were 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.

[[Page 41248]]

    The following chart shows the number of ICD-10-CM and ICD-10-PCS 
codes and code changes since FY 2016 when ICD-10 was implemented.

  Total Number of Codes and Changes in Total Number of Codes per Fiscal
                   Year ICD-10-CM and ICD-10-PCS Codes
------------------------------------------------------------------------
               Fiscal year                    Number          Change
------------------------------------------------------------------------
FY 2016:
  ICD-10-CM.............................          69,823  ..............
  ICD-10-PCS............................          71,974  ..............
FY 2017:
  ICD-10-CM.............................          71,486          +1,663
  ICD-10-PCS............................          75,789          +3,815
FY 2018:
  ICD-10-CM.............................          71,704            +218
  ICD-10-PCS............................          78,705          +2,916
FY 2019:................................
  ICD-10-CM.............................          71,932            +228
  ICD-10-PCS............................          78,881            +176
------------------------------------------------------------------------

    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. 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. Changes for FY 2019
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20250 through 
20251), for FY 2019, we did not propose to add any MS-DRGs to the 
policy for replaced devices offered without cost or with a credit. We 
proposed to continue to include the existing MS-DRGs currently subject 
to the policy as displayed in the table below.

------------------------------------------------------------------------
              MDC                    MS-DRG            MS-DRG title
------------------------------------------------------------------------
Pre-MDC........................             001  Heart Transplant or
                                                  Implant of Heart
                                                  Assist System with
                                                  MCC.
Pre-MDC........................             002  Heart Transplant or
                                                  Implant of Heart
                                                  Assist System without
                                                  MCC.
1..............................             023  Craniotomy with Major
                                                  Device Implant 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.

[[Page 41249]]

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

    We did not receive any public comments on our proposal to continue 
to include the existing MS-DRGs currently subject to the policy and to 
not add any additional MS-DRGs. Therefore, we are finalizing the list 
of MS-DRGs in the table included in the proposed rule and above that 
will be subject to the replaced devices offered without cost or with a 
credit policy, effective October 1, 2018.
20. Other Policy Changes: Other Operating Room (O.R.) and Non-O.R. 
Issues
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20251 through 
20257), we addressed 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 proposed to change the 
designation of procedure codes from non-O.R. to O.R. procedures, we 
also proposed 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 invited public comments on these proposed MS-DRG 
assignments.
    We also noted 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 discussed 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.

[[Page 41250]]

 
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 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).
    In the proposed rule, we stated that we agreed with the requestor 
that these procedures typically require the resources of an operating 
room. Therefore, we proposed 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).
    Comment: One commenter supported the proposal to change the 
designation of the 22 procedure codes listed in the table above to O.R. 
procedures.
    Response: We appreciate the commenter's support.
    After consideration of the public comment we received, we are 
finalizing our proposal to change the designation of the 22 ICD-10-PCS 
procedure codes shown in the table above from non-O.R. procedures to 
O.R. procedures, effective October 1, 2018.
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.
------------------------------------------------------------------------


[[Page 41251]]

    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).
    In the proposed rule, we stated that we disagreed 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 disagreed that these procedures are similar to open 
drainage procedures. Therefore, we proposed to maintain the status of 
these 22 ICD-10-PCS procedure codes as non-O.R. procedures.
    Comment: Some commenters supported the proposal to maintain the 
designation of the 22 identified procedure codes as non-O.R. 
procedures. One commenter opposed the proposal, stating that open 
extirpation procedures typically require the use of anesthesia and an 
operating room. This commenter stated that the 22 procedures are 
similar to open drainage, excisional debridement, and non-excisional 
debridement/extraction of subcutaneous tissue and fascia, which are 
designated as O.R. procedures.
    Response: We appreciate the commenters' support. In response to the 
commenter who opposed the proposal, our clinical advisors continue to 
believe 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, and therefore do not require 
the use of an operating room. Our clinical advisors further noted that 
the use of anesthesia frequently occurs in a CT or MRI suite. In 
addition, our clinical advisors continue to disagree with the assertion 
that these procedures are similar to open drainage procedures because 
fewer resources are required for open extirpation procedures relative 
to open drainage procedures and the open extirpation procedures are not 
usually performed in the operating room.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the non-O.R. status of the 22 
identified open extirpation procedures.
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-
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.
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).
    In the proposed rule, we stated that we agreed 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 
stated that 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 proposed 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,

[[Page 41252]]

Subcutaneous Tissue & Breast) for the breast procedure codes.
    Comment: Commenters supported the proposal to change the 
designation of the 13 identified procedure codes to O.R. procedures.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 13 ICD-10-PCS 
procedure codes shown in the table above from non-O.R. procedures to 
O.R. procedures, effective October 1, 2018.
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-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).
    In the proposed rule, we stated that we agreed with the requestor 
that these eight procedures typically require the resources of an 
operating room. Therefore, we proposed 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).
    Comment: One commenter supported the proposal to change the 
designation of the 8 identified procedure codes to O.R. procedures.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 8 ICD-10-PCS 
procedure codes shown in the table above from non-O.R. procedures to 
O.R. procedures, effective October 1, 2018.
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.

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

    In the proposed rule, we stated that we agreed 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 proposed 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

[[Page 41253]]

System and Connective Tissue). For the hip procedures, we proposed 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).
    Comment: Commenters supported the proposal to change the 
designation of the eight identified procedure codes to O.R. procedures. 
Several commenters who supported the proposal also requested that CMS 
ensure that changing the designation to O.R. procedures not have the 
unintended impact of reducing payment for these procedures. These 
commenters also requested that CMS clarify that the proposed MS-DRG 
assignments only apply when the eight codes are reported as stand-alone 
procedures and not, for example, when a spacer is removed and a 
permanent joint implant is inserted. One commenter stated that 
additional cost data would be useful in determining whether the payment 
for the proposed MS-DRGs fully reflect the O.R. resources used in these 
procedures.
    Response: We appreciate the commenters' support. With regard to the 
MS-DRG assignment, we are clarifying that, in all cases, the GROUPER 
logic would consider all of the procedures reported, the principal 
diagnosis, the surgical hierarchy, and the MS-DRG assignments for those 
procedures to determine the appropriate MS-DRG assignment. In cases 
where there is a procedure that is used for MS-DRG assignment that is 
higher in the surgical hierarchy, that procedure code would determine 
the MS-DRG assignment. In cases where the other procedure(s) are lower 
in the surgical hierarchy, the case would be assigned to the MS-DRGs 
listed above. With regard to the comments about the implications for 
payment and the cost data, we note that the goals of changing the 
designation of procedures from non-O.R. to O.R., or vice versa, are to 
better clinically represent the resources involved in caring for these 
patients and to enhance the overall accuracy of the system. Therefore, 
decisions to change an O.R. designation are based on whether such a 
change would accomplish those goals and not whether the change in 
designation would impact the payment in a particular direction.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the eight ICD-10-
PCS procedure codes shown in the table above from non-O.R. procedures 
to O.R. procedures, effective October 1, 2018.
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).
    In the proposed rule, we stated that we agreed 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 
further stated that 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 proposed 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).
    Comment: One commenter supported the proposal to change the 
designation of the three identified procedure codes to O.R. procedures.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the three ICD-10-
PCS procedure codes shown in the table above from non-O.R. procedures 
to O.R. procedures, effective October 1, 2018.
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.

[[Page 41254]]



------------------------------------------------------------------------
 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.
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.
    In the proposed rule, we stated that we agreed 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 proposed 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 invited 
public comments on our proposal.
    Comment: One commenter supported the proposal to change the 
designation of the nine identified procedure codes to O.R. procedures.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the nine ICD-10-
PCS procedure codes shown in the tables above from non-O.R. procedures 
to O.R. procedures, effective October 1, 2018.
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.

[[Page 41255]]

 
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 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.
    In the proposed rule, we stated that we agreed with the requestor 
that procedures involving open insertion of totally implantable VAD 
procedures typically require the resources of an operating room. 
However, we stated that we disagreed that the tunneled VAD procedures 
typically require the resources of an operating room. Therefore, we 
proposed 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 noted that these procedures already 
affect MS-DRG assignment to these MS-DRGs. However, we stated that 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-DRG.
    Comment: Commenters supported the proposal to change the 
designation of the open insertion of totally implantable VAD procedures 
to O.R. procedures. One commenter requested that CMS reconsider the 
GROUPER logic to add totally implantable VADs to additional MDCs, and 
not just MDCs 9 and 11.
    Response: We appreciate the commenters' support. With regard to the 
GROUPER logic, we will consider whether procedures should be added to 
additional MDCs during our annual assessment of the codes that group to 
the unrelated procedure MS-DRGs, which is discussed later in this 
section of the preamble of this final rule.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 10 ICD-10-PCS 
procedure codes describing open insertion of totally implantable VAD 
procedures shown in the table above from non-O.R. procedures to O.R. 
procedures, effective October 1, 2018.
    Comment: Some commenters supported the proposal to maintain the 
non-O.R. assignment of the tunneled VAD procedures listed in the table 
above, while others opposed this proposal. The commenters who opposed 
the proposal stated that tunneled VAD procedures involve significantly 
more resources than non-tunneled catheters because of the significant 
subcutaneous tunneling required. The commenters also noted that the 
procedures require the specialized setting of an operating room or 
interventional radiology suite. The commenters explained the following 
aspects of the technique that they believe indicate that the procedures 
should be designated as O.R. procedures: A small incision is typically 
made and one end of the catheter is advanced into the internal jugular 
vein, and threaded into the superior/inferior vena cava, or right 
atrium under fluoroscopic guidance. The other end of the catheter is 
tunneled beneath the skin and subcutaneous tissue and a small incision 
is made at the exit site on the chest. A small cuff is sometimes 
anchored to the skin to stabilize and prevent infection. While the 
tunneled VADs are typically performed with small incisions, the 
subcutaneous tunneling is the most complex portion of the procedure. In 
addition, one commenter listed additional tunneled VAD codes (performed 
on other body parts, such as the arms and legs) that should also be 
considered for a change to the O.R. designation.
    Response: Our clinical advisors continue to believe that tunneled 
VAD procedures do not typically require the use of an operating room. 
As the commenter stated, these procedures are frequently performed 
under image guidance, which our clinical advisors believe would 
typically take place in a radiology suite. Our clinical advisors 
believe that the list of other VAD procedures cited by the commenter 
would also typically take place in the radiology suite and, therefore, 
would not typically require the use of an operating room. Therefore, we 
are not making a change to the O.R. designation of the codes suggested 
by the commenter.
    After consideration of the public comments we received, we are 
finalizing our proposals to change the designation of the totally 
implantable VAD procedures to O.R. procedures and to maintain the non-
O.R. designation of the tunneled VAD procedures.
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.

[[Page 41256]]



------------------------------------------------------------------------
 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.
    In the proposed rule, we stated that we disagreed 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 proposed to maintain the status of these 
20 ICD-10-PCS procedure codes as non-O.R. procedures.
    Comment: Some commenters supported the proposal to maintain the 
status of the 20 ICD-10-PCS procedure codes that describe procedures 
involving percutaneous joint reposition with internal fixation device 
listed in the table above, while one commenter opposed our proposal. 
The commenter who opposed the proposal stated that these procedures are 
often done under image guidance, but that they are typically done in 
the operating room because they require anesthesia. The commenter 
stated that these procedures involving dislocated joints are even more 
resource intensive than fracture treatment involving a single bone, 
which are classified as O.R. procedures.
    Response: Our clinical advisors continue to believe that the 
resources involved in furnishing these procedures are consistent with 
non-O.R. procedures, given that they are typically done with imaging 
guidance. Our clinical advisors noted that it is not uncommon for 
anesthesia to be used in the radiology suite, and that the nature of 
the resources used in repositioning displaced joints do not require the 
use of an operating room.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the non-O.R. status of the 20 ICD-
10-PCS procedure codes that describe procedures involving percutaneous 
joint reposition with internal fixation device listed in the table 
above.
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.
------------------------------------------------------------------------

    The requestor stated that these procedures are rarely performed in 
the operating room. In the ICD-10 MS-DRGs Version 35, these four ICD-
10-PCS procedure codes are currently recognized as O.R. procedures for 
purposes of MS-DRG assignment.
    In the proposed rule, we stated that we agreed with the requestor 
that these procedures do not typically require the resources of an 
operating room. Therefore, we proposed 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.
    Comment: One commenter supported the proposal to change the 
designation of the four identified procedure codes to non-O.R. 
procedures.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the four ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to 
non-O.R. procedures, effective October 1, 2018.

[[Page 41257]]

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.
    In the proposed rule, we stated that we agreed 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 proposed 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.
    Comment: One commenter supported the proposal to change the 
designation of the five identified procedure codes to non-O.R. 
procedures.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the five ICD-10-
PCS procedure codes shown in the tables above from O.R. procedures to 
non-O.R. procedures, effective October 1, 2018.
l. Endobronchial Valve Procedures
    One commenter responding to the FY 2019 IPPS/LTCH PPS proposed rule 
identified eight ICD-10-PCS procedure codes that describe endobronchial 
valve procedures that the commenter believed should be designated as 
O.R. procedures. The codes are identified in the following table.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
0BH38GZ...................  Insertion of endobronchial valve into right
                             main bronchus, via natural or artificial
                             opening endoscopic.
0BH48GZ...................  Insertion of endobronchial valve into right
                             upper lobe bronchus, via natural or
                             artificial opening endoscopic.
0BH58GZ...................  Insertion of endobronchial valve into right
                             middle lobe bronchus, via natural or
                             artificial opening endoscopic.
0BH68GZ...................  Insertion of endobronchial valve into right
                             lower lobe bronchus, via natural or
                             artificial opening endoscopic.
0BH78GZ...................  Insertion of endobronchial valve into left
                             main bronchus, via natural or artificial
                             opening endoscopic.
0BH88GZ...................  Insertion of endobronchial valve into left
                             upper lobe bronchus, via natural or
                             artificial opening endoscopic.
0BH98GZ...................  Insertion of endobronchial valve into
                             lingula bronchus, via natural or artificial
                             opening endoscopic.
0BHB8GZ...................  Insertion of endobronchial valve into left
                             lower lobe bronchus, via natural or
                             artificial opening endoscopic.
------------------------------------------------------------------------

    The commenter stated that these procedures are most commonly 
performed in the O.R., given the need for better monitoring and support 
through the process of identifying and occluding a prolonged air leak 
using endobronchial valve technology. The commenter also noted that 
other endobronchial valve procedures have an O.R. designation. 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 commenter requested that these eight codes be assigned to MS-DRG 
163 (Major Chest Procedures with MCC) due to similar cost and resource 
use.
    Our clinical advisors disagree with the commenter that the eight 
identified procedures typically require the use of an operating room. 
Our clinical advisors believe that these procedures would typically be 
performed in an endoscopy suite. Therefore, we are not changing the 
non-O.R. designation of the eight identified ICD-10-PCS codes listed in 
the table above.
21. Out of Scope Public Comments Received
    We received public comments regarding a number of MS-DRG and 
related issues that were outside the scope of the proposals included in 
the FY 2019 IPPS/LTCH PPS proposed rule. These comments were as 
follows:
     One commenter requested that CMS evaluate the MS-DRG 
assignment for Face Transplant procedures and its designation as an 
extensive versus nonextensive O.R. procedure.
     One commenter requested that a new ICD-10-CM diagnosis 
code be created for a Kennedy terminal ulcer.
     One commenter requested that CMS examine the MS-DRG 
assignment and/or payment of patients who are admitted to the hospital 
for initiation or titration of certain antiarrhythmic drugs.
     One commenter requested that diagnosis codes in category 
O9A.2- and

[[Page 41258]]

O9A.3- for obstetrical patients be considered as a principal diagnosis 
for MDC 24 (Multiple Significant Trauma).
     One commenter requested that new MS-DRGs be created for 
endovascular cardiac valve replacements with and without a cardiac 
catheterization.
     One commenter recommended that CMS analyze claims data for 
cases reporting renal replacement therapy and issue guidance to 
facilities on the use of the ICD-10-PCS procedure codes.
     One commenter requested specific MS-DRG assignments for 
ICD-10-PCS codes that were not yet approved at the time of issuance of 
the proposed rule.
     One commenter recommended changes to the severity level 
designation for diagnosis codes that appear in Table 6E.--Revised 
Diagnosis Code Titles associated with the proposed rule.
    Because we consider these public comments to be outside the scope 
of the proposed rule, we are not addressing them in this final rule. As 
stated in section II.F.1.b. of the preamble of this final rule, we 
encourage individuals with comments about MS-DRG classification to 
submit these comments no later than November 1 of each year so that 
they can be considered for possible inclusion in the annual proposed 
rule and, if included, may be subjected to public review and comment. 
We will consider these public comments for possible proposals in future 
rulemaking as part of our annual review process.

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

1. Data Sources for Developing the Relative Weights
    In developing the FY 2019 system of weights, we proposed 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 final rule include 
discharges occurring on October 1, 2016, through September 30, 2017, 
based on bills received by CMS through March 31, 2018, from all 
hospitals subject to the IPPS and short-term, acute care hospitals in 
Maryland (which at that time were under a waiver from the IPPS). The FY 
2017 MedPAR file used in calculating the relative weights includes data 
for approximately 9,689,743 Medicare discharges from IPPS providers. 
Discharges for Medicare beneficiaries enrolled in a Medicare Advantage 
managed care plan are excluded from this analysis. These discharges are 
excluded when the MedPAR ``GHO Paid'' indicator field on the claim 
record is equal to ``1'' or when the MedPAR DRG payment field, which 
represents the total payment for the claim, is equal to the MedPAR 
``Indirect Medical Education (IME)'' payment field, indicating that the 
claim was an ``IME only'' claim submitted by a teaching hospital on 
behalf of a beneficiary enrolled in a Medicare Advantage managed care 
plan. In addition, the March 31, 2018 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 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 FY 2019 
relative weights are based on the ICD-10-CM diagnoses and ICD-10-PCS 
procedure codes from the FY 2017 MedPAR claims data, grouped through 
the ICD-10 version of the FY 2019 GROUPER (Version 36).
    The second data source used in the cost-based relative weighting 
methodology is the Medicare cost report data files from the HCRIS. 
Normally, we use the HCRIS dataset that is 3 years prior to the IPPS 
fiscal year. Specifically, we used cost report data from the March 31, 
2018 update of the FY 2016 HCRIS for calculating the final FY 2019 
cost-based relative weights.
2. Methodology for Calculation of the Relative Weights
    As we explain in section II.E.2. of the preamble of this final 
rule, we calculated the FY 2019 relative weights based on 19 CCRs, as 
we did for FY 2018. The methodology we used to calculate the FY 2019 
MS-DRG cost-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 FY 2019 MS-DRG classifications discussed in sections II.B. 
and II.F. of the preamble of this final rule.
     The transplant cases that were used to establish the 
relative weights for heart and heart-lung, liver and/or intestinal, and 
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively) 
were limited to those Medicare-approved transplant centers that have 
cases in the FY 2017 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those 
facilities that have received approval from CMS as transplant centers.)
     Organ acquisition costs for kidney, heart, heart-lung, 
liver, lung, pancreas, and intestinal (or multivisceral organs) 
transplants continue to be paid on a reasonable cost basis. Because 
these acquisition costs are paid separately from the prospective 
payment rate, it is necessary to subtract the acquisition charges from 
the total charges on each transplant bill that showed acquisition 
charges before computing the average cost for each MS-DRG and before 
eliminating statistical outliers.
     Claims with total charges or total lengths of stay less 
than or equal to zero were deleted. Claims that had an amount in the 
total charge field that differed by more than $30.00 from the sum of 
the routine day charges, intensive care charges, pharmacy charges, 
implantable devices charges, supplies and equipment charges, therapy 
services charges, operating room charges, cardiology charges, 
laboratory charges, radiology charges, other service charges, labor and 
delivery charges, inhalation therapy charges, emergency room charges, 
blood and blood products charges, anesthesia charges, cardiac 
catheterization charges, CT scan charges, and MRI charges were also 
deleted.
     At least 92.5 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.

[[Page 41259]]

    Under current payment policy, the presence of specific HAC codes, 
as indicated by the POA field values, can generate a lower payment for 
the claim. Specifically, if the particular condition is present on 
admission (that is, a ``Y'' indicator is associated with the diagnosis 
on the claim), it is not a HAC, and the hospital is paid for the higher 
severity (and, therefore, the higher weighted MS-DRG). If the 
particular condition is not present on admission (that is, an ``N'' 
indicator is associated with the diagnosis on the claim) and there are 
no other complicating conditions, the DRG GROUPER assigns the claim to 
a lower severity (and, therefore, the lower weighted MS-DRG) as a 
penalty for allowing a Medicare inpatient to contract a HAC. While the 
POA reporting meets policy goals of encouraging quality care and 
generates program savings, it presents an issue for the relative 
weight-setting process. Because cases identified as HACs are likely to 
be more complex than similar cases that are not identified as HACs, the 
charges associated with HAC cases are likely to be higher as well. 
Therefore, if the higher charges of these HAC claims are grouped into 
lower severity MS-DRGs prior to the relative weight-setting process, 
the relative weights of these particular MS-DRGs would become 
artificially inflated, potentially skewing the relative weights. In 
addition, we want to protect the integrity of the budget neutrality 
process by ensuring that, in estimating payments, no increase to the 
standardized amount occurs as a result of lower overall payments in a 
previous year that stem from using weights and case-mix that are based 
on lower severity MS-DRG assignments. If this would occur, the 
anticipated cost savings from the HAC policy would be lost.
    To avoid these problems, we reset the POA indicator field to ``Y'' 
only for relative weight-setting purposes for all claims that otherwise 
have an ``N'' or a ``U'' in the POA field. This resetting ``forced'' 
the more costly HAC claims into the higher severity MS-DRGs as 
appropriate, and the relative weights calculated for each MS-DRG more 
closely reflect the true costs of those cases.
    In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 
and subsequent fiscal years, we finalized a policy to treat hospitals 
that participate in the Bundled Payments for Care Improvement (BPCI) 
initiative the same as prior fiscal years for the IPPS payment modeling 
and ratesetting process without regard to hospitals' participation 
within these bundled payment models (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 the 
hospitals 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 web page 
on the CMS Center for Medicare and Medicaid Innovation's website at: 
https://innovation.cms.gov/initiatives/bpci-advanced/. As we stated in 
the proposed rule, 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 and in 
the proposed rule, these hospitals are still receiving IPPS payments 
under section 1886(d) of the Act.
    The charges for each of the 19 cost groups for each claim were 
standardized to remove the effects of differences in area wage levels, 
IME and DSH payments, and for hospitals located in Alaska and Hawaii, 
the applicable cost-of-living adjustment. Because hospital charges 
include charges for both operating and capital costs, we standardized 
total charges to remove the effects of differences in geographic 
adjustment factors, cost-of-living adjustments, and DSH payments under 
the capital IPPS as well. Charges were then summed by MS-DRG for each 
of the 19 cost groups so that each MS-DRG had 19 standardized charge 
totals. Statistical outliers were then removed. These charges were then 
adjusted to cost by applying the national average CCRs developed from 
the FY 2016 cost report data.
    The 19 cost centers that we used in the relative weight calculation 
are shown in the following table. The table shows the lines on the cost 
report and the corresponding revenue codes that we used to create the 
19 national cost center CCRs. In the FY 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20259), we stated that if stakeholders have comments about 
the groupings in this table, we may consider those comments as we 
finalize our policy. However, we did not receive any comments on the 
groupings in this table, and therefore, we are finalizing the groupings 
as proposed.
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    In the FY 2019 IPPS/LTCH PPS proposed rule, we also invited public 
comments on our proposals related to recalibration of the proposed FY 
2019 relative weights and the changes in the relative weights from FY 
2018.
    Comment: Several commenters expressed concern about significant 
reductions in the relative weights for certain MS-DRGs, typically 
citing reductions of greater than 20 percent from FY 2018. Some 
commenters specifically addressed the significant reductions to MS-DRG 
215. Commenters stated that the proposed payment rate for MS-DRG 215 is 
less than the cost of the medical devices used in these procedures, and 
suggested that the reduced payments resulting from the reduction in the 
relative weight could limit access to the procedures that map to this 
MS-DRG. Some commenters suggested that CMS maintain the relative weight 
for MS-DRG 215 at the FY 2018 level until the claims data reflects the 
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[[Page 41273]]

procedures that map to this MS-DRG. Other commenters suggested a 1-year 
policy for FY 2019 to ensure that the 2-year decrease in payment rates 
for any MS-DRG from FY 2017 does not exceed 20 percent. Yet other 
commenters suggested a phase-in for MS-DRGs with significant reductions 
to their weights to give hospitals time to modify their operations to 
adapt to the new rates. Commenters referenced prior rulemaking in which 
CMS delayed or transitioned changes impacting payment rates to limit 
the impact on providers.
    Response: As we indicated in the FY 2018 IPPS/LTCH final rule (82 
FR 38103), we do not believe it is normally appropriate to address 
relative weight fluctuations that appear to be driven by changes in the 
underlying data. Nevertheless, after reviewing the comments received 
and the data used in our ratesetting calculations, we acknowledge an 
outlier circumstance where the weight for an MS-DRG is seeing a 
significant reduction of at least 20 percent for each of the 2 years 
since CMS began using the ICD-10 data in calculating the relative 
weights. While we would ordinarily consider this weight change to be 
appropriately driven by the underlying data, given the comments 
received and the potential for these declines to be related to the 
ongoing implementation of ICD-10, we are adopting a temporary one-time 
measure for FY 2019 for an MS-DRG where the FY 2018 relative weight 
declined by 20 percent from the FY 2017 relative weight and the FY 2019 
relative weight would have declined by 20 percent or more from the FY 
2018 relative weight. (We note that no FY 2018 weight declined by more 
than 20 percent from FY 2017 due to our FY 2018 policy.) Specifically, 
for an MS-DRG meeting this criterion, the FY 2019 relative weight will 
be set equal to the FY 2018 final relative weight. We believe this 
policy is consistent with our general authority to assign and update 
appropriate weighting factors under sections 1886(d)(4)(B) and (C) of 
the Act. We also believe that it appropriately addresses the situation 
in which the reduction to the FY 2019 relative weights may still be 
potentially related to the implementation of ICD-10. We continue to 
believe that changes in relative weights that are not of this outlier 
magnitude over the 2 years since we first incorporated the ICD-10 data 
in our ratesetting are appropriately being driven by the underlying 
data and not the implementation of ICD-10. There is a significant 
approximately 10-percentage point outlier gap between this type of 
reduction and any other reduction that has occurred over the 2-year 
period.
3. Development of National Average CCRs
    We developed the national average CCRs as follows:
    Using the FY 2016 cost report data, we removed CAHs, Indian Health 
Service hospitals, all-inclusive rate hospitals, and cost reports that 
represented time periods of less than 1 year (365 days). We included 
hospitals located in Maryland because we include their charges in our 
claims database. We then created CCRs for each provider for each cost 
center (see prior table for line items used in the calculations) and 
removed any CCRs that were greater than 10 or less than 0.01. We 
normalized the departmental CCRs by dividing the CCR for each 
department by the total CCR for the hospital for the purpose of 
trimming the data. We then took the logs of the normalized cost center 
CCRs and removed any cost center CCRs where the log of the cost center 
CCR was greater or less than the mean log plus/minus 3 times the 
standard deviation for the log of that cost center CCR. Once the cost 
report data were trimmed, we calculated a Medicare-specific CCR. The 
Medicare-specific CCR was determined by taking the Medicare charges for 
each line item from Worksheet D-3 and deriving the Medicare-specific 
costs by applying the hospital-specific departmental CCRs to the 
Medicare-specific charges for each line item from Worksheet D-3. Once 
each hospital's Medicare-specific costs were established, we summed the 
total Medicare-specific costs and divided by the sum of the total 
Medicare-specific charges to produce national average, charge-weighted 
CCRs.
    Comment: Several commenters noted that the CCRs used in the 
calculation of the relative weights did not match those calculated 
using the FY 2016 HCRIS.
    Response: We appreciate the commenters bringing this issue to our 
attention. The commenters are correct that there was an error in the 
calculation of the national average CCRs in the FY 2019 proposed rule, 
in that we inadvertently used the FY 2015 HCRIS data rather than the FY 
2016 HCRIS data. The CCRs used in the calculation of the relative 
weights in this final rule correctly reflect the described methodology 
and the FY 2016 HCRIS data.
    After we multiplied the total charges for each MS-DRG in each of 
the 19 cost centers by the corresponding national average CCR, we 
summed the 19 ``costs'' across each MS-DRG to produce a total 
standardized cost for the MS-DRG. The average standardized cost for 
each MS-DRG was then computed as the total standardized cost for the 
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. 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 final 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 MS-DRG was then divided by the 
national average standardized cost per case to determine the relative 
weight.
    The FY 2019 cost-based relative weights were then normalized by an 
adjustment factor of 1.761194774 so that the average case weight after 
recalibration was equal to the average case weight before 
recalibration. The normalization adjustment is intended to ensure that 
recalibration by itself neither increases nor decreases total payments 
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
    The 19 national average CCRs for FY 2019 are as follows:

------------------------------------------------------------------------
                             Group                                 CCR
------------------------------------------------------------------------
Routine Days...................................................    0.442
Intensive Days.................................................    0.368
Drugs..........................................................    0.191
Supplies & Equipment...........................................    0.299
Implantable Devices............................................    0.309
Therapy Services...............................................    0.304
Laboratory.....................................................    0.113
Operating Room.................................................    0.179
Cardiology.....................................................    0.103
Cardiac Catheterization........................................     0.11
Radiology......................................................    0.145
MRIs...........................................................    0.074
CT Scans.......................................................    0.035
Emergency Room.................................................    0.159
Blood and Blood Products.......................................    0.296
Other Services.................................................    0.345
Labor & Delivery...............................................    0.382
Inhalation Therapy.............................................    0.156
Anesthesia.....................................................    0.078
------------------------------------------------------------------------

    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

[[Page 41274]]

threshold of 10 cases as the minimum number of cases required to 
compute a reasonable weight. We proposed to use that same case 
threshold in recalibrating the 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-volume MS-DRGs, we proposed to compute relative weights 
for the 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).
------------------------------------------------------------------------

    After consideration of the comments we received, we are finalizing 
our proposals, with the modification for recalibrating the relative 
weights for FY 2019 at the same level as the FY 2018 relative weights 
for MS-DRGs where the FY 2018 relative weight declined by 20 percent 
from the FY 2017 relative weight and the FY 2019 relative weight would 
have declined by 20 percent or more from the FY 2018 relative weight.

H. 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-

[[Page 41275]]

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. In the FY 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20276), we proposed, beginning with the thresholds for FY 
2020 and future years, 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 stated that we believed 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-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).
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing the proposal, without modification, and presenting 
the MS-DRG threshold amounts (previously included in Table 10 of the 
annual IPPS/LTCH PPS proposed and final rules) that will be used in 
evaluating new technology add-on payment applications for FY 2020 in a 
data file that is available, along with the other data files associated 
with this FY 2019 IPPS/LTCH PPS final rule, on the CMS website at: 
http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    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 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

[[Page 41276]]

and create a more transparent coding and payment process, improve the 
quality of medical decisions, and speed patient access to effective new 
treatments. It is also dedicated to supporting better decisions by 
patients and doctors in using Medicare-covered services through the 
promotion of better evidence development, which is critical for 
improving the quality of care for Medicare beneficiaries.
    To improve the understanding of CMS' processes for coverage, 
coding, and payment and how to access them, the CTI has developed an 
``Innovator's Guide'' to these processes. The intent is to consolidate 
this information, much of which is already available in a variety of 
CMS documents and in various places on the CMS 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].
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20277), we noted 
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--
     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 the 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-on payment 
applications before the publication of the FY 2019 IPPS/LTCH PPS 
proposed rule.
    As stated in the 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-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-on payment applications for FY 2019 in the 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-on payments. (We refer 
readers to the FY 2019 IPPS/LTCH PPS proposed rule for summaries of the 
comments received in response to the published notice and the New 
Technology Town Hall meeting and our responses (83 FR 20278 through 
20280).) We also noted in the proposed rule 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 did 
not summarize those written comments in the proposed rule. In section 
II.H.5. of the preamble of the FY 2019 IPPS/LTCH PPS proposed rule, we 
summarized comments regarding individual applications, or, if 
applicable, indicated that there were no comments received in response 
to the New Technology Town Hall meeting

[[Page 41277]]

notice, at the end of each discussion of the individual applications.
    Public commenters stated opinions and made suggestions relating to 
the mapping of new technologies to the appropriate MS-DRG, deeming a 
new technology a substantial clinical improvement if it receives HDE 
approval from the FDA, and the use of external data in determining the 
cost threshold that CMS considers to be outside of the scope of the 
proposed rule. Because we did not request public comments nor propose 
to make any changes to any of the issues above, we are not summarizing 
these public comments, nor responding to them in this final rule. As 
noted below in section II.H.5.a. of the preamble of this final rule, we 
refer readers to section II.F.2.d. of the preamble of this final rule 
for a summary of and our responses to the public comments we received 
in response to our solicitation regarding the most appropriate 
mechanism to provide payment to hospitals for new technologies, such as 
CAR T-cell therapy drugs, including through the use of new technology 
add-on payments (82 FR 20294), as well as a summary of the public 
comments we received in response to the solicitation for public comment 
on our concerns with the payment alternatives that we considered for 
CAR T-cell therapy drugs and therapies and our responses to those 
comments (83 FR 20190).
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. FY 2019 Status of Technologies Approved for FY 2018 Add-On Payments
a. Defitelio[supreg] (Defibrotide)
    Jazz Pharmaceuticals submitted an application for new technology 
add-on payments for FY 2017 for Defitelio[supreg] (defibrotide), a 
treatment for patients diagnosed with hepatic veno-occlusive disease 
(VOD) with evidence of multiorgan dysfunction. VOD, also known as 
sinusoidal obstruction syndrome (SOS), is a potentially life-
threatening complication of hematopoietic stem cell transplantation 
(HSCT), with an incidence rate of 8 percent to 15 percent. Diagnoses of 
VOD range in severity from what has been classically defined as a 
disease limited to the liver (mild) and reversible, to a severe 
syndrome associated with multi-organ dysfunction or failure and death. 
Patients treated with HSCT who develop VOD with multi-organ failure 
face an immediate risk of death, with a mortality rate of more than 80 
percent when only supportive care is used. The applicant asserted that 
Defitelio[supreg] improves the survival rate of patients diagnosed with 
VOD with multi-organ failure by 23 percent.
    Defitelio[supreg] 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[supreg] received FDA approval on March 
30, 2016. The applicant confirmed that Defitelio[supreg] was not 
available on the U.S. market as of the FDA NDA approval date of March 
30, 2016. According to the applicant, commercial packaging could not be 
completed until the label for Defitelio[supreg] was finalized with FDA 
approval, and that commercial shipments of Defitelio[supreg] to 
hospitals and treatment centers began on April 4, 2016. Therefore, we 
agreed that, based on this information, the newness period for 
Defitelio[supreg] begins on April 4, 2016, the date of its first 
commercial availability.
    The applicant received approval to use unique ICD-10-PCS procedure 
codes to describe the use of Defitelio[supreg], 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[supreg] and consideration of the public comments we received 
in response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved 
Defitelio[supreg] for new technology add-on payments for FY 2017 (81 FR 
56906). With the new technology add-on payment application, the 
applicant estimated that the average Medicare beneficiary would require 
a dosage of 25 mg/kg/day for a minimum of 21 days of treatment. The 
recommended dose is 6.25 mg/kg given as a 2-hour intravenous infusion 
every 6 hours. Dosing should be based on a patient's baseline body 
weight, which is assumed to be 70 kg for an average adult patient. All 
vials contain 200 mg at a cost of $825 per vial. Therefore, we 
determined that cases involving the use of the Defitelio[supreg] 
technology would incur an average cost per case of $151,800 (70 kg 
adult x 25 mg/kg/day x 21 days = 36,750 mg per patient/200 mg vial = 
184 vials per patient x $825 per vial = $151,800). Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
50 percent of the average cost of the technology or 50 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum new technology add-on payment amount for a case involving the 
use of Defitelio[supreg] is $75,900.
    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[supreg], we 
considered the beginning of the newness period to commence on the first 
day Defitelio[supreg] was commercially available (April 4, 2016). 
Because the 3-year anniversary date of the entry of the 
Defitelio[supreg] onto the U.S. market (April 4, 2019) will

[[Page 41278]]

occur in the latter half of FY 2019, in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20280 through 20281), we proposed to continue new 
technology add-on payments for this technology for FY 2019. We proposed 
that the maximum payment for a case involving Defitelio[supreg] would 
remain at $75,900 for FY 2019. We invited public comments on our 
proposal to continue new technology add-on payments for 
Defitelio[supreg] for FY 2019.
    Comment: A few commenters agreed with CMS' proposal to continue new 
technology add-on payments for Defitelio[supreg] for FY 2019. In 
addition, the applicant provided updated cost information that 
indicated, as of April 4, 2018, the current Wholesale Acquisition Cost 
(WAC) for Defitelio[supreg] is $875.24 per vial, which changes the 
average cost per case from $151,800 to $161,000 (70 kg adult x 25 mg/
kg/day x 21 days = 36,750 mg per patient/200 mg vial = 184 vials per 
patient x $875 per vial = $161,000). As such, the applicant requested 
that CMS revise the maximum new technology add-on payment for 
Defitelio[supreg] for FY 2019 to $80,500, or increase the maximum new 
technology add-on payment for cases involving the use of 
Defitelio[supreg] to 50 percent of the revised WAC of the technology 
per case.
    Response: We appreciate the commenters' support and the updated 
cost information submitted by the applicant.
    After consideration of the public comments we received, we are 
finalizing our proposal, with modification, to continue new technology 
add-on payments for Defitelio[supreg] for FY 2019. Based on the 
applicant's updated cost information, the maximum new technology add-on 
payment for a case involving the use of Defitelio[supreg] is $80,500 
for FY 2019.
b. EDWARDS INTUITY Elite\TM\ 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 Elite\TM\ Valve System (INTUITY) and the Perceval Valve 
(Perceval), respectively. Both of these technologies are prosthetic 
aortic valves inserted using surgical aortic valve replacement (AVR). 
The applicant for the INTUITY valve stated that it has a unique design, 
which utilizes features that were not previously included in 
conventional aortic valves. The deployment mechanism allows for rapid 
deployment. The expandable frame can reshape the native valve's 
orifice, creating a larger and more efficiently shaped effective 
orifice area. In addition, the expandable skirt allows for structural 
differentiation upon fixation of the valve requiring 3 permanent, 
guiding sutures rather than the 12 to 18 permanent sutures used to 
fasten standard prosthetic aortic valves. The applicant for the 
Perceval valve described the Perceval valve as including: (a) No 
permanent sutures; (b) a dedicated delivery system that increases the 
surgeon's visibility; (c) an enabler of a minimally invasive approach; 
(d) a capability to promote complexity reduction and reproducibility of 
the procedure; and (e) a unique device assembly and delivery system.
    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

[[Page 41279]]

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, in 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20281), we proposed to 
discontinue new technology add-on payments for the INTUITY and Perceval 
valves for FY 2019. We invited public comments on our proposal to 
discontinue new technology add-on payments for the INTUITY and Perceval 
valves.
    Comment: Some commenters supported CMS' proposal to discontinue new 
technology add-on payments for the INTUITY and Perceval valves and 
stated that the consideration of these two applications together 
demonstrated CMS' commitment to efficiency and optimization of the new 
technology add-on payment application process. Most commenters agreed 
that it is appropriate for the newness period to be based on the 
earliest anniversary date of the product's entry onto the U.S. market, 
given that the two technologies were evaluated and approved as one 
application. Other commenters disagreed with CMS' proposal to 
discontinue new technology add-on payments for the INTUITY and Perceval 
valves for reasons including the following: (1) There is no precedent 
for CMS to determine the 3-year anniversary date of a product's entry 
onto the U.S. market for two technologies that have been jointly 
awarded new technology add-on payments with different market 
availability dates; (2) it is inappropriate to choose the earliest 
market availability date for this class of technologies because it does 
not acknowledge the disparate newness periods for the two applicants; 
and (3) Medicare claims data and MS-DRG payment rates do not adequately 
reflect the additional costs of these technologies. Instead, some of 
these commenters suggested that the mid-point of the two commercial 
market availability dates for the Perceval and INTUITY valves be used 
as the beginning of the newness period, which would be May 25, 2016. 
These commenters believed that, by using the May 25, 2016 mid-point 
commercial market availability date, the newness period would conclude 
on May 25, 2019, which occurs in the second half of the fiscal year 
and, therefore, would allow new technology add-on payments for the 
Perceval and INTUITY valves to continue through FY 2019. Another 
commenter also disagreed with CMS' proposal to discontinue new 
technology add-on payments for the Perceval and INTUITY valves because 
the commenter believed that the commercial market availability date of 
February 29, 2016, is an inappropriate beginning for the newness period 
for the Perceval valve due to the thorough training and education 
process that was implemented by LivaNova, which impacted the market 
availability of the Perceval valve prior to April 1, 2016, and noted 
there were fewer than 30 Medicare patients who received implants 
involving the use of the Perceval valve prior to April 1, 2016.
    Response: We appreciate the commenters' input. With regard to the 
beginning of the technology's newness period, as discussed in the FY 
2005 IPPS final rule (69 FR 49003), the timeframe that a new technology 
can be eligible to receive new technology add-on payments begins when 
data begin to become available. Therefore, the precedent the commenter 
mentions regarding two technologies that have been jointly awarded new 
technology add-on payments with different commercial market 
availability dates is not relevant. Section 412.87(b)(2) states that a 
medical service or technology may be considered ``new'' within 2 or 3 
years after the point at which data begin to become available 
reflecting the inpatient hospital code assigned to the new service or 
technology (depending on when a new code is assigned and data on the 
new service or technology become available for DRG recalibration). 
Section 412.87(b)(2) also specifies that after CMS has recalibrated the 
DRGs, based on available data, to reflect the costs of an otherwise new 
medical service or technology, the medical service or technology will 
no longer be considered ``new'' under the criterion of the section. 
Additionally, as stated above, we have determined that the Perceval and 
INTUITY valves are substantially similar to each other and, therefore, 
we used the earliest date when data became available for the technology 
to determine the beginning of the newness period. Therefore, the 
newness period began February 29, 2016.
    In addition, we do not believe that case volume is a relevant 
consideration for making the determination as to whether a product is 
``new.'' Consistent with the statute and our implementing regulations, 
a technology is no longer considered as ``new'' once it is more than 2 
to 3 years old, irrespective of how frequently the medical service or 
technology has been used in the Medicare population (70 FR 47349). As 
such, in this case, because the Perceval and INTUITY valves have been 
available on the U.S. market for more than 2 to 3 years, we consider 
the costs to have been included in the MS-DRG relative weights 
regardless of whether the technologies' use in the Medicare population 
has been frequent or infrequent.
    Based on all of the reasons stated above, the Perceval and INTUITY 
valves are no longer considered ``new'' for purposes of new technology 
add-on payments for FY 2019. Therefore, after consideration of the 
public comments we received, we are finalizing our proposal to 
discontinue new technology add-on payments for the Perceval and INTUITY 
valves for FY 2019.
c. GORE[supreg] EXCLUDER[supreg] Iliac Branch Endoprosthesis (Gore IBE 
Device)
    W. L. Gore and Associates, Inc. submitted an application for new 
technology add-on payments for the GORE[supreg] EXCLUDER[supreg] Iliac 
Branch Endoprosthesis (GORE IBE device) for FY 2017. The device 
consists of two components: The Iliac Branch Component (IBC) and the 
Internal Iliac Component (IIC). The applicant indicated that each 
endoprosthesis is pre-mounted on a customized delivery and deployment 
system allowing for controlled endovascular delivery via bilateral 
femoral access. According to the applicant, the device is designed to 
be used in conjunction with the GORE[supreg] EXCLUDER[supreg] AAA 
Endoprosthesis for the treatment of patients requiring repair of common 
iliac or aortoiliac aneurysms. When deployed, the GORE IBE device 
excludes the common iliac aneurysm from systemic blood flow, while 
preserving blood flow in the external and internal iliac arteries.
    With regard to the newness criterion, the applicant received FDA 
pre-market 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

[[Page 41280]]

with branched or fenestrated 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, in 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20282), we proposed to 
discontinue new technology add-on payments for this technology for FY 
2019. We invited public comments on our proposal to discontinue new 
technology add-on payments for the GORE IBE device.
    Comment: The applicant (manufacturer) disagreed with CMS' proposal 
to discontinue new technology add-on payments for the GORE IBE device, 
and recommended that CMS continue new technology add-on payments for an 
additional year until sufficient claims data are available to reflect 
the cost of the technology. The applicant indicated that the FDA 
approval date is the date that the manufacturer may begin 
commercialization and actual manufacturing and marketing takes several 
months. As such, the applicant believed that it would be more 
appropriate to use the date of first sale or the date of the first 
procedure as the beginning of the newness period because it would more 
appropriately align with the point at which claims and costs data would 
begin to become available.
    With regard to the GORE IBE device, the applicant noted that there 
was a deletion of ICD-10-PCS procedure codes in FY 2018 used for the 
coding of procedures identifying the GORE IBE implant, which created 
confusion for hospital billing departments that were reporting these 
codes. As a result, the applicant believed that the GORE IBE implant 
procedures may have been under-reported and the claims data has not 
captured the utilization and cost data for these implant procedures. 
Additionally, the applicant stated that MACs, as a general practice, do 
not include Category III CPT codes in their internal processes and, 
specifically, do not include 0254T for the identification of the GORE 
IBE procedure. The applicant believed that this lack of alignment 
between the new technology add-on payment policy and the MACs' 
treatment of Category III CPT codes for the identification of GORE IBE 
procedures likely contributed to the severe under-reporting of 
procedures involving the GORE IBE implant. Therefore, the applicant 
recommended that CMS maintain consistent ICD-10 coding practices, 
encourage the MACs to include procedures involving devices for which 
new technology add-on payments are effective in their internal 
processes, and extend new technology add-on payments for the GORE IBE 
technology through FY 2019 to allow assessment of sufficient claims 
data that reflect the costs of the GORE IBE device.
    Response: We appreciate the applicant's input. As stated above, 
while CMS may consider a documented delay in a technology's 
availability on the U.S. market in determining when the newness period 
begins, its policy for determining whether to extend new technology 
add-on payments for an additional year generally applies regardless of 
the volume of claims for the technology after the beginning of the 
newness period. Similar to our discussion earlier and in the FY 2006 
IPPS final rule (70 FR 47349), we do not believe that case volume is a 
relevant consideration for making the determination as to whether a 
product is considered ``new'' for purposes of new technology add-on 
payments. Consistent with the statute and our implementing regulations, 
a technology is no longer considered ``new'' once it is more than 2 to 
3 years old, and the costs of the procedures are considered to be 
included in the relative weights irrespective of how frequently the 
technology has been used in the Medicare population. Additionally, 
since the technology is on the market coding changes or local coverage 
determinations typically do not delay the beginning of the newness 
period. Therefore, in this case, because the GORE IBE device has been 
available on the U.S. market for more than 2 to 3 years, we consider 
claims and costs data to be available for DRG recalibration of the 
relative weights, and the costs of the technology to have been included 
in the MS-DRG relative weights regardless of whether the technology's 
use in the Medicare population has been frequent or infrequent.
    Based on the reasons stated above, the GORE IBE device is no longer 
considered ``new'' for purposes of new technology add-on payments for 
FY 2019. Therefore, after consideration of the public comments we 
received, we are finalizing our proposal to discontinue new technology 
add-on payments for the GORE IBE device for FY 2019.
d. PRAXBIND (Idarucizumab)
    Boehringer Ingelheim Pharmaceuticals, Inc. submitted an application 
for new technology add-on payments for FY 2017 for idarucizumab (also 
known as PRAXBIND), a product developed as an antidote to reverse the 
effects of PRADAXA (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.
    PRAXBIND was approved by the FDA on October 16, 2015. PRAXBIND is 
indicated for the use in the treatment of

[[Page 41281]]

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 
PRAXBIND 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 PRAXBIND onto the U.S. market will occur in the first half of 
FY 2019 (October 15, 2018), in the FY 2019 IPPS/LTCH PPS proposed rule 
(83 FR 20282), we proposed to discontinue new technology add-on 
payments for this technology for FY 2019. We invited public comments on 
our proposal to discontinue new technology add-on payments for 
idarucizumab.
    Comment: A few commenters supported CMS' proposal to discontinue 
new technology add-on payments for FY 2019 for idarucizumab.
    Response: We appreciate the commenters' support. After 
consideration of the public comments we received, we are finalizing our 
proposal to discontinue new technology add-on payments for idarucizumab 
for FY 2019.
e. Stelara[supreg] (Ustekinumab)
    Janssen Biotech submitted an application for new technology add-on 
payments for the Stelara[supreg] induction therapy for FY 2018. 
Stelara[supreg] received FDA approval as an intravenous (IV) infusion 
treatment for adult patients with moderately to severe active Crohn's 
disease (CD) who have failed or were intolerant to treatment using 
immunomodulators or corticosteroids, but never failed a tumor necrosis 
factor (TNF) blocker, or failed or were intolerant to treatment using 
one or more TNF blockers. The FDA approved Stelara[supreg] on September 
23, 2016. Stelara[supreg] IV is intended for induction--subcutaneous 
prefilled syringes are intended for maintenance dosing. Stelara[supreg] 
must be administered intravenously by a health care professional in 
either an inpatient hospital setting or an outpatient hospital setting.
    Stelara[supreg] for IV infusion is packaged in single 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[supreg] (2 vials); patients 
weighing more than (>)55 kg, but less than (<)85 kg are administered 
390 mg of Stelara[supreg] (3 vials); and patients weighing more than 
(>)85 kg are administered 520 mg of Stelara[supreg] (4 vials). An 
average dose of Stelara[supreg] administered through IV infusion is 390 
mg (3 vials). Maintenance doses of Stelara[supreg] 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 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[supreg] and consideration of the public comments we received in 
response to the FY 2018 IPPS/LTCH PPS proposed rule, we approved 
Stelara[supreg] for new technology add-on payments for FY 2018 (82 FR 
38129). Cases involving Stelara[supreg] 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[supreg] is 
$2,400.
    With regard to the newness criterion for Stelara[supreg], we 
considered the beginning of the newness period to commence when 
Stelara[supreg] 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[supreg] onto the U.S. market 
(September 23, 2019) will occur after FY 2019, in the FY 2019 IPPS/LTCH 
PPS proposed rule (83 FR 20282 through 20283) we proposed to continue 
new technology add-on payments for this technology for FY 2019. We 
proposed that the maximum payment for a case involving Stelara[supreg] 
would remain at $2,400 for FY 2019. We invited public comments on our 
proposal to continue new technology add-on payments for Stelara[supreg] 
for FY 2019.
    Comment: A few commenters supported CMS' proposal to continue new 
technology add-on payments for Stelara[supreg] for FY 2019. In 
addition, the applicant (manufacturer) also agreed with CMS' proposal 
to continue new technology add-on payments for the Stelara[supreg] for 
FY 2019, and noted that because the technology's 3-year anniversary 
date of the product's entry onto the U.S. market would not occur until 
September 23, 2019, it is appropriate to continue new technology add-on 
payments for FY 2019.
    Response: We appreciate the commenters' support. After 
consideration of the public comments

[[Page 41282]]

we received, we are finalizing our proposal to continue new technology 
add-on payments for Stelara[supreg] for FY 2019. The maximum payment 
for a case involving Stelara[supreg] will remain at $2,400 for FY 2019.
f. VistogardTM (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 or capecitabine overdose regardless of the presence of 
symptoms and for those who exhibit early-onset, severe, or life-
threatening 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-
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, in the FY 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20283), we proposed to discontinue new technology add-on 
payments for this technology for FY 2019. We invited public comments on 
our proposal to discontinue new technology add-on payments for the 
VistogardTM.
    Comment: A few commenters supported CMS' proposal to discontinue 
new technology add-on payments for FY 2019 for VistogardTM.
    Response: We appreciate the commenters' support. After 
consideration of the public comments we received, we are finalizing our 
proposal to discontinue new technology add-on payments for 
VistogardTM for FY 2019.
g. ZINPLAVATM (Bezlotoxumab)
    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 bacteria,'' which play a role in protecting the body from 
infection. Antibiotics can kill these good bacteria and allow the C-
diff bacteria to multiply and release toxins that damage the cells 
lining the intestinal wall, resulting in a CDI. CDI is a leading cause 
of hospital-associated gastrointestinal illnesses. Persons at increased 
risk for CDI include people who are treated with current or recent 
antibiotic use, people who have encountered current or recent 
hospitalization, people who are older than 65 years, immunocompromised 
patients, and people who have recently had a diagnosis of CDI. CDI 
symptoms include, but are not limited to, diarrhea, abdominal pain, and 
fever. CDI symptoms range in severity from mild (abdominal discomfort, 
loose stools) to severe (profuse, watery diarrhea, severe pain, and 
high fevers). Severe CDI can be life-threatening and, in rare cases, 
can cause bowel rupture, sepsis and organ failure. CDI is responsible 
for 14,000 deaths per year in the United States.
    C-diff produces two virulent, pro-inflammatory toxins, Toxin A and 
Toxin B, which target host colonocytes (that is, large intestine 
endothelial cells) by binding to endothelial cell surface receptors via 
combined repetitive oligopeptide (CROP) domains. These toxins cause the 
release of inflammatory cytokines leading to intestinal fluid secretion 
and intestinal inflammation. The applicant asserted that 
ZINPLAVATM targets Toxin B sites within the CROP domain 
rather than the

[[Page 41283]]

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 adult 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 10mg/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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20283 through 20284), we proposed to continue new technology add-on 
payments for this technology for FY 2019. We proposed that the maximum 
payment for a case involving ZINPLAVATM would remain at 
$1,900 for FY 2019. We invited public comments on our proposal to 
continue new technology add-on payments for ZINPLAVATM for 
FY 2019.
    Comment: A few commenters supported CMS' proposal to continue new 
technology add-on payments for ZINPLAVATM for FY 2019.
    Response: We appreciate the commenters' support. After 
consideration of the public comments we received, we are finalizing our 
proposal to continue new technology add-on payments for 
ZINPLAVATM for FY 2019. The maximum new technology add-on 
payment for a case involving ZINPLAVATM will remain at 
$1,900 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-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. Since the issuance of 
the FY 2019 IPPS/LTCH PPS proposed rule, three applicants, Progenics 
Pharmaceuticals, Inc. (the applicant for AZEDRA[supreg]), Somahlution, 
Inc. (the applicant for DURAGRAFT[supreg]), and TherOx, Inc. (the 
applicant for Supersaturated Oxygen (SSO2) Therapy), 
withdrew their applications. One applicant, Isoray Medical, Inc. and GT 
Medical Technologies, Inc. (the applicant for GammaTileTM), 
did not meet the deadline of July 1 for FDA approval or clearance of 
the technology and, therefore, the technology is not eligible for 
consideration for new technology add-on payments for FY 2019. A 
discussion of the remaining 11 applications is presented below.
a. KYMRIAH[supreg] (Tisagenlecleucel) and YESCARTA[supreg] 
(Axicabtagene Ciloleucel)
    Two manufacturers, Novartis Pharmaceuticals Corporation and Kite 
Pharma, Inc. submitted separate applications for new technology add-on 
payments for FY 2019 for KYMRIAH (tisagenlecleucel) and YESCARTA 
(axicabtagene ciloleucel), respectively. Both of these technologies are 
CD-19-directed T-cell immunotherapies used for the purposes of treating 
patients with aggressive variants of non-Hodgkin lymphoma (NHL). In the 
FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20284), we noted that 
KYMRIAH 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 a table 
presented in the proposed rule and updated in the following table 
presented in this final rule, the new indication for which Novartis 
Pharmaceuticals Corporation is requesting approval for new technology 
add-on payments for KYMRIAH is as an autologous T-cell immune therapy 
indicated for use in the treatment of patients with relapsed/refractory 
(r/r) diffuse large B-Cell lymphoma after two or more lines of systemic 
therapy including diffuse large B-cell lymphoma (DLBCL) not eligible 
for autologous stem cell transplant (ASCT). In addition, we indicated 
that as of the time of the development of the proposed rule, Novartis 
Pharmaceuticals Corporation had been granted Breakthrough Therapy 
designation by the FDA, and was awaiting FDA approval for the use of 
KYMRIAH under this new indication. The updated table that follows 
reflects that Novartis Pharmaceuticals Corporation received FDA 
approval for the use of KYMRIAH under this new indication on May 1, 
2018. We also noted 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-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. resubmitted an application for 
approval for new technology add-on payments for FY 2019 for KTE-C19 
under a new name, YESCARTA, for the same indication. Kite Pharma, Inc. 
received FDA approval for this original indication and treatment use of 
YESCARTA on October 18, 2017. (We refer readers to the following 
updated table for a comparison of the indications and FDA approvals for 
KYMRIAH and YESCARTA).

[[Page 41284]]



                       Comparison of Indication and FDA Approval for KYMRIAH and YESCARTA
----------------------------------------------------------------------------------------------------------------
                                            Description of indication for which new
    FY 2019 applicant technology name        technology add-on payments are being         FDA approval status
                                                           requested
----------------------------------------------------------------------------------------------------------------
KYMRIAH (Novartis Pharmaceuticals         KYMRIAH: Autologous T-cell immune therapy   FDA approval received
 Corporation).                             indicated for use in the treatment of      5/1/2018.
                                           patients with relapsed/refractory (r/r)
                                           large B-cell lymphoma after two or more
                                           lines of systemic therapy including
                                           diffuse large B cell lymphoma (DLBCL) not
                                           eligible for autologous stem cell
                                           transplant (ASCT).
YESCARTA (Kite Pharma, Inc.)............  YESCARTA: Autologous T-cell immune therapy  FDA approval received
                                           indicated for use in the treatment of      10/18/2017.
                                           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
----------------------------------------------------------------------------------------------------------------
KYMRIAH (Novartis Pharmaceuticals         KYMRIAH: CD-19[dash]directed T-cell         FDA approval received
 Corporation).                             immunotherapy indicated for the use in     8/30/2017.
                                           the treatment of patients up to 25 years
                                           of age with B-cell precursor ALL that is
                                           refractory or in second or later relapse.
YESCARTA (Kite Pharma, Inc.)............  None......................................  N/A.
----------------------------------------------------------------------------------------------------------------

    We note that procedures involving the KYMRIAH and YESCARTA 
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 final 
rule, we are finalizing our proposal to assign cases reporting these 
ICD-10-PCS procedure codes to Pre-MDC MS-DRG 016 for FY 2019 and to 
revise the title of this MS-DRG to (Autologous Bone Marrow Transplant 
with CC/MCC or T-cell Immunotherapy). We refer readers to section 
II.F.2.d. of the preamble of this final rule for a complete discussion 
of these final policies.
    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-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.\6\ 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.\7\ \8\ \9\ \10\ 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.\11\ \12\ \13\ \14\ 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.\15\ 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.\16\ For patients who experience disease 
progression during or after primary treatment, the combination of HDT/
ASCT remains the only curative option.\17\ According to the applicants, 
given the modest response to second-line therapy and/or HDT/ASCT, the 
population of patients with the highest unmet need is those with 
chemorefractory disease, which include DLBCL, PMBCL, and TFL. These

[[Page 41285]]

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.\18\ Based on these definitions and available data from a multi-
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.\19\
---------------------------------------------------------------------------

    \6\ Chaganti, S., et al., ``Guidelines for the management of 
diffuse large B-cell lymphoma,'' BJH Guideline, 2016. Available at: 
www.bit.do/bsh-guidelines.
    \7\ 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.
    \8\ 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).
    \9\ 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.
    \10\ 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.
    \11\ 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.
    \12\ 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.
    \13\ 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.
    \14\ Kantoff, P.W., et al., ``Sipuleucel-T immunotherapy for 
castration-resistant prostate cancer,'' N Engl J Med, 2010, vol. 
363, pp. 411-422.
    \15\ 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.
    \16\ 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.
    \17\ 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.
    \18\ 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.
    \19\ Ibid.
---------------------------------------------------------------------------

    According to Novartis Pharmaceuticals Corporation, the recent FDA 
approval (on May 1, 2018) for the additional indication allows KYMRIAH 
to be used for the treatment of patients with R/R DLBCL who are not 
eligible for ASCT. Novartis Pharmaceuticals Corporation describes 
KYMRIAH as a CD-19-directed genetically modified autologous T-cell 
immunotherapy which utilizes peripheral blood T-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 KYMRIAH cells. The transduced T-cells 
expand in vivo to engage and eliminate CD-19-expressing cells and may 
exhibit immunological endurance to help support long-lasting 
remission.\20\ \21\ \22\ \23\ At the time the applicant submitted its 
application for new technology add-on payments, the applicant conveyed 
that 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.
---------------------------------------------------------------------------

    \20\ KYMRIAHTM [prescribing information], East 
Hanover, NJ: Novartis Pharmaceuticals Corp, 2017.
    \21\ 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.
    \22\ FDA Briefing Document. Available at: https://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/OncologicDrugsAdvisoryCommittee/UCM566168.pdf.
    \23\ 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., YESCARTA 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 YESCARTA described the technology as a CD-19-directed genetically 
modified autologous T-cell immunotherapy that binds to CD-19-expressing 
cancer cells and normal B-cells. These normal B-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-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. In 
the FY 2019 IPPS/LTCH PPS proposed rule, we noted 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. We indicated that KYMRIAH had 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 the proposed 
rule, was awaiting FDA approval. As noted previously, the applicant for 
KYMRIAH received approval for this additional indication on May 1, 
2018. We further noted in the proposed rule that, YESCARTA 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, KYMRIAH and YESCARTA are 
the first CAR T-cell immunotherapies of their kind. Because potential 
cases representing patients who may be eligible for treatment using 
KYMRIAH and YESCARTA 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 KYMRIAH or YESCARTA), and we believed 
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 disagreed with the applicants and believed 
these two technologies 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. For these reasons, and 
as discussed further below, we stated that we intended 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 KYMRIAH and YESCARTA. 
Several public commenters submitted comments regarding whether the 
technologies are substantially similar to each other in response to the 
proposed rule and we summarize and respond to the public comments 
below.
    With respect to the newness criterion, as previously stated, 
YESCARTA received FDA approval on October 18, 2017. According to the 
applicant, prior to FDA approval, YESCARTA 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, YESCARTA 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 YESCARTA 
was received by a certified treatment center on November 22, 2017. As 
discussed previously, KYMRIAH received FDA approval May 1, 2018, for 
use in the treatment of patients diagnosed with r/r DLBCL that are not 
eligible for ASCT. Additionally, as noted in the proposed rule, KYMRIAH 
was previously granted Breakthrough Therapy designation by the FDA. We 
stated in the proposed rule that 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

[[Page 41286]]

availability date submitted as the beginning of the newness period for 
both technologies. Therefore, based on our policy, with regard to both 
technologies, if the technologies are approved for new technology add-
on payments, we stated that we believe that the beginning of the 
newness period would be November 22, 2017.
    We stated in the proposed rule 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 discussed each set 
of data separately. However, we stated that we intended to make one 
determination regarding new technology add-on payments that would apply 
to both applications. We stated that 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).
    We stated that, 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, we stated that, because the technologies have 
been submitted for review in the same year and 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 
received public comments regarding our proposal to evaluate KYMRIAH and 
YESCARTA as one application for new technology add-on payments under 
the IPPS and we summarize and respond to these public comments below.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20284), we stated 
that we believe that KYMRIAH and YESCARTA are substantially similar to 
each other for purposes of analyzing these two applications as one 
application. As discussed in the proposed rule, we stated that we also 
need to determine whether KYMRIAH and YESCARTA 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 KYMRIAH 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.\24\ \25\ \26\ \27\ The applicant 
provided context regarding how KYMRIAH'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-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 KYMRIAH cells.\28\ \29\ \30\ 
According to the applicant, transduced T-cells expand in vivo to engage 
and eliminate CD-19-expressing cells and may exhibit immunological 
endurance to help support long-lasting remission.\31\ \32\ \33\
---------------------------------------------------------------------------

    \24\ KYMRIAH [prescribing information]. East Hanover, NJ: 
Novartis Pharmaceuticals Corp; 2017.
    \25\ 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.
    \26\ FDA Briefing Document. Available at: https://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/OncologicDrugsAdvisoryCommittee/UCM566168.pdf.
    \27\ 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.
    \28\ KYMRIAHTM [prescribing information], East 
Hanover, NJ: Novartis Pharmaceuticals Corp, 2017.
    \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, 3(95), pp, 95ra73.
    \30\ FDA Briefing Document. Available at: https://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/OncologicDrugsAdvisoryCommittee/UCM566168.pdf.
    \31\ 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.
    \32\ FDA Briefing Document. Available at: https://www.fda.gov/downloads/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/OncologicDrugsAdvisoryCommittee/UCM566168.pdf.
    \33\ 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.
---------------------------------------------------------------------------

    The applicant for YESCARTA stated that YESCARTA is the first 
engineered autologous cellular immunotherapy comprised of CAR T-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 YESCARTA'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. At the time of the development of the proposed 
rule, the applicant also pointed out that YESCARTA was 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

[[Page 41287]]

for KYMRIAH 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 KYMRIAH would be assigned to 
the same MS-DRGs as cases involving patients with a DLBCL diagnosis. 
Potential cases representing patients that may be eligible for 
treatment using KYMRIAH 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 YESCARTA 
submitted findings that potential cases representing patients that may 
be eligible for treatment using YESCARTA 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 KYMRIAH and 
YESCARTA 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 stated in the 
proposed rule that we believe that, under the current MS-DRGs (FY 
2018), potential cases representing patients who may be eligible for 
treatment involving either KYMRIAH or YESCARTA would map to the same 
MS-DRGs because the same ICD-10-CM diagnosis codes and ICD-10-PCS 
procedures codes will be used to report cases for patients who may be 
eligible for treatment involving KYMRIAH and YESCARTA. Furthermore, as 
noted above, we proposed, and are finalizing, that cases reporting 
these ICD-10-PCS procedure codes would be assigned to MS-DRG 016 for FY 
2019. Therefore, under this proposal (and our finalized policy), for FY 
2019, cases involving the utilization of KYMRIAH and YESCARTA would 
continue to map to the same MS-DRGs.
    The applicant for YESCARTA 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 YESCARTA 
explained that YESCARTA 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 
YESCARTA is different from the BiTE technology, the applicant explained 
that the BiTE technology is not an engineered autologous T-cell 
immunotherapy derived from a patient's own T-cells. Instead, it is a 
bi-specific T-cell engager that recognizes CD-19 and CD-3 cancer cells. 
Unlike engineered T-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-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 YESCARTA 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 YESCARTA also indicated that its mechanism of 
action is not the same or similar to the mechanism of action used by 
KYMRIAH's currently available FDA-approved CD-19-directed genetically 
modified autologous T-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.\34\ The applicant for YESCARTA stated that the mechanism of 
action is different from KYMRIAH's FDA-approved therapy because the 
spacer, transmembrane and co-stimulatory domains of YESCARTA are 
different from those of KYMRIAH. The applicant explained that YESCARTA 
is comprised of a CD-28 co-stimulatory domain and KYMRIAH 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.
---------------------------------------------------------------------------

    \34\ Food and Drug Administration. Available at: 
www.accessdata.fda.gov/scripts/opdlisting/oopd/.
---------------------------------------------------------------------------

    We stated in the proposed rule that while the applicant for 
YESCARTA stated how its technology is different from KYMRIAH, because 
both technologies are CD-19-directed T-cell immunotherapies used for 
the purpose of treating patients with aggressive variants of NHL, we 
believe that YESCARTA and KYMRIAH are substantially similar treatment 
options. Furthermore, in the FY 2019 IPPS/LTCH PPS proposed rule, we 
also stated that we were concerned there may be an age overlap (18 to 
25) between the two different patient populations for the currently 
approved KYMRIAH technology and YESCARTA technology. We stated in the 
proposed rule, which was issued prior to the approval for a second 
indication (adult patients), that the indication for the KYMRIAH 
technology is for use in the treatment of patients who are up to 25 
years of age and the YESCARTA technology is indicated for use in the 
treatment of adult patients.
    We noted in the proposed rule that the applicant asserted that 
YESCARTA is not substantially similar to KYMRIAH. We stated that under 
this scenario, if both YESCARTA and KYMRIAH 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-on payment, because procedures utilizing either YESCARTA or KYMRIAH 
CAR T-cell therapy drugs are reported using the same ICD-10-PCS 
procedure codes, in order to accurately pay the new technology add-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-on payments. In the FY 2019 IPPS/LTCH PPS 
proposed rule, CMS invited comments on alternative coding mechanisms to 
make the new technology add-on payments, if necessary.
    We also invited public comments on whether KYMRIAH and YESCARTA are 
substantially similar to existing technologies and whether the 
technologies meet the newness criterion.
    Comment: The applicants for KYMRIAH and YESCARTA each provided 
comments regarding whether KYMRIAH and YESCARTA were substantially 
similar to the other, or to any existing technology. Additional 
commenters also submitted comments.

[[Page 41288]]

    The applicant for YESCARTA stated that it continued to believe each 
technology consists of notable differences in the construction, as well 
as manufacturing processes and successes that may lead to differences 
in activity. The applicant encouraged CMS to evaluate YESCARTA as a 
separate new technology add-on payment application and approve separate 
new technology add-on payments for YESCARTA, effective October 1, 2018, 
and to not move forward with a single new technology add-on payment 
evaluation determination that covers both CAR T-cell therapies, 
YESCARTA and KYMRIAH. The applicant stated that the transmembrane 
domain of YESCARTA is comprised of a fragment of CD-28 co-stimulatory 
molecule, including an extracellular hinge domain, which provides 
structural flexibility for optimal binding of the target antigen by the 
scFV target binding region. The applicant further stated that, in 
contrast, KYMRIAH consists of a spacer and a transmembrane domain, 
which are derived from CD8-a. The applicant for YESCARTA believed that, 
the spacer provides a flexible link between the scFv and the 
transmembrane domain, which then accommodates different orientations of 
the antigen binding domain upon CD19 antigen recognition. The applicant 
stated that these differences in the origin of the transmembrane 
component between the YESCARTA and KYMRIAH may be one of the 
differences which lead to differentiation in CAR function and resulting 
activity between the two CAR constructs, which will be described later 
in this section.
    The applicant for YESCARTA believed perhaps the most critical 
difference between the two technologies, YESCARTA and KYMRIAH, may be 
that of the co-stimulatory domains, which connect the extracellular 
scFv antigen binding domain to the cytoplasmic CD3-zeta downstream 
signaling domain. The applicant explained that, for YESCARTA, the 
technology is derived from the intracellular domains of co-stimulatory 
protein CD-28. However, for KYMRIAH, in contrast, the technology is 
derived from the co-stimulatory protein 4-1BB (CD137). The applicant 
believed that, although clear mechanisms are unknown, it is surmised 
that the difference in co-stimulatory region of the two CAR products 
may be responsible for differences in activity. The applicant stated 
that the ongoing hypothesis for these differences are based on 
differentially affecting CAR T-cell cytokine production, expansion, 
cytotoxicity and persistence after administration.
    The applicant for YESCARTA also described an additional concept 
regarding the manufacturing process that it believed supported why the 
two technologies were different. The applicant explained that both, 
YESCARTA and KYMRIAH, are prepared from the patient's peripheral blood 
mononuclear cells, which are obtained via a standard leukapheresis 
procedure. However, the applicant stated that, with YESCARTA, the 
mononuclear cells are then enriched for T-cells and activated with 
anti-CD-3 antibody in the presence of IL-2 then transduced with the 
replication incompetent y-retroviral vector containing the anti-CD-19 
CAR transgene. The applicant further explained that the transduced T-
cells are expanded in cell culture, washed, formulated into a 
suspension, and cryopreserved. The applicant for YESCARTA believed 
that, in contrast, KYMRIAH uses anti CD-3/anti CD-28 coated magnetic 
beads for T-cell enrichment and activation, rather than anti-CD-3 
antibody and IL-2, which are removed after CAR T-cell expansion and 
prior to harvest. The applicant explained that a further difference in 
the manufacturing of KYMRIAH is the use of lentiviral vector in the 
anti-CD-19 CAR gene transduction rather than a y-retroviral vector, as 
used for YESCARTA in manufacturing. The applicant stated that both y-
retroviral or lentiviral vectors can permanently insert DNA into the 
genome. However, lentiviral vectors are capable of transducing 
quiescent cells, while y-retroviral vectors require cells in mitosis. 
According to the applicant, the manufacturing success in clinical 
trials is also different with results showing median turnaround time of 
17 days for YESCARTA, with 99 percent success rate versus median 
turnaround time of 113 days, with 93 percent success rate for KYMRIAH.
    The applicant for YESCARTA further stated that, if CMS decides to 
establish one new technology add-on payment determination and approval 
for both CAR T-cell therapies, the add-on payments should be structured 
to ensure that payment does not hinder access in any way for patients 
to receive the most appropriate cell therapy and use of YESCARTA and 
KYMRIAH can be uniquely and individually identified in the Medicare 
inpatient data.
    Other commenters believed that the two CAR T-cell technologies 
should be considered as separate new technology add-on payment 
applications because the technologies' indications are approved for two 
different patient populations and diagnoses. The commenters stated 
that, while the approval for one of the diagnoses for adults is the 
same for KYMRIAH and YESCARTA, KYMRIAH has also been approved for 
treating children and, therefore, that should be reasoning to consider 
the application separately. Additionally, commenters stated that the 
pricing of both medications varies based on the patient population, and 
encouraged CMS to recognize this discrepancy when determining approval 
of new technology add-on payment and establishing adequate payments 
rates. Commenters agreed with CMS' conclusion that it is appropriate to 
consider both sets of cost and clinical data when determining whether 
the standard criteria for new technology add-on payments for KYMRIAH 
and YESCARTA were met, but also encouraged CMS to consider evaluation 
and determination of both technologies as separate applications.
    Some commenters disagreed with CMS' views of the YESCARTA and 
KYMRIAH with respect to substantial similarity and expressed concerns 
with CMS' conclusion that the two CAR T-cell therapies are 
substantially similar to each other. The commenters believed that, 
because each therapy has received separate FDA Breakthrough 
designations, is approved based on separate Biological License 
Applications, and may likely be used in the treatment of different 
patient populations in different sites of care, consideration for 
approval of new technology add-on payments should be based on separate 
applications. Commenters further believed that, for purposes of meeting 
the newness criterion, each new technology add-on payment application 
must be treated as being unique. Despite these concerns, commenters 
supported CMS creating a new MS-DRG for procedures and cases 
representing patients receiving treatment involving CAR T-cell 
therapies, and recognized that each of the CAR T-cell therapies would 
be used in the treatment of cases representing patients that would be 
assigned to the same MS-DRG.
    Several commenters disagreed with CMS' determination that the 
applications for KYMRIAH and YESCARTA are similar enough to warrant 
consideration as a single new technology add-on payment application, 
and recommended CMS consider the applications separately. Commenters 
believed that because KYMRIAH received FDA approval for the use in the 
treatment of patients diagnosed with

[[Page 41289]]

r/r DLBCL on May 1, 2018, the beginning of the newness period for 
KYMRIAH for cases reporting the ICD-10-PCS procedure codes representing 
patients diagnosed with r/r DLBCL should not be the same as YESCARTA, 
which began November 22, 2017. Commenters stated that equating the two 
beginning dates for the start of the newness periods will prematurely 
shorten the new technology add-on payment period for KYMRIAH's new 
patient population, which commenters believed would wrongfully withhold 
anticipated payments from hospitals. Commenters also recommended that, 
if CMS finalized its position to consider KYMRIAH and YESCARTA as one 
application, to use the approval date for KYMRIAH as the beginning of 
the newness period to avoid any inappropriate shortening of the new 
technology add-on payment length.
    Other commenters further cautioned CMS that combining the new 
technology add-on payment applications' evaluation and determination 
for these two therapies would create precedent that may make it 
unlikely for future CAR T-cell therapies to be considered distinct from 
existing CAR T-cell therapies, or substantially similar. As a result, 
the commenters believed that, if CMS finalized its proposal to make a 
combined decision for KYMRIAH and YESCARTA, it is more likely that 
future CAR T-cell therapies will not qualify for new technology add-on 
payments. The commenters noted that, to mitigate any potential negative 
impact if CMS combines both the applications and makes its 
determination, it would be important for CMS to leave open the option 
for future CAR T-cell therapies to apply for and receive approval of 
new technology add-on payments, regardless of the decision made for the 
current applications under consideration.
    Some commenters believed that section 1886(d)(5)(K) of the Act does 
not appear to clearly authorize CMS to jointly evaluate KYMRIAH and 
YESCARTA, which were submitted by separate manufacturers, as separate 
new technology add-on payment applications for two different products 
approved by FDA under two separate Biologics License Applications with 
distinct clinical and cost data submissions. The commenters believed 
that CMS' assessment appeared concentrated on a handful of perceived 
similarities in the mechanism of action and the patient and disease 
categories between the two newly approved CAR T-cell products. 
Commenters stated that this focused approach appeared to give little 
weight to the distinctions in the manufacturing process and co-
stimulatory domains between the two CAR T-cell therapies, which 
obscures the important distinctions in how the different CAR T-cell 
technologies have been refined and optimized. The commenters further 
stated that CMS' evaluation also does not fully account for the 
difference in clinical profiles of these two agents.
    Other commenters believed that failure to recognize the legitimate 
distinctions and technological innovations reflected by CAR T-cell 
therapy--and inherent across different CAR T-cell treatments, such as 
KYMRIAH and YESCARTA, could artificially restrict access to new 
technology add-on payments for these new and promising technologies. 
Commenters recommended CMS encourage development of medical innovation 
by applying the new technology add-on payment ``newness'' criterion in 
a way that recognizes the unique, novel, and distinct nature of the CAR 
T-cell technology.
    In evaluating the new technology add-on payment applications for 
KYMRIAH and YESCARTA, some commenters believed that CMS may be 
overlooking the significant ways these two technologies represent a 
substantial medical advancement compared to existing therapies, most of 
which patients have already failed, before they go on to receive 
treatment involving CAR T-cell therapy. The commenters stated that CMS 
appeared to be unduly focusing on the perceived similarities between 
the two newly approved CAR T-cell therapies versus the advancement the 
technologies represent over existing therapies. The commenters 
encouraged CMS to recognize the ways in which KYMRIAH and YESCARTA 
significantly differ from existing technologies and to further apply 
the ``newness'' eligibility requirement for new technology add-on 
payments in a manner that does not unnecessarily discourage the 
availability of new technology add-on payments for these newly approved 
CAR T-cell therapies that represent significant clinical advantages 
over existing treatments.
    The applicant for KYMRIAH stated that, at the time it submitted its 
new technology add-on payment application and as summarized in the FY 
2019 IPPS/LTCH PPS proposed rule, similar to the applicant for 
YESCARTA, it believed the two technologies were not substantially 
similar to the other, or to other cancer drugs or biologics currently 
approved for use in the treatment of aggressive B-cell NHL and, 
therefore, met the newness criterion. However, the applicant 
acknowledged that, since the date it submitted its new technology add-
on payment application both technologies, YESCARTA and KYMRIAH, have 
received FDA approval for the technologies' intended indications. The 
applicant for KYMRIAH further indicated that, based on FDA's recent 
approval, it agreed with CMS that KYMRIAH is substantially similar to 
YESCARTA, as defined by the new technology add-on payment application 
evaluation criteria.
    The applicant for KYMRIAH detailed how it believed the technology 
is substantially similar to YESCARTA with respect to each criterion 
pertaining to substantial similarity.
    With regard to the first criterion, whether YESCARTA and KYMRIAH 
use the same or a similar mechanism of action to achieve a therapeutic 
action, the applicant stated that, although KYMRIAH's and YESCARTA's 
mechanisms of actions are distinct and unique from any other cancer 
drug or biologic that is currently FDA-approved, namely single-agent or 
combination chemotherapy regimens, the applicant believed KYMRIAH and 
YESCARTA use the same or similar mechanisms of action to achieve the 
therapeutic outcome. To further support the assertion that the two 
technologies are substantially similar to one another, the applicant 
for KYMRIAH also provided the FDA-approved prescribing information 
(``12.1 Mechanism of Action'') issued for KYMRIAH and YESCARTA 
describing the mechanisms of actions as being the same or similar for 
both technologies in the following manner:
    [ssquf] KYMRIAH: KYMRIAH is a CD19-directed genetically modified 
autologous T cell immunotherapy which involves reprogramming a 
patient's own T cells with a transgene encoding a chimeric antigen 
receptor (CAR) to identify and eliminate CD-19-expressing malignant and 
normal cells. The CAR is comprised of a murine single-chain antibody 
fragment which recognizes CD-19 and is fused to intracellular signaling 
domains from 4-1BB (CD137) and CD3 zeta. The CD3 zeta component is 
critical for initiating T-cell activation and antitumor activity, while 
4-1BB enhances the expansion and persistence of KYMRIAH. Upon binding 
to CD-19-expressing cells, the CAR transmits a signal to promote T-cell 
expansion, activation, target cell elimination, and persistence of the 
KYMRIAH cells.
    [ssquf] YESCARTA: YESCARTA, a CD-19-directed genetically modified 
autologous T-cell immunotherapy, binds to CD-19-expressing cancer cells 
and normal B cells. Studies

[[Page 41290]]

demonstrated that following anti-CD-19 CAR T cell engagement with CD-
19-expressing target cells, the CD28 and CD3-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 killing of CD-19-expressing cells.
    In a summary of the FDA-approved prescribing information, the 
applicant further noted that, within the FDA-approved prescribing 
information, both KYMRIAH and YESCARTA are CD-19-directed genetically 
modified autologous T-cell immunotherapies that bind to CD-19-
expressing cancer cells and normal B cells. Upon binding to CD-19-
expressing cells, the respective CARs transmit a signal to promote T 
cell expansion, activation, and target cell elimination.
    In response to the differences between KYMRIAH and YESCARTA related 
to spacer, transmembrane and co-stimulatory domains, which were stated 
by the applicant for YESCARTA, the applicant for KYMRIAH believed that, 
although there are structural differences that impact aspects of how 
the treatment effect is achieved, the overall mechanisms of actions of 
the two CAR T-cell therapy products are similar. The applicant 
explained that in defining drug classes, the FDA provided guidance that 
a class defined by mechanism of action would include drugs that have 
similar pharmacologic action at the receptor, membrane or tissue level. 
The applicant indicated that KYMRIAH is a cellular immunotherapy 
generated by gene modification of autologous donor T-cells. Further, 
the applicant for KYMRIAH stated that through the process of apheresis, 
leukocytes are harvested from the patient and undergo a process of ex-
vivo gene transfer in which a CAR is introduced by lentiviral 
transduction. The applicant further explained that the CAR construct 
contains an antigen binding region designed to target CD-19, a co-
stimulatory domain known as 4-1BB and a signaling domain called CD-3-
zeta. The applicant stated that once transferred, the patient's T-cells 
will express the CAR construct anti-CD-19 4-1BB/CD-3-zeta, and undergo 
ex-vivo expansion. The applicant for KYMRIAH stated that both, KYMRIAH 
and YESCARTA, utilize a gene transfer process to modify autologous 
patient immune cells with a chimeric antigen receptor capable of 
directing immune mediated killing at a pre-specified target. The 
applicant further explained that both technologies accomplish their 
pharmacological effect through the use of three specialized domains, 
which are structurally different, but achieve similar environmental 
interactions. The applicant indicated that, in both agents, the antigen 
binding domain identifies CD-19 and, therefore, the interaction between 
the agent and its environment begins with the same receptor target 
interaction. Additionally, the applicant noted that both KYMRIAH and 
YESCARTA induce T-cell mediated cell death of the bound tumor cell by 
activating the T-cell expressing the CAR through the signaling domain, 
which is common to both agents and, therefore, at the tissue level, 
both generate a pharmacological impact by producing T-cell mediated 
apoptosis. The applicant for KYMRIAH stated that the pharmacological 
effect of these two agents is attained through tumor directed expansion 
of CAR T-cells and the development of memory T-cells that allow for 
potential long-term persistence and immunosurveillance. The applicant 
believed that, in both agents, this is achieved through the use of a 
co-stimulatory domain, which leads to the secretion of inflammatory 
substances such as cytokines, chemokines and growth factors, which 
induce T-cell proliferation and differentiation. The applicant for 
KYMRIAH stated that, although it agreed with the applicant for 
YESCARTA\'\s assertion that 41BB and CD-28 are both structurally and 
functionally different and that at a micro level they generate a 
different metabolic profile and stimulate different types of memory T-
cell, on a macroscopic level the general impact is ``substantially 
similar'' in that the mechanisms of actions allow for expansion and 
memory, which yield tumor-directed killing of the target tissue and 
memory T-cell generation for longer duration response that can be 
expected with a traditional biologic agent. The applicant further 
believed that, while the manufacturing process, safety and efficacy 
outcomes of any two members of a class of drugs may differ, these 
factors do not impact the mechanism of action.
    With regard to the second criterion, whether YESCARTA and KYMRIAH 
will be assigned to the same or a different MS-DRG, the applicant 
stated that this criterion is met because cases representing patients 
eligible for treatment involving both, KYMRIAH and YESCARTA, will be 
reported using the same ICD-10-PCS procedure codes (XW033C3 and 
XW043C3) and will be assigned to the same MS-DRG--Pre-MDC MS-DRG 016 
(as discussed in section II.F.2.d. of the preamble of this final rule).
    With regard to the third criterion, whether YESCARTA[supreg] and 
KYMRIAH[supreg] will be used to treat the same or similar patient 
population, the applicant stated that both, KYMRIAH and YESCARTA, are 
FDA approved to treat adult patients diagnosed with r/r aggressive B-
cell NHL in the same or similar patient population. The applicant, in 
summary, agreed with CMS' conclusion that KYMRIAH is ``substantially 
similar'' to YESCARTA, as defined by CMS, because both technologies 
are: (1) Intended to treat the same or similar disease in the same or 
similar patient population; (2) purposed to achieve the same 
therapeutic outcome using the same or similar mechanism of action; and 
(3) would be assigned to the same MS-DRGs. However, the applicant 
stated that, despite being ``substantially similar'' technologies, 
KYMRIAH and YESCARTA are not ``substantially similar'' to any other 
existing technology and, therefore, it believed KYMRIAH met the newness 
criterion.
    Other commenters, generally, agreed that both, KYMRIAH and 
YESCARTA, are substantially similar technologies. One commenter stated 
that it agreed with CMS' approach on both clinical and policy grounds 
because given the promises and perils of both therapies, the 
surrounding coverage and payment issues present to be the same and that 
will also be the case for the successor drugs expected to soon achieve 
FDA approval and enter the U.S. market. The commenter explained that 
consideration of KYMRIAH and YESCARTA as one new technology add-on 
payment application simplifies the newness test because both 
technologies were assigned an ICD-10-PCS procedure code in 2017, and 
cases involving the utilization of the technologies and procedures 
reporting the ICD-10-PCS procedure codes will be assigned to the same 
MS-DRG, effective with the beginning of FY 2019 on October 1, 2018. The 
commenter also noted that, CMS indicated that November 22, 2017, would 
be the beginning date for the ``newness'' period because it marks the 
first delivery of YESCARTA to eligible treatment centers. The commenter 
believed this date was somewhat arbitrary, but did not provide an 
alternative date for consideration and, therefore, agreed that KYMRIAH 
and YESCARTA should be considered together as one new technology add-on 
payment application, both technologies met the criterion for newness, 
and the newness period appropriately begins on November 22, 2017. The 
commenter stated that, if approved for new

[[Page 41291]]

technology add-on payments, this newness period should grant CMS and 
the public sufficient time under the MS-DRG recalibration and the new 
technology add-on payment policies to determine whether MS-DRG 016 is 
an appropriate MS-DRG assignment for payment of CAR T-cell therapies.
    Response: We appreciate all the commenters' input and the 
additional detail regarding whether KYMRIAH and YESCARTA are 
substantially similar to each other and existing technologies.
    After consideration of the public comments we received, although we 
recognize the technologies are not completely the same in terms of 
their manufacturing process, co-stimulatory domains, and clinical 
profiles, we and also as the commenters expressed, are not convinced 
that these differences result in the use of a different mechanism of 
action and, therefore, infer that the two technologies' mechanisms of 
action are the same. Furthermore, we believe that KYMRIAH and YESCARTA 
are substantially similar to one another because potential cases 
representing patients who may be eligible for treatment using KYMRIAH 
and YESCARTA 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 KYMRIAH or YESCARTA). We also believe, as we and 
other commenters describe throughout this section, that these 
technologies are intended to treat the same or similar disease in the 
same or similar patient population--patients with r/r DLBCL who are 
ineligible for, or who have failed ASCT, and are purposed to achieve 
the same therapeutic outcome--ORR, CR, OS using the same or similar 
mechanism of action using genetically modified autologous T-cell 
immunotherapies. The respective CAR T-cells transmit a signal to 
promote T-cell expansion, activation, and ultimately cancer cell 
elimination to produce a targeted cellular therapy that may persist in 
the body even after the malignancy is eradicated.
    We also believe that KYMRIAH and YESCARTA are not substantially 
similar to any other existing technologies because, as both applicants 
asserted in their FY 2019 new technology add-on payment applications 
and as stated by the other commenters, the technologies do not use the 
same or similar mechanism of action to achieve a therapeutic outcome as 
any other existing drug or therapy assigned to the same or different 
MS-DRG and represent the only FDA-approved technologies for this 
treatment population.
    With regard to the commenter that indicated pricing of both 
products varies based on the patient population, and encouraged CMS to 
recognize this discrepancy when determining approval of new technology 
add-on payment and establishing adequate payments rates, we note that 
the applicants for both, KYMRIAH and YESCARTA, estimate that the 
average cost for an administered dose of KYMRIAH or YESCARTA is 
$373,000. We refer readers to the end of this discussion for complete 
details on the pricing of KYMRIAH and YESCARTA.
    With respect to CMS' policy for evaluating substantially similar 
technologies, we believe our current policy is consistent with the 
authority and criteria in section 1886(d)(5)(K) of the Act. We note 
that CMS is authorized by the Act to develop criteria for the purposes 
of evaluating new technology add-on payment applications. For the 
purposes of new technology add-on payments, when 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, for the reasons we discussed above and 
consistent with our evaluation of substantially similar technologies in 
prior rulemaking (82 FR 38120).
    Finally, we note that for FY 2019, there is no payment impact 
regarding the determination that the two technologies are substantially 
similar to each other because the cost of the technologies is the same. 
However, we welcome additional comments in future rulemaking regarding 
whether KYMRIAH and YESCARTA are substantially similar and intend to 
revisit this issue in next year's proposed rule.
    As we stated in the proposed rule and 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 KYMRIAH 
searched the FY 2016 MedPAR claims data file to identify potential 
cases representing patients who may be eligible for treatment using 
KYMRIAH. 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 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 KYMRIAH 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 KYMRIAH 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 KYMRIAH. 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 KYMRIAH. 
The applicant standardized the charges and then applied an inflation 
factor of 1.09357, which is the 2-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 KYMRIAH 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-weighted standardized charge per case 
for

[[Page 41292]]

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 expected the cost of KYMRIAH to be higher 
than the new technology add-on payment threshold amount for all three 
cohorts. Therefore, the applicant maintained that it met the cost 
criterion.
    We noted in the proposed rule that, as discussed in section 
II.F.2.d. of the preamble of the proposed rule, we proposed 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-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, we noted that similar to above, the applicant expected 
the cost of KYMRIAH to be higher than the new technology add-on payment 
threshold amount for MS-DRG 016. Therefore, it appeared that KYMRIAH 
would meet the cost criterion under this scenario as well.
    We stated in the proposed rule that we appreciated the applicant's 
analysis. However, we noted that the applicant did not provide 
information regarding which specific historic charges were removed in 
conducting its cost analysis. Nonetheless, we stated that we believed 
that even if historic charges were identified and removed, the 
applicant would meet the cost criterion because, as indicated, the 
applicant expected the cost of KYMRIAH to be higher than the new 
technology add-on payment threshold amounts listed earlier.
    We invited public comments on whether KYMRIAH meets the cost 
criterion.
    Comment: Commenters agreed with CMS that KYMRIAH meets the cost 
criterion for new technology add-on payments based on the analysis 
above. The commenters noted that more recent information indicates that 
the cost of the drug alone is more than twice the estimated new 
technology add-on payment MS-DRG threshold amount.
    Response: We appreciate the commenters' input and note that, since 
the publication of the proposed rule, CMS has received supplemental 
information that the cost for each administration of KYMRIAH is 
$373,000.
    After consideration of the public comments we received, we agree 
that KYMRIAH meets the cost criterion.
    With regard to the cost criterion in reference to YESCARTA, 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-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 YESCARTA 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 YESCARTA 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 
exceeded the average case-weighted threshold amount, the technology met 
the cost criterion.
    We noted in the proposed rule that, as discussed in section 
II.F.2.d. of the preamble of the proposed rule, we proposed 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-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, we noted that the applicant expected the cost of 
YESCARTA to be higher than the new technology add-on payment threshold 
amount for MS-DRG 016. Therefore, we stated that it appeared that 
YESCARTA would meet the cost criterion under this scenario as well.
    We invited public comments on whether YESCARTA technology meets the 
cost criterion.
    Comment: Commenters agreed with CMS that YESCARTA meets the cost 
criterion for new technology add-on payments based on the analysis 
above. The commenters noted that more recent information indicates the 
cost of the drug alone is more than twice the estimated new technology 
add-on payment MS-DRG threshold amount.
    Response: We appreciate the commenters' input and note that, since 
the publication of the proposed rule, CMS has received supplemental 
information that the cost for each administration of YESCARTA is 
$373,000.
    After consideration of the public comments we received, we agree 
that YESCARTA meets the cost criterion.

[[Page 41293]]

    With regard to substantial clinical improvement for KYMRIAH, the 
applicant asserted that several aspects of the treatment represent a 
substantial clinical improvement over existing technologies. The 
applicant believed that KYMRIAH 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 KYMRIAH 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 KYMRIAH 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 KYMRIAH 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).\35\
---------------------------------------------------------------------------

    \35\ 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 KYMRIAH conveyed that the PARMA study established 
high-dose chemotherapy and ASCT as the standard treatment for patients 
with r/r DLBCL.\36\ 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.\37\ 
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-line or first salvage. Chemotherapy 
response rates ranged from 0 percent to 23 percent with OS less than 10 
months in all studies.\38\ 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.\39\
---------------------------------------------------------------------------

    \36\ 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.
    \37\ Friedberg, J.W., ``Relapsed/refractory diffuse large B-cell 
lymphoma,'' Hematology AM Soc Hematol Educ Program, 2011, vol. (1), 
pp. 498-505.
    \38\ 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.
    \39\ 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 KYMRIAH, 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.\40\ M-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.\41\
---------------------------------------------------------------------------

    \40\ 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.
    \41\ 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.42 43 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.\44\ 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 KYMRIAH represents a substantial clinical 
improvement by offering a treatment option for a patient population 
unresponsive to, or ineligible for, currently available treatments.
---------------------------------------------------------------------------

    \42\ Ibid.
    \43\ 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.
    \44\ 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 KYMRIAH has improved clinical outcomes, including 
ORR, CR rate, OS, and durability of response, the applicant referenced 
clinical trials in which KYMRIAH was tested. Study 1 was a single-arm, 
open-label, multi-site, global Phase II study to determine the safety 
and efficacy of tisagenlecleucel in patients with R/R DLBCL 
(CCTL019C2201/CT02445248/`JULIET' study).45 46 47 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

[[Page 41294]]

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 x 3 and cyclophosphamide 250mg/m2/d x 3 or bendamustine 90mg/m2/d x 
2 days. The treatment and follow-up phase began 2 to 14 days after 
lymphodepleting chemotherapy, when the patient received a single 
infusion of tisagenlecleucel with a target dose of 5 x 108 
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-related issues).\48\ 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-cell, 52.4 percent response in patients with 
Germinal Center B-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.
---------------------------------------------------------------------------

    \45\ Data on file, Oncology clinical trial protocol 
CCTL019C2201: ``A Phase II, single-arm, multi-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.
    \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.
    \47\ ClinicalTrials.gov, ``Study of efficacy and safety of 
CTL019 in adult DLBCL patients (JULIET).''Available at: https://clinicaltrials.gov/ct2/show/NCT02445248.
    \48\ 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 KYMRIAH 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.49 50 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 KYMRIAH. 
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-up 
of 11.7 months. Safety and efficacy results are similar to those of the 
multi-center study.
---------------------------------------------------------------------------

    \49\ 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.
    \50\ 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 KYMRIAH reported that Study 3 was a supportive, 
patient-level meta-analysis of historical outcomes in patients who were 
diagnosed with refractory DLBCL (SCHOLAR-1).\51\ 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-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-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 months with a 2 year OS rate of 11 percent.
---------------------------------------------------------------------------

    \51\ 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 KYMRIAH provides a manageable safety 
profile when treatment is performed by trained medical personnel and, 
as opposed to ASCT, KYMRIAH 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.52 53 Median 
time to

[[Page 41295]]

onset of CRS was 3 days and median duration was 7 days with a range of 
2 to 30 days. Twenty-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.\54\ Study 2 safety 
results were consistent to those of Study 1.\55\
---------------------------------------------------------------------------

    \52\ 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.
    \53\ 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.
    \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.
    \55\ Ibid.
---------------------------------------------------------------------------

    After reviewing the studies provided by the applicant, in the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20292), we stated that we were 
concerned 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 
KYMRIAH, 43 discontinued prior to infusion (9 discontinued due to 
inability to manufacture, and 34 discontinued due to patient-related 
issues). Finally, the rate of patients who experienced a diagnosis of 
CRS was high, 58 percent.\56\
---------------------------------------------------------------------------

    \56\ 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 YESCARTA stated that YESCARTA represents a 
substantial clinical improvement over existing technologies when used 
in the treatment of patients with aggressive B-cell NHL. The applicant 
asserted that YESCARTA 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 YESCARTA, 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.\57\
---------------------------------------------------------------------------

    \57\ 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 
YESCARTA.58 59 60 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 YESCARTA. Study 1 is a Phase 
I-II multi-center, open-label study evaluating the safety and efficacy 
of the use of YESCARTA 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-label study 
evaluating the efficacy of YESCARTA.\61\ 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 YESCARTA for the treatment of 
patients with chemorefractory, aggressive B-cell NHL is supported by 
the CR of YESCARTA in Study 1, Phase II (54 percent) versus the 
historical control (7 percent).62 63 64 65 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.66 67 68 69 
The applicant also

[[Page 41296]]

provided the following tables to depict data to support substantial 
clinical improvement (we refer readers to the two tables below).
---------------------------------------------------------------------------

    \58\ 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.
    \59\ 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).
    \60\ 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.
    \61\ 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.
    \62\ 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.
    \63\ 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).
    \64\ 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.
    \65\ 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.
    \66\ 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.
    \67\ 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).
    \68\ 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.
    \69\ 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 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 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).\70\ 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).71 72 73
---------------------------------------------------------------------------

    \70\ 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.
    \71\ 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.
    \72\ 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).
    \73\ 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 YESCARTA in the hospital 
inpatient setting and were monitored in the inpatient setting for at 
least 7 days for early identification and treatment involving YESCARTA-
related toxicities, which primarily included CRS diagnoses and 
neurotoxicities. The applicant noted that the interim analysis showed 
the length of stay following infusion of YESCARTA 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 YESCARTA-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.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 (axi-cel; KTE-C19) in 
patients with refractory aggressive non-Hodgkins lymphoma (NHL),'' 
Oral presentation, American Association of Cancer Research (AACR).
---------------------------------------------------------------------------

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

[[Page 41297]]

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 YESCARTA 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.76 77
---------------------------------------------------------------------------

    \76\ 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.
    \77\ 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 YESCARTA, 
we stated in the FY 2019 IPPS/LTCH PPS proposed rule that we were 
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-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 believed 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.
---------------------------------------------------------------------------

    \77\ 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).
---------------------------------------------------------------------------

    We also stated that we were concerned that there are few published 
results showing any survival benefits from the use of this treatment. 
In addition, we were concerned with the limited number of patients 
(n=108) that were studied after infusion involving YESCARTA T-cell 
immunotherapy. Finally, we indicated that we were concerned about the 
data related to the percentage of patients who experienced 
complications or toxicities related to YESCARTA treatment. According to 
the applicant, of the patients who participated in YESCARTA clinical 
trials, 93 percent developed CRS diagnoses and 64 percent experienced 
neurological adverse events.
    We invited public comments on whether KYMRIAH and YESCARTA meet the 
substantial clinical improvement criterion.
    The applicants for KYMRIAH and YESCARTA, as well as others 
submitted comments regarding whether KYMRIAH and YESCARTA met the 
substantial clinical improvement criterion.
    Comment: The applicant for KYMRIAH responded to CMS' concerns 
presented in the proposed rule regarding the JULIET trial and provided 
updated trial results. According to the applicant, of the 160 patients 
enrolled in the JULIET trial, 106 patients received treatment involving 
tisagenlecleucel, including 92 patients who received the product 
manufactured in the U.S. and were followed for at least 3 months or 
discontinued earlier. The applicant stated that 11 out of 160 patients 
(7 percent) enrolled did not receive treatment involving 
tisagenlecleucel due to manufacturing failure and 38 other patients did 
not receive treatment involving tisagenlecleucel due to patient-related 
issues.
    In response to CMS' concerns that the use of the SCHOLAR-1 study as 
a baseline for comparison to the JULIET trial may have skewed results 
because the baseline population of the SCHOLAR-1 study included patient 
populations diagnosed with TFL and PMBCL, the applicant for KYMRIAH 
stated that the JULIET trial included patients diagnosed with TFL, 
making this patient population similar in nature to what was included 
in the SCHOLAR study. The applicant also indicated that, although it is 
true that patients diagnosed with PMBCL were excluded from the JULIET 
trial, these patients only make up 2 percent of the total population of 
the 636 patients evaluated in the SCHOLAR-1 study; limiting the impact 
that these patients could have had on the observed response rates. The 
applicant further explained that PMBCL is a form of large cell 
lymphoma, which differs from DLBCL in that the patient population is 
often younger and healthier and patients diagnosed with PMBCL are more 
likely to respond to first-line therapy, therefore, relapsed and 
refractory (r/r) patients are rare compared to those diagnosed with 
DLBCL. The applicant also stated that, due to the infrequency of 
patients diagnosed with r/r PMBCL, research isolating this pathology 
for treatment effect is limited. The applicant indicated that, although 
some studies estimate that chemorefractory PMBCL has a lower response 
rate than refractory DLBCL, those studies still report ORR equivalent 
to what was shown in SCHOLAR and each of these studies' results show r/
r PMBCL patients having a CR rate that is equivalent or better than 
what was observed in the larger SCHOLAR study. The applicant believed 
that, given these outcomes and the small number of patients diagnosed 
with PMBCL in the SCHOLAR literature, it is unlikely that the results 
are skewed in such a way as to overestimate the comparative efficacy of 
KYMRIAH for patients diagnosed with r/r DLBCL.
    In response to CMS' concerns regarding the drop-out rate within the 
JULIET trial, the applicant for KYMRIAH stated that the JULIET trial 
was designed to reflect a paradigm of patient management that the 
applicant believes reflects the real-world treatment decisions of 
health care providers. The applicant explained that in the JULIET 
trial, any patient who was identified as a candidate for treatment 
involving KYMRIAH and could undergo apheresis was enrolled in the trial 
at the time of apheresis collection, then patients were allowed to 
undergo bridging chemotherapy during the time that they awaited a 
manufacturing slot assignment and during the manufacturing process. The 
applicant indicated that this is in contrast with protocols of other 
trials in which patients are not enrolled until such time as a 
manufacturing slot is available because patients diagnosed with r/r 
DLBCL have rapidly progressive disease and they often have disease 
which is resistant or refractory to therapy and, therefore, patients 
may progress during this time. The applicant further stated that the 
design of the JULIET trial allowed these events to be captured, whereas 
other study designs that do not

[[Page 41298]]

enroll patients until a manufacturing slot is available and assigned 
would not capture such events because such patients would never be 
enrolled in the study. The applicant explained that the median time 
from apheresis to infusion of 113 days is not a direct measure of 
manufacturing time and reflects the fact that cryopreserved apheresis 
allowed patients to be apheresed before trial enrollment. Additionally, 
the applicant stated that the point at which the patient is infused 
after manufacturing is at the discretion of the treating physician, 
based on what is appropriate for the patient. The applicant explained 
that the use of cryopreserved apheresis material allows physicians to 
maximize the timing of apheresis for the benefit of patients and to 
minimize the effect of preceding chemotherapy on the health of the 
cells, which is not accounted for in a measurement of apheresis to 
infusion. The applicant further stated that the clinical trial was 
managed differently than their commercial process. The applicant 
indicated that, early in the JULIET trial, capacity-limited 
manufacturing could have led to longer wait times compared to their 
current commercial (non-trial) process, where patient cells are 
manufactured on a first-in, first manufactured basis and, their target 
is a 22-day manufacturing cycle from receipt of leukapheresis material, 
according to Novartis's requirements, to return shipping of KYMRIAH.
    The applicant also responded to CMS' concern regarding the 
percentage of patients who experienced CRS in the JULIET trial. The 
applicant for KYMRIAH stated that updated results show, using the 
conservative University of Pennsylvania Scale, CRS occurred in 78 
percent of the patients enrolled in the JULIET clinical trial. However, 
only 23 percent of the patients had >=Grade III CRS and no patient had 
Grade V CRS. The applicant further stated that patients with low grade 
CRS may reflect symptoms such as fever, myalgia, nausea or fatigue. The 
applicant noted that, in this context, the patients with >=Grade III 
CRS represent those with a life-threatening condition that requires 
interventions to support respiratory or circulatory function. The 
applicant indicated that CRS was manageable by a trained staff 
according to a specific CRS treatment algorithm and current standard-
of-care for these patients includes high-dose salvage chemotherapy 
regimens, as well as myeloablative therapy prior to autologous stem 
cell transplant, both of which have aggressive toxicity profiles. 
However, the applicant indicated that many of the toxicities of 
autologous stem cell transplant are managed without the benefit of 
treatment algorithms and directed therapies which aid in the management 
of CRS.
    The applicant for YESCARTA responded to CMS' concern that its new 
technology add-on payment application did not appear to include patient 
mortality data that was included as part of the applicant's FY 2018 new 
technology add-on payment application for the KTE-C19 technology. The 
applicant acknowledged that the Study 1 interim analysis data included 
in the FY2018 new technology add-on payment application and depicted as 
CMS' concern was not explicitly detailed in the FY 2019 application, 
which focused on the primary analysis, nor in Supplement 2, which 
provided data from the updated analysis. The applicant confirmed that 
there were no new deaths from adverse events at the time of the Study 1 
primary analysis (median follow-up of 6 months) or at the time of the 
updated analysis (median follow-up of 15.4 months).
    The applicant also responded to CMS' concern that there are few 
published results describing survival benefits from the use of 
YESCARTA. The applicant indicated that information to address this 
issue was submitted to CMS in a new technology add-on payment 
supplemental file. The applicant indicated that this file provided data 
from the updated analysis (median follow-up of 15.4 months) and 
references for the published manuscripts. (We note that the information 
the applicant provided with its public comment was also previously 
provided to CMS in the supplemental file mentioned above). The 
applicant stated that, in December 2017, the long-term follow-up of 
Study 1 (ZUMA-1), Phase I (n=7), and Phase II (n=101) was published in 
the New England Journal of Medicine and presented at ASH 2017. The 
applicant explained that at median 15.4 months follow-up at the time of 
the updated analysis data cutoff (August 11, 2017), responses were 
ongoing in 42 percent of the patients where median duration of response 
for complete response has not been reached and median overall survival 
has not been reached. The applicant indicated that the authors 
concluded these high levels of durable response confirmed that YESCARTA 
is highly effective and provides substantial clinical benefit for 
patients diagnosed with large B-cell lymphoma who otherwise have no 
curative options. Additionally, the applicant stated that results show 
(best objective response, ongoing) ORR (82 percent, 42 percent) and CR 
(58 percent, 40 percent) at the time of the updated analysis (15.4 
months) are significantly improved over results from SCHOLAR-1 
historical control of 26 percent. The applicant stated that, based on 
the evidence of improved benefits provided to patients with no other 
treatment options, this study supports the finding that YESCARTA 
demonstrates that it represents a substantial clinical improvement over 
existing treatment options. The applicant further detailed that the 
results from the updated analysis show: The median time to response was 
rapid (1.0 month; range, 0.8 to 6.0) and that the median duration of 
complete response has not been reached. Additionally, the applicant 
explained that responses to treatment, including ongoing ones, were 
consistent across key covariates, including in individuals 65 years of 
age and younger and those individuals 65 years of age and older. The 
applicant also indicated that the median overall survival has not been 
reached. However, the applicant stated that the results of the updated 
analysis show the overall survival rate at 18 months was 52 percent and 
56 percent of patients enrolled in the study were alive at the time of 
the updated analysis. The applicant also indicated that results show 
ongoing durable remissions have been observed in patients at 24 months.
    The applicant for YESCARTA also responded to CMS' concern regarding 
the limited number of patients (n=108) that were studied after infusion 
involving YESCARTA T-cell immunotherapy. The applicant stated that the 
statistical plan for Study 1 was developed by Kite in close discussion 
with FDA. The applicant explained that the design of this statistical 
plan was developed so that the study size would be powered to show 
statistical significance for the primary end point: ORR. The applicant 
indicated that the primary analysis of Study 1, Phase II demonstrates 
that the primary endpoint has been met and that key secondary endpoints 
including Duration of Response and Overall Survival were also met. 
Therefore, the applicant believed that the results of the clinical data 
show YESCARTA has demonstrated substantial clinical improvement for 
patients who previously had no curative options, no standard therapy 
and a short expected survival. The applicant also explained that the 
sample size (the number of patients planned) for Study 1 was determined 
by the number of patients required to statistically demonstrate an 
improvement in the response rate with treatment involving YESCARTA and 
is

[[Page 41299]]

consistent with other single-arm oncology studies with a response rate 
endpoint. The applicant indicated that Study 1 had an adequate sample 
size to provide 90 percent power to statistically demonstrate an 
improvement in response rate relative to the historical control rate of 
20 percent, and a historical control was the only ethical and feasible 
study design for these r/r large B-cell lymphoma patients who 
previously had no other treatment options and have a uniformly very 
poor outcome without therapy. The applicant stated that standard 
protocols, when evaluating a therapy with a profound improvement in the 
endpoint, usually require a smaller sample size and larger studies are 
required when the improvement in the endpoint is small or difficult to 
demonstrate. The applicant believed that, given the magnitude of 
improved benefit from treatment with YESCARTA, the sample size of n=108 
was adequate to demonstrate efficacy and the trial was adequately sized 
to demonstrate a positive risk-benefit consistent with Good Clinical 
Practice (GCP)17 and International Conference on Harmonization (ICH) 
guidelines.
    Response: We appreciate the applicants' submission of additional 
information to address the concerns presented in the proposed rule.
    After consideration of the public comments we received, we agree 
that both, KYMRIAH and YESCARTA, represent a substantial clinical 
improvement over existing technologies because the technologies allow 
access for a treatment option for those patients who are unable to 
receive standard-of-care treatment. Additionally, there are no other 
currently FDA-approved treatment options for patients with r/r DLBCL 
who are ineligible for, or who have failed ASCT. Finally, both 
technologies appear to significantly improve clinical outcomes, 
including ORR, CR, OS, and durability of response, and allow for a 
manageable safety profile.
    In summary, we have determined that KYMRIAH and YESCARTA meet all 
of the criteria for approval of new technology add-on payments. 
Therefore, we are approving new technology add-on payments for KYMRIAH 
and YESCARTA for FY 2019. We expect that KYMRIAH will be administered 
for the treatment of adult patients (18 years old and older) diagnosed 
with r/r DLBCL not eligible for ASCT, and YESCARTA will be administered 
for the treatment of adult patients diagnosed 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. Cases 
involving KYMRIAH and YESCARTA that are eligible for new technology 
add-on payments will be identified by ICD-10-PCS procedure codes 
XW033C3 and XW043C3. The applicants for both, KYMRIAH and YESCARTA, 
estimate that the average cost for an administered dose of KYMRIAH or 
YESCARTA is $373,000. 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 the use of KYMRIAH or YESCARTA is $186,500 for FY 
2019.
    We note that on May 16, 2018, CMS opened a national coverage 
determination (NCD) analysis on CAR T-cell therapy for Medicare 
beneficiaries with advanced cancer. The expected national coverage 
analysis completion date is May 17, 2019. For more information, we 
refer reader to the CMS website at: https://www.cms.gov/medicare-coverage-database/details/nca-tracking-sheet.aspx?NCAId=291.
    Lastly, we note that in the FY 2019 IPPS/LTCH proposed rule (83 FR 
20294), we discussed possible payment alternatives and invited public 
comments regarding the most appropriate mechanism to provide payment to 
hospitals for new technologies such as CAR T-cell therapy drugs, 
including through the use of new technology add-on payments. We also 
invited public comments on how they would affect incentives to 
encourage lower drug prices.
    As discussed further in section II.F.2.d. of the preamble of this 
final rule, building on President Trump's Blueprint to Lower Drug 
Prices and Reduce Out-of-Pocket Costs, the CMS Center for Medicare and 
Medicaid Innovation (Innovation Center) is soliciting public comment in 
the CY 2019 OPPS/ASC proposed rule on key design considerations for 
developing a potential model that would test private market strategies 
and introduce competition to improve quality of care for beneficiaries, 
while reducing both Medicare expenditures and beneficiaries' out-of-
pocket spending. Given the relative newness of CAR T-cell therapy, the 
potential model, and our request for feedback on this model approach, 
we believe that it would be premature to adopt changes to our existing 
payment mechanisms, including structural changes in new technology add-
on payments. Therefore, we disagree with commenters who have requested 
such changes under the IPPS for FY 2019.
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-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-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

[[Page 41300]]

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.\78\ The 
applicant asserted that many older adults diagnosed with AML have a 
poor performance status \79\ at presentation and multiple medical 
comorbidities that make the use of intensive induction therapy quite 
difficult or contraindicated altogether. Moreover, the CR rates of 
poor-risk patients diagnosed with AML are substantially higher in 
patients over 60 years of age; owing to a higher proportion of 
secondary AML, disease developing in the setting of a prior myeloid 
disorder.\80\
---------------------------------------------------------------------------

    \78\ 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.
    \79\ Stone, R.M., et al., (2004), ``Acute myeloid leukemia. 
Hematology'', Am Soc Hematol Educ Program, 2004, pp. 98-117.
    \80\ 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-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.\81\
---------------------------------------------------------------------------

    \81\ 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 drugs being combined in vitro, and fixing this ratio in a nano-
scale drug delivery complex to maintain the optimized combination after 
administration and ensuring exposure of this ratio to the tumor.
    Cytarabine and daunorubicin are co-encapsulated inside the 
VYXEOSTM liposome at a fixed ratiometrically, optimized 5:1 
cytarabine: daunorubicin molar ratio. According to the applicant, 
encapsulation maintains the synergistic ratios, reduces degradation, 
and minimizes the impact of drug transporters and the effect of known 
resistant mechanisms. The applicant stated that the 5:1 molar ratio has 
been shown, in vitro, to maximize synergistic antitumor activity across 
multiple leukemic and solid tumor cell lines, including AML, and in 
animal model studies to be optimally efficacious compared to other 
cytarabine: daunorubicin ratios. In addition, the applicant stated that 
in clinical studies, the use of VYXEOSTM has demonstrated 
consistently more efficacious results than the conventional ``7+3'' 
free drug dosing. VYXEOSTM is intended for intravenous 
administration after reconstitution with 19 mL sterile water for 
injection. VYXEOSTM is administered as a 90-minute 
intravenous infusion on days 1, 3, and 5 (induction therapy), as 
compared to the ``7+3'' free drug dosing, which consists of two 
individual drugs administered on different days, including 7 days of 
continuous infusion.
    With regard to the newness criterion, 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

[[Page 41301]]

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, in the 
FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20296), we stated that we 
were 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 specifically stated 
that we were 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 stated that we believe that 
potential cases representing patients who may be eligible for treatment 
involving VYXEOSTM would be assigned to the same MS-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 stated in the proposed rule 
that 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).
    In the FY 2019 IPPS/LTCH PPS proposed rule, we invited 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 invited public comments 
on whether VYXEOSTM meets the newness criterion.
    Comment: Several commenters supported the novel and effective 
ratiometric dosing drug delivery mechanism of VYXEOSTM. The 
applicant stated that preclinical and clinical evidence confirms the 
differentiated mechanism of action of VYXEOSTM from other 
available treatment options. The applicant also reiterated that it 
believed VYXEOSTM is not substantially similar to any other 
currently available drug and is highly differentiated from the 
conventional ``7+3'' free drug dosing treatment regimen.
    Response: We appreciate the commenters' and the applicant's input 
on whether VYXEOSTM meets the newness criterion. After 
consideration of the public comments we received, we believe that 
VYXEOSTM has a unique mechanism of action and, therefore, is 
not substantially similar to other drug therapies. We believe that the 
liposomal formulation used to combine daunorubicin and cytarabine to 
create VYXEOSTM is unique and distinct from other anti-
cancer agents and, therefore, we believe that 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 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 
VYXEOSTM will continue to incur other pharmacy and IV 
therapy charges for AML-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

[[Page 41302]]

met without consideration of VYXEOSTM charges. The average 
case-weighted standardized charge was $170,458, which exceeded the 
average case-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--limited 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--identified patients who have been 
diagnosed with AML in remission.
    The applicant noted that, in all of the sensitivity analysis 
scenarios, the average case-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 met the cost criterion. We invited public comments 
on whether VYXEOSTM meets the cost criterion.
    Comment: The applicant noted the detailed summary presented in the 
proposed rule of the cost analysis of the VYXEOSTM, 
including a primary cohort analysis and five sensitivity analyses. The 
applicant stated that, in each of the analyses, it was demonstrated 
that the average case-weighted standardized charge per case for the 
applicable MS-DRGs exceeded the average case-weighted threshold amount 
before considering the average per patient cost of VYXEOSTM 
to the hospital.
    Response: We appreciate the applicant's input.
    After consideration of the public comments we received, we believe 
that VYXEOSTM meets the cost criterion.
    With regard to substantial clinical improvement, according to the 
applicant, clinical data results have shown that the use of 
VYXEOSTM represents a substantial clinical improvement for 
the treatment of AML in newly diagnosed high-risk, older (60 years 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-risk subset of patients as defined by the 
European Prognostic Index. In both groups of patients, the applicant 
stated that there was significant improvement in survival for the high-
risk patient group. The applicant provided the following specific 
clinical data results.
     The applicant stated 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.,\82\ 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.
---------------------------------------------------------------------------

    \82\ 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,\83\ the applicant cited 
the 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).
---------------------------------------------------------------------------

    \83\ 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

[[Page 41303]]

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-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-risk hematological malignancies, transplantation is a useful 
treatment alternative. The applicant further stated that autologous 
HSCT has limited effectiveness and at this time, only allogeneic HSCT 
with full intensity conditioning has been reported to produce long-term 
remissions. However, the applicant stated that the clinical study by 
Medeiros, et al. 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).\84\
---------------------------------------------------------------------------

    \84\ 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,\85\ 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-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).
---------------------------------------------------------------------------

    \85\ 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 \86\ 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

[[Page 41304]]

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-risk 
patients, 78.7 percent versus 44.4 percent, as defined by the European 
Prognostic Index (EPI). In the subset analysis of this EPI poor-risk 
patient subset, the applicant stated there was a significant 
improvement in survival rate (6.6 versus 4.2 months median, hazard 
ratio=0.55, p=0.02) and improved response rate (39.3 percent versus 27 
percent). The applicant also noted the following: The safety profile 
for the use of VYXEOSTM was qualitatively similar to that of 
control ``salvage'' therapy, with nearly identical 60-day mortality 
rates (14.8 percent versus 15.9 percent); among VYXEOSTM 
treated patients, those with no history of prior HSCT (n=59) had higher 
response rates (54.2 percent versus 37.8 percent) and lower 60-day 
mortality (10.2 percent versus 16.2 percent); overall, the use of 
VYXEOSTM had acceptable safety based on 60-day mortality 
data, with somewhat higher frequency of neutropenia and 
thrombocytopenia-related grade 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,\87\ 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:
---------------------------------------------------------------------------

    \86\ 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.
    \87\ 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-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, in the proposed rule, we stated we 
were concerned that, although there was an improvement in a number of 
outcomes in Phase III Study 301, specifically overall survival rate, 
lower risk of early death, improved response rates, better outcomes 
following transplant, increased response rate and overall survival in 
patients diagnosed with FLT3 mutation, and higher response rates versus 
conventional ``salvage'' chemotherapy in younger patients diagnosed 
with poor-risk first relapse, the improved outcomes may not be 
statistically significant. Furthermore, we indicated we were 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 were 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 invited public comments on whether VYXEOSTM meets the 
substantial clinical improvement criterion.
    Comment: Several commenters supported the use of 
VYXEOSTM as a viable treatment option in the treatment of 
older adults who have been diagnosed with high-risk AML, and believed 
that clinically meaningful survival and response improvements have been 
and can be achieved for a highly difficult to treat population of 
patients with extremely limited treatment options. The applicant 
summarized the efficacy outcomes of the pivotal Phase III Study 301 and 
noted that significant improvement in overall survival was achieved 
with a hazard ratio of 0.69, p=0.005. The applicant indicated that, 
although many days of increased survival are desired rather than few, 
clinical benefit cannot be determined solely by the absolute number of 
days or months of survival increase. Rather, clinical benefit is 
determined by the relative improvement in survival. The applicant 
stated that, based on the data results from the Phase III Study 301, 
the observed improvement in median survival was 3.61 months (Control, 
5.95m versus VYXEOS, 9.56m). In other words, a 3.61 month increase in 
median survival is substantial and of great benefit given an expected 
median survival of only 5.95 months for patients treated with control 
arm therapy. The applicant believed that this result was statistically 
significant and demonstrates clinically high benefits.
    Response: We appreciate the commenters' and the applicant's input 
in response to our concerns. After consideration of the public comments 
we received, we believe that based on the statistically significant 
increase in median survival rate from the Phase III Study 301, 
VYXEOSTM is a treatment option which offers a substantial 
clinical improvement over standard therapy for patients who have been 
diagnosed with AML. Therefore, we believe that VYXEOSTM 
meets the substantial clinical improvement criterion.
    Based on evaluation of the new technology add-on payment 
application and consideration of the public comments we received, we 
have determined that VYXEOSTM meets all of the criteria for 
approval for new technology add-on payments. Therefore, we are 
approving new technology add-on payments for VYXEOSTM for FY 
2019. We expect that VYXEOSTM will be administered, as 
indicated, for use in the treatment of adults who have been newly 
diagnosed with therapy-related acute myeloid leukemia (t-AML) or AML 
with myelodysplasia-related changes (AML-MRC). Cases involving the use 
of VYXEOSTM that are eligible for new technology add-on 
payments will be identified by ICD-10-PCS procedure codes: 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).

[[Page 41305]]

    In its application, the applicant estimated that the average cost 
of a single vial for VYXEOSTM is $7,750 (daunorubicin 44 mg/
m2 and cytarabine 100 mg/m2). The applicant stated that the first 
induction of 6 vials is administered in the inpatient hospital setting, 
with 31 percent of the patients receiving a second induction of an 
administration of 4 vials. Of the 31 percent of the patients that 
receive the second induction, 85 percent of the patients receive the 
second induction in the inpatient hospital setting during the same 
inpatient stay of the first induction. The applicant further stated 
that 32 percent of all of the patients receive a first consolidation 
therapy of an administration of 3 vials, with 50 percent of these 
patients being treated in the inpatient hospital setting. The applicant 
also indicated that 50 percent of all of the patients receive a second 
consolidation therapy of an administration of 3 vials, with 40 percent 
of these patients being treated in the inpatient hospital setting. As 
is our past practice, based on the information above, we believe that 
it is appropriate to use an average to set the maximum amount of vials 
used in the inpatient hospital setting. For the induction therapy, all 
patients receive an administration of 6 vials for the first induction 
in the inpatient hospital setting, with 31 percent of all of the 
patients receiving a second induction therapy of an administration of 4 
vials--of which 85 percent of these patients are treated in the 
inpatient hospital setting during the same stay as the first induction 
therapy. Therefore, we computed the average of 6 vials for the first 
induction plus 3.4 vials for the second induction (4 vials * 0.85), 
which results in a maximum average of 9.4 vials used in the inpatient 
hospital setting. Therefore, the maximum average cost for 
VYXEOSTM used in the inpatient hospital setting is $72,850 
($7,750 cost per vial * 9.4 vials). 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 the use of 
VYXEOSTM is $36,425.
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 designated 
susceptible 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/mm3), 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/mm3), or 
left shift (greater than 15 percent immature PMNs); nausea or vomiting; 
dysuria, increased urinary frequency, or urinary urgency; flank pain; 
costo-vertebral angle tenderness on physical examination. Risk factors 
for infection with drug-resistant organisms do not, on their own, 
indicate a cUTI.\88\ The increasing incidence of multidrug-resistant 
gram-negative bacteria, such as carbapenem-resistant Enterobacteriacea 
(CRE), has resulted in a critical need for new antimicrobials.
---------------------------------------------------------------------------

    \88\ 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.
---------------------------------------------------------------------------

    The applicant reported that it has developed a beta-lactamase 
combination antibiotic, VABOMERETM, to treat cUTIs, 
including those caused by certain carbapenem-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-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-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/1.73m\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

[[Page 41306]]

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-
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-threatening 
infections under the Generating Antibiotic Incentives Now (GAIN) title 
of the FDA Safety and Innovation Act.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20300), we stated 
that we believed, although the molecular structure of the vaborbactam 
component of VABOMERETM is unique, the bactericidal action 
of VABOMERETM is the same as meropenem alone. In addition, 
we noted that there are other similar beta-lactam/beta-lactamase 
inhibitor combination therapies currently available as treatment 
options. We invited 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. We stated 
in the proposed rule that 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, we stated 
that 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.
    In the proposed rule, we stated that we were concerned 
VABOMERETM may be substantially similar to existing beta-
lactam/beta-lactamase inhibitor combination therapies. As noted in the 
proposed rule and above, we were 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-lactam/beta-lactamase inhibitor combination 
therapies currently available as treatment options). We invited public 
comments on whether VABOMERETM meets the substantial 
similarity criteria and the newness criterion.
    Comment: The applicant addressed the issue regarding the 
substantial similarity criteria and recommended CMS apply its standards 
under the newness criterion in a manner that recognizes the innovative 
nature and unique aspects of VABOMERETM. The applicant 
explained that meropenem alone is not indicated to treat a diagnosis of 
a cUTI and, moreover, is not active against KPC-producing CRE. The 
applicant stated that the action of the vaborbactam's protection of the 
meropenem is fundamental and essential to how VABOMERETM 
acts on and inhibits bacterial enzymes, and allows 
VABOMERETM to treat even those infections that would 
otherwise be resistant and not susceptible to therapy with meropenem 
alone. The applicant believed that, accordingly, 
VABOMERETM's mechanism of action is distinct from that of 
meropenem and is not the same. The applicant further explained that, 
meropenem is degraded by beta-lactamases enzymes, including KPC 
enzymes, and, therefore, is ineffective against KPC-producing CRE. The 
applicant indicated that VABOMERETM, in contrast, is not 
degraded by these enzymes and is able to provide effective treatment 
against infections that are not susceptible to meropenem. The applicant 
also reiterated that, unlike meropenem alone, VABOMERETM is 
on-label indicated for the use in the treatment of a cUTI diagnosis.
    Several commenters believed that VABOMERETM may be 
substantially similar to other existing therapies. The applicant 
believed that CMS' application of the ``substantial similarity'' 
standards for newness as described in prior IPPS rulemakings, including 
aspects of CMS' discussion of these criteria in the FY 2019 IPPS/LTCH 
PPS proposed rule as applied to VABOMERETM, are restrictive 
and may impose unnecessarily narrow standards for newness that are not 
included in the statute or regulations. The applicant stated that, if 
applied as suggested in the proposed rule, CMS may not account for the 
realities and circumstances involved in developing and bringing a new 
therapy--particularly a new antibiotic--to the U.S. market. The 
applicant

[[Page 41307]]

suggested CMS apply its newness standards in a manner that recognizes 
the innovative nature and unique aspects of new technologies, like 
VABOMERETM, consistent with the text and spirit of the new 
technology add-on payment provisions.
    Other commenters stated that, given the recognized shortage of new 
antibiotics, the unique benefits of VABOMERETM should not be 
ignored because of substantial similarities to other medicines.
    Response: We appreciate the applicant's and commenters' input. We 
agree that VABOMERETM has a unique mechanism of action that 
is not similar to other existing technologies because it is a new class 
of beta-lactamase inhibitor that protects meropenem from degradation by 
certain enzymes such as carbapenamases. We agree 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. 
After consideration of the public comments we received, we believe that 
VABOMERETM is not substantially similar to existing 
technologies and 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 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. In the FY 2019 IPPS/LTCH PPS proposed rule 
(83 FR 20301), we noted 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-weighted unstandardized charge 
per case) rather than the actual average case-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. At the time of the development of the proposed rule, the 
applicant noted that it did not yet have sufficient charge data from 
hospitals and would work to supplement its application with the 
information once it was 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-weighted standardized 
charge per case as $91,304, which exceeded the average case-weighted 
threshold amount of $74,815. Therefore, the applicant asserted that 
VABOMERETM met the cost criterion.
    In the proposed rule, we indicated we were concerned that, as noted 
earlier, instead of using actual charges from the Premier Research 
Database, the applicant computed the average case-weighted 
unstandardized charge per case based on the average case-weighted 
threshold amounts in Table 10 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 were unable to 
determine if the applicant met the cost criterion. We invited public 
comments on whether VABOMERETM met the cost criterion, 
including with respect to the concern regarding the applicant's 
analysis.
    Comment: The applicant addressed CMS' concern regarding the cost 
criterion and analysis and submitted a revised cost analysis in 
response. The applicant conducted a revised analysis using claims from 
the FY 2016 MedPAR to demonstrate that VABOMERETM meets the 
cost criterion. To identify potential cases representing patients who 
may be eligible for treatment involving VABOMERETM, the 
applicant identified 34 ICD-10-CM diagnosis codes from claims from the 
FY 2016 MedPAR specific to the anticipated VABOMERETM 
patient population. The applicant distinguished the 34 ICD-10-CM 
diagnosis codes by three different subsets, with Subset 1 based on 17 
of the 34 ICD-10-CM diagnosis codes; Subset 2 based on 13 of the 34 
ICD-10-CM diagnosis codes; and Subset 3 based on 8 of the 34 ICD-10-CM 
diagnosis codes. The applicant noted that the 8 ICD-10-CM diagnosis 
codes used in the Subset 3 analysis also are included in all three of 
the analyses, and the 13 ICD-10-CM diagnosis codes included in the 
Subset 2 analysis also are included among the 17 diagnosis codes used 
in the Subset 1 analysis.
    For each subset, the applicant conducted a cost analysis for 100 
percent of the identified cases, 75 percent of the identified cases, 
the top 20 MS-DRGs to which potential cases would map, and the top 10 
MS-DRGs to which potential cases would map. For each subset, the 
applicant performed the following: (1) Calculated the case-weighted 
unstandardized charge per case; (2) removed 100 percent of the drug 
charges from the relevant cases in order to conservatively estimate for 
charges for drugs that potentially may be replaced by 
VABOMERETM; (3) standardized the charges; (4) applied the 2-
year inflation factor of 9.357 percent from the FY 2018 IPPS/LTCH PPS 
final rule (82 FR 38527); (5) added the charges for 
VABOMERETM (the

[[Page 41308]]

applicant calculated the charges for VABOMERETM by 
converting the costs of VABOMERETM to charges and dividing 
the costs by the national CCR of 0.194 for ``Drugs'' from the FY2018 
IPPS/LTCH PPS final rule (82 FR 38103)); and (6) computed the inflated 
average case-weighted standardized charge per case and the average 
case-weighted threshold amount.
    The applicant stated that the cost of VABOMERETM is $165 
per vial. The applicant indicated that a patient receives two vials per 
dose and three doses per day. Therefore, the per-day cost of 
VABOMERETM is $990 per patient. The duration of therapy, 
consistent with the Prescribing Information, is up to 14 days. 
Therefore, the applicant estimated that the cost of 
VABOMERETM to the hospital, per patient, is $13,860. The 
applicant believed that, based on limited data from the product's 
launch, approximately 80 percent of VABOMERETM's usage would 
be in the inpatient hospital setting, and approximately 20 percent of 
VABOMERETM's usage may take place outside of the inpatient 
hospital setting. Therefore, the applicant stated that the average 
number of days of VABOMERETM administration in the inpatient 
hospital setting is estimated at 80 percent of 14 days, or 
approximately 11.2 days. As a result, the applicant calculated that the 
total inpatient cost is $11,088 ($990 * 11.2 days), which was then 
converted to charges in the calculations above.
    The applicant stated that each subset demonstrated the average 
case-weighted standardized charge per case exceeded the average case-
weighted threshold amount. Below are three tables, one for each subset, 
showing that the average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount.

----------------------------------------------------------------------------------------------------------------
                                                  100 Percent of   75 Percent of
             Subset 1 cost analysis               the identified  the identified      Top 20          Top 10
                                                       cases           cases       MS[dash]DRGs    MS[dash]DRGs
----------------------------------------------------------------------------------------------------------------
Case[dash]Weighted Unstandardized Charge Per             $66,978         $61,313         $54,894         $56,004
 Case...........................................
Inflated Average Case-Weighted Standardized              112,692         107,943         102,924         103,444
 Charge Per Case................................
Average Case-Weighted Threshold.................          56,213          54,782          51,993          52,941
Difference......................................          56,479          53,161          50,931          50,503
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                  100 Percent of   75 Percent of
             Subset 2 cost analysis               the identified  the identified      Top 20          Top 10
                                                       cases           cases       MS[dash]DRGs    MS[dash]DRGs
----------------------------------------------------------------------------------------------------------------
Case[dash]Weighted Unstandardized Charge Per             $66,135         $60,486         $54,220         $55,267
 Case...........................................
Inflated Average Case-Weighted Standardized              112,108         107,340         102,430         102,892
 Charge Per Case................................
Average Case-Weighted Threshold.................          55,924          54,421          51,749          52,683
Difference......................................          56,184          52,919          50,681          50,209
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                  100 Percent of   75 Percent of
             Subset 3 cost analysis               the identified  the identified      Top 20          Top 10
                                                       cases           cases       MS[dash]DRGs    MS[dash]DRGs
----------------------------------------------------------------------------------------------------------------
Case[dash]Weighted Unstandardized Charge Per             $66,295         $60,215         $54,264         $55,273
 Case...........................................
Inflated Average Case-Weighted Standardized              112,168         107,111         102,444         102,886
 Charge Per Case................................
Average Case-Weighted Threshold.................          56,014          54,333          51,823          52,733
Difference......................................          56,154          52,778          50,621          50,153
----------------------------------------------------------------------------------------------------------------

    Response: We appreciate the applicant's response and revised cost 
analysis. After consideration of the public comment and revised cost 
analysis we received, we believe that VABOMERETM meets the 
cost criterion.
    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 I \89\ was a prospective, randomized, double-blinded trial of 
VABOMERETM versus piperacillin-tazobactam in patients with 
cUTIs and acute pyelonephritis (A/P). TANGO 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-of-
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-of-cure (TOC) visit (day 
15 to 23). The trial enrolled 550 adult patients who were randomized 
1:1 to receive

[[Page 41309]]

VABOMERETM as a 3-hour IV infusion every 8 hours, or 
piperacillin 4g-tazobactam 500 mg 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.
---------------------------------------------------------------------------

    \89\ Vabomere Prescribing Information, Clinical Studies (August 
2017), available at: https://www.accessdata.fda.gov/drugsatfda_docs/label/2017/209776lbl.pdf.
---------------------------------------------------------------------------

    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/m2 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-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 non-inferiority 
design may have a ``superiority'' hypothesis imbedded within the study 
design that is appropriately tested using a non-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 not 
a statistically significant improvement.
    In the proposed rule, we noted that the eradication rates of the 
EMA endpoint were not statistically significant. We invited public 
comments with respect to our concern as to whether the FDA endpoints 
demonstrating non-inferiority are statistically sufficient data to 
support that VABOMERETM is a substantial clinical 
improvement in the treatment of patients with a cUTI.
    In its application, the applicant offered data from the TANGO-I 
trial comparing VABOMERETM to piperacillin-tazobactam EOT/
TOC rates in the setting of cUTIs/AP, but in the proposed rule we 
stated that the applicant did not offer a comparison to other 
antibiotic treatments of cUTIs known to be effective against gram-
negative uropathogens, specifically other carbapenems.\90\ In the 
proposed rule, we also noted that the study population is largely 
European (98 percent), and given the variable geographic distribution 
of antibiotic resistance we indicated we were 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 invited 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.
---------------------------------------------------------------------------

    \90\ 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.
---------------------------------------------------------------------------

    In the proposed rule we noted that the applicant asserted that the 
TANGO II study \91\ 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 II is a multi-

[[Page 41310]]

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

    \91\ 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 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-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 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 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 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).
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20303), we noted 
that many of the TANGO II trial outcomes showing improvements in the 
use of VABOMERETM over BAT are not statistically 
significant. We also noted that the TANGO II study included a small 
number of patients; the study population in the mCRE-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 
invited 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 invited public comments on whether the VABOMERETM 
technology meets the substantial clinical improvement criterion, 
including with respect to the specific concerns we have raised.
    Comment: The applicant stated that VABOMERETM represents 
and has demonstrated a substantial clinical improvement over other 
existing available therapies. The applicant also stated that, in 
particular, the results from the TANGO I and TANGO II, Phase III 
clinical trials establish that VABOMERETM represents a 
``substantial clinical improvement'' for treatment of deadly, 
antibiotic-resistant infections. The applicant reiterated the results 
of the TANGO I and TANGO II trials and noted the results show 
VABOMERETM had a statistically significant higher response 
rate than piperacillin/tazobactam in clinical cure and microbial 
eradication. The applicant stated that, in TANGO I, piperacillin-
tazobactam was used as a comparator because it is very commonly used in 
U.S. hospitals to treat infections, including severe UTIs. The 
applicant indicated that, for example, as reflected in the 
VABOMERETM Prescribing Information, the results of the TANGO 
I demonstrate superiority as evidenced by the overall success rate at 
the end of IV treatment (day 5 to 14) at 98.4 percent and 94 percent 
for the VABOMERETM and piperacillin/tazobactam treatment 
groups, respectively, and the TOC--7 days post IV therapy at 76.5 
percent (124 of 162 patients) for the VABOMERETM group and 
73.2 percent (112 of 153 patients) for the piperacillin/tazobactam 
group. The applicant noted that, regarding non-inferiority and 
superiority data, the statutory and regulatory standards for new 
technology add-on payments do not preclude the relevance of non-
inferiority data for purposes of demonstrating that a new therapy meets 
the ``substantial clinical improvement'' criterion. The applicant 
indicated that CMS has previously approved an application for new 
technology add-on payments and agreed that it represented a substantial 
clinical improvement over existing technologies on the basis of non-
inferior data.
    The applicant further indicated that, with regard to the size of 
the study population for TANGO II, this study focused specifically on a 
patient population known to have or suspected of having CRE. The 
applicant further stated that, despite a concerted effort to search for 
patients with CRE infection and intensive pre-screening and screening 
activities across the globe, it took more than 2.5 years to enroll 77 
patients. The applicant also noted that many other clinical studies in 
the context of new antibiotics development and other areas have 
involved similar or smaller cohorts of patients. According to the 
applicant, in the specific context of TANGO II, approximately 100 
patients were pre-screened for each individual enrolled patient. The 
applicant stated that challenges are typical of the ``ultra-orphan'' 
world of antimicrobial development, where new treatments are needed, 
and pathogen-focused or resistance-focused clinical trials are crucial 
to accurately determine the efficacy of the treatment. The applicant 
further stated that unfortunately, study challenges (including 
difficulty consenting seriously-ill patients and their families, 
restricted entry criteria, exclusion for prior antibiotics, among 
others), along with a rare diagnosis, make larger trials with this 
life-threatening condition quite difficult to conduct. The applicant 
indicated that the patients enrolled in this study had a high incidence 
of underlying comorbidities and a high disease severity, with 
approximately 40 percent of the patients being immunocompromised and 75 
percent with a Charlson Comorbidity Score >5. The applicant also noted 
appreciation that CMS recognized these challenges, particularly in the 
context of clinical trials for new antibiotic products that treat 
serious and life-threatening infections. The applicant believed that, 
for these reasons, the sample size used in the TANGO II trial does not 
undermine or diminish the significance of its results. The applicant 
indicated that the study focused specifically on

[[Page 41311]]

patients with known or suspected CRE and was powered specifically to 
test certain endpoints, which it demonstrated--and, notably--did so 
using VABOMERETM as a monotherapy. The applicant believed 
that this is distinct from other clinical trials and underscores the 
significance of the TANGO II results. The applicant further noted that 
the TANGO II trial demonstrated certain improved outcomes with such 
statistical significance that the independent data monitoring review 
board recommended early termination of the randomization in the trial 
to allow patients to cross over to the VABOMERETM arm 
instead of the BAT arm in the trial.
    One commenter agreed with CMS' concern that improved outcomes in 
some trials may not be statistically significant and that the small 
number of patients, and the lack of a comparison to other antibiotic 
treatments of cUTIs known to be effective against uropathogens may not 
support that VABOMERETM represents a substantial clinical 
improvement in the treatment of patients diagnosed with a cUTI.
    Response: We appreciate the commenter's input and the applicant's 
responses to our concerns. After consideration of the public comments 
we received, we believe that VABOMERETM offers a substantial 
clinical improvement for patients who have limited or no alternative 
treatment options because it is a new antibiotic that offers a 
treatment option for a patient population unresponsive to currently 
available treatments. Specifically, VABOMERETM is a novel, 
first-in-class beta-lactamase inhibitor helps to protect the meropenem 
from degradation by certain beta-lactamases, such as KPC. Additionally, 
results from the TANGO II study demonstrate better outcomes regarding 
28-day all-cause mortality taking into account prior antibiotic 
failures (VABOMERETM patients (5.3 percent) versus BAT 
patients (33.3 percent), p=0.03), as well as decreases nephrotoxicity 
(VABOMERETM 11.1 percent versus BAT 24.0 percent). 
Therefore, based on the above, we believe that VABOMERETM 
represents a substantial clinical improvement.
    In summary, we have determined that VABOMERETM meets all 
of the criteria for approval of new technology add-on payments. 
Therefore, we approving new technology add-on payments for 
VABOMERETM for FY 2019. We note that, the applicant did not 
request approval for the use of a unique ICD-10-PCS procedure code for 
VABOMERETM for FY 2019. As a result, hospitals will be 
unable to uniquely identify the use of VABOMERETM on an 
inpatient claim using the typical coding of an ICD-10-PCS procedure 
code. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53352), with 
regard to the oral drug DIFICIDTM, we revised our policy to 
allow for the use of an alternative code set to identify oral 
medications where no inpatient procedure is associated for the purposes 
of new technology add-on payments. We established the use of a National 
Drug Code (NDC) as the alternative code set for this purpose and 
described our rationale for this particular code set. This change was 
effective for payments for discharges occurring on or after October 1, 
2012. We acknowledge that VABOMERETM is not an oral drug and 
is administered by IV infusion, but it is the first approved new 
technology aside from an oral drug with no uniquely assigned inpatient 
procedure code. We, therefore, believe that the circumstances with 
respect to the identification of eligible cases using 
VABOMERETM are similar to those addressed in the FY 2013 
IPPS/LTCH PPS final rule with regard to DIFICIDTM because we 
do not have current ICD-10-PCS code(s) to uniquely identify the use of 
VABOMERETM to make the new technology add-on payment. 
Because we have determined that VABOMERETM has met all of 
the new technology add-on payment criteria and cases involving the use 
of VABOMERETM will be eligible for such payments for FY 
2019, we need to use an alternative coding method to identify these 
cases and make the new technology add-on payment for use of 
VABOMERETM in FY 2019. Therefore, similar to the policy in 
the FY 2013 IPPS/LTCH PPS final rule, in the place of an ICD-10-PCS 
procedure code, FY 2019 cases involving the use of 
VABOMERETM that are eligible for the FY 2019 new technology 
add-on payments will be identified by the NDC of 65293-009-01 
(VABOMERETM Meropenem-Vaborbactam Vial). Providers must code 
the NDC in data element LIN03 of the 837i Health Care Claim 
Institutional form in order to receive the new technology add-on 
payment for procedures involving the use of VABOMERETM. The 
applicant may request approval for a unique ICD-10-PCS procedure code 
for FY 2020.
    As discussed above, according to the applicant, the cost of 
VABOMERETM is $165 per vial. A patient receives two vials 
per dose and three doses per day. Therefore, the per-day cost of 
VABOMERETM is $990 per patient. The duration of therapy, 
consistent with the Prescribing Information, is up to 14 days. 
Therefore, the estimated cost of VABOMERETM to the hospital, 
per patient, is $13,860. Based on the limited data from the product's 
launch, approximately 80 percent of VABOMERETM's usage would 
be in the inpatient hospital setting, and approximately 20 percent of 
VABOMERETM's usage may take place outside of the inpatient 
hospital setting. Therefore, the average number of days of 
VABOMERETM administration in the inpatient hospital setting 
is estimated at 80 percent of 14 days, or approximately 11.2 days. As a 
result, the total inpatient cost for VABOMERETM is $11,088 
($990 * 11.2 days). 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 the use of VABOMERETM is $5,544 for FY 
2019.
d. remed[emacr][supreg] System
    Respicardia, Inc. submitted an application for new technology add-
on payments for the remed[emacr][supreg] System for FY 2019. According 
to the applicant, the remed[emacr][supreg] 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][supreg] 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 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.\92\ The applicant reported that CSA, as a primary 
disease, has a low prevalence in the United States population; and it 
is

[[Page 41312]]

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.'' \93\
---------------------------------------------------------------------------

    \92\ 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] Ssystem,'' European Journal 
of Heart Failure, pp. 1-8.
    \93\ 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.
---------------------------------------------------------------------------

    According to the applicant, prior to the introduction of the 
remed[emacr][supreg] 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.\94\
---------------------------------------------------------------------------

    \94\ 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][supreg] 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][supreg] 
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 
October 1, 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.
    As stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20309), 
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][supreg] 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][supreg] 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][supreg] 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][supreg] 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][supreg] 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][supreg] System 
is particularly suited for the treatment of CSA in patients who also 
have been diagnosed with heart failure. In the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20310), we stated we were concerned that, while 
the remed[emacr][supreg] 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 noted that the applicant's 
clinical analyses and data results related to patients who specifically 
were diagnosed with CSA and heart failure. We invited public comments 
on whether the remed[emacr][supreg] System meets the newness criterion.
    Comment: The applicant stated that the remed[emacr][supreg] System 
uses a different mechanism of action because neurostimulation of the 
phrenic nerve to treat patients who have been diagnosed with CSA is a 
new concept, both, in terms of its mechanism of action and approach. 
The applicant explained that utilizing small electrical pulses 
delivered to the phrenic nerve via a transvenous lead helps restore a 
more normal breathing pattern and indicated that there are no other 
FDA-approved CSA therapies that either utilize transvenous 
neurostimulation or generate negative pressure to treat patients who 
have been diagnosed with CSA.
    The applicant explained that currently, cases representing Medicare 
patients who have been admitted to the hospital with a diagnosis of CSA 
to receive treatment map to a wide array of MS-DRGs. However, the 
applicant believed that cases representing patients eligible for 
treatment involving the remed[emacr][supreg] System would be assigned 
to a different MS-DRG than cases representing patients treated using 
standard treatment options, including CPAP or ASV. The applicant 
further explained that, based on an analysis of FY 2018 MedPAR data, 
claims including a diagnosis of CSA mapped to 458 MS-DRGs with no 
single MS-DRG representing more than 4.5 percent of the total claims. 
The applicant believed this variant assignment of cases representing 
patients who have been diagnosed with CSA and received treatment is 
likely due to the fact that

[[Page 41313]]

the vast majority of claims in the MedPAR data included the CSA 
diagnosis as a secondary or tertiary diagnosis reported on the claim. 
The applicant indicated that cases representing patients receiving 
treatment involving the remed[emacr][supreg] System with CSA as a 
primary diagnosis would typically be assigned to MS-DRGs 040 or 041.
    Several other commenters also supported approval of new technology 
add-on payments for the remed[emacr][supreg] System, and asserted that 
the neurostimulation of the phrenic nerve is a different mechanism of 
action. The commenters indicated that they believed positive airway 
pressure (PAP) treatment is inferior to phrenic nerve stimulation 
because of patient intolerability, a lack of evidence in support of the 
success of PAP treatment in this population, or evidence showing that 
PAP such as ASV being contraindicated in the treatment of patients who 
have been diagnosed with CSA and heart failure. Another commenter 
agreed with the applicant, and stated that the remed[emacr][supreg] 
System's mechanism of action to deliver treatment, the neurostimulation 
of the phrenic nerve, is a new treatment approach that has never 
previously been used.
    Response: We appreciate the commenters' support and the applicant's 
further analysis and explanation regarding why the remed[emacr][supreg] 
System is not substantially similar to other currently available 
treatment options, as well as the input provided by the commenters. 
Based on review of the comments, we agree that utilization of the 
neurostimulation of the phrenic nerve, as performed by the 
remed[emacr][supreg] System, is a different mechanism of action and 
that cases representing patients receiving treatment involving the use 
of the remed[emacr][supreg] System would be assigned to a different MS-
DRG than currently available treatment options. Therefore, we believe 
that the remed[emacr][supreg] System is not substantially similar to 
any other existing technology. We also note that the applicant provided 
additional information regarding patients who have been diagnosed with 
CSA, without a diagnosis of heart failure, and we considered this 
additional information in our evaluation of the application.
    After consideration of the public comments we received, for the 
reasons discussed, we believe that the remed[emacr][supreg] System is 
not substantially similar to any existing technology and it meets the 
newness criterion.
    Comment: The applicant stated that the remed[emacr][supreg] 
received FDA approval on October 6, 2017. However, the applicant noted 
that the first implant procedure was completed on February 01, 2018. 
Therefore, the applicant believed that the newness period should begin 
on February 01, 2018, rather than the FDA approval date.
    Response: As we discuss in section II.H.4. and in our discussion of 
Voraxaze included in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53348), generally, our policy is to begin the newness period on the 
date of FDA approval or clearance or, if later, the date of 
availability of the product on the U.S. market. However, the applicant 
did not provide additional information to explain why there was a delay 
from the time of FDA approval until the completion of the first implant 
procedure to establish a different date of availability. Without 
additional information, we continue to believe that the newness period 
for the remed[emacr][supreg] System begins on October 6, 2017. We may 
consider any further information that may be provided regarding the 
date of availability in future rulemaking.
    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][supreg] 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][supreg] System 
assigned to MS-DRG 040; 5,309 cases representing potential patients who 
may be eligible for treatment involving the remed[emacr][supreg] System 
assigned to MS-DRG 041; and 2,178 cases representing potential patients 
who may be eligible for treatment involving the remed[emacr][supreg] 
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 met the cost criterion. With regard to the analysis above, 
in the proposed rule, we stated that we were concerned that all cases 
in MS-DRGs 040, 041, and 042 were used in the analysis. We further 
stated that we were unsure if all of these cases represent patients 
that may be truly eligible for treatment involving the 
remed[emacr][supreg] System. We invited public comments on whether the 
remed[emacr][supreg] System meets the cost criterion.
    Comment: In response to our concern presented in the FY 2019 IPPS/
LTCH PPS proposed rule, the applicant submitted a revised analysis with 
regard to the cost criterion. In its revised cost calculations, the 
applicant searched the FY 2016 MedPAR data for cases reporting an ICD-
10-CM procedure code for the insertion of an array stimulator 
generator, in combination with a neurostimulator lead. Below is a table 
listing the codes searched by the applicant.

------------------------------------------------------------------------
      ICD-10-PCS code         Description (array stimulator generator)
------------------------------------------------------------------------
0JH60BZ...................  INSERTION 1 ARRAY STIM GEN CHEST SUBQ TISS
                             FASC OPEN.
0JH60CZ...................  INSERTION 1 ARRAY RCHG STIM GEN CHST SUBQ
                             FASCIA OPN.

[[Page 41314]]

 
0JH60DZ...................  INSERTION MX ARRAY STIM GEN CHST SUBQ TISS
                             FASC OPEN.
0JH60EZ...................  INSERTION MX ARRAY RCHG STIM GEN CHST SUBQ
                             FASC OPEN.
0JH63BZ...................  INSERTION 1 ARRAY STIM GEN CHEST SUBQ FASCIA
                             PERQ.
0JH63CZ...................  INSERTION 1 ARRAY RCHG STIM GEN CHST SUBQ
                             FASC PERQ.
0JH63DZ...................  INSERTION MX ARRAY STIM GEN CHEST SUBQ
                             FASCIA PERQ.
0JH63EZ...................  INSERTION MX ARRAY RCHG STIM GEN CHST SUBQ
                             FASC PERQ.
0JH70BZ...................  INSERTION 1 ARRAY STIM GEN BACK SUBQ TISS
                             FASC OPEN.
0JH70CZ...................  INSERTION 1 ARRAY RCHG STIM GEN BACK SUBQ
                             FASC OPEN.
0JH70DZ...................  INSERTION MX ARRAY STIM GEN BACK SUBQ TISS
                             FASC OPEN.
0JH70EZ...................  INSERTION MX ARRAY RCHG STIM GEN BACK SUBQ
                             FASC OPEN.
0JH73BZ...................  INSERTION 1 ARRAY STIM GEN BACK SUBQ TISS
                             FASC PERQ.
0JH73CZ...................  INSERTION 1 ARRAY RCHG STIM GEN BACK SUBQ
                             FASC PERQ.
0JH73DZ...................  INSERTION MX ARRAY STIM GEN BACK SUBQ TISS
                             FASC PERQ.
0JH73EZ...................  INSERTION MX ARRAY RCHG STIM GEN BACK SUBQ
                             FASC PERQ.
0JH80BZ...................  INSERTION 1 ARRAY STIM GEN ABDOMEN SUBQ
                             FASCIA OPEN.
0JH80CZ...................  INSERTION 1 ARRAY RCHG STIM GEN ABDOMN SUBQ
                             FASC OPN.
0JH80DZ...................  INSERTION MX ARRAY STIM GEN ABDOMN SUBQ
                             FASCIA OPEN.
0JH80EZ...................  INSERTION MX ARRAY RCHG STIM GEN ABDMN SUBQ
                             FASC OPN.
0JH83BZ...................  INSERTION 1 ARRAY STIM GEN ABDOMEN SUBQ
                             FASCIA PERQ.
0JH83CZ...................  INSERTION 1 ARRAY RCHRG STIM GEN ABDOMN SUBQ
                             FASC PC.
0JH83DZ...................  INSERTION MX ARRAY STIM GEN ABDOMN SUBQ
                             FASCIA PERQ.
0JH83EZ...................  INSERTION MX ARRAY RCHRG STIM GEN ABDMN SUBQ
                             FASC PC.
------------------------------------------------------------------------


 
      ICD-10-PCS code            Description (neurostimulator lead)
------------------------------------------------------------------------
00HE0MZ...................  INSERTION NEURSTIM LEAD CRANIAL NERVE OPEN.
00HE3MZ...................  INSERTION NEURSTIMULATOR LEAD CRANIAL NERVE
                             PERQ.
00HE4MZ...................  INSERTION NEURSTIMUL LEAD CRANIAL NERV PERQ
                             ENDO.
01HY0MZ...................  INSERTION NEURSTIM LEAD PERIPHERAL NERVE
                             OPEN.
01HY3MZ...................  INSERTION NEURSTIMULT LEAD PERIPHERAL NERVE
                             PERQ.
01HY4MZ...................  INSERTION NEURSTIM LEAD PERIPH NERVE PERQ
                             ENDO APPR.
05H00MZ...................  INSERTION NEUROSTIMULATOR LEAD IN AZYGOS
                             VEIN OP.
05H03MZ...................  INSERTION NEUROSTIMULATOR LEAD IN AZYGOS
                             VEIN PQ.
05H04MZ...................  INSERTION NEURSTIM LEAD INTO AZYGOS VEIN PQ
                             ENDO.
05H30MZ...................  INSERTION NEUROSTIMULATOR LEAD IN RT INNOMIN
                             VEIN OPN.
05H33MZ...................  INSERTION NEURSTIM LEAD IN RT INNOMIN VEIN
                             PERQ.
05H34MZ...................  INSERTION NEURSTIM LEAD RT INNOMINATE VEIN
                             PERQ ENDO.
05H40MZ...................  INSERTION NEUROSTIMULATOR LEAD LT INNOMIN
                             VEIN OP.
05H43MZ...................  INSERTION NEUROSTIMULATOR LEAD LT INNOMINATE
                             VEIN PQ.
05H44MZ...................  INSERTION NEURSTIM LEAD IN LT INNOMIN VEIN
                             PQ END.
0DH60MZ...................  INSERTION STIMULATOR LEAD STOMACH OPEN
                             APPROACH.
0DH63MZ...................  INSERTION STIMULATOR LEAD STOMACH
                             PERCUTANEOUS.
0DH64MZ...................  INSERTION STIM LEAD STOMACH PERQ ENDO
                             APPRCH.
------------------------------------------------------------------------

    The applicant identified a total of 2,416 cases representing 
potential patients who may be eligible for treatment involving the 
remed[emacr][supreg] System, with 1,762 cases (72.9 percent of all of 
the cases) mapping to MS-DRG 41 and 654 cases (27.1 percent of all of 
the cases) mapping to MS-DRG 42, resulting in an average case-weighted 
charge per case of $86,744. The applicant removed 100 percent of the 
charges associated with the services provided in connection with the 
prior technology. The applicant then standardized the charges and 
inflated the charges by an inflation factor of 9.36 percent, which 
resulted in an inflated average case-weighted standardized charge per 
case of $61,426. According to the applicant, the cost of the 
remed[emacr][supreg] System is $34,500. The applicant converted the 
costs of the technology to charges by dividing the costs by the 
national CCR of 0.332 for ``Implantable Devices'' from the FY 2018 
IPPS/LTCH PPS final rule. This resulted in $103,916 in estimated 
hospital charges for the new technology, which were added to the 
inflated standardized charges per case. The final inflated average 
case-weighted standardized charge per case is $165,342, which is 
$87,877 more than the Table 10 average case-weighted threshold amount 
of $77,465. Therefore, the applicant maintained that it meets the cost 
criterion.
    Response: We appreciate the applicant's submission of revised cost 
calculations in response to our concerns.
    After consideration of the additional information provided by the 
applicant, we agree that the remed[emacr][supreg] System meets the cost 
criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that the remed[emacr][supreg] System meets the 
substantial clinical improvement criterion. The applicant stated that 
the remed[emacr][supreg] 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][supreg] 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][supreg] 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

[[Page 41315]]

activation, pulmonary hypertension, and arrhythmias, which ultimately 
contribute to the downward cycle of heart failure,\95\ 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.
---------------------------------------------------------------------------

    \95\ 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; \96\ and
---------------------------------------------------------------------------

    \96\ 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.\97\
---------------------------------------------------------------------------

    \97\ 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,\98\ and patients 
treated with CPAP experienced alleviation of symptoms, but no change in 
survival.\99\ 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.\100\
---------------------------------------------------------------------------

    \98\ Ibid.
    \99\ 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.
    \100\ 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][supreg] System 
represents a substantial clinical improvement over existing 
technologies because of the reduction in the number of future 
hospitalizations, few device-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 indicated that study 
results showed the remed[emacr][supreg] 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 \101\ 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).\102\ 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.
---------------------------------------------------------------------------

    \101\ 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.
    \102\ American Heart Association: ``Classes of Heart Failure,'' 
May 8, 2017. 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.

[[Page 41316]]

    The second study \103\ 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][supreg] 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.
---------------------------------------------------------------------------

    \103\ 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 \104\ 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 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.
---------------------------------------------------------------------------

    \104\ Zhang, X., Ding, N., Ni, B., Yang, B., Wang, H., & Zhang, 
S.J., ``Satefy and Feasibility of Chronic Transvenous Phrenic Nerve 
Stimulation for Treatment of Central Sleep Apnea in Heart Failure 
Patients,'' The Clinical Respiratory Journal, 2015, pp. 1-9.
---------------------------------------------------------------------------

    The fourth study \105\ extended the previous Phase I study \106\ 
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.
---------------------------------------------------------------------------

    \105\ 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[supreg]system,'' European Journal of 
Heart Failure, 2016, pp. 1-8.
    \106\ 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 \107\ 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][supreg] 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.'' \108\ While patients and physicians were unblinded, the 
polysomnography core laboratory remained blinded. The per-

[[Page 41317]]

protocol population from which statistical comparisons were made is 58 
patients treated with the remed[emacr][supreg] 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.
---------------------------------------------------------------------------

    \107\ 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.
    \108\ Ibid.
---------------------------------------------------------------------------

    The final study data was from the pivotal study with limited 
information in the form of an abstract \109\ and an executive 
summary.\110\ 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][supreg] System device with a 6-month 
follow-up period, or to the control group arm (73 patients) in which 
the initiation of treatment with the remed[emacr][supreg] 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.\111\ Primary 
exclusion criteria were CSA caused by pain medication, heart failure of 
state D from the American Heart Association, a 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.\112\ 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.
---------------------------------------------------------------------------

    \109\ 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.
    \110\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
    \111\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
    \112\ Ibid.
---------------------------------------------------------------------------

    The applicant asserted that the results from the pivotal trial 
\113\ 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.
---------------------------------------------------------------------------

    \113\ 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. In the FY 2019 IPPS/LTCH PPS proposed 
rule, we invited public comments on whether this current study design 
is sufficient to support substantial clinical improvement of the 
remed[emacr][supreg] System with respect to all patient populations,

[[Page 41318]]

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][supreg] 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][supreg] 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).
    In the proposed rule we stated we were concerned that the 
remed[emacr][supreg] 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 noted that the FDA-approved indication 
for the implantation of the remed[emacr][supreg] System is for use in 
the treatment of adult patients who have been diagnosed with moderate 
to severe CSA. We also noted that the applicant's supporting studies 
were directed primarily at patients who had been treated with the 
remed[emacr][supreg] 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][supreg] 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][supreg] System has been studied, we 
indicated we were concerned that any claims on mortality as they relate 
to treatment involving the use of the remed[emacr][supreg] System may 
be limited. Therefore, we were 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.
    We stated in the proposed rule that the applicant has shown that, 
among the subpopulation of patients who have been diagnosed with CSA 
and heart failure, the remed[emacr][supreg] System decreases morbidity 
outcomes as compared to the CPAP and ASV treatment options. In the 
proposed rule, we noted that we understood 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,114 115 116 117 only 
two studies performed analyses controlling for heart failure 
status.118 119 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 \120\ between all 
treated and control patients. However, we were 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), we stated that 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. We stated that it is possible that these results are not 
representative of the larger population of patients who have been 
diagnosed with CSA.
---------------------------------------------------------------------------

    \114\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
    \115\ 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.
    \116\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
    \117\ 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[supreg]system,'' European Journal of 
Heart Failure, 2016, pp. 1-8.
    \118\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
    \119\ 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.
    \120\ Respicardia, Inc. (n.d.). Remede System Pivotal Trial. 
https://clinicaltrials.gov/ct2/show/NCT01816776.
---------------------------------------------------------------------------

    Therefore, in the proposed rule we stated we were concerned that 
differences in morbidity and mortality outcomes between CPAP, ASV, and 
the remed[emacr][supreg] 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.\121\ 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.\122\
---------------------------------------------------------------------------

    \121\ 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.
    \122\ 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 noted that the clinical study had a small patient 
population (n=151), with follow-up for 6 months. We stated that we were 
interested in longer follow-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][supreg] System. We also expressed interest 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 
stated that we were 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 invited public comments on whether the remed[emacr][supreg] 
System represents a substantial clinical improvement over existing 
technologies.
    Comment: The applicant provided responses to CMS' substantial 
clinical improvement concerns presented in the FY 2019 IPPS/LTCH PPS 
proposed rule

[[Page 41319]]

regarding the use of the remed[emacr][supreg] System. With regard to 
CMS' concern that the clinical studies of the remed[emacr][supreg] 
System did not include comparisons to PAP treatments, which are 
available treatment options for non-heart failure patients who have 
been diagnosed with CSA, the applicant stated that the following are 
several reasons for not using PAP treatments as comparators in their 
clinical trials:
     Other clinical trials, such as the CANPAP and SERVE-HF, 
which used PAP treatments in the course of treating patients who had 
been diagnosed with CSA were halted early due to the possibility of 
increased mortality;
     There exists little evidence showing that PAP treatments 
are effective for treatment of non-heart failure patients who have been 
diagnosed with CSA, according to the AASM; and
     Prior to the development of the remed[emacr][supreg] 
System's pivotal trial, there was a lack of prospective, randomized 
data showing a relationship between PAP treatments and morbidity 
outcomes.
    The applicant also believed that positive airway pressure devices 
were more likely to be considered for use in the treatment of patients 
who have been diagnosed with CSA, but without a diagnosis of heart 
failure. Another commenter stated that it agreed with the applicant's 
reasons and supported the rationale for not using PAP treatments as 
comparators in its clinical trials.
    With regard to CMS' concern that claims related to mortality 
following treatment with the remed[emacr][supreg] System are limited, 
the applicant agreed with CMS' assessment and stated that limited 
research on the system's impact on mortality for patients who have been 
diagnosed with CSA has been completed. The applicant further noted that 
mortality information was collected primarily for safety purposes 
during the pivotal trial. Another commenter also agreed with CMS' and 
the applicant's assessment and reiterated the applicant's statements.
    The applicant addressed CMS' concern that the FDA-approved 
indication for the remed[emacr][supreg] System is for all patients 
diagnosed with moderate to severe CSA and not specifically those 
diagnosed with a heart failure comorbidity. The applicant stated that 
the data from the pivotal trial provided evidence that the use of the 
remed[emacr][supreg] System as a treatment option is safe and effective 
for patients who have been diagnosed with CSA, regardless of a heart 
failure comorbidity. Another commenter agreed with the applicant and 
stated that the data from the pivotal trial supported the applicant's 
response regarding the concern of the FDA-approved indication.
    Regarding the concern that baseline statistical comparisons between 
treatment groups were not provided controlling for heart failure 
status, the applicant stated that there were no significant differences 
in baseline CSA disease burden between the treatment and control 
groups. The applicant further stated that, as expected, the heart 
failure and non-heart failure groups differed slightly by age and 
cardiac (for example, atrial fibrillation and hypertension) and other 
comorbidities (for example, hospitalizations within the last 12 months, 
diabetes, renal disease, depression).
    In regard to the results at 6 and 12 months, the applicant stated 
that in all categories, except for quality of life, both the heart 
failure and non-heart failure groups showed statistically significant 
improvements from the baseline. The applicant asserted that for quality 
of life, which did not have a baseline, both groups had greater than 50 
percent of respondents, which demonstrates marked or moderate 
improvement to their quality of life with a higher proportion in the 
non-heart failure group as compared to the heart failure group. Another 
commenter added that given the overall consistent balance achieved 
between the treatment and control groups across the many baseline 
variables examined, there is no evidence suggesting noteworthy 
imbalances to be expected in these subgroups.
    The applicant addressed CMS' concerns related to the differences 
between heart failure and non-heart failure patients who received 
treatment with the remed[emacr][supreg] System. The applicant asserted 
that it is well established that a significant proportion of patients 
who have been diagnosed with CSA have a heart failure comorbidity; 64 
percent of patients enrolled in the pivotal trial had a diagnosis of 
heart failure. The applicant stated that it expected a higher 
proportion of heart failure patients enrolled in the study of CSA due 
to the correlated incidence of these diseases and the pivotal trial 
inclusion criteria being based on conventional sleep apnea metrics and 
not comorbidities. The applicant further stated that, regardless of the 
patients' comorbidity status, patients experienced consistent and 
durable improvements with the use of the remed[emacr][supreg] System as 
a treatment option.
    The applicant responded to CMS' concern regarding the small sample 
size used for the pivotal trial. The applicant stated that the sample 
size was chosen with an alpha error of 0.025, a power of 80 percent, an 
expected 50 percent response rate in the treatment group, and a 25 
percent response rate in the control group. The applicant further 
stated that the study accounted for a 15 percent implantation failure 
and a 10 percent drop-out rate. The applicant indicated that, 
ultimately, the trial randomized 151 patients, with 147 successful 
implantations. Another commenter stated that the results showing highly 
statistical significance were derived from a sample size of patients 
across 31 different places around the world and, therefore, are 
generalizable.
    The applicant responded to CMS' interest in longer term follow-up 
data. The applicant stated that 12-month follow-up data was recently 
published providing 12 months of treatment data for patients enrolled 
in the treated group and 6 months of treatment data for patients 
enrolled in the control group. Other commenters stated that 12-month 
follow-up data results are available and show continued durability of 
6-month results.
    The applicant addressed CMS' concern about the potential for 
electrical stimulation of unintended targets and interference from 
outside devices. The applicant stated that 42 percent of the patients 
involved in the pivotal trial had a concomitant cardiac device. The 
applicant stated that interactions between devices are not unique to 
the remed[emacr][supreg] System and that only three serious device 
interactions were reported, all of which were resolved with 
reprogramming. The applicant further indicated that, all except 1 of 
the 21 extra-respiratory stimulation cases that occurred were resolved 
with routine reprogramming of the remed[emacr][supreg] System, the 
other required repositioning of the lead. Ultimately, 96 percent of the 
patients enrolled in the pivotal trial would elect to have the medical 
procedure again.
    Lastly, the applicant addressed CMS' concern about longevity of the 
implanted device, batteries, and leads. The applicant stated that the 
expected typical battery life is 41 months, which is consistent with 
other implanted neurostimulation devices. The applicant further stated 
that the leads were FDA pre-market approved and designed based on 
predicate, permanent cardiac pacing leads for which the standards are 
more rigorous than those for neurostimulation. The applicant indicated 
that, the leads, therefore, compare favorably to leads used for 
neurostimulation in categories such as lead breakage, connector 
failure, lead dislodgement, and infection.

[[Page 41320]]

    Another commenter responded to CMS' concern about the possible 
failure in randomization when controlling for heart failure status. The 
commenter stated that it does not consider the reported baseline 
difference as a failure of randomization. The commenter further noted 
that, of the approximately 50 baseline factors examined and reported in 
the clinical study report from the pivotal trial, only MAI had a p-
value equal to less than 0.05 associated with a study group difference.
    Many commenters stated that the remed[emacr][supreg] System 
represented a substantial clinical improvement and referenced clinical 
data, in general, and others specifically mentioned the pivotal trial 
results as demonstration of the improved benefit over existing 
treatment options. These commenters also noted that the use of the 
remed[emacr][supreg] System and the mechanism of action of phrenic 
nerve stimulation showed sustained benefits for patients who have been 
diagnosed with CSA and received treatment using the system.
    Response: We appreciate the thoroughness of the additional 
information and analyses provided by the applicant and commenters in 
response to our concerns regarding whether the technology meets the 
substantial clinical improvement criterion. We agree with the applicant 
and commenters that the use of the remed[emacr][supreg] System 
represents a substantial clinical improvement over existing 
technologies because, based on the information provided by the 
applicant, it substantially improves relevant metrics related to the 
CSA condition, regardless of whether there is the presence of heart 
failure comorbidities. Specifically, the applicant provided data which 
demonstrated the effectiveness of the remed[emacr][supreg] System for 
the treatment of moderate and severe CSA in all treated patients, 
regardless of a heart failure comorbidity. Patients without a diagnosis 
of heart failure benefited from treatment involving the 
remed[emacr][supreg] System, as well as those with a diagnosis of heart 
failure. Furthermore, the applicant and commenters provided evidence to 
allay our concerns as they related to a lack of use of CPAP as a 
comparator for the remed[emacr][supreg] System in clinical trials, 
baseline data regarding differences between heart failure and non-heart 
failure groups, a small sample size in the pivotal trial, longer term 
follow-up data, the potential for interplay between concomitant 
devices, and the longevity of the device, batteries, and leads.
    After consideration of the public comments we received, we have 
determined that the remed[emacr][supreg] System meets all of the 
criteria for approval for new technology add-on payments. Therefore, we 
are approving new technology add-on payments for the 
remed[emacr][supreg] System for FY 2019. Cases involving the use of the 
remed[emacr][supreg] System that are eligible for new technology add-on 
payments will be identified by ICD-10-PCS procedures codes 0JH60DZ and 
05H33MZ in combination with procedure code 05H03MZ (Insertion of 
neurostimulator lead into right innominate vein, percutaneous approach) 
or 05H043MZ (Insertion of neurostimulator lead into left innominate 
vein, percutaneous approach).
    In its application, the applicant estimated that the average 
Medicare beneficiary would require the surgical implantation of one 
remed[emacr][supreg] System per patient. According to the application, 
the cost of the remed[emacr][supreg] System is $34,500 per patient. 
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 
the use of the remed[emacr][supreg] System is $17,250 for FY 2019. In 
accordance with the current indication for the use of the 
remed[emacr][supreg] System, CMS expects that the remed[emacr][supreg] 
System will be used for the treatment of adult patients who have been 
diagnosed with moderate to severe CSA.
e. Titan Spine nanoLOCK[supreg] (Titan Spine nanoLOCK[supreg] Interbody 
Device)
    Titan Spine submitted an application for new technology add-on 
payments for the Titan Spine nanoLOCK[supreg] Interbody Device (the 
Titan Spine nanoLOCK[supreg]) 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[supreg] 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-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[supreg]'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[supreg] received FDA 
clearance for the use of five lumbar interbody devices and one cervical 
interbody device: The nanoLOCK[supreg] TA--Sterile Packaged Lumbar ALIF 
Interbody Fusion Device with nanoLOCK[supreg] surface, available in 
multiple sizes to accommodate anatomy; the nanoLOCK[supreg] TAS--
Sterile Packaged Lumbar ALIF Stand Alone Interbody Fusion Device with 
nanoLOCK[supreg] surface, available in multiple sizes to accommodate 
anatomy; the nanoLOCK[supreg] TL--Sterile Packaged Lumbar Lateral 
Approach Interbody Fusion Device with nanoLOCK[supreg] surface, 
available in multiple sizes to accommodate anatomy; the 
nanoLOCK[supreg] TO--Sterile Packaged Lumbar Oblique/PLIF Approach 
Interbody Fusion Device with nanoLOCK[supreg] surface, available in 
multiple sizes to accommodate anatomy; the nanoLOCK[supreg] TT--Sterile 
Packaged Lumbar TLIF Interbody Fusion Device with nanoLOCK[supreg] 
surface, available in multiple sizes to accommodate anatomy; and the 
nanoLOCK[supreg] TC--Sterile Packaged Cervical Interbody Fusion Device 
with nanoLOCK[supreg] surface, available in multiple sizes to 
accommodate anatomy.
    The applicant received FDA clearance on December 14, 2015, for the 
nanoLOCK[supreg] TCS--Sterile Package Cervical Stand Alone Interbody 
Fusion Device with nanoLOCK[supreg] 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[supreg] 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[supreg] would begin on October 1, 2016. 
Procedures involving the Titan Spine nanoLOCK[supreg] technology can be 
identified by the following ICD-10-PCS Section ``X'' New Technology 
codes:
     XRG0092 (Fusion of occipital-cervical joint using 
nanotextured surface interbody fusion device, open approach);

[[Page 41321]]

     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.
    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. In the proposed 
rule we noted 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[supreg] 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[supreg]'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[supreg] 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 believed 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[supreg] interbody devices, contain 
optimized nano 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[supreg]'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[supreg]'s surface is created by using a reductive process of 
the titanium itself. The applicant asserted that use of the Titan Spine 
nanoLOCK[supreg] 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 (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 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 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 textured surfaces has demonstrated 
greater promotion of osteoblast differentiation when compared to use of 
PEEK-based surfaces.
    The applicant maintains that the nanoLOCK[supreg] 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 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

[[Page 41322]]

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[supreg] 
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[supreg] 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[supreg] 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[supreg] technology is 
substantially similar to existing technologies.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20316), we stated 
we were concerned that the Titan Spine nanoLOCK[supreg] interbody 
devices may be substantially similar to currently available titanium 
interbody devices because other roughened 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 were concerned 
that the Titan Spine nanoLOCK[supreg] interbody devices use the same or 
similar mechanism of action as other devices.
    We invited public comments on whether the Titan Spine 
nanoLOCK[supreg] interbody devices are substantially similar to 
existing technologies and whether these devices meet the newness 
criterion.
    Comment: One commenter stated that similar products to the 
nanoLOCK[supreg] interbody devices exist, and there is no unbiased 
research to support the applicant's claims of the technology's results. 
Several commenters referenced studies that show that nano-scale 
enhanced Ti6A14V interbody fusion device surfaces promote a cellular 
response to bone growth. The commenters stated that these studies show 
that cells in the osteoblast lineage (MSCs, osteoprogenitor cells, and 
osteoblasts) exhibited a more mature osteoblast phenotype when grown on 
microtextured Ti and Ti6Al4V surfaces than on tissue culture 
polystyrene (TCPS) or on other polymers like PEEK. The commenters 
further stated that, moreover, cells on the Ti6Al4V surfaces produced 
less inflammatory mediators, less apoptotic factors and less necrosis 
factors than cells on PEEK surfaces (rough < smooth Ti6Al4V <<< smooth 
PEEK) and that PEEK surfaces have long been associated with increased 
fibrous encapsulation in vivo, which was recently identified to be due 
to a direct upregulation of inflammatory factors from mesenchymal stem 
cells growing on PEEK.
    Response: We agree with the commenter that similar products to the 
nanoLOCK[supreg] interbody devices exist. We also believe that the 
current research supports the applicant's assertion that the 
technology's nanoscale features, which exhibit a biological effect 
(osteoblastic activity), have not been seen in other interbody fusion 
devices. After consideration of the public comments we received, we 
believe that the Titan Spine nanoLock[supreg] uses a unique mechanism 
of action, a nano-scale level surface technology, to enhance bone 
growth. Therefore, we believe the Titan Spine nanoLock[supreg] is not 
substantially similar to other existing technologies and meets the 
newness criterion.
    The applicant provided three analyses of claims data from the FY 
2016 MedPAR file to demonstrate that the Titan Spine nanoLOCK[supreg] 
interbody devices meet the cost criterion. In the proposed rule, we 
noted that cases reporting procedures involving lumbar and cervical 
interbody devices would map to different MS-DRGs. As discussed in the 
Inpatient New Technology Add 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 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[supreg] lumbar interbody devices. This resulted in a final 
inflated average case-weighted standardized charge per case of 
$174,688, which exceeded the average

[[Page 41323]]

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 exceeded 
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-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 final inflated average case-
weighted standardized charge per case of $149,915, which exceeded the 
average case-weighted Table 10 MS-DRG threshold amount of $104,094.
    Because the final inflated average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount in 
all of the applicant's analyses, the applicant maintained that the 
technology met the cost criterion.
    We invited public comments on whether the Titan Spine 
nanoLOCK[supreg] meets the cost criterion.
    We did not receive any public comments concerning whether the Titan 
Spine nanoLOCK[supreg] meets the cost criterion or the cost analysis 
presented in the proposed rule. We believe that the Titan Spine 
nanoLOCK[supreg] meets the cost criterion.
    With regard to the substantial clinical improvement criterion for 
the Titan Spine nanoLOCK[supreg] 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[supreg] 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. In the proposed rule, we noted 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[supreg] 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 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

[[Page 41324]]

(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[supreg] patients from ``Baseline,'' 
based on improvement at earlier than standard time points.
    In the proposed rule, we stated we were 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 limited 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 indicated we were 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 stated that we were 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[supreg] 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, raised concerns for the 
interpretation of these results. We also stated that we were 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[supreg] devices versus conventional and other 
intervertebral body fusion devices, as there were no comparisons to 
current therapies. As noted in the proposed rule and above, the 
applicant did not provide an explanation of why the outcomes studied in 
the case series were chosen for review. Therefore, we believed that we 
may have had insufficient information to determine if the outcomes 
studied in the case series are validated proxies for evidence that the 
nanoLOCK[supreg]'s surface promotes greater osteoblast differentiation 
when compared to use of PEEK-based surfaces. We invited public comments 
regarding our concerns, including with respect to why the outcomes 
studied in the case series were chosen for review.
    We note that, we did not receive any public comments with respect 
to why the outcomes in the case series were selected for review.
    The applicant's second clinical evaluation was a case-control study 
with a 1:5 case to control ratio. The applicant used deterministically 
linked, de-identified, individual 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).
    In the proposed rule (83 FR 20318), we stated we were 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 stated that we were unable to determine 
whether the findings regarding lengths of stay and cumulative post-
surgical opioid use for patients who received treatment involving the 
nanoLOCK[supreg] devices versus conventional intervertebral body fusion 
devices represent a substantial clinical improvement. We stated that 
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 were concerned 
that the interpretation of the results may be limited. Finally, we 
stated we were 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[supreg] 
device. For these reasons, we stated that we were concerned that the 
current data do not support a substantial clinical

[[Page 41325]]

improvement over the currently available devices used for lumbar and 
cervical DDD treatment.
    In the proposed rule, we noted 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 received treatment involving the 
nanoLOCK[supreg] devices versus patients receiving treatment involving 
other interbody fusion devices. We invited public comments on whether 
the Titan Spine nanoLOCK[supreg] meets the substantial clinical 
improvement criterion.
    Comment: The applicant submitted a Milligram Morphine Equivalent 
(MME) analysis. According to the applicant, the purpose of the analysis 
is to demonstrate support for the ``substantial clinical value'' in the 
reduction of MME with the implant of a Titan Spine nanoLOCK[supreg] 
device. The applicant indicated that the MME analysis was conducted to 
assess the impact of nanoLOCK[supreg] versus control devices on total 
MME and narcotic usage. The applicant submitted the results of the MME 
analysis as additional demonstration to support the representation of a 
substantial clinical improvement over existing technologies as stated 
in their application, and indicated that the data will be published 
soon as a peer-reviewed journal article. The applicant explained that 
control devices represented a mix of interbody fusion devices, 
including PEEK and alternative roughened titanium devices without nano-
surface technology. The applicant stated that all nanoLOCK[supreg] 
patients were classified as having an interbody fusion device with a 
nano technology coated surface. The applicant further indicated that 
all patients received either an allograft or autograft biologic in 
addition to the implant device. The applicant stated that follow-up 
time was recorded at 3 points: Follow-up #1--28.71 days (S.D. 20.64); 
Follow-up #2--65.07 days (S.D. 33.91); and Follow-up #3--104.21 days 
(S.D. 40.91). According to the applicant, a patient's baseline MME was 
also a significant predictor of MME at first follow-up when adjusted 
for all other variables in the model. The applicant stated that, at 
Follow-up #1, there was a total of 926 patients with data regarding the 
days from surgery to the first follow-up. The applicant indicated that, 
according to the MME analysis, of the 926 patients at the time of 
Follow-up #1, 47 patients had missing data. The applicant further 
stated that results show there were 873 patients with data on narcotic 
usage at the time of the first follow-up, with 100 patients with 
missing data, and 391 patients with data on the total MME, with 582 
missing data at the time of final analysis of follow-up #1. The 
applicant stated that the results from the remaining 391 patients 
represent only 42 percent of the original study participants. The 
applicant explained that results indicated the mean total MME of 
patients was 21.83 units (SD: 42.63). The applicant further stated that 
there were 349 patients who were using narcotics for pain at the time 
of their first follow-up. The applicant explained that all missing data 
was addressed through pairwise deletion. The applicant believed that 
this analysis further demonstrated that patients who received 
nanoLOCK[supreg] had a significantly lower total MME at first follow-up 
when compared to control devices patients when adjusted for the 
following variables: Age, male versus female, history of prior spine 
surgery, current smoker versus non-smoker, baseline MME, concomitant 
medical condition, cervical versus lumbar, nanoLOCK[supreg] versus 
control, single versus multi-level surgery, and intra-op complication. 
The applicant stated that, based on the results of the MME analysis, 
the use of nanoLOCK[supreg] reduced total MME by MME 24.47 units (95 
percent CI: 14.42 to 34.52 units) more than patients who received 
treatment using a control device. The applicant explained that a 
patient's baseline MME was also a significant predictor of MME at first 
follow-up when adjusted for all other variables in the model. The 
applicant noted that the lack of standardized registries to collect 
spine data, combined with the inability to access CMS registry 
information in advance, means that the multiple examples provided by 
the applicant regarding the use of nanoLOCK[supreg] are the most robust 
information available and the consistency in outcomes with statistical 
significance means the product's attributes generate clinical value.
    Response: We appreciate the additional data provided by the 
applicant. However, we are unable to determine the substantial clinical 
value based on the analysis' data, due in part to the vast amount of 
missing data and inconsistencies in the data provided. For example, at 
each point of follow-up the number of patients in the analysis' cohort 
is reduced, and ``missing'' numbers of patients in the cohort are 
listed. Although the analysis attempts to account for the missing 
patients and patients' data by pairwise deletions, we are unable to 
determine a consistent cohort of patients for which a possible 
reduction in MME usage may have occurred. We attempted to assess for a 
pattern of consistency with the ``missing'' data and have been unable 
to determine any such pattern. Additionally, while the applicant stated 
that it used a sample size of n=926 patients, throughout the analyses 
we noted varying numbers of patients for many of the variables included 
as covariates, making it difficult to arrive at a meaningful 
conclusion. We also note that the applicant did not provide further 
information on our concern for the 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).
    Comment: One commenter stated that the nanoLOCK[supreg] provides a 
substantial clinical benefit, which is evidenced by multiple third-
party analytics evaluations that were performed outside of the 
manufacturer's control. The commenter stated that these analytic 
evaluations have found that the nanoLOCK[supreg] technology has led to 
reduced hospital inpatient mean length of stay, fewer total 
readmissions over 30 days post operation, and decreased use of 
prescription opioids for post-operative spinal surgery patients. 
However, the commenter did not provide the specific third-party 
analytic evaluations with its public comment submission. Several 
commenters believed that the nanoLOCK[supreg] technology represents a 
substantial clinical improvement over current devices based on personal 
experience. One commenter stated that within its specific patient 
population, patients are returning to work faster, participating in 
more physical therapy, and reducing their use of opiate pain 
medications. Another commenter with personal experience with the 
nanoLOCK[supreg] technology also stated that substantial improvement 
within the fusion patient population had been recognized because of the 
granted access to the nano-surface technology. The commenter noted that 
patients are back to work earlier, starting physical therapy earlier, 
and require less narcotic medication after surgery compared to earlier 
patients who received treatment involving other fusion implants.
    Response: We appreciate the input and additional information from 
the commenters in support for the Titan Spine nanoLOCK[supreg] based on 
personal surgical experience and third party analytics. However, we 
note that the comments based on personal surgical experience were of a 
qualitative nature and did not contain objective data to support 
whether the Titan Spine nanoLOCK[supreg] meets the substantial

[[Page 41326]]

clinical improvement criterion. We believe that the Titan Spine 
nanoLock[supreg] may potentially be a viable alternative to existing 
technologies. However, the data provided did not show that use of 
nanoLock[supreg] interbody fusion devices provides a substantial 
clinical improvement over existing technologies.
    After consideration of all the information from the applicant, as 
well as the public comments we received, we are unable to determine if 
the Titan Spine nanoLOCK[supreg] represents a substantial clinical 
improvement over the currently available devices used for lumbar and 
cervical DDD treatment due to a lack of significant and meaningful 
data. As stated above, we remain concerned that the current data does 
not adequately support a sufficient 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[supreg] device to determine that the technology 
represents a substantial clinical improvement over existing available 
options. Therefore, after consideration of all of the new technology 
add-on payment criteria we are not approving new technology add-on 
payments for the Titan Spine nanoLock[supreg] devices for FY 2019.
f. ZEMDRITM (Plazomicin)
    Achaogen, Inc. submitted an application for new technology add-on 
payments for Plazomicin for FY 2019. We note that, since the 
publication of the proposed rule, the applicant has announced that the 
trade name for Plazomicin is ZEMDRITM. According to the 
applicant, ZEMDRITM (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. We stated in the proposed rule that 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, was 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). We indicated that the applicant 
stated that it expected 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 
received approval from the FDA on June 25, 2018, for Plazomicin with 
the trade name ZEMDRITM for use in the treatment of adults 
with cUTIs, including pyelonephritis.
    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-
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.
    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. In the FY 2019 
IPPS/LTCH PPS proposed rule (83 FR 20320), we indicated that Plazomicin 
had not received approval from the FDA as of the time of the 
development of the proposed rule. However, as noted previously, the 
applicant received approval from the FDA on June 25, 2018, for 
Plazomicin with the trade name ZEMDRITM for use in the 
treatment of adults with cUTIs, including pyelonephritis. We note that, 
for the remainder of this discussion in this final rule, the two 
technology names are referenced interchangeably. The applicant did not 
receive FDA approval for use in the treatment of BSIs.
    The applicant's request for approval for a unique ICD-10-PCS 
procedure code to identify the use of ZEMDRITM was granted, 
and the following procedure codes: XW033G4 (Introduction of Plazomicin 
anti-infective into peripheral vein, percutaneous approach, new 
technology group 4) and XW043G4 (Introduction of Plazomicin anti-
infective into central vein, percutaneous approach, new technology 
group 4) are effective October 1, 2018.
    As discussed earlier, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and would not be considered ``new'' 
for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome, the 
applicant asserted that 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

[[Page 41327]]

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-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, in the proposed rule, we stated we were 
concerned that the mechanism of action of Plazomicin appeared 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 invited 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.
    Comment: The applicant stated, in response to CMS' concern, that 
ZEMDRITM's (Plazomicin's) mechanism of action is not 
substantially similar to that of existing aminoglycosides because 
modifications in the chemical structure allow ZEMDRITM to 
both withstand resistance and reach the target site of action for 
antibacterial efficacy. The applicant indicated that 
ZEMDRITM is the first intravenous (IV) aminoglycoside 
approved by the FDA in over 35 years that uses a protein synthesis as 
its target site, combined with unique structural modifications that 
withstand bacterial resistance mechanisms that render currently 
marketed aminoglycosides ineffective. The applicant believed that 
consideration of the mechanism of action for antibiotics should include 
how it defends itself against inactivation by the bacteria, in addition 
to how it kills the bacteria because the increasing emergence of 
antibiotic resistance requires that new drugs not only exert 
bactericidal action, but also how the new drugs overcome bacterial 
resistance. The applicant stated that the ability of an antibiotic to 
withstand resistance is equally important as the ability to work at the 
target site because without the first action, the latter would not 
matter. Therefore, the applicant posited that, while 
ZEMDRITM's mechanism of bacterial killing is similar to 
other aminoglycosides, its ability to withstand antibiotic resistance 
due to AMEs is substantially different and represents an improvement in 
the treatment of patients diagnosed with serious gram-negative 
bacterial infections. The applicant indicated that, in the event of 
resistance, the antibiotic cannot kill the bacteria without further 
extension of mechanisms to protect against this resistance, regardless 
of its site of action. The applicant stated that other aminoglycosides, 
in contrast to ZEMDRITM, do not have the modifications that 
allow them to withstand common mechanisms of resistance and, thereby, 
cannot bind to the target site of antibacterial action and are 
inactive. The applicant further explained that, specifically, the 
structural modifications in Plazomicin protects the antibiotic from 
most AMEs produced by bacteria that inactivates other aminoglycosides 
including gentamicin, tobramycin, and amikacin. The applicant stated 
that ZEMDRITM inhibits 90 percent of the Enterobacteriaceae, 
including those resistant to one or more aminoglycoside antibiotics at 
a concentration of <=4 mcg/mL (the proposed breakpoint for Plazomicin). 
The applicant also noted that ZEMDRITM is already protected 
by at least four issued patents in the U.S., representing the general 
innovative and novel characteristics of the compound.
    Another commenter noted that CMS' concerns focused on commonalities 
between Plazomicin and other antibiotics in the same general antibiotic 
class, and stated that the unique benefits of this medicine should not 
be ignored due to the substantial similarities to other medicines, 
given the recognized shortage of new antibiotics.
    Response: We appreciate the applicant and the commenter's input 
regarding the technology. After consideration of the comments we 
received from the applicant regarding ZEMDRITM's mechanism 
of action, we agree that ZEMDRITM's ability to withstand 
antibiotic resistance is a critical component of its mechanism of 
action because it enables the antibiotic to effectively inhibit 
bacterial protein synthesis despite aminoglycoside resistance.
    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.
    Comment: The applicant agreed with CMS and stated that use of 
ZEMDRITM will not change the MS-DRG assignment for potential 
cases representing eligible patients.
    Response: We appreciate the applicant's input. We note that, the 
FDA approval for ZEMDRITM was only for the treatment of 
patients 18 years of age or older who have been diagnosed with a cUTI, 
including pyelonephritis, and not for the other proposed indication of 
bacteremia/BSI. Therefore, we are only considering the MS-DRG 
assignment for potential cases representing eligible patients for the 
approved indication.
    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, we indicated in the 
proposed rule that 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. We stated that because the 
applicant anticipated that Plazomicin would 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, we stated that it is possible that existing 
antimicrobials could also be used to treat those same bacteria 
Plazomicin is

[[Page 41328]]

intended to treat. Specifically, we indicated that the applicant was 
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. We stated that because the susceptible organisms for 
which Plazomicin was proposed to be indicated include nonresistant 
strains that existing antibiotics may effectively treat, we were 
concerned that Plazomicin may not treat a new patient population. 
Therefore, we invited public comments on whether Plazomicin treats a 
new type of disease or a new patient population. We also invited public 
comments on whether Plazomicin is substantially similar to any existing 
technologies and whether it meets the newness criterion. As noted 
previously, Plazomicin received approval with the trade name 
ZEMDRITM for use in the treatment of patients 18 years of 
age or older with cUTI, including pyelonephritis.
    Comment: The applicant disagreed with CMS' concern that 
ZEMDRITM may not treat a new patient population, and stated 
that most existing antibiotics are not effective against MDR strains of 
bacteria, especially extended spectrum b-lactamase (ESBL)-producing 
Enterobacteriaceae and CRE. The applicant further stated that, because 
of the FDA's methodology for determining antibiotic labels and 
indication of bacteria, ZEMDRITM is indicated for resistant 
and also nonresistant strains of bacteria, but the FDA label approving 
ZEMDRITM for the treatment of diagnoses of cUTIs, including 
pyelonephritis, includes the following statement limiting the 
indication to a new patient population: As only limited clinical safety 
and efficacy data are available, reserve ZEMDRITM for use in 
patients who have limited or no alternative treatment options. The 
applicant further indicated that ZEMDRITM treats a new 
patient population because patients infected with pathogens that are 
resistant to other antibiotics include patients with infections due to 
CRE, which is considered ``untreatable'' or ``hard to treat'' by the 
CDC. The applicant emphasized that the CDC cautions that CRE infections 
are increasing and resistant to ``all or nearly all'' antibiotics. The 
applicant stated that ZEMDRITM meets CMS' criterion for 
newness by providing, due to its mechanism to withstand resistance and 
its potent activity against CRE considered by the CDC as 
``untreatable'', a new treatment choice for a patient population that 
may not have a viable option for a cure.
    Several other commenters supported the approval of new technology 
add-on payments for Plazomicin, and believed that Plazomicin treats a 
new patient population with very limited treatment options. The 
commenters specifically indicated that there is a need for new 
antibiotics to combat the crisis of multi-drug resistant bacteria, 
especially CRE infections. The commenters stated that there at least 
70,000 cases of CRE annually in the United States, and the number is 
expected to double in 4 years. The commenters also noted that the CDC 
estimates that CRE infections are associated with mortality rates of up 
to 50 percent and occur in the most medically vulnerable patient 
populations. The commenters further recommended CMS acknowledge that as 
these organisms are becoming resistant to last-line antibiotic drugs, 
clinicians frequently face infections with no realistic treatment 
options for patients. The commenters also indicated that the CDC 
identified CRE as one of the three urgent drug-resistant threats to 
human health, and issued warning that without urgent action more 
patients will be ``thrust back to a time before we had effective 
drugs.'' Another commenter also noted that the World Health 
Organization identified CRE as one of the three pathogens with the 
highest priority for research and development of novel antimicrobials, 
and stated that Plazomicin is new because it has demonstrated 
superiority over historic regimens for the management of invasive CRE 
infections.
    The applicant and other commenters also stated that, even with 
newly approved antibiotic products with activity against some CRE, 
development of resistance has already been reported resulting in 
patients having no other available treatment options. The applicant and 
other commenters further stated that there is a need for more than one 
effective antibiotic active against CRE for many reasons, including 
various patient characteristics such as drug allergies, source location 
of bacteria, and the need for two active antibiotics given at the same 
time--a common practice for multi-drug or pan-drug resistance. 
Therefore, the commenters believed that multiple antibiotic treatment 
options are necessary and the existence of other effective antibiotics 
does not preclude a new antibiotic such as ZEMDRITM from 
representing an improved benefit for a patient population with limited 
or no other available treatment options.
    Another commenter stated that it, generally, supported CMS' 
concerns regarding the substantial similarity criteria for Plazomicin.
    Response: We appreciate the applicant's and other commenters' input 
on whether ZEMDRITM treats a new patient population. We 
understand that antibiotic resistance poses a significant threat to 
human health and that clinicians seek new antibiotics to treat multi-
drug resistant infections, particularly those caused by CRE. Regarding 
our concern that ZEMDRITM is indicated for resistant and 
also nonresistant strains of bacteria, we believe the FDA label 
approving ZEMDRITM for the treatment of adult patients 
diagnosed with a cUTI, including pyelonephritis, addresses this concern 
by reserving ZEMDRITM for use in patients who have limited 
or no alternative treatment options.
    After consideration of the public comments we received, we believe 
that the mechanism of action for ZEMDRITM is new, as 
discussed above. Therefore, we believe that ZEMDRITM is not 
substantially similar to any existing technologies and consequently 
meets the newness criterion. We consider the beginning of the newness 
period to commence when ZEMDRITM was approved by the FDA on 
June 25, 2018.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that the technology meets the cost 
criterion. The analyses submitted by the applicant and presented in the 
proposed rule and below were for the indications of cUTI and BSI 
because the applicant was seeking FDA approval for both indications. 
However, as noted earlier, the technology was only approved for use in 
the treatment of cUTI, including pyelonephrits. Therefore, while we 
summarize both analyses below, as presented in the proposed rule, we 
note that only the cost information related to cUTI is evaluated to 
demonstrate that the applicant meets the cost criterion. We stated in 
the proposed rule that in order to identify the range of MS-DRGs that 
potential cases representing patients who have been diagnosed with the 
specific types of infections for which the technology had 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

[[Page 41329]]

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).
    For the cost analysis summarized in the proposed rule, 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 
anticipated 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-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 had 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 exceeded the average case-
weighted threshold amount in both scenarios, the applicant maintained 
that the technology met 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 that we 
summarized in the proposed rule, 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. For the additional cost analyses summarized in the proposed 
rule, 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).
    According to the applicant's analyses submitted prior to the FDA 
approval, as stated in the proposed rule, 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-
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 final 
inflated case-weighted standardized charge per case did not

[[Page 41330]]

exceed 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, at $329 less than the 
average case-weighted threshold amount. In the proposed rule, we noted 
that because the applicant had 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-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. In the proposed rule, we noted that 
because the applicant had 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 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 invited public comments on whether 
Plazomicin meets the cost criterion.
    We note that the FDA approval for ZEMDRITM was only for 
the treatment of adults with complicated urinary tract infections cUTI, 
including pyelonephritis, and not for the other proposed indication of 
BSI. Therefore, we are only considering the cost analysis supplied by 
the applicant which considered potential cases representing patients 
who have been diagnosed with cUTI who may be eligible for treatment 
involving Plazomicin.
    Comment: The applicant believed that ZEMDRITM met the 
cost criterion, but supplied additional information that included the 
pricing for ZEMDRITM to update the cost threshold analyses 
presented in the proposed rule. The applicant noted in supplemental 
information submitted to CMS the WAC of ZEMDRITM (which is 
supplied as 500mg/10ml (50mg/mL) solution in a single dose vial) is 
$330 per vial. The applicant indicated that the recommended dosage for 
ZEMDRITM is 15mg/kg, every 24 hours administered as an IV 
infusion based on patient weight. The applicant stated that, because 
each vial contains 1,000 mg of ZEMDRITM, a single vial 
provides the complete recommended dose for a single patient who weighs 
100 kg or less. The applicant predicted that patients will typically 
require 3 vials for the course of treatment with ZEMDRITM 
per day, and the average duration of ZEMDRITM therapy is 5.5 
days. Therefore, the applicant stated that the total cost of 
ZEMDRITM per patient is $5,445. The applicant utilized the 
national CCR for ``Drugs'' as listed in the FY 2018 IPPS/LTCH PPS final 
rule to estimate hospital charges by dividing the total cost per 
patient by the CCR ($5,445/0.194).
    The applicant also updated the cost threshold analysis including 
hospital charges for ZEMDRITM. The applicant's updated 
analysis applied only to those ICD-10-CM diagnosis codes used to 
identify cases representing patients who have been diagnosed with a 
cUTI and who may be eligible for treatment involving 
ZEMDRITM. The applicant included two scenarios considering 
100 percent of identified cases mapping to 702 MS-DRGs and 75 percent 
of identified cases mapping to 56 MS-DRGs using the FY 2016 MedPAR data 
and the FY 2018 GROUPER Version 36. The applicant stated that, as 
discussed in the FY 2019 IPPS/LTCH PPS proposed rule, 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. The applicant 
further stated that the 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).
    Consistent with the analysis submitted for the proposed rule, 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. Consistent with the analysis 
submitted for the proposed rule, 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 a 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 applicant 
utilized the same methodology described in the FY 2019 IPPS/LTCH PPS 
proposed rule with the exception of adding charges for Plazomicin. The 
applicant removed 50 percent of the charges associated with other drugs 
(associated with revenue

[[Page 41331]]

codes 025x, 026x, and 063x), then standardized the charges and applied 
the 2-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. After adding the charges for Plazomicin, the inflated average 
case-weighted standardized charge per case was $81,935 in the first 
scenario and $73,252 in the second scenario. The applicant indicated 
that, in the 100 percent of cUTI cases sensitivity analysis, the final 
inflated case-weighted standardized charge per case exceeded the 
average case-weighted threshold amount for potential cases representing 
patients who have been diagnosed with a 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 $30,627 after 
including the cost of Plazomicin. The applicant further stated that, in 
the 75 percent of all cases scenario, the final inflated case-weighted 
standardized charge per case exceeded the average case-weighted 
threshold amount for potential cases representing patients who have 
been diagnosed with a cUTI and who may be eligible for treatment 
involving Plazomicin assigned to the MS-DRGs identified in the 75 
percent sensitivity analysis by $27,000 after including the cost of 
Plazomicin. In both scenarios, the final inflated case-weighted 
standardized charge per case exceeded the average case-weighted 
threshold amount and, therefore, the applicant believed that 
ZEMDRITM continued to meet the cost criterion.
    Response: We appreciate the additional information received from 
the applicant regarding the cost of ZEMDRITM and whether the 
technology meets the cost criterion. After consideration of the public 
comments we received, we agree that ZEMDRITM 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-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. In the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20322), we noted that Plazomicin is not indicated 
exclusively for resistant bacteria, but rather for certain susceptible 
organisms of gram-negative bacteria, including resistant and 
nonresistant strains for which existing antibiotics may be effective. 
We stated we were 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. We note that because the FDA approval was for the cUTI 
indication only, and not the BSI proposed indication, we are only 
summarizing comments pertaining to the cUTI indication and evaluating 
whether ZEMDRITM meets the substantial clinical improvement 
criterion for use in the treatment of cUTI.
    Comment: The applicant stated in response to CMS' concerns that the 
EPIC study evaluated the efficacy of ZEMDRITM against both 
susceptible and resistant organisms (ESBLs) in cUTIs against a highly 
potent antibiotic, meropenem. The applicant noted that, although in 
this study approximately 25 percent of the isolates were beta-lactamase 
producers (ESBL), which are resistant to commonly used antibiotics such 
as penicillins and cephalosporins, the remaining 75 percent were 
susceptible to beta-lactam antibiotics (non-ESBL). Therefore, the 
applicant indicated that, while ZEMDRITM's substantial 
clinical benefit was particularly differentiated in patients with 
infections due to MDR pathogens where limited or no alternative 
therapies are available, ZEMDRITM also demonstrated a 
clinical improvement in patients diagnosed with a cUTI, including acute 
pyelonephritis, against pathogens that are susceptible to other 
antibiotics. The applicant emphasized that the approved FDA label fully 
addresses this concern because it restricts the use of 
ZEMDRITM to patients diagnosed with a cUTI, including 
pyelonephritis, who have limited or no alternative treatment options. 
The applicant stated that the FDA labeling ensures that 
ZEMDRITM is used exclusively to treat patients diagnosed 
with infections due to resistant bacteria and will result in 
ZEMDRITM's use in the treatment of patients where the 
benefit outweighs the risk, which includes patients with infections due 
to resistant pathogens such as ESBL-producing Enterobacteriaceae, non-
susceptible to other currently marketed aminoglycosides, and CRE when 
other antibiotics cannot be used.
    Response: We agree with the applicant that the FDA label addresses 
this concern because it restricts the use of ZEMDRITM to 
patients diagnosed with a cUTI, including pyelonephritis, who have 
limited or no alternative treatment options.
    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 
pyelonephritis.
    The CARE clinical trial was a randomized, open label, multi-center 
Phase III study comparing the efficacy of Plazomicin against colistin 
in the treatment of patients who have been diagnosed with BSIs or 
hospital-acquired bacterial pneumonia (HABP)/ventilator-acquired 
bacterial pneumonia

[[Page 41332]]

(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-up was done at 
test-of-cure (TOC; 7 days after last dose of IV study drug), end of 
study (EOS; day 28), and long-term follow-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, 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-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 stated in the proposed 
rule we were 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 stated that we 
were concerned that the results from the CARE study cannot be used to 
support substantial clinical improvement.
    Comment: A commenter agreed with CMS' assessment that results of 
the CARE study are not statistically significant due to the small 
sample size of 29 patients.
    Response: We appreciate the commenter's input. However, we note 
that, we are no longer evaluating whether ZEMDRITM meets the 
substantial clinical improvement criterion for use in the treatment of 
patients diagnosed with BSI because the FDA did not approve 
ZEMDRITM for that proposed indication.
    The EPIC clinical trial was a randomized, multi-center, multi-
national, double-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-of-cure (TOC) 
was done 15 to 19 days and late follow-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-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

[[Page 41333]]

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 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. 
We expressed in the proposed rule that 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 
maintained 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, in 
the proposed rule, we expressed that we are interested in how this data 
can be extrapolated to a majority of the U.S. population.
    Comment: A commenter agreed with CMS' concern that results from the 
EPIC clinical trial are predominately based on patients enrolled in 
trials in Eastern Europe, and it is not clear how generalizable their 
results would be to patients in the United States. The applicant stated 
that the representation of the patients enrolled in the EPIC trial was 
similar to other recent cUTI studies for drugs approved in the U.S., 
and the spectrum of diagnoses and bacteriology in these studies were 
representative of the epidemiology and standard-of-care used in the 
United States. The applicant further noted that the primary analysis 
excluded pathogens resistant to either study drugs (ZEMDRITM 
or meropenem) and, therefore, avoided imbalances due to geographic 
differences in resistance. The applicant also provided additional data 
to demonstrate that the results from the EPIC trial are generalizable 
to patients treated in the U.S. because the susceptibilities of 
bacteria to ZEMDRITM do not vary between patients in the 
U.S. versus patients in Eastern Europe, and the pharmacokinetic profile 
of ZEMDRITM or meropenem are not affected by race because 
ZEMDRITM and meropenem are cleared almost entirely by the 
kidneys rather than metabolized. The applicant further indicated that, 
in the Phase II study of ZEMDRITM in patients diagnosed with 
a cUTI (ACHN-490-009), a larger number of patients from the U.S. were 
enrolled and outcomes were similar to those observed in the EPIC trial.
    Response: We appreciate the commenter's input and the applicant's 
additional explanation demonstrating the results from the EPIC trial.
    We also stated that it is also unknown how quickly resistance to 
Plazomicin might develop. Additionally, we stated that 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. In the 
FY 2019 IPPS/LTCH PPS proposed rule, we stated we were concerned 
whether there is still statistical superiority of Plazomicin in the 
intended bacterial targets in the mMITT.
    Comment: Regarding our concern about how quickly resistance to 
ZEMDRITM might develop, the applicant stated that 
ZEMDRITM's limited use indication, the short duration of 
therapy, and oversight by the antimicrobial stewardship team will 
prevent development of resistance, which is often associated with 
widespread use of antibiotics. Specifically, the applicant indicated 
that, unlike broad spectrum antibacterial drugs, the FDA restrictions 
of ZEMDRITM's use helps to reduce development of resistance 
and is consistent with antimicrobial stewardship programs recommended 
by the CDC. The applicant also explained that the clinical dose of 15 
mg/kg administered daily was selected to reduce the risk of emergence 
of resistance to ZEMDRITM. The applicant further stated 
that, because Plazomicin is generally not inactivated by common AMEs, 
the primary mechanism of resistance to Plazomicin in Enterobacteriaceae 
is target-site modification in isolates containing 16S-RMTases, which 
are rarely encountered in the U.S. and do not appear to be increasing 
in prevalence despite decades of clinical use of aminoglycoside class; 
16S-RMTases were found in only 0.08 percent or 5 of approximately 6,500 
U.S. Enterobacteriaceae isolates collected during a 2014 through 2016 
surveillance study.
    The applicant also provided data presenting the breakdown of the 
uropathogens identified from baseline urine cultures in the mMITT 
population in the EPIC study, and clarified that statistically superior 
microbiological eradication rates observed with ZEMDRITM 
compared to meropenem at TOC (Table 2) were achieved in the same mMITT 
population used for the primary endpoint.
    Response: We appreciate the additional information received from 
the applicant explaining why ZEMDRITM has a low potential 
for development of resistance and demonstrating ZEMDRITM's 
statistical superiority in the intended bacterial targets in the mMITT 
population.
    Finally, because both Plazomicin and meropenem were also utilized 
in conjunction with levofloxacin, we stated in the proposed rule that 
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.
    Comment: The applicant clarified that levofloxacin was provided 
only as an optional oral step-down therapy after pre-specified criteria 
in the protocol were met, consistent with recent trials of other 
antibiotics that have been evaluated for diagnoses of cUTIs. The

[[Page 41334]]

applicant explained that optional oral step-down therapy is commonly 
used in clinical trials of cUTIs to increase study participation by 
allowing patients to be discharged from the hospital following 
favorable response to IV therapy, rather than staying in the hospital 
for 10 days to receive the IV study drug. With regard to clinical 
practice, the applicant noted that the FDA label does not require 
patients to receive oral therapy following administration of 
ZEMDRITM, and it would be the decision of the treating 
physician if a patient may be switched to an oral agent following IV 
infusion of ZEMDRITM and the physician would determine the 
appropriate oral therapy, if applicable. The applicant indicated that 
levofloxacin did not influence the outcome of the study because it was 
used for a similarly short course in both the ZEMDRITM and 
meropenem group, and the TOC visit outcomes continued to favor 
ZEMDRITM in both patients who received the IV study drug 
only and those who received the IV study drug followed by oral therapy.
    Response: We appreciate the applicant's clarification regarding 
levoflaxin's use in clinical practice, and agree that the use of 
levoflaxin did not negate the study results favoring 
ZEMDRITM because it was used similarly in both groups and 
the TOC visit demonstrated improved outcomes for patients receiving 
only ZEMDRITM, as well as patients receiving 
ZEMDRITM followed by oral antibiotic therapy.
    We invited 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.
    Comment: The applicant and other commenters believed that 
ZEMDRITM represents a substantial clinical improvement for 
patients who have been diagnosed with a cUTI. The commenters stated 
that ZEMDRITM offers a substantial clinical improvement over 
existing aminoglycosides, both in having a higher degree of 
susceptibility against CRE and enhanced potency, which potentially 
allows safer exposures of the drug. Another commenter described some of 
the complications and limitations of existing therapies, including 
colistin, polymyxin, tigecycline, ceftolozane/tazobactam, and 
ceftazidime/avibactam, and the limited effectiveness of antibiotics 
like amikacin, and noted that ZEMDRITM provides an exciting 
option for transitions of care because it can be utilized in the 
outpatient setting and administered once-daily by IV infusion. Another 
commenter, generally, supported granting approval of new technology 
add-on payments for ZEMDRITM and stated that this next-
generation aminoglycoside is a substantial innovation and advancement 
in the treatment of serious bacterial infections due to MDR 
enterobacteriaceae that commonly occur in the hospital setting.
    Response: We appreciate the applicant's and other commenters' input 
on whether ZEMDRITM offers a substantial clinical 
improvement over current therapies for patients who have been diagnosed 
with a cUTI. We believe that ZEMDRITM offers a substantial 
clinical improvement for patients who have limited or no alternative 
treatment options because it is a new antibiotic that offers a 
treatment option for a patient population unresponsive to currently 
available treatments. After consideration of the public comments we 
received, we have determined that ZEMDRITM meets all of the 
criteria for approval of new technology add-on payments. Therefore, we 
are approving new technology add-on payments for ZEMDRITM 
for FY 2019. Cases involving ZEMDRITM that are eligible for 
new technology add-on payments will be identified by ICD-10-PCS 
procedure codes XW033G4 and XW043G4.
    In its application, the applicant estimated that the average 
Medicare beneficiary would require a dosage of 15 mg/kg administered as 
an IV infusion as a single dose. According to the applicant, the WAC 
for one dose is $330, and patients will typically require 3 vials for 
the course of treatment with ZEMDRITM per day for an average 
duration of 5.5 days. Therefore, the total cost of ZEMDRITM 
per patient is $5,445. 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 the use of ZEMDRITM is 
$2,722.50 for FY 2019. In accordance with the current 
ZEMDRITM label, CMS expects that ZEMDRITM will be 
prescribed for adult patients diagnosed with cUTIs, including 
pyelonephritis, who have limited or no alternative treatment options.
g. 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-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. The

[[Page 41335]]

applicant submitted a request for approval for a unique ICD-10-PCS code 
for the administration of GIAPREZATM beginning in FY 2019 
and was granted approval for the following procedure codes effective 
October 1, 2018: XW033H4 (Introduction of synthetic human angiotensin 
II into peripheral vein, percutaneous approach, new technology, group 
4) and XW043H4 (Introduction of synthetic human angiotensin II into 
central vein, percutaneous approach, new technology group 4).
    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[supreg] 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 vasoconstriction. In the FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20325), we stated we were concerned that 
GIAPREZATM's general mechanism of action, increasing blood 
pressure by inducing vasoconstriction through binding to certain G-
protein receptors to stimulate smooth muscle contraction, may be 
similar to that of norepinephrine, albeit leveraging a different body 
system. We invited 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 stated in the proposed rule that 
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. According to the 
applicant, 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, according to the 
applicant, no clinical evidence or consensus for treatments is 
available.
    Based on the applicant's statements as summarized above, we stated 
in the proposed rule that it appears that the applicant is asserting 
that GIAPREZATM provides a new therapeutic treatment option 
for critically-ill patients who have been diagnosed with shock who have 
limited options and worsening prognosis. However, we further stated we 
were 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-approved 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, we stated that 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.
    In the proposed rule, we invited public comments on whether 
GIAPREZATM meets the substantial similarity criteria and the 
newness criterion.
    Comment: The applicant indicated that GIAPREZATM is not 
substantially similar to existing treatment options

[[Page 41336]]

because it is the sole member of a new class of vasopressor peptide, 
and the only one that acts to leverage the renin-angiotensin-
aldosterone (RAAS) system. The applicant stated that 
GIAPREZATM's mechanism of action is unique because 
GIAPREZATM operates in a fundamentally different manner than 
norepinephrine, in addition to leveraging a different body system. The 
applicant noted, specifically, that GIAPREZATM causes 
vasoconstriction of the smooth muscles and stimulates the release of 
aldosterone from the adrenal cortex to promote sodium retention by the 
kidneys, both of which lead to increased blood pressure. The applicant 
explained that, although catecholamines, vasopressin, and angiotensin 
II all engage G-coupled protein receptors for their function, they 
engage entirely different G-coupled receptors subtypes and engage 
different receptor targets. The applicant further described the 
biochemical pathways unique to angiotensin, and recommended that CMS 
consider the feedback mechanisms present in the classical RAAS,\123\ 
which enable GIAPREZATM to be more effective in the 
treatment of diagnosis of shock than standard-of-care vasopressors. The 
applicant provided literature and specific citations that suggested ACE 
activity is diminished in conditions associated with vasodilatory 
shock, which would result in a state of relative angiotensin II 
deficiency, that is, excess angiotensin I, similar to a state induced 
by ACE inhibitor treatment in patients who have been diagnosed with 
essential hypertension.\124\ \125\ According to the applicant, in 
vasodilatory shock syndromes, the addition of exogenous angiotensin II 
attenuates production of angiotensin I by suppressing release of renin 
at the juxtaglomerular apparatus, and potentially reduces angiotensin 
(1-7) levels, resulting in a more normalized angiotensin I to/
angiotensin II ratio and a reduced endogenous vasodilator drive. In 
contrast, the applicant asserted that norepinephrine is a catecholamine 
that functions as a peripheral vasoconstrictor by acting on alpha-
adrenergic receptors and an inotropic stimulator of the heart and a 
dilator of coronary arteries, a result of its activity at the beta-
adrenergic receptors. The applicant stated that, GIAPREZATM, 
however, has a non-adrenergic mechanism of action that contributes to 
its catecholamine-sparing effect. The applicant indicated that 
GIAPREZATM can be administered in combination with 
norepinephrine because GIAPREZATM affects vasoconstriction 
not by augmentation of norepinephrine, but by way of an entirely novel 
mechanism.
---------------------------------------------------------------------------

    \123\ Sparks MA, Crowley SD, Gurley SB, Mirotsou M, Coffman TM. 
Classical renin-angiotensin system in kidney physiology. 
Comprehensive Physiology. 2014;4(3):1201-1228. doi:10.1002/
cphy.c130040.
    \124\ Luque M, Martin P, Martell N, Fernandez C, Brosnihan KB, 
Ferrario CM. Effects of captopril related to increased levels of 
prostacyclin and angiotensin-(1-7) in essential hypertension. J 
Hypertens. 1996;14:799-805.
    \125\ Balakumar P, Jagadeesh G. A century-old renin-angiotensin 
system still grows with endless possibilities: AT1 receptor 
signaling cascades in cardiovascular physiopathology. Cell Signal. 
2014;26(10):2147-60.
---------------------------------------------------------------------------

    One commenter pointed out that vasoconstriction is a very general 
and fundamental physiologic mechanism by which blood pressure is 
regulated, such that it would occur with any regimen for treating 
patients who have been diagnosed with shock.
    Other commenters stated that current standard-of-care treatment 
options only target two of the three major biological systems 
regulating MAP, which makes GIAPREZATM the first and only 
FDA-approved synthetic human angiotensin II treatment option that 
activates the RAAS to increase MAP. The commenters believed that 
GIAPREZA TM's unique mechanism of action supports a multi-
modal approach to the treatment of patients who have been diagnosed 
with shock that mimics the body's natural response to hypotension, and 
offers physicians a critical new tool for saving lives.
    With respect to the second criterion, the applicant indicated that 
there are inherent difficulties in capturing specific patient types for 
a condition such as a diagnosis of shock, and explained that the 
current structure of the MS-DRG payment system does not yet have the 
refined elements necessary to identify those patients likely to respond 
to treatment involving GIAPREZA TM. The applicant emphasized 
that the MS-DRGs for Septicemia or Severe Sepsis with or without 
Mechanical Ventilation >96 Hours are MS-DRGs that are noted frequently 
as being in the top 10 highest volume Medicare MS-DRGs reported overall 
each year. The applicant believed that medical DRGs that are driven by 
complications have an inherently more challenging time demonstrating 
uniqueness as a function of Medicare's MS-DRG GROUPER approach than the 
medical device population. However, the applicant stated that as the 
ICD-10-CM/PCS system continues to evolve and new MS-DRGs are added to 
capture new technologies, there will be additional opportunities to 
better highlight certain products' use, like GIAPREZATM, in 
key populations.
    Regarding the third criterion, the applicant contended that 
although the FDA approval for GIAPREZATM is not reserved 
exclusively for patients diagnosed with shock who have failed to 
respond to standard-of-care treatment options, GIAPREZATM 
still treats a new patient population that is a significant subset of 
the larger patient population for which GIAPREZATM has 
received FDA approval. Specifically, the applicant emphasized that, of 
approximately 1.12 million hypotensive patients, greater than 50 
percent fail the standard-of-care treatment practice and, therefore, 
have no other available treatment options. The applicant believed that 
GIAPREZATM provides a new treatment option for Medicare 
beneficiaries that can be started immediately and can benefit the 
patient within only approximately 5 minutes.
    Other commenters similarly stated that GIAPREZATM fills 
an unmet need for new treatment options for patients who have been 
diagnosed with shock, considering that more than 50 percent of patients 
who have been diagnosed with distributive shock fail to meet MAP goals 
using the standard-of-care treatment options. The commenters emphasized 
that mortality from shock remains high, especially in patients who have 
been diagnosed with refractory shock, primarily due to progressive 
hypotension and resulting organ failure and limited treatment options. 
The commenters believed that GIAPREZATM offers a 
breakthrough treatment option that promises to save lives by providing 
an alternative treatment option for a subset of the shock patient 
population for whom there was previously no other treatment options 
available.
    In addition to the public comments summarized above regarding 
mechanism of action, MS-DRG assignment of potential cases eligible for 
treatment involving use of GIAPREZATM, and the treatment of 
the intended patient population, the applicant stated that prior to 
approval of GIAPREZATM, only two classes of vasopressors 
were available: Catecholamines and vasopressin, both of which have 
narrow therapeutic windows and significant toxic effects when 
administered at higher doses. The applicant further stated that 
catecholamines are correlated to serious complications, such as 
increased digital and limb necrosis \126\ and kidney injury.\127\ The 
applicant explained that

[[Page 41337]]

vasopressin was the only non-catecholamine vasopressor available to 
clinicians, but it fails to improve blood pressure in the majority of 
patients, therefore, making its impact quite limited.\128\ 
Additionally, the applicant indicated that vasopressin is also slow to 
take effect (peak effect at 15 minutes) and, therefore, is difficult to 
titrate, to achieve and maintain the desired MAP, which further 
complicates its use and leaves patients hypotensive for longer.\129\ 
\130\ The applicant further explained that last-resort adjuvant non-
vasopressor therapies such as corticosteroids, ascorbic acid, thiamine, 
and methylene blue are still used in desperation, but none have been 
shown to reliably improve blood pressure or survival. Therefore, the 
applicant suggested that CMS recognize that GIAPREZATM 
answers an unmet need for a safe, effective, fast-acting, alternative 
therapy.\131\ With regard to newness, a couple of commenters stated 
that GIAPREZATM is the first new vasopressor approved by the 
FDA in over 40 years. To the contrary, another commenter stated that 
it, generally, supported CMS' concerns about GIAPREZATM.
---------------------------------------------------------------------------

    \126\ Brown SM, Lanspa MJ, Jones JP, et al. Survival After Shock 
Requiring High-Dose Vasopressor Therapy. Chest. 2013;143(3):664-671. 
doi:10.1378/chest.12-1106.
    \127\ Gordon AC, Mason AJ, Thirunavukkarasu N, et al. Effect of 
Early Vasopressin vs Norepinephrine on Kidney Failure in Patients 
With Septic Shock. Jama. 2016;316(5):509. doi:10.1001/
jama.2016.10485.
    \128\ Sacha GL, Lam SW, Duggal A, Torbic H, Reddy AJ, et al, 
Hypotension risk based on vasoactive agent discontinuation order in 
patients in the recovery phase of septic shock. Pharmacotherapy. 
2018 Mar;38(3):319-326. doi: 10.1002/phar.2082. Epub 2018 Feb 8.
    \129\ Vasostrict [Package Insert]. Chestnut Ridge, NY. Par 
Pharmaceutical; 2016.
    \130\ Malay MB, Ashton JL, Dahl K, Savage EB, Burchell SA, 
Ashton RC Jr, et al. Heterogeneity of the vasoconstrictor effect of 
vasopressin in septic shock. Crit Care Med. 2004;32(6):1327 31.
    \131\ Andreis DT, Singer M. Catecholamines for inflammatory 
shock: a Jekyll-and-Hyde conundrum. Intensive Care Med. 
2016;42(9):1387-97.
---------------------------------------------------------------------------

    Response: After review of the information provided by the applicant 
and consideration of the public comments we received, we believe that 
GIAPREZATM has a unique mechanism of action to achieve a 
therapeutic outcome because it leverages the RAAS system to increase 
blood pressure. Therefore, GIAPREZATM is not substantially 
similar to existing treatment options and meets 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. In the 
FY 2019 IPPS/LTCH PPS proposed rule (82 FR 20325), we stated we 
believed 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 only summarized this broader analysis in the 
proposed rule (and 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. 
At the time of development of the proposed rule, the applicant had 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 38524). The final inflated average case-
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        $111,522         $34,095
    80 Percent..................              10          96,102          77,641         100,167          22,526
    25 Percent..................               1          66,980          53,499          71,951          18,452
----------------------------------------------------------------------------------------------------------------

[[Page 41338]]

 
                            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-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 met the cost 
criterion. We noted in the proposed rule that we were unsure whether 
the selection in both scenarios fully captures the broader indication 
for which the FDA approved the use of GIAPREZATM. We invited 
public comments on whether GIAPREZATM meets the cost 
criterion, including with respect to the concern we had raised.
    Comment: The applicant provided an updated cost analysis to broaden 
the patient cases according to the expanded FDA-approved indication. 
Specifically, the applicant stated that it removed the original 
exclusion criteria, which previously limited the patient cases used in 
the cost analysis to vasopressor-unresponsive patient cases, subjected 
all three ICD-9-CM code selections to a broader procedure code 
inclusion list, and additionally adjusted codes based on the clinical 
profile of diagnoses of distributive/septic shock.
    The applicant noted, as noted in the proposed rule, that the 
inflated average case-weighted standardized charge per case exceeded 
the average case-weighted threshold amount before including the average 
per patient cost of the technology. The applicant also added charges 
for the cost of the technology to its updated analysis. The applicant 
indicated that the WAC of GIAPREZATM (which is supplied as a 
2.5mg/1mL vial) is $1,500 per vial. The applicant stated that, 
according to the FDA-approved labeling, the recommended dosage of 
GIAPREZATM is 20 nanograms (ng)/kg/min administered as an IV 
infusion, titrated as frequently as every 5 minutes by increments of up 
to 15 ng/kg/min, as needed. The applicant stated that, because each 
vial contains 2.5 mg of GIAPREZATM, a patient weighing 70 kg 
infused for 48 hours at a constant dose of 20ng/kg/min would use 1.6 
vials of GIAPREZATM. The applicant explained that, as vials 
will be used in whole integers, each episode-of-care would require 2 
vials and consequently would cost $3,000 per patient, per episode-of-
care, at the current WAC of $1,500.
    To estimate the anticipated average charge submitted by hospitals 
for use of GIAPREZATM, the applicant stated that it used a 
conservative CCR of 0.5, which equated to the lower hospital markups 
for similar drugs. The applicant subtracted 50 percent of the costs of 
prior technology charges, which resulted in the final inflated average 
standardized charge per case, which exceeded the Table 10 average case-
weighted threshold amounts by an average of $40,011, after the outlined 
changes were made. The applicant submitted the following table 
summarizing the updated cost threshold analysis:

Summary of Case-Weighted Cost-Threshold Analysis Using FY 2015 MedPAR Data (50 Percent of Pharmacy Charges) Post
                               Issuance of the FY 2019 IPPS/LTCH PPS Proposed Rule
----------------------------------------------------------------------------------------------------------------
                                                                                  Final inflated
                                                                  Case- weighted   average case-
                                   Number of MS-     Number of    new technology     weighted         Amount
                                   DRGs assessed  Medicare cases  add-on payment   standardized      exceeded
                                                                     threshold      charge per       threshold
                                                                                       case
----------------------------------------------------------------------------------------------------------------
                            Cost Analysis Based on ICD-9-CM Diagnosis Code Scenario 1
----------------------------------------------------------------------------------------------------------------
ICD-9-CM Diagnosis Code
 Selection (41 Codes):
    100 Percent.................             711         816,386         $93,312        $134,127         $40,815
    80 Percent..................              55         652,298          97,759         134,733          36,974
    25 Percent..................               1         145,043          53,499          82,947          29,448
----------------------------------------------------------------------------------------------------------------
                            Cost Analysis Based on ICD-9-CM Diagnosis Code Scenario 2
----------------------------------------------------------------------------------------------------------------
ICD-9-CM Diagnosis Code
 Selection (28 Codes):
    100 Percent.................             499         318,168          93,324         148,143          54,819
    80 Percent..................               8         251,694          96,337         139,486          43,149
    25 Percent..................               1         145,345          53,499          82,900          29,401
----------------------------------------------------------------------------------------------------------------
                            Cost Analysis Based on ICD-9-CM Diagnosis Code Scenario 3
----------------------------------------------------------------------------------------------------------------
ICD-9-CM Diagnosis Code
 Selection (99 Codes):

[[Page 41339]]

 
    100 Percent.................             685         487,091          97,294         147,388          50,094
    80 Percent..................              45         388,622         103,664         149,700          46,036
    25 Percent..................               1         145,472          53,499          82,866          29,367
----------------------------------------------------------------------------------------------------------------

    Response: After consideration of the public comments we received, 
we agree that GIAPREZATM meets the cost criterion.
    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.
    Expanding on the statements above, we stated in the proposed rule 
that 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-
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-ill patients who have been 
diagnosed with refractory shock. The applicant reported that a 
randomized, double-blind placebo controlled trial called ATHOS-3 \132\ 
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.
---------------------------------------------------------------------------

    \132\ 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 stated in the proposed rule we were 
concerned that lower cardiovascular SOFA scores may not demonstrate 
substantial clinical improvement because there was no difference in the 
improvement of other components of 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. According to the applicant, 
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 noted in the 
proposed rule that, while GIAPREZATM may potentially reduce 
certain adverse effects associated with SOC treatments, the FDA-
approved 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-approved label, prophylactic treatment for blood clots should be 
used.
    In the proposed rule, we noted that 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

[[Page 41340]]

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 stated in the proposed rule that we understood 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, we stated that there is not a 
strong pool of evidence connecting these single data points directly 
with morbidity and mortality. Therefore, in the proposed rule, we 
stated that we were 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 \133\ found that MAP was independently related to 
ICU and hospital mortality in patients with severe sepsis or septic 
shock.
---------------------------------------------------------------------------

    \133\ 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 stated in the proposed rule that we were 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. We stated 
in the proposed rule that 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 stated we were 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 were 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 invited public comments on whether 
GIAPREZATM meets the substantial clinical improvement 
criterion.
    Comment: The applicant submitted comments addressing the concerns 
raised by CMS in the proposed rule regarding whether 
GIAPREZATM meets the substantial clinical improvement 
criterion. With respect to the concern regarding the SOFA scores, the 
applicant stated that the data results, which it believes demonstrate 
that GIAPREZATM delivers substantial clinical improvement, 
are not based solely upon the observed improvements in the SOFA score. 
Rather, the applicant explained that SOFA is used to identify patients 
at a greater risk of poor outcomes. The applicant stated that the mean 
cardiovascular SOFA score at hour 48 showed that there was significant 
improvement in the GIAPREZATM group (-1.75) versus the 
placebo group (-1.28) (p=0.01), reflecting a higher incidence of 
vasopressor discontinuation prior to hour 48 and a reduced 
catecholamine dose in the GIAPREZATM group.
    The applicant also reiterated that clinical data showing 
GIAPREZATM's proven benefit of reducing the need for 
background vasopressors constitutes a substantial clinical improvement, 
considering the significant toxic effects of catecholamines and 
vasopressin administered at higher doses, including cardiac and digital 
ischemia; tachyarrhythmias with norepinephrine; cardiac, digital, and 
splanchnic ischemia; and ischemic skin lesions with 
vasopressin.134 135 136 137 138 139 The applicant further 
stated that norepinephrine (a catecholamine) is

[[Page 41341]]

also associated with immunosuppression, which may predispose the 
patient to a higher risk of secondary infections.\140\ Other commenters 
similarly stated that use of GIAPREZATM reduces the need for 
administration of these high-dose vasopressors and helps patients 
achieve MAP, with a significant reduction in adverse effects, unlike 
with the use of other vasopressors which fail to raise a patient's MAP 
and are associated with increases in mortality when administered at 
high doses; including cardiac toxicity, necrosis of the skin and distal 
extremities, and metabolic dysfunction. Regarding the risk of 
thrombosis, the applicant stated that most of the thromboembolic 
adverse events were of lower severity and assigned to Grade I or Grade 
II. The applicant further pointed out that patients who are diagnosed 
with vasodilatory shock are, generally, at a high risk for thrombosis, 
and that the FDA labeling and the immediate availability of blood-
thinning agents fully address this potential safety concern.
---------------------------------------------------------------------------

    \134\ D[uuml]nser MW, Meier J. Vasopressor hormones in shock-
noradrenaline, vasopressin or angiotensin II: which one will make 
the race? J Thorac Dis. 2017;9(7):1843-7.
    \135\ D[uuml]nser MW, Hasibeder WR. Sympathetic overstimulation 
during critical illness: adverse effects of adrenergic stress. J 
Intensive Care Med. 2009;24(5):293-316.
    \136\ Russell JA, Rush B, Boyd J. Pathophysiology of septic 
shock. Crit Care Clin. 2018;34(1):43 61.
    \137\ Asfar P, Meziani F, Hamel JF, Grelon F, Megarbane B, 
Anguel N, et al. High versus low blood-pressure target in patients 
with septic shock. N Engl J Med. 2014;370(17):1583-93.
    \138\ Schmittinger CA, Torgersen C, Luckner G, Schroder DC, 
Lorenz I, and Dunser MW. Adverse cardiac events during catecholamine 
vasopressor therapy: a prospective observational study. Intensive 
Care Med. 2012;38(6):950-8.
    \139\ Russell JA, Walley KR, Singer J, Gordon AC, H[eacute]bert 
PC, Cooper DJ, et al. VASST Investigators. Vasopressin versus 
norepinephrine infusion in patients with septic shock. N Engl J Med. 
2008;358(9):877-87.
    \140\ Stolk RF, van der Poll T, Angus DC, van der Hoeven JG, 
Pickkers P, Kox M. Potentially inadvertent immunomodulation: 
Norepinephrine use in sepsis. Am J Respir Crit Care Med. 
2016;194(5):550-8.
---------------------------------------------------------------------------

    In response to our concern that the mortality benefit was not 
statistically significant, the applicant stated that the p-values for 
the decrease in mortality rates with use of GIAPREZATM may 
not demonstrate statistical significance because the clinical trial was 
not powered to definitively prove a decrease in mortality rate. The 
applicant also contended that the substantial clinical improvement 
criterion described in the September 7, 2001 final rule (66 FR 46902) 
identifies only a ``reduced mortality rate'' as one of a multitude of 
different standards and does not restrict p-values cited to a certain 
range to support a new technology add-on payment application 
determination. Therefore, the applicant believed that the p-values 
support the validity of the new technology add-on payment application 
for GIAPREZATM; they do not detract from it. Similarly, 
other commenters stated that GIAPREZATM is the only 
vasopressor to show a strong trend towards a survival benefit.
    The applicant also disagreed with CMS regarding our statement in 
the proposed rule that there is not a strong pool of evidence directly 
connecting target MAP, lower SOFA scores, and reduced catecholamine 
usage with morbidity and mortality. The applicant submitted additional 
evidence from the Surviving Sepsis Campaign and international and 
European consensus guidelines to demonstrate that maintaining an 
adequate MAP is a clinically meaningful benefit affecting morbidity and 
mortality. The applicant reiterated that when MAP drops below 60 mmHg, 
the human body loses autoregulatory control of blood supply to key 
organs,\141\ and even short durations of hypotension (<5 minutes) are 
associated with increased serious adverse outcomes, such as myocardial 
ischemia and acute kidney injury.\142\ Furthermore, the applicant cited 
research demonstrating that a low MAP is associated with an increased 
28-day mortality, and stated that an analysis of outcomes in patients 
who have been diagnosed with distributive shock demonstrated a clear 
relationship between duration and extent of hypotension and ICU 
mortality.143 144
---------------------------------------------------------------------------

    \141\ LeDoux D, Astiz ME, Carpati CM, Rackow EC. Effects of 
perfusion pressure on tissue perfusion in septic shock. Crit Care 
Med. 2000;28(8):2729-32.
    \142\ Walsh M, Devereaux PJ, Garg AX, Kurz A, Turan A, Rodseth 
RN, et al. Relationship between intraoperative mean arterial 
pressure and clinical outcomes after noncardiac surgery: toward an 
empirical definition of hypotension. Anesthesiology. 
2013;119(3):507-15.
    \143\ Johnson AE, Pollard TJ, Shen L, et al. MIMIC-III, a freely 
accessible critical care database. Sci data 2016;3:160035.
    \144\ Nielsen ND, Zeng F, Gerbasi ME, Oster G, Grossman A, 
Shapiro NI. Blood pressure control and clinical outcomes in patients 
with distributive shock in an academic intensive care setting. 2018 
ISICEM Annual Meeting, Brussels, Belgium (March 20-23, 2018); 
Abstract No. A516.
---------------------------------------------------------------------------

    The applicant also stated that clinical data show reduced 
catecholamine use, a benefit of treatment involving 
GIAPREZATM, is associated with less mortality and less 
morbidity. The applicant further stated that, according to an analysis 
conducted by the applicant of outcomes based on a 50 percent reduction 
of the administration of catecholamine doses at 24 hours, those 
patients with a 50 percent reduction of administration of 
catecholamines doses at 24 hours had a statistically significant 
improved survival benefit. Additionally, the applicant indicated that 
the catecholamine-sparing effect resulted in significantly fewer 
patients experiencing a serious adverse event or a fatal event.
    Finally, in response to our concern 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, 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, the applicant posited that CMS' definition of substantial 
clinical improvement in the September 7, 2001 final rule (66 FR 46902) 
does not refer to the scope of FDA approval or the patient populations 
that that were enrolled in the clinical trial. The applicant asserted 
that the multitude of benefits that GIAPREZATM delivers 
directly pertaining to the substantial clinical improvement criterion 
cannot be assumed to be restricted solely to patients who have been 
diagnosed with refractory shock. The applicant specifically summarized 
the following improved outcomes:
     Reduced mortality rate with use of the device: A promising 
trend toward lower mortality was observed in the GIAPREZATM 
arm, and more generally, MAP >=65 mmHg is associated with decreased 
mortality.\145\
---------------------------------------------------------------------------

    \145\ Nielsen ND, Zeng F, Gerbasi ME, Oster G, Grossman A, 
Shapiro NI. Blood pressure control and clinical outcomes in patients 
with distributive shock in an academic intensive care setting. 2018 
ISICEM Annual Meeting, Brussels, Belgium (March 20-23, 2018); 
Abstract No. A516.
---------------------------------------------------------------------------

     Reduced rate of device-related complications: 
GIAPREZATM reduced the need for background vasopressors, the 
utilization of which is correlated to serious complications such as 
increased digital and limb necrosis,\146\ and kidney injury.\147\
---------------------------------------------------------------------------

    \146\ Brown SM, Lanspa MJ, Jones JP, et al. Survival After Shock 
Requiring High-Dose Vasopressor Therapy. Chest. 2013;143(3):664-671. 
doi:10.1378/chest.12-1106.
    \147\ Gordon AC, Mason AJ, Thirunavukkarasu N, et al. Effect of 
Early Vasopressin vs Norepinephrine on Kidney Failure in Patients 
With Septic Shock. Jama. 2016;316(5):509. doi:10.1001/
jama.2016.10485.
---------------------------------------------------------------------------

     Decreased rate of subsequent diagnostic or therapeutic 
interventions: In a sub-population analysis of patients suffering from 
acute kidney injury, it was found that GIAPREZATM-treated 
patients had fewer ICU days, shorter dialysis days, reduced ventilation 
usage, and longer survival, compared to placebo.148 149
---------------------------------------------------------------------------

    \148\ Khanna A, et al. Angiotensin II for the Treatment of 
Vasodilatory Shock Suppl: S14. NEJM. 2017. DOI: 10.1056/
NEJMoa1704154.
    \149\ Tumlin JA, Murugan R, Deane AM, et al. Outcomes in 
Patients with Vasodilatory Shock and Renal Replacement Therapy 
Treated with Intravenous Angiotensin II. Critical Care Medicine. 
2018;46(6):949-957. doi:10.1097/ccm.3092.
---------------------------------------------------------------------------

     More rapid beneficial resolution of the disease process 
treatment: Whereas SOC vasopressors are administered for extended 
periods (days), GIAPREZATM has a much shorter time to effect 
of only five minutes.
     Reduced recovery time: Since low MAP is associated with 
high ICU and 28-day mortality and GIAPREZATM achieved target 
MAP of 75 mmHg by hour 3 in significantly more patients than the 
standard-of-care, while

[[Page 41342]]

reducing the need for other vasopressors, GIAPREZATM may 
result in a shorter ICU length of stay and a faster recovery.
    Other commenters supported the clinical results and evidence of 
GIAPREZATM's meeting the substantial clinical improvement 
criterion, and explained that not only did the ATHOS-3 study provide 
compelling support for a well-tolerated new therapeutic agent that 
demonstrated significant improvements in MAP, it also demonstrated a 
strong trend toward improved survival benefit, a catecholamine-sparing 
effect, an increase in ICU free days, and a reduction in patients 
requiring renal replacement therapy (RRT). To the contrary, another 
commenter stated that it, generally, supported CMS' concerns.
    Response: We appreciate the additional information and analysis 
provided by the applicant and the commenters' input in response to our 
concerns regarding substantial clinical improvement. After reviewing 
the information submitted by the applicant addressing our concerns 
raised in the proposed rule, we agree that GIAPREZATM more 
rapidly allows for beneficial resolution of the disease process 
treatment with its shorter time to effect of only five minutes, and 
that GIAPREZATM has a reduced rate of device-related 
complications by reducing the need for background vasopressors, the 
utilization of which is correlated to serious complications. 
Specifically, we agree with the commenters and the applicant that a 
reduction in high-dose SOC catecholamines and vasopressin, which can be 
toxic and have numerous adverse effects, constitutes a substantial 
clinical improvement. We also agree with the applicant that the FDA-
approved label, which cautions that prophylactic treatment for blood 
clots should be used, addresses the potential safety concern of 
thrombosis for patients treated with GIAPREZATM. Based on 
the data provided by the applicant and consideration of the public 
comments we received, we agree with the applicant and the commenters 
that GIAPREZATM represents a substantial clinical 
improvement over existing technologies because it quickly and 
effectively raises MAP while allowing for a reduction in other 
vasopressors.
    After consideration of the public comments we received, we have 
determined that GIAPREZATM meets all of the criteria for 
approval for new technology add-on payments. Therefore, we are 
approving new technology add-on payments for GIAPREZATM for 
FY 2019. Cases involving the use of GIAPREZATM that are 
eligible for new technology add-on payments will be identified by ICD-
10-PCS procedure codes XW033H4 and XW043H4.
    In its application, the applicant estimated that the average 
Medicare beneficiary would require a dosage of 20ng/kg/min administered 
as an IV infusion over 48 hours, which would require 2 vials. The 
applicant explained that the WAC for one vial is $1,500, with each 
episode-of-care costing $3,000 per patient. 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 the use of 
GIAPREZATM is $1,500 for FY 2019.
h. Cerebral Protection System (Sentinel[supreg] Cerebral Protection 
System)
    Claret Medical, Inc. submitted an application for new technology 
add-on payments for the Cerebral Protection System (Sentinel[supreg] 
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[supreg] Cerebral Protection System was 
granted by FDA 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).\150\ 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.\151\ 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.\152\ 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.\153\ 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 silent ischemic cerebral infarctions following 
TAVR procedures is estimated to be between 68 and 91 
percent.154 155
---------------------------------------------------------------------------

    \150\ 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.
    \151\ 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.
    \152\ 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).
    \153\ 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.
    \154\ 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.
    \155\ 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.

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[[Page 41343]]

    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-procedure period and, as previously outlined, is likely due to 
mechanical factors occurring during the TAVR procedure.\156\ 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.\157\ Stroke rates in patients evaluated 30 days after TAVR 
procedures range from 1.0 percent to 9.6 percent \158\, 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.\159\
---------------------------------------------------------------------------

    \156\ 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.
    \157\ Freeman, M., et al., ``Cerebral events and protection 
during transcatheter aortic valve replacement,'' Catheterization and 
Cardiovascular Interventions, 2014, vol. 84(6), pp. 885-896.
    \158\ 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.
    \159\ 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.
---------------------------------------------------------------------------

    As stated earlier, the De Novo request for the Sentinel[supreg] 
Cerebral Protection System was granted by FDA 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[supreg] 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[supreg] 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[supreg] 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[supreg] 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, we stated in the proposed rule that it appears 
that the Sentinel[supreg] Cerebral Protection System is not 
substantially similar to other existing technologies. We invited public 
comments on whether the Sentinel[supreg] Cerebral Protection System is 
substantially similar to any existing technology and whether it meets 
the newness criterion.
    Comment: Several commenters agreed with CMS' assessment that the 
Sentinel[supreg] Cerebral Protection System is not substantially 
similar to other existing technologies.
    Response: After consideration of the public comments we received, 
we believe the Sentinel[supreg] Cerebral Protection System is not 
substantially similar to other existing technologies because it is the 
only neuro protective device available in the U.S. that has been 
granted a De Novo request by the FDA. Therefore, we believe that the 
Sentinel[supreg] Cerebral Protection System 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[supreg] 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

[[Page 41344]]

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 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-
weighted standardized charge per case of $187,707 and a Table 10 
average case-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 met the cost criterion. We invited public comments 
on whether the Sentinel[supreg] Cerebral Protection System meets the 
cost criterion.
    Comment: The applicant reiterated that the Sentinel[supreg] 
Cerebral Protection System meets the cost criterion.
    Response: We appreciate the applicant's input. After consideration 
of the public comment we received and reviewing the cost data and data 
analysis submitted by the applicant, we agree that the Sentinel[supreg] 
Cerebral Protection System meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that the Sentinel[supreg] 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[supreg] 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[supreg] study\160\ conducted by Claret Medical, Inc.; (2) the 
CLEAN-TAVI trial \161\; (3) the Ulm real-world registry \162\; and (4) 
the MISTRAL-C study.\163\ The applicant reported that the 
SENTINEL[supreg] study was a prospective, single blind, multi-center, 
randomized study using the Sentinel[supreg] 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:
---------------------------------------------------------------------------

    \160\ 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.
    \161\ 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.
    \162\ 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.
    \163\ 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.
---------------------------------------------------------------------------

     Safety Arm patients who underwent a TAVR procedure 
involving the Sentinel[supreg] 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[supreg] 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[supreg] 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-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.\164\
---------------------------------------------------------------------------

    \164\ 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[supreg] 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[supreg] Cerebral Protection System device 
arm (p=0.33). A post-hoc multi-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[supreg] 
Cerebral Protection System devices (p=0.25). Neurocognitive function 
was similar in control patients

[[Page 41345]]

and patients treated with the Sentinel[supreg] 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 
these 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[supreg] Cerebral Protection System) or to no EP (n=50). 
Patients were all treated with femoral access and self-expandable (SE) 
devices. The study endpoint was the number of brain lesions at 2 days 
post-procedure versus baseline. Patients were evaluated with DW-MRI at 
2 and 7 days post-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[supreg] 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[supreg] 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-procedure was seen in those patients 
who were treated with the Sentinel[supreg] 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[supreg] Cerebral Protection System device versus 
control patients (1.1 percent versus 3.6 percent, p=0.03).
     In multi-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[supreg] 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[supreg] 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[supreg] 
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-procedure for the 
Sentinel[supreg] Cerebral Protection System group. There were no 
strokes reported for the Sentinel[supreg] Cerebral Protection System 
group. There were 7 mortalities between 5 days and 6 months post-
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[supreg] Cerebral 
Protection System and 80 percent for the group of TAVI patients treated 
without the Sentinel[supreg] 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[supreg] 
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[supreg] 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[supreg] Cerebral Protection 
System group, p=0.03). Neurocognitive deterioration was present in 4 
percent of the patients treated with the Sentinel[supreg] 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[supreg] 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[supreg] 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[supreg] 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[supreg] 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[supreg] study, with rate of MACCE of 7.3 percent in the 
Sentinel[supreg] 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[supreg] Cerebral Protection System device have 
limitations because they are either small, nonrandomized and/or had 
significant loss to follow-up. In the proposed rule, we stated that a 
meta-analysis of EP device studies, the majority of which included use 
of the Sentinel[supreg] Cerebral Protection System device, found that 
use of cerebral EP devices was associated with a nonsignificant 
reduction in stroke and death.\165\ After further review, we realize we 
misquoted the statement made in the study. The meta-analysis from 2016 
actually concluded the following: ``Although the differences in overt 
stroke were not significant, use of intraoperative EP was associated 
with a numeric stroke reduction, which may become significant in larger 
RCTs powered for hard endpoints.'' We note that we provide an updated 
discussion of this meta-analysis in our response to comments below.
---------------------------------------------------------------------------

    \165\ 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.
---------------------------------------------------------------------------

    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20338), we stated

[[Page 41346]]

we were concerned that the use of cerebral protection devices may not 
be associated with a significant reduction in stroke and death. We 
noted that the SENTINEL[supreg] 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[supreg] 
Cerebral Protection System device group versus a 9.1 percent stroke 
rate in the control group at 30 days; p=0.25). We also noted that only 
with a post-hoc analysis of the SENTINEL[supreg] 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 stated we are concerned that studies involving the 
Sentinel[supreg] Cerebral Protection System may be inconclusive 
regarding whether the device represents a substantial clinical 
improvement for patients undergoing TAVR procedures. We also stated we 
are concerned that the SENTINEL[supreg] studies did not show a 
substantial decrease in neurological complications for patients 
undergoing TAVR procedures. We invited public comments on whether the 
Sentinel[supreg] Cerebral Protection System meets the substantial 
clinical improvement criterion.
    Comment: The applicant submitted comments in response to the 
concerns we raised in the proposed rule. Specifically, in the proposed 
rule, we noted the following:
     The SENTINEL[supreg] study, although a randomized study, 
did not meet its primary endpoint as illustrated by non-statistically 
significant reduction in new lesion volume on MRI or non-disabling 
strokes within 30 days (5.6 percent stroke rate in the Sentinel[supreg] 
Cerebral Protection System device group versus a 9.1 percent stroke 
rate in the control group at 30 days; p=0.25).
     Only with a post-hoc analysis of the SENTINEL[supreg] 
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).
    With regard to the above, the applicant responded and explained the 
following with respect to the SENTINEL[supreg] trial:
     The SENTINEL[supreg] trial's success criteria were 
designed with two primary efficacy endpoints that were a surrogate 
imaging endpoint combination of: (1) Observed reduction of 30 percent 
in new lesion volume on MRI; and (2) statistical reduction in new 
lesion volume on MRI. The applicant indicated that the trial was 
successful in demonstrating a 42 percent reduction in new lesion 
volume, but as CMS pointed out, it did not, on its own, reach 
statistical significance, which the applicant stated was because of, in 
part, the surrogate nature of the endpoint as well as the higher than 
expected variability. The applicant noted that the variability resulted 
from the following sources: (1) Variability in the MRI data, in part 
due to the variability in the allowed time window of 2 to 7 days, 
logistics of scheduling follow-up MRIs within this time window for 
elderly patients, and the transient nature of the DW-MRI signal over 
time which made the signal decay rate very noisy; (2) variability due 
to multiplicity (total of four types) of TAVR valve types (including 
balloon expandable and self-expanding) introduced mid-course into the 
trial (the trial was powered for only two types of TAVR valves 
originally), which behaved differently and required different 
procedural parameters in terms of pre-dilatation or post-dilatation and 
repositioning; and (3) variability in the patient baseline lesion 
volumes burden or white matter disease, which was unaccounted for 
because this was new science generated as a result of this trial \166\ 
that has now been published, and a related manuscript \167\ submitted 
and in review.
---------------------------------------------------------------------------

    \166\ Lazar, R., et al., ``Neurocognition and Cerebral Lesion 
Burden in High-Risk Patients Before Undergoing Transcatheter Aortic 
Valve Replacement: Insights From the SENTINEL Trial,'' J Cardiovasc 
Interv, February 26, 2018, vol. 11(4), pp. 384-392.
    \167\ Dwyer, M., et al., ``Pre-procedural white matter lesion 
burden predicts MRI outcomes in transcatheter aortic valve 
replacement (TAVR): The SENTINEL Trial.''
---------------------------------------------------------------------------

     In retrospect, the SENTINEL[supreg] trial was underpowered 
for the surrogate efficacy endpoint. However, according to the 
applicant, a meta-analysis of all three randomized trials of Claret 
dual-filter technology in TAVR using MRI endpoints by Latib, et al. 
(2017), which had an increased number of patients available for 
analysis, did show statistically significant reduction in new lesion 
volume.
     The primary safety endpoint for the SENTINEL[supreg] trial 
was occurrence of all Major Adverse Cardiac and Cerebrovascular Events 
(MACCE) at 30 days compared to a historical performance goal, and the 
Sentinel[supreg] Cerebral Protection System met this endpoint for 
noninferiority (p<0.001) and superiority (p=0.0026)
     The SENTINEL[supreg] trial was not designed to be powered 
to show a statistically significant reduction in procedural stroke 
between trial arms at 30-days; therefore, it did not reach statistical 
significance. However, according to the applicant, investigators were 
encouraged by the trend to lower rates of stroke in the 
Sentinel[supreg] arms (5.6 percent) as compared to Control (9.1 
percent) at 30-days. Additionally, more than 60 percent of ischemic 
neurological events in TAVR occur during the acute peri procedural 
phase as a result of thromboembolic debris released from manipulation 
of TAVR and accessory devices in a heavily atherosclerotic vascular and 
valvular structures.\168\ As a result, the SENTINEL[supreg] 
investigators and FDA Advisory Panel at large were, according to the 
applicant, keen to temporally analyze the stroke data in two phases 
(acute and subacute). The applicant stated that this post-hoc analysis 
demonstrated that the acute phase is the critical period where cerebral 
protection offers the most protection against any incidence of stroke 
by demonstrating a significant treatment effect of 63 percent at <72 
hours. This window was less confounded by events that may occur later 
in the subacute phase after a TAVR procedure as a result of new onset 
AF or suboptimal anticoagulation/antiplatelet regimens.
---------------------------------------------------------------------------

    \168\ Kapadia, S., et al., Circ Cardiovasc Interv, September 
2016, vol. 9(9), pp. 1-10.
---------------------------------------------------------------------------

    Response: We appreciate the applicant's input and have considered 
this information in our determination below.
    Comment: With regard to CMS' concern in the proposed rule that the 
use of cerebral protection devices may not be associated with a 
significant reduction in stroke and death (as noted previously, we have 
corrected our statement from the proposed rule on the findings of the 
meta-analysis on which this statement was based), the applicant stated 
that the meta-analysis of 180 randomized patients from 3 small 
randomized trials from 2016 did not include the results from the 
SENTINEL[supreg] randomized trial, which were not available at the 
time, but the authors of this study (Giustino, G., et al.\169\) 
subsequently published in 2017 an updated systematic review and meta-
analysis of 5 randomized trials totaling 625 patients (in which the 
SENTINEL[supreg] trial contributed 363 patients to the 625

[[Page 41347]]

patients in the 2017 meta-analysis). The 2017 Guistino, G., et al. 
meta-analysis evaluated EP during TAVR, including SENTINEL[supreg], and 
showed that at 30 days EP was associated with a lower risk of death or 
stroke on relative (6.4 percent versus 10.8 percent; RR: 0.57; 95 
percent CI: 0.33 to 0.98; p=0.04; I2=0 percent) and absolute (ARD: -4.4 
percent; 95 percent CI: -9.0 percent to -0.1 percent; NNT=22) terms 
(that is, for every 22 patients assigned to an EP device, 1 death or 
stroke event may be averted). According to the applicant, these 
findings suggest that EP may be a clinically relevant adjunctive 
strategy in patients undergoing TAVR procedures. The applicant noted 
that in the updated analysis, the authors of Giustino, G., et al. 
stated that, in conclusion, the totality of the data suggests that use 
of EP during TAVR appears to be associated with a significant reduction 
in death or stroke.
---------------------------------------------------------------------------

    \169\ Giustino, G., Sabato, S., Mehran, R., Faggioni, M., and 
Dangas, G., ``Cerebral Embolic Protection During TAVR, A Clinical 
Event Meta-Analysis,'' JACC, 2017, vol. 69, pp. 465-66.
---------------------------------------------------------------------------

    The applicant stated that an independent group recently published a 
similar meta-analysis of the same 5 randomized trials in the Journal of 
Thoracic Disease \170\ and reached the same conclusion as Giustino, G., 
et al. The applicant indicated that a third meta-analysis has been 
accepted that is in press, which includes 5 randomized and prospective 
observational studies, totaling 1,160 TAVR patients, in which cerebral 
embolic protection was used in 661.\171\ According to the applicant, 
the authors found that the risk of strokes within the first week of 
TAVR was significantly lower in the CPD group [0.56(95 percent CI 0.33-
0.96)]; p=0.034. The authors concluded that TAVR with CPD is associated 
with decreased strokes within 1 week of follow-up and not associated 
with an increase in peri-procedural adverse events. The applicant 
stated that it is important to note that the effectiveness of cerebral 
protection devices is during the procedure and best measured within a 
week or less of the procedure. The applicant further noted that events 
occurring after 1 week, up to and beyond 30 days are often associated 
with new-onset atrial fibrillation associated with the valve implant, 
inadequate anticoagulation regimen, and unrelated background risk.
---------------------------------------------------------------------------

    \170\ Wang N and Phan K, ``Cerebral protection devices in 
transcatheter aortic valve replacement: a clinical meta-analysis of 
randomized controlled trials'', J Thorac Dis, 2018;10(3):1927-1935.
    \171\ Mohananey D, et al. ``Safety and Efficacy of Cerebral 
Protection Devices in Transcatheter Aortic Valve Replacement: A 
Clinical End-points Meta-analysis.'' Cardiovasc Revasc Med, 2018 Feb 
16.
---------------------------------------------------------------------------

    Response: In the comment above, the applicant focused on the 2017 
meta-analysis from Giustino, G., et al.\172\ and stated, as indicated 
in the summary above, that the authors concluded that the totality of 
the data suggests that use of EP during TAVR appears to be associated 
with a significant reduction in death or stroke.
---------------------------------------------------------------------------

    \172\ Giustino, G., Sabato, S., Mehran, R., Faggioni, M., and 
Dangas, G., ``Cerebral Embolic Protection During TAVR, A Clinical 
Event Meta-Analysis,'' JACC, 2017, vol. 69, pp. 465-66.
---------------------------------------------------------------------------

    However, in April 2018, based on updated data, the authors for the 
2017 Giustino, G., et al. publication updated their conclusion of the 
2017 meta-analysis and stated the following: ``In conclusion, the 
totality of the data suggests that use of EP during TAVR appears to be 
associated with a nonsignificant trend towards reduction in death or 
stroke.'' Therefore, we continue to be concerned that the use of 
cerebral protection devices may not be associated with a significant 
reduction in stroke and death beyond 7 days (which is the focus of the 
meta-analysis). However, we note, as discussed below, the applicant has 
responded with additional information regarding the reduction in death 
or stroke within 7 days.
    Comment: In response to CMS' concerns as indicated in the proposed 
rule that the studies involving the Sentinel[supreg] Cerebral 
Protection System may be inconclusive regarding whether the device 
represented a substantial clinical improvement for patients undergoing 
TAVR procedures, the applicant referenced the academic study from the 
University of Ulm in Germany, which was independently funded and 
conducted, and published by Seeger, J., et al.\173\ The applicant 
stated that this study is an example of performance in routine clinical 
use, as investigators used the Sentinel[supreg] Cerebral Protection 
System in 280 consecutive TAVR patients and compared results in a 
propensity-score analysis to recent unprotected patients from the same 
institution, with the same operators, and the same independent 
neurologist who adjudicated all the neurological events. According to 
the applicant, this approach gives information about performance in a 
broad set of patients seen in clinical practice, unrestricted by 
inclusion and exclusion criteria of randomized trials. The applicant 
further explained that the academic study from the University of Ulm 
used propensity-score analysis based on an optimal matching attempt by 
adjusting/matching up to 14 key confounders after performing a 
comprehensive multivariable analysis by stepwise forward regression to 
evaluate independent predictors of clinical events. The applicant 
explained that propensity-score analyses are well accepted in the 
interventional cardiology and medical device community at large. The 
applicant further stated that propensity-score analyses are an 
alternative when randomized trials are not possible, practical, or 
ethical. For example, according to the applicant, in the case of 
cerebral embolic protection, investigators have struggled with ethical 
and moral imperatives of randomizing when many patients do not want to 
enter a randomized trial when they know that the device is already 
commercially available.
---------------------------------------------------------------------------

    \173\ 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.
---------------------------------------------------------------------------

    The applicant added that it believed that the 1 to 7 day time 
period is the most appropriate for evaluation of cerebral protection 
efficacy because it is difficult to accurately diagnose neurological 
impairment immediately post-operatively when the patient is recovering 
from the effects of anesthesia and some sequelae of embolic events can 
take time to evolve and be diagnosed, and conversely time points later 
than a week or so are confounded by strokes unrelated to embolic events 
during the index procedure, such as New Onset of Atrial Fibrillation 
(NOAF), suboptimal concomitant anti-platelet/anticoagulation 
medication, and other comorbid history of the patients.
    The applicant noted that, in the past few months, a number of TAVR 
centers have begun to share their data from routine practice using the 
Sentinel[supreg] Cerebral Protection System in TAVR procedures, which 
are in line with the clinical event reductions seen in the 
aforementioned trials. The applicant provided information from the 
following TAVR centers:
     Erasmus Medical Center (Rotterdam, The Netherlands) 
demonstrated comprehensive and systematic analysis of 747 TAVR patients 
treated with or without the use of the Sentinel[supreg] EP with 
independent neurological adjudication of the events. The applicant 
noted that, as presented by Nicolas van Mieghem, MD at the Joint 
Interventional Meeting (JIM) 2018 and Cardiovascular Research 
Technologies (CRT) 2018 conferences in February and March, there was an 
80 percent relative risk reduction from 5 percent (23/453) to 1 percent 
(3/294) for all-stroke + TIA at 3 days with use of Sentinel[supreg] 
(p<0.01).
     Data from Cedars-Sinai Medical Center in Los Angeles, CA 
from a

[[Page 41348]]

comprehensive and systematic analysis of 419 TAVR patients treated with 
or without the use of the Sentinel[supreg] EP results show: 78 percent 
relative risk reduction from 6.3 percent (8/128) to 1.4 percent (4/291) 
for all-stroke at 7 days with use of Sentinel[supreg] (HR 0.22 (95 
percent CI: 0.06 to 0.74, p=0.01).
     Data from Pinnacle Health (Harrisburg, PA) as presented by 
Hemal Gada, MD at the CMS New Technology Town Hall meeting, February 
2018, demonstrated a reduction from 10 percent (7/69) 7-day stroke rate 
without the use of the Sentinel[supreg] to 0 percent (0/53) with the 
use of the Sentinel[supreg], as of the time at the Town Hall 
presentation in February.
    The applicant concluded that the clinical evidence is robust, 
consistent, reliable, and repeatable and that the totality of the data 
shows that Sentinel[supreg] Cerebral Protection System represents a 
substantial clinical improvement for patients undergoing TAVR 
procedures.
    Response: We appreciate the applicant's response to our concerns 
and its additional input. We agree with the applicant that the 1 to 7 
day time period is the most appropriate for evaluation of cerebral 
protection efficacy. Specifically, as the commenter noted, it is 
difficult to accurately diagnose neurological impairment immediately 
post-operatively when the patient is recovering from the effects of 
anesthesia and some sequelae of embolic events can take time to evolve 
and be diagnosed. Conversely, time points later than 7 days are 
confounded by strokes unrelated to embolic events during the index 
procedure, such as NOAF, suboptimal concomitant anti-platelet/
anticoagulation medication, and other comorbid history of the patients. 
We believe that the use of propensity matching in the Ulm study 
supports the statistical difference of all-cause mortality or stroke at 
7 days. Specifically, as stated above, 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[supreg] 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[supreg] 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[supreg] Cerebral Protection System device versus 7.9 
percent in the control group (p=0.01). Therefore, we believe the data 
provided by the applicant showing reduced mortality and stroke within 7 
days of a TAVR procedure as compared to patients undergoing a TAVR 
procedure without a cerebral protection device demonstrate that the 
Sentinel[supreg] Cerebral Protection System represents a substantial 
clinical improvement.
    After consideration of the public comments we received, we have 
determined that the Sentinel[supreg] Cerebral Protection System meets 
all of the criteria for approval for new technology add-on payments. 
Therefore, we are approving new technology add-on payments for the 
Sentinel[supreg] Cerebral Protection System for FY 2019. Cases 
involving the use of the Sentinel[supreg] Cerebral Protection System 
that are eligible for new technology add-on payments will be identified 
by ICD-10-PCS procedure code X2A5312. In its application, the applicant 
estimated that the cost of the Sentinel[supreg] Cerebral Protection 
System is $2,400. 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 the use of the Sentinel[supreg] Cerebral 
Protection System is $1,400 for FY 2019.
i. The AquaBeam System (Aquablation)
    PROCEPT BioRobotics Corporation submitted an application for new 
technology add-on payments for the 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 \174\ and is defined as the ``. . . 
enlargement of the prostate due to benign growth of glandular tissue . 
. .'' in older men.\175\ BPH is estimated to affect 30 percent of males 
that are older than 50 years old.\176\ \177\ 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.\178\ \179\ 
\180\
---------------------------------------------------------------------------

    \174\ 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.
    \175\ 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.
    \176\ 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.
    \177\ 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.
    \178\ 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.
    \179\ 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.
    \180\ 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.
---------------------------------------------------------------------------

    The initial treatment for a patient who has been diagnosed with BPH 
is watchful waiting and medications.\181\ Symptom severity, as measured 
by one test, the International Prostate Symptom Score (IPSS), is the 
primary measure by which surgery necessity is decided.\182\

[[Page 41349]]

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 \183\ are among the 
primary methods. TURP is the primary reference treatment for patients 
who have been diagnosed with BPH.\184\ \185\ \186\ \187\ \188\.
---------------------------------------------------------------------------

    \181\ Ibid.
    \182\ 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.
    \183\ Ibid.
    \184\ 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.
    \185\ 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.
    \186\ 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.
    \187\ 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.
    \188\ 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.189 190 191 192 193 The likelihood of both 
adverse events and long-term morbidity related to the TURP procedure 
increase with the size of the prostate.\194\
---------------------------------------------------------------------------

    \189\ 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.
    \190\ 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.
    \191\ 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.
    \192\ 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.
    \193\ 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.
    \194\ 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 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, we 
stated in the proposed rule that if approved for new technology add-on 
payments, the newness period is considered to begin on December 21, 
2017. CMS has approved the use of ICD-10-PCS code XV508A4 (Destruction 
of prostate using robotic waterjet ablation, via natural or artificial 
opening endoscopic, new technology group 4), effective October 1, 2018, 
to uniquely identify procedures involving the AquaBeam 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 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-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-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

[[Page 41350]]

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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20346), we stated 
we had 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 stated that we were 
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 relieve compression of the urethra. Additionally, 
while the robotic arm and computer programing may result in different 
outcomes for patients, we stated we were uncertain that the use of the 
robotic hand and computer programming result in a new mechanism of 
action. We invited public comments on this issue.
    We also invited public comments on whether the AQUABEAM System's 
Aquablation therapy is substantially similar to existing technologies 
and whether it meets the newness criterion.
    Comment: The applicant stated in regard to the beginning of the 
newness period that, while the AQUABEAM System received approval from 
the FDA for its De Novo request on December 21, 2017, local non-
coverage determinations in the Medicare population resulted in the 
first case being delayed until April 19, 2018. Therefore, the applicant 
believed that the beginning date of the newness period should begin on 
April 9, 2018, instead of the date FDA granted the De Novo request.
    Response: With regard to the beginning of the technology's newness 
period, as discussed in the FY 2005 IPPS final rule (69 FR 49003), the 
timeframe that a new technology can be eligible to receive new 
technology add-on payments begins when data begin to become available. 
While local non-coverage determinations may limit the use of a 
technology in different regions in the country, a technology may be 
available in regions where no local non-coverage decision existed (with 
data beginning to become available). Additionally, similar to the 
discussion in the FY 2006 IPPS final rule (70 FR 47349), we do not 
consider how frequently the medical service or technology has been used 
in the Medicare population in our determination of newness. We welcome 
further information from the applicant for consideration in future 
rulemaking regarding the beginning of the newness period.
    Comment: The applicant reiterated in response to CMS' concerns 
regarding the mechanism of action of the AquaBeam System that it is 
novel because of: (1) The real-time multi-dimensional imaging which 
enables improved clinical decision-making and personalized treatment 
planning; (2) the accuracy of the autonomous robotic hand piece which 
autonomously executes the surgeon's treatment plan for controlled and 
precise tissue removal; and (3) the heat free submerged waterjet used 
to resect prostatic tissue which avoids the possibility of 
complications arising from thermal injury, and that these qualities 
result in consistently safe and effective outcomes for patients and 
greatly reduced chances of side effects when compared to TURP and 
further provide a minimally invasive transurethral alternative to open 
prostatectomy (OP) in large prostates. The applicant further indicated 
that each of the three components, individually, are unique to existing 
BPH surgical options and the combination of the three further 
represents the novelty of the technology's mechanism of action in the 
treatment of BPH.
    The applicant also believed that CMS' concerns that the use of 
water to perform tissue removal may not be different than other forms 
of tissue removal in treating BPH, the use of water has been used in 
other areas such as endometrial ablation and wound debridement, and 
there is uncertainty that the use of a robotic hand and computer 
programming result in a new mechanism of action reflect a broad 
interpretation of mechanism of action. The applicant stated that the 
notion that all ablation techniques are similar ignores the fact that 
ablation is used to treat a variety of illnesses and conditions 
throughout the body using a variety of technological approaches with 
varying effectiveness. The applicant reiterated that it believed the 
three mechanisms of action of the AquaBeam System are unique in 
prostate treatment when compared to all other existing prostate 
treatments, and the AquaBeam System is the only ablation technique that 
utilizes room-temperature water whereas other ablative approaches such 
as TURP, laser vaporization (PVP), laser resection (HoLEP/ThuLEP), 
microwave necrosis (TUMT), and mechanical radio-frequency resection 
(open simple prostatectomy) utilize heat as the primary mechanism of 
action. The applicant explained that the waterjet mechanism of action 
has the advantage of sparing sensitive tissues around the prostate like 
the bladder neck, verumontanum, and nerve and vascular tissues, whereas 
other ablative approaches are tissue agnostic. The applicant also 
disagreed with CMS' comparison of Aquablation therapy to wound 
debridement and tissue dissection because the surgical goals are 
different. The applicant stated that, in the application of wound 
debridement the surgical goal is wound cleansing and debris removal 
using a waterjet, and in tissue dissection, the goal is tissue 
separation or disassociating the parenchymal connective tissue. The 
applicant further stated, in contrast, the goal of all BPH surgical 
procedures is to remove excessive prostatic tissue. The applicant 
reiterated that the use of the robotic handpiece and computer 
programming is the essence of the AquaBeam System to deliver 
Aquablation therapy, and these components allow the surgeon to 
visualize the prostate in a way that was previously unavailable in BPH 
surgery to precisely determine the specific prostatic tissue to resect, 
which is not possible with existing technologies. The applicant further 
indicated that the

[[Page 41351]]

robotic handpiece autonomously executes the tissue resection, which has 
been clinically shown to provide consistent results, regardless of the 
prostate size or surgeon experience. The applicant believed that this 
differs from other treatment modalities, which rely on surgeon 
experience that introduces more variability into the procedure. The 
applicant stated that the robotic handpiece also facilitates the use of 
a minimally invasive transurethral approach to treat large prostates in 
which the vast majority of other transurethral technologies are not 
recommended.
    The applicant also stated that CMS has not historically applied 
such a broad definition when defining and evaluating mechanism of 
action, as in example, for new technology add-on payments for the 
INTUITY and Perceval valves that are aortic valve replacements that 
share the surgical goal of providing the patient with a functioning 
aortic valve. The applicant noted that, CMS determined the mechanisms 
of action of the INTUITY and Perceval valves in achieving the surgical 
goal were not substantially similar to treatments that were available 
at the time, and both technologies were approved for new technology 
add-on payments. In addition, the applicant stated that drug-coated 
balloons (a new combination of existing balloon and existing drugs) 
have a surgical goal similar to non-drug coated balloons of creating a 
lumen in the artery, and CMS determined that the drug-coated balloons 
used a different mechanism of action and similarly approved both 
applications for new technology add-on payments. The applicant 
explained that, in the case of Aquablation therapy, the surgical goal 
is similar to other BPH technologies in creating an opening in the 
prostatic urethra. However, the applicant indicated, as described 
above, the mechanism of action is different from any other technologies 
currently available. The applicant believed that, applying the same 
criterion as applied in the historical examples, the AquaBeam System 
meets the criteria for approval of new technology add-on payments.
    The applicant also stated that for large prostates, the MS-DRG 
assignment for potential cases representing patients eligible for 
treatment involving the AquaBeam System would be similar to normal 
transurethral prostate treatments, which is different than the MS-DRG 
assignment for open prostatectomy (OP). The applicant believed that 
potential cases involving Aquablation therapy would group to MS-DRGs 
713 and 714 (Transurethral Prostatectomy) and open simple prostatectomy 
procedures would group to MS-DRGs 707 and 708 (Major Male Pelvic 
Procedures). The applicant stated that, for prostates sized less than 
80 ml, potential cases involving Aquablation therapy would map to the 
same MS-DRGs as other transurethral procedures, and for large prostates 
greater than 80 ml in size, procedures involving Aquablation therapy in 
lieu of an open prostatectomy would result in a different MS-DRG 
assignment. Therefore, the applicant believed AquaBeam System's 
Aquablation therapy meets this criterion under substantial similarity.
    Other commenters believed that the AquaBeam System met the newness 
criterion. The commenters stated that the use of imaging and 
ultrasound, the autonomous robotic execution of the procedure, and the 
use of room temperature water rather than heat, combined make the 
AquaBeam System a novel treatment for BPH. Another commenter further 
indicated that many other technologies are surgeon- and experience-
dependent, whereas the AquaBeam System's image guided procedure with 
robotic execution allows for a greater degree of precision and 
monitoring of the treatment independent of experience or expertise. The 
commenter believed that the addition of image guidance and robotic 
execution of the procedure leads to consistent results independent of 
surgeon experience.
    Response: We appreciate the commenters' input. After consideration 
of these comments, we agree that the AquaBeam System has a unique 
mechanism of action because it is the first to use 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. Therefore, after 
consideration of the public comments we received, we agree that the 
AquaBeam System meets the newness criterion and the newness period 
beginning date is April 19, 2018.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that the technology meets the cost 
criterion. Given that at the time of the analysis, the AquaBeam 
System's Aquablation therapy procedure did not 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 
(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

[[Page 41352]]

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-
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 exceeded the average case-
weighted threshold amount for both analyses, the applicant maintained 
that the technology met the cost criterion.
    We invited public comment regarding whether the technology meets 
the cost criterion.
    Comment: The applicant reiterated the results of the cost analysis 
detailed in the FY 2019 IPPS/LTCH PPS proposed rule, and believed that 
the AquaBeam System meets the cost criterion.
    Response: We appreciate the applicant's input and agree that the 
AquaBeam System 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 non-inferior 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 \195\ 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.\196\ 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.\197\
---------------------------------------------------------------------------

    \195\ 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.
    \196\ Ibid.
    \197\ Ibid.
---------------------------------------------------------------------------

    The applicant indicated that 8 of the 15 patients who were enrolled 
in the trial had at least 1 procedure-related adverse event (for 
example, catheterization, hematuria, dysuria, pelvic pain, bladder 
spasms), which the authors reported to be consistent with outcomes from 
minimally-invasive transurethral procedures.\198\ There were no 
occurrences of incontinence, retrograde ejaculation, or erectile 
dysfunction at 30 days.\199\ Statistically significant improvement on 
all outcomes occurred over the 6-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-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.\200\
---------------------------------------------------------------------------

    \198\ 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.
    \199\ Ibid.
    \200\ 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.
---------------------------------------------------------------------------

    The second study \201\ 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.\202\ 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-operative 
adverse events (urinary retention, dysuria, hematuria, urinary tract 
infection, bladder spasm, meatal stenosis) were consistent with other 
minimally-invasive transurethral procedures; \203\ 6 patients had at 
least 1 adverse event, including temporary urinary symptoms and 
medically-treated urinary tract infections.\204\ 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.
---------------------------------------------------------------------------

    \201\ Ibid.
    \202\ Ibid.
    \203\ Ibid.
    \204\ Ibid.
---------------------------------------------------------------------------

    The third document provided by the applicant is the Clinical Study 
Report: WATER Study,\205\ a prospective multi-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

[[Page 41353]]

the AquaBeam System's Aquablation therapy group, with 176 (97 percent 
of patients) continuing at 3 and 6 month follow-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-month follow-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.
---------------------------------------------------------------------------

    \205\ 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,\206\ the TURP procedure, Green light laser versus the TURP 
procedure,\207\ and Urolift.\208\ 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 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-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).
---------------------------------------------------------------------------

    \206\ 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.
    \207\ 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.
    \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.
---------------------------------------------------------------------------

    In the FY 2019 IPPS/LTCH proposed rule (83 FR 20349), we stated 
that 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. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20349), we stated we have concerns with the

[[Page 41354]]

interpretation of these results that the applicant provided. We noted 
that the comparison of multiple clinical studies is a difficult issue, 
and it was 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 80 ml, 
whereas such patients may be eligible for treatment involving the 
AquaBeam System's Aquablation therapy.
    We noted that the applicant submitted a meta-analysis in an effort 
to compare currently available therapies to the AquaBeam System's 
Aquablation therapy. We stated that 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 invited 
public comments on the applicability of this meta-analysis.
    Comment: The applicant stated in response to CMS' concerns in 
regard to the meta-analysis that the meta-analysis was performed with 
the cited studies because of the similarities in geography where 
enrolled, inclusion of similar prostate size (30 to 80 ml), and the 
randomization against the same control of TURP. The applicant indicated 
that the objective of the analysis was to compare the reduced safety 
profile in ejaculatory dysfunction of Aquablation therapy compared to 
TURP as demonstrated in the WATER study, as well as to compare the 
safety profile of Aquablation therapy to the UroLift procedure.
    Response: We appreciate the applicant's response and have taken 
this new information into consideration in making a final 
determination, as indicated below.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20349), we 
indicated that we had a concern that the differences between the 
AquaBeam System's Aquablation therapy and standard treatment options 
may not be as impactful and confined to safety aspects. We stated that 
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. In the proposed rule, we stated we agree with 
the applicant 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 
stated in the proposed rule that 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. We stated that 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 invited public comments on whether the AquaBeam System's 
Aquablation therapy meets the substantial clinical improvement 
criterion.
    Comment: In response to CMS' concerns from the proposed rule that, 
while the WATER safety data showed superiority, adverse consequences 
were difficult to track because the data were combined into a composite 
endpoint, the applicant explained that in the WATER study a CD1+ event 
was defined as involving persistent bladder spasms, bleeding, dysuria, 
pain, retrograde ejaculation, urethral damage, urinary retention, 
urinary tract infection, and urinary urgency/frequency/difficulty/
leakage. The applicant stated that data from the WATER study show 
Aquablation therapy was statistically superior to TURP in CD Grade 1+ 
adverse events. The applicant indicated that CD2 and above events are 
defined as those requiring pharmacological treatment, blood 
transfusions, endoscopic, surgical, or radiological interventions. The 
applicant stated that, after removal of the ejaculatory dysfunction 
events from the composite safety endpoint, the rate of CD2 and above 
adverse events for Aquablation therapy as compared to TURP was 19.8 
percent and 23.1 percent, respectively.
    In response to CMS' concern with regard to the WATER study finding 
of Aquablation's improved safety relative to TURP and that other 
treatment modalities demonstrate safety profiles similar to 
Aquablation, the applicant stated that, while this may be true, 
treatment modalities such as TUIP, TUNA/RF, Microwave, and PUL have 
inferior efficacy to TURP in a variety of objective and subjective 
measures including peak urine flow, PVR reduction and BPH symptom 
reduction.\209\ However, the applicant indicated that, because the 
WATER study showed Aquablation efficacy similar to TURP for all 
prostate sizes and superiority in prostates sized 50 to 80 ml in 
volume, and that TURP shows superior efficacy to these other treatment 
modalities, Aquablation therapy offers an overall clinical improvement 
relative to these alternative treatment modalities.
---------------------------------------------------------------------------

    \209\ Christidis, D., McGrath, S., Perera, M., Manning, T., 
Bolton, D., & Lawrentschuk, N., ``Minimally invasive surgical 
therapies for benign prostatic hypertrophy: The rise in minimally 
invasive surgical therapies,'' Prostate International, 2017, pp. 41-
46.
---------------------------------------------------------------------------

    In response to CMS' concern that Aquablation has limited positive 
outcomes for prostates sized 50 to 80 ml, the applicant stated that in 
a pre-specified subgroup analysis the WATER study showed superior 
safety and efficacy in prostates sized 50 to 80 ml

[[Page 41355]]

compared to TURP. The applicant indicated that, in fact, because the 
subset analysis of men with prostates sized 50 to 80 ml in volume 
demonstrated Aquablation's superior outcomes over the TURP arm of the 
WATER study, the applicant sought to assess the efficacy and safety of 
the procedure in men with even larger prostates in the follow up WATER 
II study, which included prostates in sizes greater than 80 ml.
    In response to CMS' concern that Aquablation therapy performed on 
larger prostates should be compared with laser (that is, HoLEP) and 
open simple prostatectomy procedures, the applicant stated that between 
September and December 2017, 101 men (67 percent were Medicare 
eligible) with moderate-to-severe BPH symptoms and prostates sized 80 
to 150 ml in volume underwent Aquablation therapy in the prospective 
multi-center international WATER II clinical trial. The applicant 
indicated that, as noted above, the American Urological Association 
(AUA) BPH surgical guidelines recommend open simple prostatectomy or 
laser enucleation for the treatment of large prostates (>80 ml in 
volume). The applicant explained that the primary purpose of the WATER 
II was to assess the safety profile for Aquablation therapy in larger 
prostates. The applicant stated that the overall CD Grades 2, 3, and 4 
complications were recorded in 19 percent, 11 percent, and 5 percent, 
respectively.\210\ The applicant further stated that postoperative 
bleeding after Aquablation therapy that required transfusion (N=6, 5.9 
percent) and/or cystoscopy with clot evacuation/fulguration (N=2, 2.0 
percent) was observed in 8 patients during the procedural 
hospitalization.\211\ The applicant stated that these results compare 
favorably to simple prostatectomy because the severe hemorrhage rate 
(defined as patients with a diagnosis related to hemorrhage and those 
who underwent transfusion) has been reported as high as 29 percent 
(range 12 to 29 percent) based on a claims analysis of 35,171 patients 
\212\ who underwent the procedure. The applicant stated that 
Aquablation therapy has an average length of stay of 1.6 days compared 
to an average length of state of 5 days for prostatectomy. The 
applicant further indicated that transfusion rates for the AquaBeam 
System were less than those for the simple prostatectomy procedure. The 
applicant explained that the AquaBeam procedure is technically feasible 
even for surgeons with low or no prior experience, and open 
prostatectomy has higher morbidity rates, longer hospital stays, and 
longer catheter times than those for the AquaBeam System.
---------------------------------------------------------------------------

    \210\ Mihir, D., Bidar, M., Bhojani, N., Trainer, A., Arther, 
A., Kramolowsky, E., Doumanian, L., et al., ``WATER II (80-150 mL) 
Procedureal Outcomes,'' 2018, BJU International.
    \211\ Ibid.
    \212\ Pariser, J., Pearce, S., Patel, S., & Bales, G., 
``National Trends of Simple Prostatectomy for Benign Prostatic 
Hyperplasia with and Analysis of Risk Factors for Adverse 
Perioperative Outcomes,'' 2015, Urology, vol. 86(4).
---------------------------------------------------------------------------

    In response to CMS' concern regarding the appropriateness of the 
AquaBeam System for prostates of smaller sizes (for example, <30 mls), 
the applicant apologized for any inference in its application regarding 
smaller prostate sizes because it was not its intention to make any 
specific claims regarding smaller prostates.
    Other commenters also believed that the AquaBeam System represented 
a substantial clinical improvement. Another commenter stated that all 
of its treated patients experienced improved urinary flow and decreased 
BPH symptoms following treatment with the AquaBeam System. The 
commenter further stated that treated patients appreciated the 
preservation of ejaculatory function and indicated they would undergo 
the procedure again. Two commenters summarized results from the WATER 
II study, a single-arm study of the AquaBeam System in patients 
diagnosed with BPH with >80 ml prostate volumes, and stated that the 
AquaBeam System decreases operative time, time under anesthesia, 
decreases the length of inpatient stays, and has fewer complications as 
compared to open prostatectomy, which is the standard treatment for 
large prostates greater than 80 ml in volume. Another commenter with an 
interest in providing the AquaBeam therapy at its facility stated that, 
if an adequate payment is provided for the therapy, increased volume 
will most likely reduce the cost of this method of treatment.
    Response: We appreciate the additional information provided by the 
applicant and the commenters' input. We agree that the results of the 
WATER study are statistically significant (95 percent confidence 
interval of the difference between AquaBeam and TURP) and superior to 
TURP in safety as evidenced by a lower proportion of persistent CD 
Grade 1 adverse events at 3 months (which measured in totality Bladder 
spasm, Bleeding, Dysuria, Pain, Retrograde ejaculation, Urethral 
damage, Urinary retention, Urinary tract infection, Urinary urgency/
frequency/difficulty/leakage). Additionally, patients enrolled in the 
WATER study with prostate sizes greater than 50 ml in volume and 
treated with Aquablation therapy had superior IPSS improvement than 
those treated with TURP, as well as better peak urinary flow rates 
(Qmax) at 6 months, and improved ejaculatory function and incontinence 
scores at 3 months. Results from the WATER II study for patients with 
large prostate volumes demonstrate better outcomes of the AquaBeam 
System over the standard-of-care, the open prostatectomy, regarding 
less operative time, decreased length of stay, and decreased rates of 
severe hemorrhage and transfusions. Based on the results above, we have 
determined the AquaBeam System represents a substantial clinical 
improvement for the resection and removal of prostate tissue in males 
suffering from lower urinary tract symptoms due to benign prostatic 
hyperplasia.
    After consideration of the public comments we received, we have 
determined that the AquaBeam System's Aquablation therapy meets all of 
the criteria for approval of new technology add-on payments. Therefore, 
we are approving new technology add-on payments for the AquaBeam System 
for FY 2019. Cases involving the AquaBeam System that are eligible for 
new technology add-on payments will be identified by ICD-10-PCS 
procedure code XV508A4 (Destruction of prostate using robotic waterjet 
ablation, via natural or artificial opening endoscopic, new technology 
group 4).
    In its application, the applicant estimated that the average 
Medicare beneficiary would require the transurethral procedure of one 
AQUABEAM System per patient. According to the application, the cost of 
the AQUABEAM System is $2,500 per procedure. 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 the use of the AQUABEAM 
System's Aquablation System is $1,250 for FY 2019. In accordance with 
the current indication for the AQUABEAM System, CMS expects that the 
AQUABEAM System will be used in the treatment for adult patients 
experiencing lower urinary tract symptoms caused by a diagnosis of BPH.
j. 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

[[Page 41356]]

applicant previously submitted applications for new technology add-on 
payments for FY 2017 and FY 2018 for Andexanet alfa, which were 
withdrawn). In the proposed rule, we discussed AndexXaTM as 
a reversal agent for patients treated with direct and indirect Factor 
Xa inhibitors when reversal of anticoagulation is needed due to life-
threatening or uncontrolled bleeding. AndexXaTM received FDA 
approval on May 3, 2018, and is indicated for use in the treatment of 
patients treated with rivaroxaban and apixaban, when reversal of 
anticoagulation is needed due to life-threatening or uncontrolled 
bleeding. According to the FDA-approved prescribing information, 
AndexXaTM has not been shown to be effective for, and is not 
indicated for, the treatment of bleeding related to any Factor Xa 
inhibitors other than the direct Factor Xa inhibitors apixaban and 
rivaroxaban. Therefore, in this final rule, we discuss 
AndexXaTM in the context of the FDA-approved indication as a 
treatment of an anticoagulation reversal agent for rivaroxaban and 
apixaban only due to life-threatening or uncontrolled bleeding.
    AndexXaTM is an antidote used to treat patients who are 
receiving treatment with the Factor Xa inhibitors rivaroxaban and 
apixaban when reversal of anticoagulation is needed due to life-
threatening or uncontrolled bleeding. 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 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[supreg]), apixaban (Eliquis[supreg]), 
betrixaban (Bevyxxa[supreg]), and edoxaban (Savaysa[supreg]) 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, prior to May 3, 2018, there was 
no FDA-approved therapy used for the urgent reversal of Factor Xa 
inhibitors rivarobaxan and apixaban as a result of serious bleeding 
episodes.
    As stated above, AndexXaTM received FDA approval on May 
3, 2018, and is indicated for use in the treatment of patients treated 
with rivaroxaban and apixaban, when reversal of anticoagulation is 
needed due to life-threatening or uncontrolled bleeding. The applicant 
received approval for two unique ICD-10-PCS procedure codes that became 
effective October 1, 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. AndexXaTM is the first and the only antidote 
available to treat patients receiving apixaban and rivaroxaban who 
suffer a major bleeding episode and require urgent reversal of 
anticoagulation. Other anticoagulant reversal agents, such as 
KcentraTM and idarucizumab, do not reverse the effects of 
apixaban and rivaroxaban. Therefore, the applicant asserted that the 
technology is not substantially similar to any other currently approved 
and available treatment options for Medicare beneficiaries. We 
discussed the applicant's assertions in the context of the three 
substantial similarity criteria in the proposed rule, as also discussed 
below.
    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 indicated that AndexXaTM is the first 
anticoagulant reversal agent that binds to apixaban and rivaroxaban 
with high affinity, thereby sequestering the inhibitors and 
consequently rapidly reducing free plasma concentration of these Factor 
Xa inhibitors. The applicant asserted that this mechanism of action 
neutralizes the inhibitors' anticoagulant effect, which allows for the 
restoration of normal hemostasis. According to the applicant, 
AndexXaTM represents a significant therapeutic advance 
because it provides rapid reversal of the anticoagulation effect of 
apixaban and rivaroxaban in the event of a serious bleeding episode 
where other anticoagulant reversal agents, such as KcentraTM 
and idarucizumab, do not reverse the effects of these Factor Xa 
inhibitors.
    With regard to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant stated that 
AndexXaTM is the first FDA-approved anticoagulant reversal 
agent for patients receiving rivaroxaban and apixaban, and the first 
reversal agent to be FDA-approved for these Factor Xa inhibitors. The 
applicant further stated that other anticoagulant reversal agents, such 
as KcentraTM and idarucizumab, do not reverse the effects of 
these Factor Xa inhibitors. Therefore, the MS-DRGs do not contain cases 
that represent patients who have been treated with any anticoagulant 
reversal agents for these 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 
indicated that AndexXaTM is the only anticoagulant reversal 
agent available for treating patients who are receiving treatment with 
apixaban or rivaroxaban 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 stated in 
the proposed rule that we believe that it appears that 
AndexXaTM is not substantially similar to any existing 
technologies. We invited public comments on whether 
AndexXaTM meets the substantial similarity criteria, and 
whether AndexXaTM meets the newness criterion.
    Comment: The applicant reiterated that AndexXaTM 
satisfies the newness criterion. With respect to mechanism of action, 
the applicant reiterated that AndexXaTM rapidly binds to 
apixaban and rivaroxaban with high affinity, acting as a decoy molecule 
that sequesters the inhibitors to rapidly reduce the free plasma 
concentrations and neutralize their antiacoagulant effects to allow 
restoration of normal hemostasis. With respect to treating the same or 
similar type of disease and the same or similar patient population, the 
applicant further indicated that, as the first and only FDA-approved 
antidote available for a patient population receiving treatment using 
apixaban or rivaroxaban who suffer a major bleeding episode and require 
urgent reversal of direct Factor Xa coagulation of these Factor Xa 
inhibitors, AndexXaTM is not substantially similar to any 
other currently approved and available treatment options for Medicare

[[Page 41357]]

beneficiaries. The applicant emphasized that, prior to the approval of 
AndexXaTM, the management of bleeding events in patients 
taking the Factor Xa inhibitors apixaban and rivaroxaban had been 
predicated on blood transfusions (that is, whole blood, packed red 
blood cells (RBCs), fresh frozen plasma (FFP), and/or platelets), or 
the use of a number of replacement clotting factor therapies (for 
example, fresh frozen plasma, Prothrombin Complex Concentrates (PCC), 
and recombinant activated Factor VIIa)--all of which are supportive 
measures that do not reverse the Factor Xa activity of these 
inhibitors. Finally, with respect to MS-DRG assignment, because 
AndexXaTM is the first and only FDA-approved reversal agent 
of Factor Xa inhibitor for the treatment of patients receiving apixaban 
and rivaroxaban who experience life-threatening or uncontrolled 
bleeding or require emergency surgery, and the first reversal agent to 
be approved for these Factor Xa inhibitors, the applicant believed that 
the MS-DRGs do not contain any cases that represent patients treated 
with AndexXaTM as a reversal agent for these Factor Xa 
inhibitors.
    Other commenters stated that AndexXaTM meets the newness 
criterion and is not substantially similar to any existing technologies 
because there is no other reversal agent available on the U.S. market 
for patients who are being treated with these Factor Xa inhibitors and 
experience severe bleeding. These commenters stated that other 
anticoagulant reversal agents do not reverse the effects of these 
Factor Xa inhibitors.
    Response: We appreciate the commenters' and the applicant's input 
on whether AndexXaTM meets the newness criterion. After 
review of the information provided by the applicant and consideration 
of the public comments we received, we believe that 
AndexXaTM meets the newness criterion and consider the 
beginning of the technology's newness period to be May 3, 2018, when 
the technology received FDA approval.
    With regard to the cost criterion, we stated in the proposed rule 
that 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 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

[[Page 41358]]

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 invited public comments on whether AndexXaTM meets 
the cost criterion.
    Comment: The applicant reiterated that it believed 
AndexXaTM meets the cost criterion. The applicant noted that 
in all 12 scenarios submitted with the cost analysis of the application 
for AndexXaTM in October 2017, the average case-weighted 
standardized charges per case exceeded the average case-weighted 
threshold amounts in the FY 2018 Table 10 by an average of $8,431. The 
applicant further noted that, because the price of AndexXaTM 
had not been set at the time of conducting the analysis, it did not 
incorporate charges for the new technology in its application. 
Therefore, the applicant conducted and submitted an updated analysis 
that added charges for the costs of AndexXaTM as well as 
updated the charges related to administering AndexXaTM in 
response to an increase in payment rates for procedural terminology 
codes 96365 and 96366 for infusion administration.
    The applicant indicated that the WAC for 1 gram of 
AndexXaTM is $28,125, and the prescribing information 
outlines a low-dose and a high-dose regimen. The applicant explained 
that, in calculating the charges for AndexXaTM, the low-dose 
regimen was assumed for all scenarios. The applicant stated that the 
low-dose regimen consists of an initial IV bolus and a follow-on IV 
infusion. The applicant further stated that during the initial IV 
bolus, the patient is infused with 400 mg of AndexXaTM at 
the target rate of 30 mg per minute, and during the follow-on IV 
infusion, the patient is infused with 4 mg of AndexXaTM, per 
minute, for 120 minutes. The applicant noted that, for purposes of 
simplification and consistency, the follow-on IV infusion was assumed 
to be the full 120 minutes for all 12 scenarios. Applying the 
assumptions for dosing regime and duration of follow-on IV infusion, 
the applicant stated that a patient receiving a low-dose regimen is 
administered a total of 880 mg--88 percent of 1 gram--of 
AndexXaTM. The applicant calculated that the low-dose regime 
equates to a WAC of $24,750 per patient. The applicant converted the 
low-dose treatment cost of $24,750 to a charge using a cost to CCR of 
0.5.
    The applicant indicated that the addition of charges for 
AndexXaTM and the updated charges related to 
AndexXaTM administration increased the difference between 
the average case-weighted standardized charges per case

[[Page 41359]]

and the average case-weighted threshold amount in Table 10 from an 
average of $8,431 to an average of $57,932, or by a 587 percent 
increase. Below we provide a table for all 12 revised scenarios of the 
cost analysis conducted by the applicant to 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         $120,817         $60,209
 Removal of Blood and Blood Product
 Administration Costs...................
100 Percent of Cases, PI5, 60 Percent            122,619          60,209
 Removal of Blood and Blood Product
 Administration Costs...................
100 Percent of Cases, FEIBA, 40 Percent          121,683          60,209
 Removal of Blood and Blood Product
 Administration Costs...................
100 Percent of Cases, PI5, 40 Percent            123,252          60,209
 Removal of Blood and Blood Product
 Administration Costs...................
80 Percent of Cases, FEIBA, 60 Percent           117,911          58,817
 Removal of Blood and Blood Product
 Administration Costs...................
80 Percent of Cases, PI5, 60 Percent             119,696          58,817
 Removal of Blood and Blood Product
 Administration Costs...................
80 Percent of Cases, FEIBA, 40 Percent           118,790          58,817
 Removal of Blood and Blood Product
 Administration Costs...................
80 Percent of Cases, PI5, 40 Percent             120,338          58,817
 Removal of Blood and Blood Product
 Administration Costs...................
25 Percent of Cases, FEIBA, 60 Percent            95,638          45,272
 Removal of Blood and Blood Product
 Administration Costs...................
25 Percent of Cases, PI5, 60 Percent              97,242          45,272
 Removal of Blood and Blood Product
 Administration Costs...................
25 Percent of Cases, FEIBA, 40 Percent            96,600          45,272
 Removal of Blood and Blood Product
 Administration Costs...................
25 Percent of Cases, PI5, 40 Percent              97,914          45,272
 Removal of Blood and Blood Product
 Administration Costs...................
------------------------------------------------------------------------

    Response: After consideration of the public comments we received, 
we agree that 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 
apixaban or rivaroxaban who experience serious, uncontrolled bleeding 
events or who require emergency surgery because the technology 
addresses an unmet medical need for an antidote to apixaban and 
rivaroxaban. According to the applicant, AndexXaTM is the 
only FDA-approved agent shown in prospective clinical trials to rapidly 
(within 2 to 5 minutes) and sustainably reverse the anticoagulation 
activity of these Factor Xa inhibitors; is potentially nonthrombogenic, 
as no serious adverse effects of thrombosis were observed in clinical 
trials; and could supplant currently available treatments for bleeding 
from anti-Factor Xa therapy, which have not been shown to be effective 
in the treatment of all patients.
    The applicant stated that the use of any anticoagulant is 
associated with an increased risk of bleeding, and bleeding 
complications can be life-threatening. The applicant further indicated 
that bleeding is especially concerning for patients treated with these 
Factor Xa inhibitors because, prior to the FDA approval of 
AndexXaTM, no antidotes to these Factor Xa inhibitors were 
available. As a result, when a patient anticoagulated with the use of 
apixaban or rivaroxaban presented with life-threatening bleeding, 
clinicians often resorted to using preparations of vitamin K dependent 
clotting factors, such as 4-factor prothrombin complex concentrates 
(PCCs), which do not reverse the effects of these Factor Xa inhibitors' 
anticoagulation. The applicant asserted that 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 these Factor 
Xa inhibitors is commonplace in many hospitals due to the lack of any 
alternative in the setting of a serious or life-threatening bleed.
    As noted above, AndexXaTM has a unique mechanism of 
action and represents a new biological approach to the treatment of 
patients receiving apixaban or rivaroxaban 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 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).\213\ 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.214 215 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.\216\ 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.\217\ The applicant

[[Page 41360]]

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

    \213\ Truven, ``2016 Truven Medicare Projected Bleeding 
Events'', MARKETSCAN[supreg] Medicare Supplemental Database, January 
1, 2016 to December 31, 2016 Data pull, Data on File, Supplemental 
file.
    \214\ 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.
    \215\ 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.
    \216\ 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.
    \217\ 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.\218\ 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.\219\
---------------------------------------------------------------------------

    \218\ 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.
    \219\ 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,220 221 the ANNEXA-A 
(reversal of apixaban) and ANNEXA-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 studies, 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. 222 223 224
---------------------------------------------------------------------------

    \220\ Conners, J.M., ``Antidote for Factor Xa Anticoagulants,'' 
N Engl J Med, 2015 Nov 13.
    \221\ 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.
    \222\ 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.
    \223\ 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.
    \224\ 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 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-label ANNEXA-4 study. The ANNEXA-4 study is 
a multi-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, in 
the proposed rule, we stated we were concerned that this interim data 
also indicate 18 percent of patients experienced a thrombotic event and 
15 percent of patients died following reversal during

[[Page 41361]]

the 30-day follow-up period in the ANNEXA-4 study. For this reason, we 
stated we were concerned that there is insufficient data to determine 
substantial clinical improvement over existing technologies.
    We invited public comments on whether AndexXaTM meets 
the substantial clinical improvement criterion.
    Comment: The applicant reiterated that AndexXaTM 
satisfies the substantial clinical improvement criterion, and indicated 
that it is the first and only FDA-approved antidote for the direct 
Factor Xa inhibitors apixaban and rivaroxaban. The applicant stated 
that AndexXaTM has been shown to reverse the anticoagulant 
effect of apixaban and rivaroxaban immediately in patients needing 
rapid reversal of anticoagulation in emergency situations. The 
applicant referenced the results from 2 ANNEXA Phase III clinical 
trials that show that the reversal of anticoagulation activity with 
AndexXaTM occurred within 2 to 5 minutes in more than 90 
percent of patients treated with apixaban and rivaroxaban to 
demonstrate its substantial clinical improvement over existing 
technologies.\225\ The applicant also pointed out that, as shown by the 
clinical results, AndexXaTM rapidly reversed anti-Factor Xa 
activity in the ANNEXA-4 clinical trial and sustained that reversal for 
enrolled patients for 12 hours.226 227 228 Several 
commenters suggested that these results showed AndexXaTM has 
the potential to successfully treat patients who only require short-
duration reversal of the Factor Xa inhibitor anticoagulant, as well as 
patients who may need longer duration reversal. Furthermore, the 
applicant and other commenters stated that ongoing trials in which 
enrolled patients experienced uncontrolled bleeding while receiving 
apixaban and rivaroxaban have confirmed the safety and efficacy of the 
use of AndexXaTM in this patient population.
---------------------------------------------------------------------------

    \225\ Siegal DM, Curnutte JT, Connolly SJ et al. Andexanet Alfa 
for the Reversal of Factor Xa Inhibitor Activity. N Engl J Med. 
2015; 373:2413-2424.
    \226\ Ibid.
    \227\ Connolly SJ, Milling TJ, Eikelboom JW et al. Andexanet 
Alfa for Acute Major Bleeding Associated with Factor Xa Inhibitors. 
N Engl J Med 2016;375;1131-41.
    \228\ Ibid.
---------------------------------------------------------------------------

    With respect to the 18 percent of patients that experienced a 
thrombotic event and 15 percent of patients that died following 
reversal during the 30-day follow-up period in the ongoing ANNEXA-4 
trial, the applicant asserted that this is consistent with the high-
risk profile of the patients who have an intrinsic risk of dying even 
if bleeding is reversed. Specifically, the applicant explained that the 
thrombotic event rate and mortality observed in the ANNEXA-4 study, to 
date, are a reflection of the patients taking Factor Xa inhibitors due 
to a prior history of venous thromboembolisms, and reversal of 
anticoagulation in bleeding patients by use of AndexXaTM 
exposes the underlying disease risk, which can result in thrombotic 
events. The applicant further noted that, in an expanded cohort of 227 
patients, the total mortality rate was 12 percent and thrombotic events 
occurred within 3 days of AndexXaTM administration in only 
2.6 percent of patients, and within 30 days in 11 percent of patients. 
The applicant also stated that other approved reversal agents have had 
a similar safety profile. For example, in the REVERSE-AD study for the 
reversal agent idarucizumab, the results indicated that use of the 
technology had a total mortality rate of 14 percent after reversal of 
anticoagulation, and the thrombotic event rates in patients not 
anticoagulated are roughly similar at approximately 10 to 15 percent 
for both REVERSE-AD and ANNEXA-4. Furthermore, the applicant stated 
that when comparing the results of the expanded ANNEXA-4 cohort with 
the results of 16 contemporary studies enrolling 30 or more patients 
who experienced acute major bleeding, the majority of studies indicated 
a thrombotic event rate of approximately 10 percent, though rates as 
high as 25 to 28 percent have been reported. The applicant indicated 
that, while several studies have lower thrombotic event rates compared 
with the ANNEXA-4 group, they also tended to enroll younger patients in 
the populations and patients with less severe bleeding events. The 
applicant noted that the median time to a thrombotic event ranged from 
as few as 1 to 2 days to as many as 8 days, with overall follow-up 
generally ranging from 30 to 90 days. In contrast, the applicant stated 
that the median time to a thrombotic event in ANNEXA-4 was 11 days.
    Several commenters also supported the clinical results as 
demonstration of substantial clinical improvement for 
AndexXaTM over existing technologies. A commenter stated 
that the lack of a targeted antidote to Factor Xa anticoagulation is a 
significant unmet need and one that has been an impediment to the use 
of Factor Xa inhibitors such as apixaban and rivaroxaban, despite their 
use convenience. Other commenters believed that a serious risk inherent 
to Factor Xa treatment is the incidence of unanticipated bleeding, 
which may occur as a result of trauma or bleeding into a critical 
organ. Several commenters expressed concern with the high risk of death 
or major morbidity as a result of such bleeding, particularly in the 
case of an intracranial hemorrhage, which is not amenable to emergency 
invasive interventions to stop the bleeding; an issue these commenters 
believed could be resolved with the use of AndexXaTM. The 
commenters stated that, for patients with intracranial hemorrhages that 
are anticoagulation-related, there are effective reversal treatments 
when the anticoagulation is induced by warfarin, heparin or a direct 
thrombin inhibitor, but none when the critical bleeding is related to a 
Factor Xa inhibitor such as apixaban or rivaroxaban. Therefore, the 
commenters believed that the approval of new technology add-on payments 
for AndexXaTM offers an effective treatment option for 
patients receiving apixaban or rivaroxaban who experience a critical 
bleed and require urgent reversal of the anticoagulant effect. The 
commenters further stated that, as the only existing Factor Xa 
inhibitor reversal agent for apixaban and rivaroxaban, 
AndexXaTM is a needed therapy in managing these critical 
scenarios. The commenters believed that, based on these reasons, 
AndexXaTM meets the substantial clinical improvement 
criterion.
    Response: We appreciate the commenters' and the applicant's input 
regarding the substantial clinical improvement criterion for 
AndexXaTM. We agree that AndexXaTM represents a 
substantial clinical improvement over existing technologies and 
provides an alternative treatment option to Medicare beneficiaries and, 
therefore, meets the substantial clinical improvement criterion. 
Specifically, AndexXaTM: (1) Provides a rapid, sustained 
reversal of the anticoagulant effects of Factor Xa inhibitors 
rivaroxaban and apixaban; and (2) represents a treatment option for 
patients who experience severe or life-threatening bleeds, such as 
intracranial hemorrhages, during the administration of Factor Xa 
inhibitor anticoagulation. As noted above, according to the FDA-
approved prescribing information, AndexXaTM has not been 
shown to be effective for, and is not indicated for, the treatment of 
bleeding related to any Factor Xa inhibitors other than apixaban and 
rivaroxaban.
    After consideration of the public comments we received, we have 
determined that AndexXaTM meets all of the criteria for 
approval for new technology add-on payments. Therefore,

[[Page 41362]]

we are approving new technology add-on payments for 
AndexXaTM for FY 2019. Cases involving the use of 
AndexXaTM that are eligible for new technology add-on 
payments will be identified by ICD-10-PCS procedure codes XW03372 and 
XW04372. The applicant explained that the WAC for 1 vial costs $2,750 
with the use of an average of 10 vials for the low dose and 18 vials 
for the high dose. The applicant also noted that per the clinical trial 
data, 90 percent of cases were administered a low dose and 10 percent 
of cases the high dose. The weighted average between the low and high 
dose is an average of 10.22727 vials. Therefore, the cost of a standard 
dosage of AndexXaTM is $28,125 ($2,750 x 10.22727). 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 
the use of AndexXaTM is $14,062.50 for FY 2019.

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

A. Background

1. Legislative Authority
    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary adjust the standardized amounts for area differences in 
hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level. We 
currently define hospital labor market areas based on the delineations 
of statistical areas established by the Office of Management and Budget 
(OMB). A discussion of the FY 2019 hospital wage index based on the 
statistical areas appears under section III.A.2. of the preamble of 
this final rule.
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index annually and to base the update on a survey of wages and 
wage-related costs of short-term, acute care hospitals. (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 adjustment for FY 2019 is 
discussed in section II.B. of the Addendum to this final rule.
    As discussed in section III.I. of the preamble of this final rule, 
we also take into account the geographic reclassification of hospitals 
in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act 
when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of 
the Act, the Secretary is required to adjust the standardized amounts 
so as to ensure that aggregate payments under the IPPS after 
implementation of the provisions of sections 1886(d)(8)(B), 
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate 
prospective payments that would have been made absent these provisions. 
The budget neutrality adjustment for FY 2019 is discussed in section 
II.A.4.b. of the Addendum to this final rule.
    Section 1886(d)(3)(E) of the Act also provides for the collection 
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in 
order to construct an occupational mix adjustment to the wage index. A 
discussion of the occupational mix adjustment that we are applying to 
the FY 2019 wage index appears under sections III.E.3. and F. of the 
preamble of this final rule.
2. Core-Based Statistical Areas (CBSAs) for the FY 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) of the Act, beginning with FY 2005, we delineate 
hospital labor market areas based on OMB-established Core-Based 
Statistical Areas (CBSAs). The current statistical areas (which were 
implemented beginning with FY 2015) are based on revised OMB 
delineations issued on February 28, 2013, in OMB Bulletin No. 13-01. 
OMB Bulletin No. 13-01 established revised delineations for 
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and 
Combined Statistical Areas in the United States and Puerto Rico based 
on the 2010 Census, and provided guidance on the use of the 
delineations of these statistical areas using standards published on 
June 28, 2010 in the Federal Register (75 FR 37246 through 37252). We 
refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 
through 49963) for a full discussion of our implementation of the OMB 
labor market area delineations beginning with the FY 2015 wage index.
    Generally, OMB issues major revisions to statistical areas every 10 
years, based on the results of the decennial census. However, OMB 
occasionally issues minor updates and revisions to statistical areas in 
the years between the decennial censuses through OMB Bulletins. On July 
15, 2015, OMB issued OMB Bulletin No. 15-01, which 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 website at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2017/b-17-01.pdf. We noted in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20354) that we did not have sufficient time to include this change in 
the computation of the proposed FY 2019 wage index, ratesetting, and 
Tables

[[Page 41363]]

2 and 3 associated with the FY 2019 IPPS/LTCH PPS proposed rule. We 
stated in the proposed rule (83 FR 20354) that 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. In the proposed 
rule, we provided 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 in section III.B. of the preamble of the 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 was calculated 
using the average hourly wage data for one provider (provider 130002).
    In sections III.D. and E.2. of the preamble of the FY 2019 IPPS/
LTCH PPS proposed rule, we provided 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 resulted in the estimated wage 
indexes shown in the table in the proposed rule (83 FR 20354), which is 
also provided 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 FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20354), we stated that, in the 
final rule, we would incorporate this change into the final FY 2019 
wage index, ratesetting, and tables. We did not receive any public 
comments regarding this policy area. Therefore, we have incorporated 
the updates as reflected in OMB Bulletin Nos. 13-01, 15-01, and 17-01 
into the final FY 2019 wage index, ratesetting, and tables for this 
final FY2019 rule.
3. Codes for Constituent Counties in CBSAs
    CBSAs are made up of one or more constituent counties. Each CBSA 
and constituent county has its own unique identifying codes. There are 
two different lists of codes associated with counties: Social Security 
Administration (SSA) codes and Federal Information Processing Standard 
(FIPS) codes. Historically, CMS has listed and used SSA and FIPS county 
codes to identify and crosswalk counties to CBSA codes for purposes of 
the hospital wage index. 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 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 final 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 FY 2019 Wage Index

    The 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 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 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

[[Page 41364]]

related to GME (teaching physicians and residents) and certified 
registered nurse anesthetists (CRNAs), and other subprovider components 
that are not paid under the IPPS. The FY 2019 wage index also excludes 
the salaries, hours, and wage-related costs of hospital-based rural 
health clinics (RHCs), and Federally qualified health centers (FQHCs) 
because Medicare pays for these costs outside of the IPPS (68 FR 
45395). In addition, salaries, hours, and wage-related costs of CAHs 
are excluded from the wage index for the reasons explained in the FY 
2004 IPPS final rule (68 FR 45397 through 45398).
3. Use of Wage Index Data by Suppliers and Providers Other Than Acute 
Care Hospitals Under the IPPS
    Data collected for the IPPS wage index also are currently used to 
calculate wage indexes applicable to suppliers and other providers, 
such as SNFs, home health agencies (HHAs), ambulatory surgical centers 
(ASCs), and hospices. In addition, they are used for prospective 
payments to IRFs, IPFs, and LTCHs, and for hospital outpatient 
services. We note that, in the IPPS rules, we do not address comments 
pertaining to the wage indexes of any supplier or provider except IPPS 
providers and LTCHs. Such comments should be made in response to 
separate proposed rules for those suppliers and providers.

C. Verification of Worksheet S-3 Wage Data

    The wage data for the FY 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-3 are included in the Provider Reimbursement Manual (PRM), 
Part 2 (Pub. No. 15-2), Chapter 40, Sections 4005.2 through 4005.4. The 
data file used to construct the FY 2019 wage index includes FY 2015 
data submitted to us as of June 20, 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 we stated in the FY 2019 IPPS/
LTCH PPS proposed rule that 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 (83 FR 20355). 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 have made 
additional revisions to the FY 2019 wage data, as described further 
below. The revised data are reflected in this 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 the proposed 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.
    Since the development of the FY 2019 proposed wage index, as a 
result of further review by the MACs and the April and May appeals 
processes, we received improved data for 28 hospitals and are including 
the wage data of these 28 hospitals in the final wage index. However, 
during our review of the wage data in preparation of the April 27, 2018 
PUF, we identified and deleted the data of 2 additional hospitals whose 
data we determined to be aberrant (unusually low average hourly wages) 
relative to their CBSAs. With regard to CAHs, we have since learned of 
3 additional 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. Accordingly, we have removed 
11 hospitals that converted to CAH status from the FY 2019 wage index 
(8 CAHs for the proposed rule, and 3 more CAHs for the final rule). The 
final FY 2019 wage index is based on the wage index of 3,283 hospitals 
(3,260 + 28-2-3 = 3,283).
    For the final 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 final FY 2019 wage index associated 
with this final 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
              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

[[Page 41365]]

 
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 the FY 2019 proposed rule, this final 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 FY 2019 Unadjusted Wage Index

    In the FY 2019 IPPS/LTCH PPS proposed rule, we indicated we were 
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. One key to that transformation is ensuring that the 
Medicare payment rates are as accurate and appropriate as possible, 
consistent with the law. We invited the public to submit comments, 
suggestions, and recommendations for regulatory and policy changes to 
address wage index disparities.
    CMS looks forward to continuing to work on wage index disparities, 
particularly for rural hospitals, to the extent permitted under current 
law and appreciates responses to our request for public input on this 
issue. By allowing the imputed floor to expire for all urban States, as 
described section III.G.2. of the preamble of this final rule, CMS has 
begun the process of making the wage index more equitable.
1. Methodology for FY 2019
    The method used to compute the FY 2019 wage index without an 
occupational mix adjustment follows the same methodology that we used 
to compute the 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 did not propose 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 was applied to the wages of a hospital 
with such a cost reporting period.
    Using the data as previously described, the FY 2019 national 
average hourly wage (unadjusted for occupational mix) is $42.997789358.
    Previously, we also would provide a Puerto Rico overall average 
hourly wage. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56915), prior to January 1, 2016, Puerto Rico hospitals were paid 
based on 75 percent of the national standardized amount and 25 percent 
of the Puerto Rico-specific standardized amount. As a result, we 
calculated a Puerto Rico-specific wage index that was applied to the 
labor share of the Puerto Rico-specific standardized amount. Section 
601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) 
amended section 1886(d)(9)(E) of the Act to specify that the payment 
calculation with respect to operating costs of inpatient hospital 
services of a subsection (d) Puerto Rico hospital for inpatient 
hospital discharges on or after January 1, 2016, shall use 100 percent 
of the national standardized amount. As we stated in the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56915 through 56916), because Puerto Rico 
hospitals are no longer paid with a Puerto Rico-specific standardized 
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act, 
as amended by section 601 of the Consolidated Appropriations Act, 2016, 
there is no longer a need to calculate a Puerto Rico-specific average 
hourly wage and wage index. Hospitals in Puerto Rico are now paid 100 
percent of the national standardized amount and, therefore, are subject 
to the national average hourly wage (unadjusted for occupational mix) 
(which is $42.997789358 for this FY 2019 final rule) and the national 
wage index, which is applied to the national labor share of the 
national standardized amount. Therefore, for FY 2019, there is no 
Puerto Rico-specific overall average hourly wage or wage index.
2. Update of Policies Related to Other Wage-Related Costs, 
Clarification of the Calculation of Other Wage-Related Costs, and 
Policies 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.
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20357 through 20358), 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

[[Page 41366]]

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-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-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. As we stated in the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20357), 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 the 
proposed rule, we stated that we were correcting the inadvertent 
omission of Line 15 from the denominator, and we clarified 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 directed 
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.
    We stated in the FY 2019 IPPS/LTCH PPS proposed rule that, 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 (83 FR 20357). 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 wag-related costs are not a relative measure of the labor costs 
to be included in the IPPS wage index. Therefore, we stated that 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, in the FY 2019 IPPS/LTCH PPS proposed rule, we also 
discussed that 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 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-related costs other than the core list indicate that 
including other wage-related costs in the wage

[[Page 41367]]

index compromises the accuracy of the wage index as a relative measure 
of wages in a given labor market area.
    Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20358), for the reasons discussed earlier, for the FY 2020 wage index 
and subsequent years, we proposed 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 stated 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 indicated 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 stated that 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. We explained that 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-related costs in 
their wage index calculation. We also noted that this proposal to 
exclude other wage-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 noted that we would include in the FY 2019 wage 
index the other wage-related costs of the 8 hospitals that accurately 
reported those costs in accordance with the criteria in effect as of FY 
2018.
    In summary, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20358), we clarified that our 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 proposed 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.
    Comment: Several commenters supported CMS' proposal to only include 
core wage-related costs in the wage index calculation for the FY 2020 
wage index and subsequent years because only 8 hospitals out of over 
3,000 IPPS hospitals in the proposed 2019 wage index calculation had 
costs on this line for the FY 2018 wage index. One of these commenters 
reiterated that the inclusion of other wage-related costs in such a 
limited manner distorts the average hourly wage of a given labor market 
area, and does not accurately reflect the labor market area's current 
wages relative to national wages.
    A few commenters opposed this proposal. One commenter stated that 
the proposal would unreasonably exclude legitimate fringe benefits that 
can be directly linked to individual employment. Another commenter 
disagreed that other wage-related costs of an individual hospital do 
not accurately reflect the economic conditions of the labor market as a 
whole, stating that these costs more accurately represent the economic 
conditions of the labor market and that the inclusion of these costs is 
important for the financial sustainability of the minority of hospitals 
incurring other wage-related costs. The commenter urged CMS to continue 
allowing costs that meet current criteria for reporting other wage-
related costs when hospitals undergo serious circumstantial changes and 
incur costs to maintain qualified staff; for example, during a nursing 
strike when a hospital may engage in costly contract nursing agreements 
that include housing costs. This commenter believed that the cost 
report should remain a mechanism for CMS to acknowledge unforeseen or 
changing other labor costs.
    Response: We appreciate the commenters' support for our proposal. 
In response to the commenters who opposed the proposal, we continue to 
believe that other wage-related costs are not a relative measure of 
wages for the labor market area as a whole even though they may 
represent legitimate fringe benefits for individual hospitals. As we 
stated in the proposed rule, 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 (83 FR 20357). 
Furthermore, we do not believe that our proposal to exclude these costs 
threatens the financial sustainability of the minority of hospitals 
incurring other wage-related costs because these costs are typically 
only a small percentage of total wages (costs need to meet the 1 
percent test). Even if inclusion of these costs is indeed important for 
the financial sustainability of the minority of hospitals incurring 
other wage-related costs, we still do not agree that these costs should 
be included because they do not constitute a significant portion of 
wage costs in a particular labor market area and do not accurately 
represent the economic conditions of the labor market area as a whole. 
We also do not believe that the wage index is the appropriate mechanism 
to acknowledge and reimburse unforeseen other labor costs resulting 
from serious circumstantial changes such as nursing strikes. The wage 
index is intended as a relative measure of labor costs, and inclusion 
of other wage-related costs in the wage index arising from occasional, 
disruptive circumstantial changes 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.
    Comment: Several commenters requested clarification whether 
physician malpractice costs would still be included in the calculation 
of the wage index if other wage-related costs are eliminated. Several 
commenters cited the September 1, 1994 Federal Register (59 FR 45358) 
which allows only malpractice policies that list actual names or 
specific titles of covered employees in the wage index as ``explicit 
guidance and longstanding practice'' that inclusion of malpractice 
costs has ``long been recognized by CMS'' when meeting certain 
criteria. Commenters also maintained that if CMS is proposing to 
exclude malpractice costs as an other wage-related cost, this would 
create an inconsistency when comparing hospitals across the country by 
treating salaried and contract physicians differently.
    Furthermore, the commenters suggested that the number of hospitals 
reporting physician malpractice costs should be included in the number 
of hospitals that currently report other wage-related costs. One 
commenter stated that CMS' count of eight hospitals in the country 
reporting noncore wage-related costs is incorrect because malpractice 
cost is a noncore wage-related cost that is required, by cost report 
instruction, to be included with physician wage-related costs rather 
than on the noncore wage-related cost line. The commenter explained 
that CMS required physicians' wage-related costs to be listed 
separately, effective with FY 1994, because CMS anticipated

[[Page 41368]]

excluding Part A physicians' wage-related costs from the wage index, 
yet subsequently decided for FY 1999 onward to keep Part A physicians' 
wage-related cost in the wage index. Similarly, another commenter 
stated that CMS is ``vastly underestimating'' the impact of removing 
other wage-related costs from the wage index because malpractice 
insurance may currently be reported as other wage-related costs for 
certain categories of employees (for example, physicians, interns and 
residents, among others) on Lines 20 through 25, and 25.50 through 
25.53 of Worksheet S-3, Part II. The commenter urged CMS to more 
thoroughly analyze the potential impact of the proposal, stating that 
it would be ``premature for CMS to eliminate other wage-related costs 
from the wage index without a comprehensive review'' of the magnitude 
of the proposal.
    Response: We are clarifying that our proposal to remove other wage-
related costs from the wage index includes removing all categories of 
other wage-related costs, even those not currently reported on Line 18 
of Worksheet S-3, Part II--for example, contract labor. In addition, 
this removal would include other wage-related costs such as malpractice 
insurance associated with both employees and contract labor. The 
instructions for calculating the 1-percent test on Worksheet S-3, Part 
IV include the following note: ``The other wage related costs 
associated with contract labor and home office/related organization 
personnel are included in the numerator because these other wage 
related costs are allowed in the wage index (in addition to other wage 
related costs for direct employees), assuming the requirements for 
inclusion in the wage index are met.'' Therefore, by excluding other 
wage-related costs from the wage index, we are clarifying that other 
wage-related costs for contract labor would also be excluded from the 
wage index calculation. Therefore, we disagree with the commenter that 
excluding other wage-related costs creates an inconsistency when 
comparing hospitals across the country by treating salaried and 
contract physicians differently.
    In response to the commenters' citation of the September 1, 1994 
Federal Register as evidence of CMS' longstanding practice of allowing 
malpractice insurance in the wage index if actual names or specific 
titles of covered employees are listed, we emphasize that this guidance 
is applicable for reporting malpractice insurance as an other wage-
related cost between 1994 and prior to the FY 2020 wage index, because 
our proposal is to prospectively eliminate other wage-related costs 
from the calculation of the wage index beginning with FY 2020 for 
reasons enumerated in the proposed rule.
    Regarding the requirement for physician other wage-related costs to 
be listed separately, the commenters are correct that the instructions 
for Worksheet S-3, Part II, Line 18, currently include the following 
note: ``Do not include the wage-related costs for physicians Parts A 
and B, non-physician anesthetists Part A and B, interns and residents 
in approved programs, and home office personnel.'' However, we remind 
the commenters that all other wage-related costs, even those not 
reported on Line 18, must meet the 1-percent test for other-wage 
related costs, as described 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). Therefore, other wage-related costs associated 
with physicians must meet the 1-percent test. The instructions for 
calculating the 1-percent test on Worksheet S-3, Part IV, Line 25, 
read, ``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). The other wage related costs associated with contract 
labor and home office/related organization personnel are included in 
the numerator because these other wage related costs are allowed in the 
wage index (in addition to other wage related costs for direct 
employees), assuming the requirements for inclusion in the wage index 
are met. For example, if a hospital is including parking garage costs 
as an other wage related cost that is reported on the W-2 or 1099 form, 
when running the 1-percent test, include in the numerator all the 
parking garage other wage related cost for direct salary employees, 
contracted employees, and home office employees, and divide by the sum 
of Worksheet S-3, Part III, Lines 3 and 4, Column 4.
    Calculate the 1-percent test only one time for a category of other 
wage related costs, inclusive of other wage related costs for 
employees, contracted employees, and home office employees.'' (emphasis 
added)
    In response to the commenter who asserted that CMS is ``vastly 
underestimating'' the impact of removal of other wage-related costs and 
specifically malpractice insurance costs from the wage index, we 
conducted additional analysis to quantify the number of hospitals 
reporting malpractice insurance on lines other than Line 18 of 
Worksheet S-3, Part II, as an other wage-related cost meeting the 1-
percent test. For the FY 2019 wage index, only 41 hospitals reported 
costs on Worksheet S-3, Part II, Line 22 (which includes core wage-
related costs and may or may not include malpractice insurance as an 
other wage-related cost) that were greater than 1 percent of total 
salaries. Of those 41 hospitals, it is unlikely that the wage-related 
costs reported for Physician Part A Administrative were entirely 
comprised of malpractice insurance costs. Therefore, the number of 
hospitals reporting malpractice insurance as an other wage-related cost 
and which exceeds 1-percent of total salaries is likely less than 1.25 
percent of the total hospitals in the wage index (that is, 41/3,283 
IPPS hospitals included in the FY 2019 final wage index). In addition, 
we conducted further analysis and found that fewer than 30 hospitals 
indicated a description of malpractice on Line 25 of Worksheet S-3, 
Part IV, for other wage-related costs, and of those hospitals, only 3 
hospitals met the 1-percent test criteria for inclusion. Consequently, 
we believe that we have conducted the comprehensive review requested by 
the commenter and thoroughly analyzed the potential impact of this 
proposal, and concluded that the number of hospitals reporting 
malpractice as an other wage-related cost is minimal. Therefore, we 
continue to believe that removing other wage-related costs reported on 
Line 18 and other lines from the wage index is appropriate because 
costs reported by only a very small minority of hospitals do not 
accurately reflect the economic conditions of the labor market area as 
a whole.
    Comment: Commenters recommended that, if CMS eliminates other wage-
related costs from the wage index, CMS revise the core wage-related 
costs list to include malpractice costs. The commenters noted that 
malpractice coverage is required by State law for a considerable number 
of States, and, according to one commenter, is a significant cost that 
consistently meets the 1-percent test. Some commenters suggested 
additional fringe benefits to be added to the core wage-related cost 
list such as employee meals, transportation and parking costs. One 
commenter opposed CMS removing other wage-related costs without the 
opportunity for public comment on expanding the categories classified 
as ``core'' wage-related costs. This commenter emphasized that the 
current list of ``core'' benefits has not been updated since FY 1995 
and it is likely

[[Page 41369]]

that benefit cost structures and components have changed since then.
    Response: We understand the commenter's assertion that expanding 
the categories classified as core wage-related costs may be warranted 
as benefit structures evolve over time. However, after conducting the 
additional analysis discussed earlier to evaluate the magnitude of 
hospitals reporting malpractice insurance costs, we disagree with the 
commenter's statement that malpractice insurance cost is a significant 
cost that consistently meets the 1-percent test, as well as the other 
criteria that would need to be met for malpractice insurance to be 
reported as an other wage-related cost. As we stated in the proposed 
rule (83 FR 20358), 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. The extremely limited number 
of hospitals correctly reporting these costs noted in the 
aforementioned additional analysis indicates that malpractice insurance 
is not a significant wage-related cost consistently reported by most 
hospitals. We do not believe it is warranted to add an expense to the 
list of core wage-related costs that is only reported by approximately 
less than 1.25 percent of hospitals in the wage index. Similarly, we do 
not believe that employee meals, transportation, and parking costs 
constitute a significant expense for most hospitals that should be 
added to the core wage-related cost list. We note that, of the 8 
hospitals correctly reporting wage-related costs on Line 18 of 
Worksheet S-3, Part II, for the FY 2019 wage index, only 2 of those 
hospitals reported parking costs that met the 1-percent test, and only 
2 hospitals reported cafeteria costs that met the 1-percent test.
    Therefore, after consideration of the public comments we received, 
for the reasons discussed above and in the proposed rule, we are 
finalizing our proposal, without modification, to eliminate other wage-
related costs from the calculation of the wage index for the FY 2020 
wage index and subsequent years. We also are clarifying that all other 
wage-related costs, even those not reported on Worksheet S-3, Part II, 
Line 18 and Worksheet S-3, Part IV, Line 25 and subscripts, such as 
contract labor, are being removed from the calculation of the wage 
index, and we will update the cost report instructions accordingly.
3. Codification of Policies Regarding Multicampus Hospitals
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20358 through 20360), 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 
(RRCs), Sec.  412.103 for rural reclassification, and Sec.  412.108 for 
Medicare-dependent, small rural hospitals (MDHs) do not directly 
address multicampus hospitals. Thus, in the FY 2019 proposed rule, we 
proposed 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.
    We stated in the proposed rule (83 FR 20358) that the proposals 
(stated below) applied 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 proposed 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 stated in the proposed rule that 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 proposed 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 proposed to codify in our 
regulations that the combined data from the main campus and its remote 
location(s) are to be used.
    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

[[Page 41370]]

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, we stated in the proposed 
rule (83 FR 20359) that 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 we proposed, and are finalizing, to be 
redesignated as Sec.  412.108(a)(1)(ii)).
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20359), we 
reminded 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. We stated that 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).
    In the FY 2019 proposed rule, we discussed that, 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 proposed 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 proposed 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 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule, we noted 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

[[Page 41371]]

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, in the FY 2019 
proposed rule, we clarified 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 proposed 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 proposed to revise these regulations as follows:
    We proposed 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 proposed 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 proposed 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)). As discussed in our response to public comments 
below, we note that we inadvertently referenced Sec.  412.103(a)(6) 
(which applies to critical access hospitals (CAHs)) in proposed 
paragraph Sec.  412.103(a)(7). As explained in the proposed rule (83 FR 
20358) and above, these policies apply to hospitals where services are 
provided and billed under the IPPS. Thus, these policies do not apply 
to CAHs, which are not paid under the IPPS. Accordingly, as discussed 
in response to comments below, we are not including a reference to 
Sec.  412.103(a)(6) in Sec.  412.103(a)(7), as finalized in this rule.
    We proposed 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. We stated that 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 note that we are finalizing 
the proposed amendments to Sec.  412.108(a)(1)(i) as discussed in 
section IV.G.2.a. of the preamble of this final rule.)
    Comment: Commenters expressed appreciation for CMS providing 
greater clarity concerning the treatment of multicampus hospitals by 
amending the regulations for SCHs, RRCs, rural reclassifications, and 
MDHs to address the situation of multicampus hospitals. One commenter 
specifically thanked CMS for an ``important acknowledgement of the 
changing nature of the hospital industry'', and stated that these 
proposals would give hospitals a clearer understanding of the 
implications of combining with other hospitals as the consolidation of 
the industry continues.
    Several commenters requested clarification regarding the effective 
date of the proposals. The commenters asked what will happen to 
multicampus hospitals that have already reclassified as rural, and 
whether the proposals would affect new classification requests only and 
grandfather-in existing SCHs, RRCs, and MDHs, or if those hospitals 
with existing reclassifications or special statuses would be required 
to reapply according to the criteria presented in the proposed rule. 
One commenter specifically questioned CMS' authority to make a rule 
effective retroactively and asked that CMS clarify that the policy is 
effective for applications submitted on or after October 1, 2018. 
Similarly, another commenter stated that while the proposals are 
presented as a codification, they are a change in longstanding CMS 
policy because CMS has ``long been treating multicampus facilities as 
distinct entities for a variety of purposes.'' Some commenters 
requested that CMS not finalize the codification without research to 
demonstrate its impact because they view it as a change in policy. 
Commenters urged CMS to provide additional guidance and information on 
the policies for treatment of multicampus hospitals.
    Response: We appreciate the commenters' support and agree that 
codification of the policies regarding the treatment of multicampus 
hospitals for purposes of special statuses and reclassification is 
appropriate and provides greater clarity. We also appreciate the 
commenters' feedback on

[[Page 41372]]

our existing policies for multicampus hospitals. However, as we stated 
in the proposed rule (83 FR 20358), we proposed to codify in 
regulations our existing policies for multicampus hospitals and did not 
propose to change them. Thus, the policies discussed in the proposed 
rule are our existing policies currently in effect, and our intent was 
to provide greater clarification of these policies by codifying them in 
the regulations. If, after further consideration of the feedback we 
have received, we decide to seek to change our current policies, we 
believe the most appropriate approach would be to propose changes to 
those policies through future notice-and-comment rulemaking.
    In response to the commenters' questions regarding the effective 
date of the policies discussed in the proposed rule, we reiterate that 
we proposed to codify in the regulations our existing policies for 
multicampus hospitals, and thus these policies have been and continue 
to be in effect. Consequently, there is no need to ``grandfather in'' 
multicampus hospitals with existing special statuses or 
reclassifications. Similarly, we disagree that we are promulgating a 
rule retroactively because these policies are CMS' longstanding 
policies. We note that the commenter's assertion that these proposed 
codifications are a change in longstanding CMS policy were not 
accompanied by examples of CMS treating multicampus facilities as 
distinct entities. It is unclear what the commenter was referring to in 
support of this assertion. If the commenter was referring to CMS' 
treatment of multicampus facilities for wage index purposes, as 
mentioned in the proposed rule (83 FR 20358), CMS tracks multicampus 
remote locations located in different CBSAs for wage index purposes 
only, 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).
    Similarly, because we proposed to codify existing policy, 
multicampus hospitals with existing special status or rural 
reclassification would not be required to reapply according to the 
criteria codified in this rule, as the current regulations at 
Sec. Sec.  412.92(3)(i), 412.103(f), and 412.108(b)(4) state that an 
approved SCH classification, rural reclassification, or MDH status 
determination, respectively, remains in effect without need for 
reapproval unless there is a change in the circumstances under which 
the classification or determination was approved. We are reiterating 
that current MDHs and SCHs should make sure that any 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) as a result of the MDH or SCH 
opening a remote location, for example, is correctly reported to the 
MAC within 30 days of the event in accordance with Sec. Sec.  
412.108(b)(4)(ii) and (iii) and 412.92(b)(3)(ii) and (iii).
    With regard to the commenters' request that CMS not finalize its 
proposals to codify in the regulations its existing policies, we note 
that not finalizing the proposals would still leave our current 
policies unchanged and in effect with regard to multicampus hospitals 
and qualification for special statuses and reclassifications, although 
they would not be codified in regulations. We believe not finalizing 
the proposals to codify these policies in regulations would create 
confusion surrounding the existing policies currently in effect.
    In response to commenters requesting more information and guidance 
on our existing policies, we agree and will consider further provider 
education on our existing policies, where appropriate.
    Comment: Several commenters opposed CMS' proposals, stating that 
while they understood the policy objectives being advanced by CMS and 
agreed that remote campuses should not be categorically ignored for 
purposes of these determinations, the policies associated with the 
codification may have the unintended consequence of harming access to 
rural health care. Specifically, some commenters were concerned that 
SCHs are at risk of losing their designation if another hospital opens 
a remote location near them or if the SCH opens a remote location near 
other hospitals, especially if the remote location is a 
``microhospital'' that does not offer a full array of inpatient 
services.
    One commenter agreed with CMS' policy in the scenario of the 
opening of a remote location that provides general inpatient services 
within 24 miles from an existing SCH. The commenter asserted that, 
while the remote location might cause the SCH to lose its 
classification as an SCH, this outcome appears ``congruent with the 
intent of law'' because the former SCH is no longer the sole source of 
inpatient services reasonably available to individuals in the 
geographic area. However, this commenter and other commenters disagreed 
with CMS' policy of including a remote location for determining SCH 
qualification if the remote location (either of a nearby hospital or of 
the SCH) does not meet the definition of a hospital or a like hospital 
or does not provide inpatient services reasonably available to 
individuals in the geographic area, such as a remote clinic with a 
small inpatient obstetrics and gynecology or labor and delivery unit or 
a few inpatient psychiatric or rehabilitation beds as a distinct part 
unit. One commenter stated that examining remote locations for distance 
requirements would be particularly concerning if the remote location 
does not provide 24/7 emergency care, because this would allow a small 
remote clinic with limited hours and providers to result in loss of 
access to life-saving emergency care. Another commenter similarly 
stated that the policy may allow a ``competitive tactic inconsistent 
with the intent of the rule'' if a hospital could lose SCH status as a 
result of a competing hospital opening a remote location that does not 
functionally represent a like provider.
    Commenters urged CMS to carefully evaluate the impacts of the 
proposals on rural health care and consider a range of alternatives, 
including: Not finalizing the proposal to codify certain policies for 
multicampus hospitals with respect to SCHs; finalizing the proposal 
with protections for existing SCHs; excluding SCHs from the evaluation 
of the qualifying criteria on a combined basis; modifying the policy to 
apply only if the remote location is a full service inpatient facility; 
or apply the policy only if the remote location on its own could be 
licensed as a hospital under State law. One commenter specifically 
suggested that a remote location providing only limited inpatient 
services should not be considered a like provider.
    Response: As stated earlier, we did not propose to change our 
policies; rather, we proposed to codify our current policies. We note 
that our current policies benefit access to rural health care for 
hospitals seeking RRC status and rural reclassification under Sec.  
412.103(a)(3) by allowing bed counts from the main hospital and remote 
locations to be combined, making RRC status and rural reclassification 
under Sec.  412.103(a)(3) more easily obtainable. However, we 
understand the commenters' concerns that SCH status may be more 
difficult to obtain and maintain under our longstanding policies that 
consider remote locations. Therefore, we note that our current polices 
contain some existing safeguards for SCHs because these policies only 
apply to remote locations where services are provided and billed under 
the IPPS, and that hospitals are only compared to like hospitals for 
purposes of meeting SCH criteria under Sec.  412.92(a). Specifically, 
according to the definition at Sec.  412.92(c)(3), a

[[Page 41373]]

hospital is considered a like hospital if the hospital furnishes short-
term, acute care, and the total inpatient days attributable to the 
units of the nearby hospital that provides a level of care 
characteristic of the level of care payable under the acute care 
hospital IPPS are more than 8 percent of the similarly calculated total 
inpatient days of the hospital seeking SCH designation. Furthermore, we 
note that, for hospitals qualifying for SCH status under the criteria 
at Sec.  412.92(a)(1), SCH status may not be impacted by the opening of 
a remote location within 25 to 35 miles if the hospital continues to 
meet one of the requirements at Sec.  412.92(a)(1)(i) through (iii). 
For example, a hospital that qualified for SCH classification under 
Sec.  412.92(a)(1)(i) would not automatically lose SCH status if a 
hospital opens up within 25 to 35 miles if it continues to meet the 
requirements at Sec.  412.92(a)(1)(i) by providing at least 75 percent 
of the inpatient care in its service area compared to like hospitals. 
Specifically, Sec.  412.92(a)(1)(i) requires that no more than 25 
percent of residents who become hospital inpatients or no more than 25 
percent of the Medicare beneficiaries who become hospital inpatients in 
the hospital's service area are admitted to other like hospitals 
located within a 35-mile radius of the hospital, or, if larger, within 
its service area.
    However, we recognize that, under our current policies, for 
purposes of determining whether a nearby hospital consisting of a main 
campus and a remote location would be considered a like hospital with 
respect to an SCH or a hospital seeking SCH classification, the 
inpatient days of the remote location and the main hospital are not 
distinguishable for purposes of calculating the 8 percent. We also 
recognize that there may be scenarios in which a remote location that 
is within range of an SCH or a hospital seeking SCH classification and 
provides only very limited IPPS services is considered a like hospital 
by virtue of its being a remote location of a larger main hospital. We 
acknowledge the concerns raised by the commenters with respect to 
ensuring access to care in such situations, and we will take the 
feedback we received on this issue into consideration for potential 
future rulemaking.
    Comment: One commenter requested that CMS eliminate the new 
additional burden for SCHs of ensuring that they comply with the 
policies by amending the regulation at Sec.  412.92(b)(3)(ii)(A) 
requiring an SCH to notify the MAC within 30 days of the opening of a 
new hospital in its service area to exclude the opening of a new remote 
location of another hospital.
    Response: This proposed codification of our longstanding policy 
with respect to SCHs did not create any new additional burden for SCHs 
because the requirement at Sec.  412.92(b)(3)(ii)(A) to notify the MAC 
within 30 days of the opening of a new hospital in its service area 
always included the opening of a new remote location.
    Comment: One commenter requested additional justification for the 
policy that both the main hospital and all remote locations must meet 
the same geographic criteria.
    Response: With regard to the request for justification as to why 
both the main campus and all remote locations must meet geographic 
criteria, we note that we did not propose any changes to our existing 
policy. We continue to believe our policy to require both the main 
campus and remote location(s) to meet criteria involving location, 
mileage, travel time, and distance rather than require only the main 
campus to meet criteria is appropriate because both the main campus and 
remote location(s) benefit from the special status or rural 
reclassification if approved. As we stated in the proposed rule (83 FR 
20358), each remote location of a hospital is included on the main 
campus' 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 we consider the hospital to be a single entity 
with one provider agreement. We also note that the main campus and 
remote location(s) cannot jointly meet qualifying criteria that involve 
location, mileage, travel time, and distance by totaling miles or 
minutes in the same way that data derived from the cost report or 
MedPAR, such as bed count, for example, can be combined. Furthermore, 
as we stated in the proposed rule, we believe that requiring both the 
main campus and remote location(s) to meet at least one of the criteria 
at Sec.  412.92(a) for SCH status 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. Similarly, for MDH and RRC status, 
we maintain that requiring both the main campus and remote location(s) 
to be rural is necessary for the hospital to be considered located in a 
rural area, as required by sections 1886(d)(5)(G)(iv)(I) and 
1886(d)(5)(C)(i) of the Act. Finally, we believe that requiring both 
the main campus and remote location(s) to meet at least one of the 
criteria at Sec.  412.103(a) for urban to rural reclassification is 
necessary to consider the hospital as meeting the requirements at 
section 1886(d)(8)(E) of the Act, which are implemented at Sec.  
412.103.
    Comment: Several commenters requested clarifications of our 
policies. One commenter requested that CMS confirm and clarify that 
data from an IPPS excluded distinct part unit, such as an off-campus 
inpatient psychiatric unit, would not be combined with the main campus 
data and that the IPPS-excluded location would not be required to 
satisfy the SCH, RRC, MDH, or rural reclassification requirements in 
order for the hospital to qualify as an SCH, RRC, or MDH or to 
reclassify as rural. Another commenter asked for clarification 
regarding what standard would be applied for mileage requirements when 
determining distance between facilities without inpatient beds. Another 
commenter sought clarification to confirm that the proposals are not 
intended to apply to CAHs.
    Response: We are confirming that the data from an IPPS-excluded 
unit, such as an off-campus inpatient psychiatric unit, would not be 
combined with the main campus data, and that a distinct part unit would 
not be required to satisfy the SCH, RRC, MDH, or rural reclassification 
requirements in order for the hospital to qualify as an SCH, RRC, or 
MDH or to reclassify as rural. As we stated in the proposed rule, these 
policies 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.
    For purposes of these policies, a facility without inpatient beds 
would not be considered for mileage requirements. We also are 
clarifying that because these policies apply to hospitals where 
services are provided and billed under the IPPS, these policies do not 
apply to CAHs. We note that we inadvertently included in proposed Sec.  
412.103(a)(7) a reference to Sec.  412.103(a)(6), which pertains to 
CAHs. Thus, in this final rule, we are deleting the reference to Sec.  
412.103(a)(6) in Sec.  412.103(a)(7).
    Comment: One commenter maintained that it is not feasible for 
providers to calculate distances between themselves and another 
provider's remote campus because only the main

[[Page 41374]]

campus address is included in Healthcare Provider Cost Reporting 
Information System (HCRIS) cost report data, and even where the other 
hospitals may report multicampus hospitals in different CBSAs on their 
cost report, the remote campus data do not include a street address for 
actual distance calculations to another hospital's remote location. The 
commenter, therefore, recommended that CMS not implement the proposals 
until such time that CMS changes the cost report Worksheet S-2 
questions to include the street address of all remote locations and 
that information becomes available in the published HCRIS data so that 
hospitals can research and identify main campus and remote locations of 
other hospitals within the distance requirement radius.
    Response: While the commenter is correct that only the address of a 
main campus is included in the HCRIS cost report data, we believe that 
the street address of another hospital's remote location is readily 
available public information that should be easily obtainable. We note 
that, for SCH applications, for which calculating distance to other 
like hospitals is necessary, CMS and the MACs verify all supporting 
documentation, which includes information regarding all other 
hospitals' main campuses and remote locations within distance 
requirements specified at Sec.  412.92(a), or the larger of a 35-mile 
radius or its service area if applying under the criterion at Sec.  
412.92(a)(1)(i).
    Comment: One commenter indicated that combining bed counts from a 
main campus and remote locations discourages MDHs from establishing 
remote locations because opening a remote location may cause the MDH to 
exceed 100 beds and lose status. The commenter urged CMS not to 
implement the proposals and encouraged the agency to exempt existing 
MDHs if these proposed codifications are finalized.
    Response: We do not believe it would be appropriate to exclude beds 
from remote location(s) of an MDH in the hospital's bed count because 
we consider remote locations to be part of the hospital and section 
1886(d)(5)(G)(iv)(II) of the Act describes an MDH as a hospital with 
not more than 100 beds. In other words, we do not believe that a 
hospital should maintain MDH status if the hospital has a bed count 
exceeding 100, which would indicate that the hospital is no longer a 
Medicare-dependent, small rural hospital according to the statutory 
criteria. Therefore, even if we were not merely codifying our existing 
policy, we would disagree with the commenter that CMS should modify its 
policy as the commenter requested.
    After consideration of the public comments we received, for the 
reasons discussed above and in the proposed rule, we are finalizing as 
proposed, without modification, our codification of policies regarding 
multicampus hospitals in the regulations at Sec.  412.92, Sec.  412.96, 
and Sec.  412.108. For the reason discussed in response to a comment 
above, we are finalizing our codification of policies regarding 
multicampus hospitals in the regulation at Sec.  412.103(a)(7) with 
modification to remove an inadvertent reference to Sec.  412.103(a)(6) 
(which pertains to CAHs). We may further consider commenters' 
suggestions regarding appropriate modifications to our policies in 
future rulemaking.

E. 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 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 resulted in certain edit 
failures.
2. Calculation of the Occupational Mix Adjustment for FY 2019
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20361), for FY 
2019, we proposed 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 final rule (which is available 
via the internet on the CMS website), which contains the final 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 final 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 used 
the Worksheet S-3, Parts II and III wage data of 3,260 hospitals, and 
we used 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 applied proxy data for noncompliant hospitals, new hospitals, or 
hospitals that submitted erroneous or aberrant data in the same manner 
that we applied proxy data for such hospitals in the FY 2012 wage

[[Page 41375]]

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 was $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 were:

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

    Comment: One commenter stated that all hospitals should be 
obligated to submit the occupational mix survey because failure to 
complete the survey jeopardizes the accuracy of the wage index. The 
commenter suggested that a penalty be instituted for nonsubmitters. 
This commenter also requested that, pending CMS' analysis of the 
Commuting Based Wage Index and given the Institute of Medicine's study 
on geographic variation in hospital wage costs, CMS eliminate the 
occupational mix survey and the significant reporting burden it 
creates. Another commenter believed that the substantial administrative 
burden imposed by the occupational mix adjustment has far exceeded 
whatever benefit it might have conferred.
    Response: We appreciate the commenter's concern about the accuracy 
of the wage index. We have continually requested that all hospitals 
complete and submit the occupational mix surveys, although we did not 
establish a penalty for hospitals that did not submit the surveys. We 
did not establish a penalty for hospitals that did not submit the 2016 
surveys. However, we are continuing to consider for future rulemaking 
various options for ensuring full compliance with future occupational 
mix surveys. Regarding the commenter's concern about the administrative 
burden of the occupational mix survey and the suggestion that we 
eliminate it, this survey is necessary to meet the provisions of 
section 1886(d)(3)(E) of the Act, which requires us to measure the 
earnings and paid hours of employment by occupational category.
    After consideration of the public comments we received, for FY 
2019, we are adopting as final our proposal to calculate the 
occupational mix adjustment factor using the same methodology that we 
have used since the FY 2012 wage index. For the final FY 2019 wage 
index, we used the Worksheet S-3, Parts II and III wage data of 3,283 
hospitals, and we used the occupational mix surveys of 3,114 hospitals 
for which we also have Worksheet S-3 wage data, which is a ``response'' 
rate of 95 percent (3,114/3,283). (We note that the ``response'' rate 
for this final rule differs from that of the proposed rule because for 
this final rule we have generally been able to include the occupational 
mix surveys of hospitals whose wage data were aberrant for the proposed 
rule but have since been improved and were used for this final rule. In 
addition, for this final rule, we have generally been able to include 
some occupational mix surveys that had been aberrant for the proposed 
rule but have since been improved and were used for this final rule.) 
For the final FY 2019 wage index, we applied proxy data for 
noncompliant hospitals, new hospitals, or hospitals that submitted 
erroneous or aberrant data in the same manner that we applied proxy 
data for such hospitals in the FY 2012 wage index occupational mix 
adjustment (76 FR 51586). As a result of applying this methodology, the 
final FY 2019 occupational mix adjusted national average hourly wage is 
$42.955567020.
    In summary, the final FY 2019 unadjusted national average hourly 
wage and the final FY 2019 occupational mix adjusted national average 
hourly wage are:

------------------------------------------------------------------------
 Final unadjusted national average     Final occupational mix adjusted
            hourly wage                  national average hourly wage
------------------------------------------------------------------------
              $42.997789358                        $42.955567020
------------------------------------------------------------------------

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

    As discussed in section III.E. of the preamble of this final rule, 
for FY 2019, we are applying the occupational mix adjustment to 100 
percent of the FY 2019 wage index. We calculated the 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 national average hourly wage of $42.955567020.
    The 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.............................................    $41.66099188
National LPN and Surgical Technician....................     24.74107416
National Nurse Aide, Orderly, and Attendant.............     16.96864849
National Medical Assistant..............................     18.13188525
National Nurse Category.................................     35.04005228
------------------------------------------------------------------------

    The national average hourly wage for the entire nurse category as 
computed in Step 5 of the occupational mix calculation is $35.04005228. 
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 42.1 percent, 
and the national percentage of hospital employees in the all other 
occupations category is 57.9 percent. (We note that the percentage for 
this final rule differs from that of the proposed rule because we have 
recalculated this percentage based on the occupational mix data we have 
included for this final rule. That is, for this final rule, we have 
generally been able to include the occupational mix surveys of 
hospitals whose wage data were aberrant for the proposed rule but have 
since been improved and were used for this final rule. In addition, for 
final rule we have generally been able to include some occupational mix 
surveys that had been aberrant for the proposed rule but have since 
been improved and were used for this final rule). 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 occupational mix adjusted wage indexes for 
each CBSA to the unadjusted wage indexes for each CBSA. As a result of 
applying the occupational mix adjustment to the wage data, the final 
wage index values for 233 (57.0 percent) urban areas and 23 (48.9 
percent) rural areas increased. The final wage index values for 112 
(27.4 percent) urban areas increased by greater than or equal to 1 
percent but less than 5 percent, and the

[[Page 41376]]

final wage index values for 8 (2.0 percent) urban areas increased by 5 
percent or more. The final wage index values for 9 (19.1 percent) rural 
areas increased by greater than or equal to 1 percent but less than 5 
percent, and no rural area's final wage index value increased by 5 
percent or more. However, the final wage index values for 176 (43.0 
percent) urban areas and 24 (51.1 percent) rural areas decreased. The 
final wage index values for 80 (19.6 percent) urban areas decreased by 
greater than or equal to 1 percent but less than 5 percent, and 1 urban 
area's final wage index value decreased by 5 percent or more. The final 
wage index values of 7 (14.9 percent) rural areas decreased by greater 
than or equal to 1 percent and less than 5 percent, and no rural areas' 
final wage index values decreased by 5 percent or more. The largest 
final positive impacts are 6.49 percent for an urban area and 3.92 
percent for a rural area. The largest final negative impacts are 5.85 
percent for an urban area and 1.6 percent for a rural area. No urban 
area's final wage indexes and no rural area final wage indexes is 
unchanged by application of the occupational mix adjustment. These 
results indicate that a larger percentage of urban areas (57.0 percent) 
will benefit from the occupational mix adjustment than will 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 
increased or decreased under the 2016 survey data as compared to the 
prior 2013 survey data. Of the 409 urban CBSAs and 47 rural CBSAs, our 
analysis shows that the FY 2019 wage index values for 228 (55.7 
percent) urban areas and 23 (48.9 percent) rural areas increased using 
the 2016 survey data. Fifty-two (12.7 percent) urban areas increased by 
greater than or equal to 1 percent but less than 5 percent, and 3 (0.7 
percent) urban areas increased by 5 percent or more. Seven (14.9 
percent) rural areas increased by greater than or equal to 1 percent 
but less than 5 percent, and 0 rural areas increased by 5 percent or 
more. However, the wage index values for 181 (44.3 percent) urban areas 
and 24 (51.1 percent) rural areas decreased using the 2016 survey data. 
Forty nine (12.0 percent) urban areas decreased by greater than or 
equal to 1 percent but less than 5 percent, and 3 (0.7 percent) urban 
areas decreased by 5 percent or more. Two (4.3 percent) rural areas 
decreased by greater than or equal to 1 percent but less than 5 
percent, and no rural areas decreased by 5 percent or more. The largest 
positive impacts using the 2016 survey data compared to the 2013 survey 
data are 6.31 percent for an urban area and 4.71 percent for a rural 
area. The largest negative impacts are 14.32 percent for an urban area 
and 2.34 percent for rural areas. No urban areas and no rural areas are 
unaffected. These results indicate that the wage indexes of more CBSAs 
overall (55.0 percent) increased due to application of the 2016 
occupational mix survey data as compared to the 2013 occupational mix 
survey data to the wage index. However, a larger percentage of urban 
areas (55.7 percent) benefitted from the use of the 2016 occupational 
mix survey data as compared to the 2013 occupational mix survey data 
than did rural areas (48.9 percent).

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

1. 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 FY 2019 wage index associated with this final rule (which is 
available via the internet on the CMS website), we estimate that 263 
hospitals will receive an increase in their FY 2019 wage index due to 
the application of the rural floor.
2. 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-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 final rule.)
    In computing the imputed floor for an all-urban State under the 
original methodology, which was established beginning in FY 2005, we 
calculated the ratio of the lowest-to-highest CBSA wage index for each 
all-urban State as well as the average of the ratios of lowest-to-
highest CBSA wage indexes of those all-urban States. We then compared 
the State's own ratio to the average ratio for all-urban States and 
whichever is higher is multiplied by the highest CBSA wage index value 
in the State--the product of which established the imputed floor for 
the State. As of FY 2012, there were only two all-urban States--New 
Jersey and Rhode Island--and only New Jersey benefitted under this 
methodology. Under the previous OMB labor market area delineations, 
Rhode Island had only 1 CBSA (Providence-New Bedford-Fall River, RI-MA) 
and New Jersey had 10 CBSAs. Therefore, under the original methodology, 
Rhode Island's own ratio equaled 1.0, and its imputed floor was equal 
to its original CBSA wage index value. However, because the average 
ratio of New Jersey and Rhode Island was higher than New Jersey's own 
ratio, this methodology provided a benefit for New Jersey, but not for 
Rhode Island.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through 
53369), we retained the imputed floor calculated under the original 
methodology as discussed above, and established an alternative 
methodology for computing the imputed floor wage index to address the 
concern that the original imputed floor methodology guaranteed a 
benefit for one all-urban State with multiple wage indexes (New Jersey) 
but could not benefit the other all-urban State (Rhode Island). The 
alternative methodology for calculating the imputed floor was 
established using data from the application of the rural floor policy 
for FY 2013. Under the alternative methodology, we first determined the 
average percentage difference between the post-reclassified, pre-floor 
area wage index and the post-reclassified, rural floor wage index 
(without rural floor

[[Page 41377]]

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 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 the FY 2019 proposed rule (83 FR 20363), we did not propose to 
extend the imputed floor policy. As we stated in the proposed rule (83 
FR 20363), 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 explained in the proposed rule that 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 the FY 2019 proposed rule, we proposed 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, we proposed that 
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 stated that 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 the FY 2019 
IPPS/LTCH PPS proposed rule (which are available via the internet on 
the CMS website) did not reflect the imputed floor policy, and there 
was no proposed national budget neutrality adjustment for the imputed 
floor for FY 2019.
    Comment: Commenters supported CMS' proposal to allow the imputed 
floor policy to expire. Some commenters stated they have previously 
commented and continue to believe that the application of the imputed 
floor and the budget neutrality adjustment are an unfair redistribution 
of IPPS payments; they fully support the expiration of the imputed 
floor and the removal of the related budget neutrality adjustment.
    A number of commenters stated that, under the current methodology, 
areas with few rural hospitals, such as Massachusetts, Arizona, and 
California, have the ability and incentive to have major urban 
hospitals reclassify as rural under 42 CFR 412.103 and, by selectively 
doing so, such an urban to rural reclassification could significantly 
raise the rural floor in those States. Commenters conveyed that while 
the establishment of a statewide rural floor is required by statute, 
the method by which the floor is calculated is entirely at CMS' 
discretion through regulatory authority and, in fact, CMS has already 
used its discretion in establishing the imputed rural floor for all-
urban States. The commenters indicated that any rural floor calculation 
should mirror the spirit and intent of the law resulting in only the 
``natural'' rural providers in a State considered when calculating a 
rural floor. Finally, the commenters suggested that CMS consider 
immediately issuing a change to the existing calculation that includes 
only the ``natural'' rural providers in calculating the rural floor for 
a State.
    Response: We appreciate the commenters' support for the proposal 
not to extend the imputed floor. While it is not clear what is meant by 
``natural'' rural providers, we assume that commenters meant providers

[[Page 41378]]

physically located in a rural area (rather than providers with a rural 
reclassification). We appreciate the comments in regard to revisions to 
the rural floor methodology, including revising the calculation to be 
based only on providers that are physically located in rural areas, and 
not providers that are reclassified as rural. As described in the FY 
2006 IPPS final rule (70 FR 47379), in our continued effort to promote 
consistency and equity and to simplify our rules with respect to how we 
construct the wage indexes of rural and urban areas, we were persuaded 
at that time that there was a need to modify our policy when hospital 
redesignations occur under section 1886(d)(8)(E) of the Act. One aspect 
of this discussion was the rule that the wage data of an urban hospital 
reclassifying into the rural area would be included in the rural area's 
wage index, if including the urban hospital's data increases the wage 
index of the rural area. Nevertheless, as we continue to evaluate ways 
to address wage index disparities, we will take these comments to 
revisit this policy into consideration.
    Comment: Several commenters disagreed with the proposal to allow 
the imputed floor to expire, and stated that CMS should maintain the 
status quo, that is, continue extending the imputed floor for 1 year, 
until the entirety of Medicare wage index reform is complete. The 
commenters pointed out that CMS, in both the FY 2014 and FY 2015 IPPS 
final rules, extended the imputed floor for an additional year, during 
which time CMS stated that it would continue to explore potential wage 
index reform. However, the commenter stated that such reform has not 
occurred and, therefore, it is premature to remove the imputed floor.
    Response: Section 3137(b) of the Affordable Care Act required the 
Secretary of Health and Human Services to submit to Congress a report 
to reform the Medicare Wage Index applied under the IPPS. We submitted 
the Report to Congress on April 11, 2012, and posted the report and 
other information regarding wage index reform on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html. While in past years we have 
stated that we continue to explore wage index reforms while extending 
the imputed floor in increments (for example, 78 FR 50589 through 50590 
and 79 FR 49969 through 49970), we note that it has already been many 
years since the report was issued with no new legislation from Congress 
to comprehensively reform the wage index. With no such legislation from 
Congress, at this point, we do not find it appropriate to continue to 
tie the extension of the imputed floor to comprehensive wage index 
reform. Therefore, we disagree with the commenters that the imputed 
floor should be extended until such time as comprehensive wage index 
reform may be instituted. Furthermore, as noted by the recent request 
for information (RFI) in the proposed rule, we also are working to 
address wage index disparities. We believe that the elimination of the 
budget neutrality adjustment associated with the imputed floor, as also 
discussed below, is entirely consistent with our wage index disparities 
initiative.
    Comment: Several commenters stated that, by eliminating the imputed 
floor wage index, CMS is alleviating only a fraction of the combined 
payment transfer from the application of the rural and imputed floors. 
The commenters explained that combined, hospitals in the three all-
urban States (New Jersey, Rhode Island, and Delaware) accounted for 
less than 10 percent of the 400 hospitals nationally that received 
either the rural or imputed floor last year. Therefore, the commenters 
believed that the imputed floor budget neutrality adjustment is not 
resulting in the significant transfer of payments from hospitals in 
States with rural hospitals to hospitals in States where the imputed 
floor is applied.
    A number of commenters believed that eliminating the imputed floor 
would create the same uneven playing field in all-urban States that 
existed prior to 2005, in response to which CMS initially established 
the policy. According to the commenters, the anomaly originally cited 
by CMS (that is, that hospitals in all-urban States with predominant 
labor market areas do not have any type of protection, or ``floor,'' 
from declines in their wage index) would exist again if the imputed 
floor policy is discontinued.
    In addition, the commenters stated that there are many Medicare 
payment programs that redirect scarce Medicare funding to a class of 
unique hospitals, and that not all States have hospitals that benefit 
from these programs. For example, according to the commenters, CMS 
makes payments to CAHs at a rate of 101 percent of their costs and 
States that do not have any CAHs do not benefit from this program. The 
commenters stated that while CAHs are paid outside the IPPS program, 
the dollars continue to come from a finite Medicare trust fund 
representing a transfer of payments from hospitals in States without 
any CAHs into States with CAHs, similar to the transfer of payments CMS 
cites as its rationale to discontinue the imputed floor.
    The commenters also pointed out that CMS has upheld the imputed 
floor for over a decade as a valuable method of maintaining equitable 
wage index protections for all-urban States consistent with those that 
exist for States with rural areas. The commenters referenced previous 
CMS justification for creating and extending the floor in previous 
years, such as all-urban States are at a disadvantage due to the 
absence of a rural floor policy and that, in New Jersey, ``because 
there is no floor to protect those hospitals not located in the 
predominant labor market area from facing continued declines in their 
wage index, it becomes increasingly difficult for those hospitals to 
continue to compete for labor.''
    Response: While, in the past, we have provided for temporary 
extensions of the imputed floor, we do not believe at this time it is 
appropriate to continue to extend the imputed floor. While the 
commenters raise concerns that, if the imputed floor were discontinued, 
hospitals in all-urban States would again be disadvantaged by the 
absence of rural hospitals to set a wage index floor for those States, 
as well as concerns about the financial impacts of discontinuing the 
rural floor, we have also expressed concerns about continuing the 
imputed floor policy. As we pointed out in the proposed rule (83 FR 
20363), CMS has 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. As we discussed in the FY 2008 IPPS/LTCH PPS 
final rule (72 FR 47322), the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51593), the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19905), and the 
FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20363), 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. While the three all-urban States may count for a fraction of 
all States that received the rural and imputed floor last year, the 
imputed rural floor methodology still creates a disadvantage in the 
application of the wage index to hospitals in States with rural 
hospitals but no urban hospitals receiving the rural or imputed floor. 
Therefore, we do not believe it is appropriate to continue to extend 
the imputed floor.

[[Page 41379]]

    Finally, regarding the comparison made by commenters between the 
CAH payment methodology and the imputed floor methodology with respect 
to the transfer of payments, we disagree with this comparison. Because 
there is no national budget neutrality requirement relating to CAH 
payments (as there is with the imputed floor methodology), there is no 
transfer of payments from hospitals in States without any CAHs to 
hospitals in States with CAHs, similar to that which exists as a result 
of the application of the imputed floor. Under sections 1814(l) and 
1834(g) of the Act, payments made to CAHs for inpatient and outpatient 
services are generally based on 101 percent of the reasonable costs of 
the CAH in providing such services. Reasonable cost is defined in 
section 1861(v)(1)(A) of the Act and determined in accordance with the 
regulations under 42 CFR part 413.
    Comment: Several commenters opposed the continued application of 
the nationwide rural floor budget neutrality adjustment as described in 
the proposed rule. The commenters discussed section 3141 of the 
Affordable Care Act which established a policy of national budget 
neutrality for the application of the rural and imputed floors to the 
Medicare wage index. The commenters stated that, coupled with the 
orchestrated conversion of a single facility in Massachusetts--
Nantucket Cottage Hospital--from a CAH to an IPPS hospital, section 
3141 of the Affordable Care Act allows hospitals to unfairly manipulate 
the Medicare payment system and reward hospitals in Massachusetts and a 
few other States at the expense of other hospitals across the nation. 
The commenters stated that the adverse consequences of nationwide rural 
floor budget neutrality have been recognized and commented upon by HHS, 
CMS, and many others over the past several years. The commenters stated 
that, until this policy is corrected, the Medicare wage index system 
cannot possibly accomplish its objective of ensuring that payments for 
the wage component of labor accurately reflect actual wage costs.
    The commenters also pointed out that the inequity of this provision 
recently was highlighted in a March 2017 Office of Inspector General 
(OIG) report showing how a single hospital overreported dollars and 
underreported hours, driving up the average hourly wage. According to 
the commenters, the OIG estimated that this error resulted in more than 
$133 million in Medicare overpayments to be paid to Massachusetts 
hospitals. The commenters urged CMS to use its regulatory authority to 
curtail the adverse effects of section 3141 of the Affordable Care Act 
and restore integrity to the hospital wage index system, and further 
encouraged CMS to publish the effects of the nationwide rural floor on 
Medicare outpatient services in the proposed and final hospital 
outpatient prospective payment system payment and policy updates for CY 
2019.
    Response: We thank the commenters for their comments and 
recommendations regarding modifications to the hospital wage index. As 
we stated earlier, section 4410 of the BBA requires the application of 
the rural floor and section 3141 of the Affordable Care Act requires a 
uniform, national budget neutrality adjustment for the rural floor. We 
do not have authority to repeal or revise these laws.
    Regarding the comment encouraging CMS to publish the effects of the 
nationwide rural floor on Medicare outpatient services in the proposed 
and final hospital outpatient prospective payment system payment and 
policy updates for CY 2019, we will take this comment into 
consideration and may address them in the development of future 
rulemaking.
    Comment: Commenters also supported the alternative methodology for 
calculating the imputed rural floor in Rhode Island. According to 
commenters, the methodology has been used since FY 2013 and has been 
key for the State's hospitals and maintaining access to care for 
residents of Rhode Island. The commenters stated that the alternative 
methodology for calculating the imputed floor appropriately addresses a 
hospital wage index reclassification system that does not reflect Rhode 
Island's characteristics. The commenters further stated that the 
alternative methodology for calculating the imputed rural floor 
protects its hospitals from falling to some of the lowest payment rates 
in the country, at the same time while competing with some of the most 
highly reimbursed urban hospitals. The commenters stated that the 
anomaly originally cited by CMS (that is, that hospitals in all-urban 
States with predominant labor market areas do not have any type of 
protection, or ``floor,'' from declines in their wage index) would 
exist again if the imputed floor policy were discontinued. The 
commenters stressed that the elimination of imputed floor will reduce 
hospital Medicare payments in Rhode Island by approximately $28.6 
million in FY 2019. The commenters explained that hospitals are among 
Rhode Island's top employers and the impact of the discontinuation of 
this policy would adversely impact this important sector of Rhode 
Island's economy. The commenters further noted that this loss of 
funding will put Rhode Island at a competitive disadvantage for 
recruiting and maintaining staff as hospitals in Rhode Island must 
compete with neighboring States, which are located just miles away and 
are benefitting from a much higher payment rate.
    Response: While the commenters raised concerns that, if the imputed 
floor were discontinued, hospitals in all-urban States, including Rhode 
Island, would again be disadvantaged by the absence of rural hospitals 
to set a wage index floor for those States, as well as concerns about 
the financial impacts of discontinuing the imputed floor alternative 
methodology in Rhode Island, we also have expressed concerns about 
continuing the imputed floor policy. As we discussed in the FY 2008 
IPPS/LTCH PPS final rule (72 FR 47322), the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51593), the FY 2018 IPPS/LTCH PPS final rule (82 FR 38138), 
and the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20363), the 
application of the imputed floor requires a transfer of payments from 
hospitals in States with rural hospitals but where the rural floor is 
not applied to hospitals in States where the imputed floor is applied. 
As discussed previously, while Rhode Island and the two other all-urban 
States (Delaware and New Jersey) may count for a fraction of all States 
that received the rural and imputed floor last year, the application of 
the imputed rural floor methodology (both the original and alternative 
methodologies) still 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. Thus, we believe it is appropriate 
to let the imputed floor expire as scheduled on October 1, 2018.
    After consideration of public comments received, for the reasons 
discussed above and in the proposed rule, we believe it is appropriate 
to allow the imputed floor to expire on its expiration date, September 
30, 2018. Therefore, we are allowing the imputed floor to expire under 
both the original methodology and the alternative methodology on the 
date it is currently set to expire, September 30, 2018. As proposed, 
the wage index and impact tables associated with this FY 2019 IPPS/LTCH 
PPS final rule (which are available on the internet via the CMS 
website) do not reflect the imputed floor policy and we are not 
applying a national budget neutrality adjustment for the imputed floor 
for FY 2019. There are 10 hospitals in New Jersey, 9 hospitals in Rhode 
Island, and 3

[[Page 41380]]

hospitals in Delaware that will no longer receive an increase in their 
FY 2019 wage index due to the expiration of the imputed floor policy.
3. 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 the FY 2019 IPPS/
LTCH PPS proposed rule, we did not propose any changes to the frontier 
floor policy for FY 2019. We stated in the proposed rule that 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.
    We did not receive any public comments on the application of the 
State frontier floor for FY 2019. In this final rule, 50 hospitals will 
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 final rural and frontier floor policies 
for the FY 2019 wage index are identified in Table 2 associated with 
this final rule, which is available via the internet on the CMS 
website.

H. 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 the FY 2019 
IPPS/LTCH PPS proposed rule, we added a Table 4 associated with the 
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 intend to make 
this information available annually via Table 4 in the IPPS/LTCH PPS 
proposed and final rules. We refer readers to section VI. of the 
Addendum to this final rule for a discussion of the final 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 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 final rule was constructed, the MGCRB had 
completed its review of FY 2019 reclassification requests. Based on 
such reviews, there are 303 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 230 hospitals approved for wage index reclassifications in 
FY 2017 that will continue for FY 2019, and 348 hospitals approved for 
wage index

[[Page 41381]]

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 final rule, 881 
hospitals are in a MGCRB reclassification status for FY 2019 (with 21 
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-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 are incorporated 
into the wage index values published in this 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.
    Comment: One commenter stated that CMS' policy that hospitals must 
request to withdraw or terminate MGCRB reclassifications within 45 days 
of the proposed rule is problematic because a hospital could terminate 
a reclassification based on information in the proposed rule and, with 
the publication of the final rule, discover that its original 
reclassified status was more desirable. The commenter stated that 
hospitals cannot make informed decisions concerning their 
reclassification status based on values in a proposed rule that are 
likely to change. Therefore, the commenter recommended that CMS revise 
its existing policy to permit hospitals to withdraw or terminate their 
reclassification status within 45 days after the publication of the 
final rule.
    Response: We maintain that information provided in the proposed 
rule constitutes the best available data to assist hospitals in making 
reclassification decisions. In addition, section 1886(d)(8)(D) of the 
Act requires the Secretary to adjust the standardized amounts to ensure 
that aggregate payments under the IPPS after implementation of the 
provisions of certain sections of the Act, including section 
1886(d)(10) of the Act for geographic reclassifications by the MGCRB, 
are equal to the aggregate prospective payments that would have been 
made absent these provisions. If hospitals were to withdraw or 
terminate reclassification statuses after the publication of the final 
rule, as the commenter suggested CMS permit, any resulting changes in 
the wage index would not have been taken into account when calculating 
the IPPS standardized amounts in the final rule in accordance with the 
statutory budget neutrality requirement. Therefore, the values 
published in the final rule represent the final wage index values 
reflective of reclassification decisions.
    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) 786-1174. 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 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. However, we note that, beginning with the FY 
2020 reclassification application cycle, the MGCRB now requires 
applications, supporting documents, and subsequent correspondence to be 
filed electronically through the MGCRB module of the Office of Hearings 
Case and Document Management System (``OH CDMS''). Also, the MGCRB will 
issue all of its notices and decisions via email and these documents 
will be accessible electronically through OH CDMS. Registration 
instructions and the system user manual are available at https://www.cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB/Electronic-Filing.html. 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. 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

[[Page 41382]]

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 a 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. As we stated in the FY 2019 
IPPS/LTCH PPS proposed rule (83 FR 20365), in the years since we 
implemented this policy change, we have encountered questions and 
concerns regarding its implementation. In the proposed rule, we stated 
that 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. We noted that to do so, a hospital frequently was required to 
contact the appropriate CMS Regional Office or MAC for a statement 
certifying its status as the single hospital in its MSA. We explained 
that 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. We 
stated in the proposed rule (83 FR 20365) that, in light of these 
questions and concerns and after reviewing the implementation of this 
reclassification provision, we believed that a revision of the policy 
was necessary to reduce unnecessary burden to affected hospitals and 
enhance consistency while achieving previously stated policy goals.
    We explained in the proposed rule that 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 stated that 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 the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20365), we proposed 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 proposed 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 stated that 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.
    As discussed in the proposed rule, 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 its 
labor market area. We stated in the proposed rule that 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 further stated that we believe the proposed 
requirements above for meeting the single hospital MSA exception could 
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.
    Comment: A number of commenters supported the proposal.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, for the 
reasons discussed above and in the proposed rule, we are finalizing our 
revisions to Sec.  412.230(d)(5) as proposed without modification. 
Thus, for applications for reclassification for FY 2021 and subsequent 
fiscal years, a hospital must 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. Specifically, a hospital must 
provide documentation from Table 2 of the Addendum to the current 
fiscal year IPPS/LTCH PPS final rule demonstrating it is the only CCN 
listed within the associated ``Geographic CBSA'' number (currently 
listed under column H) with a ``3-Year Average Hourly Wage (2018, 2019, 
2020)'' value (currently listed under column G).
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. As discussed in the 
FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20366), in Table 2 
associated with that 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

[[Page 41383]]

discussed in section III.C. of the preamble of that proposed rule (83 
FR 20366), 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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20366), we 
requested 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. We stated in the proposed 
rule that 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.
    We did not receive any public comments specific to this 
clarification and request. Therefore, when a county group MGCRB 
reclassification includes a remote location of a hospital located in a 
different labor market area that has not yet been assigned a ``B'' 
number in Table 2 of the applicable IPPS final rule used to evaluate 
reclassification criteria, to help facilitate the MGCRB's review, the 
county group should submit the application to the MGCRB listing the 
remote location with a ``B'' in the third digit of its CCN. If the 
application is approved by the MGCRB, CMS will include the ``B'' 
location number, with applicable reclassification status and wage index 
values, in Table 2 of the subsequent IPPS final rule.
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-year period for which its out-migration 
adjustment is effective. By doing so, such a Lugar hospital would no 
longer be required during the second and third years of eligibility for 
the out-migration adjustment to advise us annually that it prefers to 
continue being treated as rural and receive the out-migration 
adjustment. 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.
    Comment: One comment addressed an issue currently under litigation 
regarding counties that qualify for redesignation under section 
1886(d)(8)(B) of the Act, also known as Lugar counties. The commenter, 
legal counsel for the hospital that is a party in the ligation, stated 
that, based on total commuting rates to all counties within a CBSA, 
under section 1886(d)(8)(B) of the Act, the hospital--which qualifies 
for redesignation--should be assigned to a different CBSA than it is 
currently assigned. The commenter also stated that the hospital 
considers its current assignment to be a clerical error.

[[Page 41384]]

    Response: In the FY 2019 IPPS/LTCH PPS proposed rule, we did not 
propose any changes to the list of qualified counties or the commuting 
standards used to redesignate Lugar counties to another CBSA. As we 
explained in the FY 2015 IPPS/LTCH PPS final rule, the list of counties 
that qualified for redesignation under section 1886(d)(8)(B) of the Act 
and their assignments were determined based on updated OMB delineations 
and Census data (79 FR 49978, which states that we ``proposed to use 
the new OMB delineations to identify rural counties that would qualify 
as `Lugar' under section 1886(d)(8)(B) of the Act and, therefore, would 
be redesignated to urban areas for FY 2015. . . . We did not receive 
any other specific comments with regard to our proposal to use the new 
OMB delineations to identify rural counties that would qualify as 
`Lugar' under section 1886(d)(8)(B) of the Act. Therefore, we are 
finalizing the policy as proposed.''). The FY 2019 IPPS/LTCH PPS 
proposed rule used the methodology adopted in the FY 2015 IPPS/LTCH PPS 
final rule (and subsequent final rules) to make the Lugar 
determinations and designations.
    The proposed Lugar assignment of the hospital at issue for FY 2019 
is not a clerical error. Under OMB's standards for determining whether 
an outlying county should be considered part of a CBSA, OMB examines 
commuting to central counties of the CBSA. Our longstanding policy is 
that, consistent with OMB standards, we examine commuting data to 
central counties of CBSAs in determining whether a hospital qualifies 
as a Lugar hospital and in determining the urban area to which it is 
assigned; we do not view the two steps in isolation. The proposed Lugar 
assignment of the hospital at issue for FY 2019 reflects proper 
application of this policy.

J. 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-
migration'' adjustment). The process, outlined in the FY 2005 IPPS 
final rule (69 FR 49061), provides for an increase in the wage index 
for hospitals located in certain counties that have a relatively high 
percentage of hospital employees who reside in the county but work in a 
different county (or counties) with a higher wage index.
    Section 1886(d)(13)(B) of the Act requires the Secretary to use 
data the Secretary determines to be appropriate to establish the 
qualifying counties. When the provision of section 1886(d)(13) of the 
Act was implemented for the FY 2005 wage index, we analyzed commuting 
data compiled by the U.S. Census Bureau that were derived from a 
special tabulation of the 2000 Census journey-to-work data for all 
industries (CMS extracted data applicable to hospitals). These data 
were compiled from responses to the ``long-form'' survey, which the 
Census Bureau used at 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-migration adjustment were applicable 
for FY 2016, FY 2017, and FY 2018, and in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20367), we proposed 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 
did not propose any changes to the methodology or data source that we 
used for FY 2016 (81 FR 25071). (We refer readers to a full discussion 
of the out-migration adjustment, including rules on deeming hospitals 
reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act 
to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51601 through 51602).)
    We did not receive any public comments on this proposed policy for 
FY 2019. Therefore, for FY 2019, we are finalizing our proposal, 
without modification, to continue using the same policies, procedures, 
and computation that were used for the FY 2012 out-migration adjustment 
and that were applicable for FY 2016, FY 2017, and FY 2018.
    Table 2 associated with this final rule (which is available via the 
internet on the CMS website) includes the final out-migration 
adjustments for the FY 2019 wage index. In addition, as discussed in 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20367), we have added 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 final rule. For this final rule, Table 4 consists of the 
following: A list of counties that are eligible for the out-migration 
adjustment for FY 2019 identified by FIPS county code, the final FY 
2019 out-migration adjustment, and the number of years the adjustment 
will be in effect. We believe this new table makes this information 
more transparent and provides 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 final 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 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

[[Page 41385]]

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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20367 through 
20368), we proposed 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 proposed 
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 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. We stated in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20368) that 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.
    As we stated in the proposed rule, under this revision, there would 
no longer be a requirement that the hospital file its rural 
reclassification application by a specified date (which at the time of 
the proposed rule was 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, we stated in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20368) 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). We explained that 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, we stated that, 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 noted 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 proposed 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 also reiterated in the proposed rule 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

[[Page 41386]]

reflecting its rural status beginning on the filing date (the effective 
date) of the reclassification, regardless of when the hospital applies.
    Comment: One commenter stated that there is ambiguity regarding the 
lock-in date at Sec.  412.103(b)(6) because the lock-in date currently 
references the ``filing date,'' which under the regulations at Sec.  
412.103(b)(5) is the date CMS receives the application. The commenter 
then maintained that the date the CMS mailroom receives the application 
may not necessarily be the date the CMS Regional Office recognizes as 
the filing date and ultimately when the provider receives rural status. 
The commenter requested that CMS clarify the filing date at Sec.  
412.103(b)(5) and simplify the regulations so that there is not a 
``hard and fast'' deadline which can lead to an ``inaccurate'' wage 
index in the event of a discrepancy between the dates when the CMS 
mailroom and the CMS division responsible for processing rural 
reclassifications receive an application.
    Response: We appreciate the commenter's request for CMS to simplify 
the regulations. Under this proposed change to the lock-in date, we are 
simplifying the regulations by eliminating the requirement for a 
hospital to file its rural reclassification application by a specified 
date. We are reiterating that, 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 
treated as rural in the wage index and budget neutrality calculations 
for setting payment rates for the next Federal fiscal year, regardless 
of the date of filing. Because our proposal to change the lock-in date 
would eliminate the reference to the ``filing date'' in Sec.  
412.103(b)(6), we believe our proposal addresses the commenter's 
concern regarding the use of this term in Sec.  412.103(b)(6). We 
appreciate the comment and may consider the commenter's suggestion to 
clarify the use of this term in Sec.  412.103(b)(5) in future 
rulemaking.
    Comment: One commenter encouraged efforts to make sure that 
information is available to CMS timely for purposes of setting wage 
index values in the final rule, but expressed concern with CMS 
proposing to replace a ``provider-based deadline'' of 70 days prior to 
the second Monday in June with a ``CMS Regional Office deadline'' of a 
decision made no later than 60 days after the public display date of 
the proposed rule, because providers are not in control of CMS Regional 
Office timing. The commenter stated that providers also do not have a 
specific date upon which to rely for the public display of the proposed 
rule each year; therefore, a provider-based deadline based on that date 
would have to be after the display date. The commenter further pointed 
out that, using the FY 2019 proposed rule as an example, it appears the 
proposed change would not make the data available to CMS sooner because 
60 days after the public display date of the proposed rule (June 25, 
2018) was after the second Tuesday in June (June 12, 2018). The 
commenter asked that CMS set a specific provider deadline to permit the 
same 70 days as the current rule (60 days for CMS Regional Office 
processing, and 10 days for transmission) and recommended that CMS 
establish a single, fixed date for submission of approved applications 
by the CMS Regional Office to the CMS Central Office in order to 
adequately inform all involved parties of expectations with regard to 
these applications.
    Response: We appreciate the commenter's encouragement of efforts to 
make sure that information is available to CMS timely for purposes of 
setting wage index values in the final rule. While we agree that 
providers are not in control of CMS Regional Office timing, 
applications for urban to rural reclassification under Sec.  412.103 
may be submitted at any time and providers are aware that, in 
accordance with Sec.  412.103(c), the CMS Regional Office may take up 
to 60 days to approve an application. Therefore, providers seeking to 
be considered rural for the wage index and budget neutrality 
calculations can plan accordingly to submit applications for urban to 
rural reclassification with ample time for the application to be 
approved before the proposed lock-in date. Furthermore, we believe that 
eliminating a ``provider-based deadline'' benefits providers because a 
hospital that is approved for rural reclassification within 60 days of 
the public display date of the proposed rule would be included as rural 
in the final rule ratesetting even if the hospital filed less than 70 
days prior to the lock-in date. We agree with the commenter that a 
provider-based deadline based on the date of the public display of the 
proposed rule, such as a requirement for a provider to file an 
application 70 days prior to 60 days after the display of the proposed 
rule, would not be practicable because providers do not have a specific 
date upon which to rely for the public display of the proposed rule 
each year. Therefore, we do not believe that CMS should set such a 
provider-based deadline to permit the same 70 days as the current rule. 
We also agree with the commenter that, using the FY 2019 proposed rule 
as an example, the proposed change would not have made the data 
available earlier than under the current policy, but we reiterate that 
the proposed rule may be displayed earlier in future years, which would 
potentially allot for more time in the ratesetting process. Therefore, 
we believe that it would be appropriate to revise the lock-in date as 
we proposed. Finally, we do not believe it is necessary to establish a 
single, fixed date for submission of approved applications by the CMS 
Regional Office to the CMS Central Office in order to adequately inform 
all involved parties of expectations with regard to these applications 
because CMS Regional Offices already have the requirement at Sec.  
412.103(c) to rule on an application within 60 days, and the CMS 
Central Office is copied on such approvals.
    After consideration of the public comments we received, for the 
reasons discussed above and in the proposed rule, we are finalizing our 
proposal, without modification, 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.

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

[[Page 41387]]

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 1, 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 website 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 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, were not considered for correction 
at this stage. In addition, April 5, 2018 was the deadline for 
hospitals to dispute data corrections made by CMS of which the hospital 
was notified after the February 2, 2018 PUF and at least 14 calendar 
days prior to April 5, 2018 (that is, March 22, 2018), that did not 
arise from a hospital's request for revisions. We note that, as we did 
for the FY 2018 wage index, for the 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 had to be sent via mail and email. We 
refer readers to the wage index timeline for complete details.
    Hospitals were given the opportunity to examine Table 2 associated 
with the proposed rule, which was listed in section VI. of the Addendum 
to the 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 
associated with the proposed rule contained each hospital's proposed 
adjusted average hourly wage used to construct the wage index values 
for the past 3 years, including the FY 2015 data used to construct the 
proposed FY 2019 wage index. We noted in the proposed rule (83 FR 
20369) that the proposed hospital average hourly wages shown in Table 2 
only reflected changes made to a hospital's data that were transmitted 
to CMS by early February 2018.
    We posted the final wage index data PUFs on April 27, 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 were made available 
solely for the limited purpose of identifying any potential errors made 
by CMS or the MAC in the entry of the final wage index data that 
resulted from the correction process 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 could only be made in those very 
limited situations involving an error by the MAC or CMS that the 
hospital could not have known about before its review of the final wage 
index data files. Specifically, neither the MAC nor CMS will approve 
the following types of requests:
     Requests for wage index data corrections that were 
submitted too late to be included in the data transmitted to CMS by the 
MACs on or before 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 believed that its wage or occupational mix data were incorrect 
due to a MAC or CMS error in the entry or tabulation of the final data, 
the hospital was given

[[Page 41388]]

the opportunity to notify both its MAC and CMS regarding why the 
hospital believed an error exists and provide all supporting 
information, including relevant dates (for example, when it first 
became aware of the error). The hospital was required to send its 
request to CMS and to the MAC no later than May 30, 2018. May 30, 2018 
was also the deadline for hospitals to dispute data corrections made by 
CMS of which the hospital was 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 did 
not arise from a hospital's request for revisions. (Data corrections 
made by CMS of which a hospital was 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 were required to be sent via mail and email 
to CMS and the MACs. We refer readers to the wage index timeline for 
complete details.
    Verified corrections to the wage index data received timely (that 
is, by May 30, 2018) by CMS and the MACs were incorporated into the 
final FY 2019 wage index, which is 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 did 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 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 had access to the final wage index data 
PUFs by late April 2018, they had the opportunity to detect any data 
entry or tabulation errors made by the MAC or CMS before the 
development and publication of the final FY 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.

[[Page 41389]]

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.L.1. of the preamble of this final 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 
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 the 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-3, despite those other wage-related costs failing to meet 
the requirement that other wage-related costs must exceed 1 percent of 
total adjusted salaries net of excluded area salaries, CMS made 
internal edits to remove those other wage-related costs from Line 18. 
Conversely, if CMS discovers after conclusion of the desk review, for 
example, that a MAC inadvertently failed to incorporate positive 
adjustments resulting from a prior year's wage index appeal 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 38156).

M. Labor-Related Share for the 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-percent labor-related share, or 
the labor-related share estimated from time to time by the Secretary, 
depending on which labor-related share resulted in a higher payment.
    In the FY 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-based IPPS market basket, we finalized a labor-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-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

[[Page 41390]]

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 the 
FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20371), for FY 2019, we did 
not propose to make any further changes to the national average 
proportion of operating costs that are attributable to wages and 
salaries, employee benefits, 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 proposed to continue to use a labor-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 final 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-
related share percentage to the Puerto Rico-specific standardized 
amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub. 
L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that 
the payment calculation with respect to operating costs of inpatient 
hospital services of a subsection (d) Puerto Rico hospital for 
inpatient hospital discharges on or after January 1, 2016, shall use 
100 percent of the national standardized amount. Because Puerto Rico 
hospitals are no longer paid with a Puerto Rico-specific standardized 
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as 
amended by section 601 of the Consolidated Appropriations Act, 2016, 
there is no longer a need for us to calculate a Puerto Rico-specific 
labor-related share percentage and nonlabor-related share percentage 
for application to the Puerto Rico-specific standardized amount. 
Hospitals in Puerto Rico are now paid 100 percent of the national 
standardized amount and, therefore, are subject to the national labor-
related share and nonlabor-related share percentages that are applied 
to the national standardized amount. Accordingly, for FY 2019, we did 
not propose a Puerto Rico-specific labor-related share percentage or a 
nonlabor-related share percentage.
    We did not receive any public comments on our proposals related to 
the labor-related share percentage. Therefore, we are finalizing our 
proposals, without modification, to continue to use a labor-related 
share of 68.3 percent for discharges occurring on or after October 1, 
2018 for all hospitals (including Puerto Rico hospitals) whose wage 
indexes are greater than 1.0000.
    Tables 1A and 1B, which are published in section VI. of the 
Addendum to this FY 2019 IPPS/LTCH PPS final rule and available via the 
internet on the CMS website, reflect the 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 applying the wage index to a 
labor-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 applying the wage 
index to a labor-related share of 68.3 percent of the national 
standardized amount.

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

A. 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 
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

[[Page 41391]]

days, and the average charges of 1-day discharge cases in the MS-DRG 
must be at least 50 percent of the average charges for all cases within 
the MS-DRG. MS-DRGs that are part of an MS-DRG severity level group 
will qualify under the MS-DRG special payment methodology policy if any 
one of the MS-DRGs that share that same base MS-DRG qualifies (Sec.  
412.4(f)(6)).
2. Changes for FY 2019
    As discussed in section II.F. of the preamble of the FY 2019 IPPS/
LTCH PPS proposed rule, based on our analysis of FY 2017 MedPAR claims 
data, we proposed to make changes to a number of MS-DRGs, effective for 
FY 2019. Specifically, we proposed 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).
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule, in light 
of the proposed changes to these MS-DRGs for FY 2019, according to the 
regulations under Sec.  412.4(d), we 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 stated in the proposed rule that 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. We noted that MS-DRGs 023, 329, 330, 331, 698, 
699, 700, 870, 871, and 872 are currently subject to the postacute care 
transfer policy. We stated that 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. We note that, as discussed in section II.F.5.b. of the 
preamble of this final rule, we are finalizing these proposed changes 
to the MS-DRGs with the exception of our proposed revisions to MS-DRGs 
329, 330, 331, 344, 345, and 336, which we are not finalizing. 
Therefore, MS DRGs 329, 330, 331, 344, 345, and 336 are not included in 
the updated analysis of the postacute care transfer policy and special 
payment policy criteria discussed below. We note that MS-DRGs that are 
subject to the postacute transfer policy for FY 2018 and are not 
revised will continue to be subject to the policy in FY 2019.
    Using the December 2017 update of the FY 2017 MedPAR file, we 
developed a chart for the proposed rule (83 FR 20378 through 20380) 
which set forth the analysis of the postacute care transfer policy 
criteria completed for the proposed rule with respect to each of these 
proposed new or revised MS-DRGs. We note that, in the proposed rule, we 
incorrectly stated that we used the March 2018 update for purposes of 
this analysis rather than the December 2017 update. We indicated that, 
for the FY 2019 final rule, we would update this analysis using the 
most recent available data at that time. The following chart reflects 
our updated analysis for the finalized new and revised MS-DRGs using 
the postacute care transfer policy criteria and the March 2018 update 
of the FY 2017 MedPAR file. We note that, with the additional time 
since the proposed rule, this analysis does take into account the 
change relating to discharges to hospice care, effective October 1, 
2018, discussed in section IV.A.3. of the preamble of this final rule. 
We also note that the postacute care transfer policy status for all 
finalized new and revised MS-DRGs remains unchanged from the proposed 
rule.

                          List of 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
                                                                                transfers      Short-stay     transfers to     Postacute care transfer
    New or revised MS-DRG              MS-DRG title            Total cases        (55th      postacute care     all cases           policy status
                                                                               percentile:      transfers         (55th
                                                                                 1,432)                        percentile:
                                                                                                               8.955224%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
016.........................  Autologous Bone Marrow                  2,095           * 422             127          * 6.06  No.
                               Transplant with CC/MCC or
                               T[dash]Cell Immunotherapy
                               (Revised).
023.........................  Craniotomy with Major Device            9,270           5,859           1,681           18.13  Yes.
                               Implant or Acute CNS
                               Principal Diagnosis with MCC
                               or Chemotherapy Implant or
                               Epilepsy with
                               Neurostimulator (Revised).
698.........................  Other Kidney and Urinary               55,393          36,062           8,386           15.14  Yes.
                               Tract Diagnoses with MCC
                               (Revised).
699.........................  Other Kidney and Urinary               35,860          17,233           3,435            9.58  Yes.
                               Tract Diagnoses with CC
                               (Revised).

[[Page 41392]]

 
700.........................  Other Kidney and Urinary                4,466           1,642             187          * 4.19  Yes **.
                               Tract Diagnoses without CC/
                               MCC (Revised).
783.........................  Cesarean Section with                     193             * 6               0          * 0.00  No.
                               Sterilization with MCC (New).
784.........................  Cesarean Section with                     549            * 19               0          * 0.00  No.
                               Sterilization with CC (New).
785.........................  Cesarean Section with                     507             * 6               0           *0.00  No.
                               Sterilization without CC/MCC
                               (New).
786.........................  Cesarean Section without                  755            * 35               6          * 0.79  No.
                               Sterilization with MCC (New).
787.........................  Cesarean Section without                2,050            * 95               3          * 0.15  No.
                               Sterilization with CC (New).
788.........................  Cesarean Section without                1,868            * 41               0          * 0.00  No.
                               Sterilization without CC/MCC
                               (New).
794.........................  Vaginal Delivery with                       1             * 1               0          * 0.00  No.
                               Sterilization/D&C with MCC
                               (New).
796.........................  Vaginal Delivery with                      49             * 2               0          * 0.00  No.
                               Sterilization/D&C with CC
                               (New).
798.........................  Vaginal Delivery with                     160             * 1               0          * 0.00  No.
                               Sterilization/D&C without CC/
                               MCC (New).
805.........................  Vaginal Delivery without                  506            * 20               0          * 0.00  No.
                               Sterilization/D&C with MCC
                               New).
806.........................  Vaginal Delivery without                2,143            * 71               2          * 0.09  No.
                               Sterilization/D&C with CC
                               (New).
807.........................  Vaginal Delivery without                3,833            * 71               7          * 0.18  No.
                               Sterilization/D&C without CC/
                               MCC (New).
817.........................  Other Antepartum Diagnoses                 75            * 12               0          * 0.00  No.
                               with O.R. Procedure with MCC
                               (New).
818.........................  Other Antepartum Diagnoses                 88             * 5               1          * 1.14  No.
                               with O.R. Procedure with CC
                               (New).
819.........................  Other Antepartum Diagnoses                 53             * 1               0          * 0.00  No.
                               with O.R. Procedure without
                               CC/MCC (New).
831.........................  Other Antepartum Diagnoses                859            * 31               1          * 0.12  No.
                               without O.R. Procedure with
                               MCC (New).
832.........................  Other Antepartum Diagnoses              1,257            * 53              13          * 1.03  No.
                               without O.R. Procedure with
                               CC (New).
833.........................  Other Antepartum Diagnoses                663            * 11               0          * 0.00  No.
                               without O.R. Procedure
                               without CC/MCC (New).
864.........................  Fever and Inflammatory                 12,206           4,064             313          * 2.56  No.
                               Conditions (Revised).
870.........................  Septicemia or Severe Sepsis            34,468          18,534           6,550           19.00  Yes.
                               with Mechanical Ventilation
                               >96 Hours (Revised).
871.........................  Septicemia or Severe Sepsis           583,535         323,308          56,341            9.66  Yes.
                               without Mechanical
                               Ventilation >96 Hours with
                               MCC (Revised).
872.........................  Septicemia or Severe Sepsis           165,853          75,185           8,323          * 5.02  Yes **.
                               without Mechanical
                               Ventilation >96 Hours
                               without MCC (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 December 2017 update of the FY 2017 MedPAR file, we 
identified MS-DRGs that we proposed to include on the list of MS-DRGs 
subject to the special payment methodology policy. We note that, in the 
proposed rule, we incorrectly stated that we used the March 2018 update 
for purposes of this analysis rather than the December 2017 update. We 
noted in the proposed rule that none of the proposed revised MS-DRGs 
that were listed in the table included in the proposed rule 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 (as noted

[[Page 41393]]

above, we are not finalizing the proposed changes to MS-DRGs 330 and 
331 and therefore they are not included in the updated analysis below). 
Based on our analysis of proposed changes to MS-DRGs included in the 
proposed rule, we 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 proposed 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 proposed 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.
    In the proposed rule, we indicated that, for the FY 2019 final 
rule, we would update this analysis using the most recent available 
data at that time. The following chart reflects our updated analysis 
for the finalized new and revised MS-DRGs using our criteria and the 
March 2018 update of the FY 2017 MedPAR file. We note that with the 
additional time since the proposed rule this analysis does take into 
account the change relating to discharges to hospice care, effective 
October 1, 2018, discussed in section IV.A.3. of the preamble of this 
final rule. We also note that status for all finalized new and revised 
MS-DRGs remains unchanged from the proposed rule.

             List of Revised MS-DRGs Subject To Review of Special Payment Policy Status for FY 2019
----------------------------------------------------------------------------------------------------------------
                                                                            50 percent of
                                                               Average         average
    Revised MS-DRG        MS-DRG title     Geometric mean   charges of 1-    charges for      Special payment
                                           length of stay  day discharges     all cases        policy status
                                                                            within MS-DRG
----------------------------------------------------------------------------------------------------------------
023..................  Craniotomy with                7.3         $97,557         $96,623  Yes.
                        Major Device
                        Implant or Acute
                        CNS Principal
                        Diagnosis with
                        MCC or
                        Chemotherapy
                        Implant or
                        Epilepsy with
                        Neurostimulator.
698..................  Other Kidney and               4.9          18,290          25,199  No.
                        Urinary Tract
                        Diagnoses with
                        MCC.
699..................  Other Kidney and               3.4          16,872          16,984  No.
                        Urinary Tract
                        Diagnoses with CC.
700..................  Other Kidney and               2.5          14,283          12,943  No.
                        Urinary Tract
                        Diagnoses without
                        CC/MCC.
870..................  Septicemia or                 12.4               0         102,505  No.
                        Severe Sepsis
                        with Mechanical
                        Ventilation >96
                        Hours.
871..................  Septicemia or                  4.8          19,860          29,939  No.
                        Severe Sepsis
                        without
                        Mechanical
                        Ventilation >96
                        Hours with MCC.
872..................  Septicemia or                  3.7          18,096          17,399  No.
                        Severe Sepsis
                        without
                        Mechanical
                        Ventilation >96
                        Hours without MCC.
----------------------------------------------------------------------------------------------------------------

    We did not receive any public comments specific to our proposal 
that MS-DRGs 23 and 24 would be subject to the special payment 
methodology effective FY 2019. Therefore, we are finalizing this 
proposal without modification.
    The special payment policy status of these MS-DRGs is reflected in 
Table 5 associated with this final rule, which is listed in section VI. 
of the Addendum to this final rule and available via the internet on 
the CMS website.
3. 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. 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. 
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20381 and 20382), we 
proposed 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 proposed 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. We stated in the proposed 
rule that, 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.
    Comment: Several comments opposed the inclusion of discharges to 
hospice care as subject to the postacute care transfer policy. The 
commenters questioned the efficacy of including hospice care within the 
postacute care transfer policy in terms of patient choice and quality 
of life at end of life. The commenters believed that the proposed 
policy would inject payment concerns within medical decisions regarding 
appropriate placement and consideration of patient needs and 
preferences. They contended that such

[[Page 41394]]

payment policies would dissuade transfers to hospice care and 
potentially result in a perverse incentive to delay hospice care 
election. The commenters further contended that the initial rationale 
for the postacute care transfer policy does not, and should not apply 
to discharges to hospice. They stated that the initial impetus for the 
postacute care transfer policy was to discourage hospitals from 
admitting and then quickly discharging patients to a postacute care 
setting for therapeutic care. Because hospice providers would not 
provide curative care, the commenters believed there would be no 
duplicative services provided by the discharging hospital and the 
postacute care provider. The commenters provided academic research 
demonstrating the numerous patient care benefits related to fast-track 
discharges from hospitals to hospices. One commenter provided analysis 
to demonstrate that the proposed application of the postacute care 
transfer policy to hospice discharges could potentially negatively 
impact up to 25 percent of hospice admissions nationally, with some 
providers experiencing rates as high as 33 percent. The same commenter 
also suggested several ways CMS could evaluate the implementation of 
the postacute care transfer policy and its effects on hospice care. 
Several commenters requested that, at a minimum, CMS monitor and 
provide detailed provider-specific data on the rates of hospice 
transfers, including inpatient days prior to hospice election, and to 
track whether the policy has a material impact on timely hospice care 
election for patients in inpatient stays.
    While several commenters recognized the statutory requirement for 
the proposed changes, they urged CMS to use its administrative 
discretion to mitigate or delay the potentially harmful effects that 
the policy could have on access to the hospice benefit by Medicare 
beneficiaries facing the end of life.
    Response: We thank commenters for the analysis and feedback 
provided. As stated in the first year of the IPPS on the hospital-to-
hospital transfer policy, we stated that ``(t)he rationale for per diem 
payment as part of our transfer policy is that the transferring 
hospital generally provides only a limited amount of treatment. 
Therefore, payment of the full prospective payment rate would be 
unwarranted'' (49 FR 244). We disagree that the postacute care transfer 
policy creates a perverse incentive to keep patients in the hospital 
longer than necessary. Our longstanding view is the policy addresses 
the appropriate level of payment once clinical decisions about the most 
appropriate care in the most appropriate setting have been made. 
Therefore, we do not believe it would be appropriate to treat 
discharges to hospice care differently than any of the other qualified 
postacute care settings. We believe that statute is unambiguous as to 
the actions CMS is required to implement for FY 2019. In addition to 
expanding the postacute care policy to include discharges to hospice, 
section 53109 of the Bipartisan Budget Act of 2018 also requires MedPAC 
to conduct a detailed evaluation of the implementation and impacts of 
this provision. Specifically, such a report must address whether the 
timely access to hospice care has been affected through changes to 
hospital policies or behaviors. Preliminary results of this report are 
due to Congress by March 21, 2020.
    Comment: One comment requested that CMS rephrase the proposed 
changes to the regulation text at Sec.  412.4(c). The commenter 
believed that the proposed text of ``For discharges occurring on or 
after October 1, 2018, to hospice care by a hospice program.'' could be 
interpreted to require a ``hospice program'' to initiate a qualified 
discharge. The commenters suggested that CMS rephrase this language to 
clearly indicate that a qualified discharge originates from a hospital.
    Response: The terminology of ``hospice care by a hospice program'' 
was taken directly from section 53109 of the Bipartisan Budget Act of 
2018. The terminology is similar to the language implemented in section 
1861(dd) of the Act (``The term `hospice care' means the following 
items and services provided to a terminally ill individual by . . . a 
hospice program). However, for sake of clarity, we are rephrasing the 
language that was originally proposed to instead read ``For discharges 
occurring on or after October 1, 2018, to hospice care provided by a 
hospice program.''
    After consideration of the public comments we received, we are 
finalizing the proposed revisions to Sec.  412.4(c) to include 
discharges to hospice care occurring on or after October 1, 2018 as 
qualified discharges, with one minor grammatical modification discussed 
previously. 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) will be subject to the postacute care transfer 
policy in accordance with this statutory amendment, effective for 
discharges occurring on or after October 1, 2018.

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

1. 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-of-increase in the hospital market basket for IPPS hospitals 
in all areas, subject to--
    (a) A reduction of one-quarter of the applicable percentage 
increase (prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals that fail to submit quality information 
under rules established by the Secretary in accordance with section 
1886(b)(3)(B)(viii) of the Act;
    (b) A reduction of three-quarters of the applicable percentage 
increase (prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals not considered to be meaningful EHR users 
in accordance with section 1886(b)(3)(B)(ix) of the Act;
    (c) An adjustment based on changes in economy-wide productivity 
(the multifactor productivity (MFP) adjustment); and
    (d) An additional reduction of 0.75 percentage point as required by 
section 1886(b)(3)(B)(xii) of the Act.
    Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added 
by section 3401(a) of the Affordable Care Act, state that application 
of the MFP adjustment and the additional FY 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-based IPPS operating market basket with the rebased and 
revised

[[Page 41395]]

2014-based IPPS operating market basket, effective with FY 2018.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20381), we 
proposed 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-based IPPS 
market basket rate-of-increase with historical data through third 
quarter 2017, which was estimated to be 2.8 percent. We proposed that 
if more recent data subsequently became 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.
    Based on the most recent data available for this FY 2019 IPPS/LTCH 
PPS final rule (that is, IGI's second quarter 2018 forecast of the 
2014-based IPPS market basket rate-of-increase with historical data 
through the first quarter of 2018), we estimate that the FY 2019 market 
basket update used to determine the applicable percentage increase for 
the IPPS is 2.9 percent.
    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. 
Based on the most recent data described above, we determined final 
applicable percentage increases to the standardized amount for FY 2019, 
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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20382), for FY 
2019, we proposed an MFP adjustment of 0.8 percentage point. Similar to 
the market basket update, for the proposed rule, we used IGI's fourth 
quarter 2017 forecast of the MFP adjustment to compute the proposed MFP 
adjustment. As noted previously, we proposed that if more recent data 
subsequently became 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 the most recent data available for this FY 2019 IPPS/LTCH 
PPS final rule (that is, IGI's second quarter 2018 forecast of the MFP 
adjustment with historical data through the first quarter of 2018), for 
FY 2019, we have determined an MFP adjustment of 0.8 percentage point.
    We did not receive any public comments on our proposals to use the 
most recent available data to determine the final market basket update 
and the MFP adjustment. Therefore, for this final rule, we are 
finalizing a market basket update of 2.9 percent and an MFP adjustment 
of 0.8 percentage point for FY 2019 based on the most recent available 
data.
    Based on the most recent available data for this final rule, as 
described previously, we have determined four applicable percentage 
increases to the standardized amount for FY 2019, as specified in the 
following table:

                              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
----------------------------------------------------------------------------------------------------------------
Market Basket Rate[dash]of[dash]Increase........             2.9             2.9             2.9             2.9
Adjustment for Failure to Submit Quality Data                  0               0          -0.725          -0.725
 under Section 1886(b)(3)(B)(viii) of the Act...
Adjustment for Failure to be a Meaningful EHR                  0          -2.175               0          -2.175
 User under Section 1886(b)(3)(B)(ix) of the Act
MFP Adjustment under Section 1886(b)(3)(B)(xi)              -0.8            -0.8            -0.8            -0.8
 of the Act.....................................
Statutory Adjustment under Section                         -0.75           -0.75           -0.75           -0.75
 1886(b)(3)(B)(xii) of the Act..................
Applicable Percentage Increase Applied to                   1.35          -0.825           0.625           -1.55
 Standardized Amount............................
----------------------------------------------------------------------------------------------------------------

    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20382), we 
proposed 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 proposed 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

[[Page 41396]]

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 did not receive any public comments on our proposed changes to 
the regulations at Sec.  412.64(d)(1) and, therefore, are finalizing 
these proposed changes without modification in this final rule.
    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 final rule, section 205 of 
the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. 
L. 114-10, enacted on April 16, 2015) extended the MDH program 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.)
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20382), for FY 
2019, we proposed 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 the FY 2019 IPPS/LTCH PPS proposed rule, 
we used IGI's fourth quarter 2017 forecast of the 2014-based IPPS 
market basket update with historical data through third quarter 2017. 
Similarly, we used IGI's fourth quarter 2017 forecast of the MFP 
adjustment. We proposed that if more recent data subsequently became 
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 did not receive any public comments with regard to our proposal. 
Therefore, we are finalizing the proposal to determine the update to 
the hospital-specific rates for SCHs and MDHs in this final rule using 
the most recent available data, specifically, IGI's second quarter 2018 
forecast of the 2014-based IPPS market basket rate-of-increase and the 
MFP adjustment with historical data through the first quarter of 2018.
    For this final rule, based on the most recent available data, we 
are finalizing the following updates to the hospital-specific rates 
applicable to SCHs and MDHs: An update of 1.35 percent for a hospital 
that submits quality data and is a meaningful EHR user; an update of 
0.625 percent for a hospital that fails to submit quality data and is a 
meaningful EHR user; an update of -0.825 percent for a hospital that 
submits quality data and is not a meaningful EHR user; and an update of 
-1.55 percent for a hospital that fails to submit quality data and is 
not a meaningful EHR user.
2. 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 final rule. 
Accordingly, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20382), 
for FY 2019, we proposed an applicable percentage increase of 1.25 
percent to the standardized amount for hospitals located in Puerto 
Rico. We note that we did not receive any public comments with regard 
to our proposal. Based on the most recent data available for this final 
rule (as discussed in section IV.B.1. of the preamble of this final 
rule), we are finalizing an applicable percentage increase of 1.35 
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 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.

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

    Under the authority of section 1886(d)(5)(C)(i) of the Act, the 
regulations at Sec.  412.96 set forth the criteria that a hospital must 
meet in order to qualify under the IPPS as a rural referral center 
(RRC). RRCs receive some special treatment under both the DSH payment 
adjustment and the criteria for geographic reclassification.
    Section 402 of Public Law 108-173 raised the DSH payment adjustment 
for RRCs such that they are not subject to the 12-percent cap on DSH 
payments that is applicable to other rural hospitals. RRCs also are not 
subject to the proximity criteria when applying for geographic 
reclassification. In addition, they do not have to meet the requirement 
that a hospital's average hourly wage must exceed, by a certain 
percentage, the average hourly wage of the labor market area in which 
the hospital is located.
    Section 4202(b) of Public Law 105-33 states, in part, that any 
hospital classified as an RRC by the Secretary for FY 1991 shall be 
classified as such an RRC for FY 1998 and each subsequent fiscal year. 
In the August 29, 1997 IPPS final rule with comment period (62 FR 
45999), we reinstated RRC status for all

[[Page 41397]]

hospitals that lost that status due to triennial review or MGCRB 
reclassification. However, we did not reinstate the status of hospitals 
that lost RRC status because they were now urban for all purposes 
because of the OMB designation of their geographic area as urban. 
Subsequently, in the August 1, 2000 IPPS final rule (65 FR 47089), we 
indicated that we were revisiting that decision. Specifically, we 
stated that we would permit hospitals that previously qualified as an 
RRC and lost their status due to OMB redesignation of the county in 
which they are located from rural to urban, to be reinstated as an RRC. 
Otherwise, a hospital seeking RRC status must satisfy all of the other 
applicable criteria. We use the definitions of ``urban'' and ``rural'' 
specified in Subpart D of 42 CFR part 412. One of the criteria under 
which a hospital may qualify as an RRC is to have 275 or more beds 
available for use (Sec.  412.96(b)(1)(ii)). A rural hospital that does 
not meet the bed size requirement can qualify as an RRC if the hospital 
meets two mandatory prerequisites (a minimum case-mix index (CMI) and a 
minimum number of discharges), and at least one of three optional 
criteria (relating to specialty composition of medical staff, source of 
inpatients, or referral volume). (We refer readers to Sec.  
412.96(c)(1) through (c)(5) and the September 30, 1988 Federal Register 
(53 FR 38513) for additional discussion.) With respect to the two 
mandatory prerequisites, a hospital may be classified as an RRC if--
     The hospital's CMI is at least equal to the lower of the 
median CMI for urban hospitals in its census region, excluding 
hospitals with approved teaching programs, or the median CMI for all 
urban hospitals nationally; and
     The hospital's number of discharges is at least 5,000 per 
year, or, if fewer, the median number of discharges for urban hospitals 
in the census region in which the hospital is located. The number of 
discharges criterion for an osteopathic hospital is at least 3,000 
discharges per year, as specified in section 1886(d)(5)(C)(i) of the 
Act.
1. Case-Mix Index (CMI)
    Section 412.96(c)(1) provides that CMS establish updated national 
and regional CMI values in each year's annual notice of prospective 
payment rates for purposes of determining RRC status. The methodology 
we used to determine the national and regional CMI values is set forth 
in the regulations at Sec.  412.96(c)(1)(ii). The national median CMI 
value for FY 2019 is based on the CMI values of all urban hospitals 
nationwide, and the 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 values are based on discharges 
occurring during FY 2017 (October 1, 2016 through September 30, 2017), 
and include bills posted to CMS' records through March 2018.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20383), we 
proposed that, in addition to meeting other criteria, if rural 
hospitals with fewer than 275 beds are to qualify for initial RRC 
status for cost reporting periods beginning on or after October 1, 
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-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 were set forth in a table 
in the proposed rule (83 FR 20383). We stated in the proposed rule that 
we intended to update the proposed CMI values in the FY 2019 final rule 
to reflect the updated FY 2017 MedPAR file, which would contain data 
from additional bills received through March 2018.
    We did not receive any public comments on our proposals.
    Based on the latest available data (FY 2017 bills received through 
March 2018), 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:
     1.6612 (national--all urban); or
     The median CMI value (not transfer-adjusted) for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec.  413.75) calculated by CMS for the census region in 
which the hospital is located.
    The final CMI values by region are set forth in the following 
table.

------------------------------------------------------------------------
                                                          Case-mix index
                         Region                                value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).................          1.4071
2. Middle Atlantic (PA, NJ, NY).........................          1.4701
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)..          1.5492
4. East North Central (IL, IN, MI, OH, WI)..............          1.5743
5. East South Central (AL, KY, MS, TN)..................          1.5293
6. West North Central (IA, KS, MN, MO, NE, ND, SD)......         1.63935
7. West South Central (AR, LA, OK, TX)..................          1.6859
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............          1.7366
9. Pacific (AK, CA, HI, OR, WA).........................          1.6613
------------------------------------------------------------------------

    A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its MAC. Data are 
available on the Provider Statistical and Reimbursement (PS&R) System. 
In keeping with our policy on discharges, the CMI values are computed 
based on all Medicare patient discharges subject to the IPPS MS-DRG-
based payment.
2. Discharges
    Section 412.96(c)(2)(i) provides that CMS set forth the national 
and regional numbers of discharges criteria in each year's annual 
notice of prospective payment rates for purposes of determining RRC 
status. As specified in section 1886(d)(5)(C)(ii) of the Act, the 
national standard is set at 5,000 discharges. In the FY 2019 IPPS/LTCH 
PPS proposed rule (83 FR 20384), for FY 2019, we proposed 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 were the latest cost report data 
available at the time the proposed rule was developed. Therefore, we 
proposed that, in addition to meeting other criteria, a hospital, if it 
is to qualify for initial RRC status for

[[Page 41398]]

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. (We 
refer readers to the table set forth in the FY 2019 IPPS/LTCH PPS 
proposed rule at 83 FR 20384.) In the proposed rule, we stated that we 
intended to update these numbers in the FY 2019 final rule based on the 
latest available cost report data.
    We did not receive any public comments on our proposals.
    Based on the latest discharge data available at this time, that is, 
for cost reporting periods that began during FY 2016, the final median 
number of discharges for urban hospitals by census region are set forth 
in the following table.

------------------------------------------------------------------------
                                                             Number of
                         Region                             discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).................           8,431
2. Middle Atlantic (PA, NJ, NY).........................           9,985
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)..          10,543
4. East North Central (IL, IN, MI, OH, WI)..............           8,297
5. East South Central (AL, KY, MS, TN)..................           8,131
6. West North Central (IA, KS, MN, MO, NE, ND, SD)......           7,805
7. West South Central (AR, LA, OK, TX)..................           5,574
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............           8,736
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 final rule, 5,000 discharges is the minimum 
criterion for all hospitals, except for osteopathic hospitals for which 
the minimum criterion is 3,000 discharges.

D. 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.
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20384), 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-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-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 appeared in the 
Federal Register on April 26, 2018 (83 FR 18301 through 18308). In 
section IV.D.2.b. of the preamble of the proposed rule and this final 
rule, we discuss the low-volume hospital payment adjustment policies 
for FY 2019.

2. 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 
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 that appeared in the 
Federal Register on April 26, 2018 (CMS-1677-N) (83 FR 18301 through 
18308). However, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20384), we proposed 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 proposed 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 low-volume hospital 
payment adjustment policy in effect for FYs 2011 through 2017 (as 
described in the FY 2018 IPPS notice (CMS-1677-N; 83 FR 18301 through 
18308).
    We did not receive any public comments on our proposal. Therefore, 
we are finalizing, without modification, our proposed 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 low-volume hospital payment 
adjustment policy in effect for FYs 2011 through 2017.
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-

[[Page 41399]]

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).
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20385), to 
implement this requirement, we proposed 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-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 proposed 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 proposed 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) - (number of total discharges/
13,200).

    As discussed below, the formula as presented in the preamble to the 
proposed rule (83 FR 20385) contained a typographical error, in that an 
``x'' sign was used in place of a minus (``-'') sign, as follows: (95/
330) x (number of total discharges/13,200). The formula set forth in 
the proposed regulatory text at Sec.  412.101(c)(3)(ii) was correct, 
and we have also corrected the typographical error in the formula as 
presented in the preamble of this final rule.
    To reflect these changes for FYs 2019 through 2022, we proposed 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 proposed 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-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) - (number of total discharges/13,200)]. (Similar to 
above, in the preamble to the proposed rule, we inadvertently included 
an ``x'' sign in place of a ``-'' sign in describing the formula that 
was specified in the text of proposed Sec.  412.101(c)(3)(ii). As 
noted, the proposed regulatory text accurately reflected the proposed 
formula, and we have also corrected the typographical error in the 
formula as presented in the preamble of this final rule.)
    In the proposed rule, we specified that 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 proposed to make conforming changes to paragraphs (b)(2)(i) 
and (c)(1) of Sec.  412.101 to reflect that the low-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 proposed 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.
    Comment: Commenters noted a typographical error in the proposed 
low-volume hospital payment adjustment formula as presented in the 
preamble of the proposed rule. Many of these commenters also noted that 
the formula in proposed Sec.  412.101(c)(3)(ii) was correct.
    Response: We thank the commenters for pointing out this 
typographical error and, as indicated earlier, are correcting the 
formula as presented in the preamble of this final rule to read: Low-
Volume Hospital Payment Adjustment = 0.25 - [0.25/3300] x (number of 
total discharges - 500) = (95/330) - (number of total discharges/
13,200).
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposed changes to Sec.  
412.101(b)(2), (c), and (d) to reflect the changes in the low-volume 
hospital payment policy provided by section 50204 of the Bipartisan 
Budget Act of 2018 as discussed in this section.
3. 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-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

[[Page 41400]]

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-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-volume hospital payment adjustment, we 
refer readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38185 
through 38188).)
    As described in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20385), 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-Medicare discharges, as was the 
case for FYs 2005 through 2010. Under Sec.  412.101(b)(2)(i) and new 
Sec.  412.101(b)(2)(iii), as proposed and finalized in this final rule, 
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 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.
    As also discussed in the FY 2019 IPPS/LTCH PPS proposed rule, in 
addition to the discharge criterion, for FY 2019 and for subsequent 
fiscal years, eligibility for the low-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 (as noted in the previous 
section, we have finalized the amendments to Sec.  412.101(b)(2) and 
new Sec.  412.101(b)(2)(iii) as proposed). 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-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.
    As explained in the proposed rule, 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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20386), for FY 2019, we proposed 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 proposed 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 would 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 noted 
in the proposed rule 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).
    Comment: Commenters generally supported CMS' proposals related to 
the process for requesting and obtaining the low-volume hospital 
payment adjustment for FY 2019. Some commenters requested clarity 
regarding the date used to establish the most recently submitted cost 
report as well as guidance regarding what information from the cost 
report should be used to determine the total number of discharges for 
purposes of the low-volume hospital payment adjustment in FY 2019 
through 2022.
    Response: Consistent with our process for determining whether a 
hospital met the discharge criterion for FYs 2005 through 2010, the 
most recently submitted cost report used to determine total discharges 
for the low-volume hospital payment policy is the most recently 
submitted cost report as of the date that the hospital submits its 
written request to the MAC, in accordance with the process discussed 
earlier in this section. In addition, the total discharges include only 
inpatient discharges as reported on Worksheet S-3, Part 1, Column 15, 
Line 1 in the current version of the cost report.

[[Page 41401]]

    After consideration of the public comments we received, we are 
finalizing our proposals relating to the process for requesting and 
obtaining the low-volume hospital payment adjustment as described 
above, without modification.

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.
    We did not receive any comments regarding the IME adjustment 
factor, which, as noted earlier, is statutorily required. Accordingly, 
for discharges occurring during FY 2019, the IME formula multiplier is 
1.35.
2. Technical Correction to Regulations at 42 CFR 412.105(f)(1)(vii)
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20386), in the regulation governing the IME payment adjustment at Sec.  
412.105(f)(1)(vii), we 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 
the proposed regulation (83 FR 20567), we proposed to correct this 
omission by amending Sec.  412.105 to remove the reference to 
``Sec. Sec.  413.79(e)(1) through (e)(4)'' and add 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 was 
intended to correct the omission and was not intended to substantially 
change the underlying regulation.
    We did not receive any public comments on this proposed technical 
correction to Sec.  412.105, and therefore are finalizing it as was 
proposed in the proposed regulation.

F. 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 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 final 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

[[Page 41402]]

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 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 in the 
rulemaking for subsequent fiscal years, we have specified our policies 
for several specific classes of hospitals within the scope of section 
1886(r) of the Act. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20388 and 20389), we discussed our specific policies with respect to 
the following hospitals:
     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. As discussed in the FY 2019 IPPS/LTCH PPS 
proposed rule (83

[[Page 41403]]

FR 20388), the performance period of the Maryland All-Payer Model is 
scheduled to end on December 31, 2018. However, since the proposed rule 
was issued, CMS and the State have entered into an agreement to govern 
payments to Maryland hospitals under a new payment model, the Maryland 
Total Cost of Care (TCOC) Model, which begins on January 1, 2019. Under 
both the Maryland All-Payer Model and the new Maryland TCOC Model, 
Maryland hospitals will not be paid under the IPPS in FY 2019, and will 
remain ineligible to receive empirically justified Medicare DSH 
payments and 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.
     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. At the time of issuance of 
the proposed rule, there were 30 hospitals participating in the 
demonstration program (83 FR 20389). Since issuance of the proposed 
rule, one hospital has withdrawn from the demonstration program. Under 
the payment methodology that applies during the second 5 years of the 
extension period under the demonstration program, participating 
hospitals do not receive empirically justified Medicare DSH payments, 
and they are also 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/

[[Page 41404]]

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 and final policies for FY 2019.
a. Calculation of 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 the FY 2019 IPPS/LTCH PPS proposed rule 
(83 FR 20389), in order to determine Factor 1 in the uncompensated care 
payment formula for FY 2019, we proposed to continue the policy 
established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628 
through 50630) and in the FY 2014 IPPS interim final rule with comment 
period (78 FR 61194) of determining Factor 1 by developing estimates of 
both the aggregate amount of Medicare DSH payments that would be made 
in the absence of section 1886(r)(1) of the Act and the aggregate 
amount of empirically justified Medicare DSH payments to hospitals 
under 1886(r)(1) of the Act. These estimates will not be revised or 
updated after we know the final Medicare DSH payments for FY 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 the 
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 
reports with Medicare DSH payment information and the most recent 
Medicare DSH patient percentages and Medicare DSH payment adjustments 
provided in the IPPS Impact File. The determination of the amount of 
DSH payments is partially based on the Office of the Actuary's Part A 
benefits projection model. One of the results of this model is 
inpatient hospital spending. Projections of DSH payments require 
projections for expected increases in utilization and case-mix. The 
assumptions that were used in making these projections and the 
resulting estimates of DSH payments for FY 2016 through FY 2019 are 
discussed in the table titled ``Factors Applied for FY 2016 through FY 
2019 to Estimate Medicare DSH Expenditures Using FY 2015 Baseline.''
    For purposes of calculating Factor 1 and modeling the impact of the 
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 September 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. (We note that the proposed rule 
included an inadvertent reference to the HCRIS December 2017 update, 
which we have corrected in this final rule to reflect the September 
2017 update of HCRIS, which was used by OACT in developing the December 
2017 estimates. The cost report data from the December quarterly update 
were not available to be used in OACT's December 2017 estimates of 
Medicare DSH payments.) 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 that were then 
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 the proposed rule, using the data sources discussed above, the 
Office of the Actuary's December 2017 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. Therefore, 
also 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

[[Page 41405]]

Act, was 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 the 
proposed rule, we proposed that Factor 1 for FY 2019 would be 
$12,221,027,954.62, which is equal to 75 percent of the total amount of 
estimated Medicare DSH payments for FY 2019 ($16,294,703,939.49 minus 
$4,073,675,984.87).
    Comment: Some commenters requested greater transparency in the 
methodology used by CMS and the OACT, particularly with respect to the 
calculation of estimated DSH payments for purposes of determining 
Factor 1, and the ``Other'' factors that are used to estimate Medicare 
DSH expenditures. A number of commenters urged CMS to provide a 
detailed explanation, including calculations, of the assumptions used 
to make these projections. Some commenters believed that the lack of 
opportunity afforded to hospitals to review the data used in rulemaking 
is in violation of the Administrative Procedure Act. Specifically, the 
commenters noted that the update factors used to derive the estimated 
DSH payment for FY 2019 were different from the factors used in 
previous years, but the changes were not addressed by CMS in the 
proposed rule. The commenters also noted that they have not had the 
opportunity to comment on the extrapolation of the 2015 DSH data and 
the way in which Medicaid expansion was accounted for in the DSH 
payment impact, or on any adjustments made to the data.
    Some commenters expressed concern about whether underreporting of 
Medicaid coverage was factored into the calculation of Factor 1, as it 
was for Factor 2. The commenters noted that, in the proposed rule, CMS 
did not explain why OACT assumed that there is an underreporting of 
Medicaid coverage due to ``a perceived stigma associated with being 
enrolled in the Medicaid program or confusion about the source of 
health insurance.'' The commenters further stated that the proposed 
rule did not indicate that the same presumption was also applied to the 
calculation of Factor 1. Many commenters provided examples of other 
assumptions made by OACT for which CMS did not provide information in 
rulemaking to explain the basis for or the data used to make the 
assumptions. The commenters believed that, given the information 
available to CMS, such as enrollment and utilization information from 
States that have expanded Medicaid and recently released reports that 
concluded that the Affordable Care Act had insured fewer individuals 
than previously estimated (CBO September 2017 report; President's 2018 
Economic Report), coverage levels were lower than estimated by CMS; and 
therefore, DSH payments to hospitals were suppressed. The commenters 
requested that CMS implement a system to reconcile uncompensated care 
payments once later data on Medicare DSH payments are available. One 
commenter thanked CMS for providing a table listing hospital-specific 
estimated uncompensated care payments and other DSH-related information 
for FY 2019. Another commenter suggested that, as CMS is permitting 
revisions to Factor 3, the agency consider completing reconciliation 
for Factor 1 and Factor 2. The commenter recognized that there are 
issues pertaining to completing reconciliation for all three factors, 
such as the determination of when to finalize all cost reports, but 
suggested using a methodology similar to the one used to determine the 
wage index by using prior years' data for settlement of a future year 
and developing time tables for submissions and revisions to the data.
    Response: We thank the commenters for their input. For the reasons 
discussed below, we have been and continue to be transparent with 
respect to the methodology and data used to estimate Factor 1 and we 
disagree with commenters who assert otherwise. Regarding the commenters 
who reference the Administrative Procedure Act, we note that under the 
Administrative Procedure Act, a proposed rule is required to include 
either the terms or substance of the proposed rule or a description of 
the subjects and issues involved. In this case, the FY 2019 IPPS/LTCH 
PPS proposed rule did include a detailed discussion of our proposed 
Factor 1 methodology and the data sources that would be used in making 
our estimate.
    To provide context, we first note that Factor 1 is not estimated in 
isolation from other OACT projections. The Factor 1 estimates for 
proposed rules are generally consistent with the economic assumptions 
and actuarial analysis used to develop the President's Budget estimates 
under current law, and the Factor 1 estimates for the final rule are 
generally consistent with those used for the Midsession Review of the 
President's Budget. As we have in the past, for additional information 
on the development of the President's Budget, we refer readers to the 
Office of Management and Budget website at: https://www.whitehouse.gov/omb/budget. For additional information on the specific economic 
assumptions used in the Midsession Review of the President's FY 2019 
Budget, we refer readers to the ``Midsession Review of the President's 
FY 2019 Budget'' available on the Office of Management and Budget 
website at: https://www.whitehouse.gov/omb/budget. We recognize that 
our reliance on the economic assumptions and actuarial analysis used to 
develop the President's Budget and the Midsession Review of the 
President's Budget in estimating Factor 1 has an impact on stakeholders 
who wish to replicate the Factor 1 calculation, such as modelling the 
relevant Medicare Part A portion of the budget, but we believe 
commenters are able to meaningfully comment on our proposed estimate of 
Factor 1 without replicating the budget.
    For a general overview of the principal steps involved in 
projecting future inpatient costs and utilization, we refer readers to 
the ``2018 Annual Report of the Boards of Trustees of the Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds'' available on the CMS website at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html?redirect=/reportstrustfunds/ under 
``Downloads.'' We note that the annual reports of the Medicare Boards 
of Trustees to Congress represent the Federal Government's official 
evaluation of the financial status of the Medicare Program. The 
actuarial projections contained in these reports are based on numerous 
assumptions regarding future trends in program enrollment, utilization 
and costs of health care services covered by Medicare, as well as other 
factors affecting program expenditures. In addition, although the 
methods used to estimate future costs based on these assumptions are 
complex, they are subject to periodic review by independent experts to 
ensure their validity and reasonableness.
    We also refer the public to the Actuarial Report on the Financial 
Outlook for Medicaid for a discussion of general issues regarding 
Medicaid projections.
    Second, as described in more detail later in this section, in the 
FY 2019 IPPS/LTCH PPS proposed rule, we included information regarding 
the data sources, methods, and assumptions employed by the actuaries in 
determining the OACT's estimate of Factor 1. In summary, we indicated 
the historical HCRIS data update OACT used to identify Medicare DSH

[[Page 41406]]

payments, we explained that the most recent Medicare DSH payment 
adjustments provided in the IPPS Impact File were used, and we provided 
the components of all the update factors that were applied to the 
historical data to estimate the Medicare DSH payments for the upcoming 
fiscal year, along with the associated rationale and assumptions. This 
discussion also included a description of the ``Other'' and 
``Discharges'' assumptions, and also provided additional information 
regarding how we address the Medicaid and CHIP expansion. Thus, for 
example, in response to the commenters' assertion that Medicaid 
expansion is not adequately accounted for in the ``Other'' column, we 
note that the discussion in the proposed rule made clear that, based on 
data from the Midsession Review of the President's Budget, the OACT 
assumed per capita spending for Medicaid beneficiaries who enrolled due 
to the expansion to be 50 percent of the average per capita 
expenditures for a preexpansion Medicaid beneficiary due to the better 
health of these beneficiaries. Taken as a whole, this description of 
our proposed methodology for estimating Factor 1 and the data sources 
used in making this estimate was entirely consistent with the 
requirements of the Administrative Procedure Act, and gave stakeholders 
adequate notice of and a meaningful opportunity to comment on the 
proposed estimate of Factor 1.
    Regarding the commenters' assertion that, similar to the adjustment 
for Medicaid underreporting on survey data in the estimation of Factor 
2, we should also account for this underreporting in our estimate of 
Factor 1, we note that the Factor 1 calculation uses Medicaid 
enrollment data and estimates and does not require the adjustment 
because it does not use survey data.
    Lastly, regarding the commenters' suggestion that CMS consider 
reconciling the estimates of Factors 1, 2, and 3, we continue to 
believe that applying our best estimates prospectively is most 
conducive to administrative efficiency, finality, and predictability in 
payments (78 FR 50628; 79 FR 50010; 80 FR 49518; 81 FR 56949; and 82 FR 
38195). We believe that, in affording the Secretary the discretion to 
estimate the three factors used to determine uncompensated care 
payments and by including a prohibition against administrative and 
judicial review of those estimates in section 1886(r)(3) of the Act, 
Congress recognized the importance of finality and predictability under 
a prospective payment system. As a result, we do not agree with the 
commenters' suggestion that we should establish a process for 
reconciling our estimates of the three factors, which would be contrary 
to the notion of prospectivity. We also address comments specifically 
requesting that we establish procedures for reconciling Factor 3 later 
in this section, as part of the discussion of the comments received on 
the proposed methodology for Facto 3.
    After consideration of the public comments we received, we are 
finalizing, as proposed, the methodology for calculating Factor 1 for 
FY 2019. We discuss the resulting Factor 1 amount for FY 2019 below.
    For this final rule, the OACT used the most recently submitted 
Medicare cost report data from the March 2018 update of HCIRS 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 June 2018 OACT estimate for Medicare DSH payments for FY 
2019, without regard to the application of section 1886(r)(1) of the 
Act, was approximately $16.339 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-specific payment rate. Therefore, based on 
the June 2018 estimate, the estimate of empirically justified Medicare 
DSH payments for FY 2019, with the application of section 1886(r)(1) of 
the Act, was approximately $4.085 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 OACT. Therefore, in this final rule, Factor 
1 for FY 2019 is $12,254,291,878.57, which is equal to 75 percent of 
the total amount of estimated Medicare DSH payments for FY 2019 
($16,339,055,838.09 minus $4,084,763,959.52).
    The Office of the Actuary's final estimates for FY 2019 began with 
a baseline of $13.230 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          1.0443        1.071589          14.177
2017....................................................          1.0015          0.9931           1.004          1.0662        1.064673          15.094
2018....................................................        1.018088          0.9892            1.02          1.0277        1.055689          15.935
2019....................................................          1.0185          1.0014           1.005         1.00035        1.025384          16.339
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounded.

    In this table, the discharges column shows the increase in the 
number of Medicare fee-for-service (FFS) inpatient hospital discharges. 
The figures for FY 2016 and FY 2017 are based on Medicare claims data 
that have been adjusted by a completion factor. The discharge figure 
for FY 2018 is based on preliminary data for 2018. The discharge figure 
for FY 2019 is an assumption based on recent trends recovering back to 
the long-term trend and assumptions related to how many beneficiaries 
will be enrolled in Medicare 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 2019 increase is an estimate 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

[[Page 41407]]

include the difference between the total inpatient hospital discharges 
and the IPPS discharges, and various adjustments to the payment rates 
that have been included over the years but are not reflected in the 
other columns (such as the change in rates for the 2-midnight stay 
policy). In addition, the ``Other'' column includes a factor for the 
Medicaid expansion due to the Affordable Care Act. The factor for 
Medicaid expansion was developed using public information and 
statements for each State regarding its intent to implement the 
expansion. Based on this information, it is assumed that 50 percent of 
all 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 20167 Actuarial Report on the Financial Outlook for 
Medicaid, which is available on the CMS website at: 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. Specifically, based on 
data from the Mid-Session Review of the President's Budget, the OACT 
assumed per capita spending for Medicaid beneficiaries who enrolled due 
to the expansion to be 50 percent of the average per capita 
expenditures for a pre-expansion Medicaid beneficiary due to the better 
health of these beneficiaries. This assumption is consistent with 
recent internal estimates of Medicaid per capita spending pre-expansion 
and post-expansion.
    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............................             2.9           -0.75            -0.8             0.5            1.85
----------------------------------------------------------------------------------------------------------------
Note: All numbers are based on the Midsession Review of FY 2019 President's Budget projections.

b. Calculation of 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) 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. In the FY 2019 IPPS/LTCH 
PPS proposed rule (83 FR 20391), we proposed 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

[[Page 41408]]

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 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, the 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

[[Page 41409]]

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, the 
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.\229\ As required by section 
1886(r)(2)(B)(ii) of the Act, the Chief Actuary of CMS has certified 
these estimates.
---------------------------------------------------------------------------

    \229\ Certification of Rates of Uninsured. March 22, 2018. 
Available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2019-CMS-1694-P-OACT.pdf.
---------------------------------------------------------------------------

    As with the CBO estimates on which we based Factor 2 in prior 
fiscal years, the NHEA estimates are for a calendar year. In the 
rulemaking for FY 2014, many commenters noted that the uncompensated 
care payments are made 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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20393), 
we proposed to continue to apply the weighted average approach used in 
past fiscal years in order to estimate the rate of uninsurance for FY 
2019. The 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 the OACT's projections for CY 2018 and CY 2019 was 
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 
x 0.091) + (0.75 x 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, we proposed that Factor 2 for FY 2019 would be 67.51 
percent.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20393), we stated 
that the proposed FY 2019 uncompensated care amount was: 
$12,221,027,954.62 x 0.6751 = $8,250,415,972.16.
    We invited public comments on our proposed methodology for 
calculation of Factor 2 for FY 2019.
    Comment: A number of commenters expressed appreciation for CMS' 
recognition that the aggregate amount available to be distributed to 
hospitals for uncompensated care costs will increase by approximately 
$1.5 billion based on the most recently available projections of 
Medicare DSH payments for FY 2019 by CMS' Office of the Actuary. Other 
commenters stated the increase in the estimated amount available to 
make uncompensated care payments in FY 2019 was not enough to address 
the underpayments to hospitals that occurred as a result of using CBO 
data since FY 2014 to estimate the change in the rate of uninsurance. 
Several commenters supported CMS' continued use of the uninsured 
estimates produced by the OACT as part of the development of the 
National Health Expenditure Accounts in estimating the percent change 
in the rate of uninsured for FY 2019. Some of these commenters stated 
that, in their view, the estimates produced by the OACT are more 
complete and more accurately capture the change in the rate at which 
uninsured individuals have obtained health insurance. A few commenters 
noted that the data source added greater transparency to the process as 
the NHEA estimates are publicly available, while other commenters urged 
CMS to ensure that all data are provided with complete transparency 
with respect to the type of data and data collection methods that are 
used.
    Response: We appreciate the support for our proposal to continue 
using the uninsured estimates produced by OACT in the computation of 
Factor 2 for FY 2019. Section 1886(r)(2)(B)(ii) of the Act permits us 
to use a data source other than CBO estimates to determine the percent 
change in the rate of uninsurance beginning in FY 2018. We believe that 
the NHEA data, on balance, best meet all of our considerations to 
ensure that the data source meets the statutory requirement that the 
estimate be based on data from the Census Bureau or other sources the 
Secretary determines appropriate and will provide reasonable estimates 
for the rate of uninsurance that are available in conjunction with the 
IPPS rulemaking cycle.
    In response to commenters who stated the increase in the estimated 
amount available to make uncompensated care payments in FY 2019 was not 
enough to address the underpayments to hospitals that occurred as a 
result of using CBO data in the past to estimate the change in the rate 
of uninsurance, we do not agree that addressing any difference between 
the prospectively determined estimates using the CBO data and later 
retrospective estimates would be appropriate for reasons we have 
articulated in past rulemaking and earlier in this section. We continue 
to believe that applying our best estimates prospectively is most 
conducive to administrative efficiency, finality, and predictability in 
payments (78 FR 50628; 79 FR 50010; 80 FR 49518; 81 FR 56949; and 82 FR 
38195). We believe that, in affording the Secretary the discretion to 
estimate the three factors used to determine uncompensated care 
payments and by including a prohibition against administrative and 
judicial review of those estimates in section 1886(r)(3) of the Act, 
Congress recognized the importance of finality and predictability under 
a prospective payment system. As a result, we do not agree with the 
commenters' suggestion that we should establish a process for 
reconciling our estimate of Factor 2 for any given year using later 
estimates.
    After consideration of the public comments we received, we are 
finalizing the calculation of Factor 2 for FY 2019 as proposed. The 
estimates of the percent of uninsured individuals have been certified 
by the Chief Actuary of CMS, as discussed in the proposed rule. The 
calculation of the final Factor 2 for FY 2019 using a weighted average 
of OACT's projections for CY 2018 and CY 2019 is as follows:

[[Page 41410]]

     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 final Factor 2 for FY 2019 is 67.51 percent.
    The final FY 2019 uncompensated care amount is: $12,254,291,878.57 
x 0.6751 = $8,272,872,447.22.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Final FY 2019 Uncompensated Care Amount............   $8,272,872,447.22
------------------------------------------------------------------------

c. Calculation of 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 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

[[Page 41411]]

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-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 analyzed as part of our consideration of this issue in 
prior rulemaking, we determined that we 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

[[Page 41412]]

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 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-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-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 was 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

[[Page 41413]]

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-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-income insured days would be 
phased out by FY 2020.
(3) Methodology for Calculating Factor 3 for FY 2019
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20396), 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 
had 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 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, non-reimbursed 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 coinsurance amounts for 
insured patients approved for charity care and non-reimbursed Medicare 
bad debt. The CCR will be applied to the charges for uninsured patients 
approved for charity care or an uninsured discount, non-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 had 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

[[Page 41414]]

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 the 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 the 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 the 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 the 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.
    As we stated in the FY 2019 IPPS/LTCH PPS proposed rule, 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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20400), we 
proposed 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 stated that 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 proposed 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 drew 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, for purposes of the FY 2019 proposed rule, was 
the HCRIS data updated through February 15, 2018. In the FY 2019 IPPS/
LTCH PPS proposed rule, we stated that we expected 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 indicated that we might 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 proposed to use Medicaid days from FY 2013 
cost reports and FY 2016 SSI ratios. We noted 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 proposed to continue the policies that 
were finalized in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50020) to 
address several specific issues concerning the process and data to be 
employed in determining Factor 3 in the case of hospital mergers. In 
addition, we proposed 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). In 
that final rule, we adopted a policy, for purposes of calculating 
Factor 3, 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 
did not propose 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 proposed to 
continue to 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

[[Page 41415]]

applicable fiscal year. With respect to the incorporation of Worksheet 
S-10, we indicated that 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 again 
proposed 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 non-reimbursable 
Medicare bad debt (Line 29).
    We noted that we were 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. As we stated in the FY 2019 IPPS/LTCH PPS proposed rule, 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 stated that 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 stated that we 
believed it was 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 acknowledged 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 proposed 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 proposed 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, in the FY 2019 IPPS/LTCH 
PPS proposed rule (83 FR 20398), we proposed the following steps for FY 
2019:
    Step 1: Remove Maryland hospitals. In addition, we would remove All 
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 ceiling so that these 
aberrant CCRs do not skew the calculation of the statewide average CCR. 
(For this final rule, 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''). For this final rule, 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 proposed that we would calculate a hospital's 
uncompensated care costs for the applicable fiscal year as being equal

[[Page 41416]]

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 stated in the proposed rule that 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 stated that 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 noted 
that we had 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, but indicated that we did 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 stated that we believed 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, in the FY 2019 
IPPS/LTCH PPS proposed rule (83 FR 20399), we proposed 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 proposed that 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 proposed 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 proposed that we would then 
use this adjusted amount when determining Factor 3 for FY 2019. We 
tentatively included the data for hospitals that had a high ratio of 
uncompensated care costs to total operating expenses when calculating 
Factor 3 for the proposed rule. However, we noted in the proposed rule 
that our calculation of Factor 3 for this final rule would be 
contingent on the results of the ongoing MAC reviews of these 
hospitals. In the event those reviews necessitate supplemental data 
edits, we stated that we would incorporate such edits in the final rule 
for the purpose of correcting aberrant data.
    We also stated in the proposed rule that, for FY 2019, we 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 
indicated that 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 noted that we had 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 proposed to follow the 
same approach that we proposed 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 proposed that 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 indicated that we had tentatively 
included the data for hospitals where there was an extremely large 
increase or decrease in uncompensated care payments when calculating 
Factor 3 for the proposed rule. However, we noted in the proposed rule 
that our calculation of Factor 3 for the final rule was contingent on 
the results of the ongoing MAC reviews of these hospitals. In the event 
those reviews necessitate supplemental data edits, we stated that we 
would incorporate such edits in the final rule for the purpose of 
correcting aberrant data.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20400), for 
Indian Health Service and Tribal hospitals, subsection (d) Puerto Rico 
hospitals, and all-inclusive rate providers, we proposed 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

[[Page 41417]]

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 stated in the proposed rule that 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-inclusive rate providers 
for treating the uninsured continues to be the low-income insured days 
data for FY 2013. Accordingly, for these hospitals, we proposed to 
determine Factor 3 only on the basis of low-income insured days for FY 
2013. We stated that 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. In 
the proposed rule, we did not make any proposals with respect to the 
calculation of Factor 3 for FY 2020 and indicated that we 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 proposed to continue 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 proposed to continue 
to use a proxy for SSI days for Puerto Rico hospitals consisting of 14 
percent of the hospital's Medicaid days, as finalized in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 56953 through 56956).
    Therefore, for FY 2019, we proposed 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 proposed 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.
    In the proposed rule, we noted 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 did not make any proposals with respect to the 
development of Factor 3 for FY 2020 and subsequent fiscal years, in the 
proposed rule, we noted that 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 will be incorporated into the calculation of Factor 
3 in FY 2019 under the policies included in this final rule, 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. We also 
indicated that it is 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 example, given the efforts hospitals have already 
undertaken with respect to reporting their Worksheet S-10 data and the 
subsequent reviews by the MACs that had already been conducted prior to 
the development of this final rule, along with additional review work 
that may take place following the issuance of this final rule, we may 
consider using 1 year of Worksheet S-10 data as the basis for 
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 proposed 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 stated that 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 noted 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, we stated that, in conjunction with both the FY 2019 IPPS/LTCH 
PPS proposed rule and this final rule, we would publish on the CMS 
website a table listing Factor 3 for all 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 noted that, at the 
time of the

[[Page 41418]]

development of the 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.
    In conjunction with the proposed rule, we also published a 
supplemental data file containing a list of the mergers that we were 
aware of and the computed uncompensated care payment for each merged 
hospital. Hospitals had 60 days from the date of public display of the 
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 could be submitted to the CMS inbox at 
[email protected]. We stated that we would 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 this FY 2019 IPPS/LTCH PPS final rule. After the 
publication of this 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 this 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.
    Comment: A number of commenters supported CMS' proposal to continue 
using data from Worksheet S-10 in the calculation of Factor 3 for FY 
2019. These commenters stated that using Worksheet S-10 data, in 
conjunction with select auditing of cost reports, will lead to better 
estimates of uncompensated care costs than the continued use of the 
current proxy of Medicaid and SSI days. Other commenters noted that the 
metrics from Worksheet S-10 appear to provide a better assessment of a 
hospital's uncompensated care costs than the current proxy data, which 
assess only low-income insured days and distribute the bulk of Medicare 
DSH payments based on the amount of inpatient care a hospital delivers 
to Medicaid patients and recipients of SSI payments. Thus, the 
commenters stated, using data from Worksheet S-10 will address the 
inequity across Medicaid expansion/nonexpansion States in distributing 
disproportionate share hospital dollars. One commenter stated that the 
use of Worksheet S-10 data in calculating the distribution of 
uncompensated care payments will continue CMS on a path to improve 
transparency and accuracy with regard to hospitals' share of 
uncompensated care costs. Other commenters noted that any negative 
effects from the transition to using the Worksheet S-10 will be eased 
due to the $1.5 billion increase in the amount available to make 
uncompensated care payments relative to FY 2018. In addition, several 
commenters pointed to the evaluation performed by the consulting firm 
Dobson DaVanzo, which found a high degree of correlation between data 
reported on Worksheet S-10 and audited uncompensated care data, as 
evidence that the information currently reported on Worksheet S-10 is 
satisfactory for purposes of allocating uncompensated care payments.
    Other commenters opposed the use of Worksheet S-10 to compute 
Factor 3 and allocate uncompensated care costs in FY 2019. Many of 
these commenters maintained their position from previous years that, 
while Worksheet S-10 has the potential to serve as a more exact measure 
of hospital uncompensated care costs, the data reported are not 
presently a reliable and accurate reflection of these uncompensated 
care costs. The commenters also noted that the administrative burden 
for hospitals to complete Worksheet S-10 is high. These commenters 
asserted that CMS should suspend its use, or not advance its 
implementation, until the agency can demonstrate that the data being 
reported are accurate and consistent, or at least until FY 2021. Some 
commenters pointed to the evaluation performed by Dobson DaVanzo and 
asserted that, while the analysis demonstrated correlation between 
Worksheet S-10 and IRS Form 990, it did not address potentially 
significant differences in the reporting requirements for the forms.
    Response: We appreciate the support for our proposal to continue 
incorporating Worksheet S-10 data into the computation of Factor 3 for 
FY 2019. We also appreciate the input from those commenters who are 
opposed to the use of data from Worksheet S-10 in the calculation of 
Factor 3. We understand the commenters' concerns about the limitations 
of the IRS 990 correlation analysis and the shortcomings of using the 
findings from this study to support assertions about the validity of 
the Worksheet S-10 data. Notwithstanding these limitations, a number of 
commenters supported the findings of the study and our proposal to use 
of Worksheet S-10 in FY 2019. Furthermore, as explained in the FY 2019 
IPPS/LTCH PPS proposed rule, we did not make the decision to continue 
Worksheet S-10 implementation in FY 2019 based on the correlation 
analysis alone. Historical analyses performed by MedPAC also show a 
high level of correlation between audited uncompensated care data and 
uncompensated care costs reported on Worksheet S-10 and a lower 
correlation between the audited uncompensated care data and Medicaid 
and SSI days. Furthermore, hospitals have expended considerable effort 
to resubmit their FY 2014 and FY 2015 data and the MACs have dedicated 
significant resources to conducting the subsequent reviews in the time 
available for the FY 2019 rulemaking, and we believe that, overall, 
those efforts have improved the data.
    In the FY 2019 IPPS/LTCH PPS proposed rule, we stated that we could 
no longer conclude that alternative data to the Worksheet S-10 are 
available for FY 2014 and FY 2015 that are a better proxy for the costs 
of subsection (d) hospitals for treating individuals who are uninsured. 
Our reviews of selected FY 2014 and FY 2015 data and the potential data 
aberrancies pointed out by commenters have not altered that conclusion. 
We continue to acknowledge that the Worksheet S-10 data are not 
perfect, but there are no perfect data sources available to us. We also 
acknowledge that the approximately $1.5 billion increase in the overall 
amount available to make uncompensated care payments will help to 
mitigate the impact of any redistribution of uncompensated care 
payments due to the continued incorporation of Worksheet S-10 data on 
hospitals that serve a large number of Medicaid and SSI patients, yet 
report proportionately lower uncompensated care amounts.
    Comment: Most commenters, whether supportive of or opposed to the 
use of data from Worksheet S-10 to compute Factor 3, believed that it 
was premature to use Worksheet S-10 data in the calculation of Factor 3 
for FY 2019, and expressed concerns about the lack of accurate and 
consistent data being reported on Worksheet S-10, primarily due to what 
they perceive as a lack of clear and concise line-level instructions 
for reporting on the Worksheet S-10. Some commenters acknowledged and 
appreciated the changes CMS had implemented through the issuance of 
revised instructions (Transmittal 11) in September 2017, and the 
opportunity for hospitals to revise their uncompensated care data 
previously reported on Worksheet S-10 for FY 2014 and FY 2015. These 
commenters also appreciated CMS' instructions to the MACs to contact 
hospitals with aberrant data. These commenters noted

[[Page 41419]]

that, given all of the steps that CMS has taken to improve the data 
from Worksheet S-10, it would be reasonable to see large increases or 
decreases in hospital uncompensated care costs. Other commenters 
expressed continued concerns with the clarity of the instructions and 
indicated that even with the revisions implemented under Transmittal 
11, a great deal of ambiguity remains in the Worksheet S-10 
instructions, leading to inconsistent reporting among hospitals and 
questionable accuracy of the updated data.
    Many commenters recognized the efforts undertaken by CMS in 
contacting select hospitals to verify reported data, and some 
commenters noted data improvements since the release of Transmittal 11 
and CMS' subsequent contact with individual hospitals. However, a 
number of commenters provided specific examples of potentially aberrant 
data that they asserted are a result of the ambiguity of the Worksheet 
S-10 instructions. These examples of potentially aberrant data related 
in large part to the reporting of charity care charges and uninsured 
discounts on Worksheet S-10, Line 20, Columns 1 and 2. For example, 
commenters noted that some hospitals reported charity care coinsurance 
and deductibles of more than 25 percent of their total charity care 
charges; some hospitals reported charity care charges that were, on 
average, 80 percent of total hospital charges; and some hospitals 
reported negative charity care charges. Several commenters also noted 
potentially aberrant data related to bad debt, including, for example, 
cases in which a hospital reported Medicare allowable bad debt 
elsewhere on the cost report, but those amounts were not reflected in 
its Worksheet S-10; hospitals that reported having more Medicare bad 
debt than total hospital bad debts; and hospitals with significant 
differences in bad debt charges over time. With respect to 
uncompensated care costs, commenters noted that, for example, some 
hospitals reported uncompensated care costs that were 30 to 70 percent 
of total hospital costs; and some hospitals reported uncompensated care 
costs that ranged from 0.14 percent to 250 percent of total hospital 
revenue. Commenters remarked that these results are implausible and 
indicate that CMS must continue working to improve the reliability of 
Worksheet S-10. Several commenters observed that the current Worksheet 
S-10 methodology may provide an incentive to hospitals to overstate 
charity care, compromising the fidelity of the information collected. 
Another commenter was concerned that the revisions to the Worksheet S-
10 instructions through Transmittal 11 and subsequent opportunity for 
hospitals to resubmit their cost reports for prior years created an 
incentive for hospitals to inflate charges for charity care. Finally, 
some commenters requested that CMS continue to offer hospitals the 
opportunity to amend, or require them to amend, cost reports for FY 
2014, FY 2015, and later years.
    Response: We believe that continued use of Worksheet S-10 will 
improve the accuracy and consistency of the reported data. In addition, 
we intend to continue with and further refine our efforts to review the 
Worksheet S-10 data submitted by hospitals based on what we have 
learned from the review process we conducted for the FY 2019 
rulemaking. We also intend to consider the various issues raised by the 
commenters specifically related to the reporting of charity care and 
bad debt costs on Worksheet S-10 as we continue to review the Worksheet 
S-10 data and instructions. In addition, we will continue to work with 
stakeholders to address their concerns regarding the accuracy and 
consistency of reporting of uncompensated care costs through provider 
education and further refinement of the instructions to the Worksheet 
S-10 as appropriate.
    As noted in the FY 2019 IPPS/LTCH PPS proposed rule, (83 FR 20396 
and 20397), on September 29, 2017, we issued Transmittal 11, which 
clarified the definitions and instructions for reporting 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 improve the integrity of 
the data reported on Worksheet S-10. 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 stated 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. Under the deadlines established in Change Request 
10378, in order for revisions to be guaranteed consideration for the 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 the 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 the FY 2019 IPPS/LTCH PPS proposed 
rule, we were able to include data updated in HCRIS through February 
15, 2018, and for this FY 2019 IPPS/LTCH PPS final rule, we have been 
able to include data updated in HCRIS through June 30, 2018. 
Specifically, in light of the impact of the hurricanes in 2017 (Harvey, 
Irma, Maria, and Nate), the extension of the deadline for resubmitting 
Worksheets S-10 for FY 2014 and FY 2015 through January 2, 2018, and 
our targeted provider outreach, we determined that it would be 
appropriate to use data updated through June 30, 2018, rather than the 
March 2018 HCRIS update, which we would typically use for the annual 
final rule. We believe that providing this additional time to allow 
data from resubmitted cost reports that may have been delayed due to 
the unique circumstances during 2017 and 2018 to be included in our 
calculations for purposes of this FY 2019 final rule, enabled us to use 
more accurate uncompensated care cost data in calculating the final 
Factor 3 values.
    We believe that the new Worksheet S-10 instructions implemented in 
Transmittal 11 were sufficiently clear to allow hospitals to accurately 
complete Worksheet S-10, and that hospitals were provided ample time 
following the issuance of Transmittal 11 to revise and amend Worksheet 
S-10 for FY 2014 and FY 2015. Because we recognize that there were 
delays in processing Worksheet S-10 to reflect the revisions in 
Transmittal 11 and consistent with our historical practice of using the 
best data available, we are using the June 30,

[[Page 41420]]

2018 HCRIS update to calculate Factor 3 for this FY 2019 IPPS/LTCH PPS 
final rule. We continue to believe that Worksheet S-10 data are the 
best data available to use in calculating uncompensated care costs for 
purposes of determining Factor 3 of the uncompensated care payment 
methodology. As stated in the FY 2018 IPPS/LTCH PPS final rule, (82 FR 
38203), the agency 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. Similarly, we believe that the Worksheet S-10 data for FY 
2014 are the best available data on the costs of subsection (d) 
hospitals for treating the uninsured during that fiscal year.
    In response to the request by some commenters that CMS continue to 
offer hospitals the opportunity to amend, or require them to amend, 
cost reports for FY 2014, FY 2015 and later years, we are using data 
from a June 30, 2018 HCRIS update to determine Factor 3 for this FY 
2019 IPPS/LTCH PPS final rule. We believe this gave hospitals ample 
time to review the revised instructions in Transmittal 11, and to 
resubmit Worksheet S-10 for these years. Furthermore, as discussed 
earlier with respect to our estimates of Factors 1 and 2, we continue 
to believe that applying our best estimates to determine uncompensated 
care payment amounts prospectively would be most conducive to 
administrative efficiency, finality, and predictability in payments. We 
believe that, in affording the Secretary the discretion to estimate the 
amount of the three factors used to determine uncompensated care 
payments and by including a prohibition against administrative and 
judicial review of those estimates in section 1886(r)(3) of the Act, 
Congress recognized the importance of finality and predictability under 
a prospective payment system. As a result, we do not agree that we 
should continue to offer hospitals the opportunity to amend, or require 
them to amend their FY 2014 and FY 2015 cost reports for purposes of 
determining uncompensated care payments for FY 2019, as this would be 
contrary to the notion of prospectivity. To the extent these commenters 
were requesting a further opportunity to revise their Worksheet S-10 
data for use in future rulemaking for FY 2020 or later years, we are 
not addressing the issue of future resubmissions in this final rule. 
Therefore, the normal timelines and procedures apply for a hospital to 
request to amend a cost report.
    Comment: A number of stakeholders commented on Transmittal 10 
(issued on November 17, 2016) in which we clarified that hospitals may 
include discounts given to the uninsured who meet the hospital's 
charity care criteria in effect for that cost reporting period and 
Transmittal 11 (issued on September 29, 2017) in which we clarified 
definitions and instructions for uncompensated care, non-Medicare bad 
debt, non-reimbursed Medicare bad debt, and charity care; modified the 
calculations relative to uncompensated care costs; and added edits to 
ensure the integrity of Worksheet S-10 data. In general, the commenters 
appreciated the release of these transmittals, particularly the 
revisions issued in Transmittal 11. Several commenters believed that 
the release of Transmittal 11 was a step forward to improve the 
Worksheet S-10 instructions, reporting consistency, and data accuracy 
and quality, in addition to offering an opportunity for hospitals to 
revise their FY 2014 and FY 2015 Worksheet S-10 reports and instructing 
the MACs flag potentially aberrant data.
    However, numerous commenters also expressed concerns with the 
release of the transmittals, noting that between Transmittal 10 and 11, 
there were significant changes in the instructions and clarifications 
that resulted in significant modifications to hospitals' reporting. One 
commenter also pointed out that CMS' requests for data resubmissions in 
both Transmittal 10 and Transmittal 11 were only 1 year apart, adding 
to hospitals' administrative burden. One commenter stated that, by the 
time Transmittal 11 was issued, hospitals had already filed their 
initial FY 2014 and FY 2015 cost reports, with some hospitals having 
already updated Worksheet S-10 data through amended cost reports. 
Several commenters believed that Transmittal 11 added significant 
strain on and caused confusion for hospitals.
    Aside from these concerns about the timing of and differences 
between Transmittals 10 and 11, numerous commenters pointed out 
specific reasons as to why the guidelines were confusing and difficult 
to be carried out, especially with regard to the changes made in 
Transmittal 11. For example, one commenter pointed out that providers 
that have already complied with CMS' updated instructions would not 
have to change submitted data. However, it was not clear from 
Transmittal 11 how hospitals were supposed to proceed in such a 
situation or if they simply had to calculate Worksheet S-10 data again 
and then resubmit.
    Among the chief concerns raised by commenters regarding the release 
of Transmittal 11 was that hospitals did not have enough time or 
sufficient resources to revise their Worksheet S-10 data. According to 
commenters, the timeframe afforded by CMS was not long enough, given 
the administrative burden of complying with all of the changes in 
Transmittal 11. In addition, a few commenters pointed out that the 
Electronic Health Record audit by the Office of the Inspector General 
was earlier than the release of Transmittal 11, contributing to an even 
shorter timeline for hospitals to respond to changes in cost reporting 
for Worksheet S-10.
    Many commenters also stated that among the factors contributing to 
restrict hospitals' ability to make timely revisions to their Worksheet 
S-10 data in response to Transmittal 11 were the limited personnel and 
financial resources available to make the changes in cost reporting 
outlined in Transmittal 11. The commenters also indicated that 
hospitals with inadequate internal financial management tracking 
systems were at an extreme disadvantage in meeting CMS' timeline.
    On a related issue, many commenters stated that the software 
updates, which were required to accommodate the changes reflected in 
Transmittal 11, reduced the timeframe hospitals had to amend their cost 
reports by the deadline for inclusion in the proposed rule. At times, 
according to one commenter, the changes mandated by Transmittal 11 
could not be executed by hospitals' information systems until a 
software update was possible, which likely did not coincide with the 
submission timeframe for the revisions.
    Some commenters pointed out that the MACs' review of data following 
the issuance of Transmittal 11 largely focused on FY 2015 data, and 
perhaps paid much less attention to equally troubling FY 2014 data. 
Other commenters stated that only limited education efforts accompanied 
the issuance of Transmittal 11.
    Response: We appreciate all of the comments raising concerns 
regarding Transmittals 10 and 11. However, we believe that hospitals 
were provided sufficient time to address the changes outlined in 
Transmittal 11 and to submit an amended Worksheet S-10 in time for it 
to be considered for the FY 2019 rulemaking, especially given our 
extension of the deadline to file resubmissions to January 2, 2018, as 
evidenced by the many hospitals that were able to resubmit their 
information by this deadline. Specifically, we issued Transmittal 11 on 
September 29, 2017,

[[Page 41421]]

and indicated that all revised data received by December 1, 2017, would 
be considered for purposes of the FY 2019 IPPS/LTCH PPS proposed rule. 
In light of the 2017 hurricanes (Harvey, Irma, Maria, Nate), we 
provided a further opportunity for hospitals to revise their Worksheet 
S-10 data for both FY 2014 and FY 2015 through 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. This change 
request stated that hospitals needed to submit revised data by January 
2, 2018. 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 had been 
submitted previously) and to upload them to HCRIS in a timely manner. 
Based on the significant number of resubmissions, we believe that 
hospitals were given ample time to revise and amend their Worksheets S-
10 for FY 2014 and FY 2015 to reflect the instructions in Transmittal 
11.
    Regarding the confusion Transmittal 11 may have caused among 
stakeholders, we note Transmittal 11 was designed to be responsive to 
previous stakeholder concerns regarding Worksheet S-10, such as 
reporting of uninsured patient discounts and the modification of 
certain calculations to account for nonreimbursable Medicare bad debt. 
We also note that some commenters indicated that Worksheet S-10 
instructions, consistency, and data accuracy have improved as a result 
Transmittal 11. However, we recognize that there are continuing 
opportunities to further improve guidance and education, and we will 
continue to work with our stakeholders to address their concerns 
through provider education and further refinement of the instructions.
    Comment: Several commenters provided specific merger information 
and requested that CMS include these mergers in determining Factor 3 
for FY 2019 payments. Several commenters noted other inaccuracies in 
the FY 2019 Proposed Rule Supplemental Data File, such as incorrect 
merger information errors in claims average calculations.
    Response: We thank the commenters for their input. We have updated 
our list of mergers based on information received by the MACs as of 
June 2018. In addition, we have reviewed the commenters' submissions 
regarding mergers not previously identified in the proposed rule and 
have updated our list accordingly. We note that, under the policy 
finalized in FY 2015 IPPS/LTCH PPS final rule, a merger is defined as 
an acquisition where the Medicare provider agreement of one hospital is 
subsumed into the provider agreement of the surviving provider (79 FR 
50020). We have also corrected the other inaccuracies identified by 
commenters, and will continue to pay diligent attention to data 
inaccuracies and work internally and with our contractors to resolve 
these issues in a timely manner.
    Comment: Numerous commenters expressed concerns that HCRIS data do 
not reflect hospital submissions in response to Transmittal 11. For 
example, one commenter pointed out that the March HCRIS data update 
still reflects data reported under the Transmittal 10 instructions 
rather than the Transmittal 11 instructions for a large number of 
hospitals. Commenters also expressed that, given problems with some 
amended cost reports not automatically being reprocessed with the 
Transmittal 11 calculation modification, the May 31, 2018 HCRIS file 
will provide the best data in determining Factor 3.
    Several commenters specifically requested that their cost data in 
the proposed FY 2019 DSH Supplemental Data File be updated in a timely 
manner to reflect the latest HCRIS information in order ensure that 
their Factor 3 for FY 2019 accurately reflects their uncompensated care 
costs. A few commenters also expressed concerns that many hospitals 
were still having challenges in resubmitting their corrections to 
Worksheet S-10 data and having them accepted by the MACs. One commenter 
urged CMS to validate the information in HCRIS before pulling data for 
the proposed and final rules. Another commenter suggested that CMS 
implement an alternative means for hospitals to submit cost report data 
to alleviate burden on hospitals and improve accuracy.
    Response: We appreciate the commenters' diligence in checking that 
their own reports were properly reprocessed under Transmittal 11. We 
also understand their concerns regarding the timeliness of updates to 
the HCRIS data. We recognize that hospitals' data in the March HCRIS 
update may not have reflected all corrections made to Worksheet S-10 
data in response to Transmittal 11. Although 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 had been submitted previously) and to upload them to HCRIS in a 
timely manner, we recognize that there were unusual delays in 
processing the amended Worksheets S-10 to reflect the revisions in 
response to Transmission 11. Consistent with our historical practice of 
using the best data available, and due to the unique circumstances that 
affected hospitals' ability to resubmit Worksheet S-10, as discussed in 
the proposed rule, and the delays in processing by the MACs, we used a 
June 30, 2018 HCRIS update to calculate Factor 3 for this FY 2019 IPPS/
LTH PPS final rule.
    We have not previously been able to use such a recent update of 
HCRIS for purposes of the annual rulemaking, and it was operationally 
challenging to take the steps necessary to be able to use a June 30, 
2018 update to calculate Factor 3 for FY 2019. The time required to 
complete the public use file process, which involves interactions with 
the MACs to ensure all reports have been appropriately included, would 
have exceeded the time we had available. In order to have the data with 
a bare minimum of time to use it in performing our calculations for the 
final rule, we needed to use a new expedited ad hoc process outside of 
the established process normally used to develop the public use file. 
We were not sure it even would be feasible to develop such an expedited 
ad hoc process. Ultimately, in order to develop the expedited process 
that was used, we had to bypass some of the safeguards built into the 
ordinary process and forgo our opportunity to further review the data. 
Given the unique circumstances that affected hospitals' ability to 
resubmit their Worksheet S-10 for FY 2014 and/or FY 2015, and the 
delays in processing by the MACs, we concluded that the potential to 
include additional, revised data for the final rule outweighed the risk 
that we might not include a report that would have been properly 
included had we been able to follow the usual process for preparing a 
public use file. Therefore, under ordinary circumstances, we would not 
even have contemplated this approach because the additional review time 
afforded by the use of the March extract under the established public 
use file process is important from an enhanced quality assurance 
standpoint and the benefits of this enhanced quality assurance were 
only outweighed by the extenuating circumstances affecting the timeline 
for both the resubmission of Worksheet S-10 data and the review of 
these data by the MACs in time to allow the data to be considered in 
this final rule.
    Following the publication of this final rule, hospitals will have 
until August 31, 2018, to review and submit comments on the accuracy of 
the table

[[Page 41422]]

and supplemental data file published in conjunction with this final 
rule relative to information they submitted to their MAC by the 
deadlines prescribed in Transmittal 11 and Change Request 10378.
    Comment: Some commenters expressed specific concerns related to 
possible violations of the Administrative Procedure Act by CMS. These 
commenters suggested that any final rule issued by CMS that disregards 
information in the rulemaking record, including copies of revised 
Worksheets S-10, that are submitted as attachments to comments, would 
violate the Administrative Procedure Act because it would not be 
supported by substantial evidence. The commenters urged CMS to 
calculate Factor 3 with the best possible data. One commenter also 
asserted that CMS is not upholding its statutory obligation unless it 
continues to accept updated Worksheets S-10 for the duration of time 
that the rulemaking period is open. The commenter cited the decision in 
Baystate Medical Center v. Leavitt, in which CMS was instructed to use 
the best data available to determine Medicare DSH payments under 
section 1886(d)(5)(F) of the Act. Another commenter also noted that, in 
the FY 2019 IPPS/LTCH PPS proposed rule, CMS proposed to use a May 31, 
2018 HCRIS update for Factor 3 calculations in the final rule. The 
commenter stated that this proposal could lead to a situation where 
hospitals see their final uncompensated care payment amounts only in 
the final rule, and thus the hospitals would not have the ability to 
comment on these amounts, which the commenter suggests is in violation 
of both the Administrative Procedure Act and the Medicare statute.
    One commenter also suggested that CMS allow for administrative or 
judicial review of its Medicare DSH payment calculations, which would 
provide an important check if the agency makes errors in the 
calculations. One commenter also asked CMS to reconsider its decision 
not to reconcile final payments for uncompensated care with actual data 
for cost reporting periods during FY 2019. One commenter included a 
request to reopen its cost reports for FY 2014 and FY 2015 to make 
corrections.
    Response: We appreciate commenters' concerns regarding Factor 3 
calculations and the importance of using the best available data. In 
response to these concerns, and in light of the considerations we have 
previously discussed, we used a June 30, 2018 HCRIS update to perform 
the Factor 3 calculations for this FY 2019 IPPS/LTCH PPS final rule, 
which was the best data available for purposes of this final rule.
    Unless the relevant information was also reflected in the June 30, 
2018 HCRIS update, we have not considered information from any revised 
Worksheets S-10 that were submitted as attachments to comments. We do 
not believe it would be appropriate to allow a hospital to use the 
rulemaking process to circumvent the requirement that cost report data 
need to be submitted to the MAC or the requirement that requests to 
reopen cost reports need to be submitted to the MAC. Otherwise we would 
have multiple potentially conflicting sources of information about a 
hospital's uncompensated care data or, more broadly, any cost report 
data that might be submitted during the rulemaking process. In 
addition, there are validity checks and other safeguards incorporated 
into the cost report submission process that would not be automatically 
applied to cost reports only submitted through rulemaking.
    Furthermore, as noted earlier, under the deadlines established in 
Change Request 10378, we stated that all amended FY 2014 and FY 2015 
cost reports containing a revised Worksheet S-10 (or a completed 
Worksheet S-10 if no data were included on the previously submitted 
cost report) received by January 2, 2018 would be available to be 
considered for purposes of the FY 2019 IPPS/LTCH PPS final rule. This 
date was important to allow sufficient time for reviews by MACs for 
potentially aberrant reports prior to the FY 2019 PPS/LTCH PPS final 
rule.
    Also, as discussed earlier, we continue to believe that using the 
best data available to prospectively estimate Factor 3 is most 
conducive to administrative efficiency, finality, and predictability in 
payments (78 FR 50628; 79 FR 50010; 80 FR 49518; 81 FR 56949; and 82 FR 
38195). Further, we believe that, in affording the Secretary the 
discretion to estimate the amount of the three factors used to 
determine these uncompensated care payments and by including a 
prohibition against administrative and judicial review of those 
estimates in section 1886(r)(3) of the Act, Congress recognized the 
importance of finality and predictability under a prospective payment 
system. In light of this preclusion, we do not have the ability to 
allow for administrative or judicial review of our estimates.
    Regarding the concerns related to the Administrative Procedure Act, 
we note that, under the Administrative Procedure Act, a proposed rule 
is required to include either the terms or substance of the proposed 
rule or a description of the subjects and issues involved. In this 
case, the FY 2019 IPPS/LTCH PPS proposed rule included a detailed 
discussion of our proposed methodology for calculating Factor 3 and the 
data that would be used. We made public the best data available at the 
time of the proposed rule, in order to allow hospitals to understand 
the anticipated impact of the proposed methodology. Moreover, following 
the publication of the proposed rule, we continued our efforts to 
ensure that information hospitals properly submitted to their MAC in 
the prescribed timeframes would be available to be used in this final 
rule in the event we finalized our proposed methodology. We believe the 
fact that we provided data with the proposed rule while concurrently 
continuing to review that data with individual hospitals is entirely 
consistent with the Administrative Procedure Act. There is no 
requirement under either the Administrative Procedure Act or the 
Medicare statute that CMS make the actual data that will be used in a 
final rule available as part of the notice of proposed rulemaking. 
Rather, it is sufficient that we provide stakeholders with notice of 
our proposed methodology and the data sources that will be used, so 
that they may have a meaningful opportunity to submit their views on 
the proposed methodology and the adequacy of the data for the intended 
purpose. This requirement for notice and comment does not, however, 
extend to a requirement that we make all data that will be used to 
compute payments available to the public, so that they may have an 
opportunity to comment on accuracy of the data reported for individual 
hospitals. Similarly, there is no requirement that we provide an 
opportunity for comment on the actual payment amounts determined for 
each hospital.
    Comment: Many commenters recommended that CMS delay the use of data 
from Worksheet S-10 for at least 1 year, and up to 3 years until FY 
2021, as CMS had originally stated in its FY 2017 IPPS/LTCH PPS final 
rule, or until CMS has put processes in place to ensure accurate and 
consistent submissions by all hospitals as discussed in the FY 2018 
IPPS/LTCH PPS final rule. Many commenters believed that this delay 
would allow hospitals the time to absorb the changes they have to make 
in order to better report their uncompensated care costs on the 
Worksheet S-10, as well as to prepare for potential losses due to 
policy changes. The commenters also believed that this delay will allow 
CMS the time to analyze how hospitals have

[[Page 41423]]

responded to the changes to the Worksheet S-10 that have already been 
implemented, identify problems that still remain, and develop an action 
plan moving forward. Specifically, a significant number of commenters 
requested that CMS further educate hospitals on how to accurately and 
consistently complete the Worksheet S-10 ``before advancing the 
transition to a greater use of Worksheet S-10 data.'' Although many 
commenters discussed how the CMS' current educational efforts--release 
of Transmittal 11, a Medicare Learning Network Matters article, along 
with Frequently Asked Questions document--were welcome and served as 
much needed guidance for the field, they provided recommendations for 
CMS to continue to partner with stakeholders in addressing these and 
other outstanding issues. Several commenters expressed their 
willingness and readiness to continue work with the agency in this 
particular area.
    Response: We acknowledge the concerns raised by commenters 
regarding our proposal to use data from Worksheet S-10 in the 
calculation of Factor 3 for FY 2019. However, as we stated in the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20394), when weighing the new 
information that has become available to us since the FY 2017 
rulemaking in conjunction with the information regarding Worksheet S-10 
data against the low-income days proxy that we have analyzed as part of 
our consideration of this issue in prior rulemaking, we can no longer 
conclude that alternative data to the Worksheet S-10 are available that 
are a better proxy for the costs of subsection (d) hospitals for 
treating individuals who are uninsured. We also note that, as part of 
our ongoing quality control and data improvement measures to continue 
to improve the Worksheet S-10 data over time, we have revised the cost 
report instructions (Transmittal 11) and are currently developing an 
audit process. Continuing our education efforts of past years, we will 
continue to work with stakeholders to address their concerns regarding 
the Worksheet S-10 data through further provider education.
    Comment: Many commenters urged CMS to implement a full desk 
auditing process to ensure the accuracy and consistency of the 
Worksheet S-10 data. A large proportion of the commenters requested an 
audit process that would be as rigorous, detailed, and thorough as the 
process used for the hospital wage index, as opposed to the less 
rigorous HITECH audits. In addition to auditing negative, missing, or 
suspicious values, many commenters also requested that CMS audit the 
revised data resubmitted by hospitals as a result of the release of 
Transmittal 11. One commenter believed that the Worksheet S-10 data 
needs real auditing, thorough auditing, professional auditing, and not 
the mere desk auditing that CMS previously indicated will be introduced 
in 2020. Another commenter recommended an alternative audit approach of 
``probe and educate'' as it has been used to review data submitted for 
Medicaid DSH, where hospitals are allowed a grace period before the 
results of audits lead to financial consequences. Regardless of the 
approach, many commenters stated that they cannot overemphasize the 
importance of auditing the Worksheet S-10 data, given the inaccurate, 
inconsistent, and anomalous reporting of these data, as well as the 
data's crucial role in the distribution of Medicare DSH uncompensated 
care payments, which these commenters viewed as finite and an example 
of a ``classic zero-sum game.'' A few commenters explained that this is 
because for every additional dollar gained by a hospital, which could 
be a result of inaccurate and inconsistent reporting, another hospital 
must lose a dollar. Several commenters also asked CMS to implement 
edits within the cost report to ensure internal consistency between the 
amounts for data elements that must reported on several different 
worksheets and that the reported amounts equal calculated amounts.
    Many commenters disagreed with CMS' stance on not sharing desk 
review and audit protocols with hospitals. These commenters pointed out 
that CMS has indicated that such protocols are confidential, but they 
believe this opacity could lead to inconsistencies in the reporting of 
Worksheet S-10 data and different interpretations of the Provider 
Reimbursement Manual among hospitals and even MACs. The commenters 
encouraged CMS to release the audit criteria for non-Medicare bad debt 
and charity care claimed on Worksheet S-10.
    One commenter believed that CMS and the MACs hide behind the ``bar 
to judicial review'' that exists under the provisions of the statute 
governing the determination of uncompensated care payments, and this 
allows the MACs to commit outright errors that go unchecked if a 
hospital is otherwise unable to convince the MAC of the error. A few 
commenters expressed disappointment with what they characterized as the 
inconsistent and arbitrary decisions made by MACs in their reviews of 
Worksheet S-10 data and expressed the need for CMS to provide guidance 
to MACs to clarify which uninsured discounts CMS expects MACs to accept 
when reported on amended and/or corrected cost reports. Commenters 
pointed out that MACs may lack sufficient guidance, instruction, and 
training with respect to the inclusion of all discounts under the 
hospital's financial assistance policy in Line 20 of Worksheet S-10. 
For example, one commenter mentioned that some hospitals have 
experienced MAC audit disallowances of certain charity care and 
uninsured costs reported on Worksheet S-10 and stated that such 
disallowances can be egregious and cause significant reductions in the 
hospitals' uncompensated care payments. Commenters also suggested that 
these disallowances highlight the need for more upfront guidance and 
clearly defined terms as well as consistency by the MACs in the 
application of that guidance in their reviews.
    Several commenters also were concerned or believed that MACs had 
created their own audit protocols for the Worksheet S-10 for purposes 
of auditing Electronic Health Record incentive payments under the 
HITECH Act without any guidance from CMS, and that any disparate 
interpretations could create disparities in the accuracy of the data 
across MACs. This, according to one commenter, allows MACs' audits to 
be subject to open interpretation. Another commenter expressed concern 
that the MACs are overstepping their authority to determine what the 
requirements for hospitals' financial assistance policies should be, 
when in fact hospitals are free to determine these requirements. The 
commenter also stated that the IRS already reviews and ensures that 
hospitals follow their financial assistance policy, and therefore there 
is no need for CMS and the MACs to duplicate its efforts.
    Response: With respect to the audit process, in the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56964), we stated that we intended to 
provide standardized instructions to the MACs to guide them in 
determining when and how often a hospital's Worksheet S-10 should be 
reviewed. To the extent the commenters are referring to concerns with 
EHR incentive payment audits, CMS strives to take lessons learned from 
these audits to improve the audits of Worksheet S-10 for purposes of 
Medicare DSH uncompensated care payments. We indicated that we would 
not make the MACs' review protocol public, as all CMS desk review and 
audit protocols are confidential and are for CMS and MAC use only. The 
instructions for the

[[Page 41424]]

MACs are still under development and will be provided to the MACs as 
soon as possible and in advance of any audit. We refer readers to the 
FY 2017 IPPS/LTCH PPS final rule for a complete discussion concerning 
the issues that we are considering in developing the instructions that 
will be provided to the MACs. Due to the overwhelming feedback from 
commenters emphasizing the importance of audits in ensuring the 
accuracy and consistency of data reported on the Worksheet S-10, we 
expect audits to begin in the Fall of 2018. We also will continue to 
work with stakeholders to address their concerns regarding the accuracy 
and consistency of data reported on the Worksheet S-10 through provider 
education and further refinement of the instructions for the Worksheet 
S-10 as appropriate.
    Comment: Many commenters supported CMS' proposal to use a 3-year 
average to calculate Factor 3 for FY 2019. Other commenters opposed the 
use of Worksheet S-10 data to determine Factor 3 for FY 2019 and also 
provided suggestions for modified or alternative methodologies to 
calculate Factor 3 in FY 2019 and beyond. Many of the commenters 
recommended a delay of at least 1 year to allow for further refinement 
of the Worksheet S-10 instructions and the development of audit 
protocols to identify and remove aberrant uncompensated care costs. One 
commenter asked that CMS consider a permanent 50-50 percent blend of 
the low-income insured days proxy data and Worksheet S-10 data. Other 
commenters suggested that CMS freeze the methodology used in 
calculating Factor 3 for FY 2018, under which we used 2 years of low-
income insured days data and 1 year of Worksheet S-10 data, for the 
foreseeable future. Some commenters who suggested this freeze also 
recommended using Worksheet S-10 data from FY 2015 for the FY 2019 
rulemaking, rather than FY 2014 data, reasoning that FY 2015 data are 
more likely to be consistently reported than FY 2014 data. One 
commenter suggested that CMS consider a proxy that would use SSI days 
to adjust the uncompensated care costs used in calculating Factor 3 
starting in FY 2020.
    Many commenters approved of the proposal to phase-in the use of 
data from the Worksheet S-10. However, other commenters had other 
varying opinions regarding the length of the phase-in period. Some 
commenters agreed with the proposal to continue the 3-year phase-in. 
However, other commenters requested that CMS consider a longer phase-in 
period or delay the transition to the use of Worksheet S 10 data. These 
commenters recommended a minimum 5-year transition period to gradually 
phase-in the use of Worksheet S-10 data, once the data have been 
audited. According to the commenters, this longer phase-in would 
mitigate the effect on hospitals of the redistribution in uncompensated 
care payments resulting from the inclusion of data from the Worksheet 
S-10.
    Some commenters stated that the proposed methodology of using 1 
year of low-income insured days and 2 years of uncompensated care data 
from Worksheet S-10 to compute uncompensated care payments for FY 2019 
would be highly redistributive, and some commenters asked that CMS 
implement a stop-loss policy to protect hospitals that lose 5 to 10 
percent in DSH payments in any given year as a result of transitioning 
to the use of Worksheet S-10 data. These commenters suggested that this 
stop-loss policy should extend beyond the 3-year phase-in to help 
hospitals with decreasing uncompensated care payments that are 
disproportionately affected by the transition to Worksheet S-10 data 
adjust to their new payment levels. However, another commenter noted 
that a stop-loss policy would not be warranted, given that a 3-year 
phase-in is an appropriate way to temporarily reduce the impact of new 
provisions.
    Response: We appreciate the commenters' support for our proposal to 
use a 3-year average in the calculation of Factor 3 for FY 2019. We 
also appreciate the comments regarding alternative ways to blend prior 
years' data for purposes of incorporating Worksheet S-10 data into the 
calculation of Factor 3 and the suggestions for alternative methods for 
computing proxies for uncompensated care costs. However, our primary 
reason for using a 3-year average is to provide assurance that 
hospitals' uncompensated care payments will remain reasonably stable 
and predictable, and less subject to unpredictable swings and anomalies 
in a hospital's low-income insured days or reported uncompensated care 
costs between cost reporting periods. While the 3-year average 
effectively functions as a transition from the use of the low-income 
insured days proxy to the use of Worksheet S-10 data, that is not its 
purpose. Furthermore, as we stated in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20394), we can no longer conclude that alternative 
data to the Worksheet S-10 are available for FY 2014 and FY 2015 that 
are a better proxy for the costs of subsection (d) hospitals for 
treating individuals who are uninsured. Therefore, we disagree with 
commenters who suggested the use of a longer phase-in or alternative 
blends to determine Factor 3 for FY 2019 in order to provide for an 
extended transition to the use of the Worksheet S-10. We note that the 
proposals in the FY 2019 IPPS/LTCH PPS proposed rule were limited to FY 
2019, and that we did not make any proposals with respect to the data 
that would be used to calculate Factor 3 for subsequent years. As a 
result, it would be premature for CMS to establish policies regarding 
the data that will be used to determine Factor 3 for future years in 
this final rule. We will consider the commenters' suggestions for 
further incorporating Worksheet S-10 into the calculation of Factor 3, 
or computing proxies for uncompensated care costs using a blend of 
Worksheet S-10 data, low-income insured days, or other data sources, as 
we develop our proposed policies for determining uncompensated care 
payments for FY 2020 and subsequent years.
    Regarding the commenters' recommendation that we adopt a stop-loss 
policy, we believe that the use of 3 years of data to determine Factor 
3 for FY 2019 already provides assurance that hospitals' uncompensated 
care payments will remain reasonably stable and predictable, and would 
not be subject to unpredictable swings and anomalies in a hospital's 
low-income insured days or reported uncompensated care costs. As a 
result, because there is already a mechanism that has the effect of 
smoothing the transition from the use of low-income insured days to the 
use of Worksheet S-10 data in place, we do not believe a stop-loss 
policy is necessary.
    Comment: A few commenters stated that the current CCR trimming 
methodology is not adequate to address the data anomalies in the 
Worksheet S-10 data reported by certain hospitals. Other commenters 
supported the current methodology. A few commenters also stated that 
hospitals that have been identified as potential outliers should have 
the opportunity to explain their data and correct errors before the 
trim methodology is applied, which would facilitate data validity. 
Other commenters requested that the trimming methodology not be 
finalized until an audit of the data has been conducted, and that 
hospitals with extremely high CCRs be audited and an appropriate CCR 
determined instead of applying an arbitrary trim to a statewide 
average. Several commenters expressed concern over the proposed trim 
methodology because hospitals that are considered ``all-inclusive rate 
providers'' are not required to complete

[[Page 41425]]

Worksheet C, Part I, which is used for reporting the CCR on Line 1 of 
the Worksheet S-10. Commenters noted that, as a result, the proposed 
trim methodology inappropriately modifies their uncompensated care 
costs, and that a high CCR could be accurate if the hospital's charges 
are close to costs, as is usually the case for all-inclusive rate 
hospitals. One commenter noted that CMS is proposing to continue to use 
the low-income patient day proxy to distribute Medicare DSH 
uncompensated care payments to all-inclusive rate providers. The 
commenter encouraged CMS to engage with hospitals in determining the 
best way to use Worksheet S-10 data to distribute uncompensated care 
payments to all-inclusive rate providers in the future and also 
recommended that CMS assess how the current CCR trim methodology would 
affect all-inclusive rate providers.
    Response: We appreciate the additional information provided by the 
commenters related to applying trims to the CCRs. We intend to further 
explore which trims are most appropriate to apply to the CCRs on Line 1 
of Worksheet S-10, including whether it would be appropriate to apply a 
unique trim for certain subsets of hospitals, such as all-inclusive 
rate providers. We note that all-inclusive rate providers have the 
ability to compute and enter their appropriate information (for 
example, departmental cost statistics) on Worksheet S-10, Line 1, by 
answering ``Yes'' to the question on Worksheet S-2, Part I, Line 115, 
rather than having it computed using information from Worksheet C, Part 
I. We intend to give additional consideration to the utilization of 
statewide averages in place of outlier CCRs, and will also consider 
other approaches that could ensure the validity of the trim 
methodology, while not penalizing hospitals that use alternative 
methods of cost apportionment. We may consider incorporating these 
alternative approaches through rulemaking for future years. However, as 
we have previously discussed, because all-inclusive rate providers have 
charge structures that differ from other IPPS hospitals, we did not 
propose to use data from the Worksheet S-10 to determine Factor 3 for 
these hospitals for FY 2019. Instead, we have determined Factor 3 for 
these hospitals using low-income insured days for FY 2013.
    Regarding the commenters' view that CCR trims should not take place 
before we conduct audits and give providers further opportunities to 
explain or amend their data, we agree that, in an ideal circumstance, 
CCR trims without audits would not be needed. However, providers have 
had sufficient time to amend their data and/or contact CMS to explain 
that the FY 2019 DSH Supplemental Data File posted in conjunction with 
FY 2019 IPPS/LTCH PPS proposed rule had incorrect data. As a result, we 
consider CCRs greater than 3 standard deviations above the national 
geometric mean CCR for the applicable fiscal year to be aberrant CCRs. 
We are finalizing the trim methodology as proposed.
    Comment: Many commenters requested that the cost of graduate 
medical education (GME) be included within the CCR calculation to 
account for the costs associated with the training of interns and 
residents. The commenters stated that not only does GME represent a 
significant portion of the overhead costs of teaching hospitals, but 
these trained interns and residents treat patients from all financial 
backgrounds, including the uninsured. Therefore, the commenters 
believed that including GME costs in the CCR calculation and then using 
this adjusted CCR for Worksheet S-10 would more accurately represent 
the true uncompensated care costs for teaching hospitals. Some 
commenters observed that GME is included in the denominator but not the 
numerator of the Worksheet S-10 CCR and that this discrepancy should be 
rectified. One commenter noted that this inconsistency occurs because 
Line 1 uses data from Worksheet C, Column 3 (``costs,'' which do not 
include GME) and Worksheet C, Column 8 (``charges,'' which do include 
GME). Commenters recommended using the ``costs'' definition from 
Worksheet B, Part I, Column 24, Line 118 to reconcile the discrepancy. 
Other commenters requested that the Reasonable Compensation Equivalency 
(RCE) be removed from the calculation of the CCR. One commenter stated 
that the current Worksheet S-10 ignores substantial costs hospitals 
incur in training medical residents, supporting physician and 
professional services, and paying provider taxes associated with 
Medicaid revenue. Therefore, this commenter recommended that CMS use 
the total of Worksheet A, Column 3, Lines 1 through 117, reduced by the 
amount on Worksheet A-8, Line 10, as the cost component of the CCR; and 
use Worksheet C, Column 8, Line 200, as the charge component. The 
commenter noted that this result would more accurately reflect the true 
cost of hospital services compared with the CCR currently used in 
Worksheet S-10.
    Response: As we have stated previously in response to this issue, 
we believe that the purpose of uncompensated care payments is to 
provide additional payment to hospitals for treating the uninsured, not 
for the costs incurred in training residents. In addition, because the 
CCR on Line 1 of Worksheet S-10 is pulled from Worksheet C, Part I, and 
is also used in other IPPS ratesetting contexts (such as high-cost 
outliers and the calculation of the MS-DRG relative weights) from which 
it is appropriate to exclude GME because GME is paid separately from 
the IPPS, we hesitate to adjust the CCRs in the narrower context of 
calculating uncompensated care costs. Therefore, we continue to believe 
that it is not appropriate to modify the calculation of the CCR on Line 
1 of Worksheet S-10 to include GME costs in the numerator.
    With regard to the comment that the CCRs on Worksheet S-10 are 
reported with the RCE limits applied, we believe the commenter is 
mistaken. Line 1 of Worksheet S-10 instructs hospitals to compute the 
CCR by dividing the costs from Worksheet C, Part I, Line 202, Column 3, 
by the charges on Worksheet C, Part I, Line 202, Column 8. The RCE 
limits are applied in Column 4, not in Column 3; thus, the RCE limits 
do not affect the CCR on line 1 of Worksheet S-10.
    Comment: Several commenters supported the proposed definition of 
uncompensated care as charity care plus non-Medicare bad debt. However, 
some commenters suggested that uncompensated care should include 
shortfalls from Medicaid, CHIP, and State and local indigent care 
programs. The most common concern expressed was the exclusion of 
Medicaid shortfalls from the definition of uncompensated care as 
captured by Worksheet S-10. Commenters stated that excluding Medicaid 
shortfalls from the definition of uncompensated care severely penalizes 
hospitals that care for large numbers of Medicaid patients because many 
States do not fully cover the costs associated with newly insured 
Medicaid recipients. One commenter noted that just because patients are 
covered by Medicaid does not mean that they have no remaining 
uncompensated care costs, and that, as the policy stands now, Medicare 
will significantly subsidize those States with Medicaid payment rates 
that cover the cost of care relative to those with lower Medicaid 
payment rates that do not cover the cost of care. However, some 
commenters noted that Worksheet S-10 provides an incomplete picture of 
Medicaid shortfalls and should be revised to instruct hospitals to 
deduct intergovernemental transfers,

[[Page 41426]]

certified public expenditures, and provider taxes from their Medicaid 
revenue. One commenter questioned why CHIP and indigent care data are 
collected on Worksheet S-10 if there is no plan to utilize this 
information in the calculation of Factor 3.
    Several commenters urged CMS to use Worksheet S-10, Line 31 to 
identify a hospital's share of uncompensated care costs rather than 
Line 30. These commenters did not believe that Line 30 adequately 
captures a hospital's uncompensated care because it excludes 
unreimbursed costs for State and local indigent care programs. 
Commenters also believed that CMS' use of Line 30 results in a mismatch 
between payment and costs for care furnished to the uninsured and 
underinsured due to lack of clear reporting guidelines. The commenters 
believed that this is because many States support uncompensated care 
through supplemental Medicaid programs funded through their Federal 
Medicaid DSH allotment or a Medicaid waiver program. The commenters 
stated that these supplemental payments are likely reported on 
Worksheet S-10 as Medicaid revenue while some of the hospital's 
uncompensated care costs are reported as charity care, as such 
reporting was at a hospital's discretion at the time of cost report 
filing.
    In addition to comments about the Medicaid shortfalls, commenters 
observed that States differ in how they define uncompensated care 
costs, and that not all costs incurred by hospitals in treating the 
uninsured are categorized as charity care and bad debt, such as in the 
case of discounts to the uninsured who are unable to pay or unwilling 
to provide means-tested information. One commenter supported CMS' 
definition of uncompensated care costs as the cost of all charity care 
and non-Medicare bad debt but expressed concerns with the proposed 
expansion under Transmittal 10 to include discounts to the uninsured. 
The commenter stated that its health system has a long history of 
providing discounts to the uninsured through a voluntary agreement with 
the Attorney General's Office. The commenter also argued that higher 
adoption of high-deductible health plans should be considered.
    Response: In general, we will attempt to address commenters' 
concerns through future cost report clarifications to further improve 
and refine the information that is reported on Worksheet S-10 in order 
to support collection of the information necessary to implement section 
1886(r)(2) of the Act. With regard to the comments regarding Medicaid 
shortfalls, we recognize commenters' concerns but continue to believe 
there are compelling arguments for excluding Medicaid shortfalls from 
the definition of uncompensated care, including the fact that several 
key stakeholders, such as MedPAC, do not consider Medicaid shortfalls 
in their definition of uncompensated care, and that it is most 
consistent with section 1886(r)(2) of the Act for Medicare 
uncompensated care payments to target hospitals that incur a 
disproportionate share of uncompensated care for patients with no 
insurance coverage.
    Conceptual issues aside, we note that even if we were to adjust the 
definition of uncompensated care to include Medicaid shortfalls, this 
would not be a feasible option at this time due to computational 
limitations. Specifically, computing such shortfalls is operationally 
problematic because Medicaid pays hospitals a single DSH payment that 
in part covers the hospital's costs in providing care to the uninsured 
and in part covers estimates of the Medicaid ``shortfalls.'' Therefore, 
it is not clear how CMS would determine how much of the ``shortfall'' 
is left after the Medicaid DSH payment is made. In addition, in some 
States, hospitals return a portion of their Medicaid revenues to the 
State via provider taxes, making the computation of ``shortfalls'' even 
more complex.
    With regard to the comments that States differ in how they define 
uncompensated care costs, and that hospitals' costs of treating the 
uninsured are not always categorized as charity care and bad debt, such 
as in the case of discounts to the uninsured who are unable to pay or 
unwilling to provide income information, we believe the commenters are 
referring to the Worksheet S-10 instructions for Line 20, revised in 
Transmittal 10, which state, in part, ``Enter in column 1, the full 
charges for uninsured patients and patients with coverage from an 
entity that does not have a contractual relationship with the provider 
who meet the hospital's charity care policy or FAP.'' We believe that 
hospitals have the discretion to design their charity care policies as 
appropriate and may include discounts offered to uninsured patients as 
``charity care.'' Accordingly, for the reasons discussed in the 
proposed rule and previously in this final rule, we are finalizing our 
proposal to define uncompensated care costs 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 non-reimbursable Medicare bad debt 
(Line 29).
    Comment: Many commenters had several specific concerns regarding 
the instructions for reporting charity care and Medicare bad debt on 
the Worksheet S-10. Commenters acknowledged that while Transmittal 11 
helped provide clarification, certain aspects of the instructions 
remain vague and ambiguous. For example, one commenter asked whether 
non-Medicare bad debt expenses must meet requirements equivalent to the 
statutory requirements applicable to Medicare bad-debt as described in 
CMS Pub. 15-1 Chapter 3. In addition, some commenters questioned 
whether guidance related to the recognition of bad debt expense for 
purposes of Medicare bad debts is also applicable for non-Medicare bad 
debt. A few commenters also suggested that CMS allow bad debt related 
to unpaid coinsurance and deductibles to be included on the Worksheet 
S-10 without multiplying these amounts by the CCR, similar to the 
modification made for charity care.
    A few commenters also expressed concerns about the Financial 
Accounting Standards Board (FASB) update 2014-09 Topic 606. These 
commenters noted that the FASB guidelines indicate that bad debt is to 
be reported based on historical experience and that recoveries may not 
correlate to reported bad debt expense on the general ledger. 
Specifically, commenters asked that CMS address whether bad debt should 
still be reported net of recoveries on the Worksheet S-10.
    Several commenters also expressed concerns that instructions 
pertaining to Worksheet S-10, Line 20 are not clear. The commenters 
stated, for example, that many hospitals incorrectly report ``insured'' 
charity care on Worksheet S-10, Line 20, Column 2 (which is not reduced 
by CCR), citing, as an example, noncovered Medicaid charges, which need 
to be reported as ``uninsured'' on Worksheet S-10 and reduced by CCR, 
as stated in the Worksheet S-10 instructions. The commenters pointed 
out that this inconsistency with respect to the reporting of charity 
care costs is commonly due to misinterpretation of instructions because 
of lack of clarity, and may be contributing to the overstatement of 
charity care costs.
    Several commenters also pointed out that some hospitals may 
interpret the instructions literally, while other hospitals do not. The 
commenters asked CMS to correct this uncertainty and ambiguity to avoid 
inconsistent interpretations. In relation to this, one commenter 
asserted that contradictory and confusing language in the instructions 
leaves key terms undefined,

[[Page 41427]]

such as determination of uninsured status. The commenter believed that 
the focus in determining whether a patient is ``uninsured'' should be 
on whether the patient has coverage for the specific services provided, 
in the same manner that CMS defines ``uninsured'' and ``no health 
insurance'' for purposes of Medicaid DSH.
    Some commenters questioned whether guidance on determining 
indigence of a Medicare beneficiary should be applicable to non-
Medicare patients to determine whether charity care was furnished. 
Several commenters also suggested improvements that could be made to 
the instructions of Worksheet S-10, such as adding a requirement to 
report utilization data to add context to the monetary amounts reported 
for uncompensated care.
    Response: We thank commenters for sharing their concerns and making 
suggestions regarding potential revisions to the instructions for 
Worksheet S-10. Some of these questions and concerns have been raised 
in previous rulemaking. (For example, we refer readers to the related 
discussion in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38219 and 
38220).) We also note that a number of these questions and concerns are 
addressed by the updated instructions for Worksheet S-10 that were 
issued in November 2016 through Transmittal 10, as well as those issued 
on September 2017 through Transmittal 11, where we clarified 
definitions and the instructions for reporting uncompensated care, non-
Medicare bad debt, nonreimbursed Medicare bad debt, charity care, and 
modified the calculations relative to uncompensated care costs. 
Additional reference materials include the MLN article titled ``Updates 
to Medicare's Cost Report Worksheet S-10 to Capture Uncompensated Care 
Data'', available at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE17031.pdf 
as well as the Worksheet S-10 Q&As on the CMS DSH website in the 
download section, available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/Worksheet-S-10-UCC-QandAs.pdf. To the extent that commenters have raised new questions and 
concerns, we will continue to work with stakeholders to address their 
questions and concerns through further refinement of the instructions 
to the Worksheet S-10 as appropriate.
    Comment: Several commenters supported the proposal to use one cost 
report beginning in each fiscal year to derive the uncompensated care 
costs for that year, and to annualize Medicaid days and uncompensated 
care data for hospitals with less than 12 months of data. However, one 
commenter noted that this proposal may lead to double counting of the 
uncompensated care costs of acquired hospitals with short cost 
reporting periods and recommended that CMS modify its methodology to 
ensure that the data for acquired hospitals is not annualized twice. In 
addition, for acquired hospitals with more than one cost report 
beginning in the same Federal fiscal year, the commenter recommended 
that CMS not automatically select the one with the longer cost 
reporting period, in order to avoid double-counting. The commenter also 
recommended that CMS include the report record number in the DSH 
Supplemental File.
    Response: We appreciate the support for our proposal to annualize 
cost reports that do not equal 12 months of data. We may consider 
adopting the commenters' recommendations regarding alternatives to the 
use of the longer cost report in specific situations through future 
rulemaking if objective and administratively feasible criteria can be 
developed. However, at present, we continue to believe that our current 
approach of annualizing the cost report data from the longest cost 
reporting period during the applicable fiscal year is generally the 
most accurate and consistent across hospitals. We do not believe it is 
necessary to include report record numbers in the DSH Supplemental 
File, as the quarterly HCRIS Public Use Files can be used to reference 
cost report records for this additional detail. Accordingly, for the 
reasons discussed in the proposed rule, and previously in this final 
rule, we are finalizing the proposal to use the longest cost report 
beginning in the applicable fiscal year and to annualize Medicaid data 
and uncompensated care data if a hospital's cost report does not equal 
12 months of data.
    Comment: A number of commenters supported the proposal to adjust a 
hospital's uncompensated care costs when those costs are extremely high 
in relation to its total operating costs for the same year. The 
commenters noted that this adjustment would help to control for data 
anomalies. However, one commenter noted that the trim currently uses a 
50-percent threshold for the ratio of uncompensated care costs to total 
operating costs, yet the national average is 6 percent. Another 
commenter recommended that CMS investigate in cases where a hospital's 
uncompensated care value is an unrealistically high proportion of total 
revenue and ask for additional documentation before either allowing the 
value or requiring a modification. This commenter suggested that CMS 
could focus on providers at or near trim points initially, then expand 
to other providers with unlikely values.
    Response: We appreciate the support for our proposal to adjust 
uncompensated care costs that are an extremely high ratio of a 
hospital's total operating costs for the same year. We believe that the 
proposed approach balances our desire to exclude potentially aberrant 
data, with our concern regarding inappropriately reducing FY 2018 
uncompensated care payments to a hospital that may have a legitimately 
high ratio. We are finalizing this adjustment. In the FY 2019 IPPS/LTCH 
PPS proposed rule (83 FR 20399), we noted that our calculation of 
Factor 3 for the final rule would be contingent on the results of the 
ongoing MAC reviews of hospitals' Worksheet S-10 data, and 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. After the completion of the MAC reviews, we are not incorporating 
any additional edits to the Worksheet S-10 data that we did not propose 
in the proposed rule. While, as stated earlier, we acknowledge that the 
Worksheet S-10 data are not perfect, we need to balance the possibility 
of potentially improving the accuracy of the Worksheet S-10 data for 
some hospitals through the creation of additional data edits against 
the possibility of inadvertently reducing the uncompensated care 
payments for other hospitals that might fail the edit, but whose data 
might in fact be accurate. For FY 2019, we have concluded that it is 
best to err on the side of not inadvertently reducing the uncompensated 
care payments for hospitals whose data might in fact be accurate.
    Comment: Two commenters requested that CMS consider using a proxy 
for Puerto Rico hospitals' SSI days in computing the empirically 
justified DSH payment amount, or 25 percent of the amount that would 
have been paid for Medicare DSH prior to implementation of section 3133 
of the Affordable Care Act.
    Response: In the FY 2019 IPPS/LTCH PPS proposed rule, we did not 
propose any changes to the methodology used to calculate empirically 
justified Medicare DSH payments. Therefore, we consider this comment to 
be outside the scope of the proposed rule. However, we note that, while 
section 1886(r)(2)(C)(i) of the Act allows for the use of alternative 
data as a proxy to determine the costs of

[[Page 41428]]

subsection (d) hospitals for treating the uninsured for purposes of 
determining uncompensated care payments, section 1886(r)(1) of the Act 
requires the Secretary to pay an empirically justified DSH payment that 
is equal to 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(d)(5)(F)(vi) of the Act, 
which prescribes the disproportionate patient percentage used to 
determine empirically justified Medicare DSH payments, specifically 
calls for the use of SSI days in the Medicare fraction and does not 
allow the use of alternative data, we do not believe there is any legal 
basis for CMS to use a proxy for Puerto Rico hospitals' SSI days in the 
calculation of the empirically justified Medicare DSH payment under 
section 1886(r)(1) of the Act.
    Comment: Several commenters supported the proposal to continue to 
use 14 percent of Medicaid days as a proxy for Medicare SSI days when 
determining Factor 3 of the uncompensated care payment methodology for 
Puerto Rico Hospitals. The commenters stated that they appreciated the 
attention and effort by CMS to develop a fair and appropriate method to 
estimate SSI days for Puerto Rico, as the SSI program is statutorily 
unavailable to U.S. citizens residing in the Territories.
    One commenter recommended that CMS identify and seek comment on 
alternate sources of proxy data for Puerto Rico Hospitals for use in 
future years, such as using data for Medicare beneficiaries with 
Medicaid eligibility (dual eligible beneficiaries).
    Response: We appreciate the support for our proposal to use 14 
percent of a Puerto Rico hospital's Medicaid days as a proxy for SSI 
days. Because we are continuing to use insured low-income patient days 
as a proxy for uncompensated care in determining Factor 3 for FY 2019, 
and residents of Puerto Rico are not eligible for SSI benefits, we 
believe it is important to create a proxy for SSI days for Puerto Rico 
hospitals in the Factor 3 calculation. Regarding the recommendation 
that we consider using inpatient days for Medicare beneficiaries 
receiving Medicaid as a proxy for uncompensated care in the future, we 
have examined this concept and have been unable to identify a 
systematic source for these data for Puerto Rico hospitals. 
Specifically, we note that inpatient utilization for Medicare 
beneficiaries who are also entitled to Medicaid is not reported by 
hospitals on the Medicare cost report, either within or outside Puerto 
Rico. We expect to further address issues related to estimating the 
amount of uncompensated care for hospitals in Puerto Rico in future 
rulemaking.
    After consideration of the public comments we received, and for the 
reasons discussed in the proposed rule and in this final rule, we are 
finalizing our proposal to use 2 years of Worksheet S-10 data from FY 
2014 and FY 2015 cost reports in conjunction with data on low-income 
insured days that reflects Medicaid days from FY 2013 and SSI days from 
FY 2016, to calculate Factor 3 for FY 2019.
    Therefore, for FY 2019, we are finalizing a policy 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 finalizing the following proposals: (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) to discontinue the policy of combining cost reports for providers 
with multiple cost reports beginning during the same fiscal year; (3) 
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, to 
use the cost report that spans both fiscal years for the latter fiscal 
year; and (4) to apply statistical trim methodologies to potentially 
aberrant CCRs and potentially aberrant uncompensated care costs.
    For this FY 20019 IPPS/LTCH PPS final rule, we are finalizing a 
HCRIS cutoff of June 30. This cutoff also applies to revised reports 
from providers who were contacted by their MAC regarding potentially 
aberrant uncompensated care costs.
    We are also finalizing our proposal to amend the regulations at 
Sec.  412.106(g)(1)(iii)(C) by adding a new paragraph (5) to reflect 
the methodology for computing Factor 3 for FY 2019. We note that are 
making a technical correction to the uncompensated care definition in 
proposed paragraph (5) to include nonreimbursable Medicare bad debt to 
conform with our proposal in the FY 2019 IPPS/LTCH PPS proposed rule 
(83 FR 20398) to define uncompensated care costs as the amount on 
Worksheet S-10 line 30, which includes charity care and non-Medicare 
and non-reimbursable Medicare bad debt), and which we are also 
finalizing in this final rule.

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-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

[[Page 41429]]

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 noted in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20401) 
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 FY 
2018 IPPS notice that appeared in the Federal Register on April 26, 
2018 (CMS-1677-N; 83 FR 18303) 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. In the FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20401), we noted 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 also noted that we were proposing in section IV.G.3. of the 
preamble of the proposed rule to change the effective date for a 
determination of MDH status. We stated that 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-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 noted in the 
proposed rule 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 noted that we were 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20402), we 
proposed 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

[[Page 41430]]

Act of 2018. We proposed a similar conforming change to Sec.  412.90(j) 
to reflect the extension of the MDH program through FY 2022.
    Comment: Commenters supported our proposals to make conforming 
changes to the regulations to reflect the legislation extending the MDH 
provision.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
adopting as final the proposed conforming changes to the regulations 
text at Sec. Sec.  412.90 and 412.108 to reflect the extension of the 
MDH program through FY 2022 and the additional MDH classification 
provision made for hospitals located in all-urban States in accordance 
with section 50205 of the Bipartisan Budget Act of 2018. We are 
finalizing the proposed changes in paragraphs (a)(1) and (c)(2)(iii) of 
Sec.  412.108 and paragraph (j) of Sec.  412.90 without modification.
3. 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20402 and 20403), 
to minimize the lag between the effective date of rural 
reclassification under Sec.  412.103 and the effective date for SCH 
status, we proposed 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. However, as discussed in response to comments below, 
because the MAC receives SCH applications and not CMS, we are 
clarifying in this final rule that under our policy, as finalized 
below, the effective date is the date that the MAC receives the 
complete application. We have revised our finalized regulatory text and 
this preamble throughout to reflect that the MAC, and not CMS, receives 
the SCH application. 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. We stated in the proposed rule that for an application 
to be complete, all criteria must be met as of the date CMS receives 
the SCH application, but, similar to above, we are clarifying in this 
final rule and revising this preamble discussion to reflect that all 
criteria must be met as of the date the MAC receives the SCH 
application, because the MAC, and not CMS, receives SCH applications. 
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 the MAC receives the SCH application.
    Similar to rural reclassification obtained under Sec.  412.103, we 
proposed that the effective date for SCH status would be the date that 
CMS receives the complete application. We also proposed 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 
proposed 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 stated that we 
believe 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 stated that we 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 proposed 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 proposed 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. However, as discussed in response to comments below, because 
the MAC receives MDH applications and not CMS, we are clarifying in 
this final rule that under our policy, as finalized below, the 
effective date is the date that the MAC receives the complete 
application. We have revised our finalized regulatory text and this 
preamble throughout to reflect that the MAC, and not CMS, receives the 
MDH application. 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. We stated in the proposed rule that for an 
application to be complete, all criteria must be met as of the date CMS 
receives

[[Page 41431]]

the MDH application, but, similar to above, we are clarifying in this 
final rule and revising our preamble discussion to reflect that all 
criteria must be met as of the date the MAC receives the SCH 
application, because the MAC, and not CMS, receives MDH applications. 
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) (redesignated as Sec.  
412.108(a)(1)(iv)(C) pursuant to our finalized changes to this 
regulation, as discussed in the prior section), 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 the MAC 
receives the MDH application. (We noted 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 stated that 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, we stated that 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.
    Comment: Commenters supported this proposal and agreed with CMS 
that this policy to change the effective dates of SCH and MDH 
classifications will streamline the process, reduce burden, and align 
the SCH and MDH status timeline with the rural reclassification process 
in some cases. The commenters further agreed with CMS that this policy 
change would benefit hospitals by minimizing the disadvantages 
associated with a lag between reclassification and SCH or MDH status, 
and encouraged CMS to finalize this policy as proposed. Other 
commenters supported the proposal as a positive change expediting the 
effective date of these classifications but noted that the SCH and MDH 
regulations at Sec.  412.92(b)(l)(i) and Sec.  412.108(b)(2) require 
those applications to go to the MAC, rather than to CMS. The commenters 
therefore requested clarification regarding the proposed effective date 
of ``the date CMS receives the complete application''.
    Response: We appreciate the commenters' support for our proposal as 
a positive change that would benefit hospitals by reducing burden and 
minimizing potential payment disadvantages. The commenters' observation 
that the regulations require that SCH and MDH applications be submitted 
to the MAC, rather than to CMS, is correct and we are making the 
appropriate changes in the regulation and clarifying our policy in the 
preamble to this final rule. Specifically, we are finalizing that the 
effective date of SCH and MDH classification status is the date that 
the MAC (rather than CMS) receives the complete application.
    After consideration of the public comments we received, we are 
finalizing our proposed changes to Sec.  412.92(b)(2)(i) and 
(b)(2)(iv), with modification, so that for applications received on or 
after October 1, 2018, the effective date for SCH classification and 
for the payment adjustment is the date that the MAC, rather than CMS, 
receives the complete SCH application. We also are finalizing with 
modification conforming changes to the effective date at Sec.  
412.92(b)(2)(ii) for instances when a court order or a determination by 
the PRRB reverses a CMS denial of SCH status and no further appeal is 
made, so that if the hospital's application for SCH status was received 
on or after October 1, 2018, the effective date is the date the MAC 
receives the complete application.
    Similarly, we are finalizing our proposed changes to Sec.  
412.108(b)(4), with modification, to specify that for applications 
received on or after October 1, 2018, a determination of MDH status 
made by the MAC is effective as of the date the MAC receives the 
complete application.
4. Conforming Technical Changes to Regulations
    We note that, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20403), we also proposed 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).
    We did not receive any public comments on the proposed conforming 
changes to the regulations text at Sec. Sec.  412.92 and 412.108 to 
reflect the change CMS made some time ago to identify fiscal 
intermediaries as MACs. Therefore, in this final rule, we are adopting 
as final the proposed revisions to Sec.  412.92 and Sec.  412.108 
without modification.

H. Hospital Readmissions Reduction Program: 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, amended by section 10309 of the Affordable Care 
Act, and further amended by section 15002 of the 21st Century Cures 
Act, established 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 FR 38221 
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,

[[Page 41432]]

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 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.
    We note that we received public comments on the effectiveness and 
design of the Hospital Readmissions Reduction Program in response to 
the FY 2019 IPPS/LTCH PPS proposed rule. While we appreciate the 
commenters' feedback, because we did not include in the proposed rule 
any proposals related to these topics, we consider the public comments 
to be out of the scope of the proposed rule. Therefore, we are not 
addressing most of these comments in this final rule. All other topics 
that we consider to be out of scope of the proposed rule will be taken 
into consideration when developing policies and program requirements 
for future years.
    Comment: Several commenters requested that CMS study the continued 
viability of the Hospitals Readmissions Reduction Program. Some 
commenters believed that certain level of readmissions may be necessary 
for patient care as defined by medical research on this subject, which 
means some of the program's measures may have reached the point of 
diminishing returns. Other commenters expressed concerns about the 
possibility of unintended patient consequences resulting from the 
Hospital Readmissions Reduction Program, such as the potential for 
mortality to increase as readmissions decrease. Some commenters 
requested that CMS and/or AHRQ undertake a study on any unintended 
consequences arising from the program.
    Response: We believe that the Hospital Readmissions Reduction 
Program has successfully reduced readmissions which are both harmful to 
patients and costly for the health care system. Patient well-being is 
one of our highest priorities, and we welcome any research reports 
pertaining to the unintended consequences of the program. We are 
committed to monitoring any unintended consequences over time, such as 
the inappropriate shifting of care or increased patient morbidity and 
mortality, to ensure that the Hospital Readmissions Reduction Program 
improves the lives of patients and reduces cost.
    Comment: Some commenters suggested that CMS review the Hospital 
Readmissions Reduction Program in the context of all quality 
improvement programs, determine whether the program is worth retaining, 
and assess whether the program has achieved its purpose or should give 
way to a new approach.
    Response: As part of the Meaningful Measures Initiative, which we 
discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20404) and 
in greater detail below, 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. The focus of the Hospital 
Readmissions Reduction Program is on care coordination measures, which 
address the quality priority of promoting effective communication and 
care coordination within the Meaningful Measures Initiative. In 
addition, we will continue to monitor the program to ensure that each 
program is meeting its intended goals within the larger context of CMS' 
value-based purchasing programs.
    We would like to clarify for the commenters that the Hospital 
Readmissions Reduction Program is required by statute, and we cannot 
decline to administer it.
    Comment: Several commenters expressed concern that, under the 
Hospital Readmissions Reduction Program, hospitals can undertake and 
perform reasonable acts to avoid readmissions, but still be penalized 
because their performance might remain relatively worse when compared 
to peer group hospitals' performance.
    Response: We understand the commenters' concern. We continue to 
encourage hospitals to reduce avoidable readmissions through proven 
care coordination and communications quality improvement tools, such as 
CMS Quality Improvement and Innovation Network efforts (https://qioprogram.org/qionews/topics/care-coordination).
    However, we note that the basic readmissions payment adjustment 
formula for assessing readmissions and penalties under the Hospital 
Readmissions Reduction Program are specified in the Act, and we are 
required to implement the statute as written. In particular, the 21st 
Century Cures Act, which amended section 1886(q) of the Act, directs 
the Hospital Readmissions Reduction Program to develop a transitional 
methodology based on dual-eligible beneficiaries that allows for 
separate comparisons for hospitals within peer groups to determine a 
hospital's payment adjustment factor. It also allows the program to 
consider other risk-adjustment methodologies, taking into account 
studies conducted and recommendations made by the Secretary in reports 
required under section 2(d)(1) of the Improving Medicare Post-Acute 
Care Transformation Act of 2014 (IMPACT Act), Public Law 113-185. We 
will continue to review our risk-adjustment methodologies and monitor

[[Page 41433]]

our quality reporting and incentive programs for any unintended and 
negative consequences, and we will take the commenters' views into 
account when reviewing Hospital Readmissions Reduction Program data.
3. Summary of Policies for the Hospital Readmissions Reduction Program
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20403 through 
20407), we proposed to: (1) Establish the applicable period for FY 
2019, FY 2020 and FY 2021; (2) codify the previously adopted definition 
of ``dual-eligible''; (3) codify the previously adopted definition of 
``proportion of dual-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 prioritize 
patients by ensuring that they, along with their clinicians, are 
empowered to make decisions about their own healthcare using 
information aligned with 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 that we described in section I.A.2. of 
the preambles of the proposed rule (82 FR 20167 through 20168) and this 
final 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 proposed for removal from the 
Hospital IQR Program as discussed in section VIII.A.5.b.(3) of the 
preambles of the proposed rule and this final 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, in the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20404), we did not propose to 
adopt any new measures.
    We note that we received public comments on the program's measures 
and our holistic approach to the value-based purchasing program and the 
program's measures. Because we did not propose any measure changes to 
the program in the FY 2019 IPPS/LTCH PPS proposed rule, we consider 
these public comments out of the scope of the proposed rule and, 
therefore, we are not addressing most of them in this final rule. All 
other topics that we consider to be out of the scope of the proposed 
rule will be taken into consideration when developing policies and 
program requirements for future years. However, we address some public 
comments pertaining to our holistic review of the value-based 
purchasing programs below.
    Comment: Some commenters supported CMS' holistic view of the 
various hospital value-based purchasing programs and quality reporting 
programs in an effort to ease provider reporting burden and better 
focus quality and patient safety efforts. The commenters agree that the 
reduction of duplicative measures across various programs will help 
streamline quality measure reporting for hospitals, enhance provider 
focus on important clinical outcomes, and reduce cost. Other commenters 
appreciated and encouraged the greater focus on outcome focus rather 
than process.

[[Page 41434]]

    Response: We thank the commenters for their support.
    Comment: One commenter requested that CMS ensure ample time is 
provided to the organizations for implementation of new processes such 
as data collection measures/processes, operations change to align with 
the Meaningful Measures Initiative, and CMS' holistic approach to the 
value-based purchasing programs.
    Response: We thank the commenter for its comment. As changes occur 
to implement these initiatives, we will, to the greatest extent 
possible, work to operationalize our policies in the most seamless way 
possible. In instances where we expect disruption to stakeholders, we 
will welcome an ongoing conversation to ensure that providers can 
continue to focus on patients.
    Comment: One commenter opposed removing Hospital Readmissions 
Reduction Program measures from the Hospital IQR Program because the 
commenter believed that measures should be initially adopted into the 
Hospital IQR Program to allow for a period of measure validation, and 
for health systems to gain familiarity with the measures before they 
are moved into value-based programs. Other commenters requested that 
CMS require that any measures newly added to the Hospital Readmissions 
Reduction Program be publicly reported either in the Hospital IQR 
Program or within the program without penalty implications for at least 
1 year to ensure that hospitals have time to familiarize themselves 
with the measure and that there are no adverse unintended consequences 
of the measure use. One commenter urged CMS to not introduce measures 
with financial impact on providers until after an initial transition 
period that allows hospitals and CMS to become accustomed to reporting 
and measuring these items.
    Response: We are cognizant of stakeholder concerns and understand 
the importance of providing hospitals with an opportunity to gain 
familiarity with a quality measure prior to its implementation in a 
payment program. We will consider how to best implement new measures in 
the payment programs before proposing additional measures for the 
programs, but we do not believe it is appropriate to address how we 
would adopt new measures into the program at this time. We note also 
that we did not propose to add any measures to the Hospital 
Readmissions Reduction Program in the FY 2019 IPPS/LTCH PPS proposed 
rule.
    We received numerous comments from stakeholders regarding our 
holistic approach to evaluating the appropriateness of measures 
previously adopted under the Hospital Readmissions Reduction Program, 
the Hospital VBP Program, the HAC Reduction Program, and the Hospital 
IQR Program and our vision for the future of these programs. While 
program-specific comments and policies are discussed in more detail in 
each program-specific section of this final rule, we would like to 
clarify that, in light of our mission to prioritize patients in the 
provision of services, we are expanding the stated scope of the 
Hospital VBP Program to include patient safety measures. While we 
initially sought to delineate measure focus areas between the Hospital 
VBP Program and the HAC Reduction Program, we agree with commenters 
that patient safety is a critical component of quality improvement 
efforts. Therefore, we believe it is appropriate and important to 
provide incentives under more than one program to ensure that hospitals 
take every reasonable precaution to avoid adverse patient safety 
events. In addition, we believe including patient safety measures in 
both the HAC Reduction Program and the Hospital VBP Program will best 
promote transparency through publicly reporting hospital performance on 
these measures, as stakeholders will be able to see both hospitals' 
performance compared to all other hospitals and hospitals' performance 
improvement over time. Finally, we note that this approach will also 
reduce provider burden associated with safety measure data collection 
and reporting because these measures are being finalized for removal 
from the Hospital IQR Program, as discussed in section VIII.A.5.b.(2) 
of the preamble of this final rule.
    Comment: One commenter expressed concern about unintended 
consequences of making care coordination the sole feature of the 
Hospital Readmissions Reduction Program and not related measures in an 
incentive program. This commenter believed that, without the 
possibility of receiving an incentive payment for performing well, 
hospitals outside of the penalty portion of the programs would cease 
trying to improve.
    Response: We thank the commenter for its comment. The Hospital 
Readmissions Reduction Program scores a hospital's performance in 
relation to its peer institutions' performance. We believe that peer 
comparison provides appropriate incentives for hospitals to strive for 
continuous improvement in readmission rates, while also recognizing the 
impacts of hospital case-mix and other characteristics on a hospital's 
performance rates.
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 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?=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772412995.
6. 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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20405), for FY 
2019, consistent with the definition specified at Sec.  412.152, we 
proposed 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 proposed 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

[[Page 41435]]

discharges occurring during the 3-year period of July 1, 2014 through 
June 30, 2017.
    In the FY 2019 IPPS/LTCH PPS proposed rule, for FY 2020, consistent 
with the definition specified at Sec.  412.152, we proposed 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 the FY 2019 IPPS/LTCH PPS proposed rule, for FY 
2021, consistent with the definition specified at Sec.  412.152, we 
proposed 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.
    Comment: Some commenters supported the applicable periods for FY 
2019, FY 2020, and FY 2021 as proposed.
    Response: We thank commenters for their support.
    Comment: Some commenters expressed concern about the proposed 
performance period for FY 2019 because it combines data collected under 
both the ICD-9 and ICD-10 coding sets. Commenters also requested that 
CMS provide further empirical analysis in the final rule to show that 
measure reliability and validity are not compromised by using two 
different coding systems and ensure that the ICD-10 versions of the 
measures in the Hospital Readmissions Reduction Program are NQF-
endorsed as soon as practicable.
    Response: As we stated in the FY 2018 IPPS/LTCH PPS final rule (82 
FR 38223), the readmission measures in the Hospital Readmissions 
Reduction Program all completed ``maintenance of endorsement,'' a 
periodic evaluation of measures to assess impact and potential 
unintended consequences, in December 2016 and are NQF-endorsed. The NQF 
requires developers to submit all ICD- 9 and ICD-10 diagnosis and 
procedure codes used to define the measure cohorts. We identified all 
ICD-10 codes that corresponded with ICD-9 codes used in the measure 
cohort definitions using the General Equivalence Mappings tool (GEMs). 
The ICD-10 codes identified using GEMs were reviewed by measure and 
clinical experts and made public as a part of the maintenance of 
endorsement process. We will submit testing results in claims data 
coded with ICD-10 in future cycles of NQF endorsement maintenance.
    In addition, we have examined changes in risk-standardized 
readmission rates at the hospital level and the distribution of changes 
in rates for all claims-based readmission measures, comparing the 
results of the 2015, 2016, 2017, and 2018 reporting periods. These 
analyses suggest no more than typical year-to-year variability in 
hospital-level rates before and after the introduction of ICD-10 codes 
for most measures. Year-to-year changes between 2015 and 2016, which 
both contained only ICD-9 claims, are similar to year-to-year changes 
for the following years, which included a mix of ICD-9 and ICD-10 
claims. Risk-standardized readmission rates for 2018 public reporting 
are similar to those for 2015, 2016, and 2017 public reporting, which 
also indicates that the results using ICD-9 codes and ICD-10 codes are 
comparable. Overall, these results suggest that we have successfully 
created measure specifications in ICD-10 that align with the intent of 
the measure, which allows us to compare rates with measures calculated 
using ICD-9 codes and ICD-10 codes.
    We will continue to use a 3-year measurement period rather than a 
1-year measurement period, despite the implementation of ICD-10. We use 
a 3-year measurement period because some small and rural hospitals do 
not have at least 25 admissions for Medicare FFS patients who are 65 
years and older for each of the measure conditions in a single year or 
even over the course of 2 years. The 3-year period allows us to include 
the maximum possible number of hospitals in scoring and public 
reporting.
    Comment: One commenter encouraged CMS to include feedback from 
providers and other stakeholders through previewing model results prior 
to releasing hospital-specific reports.
    Response: We thank commenter for its input. We agree with the need 
for transparency and providing stakeholders with data to confirm their 
dual proportion assignment. We also are seeking input from stakeholders 
and considering different options to provide hospitals with early 
individualized feedback regarding their peer grouping and payment 
adjustment.
    Comment: One commenter believed that a 1-year performance period is 
more appropriate than the 3-year period because a 3-year performance 
period is too long, as some hospitals may demonstrate significant 
improvement year-over-year and it requires the combination of data from 
ICD-9 and ICD-10. Another commenter believed the lag time between 
actual performance and public reporting is troublesome as patients and 
hospitals may be relying on stale data. This commenter further 
recommended the consideration of electronic health records (EHRs) to 
derive more accurate and timely metrics.
    Response: We continue to believe the 3-year period as codified at 
42 CFR 412.152 is appropriate. We use a 3-year period of index 
admissions to increase the number of cases per hospital used for 
measure calculation, which improves the precision of each hospital's 
readmission estimate. While this approach utilizes older data, it also 
identifies more variation in hospital performance and still allows for 
improvement from one year of reporting to the next. We are maintaining 
the 3-year period as previously adopted because we continue to believe 
it balances the needs for the most recent claims and for sufficient 
time to process the claims data and calculate the measures to meet the 
program implementation timeline. With respect to EHRs, the Hospital 
Readmissions Reduction Program relies on claims data; therefore, we 
question whether EHRs would provide much more timely information.
    After consideration of the public comments we received, we are 
finalizing as proposed, without modification, the applicable period of 
the 3-year time period of July 1, 2014 through June 30, 2017 for FY 
2019; the applicable period of the 3-year time period July 1, 2015 
through June 30, 2018 for FY 2020; and the applicable period of the 3-
year time period of July 1, 2016 through June 30, 2019 for FY 2021 to 
calculate readmission payment adjustment factor for FYs 2019, FY 2020, 
and FY 2021, respectively, under the Hospital Readmissions Reduction 
Program.
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

[[Page 41436]]

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, because 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 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 proposed to continue to 
exclude admissions for patients enrolled in Medicare Advantage as 
identified in the Medicare Enrollment Database.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20405), for FY 
2019, we proposed 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 
noted that, for the purpose of modeling the proposed FY 2019 
readmissions payment adjustment factors for the proposed rule, we used 
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 that 
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 the proposed rule, for FY 2019, we proposed to use MedPAR data 
from July 1, 2014 through June 30, 2017 for FY 2019 Hospital 
Readmissions Reduction Program calculations. Specifically, for the 
final rule, we proposed to use the following MedPAR files--
     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 did not receive any public comments on our proposal to use of 
the above stated MedPAR files, and therefore are finalizing as 
proposed, without modification, the use of the above listed MedPAR 
files to identify claims.
    As discussed earlier, the final FY 2019 readmissions payment 
adjustment factors are not available at this time because hospitals 
have not yet had the opportunity to review and correct the data 
(program calculations based on the 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 data. After hospitals have 
been given an opportunity to review and correct their calculations for 
FY 2019, we will post Table 15 (which will be available via the 
internet on the CMS website) to display the final FY 2019 readmissions 
payment adjustment factors that will be applicable to discharges 
occurring on or after October 1, 2018. We expect Table 15 will be 
posted on the CMS website in the fall of 2018.
8. Calculation of Payment Adjustment Factors for FY 2019 and 
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 several 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-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-eligibility as the 3-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] TR17AU18.015

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

[[Page 41437]]

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. In the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20406), we did not propose any 
changes to the methodology for FY 2019 or subsequent years. However, we 
proposed 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 proposed 
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.
    Comment: One commenter supported the proposal to codify the 
previously finalized definitions of applicable period for dual-
eligibility, dual-eligible, and proportion of dual-eligibles. Several 
commenters supported the codification of previously adopted definitions 
for dual-eligibles to better assess disparate outcomes across patient 
populations at a given hospital.
    Response: We thank commenters for their support.
    Comment: Some commenters opposed the use of Medicare Advantage (MA) 
patients in the proportion of dual-eligibles definition and stated that 
CMS should base the peer group only on the share of FFS patients that 
are fully dual eligible, not on the share of all (FFS and MA) patients 
because the penalty does not apply to readmissions of MA patients. The 
commenters asserted that their risk characteristics could distort the 
risk profiles of hospitals because the income characteristics of FFS 
and MA patients may differ for particular hospitals. Other commenters 
opposed the use of dual-eligible as the basis for determining 
socioeconomic status because it does not necessarily reflect 
demographic or economic factors and conditions where the hospital is 
located or the patient resides.
    Response: We would like to clarify that we did not propose any 
changes to the definition of dual-eligible; we merely proposed to 
codify it. As we stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38221), we finalized using FFS and MA patients because calculating the 
dual proportion among all Medicare FFS and managed care patients more 
accurately represents the dual status of the hospital, particularly for 
hospitals in States with high managed care penetration rates. This 
approach enables more accurate and complete risk profiles for 
hospitals. There is a strong relationship between dual proportion and 
penalties under both the current methodology and proposed approaches, 
whether hospitals are stratified based on Medicare FFS patients only or 
based on both Medicare FFS and managed care patients. In general, this 
relationship is similarly positive; hospitals with higher dual 
proportions by either definition incur larger penalties, on average. 
However, the relationship between the penalty share of payments and 
dual proportion among FFS and managed care patients exhibits a slightly 
stronger upward trend. We refer readers to FY 2018 IPPS/LTCH PPS final 
rule (82 FR 38228 through 38229) for more information. Further, the 
statute directs the Secretary to use dual-eligibles to assign the peer 
groups during this transitional phase of risk-adjustment.
    We did not propose changes with respect to our previously finalized 
proposals. However, commenters provided many suggestions on the 
Hospital Readmissions Reduction Program's risk-adjustment methodology. 
While we appreciate the commenters' feedback, we consider these topics 
to be out of the scope of the proposed rule. Therefore, we are not 
addressing most of them in this final rule. However, because there is 
stakeholder interest in this topic, we have included summaries of some 
of these comments with responses below. All other topics that we 
consider to be out of the scope of the proposed rule, even if not 
addressed below, will be taken into consideration when developing 
policies and program requirements for future years.
    Comment: Some commenters supported the previously adopted payment 
adjustment methodology for FY 2019, which implemented the transitional 
methodology required by the 21st Century Cures Act. Commenters 
supported appropriate risk-adjustment methodology for the Hospital 
Readmissions Reduction Program. Commenters also supported organizing 
hospitals into peer groups and evaluating their performance in 
comparison to similar hospitals.
    Response: We thank the commenters for their support.
    Comment: Some commenters supported accounting for social risk 
factors in quality programs through peer grouping.
    Response: We thank the commenters for their support.
    Comment: One commenter recommended that, instead of peer groups, 
CMS find ways to direct additional resources to hospitals that serve 
the most disadvantaged populations to achieve health equity.
    Response: We do not believe there is a provision in the statute 
that authorizes the Program to provide direct resources to hospitals. 
However, subparagraphs (D) and (E) to section 1886(q)(3) of the Act 
direct the Secretary to assign hospitals to peer groups, develop a 
methodology that allows for separate comparisons for hospitals within 
these groups, and allows for changes in the risk adjustment 
methodology. Following this transitional methodology, the Secretary is 
allowed to consider the recommendations in the reports required by the 
IMPACT Act related to risk adjustment and social risk factors to 
determine improved risk adjustment, but is not authorized to provide 
direct support to hospitals. We refer readers to the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38221 through 38222) for more information. We 
also note that many programs throughout HHS, run by CMS and other 
agencies, provide funding and support for ``safety net hospitals.''
    Comment: Some commenters questioned whether five peer groups were 
the appropriate number of peer groups and whether there should be more 
peer groups. One commenter reiterated its recommendations to use 
statistical analysis to create what it posits as a more natural 
distribution of provider performance than quintiles. Another commenter 
provided a different statistical approach to determine hospital 
groupings. Commenters urged CMS to continuously evaluate this peer 
groupings to avoid unintended consequences.
    Response: We would like to clarify that we did not propose any 
changes to the policy for five peer groups. In the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38229 through 38231), we finalized stratifying 
hospitals into quintiles (five peer groups) because that policy creates 
peer groups that accurately reflect the relationship between the 
proportion of dual-eligible patients in the hospital's population 
without the disadvantage of establishing a larger number of peer 
groups. We continue to believe

[[Page 41438]]

preselecting peer groups of equal size and choosing the size that best 
meets these objectives is transparent and effective. In the future, 
more flexible methods for peer group formation may be considered for 
implementation. Any approach must be evaluated based on multiple 
criteria, including those described above and proposed through the 
rulemaking process.
    Comment: Some commenters supported assignment of hospitals to peer 
groups (quintiles) as a first step of accounting for social risk 
factors, but encouraged CMS to continue to work with stakeholders to 
develop appropriate risk-adjustment methodologies. Commenters believed 
that stratifying performance by the hospital's number of dual-eligible 
patients is only a temporary solution, and recommended that CMS take 
steps to ensure that individual measures account for socio-demographic 
status (SDS) in the measure level risk adjustment model. Commenters 
asked CMS to consider whether it should continue to use dual-
eligibility as an adjustment variable and whether it should move from 
the current peer grouping approach to one that incorporates one or more 
socioeconomic variables into the risk-adjustment model of Hospital 
Readmissions Reduction Program measures. Commenters supported CMS' 
efforts to adjust for socioeconomic factors. However, these commenters 
urged continued refinements to stay current with evolving measurement 
science around accounting for social risk factors.
    Response: As required by the 21st Century Cures Act, we are 
stratifying hospitals based on dual-eligible proportion and modifying 
the payment adjustment factor formula to assess a hospital's 
performance relative to other hospitals in its peer group. This 
approach is transparent. We believe this approach achieves both the 
goal of holding all hospitals to a high standard while also ensuring we 
are not disproportionally penalizing hospitals serving an at-risk 
population. Section 1886(q)(3)(E)(i) of the Act allows the Secretary to 
consider studies conducted and recommendations made by the Secretary 
under section 2(d)(1) of the IMPACT Act in the application of risk 
adjustment methodologies. We will continue to monitor the progress and 
findings of research the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting as part of its IMPACT Act study and the 
National Quality Forum's trial period and will consider their 
recommendations. We also will continue to monitor the impact of 
accounting for dual-eligible patients in the Hospital Readmissions 
Reduction Program and evaluate whether future changes to include other 
variables or adjustments are needed. For more information, we refer 
readers to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38221 through 
38222).
    Comment: Some commenters believed that peer grouping by dual-
eligibility has limitations or flaws limitations as a risk-adjustment 
method, and urged CMS to consider whether it should continue to use 
dual-eligibility as the adjustment variable and whether to move from 
the current peer grouping approach to one in which it incorporates one 
or more socioeconomic variables into the risk adjustment models of the 
Hospital Readmissions Reduction Program measures (that is, direct risk 
adjustment). Commenters encouraged CMS to review the evolving 
measurement science continually and consider NQF and National Academy 
of Medicine concepts as it considers best ways to risk-adjust quality 
measures for social factors. Other commenters urged CMS to include 
factors related to a patient's background--including SDS, language, and 
post-discharge support structure--in measure development and risk-
adjustment methodology. Still other commenters recommended that CMS use 
census data, distressed community index, or location information to 
determine socioeconomic adjustment.
    Response: We will continue to monitor the impact of accounting for 
dual-eligible patients in the Hospital Readmissions Reduction Program 
and evaluate whether future changes to include other variables or 
adjustments are needed. As we have previously noted, the Hospital 
Readmissions Reduction Program is required by section 1886(q)(3)(D) of 
the Act to use dual-eligible beneficiaries for hospital's adjustment 
factor beginning in FY 2019, and until the application of section 
1886(q)(3)(E)(i) of the Act, at which point the Secretary may consider 
other risk-adjustment methodologies, taking into account the reports 
mandated by the IMPACT Act. The second and final report is scheduled 
for release in October 2019. We refer readers to the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38221 through 38222) for more information.
    Comment: One commenter urged CMS to not use social risk factors to 
adjust quality measures for transparency and payment.
    Response: We thank the commenter for its comment. However, we note 
Congress mandated that the Hospital Readmissions Reduction Program 
account for social risk factors when it added subparagraphs (D) and (E) 
to section 1886(q)(3) of the Act directing the Secretary to assign 
hospitals to peer groups, develop a methodology that allows for 
separate comparisons for hospitals within these groups, and allows for 
changes in the risk adjustment methodology. As we have noted 
previously, the goal of risk adjustment is to account for factors that 
are inherent to the patient at the time of admission, such as severity 
of disease to put hospitals on a level playing field. The measures 
should not be risk-adjusted to account for differences in practice 
patterns that lead to lower or higher risk for patients to be 
readmitted. The measures aim to reveal differences related to the 
patterns of care.
    After consideration of the public comments we received, we are 
finalizing as proposed, without modification, our decision to codify 
the definitions of ``applicable period for dual-eligibility''; ``dual-
eligible''; and ``proportion of dual-eligibles'' as stated above at 42 
CFR 412.152.
9. 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).

[[Page 41439]]

    Comment: One commenter supported budget neutral adjustment approach 
directed by the 21st Century Cures Act.
    Response: We thank the commenter for its support.
    Comment: Another commenter addressed what it believed is a 
methodological flaw in the statutory design of the penalty calculation. 
However, this commenter agreed that only Congress has the authority to 
amend the statute to correct the calculations.
    Response: We thank the commenter for the feedback. As the commenter 
noted, we are bound by the statute's direction.
    After consideration of the public comments we received, we are 
finalizing as proposed, without modification, the calculation of 
payment adjustment for FY 2019.
10. Accounting for Social Risk Factors in the Hospital Readmissions 
Reduction Program
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20406 through 
20407), we discussed 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.\230\ 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.\231\ 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 
38237), 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.\232\ 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,\233\ allowing further examination of social risk factors 
in outcome measures.
---------------------------------------------------------------------------

    \230\ 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.
    \231\ 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.
    \232\ Available at: http://www.qualityforum.org/SES_Trial_Period.aspx.
    \233\ 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 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.
    While we did not specifically request public comment on social risk 
factors in the FY 2019 IPPS/LTCH PPS proposed rule, we received a 
number of comments with respect to social risk factors. We thank 
commenters for sharing their views and their willingness to support the 
efforts of CMS and NQF on this important issue. We will take this 
feedback into account as we continue to review social risk factors on 
an ongoing and continuous basis. In addition, we both welcome and 
appreciate stakeholder feedback as we continue our work on these 
issues.

[[Page 41440]]

I. Hospital Value-Based Purchasing (VBP) Program: 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 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 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 published proxy value-based incentive payment adjustment 
factors in Table 16 associated with the FY 2019 IPPS/LTCH PPS proposed 
rule (which is available via the internet on the CMS website). We are 
publishing updated proxy value-based incentive payment adjustment 
factors in Table 16A associated with this final 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 
updated slope of the linear exchange function used to calculate the 
proxy value-based incentive payment adjustment factors in Table 16A is 
2.8887004713. This slope, along with the estimated amount available for 
value-based incentive payments, has been updated based on the March 
2018 update to the FY 2017 MedPAR file and is also published in Table 
16A (which is available via the internet on the CMS website).
    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 Removal of Quality Measures
a. Retention of Previously Adopted Hospital VBP Program Measures and 
Clarification of 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 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20408), we did not 
propose any changes to this policy.
    In the FY 2019 IPPS/LTCH/PPS proposed rule (83 FR 20408), we 
proposed 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. We stated that the proposed revision to the 
regulation text would clarify that Hospital VBP Program 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 final 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. In the FY 2019 IPPS/LTCH PPS proposed rule, we 
stated that this proposal would reduce costs, such as those discussed 
in section IV.I.2.b. of the preamble of the proposed rule, by allowing 
us to remove duplicative measures from the Hospital IQR Program that 
are retained in the Hospital VBP Program.
    Comment: A number of commenters supported CMS' proposal to revise 
its regulations to clarify that once CMS has complied with the 
statutory prerequisites for the Hospital VBP Program, the Hospital VBP 
Program statute does not require that a measure continue to remain in 
the Hospital IQR Program. These commenters agreed that clarifying these 
statutory requirements would reduce the complexity and costs associated 
with maintaining duplicative measures across CMS quality programs.

[[Page 41441]]

One commenter also expressed its belief that this clarification would 
allow for more focused quality improvement efforts by hospitals and 
result in streamlined public reporting, which would be easier for the 
public to understand.
    Response: We thank the commenters for their support.
    Comment: Some commenters did not support CMS' proposal to clarify 
the Hospital VBP Program's regulations. These commenters expressed 
their belief that CMS lacks the statutory authority to remove a measure 
from the Hospital IQR Program that is being used in the Hospital VBP 
Program, and further asserted that removing such a measure would 
undermine the statutory requirements that created and preserve the 
Hospital IQR Program. Other commenters stated that initially adopting 
measures into the Hospital IQR Program allows for a period of measure 
validation and for health systems to gain familiarity with the measures 
before they are moved into value-based purchasing programs, and 
expressed concern CMS' ``holistic'' view would allow new measures to be 
adopted immediately into the value-based purchasing programs without 
this time for familiarization and validation. These commenters stated 
their belief that adopting measures directly into the value-based 
purchasing programs would result in significant harm, undue hardship, 
and potentially financial penalties on healthcare systems.
    Other commenters expressed confusion regarding the proposed 
revisions to the Hospital VBP Program's regulatory text, and requested 
clarification about whether measures would continue to be adopted in 
the Hospital IQR Program and publicly reported on Hospital Compare for 
one year prior to adoption in the Hospital VBP Program.
    Response: We thank the commenters for their comments, but emphasize 
that our proposal to revise the Hospital VBP Program regulations at 42 
CFR 412.164(a) does not affect the underlying statutory requirements of 
the Hospital VBP or Hospital IQR Programs. As required under sections 
1886(o)(2)(A) and 1886(o)(2)(C)(i) of the Act, we will continue to 
select measures for the Hospital VBP Program that have been specified 
for the Hospital IQR Program and refrain from beginning the performance 
period for any new measure until the data on that measure have been 
posted on Hospital Compare for at least one year. We note the statute 
does not require a measure that has met these statutory requirements to 
remain in the Hospital IQR Program at the same time as the Hospital VBP 
Program. The proposed revisions to the regulatory text only clarify 
that after a measure has met the above requirements and been adopted 
into the Hospital VBP Program measure set, it can be removed from the 
Hospital IQR Program measure set. We, therefore, disagree that this 
revision could result in harm, undue hardship, or financial penalties 
to hospitals because it does not alter the processes associated with 
adopting a new measure into the Hospital VBP Program.
    We also disagree that removing measures from the Hospital IQR 
Program after adoption by the Hospital VBP Program undermines the 
Hospital IQR Program's statutory requirements or purpose. The Hospital 
IQR Program will continue to serve as the primary quality reporting 
program for the inpatient hospital setting of care, and its authority 
to collect and report data is unaffected by this revision to the 
Hospital VBP Program's regulatory text. We believe removing certain 
measures from the Hospital IQR Program that have transitioned to the 
Hospital VBP Program will better enable the Hospital IQR Program to 
consider new quality measures and collect and publicly report these 
data for both patients and providers without imposing an unduly high 
burden on providers.
    Comment: A number of commenters did not support CMS' proposal to 
clarify the Hospital VBP Program's regulations due to concerns this 
clarification would reduce transparency in public reporting. Some 
commenters noted that the Hospital IQR Program publicly reports measure 
performance data but the Hospital VBP Program only reports program-
specific performance scores for its measures and domains, which are not 
meaningful to consumers and are only indirectly tied to actual data. 
These commenters, therefore, expressed concern that the Hospital VBP 
Program's current public reporting is an insufficient substitute for 
the Hospital IQR Program's measure-specific reporting. A few commenters 
also noted that the Hospital IQR Program and Hospital Compare have a 
carefully outlined process for reviewing measure data with hospitals 
before releasing that data to the public, and expressed their belief 
that measures must be in the Hospital IQR Program in order to undergo 
this process. One commenter observed that the Hospital VBP Program is 
built around the Hospital IQR Program reporting infrastructure to 
establish a progression of measures to promote higher quality of care, 
and should be maintained as such. A number of commenters requested CMS 
ensure that measure-level results continue to be reported on Hospital 
Compare for all measures in the Hospital VBP program to ensure that 
there is no loss of information to the public. One commenter further 
requested that CMS consider the impact of measure removals from the 
Hospital IQR Program for hospitals that do not participate in the 
Hospital VBP Program and the potential effect on public reporting of 
data for these hospitals.
    Response: We thank commenters for sharing their concerns, and 
clarify that we will continue to report measure-level data for all of 
CMS' quality programs in a manner that is transparent and easily 
understood by patients. We note that section 1886(o)(10)(A) of the Act 
requires the Hospital VBP Program to make information available to the 
public regarding the performance of individual hospitals, including 
performance with respect to each measure, on the Hospital Compare 
website in an easily understandable format. We currently publicly 
report hospital-specific measure-level information from the Hospital 
VBP Program along with program-specific scores, and we will continue to 
solicit input from and share updates with stakeholders as we move 
forward with plans to publicly report Hospital VBP Program data in 
order to ensure the publicly reported information is sufficiently 
streamlined to avoid confusion while also providing the information 
necessary to assist patients in making decisions about their care. We 
therefore clarify that we will continue to publicly report the quality 
measure data for those measures removed from the Hospital IQR Program 
but kept in the Hospital VBP program on the Hospital Compare website in 
a manner similar to the way the data have previously been reported 
under the Hospital IQR Program. We will also take commenters' concerns 
regarding public reporting of data for hospitals not included or not 
participating in the Hospital VBP Program into account as we continue 
to assess public reporting options.
    After consideration of the public comments we received, we are 
finalizing the proposed revisions to our regulations at 42 CFR 
412.164(a).
b. 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

[[Page 41442]]

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), the measure led to 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, in the FY 2019 IPPS/LTCH/
PPS proposed rule (83 FR 20408 through 20409), we proposed 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; \234\
---------------------------------------------------------------------------

    \234\ 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 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.
    We noted 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.
    Also, in alignment with proposals that were made for other quality 
reporting and value-based purchasing programs, we proposed 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 the proposed 
rule with respect to our new Meaningful Measures Initiative and in this 
final rule, 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 proposed 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.
    Comment: Several commenters supported the adoption of the seven 
measure removal factors previously adopted by the Hospital IQR Program 
into the Hospital VBP Program. A few commenters stated that adoption of 
these factors would allow for consistency in measure evaluation 
methodology across programs. One commenter believed that the factors 
are well-established and ensure that a variety of valid reasons to 
remove a measure are considered by CMS. Another commenter agreed the 
seven measure removal factors improve the

[[Page 41443]]

usefulness of accepted quality measures included in the Hospital VBP 
Program (that is, they make them align with clinical practice, relate 
to good patient outcomes, do not lead to unintended adverse 
consequences, are feasible, and have room for improvement) and uphold 
the purpose behind the program to improve patient care and reduce 
Medicare costs. A third commenter expressed appreciation that these 
factors are guidelines and not firm requirements.
    Response: We thank commenters for their support.
    Comment: One commenter did not support adoption of measure removal 
Factor 1, ``measure performance among hospitals is so high and 
unvarying that meaningful distinctions and improvement in performance 
can no longer be made (``topped out'' measures)'' because the commenter 
believed removal of a measure immediately upon a ``topped out'' 
analysis would eliminate the ability to determine whether performance 
regresses or that the removal of the measure may result in lower 
quality of care over the long term. The commenter recommended CMS 
either consolidate measures that meet the ``topped out'' criteria but 
are still considered meaningful to stakeholders into a composite 
measure or include them as an evidence-based standard in a verification 
program. The commenter further recommended that CMS ask measure 
stewards for different data sources which may demonstrate a gap in 
performance, as well as assess whether a measure is topped-out across 
all provider types and all sub-groups of patients to identify any 
potential gaps before proposing to remove the measure.
    Response: We thank commenter for its recommendations. As we 
discussed in the proposed rule, the removal factors are intended to be 
considerations taken into account when deciding whether or not to 
remove measures, but are not firm requirements. 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. We intend to take multiple considerations into account 
when determining whether to propose a measure for removal under Factor 
1 or any of the other removal factors.
    Comment: A few commenters did not support the adoption of measure 
removal Factor 4, ``performance or improvement on a measure does not 
result in better patient outcomes'' for the Hospital VBP Program 
because the commenters were concerned the factor could be used as a 
reason to remove any measure that is not directly linked to clinical 
outcomes. These commenters asserted there is value in including 
multiple types of measures in the Hospital VBP Program, not just 
outcomes-related measures.
    Response: As we discussed in the proposed rule, the removal factors 
are intended to be considerations taken into account when deciding 
whether or not to remove measures, but are not firm requirements. 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. Although we strive to have measures in our programs that 
can drive improvement in patient health outcomes, we agree that other 
types of measures may be of value to the program as well.
    Comment: A few commenters did not support the adoption of measure 
removal Factor 6, ``collection or public reporting of a measure leads 
to negative unintended consequences other than patient harm,'' because 
the commenters believed hospitals often claim unintended consequences 
as a reason to oppose quality measurement without offering evidence to 
support such claims. The commenters therefore recommended that CMS 
require documented evidence of real consequences as opposed to 
potential or speculative consequences before removing a measure under 
this factor.
    Response: We thank commenters for their recommendation. We intend 
to take multiple sources of evidence into account when proposing to 
remove measures under any of the removal factors and always welcome 
stakeholder input.
    Comment: Many commenters supported the addition of measure removal 
Factor 8, ``the costs associated with a measure outweigh the benefit of 
its continued use in the program'' to the Hospital VBP Program. Several 
commenters supported the adoption of measure removal Factor 8 for the 
Hospital VBP Program because they believe it is appropriate for CMS to 
consider the costs to providers and the agency itself in considering 
whether to remove a measure under this factor. A number of commenters 
stated that they believed the proposed new removal factor will provide 
CMS the flexibility to streamline measures to meet the goals of the 
Meaningful Measures Initiative by reducing measures that are 
inappropriately burdensome and ensuring greater consistency in measure 
evaluation methodologies across programs. A few commenters expressed 
their agreement that the five types of costs outlined in the proposed 
rule are important to consider when creating new or revised meaningful 
measures for quality and value-based payment programs. Another 
commenter believed that eliminating measures that are costly and have a 
limited benefit to program objectives allows providers to focus more 
efforts on reporting and improving performance on measures that benefit 
provider patient populations.
    Response: We thank commenters for their support. We note that the 
five types of costs listed in the FY 2019 IPPS/LTCH PPS proposed rule 
were intended to provide examples of costs we would assess when 
removing a measure under measure removal Factor 8, and were not 
intended to comprise an exhaustive list of cost types. Costs assessed 
under this measure removal factor would include direct and indirect 
costs, financial and otherwise, to stakeholders including but not 
limited to, patients, caregivers, providers, CMS, healthcare 
researchers, healthcare purchasers, and other entities. We also believe 
that while a measure's use in the Hospital VBP Program may benefit many 
entities, a key benefit is to patients and their caregivers through 
incentivizing the provision of high quality care and through providing 
publicly reported data regarding the quality of care available.
    Comment: Several commenters that supported the adoption of measure 
removal Factor 8 also requested additional information and transparency 
on the factors used to determine costs and benefits, including factors 
that deem the cost to be burdensome, whether the costs exceed the 
benefits, the nature of the burden that the removal of a measure 
relieves, and methods or criteria used to assess when the measure cost 
or burden outweighs the benefits of retaining it. One commenter 
supported measure removal Factor 8, but did not agree with how CMS 
applied its cost assumptions, questioning how costs can be reduced for 
hospitals by removing a measure from one program when the measure 
remains in another program.
    Response: We intend to be transparent in our assessment of measures 
under this measure removal factor. As described above, there are 
various considerations of costs and benefits, direct and indirect, 
financial and otherwise, that we will evaluate in applying removal 
Factor 8, and we will take into consideration the perspectives of 
multiple stakeholders. However, because we intend to evaluate each

[[Page 41444]]

measure on a case-by-case basis, and each measure has been adopted to 
fill different needs in the Hospital VBP Program, we do not believe it 
would be meaningful to identify a specific set of assessment criteria 
to apply to all measures. We believe costs include costs to 
stakeholders such as patients, caregivers, providers, CMS, and other 
entities. In addition, we note that the benefits we will consider 
center around benefits to patients and caregivers as the primary 
beneficiaries of our quality reporting and value-based payment 
programs. When we propose to remove a measure under this measure 
removal factor, we will provide information on the costs and benefits 
we considered in evaluating the measure.
    We also recognize that hospitals would still be required to monitor 
measures removed from one program but retained in another quality 
program. However, we believe that the simplification benefits hospitals 
because they will no longer be required to identify discrepancies in 
reporting and identify whether those discrepancies are due to differing 
measure specifications or due to potential CMS measure calculation 
error. Furthermore, we believe this simplification will benefit 
patients and caregivers because they will not need to review data 
submitted on the same or similar metrics through multiple programs to 
compare quality of care across multiple providers.
    Comment: Several commenters supported the adoption of measure 
removal Factor 8 but also recommended specific things the commenters 
believed CMS should consider in the assessment of costs and benefits, 
including: The mode of data collection and reporting; input from 
relevant clinical experts and patient perspectives; the value of 
consistency in program measure sets; whether removing measures creates 
a gap in the measure set; resources required for providers to perform 
well on the measure; costs associated with contracting out or otherwise 
paying external vendors; costs associated with adding processes to 
collect data to inform the measure; whether new processes added to 
collect data on the measure will duplicate efforts with existing tasks; 
and whether the process involves completing more steps or tasks as it 
produces outputs for measurement. Commenters also requested that CMS 
clarify the process for seeking input of stakeholders in the decision-
making process.
    Response: We note that in our proposal to adopt this measure 
removal factor (83 FR 20409), we stated that we will evaluate costs and 
benefits on a case-by-case basis and identified several types of costs 
to provide examples of costs which we would evaluate in this analysis. 
These costs include, but are 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 maintenance and public display; and/or (5) 
the provider and clinician cost associated with compliance with other 
federal and/or state regulations (if applicable). This was not intended 
to be a complete list of the potential factors to consider in 
evaluating measures.
    The other factors suggested by commenters are additional factors 
that we will consider in evaluating the costs and benefits of each 
measure on a case-by-case basis under measure removal Factor 8. For 
example, resources for quality improvement is an example of a cost that 
would be evaluated on a case-by-case basis because we believe that 
investing resources in quality improvement is an inherent part of 
delivering high-quality, patient-centered care, and is therefore, 
generally not considered a part of the quality reporting program 
requirements. However, there may be cases where a measure would require 
such a specific quality improvement initiative that it would be 
appropriate to consider this cost to be associated with the measure. We 
also value transparency in our processes, and continually seek 
stakeholder input through education and outreach activities, such as 
webinars and national provider calls, stakeholder listening sessions, 
through rulemaking, and other collaborative engagements with 
stakeholders.
    Comment: Several commenters did not support the adoption of 
proposed measure removal Factor 8 because commenters believed the 
factor may not adequately consider the value a measure holds for 
beneficiaries or consumers, and other commenters requested additional 
information about how the calculation applies to beneficiaries. Some 
commenters recommended that CMS develop a standardized evaluation and 
scoring system with multi-stakeholder input to ensure measure removal 
Factor 8 appropriately balances the needs of all healthcare 
stakeholders, and to consider how beneficiary decision-making occurs 
and ensure that policies do not demand beneficiaries make life-altering 
decisions based on scant information, inadequate tools, or insufficient 
assistance. A few commenters requested that CMS adopt a more inclusive 
process that accounts for the perspective of both patients and 
clinicians when making measure removal determinations.
    Response: We believe that various stakeholders may have different 
perspectives on how to define costs as well as benefits. Because of 
these challenges, we intend to evaluate each measure on a case-by-case 
basis, while considering input from a variety of stakeholders, 
including, but not limited to: Patients, caregivers, patient and family 
advocates, providers, provider associations, healthcare researchers, 
healthcare purchasers, data vendors, and other stakeholders with 
insight into the direct and indirect benefits and costs (financial and 
otherwise) of maintaining the specific measure in the Hospital VBP 
Program. However, we also agree that while a measure's use in the 
Hospital VBP Program may benefit many entities, the primary benefit is 
to patients and their caregivers through incentivizing high-quality 
care and providing publicly reported data regarding the quality of care 
available. We note that we intend to assess the costs and benefits to 
program stakeholders, including but not limited to, those listed above.
    Comment: A few commenters that did not support adoption of removal 
measure removal Factor 8 expressed concern that the proposal does not 
define how burden and benefits would be evaluated or weighted. One 
commenter asked how that definition is to be tested and what results 
will empirically determine whether there is, or is not, a cost-benefit 
of the measure.
    Response: We believe that various stakeholders may have different 
perspectives on how to define costs as well as benefits. Because of 
these challenges, we intend to evaluate each measure on a case-by-case 
basis, while considering input from a variety of stakeholders, 
including, but not limited to: Patients, caregivers, patient and family 
advocates, providers, provider associations, healthcare researchers, 
healthcare purchasers, data vendors, and other stakeholders with 
insight into the direct and indirect benefits and costs, financial and 
otherwise, of maintaining the specific measure in the Hospital VBP 
Program. We note that we intend to assess the costs and benefits to all 
program stakeholders, including but not limited to, those listed above. 
We do not believe it is necessary to

[[Page 41445]]

empirically test measure removal factors. These factors are part of a 
coordinated approach to developing a balanced measure set, and may 
affect measures in different programs differently because of the 
specific needs of each program
    Comment: A few commenters that did not support removal Factor 8 
expressed concern that the proposal did not reference the cost to 
patients or to the Medicare program for the treatment people may need 
following events. One commenter asserted it is difficult to measure the 
benefits to Medicare beneficiaries (such as good quality of care, 
timely care, good communication between providers and individuals and 
their family caregivers, and quality of life) using a dollar metric. 
Another commenter recommended that CMS also consider whether a more 
efficient alternative reporting method is available to collect the 
performance data under this analysis. This commenter further stated 
that any assessments of the benefits of continued use of a given 
measure must account for the public's right to quality and cost 
transparency and consumers' reliance on publicly available information 
to make important healthcare decisions, in addition to the potential 
impact of the measure on improving care quality (for example, size of 
performance gap).
    Response: We do intend to assess the costs and benefits to a 
variety of program stakeholders, including but not limited to, those 
listed above. As noted, the list of potential costs we described in the 
proposed rule was not intended to be a complete list of the potential 
factors to consider in evaluating measures. The other factors suggested 
by commenters are additional factors that we will consider in 
evaluating the costs and benefits of each measure on a case-by-case 
basis under measure removal Factor 8. We also agree with the commenter 
that it is useful to consider whether a more efficient alternative is 
available to collect performance data and believe it would be 
appropriate to consider this in our evaluation of measures under 
measure removal Factor 8. While a measure's use in the Hospital VBP 
Program may benefit many entities, the primary benefit is to patients 
and their caregivers through incentivizing provision of high quality 
care and through providing publicly reported data regarding the quality 
of care available. Therefore, we intend to consider the benefits, 
especially those to patients and their families, when evaluating 
measures under this measure removal factor.
    Comment: A few commenters that did not support measure removal 
Factor 8 expressed concern that focusing on cost alone may be 
problematic and does not reflect the potential for assessing or 
improving care quality that are important to patients and families.
    Response: We intend to balance the costs with the benefits to a 
variety of stakeholders. These stakeholders include, but are not 
limited to, patients and their families or caregivers, providers, the 
healthcare research community, healthcare purchasers, and patient and 
family advocates. Because for each measure the relative benefit to each 
stakeholder may vary, we believe that the benefits to be evaluated for 
each measure are specific to the measure and the original rationale for 
including the measure in the program.
    We also understand that while a measure's use in the Hospital VBP 
Program may benefit many entities, the primary benefit is to patients 
and caregivers through incentivizing the provision of high quality care 
and through providing publicly reported data regarding the quality of 
care available. One key aspect of patient benefits is assessing the 
improved beneficiary health outcomes if a measure is retained in our 
measure set. We believe that these benefits are multifaceted, and are 
illustrated through the domains of the Meaningful Measures Initiative. 
When the costs associated with a measure outweigh the evidence 
supporting the benefits to patients with the continued use of a measure 
in the Hospital VBP Program we believe it may be appropriate to remove 
the measure from the program.
    Comment: One commenter expressed its belief that a fair and 
appropriate number of measures should be retained in the Hospital VBP 
Program and that measure removals and adoptions should take into 
account the time and resources required to adjust and adapt to changing 
program requirements. The commenter specifically recommended that CMS 
implement a standard 24-month timeline for measure adoptions and 
removals in order to allow hospitals time to budget, plan, adopt, and 
operationalize any necessary changes to their plans and workflows.
    Response: We attempt to ensure that a fair and appropriate number 
of measures are retained in the Hospital VBP Program. We note that in 
our proposal to adopt this measure removal factor (83 FR 20409), we 
stated that we will evaluate costs and benefits on a case-by-case basis 
and identified several types of costs to provide examples of costs 
which we would evaluate in this analysis. These costs include, but are 
not limited to, those listed in the FY 2019 IPPS/LTCH PPS proposed rule 
(83 FR 20409). This was not intended to be a complete list of the 
potential factors to consider in evaluating measures. The other factors 
suggested by commenters are additional factors that we will consider in 
evaluating the costs and benefits of each measure on a case-by-case 
basis under measure removal Factor 8. Regarding commenter's 
recommendation to implement a 24-month timeline for measure adoptions 
and removals, we do not believe such a timeline is necessary to adopt a 
measure given that hospitals would have been reporting measure data 
under the Hospital IQR Program prior to adoption into the Hospital VBP 
Program. We also believe it is important to retain flexibility in the 
timing of removing measures from the program, especially when we have 
determined that the costs of continued use in the program outweigh the 
benefits.
    Comment: One commenter recommended that CMS adopt an additional 
removal factor addressing measure reliability and/or validity, under 
which CMS would remove an existing measure from the program when a new 
measure that provides results which are more reliable and/or valid 
becomes available. The commenter expressed its belief that such a 
factor would better recognize that as measure development and 
implementation become more sophisticated, these new measures are better 
able to precisely and accurately represent the quality of care provided 
to patients.
    Response: We thank the commenter for its suggestion and will take 
this under consideration when considering future policies for the 
program. We consider validity and reliability in determining whether to 
adopt a measure and will continue to do so as we evaluate the ongoing 
measure sets.
    Comment: One commenter recommended that the Hospital VBP Program 
also adopt measure retention factors, such as: (1) Measure aligns with 
other CMS and HHS policy goals; (2) measure aligns with other CMS 
programs, including other quality reporting programs; and (3) measure 
supports efforts to move the program towards reporting electronic 
measures.
    Response: We note that the Hospital VBP Program currently has a 
policy to retain measures from prior program years for each successive 
program year, unless otherwise proposed and finalized. We thank 
commenter for their suggestions and also note that under the Meaningful 
Measures Initiative, as described in section I.A.2. of the preambles of 
the proposed rule and in this final rule, we will take into

[[Page 41446]]

consideration measures that could allow us to align across programs 
and/or with other payers, as well as to 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).
    After consideration of the public comments we received, we are 
finalizing our proposals to adopt for the Hospital VBP Program the 
measure removal factors currently in the Hospital IQR Program, and a 
measure removal Factor 8, where ``the costs associated with a measure 
outweigh the benefit of its continued use in the program'' beginning 
with FY 2019 program year.
    In addition to the proposals discussed above, to further align with 
policies adopted in the Hospital IQR Program (74 FR 43864), we proposed 
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.
    Comment: Several commenters supported the proposal to remove a 
measure from the Hospital VBP Program without rulemaking if it poses a 
patient safety concern.
    Response: We thank the commenters for their support.
    Comment: A few commenters recommended that CMS be transparent in 
the process for determining if a measure meets this criterion and to 
promptly respond to stakeholders' concerns when potential patient 
safety concerns are identified. One commenter recommended use of the 
rulemaking process and stakeholder input wherever possible because 
partnership in reaching measure consensus will help to avoid unintended 
consequences for all. Another commenter requested clarification on the 
level of evidence needed to rapidly remove a measure from a program 
without rulemaking. A third commenter recommended that CMS continuously 
monitor the impact of measures and emerging literature to better 
position itself to remove measures proactively before widespread 
patient harm occurs rather than after harm has already occurred.
    Response: We thank commenters for their recommendations. We intend 
to be transparent about our concerns and seek input from relevant 
stakeholders when possible, depending on the urgency of the patient 
safety concern. While we do not believe it is possible to anticipate 
the exact level of evidence that would be required to take such action, 
we would take such considerations seriously and do not anticipate 
making such a decision based on scant evidence. Rather, we believe that 
a high level of evidence would be required in most circumstances, 
depending on the patient safety concern at issue, such as consistent 
evidence from multiple sources. We currently monitor various sources to 
assess impacts and effects of measures and plan to continue doing so.
    Comment: A few commenters did not support CMS' proposal to remove 
measures for patient safety concerns without rulemaking. Other 
commenters expressed concern with circumventing the rulemaking process 
and delaying opportunity for public comment from multiple stakeholders. 
One commenter expressed concern because numerous public and private 
purchasers have come to employ measures from the Hospital VBP Program 
in their own accountability strategies. Another commenter expressed 
concern with how this approach may impact a hospital's overall 
performance score and payment adjustment, especially for safety-net 
hospitals and those operating in underserved areas that treat a 
disproportionate share of high risk patients. A third commenter 
recommended that this authority should be used narrowly and rarely, if 
at all, and only in the most urgent of circumstances. This commenter 
also recommended that it be exercised transparently in ways that 
prioritize beneficiary safety and access to information, and, if it is 
used, to seek public comment, at that time, on continued use of this 
authority.
    Response: We thank the commenters for their input. We intend to use 
this authority narrowly and in only those circumstances that pose 
specific and serious patient safety concerns. Although we may take this 
action outside of rulemaking, we intend to be transparent about 
concerns and seek input from relevant stakeholders to the extent 
possible, depending on the urgency of the concern. We also appreciate 
commenter's concern regarding the impact of a measure removal under 
this policy on a hospital's overall performance score and payment 
adjustment, and will attempt to mitigate such impacts to the extent 
program requirements may allow. While we note that we would remove a 
measure under this policy based on specific patient safety concerns, we 
would also analyze the potential impacts on scoring and payment 
adjustments. However, any changes to program requirements, including 
any potential changes to the minimum number of measures required for a 
domain score, would be proposed through rulemaking. We will also 
consider commenters' other suggestion regarding transparency, for the 
future.
    After consideration of the public comments we received, we are 
finalizing 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. 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 described in section I.A.2. of the 
preambles of the proposed rule and in this final rule.
    As part of this review, we stated in the proposed rule that 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

[[Page 41447]]

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 
stated in the proposed rule that 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. We stated 
that 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 stated that 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 the FY 2019 IPPS/LTCH/PPS proposed rule (83 FR 20409 through 
20412), we proposed 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); \235\
---------------------------------------------------------------------------

    \235\ 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).
    In addition to the measure-specific comments discussed below, we 
received a number of comments addressing all measures proposed for 
removal as a single set.
    Comment: Many commenters expressed general support for CMS' 
proposals to remove 10 measures that are duplicative, burdensome, or 
otherwise do not meet the goals of CMS' Meaningful Measure Initiative 
from the Hospital VBP Program. Many of these commenters expressed 
particular support for these measure removals because they would reduce 
the number of duplicative measures used across CMS' quality programs 
and thereby increase program alignment. Some commenters noted that 
removing these measures would simplify program participation 
requirements and reduce the time and resources required to track 
performance across multiple programs, and in turn allow hospitals more 
time to focus on implementing quality care improvements. A few 
commenters stated this program alignment will also reduce confusion for 
patients and providers associated with each program's respective focus 
and purpose. One commenter expressed general support for these measure 
removals as a way to streamline and align CMS' quality programs, but 
asserted the removals will not have any actual impact on the burden of 
reporting as the measures will continue to be used in other programs.
    Response: We thank commenters for their support. We recognize that 
hospitals would still be required to monitor measures removed from one 
program, but retained in another quality program. However, we believe 
this simplification benefits hospitals because they will reduce the 
burden associated with identifying discrepancies in reporting and 
determining whether those discrepancies are due to differing measure 
specifications or due to CMS measure calculation error. Furthermore, we 
believe this simplification will benefit patients and caregivers 
because they will not need to review data submitted on the same or 
similar metrics through multiple programs to compare quality of care 
across multiple providers.
    Comment: One commenter expressed particular support for a smaller 
set of measures in the Hospital VBP Program because the commenter 
believed this would enable hospitals that have historically fared 
poorly in the Hospital VBP Program to improve performance and 
potentially earn an incentive payment.
    Response: We thank the commenter for its support.
    Comment: A few commenters did not support CMS' proposal to remove 
any measures from the Hospital VBP Program. Some of these commenters 
asserted the measures proposed for removal are all valid for use in a 
value-based purchasing program and therefore did not support their 
removal.
    Response: We agree with commenters that the measures proposed for 
removal from the Hospital VBP Program are valid measures; for this 
reason, we are not proposing to remove the measures from all of CMS' 
quality programs, only to reduce instances where the same measure is 
used in multiple programs

[[Page 41448]]

such that the costs outweigh the benefits of their continued use. We 
note that the AMI Payment, HF Payment, PN Payment, and PC-01 measures 
will continue to be used in the Hospital IQR Program. While the 
Hospital IQR Program is not a value-based purchasing program, we 
believe continued public reporting of these measures will appropriately 
incentivize continued high performance or improvement on these 
measures. We further note that, as discussed in section IV.I.2.c.(2) of 
the preamble of this final rule, below, we are not finalizing the 
removal of six safety measures and note that those measures will 
continue to be used both in the Hospital VBP Program and in the HAC 
Reduction Program.
(1) Removal of PC-01: Elective Delivery (NQF #0469)
    We proposed 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 
finalizing in section IV.I.2.b. of the preamble of this final 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 proposed 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.
    Comment: The majority of commenters that specifically commented on 
the proposed removal of PC-01 supported removal of PC-01 from the 
Hospital VBP Program. One commenter supported the removal of PC-01 
because although hospitals should continue to strive for 100 percent of 
early elective deliveries to have a valid clinical indication, 
performance on this measure should not be expected to reach zero 
percent, nor should hospital payments in value-based purchasing 
programs be based on this benchmark. One commenter supported removal 
because the measure no longer meaningfully differentiates hospitals for 
purposes of Hospital VBP Program scoring. One commenter supported 
removal but believed unintended patient harm is a more appropriate 
rationale because the commenter believed striving for zero percent 
performance is not a safe practice as it may inadvertently prevent a 
medically indicated delivery from being performed prior to 39 weeks due 
to facilities trying to reach a zero percent performance threshold.
    Response: We thank commenters for their support. We agree that with 
both the benchmark at 0.000000 and the achievement threshold at 
0.000000 for the PC-01 measure for the FY 2020 program year, we believe 
the measure no longer meaningfully differentiates performance among 
most participating hospitals for Hospital VBP scoring purposes. We lack 
data or anecdotal evidence indicating use of this measure in CMS' 
quality programs is causing unintended consequences. However, because 
this measure will remain in the Hospital IQR Program, we will continue 
to monitor for any unintended consequences associated with its 
continued use in a CMS reporting program.
    Comment: One commenter did not support CMS' proposal to remove the 
PC-01 measure from the Hospital VBP Program because it could detract 
focus from this important (as indicated by CMS) measure, thus the 
commenter recommended that the PC-01 measure be retained but allow its 
collection via electronic means (that is, as an eCQM) for the Hospital 
VBP Program, the Hospital IQR Program, and Medicare and Medicaid 
Promoting Interoperability Programs and, where possible, allow 
organizations to elect (as resources and systems allow) the ability to 
submit the measures electronically or via manual abstraction.
    Response: As discussed in section VIII.A.5.b.(9)(e) of the preamble 
of this final rule, the chart-abstracted version of the PC-01 measure 
will be retained in the Hospital IQR Program for public reporting, 
which we believe will be sufficient to incentivize continued high 
performance or improvement on the measure. We note that the eCQM 
version of the PC-01 measure has not been adopted into the Hospital VBP 
Program. We also refer readers to sections VIII.A.5.b.(9)(e) and 
VIII.D.8.b. of the preamble of this final rule for a discussion about 
our decisions to finalize removal of the eCQM version of PC-01 from the 
Hospital IQR Program and the Medicare and Medicaid Promoting 
Interoperability Programs.

[[Page 41449]]

    Comment: One commenter disagreed with applying measure removal 
Factor 8 as a rationale for CMS' proposal to remove the PC-01 measure 
from the Hospital VBP Program because the commenter believed removing 
the measure from the Hospital VBP Program while retaining it in the 
Hospital IQR Program is inconsistent with measure removal Factor 8.
    Response: We do not agree that removing the measure from the 
Hospital VBP Program while retaining it in the Hospital IQR Program is 
inconsistent with measure removal Factor 8. We believe the costs and 
benefits of a measure should be evaluated on a program by program basis 
because the costs and benefits of continued use of a measure in one 
program may be different than the costs and benefits of continued use 
in another program. As discussed in the proposed rule (83 FR 20410), we 
believe that the costs associated with retaining the PC-01 measure 
outweigh the benefits associated with its continued use in the Hospital 
VBP Program because we believe the measure no longer meaningfully 
differentiates performance among most participating hospitals for 
scoring purposes in the Hospital VBP Program. We believe removing PC-01 
from the Hospital VBP Program while maintaining it in the Hospital IQR 
Program will reduce costs and potential confusion for providers to 
review different reports and track slightly different measure rates 
across programs, while continuing to incentivize continued high 
performance through public reporting in the Hospital IQR Program.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the Elective Delivery (NQF #0469) 
(PC-01) measure from the Hospital VBP Program beginning with the FY 
2021 program year.
(2) Maintenance of Healthcare-Associated Infection (HAI) Measures and 
the Patient Safety and Adverse Events (Composite) Measure
    We proposed 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 also proposed 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 the 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. In the proposed rule, we 
stated that 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 stated that we 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 preambles of the proposed rule and this final rule for 
how data for the same HAI measures in the HAC Reduction Program will 
continue to be reported by hospitals to CMS via the CDC's NHSN and 
posted on our Hospital Compare website. In the proposed rule, we stated 
that we believe removing these measures from the Hospital VBP Program, 
but retaining them in the HAC Reduction Program, would strike an 
appropriate balance of benefits and costs associated with these 
measures across payment programs.
    Therefore, we proposed 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 also proposed 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.\236\ 
As the PSI 90 measure would not be incorporated into TPS calculations 
until the FY 2023 program year, we stated in the proposed rule that we 
could operationally remove this 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 the proposed rule, where we discussed our proposals 
to remove the Safety domain from the Hospital VBP Program and to 
increase the weight of the Clinical Care domain (which we proposed to 
rename as the Clinical Outcomes domain) if our proposals to remove all 
of the current Safety domain measures were adopted, beginning with the 
FY 2021 program year.
---------------------------------------------------------------------------

    \236\ 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 proposed 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.
---------------------------------------------------------------------------

    Comment: Many commenters did not support CMS' proposals to remove 
the five HAI measures and PSI 90 from the

[[Page 41450]]

Hospital VBP Program because the commenters believe patient safety 
measures should remain in all payment programs to sufficiently 
incentivize continued improvement on these measures and prioritize 
practices that ensure safe care. A number of commenters expressed 
concern that the HAC Reduction Program payment penalty does not 
sufficiently incentivize medium- and high-performing hospitals to 
continue to strive for continuous improvement. A few commenters 
expressed concern that removal of the HAI measures from the Hospital 
VBP Program sends a message to hospitals that mediocre performance on 
hospital safety measures is acceptable, and could result in hospitals 
receiving incentive payments under the Hospital VBP Program despite 
having a high rate of preventable infections. One commenter expressed 
concern that even with the HAI measures being used in both the Hospital 
VBP Program and HAC Reduction Program, some data may indicate hospitals 
have performed worse over time on four of these measures (MRSA, CLABSI, 
Colon and Abdominal Hysterectomy SSI, CDI). Another commenter expressed 
concern that retaining the measures in only the HAC Reduction Program 
might result in continually penalizing hospitals that serve 
predominantly high-risk patients even if a hospital's individual 
performance improves from year to year. Another commenter expressed 
concern that the penalty only structure of the HAC Reduction Program 
could create a defeatist attitude and recommended that CMS examine ways 
to use simple, rationalized, and appropriately-incented payment 
structures to encourage quality improvement within hospitals.
    Response: We agree that patient safety is a high priority focus of 
CMS' quality programs and, as part of the Meaningful Measures 
Initiative, we strive to put patients first. Within the framework of 
the Meaningful Measures and Patients Over Paperwork initiatives, we 
seek to ensure quality measurement is simultaneously useful and 
impactful for patients and not overly burdensome on providers such that 
it takes time and resources away from providing quality care to 
patients. In evaluating the costs and benefits of keeping certain 
measures in more than one CMS quality program, we found determining the 
right balance in using these patient safety measures in our programs a 
challenge with various stakeholders who may have different 
perspectives.
    We appreciate the many commenters who provided feedback and 
recommendations on this important topic. In particular, we appreciate 
commenters who conveyed the multifaceted benefits of retaining the 
safety measures in more than one value-based purchasing program, and we 
agree that while a measure's use in the Hospital VBP Program may 
benefit many entities, the primary benefit is to patients and their 
caregivers through incentivizing the provision of high quality care. 
While we initially sought to clearly delineate the safety focus between 
the Hospital VBP Program and the HAC Reduction Program for program 
simplification, we agree with commenters that these measures cover 
topics of critical importance to quality improvement and patient safety 
in the inpatient hospital setting. These measures track infections and 
adverse events that could cause significant health risks and other 
costs to Medicare beneficiaries; therefore, we agree it is appropriate 
and important to provide appropriate incentives for hospitals to avoid 
them through inclusion in more than one program.
    In addition, regarding performance over time on the HAI measures, 
we refer readers to recently updated AHRQ/CMS results that show 
continued improvement on several hospital acquired conditions.\237\ 
This report indicates that national efforts to reduce hospital-acquired 
conditions, such as adverse drug events and injuries from falls, helped 
prevent an estimated 8,000 deaths and saved approximately $2.9 billion 
between 2014 and 2016. We believe these findings further support 
retaining the HAI measures and PSI 90 measure in both the Hospital VBP 
and HAC Reduction Programs, as both programs provide hospitals 
different but complimentary incentives to continually strive for 
improvement and high performance on these measures. Importantly, the 
Hospital VBP Program provides an incentive for hospitals to achieve 
high performance on these measures, with both positive as well as 
negative payment adjustments available based on each hospital's Total 
Performance Score; whereas the HAC Reduction Program imposes a payment 
reduction on only the lowest quartile of hospitals.
---------------------------------------------------------------------------

    \237\ Agency for Healthcare Research and Quality (AHRQ), 
``Declines in Hospital-Acquired Conditions Save 8,000 Lives and $2.9 
Billion in Costs,'' News release, (June 5, 2018). Available at: 
https://www.ahrq.gov/news/newsroom/press-releases/declines-in-hacs.html?utm_source=ahrq&utm_medium=en-3&utm_term=&utm_content=3&utm_campaign=ahrq_en6_5_2018; AHRQ. 
National Scorecard on Hospital-Acquired Conditions: Updated Baseline 
Rates and Preliminary Results 2014-2016. (June 2018). Available at: 
https://www.ahrq.gov/sites/default/files/wysiwyg/professionals/quality-patient-safety/pfp/natlhacratereport-rebaselining2014-2016_0.pdf.
---------------------------------------------------------------------------

    For these reasons, we are not finalizing our proposal to remove the 
five HAI measures or the PSI 90 measure from the Hospital VBP Program. 
We will retain the HAI measures and PSI 90 measure in both the Hospital 
VBP and HAC Reduction Programs. However, in order to reduce some cost 
and burden for providers in having to track these safety measures in 
multiple programs, while maintaining a strong financial incentive to 
perform well on the measures, we are finalizing our proposal to remove 
these measures from the Hospital IQR Program. We refer readers to 
section VIII.A.5.b.(2) of the preamble of this final rule where we 
discuss these measures in the Hospital IQR Program.
    Comment: A number of commenters stated their belief that 
incentivizing performance improvement is preferable to the penalty-only 
structure of the HAC Reduction Program and therefore recommended that 
CMS should retain the HAI measures and the PSI 90 measure in the 
Hospital VBP Program and eliminate them from the HAC Reduction Program, 
or modify the HAC Reduction Program to incorporate positive payment 
incentives like those currently used in Hospital VBP Program. A few of 
these commenters expressed concern that risk adjustment strategies 
within the HAC Reduction Program are limited and do not always account 
for facility-specific populations (for example, trauma or other 
facilities with a high percentage of high risk or vulnerable patients), 
which might result in continually penalizing hospitals that serve 
predominantly high-risk patients even if a hospital's individual 
performance improves from year to year, while the Hospital VBP Program 
provides incentives for each facility's performance improvement as well 
as penalties for poor performance.
    One commenter specifically recommended retaining the PSI 90 measure 
in the Hospital VBP Program because the commenter believes the specific 
measures in the composite target the most important quality priorities, 
directly address patient outcomes that impact vulnerable Medicare 
beneficiaries, and encourage hospitals to prioritize the prevention of 
adverse events that are costly to treat. Another commenter expressed 
concern that removing these measures from the Hospital VBP Program will 
also eliminate hospitals' ability to receive positive incentive 
payments for HAI measure performance in the Hospital VBP Program. A 
third commenter noted the importance of recognizing that each

[[Page 41451]]

of these programs is structured differently, with different goals and 
policy mechanisms, and therefore recommended that CMS retain patient 
safety measures in the quality program that will have the most 
potential to influence provider behavior.
    Response: We thank the commenters for their recommendations. We 
agree with commenters that the HAC Reduction Program and Hospital VBP 
Program apply different scoring methodologies and different incentive 
structures. The HAC Reduction Program, as outlined in section 1886(p) 
of the Act, reduces payments to the lowest quartile of hospitals for 
excess hospital-acquired conditions in order to increase patient safety 
in hospitals. The Hospital VBP Program, on the other hand, is an 
incentive program that redistributes a portion of the Medicare payments 
made to hospitals based on their performance on a variety of measures. 
All hospitals in the program are incentivized to achieve high 
performance on all the measures, and hospitals may receive positive as 
well as negative payment adjustments based on their overall 
performance. As stated above, we believe the critical importance of 
these measures to patient safety and maintaining a strong financial 
incentive to perform well on the measures warrant their continued 
inclusion in both programs.
    Therefore, although these measures will continue to exist in more 
than one program, we clarify that they will be used and calculated 
under different scoring methodologies. Because we continue to consider 
patient safety and reducing hospital-acquired conditions high 
priorities (as reflected in the Meaningful Measures Initiative quality 
priority of making care safer by reducing harm caused in the delivery 
of care), we will continue to monitor the HAC Reduction and Hospital 
VBP Programs and analyze the impact of our program policies, including 
any unintended consequences associated with continuing to use these 
measures in more than one program. We refer readers to section 
VIII.A.5.b.(2) of the preamble of this final rule where we discuss 
finalizing our proposals to remove these measures from the Hospital IQR 
Program. We also refer readers to section IV.J.4.b., e. and h. of the 
preamble of this final rule for additional discussion of how the 
measures in the HAC Reduction Program will continue to be reported by 
hospitals, validated, and posted on the Hospital Compare website.
    We note that all of these safety measures apply risk adjustment 
methodologies that have been reviewed by the NQF and are endorsed 
measures. We will continue to consult with the CDC and take feedback 
about measure risk adjustment into consideration for measure 
maintenance and future refinement of measure specifications.
    Comment: A few commenters recommended that CMS explore other 
solutions to address duplication of safety measures across CMS quality 
programs, including adjusting reporting periods or allow hospitals to 
report on a measure once for use in multiple accountability programs. A 
few commenters believed that consolidating the measures in only a 
single program does not relieve a significant burden on facilities 
because data are submitted in the same way to be used for the various 
programs. One commenter noted that the costs associated with even one 
additional HAI in any of the impacted facility types far outweighs the 
estimated annual savings associated with removing the HAI measures from 
the Hospital VBP Program. One commenter believed that as many as 
440,000 Americans die from preventable hospital errors each year.
    Response: We thank commenters for their input. We recognize that 
there are many factors to be considered in assessing the costs and 
benefits of a measure under removal Factor 8. We will continue to 
monitor the HAC Reduction and Hospital VBP Programs and analyze the 
impact of our program policies, including the impact on patient safety 
and the reduction of preventable errors and HAIs.
    Comment: Numerous commenters supported CMS' proposals to remove the 
five HAI measures and PSI 90 measure from the Hospital VBP Program 
because it would eliminate duplication of the measures with the HAC 
Reduction Program and thereby reduce the possibility of double 
penalties in two separate pay-for-performance programs. Some commenters 
specifically supported removing these measures because they believed 
the duplicative and overlapping penalties are detrimental to hospitals 
serving vulnerable populations. Some of these commenters also supported 
removing these measures because doing so would reduce the potential for 
conflicting signals on performance. One commenter specifically 
expressed its belief that removing these measures will lead to greater 
alignment and consistency across programs.
    Response: We thank the commenters for their support of our 
proposals. However, for the reasons discussed above, we are not 
finalizing removal of these measures from the Hospital VBP Program. We 
believe retaining these safety measures in two value-based purchasing 
programs (and removing them from the Hospital IQR Program, as finalized 
in section VIII.A.5.b.(2) of this final rule) will at least partly 
address the concerns of both commenters who want to retain these 
measures and commenters who supported their removal and de-duplication.
    Comment: Several commenters stated that transparency through 
continued public reporting of performance data for the HAI measures is 
important. One commenter recommended that CMS make public additional 
information demonstrating the progress made in quality, patient safety, 
and patient outcomes since the implementation of the Hospital VBP and 
HAC Reduction Programs.
    Response: We agree with commenters that maximizing transparency 
through public reporting of performance data is a critical component of 
CMS' quality programs, which is why we intend to continue publicly 
reporting the five HAI measures and the PSI 90 measure on the Hospital 
Compare website in a consumer-friendly manner, and data will continue 
to be available at: https://data.medicare.gov/. We reiterate that 
removing these measures from the Hospital IQR Program will not cease or 
otherwise interfere with collection or public reporting of these data. 
The HAI data will continue to be made publicly available on a quarterly 
basis and the PSI 90 data on an annual basis in a consumer-friendly 
manner and also through downloadable files. We note that section 
1886(p)(6) of the Act requires the HAC Reduction Program to make 
information available to the public regarding hospital-acquired 
conditions of each applicable hospital on the Hospital Compare website 
in an easily understandable format.
    We further note that section 1886(o)(10)(A) of the Act requires the 
Hospital VBP Program to make information available to the public 
regarding the performance of individual hospitals, including 
performance with respect to each measure, on the Hospital Compare 
website in an easily understandable format. We currently publicly 
report hospital-specific measure-level information from the Hospital 
VBP Program along with program-specific scores, and we will continue to 
solicit input from and share updates with stakeholders as we move 
forward with plans to publicly report Hospital VBP Program data in 
order to ensure the publicly reported information is sufficiently 
streamlined to avoid confusion while also providing the information 
necessary to assist

[[Page 41452]]

patients in making decisions about their care.
    After consideration of the public comments we received, we are not 
finalizing our proposals to remove the CAUTI, CLABSI, Colon and 
Abdominal Hysterectomy SSI, MRSA Bacteremia, and CDI measures from the 
Hospital VBP Program or our proposal to remove the PSI 90 measure from 
the Hospital VBP Program.
(3) Removal of Condition-Specific Payment Measures
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20411 through 
20412), we proposed 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 final 
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) 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 final rule, where we discuss 
finalizing our proposal to remove the MSPB measure from the Hospital 
IQR Program.
    Therefore, we proposed 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 \238\ would not be incorporated 
into TPS calculations until the FY 2021 program year and the PN Payment 
measure \239\ would not be incorporated into TPS calculations until the 
FY 2022 program year, we can operationally remove these measures from 
the program effective with the effective date of the FY 2019 IPPS/LTCH 
PPS final rule.
---------------------------------------------------------------------------

    \238\ 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 proposed 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.
    \239\ 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 proposed 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.
---------------------------------------------------------------------------

    Comment: Many commenters specifically supported CMS' proposals to 
remove the three condition-specific payment measures from the Hospital 
VBP Program due to their overlap with the MSPB measure and the 
potential for this overlap to lead to unnecessary confusion among 
hospitals and patients. A number of commenters specifically noted the 
potential for these measures to double-count services that are already 
captured under the MSPB measure. One commenter expressed its belief 
that the condition-specific payment measures are no more actionable for 
providers than the MSPB measure because the measures themselves do not 
provide any insight into where improvements should be made in the 
delivery of care across the continuum. However, a number of these 
commenters also expressed support for the use of well-designed measures 
of cost and resource use and their ability to assist in assessing the 
value of care provided to patients. One commenter expressed particular 
support for CMS' proposal to remove the HF Payment measure.
    Response: We thank the commenters for their support.
    Comment: Several commenters supported CMS' proposals to remove the 
condition-specific payment measures, but expressed concern about 
continued use of the current MSPB measure. A few commenters noted 
findings from ASPE's Report to Congress indicating that differences in 
MSPB measure performance were driven, in part, by the higher likelihood 
of dual-enrolled beneficiaries to use more expensive post-acute care 
settings, and to have higher charges during their stays in these 
settings. These commenters therefore urged CMS to improve the 
predictive power of the MSPB measure and ensure the MSPB measure can 
stand alone as a reliable and valid measure of efficiency and cost 
reduction in the Hospital VBP Program.
    Response: We thank the commenters for their support, and note the 
MSPB measure is a valid and reliable measure of Medicare spending that 
was recently re-endorsed by the NQF.\240\ As part of this endorsement 
review, we submitted both sociodemographic and socioeconomic status 
adjustment measure testing indicating such adjustments had a minimal 
impact on hospitals' measure scores, as well as demonstrating that dual 
eligibility had a low impact on MSPB measure scores and hospitals on 
the tails of score distributions were not disproportionately 
affected.\241\ The NQF Cost and Resource Use Workgroup also 
acknowledged ASPE's findings, stating ``the analysis in the appendix's

[[Page 41453]]

Supplementary Table 7 suggest that these differences may be that 
measure scores are high for both duals and non-duals in these 
hospitals. This suggests that these hospitals are relatively higher-
cost for all types of patients.'' \242\ For these reasons, we continue 
to believe the MSPB measure is an appropriate, reliable, and valid 
measure of Medicare spending, and is therefore appropriate for use in 
the Hospital VBP Program.
---------------------------------------------------------------------------

    \240\ Medicare Spending Per Beneficiary (MSPB)--Hospital, 
National Quality Forum, http://www.qualityforum.org/QPS/QPSTool.aspx?m=2158&e=1. The MSPB Measure was re-endorsed as 
specified on September 11, 2017.
    \241\ National Quality Forum, Cost and Resource Use 2016-2017 
Final Technical Report (August 20, 2017). Available at: http://www.qualityforum.org/Publications/2017/08/Cost_and_Resource_Use_2016-2017_Final_Technical_Report.aspx.
    \242\ Ibid.
---------------------------------------------------------------------------

    Comment: Some commenters did not support CMS' proposals to remove 
the AMI Payment, HF Payment, and PN Payment measures because the 
commenters believed these measures serve as strong indicators of 
hospital efficiency and are key factors in ensuring hospital 
accountability. These commenters also noted that each of these 
measures, when paired with a corresponding quality measure, could 
provide a clear, meaningful picture of value-based care delivery. A few 
of these commenters also expressed concern that removing the condition-
specific payment measures would revert the Hospital VBP Program to 
assessing efficiency and cost reduction using only the MSPB measure, 
which the commenters believe does not provide actionable or meaningful 
data to patients or providers and is difficult to operationalize at the 
service line level. One commenter expressed further concern that 
removing these measures from the Hospital VBP Program would reduce 
hospitals' incentives to provide quality care by reducing transparency 
in public reporting. Another commenter believed that although these 
measures cannot currently provide a full vision of the value of care 
because they are not linked to corresponding quality measures, the 
condition-specific payment measures have the potential to improve 
coordination and transitions of care and provide patients with more 
contextual data for using in medical decision-making, thereby 
increasing the efficiency of care across the full care continuum.
    Response: We acknowledge commenters' concerns, and thank the 
commenters for their recommendations. Section 1886(o)(2)(B)(ii) of the 
Act requires that the Hospital VBP Program ``include efficiency 
measures, including measures of `Medicare spending per beneficiary.' '' 
While we agree that condition-specific payment measures can provide 
hospitals with important data on payments associated with an episode of 
care, we continue to believe the MSPB measure also provides hospitals 
with valuable information because this measure captures a wide range of 
services provided in the inpatient hospital setting. In addition, we 
note the MSPB measure has been NQF-endorsed and is considered to be a 
valid, reliable measure of Medicare spending.
    We disagree with commenters' suggestions that removing these 
condition-specific payment measures from the Hospital VBP Program would 
reduce hospitals' incentive to provide quality care by reducing 
transparency in public reporting or reduce patients or providers from 
receiving actionable or meaningful data. As listed in the tables of 
previously adopted measures for the Hospital IQR Program in sections 
VIII.A.7. and 8. of the preamble of this final rule, these three 
measures will remain in the Hospital IQR Program. Therefore, these 
three measures will continue to be publicly reported under the Hospital 
IQR Program. In addition, we proposed to remove these measures before 
they have been incorporated into hospitals' Total Performance Scores 
(TPS) or public reporting under the Hospital VBP Program. Therefore, 
removing these measures at this time will not change performance 
scoring or public reporting under the Hospital VBP Program.
    We continue to believe that using condition-specific payment 
measures that can be paired directly with clinical quality measures, 
aligned by comparable populations, performance periods, or risk-
adjustment methodologies will help move toward enabling patients, 
payers, and providers to better assess the overall value of care 
provided at a hospital. However, we believe retaining MSPB, an overall 
hospital efficiency measure, while removing these condition-specific 
payment measures will allow for reduced costs and complexity from the 
Hospital VBP Program and across the hospital quality programs.
    After consideration of the public comments we received, we are 
finalizing our proposals 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.
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 did not propose any changes to this 
measure set.

        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 (0228)
                                  Assessment of
                                  Healthcare 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).
------------------------------------------------------------------------

[[Page 41454]]

 
                              Safety Domain
------------------------------------------------------------------------
CAUTI..........................  National Healthcare                0138
                                  Safety Network (NHSN)
                                  Catheter[dash]Associat
                                  ed Urinary Tract
                                  Infection (CAUTI)
                                  Outcome Measure.
CLABSI.........................  National Healthcare                0139
                                  Safety 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                1716
                                  Safety Network (NHSN)
                                  Facility-wide
                                  Inpatient Hospital-
                                  onset Methicillin-
                                  resistant
                                  Staphylococcus aureus
                                  (MRSA) Bacteremia
                                  Outcome Measure.
CDI............................  National Healthcare                1717
                                  Safety Network (NHSN)
                                  Facility[dash]wide
                                  Inpatient Hospital-
                                  onset Clostridium
                                  difficile Infection
                                  (CDI) Outcome Measure.
PC-01..........................  Elective Delivery......            0469
------------------------------------------------------------------------
                  Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB...........................  Medicare Spending Per              2158
                                  Beneficiary (MSPB)--
                                  Hospital.
------------------------------------------------------------------------
* In section IV.I.4.a.(1) of the preamble of this final rule, we discuss
  our decision to finalize changing the name of this domain from the
  Clinical Care domain to the Clinical Outcomes domain beginning with
  the FY 2020 program year.

e. Summary of Measures for the FY 2021, FY 2022, and FY 2023 Program 
Years
    We refer readers to the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20413 through 20414) for tables showing summaries of measures for the 
FY 2021, FY 2022, and FY 2023 program years if the measure removals 
proposed in the proposed rule were finalized. Set out below are 
summaries of measures for the FY 2021, FY 2022, and FY 2023 program 
years based on our finalized policies in this final rule.

            Summary of Measures for the FY 2021 Program Year
------------------------------------------------------------------------
       Measure short name          Domain/measure name         NQF #
------------------------------------------------------------------------
                 Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS.........................  Hospital Consumer           0166 (0228)
                                  Assessment of
                                  Healthcare Providers
                                  and Systems (HCAHPS)
                                  (including Care
                                  Transition Measure).
------------------------------------------------------------------------
                             Safety Domain *
------------------------------------------------------------------------
CAUTI..........................  National Healthcare                0138
                                  Safety Network (NHSN)
                                  Catheter Associated
                                  Urinary Tract
                                  Infection (CAUTI)
                                  Outcome Measure.
CLABSI.........................  National Healthcare                0139
                                  Safety Network (NHSN)
                                  Central Line
                                  Associated Bloodstream
                                  Infection (CLABSI)
                                  Outcome Measure.
Colon and Abdominal              American College of                0753
 Hysterectomy SSI.                Surgeons--Centers for
                                  Disease Control and
                                  Prevention Harmonized
                                  Procedure Specific
                                  Surgical Site
                                  Infection (SSI)
                                  Outcome Measure.
MRSA Bacteremia................  National Healthcare                1716
                                  Safety Network (NHSN)
                                  Facility-wide
                                  Inpatient Hospital-
                                  onset Methicillin-
                                  resistant
                                  Staphylococcus aureus
                                  (MRSA) Bacteremia
                                  Outcome Measure.
CDI............................  National Healthcare                1717
                                  Safety Network (NHSN)
                                  Facility wide
                                  Inpatient Hospital-
                                  onset Clostridium
                                  difficile Infection
                                  (CDI) Outcome 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).
------------------------------------------------------------------------

[[Page 41455]]

 
                Efficiency and Cost Reduction Domain ***
------------------------------------------------------------------------
MSPB...........................  Medicare Spending Per              2158
                                  Beneficiary (MSPB)--
                                  Hospital.
------------------------------------------------------------------------
* As discussed in section IV.I.2.c.(1) of the preamble of this final
  rule, we are finalizing our proposal to remove the PC-01 measure from
  the Hospital VBP Program beginning with the FY 2021 program year.
  However, as discussed in sections IV.I.2.c.(2) and IV.I.4.a.(2) of the
  preamble of this final rule, we are not finalizing our proposals to
  remove CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, and
  MRSA Bacteremia measures, or the Safety domain.
** In section IV.I.4.a.(1) of the preamble of this final rule, we
  discuss our decision to finalize changing 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.(3) of the preamble of this final
  rule, we are finalizing our proposal to remove two measures from the
  Efficiency and Cost Reduction domain (AMI Payment and HF Payment),
  which would have entered the program beginning with the FY 2021
  program year.


            Summary of Measures for the FY 2022 Program Years
------------------------------------------------------------------------
       Measure short name          Domain/measure name         NQF #
------------------------------------------------------------------------
                 Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS.........................  Hospital Consumer           0166 (0228)
                                  Assessment of
                                  Healthcare Providers
                                  and Systems (HCAHPS)
                                  (including Care
                                  Transition Measure).
------------------------------------------------------------------------
                             Safety Domain *
------------------------------------------------------------------------
CAUTI..........................  National Healthcare                0138
                                  Safety Network (NHSN)
                                  Catheter Associated
                                  Urinary Tract
                                  Infection (CAUTI)
                                  Outcome Measure.
CLABSI.........................  National Healthcare                0139
                                  Safety Network (NHSN)
                                  Central Line
                                  Associated Bloodstream
                                  Infection (CLABSI)
                                  Outcome Measure.
Colon and Abdominal              American College of                0753
 Hysterectomy SSI.                Surgeons--Centers for
                                  Disease Control and
                                  Prevention Harmonized
                                  Procedure Specific
                                  Surgical Site
                                  Infection (SSI)
                                  Outcome Measure.
MRSA Bacteremia................  National Healthcare                1716
                                  Safety Network (NHSN)
                                  Facility-wide
                                  Inpatient Hospital-
                                  onset Methicillin-
                                  resistant
                                  Staphylococcus aureus
                                  (MRSA) Bacteremia
                                  Outcome Measure.
CDI............................  National Healthcare                1717
                                  Safety Network (NHSN)
                                  Facility wide
                                  Inpatient Hospital-
                                  onset Clostridium
                                  difficile Infection
                                  (CDI) Outcome 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 section IV.I.2.c.(1) of the preamble of this final
  rule, we are finalizing our proposal to remove the PC-01 measure from
  the Hospital VBP Program beginning with the FY 2021 program year.
  However, as discussed in sections IV.I.2.c.(2) and IV.I.4.a.(2) of the
  preamble of this final rule, we are not finalizing our proposals to
  remove CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, and
  MRSA Bacteremia measures, or the Safety domain.
** In section IV.I.4.a.(1) of the preamble of this final rule, we
  discuss our decision to finalize changing 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.(3) of the preamble of this final
  rule, we are finalizing our proposal to remove two measures from the
  Efficiency and Cost Reduction domain (AMI Payment and HF Payment),
  which would have entered the program beginning with the FY 2021
  program year, and one measure (PN Payment) which would have entered
  the program beginning with the FY 2023 program year.


[[Page 41456]]


            Summary of Measures for the FY 2023 Program Year
------------------------------------------------------------------------
       Measure short name          Domain/measure name         NQF #
------------------------------------------------------------------------
                 Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS.........................  Hospital Consumer           0166 (0228)
                                  Assessment of
                                  Healthcare Providers
                                  and Systems (HCAHPS)
                                  (including Care
                                  Transition Measure).
------------------------------------------------------------------------
                             Safety Domain *
------------------------------------------------------------------------
CAUTI..........................  National Healthcare                0138
                                  Safety Network (NHSN)
                                  Catheter Associated
                                  Urinary Tract
                                  Infection (CAUTI)
                                  Outcome Measure.
CLABSI.........................  National Healthcare                0139
                                  Safety Network (NHSN)
                                  Central Line
                                  Associated Bloodstream
                                  Infection (CLABSI)
                                  Outcome Measure.
Colon and Abdominal              American College of                0753
 Hysterectomy SSI.                Surgeons--Centers for
                                  Disease Control and
                                  Prevention Harmonized
                                  Procedure Specific
                                  Surgical Site
                                  Infection (SSI)
                                  Outcome Measure.
MRSA Bacteremia................  National Healthcare                1716
                                  Safety Network (NHSN)
                                  Facility-wide
                                  Inpatient Hospital-
                                  onset Methicillin-
                                  resistant
                                  Staphylococcus aureus
                                  (MRSA) Bacteremia
                                  Outcome Measure.
CDI............................  National Healthcare                1717
                                  Safety Network (NHSN)
                                  Facility wide
                                  Inpatient Hospital-
                                  onset Clostridium
                                  difficile Infection
                                  (CDI) Outcome Measure.
PSI 90 **......................  Patient Safety and                 0531
                                  Adverse Events
                                  (Composite) **.
------------------------------------------------------------------------
                      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 section IV.I.2.c.(1) of the preamble of this final
  rule, we are finalizing our proposal to remove the PC-01 measure from
  the Hospital VBP Program beginning with the FY 2021 program year.
  However, as discussed in sections IV.I.2.c.(2) and IV.I.4.a.(2) of the
  preamble of this final rule, we are not finalizing our proposals to
  remove CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, MRSA
  Bacteremia, and PSI 90 measures, or the Safety domain.
** In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38251 through 38256),
  we finalized adoption of the PSI 90 measure beginning with the FY 2023
  program year.
*** In section IV.I.4.a.(1) of the preamble of this final rule, we
  discuss our decision to finalize changing 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.(3) of the preamble of this final
  rule, we are finalizing our proposal to remove two measures from the
  Efficiency and Cost Reduction domain (AMI Payment and HF Payment),
  which would have entered the program beginning with the FY 2021
  program year and one measure (PN Payment) which would have entered the
  program beginning with the FY 2023 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.\243\ 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.\244\ 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

[[Page 41457]]

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.\245\ 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,\246\ allowing further examination of social risk factors in 
outcome measures.
---------------------------------------------------------------------------

    \243\ 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.
    \244\ 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.
    \245\ Available at: http://www.qualityforum.org/SES_Trial_Period.aspx.
    \246\ Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=86357.
---------------------------------------------------------------------------

    In the FY 2018 IPPS/LTCH PPS and CY 2018 OPPS/ASC 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 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.
    Comment: Many commenters recommended that CMS risk-adjust quality 
and cost measures (including Medicare Spending per Beneficiary--MSPB) 
for social risk factors because these factors are outside of a 
provider's control and affect patient outcomes. Several commenters 
expressed that risk adjustment for social risk factors is critical 
because public reporting of performance on measures that have not been 
adjusted for social risk factors may lead consumers to conclude that 
providers with a high-risk patient population provide lower quality 
care. Other commenters noted that public reporting of performance on 
measures that have not been risk-adjusted may lead policy makers to not 
address the underlying health disparities. Some commenters recommended 
specific factors for risk adjustment, including: (1) Elements in the 
ASPE, NQF, and NAM reports; (2) availability of primary care; (3) 
availability of physical therapy; (4) access to medications; (5) access 
to appropriate food; (6) access to support services; (7) dual 
eligibility; (8) income; (9) education; (10) neighborhood deprivation; 
(11) marital status; (12) access to transportation; (13) homelessness; 
(14) type of residence; (15) local crime rates; (16) employment status; 
(17) race/ethnicity; and (18) primary language.
    Response: We thank these commenters for their support and will 
consider these topics in our future analyses of social risk factors.
    Comment: Several commenters recommended specific methods of risk 
adjustment to evaluate performance and calculate payment adjustments, 
including: (1) Risk adjustment at the domain level; (2) risk adjustment 
at the measure level, including requiring measures developers to build 
the risk adjustment in from the start through testing; (3) peer 
grouping of similar facilities, at either the domain or measure level; 
(4) stratification for public reporting; (5) confidential 
stratification reports; and (6) reporting hospital-specific 
disparities.
    Response: We thank these commenters for their input and will 
consider these topics in our future analyses of accounting for social 
risk factors.
    Comment: Several commenters provided recommendations for adopting 
processes for accounting for social risk factors. Some of these 
commenters recommended that CMS allow providers time to review and 
analyze confidential stratified measure results prior to making these 
data public. These commenters recommended use of the rulemaking process 
to identify measures for which these reports would be generated, and 
for which data would be publicized. Other commenters recommended that 
CMS perform analyses to ensure that providers are not penalized for 
treating disadvantaged populations. Some commenters observed that there 
is inconsistent data collection regarding social risk factors and 
recommended that CMS address this (potentially through a pilot program 
centered on EHR use for data collection). Some commenters requested 
that CMS develop and publicize a work plan and timeline for accounting 
for social risk factors within CMS quality reporting and value-based 
purchasing programs. Other commenters encouraged CMS to continue 
monitoring and evaluation to identify potential unintended consequences 
of quality reporting and value-based purchasing programs on vulnerable 
populations.
    Response: We thank these commenters for their input and will 
consider these topics in our future analyses of social risk factors.
    Comment: One commenter expressed concern that accounting for social 
risk factors in quality reporting and value-based purchasing programs 
minimizes incentives to improve outcomes for

[[Page 41458]]

high-risk patients and therefore does not address the underlying 
disparities.
    Response: We agree with the commenter that accounting for social 
risk factors should not come at the cost of minimizing incentives to 
improve outcomes for high-risk patients. We note that 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. These are the 
objectives that we are seeking to achieve in evaluating methods to 
account for social risk factors in our programs.
    We thank the commenters for their views and will take them into 
consideration as we continue our work on these issues.
4. Scoring Methodology and Data Requirements
a. Changes to the Hospital VBP Program Domains
(1) 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 final 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 final 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, in the FY 2019 
IPPS/LTCH PPS proposed rule (83 FR 20415), we proposed 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.
    Comment: One commenter supported CMS' proposal to rename the 
Clinical Care domain to the Clinical Outcomes domain.
    Response: We thank the commenter for its support.
    Comment: One commenter expressed concern about the proposed change 
of the domain name from Clinical Care to Clinical Outcomes due to a 
perceived lack of outcome measures that meet all the criteria of strong 
evidence; measurable with a high degree of precision; risk-adjustment 
methodology including, and accurately measuring the risk factors most 
strongly associated with the outcome; and having little chance of 
inducing unintended adverse consequences. The commenter stated the 
importance of continuing to report good process measures that give 
hospitals specific data on their performance that is actionable.
    Response: As discussed in section IV.I.2.b. of the preambles of the 
proposed rule and this final rule, we strive to have measures in our 
programs that can drive improvement in patients' health outcomes. We 
believe changing the name to the Clinical Outcomes domain better aligns 
with this priority. While we recognize that the measures in the 
Clinical Care (newly finalized as the Clinical Outcomes) domain do not 
account for every potential risk factor, the measures are risk adjusted 
and NQF-endorsed. As part of our measure maintenance process, we 
welcome specific feedback from stakeholders regarding ways to improve 
risk adjustment for the measures in the hospital programs. We refer 
readers to the measure methodology reports available at: https://www.qualitynet.org. Regarding the importance to continue reporting 
process measures, we agree that some process measures are valuable and 
may warrant inclusion in CMS' value-based purchasing programs. 
Currently, there are no process measures in the Clinical Care (Clinical 
Outcomes) domain; however, we may consider adding additional measures 
to the domain in the future that can drive improvement in outcomes, 
including process measures that can be directly linked to outcomes.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the domain name from Clinical Care to 
Clinical Outcomes, beginning with the FY 2020 program year.
(2) Maintenance 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 preambles of the proposed rule and 
this final rule, above, we proposed 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. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20415 through 20416), we did not propose any new measures for the 
Safety domain. In addition, as discussed in section IV.I.2.c. of the 
preamble of the proposed rule, we stated that 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 
believed 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 stated 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). In the proposed rule, we 
stated that 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. We 
further stated that for the Hospital VBP Program, specifically, we 
believed

[[Page 41459]]

removing the measures in the Safety domain and retaining them in the 
HAC Reduction Program would address the concerns expressed by these 
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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20415 through 
20416), we proposed 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 acknowledged that by removing the Safety 
domain and its 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 stated we believed hospitals would still be 
sufficiently incentivized to perform well on the measures even if they 
are only in one value-based purchasing program, and we intended 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 referred readers to section IV.I.4.b.(2) of the preamble of 
the proposed rule, where we discussed 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) were adopted, there would be no measures left in the Safety 
domain beginning with the FY 2021 program year.
    Therefore, we proposed to remove the Safety domain from the 
Hospital VBP Program beginning with the FY 2021 program year.
    Comment: A number of commenters did not support CMS' proposal to 
remove the Safety domain because they believe its removal would detract 
from the previously increasing focus on safety within inpatient 
hospitals. One commenter further stated that safe care is the 
foundation of high-value care and measuring hospitals' overall quality 
performance--and financially rewarding them based on this--is 
incomplete without accounting for the degree to which hospitals are 
safely providing care.
    Response: We agree with commenters that patient safety is a high 
priority focus of CMS' quality programs and, as part of the Meaningful 
Measures Initiative, we strive to put patients first. As discussed in 
sections IV.I.2.c.(1) and (2) of the preamble of this final rule, 
above, while we are finalizing removal of the PC-01 measure from the 
Safety domain, we are not finalizing removal of the five HAI measures 
(CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, MRSA Bacteremia, 
CDI) or the removal of the Patient Safety and Adverse Events 
(Composite) Measure (PSI 90). For this reason, we are not finalizing 
removal of the Safety domain.
    Comment: Many commenters supported CMS' proposal to remove the 
Safety domain. A few commenters supported CMS' proposal to remove the 
Safety domain because there would be no measures in the domain. One 
commenter asserted the measures currently included in the Hospital VBP 
Program Safety domain are adequately represented in other Medicare 
quality programs.
    Response: We thank the commenters for their input regarding the 
proposed removal of the Safety domain from the Hospital VBP Program. 
However, as discussed in section IV.I.2.c.(2) of the preamble of this 
final rule, above, we are not finalizing our proposal to remove the 
five HAI measures (CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, 
MRSA Bacteremia, CDI) or to remove the Patient Safety and Adverse 
Events (Composite) Measure (PSI 90). For this reason, we are not 
finalizing our proposal to remove the Safety domain.
    Comment: One commenter recommended that even if the measures 
currently in the Safety domain are removed, the Safety domain should 
remain in the Hospital VBP Program and CMS should adopt a number of 
eCQMs for this domain.
    Response: We thank the commenter for their suggestion. As stated 
above, we are not finalizing our proposal to remove the Safety domain. 
Regarding the adoption of eCQMs for the Hospital VBP Program, we 
continue to evaluate our measure sets and may consider proposing the 
incorporation of eCQMs into the program in the future.
    After consideration of the public comments we received, we are not 
finalizing our proposal to remove the Safety domain from the Hospital 
VBP Program beginning with the FY 2021 program year.
b. Maintenance of Existing Domain Weighting 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).
    In the FY 2019 IPPS/LTCH PPS proposed rule, we discussed our 
proposal 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 stated 
that 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 (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. However, as discussed in 
section IV.I.2.c.(2) of the preamble of this final rule, we are not 
finalizing the removal of the 5 HAI measures or the PSI 90 measure from 
the Safety domain, and as discussed in section IV.I.4.a.(2) of the 
preamble of this final rule, we are not finalizing removal of the 
Safety domain from the Hospital VBP Program. Therefore, we are not 
finalizing any changes to the Hospital VBP Program domain weighting 
policies in this final rule, as further discussed below.

[[Page 41460]]

    In the proposed rule, we discussed that to account for these 
proposed 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 have been only three domains if our proposals to 
remove the Safety domain and all of the Safety domain measures were 
adopted, we did not propose 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 discussed in the proposed rule that we 
considered keeping the current domain weighting (25 percent for each of 
the four domains--Safety, Clinical Outcomes, 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 in the proposed rule, we proposed 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
------------------------------------------------------------------------
* In section IV.I.4.a.(1) of the preamble of this final rule, we discuss
  our decision to finalize changing the name of this domain from the
  Clinical Care domain to the Clinical Outcomes domain beginning with
  the FY 2020 program year.

    In the proposed rule, we stated that we believe the proposed domain 
weighting best aligns with our emphasis on clinical outcomes, which 
address the Meaningful Measures Initiative quality priority of 
promoting effective treatment, and would provide 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 
stated that 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 the proposed rule, were adopted.
    Under the proposed domain weighting, each measure in the Clinical 
Outcomes domain (measures of mortality and complications) would have 
comprised 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 met the case minimum for each measure in the 
domain, and no more than 25 percent for each measure if a hospital 
could 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. In the proposed rule, we 
stated that we believed the proposed domain weighting would better 
balance the contributing weights of each individual measure that would 
be retained in the Hospital VBP Program (assuming there were no Safety 
domain measures) compared to the alternative weighting we considered of 
equal weights (one-third (\1/3\) for each domain), as discussed in more 
detail below.
    In the proposed rule, we stated that we also believed 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.\247\ 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.\248\
---------------------------------------------------------------------------

    \247\ Hospital Value-Based Purchasing: CMS Should Take Steps to 
Ensure Lower Quality Hospitals Do Not Qualify 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.
    \248\ 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,\249\ we analyzed the estimated 
potential impacts to hospital TPSs and payment adjustment. Based on 
this analysis, we estimated 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

[[Page 41461]]

readers to the table in section IV.I.4.b.(3) of the preamble of this 
final rule, below summarizing the results of this analysis.
---------------------------------------------------------------------------

    \249\ 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,\250\ 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.
---------------------------------------------------------------------------

    \250\ 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) of the 
preambles of the proposed rule and this final rule summarizing the 
results of these analyses.
(2) Alternatives Considered
    In the proposed rule, we stated that 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 types of 
hospitals historically perform better than average compared to large 
bed size, hospitals in urban areas, teaching hospitals, and safety net 
status hospitals.\251\ 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 estimated 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 preambles of the 
proposed rule and this final rule summarizing the results of these 
analyses.
---------------------------------------------------------------------------

    \251\ 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.
---------------------------------------------------------------------------

    In the proposed rule, we stated that 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.(2) of the 
preamble of this final rule, we are not finalizing our proposal to 
remove the PSI 90 and five HAI measures from the Hospital VBP Program.
(3) Analysis
    In the proposed rule, we stated that 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 in the proposed rule, and continues to incentivize 
quality improvement. As noted in the 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 provided an overview 
of the estimated impact on hospitals' TPS by certain hospital 
characteristics and as they would compare to actual FY 2018 TPSs, which 
included scoring on four domains, including the Safety domain, and 
applying proportionate reweighting if a

[[Page 41462]]

hospital had 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 FY 2018 program year 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 provided a summary of the estimated impacts on 
average TPSs and payment adjustments for all hospitals,\252\ including 
as they would compare to actual FY 2018 program results under current 
domain weighting policies.
---------------------------------------------------------------------------

    \252\ 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 FY 2018 program year 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 
was 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

[[Page 41463]]

required on all three domains (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 FY 
2018 program year scoring policy, if a hospital did not have sufficient 
data for a score on the Clinical Outcomes domain, but received a score 
on the other three domains (Safety, Person and Community Engagement, 
and Efficiency and Cost Reduction), the hospital could have had its 
domain scores proportionately reweighted and received 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 Outcomes domain would not receive a TPS or 
payment adjustment.
    We also refer readers to section I.H.6.b. of Appendix A of the 
proposed rule (83 FR 20620 through 20621) for detailed discussions 
regarding the estimated impacts of the proposed domain weighting and 
equal weighting alternative on hospital percentage payment adjustments.
(4) Summary
    In the proposed rule, we stated that based on our analyses and all 
of the other considerations discussed above, we believed 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 would best 
align 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.
    Because we proposed 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 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. In the proposed rule, we stated that if our 
proposal to remove the Safety domain beginning with the FY 2021 program 
year is adopted, we proposed 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. However, 
as discussed in section IV.I.2.c.(2) of the preamble of this final 
rule, we are not finalizing the removal of the 5 HAI measures or the 
PSI 90 measure from the Safety domain. Therefore, we are not finalizing 
the removal of the Safety domain from the Hospital VBP Program, as 
further discussed below.
    Comment: A few commenters expressed concern that ongoing changes to 
the program's scoring and weighting methodology create volatility for 
providers and do not allow for assessments of hospital performance over 
time. These commenters recommended that CMS create stability for the 
program going forward to afford providers a level of predictability and 
allow for comparison across time.
    Response: We appreciate commenters' concerns, and will take this 
into account as we continue to move forward with the holistic approach 
to program and measure evaluation across CMS' quality programs. We note 
that as discussed in section IV.I.2.c.(2) of the preamble of this final 
rule, above, we are not finalizing the removal of the 5 HAI measures or 
the PSI 90 measure from the Safety domain, and as discussed in section 
IV.I.4.a.(2) of the preamble of this final rule, above, we are not 
finalizing our proposal to remove the Safety domain, and are therefore 
not finalizing any changes to the Hospital VBP Program domain weighting 
policies in this final rule.
    We note that in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49568 
through 49570), we adopted equal weights of 25 percent for each of the 
four domains in the FY 2018 program year for hospitals that receive a 
score in all domains. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 
57009 through 57010), for the FY 2019 program year, we retained this 
domain weighting. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38265 
through 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. 
Because we did not propose to change the domain weighting policies 
based on consideration of four domains (including retention of the 
Safety domain) in the FY 2019 IPPS/LTCH PPS proposed rule, and in 
response to stakeholder concerns of changes to the program's scoring 
and weighting methodology creating volatility for providers, we are not 
making changes to the previously finalized equal weight of 25 percent 
for each of the four domains for hospitals that receive a score in all 
domains in this final rule.
    Comment: Many commenters supported the proposed increased weight to 
the Clinical Outcomes domain because they believed it would most fairly 
weight the individual measures within the program, given that the 
distribution of measures across the three domains. Some commenters 
recommended delaying implementation of the proposed domain weighting to 
allow hospitals time to shift quality improvement focus toward the 
Clinical Outcomes domain. A number of commenters recommended adopting 
the alternative domain weighting proposal, where each remaining domain 
would be weighted equally at one-third of a hospital's TPS, because it 
would result in a roughly equal distribution of gains and losses across 
hospitals participating in the Hospital VBP Program and thereby provide 
hospitals an opportunity to be rewarded for good performance on any one 
of the measure domains. A few commenters expressed concern about 
increasing the weight of the Clinical Outcomes domain to 50 percent 
because the commenters believed the domain does not provide an 
accurate, comprehensive view of hospital performance. Some commenters 
did not support adoption of any domain weighting methodology where the 
Safety domain is removed.
    Response: We thank the commenters for their input regarding the 
proposed domain weighting policies for the Hospital VBP Program. As 
discussed in section IV.I.4.a.(2) of the preamble of this final rule, 
above, we are not finalizing our proposal to remove the Safety domain. 
For this reason, as stated above, we are not finalizing any changes to 
the current domain weighting in this final rule. However, we will take 
commenters' feedback into consideration in evaluating any potential 
future changes to the domain weights.
    Comment: Several commenters did not support weighting the 
Efficiency and Cost Reduction domain at 25 percent because this domain 
would include only the MSPB measure and

[[Page 41464]]

therefore recommended reducing its weight. A few commenters recommended 
that CMS consider further deemphasizing the weight of the Efficiency 
and Cost Reduction domain if it continues to observe that hospitals 
that perform below the national average on the clinical quality 
measures but perform well on the MSPB measure receive an incentive 
payment under the proposed approach. Other commenters recommended 
reducing the weight of the Efficiency and Cost Reduction domain and 
increasing the weight of the Person and Community Engagement domain.
    Response: We thank commenters for their input, and note that the 
previously finalized weight of the Efficiency and Cost Reduction domain 
for the FY 2019 and FY 2020 program years, which contains only the MSPB 
measure, is 25 percent. Because we did not consider a weight for the 
Efficiency and Cost Reduction domain below 25 percent in our analyses 
of the domain weighting options discussed in the FY 2019 IPPS/LTCH PPS 
proposed rule, we are not revising the previously finalized weighting 
of the Efficiency and Cost Reduction domain in this final rule. 
However, will take commenters' recommendations into consideration as we 
continue evaluating our domain weighting policies, including ways to 
address concerns about hospitals that perform below the national 
average on quality measures receiving incentive payments.
    Comment: One commenter expressed concern about the weight placed on 
the Person and Community Engagement domain because it is based on only 
the HCAHPS patient experience survey measures, which the commenter 
believes are subjective, can force hospitals to overemphasize 
experience as opposed to making improvements to clinical care, and 
could lead to unintended consequences.
    Response: We thank the commenter for its input, and will take this 
recommendation into consideration for future years of the program as we 
continue evaluating our domain weighting policies. Because we did not 
consider a weight for the Person and Community Engagement domain below 
25 percent in our analyses of the domain weighting options discussed in 
the FY 2019 IPPS/LTCH PPS proposed rule, we are not revising the 
previously finalized weighting of the Person and Community Engagement 
domain in this final rule. As previously finalized, we believe 
weighting the Person and Community Engagement domain at 25 percent of 
hospitals' TPSs is appropriate for the domain that measures important 
elements of the patient's experience of inpatient care. We have 
adjusted HCAHPS scores for certain patient-level factors that are 
beyond the hospital's control but which affect survey responses. These 
factors include patient severity, as indicated by self-reported overall 
health, and patient's highest level of education, considered the most 
accurate single measure of socioeconomic status for older adults. We 
also note that AHRQ carried out a rigorous, scientific process to 
develop and test the HCAHPS instrument. This process entailed multiple 
steps, including: A public call for measures; literature reviews; 
cognitive interviews; consumer focus groups; multiple opportunities for 
additional stakeholder input; a 3-State pilot test; small-scale field 
tests; and notice-and-comment rulemaking. The HCAHPS Survey is NQF-
endorsed and is currently the only measure in the program which uses 
information collected directly from patients.
    Comment: One commenter specifically recommended further development 
of the Person and Community Engagement domain and then increasing the 
weight of that domain. Another commenter recommended that CMS 
reevaluate the measures in the program to encompass a more holistic 
view of quality, including improving patient's quality of life, because 
the commenter believed that while experience and cost are important 
measures of quality, they are not necessarily equivalent to high 
quality. A third commenter recommended that if measures are added to or 
removed from these domains, CMS should examine the weighting and make 
appropriate adjustments.
    Response: We thank the commenters for their recommendations, and 
will take these recommendations into consideration for future years of 
the program.
    After consideration of the public comments we received, we are not 
finalizing our proposal to use three domains, beginning with the FY 
2021 program year, with the Clinical Outcomes domain weighted at 50 
percent; the Person and Community Engagement domain weighted at 25 
percent; and the Efficiency and Cost Reduction domain weighted at 25 
percent. We are also not finalizing our proposal to remove the Safety 
domain because we are not removing all of the measures in that domain. 
Therefore, in accordance with our current policy, we will maintain four 
domains in the Hospital VBP Program, each with a weight of 25 percent, 
for hospitals that receive a score in all domains, and hospitals with 
sufficient data on only three domains will have their TPSs 
proportionately reweighted.
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 domain score 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 final 
rule, we are not finalizing our proposal to remove the Safety domain 
from the Hospital VBP Program beginning with the FY 2021 program year. 
Therefore, based on previously finalized policies (82 FR 38266), we are 
clarifying in this final rule that additionally:
     A hospital must receive a minimum of two measure scores 
within the Safety domain.
    We note that we are finalizing our proposal to remove the 
condition-specific payment measures from the Hospital VBP Program and, 
therefore, a hospital's Efficiency and Cost Reduction domain score 
would be based solely on its MSPB measure score. In the proposed rule 
(83 FR 20420), we did not propose 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

[[Page 41465]]

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/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 the proposed rule (83 FR 20420), we did not propose 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 the proposed rule (83 FR 20420), we did not propose 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 the proposed rule (83 FR 20420), we did not propose any changes 
to these policies for the MSPB measure; however, as discussed in 
section IV.I.2.c.(3) of the preamble of this final rule, we are 
finalizing our proposals 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.
    As discussed in section IV.I.2.c.(1) of the preamble of this final 
rule, we are finalizing our proposal to remove the PC-01 measure from 
the Hospital VBP Program beginning with the FY 2021 program year. 
However, as discussed in section IV.I.2.c.(2) of the preamble of this 
final rule, we are not finalizing our proposals to remove the HAI 
measures (CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, and 
MRSA Bacteremia) beginning with the FY 2021 program year, or to remove 
the PSI 90 measure effective with the effective date of the FY 2019 
IPPS/LTCH PPS final rule. Therefore, previously adopted minimum numbers 
of cases for those measures are also set forth in the table below. In 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53608 through 53609), we 
adopted a minimum of one predicted infection for NHSN-based 
surveillance measures (that is, the CAUTI, CLABSI, CDI, MRSA, and SSI 
measures) based on CDC's minimum case criteria. In the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50085), we adopted this case minimum for the 
NHSN-based surveillance measures for the FY 2016 Hospital VBP Program 
and subsequent years. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38267), beginning with the FY 2023 program year, we adopted a policy 
that hospitals must report a minimum of three eligible cases on any one 
underlying indicator during the baseline period in order to receive an 
improvement score and three eligible cases on any one underlying 
indicator during performance period in order to receive an achievement 
score on the Patient Safety and Adverse Events (Composite) (PSI 90) 
measure. For the purposes of the PSI 90 measure, a case is ``eligible'' 
for a given indicator if it meets the criterion for inclusion in the 
indicator measure population.

   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 cohort)..  Hospitals must report a minimum number of
                                25 cases.
MORT-30-COPD.................  Hospitals must report a minimum number of
                                25 cases.
MORT-30-CABG.................  Hospitals must report a minimum number of
                                25 cases.
THA/TKA......................  Hospitals must report a minimum number of
                                25 cases.
------------------------------------------------------------------------
                              Safety Domain
------------------------------------------------------------------------
CAUTI........................  Hospitals have a minimum of 1.000
                                predicted infections as calculated by
                                the CDC.
CLABSI.......................  Hospitals have a minimum of 1.000
                                predicted infections as calculated by
                                the CDC.
Colon and Abdominal            Hospitals have a minimum of 1.000
 Hysterectomy SSI.              predicted infections as calculated by
                                the CDC.
MRSA Bacteremia..............  Hospitals have a minimum of 1.000
                                predicted infections as calculated by
                                the CDC.
CDI..........................  Hospitals have a minimum of 1.000
                                predicted infections as calculated by
                                the CDC.

[[Page 41466]]

 
Patient Safety and Adverse     Hospitals must report a minimum of three
 Events (Composite) #.          eligible cases on any one underlying
                                indicator.
------------------------------------------------------------------------
                  Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB.........................  Hospitals must report a minimum number of
                                25 cases.
------------------------------------------------------------------------
* In section IV.I.4.a.(1) of the preamble of this final rule, we discuss
  our decision to finalize our proposal to change the name of this
  domain from the Clinical Care domain to the Clinical Outcomes domain
  beginning with the FY 2020 program year.
# 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. In the FY 2018 IPPS/LTCH PPS final rule
  (82 FR 38251 through 38256), we adopted the Patient Safety and Adverse
  Events (Composite) (PSI 90) measure beginning with the FY 2023 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 the proposed rule (83 FR 20421), we did not propose 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 the proposed rule (83 FR 20421), we did not propose any changes 
to these policies.
d. Clinical Care Domain/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).\253\ 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.
---------------------------------------------------------------------------

    \253\ 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 the proposed rule (83 FR 20421), we did not propose 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

[[Page 41467]]

period that runs on the calendar year 4 years prior to the applicable 
program year for the FY 2019 program year and subsequent program years 
(81 FR 57000). 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 (82 FR 38258 through 38259).
    As discussed in section IV.I.2.c.(1) of the preamble of this final 
rule, we are finalizing our proposal to remove the PC-01 measure from 
the Hospital VBP Program beginning with the FY 2021 program year. 
However, as discussed in section IV.I.2.c.(2) of the preamble of this 
final rule, we are not finalizing our proposals to remove the HAI 
measures (CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, and 
MRSA Bacteremia) beginning with the FY 2021 program year, or 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. In the FY 2019 IPPS/LTCH PPS proposed 
rule, we did not summarize the previously adopted baseline and 
performance periods for the Safety domain or its measures for the FY 
2021 program year or subsequent years due to our proposal to remove the 
Safety domain and its measures. However, because we are not finalizing 
our proposals to remove the five HAI measures, the PSI 90 measure, or 
the Safety domain as a whole, we are providing the previously adopted 
baseline and performance periods for those measures in this final rule, 
below.

   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[dash]30-PN).
     THA/TKA........   July 1,       July 1,
                               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 Cost Reduction:
     MSPB...........   January 1,    January 1,
                               2016-December 31,     2018-December 31,
                               2016.                 2018.
------------------------------------------------------------------------
* In section IV.I.4.a.(1) of the preamble of this final rule we discuss
  our decision to finalize changing the name of this domain from the
  Clinical Care domain to the Clinical Outcomes domain beginning with
  the FY 2020 program year.


   Previously Adopted Baseline and Performance Periods for the FY 2021
   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,
                               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.
Safety: **
     NHSN measures     January 1,    January 1,
     (CAUTI, CLABSI, SSI,      2017-December 31,     2019-December 31,
     CDI, MRSA).               2017.                 2019.
Efficiency and Cost
 Reduction: ***
     MSPB...........   January 1,    January 1,
                               2017-December 31,     2019-December 31,
                               2017.                 2019.
------------------------------------------------------------------------
* In section IV.I.4.a.(1) of the preamble of this final rule we discuss
  our decision to finalize changing 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) of the preamble of this final
  rule, we are finalizing our proposal to remove the PC-01 measure from
  the Hospital VBP Program beginning with the FY 2021 program year.
  However, as discussed in sections IV.I.2.c.(2) and IV.I.4.a.(2) of the
  preamble of this final rule, we are not finalizing our proposals to
  remove CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, and
  MRSA Bacteremia measures, or the Safety domain.
*** As discussed in section IV.I.2.c.(3) of the preamble of this final
  rule, we are finalizing our proposal to remove the AMI Payment and HF
  Payment measures effective with the effective date of the FY 2019 IPPS/
  LTCH PPS final rule.


[[Page 41468]]


   Previously Adopted Baseline and Performance Periods for the FY 2022
   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,
                               2018-December 31,     2020-December 31,
                               2018.                 2020.
Clinical Outcomes: *
     Mortality         July 1,       July 1,
     (MORT[dash]30-AMI, MORT-  2012-June 30, 2015.   2017-June 30, 2020.
     30-HF, 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.
Safety: **
     NHSN measures     January 1,    January 1,
     (CAUTI, CLABSI, SSI,      2018-December 31,     2020-December 31,
     CDI, MRSA).               2018.                 2020.
Efficiency and Cost
 Reduction: ***
     MSPB...........   January 1,    January 1,
                               2018-December 31,     2020-December 31,
                               2018.                 2020.
------------------------------------------------------------------------
* In section IV.I.4.a.(1) of the preamble of this final rule we discuss
  our decision to finalize changing 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) of the preamble of this final
  rule, we are finalizing our proposal to remove the PC-01 measure from
  the Hospital VBP Program beginning with the FY 2021 program year.
  However, as discussed in sections IV.I.2.c.(2) and IV.I.4.a.(2) of the
  preamble of this final rule, we are not finalizing our proposals to
  remove CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, and
  MRSA Bacteremia measures, or the Safety domain.
*** As discussed in section IV.I.2.c.(3) of the preamble of this final
  rule, we are finalizing our proposal 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.


   Previously Adopted Baseline and Performance Periods for the FY 2023
   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,
                               2019-December 31,     2021-December 31,
                               2019.                 2021.
Clinical Outcomes: *
     Mortality         July 1,       July 1,
     (MORT[dash]30-AMI, MORT-  2013-June 30, 2016.   2018-June 30, 2021.
     30-HF, 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.
Safety:
     NHSN measures     January 1,    January 1,
     (CAUTI, CLABSI, SSI,      2019-December 31,     2021-December 31,
     CDI, MRSA).               2019.                 2021.
     Patient Safety    October 1,    July 1,
     and Adverse Events        2015-June 30, 2017.   2019-June 30, 2021.
     (Composite) (PSI 90).
Efficiency and Cost            January 1,    January 1,
 Reduction: ***                2019-December 31,     2021-December 31,
                               2019.                 2021
     MSPB...........
------------------------------------------------------------------------
* In section IV.I.4.a.(1) of the preamble of this final rule we discuss
  our decision to finalize changing 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) of the preamble of this final
  rule, we are finalizing our proposal to remove the PC-01 measure from
  the Hospital VBP Program beginning with the FY 2021 program year.
  However, as discussed in sections IV.I.2.c.(2) and IV.I.4.a.(2) of the
  preamble of this final rule, we are not finalizing our proposals to
  remove CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, and
  MRSA Bacteremia measures, PSI 90 measure, or the Safety domain.
*** As discussed in section IV.I.2.c.(3) of the preamble of this final
  rule, we are finalizing our proposal to remove AMI Payment, HF
  Payment, and PN Payment measures effective with the effective date of
  the FY 2019 IPPS/LTCH PPS final rule.


   Previously Adopted Baseline and Performance Periods for the FY 2024
   Program Year: Person and Community Engagement; Clinical Outcomes; *
          Safety; ** and Efficiency and Cost Reduction Domains
------------------------------------------------------------------------
            Doman                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.
Safety: **
     NHSN measures     January 1,    January 1,
     (CAUTI, CLABSI, SSI,      2020-December 31,     2022-December 31,
     CDI, MRSA).               2020.                 2022.
     Patient Safety    July 1,       July 1,
     and Adverse Events        2016-June 30, 2018.   2020-June 30, 2022.
     (Composite) (PSI 90).
Efficiency and Cost
 Reduction: ***

[[Page 41469]]

 
     MSPB...........   January 1,    January 1,
                               2020-December 31,     2022-December 31,
                               2020.                 2022.
------------------------------------------------------------------------
* In section IV.I.4.a.(1) of the preamble of the proposed this final
  rule we discuss our decision, to finalize changing 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) of the preamble of this final
  rule, we are finalizing our proposal to remove the PC-01 measure from
  the Hospital VBP Program beginning with the FY 2021 program year.
  However, as discussed in sections IV.I.2.c.(2) and IV.I.4.a.(2) of the
  preamble of this final rule, we are not finalizing our proposals to
  remove CAUTI, CLABSI, Colon and Abdominal Hysterectomy SSI, CDI, and
  MRSA Bacteremia measures, PSI 90 measure, or the Safety domain.
*** As discussed in section IV.I.2.c.(3) of the preamble of this final
  rule, we are finalizing our proposal to remove AMI Payment, HF
  Payment, and PN Payment measures effective with the effective date of
  the FY 2019 IPPS/LTCH PPS final rule.

6. Previously Adopted and Newly Finalized Performance Standards for the 
Hospital VBP Program
a. Background
    Section 1886(o)(3)(A) of the Act requires the Secretary to 
establish performance standards for the measures selected under the 
Hospital VBP Program for a performance period for the applicable fiscal 
year. The performance standards must include levels of achievement and 
improvement, as required by section 1886(o)(3)(B) of the Act, and must 
be established no later than 60 days before the beginning of the 
performance period for the fiscal year involved, as required by section 
1886(o)(3)(C) of the Act. We refer readers to the Hospital Inpatient 
VBP Program final rule (76 FR 26511 through 26513) for further 
discussion of achievement and improvement standards under the Hospital 
VBP Program.
    In addition, when establishing the performance standards, section 
1886(o)(3)(D) of the Act requires the Secretary to consider appropriate 
factors, such as: (1) Practical experience with the measures, including 
whether a significant proportion of hospitals failed to meet the 
performance standard during previous performance periods; (2) 
historical performance standards; (3) improvement rates; and (4) the 
opportunity for continued improvement.
    We refer readers to the FY 2013, FY 2014, and FY 2015 IPPS/LTCH PPS 
final rules (77 FR 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 Newly Finalized 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. As discussed in sections IV.I.2.c.(2) and IV.I.4.a.(2) of 
this final rule, we are not finalizing our proposals to remove the five 
HAI measures, the PSI 90 measure, or the Safety domain from the 
Hospital VBP Program; therefore, below we are displaying newly 
finalized performance standards for the following Safety domain 
measures for the FY 2021 program year: CAUTI, CLABSI, CDI, MRSA 
Bacteremia, Colon and Abdominal Hysterectomy SSI.

 Previously Adopted and Newly Displayed Performance Standards for the FY
2021 Program Year: Safety, Clinical Outcomes, [caret] and Efficiency and
                        Cost Reduction Domains 
------------------------------------------------------------------------
                                   Achievement
     Measure short name             threshold             Benchmark
------------------------------------------------------------------------
                              Safety Domain
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
CAUTI.......................  0.774...............  0.
CLABSI......................  0.687...............  0.
CDI.........................  0.748...............  0.067.
MRSA Bacteremia.............  0.763...............  0.
Colon and Abdominal            0.754......   0.
 Hysterectomy SSI.             0.726......   0.
------------------------------------------------------------------------
                   Clinical Outcomes Domain [caret] *
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
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.
------------------------------------------------------------------------

[[Page 41470]]

 
                  Efficiency and Cost Reduction Domain
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
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] In section IV.I.4.a.(1) of the preamble of this final rule, we
  discuss our decision to finalize changing 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 final
  rule, we are finalizing our proposal 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 proposed to 
adopt performance standards for the FY 2021 program year for the Person 
and Community Engagement domain. In the proposed rule, we noted that 
the numerical values for the proposed performance standards displayed 
in the proposed rule represent estimates based on the most recently 
available data, and that we intended to update the numerical values in 
the FY 2019 IPPS/LTCH PPS final rule.
    Although we invited public comment on the proposed performance 
standards for the eight HCAHPS survey dimensions, we did not receive 
any public comments on the proposed performance standards, and are 
adopting the performance standards listed in the table below. These 
HCAHPS survey dimension performance standards in the table below have 
been updated from the FY 2018 IPPS/LTCH PPS proposed rule and represent 
the most recently available data.

Newly Finalized 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.......................................           42.06           79.06           87.36
Communication with Doctors......................................           41.99           79.91           88.10
Responsiveness of Hospital Staff................................           33.89           65.77           81.00
Communication about Medicines...................................           33.19           63.83           74.75
Hospital Cleanliness & Quietness................................           30.60           65.61           79.58
Discharge Information...........................................           66.94           87.38           92.17
Care Transition.................................................            6.53           51.87           63.32
Overall Rating of Hospital......................................           34.70           71.80           85.67
----------------------------------------------------------------------------------------------------------------
 The performance standards displayed in this table were calculated using four quarters of CY 2017
  data in this final rule.

c. Previously Adopted Performance Standards for Certain Measures for 
the FY 2022 Program Year
    We have adopted certain measures for the Clinical Care domain 
(newly finalized as the Clinical Outcomes domain) and the Efficiency 
and Cost Reduction domain 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 (newly finalized as the 
Clinical Outcomes 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.

[[Page 41471]]



  Previously Adopted Performance Standards for the FY 2022 Program Year
------------------------------------------------------------------------
                                   Achievement
     Measure short name             threshold             Benchmark
------------------------------------------------------------------------
                   Clinical Outcomes Domain [caret] *
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
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 
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
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] In section IV.I.4.a.(1) of the preamble of this final rule, we
  discuss our decision to finalize our proposal 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 final
  rule, we are finalizing our proposal 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 and Newly Displayed Finalized Performance 
Standards for Certain Measures for the FY 2023 Program Year
    In the proposed rule (83 FR 20425 through 20426), we noted that we 
have adopted certain measures for the Clinical Care domain (newly 
finalized as the Clinical Outcomes domain) and the Efficiency and Cost 
Reduction domain 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 
(newly finalized as the Clinical Outcomes 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.
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20425 through 20426), we proposed 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 did not include proposed 
performance standards for this measure in the proposed rule. However, 
as discussed in section IV.I.2.c.(2) of the preamble of this final 
rule, we are not finalizing our proposal to remove the PSI 90 measure 
from the Hospital VBP Program. Therefore, we are displaying newly 
finalized performance standards for the PSI 90 measure for the FY 2023 
program year, in the table below. 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 and newly displayed 
performance standards for the other measures are also set out in the 
table below.

 Previously Adopted and Newly Displayed Finalized Performance Standards
                      for the FY 2023 Program Year
------------------------------------------------------------------------
                                   Achievement
     Measure short name             threshold             Benchmark
------------------------------------------------------------------------
                              Safety Domain
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
PSI 90 **...................  0.972658............  0.760882.
------------------------------------------------------------------------
                   Clinical Outcomes Domain [caret] *
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
MORT-30-AMI.................  0.866548............  0.885499.
MORT-30-HF..................  0.881939............  0.906798.
MORT-30-PN (updated cohort).  0.840138............  0.871741.
MORT-30-COPD................  0.919769............  0.936349.
MORT-30-CABG................  0.968747............  0.979620.
THA/TKA **..................  0.027428............  0.019779.
------------------------------------------------------------------------

[[Page 41472]]

 
                 Efficiency and Cost Reduction Domain 
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
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] In section IV.I.4.a.(1) of the preamble of this final rule, we
  discuss our decision to finalize our proposal 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 final
  rule, we are finalizing our proposal 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. Performance Standards for Certain Measures for the FY 2024 Program 
Year
    We have adopted certain measures for the Clinical Care domain 
(newly finalized as the Clinical Outcomes domain) and the Efficiency 
and Cost Reduction domain 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 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20427), we proposed the following performance standards for 
the FY 2024 program year for the Clinical Care domain (newly finalized 
as the Clinical Outcomes domain) and the Efficiency and Cost Reduction 
domain. 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. These newly 
proposed performance standards for these measures are set out in the 
table below.
    Although we invited public comments on these proposed performance 
standards for the FY 2024 program year, we did not receive any public 
comments on the proposed performance standards for the FY 2024 program 
year, and are adopting the performance standards listed below.

   Newly Finalized Performance Standards for the FY 2024 Program Year
------------------------------------------------------------------------
                                   Achievement
     Measure short name             threshold             Benchmark
------------------------------------------------------------------------
                   Clinical Outcomes Domain [caret] *
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
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
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
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] In section IV.I.4.a.(1) of the preamble of this final rule, we
  discuss our decision to finalize our proposal 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.

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 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

[[Page 41473]]

(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 
preambles of the proposed rule and this final rule.
    As part of this review, as discussed in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20426 through 20428), we took 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'' \254\ 
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 
CMS Patient Safety and Adverse Events Composite (CMS 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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 
FR 20474 through 20475; 20411), we proposed to remove these measures 
from the Hospital IQR and VBP Programs.\255\ We believe this framework 
will allow hospitals and patients to continue to obtain meaningful 
information about hospital performance while streamlining the measure 
sets.
---------------------------------------------------------------------------

    \254\ ``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.
    \255\ We note that following the comment period, we determined 
that the Hospital VBP Program would retain NHSN HAI measures and its 
version of the CMS PSI-90. In order to facilitate the Hospital VBP 
Program's adoption of administrative requirements similar to 
requirements under the HAC Reduction Program, the Hospital IQR 
Program will retain NHSN HAI measures for additional year.
---------------------------------------------------------------------------

    The HAC Reduction Program has historically relied on Hospital IQR 
Program processes for administrative support; we therefore proposed in 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20429 through 20437) 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 
the proposed rule), the HAC Reduction Program proposed 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. In the proposed rule, we noted that 
if the Hospital IQR Program did 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 the proposed rule (83 FR 20426 through 20437), for the HAC 
Reduction Program, we proposed 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

[[Page 41474]]

fairness across hospital types in the Program; (3) establish the data 
collection period for the FY 2021 Program Year; and (4) solicit 
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.\256\ 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.\257\ 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.\258\ 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,\259\ allowing further examination of social risk factors 
in outcome measures.
---------------------------------------------------------------------------

    \256\ 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.
    \257\ 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.
    \258\ Available at: http://www.qualityforum.org/SES_Trial_Period.aspx.
    \259\ 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.
    While we did not specifically request comment on social risk 
factors in the FY 2019 proposed rule, we received a number of comments 
with respect to social risk factors. We thank commenters for sharing 
their views and their willingness to support the efforts of CMS and NQF 
on this important issue. We take this feedback seriously and will 
continue to review social risk factors on an on-going and continuous 
basis. In addition, we both welcome and appreciate stakeholder feedback 
as we continue our work on these issues.
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 CMS Patient Safety and Adverse Events 
Composite (CMS PSI 90) \260\ 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.

[[Page 41475]]

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

    \260\ 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.

               HAC Reduction Program Measures for FY 2019
------------------------------------------------------------------------
           Short name                  Measure name            NQF #
------------------------------------------------------------------------
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 
also stated in that 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. Data Collection Beginning CY 2019
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20429 through 
20430), we proposed 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 remain constant 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 final 
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 are derived from 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, we proposed to adopt the NHSN HAI data 
collection process established in the Hospital IQR Program if the 
Hospital IQR Program removed the NHSN HAI

[[Page 41476]]

measures. 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 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 proposed 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 CY 2019,\261\ the HAC Reduction Program would provide 
hospitals with 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.
---------------------------------------------------------------------------

    \261\ We note that in the FY 2019 IPPS/LTCH PPS proposed rule, 
we incorrectly stated that HAC Reduction Program would provide the 
same quarterly reports as stakeholders under Hospital IQR Program 
beginning in ``FY 2019'' as opposed to CY 2019, which aligned with 
the proposed removal of the NHSN HAI measures from the Hospital IQR 
Program. We intend to begin reporting data beginning with CY 2020 
(January 1, 2020), which is when the HAC Reduction Program will 
begin collecting CDC NHSN data. This is 1 year after we initially 
proposed because the Hospital IQR Program is retaining these 
measures for an additional year.
---------------------------------------------------------------------------

    Comment: Many commenters supported CMS' proposal to adopt a HAC 
Reduction Program-specific data collection process to receive NHSN HAI 
data from CDC.
    Response: We thank the commenters for their support. As noted in 
section VIII.A.5.b.(2)(b) of the preamble of this final rule, we are 
delaying removal of the NHSN HAI measures from the Hospital IQR Program 
until the CY 2020 reporting period/FY 2022 payment determination. For 
this reason, we are also delaying collection and reporting of this data 
under the HAC Reduction Program until CY 2020.
    Comment: A commenter urged CMS to clearly communicate any 
administrative policies regarding the collection of quality measure 
data to stakeholders before the implementation of any finalized 
administrative policies to ensure a seamless, uninterrupted transition. 
Other commenters asked CMS to clarify that quality data would still be 
available on Hospital Compare and sought assurance that hospitals would 
still receive access to the data they were accustomed to receiving 
through the Hospital IQR Program.
    Response: We thank the commenters for the comments. We do not 
expect hospitals to notice any changes in the submission of their NHSN 
HAI data. We are merely finalizing the CDC NHSN portal as the mechanism 
through which the HAC Reduction Program receives NHSN HAI data. We 
expect this process to occur seamlessly, but because of prior 
rulemaking, we needed to formally propose and adopt the CDC NHSN as the 
mechanism for the HAC Reduction Program to receive data. However, if we 
determine that any changes will impact how hospitals are able to view 
and report their data, we will clearly communicate any information 
regarding administrative actions through our established communication 
channels.
    We received numerous comments from stakeholders regarding our 
holistic approach to evaluating the appropriateness of measures 
previously adopted under the Hospital Readmissions Reduction Program, 
Hospital VBP Program, HAC Reduction Program, and Hospital IQR Program 
and our vision for the future of these programs. While program-specific 
comments and policies are discussed in more detail in each program-
specific section of the preamble of this final rule, we would like to 
clarify that in light of our mission to prioritize patients in the 
provision of services, we are expanding the stated scope of the 
Hospital VBP Program to include patient safety measures. While we 
initially sought to delineate measure focus areas between the Hospital 
VBP Program and HAC Reduction Program, we agree with commenters that 
patient safety is a critical component of quality improvement efforts, 
and we appreciate commenters who conveyed the multifaceted benefits of 
retaining the safety measures in more than one value-based purchasing 
program. Therefore, we believe it is appropriate and important to 
provide incentives under more than one program to ensure that hospitals 
take every precaution to avoid adverse patient safety events.
    In addition, because the incentive payment structure is different 
under the HAC Reduction and Hospital VBP Programs, we believe including 
patient safety measures in both programs will provide hospitals with 
strong incentives to continually strive for both improvement and high 
performance on these measures. In addition, retaining the measures in 
both programs will best promote transparency through publicly reporting 
hospital performance on these measures, as stakeholders will continue 
to be able to see both hospitals' performance compared to all other 
hospitals and hospitals' performance improvement over time. Finally, we 
note this approach will also reduce provider burden associated with 
these measures because these measures are being finalized for removal 
from the Hospital IQR Program, as discussed in section 
VIII.A.5.b.(2)(b) of the preamble of this final rule.

[[Page 41477]]

    As we discussed in the proposed rule, the reporting of NHSN HAI 
measures and the CMS PSI-90 will not change in any substantive way. The 
CMS PSI 90 measure is reported on the Hospital Compare web pages; 
however, the child measures (that is, the 10 individual indicators that 
comprise the CMS PSI 90 measure) 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. 
Upon finalizing our policy for the HAC Reduction Program to collect 
NHSN HAI data, the HAC Reduction Program will continue to make data 
available in the same form and manner on the Hospital Compare website, 
and as it is currently displayed under the Hospital IQR Program.
    Comment: A commenter strongly opposed CMS' proposal to have the HAC 
Reduction Program receive NHSN HAI data from the CDC NHSN portal 
because it did not believe the HAC Reduction Program should be 
separated from the Hospital IQR Program based on its concern separation 
of the programs will lead to patient harm, unfair scoring and 
inaccurate reporting of performance.
    Response: We thank the commenter for this view. As we discussed in 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20427), 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. As 
part of this review, we took 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, and after thoughtful review as well as consideration of public 
comments, we have determined that the CMS Patient Safety and Adverse 
Events Composite (CMS PSI 90) and the NHSN HAI measures are most 
appropriately included as part of the HAC Reduction Program and 
Hospital VBP Program.
    In order for the HAC Reduction Program to continue to receive its 
NHSN HAI data following the removal of NHSN HAI measures from the 
Hospital IQR Program, the HAC Reduction Program must establish the CDC 
NHSN as its mechanism to receive the required data. We believe that the 
collection and reporting of safety and NHSN HAI data is essential to 
reducing hospital-acquired conditions and improving patient safety. We 
also note that the HAC Reduction Program proposed to adopt validation 
policies for NSHN HAI data to ensure accurate data is received and used 
in the program. We provide more information on our validation policies 
in section IV.J.4.e.(1) of the preamble of this final rule below.
    After consideration of the public comments we received, we are 
finalizing our proposal to adopt the CDC NHSN as the mechanism by which 
hospitals will report NHSN HAI measures for the HAC Reduction Program. 
However, we are delaying implementation of these reporting requirements 
until January 1, 2020 in order to align with a corresponding delay in 
removing these NHSN HAI measures from the Hospital IQR Program. We are 
also finalizing our proposal to adopt the IPPS Quality Reporting 
Programs Measure Exception Form beginning on January 1, 2020.
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 did not propose 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20430), we did 
not propose 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

[[Page 41478]]

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 was discussed in section IV.J.4.g. of the 
preamble of the proposed rule.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20430), we did 
not propose any changes to our current administrative policy regarding 
the submission, review, and correction of chart-abstracted HAI data.
e. Changes to Existing Validation Processes
    As discussed in above in section IV.J.1. of the preamble of the 
proposed rule (83 FR 20431 through 20433), we proposed 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%2FQnetTie
r3&c=Page. We proposed 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 the proposed rule (proposed 
measures subject to validation); section IV.J.4.e.(2) of the preamble 
of the proposed rule (proposed provider selection); section 
(IV.J.4.e.(3) of the preamble of the proposed rule (proposed targeting 
criteria); section IV.J.4.e.(4) of the preamble of the proposed rule 
(proposed calculation of the confidence period); section IV.J.4.e.(5) 
of the preamble of the proposed rule (proposed educational review 
process); section IV.J.4.e.(6) of the preamble of the proposed rule 
(proposed application of validation penalty); and section IV.J.4.e.(7) 
of the preamble of the proposed rule (proposed validation period).
    Comment: Commenters expressed understanding and support for CMS' 
proposal to adopt the Hospital IQR Program's NHSN HAI measure 
validation process to the greatest extent possible in the HAC Reduction 
Program. The commenters appreciated that the validation requirements 
and process for the Hospital IQR Program are well established, and 
supported CMS' efforts to maintain continuity as it removes the 
measures from the Hospital IQR Program, but retains them in the HAC 
Reduction Program.
    Response: We thank the commenters for their support. As noted in 
section VIII.A.5.b.(2)(b) of the preamble of this final rule, we are 
delaying removal of the NHSN HAI measures from the Hospital IQR Program 
until the CY 2020 reporting period/FY 2022 payment determination. For 
this reason, we are also delaying adoption of the NHSN HAI measure 
validation processes into the HAC Reduction Program as discussed in 
more detail below.
    Comment: One commenter recommended that CMS work on a continuing 
basis with experts at CDC and others to improve surveillance case 
definitions and other measures in NHSN. The commenter also encouraged 
CMS to work with CDC's Division of Healthcare Quality Promotion, which 
funds HAI programs in State health departments on the validations of 
NHSN data, because it believed that State HAI programs are better 
positioned to conduct validations in more facilities and follow-up with 
them to improve the quality of data.
    Response: We thank the commenter for its views. We will continue to 
work with CDC and our partner institutions to ensure that the HAC 
Reduction Program is continually improving case definitions to improve 
quality measurement through specific and clear data element 
definitions, reduce hospital-acquired conditions, and avoids any 
unintended consequences.
    We also appreciate the comment concerning validation. Our 
validation process is designed to ensure nationwide accuracy across all 
States reporting NHSN data through objective, clear, and specific 
feedback to hospitals about their reported data. We use a single 
nationwide methodology for validating NHSN data, which ensures a 
uniform application to this CMS requirement. We also recognize that 
over 20 State health departments do not currently validate NHSN data 
for hospitals. Our validation is the only known process to ensure 
accuracy in these States with no current validation process.
    Comment: One commenter opposed CMS' proposal for the HAC Reduction 
Program's validation because it believed data validation should remain 
within the Hospital IQR Program. The commenter believed that CMS' plan 
for validation only further convolutes the programs and will cause 
undue financial hardship for healthcare systems.
    Response: We thank the commenter for its views. We believe that the 
validation processes for NHSN HAI measures are essential to ensure the 
HAC Reduction Program continues to receive reliable NHSN HAI measures 
data for use in the program and for reporting NHSN HAI data following 
the removal of the NHSN HAI measures from the Hospital IQR Program.
    After consideration of the public comments we received, we are 
finalizing our proposal to adopt a validation process for the NHSN HAI 
measures for the HAC Reduction Program as described in greater detail 
in the following sections of the preamble of this final rule. However, 
we are delaying adoption of this NHSN HAI measure validation process 
into the HAC Reduction Program until Q3 2020

[[Page 41479]]

discharges for FY 2023 in order to align with a corresponding delay in 
removing these NHSN HAI measures from the Hospital IQR Program.
(1) 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 the proposed rule, we proposed 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 the proposed rule, 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.
    Comment: Commenters generally understood and supported CMS' 
proposal to validate NHSN HAI measures upon their removal from the 
Hospital IQR Program.
    Response: We appreciate the commenters' support. As noted in 
section VIII.A.5.b.(2)(b) of the preamble of this final rule, we are 
delaying removal of the NHSN HAI measures from the Hospital IQR Program 
until the CY 2020 reporting period/FY 2022 payment determination. For 
this reason, we are also delaying adoption of the NHSN HAI measure 
validation processes into the HAC Reduction Program until Q3 2020 
discharges for FY 2023.
    Comment: One commenter, in addition to its general opposition to 
the HAC Reduction Program, more specifically opposed the HAC Reduction 
Program's validation proposals because it believed data validation and 
the NHSN HAI measures should remain within the Hospital IQR Program. 
The commenter believed that CMS' plan only further convolutes the 
programs and will cause undue financial hardship for healthcare 
systems.
    Response: We thank the commenter for its comment. We believe that 
the validation processes for NHSN HAI measures are essential to ensure 
the HAC Reduction Program's continues to receive reliable NHSN HAI 
measures data for use in the program following removal of the NHSN HAI 
measures from the Hospital IQR Program.
    After consideration of the public comments we received, we are 
finalizing our proposal to validate chart-abstracted NHSN HAI measures 
(CAUTI, CDI, CLABSI, Colon and Abdominal Hysterectomy SSI, and MRSA 
Bacteremia) submitted via NHSN under the HAC Reduction Program, but are 
delaying implementation to begin with Q3 2020 discharges for FY 2023.
(2) 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). In the FY 2019 IPPS/LTCH PPS proposed rule 
(83 FR 20431), we stated that we intend to mirror these policies for 
the HAC Reduction Program, and thus, we proposed 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 the 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 proposed 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.
    Comment: As noted above in section IV.J.4.e.(1) of the preamble of 
this final rule, commenters expressed understanding and support for 
CMS' proposal to adopt the Hospital IQR Program's NHSN HAI measure 
validation process to the greatest extent possible in the HAC Reduction 
Program. The commenters specifically appreciated that the validation 
requirements and that process for the Hospital IQR Program validation 
are well established, and CMS' efforts to maintain continuity as it 
removes the measures from the Hospital IQR Program, but retains them in 
the HAC Reduction Program.
    Response: We interpret these general comments to include support 
for CMS' proposals regarding provider selection as well. We thank the 
commenters for their support.
    Comment: A number of commenters understood the impetus for the HAC 
Reduction Program to adopt validation procedures, but expressed concern 
that as proposed, hospitals could be validated under both the Hospital 
IQR Program and the HAC Reduction Program during the same reporting 
period. These commenters urged CMS to enact a policy that prevents dual 
data validation selection for the same reporting period because the 
commenters were concerned about the potential for additional burden 
being imposed on participating hospitals. Some commenters suggested 
that CMS should align the random audits so that hospitals' audit 
frequency is unchanged. Other commenters suggested that a hospital 
should be ineligible for a random audit in a third year if they have 
been selected for audit in either the HAC Reduction Program or Hospital 
IQR Program in each year of the preceding two-year period. Other 
commenters encouraged CMS to finalize a policy under which a hospital 
selected for data validation under the Hospital IQR Program is not 
eligible for selection in that year for data validation in the HAC 
Reduction Program.
    Response: We thank the commenters for sharing their concerns and 
suggestions. As part of our Meaningful Measures Initiative and Patients 
Over Paperwork initiative, our goal is to reduce provider burden and we 
are striving to ensure our processes are as least burdensome as 
possible. We are currently reviewing several options to address 
commenters' concerns and will provide more information in future 
rulemaking.
    Comment: One commenter encouraged CMS to ensure that notices of 
inclusion and validation of results be located in a single interface 
and posted at the same time. Another commenter stated that CMS needs to 
provide the hospitals with unified case selection reports, records 
requests and submission processes that will cover both the Hospital IQR 
Program and the HAC Reduction Program validation.

[[Page 41480]]

    Response: We are aware of hospitals' concerns. We thank the 
commenters for their suggestions, which we will take under advisement. 
We will work with our contractors to ensure that the information is 
provided in clearest and most convenient manner, so that hospitals can 
spend less time doing paperwork and more time with patients.
    After consideration of the public comments we received, we are 
finalizing our proposal to randomly select 400 hospitals. Again, we 
note that we are delaying adoption of the Hospital IQR Program's NHSN 
HAI measure validation process to begin with Q3 2020 discharges for FY 
2023.
(3) 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 Program 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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20431 
through 20432). We proposed 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-tailed confidence interval that included 75 percent; 
\262\ and
---------------------------------------------------------------------------

    \262\ 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.
    Although we invited public comment on our proposals, because 
commenters did not specify whether their responses were directed to 
general provider selection, or the targeted selection proposals, we 
have included all validation selection comments under the provider 
selection section above, located at section IV.J.4.e.(2) of the 
preamble of this final rule.
    After consideration of the public comments we received, we are 
finalizing our proposal to select 200 additional hospitals for targeted 
validation. Again, we note that we are delaying adoption of the 
Hospital IQR Program's NHSN HAI measure validation process to begin 
with Q3 2020 discharges for FY 2023.
(4) 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, in the FY 2019 
IPPS/LTCH PPS proposed rule (83 FR 20432), we proposed 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.
    Comment: One commenter supported CMS' proposals for computing the 
confidence interval.
    Response: We thank the commenter for its support.
    After consideration of the public comments we received, we are 
finalizing our proposals to 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 by 
computing a confidence interval. If the upper bound of this confidence 
interval is 75 percent or higher, the hospital would pass the HAC 
Reduction Program validation requirement; if the upper bound is below 
75 percent, the hospital would fail the HAC Reduction Program 
validation requirement. However, as discussed above, we are delaying 
adoption of the Hospital IQR Program's NHSN HAI measure validation 
process to begin with Q3 of FY 2020 discharges for FY 2023.
(5) 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 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).
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20432), we stated 
that 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 proposed 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

[[Page 41481]]

clarification, and potentially identify a CMS validation error. In 
addition, like the Hospital IQR Program, we proposed 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 also proposed 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.
    Comment: A commenter supported CMS' proposal to adopt an 
Educational Review process similar to the current Hospital IQR Program. 
This commenter also supported the addition of the proposal that if a 
timely review is requested and an error is identified in the fourth 
quarter of review, CMS would use the corrected quarterly score to 
compute the final confidence interval.
    Response: We thank the commenter for its support.
    Comment: One commenter urged CMS to clearly communicate any 
administrative policies regarding the validation of NHSN HAI measures 
and provide education to stakeholders on any changes to existing 
processes.
    Response: We plan to provide education to stakeholders before the 
implementation of finalized administrative policies to ensure a 
seamless, uninterrupted transition. We plan to hold education and 
outreach sessions, as well as post information, consistent with our 
normal course of communications to provide hospitals with as much 
information as possible on the new policies.
    Comment: A commenter urged CMS to ensure that all measure 
abstractors complete the NHSN training modules for HAI surveillance in 
order to be qualified to validate hospital reported data train measure 
abstractors because it believes this understanding of the application 
of the NHSN surveillance definitions will prevent unnecessary and time 
intensive educational reviews.
    Response: We thank the commenter for its comment. All abstractors 
are trained to perform independent abstractions, and CMS provides 
ongoing training to abstractors to ensure they are competent to conduct 
abstractions. We will also continue to work with CDC to provide our 
abstractors with clear and specific NHSN surveillance to improve both 
hospital reporting accuracy and CMS validation abstraction reliability.
    After consideration of the public comments we received, we are 
finalizing 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. 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. 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. Again, we note we are 
delaying adoption of the Hospital IQR Program's NHSN HAI measure 
validation process to begin with Q3 2020 discharges for FY 2023.
(6) 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).
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20432), for the 
HAC Reduction Program, if a hospital could not meet the overall 
validation requirement, we proposed to penalize hospitals that failed 
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 proposed that hospital would 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 reduce 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).
    Comment: Some commenters appreciated CMS' proposal to adopt what 
they characterized as a fair validation penalty. Specifically, the 
commenters believed that the proposed validation penalty is fairer to 
hospitals, will reduce the likelihood of a penalty due to data 
validation failure and is consistent with the current HAC reduction 
program policy of assigning the maximum Winsorized z-score when a 
hospital fails to submit data for a measure. The commenters stated 
their appreciation for the change in penalty application to only the 
measures that fail validation, rather than application of the penalty 
to all measures.
    Response: We thank commenters for their support.
    Comment: One commenter expressed concern about penalty application 
for failing validation and urged that validation penalty be no more 
than the penalty under Hospital IQR Program. The commenter noted that 
it is technically possible to fail validation for reporting HAC numbers 
that are higher than those the hospital actually has, and suggested 
that failing validation does not necessarily imply being a ``worse 
performer.'' The commenter also expressed concern over the ``worst 
performer'' title to those that failed validation instead of 
performance issues.
    Response: We appreciate the commenter's feedback. We continue to 
believe that hospitals need to submit accurate data for the HAC 
Reduction Program's integrity. With respect to the ``worst-performer'' 
title, we will take the commenter's concern under advisement, and 
consider options on how we identify hospitals that failed validation.
    Comment: One commenter expressed concern that hospitals could fail 
validation due to electronic record issues that may prevent validators 
from having complete information related to the case, rather than 
inaccurate case determinations.
    Response: We thank the commenter for its comment. We provide all 
abstractors training to perform independent abstractions, and CMS 
provides ongoing training to abstractors

[[Page 41482]]

to ensure they are competent to conduct abstractions. We continue to 
work with CDC to provide our abstractors with clear and specific NHSN 
surveillance to improve both hospital reporting accuracy and CMS 
validation abstraction reliability. The participating hospital is 
responsible for sending all the required information necessary for 
validation. If hospitals are unable to submit data due to CMS system 
issues, hospitals should contact the QualityNet HelpDesk at: https://www.qualitynet.org/dcs/ContentServer?pagename=QnetPublic/Page/PageFooterContent&name=glh.ContactUs.pag, and the Validation Support 
Contractor (VSC) at [email protected].
    Comment: A commenter did not believe the penalty associated with a 
failed validation within the HAC Reduction Program is fair, nor did it 
believe the facilities would be able to easily replicate the 
calculation.
    Response: We appreciate the commenter's concern; however, in order 
to ensure that hospitals provide accurate data for the program, we 
continue to believe a validation penalty of the worst possible 
Winsorized z-score for the measures that fail validation is fair and 
appropriate. We believe that facilities will be provided with 
sufficient information to inform their calculation, as is the current 
policy under the Hospital IQR Program.
    After consideration of the public comments we received, we are 
finalizing our proposal that if a hospital does not meet the overall 
validation requirement, we will penalize it by assigning the maximum 
Winsorized z-score only for the set of measures CMS validated. Again, 
we note we are delaying adoption of the Hospital IQR Program's NHSN HAI 
measure validation process to begin with Q3 2020 discharges for FY 
2023.
(7) 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20432 through 
20433), we stated that after consideration, we proposed 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 proposed 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.
---------------------------------------------------------------------------

    \263\ The CMS Clinical Data Abstraction Center (CDAC) performs 
the validation. We neglected to define the acronym in the proposed 
rule, so we define it now.

                            Proposed Validation Period for the HAC Reduction Program
                                         [* Dates are subject to change]
----------------------------------------------------------------------------------------------------------------
                                   Current NHSN    Current NHSN   Estimated CDAC  Estimated date     Estimated
  Discharge quarters by fiscal    HAI submission  HAI validation   \263\ record   records due to    validation
            year (FY)               deadline *      templates *       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
    1Q4 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

[[Page 41483]]

 
    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 proposed 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 
proposed 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&pagenameQnetPublic%2FPage%2FnetTier3&c=Page.
    We did not receive any comments on our validation proposals; 
however, as discussed above, we are delaying adoption of the Hospital 
IQR Program's NHSN HAI measure validation process into the HAC 
Reduction Program in order to align with a corresponding delay in 
removal of these measures from the Hospital IQR Program. We are 
therefore finalizing our proposal to begin validation with Q3 
discharges for FY 2020 for the FY 2023 program year.
    The commencement of validation, along with key validation dates, is 
shown in the table below.
---------------------------------------------------------------------------

    \264\ As we stated in the proposed rule, the dates of validation 
are subject to change. In the proposed rule, we proposed to begin 
validation with Q3 of FY 2019 discharges for FY 2022. However, 
because the Hospital IQR Program is delaying its removal of NHSN HAI 
measures by a year, we are delaying the implementation of the HAC 
Reduction Program's validation process by one year. This table now 
reflects the updated implementation date of Q3 of FY 2020 discharges 
for FY 2023.
    \265\ The CMS Clinical Data Abstraction Center (CDAC) performs 
the validation. We neglected to define the acronym in the proposed 
rule, so we define it now.

                            Finalized Validation Period for the HAC Reduction Program
                                      [* Dates are subject to change] \264\
----------------------------------------------------------------------------------------------------------------
                                   Current NHSN    Current NHSN   Estimated CDAC  Estimated date     Estimated
  Discharge quarters by fiscal    HAI submission  HAI validation   \265\ record   records due to    validation
            year (FY)               deadline *      templates *       request          CDAC         completion
----------------------------------------------------------------------------------------------------------------
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.

f. 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. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20433), we 
proposed 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.
    Comment: One commenter supported CMS' proposal to adopt DACA 
requirements for hospitals to electronically acknowledge the accuracy 
and completeness of data to the best of their knowledge on an annual 
basis via the QualityNet Secure Portal.
    Response: We thank the commenter for its support.
    After consideration of the public comment we received, we are 
finalizing our proposal to require that hospitals electronically 
acknowledge the data submitted are accurate and complete to the best of 
their knowledge. Hospitals

[[Page 41484]]

would be required to complete and sign the DACA on an annual basis via 
the QualityNet Secure Portal. As noted in section VIII.A.5.b.(2)(b) of 
the preamble of this final rule, we are delaying removal of the NHSN 
HAI measures from the Hospital IQR Program until the CY 2020 reporting 
period/FY 2022 payment determination. For this reason, we are also 
delaying the first DACA submission under the HAC Reduction Program 
until April 1 through May 15, 2021 for calendar year 2020 data.
g. Scoring Calculations Review and Correction Period
    Although we did not propose any changes to the review and 
correction procedures for FY 2019 (83 FR 20433 through 20434), 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 via the QualityNet 
Secure Portal. As noted in section IV.J.4.b. of the preamble of the 
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 the 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 
the proposed rule.
    Comment: A commenter supported CMS' proposed renaming convention 
for the 30-day review period to the ``Scoring Calculation Review and 
Correction Period'' to accurately reflect the intent of the process.
    Response: We thank the commenter for its support.
    Comment: A commenter recommended that CMS clarify the review 
periods by distinguishing when a hospital is reviewing the underlying 
data versus the scoring of that data under the HAC Reduction Program. 
The commenter believed that a clarifying name change is helpful, but 
requested more information on CMS' quality reporting websites to ensure 
transparency of the differing review periods in programs.
    Response: We thank the commenter for its views. We refer readers to 
IV.J.4.c. of the preamble of this final rule (Review and Correction of 
Claims Data Used in the HAC Reduction Program for FY 2019 and 
Subsequent Years) and IV.J.4.d. of the preamble of this final rule 
(Review and Correction of Chart-Abstracted NHSN HAI Data used in the 
HAC Reduction Program for FY 2019 and Subsequent Years) where we 
discuss the review and corrections process of underlying data for both 
claims-based and chart-abstracted measures. We will take the commenters 
concern into account and consider what, if any, changes to CMS' quality 
reporting websites and education and outreach materials could 
facilitate greater transparency.
h. Public Reporting of Hospital-Specific Data Beginning FY 2019
(1) 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.
    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. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20434), we proposed to make data

[[Page 41485]]

available in the same form and manner as currently displayed under the 
Hospital IQR Program.
    As we stated in the proposed rule, 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.
    Comment: Commenters encouraged CMS to commit to publicly reporting 
the NHSN HAI data on Hospital Compare and strongly urged CMS to 
communicate how it specifically intends to report quality measure data, 
including NHSN HAI data. One commenter also urged CMS to post data on 
both the Hospital Compare and the https://data.medicare.gov/ websites.
    Response: We thank the commenters for their views. As we stated in 
the proposed rule, we intend to continue making NHSN HAI data available 
to the public on a quarterly basis 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. In the FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20434), we proposed to make data 
available in the same form and manner as currently displayed under the 
Hospital IQR Program.
    Comment: A commenter strongly urged CMS to publicly report both the 
full CMS PSI 90 composite score and the scores of individual child 
measures within the composite. In the reporting of the child measures, 
the commenter encouraged CMS to continue to report the current data 
fields that presently appear in the CMS Hospital Compare downloadable 
database (for example, denominator, score) because the commenter 
believed that these fields are helpful in discerning performance in the 
child measures, and are useful for health care raters that wish to 
responsibly use the measures in their transparency efforts.
    Response: We thank the commenter for the comment. As discussed in 
section VIII.A.5.b.(2)(a) of the preamble of this final rule, we are 
finalizing our proposal to remove the CMS PSI 90 measure from the 
Hospital IQR Program; however, the CMS PSI 90 measure will continue to 
be reported on the Hospital Compare web pages; and the child measures 
will continue to be reported in the downloadable database on Hospital 
Compare.
(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 be 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. 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 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,\266\ 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.
---------------------------------------------------------------------------

    \266\ 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 2019 (N=3,195)
----------------------------------------------------------------------------------------------------------------
                                                                      Number            Weight applied to:
                                                                   (percent) of  -------------------------------
         Number of Domain 2 measures with measure scores           hospitals in
                                                                    FY 2019 a b     CMS PSI 90     Each Domain 2
                                                                                                      measure
----------------------------------------------------------------------------------------------------------------
0...............................................................       223 (6.9)           100.0             N/A
1...............................................................      332 (10.3)            15.0            85.0
2...............................................................       210 (6.5)            15.0            42.5
3...............................................................       188 (5.8)            15.0            28.3
4...............................................................       250 (7.8)            15.0            21.3

[[Page 41486]]

 
5...............................................................    1,992 (61.9)            15.0            17.0
----------------------------------------------------------------------------------------------------------------
\a\ The denominator for percentage calculations is all non-Maryland hospitals with a FY 2019 Total HAC Score
  (N=3,219).
\b\ This table is updated from the FY 2019 IPPS/LTCH PPS proposed rule, which used FY 2018 data. To see that
  table, we refer readers to 83 FR 20434 through 20437.


Weight Applied to Each Measure by Number of Domain 2 Measures With Measure Scores for Hospitals Without a Domain
                                            1 Score in FY 2019 (N=24)
----------------------------------------------------------------------------------------------------------------
                                                                      Number            Weight applied to:
                                                                   (percent) of  -------------------------------
         Number of Domain 2 measures with measure scores           hospitals in
                                                                    FY 2019 a b     CMS PSI 90     Each Domain 2
                                                                                                      measure
----------------------------------------------------------------------------------------------------------------
1...............................................................         8 (0.2)             N/A           100.0
2...............................................................         1 (0.0)             N/A            50.0
3...............................................................         0 (0.0)             N/A            33.3
4...............................................................         3 (0.1)             N/A            25.0
5...............................................................        12 (0.4)             N/A            20.0
----------------------------------------------------------------------------------------------------------------
\a\ The denominator for percentage calculations is all non-Maryland hospitals with a FY 2019 Total HAC Score
  (N=3,219).
\b\ This table is updated from the FY 2019 IPPS/LTCH PPS proposed rule, which used FY 2018 data. To see that
  table, we refer readers to FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20434 through 20437).

    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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20434 through 
20437), we discussed 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 sought 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 the proposed rule, we stated that 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.

 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).
------------------------------------------------------------------------


[[Page 41487]]

    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 \267\
---------------------------------------------------------------------------

    \267\ This analysis is updated from the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20434 through 20437), which used FY 2018 data.
---------------------------------------------------------------------------

    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 2019 HAC 
Reduction Program data. We compared the percentage of hospitals in the 
worst-performing quartile in FY 2019 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 c
------------------------------------------------------------------------
                                        Equal measure    Variable domain
          Hospital group a               weights (%)       weights (%)
------------------------------------------------------------------------
Teaching hospitals: 100 or more                    3.6               1.6
 residents (N=248)..................
Safety-net \b\ (N=646)..............               0.9               0.8
Urban hospitals: 400 or more beds                  2.5               0.8
 (N=358)............................
Hospitals with fewer than 100 beds                -1.7              -1.0
 (N=1,208)..........................
Hospitals with a measure score for:
    Zero Domain 2 measures (N=223)..               0.4               0.0
    One Domain 2 measure (N=340)....              -4.1              -2.9
    Two Domain 2 measures (N=211)...              -3.8              -3.3
    Three Domain 2 measures (N=188).              -0.5               0.5
    Four Domain 2 measures (N=253)..               0.0               0.4
    Five Domain 2 measures (N=2,004)               1.1               0.7
------------------------------------------------------------------------
\a\ The number of hospitals in the given hospital group for FY 2019 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.
\c\ This table is updated from the FY 2019 IPPS/LTCH PPS proposed rule,
  which used FY 2018 data.

    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 FY 2019 HAC Reduction Program data, the 
percentage of hospitals in the worst-performing quartile decreases by 
1.7 percent for small hospitals (that is, fewer than 100 beds), 4.1 
percent for hospitals with one Domain 2 measure, 3.8 percent for 
hospitals with two Domain 2 measures, while it increases by 2.5 percent 
for large urban hospitals (that is, 400 or more beds) and 3.6 percent 
for large teaching hospitals (that is, 100 or more residents). The 
Variable Domain Weights approach decreases the percentage of hospitals 
in the worst-performing quartile by 1.0 percent for small hospitals, 
2.9 percent for hospitals with one Domain 2 measure, and 3.3 for

[[Page 41488]]

hospitals with two Domain 2 measures, while it increases the percentage 
of hospitals in the worst-performing quartile by 0.8 percent for large 
urban hospitals and 1.6 percent for large teaching 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 proposed 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.
    Comment: Many commenters supported the Equal Measure Weights 
approach. Some commenters supported this approach because they believed 
it will improve the fairness of the HAC Reduction Program's penalty 
assessments on smaller and low-volume hospitals whose HAI domain scores 
could often rest on only one or two measures. Some commenters supported 
this approach because they believed it will ensure that patient safety 
and adverse event avoidance (CMS PSI 90) remains a fixture of the HAC 
Reduction Program. Other commenters supported this approach because 
they believed that its adoption would simplify the calculation of 
performance results.
    Response: We thank the commenters for their support for our 
preferred approach. We agree that the Equal Measure Weights policy 
aligns with the intent of the original program design to apply a 
similar weight to each measure and will help address the concern about 
the substantially high weight being applied to one or two HNSN HAI 
measures when a hospital does not have data for the other HNSN HAI 
measures. We also believe the Equal Weights approach simplifies the 
methodology and will result in small and low-volume hospitals being 
scored more fairly.
    Comment: Some commenters supported and favored the Equal Measure 
Weights approach, but also supported the Variable Domain Weights 
approach over the current methodology. These commenters believed that 
either proposal would result in a more equitable and useful scoring 
methodology for all hospitals.
    Response: We thank the commenters for their support of either 
proposed approach. We agree that either approach could improve the 
current methodology, but the Equal Measure Weights approach remains our 
preferred approach.
    Comment: One commenter supported the Equal Measure Weights approach 
for the scoring methodology, but requested that CMS run hospital level 
preview reports before implementation.
    Response: We thank commenter for this suggestion. We will review 
the feasibility of this suggestion with our contractors and provide an 
update through our normal outreach and communication methods. We also 
note that as part of public reporting, hospitals will receive an HSR 
during the HAC Reduction Program's Scoring Calculations Review and 
Correction Period, usually in July, which is in advance of public 
reporting in January. This HSR would include the results using the new 
weighting approach and allow hospitals to review these results prior to 
public reporting or application of payment adjustments.
    Comment: Some commenters supported the Equal Measure Weights 
approach but encouraged CMS to reexamine the Equal Measure Weights 
approach and Variable Domain Weights approach whenever it considers 
adding a new measure to ensure that the finalized approach does not 
unfairly penalize one type of hospital.
    Response: We thank the comment for this suggestion. We strive for 
continuous improvement in the HAC Reduction Program and will continue 
to monitor the unintended consequences of our policies.
    Comment: Some commenters supported the Variable Domain Weights 
approach over the Equal Measure Weights approach because they believed 
that the Variable Domain Weights approach could reduce the emphasis on 
the CMS PSI 90 measure.
    Response: We thank the commenters for their support of the Variable 
Domain Weights approach. We note that we continue to believe the CMS 
PSI-90 measure is a valuable measure for the HAC Reduction Program, and 
part of our reasoning in proposing new scoring methodologies is to 
facilitate scoring more evenly across measures.
    Comment: A few commenters recommended retaining the current scoring 
methodology because they believe that using the new methodologies would 
negatively impact large teaching and urban hospitals. A few commenters 
also believed that the Variable Domain Weights approach was the same as 
the current methodology.
    Response: We thank the commenters for their feedback. We proposed 
the Equal Measure Weights approach to create a more equitable approach 
for all hospitals and closer align payment to performance as directed 
under our statutory requirements.
    Comment: Some commenters opposed both the Equal Measure Weights 
approach and the Variable Domain Weights approach, while others simply 
expressed concerns, because the commenters believed that both 
approaches, as well as CMS' attempt to reduce the effect of the program 
on low-volume hospitals, could result in increased penalties on other 
hospital groups, including teaching hospitals,

[[Page 41489]]

large hospitals, and hospitals caring for larger numbers of 
disadvantaged patients.
    Response: We thank the commenters for their comments. We will 
continue to review unintended consequences of our policies. As with any 
proposal, some hospitals may benefit more than others. We believe that 
the Equal Measure Weights approach is more equitable for most hospitals 
as compared to the current methodology to implement our statutory 
requirement to link payment to eligible hospitals based on their 
Hospital Acquired Condition performance.
    Comment: Some commenters urged CMS to further examine the 
unintended consequences of its proposed changes to the HAC Reduction 
Program methodology to mitigate any negative impact on essential 
hospitals.
    Response: We thank the commenters for their feedback. We will 
continue to review unintended consequences of our policies.
    Comment: A few commenters opposed both of the proposed 
methodologies because the commenters believed that small rural tribal 
hospitals will be penalized even with the proposed changes. The 
commenters explained that when volumes are low, shifting the weighting 
to measures where there are reported incidents serves only to 
artificially weight and enhance them, rather than giving the hospital 
its due credit for having zero incidents in other identified measures, 
either within the domains or among the two domains. The commenters 
suggested that CMS' use of ``expected'' events is contrary to the 
objectives of the program for small and rural hospitals, and suggested 
that if a low volume hospital has no events in previous years, the 
expected rate becomes very low. The commenters noted that one incident 
will then result in a very detrimental result for the hospital.
    Response: We strive for continuous improvement in the HAC Reduction 
Program and will continue to monitor ways to improve the program. 
Though the impact to small tribal hospitals are minimal, this policy 
will decrease the number of small rural hospitals found in the worst-
performing quartile. We are also working with the CDC to identify 
additional changes to measure specifications included in the program 
that could enhance program participation for smaller hospitals.
    Comment: Some commenters urged CMS to consider additional changes 
to the HAC Program beyond the measure domain weightings. Some 
commenters recommended that CMS work with the CDC to examine whether 
the number of expected infections hospitals must receive a score on the 
HAI measures could be lowered without compromising the measures' 
reliability and accuracy. Commenters believed that part of the reason 
that many small hospitals do not have scores on the HAI measures is 
because their volumes are not sufficient to meet the threshold of one 
expected infection. By lowering the threshold, the commenters said, CMS 
may be able to score smaller hospitals on a wider variety of HAI 
measures. Commenters also urged CMS to work with stakeholders on 
analysis and make the impact of changing the threshold available for 
public review and comment.
    Response: Earlier this year, the HAC Reduction Program performed an 
analysis of the approach encouraged by these commenters. Our 
preliminary findings did not demonstrate the anticipated impact, and 
tended to exacerbate the scoring issues associated with low-volume and 
small hospitals. As such, we continue to believe that the current 
number of expected infections is ideal to maintain appropriate 
reliability and accuracy. CMS will continue to work with CDC on 
approaches to address the commenters concerns. We seek to optimize the 
participation of low volume facilities while maintaining reliability 
and validity.
    Comment: One commenter expressed concern about CMS' proposals to 
remove measures from the Hospital IQR Program and adopt them in the HAC 
Reduction Program. The commenter asserted that, because HAC Reduction 
Program does not provide incentives for hospitals to submit quality 
measure data, removing measures from Hospital IQR Program and adopting 
them in HAC Reduction Program may imperil our quality data collection 
efforts, as hospitals would not have any incentive to submit the data 
needed to assess hospitals under HAC Reduction Program.
    Response: We would like to clarify that the HAC Reduction Program 
is established by statute and its measure set is not limited to those 
measures adopted under the Hospital IQR Program. While we understand 
the commenter's concern, we note that hospitals that fail to report 
quality measure data for HAC Reduction Program purposes will be 
assessed the worst possible score for those measures, and we continue 
to believe that incentive to be sufficient to ensure that all eligible 
hospitals submit all required data to the HAC Reduction Program.
    Comment: Some commenters offered alternative scoring methodologies. 
Some recommended that CMS consider alternatives either focusing on 
improving the measures or comparing hospitals based upon the number of 
measures scores they have. The commenters suggested that a measure 
improvement approach might, for example, consider changes to the 
measures themselves that would result in smaller hospitals being more 
likely to have measure scores on the NHSN measures in Domain 2 (such as 
reducing the number of qualifying infection events to less than 1). The 
commenters suggested that a more systematic approach would be to modify 
the program's scoring such that it is comparing cohorts of hospitals 
based upon the measures for which they have scores (rather than 
comparing performance across varying measure score completeness).
    Response: We thank the commenters for their comments. We have 
considered several scoring options where cohorts of hospitals were 
compared based on the measures and domains for which they have scores. 
These options were: (1) Extremely complicated resulting in a lack of 
transparency, parsimony and program score results; or (2) yielded 
minimal impact in improving the inclusion of small hospitals. We will 
continue to explore methods for improving the program and will look 
further into these comments raised.
    Comment: Some commenters recommended that CMS ensure that the 
methodology and quality measures in the HAC Reduction Program are 
tailored to measure hospitals' improvements on HACs accurately and do 
not disproportionately penalize certain types of hospitals.
    Response: We interpret the commenter's comment to suggest that the 
HAC Reduction Program could account for hospitals' improvement on HACs. 
However, the HAC Reduction Program's statutory authority does not allow 
us to provide incentive payments for improvement.
    After consideration of the public comments we received, we are 
finalizing our policy to adopt an Equal Measure Weights scoring 
methodology beginning in FY 2020.
6. Applicable Period for FY 2021
    Consistent with the definition specified at Sec.  412.170, in the 
FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20437), we proposed 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

[[Page 41490]]

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.
    Comment: Commenters supported the proposed applicable period for FY 
2021.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing, consistent with 42 CFR 412.170, 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.
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, in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20437), we sought stakeholder feedback on the 
adoption of additional Program measures.
    We welcomed 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.
    Comment: Commenters strongly recommended that all new measures, 
including eCQMs, be NQF-endorsed, approved by the MAP, scientifically 
valid, reliable, and feasible, and that such measures be reviewed to 
determine whether they are appropriate for review in the NQF SDS trial 
period. Commenters also believed new measures should be evaluated 
within the Meaningful Measures Initiative framework and appropriate 
corresponding measure removals should be considered to balance a 
measure's addition. A commenter opposed additional claims-based 
measures because claims data does not demonstrate if the standard of 
care was met and are not actionable improve care delivery and outcomes. 
Other commenters believed that although claims-based reporting is far 
from a perfect assessment of care quality, elimination of these 
measures could create a significant risk to patient safety. Many 
commenters believed that the HAC Reduction Program should not directly 
adopt new measures, including eCQMs, into the program without providing 
stakeholders to gain opportunity to familiarize themselves with a 
measure before it is used to determine their Medicare payments.
    Most commenters believed that hospitals should have the measure 
publicly reported for at least a year without penalty. Some commenters 
suggested that this should be accomplished by including measures in the 
Hospital IQR Program prior to adopting them to the HAC Reduction 
Program, or by reported on them Hospital Compare for a year, or by 
creating a reporting only category within the HAC Reduction Program. 
These commenters urged CMS to give hospitals time to become accustomed 
to reporting and measuring these items before implementation.
    Response: We thank the commenters for their feedback.
    Comment: One commenter suggested the HAC Reduction Program consider 
telemedicine, patient reported data and wearables. Another commenter 
recommended that CMS use its data to identify at risk-patients before 
they are in a disease state.
    Response: We thank the commenter for their suggestions. As a 
statutory requirement, the HAC Reduction Program can only include 
measures that assess conditions that are hospital-acquired (that is, 
not present on admission) while a patient in the inpatient hospital 
setting.
    Comment: A few commenters recommended that CMS consider adding a 
measure to account for surgical site infections associated with hip and 
knee replacement surgeries for inpatient and outpatient procedures 
using NHSN measures. Another commenter recommended adding a measure to 
address the inappropriate overuse of antibiotics and infection 
prevention practices.
    Response: We thank the commenters for their feedback.
    Comment: A number of commenters supported eCQMs for the reporting 
of HAC Reduction Program measures and stated that such measures would 
be beneficial. One commenter expressed optimism that electronically 
reported data elements could provide more accurate, informative, and 
timely information about clinical care for patients.
    Response: We thank the commenters for their comments in support of 
the potential for eCQMs in the HAC Reduction Program.
    Comment: Commenters encouraged CMS to consider adopting NQF-
endorsed measures and to ensure that they have reliable risk-
adjustment. One commenter believed eCQMs can be risk adjusted to 
account for socioeconomic status and health history for appropriate 
national comparisons of care.
    Response: We thank the commenters for their comments.
    Comment: A commenter urged that, prior to adopting any eCQMs for 
the HAC Reduction Program: Those eCQMs must be thoroughly tested for 
validity,

[[Page 41491]]

reliability, and feasibility and determined to produce comparable and 
consistent results; the data elements should be accurately and 
efficiently gathered in the healthcare provider workflow, using data 
elements already collected as part of the care process and stored in 
EHRs or other interoperable clinical and financial technology; and that 
the eCQMs should provide an accurate reflection of care delivered, and 
be actionable to drive meaningful improvements in care delivery.
    Response: We thank the commenter for its feedback. Any measure 
proposed for the HAC Reduction Program would be assessed to ensure that 
it is a reliable, valid, and appropriate measure for the Program. In 
addition, any measure proposed would be subject to CMS' pre-rulemaking 
and rulemaking process before being adopted in the HAC Reduction 
Program, providing multiple opportunities for stakeholder comment and 
input.
    Comment: Some commenters believed that eCQMs could reduce reporting 
burden; although some cautioned about the potential for inherent 
incongruities between claims codes and the quality of care provided to 
the patient when using eCQMs instead of claims quality measurement. The 
commenters recommended that any additions be done thoughtfully and with 
regard to alignment, timeliness of implementation, and the amount of 
burden that will be incurred.
    Response: We thank the commenters for their comments and will take 
them into consideration should CMS decide to pursue an eCQM for the HAC 
Reduction Program.
    Comment: Commenters opposed the addition of measures simply for the 
sake of having eCQMs and noted that such an approach would not be 
helpful.
    Response: We thank the commenters for their comments about the 
potential future use of eCQMs in the HAC Reduction Program.
    Comment: Commenters encouraged CMS to consider alignment, timing, 
and the amount of burden associated with a given eCQM. Commenters 
believed that eCQM implementation needs to allow time for this 
development work, and that CMS set realistic timeframes.
    Response: We thank the commenters for their comments and will take 
them into consideration should CMS decide to pursue an eCQM for the HAC 
Reduction Program.
    Comment: Some commenters believed the HAC Reduction Program's 
measures should clearly support improving the patient experience of 
care (including quality, outcomes, and satisfaction). Other commenters 
recommended focusing on preventable common medical errors for which the 
HAC Reduction Program has few measures, such as medication errors. Some 
commenters supported the development of outcomes-driven clinical 
quality measures that can be extracted from electronic clinical data
    Response: We thank the commenters for their suggestions. Measures 
for the HAC Reduction Program, by statutory authority, must address 
conditions that are hospital-acquired and were not present-on-
admission. As such, measures assessing patient experience of care, 
satisfaction, and other similar types of measures would not be 
appropriate for the HAC Reduction Program.
    Comment: A number of commenters expressed caution about adopting 
eCQMs into the HAC Reduction Program because they believed there are 
still required improvements for eCQMs. Some commenters were concerned 
with that different vendors may not have equivalent eCQMs from system 
to system, and believed that because of this variability, it would be 
unfair to base hospital reimbursement on measures where performance may 
simply be a function of which electronic health record vendor a 
facility is using.
    Response: We thank the commenters for their comments and will take 
them into consideration should CMS decide to pursue an eCQM for the HAC 
Reduction Program.
    Comment: A commenter believes that eCQMs should not be considered 
for inclusion in HAC Reduction Program because eCQMs are costly and 
labor intensive to report and CMS has sent conflicting signals with 
respect to eCQMs. The commenter noted that CMS is proposing to retire 
nearly half of the current eCQM metrics and requests clear direction in 
order to minimize reporting expenses.
    Response: We thank the commenter for their comments about the 
future use of eCQMs in the HAC Reduction Program.
    Comment: Commenters noted that seeking EHR input early in the 
measure development process can help set realistic expectations for 
feasibility of EHR data collection, timeline and cost. Commenters 
recommended that CMS: Collaborate with accreditation organizations (for 
example, The Joint Commission), private payers, and States to develop 
consensus; support a core measure set that closely aligns to the CMS 
eCQM menu set; standardize set of vendor-agnostic tools and notes to 
auto feed quality data elements.
    Response: We thank the commenters for their comments about eCQMs 
and will take these suggestions under advisement as we continue to work 
on eCQMs.
    Comment: Some commenters recommended that eCQMs should be selected 
based on data elements that are already used in electronic health 
records. A commenter expressed concern that it is difficult to capture 
an infection upon admission as a discrete data element in an electronic 
health record. Other commenters expressed concern about current eCQMs' 
degree of accuracy particularly with surgical procedures and risk-
adjustment factors. A commenter expressed the need for quality 
abstractors to work closely with coders to ensure that the measure 
specifications and coding support the quality measure's specifications.
    Response: We thank the commenters for their comments and will take 
them into consideration.
    Comment: A commenter recommended having a thorough validation 
process of any eCQMs. Others encouraged CMS to postpone adding eCQMs to 
payment programs until the first period of eCQM validation is complete 
under the Hospital IQR Program. Another commenter requested that CMS 
focus on addressing current concerns with eCQM reporting rather than on 
developing additional eCQMs for inclusion in hospital reporting 
programs for the future. Other commenters recommended that CMS focus on 
the inclusion of a small number of measures in the eCQM program that 
are meaningful and not overly burdensome will provide hospitals with 
additional time and bandwidth to address the considerable challenges of 
electronic data reporting.
    Response: We thank the commenters for their comments about eCQMs 
and we will take them into consideration.
    Comment: Several commenters encouraged the advancement of standards 
for Certified EHR Technology (CEHRT) to better support measure 
development. Commenters also encouraged interoperability and the 
establishment of electronic health record data standards to ensure 
measures can be assessed comparably across systems.
    Response: We thank the commenters for their comments about CEHRT to 
support measure development. We will take these into consideration.
    Comment: Commenters recommended that CMS incentivize, perhaps 
through scoring bonuses, the development and testing of new eCQMs.
    Response: We thank the commenters for their views and will take 
them into consideration as we continue to explore

[[Page 41492]]

additional measures for potential future adoption.

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 regulation regarding 
the calculation of this additional payment is 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. 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 have a shared rotational arrangement 
and are either located in the same urban or rural area or in contiguous 
urban or rural areas, are under common ownership, or 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 received 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 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).
    As we discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20438), 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 allowed under the current regulation at 
Sec.  413.79(e)(1)(iv) involves an existing teaching hospital(s) (a 
hospital with caps based on training occurring in 1996) and a new 
teaching hospital(s) (a hospital with caps established after 1996), and 
therefore, we do not believe a Medicare GME affiliation agreement 
consisting solely of new urban teaching hospitals is

[[Page 41493]]

permissible under Sec.  413.79(e)(1)(iv). However, as we stated in the 
proposed rule, 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 
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 a change 
will 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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20439), we 
proposed 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.
    In the proposed rule, we emphasized 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 stated that 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 proposed to revise Sec.  413.79(e)(1)(iv) by 
designating the existing provision of paragraph (iv) as paragraph (A) 
and adding 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 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 proposed that this change would be effective beginning with 
affiliation agreements entered into for the July 1, 2019 through June 
30, 2020 residency training year. We noted that, if the proposed change 
is adopted in the final rule, it would apply to both Medicare GME 
affiliation agreements and emergency Medicare GME affiliation 
agreements.
    Comment: Commenters supported the proposed change to the 
regulations to allow new urban teaching hospitals to form a Medicare 
GME affiliated group(s) and therefore be eligible to receive decreases 
to their FTE caps. The commenters stated that the proposal would 
provide flexibility under the statutorily mandated cap and would 
support the cross-training of residents. One commenter expressed 
appreciation for the proposal and specifically referenced the need for 
residency positions in Florida by stating that Florida is ranked near 
the bottom of the nation (42nd) by the Association of American Medical 
Colleges (AAMC) in the number of medical residency positions per 
100,000 people (18.8 residents per 100,000 versus 26.2 nationally) and 
currently has a shortage of more than 800 residency positions available 
in relation to the number of graduate medical students. Other 
commenters stated the proposal would provide residents with required 
and more diverse training experiences, allow residents to train where 
previously they were unable due to the current restrictions, and fill 
residencies where needed, which in turn will provide for a better 
workforce pipeline. Another commenter stated that allowing teaching 
hospitals to combine resources responds to two needs, growing and 
training the physician workforce and improving patient access, which 
are both key factors in improving health care and access to health 
care. One commenter supported the proposed change and requested CMS 
continue to support to GME programs, specifically to allow urban 
teaching hospitals to partner with rural hospitals to incentivize those 
relationships to be mutually beneficial to both hospitals and improve 
access to care in rural areas.
    Response: We appreciate the commenters' support of the proposed 
policy. As discussed later in this preamble, we are finalizing our 
proposal with modification. In response to the comment regarding 
partnerships between urban and rural teaching hospitals, we refer 
readers to the most recent discussion of rural tracks included in the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 57027 through 57031).
    Comment: Commenters requested that CMS clarify the term ``new 
teaching hospital'' as it relates to the proposed provision. The 
commenters stated that CMS defines the term ``new teaching hospital'' 
as referring to hospitals that started training residents after 1996, 
more than 20 years ago. However, the commenters added, to the medical 
community, ``new teaching hospital'' is a hospital still in its cap-
building period. The commenters requested that CMS confirm the proposed 
provision is meant to apply to hospitals that have already established 
an FTE cap(s).
    Response: In the proposed rule (83 FR 20439), we referred to new 
urban teaching hospitals as hospitals that qualify for an adjustment 
under Sec.  412.105(f)(1)(vii) or Sec.  413.79(e)(1), or both. These 
regulations describe how caps are calculated for a hospital that had no 
allopathic or osteopathic residents in its most recent cost reporting 
period ending on or before December 31, 1996 and begins training 
residents in a new medical residency training program(s) for the first 
time on or after January 1, 1995. (Specifically, a new medical 
residency training program is defined in regulation at Sec.  413.79(l) 
as a medical residency program that receives initial accreditation by 
the appropriate accrediting body or begins training residents on or 
after January 1, 1995.) We also refer readers to the FY 2010 IPPS/LTCH 
PPS final rule where we discuss the definition of new medical residency 
training program (74 FR 43908 through 43917). Therefore, the commenter 
is correct that a new teaching hospital would include a hospital that 
started training residents

[[Page 41494]]

more than 20 years ago because the term ``new teaching hospital'' 
includes both a hospital that already completed its cap-building period 
and received its own permanent FTE caps (based on training residents in 
a new program(s) that received initial accreditation or began on or 
after January 1, 1995), or a hospital that some point in the future 
will for the first time train residents in a new program and complete 
its cap-building period and receive its own permanent FTE caps.
    In response to the request that CMS confirm that the proposed 
provision was meant to apply to hospitals that have already established 
FTE caps, we note that the proposal, which we are finalizing, to allow 
a new urban teaching hospital to be part of a Medicare GME affiliated 
group composed solely of new urban teaching hospitals requires that a 
least one of the new urban teaching hospitals participating in the 
Medicare GME affiliated group has established FTE caps. (As explained 
further below, our proposal does not require that all participating 
hospitals have established FTE caps.) If a Medicare GME affiliated 
group were to consist solely of new urban teaching hospitals that do 
not have established FTE caps, there would be no cap amounts to 
transfer under the agreement. In addition, we note that when a new 
teaching hospital is within the cap-building period for a new 
program(s), the hospital's caps are not yet established and it is paid 
for IME and direct GME based on its actual count of FTE residents in 
the new program (Sec.  413.79(e)(1)(ii)). Because these FTEs are not 
capped, they cannot be decreased under a Medicare GME affiliation 
agreement.
    However, the proposal was not meant to exclude new teaching 
hospitals that do not yet have FTE caps established from participating 
in a Medicare GME affiliated group. Rather, such hospitals have always 
been able to participate in a Medicare GME affiliated group as long as 
these hospitals are the entities receiving increases to their FTE caps 
of zero under the affiliation agreement(s). For example, under our 
proposal, a new urban teaching hospital that does not yet have FTE caps 
could receive an increase to its FTE caps of zero through a Medicare 
GME affiliation agreement wherein it is training residents in an 
existing program coming from a new urban teaching hospital that has 
permanent FTE caps. In such a scenario, the new urban teaching hospital 
with permanent FTE caps would be decreasing its FTE caps such that the 
other new urban teaching hospital, which does not have FTE caps of its 
own, would have temporary FTE caps above zero and could receive IME and 
direct GME payment for the residents rotating in from the existing 
program.
    Comment: One commenter opposed CMS' interpretation that Medicare 
GME affiliation agreements consisting solely of new urban teaching 
hospitals are not permissible under Sec.  413.79(e)(1)(iv). The 
commenter stated that when growing the physician workforce is a 
priority in improving health care, CMS should be looking at 
facilitating and incentivizing this goal. The commenter stated that it 
had long supported efforts to increase the 1996 caps and urged CMS and 
Congress to lift the caps on GME for hospitals in order to update and 
modernize the training and recruitment of physicians. In lieu of 
increased funding for GME, the commenter urged CMS to look at ways to 
increase GME caps under existing regulations.
    Response: We disagree with the commenter that affiliation 
agreements consisting solely of new urban teaching hospitals are 
permissible under Sec.  413.79(e)(1)(iv). These regulations state the 
following: ``(e)ffective 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.'' The language means that a new urban 
teaching hospital can only be part of a Medicare GME affiliated group 
if it receives an increase to its FTE cap; that is, receives cap slots 
from another hospital. In order to allow for the transfer of FTE cap 
slots under a Medicare GME affiliation agreement, there would need to 
be a hospital that receives a decrease to its caps; that is, lends cap 
slots to another hospital. Therefore, under current regulations, 
Medicare GME affiliation agreements cannot consist solely of new urban 
teaching hospitals.
    In response to the request that CMS look for ways to increase FTE 
caps under current regulations, we note that the current regulations do 
provide some means of establishing and increasing FTE resident caps. 
New urban and rural teaching hospitals that do not have caps 
established can receive permanent FTE caps when they train residents in 
a new program after a 5-year cap-building period (Sec. Sec.  413.79(e) 
and 412.105(f)(1)(vii)). Furthermore, both new and existing rural 
teaching hospitals that train residents in a new program receive an 
increase to their permanent FTE caps each time they train residents in 
a new program (Sec.  413.79(e)(3)). Urban teaching hospitals that 
participate in a rural track program can receive an add-on to their 
permanent FTE caps for the time the residents spend training at the 
urban teaching hospital as part of the rural track program (Sec. Sec.  
412.105(f)(x) and 413.79(k)) (we refer readers to the August 22, 2016 
Federal Register (81 FR 57027) for a discussion of rural tracks). 
Lifting hospitals' 1996 caps would require legislation.
    Comment: Two commenters supported the proposed change to allow 
Medicare GME affiliated groups to consist solely of new urban teaching 
hospitals. However, these commenters also requested that CMS provide 
additional flexibilities, and they proposed several policy alternatives 
for CMS to consider.
    One commenter stated the practicality of two new teaching hospitals 
in close vicinity to have shared rotational arrangements is minimal. 
The commenter understood and appreciated CMS' concern that some 
teaching hospitals with existing medical residency training programs 
may try and circumvent the statutory FTE caps by establishing new 
residency training programs at new teaching hospitals solely for the 
purposes of affiliation. However, the commenter stated that, under 
these restrictions, CMS limits the ability to cross-train future 
physicians, especially in multihospital settings in rural areas. The 
commenter stated many ``new'' teaching hospitals started training 
programs after the 1996 caps were established, and these hospitals have 
since become associated with larger teaching hospitals and medical 
schools. The commenter suggested that after a specified time-period in 
which the new teaching hospital first began training residents, CMS 
allow a new teaching hospital to lend cap slots to existing teaching 
hospitals that are part of related organizations. The commenter 
suggested a 10-year waiting period, which is consistent with the length 
of time a hospital must remain reclassified as rural in order to retain 
any increases to its IME cap associated with being rural, as described 
in the regulations at Sec.  412.105(f)(1)(xv).
    Response: We appreciate the commenter's suggestion to provide 
additional flexibility for new urban teaching hospitals under the 
Medicare GME affiliation agreement regulations. However, we disagree 
with the commenter's proposal that after a 10-year period, CMS should 
allow a new urban teaching hospital to lend cap slots to an existing 
teaching hospital that is

[[Page 41495]]

part of a related organization. It may be administratively difficult 
for CMS and its contractors to ensure that the new teaching hospital is 
participating in an agreement with an existing teaching hospital(s) 
that is part of a related organization. Ensuring that the term 
``related organizations'' is applied consistently would require 
additional rulemaking.
    Comment: One commenter believed CMS' overall concern regarding 
Medicare GME affiliation agreements as expressed in the FY 2019 IPPS/
LTCH PPS proposed rule is misplaced, and that there is no need for CMS 
to protect ``smaller-sized, community-based hospitals'' from existing 
teaching hospitals. The commenter stated a Medicare GME affiliation 
agreement is a voluntary contractual arrangement between two 
organizations with two distinct Medicare provider numbers and Medicare 
provider agreements. The commenter noted it has worked with many of its 
member teaching hospitals--large and small, public and private, urban 
and suburban--on Medicare GME affiliation agreements and has not 
encountered a situation where any one of these hospitals was not 
entering into the agreement of its own free will, ensuring that its own 
interests are met through the affiliation agreement.
    Response: We continue to believe it is important to ensure that the 
intent of Medicare GME affiliation agreements is met; that is, Medicare 
GME affiliation agreements are in place 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. However, we appreciate hearing that the commenter has 
not encountered situations where a Medicare GME affiliation agreement 
has only benefited one or some of the participating hospitals, 
particularly because a Medicare GME affiliation agreement is a 
voluntary contractual arrangement.
    Comment: One commenter stated that, as part of CMS' new teaching 
hospital rulemaking and policy clarification (74 FR 43908), CMS has 
specified that, among other requirements, a new teaching hospital must 
establish new programs with new residents in order to build direct GME 
and IME FTE caps. The commenter stated that, under these requirements, 
CMS has essentially prohibited an existing teaching hospital from 
entering in a Medicare GME affiliation agreement with a new teaching 
hospital in order to circumvent its statutory FTE caps. The commenter 
questioned why the new program requirements for new teaching hospitals 
combined with a time-based restriction on Medicare GME affiliation 
agreements would not be sufficient to achieve CMS' policy goals. The 
commenter noted that, in 2006 and in the FY 2019 IPPS/LTCH PPS proposed 
rule, CMS has granted/is granting some small flexibility to new 
teaching hospitals, some of which have had caps for over a decade. 
Therefore, the commenter believed that CMS does not seem concerned 
about these new teaching hospitals (that have had FTE caps for over a 
decade) circumventing their statutory caps. The commenter questioned 
why, if CMS is willing to grant flexibility to allow new teaching 
hospitals to lend slots to other new teaching hospitals that have had 
FTE caps for well over a decade, CMS cannot grant the same flexibility 
to new teaching hospitals to lend FTE cap slots to hospitals with 1996 
caps that are similarly situated in the community.
    Response: If we understand the commenter correctly, the commenter 
is stating that in order to receive FTE caps a new teaching hospital 
must train residents in a new program (which is comprised of new 
residents, new teaching staff, and a new program director), and that 
because the involvement of an existing teaching hospital would call 
into question the ``newness'' of that program, an existing teaching 
hospital would be prevented from using a new teaching hospital's FTE 
caps for its own purposes. We do not believe this argument is 
applicable to both our proposed policy and the policy finalized in this 
final rule. That is, as explained above, a new teaching hospital that 
is within its cap-building period for a new program(s) cannot use those 
slots as part of a Medicare GME affiliation agreement during that cap-
building period anyway (regardless of an increase or decrease) because 
those slots are not yet permanent cap slots. Rather, our proposed and 
final policies instead focus on expanding the flexibility of new 
teaching hospitals entering into Medicare GME affiliation agreements 
after its FTE caps are permanently set.
    Comment: One commenter stated CMS did not provide data to support 
its claims that existing urban teaching hospitals are generally large 
academic medical centers and that new urban teaching hospitals differ 
in size from existing urban teaching hospitals. The commenter reported 
that it had analyzed data included in the Hospital Cost Report 
Information System (HCRIS) using FY 2016 cost reports to try to verify 
the validity of CMS' claims. The commenter stated that because there is 
no standard definition of academic medical center (the term generally 
refers to a large hospital closely affiliated with a medical school), 
for purposes of the analysis, the commenter defined an academic medical 
center as a teaching hospital with at least 500 beds. Based on the 
commenter's analysis, only 22.7 percent of hospitals training residents 
in 1996 had 500 or more available beds. The commenter stated that, in 
total, 72.8 percent of existing teaching hospitals that reported 
training residents in 1996 had between 100 and 500 available beds, and 
therefore would not be considered a ``large academic medical center.'' 
Therefore, the commenter disagreed with CMS' assertion that existing 
teaching hospitals are generally large academic medical centers. The 
commenter stated that, based on its analysis, 22 percent of existing 
teaching hospitals had between 100 and 200 available beds, and another 
22 percent of existing teaching hospitals had between 200 and 300 
available beds. The commenter noted that, of the hospitals that 
received caps after 1996, 81.9 percent of these hospitals also had 
between 100 and 500 beds. Therefore, the commenter stated that, based 
on its analysis, the percentage of existing teaching hospitals and new 
teaching hospitals of the same size is within 10 points. The commenter 
noted that even though very small urban hospitals (fewer than 100 beds) 
were disproportionately nonteaching hospitals in 1996 (and 40 percent 
remain nonteaching), the commenter's analysis indicates the vast 
majority of existing teaching hospitals and new teaching hospitals are 
not substantially different in size from each other. Therefore, the 
commenter disagreed with CMS' rationale that a distinction between 
existing teaching hospitals and new teaching hospitals is necessary and 
encouraged CMS to reconsider its policy regarding treating new teaching 
hospitals differently from existing teaching hospitals for purposes of 
Medicare GME affiliation agreements.
    Response: We have not independently verified the commenter's 
analysis or performed a detailed cost report analysis for purposes of 
this proposal. However, even if many new teaching hospitals are 
approximately the same size as many existing teaching hospitals, we 
still believe a distinction can be made between existing teaching 
hospitals and those new teaching hospitals that have just started 
training residents, with the former having greater expertise in the 
logistics of running residency training programs than the latter. 
However, we are receptive to the commenter's concerns, and therefore,

[[Page 41496]]

we are modifying our proposed policy, as explained further below, to 
provide greater flexibility for new urban teaching hospitals to 
affiliate with existing teaching hospitals.
    Comment: One commenter stated that because ``new'' teaching 
hospitals could have started training residents as early as 1997, it 
does not seem appropriate to characterize a hospital that has been 
training residents for close to 20 years as ``new'' and use that as a 
basis to draw a distinction between that hospital and other hospitals 
in 2018. The commenter stated that, for this reason, it along with 
national colleagues and the provider community have encouraged CMS to 
provide flexibility to new teaching hospitals after some reasonable 
period of time (for example, 5 years after the establishment of a cap, 
or 10 years after first training residents). The commenter stated that, 
at that point in time, it is difficult to reasonably still characterize 
the hospital as a ``new'' teaching hospital and hold the hospital to a 
different standard compared to--in CMS' terminology--an ``existing'' 
teaching hospital.
    The commenter also suggested a policy alternative that would be 
associated with putting a limit on the proportion of FTE cap slots a 
new teaching hospital could lend to an existing teaching hospital. The 
commenter suggested that CMS could simply limit the number of shared 
FTE cap slots to some reasonable percentage, thereby ensuring that the 
new teaching hospital's cap generally ``stays'' with it. The commenter 
noted that, for example, CMS could specify that a new teaching hospital 
could enter into a Medicare GME affiliation agreement with an existing 
teaching hospital such that it may experience a decrease in its FTE cap 
but for no more than more than 20 percent of the new teaching 
hospital's FTE cap slots. The commenter stated there is nothing 
explicit in the statute to guide the selection of a particular 
percentage. However, the commenter believed that such a policy 
determination would be well within CMS' rulemaking authority.
    The commenter discussed teaching hospitals located in the same 
health system. The commenter noted that that CMS' extremely limited 
policy restrictions, even with the addition of the flexibility included 
within the FY 2019 IPPS/LTCH PPS proposed rule, seem extremely outdated 
in an era where hospitals are entering into system arrangements to 
create centers of excellence and to locate services where they best 
serve their communities. The commenter stated that for CMS to hold one 
teaching hospital within an integrated delivery system to one set of 
Medicare GME affiliation agreement requirements and another teaching 
hospital within that same health system to a different set of 
requirements (seemingly to protect one from the other) is inconsistent 
with the intent of joint membership in the system. The commenter stated 
that CMS' current policy is contrary to the very notion of 
``systemness'' and clinical/academic integration, which many health 
care leaders and policymakers are trying to promote as a means of 
improving quality of care for patients and improved training 
experiences for residents. Therefore, the commenter suggested that, in 
addition to the policy change included as part of the FY 2019 IPPS/LTCH 
PPS proposed rule, CMS, at a minimum, permit new urban teaching 
hospitals to enter into Medicare GME affiliation agreements with any 
existing teaching hospital under the same corporate parent whereby the 
existing urban teaching hospital could experience an increase to its 
FTE cap.
    Response: We do not agree with the commenter's suggestion to allow 
a new urban teaching hospital to enter into a Medicare GME affiliation 
agreement with any existing teaching hospital under the same corporate 
parent wherein the new urban teaching hospital would experience a 
decrease to its FTE cap. We believe that understanding the hospitals' 
corporate structure for purposes of determining which hospitals can 
affiliate could prove to be administratively burdensome, and that 
corporate structures may change over time, which could call into 
question the validity of Medicare GME affiliation agreement structured 
under such an approach.
    In response to the commenter's suggestion to permit a new urban 
teaching hospital to participate in a Medicare GME affiliation 
agreement and receive a decrease to its FTE cap for a certain 
proportion of FTE cap slots, we believe it would be challenging to 
determine an appropriate percentage of FTE cap slots from a new urban 
teaching hospital that should be permitted to be transferred to an 
existing teaching hospital. Furthermore, an appropriate percentage may 
differ among new urban teaching hospitals based on their individual 
training needs, adding to the administrative complexity.
    However, we do believe that a time-limited approach may provide new 
urban teaching hospitals the opportunity to receive decreases to their 
caps while at the same time addressing our concern that existing 
teaching hospitals not use new teaching hospitals to circumvent their 
FTE caps. Specifically, we believe that requiring a new urban teaching 
hospital to wait a certain period of time prior to lending its cap 
slots to an existing teaching hospital through a Medicare GME 
affiliation agreement (that is, the new urban teaching hospital would 
receive a decrease to its FTE caps as part of the affiliation 
agreement) would demonstrate that the new teaching hospital is, in 
fact, establishing and expanding its own new residency training 
programs rather than serving as a means for an existing teaching 
hospital to receive additional FTE caps. We further believe that a 
time-limited approach would be a more equitable way of providing new 
urban teaching hospitals with the opportunity to decrease their FTE 
caps instead of using a percentage of slots or determining whether a 
new urban teaching hospital falls under the same corporate structure as 
an existing teaching hospital. As previously stated, hospitals 
participating in a Medicare GME affiliation agreement may have 
different training needs such that a single percentage would not be 
advantageous to all new urban teaching hospitals. In addition, not all 
new urban teaching hospitals may have existing teaching hospitals 
within the same corporate structure that are in a position to receive 
FTE cap slots as part of a Medicare GME affiliation agreement.
    As noted earlier, one commenter made the suggestion of a time-
limited period of 5 years after the establishment of a cap, or 10 years 
after first training residents. Based on the comments received, we 
believe that the potential misuse of Medicare GME affiliation 
agreements can be mitigated after a certain period of time. We agree 
that a 5-year waiting period after the establishment of an FTE cap is a 
suitable waiting period for purposes of allowing a new urban teaching 
hospital to participate in a Medicare GME affiliation agreement with an 
existing teaching hospital and receive a decrease to its FTE cap as a 
result of that affiliation agreement. We are comfortable with a 5-year 
waiting period because it is consistent with our already established 
policies regarding the use of FTE cap slots received under sections 
5503 and 5506 of the Affordable Care Act. In the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 72194), we stated that a hospital that 
received FTE cap slots under section 5503 may use those FTE cap slots 
for Medicare GME affiliation agreements after 5 years, which coincides 
with the end of the period of

[[Page 41497]]

other restrictions applicable to the slots awarded under section 5503. 
In that same final rule with comment period, we stated that a hospital 
is able to use the slots it received under section 5506 for a Medicare 
GME affiliation agreement 5 years after the date the slots are made 
permanent at the respective hospital (75 FR 72221). That is, under both 
provisions of the Affordable Care Act, hospitals that received cap 
slots were/are encouraged to use their additional FTE cap slots to 
establish or expand existing residency training programs prior to using 
those cap slots as part of a Medicare GME affiliation agreement. 
Accordingly, we are finalizing our proposed policy with modifications 
so that new urban teaching hospitals will have additional flexibilities 
under the Medicare GME affiliation agreement regulations after a 5-year 
waiting period, effective for Medicare GME affiliation agreements 
entered into on or after July 1, 2019.
    We are finalizing a policy 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 established permanent 
FTE caps after 1996) may enter into a Medicare GME affiliated group and 
receive a decrease to its FTE caps if the decrease results from a 
Medicare GME affiliated group consisting solely of two or more new 
urban teaching hospitals. In addition, we are finalizing a policy that, 
effective for Medicare GME affiliation agreements entered into on or 
after July 1, 2019, a new urban teaching hospital(s) may enter into a 
Medicare GME affiliated group with an existing teaching hospital(s) 
(that is, a hospital(s) with 1996 FTE caps) and receive a decrease to 
its FTE caps, as long as the new urban teaching's hospitals caps have 
been in effect for 5 or more years. That is, once a new urban teaching 
hospital's caps are effective, after a cap-building period, the new 
urban teaching hospital can participate in a Medicare GME affiliation 
agreement with an existing teaching hospital and receive a decrease to 
its FTE caps after an additional 5-year waiting period.
    Because Medicare GME affiliation agreements are effective 
consistent with the residency training year (July 1 through June 30), 
under the policy finalized in this rule, the new urban teaching 
hospital will be able to participate in an affiliation agreement with 
an existing teaching hospital and receive a decrease to its FTE caps 
effective with the July 1 date (the residency training year) that 
begins at least 5 years after the new urban teaching hospital's caps 
are effective. In the August 22, 2014 Federal Register (79 FR 50110), 
we finalized a policy that a new teaching hospital's FTE caps are 
effective beginning with the applicable hospital's cost reporting 
period that coincides with or follows the start of the sixth program 
year of the first new program started. Therefore, in applying both the 
policy finalized in the August 22, 2014 Federal Register and the 5-year 
waiting period for new urban teaching hospitals finalized in this rule, 
a new urban teaching hospital can lend FTE cap slots to an existing 
teaching hospital under a Medicare GME affiliation agreement, effective 
with the July 1 date (the residency training year) that is at least 5 
years after the start of the hospital's cost reporting period that 
coincides with or follows the start of the sixth program year of the 
first new program. Consistent with this policy, we are amending the 
regulations at Sec.  413.79(e)(1)(iv) as follows:
     Effective for Medicare GME affiliation agreements entered 
into on or after October 1, 2005, except as provided in Sec.  
413.79(e)(1)(iv)(B)(2), an urban hospital that qualifies for an 
adjustment to its FTE cap under Sec.  413.79(e)(1) 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.
     Effective for Medicare GME affiliation agreements entered 
into on or after July 1, 2019, an urban hospital that received an 
adjustment to its FTE cap under Sec.  413.79(e)(1) 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, provided the Medicare GME affiliated group 
meets one of the following conditions:
    [square] The Medicare GME affiliated group consists solely of two 
or more urban hospitals that qualify for adjustments to their FTE caps 
under Sec.  413.79(e)(1).
    [square] The Medicare GME affiliated group includes an urban 
hospital(s) that received FTE cap(s) under Sec.  413.79(c)(2)(i) and/or 
Sec.  412.105(f)(1)(iv)(A). This Medicare GME affiliated group must be 
established effective with a July 1 date (the residency training year) 
that is at least 5 years after the start of the cost reporting period 
that coincides with or follows the start of the sixth program year of 
the first new program for which the hospital's FTE cap was adjusted in 
accordance with Sec.  413.79(e)(1) or Sec.  412.105(f)(1)(v)(C) or (D), 
or both.
    We note that we have made a conforming change to Sec.  
413.79(e)(1)(iv)(A) to clarify that new teaching hospitals can continue 
to participate in Medicare GME affiliated groups with existing teaching 
hospitals wherein the new teaching hospitals receive increases to their 
FTE caps. In addition, we are clarifying that the terms ``qualifies'' 
and ``qualify'' used at Sec.  413.79(e)(1)(iv)(A) and Sec.  
413.79(e)(1)(iv)(B)(1) are meant to include new teaching hospitals that 
have already established permanent FTE caps and new teaching hospitals 
that in the future will establish permanent FTE caps.
    The 5-year waiting period and the policy described at Sec.  
413.79(e)(1)(iv)(B)(2) may best be explained through the examples 
below.
    Example 1: Assume Hospital A's (a new urban teaching hospital that 
did not train residents in 1996) cost reporting period is from July 1 
to June 30. Hospital A started training residents in its first new 
program effective July 1, 2014. Hospital A's 5-year cap-building period 
lasts through June 30, 2019 and its caps are effective July 1, 2019. 
Hospital A would be able to participate in a Medicare GME affiliation 
agreement with an existing teaching hospital and receive a decrease to 
its FTE caps beginning with the July 1 date (the residency training 
year) that is at least 5 years after July 1, 2019 (the start of the 
cost reporting period in which the permanent FTE caps are effective). 
Therefore, Hospital A would be able to receive a decrease to its FTE 
caps effective July 1, 2024.
    Example 2: Assume Hospital B (a new urban teaching hospital that 
did not train residents in 1996) has a cost reporting period that is 
from January 1 to December 31. Hospital B also started training 
residents in its first new program effective July 1, 2014. Hospital B's 
5-year cap building period lasts through June 30, 2019 and its cap is 
effective January 1, 2020. Hospital B would be able to participate in a 
Medicare GME affiliation agreement with an existing teaching hospital 
and receive a decrease to its FTE caps beginning with the July 1 date 
(the residency training year) that is at least 5 years after January 1, 
2020 (the start of the cost reporting period in which the permanent FTE 
caps are effective). Therefore, Hospital B would be able to receive a 
decrease to its FTE caps effective July 1, 2025.
    Example 3: Assume Hospital C (a new urban teaching hospital that 
did not train residents in 1996) has a cost reporting period that is 
from October 1 to September 30. Hospital C, like Hospitals A and B, 
started training residents in its first new program

[[Page 41498]]

effective July 1, 2014. Hospital C's 5-year cap building period lasts 
through June 30, 2019 and its caps are effective October 1, 2019. 
Hospital C would be able to participate in a Medicare GME affiliation 
agreement with an existing teaching hospital and receive a decrease to 
its FTE caps beginning with the July 1 date (the residency training 
year) that is at least 5 years after October 1, 2019 (the start of the 
cost reporting period in which the permanent FTE caps are effective). 
Therefore, Hospital C would be able to receive a decrease to its FTE 
caps effective July 1, 2025.
    Because the policy finalized in this final rule is consistent with 
the start of the residency training year, that is, July 1, new urban 
teaching hospitals with fiscal years other than July 1 through June 30 
may have to wait some additional time before being able to receive a 
decrease to their FTE resident caps through a Medicare GME affiliation 
agreement with an existing teaching hospital. However, the delay for 
these new urban teaching hospitals is a one-time delay, consistent with 
the timing of implementation of FTE caps, and we believe any negative 
aspect of this delay is far outweighed by the additional flexibility 
provided to these new urban teaching hospitals for purposes of Medicare 
GME affiliation agreements.
    Unlike the examples provided above for Hospitals A, B, and C, the 
commenters mentioned ``new'' urban teaching hospitals that established 
their FTE caps after 1996, but have had those caps in place already for 
close to 20 years. These new urban teaching hospitals have already 
completed the 5-year waiting period and can receive a decrease to their 
FTE caps through Medicare GME affiliation agreements with existing 
teaching hospitals effective July 1, 2019. For example, assume Hospital 
D (a new urban teaching hospital that was not training residents in 
1996) established its caps effective July 1, 2000. Hospital D can 
receive a decrease to its FTE caps through a Medicare GME affiliation 
agreement with an existing teaching hospital effective July 1, 2019.
    In summary, we are finalizing our proposed policy with 
modifications. Effective for Medicare GME affiliation agreements 
entered into on or after July 1, 2019, a new urban teaching hospital 
may enter into 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 caps if the decrease results from 
a Medicare GME affiliated group consisting solely of two or more new 
urban teaching hospitals. In addition, effective for Medicare GME 
affiliation agreements entered into on or after July 1, 2019, a new 
urban teaching hospital may participate in a Medicare GME affiliated 
group with an existing teaching hospital and receive an adjustment that 
is a decrease to the urban hospital's FTE caps, provided the Medicare 
GME affiliation agreement is effective with a July 1 date (the 
residency training year) that is at least 5 years after the start of 
the new urban teaching hospital's cost reporting period that coincides 
with or follows the start of the sixth program year of the first new 
program. Other requirements for Medicare GME affiliated groups and 
agreements at Sec. Sec.  413.75(b) and 413.79(f) remain unchanged. The 
policies included in this final rule apply to both Medicare GME 
affiliation agreements and emergency Medicare GME affiliation 
agreements.
3. Out of Scope Public Comments Received
    We received public comments regarding GME issues that were outside 
of the scope of the proposals included in the FY 2019 IPPS/LTCH PPS 
proposed rule. These comments requested that--
     CMS not establish FTE caps and PRAs for hospitals that 
have trained a de minimis number of FTE residents.
     CMS extend the cap-building window for teaching hospitals 
in rural, underserved, underresourced communities and/or areas 
currently lacking medical training infrastructure.
     CMS permit hospitals with new or established GME programs 
in areas of need to apply for additional residency slots through a 
``Cap Flexibility'' demonstration project; prioritizing those supplying 
psychiatric residency training to regions with a maldistribution of 
physicians that provide mental health care and treatment.
     CMS use ``Cap Flexibility'' to allow new GME teaching 
hospitals in areas of need to have up to an additional 5 years beyond 
the current 5-year window to add residents to their training programs.
     Indian Health Service and Tribal Hospitals be made 
eligible to receive Medicare funding for residency training programs.
     CMS review the ``frozen cap'' for the Psychiatric Teaching 
Status Adjustment Cap for rural providers and CMS re-review the current 
care needs at the national level across inpatient psychiatric 
facilities and adjust regulations accordingly.
     CMS release its findings regarding awardee hospitals' use 
of their section 5503 slots and their compliance with the terms and 
conditions of section 5503.
    Because we consider these public comments to be outside of the 
scope of the proposed rule, we are not addressing them in this final 
rule.
4. Notice of Closure of Teaching Hospital 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 with comment period (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 Memorial Hospital of Rhode Island, Located in 
Pawtucket, RI, and the Application Process--Round 13
    CMS has learned of the closure of Memorial Hospital of Rhode 
Island, located in Pawtucket, RI (CCN 410001). 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 13th round (``Round 13'') of 
the application and selection process. The table below contains the 
identifying information and IME and direct GME FTE resident caps for 
the closed

[[Page 41499]]

teaching hospital, which is part of the Round 13 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)
--------------------------------------------------------------------------------------------------------------------------------------------------------
410001...........................  Memorial Hospital of  Pawtucket, RI.......    39300  January 31, 2018....  67.75 + 5.91 sec.     75.56 - 0.47 sec.
                                    Rhode Island.                                                              422 increase =        422 reduction -
                                                                                                               73.66 \3\.            2.47 sec. 5503
                                                                                                                                     reduction = 72.62.
                                                                                                                                     \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\ Memorial Hospital of Rhode Island's 1996 IME FTE resident cap is 67.75. Under section 422 of the MMA, the hospital received an increase of 5.91 to
  its IME FTE resident cap: 67.75 + 5.91 = 73.66.
\4\ Memorial Hospital of Rhode Island's 1996 direct GME FTE resident cap is 75.56. Under section 422 of the MMA, the hospital received a reduction of
  0.47 to its direct GME FTE resident cap, and under section 5503 of the Affordable Care Act, the hospital received a reduction of 2.47 to its direct
  GME FTE resident cap: 75.56 - 0.47 - 2.47 = 72.62.

c. 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 notice to 
the public of a hospital closure (77 FR53436). Therefore, hospitals 
that wish to apply for and receive slots from the FTE resident caps of 
closed Memorial Hospital of Rhode Island, located in Pawtucket, RI, 
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 October 
31, 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 October 31, 2018 deadline date. It is not sufficient for 
applications to be postmarked by this date.
    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 13 due to the closure of Memorial Hospital of 
Rhode Island. 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 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 final 
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

[[Page 41500]]

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 rural community hospitals 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 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). Section 410A(g)(6)(B) of Public Law 108-173 
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

[[Page 41501]]

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 
Pub. L. 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 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 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.
    We described these provisions in the FY 2019 IPPS/LTCH PPS proposed 
rule. Since the publication of the proposed rule, one of the hospitals 
selected in 2017 has withdrawn from the demonstration, prior to 
beginning participation in the demonstration on July 1, 2018. Thus, 29 
hospitals are participating 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 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

[[Page 41502]]

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/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 stated in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20444) that we would 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 stated that we would 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 and FY 2019 
proposed rule, we are 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, in this final 
rule, we are including 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

[[Page 41503]]

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. As we proposed in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20444), in this FY 2019 IPPS/LTCH PPS final rule, 
we are including 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 (and again 
described in the FY 2019 IPPS/LTCH PPS proposed 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 and as we described in the FY 2019 IPPS/LTCH 
PPS proposed rule (83 FR 20444), 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) 
and FY 2019 IPPS/LTCH PPS proposed rule, we are incorporating 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 are 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 are multiplying 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 29 participating hospitals, we 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 multiply each of these amounts by the FY 2017 
and 2018 IPPS market basket percentage increases, which are formulated 
by the CMS Office of the Actuary. 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 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.
    Step 2: For each of the participating hospitals, we identify the 
estimated amount that would otherwise be paid in FY 2018 under 
applicable Medicare

[[Page 41504]]

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 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 
are 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 constitute the majority of payments that would 
otherwise be made without the demonstration and the applicable 
percentage increase is the factor used under the IPPS to update the 
inpatient hospital payment rates.
    We note that, in the FY 2019 IPPS/LTCH PPS proposed rule, we had 
applied a 3-percent volume adjustment to the estimates resulting from 
each of Steps 1 and 2. This increase was consistent with previous 
policy, and intended to reflect the possibility that hospitals' 
inpatient caseloads might increase. However, we stated in the proposed 
rule that we would evaluate the appropriateness of this increase in 
light of empirical trends specific to the participating hospitals. For 
each of the 17 previously participating hospitals, we compared the 
number of Medicare inpatient discharge reported on their cost reports 
for cost reporting years ending in 2012 and in 2016, and found an 
overall decline between these years of approximately 14 percent. For 
the 12 newly selected hospitals, we examined statistics on inpatient 
discharges for 2014 and 2016 reported on their applications, and found 
an increase between these years of approximately 1.7 percent. 
Considering that the overall trend reflects declining Medicare 
inpatient discharges, we have determined that the additional 3-percent 
adjustment is no longer justified and, therefore, are omitting it from 
these estimated amounts in this final rule.
    Step 3: We 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 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 is derived.
    Step 5: We then sum these hospital-specific amounts derived in Step 
4 across all 29 hospitals participating in the demonstration in FY 
2018. This resulting sum represents the estimated costs of the 
demonstration applicable to FY 2018 to be incorporated in the budget 
neutrality offset amount for rulemaking in FY 2019.
    In the FY 2019 IPPS/LTCH PPS proposed rule, the resulting amount 
applicable to FY 2018 was $33,254,247. We stated that this estimated 
amount was based on specific assumptions regarding the data sources 
used, and that if updated data became available prior to the FY 2019 
IPPS/LTCH PPS final rule, we would use them as appropriate to estimate 
the costs for the demonstration program applicable to FY 2018 in 
accordance with our methodology for determining the budget neutrality 
estimate.
    For this final rule, the estimated amount for the costs of the 
demonstration applicable to FY 2018 differs from that in the proposed 
rule because of the following factors, which we have identified: (1) 
Removing the hospital that has withdrawn; and (2) omitting the 3-
percent volume adjustment. Based on these updated data, for this final 
rule, the resulting amount applicable to FY 2018 is $31,070,880, which 
we have included in the budget neutrality offset adjustment for FY 
2019.
(4) Methodology for Estimating Demonstration Costs for FY 2019
    As described in the FY 2019 IPPS/LTCH PPS proposed rule, we are 
applying two differences specific to the methodology described for FY 
2018 to estimate the costs of the demonstration for FY 2019. We are 
using 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 and payment, 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 finalized amounts for FY 2019 for these respective update 
factors are found in section IV.B. of the preamble to this final rule. 
Also, 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. (In addition, for the 
reasons described earlier, we are omitting the 3-percent volume 
adjustment in determining this estimate.)
    For the FY 2019 IPPS/LTCH PPS proposed rule, the resulting amount 
for FY 2019 was $78,409,842. Similar to above, we stated that if 
updated data became available prior to the final rule, we would use 
them to the extent appropriate to estimate the costs for the 
demonstration program in FY 2019 in accordance with our finalized 
methodology. Thus, the estimated amount of the costs of the 
demonstration for FY 2019 included in this FY 2019 IPPS/LTCH PPS final 
rule differs from that in the proposed rule because of several factors: 
(1) We are using the finalized market basket percentage and applicable 
percentage increase for FY 2019; (2) we are omitting cost report data 
on the one hospital that withdrew from the demonstration program; and 
(3) similar to our earlier discussion, we are omitting the 3-percent 
volume adjustment for FY 2019. Based on updated data, for this FY 2019 
final rule, the resulting amount for FY 2019 is $70,929,313, which we 
are including in the budget neutrality offset adjustment for FY 2019.
(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

[[Page 41505]]

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 earlier); 
and (2) the amount by which the actual demonstration costs 
corresponding to an earlier, given year (which would be known once 
finalized cost reports become 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 the FY 2019 IPPS/LTCH PPS proposed rule, we 
identified 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 proposed to adjust the 
current year's budget neutrality offset amount by the combined 
difference. We stated that if any information relevant to the 
determination of these amounts (for example, a cost report reopening) 
would necessitate a revision of these amounts, we would make the 
appropriate change and include the determination in the FY 2019 IPPS/
LTCH PPS final rule. We stated, furthermore, that if the needed costs 
reports are available in time for the FY 2019 IPPS/LTCH PPS final rule, 
we also would 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.
    As described in the FY 2019 IPPS/LTCH PPS proposed rule, finalized 
cost reports are 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 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. We have identified no factors that require a 
change to this number for this FY 2019 final rule.
    In addition, as also described in the FY 2019 IPPS/LTCH PPS 
proposed rule, finalized cost reports for the 23 demonstration 
hospitals that began a cost reporting period 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 IPPS final rule by $8,500,373. Similarly, 
we have identified no factors that require a change to this number for 
this year's final rule.
    For this final rule, finalized cost reports for the 22 hospitals 
that

[[Page 41506]]

completed a cost reporting period under the demonstration payment 
methodology beginning in FY 2013 are 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 2013 IPPS 
final rule by $5,398,382.
    We note that the amounts identified for the actual cost of the 
demonstration for each of FYs 2011, 2012, and 2013 (determined from 
finalized cost reports) is less than the amount that was identified in 
the final rule for the respective year. Therefore, in keeping with 
previous policy finalized in situations when the costs of the 
demonstration fell short of the amount estimated in the corresponding 
year's final rule, we are including this component as a negative 
adjustment to the budget neutrality offset amount for the current 
fiscal year.
e. Total Final Budget Neutrality Offset Amount for FY 2019
    For this FY 2019 IPPS/LTCH PPS final 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 section IV.L.4.c.(3) of the 
preamble of this final 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 
$31,070,880.
    Step 2: The amount, determined under section IV.L.4.c.(4) of the 
preamble of this final 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 $70,929,313.
    Step 3: The amount determined under section IV.L.4.d. of the 
preamble of this final 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 determined under section IV.L.4.d. of the 
preamble of this final 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.
    Step 5: The amount, also determined under section IV.L.4.d. of the 
preamble of this final rule, according to which the actual costs of the 
demonstration for FY 2013 for the 22 hospitals that completed a cost 
reporting period beginning in FY 2013 differ from the estimated amount 
in the FY 2013 final rule. Analysis of this set of cost reports shows 
that the actual costs of the demonstration for FY 2013 fell short of 
the estimated amount finalized in the FY 2013 IPPS/LTCH PPS final rule 
by $5,398,382.
    In keeping with previously finalized policy, we are applying these 
differences, according to which the actual costs of the demonstration 
for each of FYs 2011, 2012, and 2013 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, the total budget neutrality offset amount that we are 
applying to the national IPPS rates for FY 2019 is: The amount 
determined under Step 1 ($31,070,880) plus the amount determined under 
Step 2 ($70,929,313) minus the amount determined under Step 3 
($29,971,829) minus the amount determined under Step 4 ($8,500,373) 
minus the amount determined under Step 5 ($5,398,382). This total is 
$58,129,609.
    In addition, in accordance with the policy finalized in the FY 2018 
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.
    In response to the FY 2019 IPPS/LTCH PPS proposed rule, we received 
one public comment in support of continuing the demonstration. We 
appreciate the commenter's support.

M. 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 ordering physician or other qualified 
practitioner to admit the beneficiary as an inpatient can clearly be 
derived from the medical record, medical review

[[Page 41507]]

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. Revisions Regarding Admission Order Documentation Requirements
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20447 and 20448), 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 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 medically 
reasonable and necessary inpatient stays, even if such denials occur 
infrequently.
    Therefore, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20447 
and 20448), we proposed 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 proposed 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 still 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 stated that 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. We stated that the proposal would 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 proposed to no 
longer require that the specific documentation requirements of 
inpatient admission orders be present in the medical record as a 
condition of Medicare Part A payment.
    Accordingly, we proposed 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 did 
not propose any changes with respect to the ``2 midnight'' payment 
policy.
    Comment: Numerous commenters supported CMS' proposal. One commenter 
conveyed that there are instances where medical records clearly 
indicate inpatient intent but the associated claim is denied only 
because the inpatient admission order was missing a signature. Another 
commenter agreed with CMS' proposal because the requirement for an 
inpatient admission order to be present in the medical record is 
duplicative in nature. One commenter explained that alleviating this 
requirement will result in significant burden reduction for physicians 
and providers.
    Response: We appreciate the commenters' support.
    Comment: Some commenters were concerned that the proposal may 
render the inpatient admission order completely insignificant and not 
required for any purpose. In addition, and in further context, the 
commenters referenced previous CMS subregulatory guidance from January 
2014 which explained that if a practitioner disagreed with the decision 
to admit a patient to inpatient status, the practitioner could simply 
refrain from authenticating the inpatient admission order and the 
patient would remain in outpatient status. The commenters were 
concerned that if CMS no longer requires a written inpatient admission 
order to be present in the medical record as a specific condition of 
Medicare Part A payment, CMS would not be able to distinguish between 
orders that were simply defective and orders that were intentionally 
not signed.
    Other commenters believed that the proposal would make the payment 
process even more difficult, especially in instances where patients 
were not registered by the hospital admissions staff, did not receive 
the required notice of their inpatient status, and there was no valid 
admission order related to their visit. The commenters were concerned 
that these particular cases would prevent patients from being 
knowledgeable of their appeal rights and financial liability.
    Some commenters believed that, without an inpatient admission 
order, Medicare coverage of SNF services would be at risk due to issues 
such as lack of clarity in the medical record or a MAC's 
misinterpretation of physician intent, and stated that denial of such 
needed services would negatively impact patients' health.
    Response: Our proposal does not change the requirement that, for 
purposes of Part A payment, an individual becomes an inpatient when 
formally admitted as an inpatient under an order for inpatient 
admission. The physician order remains a significant requirement 
because it reflects a determination by the ordering physician or other 
qualified practitioner that hospital inpatient services are medically 
necessary, and initiates the process for inpatient admission.
    Regarding the concerns of some commenters regarding orders that 
were intentionally not signed because the practitioner responsible for 
signing disagreed with the decision to admit, it should never have been 
the case that the only evidence in the medical record regarding this 
uncommon situation was the absence of the physician's or other 
qualified practitioner's signature. The medical record as a whole 
should reflect whether there was a decision by a physician or other 
qualified practitioner to admit the beneficiary as an inpatient or not. 
This fact is precisely why, under our current guidance, we acknowledged

[[Page 41508]]

that in the extremely rare circumstance where the order to admit is 
missing or defective, yet the intent, decision, and recommendation of 
the ordering physician or other qualified practitioner to admit the 
beneficiary as an inpatient can clearly be derived from the medical 
record, medical review contractors have discretion to determine that 
this information constructively satisfies the requirement that a 
written hospital inpatient admission order be present in the medical 
record. We disagree with these commenters that reliance only on the 
absence of the signature in these uncommon situations reflected good 
medical documentation practice.
    Regarding the commenters who were concerned that our proposal would 
remove the requirement for an order altogether, affecting patient 
appeal rights, or increase financial liability, as stated earlier, the 
physician order remains a requirement for purposes of reflecting a 
determination by the ordering physician or other qualified practitioner 
that hospital inpatient services are medically necessary, initiating 
the inpatient admission. Additionally, regardless of this proposal and 
other physician order requirements described earlier, the hospital CoPs 
include the requirement that all Medicare inpatients must receive 
written information about their hospital discharge appeal rights.
    Comment: Commenters inquired about situations where a patient in 
outpatient status under observation spent two medically necessary 
midnights and was subsequently discharged. The commenters stated that, 
in these situations, providers are allowed to obtain an admission order 
at any time prior to formal discharge. The commenters inquired whether 
providers can review this stay after discharge, determine the 2-
midnight benchmark was met, and submit a claim for inpatient admission.
    Response: Again, the proposal would not change the requirement 
that, for purposes of Part A payment, an individual becomes an 
inpatient when formally admitted as an inpatient under an order for 
inpatient admission. As noted previously, the physician order reflects 
the determination by the ordering physician or other qualified 
practitioner that hospital inpatient services are medically necessary, 
and initiates the inpatient admission. With respect to the question 
about reviewing an outpatient stay after discharge and submitting an 
inpatient claim for that stay, we refer readers to the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50942) in our response to comments where we 
stated that ``The physician order cannot be effective retroactively. 
Inpatient status only applies prospectively, starting from the time the 
patient is formally admitted pursuant to a physician order for 
inpatient admission, in accordance with our current policy.''
    Comment: Some commenters asked whether condition code 44 was still 
required to change a patient's status from inpatient to outpatient. 
Other commenters asked whether condition code 44 could still be used by 
hospitals without the presence of an inpatient admission order.
    Response: We consider these comments regarding the use of condition 
code 44 to be outside the scope of the proposed rule because we did not 
make a proposal regarding changing patient status from inpatient to 
outpatient. Therefore, we are not responding to these comments in this 
final rule.
    Comment: Some commenters wanted to know how the proposed policy 
changes the process for moving a patient from observation status to 
inpatient status and the timing of inpatient billing related to this 
process. Some commenters stated that the proposed policy change appears 
to suggest that the completion of admission orders would now be 
optional and other available documentation could be used to create 
retroactive orders.
    Response: As stated earlier, the proposal does not change the 
requirement that, for purposes of Part A payment, an individual becomes 
an inpatient when formally admitted as an inpatient under an order for 
inpatient admission. In addition, this proposal does not change the 
fact that hospitals are required to operate in accordance with 
appropriate CoPs.
    Regarding the comment about retroactive orders, it has been and 
continues to be longstanding Medicare policy to not permit retroactive 
orders. The order must be furnished at or before the time of the 
inpatient admission. The order can be written in advance of the formal 
admission (for example, for a prescheduled surgery), but the inpatient 
admission does not occur until hospital services are provided to the 
beneficiary.
    Comment: Commenters also discussed how the proposed policy may 
affect procedures on the inpatient only list. Specifically, the 
commenters wanted to know how this policy proposal applies to patients 
who receive procedures on the inpatient only list when the patient is 
an outpatient. In instances when a patient's status changes to 
inpatient prior to an inpatient order being placed, the commenters 
questioned whether hospitals would be able to determine the inpatient 
only procedure was performed and submit a bill for Medicare Part A 
payment.
    Response: The proposed revision does not include revisions to the 
policy for processing payment for inpatient only list procedures. As 
noted previously, our proposal does not change the requirement that, 
for purposes of Part A payment, an individual becomes an inpatient when 
formally admitted as an inpatient under an order for inpatient 
admission. The physician order remains a significant requirement 
because it reflects a determination by the ordering physician or other 
qualified practitioner that hospital inpatient services are medically 
necessary, and initiates the process for inpatient admission. We did 
not understand the comment regarding a patient's status changing prior 
to an order being placed. Therefore, we are unable to specifically 
respond to that comment.
    Comment: Commenters inquired if the proposal would change the 
requirements regarding which practitioners are allowed to furnish 
inpatient admission orders.
    Response: The proposed revision relating to hospital inpatient 
admission order documentation requirements under Medicare Part A does 
not include revisions to the requirements regarding which practitioners 
are allowed furnish inpatient admission orders.
    Comment: A number of commenters had specific questions regarding 
technical discrepancies. Specifically, the commenters wanted to know if 
CMS will be publishing a list of acceptable and unacceptable technical 
discrepancies considered by medical review contractors for the purposes 
of approving or denying Medicare Part A payment for inpatient 
admissions. In addition, the commenters wanted to know if CMS will 
require a specific error rate for compliance with inpatient physician 
orders, such as for provider technical errors that may be deemed 
excessive or unacceptable. The commenters also inquired whether 
providers will be required to document in the medical record whether 
technical discrepancies occurred in order for Medicare Part A payment 
to be considered. For example, the commenters wanted to know if an 
inpatient order for a medically necessary inpatient admission is not 
signed prior to the patient's discharge, will the facility need to 
document why the technical discrepancy occurred.
    Response: We have not considered developing a list of acceptable or 
unacceptable technical discrepancies nor have we considered requiring a 
technical discrepancy error rate.

[[Page 41509]]

    In regards to the comment regarding whether this proposed policy 
would require documentation of how a technical discrepancy occurred, we 
refer readers to the following subregulatory guidance from the Medicare 
Benefits Policy Manual (MBPM), Chapter 1, Section 10.2.: ``The order to 
admit may be missing or defective (that is, illegible, or incomplete, 
for example `inpatient' is not specified), yet the intent, decision, 
and recommendation of the ordering practitioner to admit the 
beneficiary as an inpatient can clearly be derived from the medical 
record. In these situations, contractors have been provided with 
discretion to determine that this information provides acceptable 
evidence to support the hospital inpatient admission. However, there 
can be no uncertainty regarding the intent, decision, and 
recommendation by the ordering practitioner to admit the beneficiary as 
an inpatient, and no reasonable possibility that the care could have 
been adequately provided in an outpatient setting.'' This guidance will 
remain in effect after this rule is finalized.
    Comment: Some commenters recommended that CMS change the audit 
requirements for contractors so that claims are not denied solely on 
technical issues found in the inpatient admission order. The commenters 
also suggested that CMS amend its Medicare Manual to clarify if an 
inpatient admission order is deemed defective.
    Response: We thank the commenters for their recommendations and 
suggestions. In carrying out their work, medical review contractors are 
required to follow CMS regulations and policy guidance. If necessary, 
we may revise our manuals and/or issue additional subregulatory 
guidance as appropriate with respect to the finalized regulation.
    Comment: Some commenters submitted information to demonstrate that 
CMS had indeed at one point intended to require orders and deny payment 
based on the absence of orders. As such, the commenters indicated that 
CMS' FY 2019 proposed policy would institute a change in language that 
may confuse hospitals due to lack of clarity. The commenters stated 
that any change should be accompanied with further changes to relevant 
CoPs and codified through provider education mechanisms.
    The commenters stated that because of perceived uncertainty and 
lack of clarity in comparing previous CMS guidance and rulemaking 
language to the language in the policy proposal, providers are going to 
need assistance in how to proceed in determining how to document 
inpatient admission orders and ensure proper processing of Medicare 
Part A payment. The commenters requested that the proposed policy be 
incorporated into hospital's post-discharge review in addition to the 
audits performed by Medicare contractors.
    In addition, commenters believed that the 2-midnight rule amended 
the Medicare CoPs to require an inpatient admission order. The 
commenters explained that if CMS proceeds with its proposal, the Agency 
would have to revise the CoPs to clarify that an order is no longer a 
condition for Medicare Part A payment.
    Response: 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, as well as codified the requirement that 
a physician order for inpatient admission was a specific condition for 
Part A payment. In that rulemaking, we acknowledged that, in the 
extremely rare circumstance that the order to admit is missing or 
defective, yet the intent, decision, and recommendation of the 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.
    However, as we have gained experience with the policy, it has come 
to our attention that, 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, some medically necessary inpatient admissions are being denied 
payment due to technical discrepancies with the documentation of 
inpatient admission orders. Particularly during the case review 
process, these discrepancies have occasionally been the primary reason 
for denying Medicare payment of an individual claim. We note that when 
we finalized the admission order documentation requirements in past 
rulemaking and guidance, it was not our intent that admission order 
documentation requirements should, by themselves, lead to the denial of 
payment for medically reasonable and necessary inpatient stay, even if 
such denials occur infrequently. It is our intention that this revised 
policy will properly adjust the focus of the medical review process 
towards determining whether an inpatient stay was medically reasonable 
and necessary and intended by the admitting physician rather than 
towards occasional inadvertent signature or documentation issues 
unrelated to the medical necessity of the inpatient stay or the intent 
of the physician.
    Regarding whether CMS would also need to make revisions to the CoPs 
in order to support this finalized revised regulation, we note that CMS 
did not make any amendments to the CoPs when we adopted the 2-midnight 
payment policy or our current inpatient admission order policy; 
therefore, there is no need to revise the CoPs as a result of the 
regulatory change we are now finalizing.
    Comment: Commenters also asked if the proposal includes any changes 
to physician certification policy or regulations and whether physician 
certification will still be required to support payment for an 
inpatient Medicare Part A claim. Commenters believed CMS' preamble 
language that ``(i)f other available documentation, such as the 
physician certification statement when required, progress notes, or the 
medical record as a whole . . .'' implied that physician certification 
statements were not always required.
    Response: The proposed revision of hospital inpatient admission 
orders documentation requirements under Medicare Part A did not include 
any changes to physician certification requirements. Not all types of 
covered services provided to Medicare beneficiaries require physician 
certification. Physician certification of inpatient services is 
required for cases that are 20 inpatient days or more (long-stay 
cases), for outlier cases of hospitals other than inpatient psychiatric 
facilities, and for cases of CAHs. We refer readers also to the CY 2015 
OPPS/ASC final rule with comment period (79 FR 66997), and 42 CFR part 
412, subpart F, 42 CFR 424.13, and 42 CFR 424.15.
    Comment: Commenters wanted to know if the proposed revision of 
hospital inpatient admission orders documentation requirements under 
Medicare Part A has an effective date or whether the guidance will be 
retroactive.
    Response: The proposed revision of hospital inpatient admission 
orders documentation requirements under Medicare Part A will be 
effective for dates of admission occurring on or after October 1, 2018. 
Previous guidance in our manual regarding constructive satisfaction of 
hospital inpatient admission order requirements still applies to dates 
of admission before

[[Page 41510]]

October 1, 2018, and will continue to apply after the effective date of 
this final rule.
    Comment: Commenters were concerned that the proposal to revise 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, will not reduce the 
administrative burden to providers. The commenters expressed that 
inpatient admissions will still be denied based solely on timeliness or 
completion of the attending physician's order and that other Medicare 
regulations will be referenced as the source of denial.
    Response: We will continue to stay engaged with medical review 
contractors, as we have historically, so that there is awareness and 
understanding of this revision. As indicated earlier, if necessary, we 
may revise our manuals and/or issue additional subregulatory guidance 
as needed.
    Comment: Commenters also suggested alternative options to address 
CMS' concerns regarding hospital inpatient admission order 
documentation requirements under Medicare Part A, including policy 
proposals that would substantively change the 2-midnight rule.
    Response: We did not propose changes to the 2-midnight rule with 
this proposal to revise hospital inpatient admission orders 
documentation requirements. However, we will continue to monitor this 
policy and may propose additional changes in future rulemaking, or 
issue further clarifications in subregulatory guidance, as necessary.
    Comment: Some commenters believed that removing the hospital 
inpatient admission order documentation requirement will have negative 
effects on both the cost and quality of care by losing the assurance 
that a qualified physician has close involvement in the decision to 
admit the patient, that they are involved early in the patients care, 
and that admitting physicians are free from postdischarge financial 
pressures from the hospital.
    Response: We refer readers to our impact discussion regarding this 
proposal in Appendix A--Economic Analyses, Section I.H.10. of the 
preamble of this final rule where we state, ``our actuaries estimate 
that any increase in Medicare payments due to the change will be 
negligible, given the anticipated low volume of claims that will be 
payable under this policy that would not have been paid under the 
current policy.'' Furthermore and as stated earlier, this policy 
proposal would not change the requirement that a beneficiary becomes an 
inpatient when formally admitted as an inpatient under an order for 
inpatient admission (nor that the documentation must still otherwise 
meet medical necessity and coverage criteria); only that the 
documentation requirement for inpatient orders to be present in the 
medical record will no longer be a specific condition of Part A 
payment.
    Comment: Some commenters expressed concern that the proposal to 
revise the inpatient admission order policy presents a problem for the 
capture of specific data elements necessary for compliance with 
electronic clinical quality measures.
    Response: As indicated earlier, this proposal would not change the 
requirement that an individual is considered an inpatient if formally 
admitted as an inpatient under an order for inpatient admission. The 
physician order reflects affirmation by the ordering physician or other 
qualified practitioner that hospital inpatient services are medically 
necessary, and serves the purpose of initiating the inpatient admission 
and documenting the physician's (or other qualified practitioner's, as 
provided in the regulations) intent to admit the patient. Accordingly, 
inpatient admission order documentation information should continue to 
be available in electronic health records.
    Comment: Commenters pointed out that this policy proposal only 
applies to the inpatient prospective payment system and that to 
encourage consistency across payment systems and reduce documentation 
burden, CMS should make the same change to documentation requirements 
at other sites where there will be an inpatient admission, such as in 
psychiatry and rehabilitation. The commenters acknowledged that this 
will require rulemaking and encourages CMS to make these changes as 
soon as possible.
    Response: We appreciate the recommendations made by the commenters 
and will take these comments into consideration in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal 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. Specifically, we are finalizing our proposal to revise the 
regulation 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.

V. Changes to the IPPS for Capital-Related Costs

A. Overview

    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient acute hospital services in 
accordance with a prospective payment system established by the 
Secretary. Under the statute, the Secretary has broad authority in 
establishing and implementing the IPPS for acute care hospital 
inpatient capital-related costs. 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

[[Page 41511]]

qualify under the thresholds established for each fiscal year.

B. Additional Provisions

1. Exception Payments
    The regulations at 42 CFR 412.348 provide for certain exception 
payments under the capital IPPS. The regular exception payments 
provided under Sec.  412.348(b) through (e) were available only during 
the 10-year transition period. For a certain period after the 
transition period, eligible hospitals may have received additional 
payments under the special exceptions provisions at Sec.  412.348(g). 
However, FY 2012 was the final year hospitals could receive special 
exceptions payments. For additional details regarding these exceptions 
policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51725).
    Under Sec.  412.348(f), a hospital may request an additional 
payment if the hospital incurs unanticipated capital expenditures in 
excess of $5 million due to extraordinary circumstances beyond the 
hospital's control. Additional information on the exception payment for 
extraordinary circumstances in Sec.  412.348(f) can be found in the FY 
2005 IPPS final rule (69 FR 49185 and 49186).
2. New Hospitals
    Under the capital IPPS, the regulations at 42 CFR 412.300(b) define 
a new hospital as a hospital that has operated (under previous or 
current ownership) for less than 2 years and lists examples of 
hospitals that are not considered new hospitals. In accordance with 
Sec.  412.304(c)(2), under the capital IPPS, a new hospital is paid 85 
percent of its allowable Medicare inpatient hospital capital-related 
costs through its first 2 years of operation, unless the new hospital 
elects to receive full prospective payment based on 100 percent of the 
Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule 
(76 FR 51725) for additional information on payments to new hospitals 
under the capital IPPS.
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. Annual Update for FY 2019

    The final annual update to the national capital Federal rate, as 
provided for in 42 CFR 412.308(c), for FY 2019 is discussed in section 
III. of the Addendum to this FY 2019 IPPS/LTCH PPS final rule.
    In section II.D. of the preamble of this FY 2019 IPPS/LTCH PPS 
final rule, we present a discussion of the MS-DRG documentation and 
coding adjustment, including previously finalized policies and 
historical adjustments, as well as the adjustment to the standardized 
amount under section 1886(d) of the Act that we proposed and are 
finalizing 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 making a similar 
adjustment to the national capital Federal rate (or to the hospital-
specific rates).

VI. Changes for Hospitals Excluded From the IPPS

A. 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 have used the percentage increase in 
the IPPS operating market basket to update the target amounts for 
children's hospitals, cancer hospitals, and RNHCIs. Consistent with the 
regulations at Sec. Sec.  412.23(g), 413.40(a)(2)(ii)(A), and 
413.40(c)(3)(viii), we also have used the percentage increase in the 
IPPS operating market basket to update 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 is the FY 2019 percentage increase in the 2014-based IPPS 
operating market basket.

[[Page 41512]]

    For the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20449), based on 
IGI's 2017 fourth quarter forecast, we estimated that the 2014-based 
IPPS operating market basket update for FY 2019 would be 2.8 percent 
(that is, the estimate of the market basket rate-of-increase). Based on 
this estimate, we stated in the proposed rule that 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. However, we indicated 
in the proposed rule that if more recent data became available for the 
final rule, we would use them to calculate the final IPPS operating 
market basket update for FY 2019. For this FY 2019 IPPS/LTCH PPS final 
rule, based on IGI's 2018 second quarter forecast (which is the most 
recent data available), we calculated the 2014-based IPPS operating 
market basket update for FY 2019 to be 2.9 percent. Therefore, the FY 
2019 rate-of-increase percentage that is 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 is 2.9 percent, in accordance with 
the applicable regulations at 42 CFR 413.40.
    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 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, which, in 
the proposed rule, was 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 the FY 2019 proposed 
rule, the update to an extended neoplastic disease care hospital's 
target amount for FY 2019 was 2.8 percent, which was based on IGI's 
2017 fourth quarter forecast. Furthermore, we proposed that if more 
recent data became available for the final rule, we would use that 
updated data to calculate the IPPS operating market basket update for 
FY 2019. For this final rule, based on IGI's second quarter 2018 
forecast (which is the most recent data available), the update to an 
extended neoplastic disease care hospital's target amount for FY 2019 
is 2.9 percent.
    We did not receive any public comments in response to these 
proposals. Therefore, we are finalizing them as proposed.

B. 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 rationale 
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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20450 and 
20451), we proposed to revise our regulations at

[[Page 41513]]

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 proposed 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. We stated that 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20451), we also 
proposed 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 proposed 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), which 
we are finalizing without modification after consideration of public 
comments, as discussed in section VI.C. of the preamble of this final 
rule.
    In the FY 2019 IPPS/LTCH PPS proposed rule, we stated that 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 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 noted that the 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.
    Comment: Several commenters supported CMS' proposals. Some 
commenters requested that CMS expand the scope of the proposal and 
exempt IPPS-excluded satellite facilities that are not co-located with 
IPPS hospitals from all separateness and control requirements in Sec.  
412.22(h)(2), not just those requirements at Sec.  
412.22(h)(2)(iii)(A)(1) through (3).
    Response: We appreciate the commenters' support of our proposals. 
We have reviewed the remaining requirements in Sec.  412.22(h)(2) and 
do not believe that it is appropriate to expand our proposals to excuse 
compliance with those requirements for IPPS-excluded satellite 
facilities that are not co-located with IPPS hospitals. For example, 
the commenter requested that satellite facilities be exempted from the 
requirement that they comply with the applicable payment rules which 
form the basis of their exclusion from the IPPS. We believe that such 
an exclusion fundamentally undermines the Medicare program and would 
advantage satellite facilities beyond any other hospital type. In 
addition, we believe that such an expanded proposal would advantage 
satellite facilities over HwHs (meaning that satellite facilities would 
be exempt from separateness and control requirements in situations in 
which an HwH would not be), and this directly contradicts our goal of 
bringing satellite facilities and HwH regulations into alignment.
    We note that, in response to the proposed rule, several commenters 
addressed issues relating to HwHs and satellite facilities that were 
outside the scope of the proposals in the proposed rule related to the 
CoPs and our existing regulations concerning HwHs. We are not 
addressing those comments in this final rule. However, we may take them 
into consideration for future rulemaking.
    After consideration of the public comments received, we are 
finalizing our proposals without modification. Specifically, we are 
adding 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. New Sec.  412.22(h)(2)(iii)(A)(4) specifies 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.

C. 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 final 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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20451), we proposed 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

[[Page 41514]]

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 stated that 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 indicated that 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 the FY 2019 IPPS/LTCH PPS proposed rule, we proposed 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 the 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 proposed 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 stated 
that 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 noted 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 proposed that 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 stated that we believed 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.
    Comment: Several commenters supported CMS' proposals to allow IPPS-
excluded hospitals to operate IPPS-excluded units and to make the 
proposed change effective for cost reporting periods beginning on or 
after October 1, 2019. However, some of these commenters requested that 
CMS not delay the effective date until FY 2020 as proposed.
    Response: We appreciate the commenters' support. While we 
appreciate that providers may wish to begin operating units as soon as 
possible, we believe that making the change effective for cost 
reporting periods beginning in FY 2019 is operationally not feasible, 
given the administrative and operational changes that must be made in 
order to fully implement this policy while minimizing unintended 
consequences of these changes. Therefore, we are not changing the 
effective date of this policy change to make it earlier than FY 2020 as 
requested by the commenters.
    Comment: Some commenters objected to CMS' proposal to allow IPPS-
excluded hospitals to operate IPPS-excluded units. Specifically, these 
commenters objected to the fact that, if the proposal is finalized, an 
LTCH would be allowed to operate an IRF unit but an IRF would not be 
allowed to operate a ``long-term care unit'' and contended that this 
result is unfair. Some of these commenters also expressed concern about 
the effect of these proposals on patient care and believed that the 
proposed change is inconsistent with the hospital CoPs, which do not 
allow co-located hospitals to jointly meet the CoPs. Other commenters 
argued that CMS did not sufficiently explain the proposal in the 
proposed rule or CMS should have made other regulatory text changes, 
such as allowing long-term care units. Some commenters requested that 
CMS withdraw the proposal and provide more outreach activities or 
implement small-scale models prior to making a regulatory change.
    Response: We believe the commenters may have misunderstood the crux 
of our proposal. Our proposal was not merely ``to allow LTCHs to 
operate rehabilitation units.'' Rather, under our proposal, all types 
of IPPS-excluded hospitals (including both LTCHs and IRFs) would be 
able to operate all types of IPPS-excluded units (rehabilitation and 
psychiatric) so long as such a unit would not be in a hospital of the 
same type. While one of the possible outcome of this proposal would be 
an LTCH operating an IRF unit, the reason an IRF could not operate a 
distinct part long-term care unit (which would be paid under the LTCH 
PPS) is because the Act does not allow for long-term care units (as we 
have stated on numerous occasions and some commenters acknowledged). 
However, we point out that, under our proposal, an IRF would be allowed 
to operate a psychiatric unit and a psychiatric hospital would also be 
allowed to operate a rehabilitation unit, as long as applicable CoPs 
are met.
    While we appreciate the concern expressed by some commenters 
relating to the care accessible to Medicare beneficiaries, we disagree 
that such concerns are valid or germane to our proposed revisions. As 
discussed in more detail earlier, the reason why we prohibited IPPS-
excluded hospitals from operating IPPS-excluded units was because we 
were concerned that the IPPS-excluded hospital could artificially 
manipulate its TEFRA ceiling. As we also discussed in more detail 
earlier, that concern is no longer valid, given reforms in payment 
systems for IPPS-excluded hospitals. Therefore, we believe it is 
appropriate to retire a policy that no longer serves its purpose. In 
addition, while the commenters stated their concern, they did not 
provide data or information to indicate that the proposed change would 
adversely affect patients nor did they

[[Page 41515]]

indicate what data or information should be used in any analysis. We 
also note that our proposal would not impact the ability of an LTCH to 
offer rehabilitation services (which they currently can offer and are 
paid under the LTCH PPS) and that, under our proposal, IPPS hospitals 
can continue to operate IRF units. Similarly, in response to the 
commenters' request for additional outreach activities or small-scale 
models, it is unclear from the comments what purpose these outreach 
activities or small-scale models would serve (aside from delaying the 
implementation of the policy). Based on the number and variety of 
comments in response to our proposals, we believe our proposals and 
rationale for our proposals as presented in the proposed rule provided 
sufficient information for stakeholders to opine on the issue. In 
particular, it is not clear to us what the commenters found 
insufficient, and we reiterate the previously referenced discussion 
from the proposed rule in which we discuss that the underlying concern 
for the prohibition on IPPS-excluded hospitals from operating IPPS-
excluded units was based on payment concerns that are no longer valid, 
given the reforms to payment systems between when CMS adopted the 
policy and now. For these reasons, we are not withdrawing our proposal 
as the commenters requested.
    With respect to the comment that the proposed changes are 
inconsistent with the hospital CoPs, as we stated earlier, our proposal 
to allow IPPS-excluded hospitals to operate IPPS-excluded units is a 
payment rule, which cannot supersede the hospital CoPs. We believe that 
our proposal is consistent with the CoPs as well as with the finalized 
changes to the separateness and control rules for HwHs and satellite 
facilities discussed in section VI.B. of the preamble of this final 
rule.
    We note that, in response to the proposed rule, some commenters 
requested other changes in light of our proposals--for example, 
changing the hospital CoPs to allow additional integration between co-
located hospitals--that were outside the scope of the provisions in the 
proposed rule. While we are not addressing those comments in this final 
rule, we will take these suggestions into consideration for possible 
future rulemaking.
    Comment: Some commenters requested clarification regarding whether 
patients in units would be included in the calculation of an LTCH's 
average length of stay at Sec.  412.23(e)(3). Some of these commenters 
believed that it was implied in our proposal that they would not be 
included.
    Response: We are clarifying that the days that patients stay in 
psychiatric and rehabilitation units would be excluded from the 
calculation of an LTCH's average length of stay. Specifically, as LTCH 
patients with a principal diagnosis relating to a psychiatric or 
rehabilitation diagnosis must be paid under the site neutral rate, and 
as those LTCH patients site neutral days are not counted toward a 
facility's average length of stay calculation, we believe that 
excluding psychiatric and rehabilitation unit days from the calculation 
of the LTCH's average length of stay is the most appropriate policy. 
Furthermore, under policies discussed and finalized earlier, patients 
in IPPS-excluded units in an LTCH will not be paid under the LTCH PPS. 
In other instances in which an LTCH patient is not paid at an LTCH 
rate, such as patients under a Medicare Advantage plan, those patients 
are excluded from the average length of stay calculation. Therefore, we 
believe that treating unit patients similar to Medicare Advantage plan 
patients would ensure consistency in the program. As such, in this 
final rule, we are revising Sec.  412.23(e)(3) by adding a new 
paragraph (vii) that specifies that, for cost reporting periods 
beginning on or after October 1, 2019, the Medicare inpatient days from 
patients treated in an IPPS-excluded unit will not be included in the 
Medicare average length of stay calculation.
    Comment: Some commenters requested that CMS make a conforming 
change to Sec.  412.25(a)(1)(iii) of the regulations in order to 
implement the proposals.
    Response: Upon review of our proposals, we agree with the 
commenters that we should make a conforming change to the basis for 
exclusion requirements for IPPS-excluded units in Sec.  
412.25(a)(1)(iii), without which an IPPS-excluded unit would not be 
able to be co-located with an IPPS-excluded hospital, despite 
finalizing our proposal. Therefore, in finalizing changes to the 
regulations for IPPS-excluded units, we also are making a conforming 
change to Sec.  412.25(a)(1)(iii) to avoid an inadvertent 
contradiction. Specifically, we are replacing the phrase ``beds that 
are not excluded from the inpatient prospective payment system'' 
currently in the regulations with the phrase ``beds that are paid under 
the applicable payment system under which the hospital is paid.''
    We received several public comments that addressed issues related 
to services provided in excluded units that were outside the scope of 
the provisions of the proposed rule. We are not addressing those 
comments in this final rule but may take them under consideration for 
future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our changes to Sec.  412.25(a)(1)(ii) as proposed without 
modification, making a conforming change to Sec.  412.25(a)(1)(iii) by 
replacing the phrase ``beds that are not excluded from the inpatient 
prospective payment system'' with the phrase ``beds that are paid under 
the applicable payment system under which the hospital is paid'', as 
described earlier in our response to comments, revising 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, 
and revising Sec.  412.23(e)(3) to specify that discharges from IPPS-
excluded units will not be included in the calculation of an LTCH's 
average length of stay.

D. Report on Adjustment (Exception) Payments

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

[[Page 41516]]

are publishing data on adjustment payments that were processed by the 
MAC or CMS during FY 2017.
    The table below includes the most recent data available from the 
MACs and CMS on adjustment payments that were adjudicated during FY 
2017. As indicated above, the adjustments made during FY 2017 only 
pertain to cost reporting periods ending in years prior to FY 2017. 
Total adjustment payments made to excluded hospitals during FY 2017 are 
$8,811,316. The table depicts for each class of hospitals, in the 
aggregate, the number of adjustment requests adjudicated, the excess 
operating costs over the ceiling, and the amount of the adjustment 
payments.

----------------------------------------------------------------------------------------------------------------
                                                                                    Excess cost     Adjustment
                        Class of hospital                             Number       over ceiling      payments
----------------------------------------------------------------------------------------------------------------
Children's Hospitals............................................               1        $600,616        $336,553
Cancer Hospitals................................................               1      13,057,016       8,025,996
Religious Nonmedical Health Care Institution (RNHCI)............               1         411,854         184,816
Psychiatric Unit................................................               2       6,126,163         263,951
                                                                 -----------------------------------------------
    Total.......................................................  ..............  ..............       8,811,316
----------------------------------------------------------------------------------------------------------------

E. 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
    As discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20451 through 20453), 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 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, ambulance services, 
and home health services, and an increase in the number of swing beds 
available to furnish skilled nursing facility/nursing facility 
services. 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,

[[Page 41517]]

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 2019 IPPS/LTCH PPS proposed rule, for this FY 2019 
IPPS/LTCH PPS final rule, we estimate that the total impact of the 
payment recoupment will 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.
    We did not receive any public comments on our discussion of the 
FCHIP demonstration in the FY 2019 IPPS/LTCH PPS proposed rule.

VII. 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-

[[Page 41518]]

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 final rule, when we refer to discharges, we describe Medicare 
discharges.) The August 30, 2002 final rule further details the payment 
policy under the TEFRA system (67 FR 55954).
    In the August 30, 2002 final rule, we provided for a 5-year 
transition period from payments under the TEFRA system to payments 
under the LTCH PPS. During this 5-year transition period, an LTCH's 
total payment under the PPS was based on an increasing percentage of 
the Federal rate with a corresponding decrease in the percentage of the 
LTCH PPS payment that is based on reasonable cost concepts, unless an 
LTCH made a one-time election to be paid based on 100 percent of the 
Federal rate. Beginning with LTCHs' cost reporting periods beginning on 
or after October 1, 2006, total LTCH PPS payments are based on 100 
percent of the Federal rate.
    In addition, in the August 30, 2002 final rule, we presented an in-
depth discussion of the LTCH PPS, including the patient classification 
system, relative weights, payment rates, additional payments, and the 
budget neutrality requirements mandated by section 123 of the BBRA. The 
same final rule that established regulations for the LTCH PPS under 42 
CFR part 412, subpart O, also contained LTCH provisions related to 
covered inpatient services, limitation on charges to beneficiaries, 
medical review requirements, furnishing of inpatient hospital services 
directly or under arrangement, and reporting and recordkeeping 
requirements. We refer readers to the August 30, 2002 final rule for a 
comprehensive discussion of the research and data that supported the 
establishment of the LTCH PPS (67 FR 55954).
    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 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 (82 FR 38318 through 38320), we also 
implemented a 1-year regulatory delay on the full implementation of the 
25-percent threshold policy under Sec.  412.538.
     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 Public Law 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.
    As we proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20465), we are making conforming changes to our regulations to 
implement the provisions of section 51005 of the Bipartisan Budget Act 
of 2018, Public Law 115-123, which extends the transitional blended 
payment rate for site neutral payment rate cases for an additional 2 
years. We refer readers to section VII.C of the preamble of this final 
rule for a discussion of our final policy.
    We received several public comments that addressed issues that were 
outside the scope of the FY 2019 proposed rule. Therefore we are not 
responding to them in this final rule. We may take these public 
comments under consideration in future rulemaking.
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.

[[Page 41519]]

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. 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 
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 are 761 MS-DRG groupings based on the 
changes, as discussed in section II.F. of the preamble of this FY 2019 
IPPS/LTCH PPS final rule. Consistent with section 123 of the BBRA, as 
amended by section 307(b)(1) of the BIPA, and Sec.  412.515 of the 
regulations, we use information derived from LTCH PPS patient records 
to classify LTCH discharges into distinct MS-LTC-DRGs based on clinical 
characteristics and estimated resource needs. We then assign an 
appropriate weight to the MS-LTC-DRGs to account for the difference in 
resource use by patients exhibiting the case complexity and multiple 
medical problems characteristic of LTCHs.
    In this section of the final rule, we provide a general summary of 
our existing methodology for determining the FY 2019 MS-LTC-DRG 
relative weights under the LTCH PPS.
    As we proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20455), in general, for FY 2019, we are continuing to use our existing 
methodology to determine the MS-LTC-DRG relative weights (as discussed 
in greater detail in section VII.B.3. of the preamble of this final 
rule). As we established when we implemented the dual rate LTCH PPS 
payment structure codified under Sec.  412.522, which began in FY 2016, 
as we proposed, 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

[[Page 41520]]

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 do 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 final rule). In addition, in this FY 2019 IPPS/LTCH PPS final 
rule, for FY 2019, as we proposed, we are continuing to exclude the 
data from all-inclusive rate providers and LTCHs paid in accordance 
with demonstration projects, as well as any Medicare Advantage claims 
from the MS-LTC-DRG relative weight calculations for the reasons 
discussed in section VII.B.3.c. of the preamble of this final rule.
    Furthermore, for FY 2019, in using data from applicable LTCH cases 
to establish MS-LTC-DRG relative weights, as we proposed, we are 
continuing 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 grouped all of the low-volume MS-LTC-DRGs 
into five quintiles based on average charges per discharge. Then, under 
our existing methodology, we accounted 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 made 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 final rule.)
2. Patient Classifications Into MS-LTC-DRGs
a. Background
    The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under 
the LTCH PPS) are based on the CMS DRG structure. As noted previously 
in this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs 
although they are structurally identical to the MS-DRGs used under the 
IPPS.
    The MS-DRGs are organized into 25 major diagnostic categories 
(MDCs), most of which are based on a particular organ system of the 
body; the remainder involve multiple organ systems (such as MDC 22, 
Burns). Within most MDCs, cases are then divided into surgical DRGs and 
medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy 
that orders operating room (O.R.) procedures or groups of O.R. 
procedures by resource intensity. The GROUPER software program does not 
recognize all ICD-10-PCS procedure codes as procedures affecting DRG 
assignment. That is, procedures that are not surgical (for example, 
EKGs), or minor surgical procedures (for example, a biopsy of skin and 
subcutaneous tissue (procedure code 0JBH3ZX)) do not affect the MS-LTC-
DRG assignment based on their presence on the claim.
    Generally, under the LTCH PPS, a Medicare payment is made at a 
predetermined specific rate for each discharge that varies based on the 
MS-LTC-DRG to which a beneficiary's discharge is assigned. Cases are 
classified into MS-LTC-DRGs for payment based on the following six data 
elements:
     Principal diagnosis;
     Additional or secondary diagnoses;
     Surgical procedures;
     Age;
     Sex; and
     Discharge status of the patient.
    Currently, for claims submitted using version ASC X12 5010 format, 
up to 25 diagnosis codes and 25 procedure codes are considered for an 
MS-DRG assignment. This includes one principal diagnosis and up to 24 
secondary diagnoses for severity of illness determinations. (For 
additional information on the processing of up to 25 diagnosis codes 
and 25 procedure codes on hospital inpatient claims, we refer readers 
to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS 
final rule (75 FR 50127).)
    Under the HIPAA transactions and code sets regulations at 45 CFR 
parts 160 and 162, covered entities must comply with the adopted 
transaction standards and operating rules specified in Subparts I 
through S of Part 162. Among other requirements, on or after 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 final rule. 
Additional coding instructions and examples are published in the AHA's 
Coding Clinic for ICD-10-CM/PCS.
    To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base 
DRGs were subdivided according to the presence of specific secondary 
diagnoses designated as complications or comorbidities (CCs) into one, 
two, or three levels of severity, depending on the impact of the CCs on 
resources used for those cases. Specifically, there are sets of MS-DRGs 
that are split into 2 or 3 subgroups based on the presence or absence 
of a CC or a major complication or comorbidity (MCC). We refer readers 
to section II.D. of the FY 2008 IPPS final rule with comment period for 
a detailed discussion about the creation of MS-DRGs based on severity 
of illness levels (72 FR 47141 through 47175).
    MACs enter the clinical and demographic information submitted by 
LTCHs into their claims processing systems and subject this information 
to

[[Page 41521]]

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. 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 final rule, as we proposed, we 
updated the MS-LTC-DRG classifications effective October 1, 2018, 
through September 30, 2019 (FY 2019), consistent with the changes to 
specific MS-DRG classifications presented in section II.F. of the 
preamble of this final rule. Accordingly, the MS-LTC-DRGs for FY 2019 
presented in this final rule are the same as the 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 MS-DRGs for FY 2019, the other changes 
that affect MS-DRG (and by extension MS-LTC-DRG) assignments under 
GROUPER Version 36 as discussed in section II.F. of the preamble of 
this final rule, including the changes to the MCE software and the ICD-
10-CM/PCS coding system, also are applicable under the LTCH PPS for FY 
2019.
3. Development of the 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 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 MS-LTC-DRG Relative Weights for FY 2019
    In this FY 2019 IPPS/LTCH PPS final rule, as we proposed in the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20456), we are continuing to 
use our current methodology to determine the 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 MS-LTC-DRGs, low-volume and no-
volume MS-LTC-DRGs, adjustments for nonmonotonicity, the steps for 
calculating the MS-LTC-DRG relative weights with a 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 application of our existing 
methodology for determining the MS-LTC-DRG relative weights for FY 
2019, and we

[[Page 41522]]

discuss the effects of our policies concerning the data used to 
determine the 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 and final MS-LTC-DRGs and their respective 
proposed and final 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 payment rates or factors for the 
applicable payment year, in the FY 2019 IPPS/LTCH PPS proposed rule (83 
FR 20457), we proposed 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 stated 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 and final 
payment rates or factors for the applicable payment year while 
continuing to furnish the same information the tables provided in 
previous fiscal years.
    We did not receive any public comments on these proposals. 
Therefore, we are finalizing, without modification, the proposals and 
the continued use of the existing policies, as proposed.
c. Data
    For the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20457), 
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 was the best available data at that time, 
and we proposed to use Version 36 of the GROUPER to classify LTCH 
cases. Consistent with our historical practice, we proposed 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. For this final rule, based on 
updated from FY 2017 Medicare LTCH claims data from the March 2018 
update of the FY 2017 MedPAR file, which is the best available data at 
the time of development of this final rule, and we used Version 36 of 
the GROUPER to classify LTCH cases. To calculate the FY 2019 MS-LTC-DRG 
relative weights under the dual rate LTCH PPS payment structure, as we 
proposed, we continued 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 
March 2018 update of the FY 2017 MedPAR file to determine which LTCH 
cases would meet the criteria for exclusion from the site neutral 
payment rate under Sec.  412.522(b) had the dual rate LTCH PPS payment 
structure 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 FY 2019 MS-LTC-DRG relative weights using 
our current methodology, we did not make any exceptions 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 used for this final 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 
excluded any claims in the resulting data set that were submitted by 
LTCHs that were 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 
excluded any Medicare Advantage (Part

[[Page 41523]]

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 FY 2019 MS-LTC-DRG relative weights in this final 
rule, as we proposed, 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 March 2018 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 March 2018 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.) As we 
proposed, we used the remaining data (that is, the applicable LTCH 
data) to calculate the 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 
final rule, as we proposed in the FY 2019 IPPS/LTCH PPS proposed rule 
(83 FR 20458), we continued to use a hospital-specific relative value 
(HSRV) methodology to calculate the 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 reduced 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, as we 
proposed, we continued 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 final rule) by the average adjusted charge for all 
applicable LTCH cases at the LTCH in which the case was treated. SSO 
cases are cases with a length of stay that is less than or equal to 
five-sixths the average length of stay of the MS-LTC-DRG (Sec.  412.529 
and Sec.  412.503). The average adjusted charge reflects the average 
intensity of the health care services delivered by a particular LTCH 
and the average cost level of that LTCH. The resulting ratio was 
multiplied by that LTCH's case-mix index to determine the standardized 
charge for the case.
    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 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 final 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, 
as we proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20459), we are continuing 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 FY 2019 MS-LTC-DRG relative weights, when 
necessary, as is our longstanding practice, as we proposed, we made 
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 
final rule. We refer readers to the discussion in the FY 2010 IPPS/RY 
2010 LTCH PPS final rule for our rationale for including an adjustment 
for nonmonotonicity (74 FR 43953 through 43954).
f. Low-Volume MS-LTC-DRGs
    In order to account for MS-LTC-DRGs with low-volume (that is, with 
fewer than 25 applicable LTCH cases), consistent with our existing 
methodology, as we proposed in the FY 2019 IPPS/LTCH PPS proposed rule 
(83 FR 20459), we are continuing to employ the quintile methodology for 
low-

[[Page 41524]]

volume MS-LTC-DRGs, such that we group the ``low-volume MS-LTC-DRGs'' 
(that is, 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 low-volume MS-LTC-
DRG to a quintile results in nonmonotonicity within a base-DRG, as we 
proposed, we made adjustments to the resulting low-volume MS-LTC-DRGs 
to preserve monotonicity, as discussed in detail in section VII.B.3.g. 
(Step 6) of the preamble of this final rule.
    In this final rule, based on the best available data (that is, the 
March 2018 update of the FY 2017 MedPAR files), we identified 271 MS-
LTC-DRGs that contained between 1 and 24 applicable LTCH cases. This 
list of MS-LTC-DRGs was then divided into 1 of the 5 low-volume 
quintiles, each containing at least 54 MS-LTC-DRGs (271/5 = 54 with a 
remainder of 1). We assigned the low-volume MS-LTC-DRGs to specific 
low-volume quintiles by sorting the low-volume MS-LTC-DRGs in ascending 
order by average charge in accordance with our established methodology. 
Based on the data available for this final rule, the number of MS-LTC-
DRGs with less than 25 applicable LTCH cases was not evenly divisible 
by 5 and, therefore, as we proposed, we employed our historical 
methodology for determining which of the low-volume quintiles would 
contain the additional low-volume MS-LTC-DRG. Specifically for this 
final rule, after organizing the MS-LTC-DRGs by ascending order by 
average charge, we assigned the first 55 (1st through 55th) of low-
volume MS-LTC-DRGs (with the lowest average charge) into Quintile 1. 
The 54 MS-LTC-DRGs with the highest average charge cases were assigned 
into Quintile 5. Because the average charge of the 55th low-volume MS-
LTC-DRG in the sorted list was closer to the average charge of the 54th 
low-volume MS-LTC-DRG (assigned to Quintile 1) than to the average 
charge of the 56th low-volume MS-LTC-DRG (assigned to Quintile 2), we 
assigned it to Quintile 1 (such that Quintile 1 contains 55 low-volume 
MS-LTC-DRGs before any adjustments for nonmonotonicity, as discussed 
below). This resulted in 4 of the 5 low-volume quintiles containing 54 
MS-LTC-DRGs (Quintiles 2, 3, 4, and 5) and 1 low-volume quintile 
containing 55 MS-LTC-DRGs (Quintile 1). As discussed earlier, for this 
final rule, as we proposed, we are providing the list of the 
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 final 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 FY 2019 relative weights for the low-
volume MS-LTC-DRGs, consistent with our historical practice, as we 
proposed, we used the five low-volume quintiles described previously. 
We determined a relative weight and (geometric) average length of stay 
for each of the five low-volume quintiles using the methodology 
described in section VII.B.3.g. of the preamble of this final rule. We 
assigned the same relative weight and average length of stay to each of 
the low-volume MS-LTC-DRGs that make up an individual low-volume 
quintile. We note that, as this system is dynamic, it is possible that 
the number and specific type of MS-LTC-DRGs with a low-volume of 
applicable LTCH cases will vary in the future. Furthermore, we note 
that we 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 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 FY 2019 MS-LTC-DRG Relative Weights
    In this final rule, as we proposed in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20460), we are continuing to use our current 
methodology to determine the FY 2019 MS-LTC-DRG relative weights.
    In summary, to determine the FY 2019 MS-LTC-DRG relative weights, 
as we proposed, we grouped applicable LTCH cases to the appropriate MS-
LTC-DRG, while taking into account the low-volume quintiles (as 
described above) and cross-walked no-volume MS-LTC-DRGs (as described 
later in this section). After establishing the appropriate MS-LTC-DRG 
(or low-volume quintile), as we proposed, we calculated 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, as 
we proposed, we adjusted the number of applicable LTCH cases in each 
MS-LTC-DRG (or low-volume quintile) for the effect of SSO cases (Step 3 
below). After removing applicable LTCH cases with a length of stay of 7 
days or less (Step 1 below) and statistical outliers (Step 2 below), 
which are the SSO-adjusted applicable LTCH cases and corresponding 
charges (Step 3 below), as we proposed, we calculated ``relative 
adjusted weights'' for each MS-LTC-DRG (or 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 calculation of the 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 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 FY 2019 MS-LTC-DRG relative weights, as we proposed, we 
removed 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 calculation of the 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, as we proposed, we continued 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 were removed prior to calculating the relative

[[Page 41525]]

weights because we believe that they may represent aberrations in the 
data that distort the measure of average resource use. Including those 
LTCH cases in the calculation of the relative weights 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 were left with applicable LTCH cases that have a length of 
stay greater than or equal to 8 days. In this final rule, we refer to 
these cases as ``trimmed applicable LTCH cases.''
    Step 3--Adjust charges for the effects of SSOs.
    As the next step in the calculation of the FY 2019 MS-LTC-DRG 
relative weights, consistent with our historical approach, as we 
proposed, we adjusted each LTCH's charges per discharge for those 
remaining cases (that is, trimmed applicable LTCH cases) for the 
effects of SSOs (as defined in Sec.  412.529(a) in conjunction with 
Sec.  412.503). Specifically, we made this adjustment by counting an 
SSO case as a fraction of a discharge based on the ratio of the length 
of stay of the case to the average length of stay for the MS-LTC-DRG 
for non-SSO cases. This had 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 produced the same 
result as if the actual charges per discharge of an SSO case were 
adjusted to what they would have been had the patient's length of stay 
been equal to the average length of stay of the MS-LTC-DRG.
    Counting SSO cases as full LTCH cases with no adjustment in 
determining the FY 2019 MS-LTC-DRG relative weights would lower the 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, as we proposed, we continued 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 FY 2019 MS-LTC-DRG relative weights on an 
iterative basis.
    Consistent with our historical relative weight methodology, as we 
proposed, we calculated the 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 calculated a hospital-
specific relative charge value by dividing the charge per discharge 
after adjusting for SSOs of the LTCH case (from Step 3) by the average 
charge per SSO-adjusted discharge for the LTCH in which the case 
occurred. The resulting ratio was then multiplied by the LTCH's case-
mix index to produce an adjusted hospital-specific relative charge 
value for the case. We used an initial case-mix index value of 1.0 for 
each LTCH.
    For each MS-LTC-DRG, we calculated the FY 2019 relative weight by 
dividing the SSO-adjusted average of the hospital-specific relative 
charge values for applicable LTCH cases for the 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 MS-LTC-DRG) 
by the overall SSO-adjusted average hospital-specific relative charge 
value across all applicable LTCH cases for all LTCHs (that is, the sum 
of the hospital-specific relative charge value from above divided by 
the sum of equivalent applicable LTCH cases from Step 3 for each MS-
LTC-DRG). Using these recalculated MS-LTC-DRG relative weights, each 
LTCH's average relative weight for all of its SSO-adjusted trimmed 
applicable LTCH cases (that is, its case-mix) was calculated by 
dividing the sum of all the LTCH's MS-LTC-DRG relative weights by its 
total number of SSO-adjusted trimmed applicable LTCH cases. The LTCHs' 
hospital-specific relative charge values (from previous) were then 
multiplied by the hospital-specific case-mix indexes. The hospital-
specific case-mix adjusted relative charge values were then used to 
calculate a new set of MS-LTC-DRG relative weights across all LTCHs. 
This iterative process 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 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 MS-LTC-DRGs for which there 
were no claims in the March 2018 update of the FY 2017 MedPAR file and, 
therefore, for which no charge data was available for these MS-LTC-
DRGs. Because patients with a number of the diagnoses under these MS-
LTC-DRGs may be treated at LTCHs, consistent with our historical 
methodology, we generally assign a relative weight to each of the no-
volume MS-LTC-DRGs based on clinical similarity and relative costliness 
(with the exception of ``transplant'' MS-LTC-DRGs, ``error'' MS-LTC-
DRGs, and MS-LTC-DRGs that indicate a principal diagnosis related to a 
psychiatric diagnosis or rehabilitation (referred to as the 
``psychiatric or rehabilitation'' MS-LTC-DRGs), as discussed later in 
this section of this final rule). (For additional information on this 
step of the relative weight methodology, we refer readers to 67 FR 
55991 and 74 FR 43959 through 43960.)
    As we proposed, we cross-walked each no-volume MS-LTC-DRG to 
another MS-LTC-DRG for which we calculated a relative weight 
(determined in accordance with the methodology described above). Then, 
the ``no-volume'' MS-LTC-DRG was assigned the same relative weight (and 
average length of stay) of the MS-LTC-DRG to which it was cross-walked 
(as described in greater detail in this section of this final rule).
    Of the 761 MS-LTC-DRGs for FY 2019, we identified 346 MS-LTC-DRGs 
for which there were 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). As we proposed, we assigned relative 
weights to each of the 346 no-volume MS-LTC-DRGs that contained trimmed 
applicable LTCH cases based on clinical similarity and relative 
costliness to 1 of the remaining 415 (761-346 = 415) MS-LTC-DRGs for 
which we calculated 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'' MS-LTC-DRGs as the MS-LTC-DRGs to which we cross-
walked 1 of the 346 ``no volume'' MS-LTC-DRGs.) Then, as we generally 
proposed, we assigned the 346 no-volume MS-LTC-DRGs the relative weight 
of the cross-walked MS-LTC-DRG. (As explained below in Step 6, when 
necessary, we made adjustments to account for nonmonotonicity.)
    We cross-walked the no-volume MS-LTC-DRG to a MS-LTC-DRG for which 
we calculated relative weights based on the March 2018 update of the FY 
2017 MedPAR file, and to which it is similar

[[Page 41526]]

clinically in intensity of use of resources and relative costliness as 
determined by criteria such as care provided during the period of time 
surrounding surgery, surgical approach (if applicable), length of time 
of surgical procedure, postoperative care, and length of stay. (For 
more details on our process for evaluating relative costliness, we 
refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (73 FR 
48543)). We believe in the rare event that there would be a few LTCH 
cases grouped to one of the no-volume MS-LTC-DRGs in FY 2018, the 
relative weights assigned based on the cross-walked MS-LTC-DRGs would 
result in an appropriate LTCH PPS payment because the crosswalks, which 
are based on clinical similarity and relative costliness, would be 
expected to generally require equivalent relative resource use.
    We then assigned the relative weight of the cross-walked MS-LTC-DRG 
as the relative weight for the no-volume MS-LTC-DRG such that both of 
these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and the cross-
walked MS-LTC-DRG) have the same relative weight (and average length of 
stay) for FY 2019. We note that, if the cross-walked MS-LTC-DRG had 25 
applicable LTCH cases or more, its relative weight (calculated using 
the methodology described in Steps 1 through 4 above) was assigned to 
the no-volume MS-LTC-DRG as well. Similarly, if the MS-LTC-DRG to which 
the no-volume MS-LTC-DRG was cross-walked had 24 or less cases and, 
therefore, was designated to 1 of the low-volume quintiles for purposes 
of determining the relative weights, we assigned the relative weight of 
the applicable low-volume quintile to the no-volume MS-LTC-DRG such 
that both of these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and 
the cross-walked MS-LTC-DRG) have the same relative weight for FY 2019. 
(As we noted previously, in the infrequent case where nonmonotonicity 
involving a no-volume MS-LTC-DRG resulted, additional adjustments as 
described in Step 6 were required in order to maintain monotonically 
increasing relative weights.)
    As discussed earlier, for this final rule, as we proposed, we are 
providing the list of the no-volume MS-LTC-DRGs and the MS-LTC-DRGs to 
which each was cross-walked (that is, the cross-walked MS-LTC-DRGs) for 
FY 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 final 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 relative weights 
for the FY 2019 MS-LTC-DRGs with no applicable LTCH cases, we are 
providing the following example, which refers to the no-volume MS-LTC-
DRGs crosswalk information for FY 2019 (which, as previously stated, we 
are providing in a supplemental data file posted via the internet on 
the CMS website for this final rule).
    Example: There were no trimmed applicable LTCH cases in the FY 2017 
MedPAR file that we used for this final rule for MS-LTC-DRG 061 (Acute 
Ischemic Stroke with Use of Thrombolytic Agent with MCC). We determined 
that MS-LTC-DRG 070 (Nonspecific Cerebrovascular Disorders with MCC) is 
similar clinically and based on resource use to MS-LTC-DRG 061. 
Therefore, we assigned the same relative weight (and average length of 
stay) of MS-LTC-DRG 70 of 0.8822 for FY 2019 to MS-LTC-DRG 061 (we 
refer readers to Table 11, which is listed in section VI. of the 
Addendum to this final rule and is available via the internet on the 
CMS 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 relative weights in this final rule.
    For FY 2019, consistent with our historical relative weight 
methodology, as we proposed, we established a relative weight of 0.0000 
for the following transplant MS-LTC-DRGs: Heart Transplant or Implant 
of Heart Assist System with MCC (MS-LTC-DRG 001); Heart Transplant or 
Implant of Heart Assist System without MCC (MS-LTC-DRG 002); Liver 
Transplant with MCC or Intestinal Transplant (MS-LTC-DRG 005); Liver 
Transplant without MCC (MS-LTC-DRG 006); Lung Transplant (MS-LTC-DRG 
007); Simultaneous Pancreas/Kidney Transplant (MS-LTC-DRG 008); 
Pancreas Transplant (MS-LTC-DRG 010); and Kidney Transplant (MS-LTC-DRG 
652). This is because Medicare only covers these procedures if they are 
performed at a hospital that has been certified for the specific 
procedures by Medicare and presently no LTCH has been so certified. At 
the present time, we include these eight transplant 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, as we proposed, we established 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 final rule, 
section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 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 final rule, 
consistent with our practice in FYs 2016 through 2018, as we proposed, 
we established a 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: MS-LTC-DRG 876 (O.R. Procedure with 
Principal Diagnoses of Mental Illness); MS-LTC-DRG 880 (Acute 
Adjustment Reaction & Psychosocial Dysfunction); MS-LTC-DRG 881 
(Depressive Neuroses); MS-LTC-DRG 882 (Neuroses Except Depressive); MS-
LTC-DRG 883 (Disorders of Personality & Impulse Control); MS-LTC-DRG 
884 (Organic Disturbances & Mental Retardation); MS-LTC-DRG 885 
(Psychoses); MS-LTC-DRG 886 (Behavioral & Developmental Disorders); MS-
LTC-DRG 887 (Other Mental Disorder Diagnoses); MS-LTC-DRG 894 (Alcohol/
Drug Abuse or Dependence, Left Ama); MS-LTC-DRG 895 (Alcohol/Drug Abuse 
or Dependence, with Rehabilitation Therapy); MS-LTC-DRG 896 (Alcohol/
Drug Abuse or Dependence, without Rehabilitation Therapy with MCC); MS-
LTC-DRG 897 (Alcohol/Drug Abuse or Dependence, without Rehabilitation 
Therapy without MCC); MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and 
MS-

[[Page 41527]]

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'' 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 relative weight for the 
``psychiatric and rehabilitation'' MS-LTC-DRGs. In other words, any 
LTCH PPS discharges grouped to any of the 15 ``psychiatric and 
rehabilitation'' MS-LTC-DRGs would always be paid at the site neutral 
payment rate, and, therefore, those 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 final rule for a detailed 
discussion of the extension of the transitional blended payment method 
provisions under Pub. L. 115-123 and our policies 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'' MS-
LTC-DRGs in FY 2019, we assigned a relative weight to these 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'' 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 were able to determine 
relative weights based on applicable LTCH cases in the March 2018 
update of the FY 2017 MedPAR file data using the steps described above. 
Furthermore, we believe that it would be administratively burdensome 
and introduce unnecessary complexity to the MS-LTC-DRG relative weight 
calculation to use the LTCH discharges in the MedPAR file data to 
calculate a relative weight for those 15 ``psychiatric and 
rehabilitation'' MS-LTC-DRGs to be used for the sole 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 established a relative weight (and 
average length of stay thresholds) equal to the respective FY 2015 
relative weight of the MS-LTC-DRGs for the 15 ``psychiatric or 
rehabilitation'' MS-LTC-DRGs listed previously (that is, MS-LTC-DRGs 
876, 880, 881, 882, 883, 884, 885, 886, 887, 894, 895, 896, 897, 945, 
and 946). Table 11, which is listed in section VI. of the Addendum to 
this final rule and is available via the internet on the CMS website, 
reflects this policy.
    Step 6--Adjust the 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 FY 2019 MS-LTC-DRG relative 
weights, consistent with our historical methodology, as we proposed, we 
continued 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 FY 2019 MS-LTC-DRG relative weights in this final rule 
by applying this methodology are denoted in Table 11, which is listed 
in section VI. of the Addendum to this final rule and is available via 
the internet on the CMS website.
    Step 7--Calculate the 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-

[[Page 41528]]

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, as we proposed, we updated the MS-LTC-DRG classifications 
and relative weights for FY 2019 based on the most recent available 
LTCH data for applicable LTCH cases, and continued to apply a budget 
neutrality adjustment in determining the FY 2019 MS-LTC-DRG relative 
weights.
    In this FY 2019 IPPS/LTCH PPS final rule, to ensure budget 
neutrality in the update to the MS-LTC-DRG classifications and relative 
weights under Sec.  412.517(b), as we proposed, we continued to use our 
established two-step budget neutrality methodology.
    To calculate the normalization factor for FY 2019, we grouped 
applicable LTCH cases using the FY 2019 Version 36 GROUPER, and the 
recalibrated 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 FY 2019. That ratio is 
the normalization factor. Because the calculation of the normalization 
factor involves the relative weights for the MS-LTC-DRGs that contained 
applicable LTCH cases to calculate the average CMIs, any low-volume MS-
LTC-DRGs are included in the calculation (and the MS-LTC-DRGs with no 
applicable LTCH cases are not included in the calculation).
    To calculate the budget neutrality adjustment factor, we simulated 
estimated total FY 2019 LTCH PPS standard Federal payment rate payments 
for applicable LTCH cases using the FY 2019 normalized relative weights 
and GROUPER Version 36; simulated estimated total FY 2018 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 budget neutrality adjustment factor. The calculation of 
the budget neutrality factor involves the relative weights for the LTCH 
cases used in the payment simulation, which includes any cases grouped 
to low-volume MS-LTC-DRGs or to MS-LTC-DRGs with no applicable LTCH 
cases, and generally does not include payments for cases grouped to a 
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 relative weight calculation in step (2) that 
are grouped to a MS-LTC-DRG with no applicable LTCH cases are included 
in the payment simulations used to calculate the budget neutrality 
factor. However, the number and payment amount of such cases have a 
negligible impact on the budget neutrality factor calculation).
    In this final rule, to ensure budget neutrality in the update to 
the MS-LTC-DRG classifications and relative weights under Sec.  
412.517(b), as we proposed, we continued to use our established two-
step budget neutrality methodology. Therefore, in this final rule, in 
the first step of our MS-LTC-DRG budget neutrality methodology, for FY 
2019, as we proposed, we calculated and applied a normalization factor 
to the recalibrated 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 changes to 
the classification system. That is, the normalization adjustment is 
intended to ensure that the recalibration of the MS-LTC-DRG relative 
weights (that is, the process itself) neither increases nor decreases 
the average case-mix index.
    To calculate the normalization factor for FY 2019 (the first step 
of our 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 FY 2019 GROUPER (that is, 
Version 36 for FY 2019) and the recalibrated 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 MS-LTC-DRG relative weights for 
FY 2019, each recalibrated MS-LTC-DRG relative weight was multiplied by 
the normalization factor of 1.275254 (determined in Step 1.c.) in the 
first step of the budget neutrality methodology, which produced 
``normalized relative weights.''
    In the second step of our MS-LTC-DRG budget neutrality methodology, 
we calculated a second budget neutrality factor consisting of the ratio 
of estimated aggregate FY 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 final rule, for FY 2019, under the second step of 
the budget neutrality methodology, as we proposed, we determined the 
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 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 FY 2019 MS-LTC-DRG relative weights, 
each normalized relative weight was then multiplied by a budget 
neutrality factor of 0.9931052 (the value determined in Step 2.c.) in

[[Page 41529]]

the second step of the budget neutrality methodology to achieve the 
budget neutrality requirement at Sec.  412.517(b).
    Accordingly, in determining the FY 2019 MS-LTC-DRG relative weights 
in this final rule, consistent with our existing methodology, as we 
proposed, we applied a normalization factor of 1.275254 and a budget 
neutrality factor of 0.9931052. Table 11, which is listed in section 
VI. of the Addendum to this final rule and is available via the 
internet on the CMS website, lists the MS-LTC-DRGs and their respective 
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. Modifications to the Application of the Site Neutral Payment Rate 
(Sec.  412.522)

    Section 1206 of Pathway for SGR Reform Act (Pub. L. 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), 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 (Pub. L. 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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 
FR 20464 through 20465), we proposed 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, in the FY 2019 IPPS/LTCH PPS proposed rule, we proposed 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 proposed 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.
    Comment: Several commenters supported CMS' proposed codification of 
section 51005 of Public Law 115-123. However, several commenters stated 
that the 4.6 percent reduction to the site neutral payment rate 
mandated under section 51005(b) of Public Law 115-123 should begin with 
discharges occurring based on the beginning date of a hospital's cost 
reporting period rather than the Federal fiscal year. Specifically, 
these commenters believed that because the transitional blended payment 
was initially based on discharges occurring during a hospital's cost 
reporting period, the 4.6 percent payment reduction specified under 
added section 1886(m)(6)(B)(iv) of the Act should also be applied on 
this basis. Some commenters stated that applying the 4.6 percent 
payment reduction based on the Federal fiscal year is inconsistent with 
CMS' previous implementation of other statutes. Other commenters stated 
that applying the 4.6 percent payment reduction on a Federal fiscal 
year basis is inconsistent with the surrounding provisions of Public 
Law 115-123. Some commenters expressed concern regarding the brevity of 
CMS' proposal and the use of subregulatory guidance in implementing the 
statute, and urged CMS to examine the ``legislative intent'' behind the 
provision of section 51005(b) of Public Law 115-123. Other commenters 
requested that CMS delay implementation of the application of the 4.6 
percent payment reduction specified under section 1886(m)(6)(B)(iv) of 
the Act, as added by section 51005(b) of Public Law 115-123, until FY 
2020.
    Response: We appreciate commenters' support for our proposals to 
implement and codify the provisions of section 51005 of Public Law 115-
123, which added section 1886(m)(6)(B)(iv) of the Act. With regard to 
those commenters who questioned our application of the provision of 
section 51005(b), we believe that the statutory language of section 
51005(b) is clear: The 4.6 percent payment reduction is to occur for 
discharges in each of Federal fiscal years 2018 through 2026 without 
reference to cost reporting periods. The transitional blended payment 
provision under section 51005(a), on the other hand, specifically 
states that the payments are to be made based on discharges in the 
individual hospital's cost reporting period beginning in a particular 
fiscal year. Given the clear statutory direction and the explicit 
difference between the language used in the different provisions of the 
statute, we do not believe that we have the authority to implement the 
reduction in payments specified under section 1886(m)(6)(B)(iv) of the 
Act, as added by

[[Page 41530]]

section 51005(b) of Public Law 115-123, other than on a Federal fiscal 
year basis.
    With regard to the commenters' concern regarding the brevity of our 
proposal, we believe that the provisions of section 51005 of Public Law 
115-123 are clear and self-implementing, and merely require updating 
the regulations to be consistent with the statutory directive. 
Therefore, because of the clear, unambiguous statutory directive in the 
statute, we used subregulatory guidance to implement the provision of 
section 51005(b) of Public Law 115-123. The statutory language of 
section 51005 (b) states that the amendments to Act applies for each of 
Federal fiscal years 2018 through 2026, and does not contain any 
reference to cost reporting periods. We believe that the ``legislative 
intent'' is defined by use of the language in the statute, which is 
clear and unambiguous.
    With respect to the commenters' request that we delay 
implementation of the application of the 4.6 percent payment reduction 
until FY 2020, we note that the statute specifically directs us to 
apply the payment reduction beginning in FY 2018. Therefore, we believe 
that we lack the authority to delay beginning the application of the 
4.6 percent payment reduction after FY 2018, again due to the explicit, 
unambiguous statutory direction.
    We agree with the commenters that the application of the 4.6 
percent payment reduction on a Federal fiscal year basis is not based 
on the same language as surrounding areas of the statute. However, we 
believe that this fact supports our interpretation and implementation 
manner. That is, the plain language of surrounding statutory provisions 
explicitly bases payment provisions on a hospital's cost reporting 
period, while the plain language of section 51005(b) of Public Law 115-
123 expressly fails to do so with regard to the 4.6 percent payment 
reduction. Given this obvious difference, we believe that it is clear 
the 4.6 percent payment reduction specified under section 
1886(m)(6)(B)(iv) of the Act, as added by section 51005(b) of Public 
Law 115-123, is to be applied on a Federal fiscal year basis.
    In response to the commenters' opinion that CMS' application of the 
4.6 percent payment reduction on a Federal fiscal year basis is 
inconsistent with the way in which CMS has interpreted and implemented 
certain other statutes, we believe that these perceived inconsistencies 
are sufficiently distinguishable due to the statutory language of the 
provisions of section 51005 of Public Law 115-123 and section 
1886(m)(6)(B) of the Act. For example, some commenters cited CMS' 
implementation of the uncompensated care payments under section 
1886(r)(2) of the Act, which the commenters stated are made on the 
basis of a hospital's cost reporting period. In general, under our 
uncompensated care payment methodology, an eligible hospital's 
uncompensated care payment for a Federal fiscal year is determined 
annually in the IPPS/LTCH PPS rulemaking. For a hospital with a cost 
reporting period that coincides with the Federal fiscal year, its 
uncompensated care payment for that cost reporting period is its 
uncompensated care payment for that Federal fiscal year. (Interim 
uncompensated care payments, which are made on a per-claim basis during 
the Federal fiscal year, are reconciled as needed as part of the 
standard cost report settlement process.) For a hospital with a cost 
reporting period that spans 2 Federal fiscal years, its uncompensated 
care payment for the cost reporting period is based on a pro rata ratio 
of the proportion of the cost reporting period that occurred in each 
applicable Federal fiscal year (78 FR 61193). While the reconciliation 
of interim uncompensated care payments may operationally occur based on 
a hospital's cost reporting period, the hospital's final uncompensated 
care payment is, nevertheless, a payment amount determined for each 
Federal fiscal year (not each cost reporting period), and, as 
applicable, paid proportionally when a hospital's cost reporting period 
spans the Federal fiscal year. Another purported example of 
inconsistent interpretation and manner of implementation cited by 
commenters is CMS' implementation of various moratoria on the 
establishment of LTCHs. However, we are not persuaded by this 
comparison because those statutory provisions required interpretation 
to implement. The provision of section 51005(b) of Public Law 115-123 
is distinguishable in this respect. There is no impediment to 
implementing the 4.6 percent payment reduction exactly as written and, 
given the explicit statutory direction, we do not believe that we have 
any authority to superimpose regulatory interpretation to clear 
statutory direction.
    After consideration of the public comments we received, we are 
finalizing, as proposed, the codification of the provision of section 
51005(b) of Public Law 115-123 in regulations. Specifically, we are: 
(1) Revising Sec.  412.522(c)(3) to extend the transitional blended 
payment for site neutral payment rate cases to include discharges 
occurring in cost reporting periods beginning on or before September 
30, 2019; (2) under Sec.  412.522(c)(1), providing for the application 
of a 4.6 percent payment reduction to the IPPS comparable amount for 
discharges occurring in FYs 2018 through 2026; and making 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.
    We note that we received several public comments that addressed 
issues related to site neutral payment rate payments that were outside 
the scope of the provisions of the proposed rule. Therefore, we are not 
responding to those comments in this final rule. We will take these 
public comments into consideration, as feasible, in future rulemaking.

D. Changes to the LTCH PPS Payment Rates and Other 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 used 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

[[Page 41531]]

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 final rule, we present our policies 
related to the annual update to the LTCH PPS standard Federal payment 
rate for FY 2019.
    The update to the LTCH PPS standard Federal payment rate for FY 
2019 is presented in section V.A. of the Addendum to this final rule. 
The components of the 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 final rule). In addition, as 
we proposed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20592), 
we made an adjustment to the LTCH PPS standard Federal payment rate to 
account for the estimated effect of the changes to the area wage level 
adjustment for FY 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 final rule).
2. 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 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. 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 57085 through 57099).) 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 final 
rule, as we proposed, we used 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. 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

[[Page 41532]]

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 final rule.)
d. Annual Market Basket Update Under the LTCH PPS for FY 2019
    Consistent with our historical practice, 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 second quarter 2018 
forecast, the FY 2019 full market basket estimate for the LTCH PPS 
using the 2013-based LTCH market basket is 2.9 percent. The current 
estimate of the MFP adjustment for FY 2019 based on IGI's second 
quarter 2018 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, 
as we proposed, we are reducing the full estimated FY 2019 market 
basket increase by the FY 2019 MFP adjustment. To determine the market 
basket increase for LTCHs for FY 2019, as reduced by the MFP 
adjustment, consistent with our established methodology, we subtracted 
the 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 productivity adjustment, as we 
proposed, we are further reducing the adjusted market basket update 
(that is, the full FY 2019 market basket increase less the MFP 
adjustment) by the ``other adjustment'' specified by sections 
1886(m)(3)(A)(ii) and 1886(m)(4) of the Act. (For additional details on 
our established methodology for adjusting the market basket increase by 
the MFP 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. Therefore, 
the 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 final rule, in accordance with the 
statute, as we proposed, we reduced the FY 2019 full market basket 
estimate of 2.9 percent (based on IGI's second quarter 2018 forecast of 
the 2013-based LTCH market basket) by the FY 2019 MFP adjustment of 0.8 
percentage point (based on IGI's second quarter 2018 forecast). 
Following application of the MFP adjustment, as we proposed, we are 
reducing the adjusted market basket update of 2.1 percent (2.9 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 establishing an annual market basket update 
to the LTCH PPS standard Federal payment rate for FY 2019 of 1.35 
percent (that is, the most recent estimate of the LTCH PPS market 
basket increase of 2.9 percent, less the 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, consistent with our 
proposal, we are revising Sec.  412.523(c)(3) by adding a new paragraph 
(xv), which specifies 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 1.35 percent, and as further 
adjusted, as appropriate, as described in Sec.  412.523(d) (including 
the budget neutrality adjustment for the elimination of the 25-percent 
threshold policy under Sec.  412.523(d)(6) discussed in section VII.E. 
of the preamble of this final rule). For LTCHs that fail to submit 
quality reporting data under the LTCH QRP, under Sec.  
412.523(c)(3)(xv) in conjunction with Sec.  412.523(c)(4), as we 
proposed, we further reduced the annual update to the LTCH PPS standard 
Federal payment rate by 2.0 percentage points, in accordance with 
section 1886(m)(5) of the Act. Accordingly, we are establishing an 
annual update to the LTCH PPS standard Federal payment rate of -0.65 
percent (that is, 1.35 percent minus 2.0 percentage points) for FY 2019 
for LTCHs that fail to submit quality reporting data as required under 
the LTCH QRP. Consistent with our historical practice, as we proposed, 
we used a more recent estimate of the market basket and the MFP 
adjustment in this final rule to establish an annual update to the LTCH 
PPS standard Federal payment rate for FY 2019 under Sec.  
412.523(c)(3)(xv). (We note that, consistent with historical practice, 
we also are adjusting the 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 final rule).)

E. 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

[[Page 41533]]

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 
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, in the FY 2019 IPPS/LTCH 
PPS proposed rule (83 FR 20468), we stated that we believe it was 
appropriate at that time to propose the removal of this payment 
adjustment policy. We also stated that, 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 the proposed 
rule, we proposed to eliminate the 25-percent threshold policy under 
Sec.  412.538.
    In the proposed rule, we indicated 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, the elimination of the 25-percent 
threshold policy would result in an increase in aggregate LTCH PPS 
payments. As a result, we also stated in the proposed rule that we 
believe 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, in the proposed rule, we stated 
that, if we finalized 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 would make a one-
time, permanent adjustment to the 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 proposed to remove the provisions of Sec.  412.538, 
reserving 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

[[Page 41534]]

removal of the 25-percent threshold policy at existing Sec.  412.538 is 
budget neutral. (We note that, in proposed new 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 proposed to make conforming 
technical changes to remove paragraph (c)(2)(v) of Sec.  412.522 and 
paragraph (d)(6) of Sec.  412.525.
    Comment: Many commenters supported CMS' proposal to eliminate the 
25-percent threshold policy, but expressed concerns with the 
corresponding budget neutrality adjustment. Some of these commenters 
disagreed with CMS' proposal of applying a budget neutrality adjustment 
because they believed that such an adjustment is not needed. Commenters 
that generally opposed the application of a budget neutrality 
adjustment stated that: (1) CMS has not recovered payments for 
violations of the 25-percent threshold policy and, therefore, it would 
be incorrect to state that eliminating the 25-percent threshold policy 
would increase Medicare spending; (2) LTCHs would adjust to a fully 
implemented 25-percent threshold policy, thereby minimizing the penalty 
amount; (3) implementation of the site neutral payment rate has led to 
yearly decreases in LTCH payments from FY 2016 to FY 2019 due to a 
reduction in the overall volume of LTCH cases and this decrease in LTCH 
payments eliminates the need for any further budget neutrality 
adjustments; and (4) the statutory delay in FY 2017 (and prior years) 
and the regulatory delay in FY 2018 in the full implementation of the 
25-percent threshold policy were never paired with a budget neutrality 
adjustment and, therefore, an adjustment as a result of the elimination 
of the policy is unwarranted. Commenters also addressed the proposed 
budget neutrality adjustment calculation methodology (which we discuss 
in detail below).
    Response: We appreciate the commenters' support for our proposal to 
eliminate the 25-percent threshold policy. In response to the 
commenters who opposed the application of a budget neutrality 
adjustment, we disagree that a budget neutrality adjustment is not 
needed to maintain aggregate LTCH PPS payments at the same level that 
would have been if we were not eliminating this policy. As described 
earlier, if the 25-percent threshold policy were to go into full 
effect, it would reduce the LTCH PPS payments for certain discharges; 
therefore, an elimination of the 25-percent threshold policy would 
necessarily result in an increase in aggregate LTCH PPS payments. As we 
have stated, we believe aggregate LTCH PPS payments are sufficient and, 
therefore, the budget neutrality adjustment is necessary to ensure the 
elimination of the 25-percent threshold does not increase aggregate 
LTCH PPS payments. Specifically, a budget neutrality adjustment is 
necessary to ensure that the elimination of the 25-percent threshold 
policy does not increase aggregate LTCH PPS payments in FY 2019 and 
future years, and this is independent of aggregate payment levels in 
past years, including any adjustment (or lack of) to payments for 
violations of the 25-percent threshold policy. Moreover, we note that, 
while some LTCHs may indeed adjust to a fully implemented 25-percent 
threshold policy, thereby minimizing the penalty amount, this 
compliance with policy does not ensure budget neutrality. Similarly, 
any reduction in aggregate LTCH PPS payments as a result of the 
implementation of the site neutral payment rate, including any decrease 
in the annual number of LTCH cases, does not ensure that the 
elimination of the 25-percent threshold policy would not increase 
aggregate LTCH PPS payments in FY 2019 and future years.
    While the statutory and regulatory delays in prior years were not 
implemented in a budget neutrality manner, this does not preclude the 
application of such an adjustment at this time. We also note that, both 
the past statutory and regulatory delays were temporary, unlike our 
proposal to permanently eliminate the 25-percent threshold policy, 
which differentiates our proposal from past policy.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to remove and reserve 
the provisions of Sec.  412.538, add a new paragraph (d)(6) to Sec.  
412.523, and make further conforming changes to existing regulations.
    As described earlier, in the proposed rule, we proposed to make a 
one-time, permanent adjustment to the FY 2019 LTCH PPS standard Federal 
payment rate, which 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. We also proposed 
that this budget neutrality adjustment would only be applied to the 
LTCH PPS standard Federal payment rate (or such portion of a 
transitional blended payment) because payments made under the site 
neutral payment rate would have been 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, in the proposed rule, we stated that 
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 budget neutrality adjustment. To do so, we proposed to 
use the following methodology to determine the budget neutrality factor 
that would be applied to the 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, in the proposed rule, we stated that if more recent data 
became available, we would use such data for the final rule (83 FR 
20468 through 20469).
    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

[[Page 41535]]

LTCHs located in an MSA with an MSA-dominant hospital, we used IPPS 
claims data from the March 2017 update of the FY 2016 MedPAR files to 
determine, for each CBSA, the highest discharge percentage among all 
IPPS providers within that CBSA. (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, as discussed earlier, 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 FY 2019 LTCH PPS standard 
Federal payment rate to achieve budget neutrality (that is, the 
adjustment that would have to be applied to the 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 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 
adjustment factor would be applied to the FY 2019 LTCH PPS standard 
Federal payment rate after the application of the FY 2019 annual update 
and the FY 2019 area wage level adjustment budget neutrality factor.
    Comment: One commenter suggested that CMS consider alternate impact 
methodologies for the budget neutrality adjustment to limit or avoid 
impacting providers who have no need of relief from the 25-percent 
threshold policy. Other commenters, including some commenters who 
opposed the budget neutrality adjustment in concept, stated that the 
proposed methodology for calculating the budget neutrality adjustment 
overstates the cost of eliminating the 25-percent threshold policy by 
failing to include behavioral responses or year-to-year trends in 
violations, as well as the full implementation of the site neutral 
payment rate. In particular, some commenters suggested that the 
estimated cost of eliminating the 25-percent threshold policy needs to 
be reduced in FY 2020 and subsequent years to reflect the phase-out of 
the transitional blended payment rate payments to site neutral payment 
rate cases. Some commenters believed that, if there is a budget 
neutrality adjustment, it should not be permanent and should only apply 
in FY 2019 and have no impact in FY 2020 and subsequent years. Some 
commenters also requested that the most recent data available be used 
to determine the budget neutrality adjustment, and some commenters 
specifically requested that FY 2017 data be used instead of FY 2016 
data that were used in the calculations determined using the proposed 
methodology.
    Response: We appreciate the commenters' input. While many 
commenters believed that our proposed methodology used to calculate the 
budget neutrality adjustment overstated the estimated cost of 
eliminating the 25-percent threshold policy due to a lack of accounting 
for certain behavioral assumptions, with one exception, commenters did 
not provide a methodology for quantifying such behavioral assumptions, 
and that suggestion does not account for other behavioral assumptions 
that could raise the estimated cost of the removal of the policy. The 
commenters' suggestion was to assume a 50-percent reduction in 
violations because this is the midpoint benchmark between assuming the 
behavioral adjustment would cause no change in behavior (a 0 percent 
reduction in violations) and the behavioral adjustment would lead to 
full compliance (a 100 percent reduction in violations), and these 
commenters did not provide any evidence for this assumption.
    However, while we agree with the commenters that there are 
behavioral assumptions that could lower the estimated cost of the 
elimination of the 25-percent threshold policy (such as those suggested 
by commenters), we believe that there are equally viable behavioral 
assumptions that could raise the estimated cost of eliminating the 25-
percent threshold policy that are also not accounted for in our 
proposed estimate. For example, once the 25-percent threshold policy is 
retired, there would be no incentive for a hospital to limit admissions 
from a single referring hospital, which could lead to behaviors

[[Page 41536]]

that would have been violations if the policy were to be fully 
implemented and, therefore, increase the estimated cost of elimination 
of the policy. In addition, the continuation of the transition to the 
site neutral payment system could result in a higher percentage of 
cases being paid under the LTCH PPS standard Federal payment rate (as 
opposed to the site neutral payment rate), which also could increase 
the costs of the elimination of the policy. Because we do not have (and 
commenters did not suggest) any way to use existing data or information 
to reasonably account for any of these behavioral assumptions, we do 
not believe it is appropriate to introduce unnecessary uncertainty into 
our estimate. On the contrary, we believe that including adjustments 
with insufficient support would constitute arbitrary and capricious 
action, in violation of the requirements of the Administrative 
Procedure Act. We believe that the most recent available historical 
data are the best basis we have to estimate the effects and costs of 
elimination of the 25-percent threshold policy, and do not inherently 
bias the estimate towards overstating or understating the cost. 
Therefore, we believe the most recent available historical data are the 
most appropriate source to use to calculate the budget neutrality 
adjustment, and we are adopting commenters' suggestion to use the most 
recent data available to determine the budget neutrality adjustment, 
which are claims from the March 2018 update of the FY 2017 MedPAR 
files.
    We agree with commenters that our estimated cost of eliminating the 
25-percent threshold policy based on the transitional blended payment 
rate for FY 2019 does not take into account that site neutral payment 
rate cases will no longer be paid based on a transitional blended 
payment basis in FY 2020 and subsequent years, and, therefore, applying 
a single one-time permanent budget neutrality adjustment would overly 
reduce payments for FY 2020 and beyond. To address this, we are 
modifying our proposed methodology for calculating the budget 
neutrality adjustment as described below to address the rolling end of 
the transitional blended payment rate to site neutral payment rate 
cases.
    In this FY 2019 IPPS/LTCH PPS final rule, to account for the 
rolling end to the transitional blended payment rate, we are 
determining individual budget neutrality adjustments that correspond to 
the various stages of the phase-out of the transitional blended payment 
rate as follows:
     For FY 2019, the budget neutrality adjustment under Sec.  
412.523(d)(6) will be calculated using the estimated cost of 
eliminating the 25-percent threshold policy, whereby all site neutral 
payment rate discharges are paid the transitional blended payment rate. 
This temporary adjustment will only apply to the LTCH PPS standard 
Federal payment rate for FY 2019.
     For FY 2020, the budget neutrality adjustment will be 
calculated using the estimated cost of eliminating the 25-percent 
threshold policy, whereby all site neutral payment rate discharges that 
would occur in cost reporting periods beginning before October 1, 2019, 
are paid the transitional blended payment, and those site neutral 
discharges that would occur in cost reporting periods beginning on or 
after October 1, 2019, are paid the full site neutral payment rate. 
This temporary adjustment will only apply to the LTCH PPS standard 
Federal payment rate for FY 2020.
     For FY 2021 and beyond, the budget neutrality adjustment 
will be calculated using the estimated cost of eliminating the 25-
percent threshold policy, whereby all site neutral payment rate 
discharges are paid the full site neutral payment rate. As such, the 
budget neutrality adjustment will be calculated using only aggregated 
estimated LTCH PPS standard Federal rate payments because there will be 
no portion of site neutral payment rate payments based on the LTCH PPS 
standard Federal rate for discharges occurring in FY 2021 and 
subsequent years. This permanent adjustment will apply to the LTCH PPS 
standard Federal payment rate for FY 2021 and subsequent years 
(consistent with our proposal prior to this modification to address the 
rolling end to the transitional blended payment rate).
    As proposed, this budget neutrality adjustment will only be applied 
to the LTCH PPS standard Federal payment rate (or such portion of a 
transitional blended payment) because payments made under the site 
neutral payment rate are unaffected by the 25-percent threshold policy. 
We also are revising our proposed changes to Sec.  412.523(d)(6) to 
reflect the a one-time, temporary budget neutrality adjustment in FY 
2019 and FY 2020 and a one-time, permanent budget neutrality adjustment 
in FY 2021, as described above.
    In summary, for the reasons discussed earlier, we are not making 
any adjustments to our methodology for calculating the budget 
neutrality adjustment for potential behavioral responses. As discussed 
in more detail above, we agree with the commenters that there are 
potential behavior responses to the full implementation of the 25-
percent threshold policy, but we believe that none of these can be 
estimated with sufficient justification to be incorporated into an 
actuarial assumption in a nonarbitrary manner. We also agree with 
commenters that the most recent available historical data is the most 
appropriate source to use to calculate the budget neutrality adjustment 
and, as such, used claims from the March 2018 update of the FY 2017 
MedPAR files for our budget neutrality calculations in this final rule. 
Finally, in response to public comments we received, we are modifying 
our proposed budget neutrality adjustment methodology so that the 
rolling end of the transitional blended payment rate for site neutral 
payment rate cases is accounted for in our estimated cost of 
eliminating the 25-percent threshold policy.
    After consideration of the public comments we received, we are 
finalizing our proposed methodology, with the modification described 
above to account for the transitional blended payment rate payments to 
site neutral cases. Based on the updated LTCH claims data used for this 
final rule (the March 2018 update of the FY 2017 MedPAR files), we 
estimate that the costs of the elimination of the 25-percent threshold 
policy will increase aggregate LTCH PPS payments by approximately $35 
million (compared to $36 million as stated in the proposed rule) in FY 
2019; by approximately $33 million in FY 2020 (during the rolling end 
of the transitional blended payment rate for site neutral payment rate 
cases); and by approximately $28 million in FY 2021 and subsequent 
years. For this final rule, using the steps in the methodology 
described above, we have determined the following budget neutrality 
adjustment factors for the costs of the elimination of the 25-percent 
threshold policy:
     For FY 2019, a temporary, one-time factor of 0.990884;
     For FY 2020, a temporary, one-time factor of 0.990741; and
     For FY 2021 and subsequent years, a permanent, one-time 
factor of 0.991249.
    To determine the budget neutrality adjustment for FY 2020, the 
rolling end of the transitional blended payment rate for site neutral 
payment rate cases in FY 2020 requires us to estimate the LTCH PPS 
standard Federal payment rate payments to LTCH PPS standard Federal 
payment rate cases and the portion of the transitional blended payment 
rate payments to site neutral payment rate cases that are paid based on 
the LTCH PPS standard Federal

[[Page 41537]]

payment rate in FY 2019. To do so, we used the same general method used 
to estimate total FY 2018 LTCH PPS payments for site neutral payment 
rate cases for purposes of the impact analysis in the FY 2018 IPPS/LTCH 
PPS final rule (82 FR 38575 through 38576) because we continue to 
believe this approach is an appropriate approach to take into account 
the rolling end of the transitional payment method for site neutral 
payment rate cases.
    In summary, under this approach, we grouped LTCHs based on the 
quarter their cost reporting periods will begin during FY 2020. For 
example, the 35 LTCHs with cost reporting periods that begin between 
October and December 2020 begin during the first quarter of FY 2020. 
For LTCHs grouped in each quarter of FY 2020, we modeled those LTCHs' 
estimated site neutral payment rate payments under the transitional 
blended payment rate based on the quarter in which the LTCHs in each 
group would continue to be paid the transitional payment method for the 
site neutral payment rate cases.
    For purposes of this estimate, then we assume the cost reporting 
period is the same for all LTCHs in each of the quarterly groups, and 
that this cost reporting period begins on the first day of that 
quarter. (For example, our first group consists of 35 LTCHs, whose cost 
reporting periods will begin in the first quarter of FY 2020. 
Therefore, for purposes of this estimate, we assumed all 35 LTCHs will 
begin their FY 2020 cost reporting periods on October 1, 2019.) Next, 
we estimated the proportion of site neutral payment rate cases in each 
of the quarterly groups, and we then assume this proportion is 
applicable for all four quarters of FY 2020. (For example, we estimate 
the first quarter group will discharge 6.2 percent of all FY 2020 site 
neutral payment rate cases and, therefore, we estimate that group of 
LTCHs will discharge 6.2 percent of all FY 2020 site neutral payment 
rate cases in each quarter of FY 2020.) Then, we used our model of 
estimated payments to estimate quarterly-based payments under the LTCH 
PPS standard Federal payment rate based on the assumptions described 
above.
    Based on the fiscal year begin date information in the March 2018 
update of the PSF and the LTCH claims from the March 2018 update of the 
FY 2017 MedPAR files, we found the following: 6.2 percent of site 
neutral payment rate cases are from 35 LTCHs whose cost reporting 
periods will begin during the first quarter of FY 2020; 22.2 percent of 
site neutral payment rate cases are from 102 LTCHs whose cost reporting 
periods will begin in the second quarter of FY 2020; 9.2 percent of 
site neutral payment rate cases are from 56 LTCHs whose cost reporting 
periods will begin in the third quarter of FY 2020; and 62.4 percent of 
site neutral payment rate cases are from 217 LTCHs whose cost reporting 
periods will begin in the fourth quarter of FY 2020. Therefore, the 
following percentages apply in the approach described above:
     First Quarter FY 2020: 6.2 percent of site neutral payment 
rate cases (that is, the percentage of discharges from LTCHs whose FY 
2020 cost reporting periods will begin in the first quarter of FY 2020) 
are no longer eligible for the transitional payment method, while the 
remaining 93.8 percent of site neutral payment rate discharges are 
eligible to be paid under the transitional payment method.
     Second Quarter FY 2020: 28.4 percent of site neutral 
payment rate second quarter discharges (that is, the percentage of 
discharges from LTCHs whose FY 2020 cost reporting periods will begin 
in the first or second quarter of FY 2020) are no longer eligible for 
the transitional payment method, while the remaining 71.6 percent of 
site neutral payment rate second quarter discharges are eligible to be 
paid under the transitional payment method.
     Third Quarter FY 2020: 37.6 percent of site neutral 
payment rate third quarter discharges (that is, the percentage of 
discharges from LTCHs whose FY 2020 cost reporting periods will begin 
in the first, second, or third quarter of FY 2020) are no longer 
eligible for the transitional payment method, while the remaining 62.4 
percent of site neutral payment rate third quarter discharges are 
eligible to be paid under the transitional payment method.
     Fourth Quarter FY 2020: 100.0 percent of site neutral 
payment rate fourth quarter discharges (that is, the percentage of 
discharges from LTCHs whose FY 2020 cost reporting periods will begin 
in the first, second, third, or fourth quarter of FY 2020) are no 
longer eligible for the transitional payment method. Therefore, no site 
neutral payment rate case discharges are eligible to be paid under the 
transitional payment method.
    Using this approach under the modified methodology for calculating 
the budget neutrality adjustment described above to address the rolling 
end of the transitional blended payment rate to site neutral payment 
rate cases, as noted above, we calculated a temporary, one-time budget 
neutrality adjustment factor of 0.990741 that will be applied to the 
LTCH PPS standard Federal payment rate for FY 2020.
    For all LTCH discharges occurring in FY 2021 and beyond, all site 
neutral payment rate discharges will be paid the full site neutral 
payment rate. Therefore, as described above, the permanent budget 
neutrality adjustment that will be applied to the LTCH PPS standard 
Federal payment rate for FY 2021, and subsequent years was calculated 
using only aggregate estimated LTCH PPS standard Federal rate payments 
because there will be no portion of site neutral payment rate payments 
based on the LTCH PPS standard Federal rate for discharges occurring in 
FY 2021 and subsequent years. Using the modified methodology for 
calculating the budget neutrality adjustment described above to address 
the rolling end of the transitional blended payment rate to site 
neutral payment rate cases, as noted above, we calculated a temporary, 
permanent budget neutrality adjustment factor of 0.991249 that will be 
applied to the LTCH PPS standard Federal payment rate for FY 2021 and 
subsequent years.
    As noted above, using the modified methodology for calculating the 
budget neutrality adjustment we are adopting in this final rule, we 
calculated a temporary, one-time budget neutrality adjustment factor of 
0.990884 for FY 2019. Accordingly, in section V. of the Addendum to 
this final rule, to determine the FY 2019 LTCH PPS standard Federal 
payment rate, as we proposed, we applied the temporary one-time budget 
neutrality adjustment factor of 0.990884 for the costs of the 
elimination of the 25-percent threshold policy. The FY 2019 LTCH PPS 
standard Federal payment rate shown in Table 1E reflects this 
adjustment.

VIII. Quality Data Reporting Requirements for Specific Providers and 
Suppliers

    In section VIII. of the preamble of the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20470 through 20515; 83 FR 20683 through 28604), 
we proposed changes to the following Medicare quality reporting 
systems:
     In section VIII.A., the Hospital IQR Program;
     In section VIII.B., the PCHQR Program; and
     In section VIII.C., the LTCH QRP.
    In addition, in section VIII.D. of the preamble of the proposed 
rule (83 FR 20515 through 20544), we proposed changes to the Medicare 
and Medicaid Promoting Interoperability Programs (previously known as 
the Medicare and Medicaid EHR Incentive Programs) for

[[Page 41538]]

eligible hospitals and critical access hospitals (CAHs).
    We refer readers to section I.A.2. of the preamble of this final 
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 previously 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 final rule in which 
we discuss the transition to Clinical Quality Language (CQL) beginning 
with the Annual Update that was published in May 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20470), we did 
not propose any changes to our policies on the measure maintenance 
process.
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 FR 50776 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 on Hospital Compare, we refer readers to the 
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

[[Page 41539]]

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 the FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20470 through 20471), we did not propose 
any changes to these policies.
    We note that in section VIII.A.10. of the preamble of this final 
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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20470 through 
20500), we proposed 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 final rule. The proposals reflected 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 stated that we took 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 
final 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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20471), we 
did not propose 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 the proposed rule, we did not propose any changes to these 
policies. We also refer readers to section I.A.2. of the preamble of 
this final rule, in which we describe the Meaningful Measures quality 
topics that we have identified as high impact measurement areas that 
are relevant and meaningful to both patients and providers.

[[Page 41540]]

    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).\268\ The previously adopted removal factors are:
---------------------------------------------------------------------------

    \268\ 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 that 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20472), we did 
not propose to modify any existing removal factors.
b. New Measure Removal Factor
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20472), we 
proposed 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 final 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 proposed 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 refer readers to section VIII.A.5.b. of the preamble of this 
final rule, where we discuss our proposals to remove a number of 
measures based on this proposed removal factor.
    Comment: The majority of commenters expressed support for the 
adoption of the new measure removal Factor 8, ``the costs associated 
with a measure outweigh the benefit of its continued use in the 
program.'' Many of these commenters supported the adoption of removal 
Factor 8 because they believe this factor will support efforts to 
ensure that the Hospital IQR Program measure set continues to promote 
improved health outcomes for our beneficiaries while reducing 
administrative and other program-related costs. Some commenters also 
expressed support for removal Factor 8 because it aligns with CMS' goal 
of

[[Page 41541]]

moving 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. Other commenters expressed support for removal Factor 8 
because it simplifies how providers are reporting and accessing data. 
Several commenters stated that the new measure removal factor is a long 
overdue addition to the program.
    A number of commenters supported the adoption of removal Factor 8 
because it would allow for the removal of inappropriately burdensome 
measures, and noted that costs are an important factor to consider when 
evaluating measures for removal from the Hospital IQR Program measure 
set. Other commenters appreciated that CMS has identified costs beyond 
those associated with data collection and submission as part of its 
evaluation of measures under this new removal factor.
    Numerous commenters supported the adoption of removal Factor 8 
because it would allow for the removal of measures with limited 
utility, such as measures that do not support program objectives of 
informing beneficiary decision-making and improving hospital quality of 
care, as well as for the removal of duplicative measures contained in 
multiple quality programs.
    Response: We thank these commenters for their support.
    Comment: Many commenters who supported the adoption of removal 
Factor 8 also encouraged CMS to provide additional information and 
transparency in this final rule on how it intends to evaluate the costs 
and benefits associated with a measure proposed for removal, including 
the criteria used in assessing costs, the nature of the burden that the 
removal of a measure relieves, and the methods used to assess whether 
the costs associated with a measure outweigh the benefits of its 
continued use in the program. Some of those commenters stated that 
costs and benefits can be difficult to define and that various 
stakeholders may have different perspectives on the costs and benefits 
of measures.
    Response: We agree with commenters that various stakeholders may 
have different perspectives on how to define costs as well as benefits. 
Because of these challenges, we intend to evaluate each measure on a 
case-by-case basis, while considering input from a variety of 
stakeholders, including, but not limited to: Patients, caregivers, 
patient and family advocates, providers, provider associations, 
healthcare researchers, healthcare payers, data vendors, and other 
stakeholders with insight into the direct and indirect benefits and 
costs, financial and otherwise, of maintaining the specific measure in 
the Hospital IQR Program. We note that we intend to assess the costs 
and benefits to all program stakeholders, including but not limited to, 
those listed above and provide a robust discussion of these costs and 
benefits in the proposed rules. We further note that our assessment of 
costs and benefits is not limited to a strictly quantitative analysis.
    Comment: A few commenters requested clarification on whose benefit 
is being considered when evaluating whether ``the costs associated with 
the measure outweigh the benefit of its continued use in the program.''
    Response: We intend to balance the costs with the benefits to a 
variety of stakeholders. These stakeholders include, but are not 
limited to, patients and their families or caregivers, providers, the 
healthcare research community, healthcare payers, and patient and 
family advocates. We also believe that while a measure's use in the 
Hospital IQR Program may benefit many entities, a key benefit is to 
patients and their caregivers through incentivizing the provision of 
high quality care and through providing publicly reported data 
regarding the quality of care available. For each measure, the relative 
benefit to each stakeholder may vary; thus, we believe that the 
benefits to be evaluated for each measure are specific to the measure 
itself and the original rationale for including the measure in the 
program.
    Comment: A few commenters urged CMS to develop a standardized 
evaluation and scoring system with significant multi-stakeholder input, 
to ensure that Factor 8 appropriately balances the needs of all 
healthcare stakeholders. One commenter further recommended that CMS 
convene a set of working groups in order to consider input from the 
provider community.
    Response: While we do not currently plan to develop a standardized 
evaluation and scoring system for use of Factor 8, we value 
transparency in our processes, and continually seek input from multiple 
stakeholders through outreach and education efforts, such as through 
webinars, national provider calls, stakeholder listening sessions, as 
well as through rulemaking and other collaborative engagements with 
stakeholders. We will continue to do so in the future when proposing 
measures for adoption or removal from the Hospital IQR Program. 
Further, preliminary input from stakeholders on data collection and 
reporting burden was instrumental in deriving the newly proposed 
removal factor. As discussed above, the removal of measures under 
Factor 8 will function as a balancing test between the cost of ongoing 
maintenance, reporting/collection, and public reporting against the 
benefits associated with reporting that data. We intend to consider the 
costs and benefits to all program stakeholders. Furthermore, we intend 
to take multiple sources of evidence into account when proposing to 
remove measures under any of the removal factors and always welcome 
stakeholder input.
    Comment: Many commenters recommended that CMS consider additional 
types of costs and benefits under Factor 8, including:
     Insights from stakeholders, including patients and 
providers, on costs and benefits, as well as potential unintended 
consequences of removal (such as a decline in performance, particularly 
if the measure would not be captured in any of the other IPPS 
programs);
     Benefits of consistent measure sets;
     Multiple methods of data collection and reporting;
     Costs associated with designing, developing, and 
implementing a measure;
     Costs associated with updating clinical processes and 
workflows to adapt to an updated measure set;
     Providers' costs to contract with vendors for data 
collection or reporting;
     Development and implementation of processes to perform 
well on the measure; and
     Whether measure implementation adds or duplicates tasks 
within provider processes.
    Response: We note that in our proposal to adopt this measure 
removal factor (83 FR 20472), we stated that we will evaluate costs and 
benefits on a case-by-case basis and identified several types of costs 
to provide examples of costs which we would consider in our evaluation. 
We noted that these costs include, but are 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 maintenance and

[[Page 41542]]

public display; and/or (5) the provider and clinician cost associated 
with compliance with other federal and/or State regulations (if 
applicable). This was not intended to be a complete list of the 
potential types of costs to consider in evaluating measures.
    We also understand that while a measure's use in the Hospital IQR 
Program may benefit many entities, the primary benefit is to patients 
and caregivers through incentivizing the provision of high quality care 
and through providing publicly reported data regarding the quality of 
care available. One key aspect of patient benefits is assessing the 
improved beneficiary health outcomes if a measure is retained in our 
measure set. We believe that these benefits are multifaceted, and are 
illustrated through the domains of the Meaningful Measures Initiative. 
When the costs associated with a measure outweigh the evidence 
supporting the benefits to patients with the continued use of a measure 
in the Hospital IQR Program we believe it may be appropriate to remove 
the measure from the program.
    We appreciate commenters' suggestions for other types of costs and 
benefits to consider when evaluating the costs and benefits of each 
measure on a case-by-case basis under measure removal Factor 8, and 
will take these into consideration for future years.
    Comment: One commenter believed that cost assessments should not 
only consider the reporting method (for example, eCQMs, claims-based) 
but also whether a more efficient alternative is available to collect 
the performance data.
    Response: We agree with the commenter that it is useful to consider 
whether a more efficient alternative is available to collect 
performance data and believe it would be appropriate to consider this 
in our evaluation of measures under measure removal Factor 8. We will 
also consider the value of longer term efficiencies when evaluating 
costs, such as the costs associated with creating and sustaining EHR-
based measures like eCQMs.
    Comment: A few commenters encouraged CMS to not remove measures 
simply because a previously finalized measure was too difficult to 
implement, thereby creating a gap in the measure set, but rather to 
attempt to identify ways to gather the appropriate data by different 
means.
    Response: We note that it is not our intent to remove measures 
solely based on ease of implementation. Further, implementation 
concerns are something we take into account when proposing to adopt a 
measure. As discussed above, the removal of measures under the newly 
proposed Factor 8 will serve to balance the costs of ongoing 
maintenance, reporting/collection, and public reporting with the 
benefit associated with reporting that data, including the benefits to 
patients and their caregivers through incentivizing the provision of 
high quality care by providing publicly reported data regarding the 
quality of care available. We continually seek ways to improve the 
Hospital IQR Program measure set, including through identification of 
more efficient means of capturing data.
    Comment: A few commenters recommended that any measures removed 
under Factor 8 be replaced by comparable or better measures in the same 
domain, such as measures that are more outcomes-oriented or easier to 
implement.
    Response: Retaining a strong measure set that addresses critical 
quality issues is one benefit that we would consider in evaluating 
whether a measure should be potentially removed from the Hospital IQR 
Program measure set.
    Comment: One commenter observed that many hospitals do not review 
feedback reports because these hospitals track quality improvement 
using internal systems, and therefore this cost should not be 
considered in a cost analysis of measures.
    Response: We recognize that not all providers review the feedback 
reports provided through our quality reporting programs. However, a 
majority of providers do view and download these reports (for example, 
in May 2018, over 83 percent of hospitals downloaded their Hospital IQR 
Program hospital-specific reports for claims-based outcome measures, as 
tracked by our QualityNet system) in addition to their internally 
generated feedback reports. Therefore, we continue to believe that it 
is important to consider this as one cost of continued use of the 
measure in the Hospital IQR Program. We note that the cost of reviewing 
feedback reports is only one example of the costs that may be 
associated with a measure. We will continue to consider this cost among 
the other costs of a measure's continuing use in the Hospital IQR 
Program.
    Comment: One commenter requested that CMS perform an impact 
analysis before finalizing the addition of removal Factor 8, 
particularly to take into consideration the impact of measure removals 
on safety-net providers, and for CMS to consider a stop-loss policy if 
the financial impact of these changes results in a larger than a 10 
percent reduction in performance payments each year. Another commenter 
recommended that CMS publish annual assessments to determine how 
quality measures from CMS have impacted patient care and clinical 
outcomes.
    Response: We intend to evaluate the costs and benefits of 
potentially removing any measure from the Hospital IQR Program under 
removal Factor 8 on a case-by-case basis. In our evaluation of costs 
and benefits, we intend to evaluate the effects on providers, including 
safety-net providers, of retaining or removing the measure from the 
Hospital IQR Program, as well as the effects on patients and their 
caregivers with regards to access to publicly reported data regarding 
the quality of care available. We do not believe that an impact 
analysis on whether or not to adopt the measure removal factor itself 
is necessary because of our intent to apply it through a case-by-case 
evaluation that will take into account various considerations of costs 
and benefits to multiple stakeholders as described above, as well as 
the circumstances and facts unique to a given measure.
    Comment: A commenter expressed support for the simplification 
resulting from removing duplicative measures used in multiple quality 
programs, but noted that such removals would not result in provider 
cost reduction because hospitals would still be required to monitor 
those measures retained in another quality program.
    Response: We recognize that hospitals would still be required to 
monitor measures removed from one program, but retained in another 
quality program. However, we believe that simplification benefits will 
be gained by hospitals that have been reviewing their multiple reports 
and will no longer be required to identify discrepancies in reporting 
and identify whether those discrepancies are due to differing measure 
specifications or due to a CMS measure calculation error. Furthermore, 
we believe this simplification will benefit patients and caregivers who 
view measure results information on the Hospital Compare website 
because they will be less likely to be confused if they see slightly 
different measure results for the same measures for the same hospital 
but through multiple programs.
    Comment: Many commenters did not support the adoption of removal 
Factor 8. Several commenters did not support the adoption of removal 
Factor 8 due to the perceived lack of transparency on the methods or 
criteria that would be used to assess the costs and benefits associated 
with a measure. A number of commenters asserted that the assessment of 
value should also include a clear prioritization of the needs of 
patients.

[[Page 41543]]

    Response: We wish to clarify that it is not our intent to remove 
measures that continue to benefit patients or providers solely because 
these measures incur administrative costs to CMS or to others. We will 
be transparent in our assessment of measures under this measure removal 
factor. As described above, there are various considerations of costs 
and benefits, direct and indirect, financial and otherwise, that we 
will evaluate in applying removal Factor 8, and we will take into 
consideration the perspectives of multiple stakeholders. However, 
because we intend to evaluate each measure on a case-by-case basis, and 
each measure has been adopted to fill different needs of the Hospital 
IQR Program, we do not believe it would be meaningful to identify a 
specific set of assessment criteria to apply to all measures.
    In addition, we note that the benefits we will consider center 
around benefits to patients and caregivers as the primary beneficiaries 
of our quality reporting and value-based payment programs. When we 
propose a measure for removal under this measure removal factor, we 
will provide information on the costs and benefits we considered in 
evaluating the measure. We continue to monitor and evaluate our 
programs to identify their benefit with respect to quality of care and 
patient safety as well as their costs with respect to provider burden, 
potentially contradictory public information for beneficiaries to 
analyze in their decision making, and measure maintenance. When our 
analyses indicate that a measure's costs outweigh the benefit of 
continuing to use the measure in the program, we will propose to remove 
that measure through notice and comment rulemaking.
    Comment: A few commenters believed that the existing seven factors 
are sufficient for determining whether it is appropriate to remove a 
measure.
    Response: While we acknowledge that there are seven factors 
currently adopted that may be used for considering measure removal from 
the Hospital IQR Program, we believe the proposed new measure removal 
factor adds a new criterion that is not captured in the other seven 
factors. The proposed new measure removal factor will help advance the 
goals of the Meaningful Measures Initiative, which aims to improve 
outcomes for patients, their families, and health care providers while 
reducing burden and costs for clinicians and providers.
    Comment: A number of commenters expressed the concern that the 
benefits associated with a measure proposed for removal would be 
determined based solely on the cost reductions associated with reduced 
administrative burden for hospitals. Several commenters also expressed 
concern that Factor 8 could result in the removal of measures based 
solely on cost reductions to providers and/or CMS, and thus not 
consider or prioritize patient perspectives. One commenter urged CMS to 
prioritize the needs of patients and consumers when assessing the 
benefits of a measure under Factor 8, by taking into consideration the 
public's right to quality and cost transparency, as well as consumers' 
reliance on publicly available information to make important healthcare 
decisions. Another commenter expressed the concern that costs are 
typically imposed on providers while benefits are rendered to 
beneficiaries, and therefore does not believe that costs and benefits 
can be compared.
    Response: As described above, there are various considerations of 
costs and benefits, direct and indirect, financial and otherwise, that 
we will evaluate in applying removal Factor 8, and we will take into 
consideration the perspectives of multiple stakeholders. We intend to 
apply measure removal Factor 8 on a case-by-case basis because the 
costs and benefits associated with each measure are unique to that 
measure. We agree with the commenter that while a measure may 
contribute costs to many entities, providers do bear the primary cost 
of participation in Hospital IQR Program. However, we will assess the 
costs to all stakeholders, including but not limited to, patients, 
caregivers, providers, CMS, and other entities, in determining whether 
to propose removal of a measure under Factor 8. We also agree that 
while a measure's use in the Hospital IQR Program may benefit many 
entities, the primary benefit is to patients and their caregivers 
through incentivizing the provision of high quality care and through 
providing publicly reported data regarding the quality of care 
available. We also believe that the benefits of measures can include 
benefits for all stakeholders, including but not limited to, patients, 
caregivers, providers, CMS, advocacy organizations, healthcare 
researchers, healthcare purchasers, and others. We intend to identify 
the relevant stakeholders and assess both costs and benefits to these 
stakeholders in our assessment of each measure.
    Comment: Some commenters expressed concern that this measure 
removal factor could allow providers to recommend removal of measures 
they do not support based on the argument that these measures are 
costly.
    Response: We agree that it is possible that providers may recommend 
removal of measures they do not support based on the argument that 
these measures are costly. However, input from providers is only part 
of our case-by-case evaluation of measures. We also intend to consider 
input from other stakeholders, including patients, caregivers, advocacy 
organizations, healthcare researchers, healthcare purchasers, and other 
parties as appropriate to each measure. We will weigh input we receive 
from all stakeholders with our own analysis of each measure to make our 
case-by-case determination of whether it would be appropriate to remove 
a measure based on its costs outweighing the benefit of its continued 
use in the program.
    Comment: A few commenters expressed concern that the lack of 
references to patient considerations in the proposed rule appeared to 
suggest that this measure removal factor does not take into account the 
value of a measure to beneficiaries, and noted that the Factor 8 does 
not appear to include the following benefits associated with patient 
perspectives:
     Saving lives;
     Ensuring high quality care;
     Ensuring patient safety; and
     Facilitating consumer access to information.
    Response: We intend to consider all benefits of measure, similar to 
our intent to consider all costs, when assessing whether the costs 
outweigh the benefits of the measure's continued use in the Hospital 
IQR Program. The likelihood of a measure to significantly improve 
patient well-being is a non-quantifiable benefit that would be weighed 
against potential costs to ensure that measures that save lives and 
ensure patient safety are retained when appropriate. We agree with the 
commenters that these benefits are all potential benefits associated 
with a measure's continued use in the Hospital IQR Program and will 
continue to consider these and other benefits in our evaluations.
    Comment: A few commenters urged CMS to retain measures that, while 
costly or burdensome, hold value to beneficiaries, because in these 
cases the benefits would justify the cost. A few commenters noted 
certain measures of value to beneficiaries, such as measures that 
continuously monitor the aspects of care quality that are deemed 
essential to high-quality patient care or have serious consequences if 
done poorly. Some of these commenters further recommended that measures 
of such value to beneficiaries should never be removed from quality 
programs, even if they are topped-out.

[[Page 41544]]

    Response: We appreciate the commenters' feedback. We intend to 
consider all benefits of a measure, including the ability of a measure 
to promote patient safety and experience, when assessing whether the 
costs outweigh the benefits of the measure's continued use in the 
Hospital IQR Program.
    Comment: One commenter questioned how measures that were not too 
costly to implement could now be too costly to maintain in the program. 
Another commenter asserted the value of measures is self-evident in 
their initial adoption, and that the removal of any measure would 
thereby decrease the ability of that measure to improve patient care 
and reduce Medicare costs, and concluded that the removal of a measure, 
by definition, would decrease the effectiveness of the program itself.
    Response: There are several ways that a measure for which the 
benefit once outweighed costs may now have the costs outweigh its 
benefit. As one example, measures that incentivize providers to update 
clinical workflows or adopt specific infrastructure may become less 
beneficial over time as an increasing number of providers adopt the 
appropriate processes into their workflows and performance approaches 
or reaches topped-out status. Under this example, the measure was 
highly beneficial upon adoption but may become less beneficial as it 
incentivizes a smaller number of providers. Therefore, such measures 
may still cost the same, but because of their now reduced benefit these 
costs may now outweigh the benefit of continuing to maintain and 
require reporting on these measures.
    We also disagree with the assertion that removing measures from the 
program inherently decreases the effectiveness of the program itself. 
We believe one of the Hospital IQR Program's primary benefits to 
patients and the public is its ability to collect and publicly report 
data for patients to use in making decisions about their care. We 
further believe maintaining an unnecessarily large or complicated 
measure set including measures that are not meaningful to patients 
hampers the program's effectiveness at presenting valuable data in a 
useful or usable manner. For this reason, we believe it is in the 
interest of patients for the Hospital IQR Program to ensure an 
individual measure continues to benefit patients. Furthermore, we note 
that removal of such measures would free up CMS programmatic resources 
to focus on other priority measures or areas of the Hospital IQR 
Program.
    Comment: A few commenters expressed concern that this factor is not 
supported by scientific criteria.
    Response: We believe it is important to adequately weigh the 
potential benefits of a measure in determining whether the costs 
outweigh those benefits. However, we disagree that this can only be 
achieved by applying scientific criteria. We believe that an 
appropriate measure set for a specific program is achieved by applying 
a balanced set of factors and taking into consideration the potential 
impact to multiple stakeholders to ensure that each measure serves a 
purpose in the program, and this is one element of that set of factors.
    After consideration of the public comments we received, we are 
finalizing our proposal to adopt measure removal Factor 8, ``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 as proposed.
5. Removal of Hospital IQR Program Measures
    We refer readers to section VIII.A.4. of the preamble of this final 
rule for a discussion of our current and proposed measure removal 
criteria. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20472 
through 20485), we proposed to remove a total of 39 measures from the 
Hospital IQR Program across the FYs 2020, 2021, 2022, and 2023 payment 
determinations. In this final rule, we are finalizing removal of all 39 
of those measures with some modification as discussed below.
a. 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
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20473), we 
proposed 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).\269\ While we proposed 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 proposed 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.
---------------------------------------------------------------------------

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

    Comment: A majority of commenters supported CMS' proposal to remove 
the Hospital Survey on Patient Safety Culture measure from the Hospital 
IQR Program beginning with the CY 2018 reporting period/FY 2020 program 
year. One commenter specifically noted its opinion that collecting, 
analyzing, and reporting data on this measure is burdensome. A few 
commenters stated their belief the measure no longer has value. Another 
commenter supported removal of the Hospital Survey on Patient Safety 
Culture measure, but recommended CMS evaluate opportunities to adopt 
another measure that utilizes the data gathered under this

[[Page 41545]]

survey, as opposed to the current structural measure.
    Response: We thank the commenters for the support. While we 
continue to believe that patient safety culture is an important topic 
for hospitals, as a structural measure, this particular measure no 
longer meets the needs of the Hospital IQR Program. We appreciate the 
commenter's suggestion and we intend to evaluate opportunities to adopt 
another non-structural measure utilizing the data gathered under this 
survey.
    Comment: A number of commenters did not support CMS' proposal to 
remove the Hospital Survey on Patient Safety Culture measure from the 
Hospital IQR Program beginning with the CY 2018 reporting period/FY 
2020 program year. Several commenters expressed concern that removing 
this measure would encourage hospitals to stop assessing patient safety 
culture, whereas requiring the measure incentivizes hospitals to 
improve their patient safety culture, and asserted their belief that 
there is a strong correlation between safety culture assessment and 
improved clinical outcomes.
    Response: We acknowledge commenters' concerns that some hospitals 
might stop assessing patient safety culture; however, we believe most 
hospitals are committed to assessing and improving their patient safety 
culture and will continue to survey employees regarding patient safety 
culture. Our data indicate that 98 percent of hospitals use some 
version of a patient safety culture survey, such that no further 
incentive is required to encourage hospitals to implement patient 
safety culture surveys.
    Comment: Despite opposing the removal of the hospital survey on 
patient safety culture, one commenter acknowledged that these surveys 
have become a part of routine operational assessments and expressed 
their belief that most organizations will continue to conduct the 
survey regardless of whether it is required by the Hospital IQR 
Program. Another commenter asserted that requiring the measure allows 
for meaningful comparisons between hospitals. A third commenter 
expressed their belief that CMS should prioritize patient safety 
culture, and further stated that surveys are the most effective means 
of capturing hospital employees' feedback on the safety culture.
    Response: We agree with commenters that assessing patient safety 
culture has become a routine part of operational safety assessments, 
and further agree that surveys can be an effective way of capturing 
employee feedback on a hospital's patient safety culture. We therefore 
believe that hospitals will continue to survey their employees about 
patient safety culture after this measure is removed from the Hospital 
IQR Program.
    However, we disagree that the measure allows for meaningful 
comparisons between hospitals due to its design as a structural 
measure. The Hospital Survey on Patient Safety Culture measure does not 
collect data on either a hospital's survey results or those results' 
impact on patient safety outcomes. As a result, comparisons between 
hospitals on this measure only inform the public about whether or not 
hospitals use a patient safety culture survey. Because the data 
indicate 98 percent of hospitals are now administering patient safety 
culture surveys, we believe continuing to collect and publicly report 
this data does not capture information that will incentivize specific 
improvements for hospitals or provide valuable information for use by 
patients in making decisions about where to seek care. Therefore, we do 
not believe continuing to collect--or, conversely, ceasing to collect--
data under this measure will assess or affect the patient safety 
culture within hospitals.
    Comment: A number of commenters suggested refining the measure 
instead of removing it. One commenter highlighted that there are a 
variety of methods to survey and report data that allow hospitals to 
use a mechanism that minimizes burden while generating important 
information to manage patient safety culture. Another commenter 
recommended modifying the measure to reflect a more meaningful measure 
of actions taken to promote a strong patient safety culture, or 
modifying the measure to have hospitals report scores on a particular 
safety culture domain that is consistent across safety culture surveys. 
A third commenter suggested implementing this measure as an outcomes 
measure instead of a structural measure. Another commenter recommended 
that the survey be conducted bi-annually rather than annually because 
hospital safety culture can be slow to change.
    Response: We appreciate commenters' recommendations regarding 
potential refinements to this measure. We agree that patient safety 
cultures generally do not change overnight. While we are finalizing 
removal of this measure, we believe the data already collected could 
help inform consideration and/or development of a potential future 
patient safety culture measure that might assess patient safety culture 
in more detail, as commenters recommended. We will therefore take these 
recommendations into consideration for future measure development.
    After consideration of the public comments we received, we are 
finalizing removal of the Hospital Survey on Patient Safety Culture 
from the Hospital IQR Program measure set beginning with the CY 2018 
reporting period/FY 2020 payment determination as proposed.
b. Removal of Measures--Removal Factor 8, the Costs Associated With a 
Measure Outweigh the Benefit of Its Continued Use in the Program
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20473 through 
20484), we proposed 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). In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20473 through 
20474), we proposed 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 the 
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.

[[Page 41546]]

    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 
(COV) 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 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 proposed 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 Outpatient Quality Reporting (OQR) and 
Ambulatory Surgical Center Quality Reporting (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).
    Comment: Many commenters supported CMS' proposal to remove the Safe 
Surgery Checklist Use measure from the Hospital IQR Program beginning 
with the CY 2018 reporting period/FY 2020 payment determination. A few 
commenters specifically supported CMS' position that the cost of 
collecting and reporting data under the measure outweighs the benefit 
of retaining it in the Hospital IQR Program. Other commenters noted 
that the measure's nature as a structural measure hinders its ability 
to provide data on whether the communication among surgical team 
members was effective in translating anticipated critical events or 
improving patient outcomes.
    One commenter stated that while there is value in ensuring quality 
communication during critical phases of the surgical patient 
experience, the high level of compliance for this measure strongly 
suggests that the measure is deeply embedded in clinical workflows and 
processes, leaving little to be gained from continued reporting of the 
measure. The commenter agreed that use of a safe surgery checklist has 
been widely adopted by hospitals, but asserted that there is little 
evidence demonstrating that the measure provides educational 
opportunities for improving the ongoing competency of surgical teams 
regarding patient harm prevention. The commenter asserted that 
education aimed at reducing near-miss events has been proven to be 
effective and recommended that CMS revisit and refine the measure 
criteria to ensure that it requires education to be provided and to 
demonstrate improved communication ongoing surgical team competency.
    Response: We thank commenters for their support. We agree that the 
high level of compliance for this measure strongly suggests that safe 
surgery checklist use is deeply embedded in clinical workflows and 
processes, indicating there is little room for improvement under the 
current measure. We also appreciate commenters' recommendations for 
future measures of perioperative communication, and will take these 
into consideration for future years.
    Comment: A number of commenters opposed CMS' proposal to remove the 
Safe Surgery Checklist Use measure from the Hospital IQR Program 
beginning with the CY 2018 reporting period/FY 2020 payment 
determination. A few commenters expressed their concern about the 
potential adverse impact removing this measure might have on patient 
care, asserting that hospitals may stop using safe surgery checklists 
if the measure is removed. One commenter asserted that the potential 
negative impact of removal outweighs any projected benefit associated 
with no longer collecting the information, and recommended that the 
measure be kept as a reminder to the surgical community to practice 
good communication in the operating room. Another commenter asserted 
that the rate of ``never events'' occurring in hospitals indicates the 
measure is not topped out, and further expressed their concern that 
many hospitals may only use safe surgery checklists in a cursory or 
rote manner. The commenter therefore recommended that CMS ensure never 
events and wrong site surgeries be adequately monitored through another 
IPPS quality program to avoid negative patient outcomes before removing 
the Safe Surgery Checklist Use measure. Another commenter recommended 
that CMS delay removing the measure until use of a safe surgery 
checklist has been added as a Condition of Participation for hospitals.
    Response: While we understand commenters' position that retaining 
the measure may add some value to the program, we would like to make 
clear that high performance on the Safe Surgery Checklist Use measure 
is not

[[Page 41547]]

intended to indicate whether perioperative communication among surgical 
team members is effective. This measure is not specified to assess the 
effectiveness of a team's communication, only whether a safe surgery 
checklist is used. Therefore, we do not believe continuing to collect 
or ceasing to collect data under this measure will assess or affect the 
effectiveness of perioperative communication within hospitals. As a 
result, we believe the administrative burden to hospitals associated 
with collecting and reporting this data to CMS outweighs the benefit of 
publicly reporting this data. We will also take commenters' 
recommendations regarding updates to the Conditions of Participation 
and monitoring of never-events into consideration as we continue to 
implement the Meaningful Measures initiative across CMS' quality 
programs.
    Comment: One commenter recommended that for measures on which 
providers continually have high scores, CMS should improve the measures 
instead of removing them from the Hospital IQR Program entirely.
    Response: We appreciate the recommendation to revise this measure 
and will take this into consideration as we continue to develop and 
refine measures for the Hospital IQR Program.
    After consideration of the public comments we received, we are 
finalizing removal of the Safe Surgery Checklist Use measure from the 
Hospital IQR Program measure set beginning with the CY 2018 reporting 
period/FY 2020 payment determination as proposed.
(2) Patient Safety Measures
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20474 through 
20475), we proposed to remove the Patient Safety and Adverse Events 
Composite \270\ (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.
---------------------------------------------------------------------------

    \270\ 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.
---------------------------------------------------------------------------

    In this final rule, we wish to clarify that our proposals in the FY 
2019 IPPS/LTCH PPS proposed rule, and ultimately, our finalized policy 
as discussed below, to remove these measures from the Hospital IQR 
Program will not end or otherwise interfere with collection or public 
reporting of these data. The HAI data will continue to be made publicly 
available on a quarterly basis and the PSI 90 data on an annual basis 
in a consumer-friendly manner on the Hospital Compare website and 
through downloadable files under the HAC Reduction Program. We refer 
readers to section IV.J.4.h. of the preamble of this final rule where 
this is discussed in the HAC Reduction Program. We will also strive to 
minimize disruptions to preexisting processes and timelines for 
publicly reporting these data, as discussed further below in our 
responses to comments received.
(a) 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 proposed to remove the PSI 90 measure beginning with the FY 2020 
payment determination (which would use a performance period of July 1, 
2016 through June 30, 2018). As the PSI 90 measure 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) 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 proposed 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 determinations under the Hospital IQR Program. Although 
we proposed to remove these measures from the Hospital IQR Program, we 
did not propose 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 the 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 proposed 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 proposed to remove these six patient safety 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 final rule where we discuss 
examples of the costs associated with implementing and maintaining 
these measures for the

[[Page 41548]]

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 multiple 
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; 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 stated in the proposed rule that we believe the costs as 
discussed above outweigh the associated benefit to maintaining these 
measures in multiple programs, because that information can be captured 
through inclusion of these measures in the HAC Reduction Program. 
Although we are finalizing our proposals 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 a critical 
quality area for which continued progress and improvement is needed, 
and that patient safety should be a high priority focus of quality 
programs. For these reasons, and as discussed below, we will continue 
to use these measures in the HAC Reduction Program and we will not 
finalize their removal from the Hospital VBP Program. (We refer readers 
to section IV.I.2.c.(2) of the preamble of this final rule where we 
discuss retaining these safety measures in the Hospital VBP Program.) 
Unlike the Hospital IQR Program, performance data on measures 
maintained in the HAC Reduction and Hospital VBP Programs are used both 
to assess the quality of care provided at a hospital and to calculate 
incentive payment adjustments for a given year of each respective 
program based on performance. Also, the HAC Reduction and Hospital VBP 
Programs' incentive payment structures tie hospitals' payment 
adjustments on claims paid under the IPPS to their performance on 
selected quality measures, including the above measures sufficiently 
incentivizing high performance as well as performance improvement on 
these measures among participating hospitals. By keeping the measures 
in the HAC Reduction and Hospital VBP Programs, patients, hospitals, 
and the public also continue to receive information about the quality 
of care provided with respect to these measures.
    We discussed in the proposed rule that we believed removing these 
measures from the Hospital IQR Program, while keeping them in the HAC 
Reduction Program, would strike 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 
final rule where we discuss safety measures included in the HAC 
Reduction Program and section IV.I.2.c.(2) of the preamble of this 
final rule for this discussion in the Hospital VBP Program. As 
discussed in section VIII.A.4.b. of the preamble this final 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 and the Hospital VBP Program 
addresses the Meaningful Measures Initiative quality priority of making 
care safer by reducing harm caused in the delivery of care.\271\ In 
addition, as discussed in more detail below, we believe keeping these 
measures in the Hospital IQR Program would not align with our goal of 
not adding unnecessary complexity or cost with duplicative measures.
---------------------------------------------------------------------------

    \271\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/MMF/General-info-Sub-Page.html.
---------------------------------------------------------------------------

    In the proposed rule, we proposed 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.
    Comment: Many commenters did not support removal of the patient 
safety measures from the Hospital IQR Program, because although the 
reporting burden on hospitals associated with these measures may be 
significant, they believe the cost of infections to patients and to the 
economy is greater. Commenters noted that these measures are critical 
because hospital iatrogenic infections, accidents, errors, and injuries 
together are a leading cause of death in the United States.
    Response: We agree with commenters that hospital-acquired 
conditions can pose substantial financial costs, as well as cause 
severe negative effects on patients' health and well-being.\272\ It is 
for this reason that we did not propose to remove the PSI 90, CDI, 
CAUTI, CLABSI, MRSA, and Colon and Abdominal Hysterectomy SSI measures, 
collectively referred to as the patient safety measures, from the HAC 
Reduction Program, and we are not finalizing their proposed removal 
from the Hospital VBP Program. (We refer readers to section 
IV.I.2.c.(2) of the preamble of this final rule where we discuss 
retaining these safety measures in the Hospital VBP Program.) Because 
many commenters agreed with our assessment that there are costs 
associated with using the same measures in multiple programs, to 
providers, to CMS, and to patients and consumers trying to understand 
information about the same measures used in different programs, we are 
finalizing our proposal to remove the PSI 90 measure for the FY 2020 
payment determination as proposed. We are also finalizing our proposal 
to remove the five NHSN HAI measures (that is, the CDI, CAUTI, CLABSI, 
MRSA, and Colon and Abdominal Hysterectomy SSI measures) but with 
modification to remove the five NHSN HAI measures from the Hospital IQR 
Program one year later than proposed beginning with the CY 2020 
reporting period/FY 2022 payment determination and for subsequent 
years. These policies are discussed in more detail below.
---------------------------------------------------------------------------

    \272\ Zimlichman E, et al. Health Care--Associated Infections A 
Meta-analysis of Costs and Financial Impact on the US Health Care 
System. JAMA Intern Med. 2013;173(22):2039-2046.
---------------------------------------------------------------------------

    Comment: A few commenters did not support removal of the patient 
safety measures because they believed the rationale under proposed 
removal Factor 8 contradicts the Meaningful Measures Initiative 
priority of making

[[Page 41549]]

clinically meaningful improvement to patient care with measurable 
reductions in patient safety events. Some commenters expressed concern 
that CMS may be inappropriately prioritizing the cost for those who 
collect the information over the benefits of the information to 
patients or direct care providers and recommended that protecting and 
improving the health of the public be central to decisions made 
regarding measure removals, particularly with regard to measures of 
patient safety.
    Response: Because we continue to consider patient safety and 
reducing hospital-acquired conditions 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), we are not 
finalizing our proposed to remove these six patient safety measures 
from the Hospital VBP Program. We refer readers to section IV.I.2.c.(2) 
of the preamble of this final rule where we discuss retaining these 
safety measures in the Hospital VBP Program. We are also finalizing a 
modified version of our proposal under the Hospital IQR Program, such 
that instead of removing the five NHSN HAI measures (that is, the CDI, 
CAUTI, CLABSI, MRSA, and Colon and Abdominal Hysterectomy SSI measures) 
for the CY 2019 reporting period/FY 2021 payment determination and 
subsequent years as proposed, we are delaying removal for one 
additional year, until the CY 2020 reporting period/FY 2022 payment 
determination and subsequent years. By delaying removal of these 
measures from the Hospital IQR Program by one year, we will ensure 
consistency in collection and reporting of these data for continued use 
in the Hospital VBP Program and until such time when the collection, 
reporting, and validation of these data are transitioned to the HAC 
Reduction Program.
    Because these measures will be publicly reported under the HAC 
Reduction and Hospital VBP Programs while also being used to assess 
hospital performance and impose payment adjustments on hospitals that 
perform poorly on these measures, we believe retaining the measures in 
two value-based purchasing programs and removing them from the Hospital 
IQR Program, will at least partly address the concerns of both the 
commenters who want to retain these measures and the commenters who 
supported their removal and de-duplication. We are, however, removing 
the 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 as proposed, because the data used to assess 
performance under this measure are collected via claims and therefore 
require no additional collection processes. We reiterate that removing 
the patient safety measures from the Hospital IQR Program beginning 
with the CY 2020 reporting period/FY 2022 payment determination for the 
five NHSN HAIs, and beginning with the FY 2020 payment determination 
for the PSI 90 measure, will not end or otherwise interfere with 
collection or public reporting of these data under other CMS quality 
programs. Under the HAC Reduction Program: (1) The NHSN HAI measures 
data will continue to be made publicly available on the Hospital 
Compare website on a quarterly basis, and (2) the PSI 90 data will 
continue to be made public on an annual basis, with all of these 
measures publicly reported in a consumer-friendly manner as well as 
through downloadable files. We refer readers to sections IV.J.4.e. and 
IV.J.4.h.(1) of the preamble of this final rule for discussions of data 
collection and public reporting in the HAC Reduction Program. We note 
that section 1886(p)(6) of the Act requires the HAC Reduction Program 
to make information available to the public regarding hospital-acquired 
conditions of each applicable hospital on the Hospital Compare website 
in an easily understandable format. Furthermore, section 1886(o)(10)(A) 
of the Act requires the Hospital VBP Program to make information 
available to the public regarding the performance of individual 
hospitals, including performance with respect to each measure, on the 
Hospital Compare website in an easily understandable format. We refer 
readers to section IV.J.4.h.(1) of the preamble of this final rule for 
discussion of public reporting under the HAC Reduction Program. We will 
continue to monitor hospital performance on these measures under both 
the HAC Reduction and Hospital VBP Programs, including any unintended 
consequences that may be associated with removing the measures from the 
Hospital IQR Program.
    Comment: Several commenters specifically supported the removal of 
the NHSN HAI measures from the Hospital IQR Program to minimize 
redundancy in the programs and to reduce the costs associated with 
tracking and previewing reports in multiple programs, while noting that 
the cost and burden of infection surveillance, NHSN case 
identification, NHSN program maintenance, and data submission would not 
change. One commenter noted the benefit of removing the measures from 
the Hospital IQR Program, which only encourages reporting of quality 
data, while retaining them in the HAC Reduction Program, which directly 
ties payment to quality outcomes. A few commenters supported removing 
the NHSN HAI measures from the Hospital IQR Program, but encouraged CMS 
to maintain transparency of individual NHSN HAI measures by continuing 
to publicly report performance data on the Hospital Compare website. A 
few commenters expressed hope that removal of these measures from the 
Hospital IQR Program would not weaken incentives for facilities to 
report HAI surveillance data to the NHSN because conducting HAI 
surveillance using NHSN methods and maintaining quality infection 
prevention and control programs improves patient safety. Commenters 
recommended that CMS work with other agencies, experts, and State 
health departments to continue to improve quality around patient 
safety.
    Response: We thank the commenters for their support of our proposal 
to de-duplicate the NHSN HAI measures (that is, the CDI, CAUTI, CLABSI, 
MRSA, and Colon and Abdominal Hysterectomy SSI measures) from the 
Hospital IQR Program. As noted previously, we will continue to publicly 
report hospital performance data on these measures under the HAC 
Reduction and Hospital VBP Programs in a manner that is transparent and 
easily understood by patients. As noted above, we refer readers to 
sections IV.J.4.h.(1) and IV.I.2.c.(2) of the preamble of this final 
rule where we detail our policies for these measures in the HAC 
Reduction and Hospital VBP Programs. Specifically, the NHSN HAI data 
will continue to be made available on a quarterly basis in a consumer-
friendly manner on Hospital Compare and also through downloadable 
files. We will also strive to minimize disruptions to preexisting 
processes and timelines for publicly reporting these data. We further 
believe removing the NHSN HAI measures from the Hospital IQR Program 
will have no impact on the incentive to report these measure data 
because the measures will remain in both the HAC Reduction and Hospital 
VBP Programs' measure sets, under which hospitals are subject to 
payment adjustments based on their performance.
    Comment: Several commenters supported removal of the measures from 
the Hospital IQR Program but recommended that the measures, and their 
associated validation, scoring, and public reporting requirements, be 
retained in the Hospital VBP Program instead of the HAC Reduction 
Program

[[Page 41550]]

because the Hospital VBP Program provides incentives for each 
facility's performance improvement as well as penalties for poor 
performance, whereas the HAC Reduction Program only penalizes hospitals 
in the worst-performing quartile (25 percent) of program performance. 
One commenter similarly supported only retaining the NHSN HAI measures 
in the Hospital VBP Program because the HAC Reduction Program's risk 
adjustment strategies are limited and may not appropriately account for 
facility-specific populations, leading to the over-penalization of 
hospitals that serve predominately high-risk patients. If retaining the 
NHSN HAI measures only in the Hospital VBP Program were not possible, 
one commenter recommended modifying the HAC Reduction Program to 
incorporate an incentive structure like that used in the Hospital VBP 
Program.
    Response: We thank the commenters for their comments. As discussed 
above, we are finalizing removal of the NHSN HAI and PSI 90 measures 
from the Hospital IQR Program with modification and retaining them in 
both the HAC Reduction and Hospital VBP Programs. In connection with 
these measure removals from the Hospital IQR Program, we are finalizing 
our proposals to adopt HAI data collection and validation processes 
under the HAC Reduction Program that align with those currently used in 
the Hospital IQR Program. We refer readers to section IV.J.4.e. of the 
preamble of this final rule where we discuss the HAI data collection 
and validation processes under the HAC Reduction Program in further 
detail.
    While we recognize that the payment structures of the HAC Reduction 
Program and Hospital VBP Program are different, particularly in that 
the Hospital VBP Program scoring methodology scores hospitals on the 
higher of improvement or achievement on each measure, and incentivizes 
all hospitals to improve and achieve high performance with both 
positive and negative payment adjustments. Because many commenters have 
expressed this similar concern about the potential reduced incentive 
for hospitals to continue to improve and achieve high performance on 
these safety measures, we are not finalizing our proposal to remove 
these measures from the Hospital VBP Program and refer readers to 
section IV.I.2.c.(2) of the preamble of this final rule where we 
discuss this decision in detail.
    We note that the HAC Reduction Program was designed to include 
risk-adjusted measures that are reflective of hospital performance (78 
FR 50712 through 50715). We will continue to consult with the CDC and 
take this feedback into consideration for measure maintenance and 
future refinement of measure specifications. Furthermore, we will 
continue to monitor hospital performance on these measures under both 
the HAC Reduction and Hospital VBP Programs, including any unintended 
consequences. We will take the commenter's feedback regarding the HAC 
Reduction Program incentive structure into consideration for future 
years to the extent authorized under section 1886(p) of the Act.
    Comment: Several commenters disagreed that the patient safety 
measures in the Hospital IQR Program are duplicative of measures in 
other programs and further recommended that more patient safety 
measures should be added to quality reporting programs out of concern 
that quality and cost-effectiveness are nullified when safety is 
absent. One commenter noted that by virtue of being housed in the 
Hospital IQR Program, virtually all hospitals report on and are 
accountable to the public for these measures and, if removed from the 
Hospital IQR Program, many hospitals might choose to no longer report 
on these measures. Moreover, some commenters expressed concern that if 
the patient safety measures were removed from the Hospital IQR Program, 
then hospitals would not be given the payment incentive for full 
reporting, creating a financial disincentive to report the measures 
because the HAC Reduction Program only penalizes hospitals that perform 
in the lowest quartile of performance, potentially resulting in 
increased infections and patient safety issues. Several commenters 
expressed concern that if these measures are retained only in the HAC 
Reduction Program, and the HAC Reduction Program was repealed (through 
a repeal of the Patient Protection and Affordable Care Act), that 
hospitals would be left with nothing to incentivize reporting on 
patient safety measures.
    Response: We seek to clarify that these patient safety measures 
previously finalized for the Hospital IQR, Hospital VBP, and HAC 
Reduction Programs are the same six measures, and that subsection (d) 
hospitals are subject to all three programs. Because the HAC Reduction 
Program imposes a 1 percent payment penalty on all hospitals scoring in 
the worst-performing quartile of all subsection (d) hospitals (and 
hospitals that do not report measures and do not have a waiver receive 
the worst-possible score for those measures, (79 FR 50098 and 81 FR 
57013)) and the Safety domain using patient safety measures comprises 
25 percent of a hospital's Total Performance Score under the Hospital 
VBP Program, we believe there are sufficiently strong incentives to 
ensure hospitals continue to report and strive for high performance on 
these patient safety measures. We note that the payment adjustment 
associated with not reporting data to the Hospital IQR Program is a 
one-quarter reduction in the hospital's annual payment update (APU). 
There is no positive payment adjustment associated with either 
reporting data to the program or a hospital's performance on a measure 
collected under the Hospital IQR Program.\273\ We refer readers to the 
table below for more information on average APU percentages since FY 
2015 when the financial risk for failure to report data under the 
Hospital IQR Program became a one-fourth reduction of the annual 
payment update:
---------------------------------------------------------------------------

    \273\ 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.

------------------------------------------------------------------------
                                                           One-fourth of
                   FY                           APU             APU
------------------------------------------------------------------------
2015....................................             1.4            0.35
2016....................................             0.9            0.23
2017....................................            0.95            0.24
2018....................................             1.2             0.3
                                         -------------------------------
    Average.............................            1.11            0.28
------------------------------------------------------------------------


[[Page 41551]]

    In order to ensure continuity under the HAC Reduction Program for 
the public reporting of the NHSN HAI data quarterly and to assess 
payment penalties based on hospitals' performance on the measures, we 
believe it is appropriate to transfer collection of these patient 
safety measure data to that program. We further note that in retaining 
these measures in the Hospital VBP Program, performance on these 
measures will also continue to be tied to that program's payment 
incentive structure, reinforcing improvement and high achievement on 
the measures, and providing positive as well as negative payment 
adjustments. We acknowledge commenters' concern regarding future 
potential statutory changes, and would address any such changes in 
future rulemaking.
    Comment: A few commenters did not support removal of the patient 
safety measures, asserting that retaining the measures in only one 
program would not alleviate any significant burden on hospitals because 
there is no burden associated with data submission for claims-based 
measures, such as the PSI 90 measure, and hospitals submit data to the 
NHSN only once for multiple programs in the case of the NHSN HAI 
measures.
    Response: While we agree with commenters that removal of these 
measures from the Hospital IQR Program may not significantly reduce the 
information collection burden of reporting associated with these 
measures due to either their claims-based collection or their continued 
use in another program, the costs associated with a measure also 
include those associated with reviewing multiple preview reports, which 
would be reduced by streamlining measure sets. Further, as discussed in 
section VIII.A.4.b. of the preamble of this final rule, when evaluating 
the removal of a measure under removal Factor 8, we consider costs 
beyond the information collection burden, 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). 
As stated above, in response to many commenters, we are not finalizing 
their proposed removal from the Hospital VBP Program. We refer readers 
to section IV.I.2.c.(2) of the preamble of this final rule where we 
discuss retaining these safety measures in the Hospital VBP Program. We 
also note that, as discussed above, we are finalizing a modified 
version of our proposal, such that we are delaying removal of the NHSN 
HAI measures from the Hospital IQR Program for one year such that 
removal begins with the CY 2020 reporting period/FY 2022 payment 
determination in order to ensure consistency in data collection and 
reporting while we work to establish data collection policies for these 
measures under the Hospital VBP Program. This will also help to have a 
more seamless transition for data collection, validation, and public 
reporting under the HAC Reduction Program.
    Comment: Many commenters did not support removal of the patient 
safety measures due to concerns about transparency in public reporting. 
These commenters expressed concern that if the patient safety measures 
were removed from the Hospital IQR Program, that public reporting of 
the measure data would no longer be available, decreasing the 
information available to the public, and thereby, disincentivizing 
related hospital quality improvement efforts, leading to endangering 
the lives and safety of vulnerable patients. A few commenters noted 
that informing the public of hospital quality performance is a central 
purpose of the Hospital IQR Program; public reporting of these measures 
helps focus and strengthen efforts to improve healthcare safety and 
quality. One commenter asserted that 90 percent of the measures in the 
Hospital IQR Program have seen improvement, a record unparalleled in 
any other health quality programs. Several commenters further expressed 
concern that even if these measures are retained in another CMS quality 
program, the resulting data may not be reported in an easily accessible 
manner. Therefore, commenters urged CMS to prioritize transparency 
throughout its programs, particularly as it relates to patient safety 
measures, by continuing to publicly report patient safety measure data 
on the Hospital Compare website to enable hospitals to compare their 
performance with other hospitals to drive quality improvement efforts 
and for patients to make informed decisions about their health care.
    Response: We appreciate the commenters' concerns and reiterate that 
we will continue to report measure-level data for all of CMS' quality 
programs in a manner that is transparent and easily understood by 
patients and consumers. As noted above, under the HAC Reduction 
Program, data on the NHSN HAI measures will continue to be made 
publicly available on the Hospital Compare website as they have been on 
a quarterly basis; furthermore, data on the PSI 90 measure will 
continue to be published on an annual basis, with all of these measures 
publicly reported in a consumer-friendly manner and also through 
downloadable files. We will also strive to minimize disruptions to 
preexisting processes and timelines for publicly reporting these data. 
We refer readers to section IV.J.4.h.(1) of the preamble of this final 
rule where this is discussed in more detail for the HAC Reduction 
Program.
    Comment: Several commenters did not support removal of the patient 
safety measures from the Hospital IQR Program because it provided the 
original statutory mechanism requiring quality data to be made public 
on the Hospital Compare website and because it has served as the 
primary vehicle for public reporting of hospital performance data. One 
commenter asserted its interpretation that measures not reported 
through the Hospital IQR Program cannot, by statute, be used in other 
payment programs, noting that CMS attempted to report a set of Deficit 
Reduction Act (DRA)-HAC measures removed from the Hospital IQR Program 
on the Hospital Compare website, but concluded the HAC Reduction 
Program lacked the statutory authority because measures not in the 
Hospital IQR Program could not be reported on the Hospital Compare 
website.
    Response: Under the holistic approach of evaluating the measures 
used in the four inpatient hospital quality programs--the Hospital IQR, 
Hospital VBP, HAC Reduction, and Hospital Readmissions Reduction 
Programs--as discussed above and in the preamble of the proposed rule, 
the Hospital IQR Program will continue to serve as the primary quality 
reporting program for quality and cost measures that are important for 
data collection and public reporting, but may not be ready or 
appropriate for use in one of the other value-based purchasing 
programs. As required under sections 1886(o)(2)(A) and 1886(o)(2)(C)(i) 
of the Act, we will continue to select measures for the Hospital VBP 
Program that have been specified for the Hospital IQR

[[Page 41552]]

Program and refrain from beginning the performance period for any new 
measure until the data on that measure have been posted on Hospital 
Compare for at least one year. We note the statute does not require a 
measure that has met these statutory requirements to remain in the 
Hospital IQR Program at the same time as the Hospital VBP Program. The 
HAC Reduction and Hospital Readmissions Reduction Programs do not have 
any similar statutory requirements.
    We believe removing measures that have transitioned to a value-
based purchasing program from the Hospital IQR Program will better 
enable us to focus on new quality measures and collecting and publicly 
reporting these data for both patients and providers without imposing 
additional cost or burden on providers for duplicative measures unless 
the benefits outweigh the costs. (For example, we refer readers to 
section IV.I.2.c.(2) of the preamble of this final rule where we 
discuss retaining these patient safety measures in the Hospital VBP 
Program.)
    We would like to clarify that the payment provision established by 
section 5001(c) of the Deficit Reduction Act (DRA) of 2005 (also known 
as DRA-HAC or the Hospital-Acquired Conditions (Present on Admission 
Indicator) payment provision), is a policy under which hospitals no 
longer receive additional payment for cases in which one of a selected 
set of HACs occurred but was not present on admission.\274\ \275\ While 
CMS does calculate and report rates for a subset of the conditions 
included in the DRA-HAC payment provision under DRA HAC Reporting via 
public use files, this payment policy and associated reporting are 
separate and distinct from the Hospital IQR and HAC Reduction Programs 
discussed in this final rule.
---------------------------------------------------------------------------

    \274\ Additional information about the DRA-HAC payment provision 
is available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/index.html.
    \275\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Downloads/FAQ-DRA-HAC-PSI.pdf.
---------------------------------------------------------------------------

    We further disagree that the HAC Reduction Program lacks statutory 
authority to publicly report measures that are not also in the Hospital 
IQR Program, and refer readers to section 1886(p)(6) of the Act, which 
specifically requires the Secretary to make publicly available 
information regarding hospital acquired conditions under the HAC 
Reduction Program and to post such information on Hospital Compare in 
an easily understandable format. We also refer readers to sections 
IV.J.4.b. and IV.J.4.h.(1) of the preamble of this final rule where we 
address in detail how the NHSN HAI measures will be publicly reported 
on Hospital Compare under the HAC Reduction Program.
    Comment: Several commenters expressed concern that removing these 
measures could negatively impact States that have structured their laws 
to align with CMS regulations.
    Response: We acknowledge commenters' concern, but we disagree 
because, as stated above, these measure data will continue to be 
collected under HAC Reduction Program and made publicly available--the 
NHSN HAI data on a quarterly basis and PSI 90 data on an annual basis--
in a consumer-friendly manner on Hospital Compare and also through 
downloadable files which can be accessed by all stakeholders, including 
States and public health agencies.
    Comment: Several commenters expressed particular concern regarding 
removal of the PSI 90 measure. Specifically, one commenter worried that 
the measure's 10 individual component indicators of the composite 
measure may no longer be publicly reported with the same level of 
granularity if the measure were removed from the Hospital IQR Program. 
This commenter recommended CMS continue to publicly report both the 
full composite score for the PSI 90 measure as well as the scores of 
individual indicators comprising the measure, because the commenter 
believed that the PSI 90 measure represents important patient safety 
outcomes data. Another commenter recommended that CMS delay the removal 
of the PSI 90 measure from the Hospital IQR Program until the measure 
steward transfer from AHRQ to CMS is completed.
    Response: As discussed above, we believe retaining the PSI 90 
measure in the HAC Reduction Program, which specifically focuses on 
reducing hospital-acquired conditions and improving patient safety 
outcomes, as well as not finalizing removal of this measure from the 
Hospital VBP Program, while finalizing its removal as proposed from the 
Hospital IQR Program will at least partly address the concerns of both 
commenters who want to retain this measure and commenters who supported 
its removal and de-duplication. We reiterate that removing this measure 
from the Hospital IQR Program will not end or otherwise interfere with 
public reporting of these data. We refer readers to section IV.J.4.h. 
of the preamble of this final rule in which the HAC Reduction Program 
is finalizing its proposal to make data available in the same form and 
manner as currently displayed under the Hospital IQR Program. The data 
will continue to be made available in a consumer-friendly manner on 
Hospital Compare, with the same granularity, and also through 
downloadable files. We therefore continue to believe that removing this 
measure from the Hospital IQR Program as proposed while retaining it in 
two value-based purchasing programs strikes the appropriate balance of 
benefits and costs associated with using the PSI 90 measure across the 
programs. We further believe it is unnecessary to delay removal of the 
PSI 90 measure from the Hospital IQR Program until after measure 
stewardship has transitioned from AHRQ to CMS because the measure 
specifications as previously adopted for both the HAC Reduction Program 
and Hospital IQR Program remain unchanged.\276\
---------------------------------------------------------------------------

    \276\ 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. The 2018 measure specifications for 
PSI 90 as it is used in both the HAC Reduction Program and the 
Hospital IQR Program can be found at: https://qualityindicators.ahrq.gov/Modules/PSI_TechSpec_ICD10_v2018.aspx.
---------------------------------------------------------------------------

    Comment: One commenter suggested modifying the patient safety 
measures to include bidirectional case reporting, which the commenter 
believed incentivizes public health reporting and is important to 
public health agencies.
    Response: We thank the commenter for its suggestion. We interpret 
the commenter's reference to ``bidirectional case reporting'' as the 
NHSN system allowing data from public health agencies to populate NHSN 
and the NHSN system allowing public health agencies access to NHSN 
data. We will consult with the CDC and evaluate whether bidirectional 
case reporting is feasible and consider this option in the future if 
feasible and appropriate to do so.
    Comment: Several commenters supported the removal of the patient 
safety measures from the Hospital IQR Program for the following 
reasons: (1) To reduce the costs associated with reporting the same 
measure in multiple programs with differing reporting periods; (2) to 
reduce the confusion associated with reviewing multiple reports from 
multiple programs for the same measures; and (3) to streamline quality 
reporting requirements. Some commenters supported the removal of 
patient safety measures from the Hospital IQR Program, but recommended 
that we continue to

[[Page 41553]]

publicly report these measures on the Hospital Compare website under 
the HAC Reduction Program, because commenters believed these measures 
are of great interest to the public.
    Response: We thank the commenters for their support of our proposal 
to de-duplicate the patient safety measures from the Hospital IQR 
Program. As discussed above, we are finalizing removal of these 
measures from the Hospital IQR Program with modification to delay 
removal of the NHSN HAI measures for one year and retaining them in the 
HAC Reduction and Hospital VBP Programs.
    Comment: One commenter recommended that whichever quality program 
retains the patient safety measures should retain the administrative 
requirements previously provided under the Hospital IQR Program, 
including data collection requirements, validation requirements, and 
scoring associated with data completeness, timeliness, and accuracy, as 
well as public reporting of the data on Hospital Compare website. 
Another commenter specifically supported the removal of the PSI 90 
measure from the Hospital IQR Program and retention in the HAC 
Reduction Program because the HAC Reduction Program will be the program 
primarily focusing on safety of care quality for the inpatient hospital 
setting. In addition, the commenter recommended that the PSI 90 measure 
be validated and publicly reported on the Hospital Compare website.
    Response: We appreciate the first commenter's suggestion and note 
that while the patient safety measures are being removed from the 
Hospital IQR Program, they are being retained in the HAC Reduction 
Program and the Hospital VBP Program and will be subject to the 
administrative requirements and scoring methodologies of those 
programs. Further, we refer readers to section IV.J.4.h. of the 
preamble of this final rule in which the HAC Reduction Program is 
finalizing its proposal to make data available in the same form and 
manner as currently displayed under the Hospital IQR Program. We 
reiterate that the PSI 90 measure will be publicly reported on the 
Hospital Compare website, however, it will not be included in the HAC 
Reduction Program validation process because it is a claims-based 
measure for which hospitals do not submit any additional quality 
measure data for validation.
    Comment: A few commenters expressed support specifically for the 
removal of the PSI 90 measure from the Hospital IQR Program to reduce: 
(1) Redundant and duplicative work for providers; and (2) costs 
associated with reporting and remaining in compliance with the 
requirements of quality reporting programs. One commenter supported 
removal of the PSI 90 measure from the Hospital IQR Program because it 
believed that it is unclear whether recent measure modifications might 
affect hospital performance. Further, the commenter did not believe 
that such population-based measures are appropriate for hospital 
accountability, and recommended that the effects of the modification on 
performance and ranking be explored before implemented in any of the 
quality reporting programs.
    Response: We thank the commenters for their support of our proposal 
to de-duplicate the PSI 90 measure from the Hospital IQR Program. As 
discussed above, we are finalizing removal of this measure from the 
Hospital IQR Program as proposed because the cost of keeping the 
measure in three CMS programs outweighs the benefits. We acknowledge 
the commenter's concern about the impact of the recent measure 
modifications, which we interpret as referencing the ICD-10 change and 
broadening of the cohort (81 FR 57128 through 57133). However, we 
continue to believe this measure as specified is valid and reliable, 
and therefore, appropriate for use in other CMS quality programs. We 
appreciate the commenter's feedback regarding population-based measures 
and will take that into consideration for future program years.
    Comment: One commenter opposed the inclusion of the PSI 90 measure 
in any quality program and recommended that CMS not reintroduce the 
measure until it meets the standards of the National Quality Forum.
    Response: We note the PSI 90 measure (NQF #0531) is currently 
endorsed by the National Quality Forum (NQF).\277\ As stated above, we 
continue to believe this measure is a valid and reliable measure of 
potentially preventable hospital-related events associated with harmful 
outcomes for patients. We further note that the PSI 90 measure remains 
in the HAC Reduction Program, as well as the Hospital VBP Program 
beginning with the FY 2023 program year (we refer readers to section 
IV.I.2.c.(2) of the preamble of this final rule where we discuss not 
finalizing our proposal to remove the PSI 90 measure from the Hospital 
VBP Program).
---------------------------------------------------------------------------

    \277\ For a full history of the PSI 90 measure's NQF review and 
endorsement, we refer readers to the NQF Quality Positioning System 
page for this measure, available at: http://www.qualityforum.org/QPS/0531.
---------------------------------------------------------------------------

    Comment: One commenter recommended that CMS carefully consider 
whether or not to include NHSN CDI in performance programs because the 
commenter believed that it is notably flawed due to variable 
documentation, surveillance, and testing practices among organizations.
    Response: While we acknowledge variability in hospital 
documentation, reporting, and sensitivity of laboratory testing methods 
may make a difference in the event data hospitals report, the CDC's 
Multidrug-Resistant Organism & Clostridium difficile Infection (CDI) 
Module provides guidelines for identifying, documenting, and reporting 
events under this measure.\278\ In addition, we believe the validation 
process established for the NHSN CDI measure and other NHSN measures is 
the best approach for us to systematically identify candidates that are 
likely to yield a high proportion of cases that should have been 
reported to NHSN.\279\ As discussed in section IV.J.4.e. of the 
preamble of this final rule, the HAC Reduction Program is finalizing 
its proposal to begin validating the NHSN HAI measures following their 
removal from the Hospital IQR Program. We believe transitioning this 
validation process to a payment program will provide sufficient 
incentives for hospitals to ensure diligent and accurate reporting of 
CDI events; however, we will also consult with the CDC to take the 
commenter's concerns into consideration for future program years.
---------------------------------------------------------------------------

    \278\ We refer readers to the CDC's Multidrug-Resistant Organism 
& Clostridium difficile Infection Module for a detailed discussion 
of how to report these events. Available at: https://www.cdc.gov/nhsn/PDFs/pscManual/12pscMDRO_CDADcurrent.pdf.
    \279\ 78 FR 50829 through 50834.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing our proposal to remove the PSI 90 measure beginning with the 
FY 2020 payment determination (which applies to the performance period 
of July 1, 2016 through June 30, 2018) as proposed. Furthermore, we are 
finalizing our proposals to remove the CDI, CAUTI, CLABSI, MRSA, and 
Colon and Abdominal Hysterectomy SSI measures with modification; 
instead of removing them beginning with the CY 2019 reporting period/FY 
2021 payment determination as proposed, we are finalizing a delay in 
the removal of these measures until the CY 2020 reporting period/FY 
2022 payment determination.

[[Page 41554]]

(3) Claims-Based Readmission Measures
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20475 through 
20476), we proposed 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 proposed 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 the 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 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 the 
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 final 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 proposed 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 Clinical Classification 
Software (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). The transition of the CCS-based measure 
specifications to the ICD-10-CM version of the CCS is underway. The 
ICD-10 to CCS map and tools for its use are currently available at: 
https://www.hcup-us.ahrq.gov/toolssoftware/ccs10/ccs10.jsp. 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

[[Page 41555]]

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 final 
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 proposed 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 invited 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.
    Comment: A number of commenters supported CMS' proposals to remove 
seven claims-based readmission measures beginning with the FY 2020 
payment determination. One commenter supported removal of the 
readmission measures because they are less applicable to its patient 
population. One commenter supported the removal of these measures, but 
highlighted its belief that removing them would not reduce burden 
because hospitals will still report most of these measures to the 
Hospital Readmissions Reduction Program.
    Response: We thank commenters for their support of the removal of 
these measures. We respectfully disagree that removing these measures 
will not reduce the costs associated with these measures. We believe 
that removing these measures would reduce costs for providers by 
eliminating the need to monitor the same measures used in multiple 
programs, including tracking confidential feedback, preview reports, 
and publicly reported information on these measures. Beneficiaries may 
also find it confusing to see public reporting on the same measures in 
different programs. In addition, costs to CMS would be reduced by no 
longer having to maintain the tools needed to analyze and publicly 
report the measure data for multiple programs. We refer readers to 
section VIII.A.4.b. of the preamble of this final rule where we discuss 
examples of the costs associated with implementing and maintaining 
these measures.
    Comment: One commenter supported CMS' proposals to remove READM-30-
AMI, READM-30-CABG, READM-30-COPD, READM-30-HF, READM-30-PN, and READM-
30-THA/TKA for the following reasons: (1) Reducing duplication, which 
will in turn reduce administrative burden as well as patient and 
provider confusion; and (2) preventing hospitals from being penalized 
or rewarded for the same measure across multiple programs.
    Response: We thank the commenter for its support of the removal of 
READM-30-AMI, READM-30-CABG, and READM-30-HF and agree with the 
reasons.
    Comment: One commenter supported CMS' proposals to remove READM-30-
AMI, READM-30-CABG, and READM-30-HF for purposes of administrative 
simplification, and recommended that CMS eliminate use of those three 
measures from all quality programs altogether. The commenter also 
expressed their opinion that READM-30-HF may not be an appropriate 
indicator of quality based on emerging literature.
    Response: We thank commenters for their support of the removal of 
READM-30-AMI, READM-30-CABG, and READM-30-HF measures from the Hospital 
IQR Program. While we continue to believe these measures as specified 
are valid and reliable (adopted at 73 FR 68781, 79 FR 50220, and 73 FR 
48606 respectively), we are removing them from the Hospital IQR Program 
because the costs associated with these measures outweigh the benefits 
of their continued use in the Hospital IQR Program.
    We note that, as discussed in section IV.H.4. of the preamble of 
this final rule, these measures will continue to be used in the 
Hospital Readmissions Reduction Program. However, we will take 
commenters' recommendations into consideration as we continue to 
evaluate the other quality programs' measure sets in future years.
    Comment: One commenter specifically supported the proposal to 
remove READM-30-HF from the Hospital IQR Program because it would 
reduce the reporting burden on hospitals without compromising the 
measure in the Hospital Readmissions Reduction Program.
    Response: We thank the commenter for its feedback.
    Comment: A few commenters specifically supported the proposal to 
remove READM-30-THA/TKA. One commenter agreed that it is appropriate to 
address THA and TKA readmissions through the Hospital Readmissions 
Reduction Program.
    Response: We thank the commenters for their feedback.
    Comment: A few commenters supported CMS' proposal to remove the 
READM-30-STK measure for the following reasons: (1) The loss of 
condition-specific, hospital-level risk-standardized information is 
outweighed by the more important overarching goal of maintaining the 
least burdensome and most harmonized measure set; (2) the associated 
data will be used in aggregated form in the Hospital-Wide All-Cause 
Unplanned Readmission measure; and (3) the measure was never NQF 
endorsed.
    Response: We thank the commenters for their feedback. We note that 
the Hospital IQR Program considers NQF endorsement when adopting 
measures into the measure set. Even if a measure is not NQF endorsed, 
the Hospital IQR Program may adopt it into the program under the 
exclusion authority in section 1886(b)(3)(B)(IX)(bb) of the Act, by 
considering other available topical measures that have been endorsed or 
adopted by a consensus organization.

[[Page 41556]]

    Comment: A few commenters did not support CMS' proposals to remove 
the seven readmission measures. One commenter opposed removal of the 
seven condition-specific readmission measures due to concerns that 
their removal could result in a lack of public access to user-friendly 
condition-specific outcomes information, and suggested that measure-
level reporting continue on Hospital Compare under the Hospital IQR 
Program to ensure that future improvements in public reporting can be 
adopted consistently across publicly reported measures.
    Response: We thank the commenters for their concerns and reiterate 
that we will continue to publicly report measure-level data for all of 
CMS' quality programs in a manner that is transparent and easily 
understood by patients, as well as through downloadable files. These 
measures will continue to be included in the Hospital Readmissions 
Reduction Program, and we note that section 1886(q)(6) of the Act 
requires the Hospital Readmissions Reduction Program to make 
information available to the public regarding readmission rates of each 
subsection (d) hospital on the Hospital Compare website in an easily 
understandable format. We will also strive to minimize disruptions to 
preexisting processes and timelines for publicly reporting this data. 
We refer readers to section IV.H.4. of the preamble of this final rule 
where we discuss these measures under the Hospital Readmissions 
Reduction Program.
    Comment: One commenter did not support CMS' ``holistic'' view of 
the hospital quality programs. The commenter stated that initially 
adopting measures into the Hospital IQR Program allows for a period of 
measure validation, and for health systems to gain familiarity with the 
measures before they are moved into value-based purchasing programs, 
and expressed concern that CMS' ``holistic'' view would allow new 
measures to be adopted immediately into the value-based purchasing 
programs without this time for familiarization and validation. The 
commenter stated their belief that adopting measures directly into the 
value-based purchasing programs would result in significant harm, undue 
hardship, and potentially financial penalties on healthcare systems.
    Response: We thank the commenter for its comment, but emphasize 
that our proposal to remove duplicative measures from the Hospital IQR 
Program does not affect the underlying statutory requirements of the 
Hospital VBP, HAC Reduction, or Hospital Readmissions Reduction 
Programs. Those programs will continue to select new measures as 
required by their statutory authority. For instance, the Hospital VBP 
Program will continue to select measures that have been specified under 
the Hospital IQR Program and refrain from beginning the performance 
period for any new measure until the data on that measure have been 
posted on Hospital Compare for at least one year. We note the HAC 
Reduction and Hospital Readmissions Reduction Programs do not have any 
similar statutory requirements in this regard as the Hospital VBP 
Program. We therefore disagree that these removals could result in 
harm, undue hardship, or financial penalties to hospitals because they 
do not alter the processes associated with adopting new measures into 
the Hospital VBP, HAC Reduction, or Hospital Readmissions Reduction 
Programs. We will, however, continue to consider on a case-by-case 
basis for each new measure whether it would be appropriate to propose 
the measure for the Hospital IQR Program before proposing to use it in 
either the HAC Reduction Program or the Hospital Readmissions Reduction 
Program.
    Comment: One commenter did not support removal of the READM-30-AMI, 
READM-30-HF, and READM-30-PN measures because the commenter believed 
they are essential health and safety measurements, key to hospital 
accountability and incentivizing quality care. The commenter also 
expressed its opinion that the removal would decrease transparency and 
public accountability.
    Response: We appreciate the commenter's concerns and reiterate that 
we will continue to publicly report measure-level data for all of CMS' 
quality programs in a manner that is transparent and easily understood 
by patients. The readmissions measures will continue to be publicly 
reported on Hospital Compare as they have been. We will also strive to 
minimize disruptions to preexisting processes and timelines for 
publicly reporting this data. Because the READM-30-AMI, READM-30-CABG, 
READM-30-COPD, READM-30-HF, READM-30-PN, and READM-30-THA/TKA measures 
will be retained in the Hospital Readmissions Reduction Program, which 
ties hospital performance on the measures to payment adjustments, we 
believe hospitals will continue to be strongly incentivized to improve 
on the measures. We refer readers to section IV.H.7. of the preamble of 
this final rule where we discuss these policies under the Hospital 
Readmissions Reduction Program. In addition, because readmission rates 
for stroke patients will continue to be captured by the Hospital-Wide 
Readmission measure that is being retained in the Hospital IQR Program, 
we believe hospitals will continue to be strongly incentivized to 
improve on this measure as well.
    After consideration of the public comments we received, we are 
finalizing removal of 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 
from the Hospital IQR Program measure set beginning with the FY 2020 
payment determination as proposed.
(4) Claims-Based Mortality Measures
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20476 through 
20477), we proposed 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);
     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 proposed 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

[[Page 41557]]

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 the 
preamble of this final 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 
prevention and treatment of chronic disease), 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 final 
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 final 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 
proposed 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 proposed 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.
    Comment: A number of commenters supported CMS' proposals to remove 
five claims-based mortality measures. One commenter specifically agreed 
with removing these measures under the new removal Factor 8 while 
continuing to use them in the Hospital VBP Program. One commenter 
expressed support for CMS' proposals to remove MORT-30-AMI, MORT-30-HF, 
and MORT-30-CABG because it would reduce the burden of information 
collection and review for hospitals and would eliminate beneficiary 
confusion. One commenter specifically supported CMS' proposal to remove 
the MORT-30-HF measure from the Hospital IQR Program because it would 
reduce the reporting burden on hospitals without compromising the 
measure in the Hospital VBP Program.
    Response: We thank the commenters for their support of removal of 
the five claims-based mortality measures.
    Comment: One commenter supported the removal of these measures but 
noted that it did not believe burden would be reduced because the 
measures would still be reported in the Hospital VBP Program.
    Response: We respectfully disagree that removing these measures 
will not reduce the costs associated with these measures. We believe 
that removing these measures would reduce the costs associated with 
tracking confidential feedback reports, preview reports, and publicly 
reported information for these measures in multiple programs. 
Healthcare providers incur additional cost to monitor measure 
performance in multiple programs for internal quality improvement and 
financial planning purposes when measures are used in multiple 
programs. Beneficiaries may also find it confusing to see public 
reporting on the same measures in different programs. In addition, 
costs to CMS would be reduced by no longer having to maintain the 
measure specifications, as well as the tools need to analyze and 
publicly report the measure data for multiple programs. We refer 
readers to section VIII.A.4.b. of the preamble of this final rule where 
we discuss examples of the costs associated with implementing and 
maintaining these measures.
    Comment: One commenter sought clarification on whether removing 
these five mortality measures would also end public reporting on those 
measures. One commenter recommended that these measures continue to be 
publicly reported on Hospital Compare. A few commenters opposed CMS' 
proposals to remove five condition-specific mortality measures. A few 
commenters expressed concern that removing these measures would reduce 
program transparency and could result in a lack of public access to 
user-friendly condition-specific outcomes information. A few commenters 
recommended that measure-level reporting continue on Hospital Compare 
under the Hospital IQR Program, including frequency of reporting, for 
all measures in the Hospital VBP Program to ensure no loss of 
information to the public, and that future improvements in public 
reporting can be adopted consistently across publicly reported 
measures.
    Response: We thank the commenters for their concerns and reiterate 
that we

[[Page 41558]]

will continue to publicly report measure-level data for the MORT-30-
AMI, MORT-30-HF, MORT-30-COPD, MORT-30-PN, and MORT-30-CABG measures on 
the Hospital Compare website under the Hospital VBP Program, in 
accordance with its policies and in a manner that is transparent and 
easily understood by patients. Section 1886(o)(10)(A) of the Act 
requires the Hospital VBP Program to make information available to the 
public regarding the performance of individual hospitals, including 
performance with respect to each measure, on the Hospital Compare 
website in an easily understandable format. These measures will 
continue to be reported on Hospital Compare as they have been for the 
Hospital IQR Program, but under the requirements of the Hospital VBP 
Program. We will also strive to minimize disruptions to preexisting 
processes and timelines for publicly reporting these data.
    Comment: One commenter did not support CMS' ``holistic'' view of 
the hospital quality programs. This commenter stated that initially 
adopting measures into the Hospital IQR Program allows for a period of 
measure validation, and for health systems to gain familiarity with the 
measures before they are moved into value-based purchasing programs, 
and expressed concern CMS' ``holistic'' view would allow new measures 
to be adopted immediately into the value-based purchasing programs 
without this time for familiarization and validation. The commenter 
stated its belief that adopting measures directly into the value-based 
purchasing programs would result in significant harm, undue hardship, 
and potentially financial penalties on healthcare systems.
    Response: We thank the commenter for its comment, but emphasize 
that our proposal to remove duplicative measures from the Hospital IQR 
Program does not affect the underlying statutory requirements for 
adding new measures to the Hospital VBP, HAC Reduction, or Hospital 
Readmissions Reduction Programs. Those programs will continue to select 
measures as required by their statutory authority. For instance, the 
Hospital VBP Program will continue to select measures that have been 
specified under the Hospital IQR Program and refrain from beginning the 
performance period for any new measure until the data on that measure 
have been posted on Hospital Compare for at least one year, as required 
by section 1886(o)(2)(C)(i) of the Act. We note the HAC Reduction and 
Hospital Readmissions Reduction Programs do not have any similar 
statutory requirements in this regard as the Hospital VBP Program. We 
therefore disagree that these removals could result in harm, undue 
hardship, or financial penalties to hospitals because they do not alter 
the processes associated with adopting new measures into the Hospital 
VBP, HAC Reduction, or Hospital Readmissions Reduction Programs. We 
will, however, continue to consider on a case-by-case basis for each 
new measure whether it would be appropriate to propose the measure for 
the Hospital IQR Program before proposing to use it in either the HAC 
Reduction Program or the Hospital Readmissions Reduction Program.
    Comment: One commenter did not support CMS' proposals to remove the 
MORT-30-AMI, MORT-30-HF, and MORT-30-PN measures because the commenter 
believed they are essential health and safety measurements, key to 
hospital accountability and incentivizing quality care. The commenter 
also expressed its opinion that the removal would decrease transparency 
and public accountability.
    Response: We agree that these measures provide important 
information that can be used to promote accountability and to 
incentivize quality care. To further those goals, we will continue to 
include these measures in the Hospital VBP Program, which will both 
publicly report hospital performance on these measures and assess 
payment incentives to hospitals based on their performance on these and 
other quality measures. We refer readers to sections IV.I.2.d. and 
IV.I.2.e. of the preamble of this final rule where we list the measures 
used in the Hospital VBP Program. We appreciate the commenter's 
concerns and reiterate that we will continue to publicly report 
measure-level data for all of CMS' quality programs in a manner that is 
transparent and easily understood by patients. We will also strive to 
minimize disruptions to preexisting processes and timelines for 
publicly reporting this data.
    After consideration of the public comments we received, we are 
finalizing removal of MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-
PN, and MORT-30-CABG from the Hospital IQR Program measure set across 
the FYs 2020, 2021, and 2020 payment determinations as proposed.
(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
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20477 through 
20478), we proposed 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 final 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 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.

[[Page 41559]]

    As discussed in section VIII.A.4.b. of the preamble of this final 
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 final 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 proposed 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.
    Comment: Many commenters supported CMS' proposal to remove the Hip/
Knee Complications measure beginning with the FY 2023 payment 
determination. One commenter stated that including this measure in the 
Hospital VBP Program provides a stronger incentive for hospitals to 
focus on performance improvement.
    Response: We thank the commenters for their support for the removal 
of this measure and agree that retaining this measure in the Hospital 
VBP Program incentivizes providers to perform well on this measure.
    Comment: One commenter opposed CMS' proposal to remove the Hip/Knee 
Complications measure due to concerns that its removal will reduce 
program transparency and could result in a lack of public access to 
user-friendly condition-specific outcome information. The commenter 
recommended that measure-level data reporting continue on Hospital 
Compare under the Hospital IQR Program, including the frequency of 
reporting, for all measures in the Hospital VBP Program to ensure no 
loss of information to the public and that future improvements in 
public reporting can be adopted consistently across publicly reported 
measures.
    Response: We thank the commenter for sharing its concerns, and 
reiterate that we will continue to publicly report measure-level data 
for the Hip/Knee Complications measure on the Hospital Compare website 
under the Hospital VBP Program according to program policies in a 
manner that is transparent and easily understood by patients. Section 
1886(o)(10)(A) of the Act requires the Hospital VBP Program to make 
information available to the public regarding the performance of 
individual hospitals, including performance with respect to each 
measure, on the Hospital Compare website in an easily understandable 
format. We will also strive to minimize any disruptions to preexisting 
processes and timelines for publicly reporting this data.
    After consideration of the public comments we received, we are 
finalizing removal of the Hip/Knee Complications measure from the 
Hospital IQR Program measure set beginning with the FY 2023 payment 
determination and for subsequent years as proposed.
(6) Medicare Spending per Beneficiary (MSPB)--Hospital Measure (NQF 
#2158) (MSPB)
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20478 through 
20479), we proposed 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 51618) 
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 final 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 this final 
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

[[Page 41560]]

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 final 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 proposed 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 other measures we proposed for 
removal in the proposed rule.
    Comment: A few commenters expressed their support for CMS' proposal 
to remove the MSPB measure from the Hospital IQR Program.
    Response: We thank the commenters for their support.
    Comment: One commenter did not support CMS' proposal to remove the 
MSPB measure from the Hospital IQR Program based on their concern that 
CMS' ``holistic'' view would allow new measures to be adopted 
immediately into the value-based purchasing programs without adequate 
time for familiarization and validation. Specifically, the commenter 
stated that initially adopting measures into the Hospital IQR Program 
allows for a period of measure validation, and for health systems to 
gain familiarity with the measures before they are moved into value-
based purchasing programs. The commenter stated its belief that 
adopting measures directly into the value-based purchasing programs 
would result in significant harm, undue hardship, and potentially 
financial penalties on healthcare systems.
    Response: We thank the commenter for its feedback. We note that the 
MSPB measure has been used in the Hospital VBP Program since the FY 
2015 program year. We also emphasize that our proposal to remove 
duplicative measures from the Hospital IQR Program does not affect the 
underlying statutory requirements of adding new measures to the 
Hospital VBP, HAC Reduction, or Hospital Readmissions Reduction 
Programs. Those programs will continue to select new measures as 
required by their statutory authority. For instance, the Hospital VBP 
Program will continue to select measures that have been specified under 
the Hospital IQR Program, like the MSPB measure, and refrain from 
beginning the performance period for any new measure until the data on 
that measure have been posted on Hospital Compare for at least one 
year, as required by section 1886(o)(2)(C)(i) of the Act. We note the 
HAC Reduction and Hospital Readmissions Reduction Programs do not have 
any similar statutory requirements in this regard as the Hospital VBP 
Program. We therefore disagree that these removals could result in 
harm, undue hardship, or financial penalties to hospitals because they 
do not alter the processes associated with adopting new measures into 
the Hospital VBP, HAC Reduction, or Hospital Readmissions Reduction 
Programs. We will, however, continue to consider on a case-by-case 
basis for each new measure whether it would be appropriate to propose 
the measure for the Hospital IQR Program before proposing to use it in 
either the HAC Reduction Program or the Hospital Readmissions Reduction 
Program. We also note that we assess the reliability and validity of 
measures before proposing to adopt them into any program, and will 
continue to do so.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the Medicare Spending Per 
Beneficiary--Hospital (NQF #2158) (MSPB) measure from the Hospital IQR 
Program, beginning with the FY 2020 payment determination as proposed.
(7) Clinical Episode-Based Payment Measures
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20479 through 
20480), we proposed 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 proposed 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 final 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

[[Page 41561]]

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 proposed 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 proposed 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 final 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 final 
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 proposed 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 proposed for removal in the proposed rule.
    We invited 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.
    Comment: A number of commenters supported CMS' proposals to remove 
the clinical episode-based payment measures from the Hospital IQR 
Program. These commenters asserted that these clinical episode-based 
payment measures are of limited value to beneficiaries because without 
being tied directly to corresponding clinical quality measures, these 
measures only address resource use, and cost alone does not provide 
sufficient data for an assessment of the value of care provided. A few 
commenters also expressed support for removal of the clinical episode-
based payment measures due to their overlap with the MSPB measure. One 
commenter asserted that the clinical episode-based payment measures 
should be removed because the commenter believes they have not been 
adequately assessed to address methodological issues such as 
attribution and the lack of social risk factor adjustments.
    Response: We thank the commenters for their support, and appreciate 
the feedback on additional considerations for removing the clinical 
episode-based payment measures from the Hospital IQR Program. While we 
continue to believe that these measures as specified are valid and 
reliable as discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 
49660 through 49661; 80 FR 49664 through 49674) and the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57133 through 57142), we are finalizing 
their removal because we believe the costs outweigh the benefits 
supporting the continued use of these measures in the Hospital IQR 
Program. We also refer readers to section VIII.A.10. of the preamble of 
this final rule for a discussion of our ongoing efforts to account for 
social risk factors in the Hospital IQR Program.
    Comment: One commenter expressed particular support for CMS' 
proposal to remove the Aortic Aneurysm Procedure Clinical Episode-Based 
Payment Measure (AA Payment) from the Hospital IQR Program. The 
commenter noted that the measure was not supported by the MAP for 
adoption in the Hospital IQR Program and is not NQF-endorsed, and 
further stated their belief that due to the high rate of innovation and 
the ongoing introduction of new technologies and medical devices for 
treatment of aortic aneurysms, it is not an appropriate clinical area 
for cost measurement.
    Response: We thank the commenter for its support.
    Comment: A few commenters supported CMS' proposal to remove the 
Spinal Fusion Clinical Episode-Based Payment Measure (SFusion Payment) 
from the Hospital IQR Program. One commenter supported removal because

[[Page 41562]]

the measure data are captured within the overall hospital MSPB measure, 
which will be retained in the Hospital VBP Program. Another commenter 
specifically supported removal because the data derived from this 
clinical episode-based payment measure, in its current form, may be of 
lower utility to patients and providers since the measure is not tied 
directly with any other clinical quality measures, and thus does not 
provide a complete picture of providers' clinical effectiveness and 
efficiency.
    Response: We thank the commenters for their support.
    Comment: A few commenters did not support CMS' proposals to remove 
the clinical episode-based payment measures from the Hospital IQR 
Program because these commenters believe the MSPB measure, which is 
being retained in the Hospital VBP Program, is too broad of a measure 
to tie to specific existing quality measures and too general to be 
meaningful to providers. One commenter noted the lack of a demonstrated 
linkage between spending and outcomes under the MSPB measure. Some 
commenters also noted that the clinical episode-based payment measures 
allow hospitals to receive more precise and contextual data on 
healthcare costs, and asserted that this information cannot be derived 
from the MSPB measure. One commenter stated that the clinical episode-
based payment measures, while not currently linked to corresponding 
clinical quality measures, have the potential to improve coordination 
and transitions of care and thereby increase the efficiency of care 
across the full continuum.
    Response: We thank the commenters for their feedback. We understand 
commenters' appreciation for the more granular payment measure data 
derived from individual clinical episode-based payment measures rather 
than the MSPB measure, as we recognize that specific clinical 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. However, we also understand 
that other hospitals may not benefit from the use of individual 
clinical episode-based payment measures because they lack a sufficient 
number of cases for those measures to be calculated. Although the MSPB 
measure does not provide the same level of granularity as the 
individual clinical episode-based payment measures, we believe the most 
essential data elements are captured by and publicly reported under the 
MSPB measure in the Hospital VBP Program. As stated in the proposed 
rule, 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 specific types of 
clinical episodes. Furthermore, while we recognize the MSPB \280\ 
measure is not currently tied to a specific existing quality measure, 
we respectfully disagree with commenters' assertions that the measure 
is too general to be meaningful to providers, as we continue to believe 
the MSPB measure provides valuable information that captures a wide 
range of services provided in the inpatient hospital setting and 
immediately post-discharge, and addresses the Meaningful Measures 
Initiative priority of making care affordable, which is why we will 
continue to use this measure in the Hospital VBP Program.
---------------------------------------------------------------------------

    \280\ For a detailed discussion of our adoption of the MSPB 
measure in the Hospital IQR Program, we refer readers to the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51618 through 51627).
---------------------------------------------------------------------------

    Finally, we agree that the clinical episode-based payment measures, 
if tied to corresponding clinical quality measures, have the potential 
to improve coordination and transitions of care and thereby increase 
the efficiency of care across the full continuum, and will take these 
recommendations into consideration for future program years. However, 
as the clinical episode-based payment measures are not currently tied 
directly to other clinical quality measures, 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 receiving 
feedback to reduce cost and improve efficiency while maintaining high 
quality care.
    After consideration of the public comments we received, we are 
finalizing our proposal as proposed to remove the six clinical episode-
based payment measures from the Hospital IQR Program beginning with the 
FY 2020 payment determination: (1) Cellulitis Clinical Episode-Based 
Payment Measure (Cellulitis Payment); (2) Gastrointestinal Hemorrhage 
Clinical Episode-Based Payment Measure (GI Payment); (3) Kidney/Urinary 
Tract Infection Clinical Episode-Based Payment Measure (Kidney/UTI 
Payment); (4) Aortic Aneurysm Procedure Clinical Episode-Based Payment 
Measure (AA Payment); (5) Cholecystectomy and Common Duct Exploration 
Clinical Episode-Based Payment Measure (Chole and CDE Payment); and (6) 
Spinal Fusion Clinical Episode-Based Payment Measure (SFusion Payment).
(8) Chart-Abstracted Clinical Process of Care Measures
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20480 through 
20481), we proposed 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 the proposed rule, where we discuss the information 
collection burden associated with each of these measures with greater 
specificity.
    We invited public comment on our proposals and received the 
following general comments. Measure-specific comments are discussed 
further below.
    Comment: Several commenters supported CMS' proposal to remove the 
chart-abstracted Clinical Process of Care (CPOC) measures IMM-2, VTE-2, 
ED-1, and ED-2 because they are duplicative to measures in other 
programs and are burdensome to report. Commenters noted that measures 
should provide value in data generated in proportion to intensity of 
data collection effort. A few commenters expressed that while they 
supported the removal of these particular CPOC measures, they are not 
opposed to the use of chart-abstraction to gather data when necessary 
to achieve quality improvement goals, even though this data collection 
method represents the greatest reporting burden for hospitals. One 
commenter supported removal of the CPOC measures, but expressed concern 
about the SEP-1 Sepsis Management Bundle being the only measure subject 
to validation in the Hospital IQR Program because SEP-1 is extremely 
complex and a relatively new measure.
    Response: We thank the commenters for their support and appreciate 
the feedback regarding the potential future adoption of chart-
abstracted measures when necessary to achieve important quality 
improvement goals. We agree with commenters that removal of these four 
chart-abstracted CPOC measures from the Hospital IQR Program will

[[Page 41563]]

reduce reporting burden for hospitals, and we note that their removal 
will also reduce the costs and burden related to the validation of 
these measures, so that hospitals may direct resources to more 
meaningful measures such as the SEP-1 measure, which hospitals began 
reporting under the Hospital IQR Program with 4th quarter 2015 data. 
While we acknowledge the commenter's concern about the SEP-1 measure 
remaining as the only measure subject to chart-abstracted validation 
under the Hospital IQR Program, we note that the SEP-1 measure has been 
a part of the Hospital IQR Program for a number of years,\281\ which we 
believe has given hospitals sufficient time to become familiar with the 
reporting and validation requirements for this measure to ensure they 
are accurately reporting data for this measure. Furthermore, because 
ensuring proper and timely care for patients with severe sepsis and 
septic shock aligns with the Meaningful Measures Initiative quality 
priority of making care safer by reducing harm caused in the delivery 
of care, we believe it is appropriate to continue incentivizing proper 
reporting of sepsis measure data through our current data validation 
policies.
---------------------------------------------------------------------------

    \281\ We refer readers to the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50236 through 50241), where the SEP-1 measure was adopted 
into the Hospital IQR Program.
---------------------------------------------------------------------------

    Comment: One commenter did not support CMS' proposals to remove the 
IMM-2, ED-1, and ED-2 measures because it stated that these measures 
are part of the core measure set for the Medicare Beneficiary Quality 
Improvement Project (MBQIP) administered by HRSA, and they are both 
relevant to rural care delivery and resistant to low case volume. The 
commenter noted that removal of these measures would leave CAHs with 
very limited options in terms of relevant inpatient metrics for 
engagement in public reporting and demonstrating quality.
    Response: We acknowledge that facilitating quality improvement for 
rural hospitals and CAHs presents unique challenges and is a high 
priority under the Meaningful Measures Initiative. However, as 
discussed in the proposed rule, in assessing the continued use of these 
specific measures in the Hospital IQR Program, we determined that the 
costs associated with these measures, particularly the data collection 
burden for hospitals, outweigh the benefit of their continued use in 
the program. We note that the eCQM version of ED-2 remains available 
under the Hospital IQR Program, as well as the Promoting 
Interoperability Program's eCQM measure set for reporting by CAHs. In 
addition, we are exploring opportunities to develop more relevant 
measures and less burdensome methods to collect quality measure data 
for use by small and rural hospitals. For more information about 
quality measurement efforts for rural health settings, we refer readers 
to the MAP Rural Health Workgroup at: http://www.qualityforum.org/MAP_Rural_Health_Workgroup.aspx. For more information about the 
reporting and use of MBQIP data, including the MBQIP measure set, we 
refer readers to the National Rural Health Resource Center at: https://www.ruralcenter.org/tasc/mbqip/data-reporting-and-use.
    Comment: One commenter requested clarification about whether the 
2018 eCQM reporting requirements also means that CAHs are required to 
submit chart-abstracted measures to the Hospital IQR Program.
    Response: We clarify that under section 1886(b)(3)(B)(viii) of the 
Act, only subsection (d) hospitals are required to submit data to the 
Hospital IQR Program. CAHs are neither required to submit chart 
abstracted measure data to the Hospital IQR Program, nor subject to any 
payment reduction. CAHs participating in the Promoting Interoperability 
Programs have eCQM reporting requirements with respect to those 
programs; we refer readers to section VIII.D. of the preamble of this 
final rule where that is discussed.
(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 the proposed rule, we proposed 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)................           3,326          0.9292          0.9867          0.9965          0.0560
FY 2017...................................  2015 (Q1-Q4)................           3,293          0.9372          0.9890          0.9970          0.0494
FY 2018...................................  2016 (Q1-Q4)................           3,258          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 proposed 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 final 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

[[Page 41564]]

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 proposed 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 proposed to remove the IMM-2 measure from the 
Hospital IQR Program for the CY 2019 reporting period/FY 2021 payment 
determination and subsequent years.
    Comment: Several commenters supported CMS' proposal to remove the 
chart-abstracted IMM-2 measure because it is topped-out, although they 
acknowledged vaccination in the hospital is beneficial to protect 
against the influenza and expressed the hope that removing the IMM-2 
measure does not impact overall vaccination efforts and public health 
efforts during the influenza season. One commenter also noted that the 
IMM-2 measure does not directly measure patient outcomes.
    Response: We thank commenters for their support.
    Comment: Several commenters did not support CMS' proposal to remove 
the chart-abstracted IMM-2 measure because they believed there is still 
a need for improvement in immunization rates and the measure has 
significant public health implications. A few commenters expressed 
concern that there has been little progress toward the CDC Healthy 
People 2020 goal of 70 percent for influenza vaccinations with a 
current rate of 38.1 percent for 2014, and that once measures are 
removed, performance may deteriorate below the baseline.
    Response: We recognize and agree that influenza prevention is an 
important public health issue. However, even though, as commenters 
suggest, there is significant room for improvement in nationwide 
vaccination rates toward the national immunization goals set by CDC 
Healthy People 2020,\282\ the IMM-2 measure is a process measure that 
tracks only whether inpatients are assessed and given an influenza 
vaccination with their consent prior to discharge, if indicated. As a 
result, this measure does not directly assess patient outcomes and is 
limited to incentivizing immunization of patients admitted to an acute 
care hospital--a small subset of the total U.S. population. In 
addition, the IMM-2 measure has been topped-out for the past three 
reporting periods, indicating the rate of acute care hospitals 
assessing admitted patients for influenza vaccination is significantly 
higher than the national average. Because the IMM-2 measure, as 
specified, is limited to patients admitted to an acute care hospital, 
we do not believe continued use of this measure is likely to result in 
additional improvement in rates of influenza vaccination assessment 
among admitted hospital patients.
---------------------------------------------------------------------------

    \282\ For more information about the national immunization goals 
under CDC Healthy People 2020, we refer readers to: https://www.healthypeople.gov/2020/topics-objectives/topic/immunization-and-infectious-diseases.
---------------------------------------------------------------------------

    Comment: One commenter noted that accountable care organizations 
(ACOs) are also required to report on an influenza immunization 
measure. Accordingly, they may be able to contract with hospitals to 
incorporate processes or standing orders to immunize patients for 
influenza, and the alignment between the measures reported by ACOs and 
hospitals would reinforce incentives to improve immunization rates. 
Another commenter suggested that the IMM-2 measure should remain in the 
Program as a required chart-abstracted measure until such a time that 
CMS develops an eCQM to replace it.
    Response: We appreciate the commenter's suggestion that ACOs may be 
able to contract with hospitals to incorporate processes to immunize 
for influenza and the recommendation to develop an eCQM version of IMM-
2. We will continue to assess opportunities to address influenza 
vaccination rates outside of the hospital quality programs or through 
other types of measures.
    Comment: One commenter noted that the rationale to remove the IMM-2 
measure from the Hospital IQR Program because the HCP measure will be 
retained contradicts the rationale to remove the HCP measure from the 
IPFQR Program.
    Response: We disagree with the commenter's assertion that removal 
of IMM-2 contradicts the rationale to retain the HCP measure in the 
Hospital IQR Program. We believe that the burden of reporting the HCP 
measure is greater for IPFs compared to the relative burden for acute 
care hospitals participating in the hospital quality reporting and 
value-based purchasing programs. The entire burden of registering for 
and maintaining access to the CDC's NHSN system for IPFs, especially 
independent or freestanding IPFs, is due to one measure (HCP); whereas 
a hospital participating in the hospital quality reporting and value-
based purchasing programs, for example, must register and maintain NHSN 
access for purposes of submitting data for several, not just one, 
healthcare safety measures for the hospital quality reporting and 
value-based purchasing programs in which it participates. Furthermore, 
because the topic is addressed in other initiatives, such as state laws 
\283\ and employer programs, we believe that the costs and burden of 
this measure on IPFs, especially independent or freestanding IPFs, 
outweighs the benefit of retaining the measure in the IPFQR Program.
---------------------------------------------------------------------------

    \283\ CDC, Menu of State Hospital Influenza Vaccination Laws. 
Available at: https://www.cdc.gov/phlp/docs/menu-shfluvacclaws.pdf.
---------------------------------------------------------------------------

    Comment: A few commenters did not agree with the timing of the 
removal of IMM-2 because as proposed, the removal does not align with 
the collection and reporting of IMM-2 data. Commenters noted that 
immunization

[[Page 41565]]

data is not collected for the ``first three quarters'' of the CY 
reporting period, but rather influenza data is only collected in Q1 and 
Q4. Therefore, by removing the measure beginning with the CY 2019 
reporting period/FY 2021 payment determination, hospitals would already 
have collected and reported data in Q4 2018, which is half of the 
measure's flu season.
    Response: We recognize that the influenza season spans the winter 
months from Q4 to Q1 and those are the data used for public reporting 
purposes on the Hospital Compare website, however, data collection 
occurs on a quarterly basis for the entire calendar year.\284\ 
Therefore, if this measure were to be removed beginning with the CY 
2018 reporting period/FY 2020 payment determination, hospitals would 
already have collected data for Q4 2017 and Q1 2018, as well as Q2 2018 
and Q3 2018, but would not receive credit for reporting that 
information. Although hospitals would only have collected half of the 
data that would be used for public reporting purposes by the time of 
publication of the FY 2019 IPPS/LTCH PPS final rule, removing this 
measure beginning with the CY 2019 reporting period/FY 2021 payment 
determination would enable hospitals to get credit for the half-year of 
data already collected. Therefore, in the interest of ensuring that 
resources already expended do not go to waste, we believe that removing 
this measure beginning with the CY 2019 reporting period/FY 2021 
payment determination is most appropriate.
---------------------------------------------------------------------------

    \284\ 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.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing our proposal to remove the IMM-2 measure from the Hospital 
IQR Program for the CY 2019 reporting period/FY 2021 payment 
determination and subsequent years as proposed.
(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 (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 the proposed rule, we proposed 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 
proposed to remove the chart-abstracted version of ED-2 beginning with 
the CY 2020 reporting period/FY 2022 payment determination. We proposed 
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 final 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 the proposed rule, we proposed 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 final 
rule, one of our main goals is to move the program

[[Page 41566]]

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 proposed 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 proposed 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 proposed 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.
    Comment: A few commenters specifically supported CMS' proposal to 
remove the chart-abstracted version of the VTE-6 measure because it is 
burdensome and duplicative of other quality measures. Another commenter 
supported CMS' proposal to remove the chart-abstracted version of the 
VTE-6 measure, but disagreed with the rationale using proposed removal 
Factor 8. Instead, the commenter suggested using removal Factor 5--the 
availability of a measure that is more strongly associated with desired 
patient outcomes for the particular topic--because the chart-abstracted 
versions of VTE-1 and VTE-2 measures have previously been removed from 
the Hospital IQR Program using removal Factor 5.
    Response: We thank commenters for their support. With regard to the 
commenter's suggestion that we remove the VTE-6 measure using removal 
Factor 5 rather than removal Factor 8, because the chart-abstracted 
versions of the VTE-1 and VTE-2 measures have previously been removed 
from the Hospital IQR Program using removal Factor 5, we do not believe 
this rationale would be appropriate in this case because the eCQM 
versions of the VTE-1 and VTE-2 measures were retained in the Hospital 
IQR Program, as the ``measures more strongly associated with desired 
patient outcomes for the particular topic,'' whereas there is no 
equivalent eCQM measure to replace VTE-6 remaining in the Program. More 
generally, we note that applicability of the removal factors is not 
mutually exclusive and there can be situations where more than one 
removal factor may apply.
    Comment: One commenter suggested that if a related measure replaces 
the current VTE-6 measure, that the measure steward should modify the 
list of acceptable VTE risk assessment tools to include the ``three-
bucket'' Risk Assessment Model (RAM).
    Response: The ``three-bucket'' RAM is a tool that allows hospital 
providers to categorize patients into one of three groups based on 
whether they are at low, moderate, or high risk of getting a VTE.\285\ 
The VTE RAM is completed by the physician in a simple order sheet on 
admission, post-op, and/or transfer. We thank the commenter for its 
suggestion to modify the list of acceptable VTE risk assessment tools, 
should we propose a new VTE measure in future rulemaking to replace 
VTE-6. However, we note that at this time we have no plans to add 
additional VTE measures to the Hospital IQR Program. We will take this 
suggestion into consideration if additional VTE measures are proposed 
for addition to the Hospital IQR Program in the future.
---------------------------------------------------------------------------

    \285\ Venous Thromboembolism (VTE) Prevention in the Hospital, 
AHRQ. Available at: https://archive.ahrq.gov/professionals/quality-patient-safety/quality-resources/value/vtepresentation/maynardtxt.html.
---------------------------------------------------------------------------

    Comment: Another commenter supported CMS' proposal to remove the 
current VTE-6 measure, but recommended the measure be revised and 
readopted as an eCQM because it is a clinically important issue, 
relevant for purposes of improving the quality of care provided in the 
acute care setting, and one of few outcome measures in the Program. 
This commenter acknowledged that the cost of the chart-abstracted 
version of the VTE-6 measure outweighs the benefit of its continued 
use; however, abstraction burden would be reduced and the measure more 
cost-effective as an eCQM. The commenter suggested that an eCQM could 
capture VTE prevention process failures during the hospital stay by 
measuring an undesirable outcome as patients who are not assessed for 
VTE risk, not prescribed prophylaxis, miss one or more doses of 
prescribed prophylaxis, and develop a pulmonary embolism or VTE during 
the hospitalization. In addition, the commenter urged development of a 
risk-adjustment model for an eCQM version of the VTE-6 measure, since 
this is an outcome measure.
    Response: We will continue to assess opportunities to address this 
clinically important issue through other types of measures. We note, 
however, that a VTE-6 eCQM was previously adopted in the Hospital IQR 
Program (78 FR 50784) and subsequently removed (81 FR 57120) because a 
majority of hospitals did not have the ability to capture required data 
elements, such as diagnostic study results/reports and location of the 
specific vein in which deep vein thrombosis was diagnosed, in discrete 
structured data fields to support these eCQMs, because they are often 
found as free text in clinical notes instead. We also note that we are 
removing the VTE-6 measure because the VTE-1 and VTE-2 eCQMs 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.
    Comment: Several commenters supported CMS' proposals to remove the 
chart-abstracted versions of the ED-1 and ED-2 measures to reduce costs 
and eliminate overlapping reporting requirements between eCQM and 
chart-abstracted versions of the same measures. One commenter supported 
CMS' proposal to remove the chart-abstracted versions of the ED-1 and 
ED-2 measures, but disagreed with the rationale using proposed removal 
Factor 8. Instead, the commenter suggested using removal Factor 5--the 
availability of a measure that is more strongly associated with desired 
patient outcomes for the particular topic--because the eCQM versions of 
ED-1 and

[[Page 41567]]

ED-2 represent measures ``that is more strongly associated with desired 
patient outcomes for the particular topic.''
    Response: We thank the commenters for their support of these 
removals. We appreciate the commenters' recommendation to remove these 
measures under removal Factor 5; however, because we are finalizing our 
proposal to remove the ED-1 eCQM, Factor 5 would not apply to the 
removal of the chart-abstracted version of the ED-1 measure. We further 
believe removal Factor 8 is an appropriate removal factor for this 
measure. More generally, we note that applicability of the removal 
factors is not mutually exclusive and there can be situations where 
more than one removal factor may apply.
    Comment: One commenter supported CMS' proposal to remove the chart-
abstracted version of the ED-1 measure beginning with the CY 2019 
reporting period/FY 2021 payment determination and the chart-abstracted 
version of the ED-2 measure beginning with the CY 2020 reporting 
period/FY 2022 payment determination, as proposed, in order to complete 
the validation process for the eCQM versions of the measure and to 
compare to chart-abstracted measure results before removing the chart-
abstracted version of ED-2. Several commenters supported CMS' proposal 
to remove the chart-abstracted versions of the ED-1 and ED-2 measures, 
but encouraged CMS to remove both measures in the same year. These 
commenters argued that the patient's chart must still be reviewed for 
the ED-2 measure, even when the chart-abstracted version of the ED-1 
measure is retired and therefore, retiring one before the other does 
not reduce provider burden or workload.
    Response: We thank the commenter that supported removing the chart-
abstracted versions of the ED-1 and ED-2 measures on the proposed 
timeline and agree that it is a benefit to complete the validation 
process for the eCQM versus chart-abstracted measure before removing 
the chart-abstracted version of the ED-2 measure. We appreciate the 
commenters' position that the chart-abstracted versions of the ED-1 and 
ED-2 measures should be removed in the same year; however, we disagree 
that removing one measure before the other will not reduce provider 
burden. We acknowledge that patient charts will still need to be 
abstracted to report on the chart-abstracted version of the ED-2 
measure up to the CY 2020 reporting period/FY 2022 payment 
determination, however, the abstractors would only need to review the 
charts for the ED-2 measure elements, and not the ED-1 elements, which 
we believe will result in some reduction in provider cost.
    Comment: One commenter noted that comparison of ED-2 eCQM data with 
the ED-2 chart-abstracted data is not feasible because many 
organizations sample chart-abstracted data due to the large volume of 
patients, meaning analysis would be comparing the median time of 
approximately 90 cases per quarter versus over 10,000 eCQM cases. The 
commenter expressed concern that the median values between the two sets 
never match and can vary greatly. In addition, the specifications for 
the admit date/time do not match as the eCQM is limited to selecting a 
specific data field typically from a registration system and the chart-
abstracted version requires an abstractor to take the first documented 
time in the chart.
    Response: We thank the commenter for its feedback on the challenges 
of direct comparisons between the chart-abstracted and the eCQM 
versions of the ED-2 measure. We will continue to review and take these 
concerns into consideration.
    Comment: A few commenters did not support CMS' proposals to remove 
the chart-abstracted versions of the ED-1 and ED-2 measures because the 
Maryland Health Services Cost Review Commission uses these measures to 
incentivize progress in improving ED wait times.
    Response: We acknowledge the commenters' concern. We clarify that 
Maryland hospitals do not participate in the Hospital IQR Program, 
though they do report data pursuant to the all-payer model 
agreement.\286\ We also refer readers to the FY 2010 IPPS/LTCH PPS 
final rule (74 FR 43881) and FY 2014 IPPS/LTCH PPS final rule (78 FR 
50789) for more detailed discussions of Maryland hospitals in relation 
to the Hospital IQR Program. As discussed in the proposed rule, in 
assessing the continued use of these specific measures in the Hospital 
IQR Program, we determined that the costs associated with these 
measures, particularly the data collection burden for hospitals, 
outweigh the benefit of their continued use in the program. However, we 
note that the removal of these measures from the Hospital IQR Program 
does not preclude their use in other CMS and non-CMS quality programs.
---------------------------------------------------------------------------

    \286\ For more information regarding the Maryland All-Payer 
Model, we refer readers to: https://innovation.cms.gov/initiatives/Maryland-All-Payer-Model/.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing our proposals to remove the VTE-6 measure and the chart-
abstracted version of ED-1 beginning with the CY 2019 reporting period/
FY 2021 payment determination and the chart-abstracted version of ED-2 
beginning with the CY 2020 reporting period/FY 2022 payment 
determination, as proposed.
(9) Removal of Electronic Clinical Quality Measures (eCQMs)
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20481 through 
20484), in alignment with the Medicare and Medicaid Promoting 
Interoperability Programs (previously known as the Medicare and 
Medicaid EHR Incentive Programs) for eligible hospitals and CAHs, we 
proposed 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 proposed 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 proposed 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 final 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 final rule, for the CY 2019 reporting

[[Page 41568]]

period/FY 2021 payment determination, we discuss our proposal 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 final 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 proposed 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 proposed 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.\287\ 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.
---------------------------------------------------------------------------

    \287\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Downloads/Blueprint-120.pdf.
---------------------------------------------------------------------------

    Furthermore, we stated that 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,\288\ specific anti-thrombolytic therapy,\289\ and/or 
anticoagulation therapy \290\ 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.\291\ We 
also note that the STK-08 and STK-10 eCQMs already have been removed 
from The Joint Commission's eCQM measure set.\292\
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    \288\ Measure specifications for STK-06 are available at: 
https://ecqi.healthit.gov/ecqm/measures/cms105v6.
    \289\ Measure specifications for STK-02 and STK-05 are available 
at: https://ecqi.healthit.gov/ecqm/measures/cms104v6 and https://ecqi.healthit.gov/ecqm/measures/cms072v6.
    \290\ Measure specifications for STK-03 available at: https://ecqi.healthit.gov/ecqm/measures/cms071v7.
    \291\ http://www.strokeassociation.org/STROKEORG/AboutStroke/Impact-of-Stroke-Stroke-statistics_UCM_310728_Article.jsp.
    \292\ https://www.jointcommission.org/the_joint_commission_measures_effective_january_1_2018/.
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(c) ED-1
    We proposed 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, Admit Decision Time to 
ED Departure Time for Admitted 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 the proposed rule, we proposed 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

[[Page 41569]]

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 proposed 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.\293\ 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.
---------------------------------------------------------------------------

    \293\ http://www.infanthearing.org/ehdi-ebook/2017_ebook/1b%20Chapter1EvolutionEHDI2017.pdf.
---------------------------------------------------------------------------

(e) PC-01
    We proposed to remove the eCQM version of PC-01. Due to the 
importance of child and maternal health, we did not propose 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 the 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 proposed 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 proposed 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 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 the 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 2022 
payment determination. Ultimately, in order to be responsive to the 
previous stakeholder feedback we have received, we proposed 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 the proposed rule, we noted that 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 proposed

[[Page 41570]]

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 the 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 final 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 invited public comment on our proposal as discussed above, 
including the specific measures proposed for removal and the timing of 
removal from the program.
    Comment: Many commenters supported CMS' proposals to remove seven 
eCQMs from the Hospital IQR Program because removal: (1) Aligns with 
the Meaningful Measures framework to reduce reporting burden by 
examining measures through a lens that identifies meaningful, outcome-
based measures; (2) creates a streamlined measure set and makes it 
easier for vendors to maintain specifications for the available eCQMs; 
(3) satisfies the aims of removal Factor 8, in that the expense of 
implementing and maintaining these measures outweighs the benefit to 
the healthcare team and Medicare beneficiaries; and (4) gives hospitals 
more time and resources to accommodate new reporting requirements by 
enabling them to focus on a more specific subset of eCQMs, while still 
allowing flexibility in measure selection to best reflect patient 
populations and support internal quality improvement efforts. 
Specifically, one commenter supported reducing the number of reportable 
eCQMs, and instead consolidating some of these additional quality 
measures into cost metrics such as the Medicare Spending Per 
Beneficiary (MSPB). Another commenter supported removing these seven 
eCQMs and further recommended CMS remove all existing eCQMs as they 
believe they do not fully support the Meaningful Measures framework and 
moving towards value-based care.
    Response: We thank commenters for their support. We appreciate 
commenters' suggestions to remove additional eCQMs and to consolidate 
or replace them with more meaningful, outcomes-based measures. It is 
one of our goals to expand EHR-based quality reporting in the Hospital 
IQR Program using more meaningful measures, which we believe will 
ultimately reduce burden on hospitals as compared with chart-abstracted 
data reporting and improve patient outcomes by providing more robust 
data to support quality improvement efforts. We intend to introduce 
additional eCQMs into the program as eCQMs that support our program 
goals become available and would propose any such measures through 
future rulemaking.
    Comment: A few commenters specifically supported CMS' proposal to 
remove the AMI-8a eCQM because with a limited number of hospitals 
reporting this measure, there is a lack of significant data for 
analysis of patient care and the costs outweigh the benefits. One 
commenter supported removal of the AMI-8a eCQM, but disagreed with the 
rationale for removal asserted under proposed removal Factor 8.
    Response: We thank commenters for their support and we believe 
removal Factor 8 provides the appropriate rational for removal of the 
AMI-8a eCQM because, as some commenters observed, the lack of data 
reported on the measure precludes meaningful data analysis, and 
therefore the costs outweigh the benefits of retaining the measure.
    Comment: A few commenters specifically supported CMS' proposal to 
remove the CAC-3 eCQM because it is a ``checkbox'' measure that is 
based on documentation without evaluation of clinical quality. One 
commenter supported removal of the CAC-3 eCQM, but disagreed with the 
rationale for removal asserted under proposed removal Factor 8.
    Response: We thank commenters for their support and we believe 
removal Factor 8 provides the appropriate rational for removal of the 
CAC-3 eCQM because, as some commenters observed, it is based on 
documentation without evaluation of clinical quality, and therefore the 
costs outweigh the benefits of retaining the measure.
    Comment: A few commenters specifically supported CMS' proposals to 
remove the STK-08 and STK-10 eCQMs because they are ``checkbox'' 
measures that are based on documentation without evaluation of clinical 
quality. One commenter supported removal of the STK-08 and STK-10 
eCQMs, but disagreed with the rationale for removal asserted under 
proposed removal Factor 8. Another commenter noted that The Joint 
Commission removed the STK-08 and STK-10 eCQMs for the 2017 reporting 
year, acknowledging that their value was limited.
    Response: We thank commenters for their support and we believe 
removal Factor 8 provides the appropriate rational for removing the 
STK-08 and STK-10 eCQM s because, as some commenters observed, they are 
based on documentation without evaluation of clinical quality, and 
therefore the costs outweigh the benefits of retaining the measures.
    Comment: A few commenters specifically supported CMS' proposals to 
remove the ED-1 measures (both eCQM and chart-abstracted versions) and 
ED-2 (chart-abstracted version), as well as removal of the ED-2 eCQM 
(which was not proposed for removal) due to cost. One commenter 
explained that their system cannot pull the required times from the 
required locations (found in algorithm) so it is very difficult to get 
the true length of wait times. Despite efforts to change the system and 
educate the staff, the commenter believed these measures fail to 
improve quality of care because until patients stop misusing the ED and 
jamming up the system, the measure will not effectuate change. For 
these reasons, the commenter suggested that although the ED-2 eCQM was 
not proposed for removal, the ED-2 eCQM should also be removed.
    Response: We thank the commenters for their support of these 
removals. We appreciate the commenter's feedback regarding the 
difficulty that may be experienced in identifying true length of ED 
wait times. We will take into consideration the feedback on the ED 
eCQMs as part of measure maintenance on the ED-2 eCQM. We believe ED-2 
is clinically significant because it provides actionable information 
for quality improvement purposes such that it is important to retain 
the eCQM version in the measure set; however, we will also take into 
consideration the recommendation to remove the ED-2 eCQM from the 
Hospital IQR Program into consideration for future program years.
    Comment: One commenter encouraged CMS to exclude CAHs with low ED 
volume from reporting both chart-abstracted and eCQM versions of the 
ED-2 measure.
    Response: We appreciate the commenter's feedback, but note that 
under section 1886(b)(3)(B)(viii) of the Act, only subsection (d) 
hospitals are required to submit data to the Hospital IQR Program, not 
CAHs. However, we acknowledge that facilitating quality improvement for 
rural hospitals and small hospitals, such as CAHs, can present unique 
challenges and is a high

[[Page 41571]]

priority under the Meaningful Measures Initiative.
    Comment: A few commenters specifically supported CMS' proposal to 
remove the EHDI-1a eCQM because there is little benefit to measuring a 
widely practiced standard of care. One commenter supported CMS' 
proposal to remove the EHDI-1a eCQM, but disagreed with the rationale 
for removal asserted under proposed removal Factor 8.
    Response: We thank commenters for their support and we believe 
removal Factor 8 provides the appropriate rational for removal of the 
EHDI-1a eCQM because, as some commenters observed, it is of little 
benefit to measure a widely practiced standard of care, and therefore 
the costs outweigh the benefits of retaining the measure.
    Comment: A few commenters specifically supported CMS' proposal to 
remove the PC-01 eCQM because the chart-abstracted version of the 
measure would be retained. Another commenter specifically supported 
CMS' proposal to remove PC-01, but requested that removal be aligned 
with removal of the chart-abstracted version of the measure from the 
Hospital VBP Program in the same performance year. The commenter 
asserted the belief that if a measure is topped out or removed in one 
format, it is most likely topped out in the other format as well.
    Response: We thank commenters for their support. We appreciate the 
suggestion that removal of the PC-01 eCQM from the Hospital IQR Program 
be aligned with the removal of the chart-abstracted version of the PC-
01 measure from the Hospital VBP Program; however, we believe that 
removing the PC-01 eCQM from the Hospital IQR Program beginning with 
the CY 2020 reporting period/FY 2022 payment determination and removing 
the chart-abstracted version of the PC-01 measure from the Hospital VBP 
Program beginning with the CY 2019 reporting period/FY 2021 payment 
determination as proposed is the appropriate timeline for removal of 
each measure from their respective programs. As stated above, we are 
removing eCQMs beginning with the CY 2020 reporting period/FY 2022 
payment determination as a result of stakeholder feedback requesting 
more notice before making changes to the eCQM measure set in order to 
give hospitals additional time to select alternate eCQMs, and to modify 
workflows and systems as necessary, in the case that eCQMs they had 
previously been reporting are being removed.
    We refer readers to section IV.I.2.c.(1) of the preamble of this 
final rule for a discussion of the reasons we are removing the chart-
abstracted version of the PC-01 measure from the Hospital VBP Program 
as soon as practicable, beginning with the CY 2019 performance period 
for the FY 2021 program year. We note that the chart-abstracted version 
of the PC-01 measure will continue to be included in the Hospital IQR 
Program and therefore, removing the chart-abstracted version of the PC-
01 measure from the Hospital VBP Program will have no effect on 
hospital data collection burden whether it occurs beginning with the CY 
2019 performance period or the CY 2020 performance period.
    Comment: One commenter was neutral on the proposed removal of the 
eCQMs, but indicated that it would implement any replacement measures 
if necessary.
    Response: We appreciate the commenter's support.
    Comment: One commenter urged CMS to maintain a reasonable 
proportion of eCQMs applicable in primary care, retain eCQMs that are 
essential to Federally Qualified Health Center patient populations, and 
continue to implement measures that are relevant to medically 
underserved populations.
    Response: We acknowledge that facilitating quality improvement for 
medically underserved patient populations, such as those served by 
Federally Qualified Health Centers, presents unique challenges and 
eliminating disparities is a one of the strategic goals under the 
Meaningful Measures Initiative. For more information about Federal 
Qualified Health Centers, we refer readers to: https://www.hrsa.gov/opa/eligibility-and-registration/health-centers/fqhc/index.html. As 
stated above, it is also one of our goals to reduce reporting burden by 
expanding EHR-based quality reporting in the Hospital IQR Program using 
more meaningful measures, which we believe will ultimately reduce 
burden on hospitals as compared with chart-abstracted data reporting 
and improve patient outcomes by providing more robust data to support 
quality improvement efforts. We intend to introduce additional eCQMs 
that support our program goals as they become available.
    Comment: One commenter expressed concern that reducing the number 
of required measures may not result in reduced administrative burden 
for clinicians and staff and urged CMS to reduce the operational burden 
each specific measure places on clinicians and their medical practice 
staff by continuing to evaluate associated documentation requirements 
for measures to effectively reduce the administrative burden facing 
clinicians.
    Response: We believe in 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. 
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 
remove additional eCQMs at this time to develop an even more 
streamlined set of the most meaningful eCQMs for hospitals. Creating a 
streamlined measure set reduces burden by making it easier for vendors 
to maintain specifications for the available eCQMs and giving hospitals 
more time and resources to accommodate new reporting requirements, 
while still allowing flexibility in measures selection to best reflect 
patient populations and support internal quality improvement efforts. 
In addition, we will continue to evaluate measure specifications and 
associated documentation requirements for the eCQMs we are retaining 
and for potential future eCQMs to ensure that we are moving the Program 
forward in the least burdensome manner possible while continuing to 
encourage improvement in the quality of care provided to patients.
    Comment: Several commenters did not support removal of the seven 
eCQMs because of the burden on hospitals associated with selecting 
different measures to report if they had previously reported on the 
measures proposed for removal. The remaining measures are being 
collected, but additional work is needed to streamline data collection 
and discrete data analysis. One commenter explained that it has a few 
of the measures proposed for removal built in their system. The 
commenter expressed concern the measure removals would occur before 
hospitals have had significant time to really learn how to effectively 
build, review, and evaluate the eCQMs. A few commenters expressed 
concern that hospitals would need to fully redevelop measures, pulling 
scarce resources from ongoing quality improvement efforts and 
recommended that CMS keep the current set of eCQMs, make the program 
data public, and allow the industry to learn how to best use the 
current set of

[[Page 41572]]

measures before further modifications are made.
    Response: We understand the commenters' concern with removing eCQMs 
that have been previously reported and implemented in an existing EHR 
workflow, and we acknowledge the time, effort, and resources that 
hospitals expend on reporting these measures. However, we believe that 
removal of these seven eCQMs will be less burdensome to hospitals 
overall than continuing to keep them in the Hospital IQR Program. 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 final rule, our decision to 
remove measures from the Hospital IQR Program is an extension of our 
programmatic goal to continually refine the measure set.
    We will continue working to provide hospitals with the education, 
tools, and resources necessary to help reduce eCQM reporting burden and 
more seamlessly account for the removal/addition of eCQMs. Further, we 
will consider the issues associated with new software, workflow 
changes, training, et cetera as we continue to improve our education 
and outreach efforts for eCQM submission and validation. We note that, 
as stated in the proposed rule, these eCQMs would not be removed until 
the CY 2020 reporting period/FY 2022 payment determination as a result 
of stakeholder feedback requesting more notice before making changes to 
the eCQM measure set in order to give hospitals additional time to 
select alternate eCQMs, and to modify workflows and systems as 
necessary, in the case that eCQMs they had previously been reporting 
are being removed. We will try to be as proactive as possible in 
providing lead time about the removal of measures from the Hospital IQR 
Program measure set.
    Comment: One commenter did not support CMS' proposals to remove the 
seven eCQMs because there may be cases where individual eCQMs have 
value, even if topped out, or that there may be a risk of ``back 
sliding'' due to a shift in resources from topped-out measures to a new 
eCQM(s). Another commenter added that some evidence suggests removing 
certain technological and practice interventions leads to a reduction 
in desired clinical behavior. The commenter recommended that CMS 
monitor and evaluate how behaviors may change when eCQMs are removed 
through the process CMS finalized in its FY 2015 IPPS/LTCH PPS final 
rule.
    Response: We respectfully disagree with the commenter that the 
removal of ``topped-out'' measures will necessarily result in hospitals 
no longer focusing on maintaining a high level of performance. We have 
confidence that hospitals are committed to providing good quality care 
to patients and we do not have any indication that they will stop doing 
so in these areas for which the quality of care measured has become 
standard practice. We also note that the eCQMs we are finalizing for 
removal are either duplicative of other measures in the program, or are 
of little benefit in assessing a widely practiced standard of care, or 
are based on documentation without evaluation of clinical quality, and 
therefore the costs outweigh the benefits of retaining these measures. 
We encourage commenters to submit to CMS any evidence suggesting that 
removing certain technological and practice interventions leads to a 
reduction in desired clinical behavior.
    Comment: Some commenters did not support CMS' proposals to remove 
the seven eCQMs because they believed the remaining eCQMs do not 
represent populations for small community hospitals. A few commenters 
observed that many small and rural hospitals triage and transfer stroke 
patients (four of the remaining eCQMs), less than half have labor and 
delivery units (two of the remaining eCQMs), and few have ICUs (one of 
the remaining eCQMs). A few commenters expressed their belief that for 
most CAHs, only two of the remaining eCQMs are relevant (ED-2 and VTE-
1). Commenters reiterated the need for CMS to develop measures that are 
relevant for rural hospitals, because removing measures for which 
hospitals have a reasonable initial population results in a lack of 
options for hospitals with respect to eCQM reporting. Although 
hospitals that do not have a sufficient number of patients may submit a 
zero denominator exemption, commenters noted there is no value to 
quality or improvement efforts if hospitals are exempted. Commenters 
believe hospitals need flexibility to choose the measures that are most 
representative of their patient populations.
    In addition, a few commenters noted that reducing the number of 
available eCQMs may present a challenge for hospitals to select 
measures that are well developed in data collection, workflow, and add 
value to the patient population of the organization. Commenters urged 
CMS to continue to work with stakeholders to develop measures that 
focus on quality and safety, and to ensure that eCQMs truly provide 
comparable data across institutions to better assist our hospitals in 
understanding the methodology and ways to improve patient care.
    Response: We acknowledge that facilitating quality improvement for 
rural hospitals, small hospitals, and CAHs \294\ can present unique 
challenges and is a high priority under the Meaningful Measures 
Initiative. We understand the commenters' concern that the ability to 
submit a zero denominator exemption does not provide direct information 
for supporting quality improvement efforts and that hospitals need 
flexibility to choose the measures that are most representative of 
their patient populations. It is one of our goals to expand EHR-based 
quality reporting in the Hospital IQR Program using more meaningful 
measures, which we believe will ultimately reduce burden on hospitals 
as compared with chart-abstracted data reporting and improve patient 
outcomes by providing more robust data to support quality improvement 
efforts. We intend to introduce additional eCQMs into the program as 
ones that support our program goals become available. We also intend to 
continue to work with stakeholders to develop measures that focus on 
quality and safety. For more information about quality measurement 
efforts for rural health settings, we refer readers to the MAP Rural 
Health Workgroup at: http://www.qualityforum.org/MAP_Rural_Health_Workgroup.aspx.
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    \294\ We note that under section 1886(b)(3)(B)(viii) of the Act, 
only subsection (d) hospitals are required to submit data to the 
Hospital IQR Program. CAHs participate in the electronic reporting 
of CQMs under the Promoting Interoperability Programs.
---------------------------------------------------------------------------

    Comment: One commenter recommended that before a significant number 
of measures are eliminated or there is an increase of measures that are 
required to be reported to CMS, CMS provide an offering of measures 
that allows organizations to be able to select the measures that are 
aligned with the care given without increasing implementation and 
adoption burden. The commenter stated that one option would be to have 
a listing of all chart-abstracted measures, claims-based measures, 
hybrid measures, and eCQMs available for the organization to select 
from and all reporting agencies would accept a combination of any of 
these measures (without regard to collection method) for providers to 
achieve minimum quality compliance.
    Alternatively, similar to the Promoting Interoperability Program's

[[Page 41573]]

Objectives and Measures, the commenter suggested that CMS could 
implement a `point system' in which reporting of each quality measure 
is granted 3 points for chart-abstracted or claims-based measures, 4 
points for hybrid measures, and 5 points for eCQMs. Bonus points could 
be given (up to 5 points) for voluntary measures that are being 
considered for inclusion. With a selection choice of 20 total measures, 
a minimum of 30 points could be required to meet the quality reporting 
requirement. This could satisfy all reporting programs, including but 
not limited to, CMS' Promoting Interoperability, Hospital IQR, and 
Hospital VBP Programs, etc., as well as The Joint Commission. Overall, 
the idea would be to have the ability to choose measures that are best 
suited for each organization's quality needs, reduce the requirements 
for complex chart-abstracted and electronic measures across various 
programs if eCQMs are easily available, and allow measures to satisfy 
multiple programs with single data submissions.
    Response: We appreciate the commenter's suggestions and will take 
them into consideration as we continually refine the measure sets for 
our quality programs, as well as to improve alignment of requirements 
across our programs whenever possible.
    Comment: One commenter specifically did not support CMS' proposal 
to remove the CAC-3 eCQM because it believed that plan-of-care 
documents are critical for the continuity of care and outcomes once a 
patient is discharged from the hospital. The commenter requested 
additional clarification about how removing the plan of care document 
reduces costs associated with the policy of Meaningful Measures without 
affecting patient outcomes.
    Response: We agree that continuity of care and outcomes once a 
patient is discharged are important priorities; however, we disagree 
that the CAC-3 eCQM accomplishes these priorities. The CAC-3 eCQM 
assesses the proportion of pediatric asthma patients discharged from an 
inpatient hospital stay with a Home Management Plan of Care document 
given to the pediatric asthma patient/caregiver (83 FR 20482). We have 
previously 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, the 
delivery-of-the-care-plan document for the CAC-3 measure.\295\ In our 
effort to create a more parsimonious measure set, we assessed which 
measures were least costly to report and most effective in particular 
priority areas. We believe that the CAC-3 eCQM is among the measures 
that provide less benefit to providers and beneficiaries, relative to 
the costs of implementing, maintaining, and reporting on this measure.
---------------------------------------------------------------------------

    \295\ 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.
---------------------------------------------------------------------------

    Comment: A few commenters did not support CMS' proposal to remove 
the ED-1 eCQM because they believed the measure has significant value 
and organizations have spent the time and effort to map and use this 
eCQM.
    Response: We appreciate the commenters' position; however, we 
believe that it is appropriate to remove the ED-1 eCQM because the ED-2 
eCQM is more effective at driving quality improvements. Removing the 
ED-1 eCQM is in keeping with our goal of moving the Hospital IQR 
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 refer readers to section I.A.2. of the 
preamble of this final rule for a detailed description of those goals.
    Comment: A few commenters requested that CMS provide at least 2 
years notice prior to proposing to remove an eCQM due to the time and 
effort it takes to map an eCQM.
    Response: We specifically crafted our proposed removal of the eCQMs 
to reflect stakeholder feedback to have more time to prepare for 
changes to eCQM reporting requirements, including changes to the eCQM 
measure set. We believe removal of the seven eCQMs beginning with the 
CY 2020 reporting period/FY 2022 payment determination, with a data 
submission deadline of February 28, 2021, provides sufficient notice of 
eCQMs that will and will not be available for future reporting and 
allows hospitals enough time to implement changes associated with 
mapping new eCQMs. We will take the commenters' feedback about the 
timing of eCQM changes into consideration for future program years.
    Comment: A few commenters believed it is difficult to interpret 
boarding time (ED-2) without measuring total length of stay for 
admitted patients (ED-1); the time stamp of ``admit decision time'' 
varies by hospital, and therefore comparing ED-2 between hospitals has 
little meaning without measuring ED-1. The commenters cautioned there 
may be potential for gaming by hospitals if just the ED-2 measure is 
used because hospitals hoping to reduce their ED-2 time might pressure 
emergency physicians to not indicate a decision to admit until an 
inpatient bed is available. If the ED-1 measure is retained, CMS may be 
able to monitor this practice by assessing how ED-1 increases relative 
to ED-2. Therefore, the commenters believed that both measures are 
necessary to ensure that patients receive high-quality care and that ED 
boarding times are appropriate. Finally, the commenters believed that 
keeping both measures in the program should not add any burden since 
hospitals do not have to invest additional financial resources 
reporting ED-1 and both measures are useful for research purposes.
    Response: We understand that hospitals may need to collect the 
total length of stay for admitted patients to interpret boarding time, 
but we believe that in order to maintain a parsimonious set of the most 
meaningful measures, it is appropriate at this time to remove the ED-1 
eCQM. We note the commenter's concern about potential for gaming the 
ED-2 eCQM and we encourage stakeholders to share these concerns and any 
evidence of such instances with us.
    We respectfully disagree that removing the ED-1 eCQM would not 
reduce some burden on providers and their health IT vendors. Focusing 
on a more streamlined measure set gives hospitals and their health IT 
vendors more time and resources to accommodate new reporting 
requirements by reducing measure maintenance and specification 
requirements. As we have stated above, the ED-2 eCQM captures more 
actionable information and hospitals have greater control over 
allocating resources and aligning inter-departmental communication to 
consistently reduce the time between the decision to admit and the time 
of admission. In addition, the Hospital OQR Program includes an ED 
throughput measure which publicly reports similar data as is captured 
by ED-1.
    Comment: One commenter supported retaining the ED-1 eCQM but 
suggested refining it by adding the Emergency Severity Index to the 
measure to allow a better review of the length of time the patient is 
in the ED and to incorporate the acuity of the patient into the measure 
result.
    Response: We thank the commenter for their suggestion to add the

[[Page 41574]]

Emergency Severity Index, a five-level triage algorithm,\296\ to refine 
the ED-1 eCQM, and will take it into consideration as we continually 
refine the measure sets for our quality programs.
---------------------------------------------------------------------------

    \296\ For more information on the Emergency Severity Index, we 
refer readers to: https://www.ahrq.gov/professionals/systems/hospital/esi/index.html.
---------------------------------------------------------------------------

    Comment: One commenter did not support removal of the ED-1 eCQM 
because it is one of few eCQMs available for CAHs to meaningfully 
report on.
    Response: We acknowledge the commenter's concern about the 
sufficient availability of eCQMs, like the ED-1 eCQM, for reporting by 
CAHs. We note that under section 1886(b)(3)(B)(vii) of the Act, only 
subsection (d) hospitals are required to submit data to the Hospital 
IQR Program. CAHs are neither required to submit eCQM measure data to 
the Hospital IQR Program, nor subject to any payment reduction. 
However, CAHs participating in the Promoting Interoperability Programs 
have eCQM reporting requirements with respect to those programs using 
the same eCQM measure set, and we acknowledge that facilitating quality 
improvement for rural hospitals, small hospitals, and CAHs can present 
unique challenges and is a high priority under the Meaningful Measures 
Initiative. We are exploring opportunities to develop more relevant 
measures and less burdensome methods to collect quality measure data 
for use by small and rural hospitals. For more information about 
quality measurement efforts for rural health settings, we refer readers 
to the MAP Rural Health Workgroup at: http://www.qualityforum.org/MAP_Rural_Health_Workgroup.aspx.
    Comment: One commenter did not support CMS' proposal to remove the 
EHDI-1a and PC-01 eCQMs because the commenter represents a small 
community hospital that has already expended resources to implement 
these measures and because they are one of the few available eCQMs for 
which the hospital has a sufficient number of patients in the initial 
patient population to allow them to evaluate and maintain quality care 
and documentation.
    Response: As noted above, we acknowledge that facilitating quality 
improvement for rural hospitals, small hospitals, and CAHs presents 
unique challenges and is a high priority under the Meaningful Measures 
Initiative. We further appreciate the commenter's frustration that they 
have expended resources to implement measures that are being removed. 
It is one of our goals to expand EHR-based quality reporting in the 
Hospital IQR Program using more meaningful measures, which we believe 
will ultimately reduce burden on hospitals as compared with chart-
abstracted data reporting and improve patient outcomes by providing 
more robust data to support quality improvement efforts. We intend to 
introduce additional eCQMs into the program as eCQMs that support our 
program goals become available.
    Comment: A few commenters did not support CMS' proposal to remove 
the PC-01 eCQM because they would prefer to report the eCQM version of 
the measure rather than the chart-abstracted version. One commenter 
recommended that CMS begin requiring eCQMs rather than chart-abstracted 
measures as they are seeing significant cost-reductions associated with 
not having to chart-abstract, and instead be allowed to submit eCQMs. 
Another commenter observed that retaining the chart-abstracted version 
of this measure continues the burden of having to manually collect the 
data, in order to obtain the numerator and denominator to enter into 
the QualityNet Secure Portal and argued that retaining the PC-01 eCQM 
while removing the PC-01 chart-abstracted measure would result in 
reduced burden as healthcare systems have already mapped the PC-01 
eCQM. A third commenter noted that data collection for the PC-01 eCQM 
may reflect better performance on the measure as compared to the chart-
abstracted version due to the discrete data requirement and all patient 
reporting for the eCQM versus the sample method of using any data 
(discrete and non-discrete) for reporting the chart-abstracted version.
    One commenter did not support CMS' proposal to remove the PC-01 
eCQM because the commenter believed it could be useful to retain both 
the eCQM and chart-abstracted versions of the measure to allow for 
comparison of the data. The commenter recommended CMS work to improve 
the PC-01 eCQM so that it can replace the chart-abstracted measure in 
the future. The PC-01 eCQM could collect all the cases in the 
population rather than sampling of cases as is done with the chart-
abstracted measure. In addition, the electronic version of the measure 
would reduce the burden to the hospitals having to abstract, aggregate, 
and submit the measure data elements via the CMS web-based tool.
    Response: We acknowledge commenters' feedback regarding a 
preference to use eCQMs rather than chart-abstracted measures in the 
Hospital IQR Program. We will take these suggestions into consideration 
for future program years. We are retaining the chart-abstracted version 
of the PC-01 measure rather than the PC-01 eCQM, because due to the 
importance of child and maternal health, we believe all hospitals with 
a sufficient number of cases should be required to report data on this 
measure. We reiterate our concern that if the eCQM version were 
retained and the chart-abstracted version removed, we believe that due 
to the low volume of patients relative to total adult hospital 
population and the ability of hospitals to select other eCQMs to report 
other than the PC-01 eCQM, we would not receive enough data to produce 
meaningful analyses.
    Further, hospitals are only required to submit several aggregate 
counts for the chart-abstracted version of this measure,\297\ instead 
of the potentially numerous patient-level charts, such that submission 
of this measure places less information collection burden on hospitals 
than other chart-abstracted measures. Hospitals are able to submit 
their aggregate counts using our Web-Based Measure Tool through the 
QualityNet website. In addition, PC-01 is one of only two measures of 
child and maternal health in the Hospital IQR Program measure set, and 
is the only publicly reported measure of child and maternal health in 
the Program. As to the commenter's belief that the PC-01 eCQM may 
reflect better measure performance as compared to the chart-abstracted 
version, we note that since eCQM data are not currently publicly 
reported, the chart-abstracted version of PC-01 is currently the only 
pathway for publicly reporting these data and is therefore important to 
retain. We believe it is important to continue to provide publicly 
reported information on this important topic, but that it would be 
costly and duplicative to retain both the chart-abstracted version and 
the eCQM. As discussed in section VIII.A.4.b. of the preamble of this 
final 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 the chart-abstracted version and removing the eCQM version 
best aligns with that goal. We appreciate commenter's recommendation to 
improve the PC-01 eCQM version to replace the chart-abstracted version 
and

[[Page 41575]]

will take that into consideration for future program years.
---------------------------------------------------------------------------

    \297\ FY 2013 IPPS/LTCH PPS final rule (77 FR 53528 through 
53530).
---------------------------------------------------------------------------

    Comment: Many commenters supported CMS' proposals to remove the 
seven eCQMs beginning with the CY 2020 reporting period/FY 2022 payment 
determination as proposed, because they stated that hospitals need 
extensive time and resources to install software, map updates 
appropriately, and to successfully submit the data to CMS. In 
particular, commenters noted that the proposed eCQM removal timeline 
would ensure hospitals currently preparing to report any of the removed 
measures in 2019 would not be forced to choose new measures with a 
reduced implementation timeline.
    Response: We thank commenters for their support.
    Comment: Many commenters supported the alternative considered, for 
CMS to remove the seven eCQMs sooner beginning with the CY 2019 
reporting period/FY 2021 payment determination because they believe 
earlier removal would alleviate burden from hospitals to report and for 
health IT vendors to update and certify measures that will not be 
available to report in the future. Commenters also suggested that 
measures for which CMS determines that the costs outweigh the benefits 
should be removed as soon as possible. Several commenters noted that 
EHR vendors must rewrite all measures in CQL for this reporting period, 
which would have very limited utility before being phased out. 
Commenters added that earlier removal would prevent additional work for 
health IT vendors and hospitals to update internal reporting to the new 
measure specifications and value sets anticipated in late calendar year 
2018.
    A few commenters recommended CMS allow hospitals to use the eCQM 
Extraordinary Circumstances Exception to apply for an exception from 
the eCQM reporting requirements for the CY 2019 reporting period/FY 
2021 payment determination if the hospital cannot use four of the 
remaining eight eCQMs. One commenter believed that the request to 
lengthen the time period between changes applies to the updating of 
specifications or introduction of new eCQMs, not to the complete 
removal as there is minimal work associated with removing an eCQM 
compared to updating or implementing an eCQM.
    Response: We appreciate commenters' recommendation that we remove 
the eCQMs sooner than proposed. However, we continue to believe 
removing these eCQMs beginning with the CY 2020 reporting period/FY 
2022 payment determination is the least burdensome choice for the 
largest number of hospitals participating in the Hospital IQR Program. 
We note that since hospitals will have the same requirement of 
reporting 4 eCQMs and one quarter of data as in previous years for the 
CY 2019 reporting period/FY 2021 payment determination, as finalized in 
section VIII.A.11.d.(2) of the preamble of this final rule, there will 
be no increase in reporting burden by removing the seven eCQMs 
beginning with the CY 2020 reporting period/FY 2022 payment 
determination, while preserving greater availability of eCQMs to choose 
from for an additional year, especially for small and rural hospitals 
and any other hospitals that may benefit from the additional year to 
plan time and resources for when the eCQMs are ultimately removed from 
the program. We have previously received feedback from hospitals 
indicating they would benefit from longer timelines for implementing 
changes to eCQM requirements because hospitals may need time to adjust 
workflows and work with health IT vendors to modify support for eCQM 
implementation, data collection, and reporting. This lead time is 
particularly important for hospitals that have already developed the 
necessary IT and workflow plans to report data on the eCQMs being 
removed from the Hospital IQR Program, as retaining the measures for an 
additional year will allow those hospitals to submit data as planned 
for the CY 2019 reporting period that begins January 1, 2019 and begin 
any necessary updates for subsequent years' reporting well ahead of 
time. Therefore, in consideration of the time, effort, and resources 
already expended to report these measures that we are finalizing for 
removal and the time and resources necessary to update hospital EHR 
systems to report on different measures in future program years, we 
believe retaining these eCQMs measures in the Hospital IQR Program 
until the CY 2020 reporting period/FY 2022 payment determination is the 
most appropriate timeline for the greatest number of hospitals.
    Under the Hospital IQR Program Extraordinary Circumstances 
Exceptions (ECE) Policy, hospitals may request an exception when they 
are unable to submit required data due to extraordinary circumstances 
not within their control. We note that ECE requests for the Hospital 
IQR Program are considered on a case-by-case basis (81 FR 57182). We 
will assess the hospital's request on a case-by-case basis to determine 
if an exception is merited. Therefore, our decision whether or not to 
grant an ECE will be based on the specific circumstances of the 
hospital. For additional information about eCQM-related ECE requests, 
we refer readers to section VIII.A.16 of the preamble of this final 
rule.
    After consideration of the public comments we received, we are 
finalizing our proposal 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 as proposed. We refer readers to section VIII.D.9 of the preamble 
of this final rule where we also remove these seven eCQMs from the 
Medicare and Medicaid Promoting Interoperability Programs (previously 
known as the Medicare and Medicaid EHR Incentive Programs.
c. Summary of Hospital IQR Program Measures Newly Finalized for Removal
    In the proposed rule, we proposed to remove a total of 39 measures 
from the program, as summarized in the table in section VIII.A.5.c. of 
the preamble of the proposed rule (83 FR 20484 through 20485). We are 
finalizing the removal of those 39 measures as they are summarized in 
the table below:

                      Summary of Hospital IQR Program Measures Newly Finalized for Removal
----------------------------------------------------------------------------------------------------------------
                                                                             First payment
              Short name                        Measure name            determination year for         NQF #
                                                                                removal
----------------------------------------------------------------------------------------------------------------
                                       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.
----------------------------------------------------------------------------------------------------------------

[[Page 41576]]

 
                                             Patient Safety Measures
----------------------------------------------------------------------------------------------------------------
PSI 90...............................  Patient Safety and Adverse     FY 2020                               0531
                                        Events Composite.
CAUTI................................  National Healthcare Safety     FY 2022                               0138
                                        Network (NHSN) Catheter-
                                        associated Urinary Tract
                                        Infection (CAUTI) Outcome
                                        Measure.
CDI..................................  National Healthcare Safety     FY 2022                               1717
                                        Network (NHSN) Facility-wide
                                        Inpatient Hospital-onset
                                        Clostridium difficile
                                        Infection (CDI) Outcome
                                        Measure.
CLABSI...............................  National Healthcare Safety     FY 2022                               0139
                                        Network (NHSN) Central Line-
                                        Associated Bloodstream
                                        Infection (CLABSI) Outcome
                                        Measure.
Colon and Abdominal Hysterectomy SSI.  American College of Surgeons-- FY 2022                               0753
                                        Centers for Disease Control
                                        and Prevention (ACS-CDC)
                                        Harmonized Procedure
                                        Specific Surgical Site
                                        Infection (SSI) Outcome
                                        Measure.
MRSA Bacteremia......................  National Healthcare Safety     FY 2022                               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.
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].

[[Page 41577]]

 
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 finalized for removal in chart-abstracted form, but will be retained in eCQM form.
+ NQF endorsement removed.

6. Summary of 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 finalized for removal beginning 
with the FY 2020 payment determination in this final rule):

            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                   0351
                                  Surgical Inpatients
                                  with Serious Treatable
                                  Complications \298\.
------------------------------------------------------------------------
                     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               2881
                                  Care after
                                  Hospitalization for
                                  Acute Myocardial
                                  Infarction.
HF Excess Days.................  Excess Days in Acute               2880
                                  Care after
                                  Hospitalization for
                                  Heart Failure.
PN Excess Days.................  Excess Days in Acute               2882
                                  Care after
                                  Hospitalization for
                                  Pneumonia.
------------------------------------------------------------------------

[[Page 41578]]

 
                      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]Standardiz
                                  ed 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             0497
                                  ED Departure Time for
                                  Admitted Patients.
IMM-2..........................  Influenza Immunization.            1659
PC-01 **.......................  Elective Delivery......            0469
Sepsis.........................  Severe Sepsis and                  0500
                                  Septic 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             0497
                                  ED Departure Time for
                                  Admitted Patients.
EHDI-1a........................  Hearing Screening Prior            1354
                                  to Hospital Discharge.
PC-01 **.......................  Elective Delivery......            0469
PC-05..........................  Exclusive Breast Milk              0480
                                  Feeding.
STK-02.........................  Discharged on                      0435
                                  Antithrombotic Therapy.
STK-03.........................  Anticoagulation Therapy            0436
                                  for Atrial
                                  Fibrillation/Flutter.
STK-05.........................  Antithrombotic Therapy             0438
                                  by 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 final rule,
  we are finalizing our proposals 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.
*** We have proposed to update the HCAHPS Survey by removing the
  Communication About Pain questions effective with January 2022
  discharges, for the FY 2024 payment determination and subsequent
  years. We refer readers to the CY 2019 OPPS/ASC proposed rule
  (available at: https://www.regulations.gov/document?D=CMS-2018-0078-0001 0001).
+ NQF endorsement has been removed.

7. Summary of 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 finalized for removal beginning 
with the FY 2021 payment determination in this final rule):
---------------------------------------------------------------------------

    \298\ 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 41579]]



             Measures for the FY 2021 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.
MRSA Bacteremia................  National Healthcare                1716
                                  Safety Network
                                  Facility-wide
                                  Inpatient Hospital-
                                  onset Methicillin-
                                  resistant
                                  Staphylococcus aureus
                                  (MRSA) Bacteremia
                                  Outcome Measure.
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-
                                  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               2881
                                  Care after
                                  Hospitalization for
                                  Acute Myocardial
                                  Infarction.
HF Excess Days.................  Excess Days in Acute               2880
                                  Care after
                                  Hospitalization for
                                  Heart Failure.
PN Excess Days.................  Excess Days in Acute               2882
                                  Care 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-Level, Risk-               N/A
                                  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             0497
                                  ED Departure Time for
                                  Admitted Patients.
PC-01 *........................  Elective Delivery......            0469
Sepsis.........................  Severe Sepsis and                  0500
                                  Septic Shock:
                                  Management Bundle
                                  (Composite Measure).
------------------------------------------------------------------------
    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             0497
                                  ED 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             0438
                                  by 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.
------------------------------------------------------------------------

[[Page 41580]]

 
               Patient Experience of Care Survey Measures
------------------------------------------------------------------------
HCAHPS **......................  Hospital Consumer                  0166
                                  Assessment of                   (0228)
                                  Healthcare Providers
                                  and Systems Survey.
                                 (including Care
                                  Transition Measure).
------------------------------------------------------------------------
* Measure listed twice, as both chart-abstracted and eCQM versions.
** We have proposed to update the HCAHPS Survey by removing the
  Communication About Pain questions effective with January 2022
  discharges, for the FY 2024 payment determination and subsequent
  years. We refer readers to the CY 2019 OPPS/ASC proposed rule
  (available at: https://www.regulations.gov/document?D=CMS-2018-0078-0001 0001).
+ NQF endorsement has been removed.

8. Summary of 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 finalized for removal beginning 
with the FY 2022 payment determination in this final rule) and 
subsequent years:

   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                   0351
                                  Surgical Inpatients
                                  with Serious Treatable
                                  Complications.
------------------------------------------------------------------------
                     Claims-Based Mortality Measures
------------------------------------------------------------------------
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               2881
                                  Care after
                                  Hospitalization for
                                  Acute Myocardial
                                  Infarction.
HF Excess Days.................  Excess Days in Acute               2880
                                  Care after
                                  Hospitalization for
                                  Heart Failure.
PN Excess Days.................  Excess Days in Acute               2882
                                  Care 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]Standardiz
                                  ed 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
------------------------------------------------------------------------
PC-01..........................  Elective Delivery......            0469
Sepsis.........................  Severe Sepsis and                  0500
                                  Septic 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             0497
                                  ED 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             0438
                                  by 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.
------------------------------------------------------------------------

[[Page 41581]]

 
               Patient Experience of Care Survey Measures
------------------------------------------------------------------------
HCAHPS **......................  Hospital Consumer                  0166
                                  Assessment of                   (0228)
                                  Healthcare Providers
                                  and Systems Survey.
                                 (including Care
                                  Transition Measure).
------------------------------------------------------------------------
* Finalized 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 final rule.
** We have proposed to update the HCAHPS Survey by removing the
  Communication About Pain questions effective with January 2022
  discharges, for the FY 2024 payment determination and subsequent
  years. We refer readers to the CY 2019 OPPS/ASC proposed rule
  (available at: https://www.regulations.gov/document?D=CMS-2018-0078-0001 0001).

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 final 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, in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20489 through 20495), we invited 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 sought 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.\299\ 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.300 301 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.302 303 304
---------------------------------------------------------------------------

    \299\ James JT. A new, evidence-based estimate of patient harms 
associated with hospital care. Journal of patient safety. 
2013;9(3):122-128.
    \300\ 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.
    \301\ 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.
    \302\ 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.
    \303\ 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.
    \304\ 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.
---------------------------------------------------------------------------

    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.\305\ 
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-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.
---------------------------------------------------------------------------

    \305\ 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.

[[Page 41582]]

    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 
(TEP) 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.\306\
---------------------------------------------------------------------------

    \306\ 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.\307\
---------------------------------------------------------------------------

    \307\ 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.\308\ 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.\309\ The MAP also expressed concern regarding the potential 
unintended consequences of unnecessary interventions for patients at 
the end of life; \310\ 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.
---------------------------------------------------------------------------

    \308\ Ibid.
    \309\ Ibid.
    \310\ Ibid.
---------------------------------------------------------------------------

    The MAP further suggested that condition-specific mortality 
measures may be more actionable for providers and informative for 
consumers.\311\ 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 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 FY 
2019, after the measures have been fully specified for use with ICD-10 
data.
---------------------------------------------------------------------------

    \311\ Ibid.
---------------------------------------------------------------------------

(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

[[Page 41583]]

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. During measure development, we used 
the AHRQ Clinical Classification Software (CCS) \312\ to group 
diagnostic and procedural ICD-9 codes into the clinically meaningful 
categories defined by the AHRQ grouper. The transition of the ICD-9 
CCS-based measure specifications to the ICD-10-CM version of the CCS is 
underway. The ICD-10 to CCS map and tools for its use are currently 
available at: https://www.hcup-us.ahrq.gov/toolssoftware/ccs10/ccs10.jsp. 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.
---------------------------------------------------------------------------

    \312\ 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 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

[[Page 41584]]

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
         Data elements             Units of measurement      captured
                                                          values (hours)
------------------------------------------------------------------------
Heart Rate.....................  Beats per minute.......             0-2
Systolic Blood Pressure........  mmHg...................             0-2
Temperature....................  Degrees (Fahrenheit or              0-2
                                  Celsius).
Oxygen Saturation..............  Percent................             0-2
Hemoglobin.....................  g/dL...................            0-24
Platelet.......................  Count..................            0-24
White Blood Cell Count.........  Cells/mL...............            0-24
Sodium.........................  mEq/L..................            0-24
Bicarbonate....................  mmol/L.................            0-24
Creatinine.....................  mg/dL..................            0-24
------------------------------------------------------------------------

    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: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods.html.
    We invited 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 also invited 
public comment on other aspects of the measure. Specifically, we sought 
public comment on the following: (1) Feedback about the 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.

[[Page 41585]]

    Comment: Several commenters supported future implementation of the 
hybrid version of the Hospital-Wide Mortality Measure over the claims-
only version of the measure. Many commenters commended use of EHR data 
in the hybrid version of the measure.
    Response: We thank commenters for their support of the hybrid 
version of the measure.
    Comment: One commenter supported future implementation of the 
claims-only version of the measure, expressing concern that hybrid 
measures have not been sufficiently validated. Another commenter 
supported the claims-only version, citing the need for improvements to 
the process of submitting EHR data elements using the Quality Reporting 
Data Architecture (QRDA) I file format prior to implementation of 
hybrid measures.
    Response: We thank commenters for their support of the claims-only 
version of the measure. However, in response to concerns that the 
hybrid measures have not been sufficiently validated, we note that 
several condition-specific hybrid measures (Hybrid Hospital 30-Day, 
All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Acute 
Ischemic Stroke with Risk Adjustment for Stroke Severity (NQF #2877) 
and Hybrid Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
(RSMR) Following Acute Myocardial Infarction (AMI) (NQF #2473)), and 
the Hybrid Hospital-Wide Readmission Measure with Claims and Electronic 
Health Record Data (NQF #2879), have all been tested and validated. 
Their validity and reliability have been reviewed by the NQF and the 
measures have been endorsed. The Hybrid Hospital-Wide Readmission 
Measure was implemented in the Hospital IQR Program as a voluntary 
measure for the CY 2018 reporting period. Hospitals that voluntarily 
participate will submit 13 EHR data elements for adult inpatients 
discharged between January and June of 2018. These data elements are 
nearly identical to those required for the Hybrid Hospital-Wide 
Mortality Measure. The results from the voluntary reporting will assist 
in confirming the feasibility of submitting the required data elements. 
In addition, we continue to work to improve the process of EHR data 
submission using the QRDA I file format, including the availability of 
the Pre-Submission Validation Application (PSVA) tool to perform test 
and production QRDA I file conformance checks.
    Comment: Several commenters supported the proposed voluntary 
reporting of the Hybrid HWM measure following endorsement by the NQF.
    Response: We thank commenters for their support. As stated in the 
proposed rule (83 FR 20490) and above, we plan to submit both versions 
of the measure to NQF for endorsement proceedings as part of the 
Patient Safety Committee as early as FY 2019, after the measures have 
been fully specified for use with ICD-10 data. We have not yet 
determined the implementation pathway or timeline for these measures. 
We will consider these suggestions if we move forward with proposing to 
include either or both of these measures in the Hospital IQR Program in 
the future through rulemaking.
    Comment: Several commenters proposed revisions to the measure 
methodology, including merging surgical and non-surgical cancer 
service-line divisions and surgical and non-surgical orthopedic 
divisions.
    Response: We thank commenters for their feedback. By design, the 
measure separates surgical and non-surgical admissions in order to 
account for differences in mortality risk between surgical and non-
surgical patients. Analyses performed during measure development showed 
that even for patients with the same discharge condition, patient risk 
of death was strongly affected by whether a major surgical procedure 
was performed during hospitalization. Patients undergoing major 
surgical procedures typically have different risk of mortality than 
patients admitted with the same discharge condition but who do not 
undergo a major surgical procedure. For example, a patient admitted for 
a hip fracture (CCS 226) who undergoes a major surgical procedure such 
as hip replacement to treat their fracture is likely healthy enough to 
have the surgery, as compared to patients who are so ill that they 
either would not survive or choose not to risk undergoing surgery. In 
this example, surgery is associated with a lower observed mortality 
rate. The measure has more accurate risk adjustment, and thereby is 
better at accounting for the underlying risk of the population that the 
hospital serves, when the surgical and non-surgical patients are 
separated into distinct risk models.
    To demonstrate this further, we note that in the case of surgical 
and non-surgical orthopedics, as well as surgical and non-surgical 
cancer, the hospital-level risk-standardized mortality rates (RSMR) are 
quite different. For example, for non-surgical cancer, the median RSMR 
in the development sample was 2.5 percent (range 1.3 percent-6.0 
percent) for surgical cancer, compared to 19.3 percent (range 9.3 
percent-33.7 percent) for non-surgical cancer. Furthermore, prior 
experience with other quality measures suggests that hospitals do not 
perform equally well across different service lines, thus it benefits 
hospitals and consumers to provide quality information on more narrow 
cohorts. Therefore, in order to make this measure useful in terms of 
quality improvement and patient choice, we designed the measure to 
report the surgical and non-surgical divisions separately.
    Further, we note that some commenters observed that cancer care is 
complex and often includes surgical procedures, and advocated for both 
surgical and non-surgical cancer divisions to better capture cancer 
patients and allow providers, and possibly consumers, to view more 
detailed quality information related to cancer.
    Comment: Multiple commenters expressed concern about the 
limitations of claims data including effectiveness in quality 
measurement. One commenter suggested that the measure should not 
include claims data and instead be specified entirely using EHR data. 
One commenter recommended that CMS use specialty specific registry data 
in the measure.
    Response: We thank commenters for their feedback. Administrative 
claims data are routinely submitted by hospitals for quality 
measurement and are frequently audited by CMS. This allows for 
relatively accurate data about patients' acute and chronic conditions 
while also preventing undue burden on providers to submit additional 
clinical information. In addition, claims-based measures continue to 
provide important quality information that cannot currently be captured 
using EHR data alone. For example, claims data can be linked across 
care settings to gather complete risk factors for patients. Claims data 
also enable tracking patient outcomes such as deaths that occur outside 
of a single care setting, and provide a reliable and valid source of 
information that supports the development of measures not currently 
feasible using EHR data alone. For these reasons, we believe that 
claims-based measures will continue to play a vital role in quality 
assessment. In addition, for claims-based outcome measures (procedure-
specific mortality and readmission measures) we have previously 
developed, we have found measure scores calculated from data derived 
from medical records correlate highly with measure scores calculated

[[Page 41586]]

with claims.\313\ \314\ \315\ \316\ These studies support the use of 
claims for outcomes such as mortality.
---------------------------------------------------------------------------

    \313\ Krumholz HM, Wang Y, Mattera JA, et al. An administrative 
claims model suitable for profiling hospital performance based on 
30-day mortality rates among patients with an acute myocardial 
infarction. Circulation. 2006 Apr 4;113(13):1683-701.
    \314\ Krumholz HM, Lin Z, Drye EE, et al. An administrative 
claims measure suitable for profiling hospital performance based on 
30-day all-cause readmission rates among patients with acute 
myocardial infarction. Circ Cardiovasc Qual Outcomes. 2011 Mar 
1;4(2):243-52.
    \315\ Keenan PS, Normand S-LT, Lin Z, et al. An administrative 
claims measure suitable for profiling hospital performance on the 
basis of 30-day all-cause readmission rates among patients with 
heart failure. Circ Cardiovasc Qual Outcomes. 2008 Sep;1(1):29-37.
    \316\ Bratzler DW, Normand S-LT, Wang Y, et al. An 
administrative claims model for profiling hospital 30-day mortality 
rates for pneumonia patients. PLoS One. 2011 Apr 12;6(4):e17401.
---------------------------------------------------------------------------

    At this time it is not feasible to develop and implement an eCQM 
measuring the outcome of mortality 30-days after admission to an acute 
care hospital. Deaths recorded as outcomes in CMS' claims-based 
mortality measures are derived from the Medicare Enrollment Database 
which provides information about deaths among Medicare 
beneficiaries.\317\ Hospitals' EHRs do not include information about 
deaths that occur outside of the hospital and therefore cannot be used 
in place of Medicare enrollment data. In addition, hospital claims 
provide a standardized and audited assessment of patients' principal 
discharge diagnoses, which are the basis for the service-line division 
assignment in the HWM measures. Therefore, claims and administrative 
data continue to provide critical information to support these quality 
measures.
---------------------------------------------------------------------------

    \317\ Department of Health and Human Services Office of the 
Assistant Secretary for Planning and Evaluation (ASPE), Centers for 
Medicare & Medicaid Services: Enrollment Database. Available at: 
https://aspe.hhs.gov/centers-medicare-medicaid-services.
---------------------------------------------------------------------------

    Regarding the use of specialty registry data, we agree that 
registry data are a useful source of data to consider, in particular 
because registry data address care for all patients (not limited to 
Medicare fee-for-service patients). Registry data, however, are 
generally reported on a voluntary basis among registry participants 
only, and accordingly are not currently an available source of 
measurement data from all hospitals. However, we will continue to 
consider the potential use, feasibility, and availability of registry 
data for future measures.
    Comment: Several commenters expressed concern about risk 
adjustment, including how the measure accounts for various mortality 
risks associated with different procedures performed at a hospital. In 
addition, commenters noted that the measure includes a broad range of 
conditions and procedures associated with widely varying mortality 
risk. Commenters expressed concern that these shortcomings could mask 
preventable hospital harms and lead to inaccurate performance 
comparisons. One commenter requested a better explanation of the risk 
adjustment utilized within each of the service line divisions.
    Response: We thank commenters for their feedback. We agree that one 
of the key challenges in developing a hospital-wide mortality measure 
is to adequately account for the varying risk of mortality for the 
different populations of patients admitted to hospitals and to 
adequately adjust for these differences when comparing performance 
across hospitals. However, we feel our risk adjustment approach 
appropriately accounts for these differences.
    The measure addresses risk adjustment in several ways. First, since 
the risk of death differs between surgical and non-surgical patients, 
the measure separates patients who underwent major surgical procedures 
from those who did not. The measure then further divides the surgical 
and non-surgical groups into a total of 13 service-line divisions 
(Surgical divisions: General, Orthopedics, Cardiac, Cancer, and 
Neurosurgery; Non-surgical divisions: Cardiac, Infectious Disease, 
Pulmonary, Gastrointestinal, Renal, Orthopedic, Neurology, and Cancer). 
The surgical divisions are created by combining clinically related 
groups of procedures, considering the risk of death and the reason for 
admission (the principal discharge diagnosis) during the combination 
step. For the non-surgical division, the measure categorizes patients 
based on medical conditions that would typically be cared for by the 
same group of clinicians, as well as based on the risk of death.
    To further account for differences in risk among patients, the 
measure adjusts for both patient-level factors (the medical condition 
of the patient when admitted to the hospital, accounted for by 
adjusting for illnesses and diagnoses the patient has when admitted) 
and hospital service mix differences (the types of conditions/
procedures cared for by the hospital). Each of the 13 service-line 
divisions is risk-adjusted independently of the others, which helps 
account for differences in the mortality risks of procedures in the 
separate divisions. The hybrid version of the measure uses the same 
service-line division risk models, patient case mix, and hospital 
service mix, but adds an additional 10 clinical risk variables 
extracted from the EHR. Although no measure is perfectly able to assess 
each harm or death, the detailed approach to risk adjustment of 
individual groups of procedures and conditions is intended to prevent 
inaccurate performance assessment by this measure.
    The work described above was done with the careful and systematic 
input of clinicians. In addition, the steps described above were 
presented to the measure developer's Patient & Family Caregiver 
workgroup, technical and clinical workgroup, and the TEP, all of whom 
generally supported the approach. For more details about the risk-
adjustment approach, we refer readers to the measure methodology report 
on the CMS website at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods.html.
    Comment: Several commenters expressed concern that the measure does 
not adjust for social risk factors and that no analysis of their impact 
on the measures was provided. In addition, some commenters recommended 
additional research on the community-level factors described in the 
report by the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE).\318\
---------------------------------------------------------------------------

    \318\ 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.
---------------------------------------------------------------------------

    Response: We thank commenters for their feedback. As part of our 
plans to submit this measure to the NQF for endorsement, we intend to 
provide the results of measure testing that includes assessing the 
impact of social risk factors on the measure results, as required for 
all measures seeking NQF endorsement. Specifically, NQF requires 
developers to present the results of analyses examining the impact of 
social risk factors on the measure outcome, as well as the degree to 
which any association is occurring at the patient-level or hospital-
level.\319\ We understand that the relevant NQF committees will examine 
the evidence and determine whether the measure is suitable for 
endorsement with or without adjustment for social risk

[[Page 41587]]

factors, including consideration of potential community-level factors. 
This NQF analysis would be taken into consideration before we move 
forward with proposing either or both of these measures for inclusion 
in the Hospital IQR Program in future rulemaking.
---------------------------------------------------------------------------

    \319\ National Quality Forum (NQF). ``A Roadmap for Promoting 
Health Equity and Eliminating Disparities: The Four I's for Health 
Equity.'' Available at: https://www.qualityforum.org/Publications/2017/09/A_Roadmap_for_Promoting_Health_Equity_and_Eliminating_Disparities__The_Four_I_s_for_Health_Equity.aspx.
---------------------------------------------------------------------------

    Comment: One commenter recommended educating the public about where 
to obtain information about hospital performance on the measure in 
order to ensure that the measure is useful once results are made 
public.
    Response: We thank the commenter for the suggestion. Should we 
decide to move forward with proposing either or both of these measures 
for inclusion in the Hospital IQR Program in future rulemaking, the 
results will be publicly reported on the Hospital Compare website.
    Comment: One commenter requested clarification on how the term 
``average'' is derived and the usage of the term by the measure 
developer.
    Response: The term ``average'' is employed in three different 
circumstances. First, when identifying outlier hospitals, we use the 
unadjusted national average mortality rate, which is calculated as the 
total number of deaths divided by the total number of patients; 
hospitals' risk-standardized mortality rates are considered outliers if 
they are statistically significantly different from the unadjusted 
national average mortality rate. Secondly, in calculating the hospital 
risk-standardized mortality rate, we multiply the standardized 
mortality ratio (predicted mortality/expected mortality) by the same 
unadjusted national average mortality rate, which is calculated as the 
total number of deaths divided by the total number of patients. Lastly, 
to calculate the denominator of the standardized mortality ratio 
(expected mortality), we determine the number of deaths among that 
hospital's patients given the patients' risk factors and the average of 
all hospital-specific effects in the nation. Specifically, for each 
patient in the data-set, the estimated regression coefficients are 
multiplied by the observed characteristics and the average of the 
hospital-specific intercepts is added to this quantity. In the 
hierarchal logistic regression model, we modelled hospital specific 
intercept as deviation from the average which is set to 0, therefore 
some hospital specific intercepts will be above 0 while some hospital 
specific intercepts will be below 0. For more details, we refer readers 
to the measure methodology report on the CMS website at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods.html.
    Comment: Multiple commenters submitted suggestions about how CMS 
should implement the hybrid version of the HWM measure, including: (1) 
Conducting a pilot run of data submission prior to implementation; (2) 
testing the use of EHR data to risk-adjust the current condition-
specific mortality measures; (3) implementing a voluntary reporting 
period; and (4) publicly reporting service line data.
    Response: We thank commenters for their suggestions. We will take 
all feedback under consideration as we determine future use of these 
measures in the Hospital IQR Program.
    Comment: Some commenters expressed concern about potential 
unintended consequences of the measure, including incentivizing 
hospitals to withhold appropriate end-of-life care and penalizing 
hospitals for mortality that is not related to quality. Several 
commenters believed that the exclusions, as currently specified, could 
mask preventable hospital harms and could be improved. One commenter 
suggested a four-day hospice enrollment window instead of the 2-day 
window currently specified.
    Response: We thank commenters for their feedback. We are committed 
to examining and avoiding unintended consequences in relation to 
patient perspectives, and we agree that mortality is not an appropriate 
assessment of quality for patients or families who have elected to 
enroll in hospice and are at the end of life.
    During measure development, we sought to identify and exclude cases 
in which survival was not the primary goal and in which hospitals 
cannot influence survival through quality of care. This was achieved by 
excluding patients who had enrolled in hospice within the past 12 
months of the index hospitalization, upon admission, or within two days 
after admission to the hospital. Most patients who have enrolled in 
hospice do not have the same goals of care as those who are not 
enrolled. In addition, based on feedback from stakeholders and experts 
consulted during measure development, it is likely that for most 
patients and/or families who discussed and agreed to enroll in hospice 
within two days of admission, survival is not the primary goal due to a 
condition that was present on admission and therefore, mortality should 
not be used as a marker of quality care. Longer enrollment windows were 
considered in our discussions with experts, patients, and families. 
However, the TEP felt that the risk of excluding patients who enrolled 
in hospice care due to the outcome of poor quality of care provided by 
a hospital outweighed the potential benefit of extending the window for 
the exclusion of these patients. We recognize that there is no single, 
correct approach to identifying patients at the end-of-life and the use 
of hospice enrollment does not perfectly differentiate between patients 
who have a goal of survival from those who do not. Similarly, we cannot 
perfectly distinguish every preventable harm. However, we feel the 
current approach accurately identifies most patients we intend to 
assess through the HWM measure and errs on the side of protecting a 
patient's choice to defer aggressive treatment at the end of life.
    Comment: Several commenters expressed concerns that this measure 
was developed using ICD-9 codes that are not indicative of the current 
healthcare environment which utilizes ICD-10 codes. One commenter noted 
there is no longer a specific diagnosis code for ``admission for 
rehab'' in the ICD-10 codes.
    Response: We thank commenters for their feedback. The measures are 
currently being respecified with ICD-10 data, prior to submission to 
NQF for endorsement. Identification of admissions for rehabilitation 
and other exclusion criteria, surgical and non-surgical service-line 
division placement, and risk adjustment will be updated using ICD-10 
data.
    Comment: One commenter sought clarification in the cross-over of 
CEHRT to submit information for hybrid measures.
    Response: We have not yet determined any future implementation 
pathway or timeline for this measure. Any proposal to adopt the Hybrid 
HWM measure into the Hospital IQR Program measure set would be made 
through future rulemaking. Should we decide to move forward with 
proposing to include the Hybrid HWM measure into the Hospital IQR 
Program in the future, we will consider the certification requirements 
applicable to hybrid measures at that time.
    Comment: Some commenters had concerns about the validity of the 
hybrid version of the measure given the small sample size it would have 
as a voluntary measure should only a fraction of the nation's acute 
care hospitals participate.
    Response: We thank the commenters for their feedback. The Hybrid 
Hospital-Wide Readmission measure, which uses a nearly identical set of 
EHR data elements, was implemented as a voluntary measure in the 
Hospital IQR Program for the reporting period from January 2018 through 
June 2018. We are

[[Page 41588]]

actively compiling stakeholder feedback on the electronic 
specifications for the EHR data elements, their extraction, and on the 
data submission process. Because the Hybrid HWM measure uses a nearly 
identical set of data elements, we believe the experience gained 
through the voluntary reporting of the Hybrid HWR measure would 
potentially facilitate implementation of the Hybrid HWM measure should 
we move forward with proposing to include the measure in the Hospital 
IQR Program through future rulemaking.
    Comment: Several commenters did not believe the HWM measure is 
sensitive enough to accurately capture hospital quality. They noted 
that there are few performance outliers identified and questioned 
whether this measure would provide actionable data to inform quality 
improvement for hospitals or meaningful information to patients about 
the quality of hospitals. One commenter suggested that preventable 
mortality represents only a fraction of the overall mortality rates and 
that the simple variation in rates might be due to non-modifiable 
factors rather than quality of care. To address this variation, they 
suggested that the measure score improvement should be reported rather 
than the measure rate alone.
    Response: Although there are not many statistical performance 
outliers, we believe that the measure can still convey meaningful 
performance information. Using 95 percent confidence interval 
(uncertainty) estimates to categorize hospital outliers is conservative 
by design, meaning that the measure is designed to only declare a 
hospital as an outlier with a very high degree of certainty. But the 
overall distribution of mortality rates show meaningful variation. We 
found that the claims-only overall hospital risk-standardized mortality 
rates ranged from 5.0 percent to 9.8 percent with a median risk-
standardized mortality rate of 7.4 percent.\320\ This variation 
provides information about the range of quality among hospitals and 
will allow hospitals and consumers to see if a hospital is at the high 
end or the low end of the range. We believe reporting hospital 
mortality scores will improve transparency and promote quality 
improvement efforts. This measure identified 2.6 percent of hospitals 
as outliers, which is consistent with other CMS condition- and 
procedure-specific measures that display a range of 2.5 percent to 11.2 
percent of hospitals as outliers.
---------------------------------------------------------------------------

    \320\ Claims-Only Hospital-Wide (All-Condition, All-Procedure) 
Risk-Standardized Mortality Measure: Measure Methodology for Public 
Comment. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods.html.
---------------------------------------------------------------------------

    Should we move forward with proposing to include either of these 
measures for inclusion in the Hospital IQR Program in the future, in 
advance of public reporting, hospitals would receive confidential, 
service-line division and patient-level data to support quality 
improvement. This information would allow for thorough investigation of 
patient scenarios that resulted in mortality and, therefore, that 
contributed to each division-level standardized mortality ratios, which 
are rolled up into the overall risk-standardized mortality rate. We 
will continue to consider the best approach for communicating 
meaningful variation in performance and optimizing the usefulness of 
this measure for the public. This includes consideration of reporting 
improvement in scores in addition to hospitals' performance in a single 
measurement period.
    Comment: Several commenters did not support the inclusion of either 
version of the HWM measure in the Hospital IQR Program because they 
felt these measures are very broad and require more testing. Some 
commenters felt this measure would fail to enhance quality improvement 
efforts and noted that the condition-specific measures in the Hospital 
VBP Program are more actionable.
    Response: We appreciate commenters' interest in the information 
provided by the narrower condition-specific measures, but believe that 
while the Hospital-Wide Mortality measure assesses a broad population, 
it serves an important complementary purpose. In contrast to the 
condition-specific measures, a hospital-wide measure provides a picture 
of a hospital's overall quality and thereby complements the condition-
specific mortality measures. The measure underwent significant testing 
of the risk variables, performance of the risk models for each service-
line division, and the overall measure score. In addition, we compared 
hospital-level results from the claims-only measure with the Hybrid 
Hospital-Wide Mortality measure to establish the validity of the 
claims-only risk model. All testing results support the reliability and 
validity of the measure construct and methodology.
    In addition, the Hospital-Wide Mortality measure was developed to 
broadly measure the quality of care across hospitals, including the 
quality of care in smaller volume hospitals that might lack sufficient 
numbers of patients to be included in condition-specific mortality 
measures. Mortality is an important health outcome that is meaningful 
to patients and providers, and updated estimates suggest that more than 
400,000 patients die each year from preventable harm in hospitals.\321\ 
In addition, this measure captures a broader group of patients than 
those included in condition- and procedure-specific mortality measures.
---------------------------------------------------------------------------

    \321\ James JT. A new, evidence-based estimate of patient harms 
associated with hospital care. Journal of Patient Safety. 
2013;9(3):122-128.
---------------------------------------------------------------------------

    The Hospital-Wide Mortality Measure was also designed to support 
quality improvement efforts. By giving a hospital-wide quality score, 
the measure provides hospitals and the public with an overall 
evaluation of a hospital's performance on an important outcome. The 
Hospital-Wide Mortality measure, both with respect to the overall score 
as well as the division-level results, provides actionable information 
to hospitals that can support important quality improvements. Should we 
move forward with proposing to include either or both the hybrid or 
claims-based version of these measures for inclusion in the Hospital 
IQR Program, hospitals would receive detailed service-line and patient-
level data along with their hospital-wide mortality performance scores. 
This patient-level detail can help a hospital decide where to focus its 
quality improvement efforts.
    We thank the commenters and we will consider their views as we 
develop future policy regarding the potential inclusion of claims-only 
hospital-wide mortality measure and hybrid hospital-wide mortality 
measure with electronic health record data in the Hospital IQR Program.
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.\322\ While noting that

[[Page 41589]]

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.\323\
---------------------------------------------------------------------------

    \322\ 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.
    \323\ 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,\324\ 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.\325\ 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.
---------------------------------------------------------------------------

    \324\ 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.
    \325\ Lee LA, Caplan RA, Stephens LS, et al. Postoperative 
opioid-induced respiratory depression: a closed claims analysis. 
Anesthesiology. 2015; 122(3):659-665.
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    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.\326\ Notably, hospitals that use opioids most frequently 
have increased adjusted risk of severe opioid-related adverse 
events.\327\ 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.\328\ 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.
---------------------------------------------------------------------------

    \326\ 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.
    \327\ Ibid.
    \328\ 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.329 330 
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 or other symptoms of opioid overdose. 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.
---------------------------------------------------------------------------

    \329\ 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.
    \330\ 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) \331\ in multiple hospitals, using multiple EHR systems. The MAT 
is a web-based tool used to develop the electronic measure 
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.
---------------------------------------------------------------------------

    \331\ 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 the 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).

[[Page 41590]]

    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.\332\ 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.\333\ We plan to submit this measure for NQF endorsement as 
part of the Patient Safety Committee in November 2018.
---------------------------------------------------------------------------

    \332\ 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.
    \333\ 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 invited public comment on the possible future inclusion of the 
Hospital Harm--Opioid-related Adverse Events eCQM in the Hospital IQR 
Program. Specifically, we sought 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 sought 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.
    Comment: Several commenters expressed either outright or 
conditional support for the Hospital Harm--Opioid-Related Adverse 
Events Electronic Clinical Quality Measure (eCQM). Several commenters 
believed this measure would be useful and important.
    Response: We thank the commenters for their support.
    Comment: A number of commenters recommended various implementation 
pathways for the measure. Many commenters recommended that reporting on 
the Hospital Harm--Opioid-Related Adverse Events Electronic Clinical 
Quality Measure (eCQM) be made voluntary prior to mandatory reporting 
in either the Hospital IQR or Promoting Interoperability Programs, 
specifically until validity and feasibility of the measure has been 
proven, and the NQF has endorsed it. Several commenters recommended 
that CMS incorporate this measure into the eCQM measure set from which 
hospitals select four eCQMs to report, while one commenter specifically 
supported its inclusion in the Hospital IQR and PI Programs as a 
mandatory measure. A few commenters noted that if this measure is 
implemented, measure submission should count toward one of eCQMs 
required for the PI Program.
    One commenter suggested that CMS limit the use of this measure to 
public reporting and quality improvement programs, rather than value-
based purchasing programs. A few commenters recommended that CMS 
complete measure specification and testing prior to implementation and 
consider implementation only after the 2018 eCQM annual updates. 
Several commenters suggested that CMS provide education to hospitals on 
how to utilize this measure to improve patient safety. A few commenters 
asked for clarification on whether health IT developers will be 
required to support or certify the measure if it is introduced on a 
voluntary basis.
    Response: We thank commenters for their feedback and we will 
consider all suggestions for measure implementation and stakeholder 
outreach for future program years. We will complete specifications for 
the measure and measure validity and reliability testing prior to 
proposing this measure for future inclusion in the Hospital IQR 
Program. We have performed measure testing in multiple hospitals with 
various EHR systems to establish the feasibility of this measure as 
well as the validity of the data elements and the numerator. Additional 
testing is currently being performed to provide information about the 
feasibility and data element validity based on output from the Measure 
Authoring Tool (MAT) in multiple hospitals, using multiple EHR systems. 
We reiterate that we intend to submit this measure to the NQF for 
endorsement as part of the Patient Safety Committee as early as FY 
2019. We will continue to engage stakeholders in the development of 
this measure. Any proposals for future adoption of this measure will be 
announced through rule-making.
    Comment: Commenters raised concerns that the measure does not 
capture opioid-related adverse events that occur outside of the 
hospital. One commenter expressed concern that including naloxone 
administered in the hospital to reverse a narcotic overdose that 
occurred outside of the hospitals would place unwarranted blame on 
hospitals.
    Response: We thank commenters for sharing their concerns. This 
measure is not intended to measure opioid-related adverse events that 
occur outside of the hospital. This Hospital Harm eCQM focuses 
specifically on in-hospital opioid-related adverse events, rather than 
opioid overdose events that happen in the community. For naloxone 
administration to be considered a harm, the measure requires 
documentation of hospital-administered opioids in the

[[Page 41591]]

first 24 hours of a hospitalization (including patients treated in the 
emergency department or who are in observational status who become 
inpatient), with the intent to capture only naloxone administrated due 
to overuse of narcotics that were given in the hospital and to exclude 
naloxone administered to reverse community-acquired opioid overdoses. 
The measure is designed to focus on the quality of care and to capture 
a specific harm: Naloxone given due to opioid administration that 
occurred within the hospital.
    Comment: Commenters suggested several changes to the measure 
specifications, including excluding instances in which naloxone is 
administered by an anesthesiologist, or to patients with opioid 
sensitivity. Two commenters suggested including only patients with 
documented respiratory failure in presence of narcotic administration. 
Commenters also advised considering stratification rather than risk 
adjustment, particularly for chronic opioid users.
    Response: We thank commenters for their recommendations regarding 
potential measure exclusions and stratification. We aim to be as 
inclusive as possible in defining a measure cohort to ensure the 
measure will have an impact on the broadest possible group of patients 
at risk of the outcome. We also intend to minimize the complexity of 
the measure specifications to reduce burden to hospitals when 
implementing the measure. The measure does exclude instances in which 
naloxone is administered in the operating room where it could be part 
of the sedation plan administered by an anesthesiologist. Regarding the 
comments on including only patients with documented respiratory failure 
in presence of narcotic administration, we believe that using EHR data 
to capture respiratory failure may not be consistently feasible or 
consistent across different hospital systems. Given that naloxone is 
primarily administered when a patient has severe responses to an opioid 
overdose, it has been used as a surrogate for important adverse 
reactions and is more feasible to capture.\334\ We will continue to 
consider the suggested modifications to the cohort during measure 
testing.
---------------------------------------------------------------------------

    \334\ Agency for Healthcare Research and Quality. (2016). 
National Scorecard on Rates of Hospital-Acquired Conditions 2010-
2015: Interim Data from National Efforts to Make Health Care Safer. 
Retrieved from: https://www.ahrq.gov/professionals/quality-patient-safety/pfp/2015-interim.html.
---------------------------------------------------------------------------

    Regarding commenters' suggestions about measure stratification and 
risk adjustment, this measure does not require a data element for 
chronic opioid users. We do not anticipate risk adjusting this measure 
for chronic opioid use, as most instances of opioid-related adverse 
events should be preventable for all patients regardless of prior 
exposure to opioids or chronic opioid use. In addition, there are 
several risk factors that affect sensitivity to opioids that physicians 
should consider when dosing opioids. Risk adjustment would only be 
needed if certain hospitals have patients with distinctly different 
risk profiles that cannot be mitigated by providing high-quality care. 
Similarly, the current measure specification does not include 
stratification of patients for chronic opioid use for three reasons: 
(1) This is a challenging data element to capture consistently in the 
EHR; (2) chronic opioid use should be taken into consideration by 
clinicians in determining dosing in the hospital and theoretically 
should not be considered a different risk level for patients; and (3) 
stratification can reduce the effective sample size of a measure and 
make it less useable.
    Comment: Multiple commenters discussed the potential burden of the 
measure on hospitals, and the feasibility of the required EHR data 
elements. Several commenters believed all required data elements are 
readily available in the EHR, while several other commenters disagreed, 
and noted challenges in mapping the required data elements and the 
complex measure logic. One commenter questioned whether manual 
abstraction would be necessary to report this measure. Another 
commenter noted that some hospitals lack EHRs in procedural or surgical 
areas, which might bias their results. One commenter noted that the 
costs associated with this measure outweigh the benefits, which is 
contrary to the Meaningful Measures Initiative. One commenter noted 
that many providers will not have enough time to update their reporting 
systems if detailed specifications are not provided far enough in 
advance.
    Response: We appreciate commenters' concerns. The measure 
specifications were developed with the end-user in mind and with the 
goal of minimizing the burden on hospitals. Testing has demonstrated 
that the data elements and measure logic are feasible and accurately 
capture opioid-related adverse events using EHR data. This measure 
should not require manual chart abstraction. To clarify, currently, the 
measure specifications capture naloxone administration in post-
procedural areas as a harm, but not naloxone administered in procedural 
areas, such as operating rooms. We recognize that stakeholders would 
require time to prepare for mandatory reporting and we will consider 
that need as we make decisions about proposing to add measures to the 
Hospital IQR Program in future years. We aim to provide measure 
specifications that are simple, useful, and provide as much information 
as possible to ease the burden of data collection and reporting.
    Comment: Many commenters noted the potential negative unintended 
consequences of the measure, and disagreed with using naloxone as a 
proxy for opioid-related adverse events. These commenters asserted that 
the use of naloxone does not necessarily mean a harm was caused by an 
opioid. One commenter stated that preliminary results presented to the 
NQF MAP Hospital Workgroup in December 2017 showed a high ``error 
rate,'' and expressed concern that these results will only be magnified 
in broader testing. Another commenter noted the low event rate of this 
harm. One commenter requested additional evidence, based on the 
tracking of performance on this measure when implemented, to ensure 
that the measure does not inappropriately incentivize providers to 
withhold naloxone before the measure is made mandatory. Several 
commenters expressed interest in whether there is true performance 
variation for this measure in care across hospitals.
    Response: We thank commenters for their feedback. We acknowledge 
that naloxone administration alone does not conclusively indicate a 
harm. For example, in some cases naloxone can be given to reverse 
severe itching related to opioids.\335\ The intent of the measure is 
not to reduce appropriate use of naloxone or to bring the rate of 
administration to zero. Rather, the measure is intended to identify 
hospitals that have particularly high rates of naloxone use relative to 
others, and thereby incentivize improved clinical practices, such as 
appropriate dosing of opioids and monitoring of patients to reduce the 
need for naloxone use in patient care. We do not believe that this 
measure would deter providers from prescribing opioids or using 
naloxone for patients who require it. The goal is to incentivize 
hospitals to avoid over-sedation and to closely monitor patients on 
opioids.
---------------------------------------------------------------------------

    \335\ Eckstrand JA, Habib AS, Williamson A, et al. Computerized 
surveillance of opioid[hyphen]related adverse drug events in 
perioperative care: a cross[hyphen]sectional study. Patient Saf 
Surg. 2009;3(1):18.

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[[Page 41592]]

    Moreover, naloxone administration has been used in a number of 
studies as an indicator of opioid-related adverse respiratory 
events.336 337 Prior testing in five hospitals showed the 
measure captured the intended harm, by assessing whether each harm 
identified in the measure could be confirmed though clinical review of 
the patients' medical record. In 93.9 percent of events, adjudicators 
noted that naloxone was administered because of excessive opioid 
medication administration. To clarify testing results around an ``error 
rate,'' we believe the commenter is referring to the success rate of 
capturing the intended harm, which ranged from 87.2 percent to 95.7 
percent across five hospitals. We agree that this measure has a low 
event rate, nonetheless, we believe hospital-caused opioid overdoses 
are important to measure. Opioids are among the most frequently 
implicated medications in adverse drug events among hospitalized 
patients, with the most serious opioid-related adverse events leading 
to brain damage and death.\338\ Further, this measure addresses the 
Meaningful Measures Initiative quality priority of making care safer by 
reducing harm caused in the delivery of care. Regarding commenters' 
interest in whether there will be true performance variation in care 
across hospitals, preliminary testing showed variation in event rates 
across the set of testing hospitals. This measure is undergoing 
continued testing and we will continue to examine the extent of 
performance variation captured by the measure. We continue to believe 
that the measure specifications are appropriate for this measure and if 
this measure were to be proposed for future inclusion in the Hospital 
IQR Program, any unintended consequences would be closely monitored 
during measure reevaluation.
---------------------------------------------------------------------------

    \336\ 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.
    \337\ 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.
    \338\ The Joint Commission. (2012). Safe use of opioids in 
hospitals. Sentinel Event Alert, 49, 1-5.
---------------------------------------------------------------------------

    Comment: Commenters voiced additional concerns and sought 
clarification about the measure specifications. One commenter sought 
clarification regarding whether patients seen in the emergency 
department were included in the measure specifications. One commenter 
noted changes in the measure specifications from what was reviewed by 
the NQF MAP Hospital Workgroup in December 2017, and the measure 
specifications outlined in the FY 2019 IPPS/LTCH PPS proposed rule. Two 
commenters recommended changing the numerator to require documentation 
of opioid administration prior to naloxone administration in all cases, 
and noted this would illuminate opportunities for hospital process 
improvement. One commenter sought clarification on the numerator since 
this measure only counts one harm per patient, and would not capture 
multiple harms to the same patient.
    Response: We thank the commenters for their feedback. The measure's 
initial population and denominator includes patients treated in the 
emergency department or who are in observational status who become 
inpatients. The Hospital Harm--Opioid-Related Adverse Events eCQM 
measure specifications were originally submitted to the ``2017 Measures 
Under Consideration List'' (available at: http://www.qualityforum.org/ProjectMaterials.aspx?projectID=75367), included documentation on a 
respiratory stimulant within 24 hours of opioid administration as 
representative of a harm to a patient, and required documentation of an 
opioid administration within the hospital within 24-hours of the 
narcotic antagonist. This measure was simplified after preliminary 
testing, to not include a respiratory stimulant and only to require 
documentation of an opioid administration prior to naloxone within the 
first 24-hours of the hospitalization. Previous testing of the measure 
indicated that we did not miss harm events when the measure logic was 
simplified in this manner. These modifications were made to reduce the 
complexity of the measure specifications while still capturing a signal 
of hospital quality. The results from hospital testing presented at the 
NQF MAP Hospital Workgroup meeting in December 2017 represented the 
final measure specifications as described in this final rule.
    The measure does capture only a single harm for each patient and 
does not capture multiple harms on a single patient during a single 
inpatient encounter. The numerator captures the number of patients who 
experience a harm, rather than the number of harms occurring to 
simplify the measure and limit the reporting burden, while still 
capturing a signal of hospital quality. For more information on the 
specifications of this measure, we refer readers to the MAT Header 
(measure specifications) and framing document (available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/Public-Comments.html).
    Comment: Some commenters did not support the Hospital Harm--Opioid-
Related Adverse Events eCQM, and proposed alternative measures to 
address the opioid epidemic. One commenter recommended that CMS 
consider including non-pharmacologic technologies such as medical 
devices to serve as alternatives to treat acute and chronic pain. 
Several commenters suggested providing education to patients to help 
prevent or reduce the risk of addiction.
    Response: We thank commenters for their feedback and suggestions on 
additional potential opioid measures. We appreciate the suggestions and 
we intend to consider other ways the Hospital IQR Program can address 
the opioid crisis. While this measure may not address all root causes 
of opioid overuse, it addresses the Meaningful Measures Initiative 
quality priority of making care safer by reducing harm caused in the 
delivery of care.
    We thank the commenters and we will consider their views as we 
develop future policy regarding the potential inclusion of the Hospital 
Harm--Opioid-Related Adverse Events Electronic Clinical Quality outcome 
measure (eCQM) in the Hospital IQR Program.
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

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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 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 sought stakeholder feedback on ways that we could address these 
and other challenges related to eCQM use. Specifically, we invited 
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?
    Comment: Question 1. A number of commenters responded to CMS' 
request for feedback on question (1)--What aspects of the use of eCQMs 
are most costly to hospitals and health IT vendors? Many commenters 
believed the costliest aspect of eCQM use is vendor cost to build, 
develop, implement, adequately test, and maintain eCQMs. This includes 
vendor support costs to develop and install code updates following 
changes to measures and program requirements made through rulemaking. A 
few commenters noted the significant labor cost associated with 
validation of eCQM reports, including re-validation of those reports, 
as they need to be re-validated after every software upgrade or 
enhancement. One commenter noted that there is considerable burden 
required to map the necessary data elements from the EHR to the 
appropriate QRDA format, and some vendors are not properly equipped to 
collect and transmit such data through the CMS portal.
    Many commenters also noted high personnel costs, including the 
personnel time and cost associated with keeping pace with on-going 
certification, mandated reporting, and annual program update change 
requirements, as well as the costs associated with training personnel 
if changes to eCQM reporting requirements are outside out of the normal 
workflow. A few commenters added that eCQM implementation requires 
utilization of resources from multiple disciplines, including IT, data 
science, quality, analytics, clinicians, laboratory, radiology, coding, 
and billing.
    Many commenters believed that eCQMs are costly because of the 
uncertainty around the reporting and submission requirements, including 
the high burden associated with making preparations to report measures 
that have been identified for removal in the near future. In addition, 
several commenters noted that the time between the finalization of a 
new quality measure in the rules and its inclusion in a government 
incentive or penalty program is too short, resulting in heightened 
resource use and high burden.
    A few commenters expressed concern that there are high costs 
associated with collecting and reporting data on measures that they 
believe are fundamentally unusable or not valuable because they include 
errors or do not appropriately serve clinician needs. Other commenters 
noted that the manual abstraction and documentation requirements 
associated with some eCQMs add to the total administrative burden 
placed on clinicians. One commenter explained that there is high burden 
associated with alignment following a facility's merger with a larger 
system.
    Question 2. A number of commenters responded to CMS' request for 
feedback on question (2)--What program and policy changes, such as an 
improved regulatory alignment, would have the greatest impact on 
addressing eCQM costs? A number of commenters suggested program and 
policy changes that might impact the costs associated with eCQM 
reporting, including: (1) Aligning the regulatory and reporting 
requirements and timeframes for eCQMs across federal and State 
programs; (2) adopting nationally standardized eCQMs; (3) streamlining 
and de-duplicating measure sets across CMS programs; (4) providing more 
time to implement new measures or measure specification updates and 
reducing the frequency of changes to the reporting requirements; (5) 
implementing broader eCQM selections and continuing to offer 
flexibility for hospitals to self-select and submit data on available 
measures best suited to their needs that would satisfy multiple 
reporting programs with a single data submission; (6) focusing on 
current challenges and not adopting new eCQMs for a period of time, 
then introducing new eCQMs at a slower pace and in lower volumes; (7) 
creating a single, facility-based quality reporting program that 
encompasses inpatient, outpatient, and observation statuses; (8) 
providing more transparency around program changes, including decision-
making criteria geared more toward clinicians, for retaining or 
removing measures; (9) offering scoring bonuses that incentivize 
technology utilization; (10) utilizing eCQM data already collected to 
inform future program requirements and stakeholders about successful 
practices; (11) requiring reporting only on the eCQM version of 
measures, and not the chart-abstracted versions, and phasing out 
claims-only outcomes reporting, or implementing a point system which 
would assess more points for submission of eCQMs than for chart-
abstracted measures to satisfy multiple reporting programs; and (12)

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identifying quality reporting requirements in a separate rulemaking 
process.
    Several commenters recommended that CMS regulate the amount charged 
by health IT vendors for new packages and updates, reimburse hospitals 
for the cost of software updates needed to meet quality reporting 
requirements, or provide grants to hospitals for these purposes.
    Some commenters provided feedback specifically related to eCQM 
testing, including: (1) Releasing technical measure specifications 
earlier; (2) allowing vendors to engage in early testing; (3) making 
the Pre-Submission Validation Application (PSVA) tool and QualityNet 
secure portal available before the start of the reporting year; (4) 
facilitating testing through shared infrastructure; and (5) providing 
timely answers to questions submitted via the JIRA case system.
    A number of commenters focused on improvements that could be made 
regarding measure development, measure specification, and measure 
standards, including: (1) Developing eCQMs based on available data and 
the provision of care; (2) working with the Office of the National 
Coordinator to develop interoperability and EHR data standards, 
including defining standards for quality reporting and further aligning 
existing QRDA standards; (3) working with industry stakeholders in the 
early stages of measure development; (4) promoting accurate provider 
attribution; and (5) utilizing eCQMs that pull from common data fields 
rather than data codes.
    Some commenters recommended changes that could be made with regards 
to measure submission, including: (1) Developing a mechanism to allow 
facilities to manually correct data once pulled; (2) providing updates 
to the value set and QRDA I file submission in advance; (3) providing 
more detailed information on submission errors and providing submission 
reports earlier; (4) providing avenues for data submission other than 
hospitals submissions, such as having The Joint Commission obtain eCQM 
data from QualityNet; and (5) creating a single submission reporting 
platform for multiple CMS programs and State Medicaid agencies to 
accept quality data submissions provided to CMS.
    Question 3. A number of commenters responded to CMS' request for 
feedback on question (3)--What are the most significant barriers to the 
availability and use of new eCQMs today? Many commenters observed 
significant barriers to the availability and use of new eCQMs. Several 
commenters expressed their belief that the technology costs, including 
EHR systems upgrades, adapting workflows, aligning documentation of 
care to capture required data, shifting timelines, building new 
specifications, testing and validating new measures, purchasing 
additional modules for reporting, is a barrier to implementation and 
reporting on new eCQMs. Other commenters identified lack of alignment 
across programs as another barrier. One commenter suggested that lack 
of transparency from developers and the variation in eCQM offerings for 
reporting new eCQMs also presents a barrier to eCQM reporting. A few 
commenters expressed their belief that the impact on clinical workflows 
where eCQMs require documentation that is not part of existing 
workflows, which actually increases burden on hospitals as compared 
with reporting on non-eCQM measures, is a significant barrier to 
reporting on new eCQMs, as is the fact that many EHRs allow for 
narrative documentation which does not flow into the discrete fields 
required by eCQMs.
    One commenter recommended that CMS limit costs by imposing 
requirements related to pricing or reimbursement for the purchase of 
additional reporting modules. Another commenter recommended that CMS 
consolidate available information on eCQMs into one website that would 
provide both technical and operational information, and requested 
additional resources to help standardize and simplify the complexity of 
codes. A few commenters asserted their belief that measure accuracy and 
the vague wording of measures causes confusion between developers and 
providers regarding the intent of the measure, which can present a 
significant barrier to reporting on new eCQMs. A few commenters 
remarked on their perceived lack of value or impact on quality 
improvement associated with eCQM reporting.
    Some commenters recommended that CMS provide additional support to 
vendors, to identify how best to capture required eCQM data, and to 
offer technical expert teams to organizations that lack the resources 
to participate in eCQM development or testing. One commenter expressed 
concern that hospitals and vendors are not ready to fully report on 
eCQMs and recommended that CMS work with EHR vendors, hospital quality 
staff, and other affected stakeholders to identify underlying 
structural problems and barriers to successful eCQM reporting. A few 
commenters noted that a major hurdle to reporting on new eCQMs is that 
EHR vendors are unwilling to participate in mapping or supporting 
voluntary measures, or prioritize certifying to report on existing 
measures above new measures. One commenter suggested that CMS work with 
the ONC to advance standards for CEHRT to develop robust 
interoperability and EHR data standards. Several commenters expressed 
their belief that more time is needed between the adoption of a new 
eCQM into the Hospital IQR Program and its required implementation by 
providers in part to accommodate vendors' need to build and test 
processes and develop reports. One commenter recommended that CMS 
identify a date by which the QualityNet Secure Portal will open for 
2018 testing. One commenter stated that a barrier to the availability 
of new eCQMs was the measure development process, and suggested that 
CMS work to improve the development and approval process. One commenter 
recommended that CMS explore whether the burden of eCQM reporting could 
be shifted to billing operations.
    Question 4. A number of commenters responded to CMS' request for 
feedback on question (4)--What specifically would stakeholders like to 
see CMS do to reduce costs and maximize the benefits of eCQMs? Some 
commenters suggested removing all the eCQMs. Conversely, a few 
commenters expressed their preference for eCQM reporting and requested 
that CMS eliminate all chart-abstracted measures, and require all 
applicable eCQMs be reported for future program years.
    A number of commenters provided feedback on how CMS could reduce 
costs and maximize the benefits of eCQM development, including: (1) 
Streamlining the measure development process; (2) developing measures 
that rely on data elements already present in EHRs and that have direct 
links to improved outcomes; (3) refining current eCQMs to reflect 
different settings of care and patient populations; (4) refining 
measures to add exclusions instead of requiring extra chart 
documentation; (5) considering moving to improved standards-based eCQM 
development and reporting; (6) working with health IT vendors to 
identify and implement ways to present eCQM data to support quality 
improvements; (7) seeking feedback from other industry stakeholders; 
(8) connecting novice eCQM measure developers with experts; and (9) 
establishing a national testing infrastructure for eCQMs.
    Several commenters provided feedback on how CMS could reduce costs 
and maximize the benefits of eCQM reporting, including: (1) Making

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eCQM tools and resources available before the start of the reporting 
year; (2) ensuring there are systems in place to receive data 
seamlessly; (3) providing timely and accurate feedback reports; (4) 
supplying additional information on the error messages during the 
submission process; (5) providing detailed measure specifications to 
ensure data is collected consistently across providers and 
communicating about individual indicators and their weights; (6) 
improving access to QualityNet for analytics personnel; (7) giving 
adequate, early notice of software updates; (8) improving 
interoperability of EHR systems; and (9) centralizing the proper 
resource for questions related to eCQMs.
    Some commenters provided feedback on how CMS could reduce costs and 
maximize the benefits of eCQM through policy changes including: (1) 
Aligning the eCQM reporting requirements across CMS programs; (2) 
requiring that vendors support reporting on all eCQMs in the Hospital 
IQR Program; (3) allowing hospitals to voluntarily report on new eCQMs 
rather than requiring reporting on new measures; (4) refraining from 
retroactively applying standards that are updated mid-year; (5) 
requiring reporting of the eCQM version only for measures also 
available in chart-abstracted form; (6) utilizing other sources of data 
rather than having hospitals report the eCQM data directly; (7) 
constraining the costs of vendor services; (8) sharing a plan for 
future eCQM use in the Hospital IQR Program; (9) changing the eCQM 
measure set less often and providing a longer time period to implement 
program changes (including adding new eCQMs or updating existing 
eCQMs); and (10) reducing the number of eCQMs available for reporting 
and only including those that are actionable with the highest return on 
investment.
    A number of commenters recommended that CMS develop new eCQMs for 
specific chart-abstracted measures, including SEP-1, IMM-2, TOB-1, TOB-
2, TOB-3, acute renal failure, ventilator use, and stroke. One 
commenter suggested refinements to EHDI-1a eCQM. One commenter 
recommended that CMS require reporting on the PC-01 eCQM.
    Question 5. A number of commenters responded to CMS' request for 
feedback on question (5)--How could CMS encourage hospitals and health 
IT vendors to engage in improvements to existing eCQMs? A number of 
commenters suggested that hospitals and health IT vendors would be more 
willing to engage in improvements to existing eCQMs if CMS provided 
incentives, such as providing a per diem or honorarium for 
participation in focus groups and other forums.
    A few commenters noted that participation would be enriched if 
hospitals were able to discuss eCQM improvement in the context of data 
from prior eCQM data submissions and be given an opportunity to inform 
future eCQM priorities that reduce reporting burden to advance 
improvements in the quality of care. One commenter suggested that CMS 
provide real-time feedback to hospitals on eCQM performance in order to 
encourage participating in eCQM improvement efforts.
    Several commenters observed that successfully meeting mandatory 
eCQM reporting requirements depends on hospitals using the correct 
version of specifications, which is generally in the control of the EHR 
vendors, not the hospitals. Commenters urged CMS to continue outreach 
to EHR vendors, hospital quality staff, and other affected stakeholders 
to identify underlying structural problems and barriers to successful 
eCQM reporting. A number of commenters recommended coordinating efforts 
between CMS, CMS subcontractors, and measure stewards to solicit 
feedback from hospitals in order to implement a more efficient feedback 
loop.
    One commenter believed that the introduction of voluntary measures 
has received increased interest and participation by providers, as it 
allows for more flexibility without the requirement for mandatory 
submissions.
    Question 6. A number of commenters responded to CMS' request for 
feedback on question (6)--How could CMS encourage hospitals and health 
IT vendors to engage in testing new eCQMs? A number of commenters 
suggested that hospitals and health IT vendors would be more willing to 
engage in testing new eCQMs if CMS provided incentives, such as: (1) 
Supplementing or reimbursing the costs to trial eCQMs and provide 
feedback; (2) providing an upside APU adjustment to the hospitals that 
participate in testing a new eCQM; (3) providing scoring bonuses, or 
offering ``bonus'' points similar to those being proposed in the 
Promoting Interoperability Program; (4) allowing providers to receive 
credit for meeting the eCQM reporting requirement in the Promoting 
Interoperability Programs; (5) conducting an ``Implementation-A-Thon;'' 
and (6) granting providers participating in a defined testing and 
development program relief from other, mandated reporting, such as 
creating a ``safe harbor'' status for organizations that utilize their 
own vetted quality measurement systems or reducing the number of 
required eCQMs if the hospital is testing a measure.
    Many commenters suggested that CMS should vet new eCQMs across a 
selection of vendors and hospitals prior to considering the measures 
for inclusion in a CMS quality reporting program for implementation.
    A few commenters noted that the data produced by chart-abstracted 
measures varies significantly from eCQM data, and recommended that CMS 
adopt a validation process and conduct robust testing to ensure eCQM 
data are accurate and comparable to chart-abstracted information. One 
commenter proposed a hybrid approach to eCQM adoption in which 
hospitals would submit eCQM data, but in the event of a measure 
failure, the hospital could also supplement the data with manual chart 
abstraction. The commenter noted that this approach would be mutually 
beneficial, as CMS would receive more accurate data and hospitals would 
learn their workflows and documentation gaps for improvement efforts. 
Moreover, this approach would be less burdensome than manual 
abstraction, without the fear of penalizing hospitals who are still 
working through the burden to transition to eCQMs. The commenter also 
advised that completed testing of eCQMs under development should 
demonstrate reliability and validity in the acute care setting and 
should also be submitted to NQF for review and endorsement prior to 
inclusion in CMS quality programs.
    A few commenters noted that providers and vendors likely would be 
encouraged to engage more in testing if additional time were available 
by, for example, delaying major program changes to a biennial 
timeframe.
    A number of commenters also recommended that CMS create a public 
``playbook'' outlining eCQM development and testing activities 
available for hospitals, as well as issuing standardized expectations 
and processes for hospitals engaging in testing, and doing so with more 
advanced notice. One commenter also noted that the legal concerns with 
release of patient detail files sometimes limits involvement, and thus 
encouraged CMS to explicitly clarify policies with regard to sharing 
PHI in a protected and legal manner for testing and development.
    Question 7. A number of commenters responded to CMS' request for 
feedback on question (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

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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? A number of commenters expressed that 
hospitals and vendors would be interested in participating in pilots or 
models of alternative approaches to quality measurement. Several 
commenters provided suggestions on how to structure pilots, including 
developing a cross-section of participants, communications, and 
providing incentives for participants.
    A few commenters expressed that hospitals and vendors would not 
want to participate in pilots because they would not want to divert 
resources necessary to pilot models that may never be incorporated into 
quality reporting, or expressed concern about the costs and resource 
tolls associated with participating.
    One commenter specifically did not support research and pilot 
projects on the use of machine learning and natural language 
processing.
    Question 8. A number of commenters responded to CMS' request for 
feedback on question (8)--What ways could CMS incentivize or reward 
innovative uses of health IT that could reduce costs for hospitals? 
Many commenters shared recommendations about incentives and rewards for 
innovative uses of health IT, including: (1) Providing an upside 
adjustment to the hospital APU or a larger increase in the Market 
Basket Increase for completing certain activities or demonstrating 
innovative uses of HIT; (2) offering ``bonus points'' for demonstrable 
innovative uses of health IT; (3) providing scoring bonuses to 
providers who report more than the required number of measures or who 
have accurate rates; (4) allowing ``bonus points'' for voluntary or 
pilot project participation; (5) providing physician providers with 
credit under the MIPS-QPP Improvement Activities or Advancing Care 
Information (now called Promoting Interoperability) performance 
categories for participating in eCQM-related workgroups or development 
and/or demonstrating innovative uses of HIT; (6) establishing 
technology `challenges' to foster innovative developments in health IT; 
(7) relieving reporting burden; (8) providing hospitals with incentives 
to recover any IT software costs; (9) excluding measures that are not 
applicable for CAHs or offering other reporting options for hospitals 
with low patient volumes; and (10) providing free software to submit 
the eCQMs and future required measures.
    Other commenters suggested that CMS provide standards, and perhaps 
incentives, for health IT vendors to standardize their practices, 
particularly with respect to the standardized reports commonly used for 
quality data and internal quality review. One commenter noted that 
currently, providers must pay extra and wait for reports to be 
developed for their EHR.
    A few commenters suggested that CMS provide public acknowledgement 
of organizations who develop or participate in innovative uses of 
health IT, similar to The Joint Commission's Pioneers in Quality Award 
or Healthcare Information and Management Systems Society (HIMSS) Davies 
Award.
    A number of commenters suggested that CMS allow providers to 
receive credit for meeting the eCQM reporting requirement in the 
Promoting Interoperability Programs, work with hospitals to identify 
areas of innovative use of health IT that align with the Meaningful 
Measures framework, and collaborate with federal partners to encourage 
health IT vendors to support hospitals in their efforts to use eCQMs 
and health IT to address the highest priority areas for quality 
measurement and improvement.
    One commenter recommended that CMS reward providers and developers 
working on population health initiatives and require data integration 
with hospitals with access to adequate data, such as claims data at the 
patient level. Another commenter recommended that CMS reward the 
internal quality improvement programs and processes using health IT 
that already exist and are utilized by hospitals.
    A few commenters suggested allowing hospitals to submit and develop 
quality measures that are meaningful to their patient populations, 
local needs, and interests, instead of focusing on measures addressing 
national healthcare quality priorities.
    Question 9. A number of commenters responded to CMS' request for 
feedback on question (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? A number of 
commenters provided suggestions specific to QualityNet, including: (1) 
Decreasing wait times for reaching the QualityNet helpdesk; (2) 
updating QualityNet to improve user-experience; (3) increasing 
QualityNet's capability to receive submissions and send reports; (4) 
providing more immediate and detailed error messages; and (5) allowing 
providers to upload encrypted QRDA I files to QualityNet.
    One commenter suggested that CMS grant funding to encourage measure 
development. Some commenters suggested that CMS could increase 
efficiency of measure testing by: (1) Improving available testing 
resources; (2) developing a shared infrastructure to test eCQMs or 
providing a universal testing tool kit for health IT vendors; (3) 
providing reports that specifically identify how a hospital ``failed'' 
reporting on a measure; (4) providing immediate and detailed feedback 
on all errors; (5) encouraging participation in HL7 FHIR[supreg] 
Development Days and HL7 Connect-a-thons for testing capabilities of 
vendors; and (6) publicly releasing the criteria used to evaluate 
success or failure in reporting of eCQMs, along with releasing actual 
results for new measure development and testing.
    Commenters' suggestions for improved guidance included: (1) 
Providing clearer documentation; (2) offering a single source of 
information and resource to ask questions related to eCQM reporting; 
(3) clarifying abstraction questions via QualityNet; (4) providing more 
avenues of communication with CMS; (5) identifying which tools 
stakeholders should use for which purposes; (6) providing resources 
geared toward quality improvement to staff and clinicians; (7) 
providing novice-level guidance on measure development and additional 
opportunities for engagement with experts; (8) creating a resource to 
allow stakeholders to share information such as best practices and 
codes used; (9) adding guidance related to the use of CQL and other 
newer standards; (10) creating an eCQM measure specification manual 
similar to the manual for chart-abstracted measures; (11) providing 
comparisons of how eCQM specifications change between years; and (12) 
identifying errors in past iterations when new eCQM measure 
specifications are released.
    Some commenters' suggestions focused on improvements that could be 
made to measure development and measure specifications, including: (1) 
Simplifying the measure development tools and measure logic; (2) using 
a standard approach to capturing data elements; (3) exploring natural 
language processing to capture discrete data elements; (4) developing a 
standard for EHRs to help implement eCQM reporting; (5) including 
thresholds and goals for all measures; (6) defining data fields using 
the Core Measures Data Dictionary; (7) standardizing references to 
measure timeframes by referencing the reporting period as well as the

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payment determination period when referring to measures; and (8) 
increasing the transparency of the eCQM calculation process by using 
open source evaluation codes.
    Other commenters focused on how CMS could improve the submissions 
process, including: (1) Providing workflow documents and technical 
release notes earlier; (2) opening the portal for eCQM data submissions 
earlier; and (3) implementing a system through which CMS could pull 
documents from hospitals using a secure direct file transfer or 
application.
    Some commenters suggested refining the reporting requirements for 
eCQMs, including: (1) Aligning the regulatory and reporting 
requirements of CMS quality programs; (2) offering flexibility to allow 
providers to select measures to submit from a pool of available 
measures in multiple forms; and (3) allowing more time to implement new 
and updated eCQMs.
    Response: We thank all of the commenters for their feedback and 
suggestions. We will take them into account and consider commenters' 
views as we develop future policies regarding the potential future 
development and adoption of eCQMs generally and for future years of the 
Hospital IQR Program. We note that our solicitation of public comments 
is part of a larger effort to collect feedback on areas for improvement 
in the implementation of eCQMs under a variety of CMS programs. We also 
have been holding listening sessions with hospitals and health IT 
vendors about EHR and eCQM issues. We will share all these comments 
with the Office of the National Coordinator for Health Information 
Technology (ONC) and other partners.
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.\339\ 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.\340\ 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.\341\ 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,\342\ allowing further examination of social risk factors in 
outcome measures.
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    \339\ 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.
    \340\ 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.
    \341\ Available at: http://www.qualityforum.org/SES_Trial_Period.aspx.
    \342\ 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 CMS 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.
    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 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

[[Page 41598]]

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 convened a TEP in the spring of 2018 to solicit feedback 
from stakeholders on approaches to consider for stratification for the 
Hospital IQR Program.\343\ 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.
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    \343\ This TEP, the Hospital Outcome Measurement for Patients 
with Social Risk Factors, is still ongoing. TEP members will be 
participating in several teleconference meetings from May through 
September 2018. For more information on TEPs, we refer readers to: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panels.html#0510.
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    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.
    Comment: Many commenters supported CMS' continued evaluation of 
social risk factors in quality measurement. Some commenters recommended 
that CMS consider both stratification and risk adjustment 
methodologies. A number of commenters made recommendations, including 
suggestions to: (1) Work with measure developers to determine the most 
accurate way to include and account for social risk factors within each 
measure; (2) study social risk factors at a program level; (3) stratify 
social risk factors at the individual measure level because it would 
provide a more detailed picture of the costs and quality administered 
among facilities, noting that when data is publicly reported and 
assigned to an individual clinician, service line, or facility, it is 
important to be clear about who is responsible for the reported 
outcomes and/or performance rates through detailed attribution model 
specifications; and (4) risk-adjust measures for patient SES status 
when appropriate, but until risk-adjusted measures are available, 
publicly report stratified measure performance rates on the Hospital 
Compare website.
    Response: We thank commenters for their feedback. Risk adjustment 
and stratification are two distinct ways of accounting for the 
importance of social risk factors on quality measures and payment 
programs. The goal of SES risk adjustment is to take into account the 
increased risk of poor outcomes for patients with social risk factors.
    The Assistant Secretary for Planning and Evaluation (ASPE), as 
required by the IMPACT Act of 2014, studied the impact of social risk 
factors, including socioeconomic status, on quality and payment 
measures used in nine Medicare value-based purchasing programs. The 
report discussed several strategies to account for social risk factors 
in these programs.\344\ It laid out

[[Page 41599]]

potential merits and limitations of risk adjusting for socioeconomic 
status in quality measurement. Some drawbacks noted included that 
adjusting measures for social risks could potentially create a lower 
standard of care for patients with social risk factors, perpetuate 
disparities, and disincentivize quality improvement for these 
vulnerable patients. The report did not specifically express a position 
in favor of or against risk adjustment for SES at the patient level, 
but did recommend evaluating measures individually to determine if risk 
adjustment for socioeconomic status is warranted on a conceptual and 
empirical basis. Likewise, following the SES two-year trial period, the 
National Quality Forum (NQF) recommended evaluating the appropriateness 
of SES risk adjustment on a measure-by-measure basis. We note, however, 
that, in their final report following the conclusion of the SES two-
year trial period, the NQF proposed the presentation of stratified 
results, as we have described in this final rule, as a potential 
strategy for consideration.345 346
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    \344\ 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.
    \345\ National Quality Forum (NQF). ``Evaluation of the NQF 
Trial Period for Risk Adjustment for Social Risk Factors.'' 
Available at: https://www.qualityforum.org/Publications/2017/07/Social_Risk_Trial_Final_Report.aspx.
    \346\ National Quality Forum (NQF). ``A Roadmap for Promoting 
Health Equity and Eliminating Disparities: The Four I's for Health 
Equity.'' Available at: https://www.qualityforum.org/Publications/2017/09/A_Roadmap_for_Promoting_Health_Equity_and_Eliminating_Disparities__The_Four_I_s_for_Health_Equity.aspx.
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    We will continue to work with measure developers to determine the 
most accurate way to include and account for social risk factors within 
each measure, including exploring stratification of social risk factors 
at the individual measure level. We intend to continue to study social 
risk factors at a program level and evaluate the effect of social risk 
factors on outcomes measures and quality programs. As to the 
commenter's request for detailed technical specifications demonstrating 
a measure's attribution model, such specifications are available on 
QualityNet for the readmission measures and include information about 
the attributed hospital.\347\
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    \347\ 2018 Condition-Specific Measures Updates and 
Specifications Report Hospital-Level 30-Day Risk-Standardized 
Readmission Measures. Available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1219069855841.
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    With regard to commenters' suggestion that we risk-adjust measures 
for patient SES status when appropriate, but until risk-adjusted 
measures are available, publicly report stratified measure performance 
rates on the Hospital Compare website, we note that such adjustment is 
not appropriate in all cases. Recent reports from ASPE, National 
Academies of Sciences, Engineering, and Medicine (NAM), and NQF do not 
specifically make recommendations in favor of or against risk 
adjustment for SES at the patient level.348 349 350 However, 
they do propose to report stratified results, as we described in the FY 
2019 IPPS/LTCH PPS proposed rule and this final rules as a potential 
strategy to consider.
---------------------------------------------------------------------------

    \348\ Department of Health and Human Services Office of the 
Assistant Secretary for Planning and Evaluation (ASPE), ``Accounting 
for Social Risk Factors in Medicare Payment.'' Jan. 2017. Available 
at: http://nationalacademies.org/hmd/Reports/2017/accounting-for-social-risk-factors-in-medicare-payment-5.aspx.
    \349\ 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.
    \350\ National Quality Forum (NQF). ``Evaluation of the NQF 
Trial Period for Risk Adjustment for Social Risk Factors.'' 
Available at: https://www.qualityforum.org/Publications/2017/07/Social_Risk_Trial_Final_Report.aspx.
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    We will continue to explore multiple options to account for the 
effect of social risk factors on quality measures and in quality 
programs.
    Comment: Many commenters supported considering factors beyond dual 
eligibility when accounting for the impact of social risk factors on 
quality measurement. Several commenters referred CMS to recent reports 
by ASPE and the National Academies of Sciences, Engineering, and 
Medicine (NAM). Commenters identified a number of SES and SDS risk 
factors for consideration, including: (1) Educational attainment; (2) 
literacy; (3) health literacy; (4) home language and English language 
proficiency; (5) availability of primary care and physical therapy; (6) 
access to medications; (7) marital status and whether one lives alone; 
employment status; (8) income; (9) race and ethnicity; (10) nativity; 
(11) payor; (12) insurance product; (13) Medicaid beneficiary status; 
(14) neighborhood deprivation (including the percent of households 
under the federal poverty level, crime rates); (15) housing insecurity; 
(16) distance traveled (derived from zip code); (17) availability of 
transportation; (18) access to appropriate food; and (19) access to 
supportive services (including availability of a caretaker).
    Response: We appreciate commenters' suggestions for additional 
social risk factors to consider. Consistent with the findings contained 
in the ASPE and NAM reports, we will explore opportunities for ways to 
account for additional social risk factors in the future as we continue 
to engage with stakeholders and determine the availability and 
feasibility of accounting for appropriate social risk factors, 
including the availability of potential data sources, that might 
influence quality outcomes measures such as readmissions.
    Comment: Many commenters supported the use of the first proposed 
method (hospital-specific disparity method) in stratifying measure 
results. One commenter asserted the data provided under the hospital-
specific disparity method would be valuable in communities that have 
unique patient populations. Another commenter ``cautiously supported'' 
the hospital-specific disparity method, but noted it would be critical 
to first ensure that the methodologies work accurately and reliably, 
and to establish social risk categorization standards that would be 
used across all quality reporting programs for hospitals to decrease 
the reporting burden.
    Several commenters supported the use of the second proposed method. 
One commenter requested that CMS utilize the second proposed method as 
soon as feasibly possible because they wanted comparison data available 
to drive improvement. One commenter did not support the second proposed 
approach because it believed patients would choose to avoid facilities 
that provide care to large volumes of patients with social risk 
factors. The commenter noted that considering how the data would be 
presented on the Hospital Compare website would be critical in 
preventing this kind of bias from being introduced.
    Response: We thank the commenters for their support and 
recommendations with respect to the two disparity measures described in 
the FY 2019 IPPS/LTCH PPS proposed rule.
    We will continue to explore a variety of methodological approaches 
to ensure we produce accurate and reliable disparity results. In 
addition, we will work to align approaches to risk stratification 
across measures to minimize burden on providers. We would like to 
highlight that the proposed disparity measures would not place any 
additional burden on hospitals. The two proposed methods focus on dual 
eligibility as the social risk factor. We use this indicator as a proxy 
of low income and assets. It has the advantage of being readily 
available in claims data and therefore does not

[[Page 41600]]

impose any additional data collection burden.
    As to the commenter's concern that the second disparity method 
might lead patients to avoid hospitals with a large proportion of 
patients with social risk factors, we note that the goal of the second 
method (the group-specific outcome rate method) is not to provide 
patients with information on hospitals' volume of patients with social 
risk factors, but rather to provide specific outcome rates for patients 
with social risk factors at the individual hospital level (for example 
readmission rates for dual eligible patients). Preliminary results have 
shown that both hospitals caring for a low and a high proportion of 
patients with social risk factors can perform well or poorly on this 
measure.
    We will also continue to evaluate what may be the best method or 
methods of publicly displaying stratified outcome measures and 
disparity information to ensure the public's understanding of the data.
    Comment: Many commenters expressly supported CMS' plans to provide 
stratified Pneumonia Readmissions measure data in confidential, 
hospital-specific feedback reports because it would allow hospitals 
adequate time to understand their performance on stratified measures, 
evaluate the accuracy and impact of the stratification, identify any 
issues around disparity in the care provided, and inform internal 
quality improvement efforts. A few commenters requested that CMS allow 
hospitals sufficient time to review and analyze stratified rates prior 
to any public reporting, with one commenter requesting receipt of at 
least two years of confidential feedback reports prior to any public 
reporting. Commenters also requested that CMS ensure that hospitals 
have sufficient information to interpret the stratified measures 
results by providing national and regional benchmarks for the 
stratifications and detailed specifications of how measures are 
stratified so that hospitals can replicate this information during 
their ongoing performance monitoring. A number of commenters suggested 
that CMS solicit additional feedback from stakeholders before publicly 
reporting stratified quality data to ensure that data would be reported 
in a manner that is accurate, reliable, and understandable to patients. 
A few commenters requested that CMS propose specific measures for 
stratification through rulemaking.
    Response: We thank commenters for their feedback and will take it 
into consideration. As described in the preamble of this final rule, we 
are planning to provide confidential reports to hospitals for the 
Pneumonia Readmission measure (NQF #0506), stratified by patient dual-
eligible status. The confidential hospital-specific reports will be 
provided for hospitals to preview from August 24 through September 24, 
2018. During this confidential preview period, we will also provide 
educational materials to ensure hospitals have sufficient information 
to understand and interpret their disparity results. Hospital specific 
reports will include national and regional benchmarks for the two 
disparity methods. Finally, a technical report will provide detailed 
specifications on the two disparity methods.
    We agree with commenters that the confidential reporting period 
will allow hospitals to understand the stratified measure data prior to 
any future public reporting. We acknowledge commenters' concerns about 
having sufficient time to review and analyze stratified measure data 
prior to any public reporting on that data. We have not yet determined 
any future plans with respect to publicly reporting stratified data, 
and intend to continue to engage with hospitals and relevant 
stakeholders about their experiences with and recommendations for the 
stratification of measure data and to ensure the reliability of such 
data before proposing to publicly display stratified measure data in 
the future. Any proposal to display stratified quality measure data on 
the Hospital Compare website would be made through future rulemaking.
    Comment: A few commenters recommended that CMS consider or 
incorporate the findings or recommendations from the reports from the 
APSE, NAM, and a TEP that the NQF convened, per HHS/CMS request. A few 
commenters suggested that CMS begin incorporating other social risk 
factors found to be important while also continuing to monitor, study, 
and refine these efforts over time. Other commenters encouraged the 
empirical testing and use of neighborhood-level adjustment (that is, 
integrating patient data with information about contextual factors that 
influence health outcomes at the community or population level) where 
the data are available, in order to assess the impact of these 
adjustments on local provider performance metrics. The commenters noted 
that based on the results of these tests, CMS and other agencies would 
be able to prioritize the national collection of data that are most 
essential for valid risk adjustment methodologies.
    A few commenters recommended that CMS work with vendors to collect 
SES and SDS variables through their EHRs, potentially through the 
implementation of demonstration projects. The commenters noted that the 
collected data elements could be used to supplement the claims data 
already captured by CMS to greatly improve the measure's risk 
adjustment methodology.
    A number of commenters requested that CMS be more transparent 
during efforts to address social risk factors and to continuously seek 
stakeholder input, including measure stewards, in order to achieve the 
goals of attaining health equity for all beneficiaries while also 
minimizing unintended consequences, as well as to ensure the adjustment 
approach keeps up with the evolving measurement science around 
accounting for social risk factors. One commenter requested that CMS 
provide a work plan and timeline, as well as increase opportunities for 
collaboration with Medicare Advantage and Medicaid health plans.
    Response: We thank commenters for their recommendations. Our work 
to date on measure stratification and risk-adjustment has been informed 
by the reports by ASPE, NAM, and the NQF, as recommended by the 
commenters, as well as feedback directly received from stakeholders 
such as through the rulemaking public comment process. This includes 
closely tracking recommendations about social risk factor variables for 
use and potential methodologies. We are committed to continuing to 
expand the range of social risk factors incorporated into measure 
stratification based on the recommendations of the above groups. 
Consistent with the findings of the ASPE and NAM reports, we will 
explore accounting for such factors in the future as we continue to 
engage stakeholders and determine the availability of appropriate 
community factors that might influence quality outcome measures such as 
readmission. We will also consider the use of social risk factors 
obtained through EHRs while balancing concerns about undue data 
collection and reporting burden on providers.
    We also thank commenters for their support on our approach to 
engaging stakeholders in our stratification methodology development 
process. As noted, a TEP was convened to receive feedback on the two 
methods we developed to illuminate disparities. The TEP members came 
from diverse perspectives and backgrounds, including clinicians, 
hospitals, purchasers, consumers, and experts in quality improvement 
and health care disparities. CMS contractors also regularly consulted 
with an advisory

[[Page 41601]]

working group of five patients, family caregivers, and consumer 
advocates. The working group meetings addressed key issues surrounding 
the development of the two disparity methods, including the conceptual 
goal of the methods, their complementarity, and how best to report 
results for the disparity methods. We also held a webinar to inform 
hospital and consumer organizations about the two disparity methods and 
the confidential preview period taking place for the Pneumonia 
Readmission measure and dual eligibility. We will continue to explore 
multiple options and will elicit further feedback from stakeholders 
before determining an approach for public reporting.
    Comment: A few commenters did not support the inclusion and 
modification of risk factors related to socioeconomic status for 
determining provider reimbursement for Medicare services in all the 
IPPS programs. One commenter expressed concerns that this approach 
would not address the underlying disparities that are often associated 
with poor health outcomes by masking potential disparities or 
minimizing incentives to improve the outcomes for disadvantaged 
populations. Specifically, the commenter asserted this approach would 
create perverse incentives for poor performers to continue with the 
status quo and for high performers to retreat from their efforts to 
address disparities in high socioeconomic status populations. Another 
commenter expressed reservations about adjusting hospitals' performance 
rates using social factors because it would obscure disparities. 
Specifically, the commenter disagreed with using the risk-adjustment 
model because it excludes some important clinical risk factors that 
cannot be obtained through administrative data, which could have an 
impact on stratified comparison of disparities if the missing risk 
factors have different incidence rates across the subgroups. One 
commenter did not support the use of stratification to account for 
social risk factors in inpatient quality programs, and recommended the 
use of risk-adjustment methodology instead, particularly for financial 
incentive programs.
    Response: We thank the commenters for their feedback and appreciate 
their concerns. In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38324 
through 38326) and in this final rule, we affirm our commitment to 
improving beneficiary outcomes, reducing health disparities, and our 
commitment to ensuring that medically complex patients, as well as 
those with social risk factors, receive high quality care. In addition, 
we seek to ensure that the quality of care furnished by providers and 
suppliers is assessed as fairly as possible under our programs while 
ensuring that beneficiaries have adequate access to excellent care. Our 
efforts, to date, have been undertaken in response to the feedback we 
have received from stakeholders and based on the findings contained in 
reports by ASPE, NAM and NQF. These efforts include closely tracking 
recommendations about social risk factors variables for use and 
potential methodologies. We continue to believe that it is important to 
consider options to address equity and disparity in our quality 
programs, which is why we will continue working with the public and 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.
    Comment: One commenter, who generally did not support 
stratification, expressed concern that many hospital quality measures, 
such as hospital-acquired infection measures, would have limited sample 
sizes at the individual hospital level, and that this could ultimately 
limit the statistical reliability of reporting quality measures by race 
or other sociodemographic characteristics. The commenter also expressed 
its belief that the quality of race and ethnicity data within the 
Medicare program is known to be suboptimal for many races outside of 
white and black, including American Indian/Alaska Native and other 
races, and recommended that CMS develop a proposal to improve the 
collection of race and ethnicity data, or propose how to promote public 
transparency using data that are of mixed quality, before reporting 
such data publicly.
    Response: We thank the commenter for the feedback. We agree with 
the commenter's concerns about the impact of small samples sizes on the 
reliability of stratified quality measure results. Furthermore, small 
sample sizes may be especially challenging for measure stratification 
because some hospitals may have few patients with social risk factors. 
Therefore, under the first method (the hospital-specific disparity 
method), disparities would be reported only for hospitals with at least 
25 patients and 10 patients for each sub-group. The second method (the 
group-specific outcome rate method) would use a cut-off of at least 25 
patients for potential public reporting. We note the overall sample 
size of 25 patients is consistent with the quality outcome measures 
currently implemented.
    We agree with the commenter's concern that race and ethnicity data 
for Medicare beneficiaries are currently not consistently captured in 
claims. We believe that examining racial and ethnic disparities in 
outcomes within hospitals is important since race and ethnicity have 
been shown to be associated with health care quality, and will continue 
to examine how best to improve the collection of such data.
    We thank the commenters for their views and will take them into 
consideration as we continue our work on these issues.
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

[[Page 41602]]

website. There are safeguards in place in accordance with the HIPAA 
Security 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). In the FY 2019 IPPS/LTCH 
PPS proposed rule (83 FR 20496 through 20497), we did not propose any 
changes to these procedural requirements.
c. Data Submission Requirements for Chart-Abstracted Measures
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51640 through 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536 
through 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50811) 
for details on the Hospital IQR Program data submission requirements 
for chart-abstracted measures. In the FY 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20497), we did not propose any changes to the data 
submission requirements for chart-abstracted measures.
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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20497 through 
20498), we clarified measure logic used in eCQM development; proposed 
to extend previously established eCQM reporting and submission 
requirements for the CY 2019 reporting period/FY 2021 payment 
determination; and proposed 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, in the proposed rule (83 FR 20497), we notified 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 was published in May 2018 
and for implementation in CY 2019) will use the Clinical Quality 
Language (CQL). CQL is a Health Level Seven (HL7) International 
standard \351\ and aims to unify the expression of logic for eCQMs and 
Clinical Decision Support (CDS).\352\ 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.
---------------------------------------------------------------------------

    \351\ 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.
    \352\ 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.\353\ 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.\354\ 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) \355\); and (6) simplifies 
calculation engine implementation.\356\ CQL replaces the logic 
expressions defined in the QDM, and QDM (beginning with v5.3 \357\) 
includes only the conceptual model for defining the data elements.
---------------------------------------------------------------------------

    \353\ Additional details about QDM Logic are available at: 
https://ecqi.healthit.gov/qdm.
    \354\ Additional details about How CQL Logic is Different from 
QDM Logic are available at: https://ecqi.healthit.gov/qdm/qdm-Qs%26As#QualityDataModelQDMforusewithClinicalQualityLanguageCQL.
    \355\ 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.
    \356\ 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.
    \357\ Additional details about QDM v5.3 available at: https://ecqi.healthit.gov/qdm/qdm-news-0/now-available-quality-data-model-qdm-v53.
---------------------------------------------------------------------------

    Measure developers successfully tested CQL for expressing eCQMs 
from 2016 through 2017.\358\ Based on the results, the Measure 
Authoring Tool (MAT) \359\ and the Bonnie \360\ 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.
---------------------------------------------------------------------------

    \358\ Additional details about the Timeline for the Transition 
to CQL are available at: https://ecqi.healthit.gov/cql.
    \359\ 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/).
    \360\ 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.
    Comment: Several commenters expressed support for the transition to

[[Page 41603]]

CQL measure logic because it will provide improved specificity, 
precision, clarity, usability, and value to eCQMs to better align with 
the clinical intent of the measures. One commenter noted that CQL will 
provide earlier, longer draft periods that could enable hospitals and 
vendors to perform more testing and provide more feedback. Another 
commenter specifically suggested use of Health Level 7 (HL7) Fast 
Healthcare Interoperability Resources (FHIR) as part of CQL.
    Response: We thank commenters for their support. We will consider 
use of HL7 FHIR as part of CQL in the future.
    Comment: A few commenters recommended monitoring the transition to 
the CQL measure logic.
    Response: We will continue to monitor the experiences of hospitals 
and vendors as they transition to CQL to proactively address any 
challenges that might arise.
    Comment: A few commenters acknowledged the benefits of CQL but 
expressed concern that the transition to CQL for the CY 2019 reporting 
period did not provide enough time to implement the complex changes 
necessary without increasing burden. One commenter suggested a 24 month 
delay in requiring implementation.
    Response: We agree with the commenter that CQL has many benefits 
including improved expressivity, precision, and interoperability to 
facilitate sharing logic between measures and with CDS tools. While we 
try to be as proactive as possible in providing lead time changes to 
the Hospital IQR Program, we believe that the CY 2019 reporting period 
is the appropriate time to transition to CQL because we believe these 
benefits should be actualized as soon as practicable. We will continue 
working to provide hospitals with the education, tools, and resources 
necessary to help seamlessly implement necessary changes while 
minimizing increase in burden. Further, we will also consider the 
issues associated with new software, workflow changes, training, et 
cetera as we continue to improve our education and outreach efforts.
(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 the FY 2019 IPPS/LTCH PPS proposed rule (83 
FR 20498), in alignment with the Medicare and Medicaid Promoting 
Interoperability Programs (previously known as the Medicare and 
Medicaid EHR Incentive Programs), we proposed 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 final rule where 
similar proposals are discussed for the Medicare and Medicaid Promoting 
Interoperability Programs (previously known as the Medicare and 
Medicaid EHR Incentive Programs).
    Comment: Many commenters supported the proposed eCQM reporting 
requirements for the CY 2019 reporting period/FY 2021 payment 
determination, such that hospitals would be required to select and 
submit one calendar quarter of data for 4 of the available eCQMs. 
Several comments expressed appreciation for the continued flexibility 
and consistency CMS has provided for eCQM reporting requirements, 
acknowledging the operational challenges in implementing eCQM 
reporting. These commenters noted that maintaining the reporting 
requirements will make the transition to 2015 Edition CEHRT more 
seamless, because the upgrade process will make it even more difficult 
for hospitals to electronically report eCQMs for more than one calendar 
quarter, especially if they are not able to complete the upgrade to the 
new CEHRT until the end of the year. One commenter also noted that 
allowing hospitals to self-select one quarter of data allows for 
adjustments to assure that the data on which CMS relies for long-term 
decision-making is accurate.
    Response: We thank the commenters for their support.
    Comment: Some commenters suggested the proposed eCQM reporting 
requirements for the CY 2019 reporting period/FY 2021 payment 
determination should also be finalized for the CY 2020 reporting/FY 
2022 payment determination, consistent with the Promoting 
Interoperability Program proposal.
    Response: With respect to extending these reporting requirements 
for the CY 2020 reporting/FY 2022 payment determination, we will 
continue to monitor and assess the progress of hospitals implementing 
eCQM requirements and engage in discussions with hospitals regarding 
their experiences as we consider policies related to eCQM reporting in 
future rulemaking. We are committed to staying in alignment with the 
Promoting Interoperability Program's eCQM-related policies to the 
greatest extent feasible, and we believe the commenter may have 
misinterpreted the Promoting Interoperability Program's proposal with 
regard to eCQM reporting requirements. In alignment with the Hospital 
IQR Program, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20539), 
the Promoting Interoperability Program proposed, ``[f]or 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.'' Neither the Promoting Interoperability Program, nor 
the Hospital IQR Program, proposed eCQM reporting requirements for the 
CY 2020 reporting/FY 2022 payment determination in the FY 2019 IPPS/
LTCH PPS proposed rule. We note that the Promoting Interoperability 
Program had additional proposals related to requirements for attesting 
to measures and objectives, which may have different requirements and 
different reporting periods than for reporting CQMs electronically and 
we refer readers to section VIII.D. of the preamble of this final rule 
for more information.
    Comment: One commenter suggested that eCQMs should be implemented 
at a faster rate and that the commenter would prefer to report all 
chart-abstracted measures in an eCQM version because eCQMs are 
resulting in significant cost-reductions associated with not having to 
chart-abstract.
    Response: We thank the commenter for their suggestion. It is one of 
our goals to expand EHR-based quality reporting in the Hospital IQR 
Program using more meaningful measures, which we believe will 
ultimately reduce burden on hospitals as compared with chart-abstracted 
data reporting and improve patient outcomes by providing more robust 
data to support quality improvement efforts. We intend to introduce 
additional eCQMs into the program as eCQMs that support our program 
goals become available, but we

[[Page 41604]]

want to ensure that we proceed slowly and incrementally to enable 
hospitals enough time to update systems and workflows in the least 
burdensome manner possible.
    Comment: A few commenters did not support the proposed eCQM 
reporting requirements for the CY 2019 reporting period/FY 2021 payment 
determination, such that hospitals would be required to select and 
submit one calendar quarter of data for 4 of the available eCQMs. 
Specifically, one commenter recommended that: (1) CMS decrease the 
number of eCQMs required to be reported to CMS in 2018; and (2) CMS 
identify one or two specific eCQMs on which it would like all hospitals 
to report rather than for measures to be removed in subsequent 
reporting years.
    Response: We thank the commenters for their views and suggestions 
but 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. Specifically, we do not believe 
decreasing the number of eCQMs required to be reported is necessary 
because for the CY 2017 reporting period and the CY 2018 reporting 
period, over 90 percent of IPPS hospitals successfully reported one 
quarter of data for 4 eCQMs. As to the suggestion to identify one or 
two specific eCQMs on which all hospitals would be required to report 
instead of removing measures for future program years, at this time we 
believe it is a greater priority to offer flexibility to hospitals in 
selecting eCQMs that are most relevant to their individual patient 
populations and quality improvement efforts as they upgrade EHR 
systems, map data elements, and modify workflows to improve EHR-based 
quality reporting. We will take this suggestion into consideration and 
continue to monitor and assess the progress of hospitals implementing 
eCQM reporting requirements, as well as whether there is a continued 
need to remove any other eCQMs from the measure set. We will also 
continue to engage in discussions with hospitals and health IT vendors 
regarding their experiences as we consider policies related to eCQM 
reporting in future rulemaking.
    Comment: One commenter suggested aligning all Hospital IQR and 
Promoting Interoperability Program requirements, including requiring 
one consecutive 90-day reporting period, to eliminate confusion among 
health care providers.
    Response: While we try to align eCQM reporting requirements for the 
Hospital IQR and Promoting Interoperability Programs to the greatest 
extent feasible (we refer readers to section VIII.D.9. of the preamble 
of this final rule where we are finalizing the same eCQM reporting 
requirements in the Hospital IQR Program as the Promoting 
Interoperability Programs for the CY 2019 reporting period/FY 2021 
payment determination), we are not able to align the Hospital IQR 
Program with the Promoting Interoperability Program's requirements for 
attesting to measures and objectives, which allow for one consecutive 
90-day reporting period. We note that the Hospital IQR Program can only 
use quality and cost measures and does not allow for an attestation 
option.
    Comment: One commenter expressed concern that the transition to CQL 
and the proposed removal of the seven eCQMs would result in 
considerable burden required to map the necessary data elements from 
the EHR for 4 eCQMs and some vendors are not properly equipped to 
collect and transmit such data through the CMS QualityNet secure 
portal.
    Response: We appreciate the commenter's concern that the transition 
to CQL and removal of the seven eCQMs may result in additional burden 
required to map the necessary data elements from the EHR for 4 eCQMs, 
however, hospitals have been successfully reporting one calendar 
quarter of data for 4 eCQMs and we believe that reporting will become 
progressively easier with every year of experience, and maintaining 
these requirements provides continuity, minimizing provider confusion 
about changing requirements.
    After consideration of the public comments we received, we are 
finalizing our proposal to extend the eCQM reporting and submission 
requirements previously finalized for the CY 2018 reporting period/FY 
2020 payment determination, 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 as proposed. We also refer readers to section VIII.D.9. 
of the preamble of this final rule where we are finalizing similar 
policy under the Medicare and Medicaid Promoting Interoperability 
Programs (previously known as the Medicare and Medicaid EHR Incentive 
Programs).
(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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20498), 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 proposed 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 final 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

[[Page 41605]]

data.\361\ 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.
---------------------------------------------------------------------------

    \361\ For CEHRT definition, we refer readers to 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_11-4-15.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 
the proposed rule, we proposed to require hospitals to use the 2015 
Edition certification criteria for CEHRT when reporting eCQMs 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 the 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.
    Comment: Many commenters supported the required use of 2015 Edition 
of CEHRT because it use enhances interoperability, increases 
implementation efficiency, shortens product development time, eases 
provider system integration, addresses health disparities by providing 
more robust demographic data collection on social determinants of 
health, includes application programming interfaces (APIs) for consumer 
access, and promotes a new streamlined approach to privacy and 
security. For these reasons, commenters believed the benefits outweigh 
any upgrade costs. Commenters noted that requiring the 2015 Edition 
CEHRT will help to simplify the Promoting Interoperability Program and 
eliminate confusion around different objective and measure sets 
available for reporting. In addition, commenters asserted the 2015 
Edition CEHRT will provide patients more control of their health data 
to inform the decisions that they make regarding their health, helping 
patients participate as full partners in their care.
    Several commenters also believed that a majority of health IT 
vendors have successfully completed, or are in the process of 
completing, their certification(s) under the 2015 Edition CEHRT 
Criteria, and it would significantly and unfairly penalize the 
diligence of these parties by any delay in order to accommodate those 
companies who have not complied with the 2015 Edition CEHRT criteria by 
now.
    Response: We thank commenters for their support.
    Comment: One commenter urged that, as soon as possible, CMS and ONC 
ensure that the U.S. Core Data for Interoperability (USCDI) captures 
more of the patient's full health care record at any given facility, 
which can then be linked to application programming interfaces (APIs) 
such as FHIR, enabling even greater functionality of EHRs.
    Response: We thank the commenter for the suggestion, and we will 
consult with ONC regarding interoperability and linking EHRs to APIs, 
or operating system tools used by developers of software applications. 
As discussed in section VIII.A.11.d.(1) above, FHIR, or Fast Healthcare 
Interoperability Resources, is a standards framework developed by 
Health Level Seven International (HL7) and is designed to enable 
information exchange to support the provision of healthcare in a wide 
variety of settings.\362\ We will continue to explore this and other 
opportunities to improve functionality for future years of the Hospital 
IQR Program.
---------------------------------------------------------------------------

    \362\ 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.
---------------------------------------------------------------------------

    Comment: A few commenters supported the required use of the 2015 
Edition of CEHRT, but recommended CMS delay the requirement until the 
CY 2020 reporting period/FY 2022 payment determination or allow 
flexibility for 6 months to a year for implementation. Although most 
commenters did not anticipate significant labor would be required from 
providers to implement the new functionalities required, some 
commenters recommended that CMS grant Extraordinary Circumstances 
Exceptions (ECEs) to hospitals that are unable to migrate to the 2015 
Edition due to vendor backlogs in updating their technology.
    Response: We note that, as described above, in both the Hospital 
IQR and Promoting Interoperability Programs, we have previously delayed 
requiring the use of the 2015 Edition CEHRT, and do not believe that 
transition to the 2015 Edition certification criteria for CEHRT for the 
CY 2019 reporting period will materially impact the percentage of 
hospitals able to successfully report eCQM data, particularly in light 
of our change to previously finalized policy to allow flexibility for 
hospitals to use the 2014 Edition, 2015 Edition, or a combination of 
both for the CY 2018 reporting period/FY 2020 payment determination. 
Consistent with the observations of several commenters, we believe a 
majority of health IT vendors have successfully completed, or are in 
the process of completing, their certification(s) under the 2015 
Criteria, and that the CY 2019 reporting period/FY 2021 payment 
determination is the appropriate time to require the transition to the 
2015 Edition.
    With regard to commenters' suggestion that hospitals unable to 
migrate to the 2015 Edition due to health IT vendor backlogs in 
updating

[[Page 41606]]

their technology be granted an Extraordinary Circumstances Exception 
(ECE), we note that if a hospital finds it is unable to meet the eCQM 
submission deadline or other submission requirements, the hospital 
should review our criteria for an eCQM-related ECE (81 FR 57182) and 
consider submitting an ECE request by the ECE request deadline. Our 
current policy allows hospitals to utilize the existing ECE form to 
request an exception from the Hospital IQR Program's eCQM reporting 
requirement for the applicable program year based on hardships 
preventing hospitals from electronically reporting (81 FR 57182). Such 
hardships could include, but are not limited to, infrastructure 
challenges (hospitals must demonstrate that they are in an area without 
sufficient internet access or face insurmountable barriers to obtaining 
infrastructure) or unforeseen circumstances, such as vendor issues 
outside of the hospital's control (including a vendor product losing 
certification) (80 FR 49695 and 49713). ECE requests for the Hospital 
IQR Program are considered on a case-by-case basis (81 FR 57182). We 
will assess the hospital's request on a case-by-case basis to determine 
if an exception is merited. Therefore, our decision whether or not to 
grant an ECE will be based on the specific circumstances of the 
hospital. For additional information about eCQM-related ECE requests, 
we refer readers to the QualityNet website at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228775554109.
    Comment: Although commenters acknowledged the 2015 Edition of CEHRT 
includes important updates to facilitate the exchange of data, many 
commenters did not support the required use of 2015 Edition of CEHRT 
because of the costs to hospitals and encouraged CMS to continue to 
allow hospitals to use the 2014 Edition of CEHRT. In particular, 
several commenters expressed concern about the ability of rural and 
solo/small group providers to upgrade EHR systems because they struggle 
to ensure products are triaged, fully tested, and implemented, with 
staff trained and workflow adjustments validated to ensure safe, 
effective, and efficient implementation and use. Some commenters 
suggested flexible approaches that allow clinicians to incorporate 
technology into their unique clinical workflows, to mitigate data 
access and functionality issues that might be unique to their practice, 
and to use EHRs in a manner that more directly responds to their 
patients' needs and aligns with their clinical workflow. One commenter 
noted a recent search of the Certified Health IT Product List shows 
that there are 338 products currently certified to the 2015 Edition. Of 
these, most are limited modules for providers and specialties or are 
limited to specific functionalities, such as a patient portal. The 
commenter noted, in comparison, there are more than 2,400 EHR products 
still certified to the 2014 Edition.
    Response: Although we acknowledge that facilitating quality 
improvement for rural and small hospitals present unique challenges and 
is a high priority under the Meaningful Measures Initiative, we believe 
the increased interoperability and the flow of information between 
providers and patients resulting from use of the 2015 Edition justifies 
the costs of implementation. As stated above, there are certain 
functionalities in the 2015 Edition that were not available in the 2014 
Edition, including features that are designed to improve the 
functionality and quality of eCQM data. 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.
    With respect to the commenter's observation that the number of 
products currently certified to the 2015 Edition are limited as 
compared to the number of products available certified to the 2014 
Edition, we expect that as more hospitals begin to use the 2015 
Edition, the number of products included in the Certified Health IT 
Product List \363\ will quickly multiply. We believe our policy to 
require use of the 2015 Edition for the CY 2019 reporting period/FY 
2021 payment determination is likely to expedite the development of 
these products.
---------------------------------------------------------------------------

    \363\ The Certified Health IT Product List is a listing of 
health IT products, tested and reviewed by the Office of the 
National Coordinator for Health IT. We refer readers to: https://chpl.healthit.gov/.
---------------------------------------------------------------------------

    Comment: One commenter requested CMS update a hyperlink in the 
proposed rule at 83 FR 20498, footnote 330.
    Response: We have updated the hyperlink in the footnote above. We 
also corrected several other hyperlinks in the proposed rule in a 
correction notice published in the Federal Register (83 FR 28603 
through 28604).
    Comment: Several commenters requested clarification about whether 
hospitals are required to use 2015 Edition CEHRT for the full calendar 
year, or for a 90-day reporting period. A few commenters suggested CMS 
make the reporting period for all programs that require the use of 2015 
Edition CEHRT be 90 days for the CY 2019 reporting period, noting that 
some CMS programs still require the use of 2015 Edition CEHRT for an 
entire year. One commenter asked CMS to clarify the date on which this 
must be certified and recommended that date correspond with the 
beginning of the chosen reporting period.
    Response: Hospitals are not required to have their EHRs certified 
to the 2015 Edition CEHRT standards for the full calendar year; 
certification should be obtained prior to the end of the eCQM reporting 
period to meet program requirements (for example, before December 31, 
2019 for the CY 2019 reporting period).
    With regard to commenters' suggestion that CMS make the reporting 
period for all programs that require the use of 2015 Edition CEHRT be 
90 days for the CY 2019 reporting period, we are committed to the 
Hospital IQR and Promoting Interoperability Programs' eCQM-related 
policies staying in alignment to the greatest extent feasible. We refer 
readers to sections VIII.A.11.d.(2) and VIII.D.9. of the preamble of 
this final rule where we are finalizing eCQM reporting requirements in 
both the Hospital IQR Program and the Promoting Interoperability 
Programs, which will bring them into greater alignment for the CY 2019 
reporting period/FY 2021 payment determination, including with regard 
to the number of eCQMs (4 measures), the number of calendar quarters of 
data (one calendar quarter of data), and which Edition of CEHRT to use 
(2015 Edition) for eCQM reporting. However, we are not able to align 
the Hospital IQR Program with the Promoting Interoperability Program's 
requirements for attesting to measures and objectives, which allow for 
one consecutive 90-day reporting period. We refer readers to section 
VIII.D.4. of the preamble of this final rule for more information on 
those requirements. We note that the Hospital IQR Program is limited to 
measures appropriate for the measurement of quality of care and does 
not allow for an attestation option.
    Comment: One commenter sought guidance on whether new measures will 
be made a part of the certification pathway, and, if so, whether there 
is

[[Page 41607]]

sufficient time to fold those new requirements into an update to the 
2015 Edition.
    Response: With respect to the commenter's request for clarification 
about the certification pathway, we note that CMS does not establish 
certification processes; we adopt reporting requirements based on 
standards set by ONC. We will share with ONC the commenter's 
recommendation to incorporate new measure requirements into an update 
to the 2015 Edition certification criteria.
    Comment: A few commenters recommended that CMS monitor the 
transition to the 2015 Edition of CEHRT.
    Response: We will continue to monitor the experiences of hospitals 
and health IT vendors as they transition to the 2015 Edition of CEHRT. 
We will continue to assess the progress of hospitals implementing 
certification requirements and engage in discussions with hospitals and 
health IT vendors regarding their experiences as we consider 
certification policies related to eCQM reporting in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal to require hospitals to use the 2015 Edition 
certification criteria for CEHRT when reporting eCQMs beginning with 
the CY 2019 reporting period/FY 2021 payment determination as proposed.
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 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. In the FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20498 through 20499), we did not propose 
any changes to the eCQM submission deadlines.
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. In the FY 2019 IPPS/LTCH 
PPS proposed rule (83 FR 20499), we did not propose any changes to our 
sampling and case threshold policies.
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). In the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20499), we did not propose any changes to the 
HCAHPS Survey administration and submission requirements. However, we 
refer readers to the CY 2019 OPPS/ASC proposed rule (available at: 
https://www.regulations.gov/document?D=CMS-2018-0078-0001), where we 
have proposed to update the HCAHPS Survey by removing the Communication 
About Pain questions effective with January 2022 discharges, for the FY 
2024 payment determination and subsequent years. We note that we did 
not propose any changes to the HCAHPS Survey administration and 
submission requirements.
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. In the FY 2019 IPPS/LTCH PPS proposed rule (83 
FR 20499), we did not propose any changes to those requirements; 
however, we refer readers to sections VIII.A.5.a. and VIII.A.5.b.(1) of 
the preamble of this final rule, in which we discuss finalizing our 
proposal to remove the Hospital Survey on Patient Safety Culture and 
Safe Surgery Checklist Use measures as proposed. As a result, no 
structural measures will remain in the Hospital IQR Program and 
hospitals will 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 did not propose any changes to these requirements in the 
FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20499), we refer readers to 
section VIII.A.5.b.(2)(b) of the preamble of this final rule, in which 
we discuss finalizing our proposal to remove these measures from the 
Hospital IQR Program with modification to delay removal for one year. 
As a result, hospitals will not be required to submit any data for HAI 
measures via NHSN for the Hospital IQR Program for the CY 2020 
reporting period/FY 2022 payment determination or subsequent years. We 
note that the five HAI measures will remain in the HAC Reduction and 
Hospital VBP Programs and will continue to be reported via NHSN. We 
further note that the HCP measure remains in the Hospital IQR Program 
and will continue to be reported via NHSN. We refer readers to section 
IV.J. of the preamble of this final rule for more information about how 
the NHSN HAI measures will be collected and validated under the HAC 
Reduction Program. We also refer readers to section IV.I.2.c.(2) of the 
preamble of this final rule where we discuss retaining the NHSN HAI 
measures in the Hospital VBP 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

[[Page 41608]]

that are still in effect. We refer readers to the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50822 through 50835), the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50262 through 50273), and the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49710 through 49712) for detailed information on the 
modifications to these processes finalized for the FY 2016, FY 2017, 
and FY 2018 payment determinations and subsequent years. In the FY 2019 
IPPS/LTCH PPS proposed rule (83 FR 20499), we did not propose any 
changes to the existing processes for validation of either eCQM or 
chart-abstracted measure data.
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. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20499), we did 
not propose any changes to the existing processes for validation of 
Hospital IQR Program eCQM data.
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. In the FY 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20499 through 20500), we did not propose any changes to the 
validation of chart-abstracted measures, including the educational 
review process.
    While we did not propose any changes to our previously established 
validation procedures in the proposed rule (83 FR 20499 through 20500), 
we refer readers to: (1) Section VIII.A.5.b.(8) of the preamble of this 
final rule, in which we discuss finalizing our proposal to remove three 
clinical process of care measures (IMM-2, ED-1, and VTE-6) beginning 
with the CY 2019 reporting period/FY 2021 payment determination, and 
one clinical process of care measure (ED-2) 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 final rule, in which we 
discuss finalizing our proposals to remove five Hospital-Acquired 
Infection (HAI) chart-abstracted measures from the Hospital IQR Program 
with modification, such that removal would be delayed by one year 
beginning with the CY 2020 reporting period/FY 2022 payment 
determination. As a result: Two chart-abstracted clinical process of 
care measures (ED-2 and Sepsis measures) and five HAI chart-abstracted 
measures (CDI, CAUTI, CLABSI, MRSA Bacteremia, and Colon and Abdominal 
Hysterectomy SSI measures) will remain in the Hospital IQR Program that 
will require validation for the FY 2021 and 2022 payment 
determinations; and only one chart-abstracted clinical process of care 
measure (Sepsis measure) will remain in the program that would require 
validation for the FY 2023 payment determination and subsequent years. 
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 2020 reporting period/FY 2022 payment 
determination will be the last year for which validation will occur 
under the Hospital IQR Program with respect to the CDI, CAUTI, CLABSI, 
MRSA Bacteremia, and Colon and Abdominal Hysterectomy SSI measures 
because, as discussed in section VIII.A.5.b.(2)(b) of the preamble of 
this final rule, we are finalizing our proposal to remove these 
measures with modification to delay removal for one year. Beyond the FY 
2022 payment determination, validation of those measures will occur 
under the HAC Reduction Program, as further discussed in section 
IV.J.4.e. of the preamble of this final 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. In the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20500), we did not propose any 
changes to the DACA requirements.
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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20500), we did 
not propose any changes to the public display requirements. However, we 
note that in section VIII.A.10. of the preamble of this final 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. 
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20500), we did not 
propose any changes to the reconsideration and appeals procedures.
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

[[Page 41609]]

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. In the FY 2019 IPPS/LTCH PPS proposed rule 
(83 FR 20500), we did not propose any changes to the ECE policy.

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 (HSS), 
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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20500 through 
20510), we proposed 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 preambles of the 
proposed rule and this final rule. The proposals reflect our efforts to 
ensure that the PCHQR 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 minimize beneficiary confusion by reducing 
duplicative reporting and streamlining the process of analyzing 
publicly reported quality measures data. The proposals 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 
Hospital Compare or another 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 \364\ for the PCHQR Program, which 
are based on factors adopted for the Hospital IQR Program (80 FR 49641 
through 49642):
---------------------------------------------------------------------------

    \364\ 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 (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 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 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. New Measure Removal Factor
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20501 through 
20502), we proposed to adopt an additional factor to consider when 
evaluating potential measures for

[[Page 41610]]

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 preambles of the proposed 
rule and this final 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 proposed 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 invited 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.
    Comment: One commenter supported the newly proposed measure removal 
criteria, noting that the broad application of this criterion helps to 
streamline CMS' quality programs. The commenter encouraged CMS to not 
remove measures simply because a previously finalized measure was too 
difficult to implement, thereby creating a gap in the measure set, but 
rather attempt to identify ways to gather the appropriate data by 
different means.
    Response: We thank the commenter for its support. We note that it 
is never our intent to remove measures solely based on ease of 
implementation. Further, implementation concerns are something we take 
into account when proposing to adopt a measure. As discussed in section 
VIII.B.2.b of the preamble of this final rule, the removal of measures 
under the newly proposed Factor 8 will serve to balance the costs of 
ongoing maintenance, reporting/collection, and public reporting with 
the benefit associated with the reporting of that data. We intend to be 
transparent in our assessment of measures under this measure removal 
factor. As described above, there are various considerations of costs 
and benefits, direct and indirect, financial and otherwise, that we 
will evaluate in applying removal Factor 8, and we will take into 
consideration the perspectives of multiple stakeholders. We believe 
costs include costs to stakeholders such as patients, caregivers, 
providers, CMS, and other entities. Additionally, we note that the 
benefits we will consider center around benefits to patients and 
consumers as the primary beneficiaries of our quality reporting and 
value-based payment programs.
    Comment: One commenter requested clarification regarding whose 
benefit is being considered when evaluating whether ``the costs 
associated with the measure outweigh the benefit of its continued use 
in the program.'' The commenter noted that there is considerable focus 
on the cost of the measure, but a transparent process must be put in 
place to weigh the patient benefit against the cost of the measure. The 
commenter appreciated that CMS will propose removing measures based on 
Factor 8 on a case-by-case basis and strongly encouraged CMS to survey 
patients to understand if they feel the measures are beneficial.
    Response: We understand the importance of transparency in our 
processes, and we reaffirm that we prioritize the impact on patients 
when assessing the adoption and/or retention of quality metrics in our 
quality reporting programs. We reiterate that we intend to evaluate 
each measure on a case-by-case basis, and to balance the costs with the 
benefits to a variety of stakeholders. These stakeholders include, but 
are not limited to, patients and their families or caregivers, 
providers, the healthcare research community, healthcare payers, and 
patient and family advocates. Because for each measure the relative 
benefit to each stakeholder may vary, we believe that the benefits to 
be evaluated for each measure are specific to the measure and the 
original rationale for including the measure in the program.
    Comment: One commenter did not support the proposed adoption and 
use of Factor 8 in any of CMS' programs, due to lack of transparency 
around assessment criteria. The commenter noted that the assessment of 
value must be as transparent as possible with a clear prioritization of 
the needs of patients/consumers. The commenter urged CMS to develop a 
standardized evaluation and scoring system with significant multi-
stakeholder input, to ensure that Factor 8 appropriately balances the 
needs of all health care stakeholders.
    Response: We thank the commenter for its feedback. We intend to 
evaluate each measure on a case-by-case basis, while considering input 
from a variety of stakeholders, including, but not limited to: 
Patients, caregivers, patient

[[Page 41611]]

and family advocates, providers, provider associations, healthcare 
researchers, data vendors, and other stakeholders with insight into the 
benefits and costs (financial and otherwise), and will continue to do 
so in the future when proposing measures for adoption or retention in 
the PCHQR Program. Further, preliminary stakeholder input on data 
collection and reporting burden was instrumental in the derivation of 
the newly proposed removal factor. As discussed in section VIII.B.2.b. 
of the preamble of this final rule, above, the removal of measures 
under Factor 8 will function as a balancing test between the cost of 
ongoing maintenance, reporting/collection, and public reporting against 
the benefit associated with reporting that data. We note that we intend 
to assess the costs and benefits to all program stakeholders.
    After consideration of the public comments we received, we are 
finalizing our proposal to adopt the new measure removal Factor 8, 
``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 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. Removal of Measures From the PCHQR Program Beginning With the FY 
2021 Program Year
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20502 through 
20503), we proposed 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 proposed (83 FR 20503) 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. The 
measures we proposed to remove on this basis are as follows:
     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) Removal of Web-Based Structural Measures
    We proposed 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 final 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.

[[Page 41612]]



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


                                                  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 invited public comment on our proposal to remove these four 
measures from the PCHQR Program beginning with the FY 2021 program 
year.
    Comment: A few commenters supported the proposed removal of the 
four web-based, structural measures. The commenters noted that topped-
out measures provide little in the way of useful quality 
differentiation and cannot, by definition, incentivize meaningful 
quality improvement. Moreover, the removal of these measures will help 
to reduce the administrative burden of the PCHQR Program.
    Response: We thank the commenters for their support.
    Comment: One commenter did not support the proposed removal of the 
Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging Low-Risk 
Patients (PCH-18) measure from the PCHQR Program. The commenter 
indicated that this measure is currently included in the CQMC Oncology 
measure set. As part of a joint effort to implement meaningful measures 
that will promote accountability and drive improvement across 
stakeholders, the commenter recommended retaining the measure in the 
program until the CQMC is able to jointly re-evaluate the measure's 
inclusion in the Oncology measure set.
    Response: We appreciate the commenter's input. However, as 
demonstrated by the data provided in the tables displaying the 2015 and 
2016 results for this measure above, this measure is statistically 
topped-out. Consequently, continued reporting of the measure provides 
limited opportunity for continuing quality improvement, while 
continuing to incur reporting burden to care providers. We believe that 
the removal of this measure from the PCHQR Program aligns with one of 
the governing tenets of the Core Quality Measure Collaborative (CQMC): 
Promotion of measurement that is evidence-based and generates valuable 
information for quality improvement.\365\ We note that topped out 
status is an example of a situation where Factor 1 could be used for 
measure removal, but is not a prerequisite to its use. Further, the 
PCHQR Program is not bound to removing measures solely because they are 
topped out, however, in this scenario, the data for this measure 
demonstrate that meaningful distinctions and improvements in 
performance can no longer be made.
---------------------------------------------------------------------------

    \365\ Centers for Medicare and Medicaid Services: ``Core 
Measures.'' Accessed on: June 26, 2018. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityMeasures/Core-Measures.html.
---------------------------------------------------------------------------

    Comment: One commenter indicated that the removal of Oncology: 
Medical and Radiation--Pain Intensity Quantified (NQF #0384) is unique 
from the other web-based, structural measures proposed for removal, in 
that it was validated and endorsed by its measure developer and NQF as 
a paired measure with the Oncology: Plan of Care for Pain--Medical and 
Radiation Oncology (NQF #0383). Given that the collection of data for 
NQF #0384 will continue to be necessary in order to obtain the eligible 
patient population for NQF #0383, the commenter recommends that these 
measures either be included or excluded from the PCHQR Program as a 
pair.
    Response: We thank the commenter for its recommendation. While we 
recognize the pairing of these two measures in the PCHQR Program, the 
Oncology: Medical and Radiation--Pain Intensity Quantified (NQF #0384) 
measure remains statistically topped out, while its companion measure, 
Oncology: Plan of Care for Pain (NQF #0383) is not. We further note 
that the Oncology: Medical and Radiation--Pain Intensity Quantified 
(NQF #0384) measure is duplicative as a plan of care for pain measure. 
We therefore believe that the Oncology: Plan of Care for Pain--Medical 
and Radiation Oncology (NQF #0383) measure suffices to assess cancer 
patient pain treatment. Further, we believe the Oncology: Plan of Care 
for Pain measure will continue to

[[Page 41613]]

incentivize continued quality improvement through public reporting in 
the PCHQR Program. As the commenter noted, the submission of data does 
not change, which will allow CMS to monitor for unintended consequences 
related to the removal of the measure.
    After consideration of the public comments we received, we are 
finalizing the removal of the following web-based, structural measures 
beginning with the FY 2021 program year: (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).
(2) Removal of National Healthcare Safety Network (NHSN) Chart-
Abstracted Measures
    We proposed 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 the 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 final rule for a detailed discussion of the measures.
    As discussed in section I.A.2. of the preambles of the proposed 
rule and this final 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 complexities 
associated with the use of these data by patients in decision-making. 
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. Further, we note that 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 preambles of the proposed rule 
and this final rule, we strive to ensure that patients are empowered to 
make decisions about their health care by 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, in the 
proposed rule we stated that if our proposal to adopt the new measure 
removal factor described in section VIII.B.2.c. of the preambles of the 
proposed rule and this final rule is finalized as proposed, we proposed 
that under that factor, we would remove the CAUTI and CLABSI measures 
from the PCHQR Program beginning with the FY 2021 program year.
    We invited public comment on our proposal to remove these two 
measures from the PCHQR Program beginning with the FY 2021 program 
year. We are conducting additional data analyses to assess measure 
performance based on new information provided by the CDC. In 
acknowledgement of the importance of these measures in assessing 
patient safety in the PCH setting, we want to be cautious to not 
prematurely remove measures from the PCHQR Program. As such, we wish to 
evaluate these data for trends that link positive improvements (i.e., a 
decrease in the reporting burden and/or cost, and/or demonstrated 
feasibility for public reporting) to these measures. We note that the 
data recently submitted by the CDC were not available at the time we 
proposed the removal of these measures from the PCHQR Program. 
Moreover, we will reconcile the comments received on the proposed 
removal of the Catheter-Associated Urinary Tract Infection (CAUTI) 
Outcome Measure (PCH-5/NQF #0138) and Central Line-Associated 
Bloodstream Infection (CLABSI) Outcome Measure (PCH-4/NQF #0139) 
measures in a future 2018 final rule, most likely in the CY 2019 OPPS/
ASC final rule targeted for release no later than November 2018. We 
also note that the deferral to the CY 2019 OPPS/ASC final rule will not 
affect PCH data submission because we proposed to end data collection 
beginning in CY 2019.
4. 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 preambles of the proposed rule 
and this final 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, 
in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20503 through 20506), 
we proposed one new measure, described below.
b. 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 Program measure set to include

[[Page 41614]]

measures that are less burdensome to report to CMS, but provide 
valuable information for beneficiaries, we proposed 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,\366\ and would fill an existing gap 
area of risk-adjusted readmission measures in the PCHQR Program.
---------------------------------------------------------------------------

    \366\ 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,'' \367\ 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.
---------------------------------------------------------------------------

    \367\ 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.\368\ Cancer disproportionately 
affects older Americans, with 86 percent of all cancers diagnosed in 
people 50 years of age and older.\369\ 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.\370\ Oncology care contributes 
greatly to Medicare spending, and accounted for an estimated $125 
billion in health care spending in 2010.\371\ This figure is projected 
to rise to between $173 billion and $207 billion by 2020.\372\ A 2012 
audit from the U.S. 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.\373\ 
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.\374\
---------------------------------------------------------------------------

    \368\ NIH's National Cancer Institute Statistics. Available at: 
https://www.cancer.gov/about-cancer/understanding/statistics.
    \369\ American Cancer Society. Cancer facts and figures 2016. 
2016. Available at: http://www.cancer.org/acs/groups/content/@research/documents/document/acspc-047079.pdf.
    \370\ Siegel RL, Miller KD, Jemal A. Cancer statistics, 2016. CA 
Cancer J Clin. 2016;66(1):7-30.
    \371\ 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.
    \372\ Ibid.
    \373\ U.S. 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.
    \374\ 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.\375\ 
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.\376\ It is estimated 
that all-cause, unplanned readmissions cost the Medicare program $17.4 
billion in 2004.\377\ 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.\378\ Furthermore, unplanned readmissions during 
treatment can delay treatment completion and, potentially, worsen 
patient prognosis.\379\
---------------------------------------------------------------------------

    \375\ 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.
    \376\ Ibid.
    \377\ 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.
    \378\ Ibid.
    \379\ 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.\380\ 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.\381\ Together, these 
studies suggest that certain readmissions in cancer patients are 
preventable and should be routinely measured for purposes of quality 
improvement and accountability.
---------------------------------------------------------------------------

    \380\ 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.
    \381\ 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 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-

[[Page 41615]]

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.382 383
---------------------------------------------------------------------------

    \382\ 2018 Considerations for Implementing Measures Draft 
Report-Hospitals. Available at: http://www.qualityforum.org/Show_Content.aspx?id=30279.
    \383\ 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 proposed 
that we would calculate this measure on a yearly basis using Medicare 
administrative claims data. Specifically, we proposed that the data 
collection period for each program year would span from July 1 of the 
year, three years prior to the program year to June 30 of the year, two 
years prior to the program year. Therefore, for the FY 2021 program 
year, we would calculate measure rates using PCH claims data from 
October 1, 2018 through September 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 \384\ 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.
---------------------------------------------------------------------------

    \384\ 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 \385\ 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.
---------------------------------------------------------------------------

    \385\ 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):
[GRAPHIC] [TIFF OMITTED] TR17AU18.016


[[Page 41616]]


    We invited 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.
    Comment: Several commenters supported the proposed adoption of the 
30-Day Unplanned Readmissions for Cancer Patients measure. The 
commenters noted that this measure is fully developed, tested, and NQF-
endorsed. Further, the commenters noted that: The MAP supported this 
measure as filling an unmet measure gap for unplanned readmissions that 
are cancer-specific in the PCHQR Program; this measure incorporates the 
unique clinical characteristics of oncology patients and will provide 
specific readmissions data that more accurately reflects the quality of 
cancer care delivery that will be hugely beneficial information for 
patients; this measure includes both surgical and non-surgical cancer 
patients who are admitted urgently or emergently to cancer hospitals or 
other hospitals within 30 days of an index admission, while, at the 
same time, it excludes readmissions for chemotherapy or radiation 
therapy, as well as patients seeking treatment for disease progression. 
Moreover, the commenters noted that these features allow hospitals to 
better identify and address preventable readmissions for cancer 
patients than current readmissions measures. The commenters stated that 
ultimately, the inclusion of this measure in the PCHQR Program will 
promote higher-value care for cancer patients and improve patient 
outcomes in the domain of hospital readmissions.
    Response: We thank the commenters for their support.
    Comment: One commenter did not support the proposed adoption of the 
30-Day Unplanned Readmissions for Cancer Patients measure (NQF #3188). 
The commenter expressed concerns that assigning accountability will be 
particularly challenging for this measure. Specifically, the commenter 
indicated that due to the severity of illness that many patients 
experience related to their cancer diagnosis, it would be misguided to 
assign responsibility and penalize other caregivers for readmissions 
associated with cancer patients. The commenter also requested 
clarification regarding the proposed data collection period for the 
measure because the proposed rule stated that the collection for this 
measure for the FY 2021 program year would begin July 1, 2018 and go 
through June 30, 2019 while also identifying the first data collection 
period for the FY 2021 program year as running from October 1, 2018 
through September 30, 2019.
    Response: We thank the commenter for its views, however, we 
disagree that assessing accountability would be difficult with this 
measure. We are finalizing that the data collection period for the FY 
2021 program year and subsequent years for this measure will be October 
1 through September 30 of the following calendar year, for each 
respective program year. Specifically, as indicated in section 
VIII.B.9.b. of the preamble of this final rule, for the FY 2021 program 
year, this corresponds to a data collection period of October 1, 2018-
September 30, 2019. We note that the date range of July 1, 2018-June 
30, 2019, provided in section VIII.B.4.b.(3) of the preamble of the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20505) was an error, and we 
have corrected it in the corresponding section of the preamble in this 
final rule. Moreover, this one-year timeframe narrows the examination 
period for the assessment of caregivers, thereby making it less 
difficult to evaluate where in the process a readmission could have 
been preempted, and easier to evaluate provider attribution.
    With regards to patient illness severity, we understand that there 
are confounding healthcare factors that contribute to the severity of 
illness that many patients experience related to their cancer 
diagnosis; however, we believe that assessing patient readmissions is a 
proactive method that PCHs can use to hone in on which (if any) of 
these factors could be remedied and/or prevented with improved quality 
care. We believe that it is most beneficial to patients to be able to 
understand causes and/or, where possible, observe trends in cancer 
patient readmissions, in an effort to establish practices that 
eliminate readmissions. We reiterate that we are only assessing the 
care provided within a one-year timeframe. We also reiterate that the 
measure excludes readmissions for patients readmitted for chemotherapy 
or radiation therapy treatment or with disease progression.
    After consideration of the public comments we received, we are 
finalizing the adoption of the 30-Day Unplanned Readmissions for Cancer 
Patients measure (NQF #3188) for the FY 2021 program year and 
subsequent years. We are also finalizing that the data collection 
period for the FY 2021 program year and subsequent years for this 
measure will be October 1 through September 30 of the following 
calendar year, for each respective program year.
c. Summary of Finalized PCHQR Program Measures for the FY 2021 Program 
Year and Subsequent Years
    The table below summarizes the PCHQR Program measure set for the FY 
2021 program year:

                                        FY 2021 PCHQR Program Measure Set
----------------------------------------------------------------------------------------------------------------
                Short name                     NQF No.                          Measure name
----------------------------------------------------------------------------------------------------------------
                               Safety and Healthcare-Associated Infection (HAI) *
----------------------------------------------------------------------------------------------------------------
CAUTI *..................................            0138  National Healthcare Safety Network (NHSN) Catheter
                                                            Associated Urinary Tract Infection (CAUTI) Outcome
                                                            Measure.
CLABSI *.................................            0139  National Healthcare Safety Network (NHSN) Central
                                                            Line Associated Bloodstream Infection (CLABSI)
                                                            Outcome Measure.
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.
----------------------------------------------------------------------------------------------------------------

[[Page 41617]]

 
                                     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.
----------------------------------------------------------------------------------------------------------------
* As discussed in section VIII.B.3.b.(2) of this final rule, we are deferring finalization of our policies
  regarding future use of the CLABSI and CAUTI measures in the PCHQR Program until the CY 2019 OPPS/ASC final
  rule.
** Measure finalized 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.\386\ 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.\387\ 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.\388\ 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,\389\ allowing further examination of social risk factors 
in outcome measures.
---------------------------------------------------------------------------

    \386\ 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.
    \387\ 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.
    \388\ Available at: http://www.qualityforum.org/SES_Trial_Period.aspx.
    \389\ 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

[[Page 41618]]

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. Regarding 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.
    Comment: A few commenters supported CMS' continued efforts to 
account for social risk factors in its quality reporting programs. The 
commenters noted that stratifying public reporting of program quality 
measures would help hospitals to balance the task of identifying some 
of the differences in the way that patients are receiving and 
responding to care, with adequately evaluating risk adjusting for the 
disparities in care. The commenters suggested that CMS explore 
additional social risk factors beyond dual eligibility, such as 
employment status, homelessness/type of residence, availability of a 
caretaker, food insecurity, transportation, crime rates, and other 
social risk factors as appropriate. Due to the complex and detailed 
nature of the research being undertaken by ASPE, as well as by measure 
stewards through the quality measure development process, the 
commenters encouraged CMS to provide more transparency on its efforts 
to address this issue. The commenters also strongly encouraged CMS to 
continue working closely with the measure stewards, and other quality 
organization stakeholders in developing any permanent risk-adjusted 
reporting changes as determined appropriate. Lastly, commenters 
encouraged CMS to include representatives on the Technical Expert Panel 
from across the wide spectrum of stakeholders that comprise the health 
care continuum.
    Response: We thank the commenters for their support, opinions, and 
recommendations, and will take them into consideration as we continue 
our work on these issues.
6. Possible New Quality Measure Topics for Future Years
a. Background
    As discussed in sections section I.A.2. of the preambles of the 
proposed rule and this final 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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20507 through 
20508), we again sought public comment on the types of measure topics 
we should consider for future rulemaking. We also sought 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.\390\ 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 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.
---------------------------------------------------------------------------

    \390\ 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,\391\ and would 
fill an existing gap area of risk-adjusted mortality measures in the 
PCHQR Program. This measure has not

[[Page 41619]]

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

    \391\ 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 requested public comment on the possible inclusion of this 
measure in future years of the program.
    Comment: A few commenters supported the possible inclusion of the 
Risk-Adjusted Morbidity and Mortality for Lung Resection for Lung 
Cancer measure in future years of the PCHQR Program, but expressed 
concern regarding certain aspects of the measure. The commenters noted 
that not all cancer hospitals perform inpatient thoracic surgeries and, 
of those that do, not all participate in the Society of Thoracic 
Surgeons (STS) General Thoracic Surgery program. Further, participation 
in the STS program incurs cost and considerable burden given that the 
measure is registry-based and requires manual abstraction of cases. The 
commenters urged CMS to consider whether this measure can be collected 
in a less burdensome manner before incorporating it into the PCHQR 
Program. In addition, the commenters requested that CMS work to clarify 
the data collection and submission process, measure calculation 
process, and any appropriate risk adjustment. Commenters also expressed 
concern about the omission of small volume centers in the model that 
STS used to validate the risk adjusted morbidity and mortality for lung 
cancer resection metric as able to sort out high performing vs. 
acceptable vs. low performing centers. Lastly, the commenters noted 
that the data used for developing the models are older and may not fit 
as well with current figures.
    Response: We thank the commenters for their support. We will 
collaborate with the measure steward (where appropriate) to ensure that 
the measure calculation and risk adjustment methodologies are 
thoroughly outlined, should we decide to move forward with a proposal 
to adopt this measure in future years of the PCHQR Program. We will 
also share the concerns related to data sampling continuity, the 
inclusion of small volume centers, and the impact of the cost and 
burden of participation in the STS General Thoracic Surgery Program on 
data extrapolation with the measure's steward.
    Comment: One commenter expressed concern over the possible future 
inclusion of the Risk-Adjusted Morbidity and Mortality for Lung 
Resection measure. Specifically, the commenter noted that the measure 
may have negative implications for lung cancer care. In the absence of 
a lung cancer risk-adjusted model, the commenter expressed concern that 
this measure may penalize centers that choose to serve more complex, 
high-risk patients.
    Response: We acknowledge the commenter's concern, and note that 
this measure does incorporate a lung cancer risk-adjusted model. 
Specifically, the lung cancer resection risk model utilized in this 
measure accounts for patient age, smoking status, comorbid medical 
conditions, and other patient characteristics, as well as operative 
approach and the extent of pulmonary resection. Additional information 
on the specifications is available at: http://www.qualityforum.org/Projects/Cancer_Endorsement_Maintenance_2011.aspx#t=2&s=&p=3%7C.
    We thank the commenters and we will consider their views as we 
develop future policy regarding the potential inclusion of the Risk-
Adjusted Morbidity and Mortality for Lung Resection for Lung Cancer 
(NQF #1790) measure in the PCHQR 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 have 
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,\392\ 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.
---------------------------------------------------------------------------

    \392\ Ibid.
---------------------------------------------------------------------------

    We requested public comment on the possible inclusion of this 
measure in future years of the program.
    Comment: A few commenters supported the future inclusion of the 
Shared Decision Making Process measure. The commenters indicated that 
this measure is essential for cancer patients, as it allows for the 
opinion of the patient to be a determinant of their care. The 
commenters were also appreciative of the fact that this measure places 
strong emphasis on the quality of dialogue between physicians and 
patients. Moreover, the commenters expressed that adoption of this 
measure would positively impact physician-patient communication, and 
thereby improve patient care. Lastly, the commenters suggested that CMS 
consider the need for expanded psychometric testing of the patient-
reported outcome (PRO) survey and further specification and validation 
of the patient-reported outcome performance measure \393\ (PRO-PM) for 
breast and prostate cancer.
---------------------------------------------------------------------------

    \393\ National Quality Forum. ``Patient-Reported Outcomes Tools 
& Performance Measures.'' Accessed on: June 25, 2018.
---------------------------------------------------------------------------

    Response: We thank the commenters for their support, and will take 
these comments into consideration should we propose to adopt this 
measure in the future.
    Comment: Some commenters expressed concerns about the Shared 
Decision Making Process measure. The commenters indicated that the 
measure may pose significant tracking, reporting, and validation 
challenges because data collection for this measure would require 
significant changes to how Electronic Health Records are currently 
structured. The commenters also expressed concern that, in the absence 
of tools to validate the fulfillment of this measure, implementing the 
measure may not result in the practice change it is intended to 
achieve. The commenters indicated that most of shared decision-making 
processes associated with lung cancer resection occurs in an outpatient 
setting, in a clinic, or in a private office, and may not be easily or 
even accurately attributed to a particular hospital. This

[[Page 41620]]

has the potential to require redundant record keeping in order to 
demonstrate auditable compliance with the metric. The commenters also 
indicated that the description of the Shared Decision Making Process 
measure antedates lung cancer screening, which was not included in the 
data to develop the measure. Lung cancer screening requires a shared 
decision-making discussion with a health care professional before 
implementation, which should be considered as this measure is rolled 
out.
    Response: We acknowledge the commenters' concerns. We note that 
this measure (as currently specified) is not an electronic clinical 
quality measure (eCQM). Should we propose to include this measure in 
future years as an eCQM, we will ensure that it is amenable to the 
existing infrastructure for data capture of eCQMs to avoid any 
structural or functional challenges. We also recognize the importance 
of the validity in quality metrics, and will ensure that adequate 
reliability and validity testing has been conducted, should we move 
forward with implementing this measure in future program years. 
Regarding the attribution issue, we note that this measure has been 
tested on nearly 3,000 patients, across 6 different clinical sites; 
\394\ with most of the usable data coming from the Dartmouth Medical 
Center,\395\ which is comprised of inpatient hospitals as well as 
outpatient clinical sites. Regarding the consideration of lung cancer 
screening, we agree that shared decision-making is pertinent in the 
screening process for this clinical condition. However, we do not 
believe that the omission of this particular procedure invalidates the 
measure or undermines its suitability for the PCHQR Program. To be 
responsive to commenters' concerns, we will communicate with the 
measure steward about the possible addition of lung cancer screening to 
the list of procedures as a future refinement of the measure.
---------------------------------------------------------------------------

    \394\ ``Shared Decision Making Process Measure Testing 
Attachment.'' Accessed on: June 26, 2018. Available at: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=80842.
    \395\ Ibid.
---------------------------------------------------------------------------

    Comment: A few commenters expressed concern about the essential 
elements defined within the Shared Decision Making Process measure. 
Specifically, the commenters indicated that the measure's essential 
elements (that is, laying out options, discussing the reasons to have 
the intervention and not to have the intervention, and asking for 
patient input) are transactional and lack the specificity required to 
prevent ``check-the-box'' activity. Further, these essential elements 
do not go far enough in assessing whether a patient's preferences, 
goals, and values were integrated into the care decision. Lastly, these 
essential elements do not address the cost component of the value 
equation. The commenters expressed concern that the essential elements, 
as currently specified, are limiting, and as a result, providers will 
not discuss other options. For example, a cancer patient may want 
information on prognosis if he or she chooses to not have surgery or 
whether radiation therapy is an option. The commenters suggested the 
integration of components that identify whether a patient's 
preferences, values, and goals were elicited and used to drive the 
healthcare decision. The commenters also suggested that this measure 
should require condition- or procedure-specific questions.
    Response: We believe that the measure's essential elements are 
satisfactory as specified. The results for this measure demonstrate 
that compared to the baseline data, the participating clinical sites 
showed significant improvement (higher than the current national 
average \396\), which supports the argument that outcome measures based 
on patient reports are linked to the way that clinical practices are 
trying to interact with patients. Further, these results convey that 
the current questions suffice to capture a patient's preferences, 
values, and goals when deriving a healthcare decision. Specifically, 
for the overall scores, the correlations were .50 (p.<.001) and .38 
(p=.004) for adjuvant therapy and surgery decisions respectively, and 
with minimum sample sizes of 25, there was an overall average 
reliability of .61.\397\
---------------------------------------------------------------------------

    \396\ Ibid.
    \397\ Ibid.
---------------------------------------------------------------------------

    We thank the commenters and we will consider their views related to 
the inclusion of a question that gauges patients' assessment of cost, 
and the inclusion of procedure-specific questions as we develop future 
policy regarding the potential inclusion of the Shared Decision Making 
Process (NQF #2962) measure in the PCHQR Program.
    Comment: A few commenters provided suggested revisions to some of 
the questions currently utilized in the Shared Decision Making Process 
measure. The commenters expressed concern with the first two questions. 
Specifically, the questions include the wording ``how much'', then 
offer ``a lot'' and ``some'' as response options. The commenters stated 
that sometimes a treatment plan is very clear and it would not be 
reasonable to do ``a lot'' of discussion about why not to do a clearly 
medically indicated, curative-intent procedure outside the normal 
discussion of possible adverse outcomes. The commenters requested that 
the two questions be rewritten as such: ``Were the advantages and 
disadvantages of the planned procedure and alternative procedures 
discussed to your satisfaction?'', with a yes/no response option. The 
commenters also expressed concern with the third and fourth questions. 
The commenters noted that these two questions only establish whether 
the patient understood that he or she had the option to accept or 
decline the procedure. To better evaluate whether patients engaged in a 
discussion that would improve the likelihood that care would align with 
their goals for treatment, the commenters suggested that the survey 
might instead ask: ``Did the doctors ask for your input into the 
decision about whether or not to perform [the intervention]?'' or, 
``Did the doctors ask you whether [the intervention] was consistent 
with your values and goals?''
    Response: We acknowledge the commenters' concerns and we thank them 
for the suggested wording revisions for the specified questions. We 
will share these suggestions with the measure steward for consideration 
during the next endorsement maintenance review of this measure with 
NQF.
    Comment: One commenter stated that patients should have the 
opportunity to engage in a shared-decision making process with their 
provider, other health care professionals, and loved ones. Because 
treatment decisions are highly personalized, the commenter asked that 
CMS include a measure that assesses whether or not providers encourage 
patients to use shared decision-making tools to develop a set of 
personalized questions based on what each individual patient values 
most.
    Response: We thank the commenter for its recommendation and will 
consider the impact of using additional decision-making tools (that is, 
training modules or toolkits for specialty or primary care) in tandem 
with the Shared Decision Making Process measure as we develop future 
policy regarding the potential inclusion of the measure in the PCHQR 
Program.
    We thank the commenters and we will consider their views as we 
develop future policy regarding the potential inclusion of the Shared 
Decision Making Process (NQF #2962) measure in the PCHQR Program.

[[Page 41621]]

d. Future Measurement Topic Areas
    As discussed in section I.A.2. of the preambles of the proposed 
rule and this final 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 welcomed 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.
    Comment: A few commenters expressed support for the development of 
a balanced scorecard that includes both general cancer care measures 
and measures that focus on cancer-specific clinical conditions. The 
commenters encouraged CMS to continue to advance a portfolio of 
measures for the PCHQR Program that assess both general cancer care and 
cancer-specific clinical conditions, such as breast, colon, prostate, 
lung, and other types of cancer. The commenters also suggested that CMS 
prioritize the inclusion of new measures based on the importance and 
utility of the information assessed, which will naturally result in a 
balanced portfolio of both general and specific measures.
    Response: We thank the commenters for their support and 
suggestions.
    Comment: One commenter expressed support for the PCHQR Program 
moving towards general cancer care measures based on its belief that as 
cancer care is increasingly built around a multi-disciplinary team, a 
move toward more general measures is appropriate so that more providers 
can report them. The commenter also stated that implementing specific 
cancer measures can be challenging due to the need for PCHs to meet the 
case minimum necessary for meaningful analysis. In addition, the 
commenter stated that general cancer measures are a better use of the 
extensive time and effort needed to develop measures because they are 
more applicable to a larger number of patients, providers and 
practices, and can be utilized in multiple quality programs.
    Response: We thank the commenter for its insight, and will consider 
the implications associated with measure implementation feasibility as 
we examine measures for future inclusion into the PCHQR Program measure 
set.
    Comment: One commenter urged CMS to promote the development and 
adoption of claims-based metrics of survival for major cancer types, 
with careful attention to attribution and risk-adjustment, in future 
rulemaking. The development of a reliable, adequately risk-adjusted 
metric of survival rates by major cancer type would vastly improve the 
PCHQR Program's ability to provide meaningful, easily understood 
information to patients seeking high-quality, high-value care.
    Response: We thank the commenter for its feedback, and will 
consider performance measures that assess cancer patient survival rates 
as we move forward with expanding the PCHQR Program measure set.
    Comment: One commenter noted that there remains a gap in measures 
that are evaluating the patient experience. The commenter encouraged 
CMS to adopt measures that document whether providers have assessed 
patients for distress or other measures that comprehensively evaluate 
the patient experience.
    Response: We thank the commenter for its feedback, and will 
consider performance measures that assess patient experience and 
engagement as we move forward with expanding the PCHQR Program measure 
set.
    Comment: One commenter encouraged CMS to develop more measures 
around end-of-life conversations. The commenter noted that because 
cancer patients who are hospitalized tend to have advanced disease, 
complications, or a very aggressive cancer, it is incredibly important 
that cancer patients are provided with the tools and resources to 
engage in shared decision-making around end-of-life decisions. The 
commenter further noted that to ensure that patients receive high-
quality, appropriate care throughout the trajectory of their cancer 
journey, it is essential that they have conversations with their care 
team and loved ones about what type of care they would like to receive, 
what they value, and when they would like to transition into hospice or 
only receive supportive care rather than curative therapy.
    Response: We thank the commenter for its feedback. We note that as 
indicated in section VIII.B.4.c. of the preamble of this final rule, 
there are currently four measures in the PCHQR measure set that assess 
end-of-life care. However, we recognize the importance of this type of 
treatment for cancer patient and will continue to consider the 
feasibility of implementing additional end-of-life measures as we move 
forward with expanding the PCHQR Program measure set.
    We thank the commenters and we will consider their views as we 
develop future policy regarding the inclusion of quality measures that 
examine general cancer care versus the inclusion of quality measures 
that examine cancer-specific clinical conditions.
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.

[[Page 41622]]

    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 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.

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  2016 and subsequent years.
 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).
 CLABSI (NQF #0139) **.............  Deferred.
 CAUTI (NQF #0138).**
 External Beam Radiotherapy for      Beginning when feasible in
 Bone Metastases (NQF #1822).                 2017 and for subsequent
                                              years.
------------------------------------------------------------------------
* Measure finalized for removal beginning with the FY 2021 program year.
** As discussed in section VIII.B.3.b.(2) of this final rule, we are
  deferring finalization of our policies regarding future use of the
  CLABSI and CAUTI measures in the PCHQR Program until the CY 2019 OPPS/
  ASC final rule. Public reporting of these measures was deferred in the
  FY 2017 IPPS/LTCH PPS final rule (81 FR 57192).

    We recognize the importance of being transparent with stakeholders 
and keeping them abreast of any changes that arise with the PCHQR 
Program measure set. As such, in the FY 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20508 through 20509), we provided a discussion of some 
recent changes affecting the timetable for the public display of data 
for specific PCHQR Program measures in the section below.
b. 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.\398\ 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.\399\ Therefore, in the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20509), we proposed to delay 
the public reporting of data for the SSI, MRSA, CDI, and HCP measures 
until CY 2019.
---------------------------------------------------------------------------

    \398\ Centers for Disease Control and Prevention. ``Paving Path 
Forward: 2015 Rebase line.'' Available at: https://www.cdc.gov/nhsn/2015rebaseline/index.html.
    \399\ Rebase line Timeline FAQ Document. Available at: https://www.cdc.gov/nhsn/pdfs/rebaseline/faq-timeline-rebaseline.pdf.
---------------------------------------------------------------------------

    We invited public comment on our proposal to delay public reporting 
of these four measures until CY 2019.
    Comment: One commenter supported the proposal to defer the public 
reporting of the SSI, MRSA, CDI, and HCP measures until statistical 
significance and reliability can be determined.
    Response: We thank the commenter for its support.
    Comment: One commenter did not support the proposal to delay the 
public reporting of the Influenza Vaccination Coverage Among Healthcare 
Personnel measure. The commenter noted that vaccinating healthcare 
personnel against influenza has been shown to improve patient safety 
and reduce disease transmission, which is essential for 
immunocompromised patients in the cancer hospital setting. Empowering 
patients and caregivers with the ability to assess cancer hospitals 
based on this measure could ultimately result in improved outcomes for 
patients through lower complications.
    Response: We thank the commenter for its feedback. We agree that 
empowering patients and caregivers with the ability to assess cancer 
hospitals could ultimately result in improved outcomes for patients, 
however, we want to ensure that the information provided to consumers 
is adequate and accurate. We reiterate that 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, 
however, we will modify our proposal, such that we will provide 
stakeholders with performance data as soon as practicable.
    After consideration of the public comments we received, we are 
finalizing a modification to our proposal to delay public reporting of 
data for the SSI, MRSA, CDI, and HCP measures until CY 2019. Instead, 
we are finalizing that we will provide stakeholders with performance 
data as soon as practicable (that is, if useable data is available 
sooner than CY 2019, we will publicly report it on Hospital Compare via 
the next available Hospital Compare release. We will continue to 
monitor the progress of the current rebaselining efforts being made by 
CDC.

[[Page 41623]]

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, given the time necessary to assess the data 
provided for this measure's annual update, we anticipate an update of 
EBRT measure data to be available in December of 2018.
d. Summary of Public Display Requirements for the FY 2021 Program Year
    Our public display requirements for the FY 2021 program year are 
shown in the following table:

        Public Display Requirements for the FY 2021 Program Year
------------------------------------------------------------------------
         Summary of newly finalized 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.
 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] (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).*
 CLABSI (NQF #0139).**
 CAUTI (NQF #0138).**
 External Beam Radiotherapy for      2017 and subsequent years.
 Bone Metastases (EBRT) (NQF #1822).
------------------------------------------------------------------------
* Newly finalized in this FY 2019 IPPS/LTCH PPS final rule.
** As discussed in section VIII.B.3.b.(2) of this final rule, we are
  deferring finalization of our policies regarding future use of the
  CLABSI and CAUTI measures in the PCHQR Program until the CY 2019 OPPS/
  ASC final rule. Public reporting of these measures was deferred in the
  FY 2017 IPPS/LTCH PPS final rule (81 FR 57192).

9. Form, Manner, and Timing of Data Submission
a. Background
    Data submission requirements and deadlines for the PCHQR Program 
are posted on the QualityNet website at: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772864228.
b. Reporting Requirements for the Newly Finalized 30-Day Unplanned 
Readmissions for Cancer Patients Measure
    As further described in section VIII.B.4.b. of the preamble of this 
final rule, we are finalizing 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 using PCH claims 
data. In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20510), we 
proposed that the data collection period would be from July 1 of the 
year, three years prior to the program year to June 30 of the year, two 
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 invited public comment on this proposal.
    Comment: One commenter supported the proposed timeframe for the 
reporting of the 30-Day Unplanned Readmissions for Cancer Patients 
measure.
    Response: We thank the commenter for its support.
    After consideration of the public comment we received, we are 
finalizing the proposal to collect data on this measure from October 1, 
2018 through September 30, 2019, for the FY 2021 program year.
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) \400\ 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

[[Page 41624]]

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

    \400\ 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 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. 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, responses to comments submitted on those 
proposals, and policies we are finalizing for future years of the LTCH 
QRP, and represents the approach we intend to use in our rulemakings 
for this program going forward.
    Comment: Several commenters supported streamlining the LTCH QRP, 
specifically CMS' effort to align areas of best practices with other 
quality reporting programs. Another commenter supported the proposed 
changes to the LTCH QRP, recognizing that these changes are part of a 
multi-year process to reform patient assessment and quality reporting 
across multiple levels of care.
    Response: We appreciate the commenters' support.
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).
    We received comments related to the IMPACT Act and the availability 
of data for LTCHs, both of which are summarized and discussed below.
    Comment: A few commenters supported the goals and objectives of the 
IMPACT Act, noting the interdependence of the four post-acute care 
settings and their respective payment systems and the critical need for 
sound analysis of data from all levels of care. One commenter supported 
the delay of the implementation of the IMPACT Act requirements to 
ensure that measures are valid and valuable.
    Commenters also supported the development of standardized patient 
assessment data elements. One commenter recommended that, as part of 
the standardized patient assessment data elements that could be 
incorporated into the post-acute care assessment instruments, CMS 
streamline adult immunization quality measures across health care 
settings. One commenter expressed that CMS communicate and collaborate 
more with LTCHs and other post-acute care providers on IMPACT Act 
implementation, encouraging CMS to include LTCHs in the development of 
standardized patient assessment data elements and all other CMS 
initiatives related to the implementation of the IMPACT Act. The 
commenter also noted that CMS should develop and refine measures that 
are either required by the IMPACT Act or will otherwise facilitate 
cross-setting measurement and eliminate measures that are not required 
under the IMPACT Act.
    Response: While we did not propose changes to the LTCH QRP's 
policies on standardized patient assessment data elements, quality 
measures, or public engagement pertaining to the implementation of the 
IMPACT Act, we will take these comments into account as we engage in 
future development of these policies. We refer readers to the FY 2016 
IPPS/LTCH PPS final rule (80 FR 49723 through 49728) and the FY 2018 
IPPS/LTCH PPS final rule (82 FR 38426 through 38433) for additional 
information on the IMPACT Act and its applicability to LTCHs.
    Comment: Some commenters requested that CMS provide opportunity for 
stakeholders of all post-acute care settings to access aggregate 
patient assessment data, including LTCH CARE Data Set data, to allow 
providers to analyze data and to provide meaningful input to CMS, 
noting that this data is available for SNFs, IRFs, and HHAs, but not, 
however, for LTCHs.
    Response: We acknowledge the commenters' requests to make the LTCH 
CARE Data Set data publicly available for research purposes. We intend 
to make the data available as soon as feasible.
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.\401\ 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.\402\ As we noted in the FY

[[Page 41625]]

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.\403\ 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,\404\ allowing further examination 
of social risk factors in outcome measures.
---------------------------------------------------------------------------

    \401\ 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.
    \402\ 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.
    \403\ Available at: http://www.qualityforum.org/SES_Trial_Period.aspx.
    \404\ 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.
    Comment: Many commenters supported the continued evaluation of 
social risk factors for the LTCH QRP measures, specifically for 
displaying stratification by social risk factors, expressed willingness 
to support efforts with CMS or NQF on this issue, and requested that 
attribution be addressed in technical specifications.
    Response: We thank the commenters for their comments and will take 
these comments into account as we further consider how to appropriately 
account for social risk factors in the LTCH QRP. We also refer the 
reader to the FY 2018 IPPS/LTCH PPS final rule (82 FR 38428 through 
38429), where we discussed displaying stratification by social risk 
factors and other related issues.
3. 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 preambles of the proposed rule and this final 
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: \405\
---------------------------------------------------------------------------

    \405\ 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 41626]]

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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20511 through 
20512), we proposed 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 preambles of the proposed 
rule and this final 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 proposed 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.
    Comment: Many commenters supported the proposal to add measure 
removal Factor 8, the costs associated with a measure outweigh the 
benefit of its continued use in the program, in the LTCH QRP. 
Commenters appreciated the consideration of costs beyond those 
associated with data collection and submission. One commenter agreed 
that the burden associated with data collection should be balanced with 
the value these measures have to providers, patients, and others. 
Another commenter suggested that CMS also consider the costs associated 
with tracking performance and resources invested for quality 
improvement. A few commenters encouraged CMS to continue to apply the 
measure removal factors to other measures in the LTCH QRP, including 
those more recently adopted in the program, to reduce regulatory burden 
on providers so that they may focus instead on improving patient 
outcomes.
    Response: We appreciate the support and suggestions regarding the 
addition of this measure removal factor to the LTCH QRP. With respect 
to considering the costs associated with tracking performance and 
resources invested for quality improvement, we believe that investing 
resources in quality improvement is an inherent part of delivering 
high-quality, patient-centered care and, therefore, is generally not 
considered a part of the quality reporting program requirements.
    Comment: A few commenters noted the existing seven removal factors 
are sufficient for appropriate measure evaluation.
    Response: While we acknowledge that there are seven factors 
currently adopted that may be used for considering measure removal from 
the LTCH QRP, we believe the proposed new measure removal factor adds a 
new criterion that is not captured in the other seven factors. The 
proposed new measure removal factor will help advance the goals of the 
Meaningful Measures Initiative, which aims to improve outcomes for 
patients, their families, and health care providers while reducing 
burden and costs for clinicians and providers.
    Comment: One commenter questioned the process involved with Factor 
1, or ``topped-out'' measures, and requested clarity on the process and 
timeline for determining whether a measure is ``topped out.''
    Response: While we did not use Factor 1 as justification for 
removing any LTCH QRP measures in the proposed rule, we acknowledge the 
commenter's request for clarification about the process and timeline 
for this measure removal factor. In our evaluation of LTCH QRP 
measures, we look at measure performance using methodology and a 
timeline that are appropriate, based on each measure's specifications. 
If we determine that measure performance is so high and unvarying that 
meaningful distinctions in improvements in performance can no longer be 
made, we will detail our process in the proposed rule and solicit 
public comment after making such a determination.
    Comment: Some commenters expressed concern related to proposed 
Factor 8. A few commenters stated that the measure removal factor only

[[Page 41627]]

accounts for the cost of reporting without considering the cost to 
patients, their families, and the Medicare program. The commenters 
requested more measures and financial incentives to spur higher quality 
care and hold providers accountable if they fail to prevent errors and 
infections.
    One commenter cautioned that measure removal should not be solely 
based on associated cost and recommended that CMS implement measures 
even at a high cost if it benefits patients. Another commenter 
requested clarification about the methods or criteria used to assess 
when the measure cost or burden outweighs the benefits of retaining it.
    Lastly, one commenter expressed concern that Factor 8 compares the 
costs with the ``use in the program,'' indicating that the usefulness 
of the measures should be self-evident and directly relate to the 
purpose of the program. The commenter believed that the removal of a 
measure would decrease the ability of that measure to improve patient 
care and reduce Medicare costs and, as a result, would reduce the 
effectiveness of the quality reporting program. The commenter also 
noted that Factor 8 does not describe a specific method to be used to 
evaluate the usefulness of a measure or describe how the number of 
measures kept within the program shall be determined.
    Response: We intend to apply measure removal Factor 8 on a case-by-
case basis because the costs and benefits associated with each measure 
are unique to that measure. However, we believe these costs include 
costs to all stakeholders, including but not limited to, patients, 
caregivers, providers, CMS, and other entities. We agree with the 
commenter's observation that for measures that serve beneficiaries, the 
costs may be outweighed by the benefits, and intend to evaluate 
measures on a case-by-case basis to achieve this balance.
    With regard to the request for clarification about criteria used to 
assess costs and burden, we provided examples of five different costs 
that could be considered in the FY 2019 IPPS/LTCH PPS proposed rule (83 
FR 20512). We note that we intend to assess the costs and benefits to 
all program stakeholders, including but not limited to, those listed 
above. We intend to be transparent in our assessment of costs and 
burden for each measure. As described above, there are various 
considerations of costs and benefits, direct and indirect, financial 
and otherwise, that we will evaluate when evaluating a measure under 
removal Factor 8, and we will take into consideration the perspectives 
of multiple stakeholders. However, because we intend to evaluate each 
measure on a case-by-case basis, and because each measure has been 
adopted to fill different needs in the LTCH QRP, we do not believe it 
would be meaningful to identify a specific set of assessment criteria 
to apply to all measures.
    Lastly, in response to the comment that the removal of measures 
would reduce the effectiveness of the LTCH QRP, we do not believe that 
more measures equate to better care. Retaining a strong measure set 
that addresses critical issues is one benefit that we would consider in 
analyzing measures for potential removal from the LTCH QRP measure set. 
We will continue to monitor and evaluate our programs to identify their 
benefit with respect to quality of care and patient safety as well as 
their costs.
    After consideration of the public comments we received, we are 
finalizing 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, in the LTCH QRP.
    We also proposed to codify both the removal factors we previously 
finalized for the LTCH QRP, as well as the new the measure removal 
Factor 8 that we are finalizing in this final rule, at Sec.  
412.560(b)(3) of our regulations.
    Comment: A few commenters supported the proposal to codify all 
eight measure removal factors, including the proposed Factor 8, the 
costs associated with a measure outweigh the benefit of its continued 
use in the program.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal 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 finalizing in this final rule, at Sec.  
412.560(b)(3) of our regulations. We are also making minor grammatical 
edits to the LTCH QRP measure removal factor language to align with the 
language of other programs.
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
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
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.
Ventilator Liberation........  Ventilator Liberation Rate.
------------------------------------------------------------------------

[[Page 41628]]

 
                                  NHSN
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
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
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
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 was replaced with the Changes in Skin Integrity Post-Acute
  Care: Pressure Ulcer/Injury measure, effective July 1, 2018.

    Comment: One commenter suggested that CMS consider adding Kennedy 
terminal ulcers as an item in the LTCH CARE Data Set in order to 
differentiate a Kennedy ulcer from a facility-acquired pressure ulcer/
injury.
    Response: While we did not solicit comments on the items on the 
LTCH CARE Data Set, we appreciate the commenter's suggestion for 
additional pressure ulcer/injury items and will take this into 
consideration as we continue our evaluation and refinement of pressure 
ulcer/injury items used to calculate skin integrity quality measures 
for PAC settings. Kennedy terminal ulcers, which are unavoidable skin 
breakdown that occur as part of the dying process, are not considered 
to be pressure ulcers/injuries and are therefore not currently coded on 
the LTCH CARE Data Set and not included in the calculation of the skin 
integrity measure, Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678), or the 
replacement measure, Changes in Skin Integrity Post-Acute Care: 
Pressure Ulcer/Injury. We will continue to provide training and 
clarification regarding coding of pressure ulcer/injury items through 
training events, FAQs, and help desk.
    Comment: One commenter requested a more precise definition of the 
phrase ``potential clinically significant medication issues'' under the 
Drug Regimen Review Conducted with Follow-Up for Identified Issues 
measure. This commenter was concerned that policies in other CMS 
programs would hinder appropriate prescribing of antipsychotic 
medications.
    Response: While we did not propose any changes to the previously 
finalized measure, Drug Regimen Review Conducted with Follow-Up for 
Identified Issues--PAC LTCH QRP, we responded to comments regarding the 
definition of a clinically significant medication issue in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 57219 through 57223), and we refer 
readers to that detailed discussion. We also refer readers to the LTCH 
QRP Manual Version 4.0 for more information about coding the drug 
regimen review data elements, available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-CARE-Data-Set-and-LTCH-QRP-Manual.html.
    Comment: A few commenters supported maintaining the Influenza 
Vaccination Coverage Among Healthcare Personnel (NQF #0431) quality 
measure in the LTCH QRP. A commenter also supported the public 
reporting of the quality measure.
    Response: We appreciate the commenters' support.
    Comment: A few commenters expressed views on measures for future 
consideration for the LTCH QRP. One commenter suggested a measure that 
addresses mental health. Another commenter encouraged CMS to move 
forward with the development and adoption of a standardized patient 
experience survey given CMS' focus on strengthening person and family 
engagement as part of the Meaningful Measures framework.
    Response: While we did not solicit public comment about future 
measures, we appreciate the input and will take it into consideration 
in future LTCH QRP measure development.
5. Removal of Three LTCH QRP Measures
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20513 through 
20515), we proposed to remove three measures from the LTCH QRP measure 
set. Beginning with the FY 2020 LTCH QRP, we proposed 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 proposed 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. Removal of the National Healthcare Safety Network (NHSN) Facility-
Wide Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus 
aureus (MRSA) Bacteremia Outcome Measure (NQF #1716)
    We proposed to remove the measure, National Healthcare Safety 
Network (NHSN) Facility-wide Inpatient Hospital-onset Methicillin-
Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF

[[Page 41629]]

#1716), from the LTCH QRP beginning with the FY 2020 LTCH QRP.
    As discussed in section VIII.C.3. of the preambles of the proposed 
rule and this final 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) 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 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.
    We stated in the proposed rule that if our proposal is 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 also 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.
    For these reasons, we proposed 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) Factor 8, the 
costs associated with a measure outweigh the benefit of its continued 
use in the program.
    We stated in the proposed rule that if our proposal is 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.
    Comment: Several commenters, including MedPAC, supported the 
proposed removal of the National Healthcare Safety Network (NHSN) 
Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant 
Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716) 
from the LTCH QRP. Commenters noted that this removal aligns with CMS' 
focus on the Meaningful Measures Initiative and expressed that the 
removal of this measure would decrease costs and administrative burden 
for LTCHs, allowing them more time to focus on patient care.
    In addition, several commenters agreed that the NHSN CLABSI Outcome 
Measure (NQF #0139) is more strongly associated with the desired 
patient outcome for bloodstream infections than the NHSN MRSA 
Bacteremia Outcome Measure (NQF #1716) and that maintaining both 
measures in the LTCH QRP would represent duplicative data collection 
and reporting. Another commenter qualified its support with a 
recommendation that CMS study the overlap between MRSA and CLABSI since 
MRSA bacteremias are often, but not always, CLABSIs.
    Response: We appreciate the support from MedPAC and other 
commenters for the proposed removal of the NHSN Facility-wide Inpatient 
Hospital-onset Methicillin-resistant Staphylococcus aureus (MRSA) 
Bacteremia Outcome Measure (NQF #1716) from the LTCH QRP. We are 
aligned with the Centers for Disease Control and Prevention's (CDC's) 
interest in examining the CDC NHSN measures, and the CDC is considering 
further study on the overlap of bacteremias within the MRSA and CLABSI 
measures.
    Comment: Some commenters expressed concern with the proposed 
removal of the National Healthcare Safety Network (NHSN) Facility-Wide 
Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus 
(MRSA) Bacteremia Outcome Measure (NQF #1716) from the LTCH QRP.
    Some commenters expressed concern that removing this measure would 
decrease the ability of providers to continually monitor and address 
critical patient safety issues and the ability of patients and 
families, employers, and payers to make informed decisions about their 
health care. These commenters stated that the public reporting of 
patient safety measures helps focus and strengthen efforts to improve 
healthcare quality and safety.
    Commenters also stated that patient safety should continue to be 
assessed in

[[Page 41630]]

a manner which provides minimal interruption to data collection and 
burden on LTCHs. In addition, several commenters noted that, with such 
a small measure set, CMS should strive to maintain key outcome 
measures.
    Other commenters believed that the NHSN CLABSI Outcome Measure (NQF 
#0139), alone, was not sufficient to capture the desired outcome of 
bloodstream infections, and stated that the two measures on this topic 
address different issues which are dependent upon different processes 
for prevention.
    Response: We would like to clarify that providers have the ability 
to continually monitor and address patient safety issues with the 
continued public reporting of the NHSN CLABSI Outcome Measure (NQF 
#0139), which captures MRSA bloodstream events, on LTCH Compare, even 
with the removal of the NHSN Facility-Wide Inpatient Hospital-Onset 
Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome 
Measure (NQF #1716).
    We agree with the commenters that patient safety should continue to 
be assessed in a manner that provides minimal interruption to data 
collection and burden on LTCHs. Through the Meaningful Measures 
Initiative, it is our goal to maximize patient safety with minimal 
burden on providers. We continue to monitor hospital acquired 
infections in the LTCH setting through the NHSN Catheter-Associated 
Urinary Tract Infection (CAUTI) Outcome Measure (NQF #0138), the NHSN 
Central Line-associated Bloodstream Infection (CLABSI) Outcome Measure 
(NQF #0139), and the NHSN Facility-wide Inpatient Hospital-onset 
Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717). In 
addition, we agree with several commenters that CMS should strive to 
maintain key outcome measures, and we will continually review, 
evaluate, and amend, if necessary, these measures within our quality 
programs.
    Lastly, we disagree with the commenter who stated that the CLABSI 
and MRSA measures address different issues which are dependent upon 
different processes for prevention. We are clarifying that MRSA 
bacteremia LabID event reporting is only based on the proxy measure of 
a positive laboratory finding with no clinical consideration. MRSA 
bacteremia LabID event reporting is different from CLABSI reporting, 
which is based on specific infection criteria. Since CLABSI reporting 
is based on standardized case definitions, there is confidence in the 
data that can be used to impact prevention efforts as well as increased 
comparability between clinical settings.
    For example, an increased CLABSI standardized infection ratio (SIR) 
would be viewed as an opportunity for improvement in overall standard 
of care practices. In addition, the monitoring conducted under CLABSI 
reporting is not limited to MRSA bloodstream infections and includes 
all organisms identified in blood culture collection, pathogens and 
common commensal organisms. Thus, the CLABSI measure data can inform 
broader preventive programs than the NHSN Facility-wide Inpatient 
Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) 
Bacteremia Outcome Measure (NQF #1716).
    After consideration of the public comments we received, we are 
finalizing our proposal 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. LTCHs will 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.
b. Removal of the National Healthcare Safety Network (NHSN) Ventilator-
Associated Event (VAE) Outcome Measure
    We proposed 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 proposed 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 on 
the topic of mechanical ventilation measures that promote positive 
outcomes while indirectly promoting a reduction in ventilator support 
complications.
    For these reasons, we proposed 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

[[Page 41631]]

desired patient outcomes for the particular topic is available.
    We stated in the proposed rule that if our proposal is 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.
    Comment: Several commenters, including MedPAC, supported the 
proposed removal of the NHSN VAE Outcome Measure from the LTCH QRP. 
Commenters agreed that this removal aligns with CMS' Meaningful 
Measures Initiative and the removal of this measure would decrease 
costs and administrative burden for LTCHs, allowing them more time to 
focus on patient care. Several commenters agreed that the measure is 
duplicative of the three ventilator-related assessment-based quality 
measures and that the NHSN VAE Outcome Measure might not be as strongly 
associated with the desired patient outcomes as these three measures.
    Response: We appreciate the support and suggestions from MedPAC and 
other commenters for the proposed removal of the NHSN VAE Outcome 
Measure from the LTCH QRP.
    Comment: A few commenters were appreciative of the removal of the 
NHSN VAE Outcome Measure and agreed that it overlaps unnecessarily with 
the other ventilator-related measures in the LTCH QRP, but recommended 
that CMS instead remove the process measure, Compliance with 
Spontaneous Breathing Trial (SBT) by Day 2 of the LTCH Stay, from the 
LTCH QRP.
    Response: We appreciate the commenters' feedback; however, we 
disagree with the recommendation to remove the Compliance with SBT by 
Day 2 of the LTCH Stay measure instead of the NHSN VAE Outcome Measure 
that we proposed to remove. The Compliance with SBT by Day 2 of the 
LTCH Stay measure, when taken together with the two other ventilator-
related assessment-based quality measures Functional Outcome Measure: 
Change in Mobility among Long-Term Care Hospital Patients Requiring 
Ventilator Support (NQF #2632) and Ventilator Liberation Rate, assesses 
positive outcomes and track patient goals of avoiding adverse outcomes 
associated with mechanical ventilation and successful liberation off 
the ventilator.
    As we stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38439 
through 38440), the Compliance with SBT by Day 2 of the LTCH Stay 
measure is important for encouraging implementation of evidence-based 
weaning protocols that reduces the risk of negative ventilator-
associated outcomes such as ventilator-associated pneumonia.
    Comment: Several commenters expressed concern with the proposed 
removal of the NHSN VAE Outcome Measure from the LTCH QRP. Some 
commenters were concerned that removing this measure would decrease the 
ability of providers to continually monitor and address critical 
patient safety issues, patients and families to make informed decisions 
about their health care, and employers and purchasers to obtain better 
value for their contracts and purchasing programs. The commenters 
stated that public reporting of patient safety measures helps focus and 
strengthen efforts to improve healthcare quality and safety.
    Several commenters stated that patient safety should continue to be 
assessed in a manner that provides minimal interruption to data 
collection and burden on LTCHs. In addition, several commenters noted 
that, with such a small measure set, CMS should strive to maintain key 
outcome measures. Several commenters also emphasized the importance of 
the NHSN VAE Outcome Measure for epidemiological tracking, with a few 
commenters adding that this measure has only been required since 
January 2016 and that only a baseline has been established. Another 
commenter advised CMS to monitor rates of worsening oxygenation, 
infection, inflammation, and ventilator-associated pneumonia to ensure 
that the measure's removal does not unintentionally lead to a rising 
trend in these events. A few commenters stated that preventing VAEs 
requires different processes than preventing central line infections 
and thus, should continue to be monitored in addition to the three 
current ventilator assessment-based quality measures currently in the 
LTCH QRP.
    Response: We acknowledge the concerns raised by the commenters. As 
we note above, the other three ventilator assessment-based quality 
measures currently in the LTCH QRP measure set (Functional Outcome 
Measure: Change in Mobility among Long-Term Care Hospital Patients 
Requiring Ventilator Support (NQF #2632); Compliance with Spontaneous 
Breathing Trials (SBT) by Day 2 of the LTCH Stay; and Ventilator 
Liberation Rate) assess activities that reduce the potential for 
serious complications and other adverse events to occur as a result of 
mechanical ventilation. We believe that encouraging implementation of 
evidence-based weaning protocols, improving mobility, and liberating 
patients off mechanical ventilation addresses critical patient safety 
issues, allows patients and families to make informed decisions based 
on positive outcomes, and strengthens the value of healthcare.
    We agree with the commenters that patient safety should continue to 
be assessed in a manner which provides minimal interruption to data 
collection and burden on LTCHs. Through the Meaningful Measures 
Initiative, one of our goals is to ensure that our measures are 
strongly associated with the desired patient outcomes. We are 
continuing to monitor hospital acquired infections in the LTCH setting 
with the NHSN Catheter-Associated Urinary Tract Infection (CAUTI) 
Outcome Measure (NQF #0138), the NHSN Central Line-associated 
Bloodstream Infection (CLABSI) Outcome Measure (NQF #0139) and the NHSN 
Facility-wide Inpatient Hospital-onset Clostridium difficile Infection 
(CDI) Outcome Measure (NQF #1717). In addition, we agree with several 
commenters that CMS should strive to maintain key outcome measures, and 
we will continually review, evaluate, and amend, if necessary, these 
measures within our quality programs.
    We also agree that epidemiological tracking of VAE is important and 
that providers should be able to continue monitoring events such as 
worsening oxygenation, infection, inflammation, and ventilator-
associated pneumonia to ensure these events will not rise. LTCHs can 
continue to report VAE data to NHSN on a voluntary basis, as well as 
use NHSN for their own internal tracking of local VAE incidence.
    Data on LTCH QRP measures that are also collected by the CDC for 
other purposes are reported by LTCHs to the CDC through the NHSN, and 
the CDC then transmits the relevant data to CMS. Even with the removal 
of the National Healthcare Safety Network (NHSN) Ventilator-Associated 
Event (VAE) Outcome Measure from the LTCH QRP, the CDC will continue to 
use VAE data in the production of national and State-level SIRs as a 
way to track progress towards prevention goals. We recognize that 
preventing VAEs requires different processes than preventing central 
line infections. However, as noted above, we believe that the other 
LTCH QRP VAE-related measures assess positive outcomes and track 
patient goals of avoiding adverse outcomes associated with mechanical 
ventilation and successful liberation off the ventilator.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the National Healthcare Safety 
Network

[[Page 41632]]

(NHSN) Ventilator-Associated Event (VAE) Outcome Measure from the LTCH 
QRP beginning with the FY 2020 LTCH QRP. LTCHs will 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. Removal of the Percent of Residents or Patients Who Were Assessed 
and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) 
(NQF #0680) Measure
    We proposed 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 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) and are 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 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 proposed to remove this measure from the LTCH QRP 
beginning with the FY 2021 LTCH QRP under measure removal Factor 8, the 
costs associated with a measure outweigh the benefit of its continued 
use in the program.
    We stated in the proposed rule that if our proposal is finalized as 
proposed, LTCHs would no longer be required to report the data elements 
necessary to calculate this measure beginning with October 1, 2018 
\406\ admissions and discharges. We stated in the proposed rule that we 
plan to remove the data elements from the LTCH CARE Data Set as soon as 
feasible. We also proposed that 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.
---------------------------------------------------------------------------

    \406\ The target period for the Percent of Residents or Patients 
Who Were Assessed and Appropriately Given the Seasonal Influenza 
Vaccine (Short Stay) (NQF #0680) measure is the influenza season, 
which begins July 1 and ends June 30 of the following year. The 
influenza vaccination season falls within the influenza season of a 
given year and starts October 1 and ends March 31 of the following 
year. This measure includes all patients who were in an LTCH at 
least one day during the influenza vaccination season. 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 October 1, 2018 marks the start of the influenza 
vaccination season for the 2018-2019 influenza season.
---------------------------------------------------------------------------

    Comment: Several commenters, including MedPAC, supported the 
proposal to remove the Percent of Residents or Patients Who Were 
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short 
Stay) (NQF #0680) measure from the LTCH QRP. The commenters emphasized 
that collecting data on this measure is costly, burdensome, and 
duplicative since many patients admitted to LTCHs are transferred from 
the acute care setting where influenza vaccinations are already being 
tracked. Other commenters stated that if providers are successfully 
meeting the established standards set by CMS, then data collection is 
an unnecessary process. In addition, the commenters stated that 
removing the measure will result in less administrative burden without 
compromising the quality of care and will allow providers to focus on 
more meaningful measures to promote better health outcomes for patients 
and to align with the Meaningful Measures Initiative.
    Response: We appreciate the support from MedPAC and other 
commenters for the proposed removal of the Percent of Residents or 
Patients Who Were Assessed and Appropriately Given the Seasonal 
Influenza Vaccine (Short Stay) (NQF #0680) measure from the LTCH QRP.
    Comment: Several commenters did not support the removal of the 
Percent of Residents or Patients Who Were Assessed and Appropriately 
Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure 
from the LTCH QRP. Commenters were concerned with consequences related 
to patient care, suggesting that the benefits of the measure far 
outweigh the costs of retaining the measure. One commenter stated that 
the high performance of the measure is a clear indicator of the success 
of the measure and continuing to track immunizations should be a 
priority because patients in LTCHs are susceptible to the acquisition 
and spread of infectious diseases. Another commenter suggested that an 
outbreak is more likely to occur and would be costlier than the burden 
of reporting the measure. Another commenter noted that confusion 
between the Percent of Residents or Patients Who Were Assessed and 
Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF 
#0680) measure and the Influenza Vaccination Coverage Among Healthcare 
Personnel (NQF #0431) measure is unlikely and should not be used as a 
rationale to remove the measure.
    Response: We recognize that assessing and appropriately vaccinating 
patients is an important component of the care process, and the 
vaccination of the majority of patients before admission to LTCHs 
protects against the spread of infectious disease. Our analysis has 
shown that most patients admitted to LTCHs are admitted from an acute-
care setting where influenza vaccinations are

[[Page 41633]]

being tracked, which is why we believe that collecting and reporting 
data on this measure would be duplicative. Further, high performance of 
the measure across LTCHs is positive, which makes assessing variations 
in provider performance difficult.
    We strive to align with the Meaningful Measures Initiative by 
prioritizing measures most vital to improving patient outcomes and 
focusing on issues that are most meaningful to patients and their 
families. We considered feedback from subject matter experts who have 
noted the potential for confusion between the Percent of Residents or 
Patients Who Were Assessed and Appropriately Given the Seasonal 
Influenza Vaccine (Short Stay) (NQF #0680) and the Influenza 
Vaccination Coverage Among Healthcare Personnel (NQF #0431) measures. 
Removal of measures will ultimately ease provider burden and allow 
LTCHs to devote more time to provide efficient and effective care to 
improve patient outcomes.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the Percent of Residents or Patients 
Who Were Assessed and Appropriately Given the Seasonal Influenza 
Vaccine (Short Stay) (NQF #0680) measure from the LTCH QRP, beginning 
with the FY 2021 LTCH QRP. LTCHs will no longer be required to report 
the data elements necessary to calculate this measure beginning with 
October 1, 2018 admissions and discharges.
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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20515), we stated 
that as a result of the input provided during a public comment period 
between November 10, 2016 and December 11, 2016, input provided by a 
technical expert panel (TEP), 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. We stated that we would 
reconvene a TEP for these measures in mid-2018 which occurred in April 
2018. We stated that 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.
    We did not receive any public comments regarding this IMPACT Act 
implementation update.
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 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20515), we sought 
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.
    Comment: Some commenters supported moving the implementation date 
of the LTCH CARE Data Set from April to October. One commenter 
supported the proposal as long as significant changes are noted in 
proposed rulemaking and CMS provides additional time to prepare and 
comply with new reporting requirements. Another commenter had no 
position in support of or against the concept of moving the 
implementation date of a new LTCH CARE Data Set from April to October. 
Another commenter encouraged CMS to keep the LTCH CARE Data Set update 
in April as it would allow for changes or comments to be included in 
the proposed rule.
    Response: We appreciate the commenters' input as we determine 
whether to propose moving the implementation date of the LTCH CARE Data 
Set from April to October. We would like to clarify that in proposing 
any updates to the LTCH CARE Data Set, the implementation date of the 
new version of the LTCH CARE Data Set would not occur until the 
following year at the earliest. For example, if we propose this change 
in April 2019, then the implementation of the new version of the LTCH 
CARE Data Set would not occur until October 1, 2020 at the earliest, as 
opposed to April 1, 2020. This would give LTCHs an additional 6 months 
(April-October) to update their systems so that they can comply with 
new reporting requirements.
8. 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20515), we 
proposed 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 feedback from providers who requested 
additional methods for notification.
    We also proposed 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.
    Comment: Many commenters supported the efforts by CMS to provide 
more methods of communication for notifying LTCHs of LTCH QRP 
noncompliance and reconsideration decisions. The commenters requested 
additional details about the timelines and logistics of these methods 
of notification, such as how providers should specify the recipients of 
notifications from the MAC. Another

[[Page 41634]]

commenter recommended that CMS work with providers to develop a formal 
notification protocol and, at a minimum, clarify how the proposal will 
affect current notification procedures before finalizing the proposal.
    In addition, some commenters expressed concerns that multiple 
notification methods and lack of specificity would cause confusion, add 
uncertainty, and cause delays in the notification process. One 
commenter suggested that CMS revise the process so that: (1) LTCHs can 
designate one person at the hospital or within the hospital 
organization to receive these notices, and (2) LTCHs can choose one 
method of notification from CMS out of the three options.
    Response: We thank commenters for their support. We will use at 
least one method of notification, and providers will be notified 
regarding the specific method of communication that we will use via the 
LTCH QRP Reconsideration and Exception & Extension website at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Exception-and-Extension.html and announcements via 
the PAC listserv. The announcements will be posted annually following 
the May 15th data submission deadline prior to the distribution of the 
initial notices of noncompliance determination in late spring/early 
summer. Messaging will include the method of communication for the 
notices of noncompliance, instructions for sending a reconsideration 
request, and the final deadline for submitting the request. This policy 
would be effective October 1, 2018.
    In response to the concerns regarding the multiple notification 
methods, it is our intent that the announcements posted on our website 
and sent via the PAC listserv will alleviate any confusion regarding 
noncompliance decisions and the reconsideration process. With regard to 
the comment about specifying the recipients of notifications for a 
specific facility, our notifications are sent to the point of contact 
on file in the QIES database. This information is populated via the 
Automated Survey Processing Environment (ASPEN) system. It is the 
responsibility of the facility to ensure that this information is up-
to-date. For information regarding how to update provider information 
in QIES, we refer providers to: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/Downloads/How-to-Update-LTCH-Demographic-Data-1-4-18-Final.pdf.
    After consideration of the public comments we received, we are 
finalizing our proposal to revise Sec.  412.560(d)(1) of our 
regulations to state that we will notify LTCHs of noncompliance with 
the LTCH QRP via a notification sent through at least one of the 
following methods: the QIES ASAP system, the United States Postal 
Service, or via an email from the MAC. We are also finalizing our 
proposal to revise Sec.  412.560(d)(3) of our regulations to clarify 
that we will notify LTCHs, in writing, of our final decision regarding 
any reconsideration request using the same notification process.

D. Changes to the Medicare and Medicaid EHR Incentive Programs (Now 
Referred to as the Medicare and Medicaid Promoting Interoperability 
Programs)

1. Background and Summaries of Final Policies Included in This Final 
Rule
a. 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 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 CEHRT, 
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.
b. Summaries of Final Policies Included in This Final Rule
    In this final rule, we are adopting final policies based on 
proposals in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20515 
through 20544) to continue advancement of CEHRT utilization, focusing 
on burden reduction, interoperability and patient access to their 
health information.
    For the reasons discussed in section VIII.D.4. of the preamble of 
this final rule, we are finalizing an EHR reporting period of a minimum 
of any continuous 90-day period in CY 2019 and 2020 for new and 
returning participants attesting to CMS or their State Medicaid agency.
    For the reasons discussed in sections VIII.D.5. and VIII.D.6. of 
the preamble of this final rule, we are finalizing with modification 
the proposed performance-based scoring methodology, which consists of a 
smaller set of objectives including e-Prescribing, Health Information 
Exchange, Provider to Patient Exchange and Public Health and Clinical 
Data Exchange. We are finalizing the Query of PDMP measure as proposed.
    We are finalizing the Verify Opioid Treatment Agreement measure as 
optional in CY 2019 and CY 2020, with the ability to earn 5 bonus 
points per year. In addition, eligible hospitals and CAHs must earn a 
minimum total score of 50 points in order to satisfy the requirement to 
report on the objectives and measures of meaningful use, which is one 
of the requirements for an eligible hospital or CAH to be considered a 
meaningful EHR user and earn an incentive payment and/or avoid a 
Medicare payment reduction.
    For the reasons discussed in section VIII.D.6. of the preamble of 
this final rule, we are finalizing the new measures Query of PDMP, 
Verify Opioid Treatment Agreement, and Support Electronic Referral 
Loops by Receiving and Incorporating Health Information. In addition, 
we are finalizing the removal of the Coordination of Care Through 
Patient Engagement objective and its associated measures Secure 
Messaging, View, Download or Transmit, and Patient Generated Health 
Data as well as the measures Request/Accept Summary of Care, Clinical 
Information Reconciliation and Patient-Specific Education. Finally, we 
are renaming measures within the Health Information Exchange objective. 
These changes include changing the name from Send a Summary of Care to 
Support Electronic Referral Loops by Sending Health Information and

[[Page 41635]]

renaming the Public Health and Clinical Data Registry Reporting 
objective to Public Health and Clinical Data Exchange objective with 
the requirement to report on any two measures of the eligible hospital 
or CAH's choice. In addition, we are renaming the Patient Electronic 
Access to Health Information objective to Provider to Patient Exchange 
objective, and renaming the remaining measure, Provide Patient Access 
to Provide Patients Electronic Access to Their Health Information. We 
are also finalizing the removal of the exclusion criteria from all of 
the Stage 3 measures retained except for the measures associated with 
the Electronic Prescribing objective, Public Health and Clinical Data 
Exchange objective and the new measure, Support Electronic Referral 
Loops by Receiving and Incorporating Health Information.
    For reasons discussed in section VIII.D.9. of the preamble of this 
final rule, we are finalizing the removal of certain CQMs beginning 
with the reporting period in CY 2020 as well as the CY 2019 reporting 
requirements as proposed to align the CQM reporting requirements for 
the Promoting Interoperability Programs with the Hospital IQR Program.
    For reasons discussed in sections VIII.D.10. and VIII.D.11. of the 
preamble of this final rule, we are finalizing the proposed 
codification of policies for subsection (d) Puerto Rico hospitals and 
amending 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.
    For reasons discussed in section VIII.D.12. of the preamble of this 
final rule, we are finalizing the $500,000 prior approval threshold for 
contracts and RFPs by amending Sec. Sec.  495.324(b)(2) and (3) and 
495.324(d). We are also finalizing the deadlines for enhanced FFP under 
the Medicaid Promoting Interoperability Programs,
    We also note that we received many comments that were unrelated to 
the Promoting Interoperability Programs or otherwise outside the scope 
of the proposed rule, and we have not responded to these comments in 
this final rule. These comments included requirements specific to the 
Merit-based Incentive Payment System (MIPS), regulation pertaining to 
vendors, information blocking clarification, functionality requirements 
for application programming interfaces (APIs), the 2015 Edition of 
CEHRT and issuance of Medicaid incentive payments in CY 2021. We thank 
all the commenters for their suggestions and feedback on the Promoting 
Interoperability Programs.
2. Renaming the EHR Incentive Program
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20516), we 
proposed 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 have changed the 
name of the Medicare and Medicaid EHR Incentive Programs to the 
Promoting Interoperability (PI) Programs, and the new name applies 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 noted 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 preambles of the proposed rule 
and this final rule) and will end under Medicaid in 2021.
3. Certification Requirements Beginning in 2019
    Beginning with the EHR reporting period in CY 2019, participants in 
the Promoting Interoperability Programs are required to use the 2015 
Edition of CEHRT pursuant to the definition of CEHRT under Sec.  495.4. 
In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20516 through 20517), 
we did not propose to change this policy, and 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. In 
addition, we indicated 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.
    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 API 
functionality. API functionality supports health care providers and 
patient electronic access to health information, contributes to quality 
improvement, and offers greater interoperability between systems.
    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,\407\ which 
is intended to enable HINs and Qualified HINs to securely exchange 
electronic health information in support of a range of permitted 
purposes, including treatment, payment, operations, individual access, 
public health, and benefits determination.
---------------------------------------------------------------------------

    \407\ https://www.healthit.gov/sites/default/files/draft-trusted-exchange-framework.pdf.
---------------------------------------------------------------------------

    We also note that the Provide Patients Electronic Access to Their 
Health Information 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.
    In working with ONC we were able to estimate the percentage of 
eligible clinicians, eligible hospitals and CAHs that have 2015 Edition 
CEHRT available

[[Page 41636]]

to them based on vendor readiness and information, and 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 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.
    We received many comments regarding the requirement to use the 2015 
Edition of CEHRT beginning in 2019. As we stated in the FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20516), we were not proposing to change 
the requirement. Because the requirement was not a subject of this 
rulemaking, we are not responding to the comments we received, although 
we will consider them to inform our future policy making in this 
subject area.
4. Revisions to the EHR Reporting Period in 2019 and 2020
    For the reasons discussed in the FY 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20517 through 20518), we proposed that 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 respective calendar years. 
Eligible professionals (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.
    We proposed corresponding changes to the definition of ``EHR 
reporting period'' and ``EHR reporting period for a payment adjustment 
year'' at 42 CFR 495.4.
    Comment: The majority of commenters strongly supported CMS' 
proposal to use a 90-day EHR reporting period in 2019 and 2020 in order 
to maximize the time available to implement and roll out system 
revisions.
    Response: We appreciate the commenters' support of a 90-day EHR 
reporting period in 2019 and 2020 and believe this will reduce the 
burden on health care providers, EHR developers and vendors by allowing 
sufficient time for system upgrades, testing and implementation of the 
2015 Edition of CEHRT functionalities and adjustment to the new scoring 
methodology, objectives and measures that we are finalizing in section 
VIII.D.5 and VIII.D.6.
    Comment: Multiple commenters requested clarification on whether the 
2015 Edition of CEHRT has to be in place by January 1, 2019 for the 
2019 reporting year.
    Response: For the Promoting Interoperability Programs, the 2015 
Edition of CEHRT must be implemented for an EHR reporting period in CY 
2019, which will be a minimum of 90 days as established in this final 
rule. It does not need to be implemented on January 1, 2019.
    Comment: A few commenters requested a 90-day EHR reporting period 
in 2021 for both the objectives and measures and CQMs.
    Response: We believe it is premature to establish policy beyond CY 
2020 and decline to extend the 90-day EHR reporting period beyond CY 
2020. We are finalizing the EHR reporting period specific to CYs 2019 
and 2020 in order to provide the additional flexibility for vendors and 
health care providers that are in the process of implementing the 2015 
Edition of CEHRT for an EHR reporting period beginning in CY 2019, 
reduce burden and allow eligible hospitals and CAHs to adjust to the 
new scoring and reporting methodology.
    After consideration of the public comments we received, we are 
finalizing as proposed that the EHR reporting period is a minimum of 
any continuous 90-day period in CY 2019 and 2020 for new and returning 
participants in the Promoting Interoperability Programs attesting to 
CMS or their State Medicaid agency. Eligible professionals, eligible 
hospitals, and CAHs may select an EHR reporting period of a minimum of 
any continuous 90-day period in CY 2019 from January 1, 2019 through 
December 31, 2019 and in CY 2020 from January 1, 2020 through December 
31, 2020.
    The applicable incentive payment year and payment adjustment years 
for the EHR reporting period in 2019 and 2020, as well as the deadlines 
for attestation and other related program requirements, will remain the 
same as established in prior rulemaking.
    We are finalizing as proposed the corresponding changes to the 
definition of ``EHR reporting period'' and ``EHR reporting period for a 
payment adjustment year'' at 42 CFR 495.4.
5. Scoring Methodology for Eligible Hospitals and CAHs Attesting Under 
the Medicare Promoting Interoperability Program
a. Background
    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 Public Law 115-123, the 
Bipartisan Budget Act of 2018. We refer readers to section VIII.D.5. of 
the preamble of the proposed rule for a discussion of the program 
stages. In light of these considerations, in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20518 through 20524), we proposed a new 
performance-based scoring methodology with fewer measures, which would 
move away from the threshold-based methodology that we currently use. 
We stated that 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. We 
stated that 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 proposed that 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

[[Page 41637]]

Medicare payment reduction for failing to demonstrate meaningful use, 
and are also eligible to earn a Medicaid incentive payment for 
meaningful use).
    We did not propose 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 preambles of 
the proposed rule and this final rule, we proposed 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 preambles 
of the proposed rule and this final 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 outlined a proposal using a 
performance-based scoring methodology in the proposed rule and the 
following sections of the preamble of this final 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.
    We stated that if we did 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 the 
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         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..
                                Electronic Case
                                 Reporting..
                                Public Health Registry
                                 Reporting..
                                Clinical Data Registry
                                 Reporting..
                                Electronic Reportable
                                 Laboratory Result
                                 Reporting..
------------------------------------------------------------------------

b. Performance-Based Scoring Methodology
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20518 through 
20524), we proposed 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 proposed these objectives to promote specific HHS 
priorities. We included 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.
    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

[[Page 41638]]

measure would contribute to the eligible hospital or CAH's total 
Promoting Interoperability 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 proposed to reduce the overall 
number of required measures from 16 to 6. We also note that the 
measures we proposed 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 stated that 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 stated that 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20520), 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. In the proposed rule, we 
sought 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 Electronic 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 
proposed to add two new measures to the Electronic 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 
preambles of the proposed rule and this final rule. The e-Prescribing 
measure would be required for reporting and weighted at 10 points in CY 
2019, 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)
    In the proposed rule, we sought public comment on whether this 
redistribution is appropriate for 2019, or whether the points should be 
distributed differently.
    We stated that 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 did not propose 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 proposed 
to require these measures beginning with the EHR reporting period in 
2020, and we sought 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 proposed 
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 proposed each of the three measures within the Electronic 
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 maintain a maximum total score of 100 points, 
beginning with the EHR reporting period in 2020, we proposed 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 proposed 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 Electronic 
Prescribing objective as described in section VIII.D.6.b. of the 
preambles of the proposed rule and this final rule, the 15 points for 
the Electronic 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.
    In the proposed rule, we sought public comment on the proposed 
distribution of points beginning with the EHR reporting period in 2020, 
but we did not receive any comments on this proposal.
    After consideration of the public comments we received, we are 
finalizing our proposed scoring for the Electronic Prescribing 
objective as proposed but with the modifications discussed at the end 
of this section VIII.D.5. of the preamble of this final rule. The e-
Prescribing measure is finalized as proposed, the Query of PDMP measure 
is finalized as proposed, and the Verify Opioid Treatment Agreement 
measure is finalized with

[[Page 41639]]

modification. We are finalizing the regulation text for the Electronic 
Prescribing objective scoring at Sec.  495.24(e)(5). In addition, we 
refer readers to section VIII.D.6.b. of the preamble of this final rule 
where we discuss our reasons for adopting the Query of PDMP measure as 
proposed and the Verify Opioid Treatment Agreement measure with 
modification.
    For the Health Information Exchange objective, we proposed to 
change the name of the existing Send a Summary of Care measure to 
Support Electronic Referral Loops by Sending Health Information, and 
proposed 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 preambles of the proposed rule and this 
final 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 
Electronic 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 
proposed 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. In the proposed rule, we sought public comment on whether this 
redistribution is appropriate, or whether the points should be 
redistributed to other measures instead.
    We did not receive any comments regarding the redistribution of 
points if an exclusion is claimed for the Support Electronic Referral 
Loops by Receiving and Incorporating Health Information measure.
    We are finalizing our proposed scoring of the Health Information 
Exchange objective as proposed. We are finalizing the regulation text 
for the Health Information Exchange objective and measure scoring at 
Sec.  495.24(e)(6). In addition, measure specification details can also 
be found in section VIII.D.6.c. of the preamble of this final rule.
    We proposed to weight the one measure in the Provider to Patient 
Exchange objective, the Provide Patients Electronic Access to Their 
Health Information measure, at 40 points toward the total Promoting 
Interoperability score in 2019 and 35 points beginning in 2020. We 
proposed 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.
    Comment: Many commenters supported CMS' proposed weighting of the 
Provide Patients Electronic Access to Their Health Information measure.
    Response: We appreciate the support regarding the weight of this 
measure. We agree that it is an essential part of the Promoting 
Interoperability Program and therefore deserves to be highly weighted.
    Comment: One commenter suggested that reporting on the Provide 
Patients Electronic Access to Their Health Information measure should 
be similar to the Security Risk Analysis measure in that it would be 
attested to by eligible hospitals and CAHs, but would not be scored.
    Response: We thank the commenter for its recommendation. We decline 
to follow the approach the commenter recommended for the Provide 
Patients Electronic Access to Their Health Information measure. As we 
indicated in the proposed rule (83 FR 20516), we were increasing our 
focus on interoperability and improving patient access to health 
information. In addition, in the proposed rule (83 FR 20521) we stated 
that we believe the measure gets to the core of improved access and 
exchange of patient data in promoting interoperability and is the crux 
of the Medicare Promoting Interoperability Program, therefore it was 
heavily weighted due to its importance and focus. We will consider this 
recommendation in future policy decisions regarding the Promoting 
Interoperability Program.
    Comment: One commenter requested that CMS score the Provide 
Patients Electronic Access to Their Health Information measure based on 
the total percentage of their patient population who have electronic 
access to their medical records, as opposed to the proposed number/
denominator performance-based scoring that includes the entire patient 
population.
    Response: We believe that is important that every patient has 
access to their health information electronically, we also believe that 
as we are moving forward to improving interoperability the patient 
should be the main partner in their health. We are committed to making 
sure that patients have access to their data electronically and believe 
this number will increase rapidly over the years. Therefore, we think 
that it is in the best interest of the Promoting Interoperability 
Program to include all patients in the denominator in part in order to 
ensure every patient is provided access and to better understand the 
amount of patients accessing their data electronically. As a result we 
will continue with the numerator/denominator performance-based scoring 
methodology.
    After consideration of the comments, we are finalizing with 
modification the Provider to Patient Exchange objective scoring. The 
Provide Patients Electronic Access to Their Health Information measure 
will be worth up to 40 points beginning in CY 2019. We are finalizing 
the regulation text for this final policy at Sec.  495.24(e)(7). For 
additional measure information, we refer readers to section VIII.6.d. 
of the preamble of this final rule.
    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 proposed 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 proposed 
that the eligible hospital

[[Page 41640]]

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 proposed 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 proposed 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 
proposed 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 preambles of the proposed rule and this 
final rule in regards to the proposals for the current Public Health 
and Clinical Data Exchange objective and its associated measures.
    Comment: A few commenters expressed concern that the Public Health 
and Clinical Data Exchange measures would be deemphasized if a minimum 
score of 50 points is required for reporting on the Promoting 
Interoperability objectives and measures or if the number of measures 
that must be reported is reduced from three to two.
    Response: We appreciate the commenters' feedback. We value the 
importance of the Public Health and Clinical Data Exchange objective. 
As we noted in the proposed rule (83 FR 20535 through 20536), 
stakeholders have indicated that some of the existing active engagement 
requirements are complicated and confusing and contribute to unintended 
burden, and our proposals were intended to address these concerns. We 
disagree that our proposals would deemphasize the Public Health and 
Clinical Data Exchange measures because eligible hospitals and CAHs 
would be required to report on (or claim exclusions for) two of these 
measures. Failure to do so would result in a score of zero for the 
Promoting Interoperability Program. Requiring the measures to be 
reported as part of the program confirms the importance of the Public 
Health and Clinical Data Exchange objective. While it would not be 
required, eligible hospitals and CAHs may choose to report on 
additional Public Health and Clinical Data Exchange measures, as they 
deem appropriate for their daily workflow, although they would not 
receive additional points for such reporting.
    After consideration of the public comments we received, we are 
finalizing our proposal for scoring the Public Health and Clinical Data 
Exchange objective as proposed but with the following modification. 
Instead of requiring eligible hospitals and CAHs to report the 
Syndromic Surveillance Reporting measure and one additional measure of 
their choosing, we will allow them to choose both of the measures that 
they will report. Eligible hospitals and CAHs must select two of the 
following measures to report on: Syndromic Surveillance Reporting, 
Immunization Registry Reporting, Electronic Case Reporting, Public 
Health Registry Reporting, Clinical Data Registry Reporting, and 
Electronic Reportable Laboratory Result Reporting. As stated in section 
VIII.6.e. of the preamble of this final rule, we believe the Syndromic 
Surveillance Reporting measure should not be required as we understand 
some hospitals and local jurisdictions are not able to send and receive 
syndromic surveillance files. In addition, allowing eligible hospitals 
and CAHs to report on any two measures of their choice promotes 
flexibility in reporting and allows them to focus on the public health 
measures that are most relevant to them and their patient populations. 
For additional measure information, we refer readers to section 
VIII.6.e. of the preamble of this final rule. We are finalizing the 
regulation text for this policy at Sec.  495.24(e)(8).
    We proposed that 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 proposed 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.\408\ Therefore, we believe that 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 sought 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.
---------------------------------------------------------------------------

    \408\ https://www.hhs.gov/hipaa/for-professionals/security/guidance/index.html.
---------------------------------------------------------------------------

    Comment: A few comments suggested that CMS should assign points for 
completing the actions of the Security Risk Analysis measure.
    Response: As we discussed in the proposed rule (83 FR 20521 through 
20522), we do not believe that the Security Risk Analysis measure 
should be scored because it includes actions required under HIPAA and 
ensures in part that the eligible hospitals and CAHs are in compliance 
with administrative, physical, and technical safeguards. We believe no 
additional points should be awarded because eligible hospitals and CAHs 
should already have been performing these actions.
    Comment: The majority of commenters supported CMS' proposal to 
require eligible hospitals and CAHs to attest to the completion of the 
actions of the Security Risk Analysis measure with no associated score 
in order to be eligible to receive an overall score in the Promoting 
Interoperability Program as they believed this measure is a requirement 
in order to safely transmit their patient data and successfully 
participate in the Promoting Interoperability Program.

[[Page 41641]]

    Response: As discussed in the preceding response, we agree that 
this measure should not be scored.
    After consideration of the public comments we received, we are 
finalizing our proposal to require, as a condition of earning a score 
in the Promoting Interoperability Program, eligible hospitals and CAHs 
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 are finalizing the regulation text for 
this policy at Sec.  495.24(e)(4).
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20522), we stated 
that, 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 Promoting 
Interoperability 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 stated that 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 stated that 
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, we 
stated that 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 the numerator and denominator of any required 
measure, or reporting a ``no'' response on a required yes/no response 
measure, unless an exclusion applies would result in a score of zero.
    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. In the proposed rule, we sought 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.
    Comment: The majority of commenters supported the proposed 50-point 
minimum Promoting Interoperability score to satisfy the requirement to 
report on the objectives and measures of meaningful use under Sec.  
495.4. A few commenters requested a lower minimum score so that 
eligible hospitals and CAHs would have an opportunity to adjust to the 
new measures and scoring methodology.
    Response: We appreciate the feedback regarding the proposed minimum 
50-point score. We decline to lower the minimum score as we continue to 
believe that 50 points is a 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.
    After consideration of the public comments we received, we are 
finalizing that for an eligible hospital or CAH to earn a score greater 
than zero, in addition to completing the activities required by the 
Security Risk Analysis measure, the hospital must submit their complete 
numerator and denominator or yes/no data for all required measures. The 
numerator and denominator for each performance measure will translate 
to a performance rate for that measure and will be applied to the total 
possible points for that measure. In addition, we are finalizing that 
an eligible hospital or CAH must 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.  495.24, which is one of the requirements for an eligible 
hospital or CAH to be considered a meaningful EHR user under Sec.  
495.4. We are finalizing regulatory text at Sec.  495.24(e) to reflect 
this final policy.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20522), we stated 
that we believe our proposal increases flexibility and helps 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

[[Page 41642]]

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 Prescription     5 points bonus.
                                           Drug Monitoring Program (PDMP).
                                          Bonus: Verify Opioid Treatment   5 points bonus.
                                           Agreement.
Health Information Exchange.............  Support Electronic Referral      20 points.
                                           Loops by Sending Health
                                           Information.
                                          Support Electronic Referral      20 points.
                                           Loops by Receiving and
                                           Incorporating Health
                                           Information.
Provider to Patient Exchange............  Provide Patients Electronic      40 points.
                                           Access to Their Health
                                           Information.
Public Health and Clinical Data Exchange  Syndromic Surveillance           10 points.
                                           Reporting (Required).
                                          Choose one or more additional:.
                                             Syndromic Surveillance
                                              Reporting..
                                          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 Drug       5 points.
                                           Monitoring Program (PDMP).
                                          Verify Opioid Treatment          5 points.
                                           Agreement.
Health Information Exchange.............  Support Electronic Referral      20 points.
                                           Loops by Sending Health
                                           Information.
                                          Support Electronic Referral      20 points.
                                           Loops by Receiving and
                                           Incorporating Health
                                           Information.
Provider to Patient Exchange............  Provide Patients Electronic      35 points.
                                           Access to Their Health
                                           Information.
Public Health and Clinical Data Exchange  Syndromic Surveillance           10 points.
                                           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..
----------------------------------------------------------------------------------------------------------------

    In the proposed rule, we sought 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 
also sought 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...............
 Data Exchange.                 Surveillance
                                Reporting
                                (Required).
                               Choose one or more
                                additional:.
                                  Immunization       Yes...............             N/A  10 points.
                                   Registry
                                   Reporting.
                               Electronic Case
                                Reporting..
                               Public Health
                                Registry Reporting..
                               Clinical Data
                                Registry Reporting..
                               Electronic
                                Reportable
                                Laboratory Result
                                Reporting..
                                                                                        ------------------------
    Total Score..............  ....................  ..................  ..............  83 points.
----------------------------------------------------------------------------------------------------------------


[[Page 41643]]

    We also sought 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 the proposed rule, we sought 
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 proposed to codify the proposed new scoring methodology in a new 
paragraph (e) under Sec.  495.24. We also proposed 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 proposed 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.
    Comment: Many commenters supported CMS' proposed scoring 
methodology in which 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.
    Some commenters supported CMS' alternative approach to scoring 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.
    Response: We appreciate the many commenters who supported the 
proposed scoring methodology. We decline to finalize the alternative 
approach to scoring. Many commenters suggested that the Public Health 
and Clinical Data Exchange objective would be deemphasized by reducing 
the reporting requirement to only one measure. In addition, the other 
objectives containing more than one measure are the Electronic 
Prescribing objective and the Health Information Exchange objective. 
For the Electronic Prescribing objective, we note that both the Query 
of PDMP and Verify Opioid Treatment Agreement measures are optional for 
reporting for CY 2019; therefore we believe this objective could 
require reporting on only one measure as opposed to multiple measures.
    Comment: Many commenters supported CMS' proposal to reduce the 
number of measures to be reported as part of the Promoting 
Interoperability Program.
    Response: We appreciate commenters support of our proposal to 
reduce the number of measures required to be reported as part of the 
Promoting Interoperability Program. We believe the reduction in 
reporting will relieve provider burden through a more flexible, 
performance-based approach.
    Comment: One commenter asked if CMS was removing the Stage 3 
requirements and indicated that the timeframe for implementation of the 
proposed scoring methodology and measure proposals were not adequate 
considering the historical timeframes needed for upgrades, workflow 
changes and training.
    Response: We did not propose to remove all the Stage 3 
requirements; we proposed to change the Stage 3 methodology by 
removing, adding, changing or maintaining certain objectives and 
measures. The Query of PDMP measure will be optional for CY 2019. This 
will allow additional time to develop, test and refine certification 
criteria and standards and workflows, while taking an aggressive stance 
to combat the opioid epidemic. While we appreciate the work that needs 
to be done to fully operationalize this measure, we believe this 
measure is a critical step in combatting the opioid crisis. Therefore, 
we are moving forward with requiring the measure beginning in CY 2020. 
The Verify Opioid Treatment Agreement measure will be optional for an 
EHR reporting period in 2019 and 2020 The Support Electronic Referral 
Loops by Receiving and Incorporating Health Information includes 
exclusion criteria for health care providers that are unable implement 
this measure for an EHR reporting period in 2019. In addition, we 
believe that maintaining the same certification criteria and standards 
currently required for the Stage 3 measures would reduce the time 
necessary to implement the new measure requirements.
    Comment: One commenter requested clarification on whether the 
required reporting of at least one patient for each measure refers to 
one patient in the denominator or the numerator.
    One commenter disagreed with the scoring methodology of reporting 
``at least one unique patient'' for each proposed measure and 
recommended that CMS maintain threshold scoring for measures.
    Response: As we stated in the proposed rule (83 FR 20522), 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 Public Health and Clinical Data 
Exchange objective. For measures that include a numerator and 
denominator, the eligible hospital or CAH must submit a numerator of at 
least one patient.
    We decline to maintain the current threshold based scoring 
methodology. In changing the scoring methodology to a performance-
based, we are allowing hospitals the flexibility to focus on measures 
that are most applicable to how they delivery care to patients. This 
flexibility allows eligible hospitals and CAHs the opportunity to push 
themselves on measures they do well in, while continuing to improve in 
challenging areas. This provides them the opportunity to reach the 
minimum total score of 50 points in order to satisfy the requirement to 
report on the objectives and measures of meaningful use. This is one of 
the requirements for an eligible hospital or CAH to be considered a 
meaningful EHR user and earn an incentive payment and/or avoid a 
Medicare payment reduction.
    Comment: One commenter expressed concern about vendors' ability to 
change the reporting structure to fit the new scoring methodology and 
costs associated with the changes.
    Reponses: The proposed scoring methodology primarily would 
eliminate or revise existing measures, which should only require 
consolidation of existing workflows and actions. In addition, the 
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.''
    In addition, we proposed two new opioid measures, which we are 
finalizing as optional for EHR reporting periods in 2019. We are 
requiring reporting on the Query of PDMP measure in CY 2020. This will 
allow additional time for vendors to update EHR systems. The Verify 
Opioid Treatment Agreement measure will remain as optional in CY 2020. 
For additional information regarding our rationale we refer readers to 
section VIII.D.6.b. of the preamble of this final rule. The Support 
Electronic Referral Loops by Receiving and Incorporating Health 
information combines the functionality of the existing Request/

[[Page 41644]]

Accept Summary of Care and Clinical Information Reconciliation measures 
into a new measure, which also includes exclusion criteria for 2019 for 
eligible hospitals and CAHs that cannot implement the measure in 2019. 
Lastly, we are finalizing an EHR reporting period of a minimum of any 
continuous 90-day period in 2019 and 2020 to provide flexibility to 
health care providers as they are becoming familiar with the new 
scoring methodology and measures finalized in this rule. We believe 
that this will allow EHR developers and vendors adequate development 
time to test and incorporate the new scoring system and measures for 
deployment and implementation.
    Comment: A commenter noted that measures without a numerator and 
denominator are less burdensome for eligible hospitals and CAHs.
    Response: We appreciate the comment and will consider this feedback 
in the future development of policy for the Promoting Interoperability 
Program.
    Comment: A commenter requested clarification on reporting for 
eligible hospitals and CAHs with multiple CEHRTs, who switch CEHRT mid-
reporting, or merge CEHRTs.
    Response: As established in this final rule, the EHR reporting 
period for eligible hospitals and CAHs is a minimum of any continuous 
90-day period in CY 2019 and 2020. Therefore, we would expect hospitals 
to select and plan their EHR reporting period with respect to the 
switching and/or merging of their CEHRT. For those who have multiple 
CEHRTs, the measure specifications remain the same.
c. Summary of Final Scoring Methodology
    As discussed above, after consideration of the comments we 
received, we are finalizing our proposed performance-based scoring 
methodology for 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, with modifications, as 
described below.
    For additional measure-specific information, we refer readers to 
section VIII.D.6. of the preamble of this final rule.
Promoting Interoperability Score
    We are finalizing that eligible hospitals and CAHs are required to 
report certain measures from each of the four objectives, with 
performance-based scoring occurring at the individual measure-level. 
Each measure is scored based on the eligible hospital or CAH's 
performance for that measure, except for the measures associated with 
the Public Health and Clinical Data Exchange objective, which require a 
yes/no attestation. Each measure will contribute to the eligible 
hospital or CAH's total Promoting Interoperability score. The scores 
for each of the individual measures are 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 will 
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 will not be considered meaningful EHR users.
    We are finalizing that for an eligible hospital or CAH to earn a 
score greater than zero, in addition to completing the actions included 
in the Security Risk Analysis measure, the hospital must submit their 
complete numerator and denominator or yes/no data for all required 
measures. The numerator and denominator for each performance measure 
will translate to a performance rate for that measure and will be 
applied to the total possible points for that measure. The eligible 
hospital or CAH must report on all of the required measures across all 
of the 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 will result in a score of 
zero. We are finalizing the regulation text for this final policy is at 
Sec.  495.24(e).
Security Risk Analysis Measure
    We are finalizing our proposal that eligible hospitals and CAHs 
must attest to having completed the actions included in the Security 
Risk Analysis measure at some point during the calendar year in which 
the EHR reporting period occurs. The Security Risk Analysis measure is 
not scored and does not contribute any points to the hospital's total 
score for the objectives and measures. We are finalizing the regulation 
text for this final policy is at Sec.  495.24(e)(4).
Electronic Prescribing Objective Scoring
    We are finalizing the Electronic Prescribing objective as proposed 
with the following modifications. The e-Prescribing measure is worth up 
to 10 points in CY 2019 and up to 5 points in CY 2020. The Query of 
Prescription Drug Monitoring Program (PDMP) measure is optional in CY 
2019 and worth up to 5 bonus points and is a required measure beginning 
in CY 2020, worth up to 5 points.
    The Verify Opioid Treatment Agreement measure is optional in CY 
2019 and 2020, and worth up to five bonus points. We intend to 
reevaluate the status of the Verify Opioid Treatment Agreement measure 
for subsequent years in future rulemaking.
    An exclusion is available for the e-Prescribing measure as 
described in section VIII.D.6. of the preamble of this final rule. If 
an exclusion is claimed for the e-Prescribing measure for CY 2019, the 
10 points for the e-Prescribing measure will be redistributed equally 
among the measures associated with the Health Information Exchange 
objective. We are finalizing a policy beginning in CY 2020 that an 
eligible hospital or CAH that qualifies for the e-Prescribing measure 
exclusion is also excluded from reporting on the Query of PDMP measure.
    In addition, separate exclusion criteria are available for the 
Query of PDMP measure beginning in CY 2020 as described in section 
VIII.D.6. of the preamble of this final rule. If an exclusion is 
claimed for the Query of PDMP measure in CY 2020, the points will be 
equally redistributed among the measures associated with the Health 
Information Exchange objective. Since the Verify Opioid Treatment 
Agreement measure is optional and eligible for bonus points, no 
exclusions are available. We are finalizing our proposal with 
modification and finalizing Sec.  495.24(e)(5) of the regulation text 
to reflect this policy.
Health Information Exchange Objective Scoring
    We are finalizing the Health Information Exchange objective as 
proposed. The Support Electronic Referral Loops by Sending Health 
Information measure is worth up to 20 points. There are no exclusions 
available for the measure. The new measure, Support Electronic Referral 
Loops by Receiving and Incorporating Health Information, is worth up to 
20 points. An exclusion is available for this measure in CY 2019, as 
described in section VIII.D.6. of the preamble of this final rule. If 
the exclusion is claimed, the 20 points would be redistributed to the 
other measure within this objective, the Support Electronic Referral 
Loops by Sending Health Information measure, which would be worth up to 
40 points. We are finalizing the regulation text for this final policy 
is at Sec.  495.24(e)(6).

[[Page 41645]]

Provider to Patient Exchange Objective Scoring
    We are finalizing the Provider to Patient Exchange objective with 
modifications. The Provide Patients Electronic Access to Their Health 
Information measure is worth up to 40 points beginning with the EHR 
reporting period in CY 2019. No exclusions are available for this 
measure. We are finalizing the regulation text for this final policy is 
Sec.  495.24(e)(7).
Public Health and Clinical Data Exchange Objective Scoring
    We are finalizing the Public Health and Clinical Data Exchange 
objective as proposed with the following modifications. Eligible 
hospitals and CAHs must submit a yes/no response for any two measures 
associated with the Public Health and Clinical Data Exchange objective 
to earn 10 points for the objective. Failure to report on two measures 
or submitting a ``no'' response for a measure will earn a score of 
zero. Exclusions available for this objective are discussed in section 
VII.6.e. of the preamble of this final rule. If an exclusion is claimed 
for one measure, but the eligible hospital or CAH submits a ``yes'' 
response for another measure, they would earn the 10 points for the 
Public Health and Clinical Data Exchange objective. If an eligible 
hospital or CAH claims exclusions for both measures they select to 
report on, the 10 points would be redistributed to the Provide Patients 
Electronic Access to Their Health Information measure under the 
Provider to Patient Exchange objective. We are finalizing the 
regulation text for this policy at Sec.  495.24(e)(8).
    The tables below reflects the final policy for the objectives, 
measures, and maximum points available for the EHR reporting periods in 
CY 2019 and CY 2020. Please note, the maximum points available do not 
include points that would be redistributed in the event that an 
exclusion is claimed:

                Final Performance-Based Scoring Methodology for EHR Reporting Periods in CY 2019
----------------------------------------------------------------------------------------------------------------
               Objectives                             Measures                         Maximum points
----------------------------------------------------------------------------------------------------------------
e-Prescribing...........................  e-Prescribing..................  10 points.
                                          Bonus: Query of Prescription     5 points bonus.
                                           Drug Monitoring Program (PDMP).
                                          Bonus: Verify Opioid Treatment   5 points bonus.
                                           Agreement.
Health Information Exchange.............  Support Electronic Referral      20 points.
                                           Loops by Sending Health
                                           Information.
                                          Support Electronic Referral      20 points.
                                           Loops by Receiving and
                                           Incorporating Health
                                           Information.
Provider to Patient Exchange............  Provide Patients Electronic      40 points.
                                           Access to Their Health
                                           Information.
Public Health and Clinical Data Exchange  Choose any two of the            10 points.
                                           following:.
                                          Syndromic Surveillance
                                           Reporting..
                                             Immunization Registry
                                              Reporting..
                                          Electronic Case Reporting......
                                          Public Health Registry
                                           Reporting..
                                          Clinical Data Registry
                                           Reporting..
                                          Electronic Reportable
                                           Laboratory Result Reporting..
----------------------------------------------------------------------------------------------------------------
Note: Security Risk Analysis is retained, but not included as part of the scoring methodology.


                Final Performance-Based Scoring Methodology for EHR Reporting Periods in CY 2020
----------------------------------------------------------------------------------------------------------------
               Objectives                             Measures                         Maximum points
----------------------------------------------------------------------------------------------------------------
e-Prescribing...........................  e-Prescribing..................  5 points.
                                          Query of Prescription Drug       5 points.
                                           Monitoring Program (PDMP).
                                          Bonus: Verify Opioid Treatment   5 points bonus.
                                           Agreement.
Health Information Exchange.............  Support Electronic Referral      20 points.
                                           Loops by Sending Health
                                           Information.
                                          Support Electronic Referral      20 points.
                                           Loops by Receiving and
                                           Incorporating Health
                                           Information.
Provider to Patient Exchange............  Provide Patients Electronic      40 points.
                                           Access to Their Health
                                           Information.
Public Health and Clinical Data Exchange  Choose any two of the            10 points.
                                           following:.
                                          Syndromic Surveillance
                                           Reporting..
                                             Immunization Registry
                                              Reporting..
                                          Electronic Case Reporting......
                                          Public Health Registry
                                           Reporting..
                                          Clinical Data Registry
                                           Reporting..
                                          Electronic Reportable
                                           Laboratory Result Reporting..
----------------------------------------------------------------------------------------------------------------
Note: Security Risk Analysis is retained, but not included as part of the scoring methodology.

    We are finalizing the codification of the scoring methodology in 
new paragraph (e) under Sec.  495.24. We are finalizing the revisions 
to the introductory text of Sec.  495.24 and the heading to paragraph 
(c) of this section to provide that the criteria specified in the new 
paragraph (e) are applicable for eligible hospitals and CAHs attesting 
to CMS for CY 2019 and subsequent years. Further, we are finalizing the 
revisions to 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) are applicable for eligible hospitals and CAHs attesting 
to a State for the Medicaid Promoting Interoperability Program for 2019 
and subsequent years.
6. Measures for Eligible Hospitals and CAHs Attesting Under the 
Medicare Promoting Interoperability Program
a. Measure Summary Overview
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20524 through 
20537), we proposed a number of changes to the Stage 3 objectives and 
measures in connection with the proposed scoring methodology for

[[Page 41646]]

eligible hospitals and CAHs discussed in the preceding section. Our 
intent was 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.
    We proposed three new measures: Query of PDMP; Verify Opioid 
Treatment Agreement; and Support Electronic Referral Loops by Receiving 
and Incorporating Health Information.
    We proposed to remove the Coordination of Care Through Patient 
Engagement objective and its three associated measures (Secure 
Messaging; View, Download or Transmit; and Patient Generated Health 
Data), as well as the measures Request/Accept Summary of Care, Clinical 
Information Reconciliation, and Patient-Specific Education.
    Finally, we proposed to rename the Send a Summary of Care measure 
to Support Electronic Referral Loops by Sending Health Information; 
rename the Public Health and Clinical Data Registry Reporting objective 
to Public Health and Clinical Data Exchange; rename the Patient 
Electronic Access to Health Information objective to Provider to 
Patient Exchange; and rename the Provide Patient Access measure to 
Provide Patients Electronic Access to Their Health Information.
    We proposed to remove the exclusion criteria from all of the Stage 
3 measures we are retaining, except for the measures associated with 
the Electronic Prescribing objective, Public Health and Clinical Data 
Exchange objective, and the new measures (Query of PDMP, Verify Opioid 
Treatment Agreement, and Support Electronic Referral Loops by Receiving 
and Incorporating Health Information), which would include exclusion 
criteria.
    We proposed the changes as certain measures have proven burdensome 
to health care providers in ways that were unintended and detract from 
health care providers' progress on current program priorities, align 
with broader HHS priorities and/or focus on program priorities related 
to increasing interoperability, exchange of health care information, 
patient access to their health information and advanced functions of 
CEHRT.
    We indicated in the proposed rule that the measures would no longer 
need to be attested to if we finalize the proposal to remove them, 
although health care providers may still continue to use the standards 
and functions of those measures based on their preferences and practice 
needs.
    In addition, we sought public comment on a potential new measure 
Health Information Exchange Across the Care Continuum under the Health 
Information Exchange objective in which 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 including but not limited to long term care facilities, 
and postacute care providers such as skilled nursing facilities, home 
health, and behavioral health settings.
    We proposed that all of these measure proposals 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 did not propose 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 preambles of the proposed rule and this final rule, we proposed to 
give States the option to adopt these measure proposals along with the 
proposed performance-based scoring methodology for the Medicaid 
Promoting Interoperability Program through their State Medicaid HIT 
Plans.
    We proposed that if we did 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, we proposed if we 
did 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.
    Comment: The majority of commenters supported the removal of the 
patient action measures and overall reduction to the number of 
measures.
    Response: We appreciate the support for the proposal to remove the 
measures including those requiring patient action, such as View, 
Download or Transmit, Patient Generated Health Data and Secure 
Messaging. Previous stakeholder feedback through correspondence, public 
forums, and listening sessions indicated there is ongoing concern with 
measures, which require health care providers to be accountable for 
patient actions. We further understand that there are barriers, which 
could negatively impact an eligible hospital or CAHs ability to 
successfully meet a measure requiring patient action, such as a 
patient's location in remote, rural areas and their inability to access 
technology such as computers, internet and/or email. As the issues 
described contribute to reporting burden and could negatively impact an 
eligible hospital or CAH's successful participation in the Promoting 
Interoperability Programs, we agree that removing the patient action 
measures reduces reporting burden and allows for focus on program goals 
which include improving interoperability, prioritizing actions 
completed electronically, use of advanced CEHRT functionalities and 
patient access to their health information.
    Comment: One commenter requested that removed measure 
functionalities remain in CEHRT moving forward.
    Response: We have stated in previous rulemaking (80 FR 62786) that 
functions and standards related to measures that are no longer required 
for the Promoting Interoperability Programs could still hold value for 
some healthcare providers and may be utilized as best suits their 
practice and the preferences of their patient population. We did not 
propose to remove the functionality from CEHRT. Removal of measures 
that are not aligned with the current emphasis of the Medicare 
Promoting Interoperability Program, which aim to increase 
interoperability and leverage the most current health IT functions and 
standards, is primarily to reduce reporting burden and is not intended 
to reflect upon the utility of the measure concepts for other purposes, 
such as providers' internal performance monitoring and improvement 
activities. Removal of a measure from program requirements does not 
require providers to remove the measures, associated data, or any 
functionalities from the health IT that they use.
    Comment: A few commenters disagreed with the proposed removal of 
the exclusion criteria related to broadband availability and the number 
of transitions or referrals received and patient encounters in which 
the provider has never previously encountered the patient because they 
believed it would limit flexibility.
    Response: As discussed in the proposed rule (83 FR 20525), we 
believe that there are valid reasons for the removal of the exclusion 
criteria. We do not believe the exclusion criteria would impact 
flexibility as we noted there are currently no counties that have less 
than 4 Mbps of broadband availability,

[[Page 41647]]

therefore, the exclusion could not be claimed. Also as we noted during 
the review of the 2016 Modified Stage 2 attestation data for eligible 
hospitals and CAHs, no eligible hospital or CAH claimed an exclusion 
based on broadband availability. In addition, based on our review of 
the 2016 Modified Stage 2 attestation data, we noted that we did not 
believe the exclusion criteria specific to transitions or referrals 
received and patient encounters in which the provider has never 
previously encountered the patient would be necessary.
    Comment: One commenter stated that CMS should include a new 
exclusion for eligible hospitals and CAHs who cannot attest to a 
measure due to actions beyond their control.
    Response: We decline to implement a new exclusion based on actions 
beyond the control of health care providers. We note that under our 
existing policy, eligible hospitals and CAHs may request a significant 
hardship exception based on extreme and uncontrollable circumstances.
    Comment: One commenter requested that CMS retain the exclusion 
criteria related to broadband availability because the commenter 
indicated that tele-health services are dependent on the bandwidth of 
the internet for many applications, and the commenter believes an 
exclusion for increased bandwidth may be necessary in the future. The 
commenter noted that certain tele-health applications can require 
higher minimal speeds than what is currently part of the exclusion 
criteria.
    Response: We decline to retain the exclusion criteria related to 
broadband availability. As we stated in the proposed rule (83 FR 
20525), the Fixed Broadband Deployment Data from Federal Communications 
Commission (FCC) form 477 \409\ indicate no counties have less than 4 
Mbps of broadband availability, and no eligible hospital or CAH claimed 
an exclusion based on broadband availability according to the 2016 
Modified Stage 2 attestation data. In addition, eligible hospitals and 
CAHs may request a significant hardship exception in cases of 
insufficient internet connectivity. We will reevaluate in the future 
the minimum broadband speed required to provide tele-health services 
and determine whether an exclusion would be warranted, but as stated 
above, we decline to retain the existing exclusion criteria.
---------------------------------------------------------------------------

    \409\ https://www.fcc.gov/general/broadband-deployment-data-fcc-form-477.
---------------------------------------------------------------------------

    Comment: Many commenters supported the proposed changes to the 
measures including the removal of certain measures and renaming of 
certain measures.
    Response: We thank the commenters for their support and reiterate 
the proposed changes were meant to remove measures that were burdensome 
to health care providers in ways that were unintended and detract from 
health care providers' progress on current program priorities, align 
with broader HHS priorities and/or focus on program priorities related 
to increasing interoperability, exchange of health care information, 
patient access to their health information and advanced functions of 
CEHRT. We believe the changes more accurately reflect the goals of the 
program moving forward.
    Comment: One commenter requested that CMS not propose additional 
changes to the objectives and measures that will apply beginning in CY 
2019 for at least two years.
    Response: We acknowledge that changes we finalize to objectives and 
measures require additional time and resources for EHR developers, 
vendors and health care providers to perform necessary updates to CEHRT 
and workflows, as well as training of staff. We are committed to 
reducing burden as well as being responsive to the concerns of 
stakeholders in the Promoting Interoperability Programs and consider 
many factors prior to proposing changes to the requirements.
    Comment: One commenter requested that CMS provide data to eligible 
hospitals and CAHs on their performance with respect to current program 
measures before proposing changes.
    Response: We will continue to work to promote data transparency and 
provide data on health care provider participation and performance and 
post data files for public use on the data and reports web page of the 
CMS website at: https://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/DataAndReports.html.
    After consideration of the public comments we received, we are 
finalizing the changes to the objectives, measures, and exclusion 
criteria as proposed for 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, with the 
modifications described in the sections below.
    We are finalizing amendments to the regulation text at Sec.  
495.24(e) and Sec.  495.24(c) to reflect these final policies.
(2) Summary of Finalized Measures Beginning With the EHR Reporting 
Period in CY 2019
    The table below provides a summary of the measures we are 
finalizing in this final rule.

 Summary of Removed and Final Measures Beginning With the EHR Reporting
                            Period in CY 2019
------------------------------------------------------------------------
             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      Supporting Electronic Referral
 modifications.                           Loops by Sending Health
                                          Information (formerly Send a
                                          Summary of Care).
                                         Provide Patients Electronic
                                          Access to Their Health
                                          Information (formerly Provide
                                          Patient Access).

[[Page 41648]]

 
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
  scoring methodology.

b. Final Policy for the Electronic Prescribing Objective
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20526 through 
20530), we proposed to add two new measures to the Electronic 
Prescribing objective under Sec.  495.24(e)(5)(iii) that are based on 
electronic prescribing for controlled substances (EPCS): Query of PDMP, 
and Verify Opioid Treatment Agreement, 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 refer readers to the proposed rule for a 
detailed discussion of the rationale for these proposals. 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 proposed to define opioids 
as Schedule II controlled substances under 21 CFR 1308.12, as they are 
recognized as having a high potential for abuse with potential for 
severe psychological or physical dependence. We also proposed to apply 
the same policies for the existing e-Prescribing measure under Sec.  
495.24(e)(5)(iii) to both the Query of 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, we indicated 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 of the Query of PDMP and 
Verify Opioid Treatment Agreement measures or claim the applicable 
exclusion.
    In addition, we stated if we finalized the new scoring methodology 
proposed in the proposed rule, 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 Electronic Prescribing objective; they would not have to also claim 
exclusions for the other two measures--Query of PDMP and Verify Opioid 
Treatment Agreement.
    However, we stated if we did not finalize the new scoring 
methodology we proposed in the proposed rule, but we finalized the 
proposed measures of Query of Prescription Drug Monitoring Program and 
Verify Opioid Treatment Agreement under the Electronic Prescribing 
objective, we would continue to apply the Stage 3 requirements 
finalized in previous rulemaking, and we proposed that eligible 
hospitals and CAHs would be required to report all three measures under 
the Electronic Prescribing objective, but would only be required to 
meet the threshold for the e-Prescribing measure, or claim an 
exclusion. In addition, if the new scoring methodology we proposed was 
not finalized, we would retain the existing e-Prescribing measure 
threshold of 25 percent under Sec.  495.24(c)(2)(ii).
    In addition to comments specific to each proposed measure, we 
received general public comments on both these proposals, which we 
summarize below.
    Comment: Several commenters supported the addition of the Query of 
PDMP and Verify Opioid Treatment Agreement measures, indicating they 
are important measures for reducing inappropriate prescriptions and 
improving patient outcomes.
    Response: We thank the commenters for their support and feedback of 
the proposed new measures under the Electronic Prescribing objective. 
We believe the measures are important to promoting care coordination 
between health care providers and reducing inappropriate prescribing 
practices. We anticipate that integration of PDMPs into certified EHR 
technology will become more widespread increasing efficiency with 
health care provider workflows.
    Comment: One commenter requested that CMS work with ONC to 
harmonize consistency in interoperability requirements, as there are 
differences in e-Prescribing standards for the 2015 Edition (Script 
10.6) and Medicare Advantage final rule (Script 2017071).
    Response: We intend to continue collaboration with ONC on the 
certification and standards criteria. Any proposed revisions to the e-
prescribing certification criteria and standards would be included in 
separate rulemaking.
    Comment: A commenter requested clarification on the e-Prescribing 
measure calculation for 2019 and whether or not hospitals can choose to 
exclude controlled substances.
    Response: We did not propose any changes to the e-Prescribing 
measure specifications. As we stated in the proposed rule (83 FR 
20527), 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). Eligible hospitals and CAHs reporting on the Query of PDMP and 
Verify Opioid Treatment Agreement measures would have to include 
Schedule II opioid prescriptions in the numerator and denominator.
    Comment: Many commenters requested that the Query of PDMP and 
Verify Opioid Treatment Agreement measures remain as optional in CY 
2020 with an associated bonus score as the timeline for implementation 
is unreasonable especially without certification criteria and 
standards.

[[Page 41649]]

    Response: We understand that the Query of PDMP and Verify Opioid 
Treatment Agreement measures could require eligible hospitals and CAHs 
to incur additional burden due to workflow changes at the point of 
care. In addition, we understand eligible hospitals and CAHs that have 
integrated PDMPs within an EHR may be required to manually calculate 
the measure, as automated functionality for this measure is not 
currently supported through certification criteria for Health IT 
Modules. However, we also stated in the proposed rule that health care 
providers would have the flexibility to query the PDMP in any manner 
allowed under their State law (83 FR 20527). This would include using 
relevant included capabilities of their CEHRT, such as those required 
by the 2015 Edition electronic prescribing criterion at 45 CFR 
170.315(b)(3).
    We are finalizing the Query of PDMP measure as proposed. As stated 
above, we anticipate that integration of PDMPs into certified EHR 
technology will become more widespread increasing efficiency with 
health care provider workflows. We believe that requiring the Query of 
PDMP measure beginning in CY 2020 promotes specific HHS priorities. 
These priorities include encouraging the increased use of PDMPs to 
reduce prescription drug abuse and diversion, improving patient 
outcomes and allowing for more informed prescribing practices. 
Therefore, we are finalizing this measure as proposed.
    Under the final policy we are adopting, the Verify Opioid Treatment 
Agreement measure will be optional for both CYs 2019 and 2020 with 
bonus point scoring as finalized in section VIII.D.5. of the preamble 
of this final rule. We plan to re-evaluate the status of the Verify 
Opioid Treatment Agreement measure for an EHR reporting period 
beginning in CY 2021.
    We also believe that extending the optional reporting status into 
CY 2020 for the Verify Opioid Treatment Agreement measure will give 
health care providers the additional time required to research and 
implement methods for verification of such agreements in practice and 
development of system changes and clinical workflows. We also believe 
the extension of the optional reporting status will provide additional 
time for CMS and ONC to review and assess findings from pilot studies 
as described in the proposed rule (83 FR 20529). We will also consider 
additional feedback from stakeholders and consider further advancement 
in developing standards. We further discuss the rationale in section 
VIII.D.6. of the preamble of this final rule.
    Comment: Several commenters stated that certification criteria and 
standards should be adopted prior to finalization of the Query of PDMP 
and Verify Opioid Treatment Agreement measures.
    Response: We agree that availability of specific mature consensus 
technical standards relevant to the use cases these measures represent 
would facilitate health IT developers' ability to offer technical 
solutions that enable providers both to perform the actions expected by 
the measures and automatically capture the data needed to calculate 
both of these measures. We will continue to evaluate the progress in 
the integration of PDMPs within providers' CEHRT, additional advances 
toward development of standards and are finalizing exclusion criteria 
as noted below.
    For the Query of PDMP measure, in the proposed rule (83 FR 20528), 
we proposed that in order to meet the measure, eligible hospitals and 
CAH must use the capabilities and standards as defined for CEHRT at 45 
CFR 170.315(b)(3) and 170.315(a)(10)(ii), therefore, certification and 
standards criteria would be associated with this measure. We stated in 
the proposed rule that there were no current exact certification and 
standards criteria available for querying a PDMP but believe the use of 
structured data in CEHRT could support querying through broader use of 
health IT (83 FR 20528). As previously stated, health care providers 
would have the flexibility to query the PDMP in any manner allowed as 
legal and practicable under their State law (83 FR 20527) which we 
believe provides more flexibility for health care providers to 
successfully demonstrate meaningful use and be able to report on this 
measure beginning in CY 2020.
    In the proposed rule (83 FR 20530), we proposed that in order to 
meet the Verify Opioid Treatment Agreement measure eligible hospitals 
and CAHs 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), however, 
there are no current exact standards for identification or exchange of 
treatment agreements. As we noted in the proposed rule (83 FR 20529 
through 20530), there are a variety of standards available within CEHRT 
that may be able to support the electronic exchange of opioid abuse 
related treatment data such as the Consolidated Clinical Document 
Architecture (C-CDA) care plan template.
    For these reasons, we are finalizing the Query of PDMP as proposed 
and the Verify Opioid Treatment Agreement measure as optional for CYs 
2019 and CY 2020. For more information, we refer readers to the 
discussion in section VIII.D.6. of the preamble of this final rule. In 
addition, we intend to propose specific certification criteria and 
standards in separate future rulemaking for the Query of PDMP and the 
Verify Opioid Treatment Agreement measures.
    We are finalizing the definition of opioids as Schedule II 
controlled substances under 21 CFR 1308.12 as proposed.
    We are finalizing the proposal to apply the same policies for the 
existing e-Prescribing measure under Sec.  495.24(e)(5)(iii) to the 
Query of PDMP measure and Verify Opioid Treatment Agreement measure, 
including the requirement to use CEHRT as the sole means of creating 
the prescription and for transmission to the pharmacy, except that 
unlike the e-Prescribing measure, eligible hospitals and CAHs must 
include Schedule II opioid prescriptions in the numerator and 
denominator of the Query of PDMP and Verify Opioid Treatment Agreement 
measures if they choose to report on them.
    In addition, we are finalizing that an eligible hospital or CAH 
that qualifies for the e-Prescribing measure exclusion is excluded from 
reporting on the Query of PDMP measure beginning in CY 2020.
(1) Measure: Query of Prescription Drug Monitoring Program (PDMP)
    A PDMP is an electronic database that tracks prescriptions of 
controlled substances at the State level and 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 intent of the Query of PDMP measure is to build upon the current 
PDMP initiatives from Federal partners focusing on prescriptions 
generated and dispensing of opioids.
    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, except where prohibited and in accordance with applicable law.
    We proposed that the query of the PDMP for prescription drug 
history

[[Page 41650]]

must be conducted prior to the electronic transmission of the Schedule 
II opioid prescription and that eligible hospitals and CAHs would have 
flexibility to query the PDMP using CEHRT in any manner allowed under 
their State law.
    We proposed to include in this measure all permissible 
prescriptions and dispensing of Schedule II opioids regardless of the 
amount prescribed during an encounter and that multiple Schedule II 
opioid prescriptions prescribed on the same date by the same eligible 
hospital or CAH would not require multiple queries of the PDMP. In the 
proposed rule, we requested comment on whether we should further refine 
the measure to limit queries of the PDMP to once during a hospital stay 
regardless of whether multiple eligible medications are prescribed 
during this time.
    CMS and ONC worked together to define the following:
    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 proposed 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.
    We stated that if we finalized the new scoring methodology we 
proposed in section VIII.D.5. of the preamble of the 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20528), we stated 
that we understood 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 and that manual 
data entry and manual calculation of the measure may be necessary. We 
also acknowledged that there are no existing certification criteria for 
the query of a PDMP but we believed the use of structured data captured 
in the CEHRT, could support querying a PDMP through the broader use of 
health IT. In the proposed rule, we sought 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 sought public comment especially from health care providers and 
health IT developers on whether they believe use of the NCPDP SCRIPT 
2017071 standard for e-prescribing could support eligible hospitals and 
CAHs seeking to report on this measure, and whether HHS should 
encourage use of this standard through separate rulemaking.
    In the proposed rule, we sought 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 proposed, we 
acknowledged and sought 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.
    In the proposed rule, we also requested 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 noted that under the new scoring methodology we proposed in 
section VIII.D.5. of the preamble of the 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. We proposed a threshold of at least one 
prescription for this measure if we did not finalize the proposed 
scoring methodology as varying State laws related to integration of a 
PDMP into CEHRT can lead to differing standards for querying.
    We also proposed 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 proposed to codify the Query of PDMP measure at Sec.  
495.24(e)(5)(iii)(B).
    Comment: A commenter indicated that CMS should work with 
stakeholders to determine feasibility and testing of EPCS measures 
prior to finalizing.
    Response: We agree that there should be testing of the measures 
prior to requiring them as part of the Promoting Interoperability 
Programs. We note that we are finalizing the Query of PDMP measure as 
proposed which is discussed in the section VIII.D.5. of the preamble of 
this final rule. The optional reporting for this measure in CY 2019 
allows additional time for expansion of PDMP integration into EHRs, 
implementation of system changes and workflows and for health IT 
developers to work with health care providers on additional methods for 
CEHRT to capture and calculate actions specific to the PDMP query.
    Comment: Several commenters agreed with the addition of the Query 
of PDMP measure indicating it was important for reducing inappropriate 
prescriptions and improving patient outcomes.
    Response: We thank the commenters for their support and feedback of 
the proposed new measure. We believe that PDMPs currently provide 
valuable information on prescribed controlled substances including 
dosages, quantity and combinations of prescriptions. In addition, we 
believe PDMPs will continue to progress to achieve full integration on 
a widespread scale resulting in more informed prescribing practices, 
reduced inappropriate prescribing of opioids, and improved patient 
outcomes while reducing workflow and time needed for querying.
    Comment: Several commenters supported the Query of PDMP measure but 
stated standards should be developed due to varying integration efforts 
across the nation. Another comment stated that CMS should collaborate 
with the DEA on standards and capabilities including use of mobile 
devices for cost control and increased flexibility.
    One commenter indicated that standards should include PDMP 
onboarding, interstate access agreements, improved access to PDMPs via 
national brokers, support for patient and user ID matching between 
CEHRT and PDMPs. One commenter stated that

[[Page 41651]]

costs and incentives associated with onboarding should be a priority 
consideration.
    Response: We thank the commenters for their support of the Query of 
PDMP measure and recognize that integration efforts are in various 
stages. While a number of these comments raise issues outside the scope 
of this rule, we appreciate the feedback on challenges and barriers 
relevant to effectively implementing the measure, which we requested in 
the proposed rule. This input will help to inform our future work as we 
continue collaborating with our colleagues across HHS, and with other 
public-and private-sector partners as appropriate, as we all work to 
advance the maturity and capabilities of America's health information 
infrastructure to seamlessly integrate with CEHRT and efficient 
clinician workflows. This is important not only for PDMP query 
functionality but for also other relevant tools, such as automated 
clinical decision support, that facilitate more informed prescribing 
practices and improved patient outcomes.
    Our goal on burden reduction also includes consideration of costs 
associated with meeting the Promoting Interoperability Programs 
requirements. We will continue to listen to stakeholders on concerns 
related to costs and work to mitigate burdens whenever practicable 
within our programs' responsibilities and authorities.
    Comment: One commenter indicated that health care providers should 
be able to continue to use a health information exchange to access 
Schedule II opioid prescription drug history in order to earn points 
for the Query of PDMP measure.
    Response: Neither of the proposed measures, including the Query of 
PDMP measure specifies whether providers' CEHRT connects to PDMPs 
directly or through HIEs. Therefore, use of HIEs to access Schedule II 
opioid prescription drug history is acceptable.
    Comment: One commenter also requested consideration for use of an 
open API by PDMPs to enable EHR access to Schedule II opioid 
prescription drug history.
    Response: Noting that we understand ``open API'' to mean an API for 
which the PDMP has made freely and publicly available the specific 
business and technical documentation necessary to interact with the 
API, we agree that implementing such an API is a step PDMPs can take to 
make it easier for providers to connect their CEHRT to PDMPs. We are 
aware of some States having already taken this step to support efforts 
to integrate PDMP with health IT used by prescribers and pharmacists in 
the course of their clinical work.
    Comment: A commenter stated that CMS should remove the requirement 
to use the capabilities and standards of CEHRT for querying the PDMP 
due to the absence of technology and infrastructure supporting 
electronic querying.
    Response: We thank the commenter for this suggestion. However, we 
disagree that the Query of PDMP measure should not include a 
requirement to use the capabilities and standards of CEHRT. We proposed 
that, in order to report on the Query of PDMP and receive a score, 
eligible hospitals and CAHs must use the capabilities and standards at 
45 CFR 170.315(b)(3) for electronic prescribing and 170.315(a)(10)(ii) 
for drug formulary checks which are required under the e-Prescribing 
measure. In the proposed rule (83 FR 20527), we proposed that the query 
of PDMP for prescription drug history must be conducted prior to the 
electronic transmission of the Schedule II opioid prescription. The 
certification criteria at 45 CFR 170.315(b)(3) would allow a health 
care provider to create a new prescription, change a prescription, 
cancel a prescription, refill a prescription, request fill status 
notifications and request and receive medication history information 
which we believe could support the query for a prescription drug 
history of the patient.
    In addition, 45 CFR 170.315(a)(10)(ii) drug formulary checks are 
most useful when performed in combination with e-prescribing which 
could increase the efficiency and safety of care and lower costs. We 
believe that the use of capabilities and standards at 45 CFR 
170.315(b)(3) for electronic prescribing for Query of PDMP, which 
include the ability of the user to reconcile a patient's active 
medication list, medication allergy list, and problem list, are key to 
system interoperability. This reconciliation will allow for the 
seamless flow of medication history data between disparate systems to 
help prescribers and pharmacists improve patient outcomes. As noted in 
the proposed rule and elsewhere in this final rule, given the variance 
in State level requirements and actions used to perform the query, 
health care providers have flexibility to satisfy this measure by 
querying the PDMP in any manner legal and practicable in their State.
    Comment: A few commenters stated that the Query of PDMP measure 
should not be finalized as part of the Promoting Interoperability 
Programs, and the integration of the PDMP with health information 
technology should remain as part of State requirements only.
    Response: We believe finalizing the Query of PDMP measure would be 
instrumental in furthering widespread implementation of PDMP query 
capabilities within EHRs. We noted in the proposed rule that several 
Federal agencies have had integral roles in the expansion of PDMPs with 
health information technology systems and we believe that this measure 
will encourage continued progress on integrating PDMP queries into EHR 
work flows, and reinforce the importance of prescribers seeking and 
using PDMP information where it is relevant to making more informed 
opioid prescribing decisions.
    Comment: A few commenters supported the use of NCPDP Script 
Standard Implementation Guide Version 2017071 medication history 
transactions for PDMP queries and response. One commenter proposed 
convergence on the use of HL7 FHIR such as CDS Hooks for other consumer 
facing apps to more extensively connect EHRs and consumer facing apps 
with PDMPs as a long term goal.
    Response: We appreciate the commenters' views. In partnership with 
colleagues across HHS, we encourage and applaud advances in standards 
and their use to deliver innovative, interoperable solutions that will 
seamlessly integrate PDMP query functionality and other relevant tools, 
such as automated clinical decision support, into clinician-friendly, 
patient-centered CEHRT-enabled workflows that facilitate safer, more 
informed prescribing practices and improved patient outcomes.
    Comment: One commenter requested an additional exclusion for the 
Query of PDMP measure specific to States that do not have a Statewide 
PDMP. Another commenter requested exclusion criteria for hospitals 
whose States do not allow direct integration with an API as workflows 
that are not interoperable will increase reporting burden.
    Response: We decline to finalize additional exclusion criteria, as 
recommended by the commenters. We stated that health care providers may 
query the PDMP in any manner that is allowed by their State, which we 
believe would reduce the burden of instituting new workflows. In 
addition, we are adopting exclusion criteria below for hospitals not 
able to report on this measure in accordance with applicable law when 
the measure is required beginning in CY 2020. We will continue to 
monitor health care provider use and querying of PDMPs and consider 
whether additional exclusion criteria

[[Page 41652]]

are necessary in future rulemaking, as the measure is optional for CY 
2019.
    We decline to finalize exclusion criteria for eligible hospitals 
and CAHs whose States do not allow for direct integration through an 
API. We believe that finalization of exclusion criteria such as this 
would enable a significant number of health care providers to avoid 
reporting on the measure, even though they would have the ability to 
query a PDMP through other means. In addition, we believe that although 
additional time and workflow changes may be necessary in order for 
health care providers to meet the measure, it is still possible without 
direct integration as long as it is conducted using CERHT in accordance 
with applicable State law.
    Comment: One commenter stated that CMS should work with State and 
other Federal agencies to develop a common set of formulary schedules, 
common data set and common set of interoperability standards that can 
easily work at an interstate level.
    Response: We recognize that there is work to be done to resolve 
various real and perceived barriers to achieving the full potential of 
interoperable health IT and health information exchange to improve 
patient care and outcomes. We plan to continue collaborating with our 
colleagues across HHS, including ONC, on standards and requirements 
specific to the Promoting Interoperability Programs. We believe that 
the pilots and projects discussed in the proposed rule at (83 FR 20527) 
which include collaboration between the agencies of ONC, SAMHSA, DOJ 
and CDC for example, have had integral roles in the progression of 
health IT as related to the opioid crisis. Likewise, the ONC and CDC 
have been integral in development of Promoting Interoperability Program 
requirements, including interoperability standards and certification 
criteria; therefore, we will continue to work with our colleagues on 
future requirements specific to interoperability standards, data sets 
and formulary schedules.
    Comment: One commenter stated that PDMP view-only access is 
insufficient and data exchange that can enable clinical decision 
support to assist health care providers is needed.
    Response: We understand where PDMP query is implemented in a way 
that does not return data in a computable format consistent with 
standards the CEHRT supports, providers and their patients will not be 
able to benefit from advanced capabilities of EHRs, such as clinical 
decision support.
    We agree that the ability to automate real-time clinical decision 
support informed by a patient's complete prescription drug history 
would be helpful to providers. We believe that as the measure is more 
widely implemented, and concurrently as advanced CDS functionalities 
become more widely available to providers via their CEHRT, both are 
vital to successfully combating the opioid crisis. To that end, we will 
continue to work across HHS and with our stakeholders to develop the 
necessary standards and complementary resources that will support such 
use. This will include further development of technical 
interoperability standards and may include revisions to this measure in 
future rulemaking.
    Comment: One commenter stated that the Query of PDMP measure should 
be prescription-based for simplicity, not evaluating medications 
administered during the admission or presentation to the ED. Another 
commenter stated the denominator should reference discharged patients 
during the EHR reporting period not the number of opioids prescribed 
during the EHR reporting period, and recommended the denominator be 
changed to ``Discharges where Schedule II medications were 
prescribed.''
    Response: The denominator for the measure is based on the Schedule 
II opioids that are electronically prescribed using CEHRT during the 
EHR reporting period rather than medications administered as the intent 
is to identify multiple provider episodes (physician shopping), 
prescriptions of dangerous combinations of drugs, prescribing rates and 
controlled substances prescribed in high quantities. In addition, we 
decline to revise the denominator of the measure as it could include 
prescriptions upon discharge as well as electronic prescriptions 
generated during the admission.
    Comment: One commenter stated that the numerator definition does 
not follow typical workflow for PDMP queries as some States require 
logging into an external portal making data capture and measure 
calculation difficult.
    Response: We understand that for PDMPs that do not currently allow 
for integration with EHR systems, prescribers may be required to take 
additional actions to complete the query, such as logging into an 
external portal. We acknowledged in the proposed rule that due to the 
varying integration of PDMPs into EHR systems, additional time, 
workflow changes and manual data capture and calculation would be 
needed to complete the query and could contribute to overall reporting 
burden. Therefore, this measure allows health care providers the 
flexibility to query the PDMP using CEHRT in any manner legal and 
practicable in their State.
    Comment: A few commenters stated that CERHT should also be able to 
support workflow integration such as querying the PDMP on demand. 
Another commenter indicated there are challenges associated with non-
consolidated responses, which present a patient-centric view of all 
prescribing activities.
    Response: It is our understanding that PDMP query integration with 
prescriber workflow can be accomplished with CEHRT on the market today. 
However, we acknowledge that it may not be an automatic capability of 
CEHRT and may not be possible in all States due to variations in laws 
and technical approaches. As the measure will be required beginning in 
CY 2020, we will review those variations over the next year and 
consider whether additional exclusion criteria would be necessary.
    Comment: One commenter requested clarification on whether hospitals 
must query multiple registries if the hospital's location is close to a 
State border.
    Response: We are not requiring eligible hospitals and CAHs to query 
multiple registries if the location is close to the State border, as we 
believe this would serve to increase the burden by requiring additional 
workflows and time requirements. We defer to the hospital and/or 
prescriber on whether multiple queries should be performed based on 
clinical relevance in specific circumstances.
    In addition, next year we intend to propose in rulemaking that EHR-
integrated PDMP querying would be required beginning in CY 2020 as part 
of this measure. In connection with that proposed requirement, we also 
intend to propose an additional exclusion for providers in States where 
integration with a Statewide PDMP is not yet feasible or not yet widely 
available. This exclusion would require confirmation from the State 
acknowledging that PDMP integration of EHRs is not yet in place. We 
will seek comment and suggestions in future rulemaking to ascertain if 
additional exclusions are needed for eligible hospitals or CAHs located 
in one of the States where PDMPs are not integrated into EHRs. We 
understand the lack of certification criteria and standards that are 
currently available as it relates to the Query of PDMP measure, but 
believe that this measure is essential to ensuring that we are working 
to combat the opioid crisis. We will continue to collaborate with our 
Federal partners to advance the capabilities, standards and

[[Page 41653]]

functionalities for querying PDMPs as well as to facilitate more 
informed prescribing practices and improvement of patient outcomes.
    After consideration of the public comments we received, we are 
finalizing the Query of PDMP measure as proposed.
    We are finalizing 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 codifying the Query of PDMP measure at Sec.  
495.24(e)(5)(iii)(B).
    We are adopting the measure as follows:
Query of PDMP
    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, except where prohibited and in accordance with applicable law.
    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.
    Exclusions beginning with an EHR reporting period in CY 2020: 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; and
    Any eligible hospital and CAH that could not report on this measure 
in accordance with applicable law.
(2) 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.
    In the proposed rule (83 FR 20529), we stated that we understood 
there are varied opinions regarding opioid treatment agreements amongst 
health care providers. Because of the debate among practitioners, we 
requested 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 acknowledged challenges related to 
prescribing practices and multiple State laws, which may present 
barriers to the uniform implementation of this proposed measure. In the 
proposed rule, we sought 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 proposed 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.
    In the proposed rule, we acknowledged in part, that completing the 
Verify Opioid Treatment Agreement measure might prove burdensome to 
health care providers as it could be difficult to identify an existing 
treatment agreement. Attempting to identify whether there is a 
treatment agreement in place would likely require additional time and 
changes to existing workflows. In the proposed rule, we sought public 
comment on pathways to facilitate the identification and exchange of 
treatment agreements and opioid abuse treatment planning.
    We proposed 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.
    We proposed 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. We proposed 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).
    In the proposed rule, we did not propose to define an opioid 
treatment agreement as a standardized electronic document; nor did we 
propose to define the data elements, content structure, or clinical 
purpose for a specific document to be considered a ``treatment 
agreement.'' We sought 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. In the 
proposed rule, we also sought public comment on methods or processes 
for incorporation of the treatment agreement into CEHRT, including 
which functionalities could be utilized to accomplish this. We sought 
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.
    Exclusions: 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

[[Page 41654]]

prescriptions for controlled substances at the start of its EHR 
reporting period.
    We proposed 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 and that 
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 under the proposed scoring methodology 
in the proposed rule. We requested 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 stated in the proposed rule that if the proposed scoring 
methodology and measure were finalized, this measure would not have a 
reporting threshold. We also proposed that if we did not finalize the 
proposed scoring methodology, but we finalized this proposed measure, 
that there would be a threshold of at least one unique patient for this 
new measure. We also noted there are medical diagnoses and conditions 
that could necessitate prescribing Schedule II opioids for a cumulative 
period of more than 30 days.
    We also proposed 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).
    Lastly, we requested 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 sought public comment about the 
feasibility of such a measure, and whether stakeholders believe this 
would help to encourage broader adoption of EPCS.
    We proposed to codify the Verify Opioid Treatment Agreement measure 
at Sec.  495.24(e)(5)(iii)(C).
    Comment: A few commenters supported the Verify Opioid Treatment 
Agreement measure and indicated that it was an important measure for 
reducing inappropriate prescriptions.
    Response: We thank the commenters for their support of the measure. 
We believe the Verify Opioid Treatment Agreement measure could have 
some benefit for promoting care coordination between health care 
providers. We also agree that this measure will help in reducing 
inappropriate prescribing practices. In addition, we believe there are 
merits to combatting the opioid crises through various means including 
health care providers verifying if there is an opioid treatment 
agreement in place before prescribing.
    However, we also have considered the lack of standards and 
agreement on the effectiveness of opioid treatment agreements. 
Therefore, we are finalizing the Verify Opioid Treatment Agreement 
measure as optional for 2019 and 2020. We will reevaluate the status of 
the measure for an EHR reporting period beginning in CY 2021.
    Comment: Many commenters requested that CMS not finalize the Verify 
Opioid Treatment Agreement measure due to the lack of defined data 
elements, structure, and standards and certification criteria. Some of 
those commenters indicated the measure would be administratively 
burdensome as most patients are discharged with no more than a week's 
prescription of schedule II controlled substances.
    In addition, a few commenters were concerned that finalization of 
this measure may result in unintended negative consequences such as a 
decline of pain management therapies and treatment for patients who are 
post-surgical or recovering from acute illnesses, reluctance of 
patients to seek treatment or health care related to pain or reluctance 
on part of health care providers to prescribe short term opioids when 
appropriate.
    Another commenter stated there are no current standards for 
exchange of opioid treatment agreements, they are not usually based on 
clinical information, and are primarily provider requested. One 
commenter stated there is no evidence that opioid treatment agreements 
improve patient outcomes. One commenter stated opioid treatment 
agreements are more commonly used by outpatient programs where use of 
CEHRT is limited.
    Response: We understand the concerns voiced by the commenters and 
acknowledged the lack of defined data elements, structure, standards 
and criteria. We also understand the concerns of the commenters that 
discussed the unintended consequences and the potential administrative 
burden associated with this measure. We also are well aware of the 
varying evidence regarding the efficacy of the opioid treatment 
agreements. All of these concerns voiced by commenters were 
acknowledged in the proposed rule (83 FR 20528 through 20530). However, 
we believe there are health care providers who are already verifying if 
there is an opioid treatment agreement in place before prescribing 
opioids. We also believe it is important to continue to improve 
prescribing practices for controlled substances using currently 
available methods, and that this particular measure can help lead to 
improvement in prescribing practices.
    As noted in the proposed rule (83 FR 20529), there are a number of 
ways certified health IT may be able to support the electronic exchange 
of opioid abuse related treatment data, such as use of the C-CDA care 
plan template that is currently optional in CEHRT. This template 
contains information on health concerns, goals, interventions, health 
status evaluation & outcomes sections that could support the 
development of an opioid treatment agreement. In addition, the 
``patient health data capture'' functionality which is part of the 2015 
Edition (45 CFR 170.315(e)(3)) could be used to incorporate a treatment 
plan that is not a structured document with structured data elements.
    We disagree that this measure will result in unintended 
consequences, such as the decline of pain management therapies. As we 
discussed in the proposed rule (83 FR 20530), we are only including 
patients where the total duration of the patient's Schedule II opioid 
prescriptions is at least 30 cumulative days within a 6-month look-back 
period. We also believe this measure could encourage discussion and 
additional treatment options between health care providers and 
patients. In addition, this measure would help to rule out issues 
related to pain management therapies for certain post-surgical patients 
and those recovering from acute illnesses. We also understand that 
certain medical conditions and diagnoses could necessitate prescribing 
for over 30 days, including some terminal illnesses, recovery from some 
surgeries or their underlying conditions, and other diagnoses that 
cause pain requiring alleviation by opioids. It is not our intention to 
be a barrier to the most effective and clinically appropriate pain 
alleviating therapies available to patients in need, or to impose an 
undue burden on health care providers. Our goal is to work on improving 
patient outcomes and we do believe that this measure has merits, as the 
opioid treatment agreement can be an integral part of clinically 
effective, patient-empowering pain management plans developed and 
implemented in the course of shared decision-making by a clinical team 
and a patient with serious, chronic pain.
    Opioid treatment agreements may be more commonly used by outpatient

[[Page 41655]]

programs where use of CEHRT is limited, however we believe their 
verification in other care settings such as hospitals would improve 
prescribing practices through identification of overutilization of 
controlled substances.
    Finally, we reiterate that this measure will be optional for 
hospitals in 2019 and 2020. We acknowledge many providers may not find 
this measure applicable for their setting, and believe it is most 
likely to be adopted by those providers already engaged in treatment 
scenarios where the verification of an Opioid Treatment Agreement would 
be beneficial, such as providers offering treatment for substance use 
disorders, or providers closely integrated with behavioral health 
treatment facilities.
    Comment: One commenter stated that the measure could present 
challenges in the context of Part 2 programs as data sharing 
restrictions complicate feasibility of the measure.
    Response: We do understand that 42 CFR part 2 protects the 
confidentiality for substance use disorder patient records. However, we 
note that the disclosure of such information may be possible under 
certain conditions, including upon patient consent or request for the 
disclosure of such information.
    Comment: One commenter requested an additional exclusion for Verify 
Opioid Treatment Agreement measure to include patients with certain 
diagnoses or settings including but not limited to terminal or end 
stage conditions, cancer and hospice settings.
    One commenter disagreed with use of medication history transaction 
for the measure denominator as this does not support the concept of 
prescription days but uses a duration, which has no start or stop date.
    Response: We decline to add an additional exclusion as this measure 
is optional for CY 2019 and 2020. We are not finalizing the proposed 
exclusion criteria (83 FR 20530) as we are finalizing this measure as 
optional for both CY 2019 and 2020.
    Moreover, as we discuss in more detail in reference to the 
preceding comment, we do not believe that confirming an opioid 
treatment agreement is inconsistent with sound clinical practices for 
developing and implementing holistic, patient-centered pain management 
plans for patients affected by conditions causing pain for which opioid 
treatment for more than 30 days is a clinically appropriate component 
of an effective overall treatment approach.
    We decline to the modify the denominator for this measure as we 
indicated that we are seeking the cumulative days for an opioid 
prescription over a 6 month look back period to identify egregious 
cases (83 FR 20529). We understand that each prescription would include 
a quantity based on the number of doses allowed. However, the intent is 
to also look at prescriptions from other health care providers as well 
for episodes of prescription shopping. As we indicated in the proposed 
rule (83 FR 20529), the 6 month look back would begin on the date in 
which the eligible hospital or CAH electronically transmits its 
Schedule II Opioid prescription using CEHRT.
    Comment: A few commenters stated that this measure may not be 
possible to calculate as the NCPDP 10.6 Medication History query does 
not contain a field for prescription days and relies on third party 
data that may not be discrete.
    Response: We recognize that the capabilities to which health IT 
must be certified in order for it to meet the minimum requirements for 
CEHRT under this program do not include the ability to automatically 
track prescriber behaviors addressed by this measure. However, we 
disagree that this measure cannot be implemented at this time, and 
believe that some health care providers are currently verifying if 
there is an opioid treatment agreement in place before they prescribe. 
As we noted that in the proposed rule (83 FR 20529), the adoption of 
the NCPDP 10.6 standard does not preclude developers from also 
incorporating and using technology standards or services not required 
by regulation in their health IT product which could result in 
development of a workflow which more closely resembles types that 
health care provider are currently using. However we do understand the 
limitations for those health care providers that have chosen not to 
implement such standards and functionalities beyond the minimum to 
which their CEHRT is required to be certified to meet the requirements 
of this program.
    We also recognize that a provider's attempt to verify whether a 
treatment agreement is in place may be difficult to capture in an 
automated fashion in cases where a machine readable treatment agreement 
cannot be queried. While we believe some providers do currently have 
the ability to query for an electronic treatment agreement, which could 
support machine capture of this data, we recognize that for most health 
care providers this will require additional workflow steps.
    As a result of these issues, we are also finalizing this measure as 
optional for CYs 2019 and 2020, and expect this measure is likely to be 
adopted by a limited set of providers in treatment arrangements that 
already possess the infrastructure to support capture and calculation 
of this measure. We intend to revisit this measure along with the 
necessary data elements in future rulemaking.
    Comment: A few commenters stated that the measure would contain 
unreliable data and suspect calculations as it would be possible for 
CEHRT to receive duplicative medication history data from various 
systems. One commenter requested information on how the EHR would 
machine calculate duplicative data and cumulative days.
    One commenter stated the patient's medical history is not clearly 
laid out in external prescription history and may require manual 
calculation with no system ability to determine if users are 
identifying applicable patients or not.
    Response: We recognize that this measure would be technically 
complex and potentially burdensome for providers to implement. However, 
we believe that some health care providers may be able to verify if 
there is an opioid treatment agreement in place through various means 
such as C-CDA based information exchange. We understand that there is a 
potential for duplicative medication history data but believe that the 
reconciliation burden this currently poses for clinicians not only in 
context of prescribing long-term opioid therapy but a variety of more 
general clinical situations and thus is one that the market should 
already be working to address.
    Moreover, as the clinical practice this measure tracks is more 
widely adopted, we believe health care providers and their health IT 
vendors will develop innovative solutions to accurately capture needed 
data elements and calculate the measure while reducing workflow 
complexity and inconvenience to prescribers and other personnel 
involved in the care and/or measurement process. Therefore, we are 
taking into account these limitations and are finalizing this measure 
as optional for CYs 2019 and 2020 and will reevaluate the status of the 
measure for an EHR reporting period beginning in CY 2021.
    After consideration of the comments we received, and for the 
reasons stated above, we are finalizing the Verify Opioid Treatment 
Agreement measure as proposed with the modification discussed in 
section VIII.D.6. of the preamble of this final rule, that the measure 
will be optional in CYs 2019 and 2020. We are codifying the measure at 
Sec.  495.24(e)(5)(iii)(C). In addition, we are finalizing that, in 
order to meet this measure, an eligible hospital or CAH

[[Page 41656]]

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).
    We are adopting the measure as follows:
Verify Opioid Treatment Agreement
    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.
    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.
c. Final Policy 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 currently includes three 
measures under Sec.  495.24(c)(7)(ii) (in the proposed rule (83 FR 
20530) we inadvertently referred to 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 the proposed 
rule, we proposed to remove the exclusions from all three of the 
measures associated with the Health Information Exchange objective 
under Sec.  495.24(c)(7)(iii), as reflected in the two measures 
proposed under Sec.  495.24(e)(6). However, we stated that if we 
finalized the new scoring methodology we proposed, eligible hospitals 
and CAHs would be able to claim an exclusion under the Support 
Electronic Referral Loops by Receiving and Incorporating Health 
Information measure.
    We proposed several changes to the current measures under the Stage 
3 Health Information Exchange objective. First, we proposed to change 
the name of Send a Summary of Care measure to Support Electronic 
Referral Loops by Sending Health Information. We also proposed 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.
    We stated that if we did not finalize the new scoring methodology 
we proposed in section VIII.D.5. of the preamble of the 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 the 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.
    Comment: One commenter suggested retaining the previous names of 
the Request/Accept Summary of Care and Clinical Information 
Reconciliation measures for consistency and to prevent confusion with 
the HIPAA electronic transaction for ``Referrals'' which also uses the 
terminology ``loops.''
    Response: We respectfully decline to retain the previous name of 
the measures Request/Accept Summary of Care and Clinical Information 
Reconciliation as the overall intent is to combine the functionalities 
and actions of both measures to reduce the burden of having to report 
on two separate measures thereby simplifying reporting. We noted in the 
proposed rule that the separate Clinical Information Reconciliation 
measure does not include the exchange of health care information nor 
use of CEHRT to successfully complete the measure action and is 
redundant in the action to incorporate summary of care records with the 
Request/Accept Summary of Care measure. As previously indicated in the 
proposed rule and this final rule, the focus of the program is on 
reducing burden, increasing interoperability, exchange of health care 
information and the advanced use of CEHRT.
    We disagree the measure name will create undue confusion with the 
HIPAA electronic transaction as both fall under separate programs and 
are associated with differing actions.
    Comment: A few commenters agreed with use of any C-CDA document 
templates available within the C-CDA which contains the most clinically 
relevant information that may be required by the recipient of the 
transition or referral. The commenters stated this proposal supports 
increased flexibility, enables increased information sharing between 
care providers, and will help providers better understand their 
patient's history.
    Response: We appreciate the feedback by the commenter and agree 
that this proposal will provide further flexibility for health care 
providers to focus on clinically relevant information and decrease 
burden associated with reporting requirements.
    Comment: A few commenters requested that CMS allow for flexibility 
to use any HL7 C-CDA formats available to meet the HIE measures to 
create and electronically send summary of care records. A few 
commenters stated all CEHRT does not support every document types 
within the HL7 C-CDA nor are they applicable in every setting.
    One commenter stated that since other document types/templates for 
the 2015 Edition are not required, availability and delivery within the 
suggested timeframe for implementation of the 2015 Edition may be 
unlikely; therefore, healthcare providers should not be limited to the 
three document types as part of the 2015 Edition.

[[Page 41657]]

Another commenter stated that CEHRT should be tested for the ability to 
generate and send the needed C-CDA template as well as the ability to 
receive and accept any C-CDA template; therefore, standard templates 
should be required.
    Response: We appreciate commenters' support for the proposal to 
allow use of any document template within the C-CDA standard for 
purposes of the measures under the Health Information Exchange 
objective. We believe this proposal will provide further flexibility 
for health care providers to focus on clinically relevant information. 
We note that CEHRT supports the ability to send and receive C-CDA 
documents according to Releases 1.1 and 2.1 to support interoperability 
and exchange. The 2015 Edition transitions of care certification 
criterion at Sec.  170.315(b)(1) requires Health IT Modules support the 
Continuity of Care Document, Referral Note, and (inpatient settings 
only) Discharge Summary document templates.
    At a minimum, all CEHRT will be able to support exchange of those 
three document types therefore, testing should not be necessary. 
However, that does not preclude developers of CEHRT in supporting 
additional document templates.
    While eligible hospitals' and CAHs' CEHRT must be capable of 
sending the full C-CDA upon request, we believe this additional 
flexibility will help support clinicians efforts to ensure the 
information supporting a transition is relevant. We note that in the 
use of a document template beyond those available in the certification 
program, the provider would need to work with their developer to 
determine appropriate technical workflows and implementation.
    Comment: One commenter stated that C-CDA standards used for 
referrals should be required to include data to link a referral request 
to consult report, a universal referral tracking or index number, 
better patient identity matching and use of common titles for the 
document.
    Response: We appreciate the comment and encourage the commenter to 
participate in the standards development-enhancement process of HL7, 
the steward of the HL7 Implementation Guide for CDA Release 2.
    Comment: A commenter recommended support for the widespread 
availability of patient identifiers for the health information exchange 
measures in the Promoting Interoperability Programs.
    Response: We appreciate the comment and will consider the 
recommendation for future rulemaking to the extent permissible by law.
(1) Modifications To Send a Summary of Care Measure
    In the proposed rule (83 FR 20531), we proposed 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 proposed 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.
    We stated in the proposed rule that if 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 proposed that eligible hospitals and CAHs may use any document 
template within the C-CDA 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 C-CDA 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 C-CDA 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 C-CDA to support 
transitions, for instance the ``Discharge Summary'' document.
    We noted that if the new scoring methodology and measure were 
finalized, this measure would not have a reporting threshold and if we 
did 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).
    Comment: A few commenters supported the name change to Supporting 
Electronic Referral Loops by Sending Health Information. A few 
commenters agreed with the focus on patient outcomes with this measure. 
These commenters believed that the measure focuses on ensuring that the 
patient's health data is accurately shared between health care 
providers thereby improving care coordination and patient outcomes.
    Response: We appreciate the support for the name change and focus 
and believe this reflects our emphasis on improving care coordination 
and communication between health care providers, as it relates to 
completing the referral loop. We believe that the emphasis on closing 
the referral loop will positively influence patient outcomes due to 
improved exchange of clinically relevant patient health information for 
care performed by other parties.
    Comment: One commenter voiced concerned that many providers do not 
have interoperable EHRs and sending a summary of care to these 
providers should not be counted towards meeting requirements under the 
Promoting Interoperability Program.
    Response: We thank the commenter for its feedback. We are committed 
to the use of certified health IT to effectively support the 
interoperable electronic exchange across the care continuum. While we 
recognize that not all of the provider types to whom a hospital or CAH 
might send a care summary currently use technology certified under the 
ONC Health IT Certification Program, we believe that it is important 
that eligible hospitals and CAHs are including these workflows in their 
everyday practice. Since the

[[Page 41658]]

beginning of the EHR Incentive Program, hospital efforts to engage in 
and expand health information exchange across the care continuum have 
helped to build and evolve health IT infrastructure across the nation. 
We note that eligible hospitals have achieved near-universal adoption 
of certified health IT, with 96 percent of Medicare- and Medicaid-
participating non-Federal acute care hospitals having adopted certified 
EHRs with the capability to electronically export a summary of clinical 
care as of 2015. We also note that there may be many cases where this 
information is valuable to health care providers even if they are not 
capable of receiving and incorporating the information when it is 
transmitted from interoperable health IT according to applicable 
interoperability standards.
    After consideration of the public comments we received, we are 
finalizing the name change of Send a Summary of Care to Support 
Electronic Referral Loops by Sending Health Information and codifying 
this measure at 42 CFR 495.24(e)(6)(ii)(A).
    We are finalizing that eligible hospitals and CAHs may use any 
document template within the C-CDA standard for purposes of the 
measures under the Health Information Exchange objective.
    We are adopting the measure description as proposed, in alignment 
with the scoring methodology in section VIII.D.5. of the preamble of 
this final rule:
    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.
    We are finalizing the proposal to remove the exclusion from this 
measure.
(2) Removal of the Request/Accept Summary of Care Measure
    In the proposed rule (83 FR 20531), we proposed 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). Our analysis of the existing 
measure and stakeholder input indicated the measure specification does 
not effectively 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, resulting in unintended consequences 
where health care providers implement either:
     A burdensome workflow to document the manual action to 
request 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.
    Further, stakeholder feedback highlights the fact that the 
requirement to incorporate data is insufficiently clear regarding what 
data must be incorporated.
    In addition, as indicated in the proposed rule, 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.
    Comment: One commenter stated that the removal of this measure 
would not reduce burden as the Request/Accept Summary of Care measure 
would be included in the Support Electronic Referral Loops By Receiving 
and Incorporating Health Information which was thought to be a more 
complex measure to calculate.
    Several commenters disagreed with the new Support Electronic 
Referrals Loops By Receiving and Incorporating Health Information 
measure as they believed it is too burdensome under one measure and 
does not align with their current workflows creating a potential for 
errors.
    A few commenters stated this measure would be more complex and 
difficult to calculate as it includes multiple actions under one 
measure. One commenter stated there was not enough time allowed for 
implementation since it is a new measure and requires testing and 
certification.
    Response: We disagree that removing this measure would not reduce 
burden. We believe that the current separation of the Request/Accept 
Summary of Care measure from the Clinical Information Reconciliation 
measure is burdensome and redundant in the action of incorporation of 
the summary of care record. In addition, stakeholder concerns indicated 
the separate Request/Accept Summary of Care and Clinical Information 
Reconciliation measures were not reflective of clinical and care 
coordination workflows.
    For instance, under the prior Request/Accept Summary of Care 
measure, a provider receiving a transition of care was required to 
obtain the patient's record (if not already received via a Direct 
message), through querying for the record or a manual request (such as 
a phone call). Once received, the provider was then required to 
``incorporate'' this information into the patient's record. Each 
individual action in this process, from querying and requesting to 
incorporating, had to be tracked for each individual use case in order 
to calculate the measure. Under the Clinical Information Reconciliation 
measure, the provider was required to review a record received 
electronically or by other means, or capture information through verbal 
discussion with the patient, and then use this information to reconcile 
the medications, medication allergies, and problem list within the 
record. As with the Request/Accept Summary of Care measure, each of 
these actions had to be tracked in order to calculate the measure.
    The combined measure, Support Electronic Referral Loops by 
Receiving and Incorporating Health Information, significantly 
simplifies these actions, specifying that upon receipt of an electronic 
record, the provider must reconcile information regarding medications, 
medication allergies, and problem list. Rather than tracking individual 
actions as required by existing measures, this new measure would 
instead 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 that moving away from the actions 
requiring manual or other tracking in the existing measures will reduce 
burden for providers and developers and more closely align with 
provider workflows.
    In addition, with regard to the commenter's concerns about 
implementation timing, we are establishing an exclusion to this measure 
for 2019. We believe that all eligible hospitals and CAHs should be 
able to perform the actions required by this measure by 2020. We also 
note that this measure aligns with our goals to have a truly 
interoperable system which includes the free flow of health information 
between EHR systems.
    After consideration of the public comments we received, we are 
finalizing the removal of the Request/Accept Summary of Care measure as 
proposed.
(3) Removal of the Clinical Information Reconciliation Measure
    In the proposed rule (83 FR 20532), we proposed to remove the 
Clinical Information Reconciliation measure at

[[Page 41659]]

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 proposed rule, 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. In 
addition, 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.
    Comment: Multiple commenters supported the removal of this measure 
and stated the removal of this measure would reduce burden.
    Response: We appreciate the support and agree that it will help to 
reduce provider burden and refocus on the use of health IT to meet the 
measure requirements.
    After consideration of the public comments we received, we are 
finalizing the removal of the Clinical Information Reconciliation 
measure as proposed.
(4) New HIE Measure: Support Electronic Referral Loops by Receiving and 
Incorporating Health Information
    In the proposed rule (83 FR 20532 through 20533), we proposed 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, medication allergy, and current problem list.
    We proposed 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 did not 
propose to change the actions associated with the existing measures; 
rather, we proposed 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.
    We proposed 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 and the numerator 
would increment upon 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 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 proposed 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 sought 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.
    In addition, we sought 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 
sought 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 sought 
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 sought 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.
    We stated if we finalize the new scoring methodology we proposed in 
section VIII.D.5. of the preamble of the proposed rule, an exclusion 
would be available for eligible hospitals and CAHs that could not 
implement the Support Electronic Referral Loops by Receiving and 
Incorporating Health

[[Page 41660]]

Information measure for an EHR reporting period in CY 2019.
    We proposed that we would maintain the current Stage 3 requirements 
finalized in previous rulemaking if we did not finalize the new scoring 
methodology proposed in section VIII.D.5. of the preamble of the 
proposed rule. 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 proposed 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)(1) and (b)(2).
    Comment: One commenter supported the exclusion for Support 
Electronic Referrals Loops by Receiving and Incorporating Health 
Information.
    Response: We appreciate the support and believe the exclusion will 
benefit health care providers who are unable to implement the measure 
for an EHR reporting period in 2019 due to additional time needed to 
perform necessary updates and workflow changes.
    Comment: A few commenters requested that CMS not finalize this 
measure and maintain the Request/Accept Summary of Care information and 
Clinical Information Reconciliation measures separately. These 
commenters believed that clinical information reconciliation presents 
many challenges including partially automated reconciliation and 
functionalities for problem list, which require some manual actions. 
These commenters suggested that the actions required for the combined 
measure would create a complex workflow and would not result in 
improved interoperability.
    Response: We believe that the current separation of the measures is 
burdensome and redundant in the action of incorporation of the summary 
of care record. In addition, we listened to stakeholder concerns 
regarding the separate Request/Accept Summary of Care and Clinical 
Information Reconciliation measures, which indicated that the 
separation between receiving and reconciling patient health information 
is not reflective of clinical and care coordination workflows and the 
incorporation aspect is redundant to both measures. We agree the 
process of clinical information reconciliation includes both automated 
and manual reconciliation to allow the receiving health care provider 
to work with both the electronic data provided with any necessary 
review, and to work directly with the patient to reconcile their health 
information. We also indicated in previous rulemaking (80 FR 62861) 
that if no update is necessary, the process of reconciliation may 
consist of simply verifying that fact or reviewing a record received on 
referral and determining that such information is merely duplicative of 
existing information in the patient record, which we believe would 
reduce burden. In addition, we believe that combining the measures of 
Request/Accept Summary of Care and Clinical Information Reconciliation 
retains the focus on interoperability and exchange of health 
information as opposed to the separation of the measures where health 
information exchange and interoperability was not a focus for clinical 
information reconciliation.
    Comment: One commenter stated that health care providers should not 
be held accountable for performance scores that depend on actions of 
another health care provider to receive credit.
    One commenter stated that health care providers are querying for 
external data but not consistently ``closing the referral loop'' by 
sending information back, and recommended automating a closed loop 
referral workflow process.
    Response: We disagree with the commenter's concern regarding being 
accountable for another health care provider's actions. We stated in 
the proposed rule (83 FR 20516) that we were moving to a new phase of 
EHR measurement with an increased focus on interoperability and 
improving patient access to health information. The Health Information 
Exchange measures focus on interoperability and coordination of care. 
Therefore, we do not believe health care providers are being held 
accountable for the actions of another health care provider, rather, we 
are focusing on improving interoperability and patient outcomes through 
exchange of health care information. In addition, we note that the 
denominator language includes ``the number of summary of care records 
received using CEHRT,'' therefore, an eligible hospital or CAH would 
not increment the denominator if a summary of care record was not 
received; however, we encourage the eligible hospital or CAH to make a 
reasonable effort to acquire the summary of care, such as a request to 
the referring provider and a query of any HIE or service. To that end, 
we believe that if information is not received after a referral, the 
eligible hospital or CAH who referred the patient should also make a 
reasonable effort to acquire the summary of care from the referral. We 
believe this will effectively improve closing the referral loop after a 
referral. We believe that in order to have an interoperable system, 
EHRs should have a free flow of data between systems. We also note that 
this measure takes into account the entire cycle of care and helps to 
foster agreement among healthcare providers.
    Similarly, we believe that it is up to the referring provider to 
ensure that they are taking into account the care of their patients in 
order to make necessary and relevant clinical decisions. We believe 
that this consolidated measure gets to that end.
    We appreciate the commenter's support for efforts to improve 
processes and technology solutions around closing referral loops. We 
believe that the measures finalized in this rule will help incentivize 
further innovation around interoperable exchange of information to 
support these processes. We also encourage providers to work with 
health IT developers to pursue products that deliver greater automation 
around key care coordination functions.
    We will continue to collaborate with ONC in future rulemaking on 
possible functionalities which could support an automated processes for 
closing the referral loop.
    Comment: One commenter stated that there should be a model for 
incorporation of health information including attachment/incorporation 
into the record, parse and group. The commenter further added that it 
should at least require data domains for the summary of care record 
(Medications, Medication Allergies, Problem Lists) with the ability to 
compare for duplication and advance informatics analytics against all 
data from all sources.
    Response: Health IT certified to the ONC 2015 Edition criteria at 
Sec.  170.315(b)(2) will have the model capabilities recommended by the 
commenter. The ONC 2015 Edition includes requirements for health IT to 
be capable of the reconciliation and incorporation of health 
information from multiple sources. Health IT certified to the 2015 
Edition must demonstrate that a transition of care/referral summary 
artifact received by a system can be properly matched to the correct 
patient, and then simultaneously display (in a single view) the data 
from at least two sources. The certified health IT must enable a user 
to create a single reconciled list of each of the following: 
Medications; medication allergies; problems; enable a user to review 
and validate the accuracy of a final set of data, and with the user's 
confirmation, automatically update the list, and

[[Page 41661]]

incorporate the reconciled data. The 2015 Edition requirement is 
codified at Sec.  170.315(b)(2) (Clinical information reconciliation 
and incorporation).
    Comment: A commenter requested clarification on the definition of a 
new patient.
    Response: As we stated in the proposed rule (83 FR 20532), this 
measure refers to patient encounters during the EHR reporting period in 
which the eligible hospital or CAH has never before encountered the 
patient.
    After consideration of the public comments we received, we are 
finalizing the Support Electronic Referral Loops by Receiving and 
Incorporating Health Information measure as proposed and codifying this 
measure at Sec.  495.24(e)(6)(ii)(B). We are finalizing the proposal to 
apply the 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 are finalizing an eligible hospital or CAH must use the 
capabilities and standards as defined for CEHRT at 45 CFR 170.315(b)(1) 
and (b)(2).
    We are adopting the Support Electronic Referral Loops by Receiving 
and Incorporating Health Information measure as follows:
    Measure 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.
    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.
    We are finalizing an exclusion 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.
d. Final Policy 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. In section VIII.D.5. of the preamble 
of the proposed rule, we proposed 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 proposed 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 
proposed the Provider to Patient Exchange objective would include one 
measure, the existing Stage 3 Provide Patient Access measure, which we 
proposed to rename to Provide Patients Electronic Access to Their 
Health Information. In addition, we proposed 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 the 
proposed rule. As discussed in section VIII.D.6.a. of the preamble of 
the proposed rule, we proposed to remove the exclusion for the Provide 
Patients Electronic Access to Their Health Information measure.
    We proposed that if we finalized the new scoring methodology we 
proposed in section VIII.D.5. of the preamble of the proposed rule, we 
would 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.
    We stated that if we did not finalize the new scoring methodology 
we proposed in section VIII.D.5. of the preamble of the 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).
(1) Modifications To Provide Patient Access Measure
    In the proposed rule (83 FR 20534), we proposed 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) (in the proposed rule (83 FR 20534), 
we inadvertently referred to 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 proposed 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

[[Page 41662]]

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 proposed 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 noted that under the new scoring methodology we proposed in 
section VIII.D.5. of the preamble of the 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. We stated that if we did 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).
    Comment: Several commenters supported the renaming of the measure 
as proposed.
    Response: We thank the commenters for their support and believe the 
name change effectively focuses the electronic aspect of the measure 
and our focus on leveraging advanced used of health IT.
    Comment: One commenter indicated concern over the current software 
available for this objective, which results in difficult and burdensome 
record submission and patient access. The commenter recommended vendor-
specific regulations to address the software concern that does not 
increase costs for health care providers.
    Response: We appreciate the commenter's feedback and have 
emphasized increasing interoperability, burden reduction and improving 
patient's electronic access to their health information. We believe 
that the new functionalities of the 2015 Edition such as the health 
care provider's ability to make patient data accessible through an API 
to other third party applications, will increase interoperability as 
well as communication and information between providers and patients. 
We will continue to review program requirements and work with our 
partners to focus on burden reduction.
    Comment: One commenter recommended that eligible hospitals and CAHs 
should be required to share all results with patients through the use 
of API functionality and that failure to do so should be considered to 
be information blocking. One commenter felt that eligible hospitals and 
CAHs should not be able to turn off any API functionality which could 
limit patient access to their health care information.
    Response: Patients should be able to access their health 
information on demand, and we encourage health care providers to 
maintain the appropriate functionalities for patient access to their 
health information at all times unless the system is undergoing 
scheduled maintenance, which should be limited to the least amount of 
time necessary to perform the maintenance. Furthermore, we noted in 
previous rulemaking (80 FR 62779) that the actions and workflows that 
support the requirements of the EHR Incentive Programs are intended to 
be in effect continuously, not enabled and implemented for only 90 
days.
    Comment: One commenter supported no longer including paper-based 
methods in measure calculations.
    Response: We thank the commenter for the support and believe the 
removal of paper-based actions in part supports the discontinuation of 
manual paper-based calculation and chart abstraction and leverages the 
advanced use of CEHRT.
    Comment: A commenter recommended an exclusion for the Provide 
Patients Electronic Access to Their Health Information measure for 
eligible hospitals and CAHs that cannot successfully identify an app 
that meets the security needs of their system.
    Response: We decline to implement exclusion criteria for the 
Provide Patients Electronic Access to Their Health Information measure 
as we believe eligible hospitals and CAHs should work with their health 
IT vendors to identify applications that meet their security needs.
    Comment: A commenter requested that the definition of ``timely'' 
should be increased to 72 hours from 36 hours.
    Response: We decline to change the definition of ``timely'' and 
note that providing patients access to their health information is a 
top priority for the program and we have not received compelling 
evidence to indicate that 36 hours is not feasible. We continue to 
believe that 36 hours is a reasonable timeframe because it allows for 
immediate access and a reasonable amount of time for health care 
providers to review any information necessary before it is made 
available to the patient as provided in previous rulemaking (80 FR 
62813 through 62814).
    Comment: A commenter requested that CMS provide privacy language 
and guidance that health care providers can use to present to patients 
who choose to access their health information via an API.
    Response: A resource titled ``Key Privacy and Security 
Considerations for Healthcare Application Programming Interfaces 
(APIs)'' dated December 2017 is available on ONC's https://www.HealthIT.gov website and includes information on this issue. We 
refer readers to additional resources that may be useful from the HHS 
Office for Civil Rights through the ``HIPAA for Individuals'' selection 
under the ``HIPAA--Health Information Privacy'' selection at the 
https://www.hhs.gov/ website.
    Comment: One commenter requested that CMS address parental/guardian 
proxy rights related to a child's personal health information, privacy 
rights, and adolescent confidentiality. The commenter also requested 
clarification on the definition of ``timely access'' specific to 
pediatric providers.
    Response: We did not make specific proposals related to parental/
guardian proxy rights, privacy rights, and adolescent confidentiality, 
and we encourage the commenter to consult existing sources of 
applicable law with regard to these topics. We did not propose to 
change the definition of ``timely access'' to health care information 
under this rule and the definition will remain within 36 hours as 
finalized in the 2015 EHR Incentive Programs final rule (80 FR 62813 
through 62814).
    Commenter: One commenter stated electronic connectivity for sharing 
of records is optimal but not always possible--and never will be. The 
commenter further stated that even while there is movement to a more 
efficient, interoperable system, there will still be myriad situations 
from frontier health care delivery to computer

[[Page 41663]]

failure that require a ``paper'' alternative and that many of these 
situations are critical for the patient involved.
    Response: We appreciate the commenter's concerns and understand 
that health care providers have an obligation to do their best to serve 
patients even during times of minor disruptions, such as a computer 
downtime or failure, or in major dislocations, such as those that may 
result from natural disasters. Therefore, contingency planning is 
prudent for continuity of all essential aspects of health care 
services, including the electronic health record. One available 
resource to assist with this issue is the ONC Safety Assurance Factors 
for EHR Resilience (SAFER) Guides (https://www.healthit.gov/topic/safety/safer-guides), specifically the Contingency Planning Guide 
(https://www.healthit.gov/sites/default/files/safer/guides/safer_contingency_planning.pdf). This guide identifies recommended 
safety practices associated with planned or unplanned EHR 
unavailability--instances in which clinicians or other end users cannot 
access all or part of the EHR and provides useful recommendations from 
backup procedures for potential clinical or administrative data loss to 
recommendations around use of paper forms to replace key EHR functions 
during downtimes.
    Comment: Multiple commenters requested that the measure should 
allow health care providers to offer access to at least one application 
or limit applications to ones deemed secure by the healthcare provider 
rather than any application configured to meet the technical 
specifications of the API in the CEHRT.
    Response: It was not our intent to imply that eligible hospitals 
and CAHs and their technology suppliers would not be permitted to take 
reasonable steps to protect the privacy and security of their patients' 
information. Such measures might include vetting application developers 
prior to allowing their applications to connect to the API 
functionality of the provider's health IT. We also remind stakeholders 
that even in the case where a health care provider or its CEHRT 
developer/vendor chooses not to vet application developers, any 
application would not have unmitigated access to data in the health 
care provider's CEHRT. To the contrary, each application should be 
registered and thus be identifiable so that the health care provider, 
or their CEHRT developer/vendor that supplies the API technology to the 
provider, can deactivate any application's access if the application 
functions in anomalous or malicious ways (for example, denial of 
service attack). We also anticipate that a patient seeking access to 
their data using any application may need to authenticate (using 
credentials previously issued by a healthcare provider or trusted 
source) and authorize the application to connect to the API server. In 
addition, the measure does not require that the eligible hospital or 
CAH provide an application for its patients' use.
    Comment: A few commenters requested that CMS slow the 
implementation and requirements for use of APIs secondary to risks for 
systems security and confidentiality of health information.
    Response: We believe that we are moving along with the current 
implementation of APIs and as a result are revising elements of the 
Promoting Interoperability Programs to take into account the new 
innovations. In addition, we believe that we are providing ample time 
for health care providers to incorporate the necessary system 
securities and confidentiality provisions.
    Comment: A commenter recommended creation of a site, list or 
address where health care providers may report and obtain information 
on suspicious applications.
    Response: We appreciate the commenter's recommendation, and we 
refer readers to the Health IT Feedback submission mechanism, at: 
https://www.healthit.gov/form/healthit-feedback-form.
    Comment: A few commenters requested additional guidance on how 
information blocking requirements would be viewed in relation to 
security of systems with use of APIs, specifically that health care 
provider determination of an unsecure API should not fall under 
information blocking.
    Response: We thank the commenters for the input and will continue 
to consider how any policy related to information blocking should treat 
issues involving the use of APIs.
    Comment: One commenter stated that CMS should work with ONC to 
specify required standards for API access to promote evolution of 
relevant patient facing applications.
    Response: We thank the commenter for the input and will continue to 
work across HHS and with partners on API standards to support patient 
access to their electronic health information.
    After consideration of the public comments we received, we are 
finalizing the Provide Patients Electronic Access to Their Health 
Information measure as proposed and codifying this measure at 42 CFR 
495.24(e)(7)(ii).
    We are finalizing the measure description in alignment with the 
scoring methodology in section VIII.D.5. of the preamble of this final 
rule:
    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.
(2) Removal of the Patient Generated Health Data Measure
    In the proposed rule (83 FR 20534), we proposed 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 (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.
    Comment: Several commenters supported the removal of the measure 
indicating the standards and processes were immature.

[[Page 41664]]

    Response: We agree that the Patient Generated Health Data did not 
focus on the advanced use of CEHRT as it was not fully health IT-based 
nor were the actions associated with the measure fully electronic and 
may have included paper-based actions, which did not align with the 
focus of Stage 3 to remove paper based actions. In addition, 
stakeholder feedback we received through correspondence and listening 
sessions indicated there was confusion related to the types of data 
that would be applicable and the situations in which the patient data 
would apply. We also believe removal of this measure will decrease 
reporting burden as it could require aspects of manual processes to 
incorporate the data and did not focus on the advanced use of CEHRT.
    Comment: One commenter requested that CMS retain the functionality 
of this measure if removed due to the benefits of receiving patient 
generated health data.
    Response: We have previously stated to healthcare providers in 
rulemaking (80 FR 62786) that functions and standards related to 
measures that are no longer required for the Promoting Interoperability 
Programs could still hold value for some healthcare providers and may 
be utilized as best suits their practice and the preferences of their 
patient population. The removal of measures is not intended to 
discourage the use of the standards, the implementation of best 
practices, or conducting and tracking the information for providers' 
own quality improvement goals.
    After consideration of the public comments we received, we are 
finalizing the removal of this measure as proposed.
(3) Removal of the Patient-Specific Education Measure
    In the proposed rule (83 FR 20534), we proposed 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.
    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.
    Comment: A few commenters recommended keeping the Patient-Specific 
Education measure as research conducted indicates the measure improves 
patient outcomes and improves quality of care, and reduces costs 
through patient knowledge of their health conditions. In addition, the 
commenters indicated the Patient-Specific Education measure instantly 
produces materials for patients increasing efficiency and lowering 
costs associated with manual procurement of those materials.
    Response: We disagree that the Patient-Specific Education measure 
should be retained as a required measure. While we believe that there 
are merits to the Patient-Specific Education measure, we affirm our 
position that the Patient-Specific Education measure does not align 
with the current emphasis of the Medicare Promoting Interoperability 
Program which aims to increase interoperability, leverage the most 
current health IT functions and standards and reduce burden for 
eligible hospitals and CAHs. In addition, as we stated in the proposed 
rule (83 FR 20525), although the measure would no longer be required 
for reporting, eligible hospitals and CAHs may continue to use the 
standards and functions of those measures no longer required for 
successful demonstration of meaningful use if they are beneficial for 
them. We believe that if health care providers find value in the 
Patient-Specific Education measure, they will continue to use the 
standards and functions, even if not required.
    Comment: A few commenters supported the removal of the Patient-
Specific Education measure, but stated that CMS should encourage use of 
its functionality.
    Response: We thank the commenters for their support of the removal. 
As we indicated in the preceding response, providers may choose to 
continue to use the functionalities that support the measure even if 
the measure is no longer required.
    After consideration of the public comments we received, we are 
finalizing the removal of this measure as proposed.
(4) Removal of the Secure Messaging Measure
    In the proposed rule (83 FR 20534 through 20535), we proposed 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.
    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 believe that because this measure is not required 
under Modified Stage 2, 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.
    Comment: A few commenters supported the removal of the secure 
messaging measure, indicating it would be burdensome to eligible 
hospitals and CAHs as follow up should be conducted

[[Page 41665]]

with the health care provider the patient is transitioning to.
    Response: We thank the commenters for their support. We agree this 
measure would detract from health care providers' progress on current 
program priorities and follow up after discharge should be with the 
health care provider to whom the patient's care is transitioned such as 
the patient's primary care provider, a rehabilitation facility, or home 
health provider. The patient would communicate with those health care 
providers instead of the hospital for information related to their 
health post-discharge.
    After consideration of the public comments we received, we are 
finalizing the removal of this measure as proposed.
(5) Removal of the View, Download or Transmit Measure
    In the proposed rule (83 FR 20535), we proposed 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 regarding the barriers 
that exist, which impact a provider's ability to meet the measure. We 
note that we have heard from these stakeholders that certain 
demographics of their patient populations which may include low-income, 
patients in rural areas, and an aging population, all contribute to the 
barriers of not having access to computers, internet and/or email. 
These barriers have resulted in certain patient actions measures being 
outside of the purview and control of the health care provider. They 
have also noted that this particular population is concerned with 
having their health information online. 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 proposed to remove 
the View, Download or Transmit measure.
    Comment: Many commenters supported removal of the View, Download or 
Transmit measure as proposed.
    Response: We appreciate support for removal of the measure. 
Previous stakeholder feedback through correspondence, public forums, 
and listening sessions indicated there is ongoing concern with measures 
which require health care providers to be accountable for patient 
actions such as VDT. We further understand that there are barriers 
which could negatively impact an eligible hospital or CAHs ability to 
successfully meet a measure requiring patient action, such as location 
in remote, rural areas and access to technology including computers, 
internet and/or email. As the issues described contribute to reporting 
burden and could negatively impact an eligible hospital or CAHs 
successful demonstration in the Promoting Interoperability Programs, we 
agree that removing the patient action measures will allow for focus on 
program goals of increasing interoperability and patient access to 
their health information.
    After consideration of the public comments we received, we are 
finalizing the removal of this measure as proposed.
e. Modifications to the Public Health and Clinical Data Registry 
Reporting Objective and Measures
    In connection with the new scoring methodology we proposed in 
section VIII.D.5. of the preamble of proposed rule (83 FR 20535 through 
20536), we proposed 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)(8) (in the 
proposed rule (83 FR 20535), we inadvertently referred to 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 proposed to change the name of the objective to Public Health 
and Clinical Data Exchange. Under the new scoring methodology proposed 
in section VIII.D.5. of the preamble of the proposed rule, in aligning 
with our goal to increase flexibility, improve value, and focus on 
burden reduction, we proposed 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 proposed 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.
    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.
    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 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 VIII.D.5. of the preamble of the proposed rule, we proposed 
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 stated that 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 sought 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. Therefore, we are also interested in identifying other 
appropriate venues in which reporting to public health and clinical 
data registries could be reported. We sought public comment on the role 
that

[[Page 41666]]

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 sought 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 proposed rule, we stated that if we did not finalize the new 
scoring methodology we proposed in section VIII.D.5. of the preamble of 
the 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. 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).
    Comment: Many commenters requested that eligible hospitals and CAHs 
be able to report on any two measures to meet the Public Health and 
Clinical Data Exchange objective, and disagreed with the proposed 
requirement to report on the Syndromic Surveillance Reporting measure 
and one other measure because they indicated not all eligible hospitals 
can report on the Syndromic Surveillance Reporting measure because some 
States do not accept Syndromic Surveillance files.
    Response: We understand the concerns of the commenters and are 
committed to reducing provider burden while increasing flexibility. We 
believe the ability to report on any two measures associated with the 
objective would promote flexibility in reporting and enables eligible 
hospitals and CAHs to focus on the measures that are most relevant to 
them and their patient population. In addition, we understand that some 
eligible hospitals and local jurisdictions are not able to send and 
receive Syndromic Surveillance files, including Oklahoma, Iowa, 
Minnesota and some counties in Colorado. With the ability to report on 
any two measures, eligible hospitals and CAHs will not have to claim an 
exclusion if they are unable to report on the Syndromic Surveillance 
Reporting measure. Rather, they will be able to select measures they 
have the ability to report on and therefore not claim exclusions, 
unless necessary. For these reasons, we are finalizing our proposal 
with the modification to allow eligible hospitals and CAHs to choose 
any two measures associated with the Public Health and Clinical Data 
Exchange objective to report. We will continue to monitor the ability 
of health care providers to report on Syndromic Surveillance Reporting 
measures and consider requiring Syndromic Surveillance reporting in 
future rulemaking.
    Comment: One commenter agreed with the Public Health and Clinical 
Data Exchange reporting requirements proposed, stating it would 
continue to advance interoperability and improve early detection of 
outbreaks as well as promote population health strategies.
    Response: We appreciate the supportive comments and reiterate that 
our priority is to improve the flexibility of the Promoting 
Interoperability Programs, reducing the reporting burden and promoting 
interoperability between health care providers and health IT systems.
    Comment: A few commenters inquired why the Syndromic Surveillance 
Reporting measure was proposed as a required measure.
    Response: We worked in conjunction with the CDC and ONC to identify 
public health reporting requirements that would be valuable to eligible 
hospitals and CAHs. As discussed in the proposed rule (83 FR 20535 
through 20536), the CDC indicated the primary source of syndromic 
surveillance data comes from EHRs in emergency care settings and 
reporting via CEHRT has been instrumental in the capture and study of 
emerging health conditions such as the opioid overdose epidemic. In 
addition, syndromic surveillance reporting has improved data collection 
efforts resulting in the ability of public health agencies to more 
closely monitor trends in emergency department visits with greater 
precision and allowing communities to respond to emerging health 
threats more expeditiously.
    Comment: One commenter stated that changes to the reporting 
requirements has resulted in less emphasis on Immunization Registry 
Reporting.
    Response: We disagree that changes to the reporting requirements 
have resulted in less emphasis on immunization reporting. Instead, EHR 
data has improved efficiencies of reporting from health care providers 
to immunization registries. For example providers no longer have to 
duplicate data entry into a website for the IIS and their EHR system as 
the data is directly sent from the EHR to the registry. Although we 
proposed to reduce reporting from three measures to two measures with 
Syndromic Surveillance Reporting being required as one of the measures, 
eligible hospitals and CAHs would have the ability to select 
Immunization Registry Reporting as the other measure. In addition, 
eligible hospitals and CAHs may attest to additional Public Health and 
Clinical Data Exchange measures; however, reporting on additional 
measures would not increase their score.
    Comment: A few commenters requested that CMS retain or increase the 
current public health reporting requirements for eligible hospitals and 
CAHs of attesting to at least three public health measures or as many 
as four as they believe reducing the amount of required measures de-
emphasizes this objective.
    One commenter requested CMS limit the Public Health and Clinical 
Data Exchange measure reporting requirements to one measure to further 
reduce reporting burden.
    Response: We decline to increase the reporting requirements for the 
Public Health and Clinical Data Exchange objective. As we had stated in 
the proposed rule (83 FR 20535), our goals include increasing 
flexibility, improving value and reducing burden to providers. In 
addition, based on stakeholder feedback, we understand the active 
engagement requirements were complicated or confusing, therefore we are 
reducing provider burden through requiring attestation to only two 
measures. We reiterate that eligible hospitals and CAHs may attest to 
additional measures under the Public Health and Clinical Data Exchange 
objective; however it would not increase their score.
    We decline to reduce the required number of measures for reporting 
to one Public Health and Clinical Data Exchange measure. While we are 
focusing on increasing flexibility, improving value and reducing burden 
to providers, we also want to balance those goals with maintaining 
communication and value in public health registry and bidirectional 
data exchange between providers and public health agencies and clinical 
data registries.
    Comment: Many commenters strongly opposed CMS intent to remove 
public health measures in the future of the program as they believed 
that interoperability of public health data is still evolving and 
incentivizes health care providers to share data with public health 
agencies.
    Response: We appreciate the feedback and understand the importance 
of reporting to public health and clinical data registries. We are 
continuing to focus on burden reduction as well as other platforms and 
venues for reporting data to public health and clinical data registries 
outside of the Promoting Interoperability Programs. We will

[[Page 41667]]

continue to monitor the data we compile specific to the public health 
reporting requirements and take the commenters' concerns into 
consideration related to future actions.
    Comment: One commenter indicated that the Public Health and 
Clinical Data Exchange objective should include additional methods for 
data capture or reporting.
    Response: Certification criteria and standards that support the 
Public Health and Clinical Data Exchange measures are established by 
ONC and we will work with them on future considerations for the 
Promoting Interoperability Programs.
    Comment: A few commenters requested clarification on whether 
claiming an exclusion would count toward meeting the objective. A few 
commenters requested clarification regarding whether a health care 
provider needed to select another measure to report on if claiming an 
exclusion.
    Response: For the Public Health and Clinical Data Exchange 
objective, health care providers are only required to attest to two 
measures total, regardless of whether an exclusion is claimed. 
Therefore, for example, a health care provider could attest to the 
Immunization Registry Reporting measure and claim an exclusion for the 
Electronic Case Reporting measure and meet the requirements for the 
objective. Providers may attest to additional Public Health and 
Clinical Data Exchange measures if they choose to; however, it would 
not increase their overall score for the objective. For additional 
information on the reporting and scoring methodology, we refer readers 
to section VIII.D.6. of the preamble of this final rule.
    Comment: One commenter requested that the public health measures 
should change from a yes/no response to reporting on the number of 
times a health care provider shares unique patient clinical data with 
public health entities regarding each of the six measures within the 
Public Health and Clinical Data exchange objective.
    Response: We decline to revise the attestation response for the 
Public Health and Clinical Data Exchange objective. We believe changing 
the attestation response would cause confusion and possibly increase 
burden to health care providers who are familiar with the current 
attestation process.
    After consideration of the public comments we received, we are 
finalizing the Public Health and Clinical Data Exchange objective 
proposals as proposed with the following modification, as discussed 
above.
    We are finalizing the objective name change from Public Health and 
Clinical Data Registry Reporting to Public Health and Clinical Data 
Exchange and to codify this change at 42 CFR 495.24(c)(8)(ii)(A) 
through (F).
    We are modifying our proposed policy and finalizing that eligible 
hospitals and CAHs must report on any two Public Health and Clinical 
Data Exchange measures of their choice.
f. Request for Comment--Potential New Measures for HIE Objective: 
Health Information Exchange Across the Care Continuum
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20536 through 
20537), we sought public comment on a potential concept for two 
additional measure options for the Health Information Exchange 
objective for eligible hospitals and CAHs who refer or transition care 
of patients to health care providers in long-term care and postacute 
care settings, skilled nursing facilities, and behavioral health 
settings. 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 sought to incorporate these workflows as part of efforts to 
improve care team coordination or to support alternative payment 
models.
    For these reasons, we sought 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 sought 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 sought 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 sought 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 
sought 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 sought public comment regarding whether 
the potential new measures should be limited to transitions of care and 
referrals specific to long-term and postacute care, skilled nursing 
care, and behavioral health care settings. We also sought public 
comment on whether additional settings of care should be considered for 
inclusion in the denominators and if a provider should

[[Page 41668]]

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 sought 
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.
    Comment: Many commenters opposed the addition of this type of 
measure as they believed that the current measures in the Health 
Information Exchange objective accurately capture the exchange of 
health information to other settings such as long term care facilities 
and an additional measure such as this would be redundant. Other 
commenters requested that CMS to convene stakeholder discussions with 
health care providers who would be included in this type of measure to 
identify what data elements are most valuable for them. Some commenters 
provided feedback that adoption of CERHT in postacute care settings 
could be a slow process. One commenter recommended that CMS focus on 
adoption of CEHRT in postacute care settings under the PFS rulemaking.
    In addition, commenters asked specific follow up questions 
regarding what providers of care would be included, and how CMS would 
develop the care setting elements into the measure.
    Response: We thank the commenters and we will consider their views 
as we develop future policy regarding the potential new measures that 
focus on health information exchange across the care continuum.
7. Application of Final 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 
the proposed rule (83 FR 20518 through 20537), we did not propose to 
require States to adopt the new scoring methodology and measures that 
we proposed. Instead, we proposed to give States the option to adopt 
the new scoring methodology we proposed in section VIII.D.5. of the 
preamble of the proposed rule together with the measures proposals 
included in section VIII.D.6. of the preamble of the 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 the proposed rule, if they so choose. Similarly, in the 
proposed rule, we also requested 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. In the proposed rule, we 
stated that 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 invited 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 proposed 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 the proposed 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 the proposed 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 proposed 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.
    Comment: One commenter requested clarification on whether States 
have only two options: (1) Continue with the existing meaningful use 
measures, or (2) adopt the Medicare QPP measures. The commenter 
supported having only two options, and stated that anything beyond 
those options creates confusion and burden for all stakeholders.
    Response: We confirm that the commenter is correct in describing 
the two options proposed for States. There is no option to adopt some 
of the revisions to the hospital scoring system, but not others.
    Comment: One commenter expressed concern that requirements around 
APIs are less stringent for Medicaid EPs compared to the MIPS program.
    Response: While the requirements differ across different programs, 
we are committed to promoting API access. For example, Medicaid EPs 
have the opportunity to use APIs to meet Stage 3, EP Objective 6, 
Measure 1 (View, download or transmit). In addition, we expressly 
support States' use of open APIs in their Medicaid enterprise 
architecture in 42 CFR 433.112.
    Comment: Several commenters stated that the Medicaid Stage 3 
requirements are too stringent and suggested that these requirements be 
aligned with those for Medicare clinicians under MIPS. In addition, one 
commenter suggested that CMS allow providers to attest to Meaningful 
Use Modified Stage

[[Page 41669]]

2 Objectives, using 2015 Edition CEHRT, through the end of the 
Promoting Interoperability Program (CY 2021).
    Response: We thank the commenters for their input about the program 
requirements. However, we did not propose any changes to Stage 3 or for 
EPs in the proposed rule, but did ask for comments on ways we can align 
and reduce the burden for EPs who also participate in MIPS. We will 
take these comments into consideration for future rulemaking. As for 
CEHRT, the 2015 Edition does not have the capability to meet the 
Modified Stage 2 meaningful use objectives and measures.
    After consideration of the public comments we received, we are 
finalizing the our proposals as proposed.
8. Promoting Interoperability Program Future Direction
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20537 through 
20538), we sought comments on the future direction of the Promoting 
Interoperability Program. 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.
    We specifically sought 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?
    Comment: Many commenters expressed support for introducing health 
IT activities in lieu of reporting on measures and indicated an 
approach such as this would reduce provider burden associated with 
these reporting activities. The commenters also noted that supporting 
improved interoperability through this approach is an important goal.
    Some commenters requested clarification on how interoperability is 
defined and requested that CMS work with stakeholders on identification 
of benchmarks and have a reasonable and predictable pathway for 
changing Health IT policies. Other commenters indicated a single set of 
standards by the Federal government is needed to ensure all health care 
providers are exchanging data in a uniform manner.
    Some commenters disagreed with introducing health IT activities in 
lieu of reporting on measures as this approach could create additional 
burden if its required additional documentation to validate that the 
provider had performed the activity. Some commenters also recommended 
that such an approach should be left optional, as many providers may 
not be able to perform the activities identified. Finally, commenters 
expressed concerns regarding specific potential activities, for 
instance, one commenter expressed concern about whether participation 
in the Trusted Exchange Framework and Common Agreement (TEFCA) would be 
available by the time this approach was finalized.
    Some commenters supported participation in the TEFCA and indicated 
it 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.
    Some commenters suggested CMS realign efforts with ``Patient 
Centered'' interoperability.
    A few commenters indicated CMS should include a measure for data 
quality based on the USCDI which would set expectations for content, 
not just exchange of data.
    Some commenters indicated the 2015 CEHRT needs to be updated to 
support integration of SNOMED, LOINC and RxNorm (and other terminology 
standards) into a single system.
    Response: We thank the commenters for their input and we will 
consider their views as we develop future policy regarding the future 
direction of 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 Promoting 
Interoperability 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

[[Page 41670]]

 
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.
* 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. 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 Promoting 
Interoperability 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 stated the 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, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20539), we proposed 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 proposed 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) of 
the preamble of the proposed rule, we proposed 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 preambles of the proposed rule and this final 
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 
proposed 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) of the preambles of the 
proposed rule and this final rule, 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 the 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 invited 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.
    Comment: Several commenters supported the reduction in the number 
of eCQMs stating that it would create a streamlined measure set. The 
majority of commenters addressed the reduction in the number of eCQMs 
in general and not specifically related to the Promoting 
Interoperability Program.
    Response: We thank the commenters for their support and refer 
readers to section VIII.A.5.b. of the preamble of this final rule for 
more information on the eCQM proposals and for additional comments and 
responses. We are committed to staying in alignment with the Hospital 
IQR Program policies to the greatest extent feasible.
    Comment: One commenter supports the use of eCQMs to measure quality 
of

[[Page 41671]]

care. In addition, the commenter suggests that proposed e-measures be 
carefully validated by EHR vendors in advance to determine if data 
elements are readily available, to eliminate documentation and burden 
redundancies.
    Response: We appreciate the commenter's position that e-measures 
should carefully validated prior to implementation. Our goal is to 
closely align the Promoting Interoperability Programs with the Hospital 
IQR Program, while reducing the burden on hospitals. By focusing on a 
smaller subset of measures, the eligible hospitals and CAHs will have 
some flexibility regarding eCQMs they choose to report best reflect 
their patient population and support internal quality improvement 
efforts.
    We encourage eligible hospitals and CAHs to submit measures during 
the Annual Call for measures. This process reinforces our commitment to 
engaging stakeholders to process reinforces our commitment to engaging 
with stakeholders to further advance meaningful use of CEHRT by 
eligible hospitals and CAHs participating in the Promoting 
Interoperability Programs.
    Comment: One commenter disagreed with the proposed reduction in the 
number of eCQMs available for reporting, indicating this would be very 
limiting in selection and creates additional costs, especially for 
small hospitals with a limited daily census.
    Response: While we understand this concern, we believe that is 
important to align the eCQM requirements for the Promoting 
Interoperability Programs with those of the Hospital IQR Program. The 
removal of these measures is consistent with CMS' commitment to using a 
smaller set of more meaningful measures. CMS is focusing on measures 
that provide opportunities to reduce both paperwork and reporting 
burden on health care providers and patient-centered outcome measures, 
rather than process measures. For further discussion of our policy 
reasons for eliminating these eCQMs for the Hospital IQR Program, which 
we believe also apply in the context of the Promoting Interoperability 
Programs, we refer readers to section VIII.A.5.b. of the preamble of 
this final rule.
    After consideration of the public comments we received, we are 
adopting our proposal as proposed.
c. CQM Reporting Periods and Criteria for the Medicare and Medicaid 
Promoting Interoperability Programs in CY 2019
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20539 through 
20540), for CY 2019, we proposed 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 proposed 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 
proposed 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 proposed 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 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 proposed 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 the proposed rule.
    Comment: A few commenters supported the proposed self-selected 
calendar quarter of CY 2019 data for CQM reporting as it aligns to the 
proposed 90-day EHR reporting period for the objectives and measures of 
the Promoting Interoperability Program.
    Response: We appreciate the support for our proposal and agree that 
reporting periods of similar length may help simplify data submission 
and reduce burden.
    After consideration of the public comments we received, we are 
adopting our proposal as proposed.
d. 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20540), for the 
reporting period in CY 2019, we

[[Page 41672]]

proposed 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 proposed 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 proposed 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 the 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 did not receive any comments on these proposals and we are 
adopting our proposal as proposed.
e. Request for Comment
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20540 through 
20541), we requested comments on a number of issues regarding eCQMs. 
Specifically, we invited comment on the following:
     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?
    We received numerous comments in response to our request for 
comment.
    Comment: Several commenters supported the goals of using EHRs to 
reduce the burden of quality reporting and use of the data to support 
their quality improvement initiatives. Several commenters supported the 
following improvements in quality measurement: Uniform calculation of 
eCQMs across various CEHRT systems and practices; addressing 
misalignment between the eCQM reporting requirements and availability 
of eCQMs by vendors; improved methods of reporting to support the needs 
of the program participants; development of strategies to apply the 
Meaningful Measures framework to eCQMs; development of metrics that 
inform readiness of eCQM data for public reporting; and increased 
opportunities for eligible hospitals and CAHs to participate in eCQM 
testing using processes, methods and/or innovated use of health IT. A 
few commenters suggested rewarding hospitals who already implemented 
innovative quality improvement programs and processes using health IT. 
A few commenters indicated that future eCQMs should be based on data 
elements that are already captured within CEHRT.
    A few commenters indicated that burdens related to use of eCQMs 
included exclusions and data availability and many eCQMs are not 
developed based on data available or created during routine care. A few 
commenters indicated it is burdensome to test eCQMs due to time, effort 
and resource requirements. A few commenters requested simplification of 
the measure development process which would include strict selection 
criteria and endorsement processes as the current development process 
was noted to create significant barrier related to availability and 
use.
    A few commenters suggested CMS work with stakeholders to establish 
research and pilot programs to reduce quality measurement burden and 
leverage data captured by all members of the care team, other 
electronic means or by the patients themselves.
    Response: We thank the commenters and we will consider their views 
as we develop future policy regarding 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

[[Page 41673]]

Appropriations Act, 2016 adjusted the existing timelines for the 
incentive payments by five years and payment reductions by seven 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 FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20541 through 
20542), we proposed 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.
b. Definitions
(1) Eligible Hospital: Subsection (d) Puerto Rico Hospitals
    We proposed 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 proposed to amend the definition of ``eligible hospital'' under 
Sec.  495.100 to include Puerto Rico eligible hospitals unless 
otherwise indicated.
    We proposed 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.
    We did not receive any comments on these proposals and are 
finalizing our proposals as proposed.
(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 proposed 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 
proposed 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 proposed corresponding amendments to the 
definition of ``EHR reporting period'' under Sec.  495.4.
    Comment: Several commenters supported the proposed codification of 
the policies for subsection (d) Puerto Rico hospitals for the Promoting 
Interoperability Program. One commenter expressed gratitude for the 
reduction of the EHR reporting period from 90 days to 14 days in CY 
2017 after Hurricane Mar[iacute]a as the commenter indicated it helped 
hospitals in Puerto Rico demonstrate meaningful use and find relief 
within the difficult situation.
    Response: We appreciate the commenters' support.
    After consideration of the public comment we received, we are 
finalizing our proposals as proposed.
(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.
    We did not receive any comments on this topic.
(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 proposed 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.
    We did not receive any comments on this proposal and are finalizing 
our proposal as proposed.
(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 proposed 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.
    We did not receive any comments on this proposal and are finalizing 
our proposal as proposed.
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 proposed 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.

[[Page 41674]]

     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 proposed 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
----------------------------------------------------------------------------------------------------------------

    We did not receive any comments on these proposals and are 
finalizing our proposals as proposed.
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 proposed 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 proposed to amend Sec.  412.64(d)(3) to reflect these 
proposed reductions.
    We did not receive any comments on these proposals and are 
finalizing our proposals as proposed.
11. Modifications to the Medicare Advantage Promoting Interoperability 
Program
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20542 through 
20543), we proposed several 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 VIII.D.8. of the 
preamble of the 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 Promoting Interoperability incentives and 
payment adjustments. We proposed 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 proposed, under 
section 1871 of the Act and to implement that amendment to the EHR 
provisions, 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 and ending with FY 2021.
    We did not receive any comments on this proposal so we are adopting 
the amendments to the definition of ``payment year'' in Sec.  495.200 
as proposed to be consistent with the statute.
(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 
proposed 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 an MA-affiliated eligible hospital in Puerto Rico, payment 
adjustment year means a calendar year starting with 2022.
    We solicited 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 requested comments on 
an alternative approach under which we would use the same reporting 
period that is used for the Medicare Promoting Interoperability 
Program.
    We did not receive any comments on this proposal so we are 
finalizing the amendment to the definition of ``MA payment adjustment 
year'' under Sec.  495.200 as proposed.

[[Page 41675]]

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 proposed 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 solicited 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.
    Comment: One commenter requested that the Medicare Advantage 
benchmarks be updated so that the 2019 Medicare Advantage benchmark 
payments can reflect any payment updates in fee for service resulting 
from 2019 FFS payment rules.
    Response: The request for CMS to immediately conform MA benchmarks 
to reflect payment updates in FFS Medicare is outside the scope of the 
proposed rule. We address updates to MA benchmarks through the annual 
Advance Notice and Rate Announcement process.
    After consideration of the public comment we received, we are 
finalizing the amendment to Sec.  495.211(e) (that is, adding paragraph 
(e)(4)) as proposed.
12. Modifications to the Medicaid Promoting Interoperability Program
    In section VIII.E.12. of the preamble of the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20543 through 20544), we proposed modifications to 
the Medicaid Promoting Interoperability Program. The policies proposed 
in that section would apply only in the Medicaid EHR Incentive (now 
Promoting Interoperability) Program.
    Comment: One commenter stated that changing the program name from 
the Medicaid EHR Incentive Program to the Medicaid Promoting 
Interoperability Program would create confusion and lead to lower 
participation rates.
    Response: The program name change was announced in the proposed 
rule. The name change was intended to highlight the efforts within CMS 
to promote interoperability between patients, health care providers and 
health insurers. We are working to educate stakeholders that the name 
change does not signal an end to Medicaid incentive payments for 
meaningful use prior to the deadlines finalized in this final rule and 
to alleviate any potential confusion regarding the name change.
a. 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 Sec.  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).
    In the proposed rule, we proposed 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 proposed 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 proposed 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 proposed 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

[[Page 41676]]

current Sec.  495.324(b)(3). We explained that 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 explained in the proposed rule that 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 did not receive any comments on this proposal and are finalizing 
the proposal as proposed.
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 proposed 
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 proposed 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. 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 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 proposed 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 invited 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 Programs.
    Comment: Many commenters expressed concerns about the December 31, 
2021 deadline for disbursing all incentive payments for the Medicaid 
Promoting Interoperability Program, particularly that it would be 
burdensome for States to issue incentive payments by December 31, 2021 
for Program Year 2021, and that EPs and eligible hospitals would not 
have time for a full reporting period before the attestation deadline. 
Several commenters suggested extending the December 31, 2021 deadline.
    Response: Under sections 1903(t)(4)(A)(iii) and (5)(D) of the Act, 
all Medicaid Promoting Interoperability Program incentive payments must 
be made by December 31, 2021. Because this is a statutory deadline, we 
do not have the authority to change it. We note that in the ``Medicare 
Program: Revisions to Payment Policies under the Physician Fee Schedule 
and Other Revisions to Part B for CY 2019, Medicare Shared Savings 
Program Requirements; Quality Payment Program, and Medicaid Promoting

[[Page 41677]]

Interoperability Program'' proposed rule, we are seeking comment on 
proposed flexibilities to the EHR reporting period and eCQM reporting 
period for the Medicaid Promoting Interoperability Program in CY 2021 
(83 FR 35872 through 35873). This proposed rule is available at: 
https://www.federalregister.gov/documents/2018/07/27/2018-14985/medicare-program-revisions-to-payment-policies-under-the-physician-fee-schedule-and-other-revisions.
    Comment: Several commenters suggested that 90 percent 
administrative FFP for HIE activities be extended beyond the proposed 
deadline.
    Response: Consistent with section 1903(a)(3)(F) and (t) of the Act, 
enhanced administrative FFP under the Medicaid Promoting 
Interoperability Program for HIE must be directly correlated to the 
Medicaid EHR Incentive Program. That is, enhanced administrative FFP 
for HIE must be directly tied to promoting EPs' and eligible hospitals' 
adoption and meaningful use of CEHRT. Once the deadline for making 
incentive payments (December 31, 2021) has passed, we are concerned 
that there would be no basis for continuing enhanced administrative FFP 
for HIE consistent with section 1903(a)(3)(F)(ii) of the Act. We intend 
to issue information regarding incurring expenditures that could be 
matched at enhanced administrative FFP under section 1903(a)(3)(F)(ii) 
of the Act for HIE under the Medicaid Promoting Interoperability 
Program. However, we are committed to promoting interoperability, and 
we are continuing to look for ways for Medicaid to support HIE 
initiatives.
    For additional information on FFP for State administrative expenses 
related to pursuing initiatives to encourage the adoption of CEHRT to 
promote health care quality and the exchange of health care 
information, we refer readers to State Medicaid Director letters #10-
016, 11-004, and #16-003. We understand the ongoing importance of HIE 
to State Medicaid programs, but again, we are concerned that we do not 
have the authority to extend the availability of enhanced 
administrative FFP under section 1903(a)(3)(F)(ii) of the Act for HIE 
beyond the December 31, 2021 deadline for making incentive payments.
    Comment: One commenter suggested that CMS allow continued 90 
percent FFP for States to complete administrative work, such as annual 
and quarterly reporting to CMS, beyond December 31, 2021.
    Response: We note that we proposed and are finalizing that FFP is 
available at 90 percent for administrative activities in support of 
implementing incentive payments to Medicaid eligible providers only for 
expenditures incurred on or before September 30, 2022, except for 
expenditures related to audit and appeal activities, which must be 
incurred before September 30, 2023 to qualify for FFP at 90 percent. 
There are two sets of reports that are required from States for the 
Medicaid Promoting Interoperability Program, the annual report at Sec.  
495.316(c) and quarterly reports at Sec.  495.352. As we approach 2021 
and 2022, we will take the deadlines we are finalizing in this final 
rule into consideration as we set reporting requirements and deadlines 
for 2021 and 2022, so that States will be able to conclude 
administrative activities by the September 30, 2022 in a manner that 
will allow them to claim 90 percent FFP.
    Comment: Several commenters supported the deadline of September 30, 
2023 for incurring expenditures related to audit and appeals activities 
that can be matched at 90 percent FFP, including directly-related 
technical assistance and administrative activities. A few commenters 
suggested extending that September 30, 2023 deadline by another year.
    Response: We thank the commenters for their input. We acknowledge 
that some States are several years behind their auditing targets. 
However, we believe that timely auditing is important and encourage 
those States to accelerate their auditing timelines. We note that 
hiring additional auditing staff or contractors would be eligible for 
enhanced FFP. In addition, we note that any expenditures related to 
audits and appeals, will be eligible for enhanced administrative FFP 
until September 30, 2023.
    After consideration of the public comments we received, we are 
finalizing the proposed policies as proposed. We are amending 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.
    The availability of 90 percent 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, will continue 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 final rule, they will 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 will 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.

IX. 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 
\410\ 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.
---------------------------------------------------------------------------

    \410\ 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

[[Page 41678]]

financial records and statistical data for proper determination of 
costs payable under the program. Moreover, providers 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 the FY 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20544 through 20548), we proposed 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 these 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 that were 
included in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20544 
through 20548) are discussed below, along with the public comments we 
received and our responses and the policies that we are finalizing in 
this final rule.

B. 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 the proposed rule and this final 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 the FY 2019 
IPPS/LTCH PPS proposed rule, we proposed 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 the proposed rule, we proposed 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 proposed 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 stated in the proposed rule that we believe the proposal is 
consistent with the recordkeeping requirements in Sec. Sec.  413.20 and 
413.24.
    Comment: Several commenters supported the incorporation of the 
Provider Cost Reimbursement Questionnaire, Form CMS-339 into the OPO 
and Histocompatibility Laboratory cost report, Form CMS-216 because of 
the ease of completing the Provider Cost Reimbursement Questionnaire as 
an incorporated worksheet within the Medicare cost report.
    Response: We appreciate the commenters' support for our proposals.
    Comment: Many commenters agreed with the proposal 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

[[Page 41679]]

cost report. Some commenters who were in agreement cited the need for 
data integrity within the Medicare cost report. However, several 
commenters disagreed with the proposal, citing increased burden upon 
providers to submit all necessary supporting documents for its cost 
report at the time of the cost report submission. Some commenters 
believed the supporting documents should only be submitted to the 
contractor during an audit of the cost report. Several commenters 
stated that the cost report should not be rejected when the provider 
fails to submit it with the supporting documentation.
    Response: We agree with the commenters that accuracy of the data 
reported in the Medicare cost report is necessary. We note that many 
Medicare payment systems are based upon data reported in the cost 
report. We disagree with the commenters that submitting supporting 
documents with the cost report is burdensome, as these data are 
recorded and maintained by the provider and are available to providers 
at the time of completion of the Medicare cost report. This 
documentation that is recorded and maintained by the provider is 
necessary to complete the cost report and supports the amounts reported 
in the cost report. When a cost report is audited, the provider's 
records are tested for accuracy and at that point additional detailed 
documents may be requested. Because not all cost reports are audited, 
the submission of supporting documents that agree with the amounts 
reported in the cost report at the time of submission is necessary so 
that contractors can pay providers promptly and accurately.
    After consideration of the public comments we received, for the 
reasons discussed above and in the proposed rule, we are finalizing our 
proposal, without modification, to incorporate the Provider Cost 
Reimbursement Questionnaire, Form CMS-339 into the OPO and 
Histocompatibility Laboratory cost report, Form CMS-216, and 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). In addition, we are finalizing the 
addition of 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.
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 readers to sections IV.E. and L. 
of the preamble of this final rule for additional background on IME and 
direct GME 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 
the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20545 and 20546), we 
proposed to remove the reference in the regulations to a diskette and 
instead reference ``Intern and Resident Information System data.'' 
Specifically, we proposed to amend Sec.  413.24(f)(5)(i) by adding a 
new paragraph (A) to include this proposed revised language (83 FR 
20546).
    In addition, to enhance the contractors' ability to review 
duplicates and to ensure residents are not being double-counted, we 
stated that 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).

[[Page 41680]]

    Therefore, effective for cost reports filed on or after October 1, 
2018, in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20546), we 
proposed 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 proposed 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 
(83 FR 20569).
    Comment: Some commenters expressed concern that the current IRIS 
does not calculate the total amounts of direct GME FTE and IME FTE 
residents, leaving teaching hospitals unable to ensure that the IRIS 
direct GME FTE totals and the IME FTE totals are the same as what a 
teaching hospital reports in its hospital cost report. The commenters 
suggested that the IRIS program be updated to calculate the total 
resident FTEs.
    Response: We understand and agree with the commenters' concerns 
that the current IRIS program does not calculate the totals of the 
hospital's resident FTEs and therefore it would be difficult to require 
that a hospital's resident FTEs in the IRIS equate to the resident FTEs 
in the hospital's cost report. The number of direct GME FTE residents 
and IME FTE residents in the current IRIS is self-reported by the 
teaching hospitals from their resident data records. We believe that 
the IRIS data should represent the total of direct GME FTE residents, 
weighted and unweighted, and the total of IME FTE residents. As we 
noted in the proposed rule, we are in the process of producing a new 
XML-based IRIS that will capture FTE resident count data consistent 
with the manner in which FTEs are reported on the Medicare cost report. 
It was our intention that the new XML-based IRIS would capture both 
weighted and unweighted direct GME FTE and IME FTE residents and 
totals. It was also our intention that the new XML-based IRIS would be 
available by October 1, 2018 and that hospitals would be able to comply 
with our proposal by ensuring that the weighted and unweighted direct 
GME FTE and IME FTE residents and totals calculated in the new XML-
based IRIS would correspond with the weighted and unweighted direct GME 
FTE and IME FTE residents and totals the hospital reports in its cost 
report. However, because of extenuating circumstances, the new XML-
based IRIS will not be able to calculate the GME (weighted and 
unweighted) FTE counts and IME FTE counts by October 1, 2018. 
Therefore, due to the concerns expressed in the comments, we are not 
finalizing our proposal that a teaching hospital's 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. We will consider making this proposal at a future time 
when the new XML-based IRIS has the capability to capture the total 
counts of direct GME FTE residents (unweighted and weighted) and of IME 
FTE residents.
    As we noted in the proposed rule, teaching hospitals no longer 
submit IRIS data on diskettes. Instead, teaching hospitals submit IRIS 
data with their cost reports in order to have an acceptable cost 
report. In this final rule, we are finalizing a change to the 
regulation at Sec.  413.24 to specify that, in order for teaching 
hospitals to have an acceptable cost report, teaching hospitals must 
submit their IRIS ``data,'' given that IRIS diskettes are no longer 
used by providers to furnish these data to contractors.
    Comment: A few commenters suggested that the goal of ensuring that 
resident FTEs are not double counted requires a review of all hospitals 
that train residents and can only be done by the contractors during the 
cost report review and reconciliation period.
    Response: We agree that ensuring that resident FTEs are not double 
counted among hospitals requires a review of IRIS data for all 
hospitals that train residents, and the review of these data is 
completed by the contractors during the cost report review and 
reconciliation period. We believe the current IRIS can be used to 
ascertain duplicate counting of resident FTEs, by ensuring that the 
IRIS FTE counts correspond to the FTE counts reported in the teaching 
hospital's cost report. However, any review of these data first 
requires that the data reported in the hospital's cost report be 
accurate and correspond to what is reported in the IRIS.
    Comment: One commenter requested that the hospital cost report and 
the IRIS have abilities to differentiate between new residents and 
those residents in existing resident programs as a way to account for 
instances when the number of a hospital's resident FTEs may exceed the 
hospital's FTE slots.
    Response: We agree with the commenter's objective to account for 
instances when the number of a hospital's resident FTEs may exceed its 
resident FTE slots. However, there is no requirement that the cost 
report FTE count be limited to the number of accredited slots. There is 
a general rule that only residents training in accredited programs can 
be reported. There are times when a hospital trains more residents in a 
program than the number of residents the program is actually accredited 
for, and if they do, hospitals are supposed to inform the ACGME of such 
an occurrence. Therefore, even in the case where the number of FTEs 
exceeds the accredited slots, the FTEs represented in IRIS should equal 
the cost report count.
    Comment: One commenter expressed concern that the Medicare Cost 
Report e-Filing (MCReF) program requires IRIS data as a separate upload 
and suggested building a functionality in MCReF that would read the 
IRIS uploaded data and compare the data to what is reported in the cost 
report and produce an immediate flag upon the cost report submission if 
the IRIS data do not match.
    Response: We appreciate the commenter's suggestion to build a 
functionality in MCReF that would read the IRIS uploaded data and 
compare them to what is reported in the cost report. We will explore 
this suggestion in the future with regard to the MCReF program and the 
feasibility for it to interface with the new XML-based IRIS program.
    Comment: One commenter asked whether providers would be required to 
purchase the new XML-based IRIS program.
    Response: We appreciate the commenter's inquiry and assure that the 
new XML-based IRIS software will be available for hospitals' use at no 
cost. However, as we explain earlier, we are not finalizing our 
proposal that 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, pending development of the new 
XML-based IRIS file and completion of the Paperwork Reduction Act (PRA) 
approval process. Providers will have an opportunity to comment during 
the comment period that is specified in the IRIS PRA notice.
    Comment: Some commenters requested clarification of the effective 
date of the proposed provision that the

[[Page 41681]]

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.
    Response: We stated in the proposed rule that the effective date 
for the proposed provision that 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, would be for 
cost reports filed on or after October 1, 2018. However, as explained 
above, because the new XML-based IRIS program is not yet available, we 
are not finalizing this portion of the proposal.
    After consideration of the public comments we received, for the 
reasons discussed earlier and in the proposed rule, we are finalizing 
our proposals with modifications. As proposed, we are removing the 
reference in the regulations to an IRIS diskette and instead 
referencing ``Intern and Resident Information System data.'' 
Specifically, we are amending Sec.  413.24(f)(5)(i) by adding a new 
paragraph (A) to provide that a teaching hospital's cost report is 
rejected for lack of supporting documentation if the cost report does 
not include the IRIS data. For the reasons discussed above, we are not 
finalizing our proposal that 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 
proposed (and are finalizing) to incorporate into the cost report, as 
discussed in section IX.B.1. of the preamble of the proposed rule and 
this final 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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20547 
and 20548), we proposed 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). We stated that this proposal 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 proposed 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 
corresponds to the bad debt amounts claimed in the provider's cost 
report.
    Comment: Some commenters generally supported the proposal, while 
other commenters suggested that a standardized format be established 
and required for the submission of the bad debt listing that 
corresponds to the bad debt amounts claimed in the provider's cost 
report. One commenter suggested that the format of the bad debt list 
follow the format of the bad debt listing from the exhibit to the Form 
CMS-339.
    Response: We appreciate the commenters' support and agree with the 
suggestion that a standardized format be required for the submission of 
the bad debt listing. The standardized format, that we will continue to 
use, for the bad debt listing is currently submitted by the provider as 
a required exhibit to the CMS Form-339 which, with the finalization of 
this rule, will be incorporated into all of the Medicare cost reports 
in the Provider Reimbursement Manual (PRM-2, CMS Pub. 15-2). We will 
continue to use the exhibit to the incorporated CMS Form-339 as the 
standardized format of the bad debt listing. Any amendments to the 
format of the bad debt listing will be published with amendments to the 
cost report in the PRM-2, CMS Pub. 15-2.
    Comment: Some commenters cited the need to revise the bad debt 
listing following the submission of the cost report and suggested that 
cost reports be permitted to be amended for this purpose.
    Response: We disagree that the bad debt listing needs to be revised 
following the submission of the cost report. Providers are required 
under Sec.  413.20(a) to maintain sufficient financial records and 
statistical data for proper determination of costs payable under the 
program. It is our expectation that the bad debt listing providers use 
to complete the cost report and that they submit with the cost report 
is complete and accurate. The Provider Reimbursement Manual, CMS Pub. 
15-1, Chapter 3, section 314, provides that uncollectible deductibles 
and coinsurance amounts are recognized as allowable bad debts in the 
reporting period in which the debts are determined to be worthless. 
Because, pursuant to Sec.  413.24(f)(2)(i), cost reports are due on or 
before the last day of the fifth month following the close of the 
period covered by the report, we believe there is sufficient time for 
the provider to accurately report bad debts. However, pursuant to 42 
CFR 405.1885(a), providers are permitted, and contractors have the 
discretion to grant, a reopening of a contractor determination in order 
to revise an item in the cost report. Also, pursuant to Sec.  
413.24(f), amended cost reports to revise cost report information that 
has been previously submitted by a provider may be permitted by the 
contractor.
    Comment: Other commenters suggested that the bad debt listing be 
submitted only when the cost report is audited instead of being 
submitted with

[[Page 41682]]

the cost report as a supporting documentation in order to have an 
acceptable cost report.
    Response: We disagree that the bad debt listing should only be 
submitted when the cost report is audited. Because not all cost reports 
are audited, the submission of the bad debt listing with the cost 
report is necessary for contractors to ensure the veracity and accuracy 
of the bad debts claimed in the cost report and to ensure there is no 
duplicate reporting of bad debts from a provider's prior fiscal year 
cost report.
    After consideration of the public comments we received, for the 
reasons discussed earlier and in the proposed rule, we are finalizing 
our proposals without modification. Effective for cost reporting 
periods beginning on or after October 1, 2018, for providers claiming 
Medicare bad debt reimbursement, a cost report will be rejected for 
lack of supporting documentation if it does not include a detailed bad 
debt listing that 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 these data for completion 
of the cost report, and to submit it when requested. However, in the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20547), we proposed that, in 
order to have an acceptable cost report submission, DSH eligible 
hospitals must submit these supporting data with their cost reports. We 
indicated that, 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, we 
stated that 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 these data when 
requested, we stated in the proposed rule that there is not additional 
burden.
    We explained in the proposed rule (83 FR 20547) that 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. We stated in the proposed rule that 
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 the FY 2019 IPPS/LTCH PPS proposed rule, we proposed 
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 proposed 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 proposed 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.
    Comment: Some commenters pointed out that, in some instances, the 
State may not have made information regarding the Medicaid eligible 
days available to the provider at the time the cost report is submitted 
and that hospitals have the 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 if the hospital 
receive updated Medicaid eligibility information from the State (CY 
2016 OPPS/ASC final rule with comment period (80 FR 70560)). Commenters 
expressed opposition to the requirement that hospitals submit a listing 
of the hospital's Medicaid eligible days that corresponds to the 
Medicaid eligible days claimed in the hospital's cost report because it 
would require the provider to submit knowingly incomplete information 
with the cost report and also would require a duplication of efforts if 
an amended cost report is submitted with an updated listing of the 
Medicaid eligible days in the 12 months following the hospital's cost 
report due date.
    Response: We disagree with the commenters' assertion that our 
proposal would require that the provider knowingly submit incomplete 
information if a hospital were to submit the cost report with a listing 
of the hospital's Medicaid eligible days that corresponds to the 
Medicaid eligible

[[Page 41683]]

days claimed in the hospital's cost report. The proposal to require a 
hospital to submit a listing of the hospital's Medicaid eligible days 
that corresponds to the Medicaid eligible days claimed in the 
hospital's cost report does not require providers to submit incomplete 
information. Currently, the provider is required to submit the cost 
report with the known Medicaid eligible days for the hospital's fiscal 
year. This proposal would require hospitals to substantiate those days 
by requiring the hospital to also submit a listing of the hospital's 
Medicaid eligible days that corresponds to the days claimed in the 
hospital's cost report. This requirement would not change the current 
requirements with respect to reporting on the cost report of the 
Medicaid eligible days known by the hospital at the time of the cost 
report submission. If the Medicaid eligible days change once the 
hospital receives the documentation from the State, the hospital may 
amend its cost report. The contractor must accept the amended cost 
report with the amended listing of the Medicaid eligible days that 
substantiates the revised Medicaid eligible days reported in the 
amended cost report if it is submitted within 12 months after the 
hospital's cost report is due. As a result, the requirement that 
hospitals submit a listing of the Medicaid eligible days with their 
cost report does not require the hospital to perform any duplicative 
actions and, in fact, only requires that in the case where a hospital 
submits an amended cost report that changes its Medicaid eligible days, 
the hospital also submit documentation to support the additional 
Medicaid days.
    Comment: One commenter requested that hospitals that are DSH 
eligible, but do not actually receive DSH, be excluded from the 
requirement to submit a listing of the Medicaid eligible days that 
substantiates the Medicaid eligible days reported in the hospital's 
cost report. The commenter provided sole community hospitals (SCHs) and 
Medicare dependent small rural hospitals (MDHs) as an example and 
requested that they be excluded.
    Response: We agree with the commenter that the requirement to 
submit a listing of the Medicaid eligible days that corresponds to the 
Medicaid eligible days reported in the hospital's cost report is not 
applicable to SCHs that are paid under the hospital-specific rate and 
are not eligible to receive DSH payment adjustments. However, because 
MDHs are eligible to receive DSH payment adjustments, this proposal 
applies to them if they are claiming a DSH payment adjustment. 
Similarly, an SCH that is not paid under its hospital-specific rate and 
is eligible to receive a DSH payment adjustment must submit a listing 
of the Medicaid eligible days that corresponds to the Medicaid eligible 
days reported in the hospital's cost report if it is claiming a DSH 
payment adjustment.
    After consideration of the public comments we received, for the 
reasons discussed earlier and in the proposed rule, we are finalizing 
our proposals without modification. Therefore, effective for cost 
reporting periods beginning on or after October 1, 2018, for hospitals 
claiming a disproportionate share 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. In addition, 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. We are 
finalizing Sec.  413.24(f)(5)(i)(C) as proposed to reflect these 
policies.
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 these data for 
completion of the cost report, and submit it when requested. However, 
in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20547 and 20548), we 
proposed that, in order to have an acceptable cost report submission, 
DSH eligible hospitals must submit these supporting data with their 
cost reports. We stated that, 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 request it. We stated that because the existing burden estimate 
for a DSH eligible hospital's cost report already reflects the 
requirement that these hospitals collect, maintain, and submit these 
data when requested, there is no additional burden.
    We stated in the FY 2019 IPPS/LTCH PPS proposed rule that 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. We stated that 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 the FY 2019 IPPS/LTCH PPS proposed rule, we proposed 
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

[[Page 41684]]

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 proposed 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.
    Comment: Some commenters supported the proposal while other 
commenters believed it was burdensome for providers to submit the 
supporting documentation that corresponds to the amounts claimed in the 
provider's cost report for charity care and/or uninsured discounts at 
the time of the cost report submission.
    Response: We appreciate the commenters' support. We disagree that 
requiring hospitals that report charity care and/or uninsured discounts 
to submit the supporting documentation that corresponds to the amounts 
claimed in the provider's cost report for charity care and/or uninsured 
discounts is burdensome to providers. As stated in the FY 2019 IPPS/
LTCH PPS proposed rule, we believe that requiring a DSH eligible 
hospital to submit, with its cost report, a detailed listing of its 
charity care and/or uninsured discounts that corresponds to the amount 
claimed in the hospital's cost report is consistent with the 
recordkeeping and cost reporting requirements of Sec. Sec.  413.20 and 
413.24, which require a provider to maintain records of its cost data 
and produce them to substantiate its costs. These data must be recorded 
and maintained by the provider and are available to providers at the 
time of completion of the Medicare cost report. In previous years, we 
have received many comments in response to IPPS proposed rules where 
stakeholders have requested that CMS ensure the accuracy of the amounts 
providers report on the Worksheet S-10, and that are used to calculate 
uncompensated care. Because not all cost reports are audited, the 
submission of supporting documents with the cost report that correspond 
to the amounts reported in the cost report for charity care and/or 
uninsured discounts is necessary so that contractors can pay providers 
promptly and accurately.
    Comment: Some commenters suggested that CMS establish a 
standardized format that hospitals would be required to use when 
submitting the supporting documentation for the charity care and/or 
uninsured discounts that corresponds to the amounts claimed in their 
cost report. Commenters believed that including such a requirement 
would ensure consistency of the supporting documentation submitted by 
hospitals.
    Response: We agree that a standardized format should be established 
and required for the submission of the supporting documentation for the 
charity care and/or uninsured discounts that corresponds to the amounts 
claimed in the provider's cost report. We agree that requiring this 
information to be submitted in a standardized format would ensure 
consistency of the documentation and facilitate the contractor's review 
and verification of the cost report. As stated in the FY 2019 IPPS/LTCH 
PPS proposed rule, for hospitals reporting charity care and/or 
uninsured discounts, we believe the documentation must include 
information such as the patient name, dates of service, insurer (if 
applicable), and the amount of the charity care and/or uninsured 
discount given to the patient that corresponds to the amounts reported 
in the hospital's cost report. We will work toward developing a 
standard format to include in a subsequent Paperwork Reduction Act 
(PRA) notice to request public comment. Until a standard format is 
adopted, in order to have an acceptable cost report submission, 
hospitals should submit a listing that includes information, such as 
the aforementioned data elements, with its cost report submission as 
necessary to support the amounts reported in their cost report.
    Comment: One commenter indicated that a hospital's submission of a 
detailed listing of the hospital's charity care/uninsured discounts 
with its cost report would be time and resource intensive.
    Response: We disagree that a hospital's submission of a listing of 
charity care/uninsured discounts that corresponds to the amount of the 
charity care and/or uninsured discounts reported in the hospital's cost 
report would be time consuming and resource intensive. As previously 
stated, this is information already in the possession of hospitals, 
developed in the normal course of hospital operations, and is already 
needed in order to report charity care and/or uninsured discounts on 
the Worksheet S-10 of the cost report. As a result, the proposal would 
simply require a hospital to submit this supporting documentation, 
which has already been developed in the normal course of hospital 
operations, with its cost report in order to have an acceptable cost 
report submission.
    After consideration of the public comments we received, for the 
reasons discussed earlier and in the proposed rule, we are finalizing 
our proposed policy, without modification, 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 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 hospital's 
cost report. We are finalizing Sec.  413.24(f)(5)(i)(D) as proposed to 
reflect this final policy. In addition, as discussed earlier, until a 
standard format is adopted, a hospital must submit a listing with its 
cost report submission that supports the amounts reported in its cost 
report including information, such as: Patient name, dates of service, 
insurer (if applicable), and the amount of the charity care and/or 
uninsured discount given to the patient.
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

[[Page 41685]]

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 
rate-setting and payment refinement activities. We stated in the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20748) that 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 the FY 2019 IPPS/LTCH PPS proposed rule, we proposed 
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. We 
stated that this proposal would facilitate the contractor's review and 
verification of the cost report without needing to request additional 
data from the provider. We stated that 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. We further stated that because the 
existing burden estimate for a provider's cost report already reflects 
the requirement that providers collect, maintain, and submit these 
data, there is no additional burden.
    Consistent with this proposal, we proposed 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.
    Comment: A few commenters supported this proposal. However, several 
commenters indicated that the proposal was not feasible because a home 
office may have a fiscal year that differs from the fiscal year of the 
providers in its chain. The commenters stated that because of the 
possible differing fiscal years, a Home Office Cost Statement may not 
include all costs allocated from the home office to the provider for 
the time period covering a provider's cost report, requiring the 
provider to submit the Home Office Cost Statement that is subsequently 
due that covers the remaining time period of the provider's cost 
report.
    Response: We acknowledge the commenters' concerns that where a 
provider and its home office have differing fiscal year ends, a Home 
Office Cost Statement may not be available to substantiate all of a 
provider's costs. For example, a provider with a fiscal year that 
begins on October 1, 2018 and ends on September 30, 2019, whose home 
office has a fiscal year that begins on January 1 and ends on December 
31 of each year, may have a portion of costs allocated to it from the 
Home Office Cost Statement that begins on January 1, 2018 and ends on 
December 31, 2018 and a portion of costs allocated to it from the Home 
Office Cost Statement that begins on January 1, 2019 and ends on 
December 31, 2019. We understand the provider's concern and are 
revising the regulation text of proposed Sec.  413.24(f)(5)(i)(E) to 
provide that when the provider and its home office have differing 
fiscal year ends, the provider's home office costs for a portion of the 
cost reporting period (as reflected on the Home Office Cost Statement) 
must correspond to a portion of the amount reported in the provider's 
cost report. When the provider and its home office have the same fiscal 
year end, the provider's home office costs for the same time period (as 
reflected on the Home Office Cost Statement) must correspond to the 
costs reported in the provider's cost report.
    Comment: Some commenters suggested that the Home Office Cost 
Statement be submitted by the chain's home office on behalf of all 
providers in the chain instead of requiring each provider in the chain 
to submit a Home Office Cost Statement with its cost report, in order 
to ensure accuracy and reduce burden to the providers in a chain.
    Response: We appreciate the commenters' concerns regarding reducing 
burden to the providers in a chain organization and ensuring accuracy 
when a provider substantiates costs allocated to it from its home 
office. We agree with the commenters' suggestion that the home office 
should instead submit the Home Office Cost Statement directly to the 
servicing contractors for its providers when the home office has 
allocated costs to its providers, instead of requiring the providers to 
submit the Home Office Cost Statement individually with their cost 
report submission. Requiring the home office to instead submit the Home 
Office Cost Statement to the servicing contractors of its providers 
will reduce burden upon the individual providers within a chain 
organization by not requiring each provider within the chain to submit 
the Home Office Cost Statement with its cost report submission. Because 
the Home Office Cost Statement lists the providers in the chain and 
each of the providers' servicing contractors, the contractors to whom 
the Home Office Cost Statement should be sent are known to the home 
office. We plan to update the PRM to reflect this policy.
    Comment: One commenter suggested that requiring the Home Office 
Cost Statement submission with the provider's cost report will make the 
information contained in the Home Office cost statement subject to a 
Freedom of Information Act (FOIA) request as opposed to the information 
currently being protected and exempt from a FOIA request.
    Response: We appreciate the commenters' concerns. The policy 
finalized in this final rule, as discussed below, does not affect 
whether a Home Office Cost Statement may or may not be produced in 
response to a FOIA request. We note that both the proposed and 
finalized policy requires that the provider substantiate costs 
allocated to it from its home office in order to have an acceptable 
cost report.
    After consideration of the public comments we received, for the 
reasons discussed earlier and in the proposed rule, we are finalizing 
our proposal with

[[Page 41686]]

modifications as follows: First, instead of requiring providers to 
submit the Home Office Cost Statement individually with their cost 
report submission, we are requiring instead that the home office or 
chain organization submit the Home Office Cost Statement directly to 
the servicing contractors for its providers when the home office or 
chain organization has allocated costs to its providers. When the home 
office submits its Home Office Cost Statement to its servicing 
contractor, the home office must also submit a copy of the Home Office 
Cost Statement to each of the contractors of its chain providers. For 
example, if a chain organization has 25 providers serviced by 2 
different contractors, the home office must submit its Home Office Cost 
Statement to each contractor. We note that only one copy of the Home 
Office Cost Statement is required to be submitted by the home office to 
a provider's contractor, regardless of the number of providers in the 
chain the contractor is servicing. Second, we are applying different 
rules for situations where the provider and the home office have the 
same fiscal year end and where the provider and the home office have a 
different fiscal year end. Thus, 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 with the same fiscal year end, a cost report will be 
rejected for lack of supporting documentation if the home office or 
chain organization has not completed and submitted to the chain 
provider's contractor a Home Office Cost Statement that corresponds to 
the amounts allocated from the home office or chain organization to the 
provider's cost report. 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 that 
has a different fiscal year end, a cost report will be rejected for 
lack of supporting documentation if the home office or chain 
organization has not completed and submitted to the chain provider's 
contractor a Home Office Cost Statement that corresponds to some 
portion of the amounts allocated from the home office or chain 
organization to the provider's cost report. These policies are 
reflected in new Sec.  413.24(f)(5)(i)(E)(1) and (2), respectively. 
Thus, when the provider and its home office have differing fiscal year 
ends, the provider's home office costs for a portion of the cost 
reporting period (as reflected in the Home Office Cost Statement) must 
correspond to a portion of the amount reported in the provider's cost 
report. When the provider and its home office have the same fiscal year 
end, the provider's home office's cost for the same time period (as 
reflected in the Home Office Cost Statement) must correspond to the 
costs reported in the provider's cost report.

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 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.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20548 and 20549), 
we indicated that 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 department 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 stated that 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.
    Therefore, as one step to further improve the public accessibility 
of charge information, effective January 1, 2019, we announced the 
update to 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 note that it was sometimes difficult to determine when certain 
commenters who submitted comments on the FY 2019 IPPS/LTCH PPS proposed 
rule were responding to the broader price transparency request for 
information (RFI) and when they were responding specifically to the 
updated guidelines. To the extent we believed that a comment addressed 
the updated guidelines, we summarized it below. Comments on the broader 
price transparency initiative and suggestions for additional future 
actions that we may take with the guidelines, including enforcement 
actions, will be addressed in future rulemaking.
    Comment: Many commenters addressed the announcement of the CMS 
update to guidelines on price transparency. Some of these commenters 
supported the update and indicated that many hospitals already make 
their standard charges available voluntarily or under applicable State 
law.
    Response: We appreciate the support from some commenters regarding 
our updated guidelines and agree that many hospitals already make their 
standard charges publicly available either voluntarily or under 
applicable State law. For example, the 2014 American

[[Page 41687]]

Hospital Association State Transparency Survey data indicated that 35 
States required hospitals to release information on some charges and 7 
States relied on voluntary disclosure of charge data (http://www.ahacommunityconnections.org/content/14transparency-trendwatch.pdf). 
We also appreciate the public support for hospitals to undertake 
efforts to engage in consumer friendly communication to help patients 
understand what their potential financial liability might be for 
services they obtain at the hospital, and to enable patients to compare 
costs for similar services across hospitals. Improving the public 
accessibility to charge information is one aspect of our broader price 
transparency initiative.
    Comment: Some commenters stated that the information contained in 
the chargemaster would not be useful to patients and would only 
increase confusion, as it would not inform them of their out-of-pocket 
costs for a particular service. The commenters stated that the 
chargemaster typically contains terms that are difficult for patients 
to understand, does not depict negotiated discounts with insurers, and 
lacks contextual information that patients would need. To the extent 
that such information would be published in a payer-specific manner, 
the commenters stated that such information is proprietary and 
confidential, and that publishing this information could undermine 
competition. Some commenters stated that certain hospitals are already 
providing patients with cost estimates that are specific to the payer 
and the patient's circumstances, and suggested that hospitals be 
required to provide this type of information instead. Other commenters 
noted programs by specific hospitals, including web-based tools, which 
enable patients to estimate their out-of-pocket costs. Other commenters 
suggested that CMS focus on ``shoppable'' health care services that can 
typically be scheduled in advance. Some commenters suggested that CMS 
conduct further research and work with stakeholders to determine the 
best approach to making information available to consumers.
    Response: We disagree with commenters that the information 
contained in the chargemaster would not be useful to patients. As 
pointed out by commenters, many hospitals have price transparency 
initiatives beyond the provision of the chargemaster and we encourage 
hospitals to provide context surrounding the chargemaster information. 
We note that we are not requiring at this time that any information be 
published in a payer-specific manner, and we disagree that transparent 
charge information undermines competition. We agree that hospitals 
should and can provide information on ``shoppable'' health care 
services that can typically be scheduled in advance. However, nothing 
in our guidelines precludes a hospital from providing this information 
to patients and the public. We also agree with commenters that CMS 
should continue to work with stakeholders to determine the best 
approach to making price transparency information available to 
consumers and we intend to do so. One step in that process is the broad 
request for information from the public that CMS is currently making.
    We acknowledge that providing patients with more specific 
information on their potential financial liability is needed and 
commend the hospitals that already do so. However, we believe that this 
more specific need does not justify a delay in the provision of 
chargemaster information to the public. We note that making charge 
information more easily accessible to patients and the public does not 
preclude hospitals from taking additional steps or continuing to 
provide the information they currently provide.
    Comment: Many commenters explained that, for insured patients, 
payers are a better source of information about the cost of care and 
should be the primary source of information for out-of-pocket costs for 
patients. Some commenters stated that payers can provide the 
information that patients require without compromising competition 
among providers. Other commenters suggested that payers and providers 
work together to make this information more accessible to patients. 
Some commenters noted that payers can provide information as to whether 
patients have met the plan deductible or out-of-pocket spending limits 
and what their cost-sharing will be. One commenter suggested requiring 
insurance companies to provide cost calculators or other tools that 
patients can use to calculate costs specific to their situation. For 
uninsured patients, commenters noted that many patients receive free or 
discounted care through the hospital's charity care policies.
    Response: With respect to the commenters who indicated that, for 
insured patients, payers are a better source of information about the 
cost of care and should be the primary source of information for out-
of-pocket costs for patients, we note that nothing in our guidelines 
precludes hospitals and payers from working together to provide 
information on out-of-pocket costs for patients and to improve price 
transparency for patients. We also recognize that sometimes uninsured 
patients receive free or discounted care through a hospital's charity 
care policies and again commend hospitals for those policies. Nothing 
in our guidelines precludes a hospital from providing charity care to 
uninsured patients.
    Comment: Several commenters expressed concern about the updated 
guidelines conflicting with State requirements and increasing 
administrative burden if hospitals are required to report charge 
information in multiple incongruent ways. Commenters stated that CMS 
should not require hospitals to duplicate or replace existing 
publically available resources and that the updated requirement would 
significantly increase provider burden to provide information that is 
not useful to patients. Other commenters noted that some State efforts 
are already providing patients with much more information than they 
could obtain from a chargemaster, and suggested that CMS instead 
encourage State level price transparency efforts.
    Response: We encourage State efforts in the area of price 
transparency. As noted earlier, we commend the many hospitals that 
already make their standard charges publicly available either 
voluntarily or under applicable State law. This demonstrates that the 
disclosure of standard charges under our updated guidelines can exist 
in a complementary manner with State regulatory initiatives.
    Comment: Some commenters stated that the definition of standard 
charges is unclear, as hospitals often have many negotiated rates for 
the same service. The commenters identified several terms, ``charges'', 
``payments'', ``cost'', and ``prices'', that, according to the 
commenters, can have different meanings but are often used 
interchangeably. The commenters believed that, absent a standard 
definition of these terms, patients could not make accurate comparisons 
between hospitals.
    Response: As noted earlier, we are not at this time requiring 
payer-specific information under our guidelines, and our updated 
guidelines are unchanged in this area compared to the prior guidelines. 
The new guidelines, when compared to the prior guidelines, merely 
require that this information be made available via the internet in a 
machine readable format and that hospitals update this information at 
least annually, or more often as appropriate.
    Comment: A few commenters expressed concern that patients may forgo 
needed care if they were informed

[[Page 41688]]

of the charges in advance. Other commenters noted that price 
information in the absence of quality information can be misleading to 
patients in a variety of ways.
    Response: We disagree that patients may forgo needed care if they 
were informed of the charges in advance if that information is placed 
in the proper context by hospitals. We agree with the commenters that 
price information and quality information are both important to provide 
to patients. We note that nothing precludes hospitals or other entities 
from incorporating quality information such as the publicly available 
CMS Hospital Compare quality information found on the website at: 
https://www.medicare.gov/hospitalcompare/search.html.
    After consideration of the public comments we received, we 
currently do not believe there is a need to further update our 
guidelines beyond the updated guidelines that we previously announced 
would be effective January 1, 2019, which are that hospitals' list of 
standard charges be made available to the public via the internet in a 
machine readable format and that hospitals update this information at 
least annually, or more often as appropriate.

XI. 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 we discussed in the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20550), 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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20550), 
we proposed to delete the last sentence of Sec.  424.11(c). In 
addition, we proposed 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.
    Comment: Commenters supported the proposed changes to Sec.  
424.11(c) of the regulations.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposed changes. Specifically, 
we are deleting the last sentence of Sec.  424.11(c) and relocating the 
second sentence of Sec.  424.11(c) to the end of the immediately 
preceding paragraph (b).

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

    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20550 through 
20553), we included a Request for Information (RFI) related to 
promoting interoperability and electronic health care information 
exchange. We received approximately 313 timely pieces of correspondence 
on this RFI. We appreciate the input provided by commenters.

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 
policies set forth in this final rule. MedPAC recommendations for the 
IPPS for FY 2019 are addressed in Appendix B to this final rule.
    For further information relating specifically to the MedPAC reports 
or to obtain a copy of the reports, contact MedPAC at (202) 653-7226, 
or visit MedPAC's 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. 
We listed the IPPS-related data files that are available in the FY 2019 
IPPS/LTCH PPS proposed rule (83 FR 20553 through 20554).
    Commenters interested in discussing any data files used in 
construction of this final rule should contact Michael Treitel at (410) 
786-4552.

B. Collection of Information Requirements

1. Statutory Requirement for Solicitation of Comments
    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.

[[Page 41689]]

     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20554 through 
20564), we solicited public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs).
2. ICRs for Application for GME Resident Slots
    The information collection requirements associated with the 
preservation of resident cap positions from closed hospitals, addressed 
in section IV.K.3. of the preamble of the proposed rule (83 FR 20439 
through 20440) and this final 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.\411\ 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 finalized policies in this final rule.
---------------------------------------------------------------------------

    \411\ 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 preambles of the proposed rule (83 FR 
20470 through 20500) and this final rule, we discuss the following 
finalized policies 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 three chart-abstracted measures beginning 
with the CY 2019 reporting period/FY 2021 payment determination; and 
(3) removal of six chart-abstracted measures beginning with the CY 2020 
reporting period/FY 2022 payment determination. Details on these 
policies, as well as the expected burden changes, are discussed below.
    This final rule also includes policies with respect to claims-based 
and other 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 the CY 
2020 reporting period/FY 2022 payment determination. As discussed 
further below, we do not expect these policies to affect our 
information collection burden estimates.
b. Information Collection Burden Estimate for the Removal of Chart-
Abstracted Measures
(1) Information Collection Burden Estimate for the Removal of Three 
Chart-Abstracted Measures Beginning With the CY 2019 Reporting Period/
FY 2021 Payment Determination
    In section VIII.A.5.b.(8)(b) of the preamble of this final rule, we 
discuss our finalized proposals to remove three chart-abstracted 
clinical process of care measures beginning with the CY 2019 reporting 
period/FY 2021 payment determination:
     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).
    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 finalized 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 measure \412\ ([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 because we are finalizing our proposals 
to remove the ED-1 and IMM-2 measures from the Hospital IQR Program.
---------------------------------------------------------------------------

    \412\ 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 anticipate our finalized proposal to remove the VTE-6 measure 
will 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 because we are finalizing our proposal to remove this 
measure from the Hospital IQR Program.
    In summary, as a result of our finalized proposals in section 
VIII.A.5.b.(8) of the preamble of this final rule to remove IMM-2, ED-
1, and VTE-6, 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 \413\) across all

[[Page 41690]]

3,300 IPPS hospitals participating in the Hospital IQR Program for the 
CY 2019 reporting period/FY 2021 payment determination.
---------------------------------------------------------------------------

    \413\ 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 Removal of Six 
Chart-Abstracted Measures Beginning With the CY 2020 Reporting Period/
FY 2022 Payment Determination
    In sections VIII.A.5.b.(2)(b) and VIII.A.5.b.(8)(b) of the preamble 
of this final rule, we are finalizing the removal of five chart-
abstracted National Healthcare Safety Network (NHSN) hospital-acquired 
infection (HAI) measures \414\ and one chart-abstracted clinical 
process of care measure beginning with the CY 2020 reporting period/FY 
2022 payment determination:
---------------------------------------------------------------------------

    \414\ As discussed in section VIII.A.5.b.(2)(b) of the preamble 
of this final rule, we proposed to remove the NHSN HAI measures 
beginning with the CY 2019 reporting period/FY 2021 payment 
determination, but are delaying their removal until the CY 2020 
reporting period/FY 2022 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); and
     Admit Decision Time to ED Departure Time for Admitted 
Patients Measure (ED-2) (NQF #0497).
    We note that as discussed in section VIII.A.5.b.(2)(b) of the 
preamble of this final rule, we proposed to remove the NHSN HAI 
measures beginning with the CY 2019 reporting period/FY 2021 payment 
determination, but are finalizing a modified version of our proposal 
which delays their removal until the CY 2020 reporting period/FY 2022 
payment determination. Our estimates below have been updated to reflect 
this change. 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 and Hospital VBP Programs, 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 further anticipate removing the chart-abstracted ED-2 measure 
will 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. Therefore, we 
estimate an 858,000 hour information collection burden decrease for the 
CY 2020 reporting period/FY 2022 payment determination because we are 
finalizing our proposal to remove this measure from the Hospital IQR 
Program.
    In summary, because we are finalizing our proposal in section 
VIII.A.5.b.(8)(b) of the preamble of this final rule to remove ED-2, we 
estimate an information collection burden reduction of 858,000 hours 
and approximately $31.4 million (858,000 hours x $36.58 per hour \415\) 
across all 3,300 IPPS hospitals participating in the Hospital IQR 
Program for the CY 2020 reporting period/FY 2022 payment determination.
---------------------------------------------------------------------------

    \415\ 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 did not propose any changes to our validation requirements 
related to chart-abstracted measures, because we are finalizing our 
proposals with modification in section VIII.A.5.b.(2)(b) \416\ and 
section VIII.A.5.b.(8) of the preamble of this final rule to remove 
five NHSN HAIs and four clinical process of care measures, we believe 
that hospitals will experience an overall reduction in information 
collection burden associated with chart-abstracted measure validation 
beginning with the FY 2023 payment determination.
---------------------------------------------------------------------------

    \416\ As discussed in section VIII.A.5.b.(2)(b) of the preamble 
of this final rule, we proposed to remove the NHSN HAI measures 
beginning with the CY 2019 reporting period/FY 2021 payment 
determination, but are delaying their removal until the CY 2020 
reporting period/FY 2022 payment determination.
---------------------------------------------------------------------------

    As noted in the FY 2016 IPPS/LTCH PPS 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 rewritable 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 finalized proposals to remove four clinical process of care 
measures. Hospitals will no longer be required to submit, or be 
reimbursed for submitting, these data to CMS.
    Because we are finalizing our proposals 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 and 
Hospital VBP Programs, we do not anticipate a change in data collection 
and reporting burden associated with this OMB control number due to our 
finalized proposals under the Hospital IQR Program.
    The data validation activities, however, are conducted by CMS. 
Since

[[Page 41691]]

the measures were adopted into the Hospital IQR Program, CMS has 
validated the data for purposes of the Hospital IQR 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. Therefore, we 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 \417\) for the FY 2023 payment 
determination because of the removal of these measures from the 
Hospital IQR Program beginning with the CY 2020 reporting period/FY 
2022 payment determination and the secondary effects on validation. We 
note that the HAC Reduction Program is finalizing the proposal to begin 
validation of these NHSN HAI measures as discussed in section IV.J. of 
the preamble of this final rule.
---------------------------------------------------------------------------

    \417\ 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 Finalized Removal of Two 
Structural Measures
    In sections VIII.A.5.a. and b.(1) of the preamble of this final 
rule, we are finalizing our proposals 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 finalized removal of the Safe 
Surgery Checklist measure because completion of this measure takes 
hospitals approximately 2 minutes each year (77 FR 53666). Similarly, 
we anticipate a very slight reduction in information collection burden 
associated with the finalized 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 Exceptions 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.
    Comment: One commenter believed that the collection of information 
burden estimate for structural measures should take into account time 
hospitals spend on overall assurance that data are accurate, reported 
correctly, validated, and submitted.
    Response: We appreciate the commenter's feedback. We note the 
burden estimate of 15 minutes per hospital is specific to the reporting 
of information for structural measures in the Hospital IQR Program, as 
opposed to the general work providers perform to address data 
collection and internal quality assurance. Further, we are finalizing 
our proposal to remove the two remaining structural measures from the 
Hospital IQR Program so that no structural measures will remain in the 
program, but we will take commenter's feedback into consideration 
should the Hospital IQR Program propose to adopt additional structural 
measures in the future. We refer readers to section I.K. of Appendix A 
of this final rule for a detailed discussion of the costs associated 
with the Hospital IQR Program, including costs that are not strictly 
information collection burden.
d. Burden Estimate for Removal of Claims-Based Measures
    In section VIII.A.5.b.(2)(a), (3), (4), (6), and (7) of the 
preamble of this final rule, we are finalizing our proposals 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 (READM-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 finalizing our proposals 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)

[[Page 41692]]

Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following 
Pneumonia Hospitalization (NQF #0468). We are also finalizing our 
proposal 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 final 
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 Finalized Removal of 
eCQMs
    In section VIII.A.5.b.(9) of the preamble of this final rule, we 
are finalizing our proposals 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); \418\
---------------------------------------------------------------------------

    \418\ Median Time from ED Arrival to ED Departure for Admitted 
ED Patients (ED-1) is finalized for removal in both chart-abstracted 
and eCQM forms in sections VIII.A.5.b.(8)(b) and VIII.A.5.(b)(9)(c) 
of the preamble of this final rule, respectively.
---------------------------------------------------------------------------

     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 finalized for removal were among a set of 
15 eCQMs available for reporting, we believe that reducing the number 
of eCQMs from which hospitals choose will enable hospitals to focus on 
and maintain a smaller subset of measures (8 instead of 15), but this 
will 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 will not 
change, we refer readers to section VIII.A.4.b. of the preamble of this 
final 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 Hospital IQR Program 
requirements.
f. Information Collection Burden Estimates for the Finalized 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 final rule, we are finalizing our proposal 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 there will be no change to the burden estimate because the 
previous 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 continue to apply to the CY 2019 
reporting period/FY 2021 payment determination.
g. Information Collection Burden Estimate for the Finalized 
Modifications to EHR Certification Requirements
    In section VIII.A.10.d.(3) of the preamble of this final rule, we 
are finalizing our proposal 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 finalized proposal to affect our information 
collection burden estimates because this policy does not require 
hospitals to submit new data to CMS. With respect to any costs 
unrelated to data submission, we refer readers to section I.K. of 
Appendix A of this final 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 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 \419\) and a total cost reduction related to information 
collection of approximately $38.3 million (-1,046,138 hours x $36.58 
per hour \420\) for the CY 2019 reporting period/FY 2021 payment 
determination; (2) a total information collection burden reduction of 
858,000 hours (-858,000 hours due to the removal of ED-2) and a total 
information collection cost reduction of approximately $31.3 million (-
858,000 hours x $36.58 per hour \421\) for the CY 2020 reporting 
period/FY 2022 payment determination; and (3) a total information 
collection burden reduction of 43,200 hours (-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 $1.6 million (-43,200 hours x $36.58 per hour) for the CY 
2021 reporting period/FY 2023 payment determination. These are the 
total information collection burden reduction estimates for which we 
are requesting OMB approval under OMB number 0938-1022.
---------------------------------------------------------------------------

    \419\ In the FY 2018 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 
will 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.
    \420\ 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.
    \421\ Ibid.

[[Page 41693]]



                   Hospital IQR Program CY 2019 Reporting Period/FY 2021 Payment Determination Information Collection Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Annual recordkeeping and reporting requirements under OMB control number 0938-1022 for CY 2019
                                                                                  reporting period/FY 2021 payment determination
                                                         -----------------------------------------------------------------------------------------------
                                                                                                                         Newly    Previously
                                                                                                Average                finalized   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 \422\...........................          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.
--------------------------------------------------------------------------------------------------------------------------------------------------------


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

    \422\ In the FY 2018 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 
will 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.

                   Hospital IQR Program CY 2020 Reporting Period/FY 2022 Payment Determination Information Collection Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Annual recordkeeping and reporting requirements under OMB control number 0938-1022 for CY 2020
                                                                                  reporting period/FY 2022 payment determination
                                                         -----------------------------------------------------------------------------------------------
                                                                                                                         Newly    Previously
                                                                                                Average                finalized   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
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Change in Information Collection Burden Hours:--858,000...........................................................................................
Total Cost Estimate: Updated Hourly Wage ($36.58) x Change in Burden Hours (-858,000) = -$31,385,640.
--------------------------------------------------------------------------------------------------------------------------------------------------------


                   Hospital IQR Program CY 2021 Reporting Period/FY 2023 Payment Determination Information Collection Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Annual recordkeeping and reporting requirements under OMB control number 0938-1022 for CY 2021
                                                                                  reporting period/FY 2023 payment determination
                                                         -----------------------------------------------------------------------------------------------
                                                                                                                         Newly    Previously
                                                                                                Average                finalized   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
--------------------------------------------------------------------------------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 41694]]

 
Total Change in Information Collection Burden Hours: -43,200.
Total Cost Estimate: Updated Hourly Wage ($36.58) xChange in Burden Hours (-43,200) = -$1,580,256.
--------------------------------------------------------------------------------------------------------------------------------------------------------

4. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
a. Background
    As discussed in sections VIII.B. of the preambles of the proposed 
rule (83 FR 20500 through 20510) and this final rule, section 
1866(k)(1) of the Act requires, for purposes of FY 2014 and each 
subsequent fiscal year, that a hospital described in section 
1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH) 
submit data in accordance with section 1866(k)(2) of the Act with 
respect to such fiscal year. There is no financial impact to PCH 
Medicare payment if a PCH does not participate. Below we discuss only 
changes in burden that will result from the proposals that we are 
finalizing in this final rule.
b. Revision of Time Estimate for Structural and Web-Based Tool Measures 
for the FY 2021 Program Year and Subsequent Years
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20559), we 
proposed to revise 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 
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, in the FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20559), we proposed 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 invited 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.
    We did not receive any public comments on this proposal. We are 
therefore finalizing that we will use a burden estimate of 15 minutes 
per measure, per PCH, with respect to the burden estimates for web-
based and/or structural measures for the FY 2021 program year and 
subsequent years.
c. Estimated Burden of PCHQR Program Proposals for the FY 2021 Program 
Year
    In section VIII.B.3. of the preamble of this final rule, we are 
finalizing our proposal 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

[[Page 41695]]

(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 
final rule, we are finalizing our proposal to adopt one claims-based 
measure, 30-Day Unplanned Readmissions for Cancer Patients (NQF #3188), 
beginning with the FY 2021 program year. As a result of these finalized 
measure removals, the PCHQR Program measure set will consist of 13 
measures for the FY 2021 program year.
(1) Removal of Web-Based Structural Measures
    We estimate that the removal of four web-based, structural measures 
will reduce the burden associated with quality reporting on PCHs. 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 finalized removal of these four measures.
(2) Maintenance of Chart-Abstracted NHSN Measures
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20503), we 
proposed to remove two NHSN measures, 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), from the PCHQR Program. As discussed in section 
VIII.B.3.b.(2) of the preamble of this final rule, we are deferring 
finalization of our policies regarding future use of the Catheter-
Associated Urinary Tract Infection (CAUTI) Outcome Measure (PCH-5/NQF 
#0138) and Central Line-Associated Bloodstream Infection (CLABSI) 
Outcome Measure (PCH-4/NQF #0139) in the PCHQR Program to a future 2018 
final rule, most likely in the CY 2019 OPPS/ASC final rule targeted for 
release no later than November 2018. We will therefore address any 
change in burden associated with this policy decision, most likely, in 
the CY 2019 OPPS/ASC final rule.
    We note that we have also reconciled the burden estimates 
associated with the remaining NHSN measures (CLABSI, CAUTI, CDI, HCP, 
MRSA and Colon and Abdominal Hysterectomy SSI) included in the PCHQR 
Program measure, which were previously accounted for under OMB Control 
Number 0938-1175. The burden associated with data collection for these 
measures is accounted for under the CDC NHSN OMB control number 0920-
0666; for this reason, we have removed the duplicative burden estimate 
from the PCHQR Program's OMB Control Number, 0938-1175.
    (3) Adoption of 30-Day Unplanned Readmissions for Cancer Patients 
Measure (NQF #3188)
    We do not anticipate any increase in burden on PCHs related to our 
finalized 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 does 
not require PCHs to submit any additional data.
    In summary, we estimate a total reduction of 11 hours of burden per 
year for all 11 PCHs (-1 hours per PCH x 11 PCHs) associated with the 
removal of the four web-based, structural measures beginning with the 
FY 2021 program year. Coupled with our estimated salary costs, we 
estimate that these finalized changes will result in a reduction in 
annual labor costs of $402 (11 hours x $36.58 hourly labor cost \423\) 
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.
---------------------------------------------------------------------------

    \423\ 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 preambles of the proposed rule (83 FR 20407 
through 20426) and this final rule, we discuss requirements for the 
Hospital VBP Program. Specifically, in this final rule, with respect to 
quality measures, we are finalizing our proposals to remove three 
claims-based measures (AMI Payment, HF Payment, and PN Payment) 
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 that 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. As discussed in section IV.I.2.c.(2) of the preamble of this 
final rule, we are not finalizing our proposal to remove a fourth 
claims-based measure--Patient Safety and Adverse Events (Composite) 
(PSI 90) (NQF #0531).
    In addition, in this final rule, we are finalizing our proposal to 
remove one chart-abstracted measure (Elective Delivery (NQF #0469) (PC-
01)) beginning with the FY 2021 program year. Because this chart-
abstracted measure used data required for and collected under the 
Hospital IQR Program (OMB control number 0938-1022), there was no 
additional data collection burden associated with this measure under 
the Hospital VBP Program. Therefore, we do not anticipate removing this 
measure will increase or decrease the reporting burden on hospitals. 
However, we believe removal of this measure 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.
    As discussed in section IV.I.2.c.(2) of the preamble of this final 
rule, we are not finalizing our proposal to remove five other chart-
abstracted measures (CAUTI, CLABSI, Colon and Abdominal Hysterectomy 
SSI, MRSA Bacteremia, and CDI). Because these chart-abstracted measures 
use data that will continue to be required for and collected under the 
Hospital IQR Program through the CY 2019 reporting period/FY 2021 
payment determination, there is no change to the data collection burden 
associated with these measures under the Hospital VBP Program.
    We note that we are finalizing our proposals to remove eight 
claims-based measures from the Hospital IQR 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 change in burden for

[[Page 41696]]

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)
    In section VIII.C.5. of the preambles of the proposed rule (83 FR 
20510 through 20515) and this final rule, we discuss our finalized 
policies 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 final rule, 
we are finalizing our proposals 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 will 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 will 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 finalizing for removal.
    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) will 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 
will 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 will 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 will 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 final 
rule, we are finalizing our proposal 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 will 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 will be reduced. Specifically, we believe 
that there will 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 will 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 finalized 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 preambles of the proposed rule (83 FR 20426 
through 20437) and this rule, we discuss requirements for the HAC 
Reduction Program. In the proposed rule, we did not propose to adopt 
any new measures into the HAC Reduction Program. In this final rule, 
the Hospital IQR Program is finalizing its proposal to remove the 
claims-based Patient Safety and Adverse Events Composite (PSI 90) 
measure effective with the effective date of the FY 2019 IPPS/LTCH PPS 
final rule and finalizing with modification, its proposal five NHSN HAI 
measures (CDI, CAUTI, CLABSI, MRSA, and Colon and Abdominal 
Hysterectomy SSI), with the removal of these measures beginning with 
the CY 2020 reporting period/FY 2022 payment determination. 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 or reduce any 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 finalized 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, because of 
our finalized proposals in sections VIII.A.5.b.(2)(b) and IV.J.4.e. of 
the preamble of this final rule to remove the HAI chart-abstracted 
measures from the Hospital IQR Program, data validation for the 
measures will transfer to the HAC Reduction Program, and this is will 
result in a net neutral shift of 43,200 hours and approximately $1.6 
million from the Hospital IQR Program to the HAC Reduction Program, 
with no overall net change 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

[[Page 41697]]

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. Therefore, we 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 \424\) as a result of our finalized proposals to 
discontinue HAI validation under the Hospital IQR Program and begin a 
validation process under the HAC Reduction Program.
---------------------------------------------------------------------------

    \424\ 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 final rule, we discuss our 
finalized proposals for the Hospital Readmissions Reduction Program. In 
this final rule, we did not adopt any new measures into the Hospital 
Readmissions Reduction Program. However, we are finalizing our 
proposals 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 Finalized Update to Hourly Wage Rate
    In section VIII.D. of the preambles of the proposed rule (83 FR 
20515 through 20544) and this final rule, we discuss our proposals and 
newly finalized policies for 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 also discuss our proposal and 
final policy to change the EHR reporting period to a minimum of any 
continuous 90-day period in CYs 2019 and 2020 for all new and returning 
participants attesting to CMS or their State Medicaid agency. In 
addition, we establish the CQM reporting period and criteria for CY 
2019 and the removal of eight CQMs beginning in CY 2020. Lastly, we 
codify the policies for subsection (d) Puerto Rico hospitals who 
participate in the Medicare Promoting Interoperability Program for 
eligible hospitals, including policies previously implemented through 
program instruction. We did not propose to change the requirement for 
the 2015 Edition of CEHRT to be used beginning in CY 2019. In this 
final rule, we discuss and finalize our proposals with a few 
modifications regarding 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 are finalizing the new measures Query of 
PDMP and Support Electronic Referral Loops by Receiving and 
Incorporating Health Information. We are finalizing the removal of the 
Coordination of Care Through Patient Engagement objective and its 
associated measures Secure Messaging, View, Download or Transmit, and 
Patient Generated Health Data as well as the measures Request/Accept 
Summary of Care, Clinical Information Reconciliation and Patient-
Specific Education. We are renaming measures within the Health 
Information Exchange objective. These changes include changing the name 
from Send a Summary of Care, to Support Electronic Referral Loops by 
Sending Health Information; renaming the Public Health and Clinical 
Data Registry Reporting objective to Public Health and Clinical Data 
Exchange with the requirement to report on any two measures options; 
renaming the name the Patient Electronic Access to Health Information 
objective to Provider to Patient Exchange objective, and renaming the 
remaining measure, Provide Patient Access measure to Provide Patients 
Electronic Access to Their Health Information measure.
    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.\425\ Because this wage rate is based on Bureau 
of Labor Statistics (BLS) data dating to 2012, in the proposed rule (83 
FR 20562), we proposed to update the wage rate to the most recent data 
available from the BLS, which is the 2016 wage rate of $19.93.\426\ 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. the preamble of this final rule, for 
more information regarding the information collection burden related to 
reporting of CQMs.
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    \425\ Occupational Outlook Handbook. Available at: http://www.bls.gov/oes/2012/may/oes292071.htm.
    \426\ Occupational Outlook Handbook. Available at: https://www.bls.gov/oes/current/oes292071.htm.
---------------------------------------------------------------------------

    We did not receive any public comments regarding this information 
collection. For the expected effects relating to the above proposals, 
we refer readers to section I.N. of Appendix A of this final rule.
b. Burden Estimates
    In sections VIII.D.5. and 6. of the preamble of this final rule, we 
discuss our finalized policies for a new scoring methodology for 
eligible hospitals and CAHs that attest to CMS for the Promoting 
Interoperability Program, and the addition of one new opioid measure 
that is optional in 2019 and 2020. This scoring approach requires 
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. In the FY 2019 IPPS/LTCH PPS proposed rule 
(83 FR 20562 through 20564), we estimated that the new scoring 
methodology reduces 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). In the proposed rule, we 
updated 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 will be different for eligible hospitals that 
attest to a State for purposes of receiving a Medicaid incentive 
payment because the existing Stage 3 requirements will 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

[[Page 41698]]

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 finalized proposal we believe it will be reduced to 623,562.19 
hours. This burden reduction will occur as a result of the reduced 
numbers of EPs and the new scoring methodology for eligible hospitals 
and CAHs proposed in the 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 will ensue as a 
result of the changes. We note that the information collection request 
(OMB Control number 0938-1278) has been revised and 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
Sec.   495.24(d)--Objectives/Measures Medicaid (eligible             133             133            7.43          988.19           67.25       66,455.78
 hospitals/CAHs)........................................
Sec.   495.24(e)--Objectives/Measures Medicare (eligible            3300            3300            7.18          23,694           67.25    1,593,421.50
 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 will be 
$,1,593,421.5 (3,300 eligible hospitals and CAHs x 7 hours 18 minutes x 
$67.25).\427\
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    \427\ https://www.bls.gov/oes/current/oes231011.htm.
---------------------------------------------------------------------------

    In this final rule, we are finalizing our proposal that the new 
scoring methodology and changes to the Stage 3 objectives and measures 
for eligible hospitals and CAHs that attest to CMS will 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 will continue to attest to the 
objectives and measures as currently specified under Sec.  495.24(d). 
Extending this option to States will allow them flexibility to benefit 
from the improvements to meaningful use scoring outlined in this final 
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 
choose to overhaul their systems to collect data. If States do not take 
the option, they will face no burden increase or decrease.
    In section VIII.D.7. of the preamble of this final rule, we are 
finalizing our proposal that the EHR reporting periods in CYs 2019 and 
2020 for new and returning participants attesting to CMS or their State 
Medicaid agency will be a minimum of any continuous 90-day period 
within each of the CYs 2019 and 2020. This means 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 will 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, will remain the 
same as established in prior rulemaking. We finalizing our proposals to 
make 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 finalized policies 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 final rule, we are 
finalizing our proposal that the reporting period for Medicare and 
Medicaid eligible hospitals and CAHs that report CQMs electronically 
will be one, self-selected calendar quarter of CY 2019 data. We are 
also finalizing our proposal 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 finalizing our 
proposals to remove eight CQMs beginning in 2020. We believe to report 
on the 4 self-selected CQMs electronically will 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 final rule, we are 
finalizing our proposals to incorporate into our regulations program 
guidance regarding subsection (d) Puerto Rico hospitals. Because we did 
not propose any new requirements, we not believe that these proposals 
will affect burden.
    In section VIII.D.12.a. of the preamble of this final rule, we are 
finalizing our proposals 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 finalizing our 
proposals that the prior approval dollar threshold in Sec.  
495.324(b)(3) be increased to $500,000, and that a prior approval 
threshold of $500,000 be added to Sec.  495.324(b)(2). In addition, in 
light of these finalized changes, we are finalizing our proposal to 
make 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

[[Page 41699]]

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) will reduce burden on States and maintain the consistency 
of our prior approval requirements. We believe that this finalized 
proposal will 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 final rule, we are 
finalizing our proposal that the 90 percent FFP for Medicaid Promoting 
Interoperability Program administration will no longer be available for 
most State expenditures incurred after September 30, 2022. We are 
finalizing 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 will 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 finalized 
proposals will impose any additional burdens on States, because they 
only affect the timing of State expenditures.
    We did not receive any public comments specific to Medicaid 
information collection.
10. ICRs for Revisions to the Supporting Documentation Requirements for 
Medicare Cost Reports
    In section IX.B.1. of the preambles of the proposed rule (83 FR 
20545) and this final rule, we discuss our proposal and finalized 
policy 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 will complete our incorporation of 
the Form CMS-339 into all Medicare cost reports. We also discuss our 
finalized policy 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 
finalized proposal does not require additional data collection from 
OPOs or histocompatibility laboratories. This policy will benefit OPOs 
and histocompatibility laboratories because they will 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 finalized policy to incorporate 
the Provider Cost Reimbursement Questionnaire, Form CMS-339, into the 
OPO and Histocompatibility Laboratory cost report will 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 is reduced because the form is incorporated into the cost 
report. The incorporation of the Form CMS-339 into the cost report as a 
cost report worksheet will decrease burden upon OPOs and 
histocompatibility laboratories. These entities will no longer be 
required to review multiple pages of questions not applicable to them. 
This finalized policy will result in an overall burden reduction to the 
58 OPOs and 47 histocompatibility laboratories of a total of 289 hours.
    Instead, these entities are required to respond to 5 questions, 
which we estimate will take 15 minutes per entity. The total estimated 
burden across all respondents is 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 will 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 final rule, we discuss 
our final policy (with modifications to the proposal) in Sec.  
413.24(f)(5)(i)(E) 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 with 
the same fiscal year end, a cost report will be rejected for lack of 
supporting documentation if the home office or chain organization has 
not submitted, to the provider's contractor, a Home Office Cost 
Statement that corresponds to the amounts it has allocated to the 
provider's cost report. 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 with 
a different fiscal year end, a cost report will be rejected for lack of 
supporting documentation if the home office or chain organization has 
not submitted, to the provider's contractor, a Home Office Cost 
Statement that corresponds to some portion of the amounts it has 
allocated to the provider's cost report. When the provider and its home 
office have differing fiscal year ends, the provider's home office 
costs for a portion of the cost reporting period (as reflected on the 
Home Office Cost Statement) must correspond to a portion of the amount 
reported in the provider's cost report. When the provider and its home 
office have the same fiscal year end, the provider's home office's cost 
for the same time period (as reflected on the Home Office Cost 
Statement) must correspond to the costs reported in the provider's cost 
report.
    With our final policy, we anticipate that a home office with costs 
allocated to providers' cost reports within its chain organization will 
submit a Home Office Cost Statement to the providers' contractors in 
order for those providers in the chain organization 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 Home Office Cost Statement already 
reflects the requirement that a home office collect, maintain, and 
submit a list of the providers' contractors within its chain 
organization on the Home Office Cost Statement, the contractors to whom 
the Home Office Cost Statement should be sent is already known to the 
home office, and thus there is no additional burden placed upon home 
offices as a result of our finalized policy to require the home office 
or chain organization to submit to the providers'

[[Page 41700]]

contractor the Home Office Cost Statement that corresponds to all or 
any portion of the costs it has allocated to the provider, in order for 
the providers within its chain organization 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.
11. Summary of All Burden in This Final Rule
    Below is a chart reflecting the total burden and associated costs 
for the provisions included in this final rule.

------------------------------------------------------------------------
                                           Burden hours
     Information collection requests         increase/     Cost (+/-) *
                                          decrease (-) *
------------------------------------------------------------------------
Application for GME Resident Slots......             N/A             N/A
Changes--Medicare Cost Report...........            -289        -$10,907
Hospital Inpatient Quality Reporting          -1,947,338     -71,233,624
 Program................................
Hospital Value-Based Purchasing Program              N/A             N/A
 \1\....................................
HAC Reduction Program \2\...............          43,200       1,580,256
Hospital Readmissions Reduction Program              N/A             N/A
 \3\....................................
Promoting Interoperability Programs.....      -3,606,593    -327,294,661
LTCH Quality Reporting Program..........          -7,202        -482,468
PPS-Exempt Hospital Quality Reporting            -27,709      -1,013,595
 Program................................
                                         -------------------------------
    Total...............................      -5,545,931    -396,428,082
------------------------------------------------------------------------
* Numbers rounded.
\1\ Because the Hospital VBP Program uses quality measure collected
  under other programs or via Medicare fee-for-service claims hospitals
  are already submitting to CMS for payment purposes, the program does
  not anticipate any change in burden associated with finalizing removal
  of measures from the Program or retaining claims-based measures in the
  Hospital VBP Program that will be removed from the Hospital IQR
  Program.
\2\ We note that the net costs reflected in the table for the HAC
  Reduction Program do not constitute a new information collection
  requirement on participating hospitals, but a transition of the NHSN
  HAI measure validation process from one program to another based on
  our efforts to reduce measure duplication across programs.
\3\ Because the Hospital Readmissions Reduction Program measures are all
  collected via Medicare fee-for-service claims hospitals are already
  submitting to CMS for payment purposes, there is no unique information
  collection burden associated with the program.

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 final rule, the 
Centers for Medicare and Medicaid Services is amending 42 CFR Chapter 
IV as set forth below:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
1. The authority citation for part 412 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. 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 provided 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

[[Page 41701]]

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 412.23 is amended by revising paragraph (e)(3)(i) and adding 
paragraph (e)(3)(vii) to read as follows:


Sec.  412.23  Excluded hospitals: Classifications

* * * * *
    (e) * * *
    (3) Calculation of average length of stay. (i) Subject to the 
provisions of paragraphs (e)(3)(ii) through (vii) of this section, the 
average Medicare inpatient length of stay specified under paragraph 
(e)(2)(i) of this section is calculated by dividing the total number of 
covered and noncovered days of stay of Medicare inpatients (less leave 
or pass days) by the number of total Medicare discharges for the 
hospital's most recent complete cost reporting period. Subject to the 
provisions of paragraphs (e)(3)(ii) through (vii) of this section, the 
average inpatient length of stay specified under paragraph (e)(2)(ii) 
of this section is calculated by dividing the total number of days for 
all patients, including both Medicare and non-Medicare inpatients (less 
leave or pass days) by the number of total discharges for the 
hospital's most recent complete cost reporting period.
* * * * *
    (vii) For cost reporting periods beginning on or after October 1, 
2019, the Medicare inpatient days and discharges that are associated 
with patients discharged from a unit of the hospital will not be 
included in the calculation of the Medicare inpatient average length of 
stay specified under paragraph (e)(2)(i) of this section.
* * * * *

0
6. Section 412.25 is amended by--
0
a. Revising paragraphs (a)(1)(ii) and (iii), (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
    (iii) Unless it is a unit in a critical access hospital, the 
hospital of which an IRF is a unit must have at least 10 staffed and 
maintained hospital beds that are paid under the applicable payment 
system under which the hospital is paid, or at least 1 staffed and 
maintained hospital bed for every 10 certified inpatient rehabilitation 
facility beds, whichever number is greater. Otherwise, the IRF will be 
classified as an IRF hospital, rather than an IRF unit. In the case of 
an inpatient psychiatric facility unit, the hospital must have enough 
beds that are paid under the applicable payment system under which the 
hospital is paid to permit the provision of adequate cost information, 
as required by Sec.  413.24(c) of this chapter.
* * * * *
    (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
7. Section 412.64 is amended by revising paragraphs (d)(1)(vii) and 
(d)(3) to read as follows:


Sec.  412.64  Federal rates for inpatient operating costs for Federal 
fiscal year 2005 and subsequent fiscal years.

* * * * *
    (d) * * *
    (1) * * *
    (vii) For fiscal years 2017, 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
8. Section 412.90 is amended by revising paragraph (j) to read as 
follows:

[[Page 41702]]

Sec.  412.90  General rules.

* * * * *
    (j) Medicare-dependent, small rural hospitals. For cost reporting 
periods beginning on or after April 1, 1990, and before October 1, 
1994, and for discharges occurring on or after October 1, 1997 and 
before October 1, 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
9. Section 412.92 is amended--
0
a. In paragraph (a)(1)(ii) by removing the term ``intermediary'' and 
adding the term ``MAC'' in 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 and (e)(1) and (3) 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), (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 the MAC 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 the MAC 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 the 
MAC receives the complete application.
* * * * *

0
10. 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
11. 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

[[Page 41703]]

paragraph (a) of this section, during the fiscal year, based on the 
hospital's Medicare discharges from the most recently available MedPAR 
data as determined by CMS, and be located more than 15 road miles, as 
defined in paragraph (a) of this section, from the nearest ``subsection 
(d)'' (section 1886(d) of the Act) hospital.
    (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
12. 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) and (2) 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), 
(e)(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
13. 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
14. 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 and nonreimbursable Medicare bad debt costs from 2014 and 2015 
cost reports from the most recent HCRIS database extract.
* * * * *


Sec.  412.108   [Amended]

0
15. 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 41704]]

    (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 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 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 the MAC 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
16. 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
17. 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
18. 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
19. 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
20. 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
21. 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
22. Section 412.523 is amended by adding paragraphs (c)(3)(xv) and 
(d)(6) to read as follows:

[[Page 41705]]

Sec.  412.523   Methodology for calculating the Federal prospective 
payment rates.

* * * * *
    (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 1.35 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 is adjusted 
as follows:
    (i) For discharges occurring on or after October 1, 2018 and before 
October 1, 2019, by a one-time factor so that estimated aggregate 
payments to LTCH PPS standard Federal rate cases in FY 2019, and the 
portion of estimated aggregate payments to site neutral cases that are 
paid based on the LTCH PPS standard Federal rate 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. This 
adjustment only applies to the fiscal year involved and will not be 
taken into account in computing the standard Federal payment rate for a 
subsequent fiscal year.
    (ii) For discharges occurring on or after October 1, 2019 and 
before October 1, 2020, by a one-time factor so that estimated 
aggregate payments to LTCH PPS standard Federal rate cases in FY 2020, 
and the portion of estimated aggregate payments to site neutral payment 
rate cases that are paid based on the LTCH PPS standard Federal rate in 
FY 2020, 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. This adjustment only applies to the fiscal year involved and 
will not be taken into account in computing the standard Federal 
payment rate for a subsequent fiscal year.
    (iii) For discharges occurring on or after October 1, 2020, by a 
permanent, one-time factor so that estimated aggregate payments to LTCH 
PPS standard Federal rate cases in FY 2021 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) The availability of a more broadly applicable (across 
settings, populations, or conditions) measure for the particular topic.
    (v) The availability of a measure that is more proximal in time to 
desired patient outcomes for the particular topic.
    (vi) The availability of a measure that is more strongly associated 
with desired patient outcomes for the particular topic.
    (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 non-compliance 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 non-
compliance 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. For providers claiming costs on their cost 
reports that are allocated from a home office or chain organization, 
the Home Office Cost statement must be submitted by the home office or 
chain organization as set forth in paragraph (f)(5)(i)(E) of this 
section. A cost report is rejected for lack of supporting documentation 
if it does not include the following, except as provided in paragraph 
(f)(5)(i)(E) of this section:
    (A) Teaching hospitals--For teaching hospitals, the Intern and 
Resident Information System (IRIS) data.

[[Page 41706]]

    (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. (1) Same fiscal year end. 
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 with the same fiscal 
year end, a Home Office Cost Statement completed and submitted by the 
home office or chain organization to its chain provider's servicing 
contractor that corresponds to the amounts allocated from the home 
office or chain organization to the provider's cost report.
    (2) Differing fiscal year end. 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 with a different fiscal year end, a Home Office Cost 
Statement completed and submitted by the home office or chain 
organization to its chain provider's servicing contractor that 
corresponds to some portion of the amounts allocated from the home 
office or chain organization to the provider's cost report.
* * * * *

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, exceptas provided in paragraph 
(e)(1)(iv)(B) of this section, 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, provided the Medicare GME 
affiliated group meets one of the following conditions:
    (1) The Medicare GME affiliated group consists solely of two or 
more urban hospitals that qualify for adjustments to their FTE caps 
under paragraph (e)(1) of this section.
    (2) The Medicare GME affiliated group includes an urban hospital(s) 
that received FTE cap(s) under paragraph (c)(2)(i) of this section or 
Sec.  412.105(f)(1)(iv)(A) of this subchapter, or both. This Medicare 
GME affiliated group must be established effective with a July 1 date 
(the residency training year) that is at least 5 years after the start 
of the cost reporting period that coincides with or follows the start 
of the sixth program year of the first new program for which the 
hospital's FTE cap was adjusted in accordance with paragraph (e)(1) of 
this section or Sec.  412.105(f)(1)(v)(C) or (D) of this subchapter, or 
both.
* * * * *

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

[[Page 41707]]

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 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

[[Page 41708]]

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 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 the e-Prescribing measure in paragraph (e)(5)(iii)(A) of this 
section and the query of PDMP measure in paragraph (e)(5)(iii)(B) of 
this section. In 2020, eligible hospitals and CAHs have the option to 
report on the verify opioid treatment agreement measure in paragraph 
(e)(5)(iii)(C) of this section. In 2020, 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 measure is worth up to 10 points in 2019 and 5 points in 
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 measure is worth up to 5 bonus points in CY 
2019 and 5 points in subsequent years.
    (C) Verify opioid treatment agreement measure. Subject to paragraph 
(e)(3) of this section, 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 the patient's 
electronic health record using CEHRT. This measure is worth up to 5 
bonus points in CY 2019 and CY 2020.
    (iv) Exclusions in accordance with paragraph (e)(2) of this section 
and redistribution of points. An exclusion claimed under paragraph 
(e)(5)(v)(A) of this section will redistribute 10 points in CY 2019 and 
5 points in CY 2020 equally among the measures associated with the 
health information exchange objective under paragraph (e)(6) of this 
section. Beginning in CY 2020, an exclusion claimed under paragraph 
(e)(5)(v)(B), (C), or (D) of this section will redistribute 5 points 
from the measure specified in paragraph (e)(5)(iii)(B) of this section 
to the e-Prescribing measure under paragraph (e)(5)(iii)(A) of this 
section.
    (v) Exclusions in accordance with paragraph (e)(2) of this section. 
(A) Beginning with the EHR reporting period in CY 2019, 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.
    (B) Beginning with the EHR reporting period in CY 2020, an eligible 
hospital or CAH that qualifies for the exclusion in paragraph 
(e)(5)(v)(A) of this section is also excluded from the measure 
specified in paragraph (e)(5)(iii)(B) of this section.
    (C) Beginning with the EHR reporting period in CY 2020, any 
eligible hospital or CAH that does not have an internal pharmacy that 
can accept electronic prescriptions for controlled substances

[[Page 41709]]

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 measure specified 
in paragraph (e)(5)(iii)(B) of this section.
    (D) Beginning with the EHR reporting period in CY 2020, any 
eligible hospital and CAH that is unable to report on the measure 
specified in paragraph (e)(5)(iii)(B) of this section in accordance 
with applicable law may be excluded from that measure.
    (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. Any eligible hospital or CAH that is unable to implement the 
support electronic referral loops by receiving and incorporating health 
information measure under paragraph (e)(6)(ii)(B) of this section for 
an EHR reporting period in 2019 may be excluded from that measure. 
Claiming the exclusion will redistribute 20 points to the support 
electronic referral loops by sending health information measure under 
paragraph (e)(6)(ii)(A) 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 beginning in CY 
2019. 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 measure is worth up to 40 points 
beginning in CY 2019.
    (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 any 
two measures specified in paragraphs (e)(8)(ii)(A) 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. If an exclusion is claimed under paragraphs (e)(8)(iii)(A) 
through (F) of this section for each of the two measures selected for 
reporting, the 10 points for the objective specified in paragraph 
(e)(8)(i) of this section will be redistributed 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.

[[Page 41710]]

    (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 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

[[Page 41711]]

    (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 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: July 27, 2018.
Seema Verma,
Administrator, Centers for Medicare and Medicaid Services.
    Dated: July 30, 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--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 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 figures for the standardized amounts, 
offsets, and budget neutrality factors. Therefore, in this final 
rule, we are setting forth the rate-of-increase percentage for 
updating the target amounts for certain hospitals excluded from the 
IPPS that 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 LTCH PPS standard Federal payment 
rate that will 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

[[Page 41712]]

known as the national adjusted standardized amount. This amount 
reflects the national average hospital cost per case from a base 
year, updated for inflation.
    SCHs are paid based on whichever of the following rates yields 
the greatest aggregate payment: The Federal national rate 
(including, as discussed in section IV.G. of the preamble of this 
final rule, uncompensated care payments under section 1886(r)(2) of 
the Act); the updated hospital-specific rate based on FY 1982 costs 
per discharge; the updated hospital-specific rate based on FY 1987 
costs per discharge; the updated hospital-specific rate based on FY 
1996 costs per discharge; or the updated hospital-specific rate 
based on FY 2006 costs per discharge.
    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. Section 50205 of the Bipartisan 
Budget Act of 2018 extended the MDH program for discharges on or 
after October 1, 2017 through September 30, 2022.
    As discussed in section IV.B. of the preamble of this final 
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, as we proposed, we 
are making 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 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 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 final rule are 
listed in section VI. of this Addendum and are available via the 
internet on the CMS website.

II. 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 used for determining the prospective payment rates for FY 2019.
    In summary, the standardized amounts set forth in Tables 1A, 1B, 
and 1C that are listed and published in section VI. of this Addendum 
(and available via the internet on the CMS 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 final rule for a complete discussion on the 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
----------------------------------------------------------------------------------------------------------------
Market Basket Rate[dash]of[dash]Increase........             2.9             2.9             2.9             2.9
Adjustment for Failure to Submit Quality Data                0.0             0.0          -0.725          -0.725
 under Section 1886(b)(3)(B)(viii) of the Act...
Adjustment for Failure to be a Meaningful EHR                0.0          -2.175             0.0          -2.175
 User under Section 1886(b)(3)(B)(ix) of the Act
MFP Adjustment under Section 1886(b)(3)(B)(xi)              -0.8            -0.8            -0.8            -0.8
 of the Act.....................................
Statutory Adjustment under Section                         -0.75           -0.75           -0.75           -0.75
 1886(b)(3)(B)(xii) of the Act..................
Applicable Percentage Increase Applied to                   1.35          -0.825           0.625           -1.55
 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

[[Page 41713]]

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 2018 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, as we proposed, we 
applied 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, as we proposed, we applied 
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 final rule, as we proposed, we are not 
extending the imputed floor policy (neither the original methodology 
nor the alternative methodology) for FY 2019. Therefore, for FY 
2019, in this final rule, we are not including 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 FY 2019 wage index.

A. Calculation of the Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts

    In general, the national standardized amount is based on per 
discharge averages of adjusted hospital costs from a base period 
(section 1886(d)(2)(A) of the Act), updated and otherwise adjusted 
in accordance with the provisions of section 1886(d) of the Act. 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 and Hawaii, IME costs, and costs to hospitals 
serving a disproportionate share of low-income patients.
    For FY 2019, as we proposed, we are continuing 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 final rule, as we proposed, we are continuing 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, as we 
proposed, we applied 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 standardized amounts for operating costs appear in Tables 
1A, 1B, and 1C that are listed and published in section VI. of the 
Addendum to this final rule and are available via the internet on 
the CMS 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, as we proposed, we calculated 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 final rule, as we 
proposed, we used the 2014-based IPPS operating and capital market 
baskets for FY 2019. As discussed in section IV.B. of the preamble 
of this final rule, in accordance with section 1886(b)(3)(B) of the 
Act, as amended by section 3401(a) of the Affordable Care Act, as we 
proposed, we reduced the FY 2019 applicable percentage increase 
(which for this final rule is based on IGI's second quarter 2018 
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 for this final rule is also calculated 
based on IGI's second quarter 2018 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, as we proposed, we further updated 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 2018 second quarter forecast of the hospital 
market basket increase (as discussed in Appendix B of this final 
rule), the forecast of the hospital market basket increase for FY 
2019 for this final rule is 2.9 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 final 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 will be 
applied to update the national standardized amount. The standardized 
amounts shown in Tables 1A through 1C that are published in section 
VI. of this Addendum and that are available via the internet on the 
CMS 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 final rule.

4. Methodology for Calculation of the Average Standardized Amount

    The methodology we used to calculate the 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 applied 
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:

[[Page 41714]]

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, as we proposed, we adjusted 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 applied budget neutrality offsets for outliers and 
geographic reclassifications to the standardized amount based on 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 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, as we proposed, 
we are including 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, as we proposed, we 
are continuing 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 applied a proxy readmissions payment adjustment factor 
and a 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 proxy FY 2019 readmissions 
payment adjustment factors, for both the proposed rule and this 
final rule, as discussed in section IV.H. of the preamble of this 
final rule, as we proposed, we used 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 the time of the development of 
the final rule, hospitals have not yet had the opportunity to review 
and correct the data (program calculations based on the 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 final rule.)
    In addition, for FY 2019, for the purpose of modeling aggregate 
payments when determining all budget neutrality factors, as we 
proposed, we used 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

[[Page 41715]]

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), 
as we proposed, we included 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 considered 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 final rule and below, as we 
proposed, we are continuing 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 included estimated 
uncompensated care payments in this comparison.
    Similarly, for MDHs, as discussed in section IV.F. of the 
preamble of this final rule, when computing payments under the 
Federal national rate plus 75 percent of the difference between the 
payments under the Federal national rate and the payments under the 
updated hospital-specific rate, as we proposed, we continued to take 
into consideration uncompensated care payments in the computation of 
payments under the Federal rate and the hospital-specific rate for 
MDHs.
     As we proposed, we 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 applicable standardized 
amount in Tables 1A and 1B for discharges occurring in FY 2019.
     In our determination of all budget neutrality factors 
described in section II.A.4. of this Addendum, we used 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 final rule.
    Comment: Based on their review of the rate information CMS made 
available with the proposed rule, a few commenters noted that there 
appeared to be an error in the determination of the hospital-
specific payment rates for SCHs and MDHs that resulted in hospital-
specific payment rates that are too low. These commenters urged CMS 
to carefully reexamine its calculations and correct the apparent 
error in the determination of hospital-specific payment rates.
    Response: We appreciate these commenters' analysis and their 
bringing this to our attention. Upon review, we found that we 
inadvertently omitted the applicable FY 2013 factors needed to 
update the hospital-specific payment rates in the PSF from FY 2012 
dollars. We have corrected this inadvertent omission in the 
determination of the hospital-specific payment rates used for this 
final rule.

a. 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 final rule, we normalized the 
recalibrated MS-DRG relative weights by an adjustment factor so that 
the average case relative weight after recalibration is equal to the 
average case relative weight prior to recalibration. However, 
equating the average case relative weight after recalibration to the 
average case relative weight before recalibration does not 
necessarily achieve budget neutrality with respect to aggregate 
payments to hospitals because payments to hospitals are affected by 
factors other than average case relative weight. Therefore, as we 
have done in past years, as we proposed, we are making 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 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 FY 2019 relative weights, and the FY 2018 
pre-reclassified wage data, and applied the FY 2019 hospital 
readmissions payment adjustments and estimated FY 2019 hospital VBP 
payment adjustments applied above. (We note that these FY 2019 
relative weights reflect our temporary measure for FY 2019, as 
discussed in section II.G. of the preamble of this final rule, to 
set the FY 2019 relative weight at the FY 2018 final relative weight 
for MS-DRGs where the FY 2018 relative weight declined by 20 percent 
from the FY 2017 relative weight and the FY 2019 relative weight 
would have declined by 20 percent or more from the FY 2018 relative 
weight.)
    Based on this comparison, we computed a budget neutrality 
adjustment factor equal to 0.997192 and applied this factor to the 
standardized amount. As discussed in section IV. of this Addendum, 
as we also proposed, we applied the MS-DRG reclassification and 
recalibration budget neutrality factor of 0.997192 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

[[Page 41716]]

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, as 
we proposed, we are adjusting 100 percent of the wage index factor 
for occupational mix. We describe the occupational mix adjustment in 
section III.E. of the preamble of this final rule.
    To compute a 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 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 FY 2019 hospital readmissions payment adjustment and the 
estimated FY 2019 hospital VBP payment adjustment; and
     Aggregate payments using the FY 2019 relative weights 
and the FY 2019 pre-reclassified wage indexes, applied the 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 FY 2019 hospital readmissions payment 
adjustments and estimated FY 2019 hospital VBP payment adjustments 
applied above.
    In addition, we applied the MS-DRG reclassification and 
recalibration budget neutrality adjustment factor (derived in the 
first step) to the payment rates that were used to simulate payments 
for this comparison of aggregate payments from FY 2018 to FY 2019. 
By applying this methodology, we determined a budget neutrality 
adjustment factor of 1.000748 for changes to the wage index.

c. Reclassified Hospitals--Budget Neutrality Adjustment

    Section 1886(d)(8)(B) of the Act provides that certain rural 
hospitals are deemed urban. In addition, section 1886(d)(10) of the 
Act provides for the reclassification of hospitals based on 
determinations by the MGCRB. Under section 1886(d)(10) of the Act, a 
hospital may be reclassified for purposes of the wage index.
    Under section 1886(d)(8)(D) of the Act, the Secretary is 
required to adjust the standardized amount to ensure that aggregate 
payments under the IPPS after implementation of the provisions of 
sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal 
to the aggregate prospective payments that would have been made 
absent these provisions. We note that the wage index adjustments 
provided for under section 1886(d)(13) of the Act are not budget 
neutral. Section 1886(d)(13)(H) of the Act provides that any 
increase in a wage index under section 1886(d)(13) shall not be 
taken into account in applying any budget neutrality adjustment with 
respect to such index under section 1886(d)(8)(D) of the Act. To 
calculate the budget neutrality adjustment factor for FY 2019, we 
used FY 2017 discharge data to simulate payments and compared the 
following:
     Aggregate payments using the FY 2019 labor-related 
share percentages, the FY 2019 relative weights, and the 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 FY 
2019 hospital readmissions payment adjustments and the estimated FY 
2019 hospital VBP payment adjustments; and
     Aggregate payments using the FY 2019 labor-related 
share percentages, the FY 2019 relative weights, and the FY 2019 
wage data after such reclassifications, and applied the same 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 final rule, which is available via the internet on the CMS 
website. This table reflects reclassification crosswalks for FY 
2019, and applies the policies explained in section III. of the 
preamble of this final rule. Based on these simulations, we 
calculated a budget neutrality adjustment factor of 0.985932 to 
ensure that the effects of these provisions are budget neutral, 
consistent with the statute.
    The FY 2019 budget neutrality adjustment factor was applied to 
the standardized amount after removing the effects of the FY 2018 
budget neutrality adjustment factor. We note that the 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 final 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 final 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 final rule, the imputed floor is set to expire 
effective October 1, 2018, and as we proposed, we are not extending 
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, as we proposed, we 
are calculating a national rural Puerto Rico wage index. Because 
there are no rural Puerto Rico hospitals with established wage data, 
our calculation of the 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 used 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 FY 2019 rural Puerto 
Rico wage index is calculated based on the average of the 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 national rural floor budget neutrality 
adjustment factor, we used FY 2017 discharge data to simulate 
payments and the post-reclassified national wage indexes and 
compared the following:
     National simulated payments without the national rural 
floor; and
     National simulated payments with the national rural 
floor.
    Based on this comparison, we determined a national rural floor 
budget neutrality adjustment factor of 0.993142. The national 
adjustment was applied to the national wage indexes to produce a 
national rural floor budget neutral wage index.

e. Rural Community Hospital Demonstration Program Adjustment

    In section IV.L. of the preamble of this final 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 final 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 applying to make an adjustment to 
the standardized amounts to ensure the effects of the Rural 
Community Hospital Demonstration program are budget neutral is 
$58,129,609. Accordingly, using the most recent data available to 
account for the estimated costs of the demonstration program, for FY 
2019, we computed a factor of 0.999467 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 final rule on complete 
details regarding the calculation of the amount we are applying to 
make an adjustment to the standardized amount.
    We note that, as discussed in section IV.L. of the preamble of 
this final rule, as we proposed, we used updated data to the extent

[[Page 41717]]

appropriate to determine the budget neutrality offset amount for FY 
2019. We refer readers to section IV.L. of the preamble of this 
final rule on complete details regarding the availability of 
additional data prior to the FY 2019 IPPS/LTCH PPS final rule.

f. 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, as we proposed, we are implementing the required +0.5 percent 
adjustment to the standardized amount. This is a permanent 
adjustment to the payment rates.

g. Outlier Payments

    Section 1886(d)(5)(A) of the Act provides for payments in 
addition to the basic prospective payments for ``outlier'' cases 
involving extraordinarily high costs. To qualify for outlier 
payments, a case must have costs greater than the sum of the 
prospective payment rate for the 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) FY 2019 Outlier Fixed-Loss Cost Threshold

    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977 through 
50983), in response to public comments on the FY 2013 IPPS/LTCH PPS 
proposed rule, we made changes to our methodology for projecting the 
outlier fixed-loss cost threshold for FY 2014. We refer readers to 
the FY 2014 IPPS/LTCH PPS final rule for a detailed discussion of 
the changes.
    As we have done in the past, to calculate the FY 2019 outlier 
threshold, we simulated payments by applying 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 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 made 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. In the proposed rule, we stated that 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.

[[Page 41718]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     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 8.6 percent 
(1.085868) over 2 years. (We note that in the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20581) we inadvertently stated the rate-of-
change over 2 years as 9.5 percent instead of 8.6 percent. However, 
the factor in the parenthetical, 1.085868, was shown correctly.) The 
billed charges are obtained from the claim from the MedPAR file and 
inflated by the inflation factor specified above.
    Comment: Several commenters were concerned with what they stated 
was a lack of transparency with respect to the charge inflation 
component of the fixed-loss threshold calculation. The commenters 
concluded that, in the absence of access to the data or more 
specific data and information about how CMS arrived at the totals 
used in the charge inflation calculation, their ability to comment 
is limited. Several commenters requested that CMS add the claims 
data used to compute the charge inflation factor to the list of 
limited data set (LDS) files that can be ordered through the usual 
LDS data request process.
    Another commenter stated that it was unable to match the figures 
in the table from the proposed rule with publicly available data 
sources and that CMS did not disclose the source of the data. The 
commenter further stated that CMS has not made the necessary data 
available, or any guidance that describes whether and how CMS edited 
such data to arrive at the total of quarterly charges and charges 
per case used to measure charge inflation. Consequently, the 
commenter stated that the table provided in the proposed rule was 
not useful in assessing the accuracy of the charge inflation figure 
that CMS used in the proposed rule to calculate the outlier 
threshold. The commenter noted that CMS provided a detailed summary 
table by provider with the monthly charges that were used to compute 
the charge inflation factor. The commenters appreciated the 
additional data, but still believed that CMS had not provided enough 
specific information and data to allow the underlying numbers used 
in CMS' calculation of the charge inflation factor to be replicated 
and/or tested for accuracy.
    Response: We responded to a similar comment in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50375), the FY 2016 IPPS/LTCH PPS final 
rule (80 FR 49779 through 49780), the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 57283), and the FY 2018 IPPS/LTCH PPS final rule (82 FR 
38524) and refer readers to those final rules for our complete 
response. We have not yet been able to restructure the files (such 
as ensuring that personal identification information is compliant 
with privacy regulations) for release with the publication of the 
proposed rule and this final rule. As we stated in last year's final 
rule and prior rulemaking, while the charge data may not be 
immediately available after the issuance of this final rule, we 
believe the data and supporting files we have provided do provide 
the commenters with additional information that can be verified once 
the charge data are available. We have produced the actual figures 
we used and disclosed our formula. We intend to post the actual 
charge data as soon as possible so that the public can verify the 
raw data with the figures we used in the calculation. As stated 
earlier and in the proposed rule, the charge data used to calculate 
the charge inflation factor are sourced from our MedPAR database. In 
addition, as stated in the FY 2018 final rule and prior rulemaking, 
for this final rule we continue to believe that it is optimal to use 
the most recent period of charge data available to measure charge 
inflation. Similar to FY 2018, the commenters did not recommend 
using charge data from a different period to compute the charge 
inflation factor. If we computed the charge inflation factor using 
the latest data available to the public at the time of issuance of 
this final rule, we would need to compare charge data from FY 2016 
(October 2015 through September 2016) to FY 2017 (October 2016 
through September 2017), data which would be at least 10 months old 
compared to the charge data we use for the final rule under our 
current approach, which are 4 months old.
    With respect to those comments requesting that CMS add the 
claims data used to compute the charge inflation factor to the list 
of LDS files that can be ordered through the usual LDS data request 
process, we note that the commenters' views were similar to comments 
received and we responded to in the FY 2018 IPPS/LTCH PPS final rule 
(82 FR 38524 through 38525) and the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49779 through 49780), and we refer readers to those rules for 
additional details our response. As we stated in response to a 
similar comment in last year's final rule (82 FR 38525), there are 
limitations on how expeditiously we can add the charge data to the 
LDS, and we do not anticipate being able to provide the charge data 
we currently use to calculate the charge inflation factor within the 
commenters' requested timeframe. We continue to be confronted with 
the dilemma of either using older data that commenters can access 
earlier, or using the most up-to-date data which will be more 
accurate, but will not be available to the public until after 
publication of the proposed and final rules. We again invite 
commenters to inform us if they believe their need to have complete 
access to the data we use in our methodology outweighs the greater 
accuracy provided by the use of more up-to-date data. We continue to 
prefer using the latest data available at the time of the proposed 
and final rules to compute the charge inflation factor because we 
believe it leads to greater accuracy in the calculation of the 
fixed-loss cost outlier threshold. However, for the FY 2020 IPPS/
LTCH PPS proposed rule, we are continuing to consider using data 
that commenters can access earlier.
    For these reasons, we disagree that CMS has not provided 
adequate information to allow for meaningful comment, and continue 
to believe that our current methodology is the most appropriate way 
to measure charge inflation to result in the most accurate 
calculation of the outlier threshold based on the best available 
data.
    As we have done in the past, in the FY 2019 IPPS/LTCH PPS 
proposed rule (8 FR 20581), we proposed 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 that proposed rule. 
We proposed 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 proposed to continue to apply an

[[Page 41719]]

adjustment factor to the CCRs to account for cost and charge 
inflation (as explained below). In the FY 2019 IPPS/LTCH PPS 
proposed rule (83 FR 20581), we also proposed that, if more recent 
data become 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.
    Therefore, as we have done since FY 2014, we proposed 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, in the proposed 
rule, 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 final rule, in accordance with 
section 10324(a) of the Affordable Care Act, we created a wage index 
floor of 1.0000 for all hospitals located in States determined to be 
frontier States. We note that the frontier State floor adjustments 
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 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 outlier threshold for FY 
2019, it was necessary to adjust the wage index of those eligible 
hospitals in a frontier State when calculating the outlier threshold 
that results in outlier payments being 5.1 percent of total payments 
for FY 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 
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 proposed 
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 proposed not to make any assumptions regarding the 
effects of reconciliation on the outlier threshold calculation.
    Comment: Commenters expressed concern with CMS' decision not to 
consider outlier reconciliation in developing the outlier threshold 
and stated that CMS did not provide any statistics or analysis 
concerning the number of hospitals that have been subjected to 
reconciliation and the amounts recovered during this process.
    In addition to the cited resources received in previous 
iterations of this comment, one commenter referenced and provided an 
OIG report from September of 2017 (available on the website at: 
https://oig.hhs.gov/oas/reports/region7/71402800.pdf) focused on the 
reconciliation of outlier payments titled ``Vulnerabilities Remain 
in Medicare Hospital Outlier Payments.'' The commenter stated that 
CMS now has 15 full fiscal years of experience with reconciliation, 
from which to project the impact of its reconciliation in the 
upcoming fiscal year. The commenter noted that the amount of outlier 
payments subject to reconciliation does not appear to be de minimis. 
The commenter cited a 2012 OIG Report (available on the website at: 
https://oig.hhs.gov/oas/reports/region7/71002764.pdf) which 
identified approximately $664 million in unreconciled outlier 
payments. Therefore, the commenter concluded that the impact of 
reconciliation that should not be ignored when setting the 
threshold. The commenter asserted that CMS' policy of refusing to 
account for the impact of reconciliation in setting the FY 2019 
outlier fixed-loss cost threshold is neither reasonable nor 
consistent with the outlier statute.
    Response: The commenters' views were similar to comments 
received and we responded to in the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50979 to 509080) and the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50376 through 50377), and we refer readers to those rules for our 
responses. In the FY 2014 IPPS/LTCH PPS final rule, we stated that 
outlier reconciliation is a function of the cost report and Medicare 
contractors record the outlier reconciliation amount on each 
provider's cost report. Therefore, as the MACs continue to perform 
these outlier reconciliations, they record these amounts on the cost 
report, which are then publicly available through the HCRIS 
database. Therefore, the outlier reconciliation data and information 
that the commenter requested should be publicly available through 
the cost report.
    Outlier cases are, by definition, out of the ordinary, and the 
occurrence of an individual outlier case is not easily predicted. It 
is also difficult to predict their occurrence for each hospital in 
the country. This alone makes incorporating reconciliation into the 
modeling of the outlier threshold challenging and even more so when 
combined with the challenges of predicting not only outliers for use 
at hospital level, but which of those hospitals in the future will 
be reconciled. We note that the commenter did not specifically 
address how any projection of the impact of reconciliation would 
account for these issues, but we welcome recommendations or 
suggestions from the commenter or other members of the public based 
on the cost report data on how to account for reconciliation in the 
calculation of the outlier threshold. We intend to revisit this 
issue in next year's proposed rule as we continue to consider the 
feasibility of including outlier reconciliation in the modeling of 
the outlier threshold.
    Lastly, we note that the $664 million estimated figure from the 
OIG report was an aggregate estimate over an older 10-year period 
from 2002 to 2012 and was not a single year estimate. We note this 
to avoid any suggestion that if we were able to feasibly incorporate 
an estimate of outlier reconciliations in the modelling of the 
outlier threshold in future years, such an estimate would be of this 
magnitude.

[[Page 41720]]

    Comment: One commenter cited CMS' response in the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49781 and 49782) which stated in regard 
to the OIG's November 13, 2013 report (available on the website at: 
https://oig.hhs.gov/oei/reports/oei-06-10-00520.pdf) that ``we note 
that the OIG report used CCRs from 2008-2011. The CCRs are updated 
in the PSF at the time the MAC tentatively settles the hospital cost 
report, which is approximately 6 to 7 months after the cost report 
has been submitted. * * * Because hospitals typically increase their 
charges, over time CCRs will decrease but, due to the lag these 
lower CCRs will not be reflected in the PSF until the following 
tentative settlement. Thus, it is possible that the PSF will reflect 
CCRs that are similar for hospitals with high and low outlier 
payments. In addition, providers determine what they will charge for 
items, services, and procedures provided to patients, and these 
charges are the amount that the providers bill for an item, service, 
or procedure. Moreover, different hospitals can have similar lengths 
of stay but different CCRs. * * * In addition, as the commenter 
noted, there are mechanisms to avoid outlier overpayments or 
underpayments as CMS and the MACs have the authority to specify an 
alternative CCR. Also, in addition to the examples cited by the 
commenter, as we note in every proposed and final rule, hospitals 
can also request alternative CCRs. Therefore, if hospitals make 
these requests, these CCRs would be reflected in the PSF which would 
be used to compute the fixed-loss threshold.''
    The commenter stated that this response infers that the findings 
from the 2013 OIG report (that high-outlier hospitals charge 
Medicare substantially more for the same MS-DRGs, even though their 
patients had similar lengths of stay as those in all other 
hospitals) are no longer an area of concern because the report was 
based on CCRs from 2008 through 2011. The commenter stated that it 
conducted an analysis of the MedPAR data which concludes that the 
findings from the 2013 OIG Report have continued without 
interruption to present. The commenter also stated that CMS' 
response that providers may determine their charges overlooks 
section 2202.4.2 of the Provider Reimbursement Manual, Part I, 
Chapter 22, that provides that charges should reflect ``the regular 
rates established by the provider for services rendered to both 
beneficiaries and to other paying patients,'' and they ``should be 
related consistently to the cost of the services and uniformly 
applied to all patients whether inpatient or outpatient.'' The 
commenter asserted that CMS' failure to reconcile ``high-outlier'' 
payments effectively condones charging decisions based on maximizing 
outlier payments.
    The commenter also cited CMS' statement from the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50377 and 50378) which stated ``that the 
CCRs will reflect these low costs and high charges that the 
commenter referred to, and when applied to the charges on the claim 
will result in less outlier payments for such cases because the 
costs of the case will be lower when compared to the total MS-DRG 
payments excluding outlier payments.'' The commenter disagreed with 
this statement and cited the OIG's 2013 report. The commenter stated 
that the 2103 report revealed that ``high-outlier hospitals charged 
Medicare substantially more for the same MS-DRGs, yet had similar 
average lengths of stay and CCRs,'' which the commenter asserted is 
directly opposite CMS' statement.
    The commenter also asserted that it is neither consistent with 
the outlier statute nor reasonable for CMS, in modeling outlier 
payments for the upcoming fiscal year, to include outlier payments 
that were based on excessively high charges for particular MS-DRGs 
and not based on truly unusually high costs.
    The commenter also asserted that CMS is fully authorized to 
reconcile the ``high-outlier'' payments and that according to its 
position in Clarian Health v. Price, No. 16-5307 (D.C. Cir.), all 
outlier payments are subject to reconciliation, regardless of 
whether they satisfy the reconciliation criteria. The commenter 
asserted that the discretion to subject all outlier payments to 
reconciliation is necessary to respond to hospitals, like those 
identified in the 2013 OIG Report, that seek to ``inappropriately 
maximize outlier payments'' by ``operating just below the threshold 
to avoid detection.''
    Response: It is challenging to evaluate the assertion regarding 
a possible current correlation between high outlier hospitals and 
hospital charges because the commenter provided no information 
regarding its analysis. Also, even if there is some degree of 
correlation between the two, it does not necessarily mean 
categorically that these hospitals are inappropriately charging for 
purposes of Medicare outlier payments. In the absence of audits and 
analysis of these hospitals, the commenter is incorrect in 
concluding from any degree of correlation that every high outlier 
hospital must have charges not relative to their costs.
    We also note we simply indicated that providers determine what 
they will charge for items, services, and procedures provided to 
patients, and these charges are the amount that the providers bill 
for an item, service, or procedure. We never stated that providers 
should disregard the PRM when setting those charges. Any assertion 
or suggestion that CMS condones hospitals inappropriately charging 
to maximize outlier payments is incorrect. In the June 9, 2003 final 
rule, we implemented the use of tentatively settled CCRs and the 
reconciliation policy directly in response to inappropriate 
charging. In addition, the PRM cited above states that charges 
should reflect ``the regular rates established by the provider for 
services rendered to both beneficiaries and to other paying 
patients,'' and they ``should be related consistently to the cost of 
the services and uniformly applied to all patients whether inpatient 
or outpatient.'' We expect hospitals to follow these guidelines and 
the manual when setting their charges.
    With respect our statement from the FY 2015 IPPS/LTCH PPS final 
rule regarding CCRs, it is correct: CCRs will reflect low costs and 
high charges and, when applied to the charges on the claim, will 
result in less outlier payments because the costs of the case will 
be lower when compared to the total MS-DRG payments, excluding 
outlier payments. There are many factors that influence outlier 
payments. Consider a simplified example of two hospitals. One higher 
outlier hospital with average charges of $100,000 and average costs 
of $33,000 and a resulting CCR of 0.33, and another lower outlier 
hospital with average charges of $60,000 and average costs of 
$20,000 which also will result in a CCR of 0.33. As noted above, in 
the absence of audits and analysis of these hospitals, the commenter 
is incorrect in concluding from the fact that one hospital has 
higher charges and costs but the same CCR that the higher outlier 
hospital must have charges not relative to their costs. The higher 
outlier hospital may treat more resource intensive patients, which 
would factor into the aggregate outlier payments the hospital 
receives. Length of stay is not an exclusive measure of resource 
intensity.
    For similar reasons, the commenter is incorrect that the 
inclusion of hospitals with higher charges in our estimation of the 
outlier threshold means that we include ``excessively high charges 
for particular MS-DRGs and not based on truly unusually high 
costs.''
    We agree with the commenter that CMS has broad authority to 
reconcile outlier payments. However, we disagree that it is 
necessary to reconcile all outlier payments in order to address any 
individual circumstances where we believe reconciliation may be 
appropriate. As discussed in the June 9, 2003 Outlier Final Rule (68 
FR 34503), we acknowledged the commenters' concerns about the 
administrative costs associated with reprocessing and reconciling 
all inpatient claims and the desirability of limiting which 
hospitals' outlier payments will be reconciled. Therefore, we agreed 
that any reconciliation of outlier payments should be done on a 
limited basis. As described in sections IV.H. and IV.I., 
respectively, of the preamble of this final rule, sections 1886(q) 
and 1886(o) of the Act establish the Hospital Readmissions Reduction 
Program and the Hospital VBP Program, respectively. We do not 
believe that it is appropriate to include the hospital VBP payment 
adjustments and the hospital readmissions payment adjustments in the 
outlier threshold calculation or the outlier offset to the 
standardized amount. Specifically, consistent with our definition of 
the base operating DRG payment amount for the Hospital Readmissions 
Reduction Program under Sec.  412.152 and the Hospital VBP Program 
under Sec.  412.160, outlier payments under section 1886(d)(5)(A) of 
the Act are not affected by these payment adjustments. Therefore, 
outlier payments will continue to be calculated based on the 
unadjusted base DRG payment amount (as opposed to using the base-
operating DRG payment amount adjusted by the hospital readmissions 
payment adjustment and the hospital VBP payment adjustment). 
Consequently, we proposed to exclude the hospital VBP payment 
adjustments and the estimated hospital readmissions payment 
adjustments from the calculation of the outlier fixed-loss cost 
threshold.
    We note that, to the extent section 1886(r) of the Act modifies 
the DSH payment

[[Page 41721]]

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 proposed 
allocating 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 proposed to include estimated FY 2019 uncompensated 
care payments in the computation of the outlier fixed-loss cost 
threshold. Specifically, we proposed to use the estimated per-
discharge uncompensated care payments to hospitals eligible for the 
uncompensated care payment for all cases in the calculation of the 
outlier fixed-loss cost threshold methodology.
    Using this methodology, we 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 proposed 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 proposed 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.
    Comment: One commenter stated that, in the proposed rule, CMS 
indicated that it divided total outlier payments ($4,738,377,622) by 
total operating Federal payments plus total outlier payments 
($92,908,351,672 + $4,738,377,622) to calculate the Agency's 5.1 
percent target. However, the commenter stated, $4,738,377,622/
($92,908,351,672 + $4,738,377,622) does not yield 5.1 percent. 
Instead, the commenter strared, it yields approximately 4.85 
percent. The commenter added that, in fact, 5.1 percent is the 
quotient of $4,738,377,622/$92,908,351,672. Thus, based on that 
description, the commenter stated that it appears that CMS has 
mistakenly based the proposed outlier threshold on outlier payments 
totaling only 4.85 percent and, consequently, set the proposed 
outlier threshold too high.
    Response: The commenter is correct. We inadvertently referred to 
total operating payments of $92,908,351,672 in the proposed rule, 
when that figure reflected the sum of total operating Federal 
payments and total outlier payments. The corrected total operating 
Federal payments for the proposed rule is $88,169,974,050. Dividing 
the proposed total outlier payments of $4,738,377,622 by the 
corrected proposed total operating Federal payments of 
$88,169,974,050 plus proposed total outlier payments of 
$4,738,377,622 yields the 5.1 percent target. Therefore we believe 
that the proposed outlier threshold and the subsequent outlier 
payments were appropriately calculated. We thank the commenter for 
noting this error.
    Comment: One commenter believed that it is important that CMS 
accurately calculate prior year actual payment comparisons to the 
5.1 percent target. The commenter asserted that it is not possible 
for CMS to appropriately modify the methodology to achieve an 
accurate result if CMS is not aware of, or misinformed about, 
inaccuracies resulting from the prior year's methodology. The 
commenter cited the FY 2017 IPPS/LTCH PPS proposed rule as an 
example where CMS indicated that actual outlier payments for FY 2015 
were approximately 4.68 percent of overall payments. The commenter 
stated that it was concerned that CMS believed the Agency would 
reach the 5.1 percent target for FY 2015 only to learn that the 
original estimate was overestimated and still raise the threshold 
for the subsequent year.
    One commenter noted that the final outlier threshold established 
by CMS is always significantly lower than the threshold set forth in 
the proposed rule. The commenter believed the decline is most likely 
due to the use of updated CCRs or other data in calculating the 
final threshold. The commenter questioned whether CMS used more 
updated data for the FY 2017 and FY 2018 proposed rules as compared 
to prior years to calculate the proposed threshold. The commenter 
stated that, if this was the case, the use of more updated data may 
account for the decreased variance seen between the proposed and 
final thresholds in FYs 2017 and 2018 as compared to prior years. 
The commenter stated that this emphasizes that CMS must use the most 
recent data available when the Agency calculates the outlier 
threshold.
    Response: We responded to similar comments in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50378 through 50379) and refer readers to 
that rule for our response. Regarding the data used for the FY 2017 
proposed rule and final rule, we used the same update of the MedPAR 
data as in prior fiscal years. Specifically, we use the December 
update of the MedPAR for the proposed rule and the March update of 
the MedPAR for the final rule. Also, in addition to the CCRs that 
can change from the proposed rule to the final rule, other factors 
such as the market basket typically change. For example, in the 
proposed rule, the market basket was 2.8 percent, and for this final 
rule, the market basket is 2.9 percent. Focusing only on the market 
basket, a higher market basket will increase the amount of Federal 
payments (a higher standardized amount) and lower the amount of 
total outlier payments requiring a lower outlier threshold to meet 
the 5.1 percent target. Therefore, the result of a lower or higher 
outlier threshold in the final rule when comparing to the proposed 
rule can be as a result of different variables.
    Comment: Commenters expressed concerned with the increase of the 
outlier threshold from $26,601 in FY 2018 to $27,545 in FY 2019. 
They stated that the continued rise in the outlier threshold results 
in hospitals experiencing higher losses in order to receive payment 
relief, in particular.
    One commenter requested CMS to examine the reasons for the 
continued rise in the outlier threshold and to identify whether 
interventions can be taken to ensure outlier payments remain 
equitable for hospitals. Another commenter suggested a reduction to 
the outlier threshold amount. Another commenter noted that the 
proposed FY 2019 outlier threshold of $27,545 is a 3.5 percent 
increase over the FY 2018 outlier threshold. This commenter stated 
that while CMS has not made any methodological changes to its 
determination of the outlier threshold, its rise is resulting in 
hospitals having to experience higher losses in order to receive any 
payment relief.
    One commenter noted that CMS' estimate of FY 2017 outlier 
payments in the proposed rule was 5.53 percent, which is above the 
5.1 percent target but falls within the statutory 5.0 to 6.0 percent 
outlier payment range. The commenter favored a simplified 
methodology and believed that, by applying a 2-year charge inflation 
factor and a 1-year CCR factor, CMS is inadvertently compounding its 
charge increase with lower costs and overstating the outlier 
threshold. The commenter suggested that CMS apply the following 
formula to compute the FY 2019 outlier threshold: FFY 2019 charge 
inflator Error = (9.5%-8.5868% = 0.9132%)/9.5% = 9.61% Overstatement 
Suggested FY 2019 Outlier Threshold = $27,545 (proposed 2019) * 
(100%-9.61% = 90.39%) = $24,897. The commenter concluded that the FY 
2019 fixed-loss cost threshold should not exceed $24,897.
    Response: We responded to similar comments in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50379) and the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49783) and refer readers to those final rules for 
our complete responses. We also note that the final outlier 
threshold for FY 2019 (finalized below at $25,769) is lower than the 
final threshold for FY 2018 ($26,537).
    Comment: One commenter asked that CMS consider whether it is 
appropriate to include extreme cases when calculating the

[[Page 41722]]

threshold. The commenter explained that high charge cases have a 
significant impact on the threshold. The commenter observed that the 
amount of cases with over $1.5 million in charges has increased 
significantly from FY 2011 (926 cases) to FY 2017 (2,291 cases). The 
commenter believed that the impact of these cases will cause the 
threshold to rise and recommended that CMS consider the removal of 
high charge cases from the calculation of the threshold.
    Response: As we explained when responding to a similar comment 
in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38526), the 
methodology used to calculate the outlier threshold includes all 
claims in order to account for all different types of cases, 
including high charge cases, to ensure that CMS meets the 5.1 
percent target. As the commenter pointed out, the volume of these 
cases continues to rise, making their impact on the threshold 
significant. We believe excluding these cases would artificially 
lower the threshold. We believe it is important to include all cases 
in the calculation of the threshold no matter how high or low the 
charges. Including these cases with high charges lends more accuracy 
to the threshold, as these cases have an impact on the threshold and 
continue to rise in volume. Therefore, we disagree with the 
commenter.
    Comment: Some commenters believe that an error exists in the 
calculation of the proposed FY 2019 outlier threshold related to the 
use of an incorrect national average CCR. These commenters did not 
provide any additional details on the possible nature of the error, 
but urged CMS to reevaluate the outlier calculation process.
    Response: We appreciate commenters pointing this potential 
error. However, we were unable to identify such error. We have 
reviewed our outlier calculations for this final rule to ensure the 
national average CCR was calculated using the most recent available 
data at the time of the development of the final rule.
    After consideration of the public comments we received, we are 
not making any changes to our methodology in this final rule for FY 
2019. Therefore, we are using the same methodology we proposed to 
calculate the final outlier threshold. We note that, as stated 
above, we will consider for FY 2020 using data that commenters can 
access earlier to validate the charge inflation factor.
    Similar to the table provided in the proposed rule, for this 
final rule, we are providing the following table that displays 
covered charges and cases by quarter in the periods used to 
calculate the charge inflation factor based on the latest claims 
data from the MedPAR file.

----------------------------------------------------------------------------------------------------------------
                                    Covered charges                         Covered charges
                                    (April 1, 2016,     Cases (April 1,     (April 1, 2017,     Cases (April 1,
             Quarter               through March 31,     2016, through     through March 31,     2017, through
                                         2017)          March 31, 2017)          2018)          March 31, 2018)
----------------------------------------------------------------------------------------------------------------
April-June......................    $133,106,496,424           2,356,775    $137,726,975,443           2,319,109
July-September..................     139,415,422,805           2,413,871     142,676,638,337           2,363,685
October-December................     151,053,166,855           2,559,371     121,360,081,623           1,983,155
January-March...................     136,264,070,864           2,415,120     142,121,633,027           2,407,887
                                 -------------------------------------------------------------------------------
    Total.......................     559,839,156,948           9,745,137     543,885,328,430           9,073,836
----------------------------------------------------------------------------------------------------------------

    Under our current 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 $57,448 
($559,839,156,948/9,745,137) from the third quarter of FY 2016 
through the second quarter of FY 2017 (April 1, 2016, through March 
31, 2017) to the average covered charge per case of $59,939.96 
($543,885,328,430/9,073,836) from the third quarter of FY 2017 
through the second quarter of FY 2018 (April 1, 2017, through March 
31, 2018). This rate-of-change was 4.3 percent (1.04338) or 8.9 
percent (1.08864) over 2 years. The billed charges are obtained from 
the claim from the MedPAR file and inflated by the inflation factor 
specified above.
    Similar to the proposed rule, for this final rule, we have made 
available a more detailed summary table by provider with the monthly 
charges that were used to compute the charge inflation factor on the 
CMS website at: https://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/AcuteInpatientPPS/index.html (click on the link on 
the left titled ``FY 2019 IPPS Final Rule Home Page'' and then click 
the link ``FY 2019 Final Rule Data Files'').
    As we have done in the past, we are establishing the FY 2019 
outlier threshold using hospital CCRs from the March 2018 update to 
the Provider-Specific File (PSF)--the most recent available data at 
the time of the development of the final rule. We applied 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 replaced these CCRs with the statewide average 
CCR for the upcoming fiscal year. We also assigned 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 
did not apply the adjustment factors described below to hospitals 
assigned the statewide average CCR. For FY 2019, we also are 
continuing to apply an adjustment factor to the CCRs to account for 
cost and charge inflation (as explained below).
    For this final rule, as we have done since FY 2014, we are 
adjusting the CCRs from the March 2018 update of the PSF by 
comparing the percentage change in the national average case-
weighted operating CCR and capital CCR from the March 2017 update of 
the PSF to the national average case-weighted operating CCR and 
capital CCR from the March 2018 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 methodology above, for this final rule, we calculated 
a March 2017 operating national average case-weighted CCR of 
0.265819 and a March 2018 operating national average case-weighted 
CCR of 0.260874. We then calculated the percentage change between 
the two national operating case-weighted CCRs by subtracting the 
March 2017 operating national average case-weighted CCR from the 
March 2018 operating national average case-weighted CCR and then 
dividing the result by the March 2017 national operating average 
case-weighted CCR. This resulted in a national operating CCR 
adjustment factor of 0.981397.
    We used the same methodology above to adjust the capital CCRs. 
Specifically, for this final rule, we calculated a March 2017 
capital national average case-weighted CCR of 0.022671 and a March 
2018 capital national average case-weighted CCR of 0.021554. We then 
calculated the percentage change between the two national capital 
case-weighted CCRs by subtracting the March 2017 capital national 
average case-weighted CCR from the March 2018 capital national 
average case-weighted CCR and then dividing the result by the March 
2017 capital national average case-weighted CCR. This resulted in a 
national capital CCR adjustment factor of 0.950739.
    As discussed above, similar to the proposed rule, for FY 2019, 
we applied the following policies (as discussed in more details 
above):
     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.
     As we did in establishing the FY 2009 outlier threshold 
(73 FR 57891), in our projection of FY 2019 outlier payments, we

[[Page 41723]]

did not make any adjustments for the possibility that hospitals' 
CCRs and outlier payments may be reconciled upon cost report 
settlement.
     We excluded the hospital VBP payment adjustments and 
the hospital readmissions payment adjustments from the calculation 
of the outlier fixed-loss cost threshold.
     We used the estimated per-discharge uncompensated care 
payments to hospitals eligible for the uncompensated care payment 
for all cases in the calculation of the outlier fixed-loss cost 
threshold methodology.
    Using this methodology, we 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 
$25,769 and calculated total operating Federal payments of 
$88,484,589,041 and total outlier payments of $4,755,375,555. 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 (($88,484,589,041/
$93,239,964,596) x 100 = 5.1 percent). As a result, we are 
finalizing 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 
$25,769.

(2) Other Changes Concerning Outliers

    As stated in the FY 1994 IPPS final rule (58 FR 46348), we 
establish an outlier threshold that is applicable to both hospital 
inpatient operating costs and hospital inpatient capital-related 
costs. When we modeled the combined operating and capital outlier 
payments, we found that using a common threshold resulted in a lower 
percentage of outlier payments for capital-related costs than for 
operating costs. We project that the thresholds for FY 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, as we 
proposed, we reduced the FY 2019 standardized amount by the same 
percentage to account for the projected proportion of payments paid 
as outliers.
    The outlier adjustment factors applied to the standardized 
amount based on the FY 2019 outlier threshold are as follows:

------------------------------------------------------------------------
                                                Operating       Capital
                                               standardized     federal
                                                 amounts         rate
------------------------------------------------------------------------
National...................................        0.948999    0.949431
------------------------------------------------------------------------

    We applied the outlier adjustment factors to the 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 1.159 or capital CCRs greater than 0.151, 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 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 will be effective for 
discharges occurring on or after October 1, 2018 and will 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 statewide 
average capital CCRs. As previously stated, the CCRs in Tables 8A 
and 8B will 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 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

    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20583), we 
stated we believe that, in the context of the pending new technology 
add-on payment applications for KYMRIAH[supreg] and 
YESCARTA[supreg], 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.
    We invited public comments on this alternative approach for FY 
2019. We also invited public 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 stated that we were 
considering alternative approaches and authorities to encourage 
value-based care and lower drug prices. We solicited comments on how 
the payment methodology alternatives may intersect and affect future 
participation in any such alternative approaches. A summary of those 
comments and our responses can be found in section II.F.2.d. of the 
preamble of this final rule.
    As also discussed in section II.F.2.d. of the preamble of this 
final rule, building on President Trump's Blueprint to Lower Drug 
Prices and Reduce Out-of-Pocket Costs, the CMS Center for Medicare 
and Medicaid Innovation (Innovation Center) solicited public comment 
in the CY 2019 OPPS/ASC proposed rule on key design considerations 
for developing a potential model that would test private market 
strategies and introduce competition to improve quality of care for 
beneficiaries, while reducing both Medicare expenditures and 
beneficiaries' out of pocket spending. Given the relative newness of 
CAR T-cell therapy, the potential model, and our request for 
feedback on this model approach, we believe it would be premature to 
adopt changes to our existing payment mechanisms for FY 2019, 
including allowing 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 for 
individual FY 2019 cases, and payments to IPPS-excluded cancer 
hospitals beginning in FY 2019.

(4) FY 2017 Outlier Payments

    Our current estimate, using available FY 2017 claims data, is 
that actual outlier payments for FY 2017 were approximately 5.57 
percent of actual total MS-DRG payments. Therefore, the data 
indicate that,

[[Page 41724]]

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 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 final rule. We will provide an 
estimate of actual FY 2018 outlier payments in the FY 2020 IPPS/LTCH 
PPS proposed rule.
    Comment: One commenter noted that, in the proposed rule, CMS 
stated that actual outlier payments for FY 2017 were approximately 
5.53 percent of total MS-DRG payments. The commenter performed its 
own analysis and concluded that outlier payments for FY 2017 are 
approximately 5.30 percent of total MS-DRG payments. The commenter 
was concerned that CMS' estimate was overstated.
    Response: We thank the commenter for the comments. We reviewed 
our data to ensure the estimate provided is accurate. Therefore, we 
believe we have provided a reliable estimate of the outlier 
percentage for FY 2017. The commenter did not provide details 
regarding the discrepancy. We welcome additional suggestions from 
the public, including the commenter, to improve the accuracy of our 
estimate of actual outlier payments.

5. 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 applying to all hospitals, except hospitals located in Puerto 
Rico, for FY 2019. The 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 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 
applying 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 standardized amounts 
reflecting the applicable percentage increases for FY 2019.
    The 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 FY 2019 national standardized 
amount. The second through fifth columns display the changes from 
the FY 2018 standardized amounts for each applicable 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 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           If Wage Index is    If Wage Index is    If Wage Index is    If Wage Index is
 removing:                         Greater Than        Greater Than        Greater Than        Greater Than
1. FY 2018 Geographic              1.0000:             1.0000:             1.0000:             1.0000:
 Reclassification Budget          Labor (68.3%):      Labor (68.3%):      Labor (68.3%):      Labor (68.3%):
 Neutrality (0.987985)             $4,059.36.          $4,059.36.          $4,059.36.          $4,059.36.
2. FY 2018 Operating Outlier      Nonlabor (30.4%):   Nonlabor (30.4%):   Nonlabor (30.4%):   Nonlabor (30.4%):
 Offset (0.948998)                 $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.
FY 2019 Update Factor...........  1.0135............  0.99175...........  1.00625...........  0.9845.
FY 2019 MS[dash]DRG               0.997192..........  0.997192..........  0.997192..........  0.997192.
 Recalibration Budget Neutrality
 Factor.
FY 2019 Wage Index Budget         1.000748..........  1.000748..........  1.000748..........  1.000748.
 Neutrality Factor.
FY 2019 Reclassification Budget   0.985932..........  0.985932..........  0.985932..........  0.985932.
 Neutrality Factor.
FY 2019 Operating Outlier Factor  0.948999..........  0.948999..........  0.948999..........  0.948999.
FY 2019 Rural Demonstration       0.999467..........  0.999467..........  0.999467..........  0.999467.
 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).
National Standardized Amount for  Labor: $3,858.62..  Labor: $3,775.81..  Labor: $3,831.02..  Labor: $3,748.21.
 FY 2019 if Wage Index is         Nonlabor:           Nonlabor:           Nonlabor:           Nonlabor:
 Greater Than 1.0000; Labor/Non-   $1,790.90.          $1,752.47.          $1,778.09.          $1,739.66.
 Labor Share Percentage (68.3/
 31.7).

[[Page 41725]]

 
National Standardized Amount for  Labor: $3,502.70..  Labor: $3,427.53..  Labor: $3,477.65..  Labor: $3,402.48.
 FY 2019 if Wage Index is Less    Nonlabor:           Nonlabor:           Nonlabor:           Nonlabor:
 Than or Equal to 1.0000; Labor/   $2,146.82.          $2,100.75.          $2,131.46.          $2,085.39.
 Non-Labor Share Percentage (62/
 38).
----------------------------------------------------------------------------------------------------------------

B. Adjustments for Area Wage Levels and Cost-of-Living

    Tables 1A through 1C, as published in section VI. of this 
Addendum (and available via the internet on the CMS website), 
contain the labor-related and nonlabor-related shares that we used 
to calculate the prospective payment rates for hospitals located in 
the 50 States, the District of Columbia, and Puerto Rico for FY 
2019. This section addresses two types of adjustments to the 
standardized amounts that are made in determining the prospective 
payment rates as described in this Addendum.

1. Adjustment for Area Wage Levels

    Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require 
that we make an adjustment to the labor-related portion of the 
national 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 final rule, we are applying 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 applying 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 final rule, we discuss the data and methodology 
for the FY 2019 wage index.

2. Adjustment for Cost-of-Living in Alaska and Hawaii

    Section 1886(d)(5)(H) of the Act provides discretionary 
authority to the Secretary to make 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, for FY 2019, as we proposed, we are continuing 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 COLA 
factors for FY 2019.

 FY 2019 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 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 final rule, 
includes uncompensated care payments); the updated hospital-specific 
rate based on FY 1982 costs per discharge; the updated hospital-
specific rate based on FY 1987 costs per discharge; the updated 
hospital-specific rate based on FY 1996 costs per discharge; or the 
updated hospital-specific rate based on FY 2006 costs per discharge 
to determine the rate that yields the greatest aggregate payment.
    The prospective payment rate for SCHs for FY 2019 equals the 
higher of the applicable

[[Page 41726]]

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 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 final rule, section 205 of the Medicare 
Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, 
enacted on April 16, 2015) extended the MDH program (which, under 
previous law, was to be in effect for discharges on or before March 
31, 2015 only) for discharges occurring on or after April 1, 2015, 
through FY 2017 (that is, for discharges occurring on or before 
September 30, 2017). 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 
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
----------------------------------------------------------------------------------------------------------------
Market Basket Rate[dash]of[dash]Increase........             2.9             2.9             2.9             2.9
Adjustment for Failure to Submit Quality Data                  0               0          -0.725          -0.725
 under Section 1886(b)(3)(B)(viii) of the Act...
Adjustment for Failure to be a Meaningful EHR                  0          -2.175               0          -2.175
 User under Section 1886(b)(3)(B)(ix) of the Act
MFP Adjustment under Section 1886(b)(3)(B)(xi)              -0.8            -0.8            -0.8            -0.8
 of the Act.....................................
Statutory Adjustment under Section                         -0.75           -0.75           -0.75           -0.75
 1886(b)(3)(B)(xii) of the Act..................
Applicable Percentage Increase Applied to                   1.35          -0.825           0.625           -1.55
 Standardized Amount............................
----------------------------------------------------------------------------------------------------------------


[[Page 41727]]

    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 final rule.
    In addition, because SCHs and MDHs use the same MS-DRGs as other 
hospitals when they are paid based in whole or in part on the 
hospital-specific rate, the hospital-specific rate is adjusted by a 
budget neutrality factor to ensure that changes to the MS-DRG 
classifications and the recalibration of the MS-DRG relative weights 
are made in a manner so that aggregate IPPS payments are unaffected. 
Therefore, the hospital-specific rate for an SCH or an MDH is 
adjusted by the MS-DRG reclassification and recalibration budget 
neutrality factor of 0.997192, as discussed in section III. of this 
Addendum. The resulting rate is used in determining the payment rate 
that an SCH or MDH will receive for its discharges beginning on or 
after October 1, 2018. We note that, in this final 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. of the 
preamble of this final rule for a complete discussion regarding our 
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. 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 capital Federal rate for FY 2019, which will 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 capital Federal rate for FY 2019. In 
particular, we explain why the FY 2019 capital Federal rate will 
increase approximately 1.27 percent, compared to the FY 2018 capital 
Federal rate. As discussed in the impact analysis in Appendix A to 
this final rule, we estimate that capital payments per discharge 
will increase approximately 2.1 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 update factor for FY 2019 under that framework 
is 1.4 percent based on a projected 1.4 percent increase in the 
2014-based CIPI, a 0.0 percentage point adjustment for intensity, a 
0.0 percentage point adjustment for case-mix, a 0.0 percentage point 
adjustment for the DRG reclassification and recalibration, and a 
forecast error correction of 0.0 percentage point. As discussed in 
section III.C. of this Addendum, we continue to believe that the 
CIPI is the most appropriate input price index for capital costs to 
measure capital price changes in a given year. We also explain the 
basis for the FY 2019 CIPI projection in that same section of this 
Addendum. Below we describe the policy adjustments that we are 
applying in the update framework for FY 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 
will 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 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 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, as we proposed, we are making 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

[[Page 41728]]

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 indicated 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, as we proposed, we are not making 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 
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 final rule, as we proposed, we are continuing to use a 
Medicare-specific intensity measure that is based on a 5-year 
adjusted average of cost per discharge for FY 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 using 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 estimated 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, as we 
proposed, we are making 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 1.4 percent capital update factor under the capital 
update framework for FY 2019, as shown in the following table.

          CMS FY 2019 Update Factor to the Capital Federal Rate
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Capital Input Price Index *..................................        1.4
Intensity....................................................        0.0
Case-Mix Adjustment Factors:
  Real Across DRG Change.....................................        0.5
  Projected Case-Mix Change..................................        0.5
                                                              ----------
  Subtotal...................................................        1.4
Effect of FY 2017 Reclassification and Recalibration.........        0.0
Forecast Error Correction....................................        0.0
                                                              ----------
      Total Update...........................................        1.4
------------------------------------------------------------------------
* 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. 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 will equal 5.06 percent 
for inpatient capital-related payments based on the capital Federal 
rate in FY 2019. Therefore, we are applying 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 total capital Federal rate payments for FY 2019 will 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 FY 2019 outlier adjustment 
of 0.9494 is a 0.12 percent change from the FY 2018 outlier 
adjustment of 0.9483. Therefore, the net change in the outlier 
adjustment to the capital Federal rate for FY 2019 is 1.0012 
(0.9494/0.9483) so that the outlier adjustment will increase the FY 
2019 capital Federal rate by 0.12 percent compared to the FY 2018 
outlier adjustment.

3. Budget Neutrality Adjustment Factor for Changes in DRG 
Classifications and Weights and the GAF

    Section 412.308(c)(4)(ii) requires that the capital Federal rate 
be adjusted so that aggregate payments for the fiscal year based on 
the capital Federal rate, after any changes resulting from the 
annual DRG reclassification and recalibration and changes in the 
GAF, are projected to equal aggregate payments that would have been 
made on the basis of the capital Federal rate without such changes. 
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 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 FY 2019 
GAFs. To achieve budget neutrality for the changes in the GAFs, 
based on calculations using updated data, we are applying an 
incremental budget neutrality adjustment factor of 0.9986 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 FY 
2019 GAFs to estimate aggregate capital Federal rate payments based 
on the cumulative effects of the FY 2019 MS-DRG classifications and 
relative weights and the FY 2019 GAFs. The incremental adjustment 
factor for DRG classifications and changes in relative weights is 
0.9989. The incremental adjustment factors for MS-DRG 
classifications and changes in relative weights and for changes in 
the GAFs through FY 2019 is 0.9975. 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

[[Page 41729]]

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 incremental adjustment factor of 0.9975 (the product of the 
incremental national GAF budget neutrality adjustment factor of 
0.9986 and the incremental DRG budget neutrality adjustment factor 
of 0.9989) 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. 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 establishing an update of 1.4 
percent in determining the FY 2019 capital Federal rate for all 
hospitals. As a result of this update and the budget neutrality 
factors discussed earlier, we are establishing a national capital 
Federal rate of $459.72 for FY 2019. The national capital Federal 
rate for FY 2019 was calculated as follows:
     The FY 2019 update factor is 1.014; that is, the update 
is 1.4 percent.
     The 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 
0.9975.
     The FY 2019 outlier adjustment factor is 0.9494.
    We are providing the following chart that shows how each of the 
factors and adjustments for FY 2019 affects the computation of the 
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 FY 2019 
update factor has the effect of increasing the capital Federal rate 
by 1.4 percent compared to the FY 2018 capital Federal rate. The 
GAF/DRG budget neutrality adjustment factor has the effect of 
decreasing the capital Federal rate by 0.25 percent. The 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 changes will increase the 
national capital Federal rate by approximately 1.27 percent, 
compared to the FY 2018 national capital Federal rate.

      Comparison of Factors and Adjustments: FY 2018 Capital Federal Rate and FY 2019 Capital Federal Rate
----------------------------------------------------------------------------------------------------------------
                                                      FY 2018         FY 2019         Change      Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\...............................          1.0130          1.0140           1.014            1.40
GAF/DRG Adjustment Factor \1\...................          0.9987          0.9975          0.9975           -0.25
Outlier Adjustment Factor \2\...................          0.9483          0.9494          1.0012            0.12
Capital Federal Rate............................         $453.95         $459.72          1.0127        1.27 \3\
----------------------------------------------------------------------------------------------------------------
\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 0.9975 GAF/DRG budget neutrality adjustment factor for FY 2019 is a net change of 0.9975
  (or -0.25 percent).
\2\ The outlier reduction factor is not built permanently into the capital Federal rate; that is, the factor is
  not applied cumulatively in determining the capital Federal rate. Thus, for example, the net change resulting
  from the application of the FY 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.

    In this final rule, we also are providing the following chart 
that shows how the final FY 2019 capital Federal rate differs from 
the proposed FY 2019 capital Federal rate as presented in the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20587 through 20589).

 Comparison of Factors and Adjustments: Proposed FY 2019 Capital Federal Rate and Final FY 2019 Capital Federal
                                                      Rate
----------------------------------------------------------------------------------------------------------------
                                                    Proposed FY                                   Percent change
                                                       2019        Final FY 2019      Change             *
----------------------------------------------------------------------------------------------------------------
Update Factor...................................          1.0120          1.0140          1.0020            0.20
GAF/DRG Adjustment Factor.......................          0.9997          0.9975         -0.0022           -0.22
Outlier Adjustment Factor.......................          0.9494          0.9494          0.0000            0.00
Capital Federal Rate............................         $459.78         $459.72          0.9999           -0.01
----------------------------------------------------------------------------------------------------------------
* 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 outlier thresholds for FY 2019 are in 
section II.A. of this Addendum. For FY 2019, a case will qualify as 
a cost outlier if the cost for the case plus the (operating) IME and 
DSH payments (including both the empirically justified Medicare DSH 
payment and the estimated uncompensated care payment, as discussed 
in section II.A.4.g.(1) of this Addendum) is greater than the 
prospective payment rate for the MS-DRG plus the fixed-loss amount 
of $25,769.
    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

[[Page 41730]]

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 final 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 
(82 FR 38170).

2. Forecast of the CIPI for FY 2019

    Based on IHS Global Inc.'s second quarter 2018 forecast, for 
this final rule, we are forecasting the 2014-based CIPI to increase 
1.4 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 3.9 percent 
increase in other capital expense prices in FY 2019, partially 
offset by a projected 1.2 percent decline in vintage-weighted 
interest expense prices in FY 2019. The weighted average of these 
three factors produces the forecasted 1.4 percent increase for the 
2014-based CIPI in FY 2019.

IV. 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 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 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. In the FY 
2019 IPPS/LTCH PPS proposed rule (83 FR 20449), based on IGI's 2017 
fourth quarter forecast, we estimated that the 2014-based IPPS 
operating market basket update for FY 2019 was 2.8 percent (that is, 
the estimate of the market basket rate-of-increase). However, we 
proposed that if more recent data became available for the final 
rule, we would use them to calculate the IPPS operating market 
basket update for FY 2019. For this final rule, based on IGI's 2018 
second quarter forecast (which is the most recent available data), 
we estimated that the 2014-based IPPS operating market basket update 
for FY 2019 is 2.9 percent (that is, the estimate of the market 
basket rate-of-increase). 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 will be applied to the FY 2018 target amounts, in 
order to determine the FY 2019 target amounts is 2.9 percent.
    The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. 
We refer readers to section VII. of the preamble of this final rule 
and section V. of the Addendum to this final rule for the updated 
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. Changes to the Payment Rates for the LTCH PPS for FY 2019

A. LTCH PPS Standard Federal Payment Rate for FY 2019

1. Overview

    In section VII. of the preamble of this final rule, we discuss 
our annual updates to the payment rates, factors, and specific 
policies under the LTCH PPS for FY 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 final rule.
    This section of the Act further provides that the application of 
section 1886(m)(3)(B) of the Act may result in the annual update 
being less than zero for a rate year, and may result in payment 
rates for a rate year being less than such payment rates for the 
preceding rate year. (As noted in section VII.D.2.a. of the preamble 
of this final rule, the annual update to the LTCH PPS occurs on 
October 1 and we have adopted the term ``fiscal year'' (FY) rather 
than ``rate year'' (RY) under the LTCH PPS beginning October 1, 
2010. Therefore, for purposes of clarity, when discussing the annual 
update for the LTCH PPS, including the provisions of the Affordable 
Care Act, we use the term ``fiscal year'' rather than ``rate year'' 
for 2011 and subsequent years.)
    For 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 FY 2019 LTCH PPS Standard Federal Payment Rate

    Consistent with our historical practice, for FY 2019, as we 
proposed, we are applying the annual update to the LTCH PPS standard 
Federal payment rate from the previous year. Furthermore, in 
determining the LTCH PPS standard Federal payment rate for FY 2019, 
we also are making certain regulatory adjustments, consistent with 
past practices. Specifically, in determining the FY 2019 LTCH PPS 
standard Federal payment rate, as we proposed, we are applying a 
budget neutrality adjustment factor for the changes related to the 
area wage adjustment (that is, changes to the wage data and labor-
related share) in accordance with Sec.  412.523(d)(4) and a 
temporary budget neutrality adjustment factor to LTCH PPS standard 
Federal payment rate cases only for the cost of the elimination of 
the 25-percent threshold policy for FY 2019 (discussed in VII.E. of 
the preamble of this final rule).
    In this FY 2019 IPPS/LTCH PPS final rule, we are establishing an 
annual update to the LTCH PPS standard Federal payment rate of 1.35 
percent. Accordingly, under Sec.  412.523(c)(3)(xv), we are applying 
a factor of 1.0135 to the FY 2018 LTCH PPS standard Federal payment 
rate of $41,415.11 to determine the FY 2019 LTCH PPS standard 
Federal payment rate. Also, under Sec.  412.523(c)(3)(xv), applied 
in conjunction with the provisions of Sec.  412.523(c)(4), we are 
establishing an annual update to the LTCH PPS standard Federal 
payment rate of -0.65 percent (that is, an update factor of 0.9935) 
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 applying an area 
wage level budget neutrality factor to the FY 2019 LTCH PPS standard 
Federal payment rate of 0.999713 based on the best available data at 
this time, to ensure that any changes to the area wage level 
adjustment (that is, the annual update of the wage index values and 
labor-related share) would not result in any change (increase or 
decrease) in estimated aggregate LTCH PPS standard

[[Page 41731]]

Federal rate payments. Finally, we are applying a temporary budget 
neutrality adjustment factor of 0.990884 to LTCH PPS standard 
Federal payment rate cases only for the cost of the elimination of 
the 25-percent threshold policy for FY 2019 (discussed in VII.E. of 
the preamble of this final rule). Accordingly, we are establishing 
an LTCH PPS standard Federal payment rate of $41,579.65 (calculated 
as $41,415.11 x 1.0135 x 0.999713 x 0.990884) 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 establishing an LTCH PPS standard Federal payment rate of 
$40,759.12 (calculated as $41,415.11 x 0.9935 x 0.999713 x 0.990884) 
(calculations performed on rounded numbers) for FY 2019.
    We did not receive any public comments on the proposed 
development of the FY 2019 LTCH PPS standard Federal payment rate. 
Therefore, we are finalizing our proposals as described above, 
without modification.

B. 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. Geographic Classifications (Labor Market Areas) for the LTCH PPS 
Standard Federal Payment Rate

    In adjusting for the differences in area wage levels under the 
LTCH PPS, the labor-related portion of an LTCH's Federal prospective 
payment is adjusted by using an appropriate area wage index based on 
the geographic classification (labor market area) in which the LTCH 
is located. Specifically, the application of the LTCH PPS area wage 
level adjustment under existing Sec.  412.525(c) is made based on 
the location of the LTCH--either in an ``urban area,'' or a ``rural 
area,'' as defined in Sec.  412.503. Under Sec.  412.503, an ``urban 
area'' is defined as a Metropolitan Statistical Area (MSA) (which 
includes a Metropolitan division, where applicable), as defined by 
the Executive OMB and a ``rural area'' is defined as any area 
outside of an urban area. (Information on OMB's MSA delineations 
based on the 2010 standards can be found at: https://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 the proposed rule and in section III.A.2. of the 
preamble of this final 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, as we proposed, we are 
adopting this revision under the LTCH PPS, effective October 1, 
2018. Accordingly, the FY 2019 LTCH PPS wage index values in Tables 
12A and 12B listed in section VI. of the Addendum to this final 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 final rule, the revision to the CBSA-based 
delineations also is being used under the IPPS.
    We did not receive any public comments in response to our 
proposal.

3. Labor-Related Share for the LTCH PPS Standard Federal Payment Rate

    Under the payment adjustment for the differences in area wage 
levels under Sec.  412.525(c), the labor-related share of an LTCH's 
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 final rule, as we proposed, we are establishing 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.
    In the proposed rule, we proposed to establish that the labor-
related share for FY 2019 includes the sum of the labor-related

[[Page 41732]]

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 proposed to establish a 
labor-related share under the LTCH PPS for FY 2019 of 66.2 percent. 
(We noted that a proposed labor-related share of 66.2 percent was 
the same as the labor-related share for FY 2018, and although the 
relative importance of some components of the market basket have 
changed, the proposed labor-related share remained at 66.2 percent 
when aggregating these components and rounding to one decimal.) This 
proposed labor-related share was determined using the same 
methodology as employed in calculating all previous LTCH PPS labor-
related shares. Consistent with our historical practice, we also 
proposed that if more recent data became available, we would use 
that data, if appropriate, to determine the final FY 2019 labor-
related share in the final rule.
    We did not receive any public comments in response to our 
proposals. Therefore, we are finalizing our proposals, without 
modification.
    In this final rule, we are establishing 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 second quarter 2018 forecast of the 2013-
based LTCH market basket, consistent with our proposal, we are 
establishing a labor-related share under the LTCH PPS for FY 2019 of 
66.0 percent. This labor-related share is determined using the same 
methodology as employed in calculating all previous LTCH PPS labor-
related shares.
    The labor-related share for FY 2019 is the sum of the FY 2019 
relative importance of each labor-related cost category, and 
reflects 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 61.8 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, as we proposed, we are taking 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 61.8 percent for the operating cost amount to determine the 
total labor-related share for FY 2019. Therefore, as we proposed, we 
are establishing that the labor-related share under the LTCH PPS for 
FY 2019 is 66.0 percent.

4. 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 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 the 
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 proposed 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 were 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 
final rule. We proposed to compute the 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 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 proposed to continue continuing 
to apportion wage data for multicampus hospitals with campuses 
located in different labor market areas to each CBSA where the 
campus or campuses are located, consistent with the IPPS policy. 
Lastly, consistent with our existing methodology for determining the 
LTCH PPS wage index values, for FY 2019, we proposed 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 will 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 will 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.
    We did not receive any public comments in response to our 
proposals. Therefore, we are finalizing our proposals, without 
modification.
    Based on the FY 2015 IPPS wage data that we used to determine 
the FY 2019 LTCH PPS standard Federal payment rate area wage index 
values, there are no IPPS wage data for the urban area of 
Hinesville, GA (CBSA 25980). Consistent with the methodology 
discussed above, we calculated the FY 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 final 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 used to determine 
the FY 2019 LTCH PPS standard Federal payment rate area wage index 
values in this final rule, there are no rural areas without IPPS 
hospital wage data. Therefore, it is not necessary to use our 
established methodology to calculate a LTCH PPS standard Federal 
payment rate wage index value for rural areas with no IPPS wage data 
for FY 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 FY 2019 LTCH PPS standard Federal payment 
rate wage index values that will 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 final rule and available via the 
internet on the CMS website.

[[Page 41733]]

5. Budget Neutrality Adjustment for Changes to the LTCH PPS Standard 
Federal Payment Rate Area Wage Level Adjustment

    Historically, the LTCH PPS wage index and labor-related share 
are updated annually based on the latest available data. Under Sec.  
412.525(c)(2), any changes to the area wage index values or labor-
related share are to be made in a budget neutral manner such that 
estimated aggregate LTCH PPS payments are unaffected; that is, will 
be neither greater than nor less than estimated aggregate LTCH PPS 
payments without such changes to the area wage level adjustment. 
Under this policy, we determine an area wage-level adjustment budget 
neutrality factor that will be applied to the standard Federal 
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 the FY 2019 IPS/LTCH PPS proposed rule, we set forth the 
proposed methodologies we would use to determine an area wage level 
adjustment budget factor that would be applied to the LTCH PPS 
standard Federal payment rate for FY 2019. We did not receive any 
public comments in response to our proposals. Therefore, we are 
finalizing our proposals, without modification.
    In this final rule, for FY 2019 LTCH PPS standard Federal 
payment rate cases, in accordance with Sec.  412.523(d)(4), we are 
applying 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 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 determined an area wage level 
adjustment budget neutrality factor that will be applied to the LTCH 
PPS standard Federal payment rate under Sec.  412.523(d)(4) for FY 
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 FY 2019 wage index values 
(as shown in Tables 12A and 12B listed in the Addendum to this final 
rule and available via the internet on the CMS website) and the FY 
2019 labor-related share of 66.0 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 FY 2019 area wage level adjustments (calculated in Step 2) 
to determine the area wage level adjustment budget neutrality factor 
for FY 2019 LTCH PPS standard Federal payment rate payments.
    Step 4--We then applied the FY 2019 area wage level adjustment 
budget neutrality factor from Step 3 to determine the FY 2019 LTCH 
PPS standard Federal payment rate after the application of the 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 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 final rule, using the steps in the methodology 
previously described, we determined a 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 final rule, to determine the FY 2019 LTCH PPS standard Federal 
payment rate, we are applying an area wage level adjustment budget 
neutrality factor of 0.999713, in accordance with Sec.  
412.523(d)(4). The FY 2019 LTCH PPS standard Federal payment rate 
shown in Table 1E of the Addendum to this final rule reflects this 
adjustment factor.

C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located in 
Alaska and Hawaii

    Under Sec.  412.525(b), a cost-of-living adjustment (COLA) is 
provided for LTCHs located in Alaska and Hawaii to account for the 
higher costs incurred in those States. Specifically, we apply a COLA 
to payments to LTCHs located in Alaska and Hawaii by multiplying the 
nonlabor-related portion of the standard Federal payment rate by the 
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into 
account in the adjustment for area wage levels 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 the FY 2019 IPPS/
LTCH PPS 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 proposed 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).)
    We did not receive any public comments on our proposal. 
Therefore, we are adopting our proposal, without modification. 
Consistent with our historical practice, we are establishing that 
the COLA factors shown in the following table will be used to adjust 
the nonlabor-related portion of the LTCH PPS standard Federal 
payment rate for LTCHs located in Alaska and Hawaii under Sec.  
412.525(b).

[[Page 41734]]



 Cost-of-Living Adjustment Factors for Alaska and Hawaii Under the LTCH
                             PPS for FY 2019
------------------------------------------------------------------------
                                                          FY 2018 and FY
                          Area                                 2019
------------------------------------------------------------------------
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
------------------------------------------------------------------------

D. 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 
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, as we proposed, we used 
the most recent data available to determine the LTCH total CCR 
ceiling for FY 2019 in this final rule. Specifically, in this final 
rule, using our established methodology for determining the LTCH 
total CCR ceiling based on IPPS total CCR data from the March 2018 
update of the Provider Specific File (PSF), which is the most recent 
data available, we are establishing an LTCH total CCR ceiling of 
1.27 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).
    We did not receive any public comments on our proposals. 
Therefore, we are finalizing our proposals as described above, 
without modification.

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

[[Page 41735]]

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 final rule, using our established 
methodology for determining the LTCH statewide average CCRs, based 
on the most recent complete IPPS ``total CCR'' data from the March 
2018 update of the PSF, as we proposed, we are establishing LTCH PPS 
statewide average total CCRs for urban and rural hospitals that will 
be effective for discharges occurring on or after October 1, 2018, 
through September 30, 2019, in Table 8C listed in section VI. of the 
Addendum to this final rule (and available via the internet on the 
CMS website). Consistent with our historical practice, as we also 
proposed, we used more recent data to determine the LTCH PPS 
statewide average total CCRs for FY 2019 in this 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 March 
2018. Therefore, consistent with our existing methodology, as we 
proposed, we used 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 IPPS 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, 
as we proposed, we used 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, as we proposed, we are continuing to use, as a proxy, 
the national average total CCR for urban IPPS hospitals and the 
national average total CCR for rural IPPS hospitals, respectively. 
We are using this proxy because we believe that the CCR data in the 
PSF for Maryland hospitals may not be entirely accurate (as 
discussed in greater detail in the FY 2007 IPPS final rule (71 FR 
48120)).
    We did not receive any public comments on our proposals. 
Therefore, we are finalizing our proposals as described above, 
without modification.

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. 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 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 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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20595), we 
proposed 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 payment rates and policies for 
these cases presented in that proposed rule).
    Specifically, based on the most recent complete LTCH data 
available at that 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 determined 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 adjusted LTCH PPS standard 
Federal payment rate payment and the fixed-loss amount for LTCH PPS 
standard Federal payment rate cases of $30,639).
    Comment: Several commenters expressed concerns with the proposed 
fixed-loss amount for HCO cases paid under the LTCH PPS standard 
Federal payment rate, noting that the proposed fixed-loss amount, 
11.9 percent greater than the fixed-loss amount in FY 2018, is the 
third consecutive year with a greater than 10-percent increase. 
Moreover, some commenters noted that the provider data used for the 
proposed rule included one new provider with a CCR of 1.029 which 
accounted for 2.65 percent of all outlier payments, despite 
accounting for only 0.116 percent of all LTCH PPS standard Federal

[[Page 41736]]

payment rate cases. Commenters attributed approximately $1,100 of 
the proposed increase to the fixed-loss amount to this one provider.
    Response: In the FY 2019 IPPS/LTCH PPPS proposed rule (83 FR 
20595), we noted 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 the 
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.
    As described in the FY 2019 IPPS/LTCH PPS proposed rule (82 FR 
20595), we used CCRs from the December 2017 update of the PSF as 
they were the best available data at that time, which included the 
provider with a CCR of 1.029 as point out by some commenters. We 
note that while a CCR over 1.0 is generally considered high, and is 
significantly higher than prior CCRs for that provider, a CCR of 
1.029 is within the current CCR ceiling of 1.280 established in the 
FY 2018 IPPS/LTCH PPS final rule (82 FR 38541). In addition, that 
provider's CCR was in the PSF with an effective date of July 1, 2016 
and, therefore, was the CCR used to determine that provider's LTCH 
PPS payments (such as outliers and site neutral payment rate 
payments) until it was updated with an effective date of January 1, 
2018, which, as anticipated by some commenters, has resulted in 
lowering the fixed-loss amount for FY 2019 as compared to the 
proposed FY 2019 fixed-loss amount of $30,639 (as described in more 
detail below). For these reasons, we did not believe it was 
inappropriate to use that provider's CCR for the calculations in the 
proposed rule.
    Consistent with our historical practice of using the best data 
available, as we proposed, for this final rule we are using the best 
available data, including CCRs from the March 2018 update of the PSF 
as described below. We note that the CCR for the provider noted by 
the commenters has decreased from 1.029 to 0.323, which we used for 
the calculations in this final rule.
    Comment: A few commenters requested that CMS provide more 
information regarding the fixed-loss amount for HCO cases paid under 
the LTCH PPS standard Federal payment rate, specifically requesting 
the charge inflation factor for LTCH PPS standard Federal payment 
rate cases and an explanation on its calculation.
    Response: We regret the inadvertent omission of the 2-year 
inflation factor from FY 2017 to FY 2019 in the FY 2019 IPPS/LTCH 
PPS proposed rule. Consistent with our historical approach, in the 
proposed rule we applied a factor based on IGI's most recent 
estimate of the 2013-based LTCH market basket increase from FY 2017 
to FY 2019, which, at that time, was 5.3 percent. For this FY 2019 
IPPS/LTCH PPS final rule, based on the Office of Actuary's most 
recent second quarter 2018 forecast of the 2013-based of the LTCH 
market basket increase from FY 2017 to FY 2019, we are using an 
inflation factor of 5.7 percent.
    Comment: One commenter stated that, with the increasing the 
fixed-loss amount for HCO cases paid under the LTCH PPS standard 
Federal payment rate over the past 5 years, the ``additional `days 
of losses' covered by the HCO amount is now approaching 10 days'', 
and requested that CMS evaluate if the 8-percent outlier target is 
satisfactory under the LTCH PPS.
    Response: We agree that an increase in the HCO amount can lead 
to an increase in the ``days of losses.'' However, a change to the 
HCO payment target for LTCH PPS standard Federal payment rate cases 
can only be accomplished through statute. Specifically, section 
1886(m)(7) of the Act, requires that 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.
    Consistent with our historical practice of using the best data 
available, as we proposed, when determining the fixed-loss amount 
for LTCH PPS standard Federal payment rate cases for FY 2019 in this 
final rule, we used the most recent available LTCH claims data and 
CCR data. In this FY 2019 IPPS/LTCH PPS final rule, we are 
continuing 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 will 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 payment rates and policies for these cases 
presented in this final rule). Specifically, based on the most 
recent complete LTCH data available at this time (that is, LTCH 
claims data from the March 2018 update of the FY 2017 MedPAR file 
and CCRs from the March 2018 update of the PSF), we determined a 
fixed-loss amount for LTCH PPS standard Federal payment rate cases 
for FY 2019 of $27,124 that will result in estimated outlier 
payments projected to be equal to 7.975 percent of estimated FY 2019 
payments for such cases. Under the broad authority of section 
123(a)(1) of the BBRA and section 307(b)(1) of the BIPA, we are 
establishing a fixed-loss amount of $27,124 for LTCH PPS standard 
Federal payment rate cases for FY 2019. Under this policy, 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 adjusted LTCH PPS standard Federal payment rate 
payment and the fixed-loss amount for LTCH PPS standard Federal 
payment rate cases of $27,124).
    We note that the fixed-loss amount for HCO cases paid under the 
LTCH PPS standard Federal payment rate in FY 2019 of $27,124 is 
significantly lower than proposed FY 2019 fixed-loss amount of 
$30,639, and slightly lower than the FY 2018 fixed-loss amount for 
LTCH PPS standard Federal payment rate cases of $27,381. This 
decrease is primarily attributable to the updated CCRs used for this 
final rule, including the provider discussed above whose CCR 
decreased from 1.029 to 0.323.
    Based on the most recent available data at the time of this 
final 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 7.4 percent of the 
estimated total LTCH PPS payments in FY 2018, which is below the 
7.975 percent target by approximately 0.6 percentage points. We also 
note the change in our estimate of FY 2018 HCO payments between the 
proposed and final rule decreased from 8.0 percent to 7.4 percent, 
and this change is largely attributable to updates to CCRs, from the 
December 2017 update of the PSF to the March 2018 update of the PSF 
and includes the provider discussed above whose CCR decreased from 
1.029 to 0.323.

4. 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

[[Page 41737]]

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 final 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 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 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 fixed-loss amount for site neutral payment rate cases 
for FY 2019 is the IPPS fixed-loss amount for FY 2019. Therefore, 
consistent with past practice, in the FY 2019 IPPS/LTCH PPS proposed 
rule (83 FR 20595 and 20596), for FY 2019, we proposed that the 
applicable HCO threshold for site neutral payment rate cases is the 
sum of the site neutral payment rate for the case and the IPPS 
fixed-loss amount. That is, we proposed 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 the 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 proposed 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).
    We did not receive any public comments on our proposals to use 
the FY 2019 IPPS fixed-loss amount and 5.1 percent HCO target for 
LTCH discharges paid at the site neutral payment rate in FY 2019. In 
this final rule, we are finalizing these proposals without 
modification.
    Therefore, for FY 2019, as we proposed, we are establishing that 
the applicable HCO threshold for site neutral payment rate cases is 
the sum of the site neutral payment rate for the case and the IPPS 
fixed loss amount. That is, we are establishing a fixed-loss amount 
for site neutral payment rate cases of $25,769, which is the same FY 
2019 IPPS fixed-loss amount discussed in section II.A.4.g.(1). of 
the Addendum to this final rule. We continue to believe that this 
policy will reduce differences between HCO payments for similar 
cases under the IPPS and site neutral payment rate cases under the 
LTCH PPS and promote fairness between the two systems. Accordingly, 
under this policy, for FY 2019, we will calculate a HCO payment for 
site neutral payment rate cases with costs that exceed the HCO 
threshold amount, which is equal to 80 percent of the difference 
between the estimated cost of the case and the outlier threshold 
(the sum of site neutral payment rate payment and the fixed loss 
amount for site neutral payment rate cases of $25,769).
    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, as we proposed, we are continuing to use the policy adopted 
for FY 2018.
    As discussed earlier, consistent with the IPPS HCO payment 
threshold, we estimate our fixed-loss threshold of $25,769 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 proposed 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 noted 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).
    Comment: As was the case in the FY 2016 through FY 2018 
rulemaking cycles, commenters again objected to the proposed site 
neutral payment rate HCO budget neutrality adjustment, claiming that 
it results in savings to the Medicare program instead of being 
budget neutral. The commenters' primary objection was again based on 
their belief that, because the IPPS base rates used in the IPPS 
comparable per diem amount calculation of the site neutral payment 
rate include a budget neutrality adjustment for IPPS HCO payments 
(that is, a 5.1 percent adjustment on the operating IPPS

[[Page 41738]]

standardized amount), an ``additional'' budget neutrality factor is 
not necessary and is, in fact, duplicative.
    Response: We continue to disagree with the commenters that a 
budget neutrality adjustment for site neutral payment rate HCO 
payments is inappropriate, unnecessary, or duplicative. As we 
discussed in response to similar comments (82 FR 38545 through 
38546, 81 FR 57308 through 57309, and 80 FR 49621 through 49622), we 
have the authority to adopt the site neutral payment rate HCO policy 
in a budget neutral manner. More importantly, we continue to believe 
this budget neutrality adjustment is appropriate for reasons 
outlined in our response to the nearly identical comments in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 57308 through 57309) and our 
response to similar comments in the FY 2016 IPPS/LTCH PPS final rule 
(80 FR 49621 through 49622).
    After consideration of the public comments we received, we are 
finalizing our proposal to apply a budget neutrality adjustment for 
HCO payments made to site neutral payment rate cases. Therefore, to 
ensure that estimated HCO payments payable to site neutral payment 
rate cases in FY 2019 will not result 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 portion of the blended rate payment 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 
this final rule, as proposed, we are applying a budget neutrality 
factor of 0.949 (that is, the decimal equivalent of a 5.1 percent 
reduction, determined as 1.0-5.1/100 = 0.949) to the site neutral 
payment rate (without any applicable HCO payment).

E. Update to the IPPS Comparable Amount 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 the FY 2019 IPPS/
LTCH PPS proposed rule (83 FR 20596) as well as in section IV.F.3. 
of the preamble of this final rule, based on the most recent data 
available, our estimate of 75 percent of the amount that would 
otherwise have been paid as Medicare 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 projected 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 the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20596), for FY 
2019, we proposed 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 proposed that if more recent data 
became available, if appropriate, we would use that data to 
determine this factor in this final rule.
    We did not receive any public comments in response to our 
proposal. In addition, there are no more recent data available to 
use that would affect the calculations determined in the proposed 
rule. Therefore, we are finalizing our proposal that, for FY 2019, 
the calculation of the ``IPPS comparable amount'' under Sec.  
412.529 includes 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. (We note that we also proposed that the ``IPPS equivalent 
amount'' under Sec.  412.538 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. However, as discussed in 
section VII.E. of the preamble of this final rule, we are finalizing 
our proposal to remove the provisions of Sec.  412.538, and 
reserving this section.)

F. Computing the 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 labor-related share of 
the LTCH PPS standard Federal payment rate for a case by the 
applicable LTCH PPS wage index (the FY 2019 values are shown in 
Tables 12A through 12B listed in section VI. of the Addendum to this 
final 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 FY 2019 factors are shown in the 
chart in section V.C. of this Addendum) in accordance with Sec.  
412.525(b). In this final rule, as we proposed, we are establishing 
an LTCH PPS standard Federal payment rate for FY 2019 of $41,579.65, 
as discussed in section V.A. of the Addendum to this final rule. We 
illustrate the

[[Page 41739]]

methodology to adjust the 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 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 final 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 relative weight for FY 2019 of 0.9583 
(obtained from Table 11 listed in section VI. of the Addendum to 
this final 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 Federal prospective payment amount by multiplying the 
unadjusted FY 2019 LTCH PPS standard Federal payment rate 
($41,579.65) by the labor-related share (66.0 percent) and the wage 
index value (1.0511). This wage-adjusted amount was then added to 
the nonlabor-related portion of the unadjusted LTCH PPS standard 
Federal payment rate (34.0 percent; adjusted for cost of living, if 
applicable) to determine the adjusted LTCH PPS standard Federal 
payment rate, which is then multiplied by the MS-LTC-DRG relative 
weight (0.9583) to calculate the total adjusted LTCH PPS standard 
Federal prospective payment for FY 2019 ($41,189.62). The table 
below illustrates the components of the calculations in this 
example.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Unadjusted LTCH PPS Standard Federal Prospective Payment      $41,579.65
 Rate...................................................
Labor-Related Share.....................................         x 0.660
Labor-Related Portion of the LTCH PPS Standard Federal      = $27,442.57
 Payment Rate...........................................
Wage Index (CBSA 16974).................................        x 1.0511
Wage-Adjusted Labor Share of LTCH PPS Standard Federal      = $28,844.89
 Payment Rate...........................................
Nonlabor-Related Portion of the LTCH PPS Standard           + $14,137.08
 Federal Payment Rate ($41,579.65 x 0.340)..............
Adjusted LTCH PPS Standard Federal Payment Amount.......    = $42,981.97
MS-LTC-DRG 189 Relative Weight..........................        x 0.9583
Total Adjusted LTCH PPS Standard Federal Prospective        = $41,189.62
 Payment................................................
------------------------------------------------------------------------

VI. Tables Referenced in This Rule Generally Available Through the 
Internet on the CMS Website

    This section lists the tables referred to throughout the 
preamble of this final rule and in the 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 
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 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 FY 2019 
IPPS/LTCH PPS final 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 final rule. 
This table consists of the following: A list of counties that are 
eligible for the out-migration adjustment for FY 2019 identified by 
FIPS county code, the FY 2019 out-migration adjustment, and the 
number of years the adjustment will be in effect. We believe this 
new table will make the 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 final 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 final rule, we have 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.--Secondary Diagnosis Order 
Additions to the CC Exclusion List; Table 6G.2.--Principal Diagnosis 
Order Additions to the CC Exclusion List; Table 6H.1.--Secondary 
Diagnosis Order Deletions to the CC Exclusion List; Table 6H.2.--
Principal Diagnosis Order Deletions to the CC Exclusion List; Table 
6I.--Complete MCC List; Table 6I.1.--Additions to the MCC List; 
Table 6I.2.--Deletions to the MCC List; Table 6J.--Complete CC List; 
Table 6J.1.--Additions to the CC List; Table 6J.2.--Deletions to the 
CC List; Table 6K.--Complete List of CC Exclusions; and Table 6P.--
ICD-10-CM and ICD-10-PCS Codes for MS-DRG Changes. Table 6P contains 
multiple tables, 6P.1c. through 6P.1f., that include the ICD-10-CM 
and ICD-10-PCS code lists relating to specific MS-DRG changes.
    In addition, under the HAC Reduction Program, established by 
section 3008 of the Affordable Care Act, a hospital's total payment 
may be reduced by 1 percent if it is in the lowest HAC performance 
quartile. However, as discussed in section IV.K. of the preamble of 
this final rule, we are not providing the hospital-level data as a 
table associated with this final rule. The hospital-level data for 
the FY 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 final 
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 providing the 
thresholds previously included in Table 10 as one of the publicly 
available data files 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 final rule regarding our inclusion of 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 final 
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

[[Page 41740]]

contains the MS-LTC-DRGs and their respective 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 final rule and available via the internet on the CMS website). 
Because the information contained in Tables 13A and 13B does not 
contain payment rates or factors for the applicable payment year, we 
are generally providing 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 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 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.
    As discussed in section IV.H. of the preamble of this final 
rule, the final FY 2019 readmissions payment adjustment factors, 
which are typically included in Table 15 of the final rule, are not 
available at this time because hospitals have not yet had the 
opportunity to review and correct the data (program calculations 
based on the 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 data. After hospitals have been given 
an opportunity to review and correct their calculations for FY 2019, 
we will post Table 15 (which will be available via the internet on 
the CMS website) to display the final FY 2019 readmissions payment 
adjustment factors that will be applicable to discharges occurring 
on or after October 1, 2018. We expect Table 15 will be posted on 
the CMS website in the fall of 2018.
    In addition, Table 18 associated with this final rule contains 
the 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 final rule are generally 
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 Final Rule Home Page'' or ``Acute 
Inpatient--Files for Download.''

Table 2.--Case-Mix Index and Wage Index Table by CCN--FY 2019
Table 3.--Wage Index Table by CBSA--FY 2019
Table 4.--List of Counties Eligible for the Out-Migration Adjustment 
under Section 1886(d)(13) of the Act--FY 2019
Table 5.--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.--Secondary Diagnosis Order Additions to the CC 
Exclusions List--FY 2019
Table 6G.2.--Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2019
Table 6H.1.--Secondary Diagnosis Order Deletions to the CC 
Exclusions List--FY 2019
Table 6H.2.--Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2019
Table 6I.--Complete MCC List--FY 2019
Table 6I.1.--Additions to the MCC List--FY 2019
Table 6I.2.--Deletions to the MCC List--FY 2019
Table 6J.--Complete CC List--FY 2019
Table 6J.1.--Additions to the CC List--FY 2019
Table 6J.2.--Deletions to the CC List--FY 2019
Table 6K.--Complete List of CC Exclusions--FY 2019
Table 6P.--ICD-10-CM and ICD-10-PCS Codes for MS-DRG Changes--FY 
2019
Table 7A.--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay: FY 2017 MedPAR Update--March 2018 GROUPER V35.0 MS-
DRGs
Table 7B.--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay: FY 2017 MedPAR Update--March 2018 GROUPER V36.0 MS-
DRGs
Table 8A.--FY 2019 Statewide Average Operating Cost-to-Charge Ratios 
(CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--FY 2019 Statewide Average Capital Cost-to-Charge Ratios 
(CCRs) for Acute Care Hospitals
Table 15.--FY 2019 Readmissions Adjustment Factors (We note that, as 
discussed earlier, Table 15 will be posted on the CMS website in the 
fall of 2018.)
Table 16A.--Updated Proxy Hospital Value-Based Purchasing (VBP) 
Program Adjustment Factors for FY 2019
Table 18.--FY 2019 Medicare DSH Uncompensated Care Payment Factor 3

    The following LTCH PPS tables for this FY 2019 final 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-F:

Table 8C.--FY 2019 Statewide Average Total Cost-to-Charge Ratios 
(CCRs) for LTCHs (Urban and Rural)
Table 11.--MS-LTC-DRGs, Relative Weights, Geometric Average Length 
of Stay, and Short-Stay Outlier (SSO) Threshold for LTCH PPS 
Discharges Occurring from October 1, 2018 through September 30, 2019
Table 12A.--LTCH PPS Wage Index for Urban Areas for Discharges 
Occurring from October 1, 2018 through September 30, 2019
Table 12B.--LTCH PPS Wage Index for Rural Areas for Discharges 
Occurring from October 1, 2018 through September 30, 2019

                                       Table 1A--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 = 1.5   is NOT a meaningful EHR user (update  and is a meaningful EHR user (update    and is NOT a meaningful EHR User
               percent)                           = -0.825 percent)                     = 0.625 percent)                  (update = -1.55 percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
       Labor             Nonlabor             Labor             Nonlabor            Labor             Nonlabor            Labor             Nonlabor
--------------------------------------------------------------------------------------------------------------------------------------------------------
       $3,858.62           $1,790.90          $3,775.81          $1,752.47          $3,831.02          $1,778.09          $3,748.21          $1,739.66
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 41741]]


                                       Table 1B--National Adjusted Operating Standardized Amounts, Labor/Nonlabor
                         [(62 percent labor share/38 percent nonlabor share if wage index is less than or equal to 1)--FY 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 = 1.35   is NOT a meaningful EHR user (update  and is a meaningful EHR user (update    and is NOT a meaningful EHR user
               percent)                           = -0.825 percent)                     = 0.625 percent)                  (update = -1.55 percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
       Labor             Nonlabor             Labor             Nonlabor            Labor             Nonlabor            Labor             Nonlabor
--------------------------------------------------------------------------------------------------------------------------------------------------------
       $3,502.70           $2,146.82          $3,427.53          $2,100.75          $3,477.65          $2,131.46          $3,402.48          $2,085.39
--------------------------------------------------------------------------------------------------------------------------------------------------------


         Table 1C--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......       $3,502.70        $2,146.82
----------------------------------------------------------------------------------------------------------------
\1\ For FY 2019, there are no CBSAs in Puerto Rico with a national wage index greater than 1.


             Table 1D--Capital Standard Federal Payment Rate
                                [FY 2019]
------------------------------------------------------------------------
                                                               Rate
------------------------------------------------------------------------
National...............................................         $459.72
------------------------------------------------------------------------


            Table 1E--LTCH PPS Standard Federal Payment Rate
                                [FY 2019]
------------------------------------------------------------------------
                                   Full update (1.35  Reduced update * (-
                                       percent)          0.65 percent)
------------------------------------------------------------------------
Standard Federal Rate...........         $41,579.65          $40,759.12
------------------------------------------------------------------------
* 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 final rule is necessary in order to make payment and policy 
changes under the Medicare IPPS for Medicare acute care hospital 
inpatient services for operating and capital-related costs as well 
as for certain hospitals and hospital units excluded from the IPPS. 
This final rule also is necessary to make payment and policy changes 
for Medicare hospitals under the LTCH PPS. Also as we note below, 
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 final rule, such as the 
updates to the IPPS and LTCH PPS rates, are needed to further each 
of these goals while maintaining the financial viability of the 
hospital industry and ensuring access to high quality health care 
for Medicare beneficiaries. We expect that these changes will ensure 
that the outcomes of the prospective payment systems are reasonable 
and equitable, while avoiding or minimizing unintended adverse 
consequences.

B. Overall Impact

    We have examined the impacts of this final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 
30, 1993), Executive Order 13563 on Improving Regulation and 
Regulatory Review (January 18, 2011), the Regulatory Flexibility Act 
(RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the 
Social Security Act, section 202 of the Unfunded Mandates Reform Act 
of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), the Congressional Review Act (5 U.S.C. 
804(2), and Executive Order 13771 on Reducing Regulation and 
Controlling Regulatory Costs (January 30, 2017).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a rule: 
(1) Having an annual effect on the economy of $100 million or more 
in any 1 year, or adversely and materially affecting a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or 
communities (also referred to as ``economically significant''); (2) 
creating a serious inconsistency or otherwise interfering with an 
action taken or planned by another agency; (3) materially altering 
the budgetary impacts of entitlement grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raising novel legal or policy issues arising out of legal mandates, 
the President's priorities, or the principles set forth in the 
Executive Order.
    We have determined that this final rule is a major rule as 
defined in 5 U.S.C. 804(2). We estimate that the changes for FY 2019 
acute care hospital operating and capital payments will redistribute 
amounts in excess of $100 million to acute care hospitals. The 
applicable percentage increase to the IPPS rates required by the 
statute, in conjunction with other payment changes in this final 
rule, will result in an estimated $4.8 billion increase in FY 2019 
payments, primarily

[[Page 41742]]

driven by a combined $4.4 billion increase in FY 2019 operating 
payments and uncompensated care payments, and a combined $0.4 
billion increase in FY 2019 capital payments, new technology add-on 
payments, and low-volume hospital payments. These changes are 
relative to payments made in FY 2018. The impact analysis of the 
capital payments can be found in section I.I. of this Appendix. In 
addition, as described in section I.J. of this Appendix, LTCHs are 
expected to experience an increase in payments by $39 million in FY 
2019 relative to FY 2018.
    Our operating impact estimate includes the 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 final rule. In addition, our operating payment 
impact estimate includes the 1.35 percent hospital update to the 
standardized amount (which includes the estimated 2.9 percent market 
basket update less 0.8 percentage point for the multifactor 
productivity adjustment and less 0.75 percentage point required 
under the Affordable Care Act). The estimates of IPPS operating 
payments to acute care hospitals do not reflect any changes in 
hospital admissions or real case-mix intensity, which will also 
affect overall payment changes.
    The analysis in this Appendix, in conjunction with the remainder 
of this document, demonstrates that this final rule is consistent 
with the regulatory philosophy and principles identified in 
Executive Orders 12866 and 13563, the RFA, and section 1102(b) of 
the Act. This final rule will affect payments to a substantial 
number of small rural hospitals, as well as other classes of 
hospitals, and the effects on some hospitals may be significant. 
Finally, in accordance with the provisions of Executive Order 12866, 
the Executive Office of Management and Budget has reviewed this 
final rule.

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 final rule will further each 
of these goals while maintaining the financial viability of the 
hospital industry and ensuring access to high quality health care 
for Medicare beneficiaries. We expect that these changes will ensure 
that the outcomes of the prospective payment systems are reasonable 
and equitable, while avoiding or minimizing unintended adverse 
consequences.
    Because this final rule contains a range of policies, we refer 
readers to the section of the final rule where each policy is 
discussed. These sections include the rationale for our decisions, 
including the need for the policy.

D. Limitations of Our Analysis

    The following quantitative analysis presents the projected 
effects of our policy changes, as well as statutory changes 
effective for FY 2019, on various hospital groups. We estimate the 
effects of individual policy changes by estimating payments per 
case, while holding all other payment policies constant. We use the 
best data available, but, generally unless specifically indicated, 
we do not attempt to make adjustments for future changes in such 
variables as admissions, lengths of stay, case-mix, changes to the 
Medicare population, or incentives. In addition, we discuss 
limitations of our analysis for specific policies in the discussion 
of those 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 July 2018, there were 3,256 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 1,398 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 changes to 
the prospective payment systems for these IPPS-excluded hospitals 
and units are not included in this final rule. The impact of the 
update and policy changes to the LTCH PPS for FY 2019 is discussed 
in section I.J. of this Appendix.

F. Effects on Hospitals and Hospital Units Excluded From the IPPS

    As of July 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 846 rehabilitation 
units, and approximately 417 LTCHs, are paid the Federal prospective 
per discharge rate under the IRF PPS and the LTCH PPS, respectively, 
and 538 psychiatric hospitals and 1,084 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 
final rule. The impacts of the changes on LTCHs are discussed in 
section I.J. of this Appendix.
    For children's hospitals, the 11 cancer hospitals, the 5 short-
term acute care hospitals located in the Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa, extended neoplastic 
disease care hospitals, and RNHCIs, the update of the rate-of-
increase limit (or target amount) is 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 2018 second quarter forecast of the 2014-based 
IPPS market basket increase, we are estimating the FY 2019 update to 
be 2.9 percent (that is, the estimate of the market basket rate-of-
increase). We used the most recent data available for this final 
rule to calculate the IPPS operating market basket update for FY 
2019. However, the Affordable Care Act requires an adjustment for 
multifactor productivity (0.8 percentage point for FY 2019) and a 
0.75 percentage point reduction to the market basket update, 
resulting in a 1.35 percent applicable percentage increase for IPPS 
hospitals that submit quality data and are meaningful EHR users, as 
discussed in section IV.B. of the preamble of this final rule. 
Children's hospitals, the 11 cancer hospitals, the 5 short-term 
acute care hospitals located in the Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa, 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 update is the percentage increase in the 2014-based 
IPPS operating market basket for FY 2019, estimated at 2.9 percent, 
without the reductions described previously under the Affordable 
Care Act.
    The impact of the update in the rate-of-increase limit on those 
excluded hospitals depends on the cumulative cost increases 
experienced by each excluded hospital since its applicable base 
period. For excluded hospitals that have maintained their cost 
increases at a level below the rate-of-increase limits since their 
base period, the major effect is on the level of incentive payments 
these excluded hospitals receive. Conversely, for excluded hospitals 
with cost increases above the cumulative update in their rate-of-
increase limits, the major effect is the amount of excess costs that 
would not be paid.

[[Page 41743]]

    We note that, under Sec.  413.40(d)(3), an excluded hospital 
that continues to be paid under the TEFRA system and whose costs 
exceed 110 percent of its rate-of-increase limit receives its rate-
of-increase limit plus the lesser of: (1) 50 percent of its 
reasonable costs in excess of 110 percent of the limit; or (2) 10 
percent of its limit. In addition, under the various provisions set 
forth in Sec.  413.40, hospitals can obtain payment adjustments for 
justifiable increases in operating costs that exceed the limit.

G. Quantitative Effects of the Policy Changes Under the IPPS for 
Operating Costs

1. Basis and Methodology of Estimates

    In this final rule, we are announcing policy changes and payment 
rate updates for the IPPS for FY 2019 for operating costs of acute 
care hospitals. The 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 total 
FY 2019 operating payments will increase by 2.4 percent, compared to 
FY 2018. In addition to the applicable percentage increase, this 
amount reflects the 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 will also affect overall payment 
changes.
    We have prepared separate impact analyses of the changes to each 
system. This section deals with the changes to the operating 
inpatient prospective payment system for acute care hospitals. Our 
payment simulation model relies on the most recent available claims 
data to enable us to estimate the impacts on payments per case of 
certain changes in this final rule. However, there are other changes 
for which we do not have data available that would allow us to 
estimate the payment impacts using this model. For those changes, we 
have attempted to predict the payment impacts based upon our 
experience and other more limited data.
    The data used in developing the quantitative analyses of changes 
in payments per case presented 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 
changes to the operating PPS do not incorporate cost data, data from 
the most recently available hospital cost reports were used to 
categorize hospitals. Our analysis has several qualifications. 
First, in this analysis, we do not make adjustments for future 
changes in such variables as admissions, lengths of stay, or 
underlying growth in real case-mix. Second, due to the 
interdependent nature of the IPPS payment components, it is very 
difficult to precisely quantify the impact associated with each 
change. Third, we use various data sources to categorize hospitals 
in the tables. In some cases, particularly the number of beds, there 
is a fair degree of variation in the data from the different 
sources. We have attempted to construct these variables with the 
best available source overall. However, for individual hospitals, 
some miscategorizations are possible.
    Using cases from the FY 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 payments under the capital IPPS, and the impact of 
payments for costs other than inpatient operating costs, are not 
analyzed in this section. Estimated payment impacts of the capital 
IPPS for FY 2019 are discussed in section I.I. of this Appendix.
    We discuss the following changes:
     The effects of the application of the adjustment 
required under section 414 of the MACRA and the applicable 
percentage increase (including the market basket update, the 
multifactor productivity adjustment, and the applicable percentage 
reduction in accordance with the Affordable Care Act) to the 
standardized amount and hospital-specific rates.
     The effects of the changes to the relative weights and 
MS-DRG GROUPER.
     The effects of the changes in hospitals' wage index 
values reflecting updated wage data from hospitals' cost reporting 
periods beginning during FY 2015, compared to the FY 2014 wage data, 
to calculate the FY 2019 wage index.
     The effects of the geographic reclassifications by the 
MGCRB (as of publication of this final rule) that will be effective 
for FY 2019.
     The effects of the rural floor with the application of 
the national budget neutrality factor to the wage index, and the 
expiration of the imputed floor.
     The effects of the 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 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 payments based on the FY 
2019 policies relative to payments based on FY 2018 policies that 
include the applicable percentage increase of 1.35 percent (or 2.9 
percent market basket update with a 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 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 
hospital-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 Public Law 109-171, as amended by section 4102(b)(1)(A) 
of the ARRA (Pub. L. 111-5) and by section 3401(a)(2) of the 
Affordable Care Act (Pub. L. 111-148), provides that, for FY 2007 
and each subsequent year through FY 2014, the update factor will 
include a reduction of 2.0 percentage points for any subsection (d) 
hospital that does not submit data on measures in a form and manner, 
and at a time specified by the Secretary. Beginning in FY 2015, the 
reduction is one-quarter of such applicable percentage increase 
determined without regard to section 1886(b)(3)(B)(ix), (xi), or 
(xii) of the Act, or one-quarter of the market basket update. 
Therefore, for FY 2019, hospitals that do not submit quality 
information under rules established by the Secretary and that are 
meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act will 
receive an applicable percentage increase of 0.625 percent. At the 
time this impact was prepared, 49 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 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, hospitals that are identified as not meaningful EHR users and 
do submit quality information under section 1886(b)(3)(B)(viii) of 
the Act will receive an applicable percentage increase of -0.825 
percent. At the time this impact analysis was prepared, 137 
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 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 will receive an 
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, 40 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.

[[Page 41744]]

    Each policy change, statutory or otherwise, is then added 
incrementally to this baseline, finally arriving at an FY 2019 model 
incorporating all of the changes. This simulation allows us to 
isolate the effects of each change.
    Our comparison illustrates the 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 update to the 
standardized amount. In accordance with section 1886(b)(3)(B)(i) of 
the Act, we are updating the standardized amounts for FY 2019 using 
an applicable percentage increase of 1.35 percent. This includes our 
forecasted IPPS operating hospital market basket increase of 2.9 
percent with a 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 will receive an update of 0.625 percent. This 
update includes a reduction of one-quarter of the market basket 
update for failure to submit these data. Hospitals that do comply 
with the quality data submission requirements but are not meaningful 
EHR users will receive an update of -0.825 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 will 
receive an update of -1.55 percent. Under section 1886(b)(3)(B)(iv) 
of the Act, the update to the hospital-specific amounts for SCHs and 
MDHs is also equal to the applicable percentage increase, or 1.35 
percent, if the hospital submits quality data and is a meaningful 
EHR user.
    A second significant factor that affects the 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 are no longer reclassified in FY 2019. 
Conversely, payments may increase for hospitals not reclassified in 
FY 2018 that are reclassified in FY 2019.

2. Analysis of Table I

    Table I displays the results of our analysis of the 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 overall impact on the 3,256 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 2,483 
hospitals located in urban areas included in our analysis. Among 
these, there are 1,302 hospitals located in large urban areas 
(populations over 1 million), and 1,181 hospitals in other urban 
areas (populations of 1 million or fewer). In addition, there are 
773 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 2,264, 
1,317, 947, and 992, respectively.
    The next three groupings examine the impacts of the changes on 
hospitals grouped by whether or not they have GME residency programs 
(teaching hospitals that receive an IME adjustment) or receive 
Medicare DSH payments, or some combination of these two adjustments. 
There are 2,157 nonteaching hospitals in our analysis, 849 teaching 
hospitals with fewer than 100 residents, and 250 teaching hospitals 
with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their 
DSH payment status, and whether they are considered urban or rural 
for DSH purposes. The next category groups together hospitals 
considered urban or rural, in terms of whether they receive the IME 
adjustment, the DSH adjustment, both, or neither.
    The next three rows examine the impacts of the changes on rural 
hospitals by special payment groups (SCHs, MDHs and RRCs). There 
were 327 RRCs, 312 SCHs, 140 MDHs, 134 hospitals that are both SCHs 
and RRCs, and 16 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 inpatient days. These data were taken from the FY 2016 or FY 
2015 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.

                                                         Table I--Impact Analysis of Changes to the IPPS for Operating Costs for FY 2019
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   FY 2019
                                                                                                 weights and                                        Rural floor
                                                                                Hospital rate    DRG changes    FY 2019 wage                           with       Application of
                                                                  Number of      update and         with          data with      FY 2019 MGCRB    application of   the frontier     All FY 2019
                                                                hospitals \1\    adjustment    application of  application of  reclassifications  national rural  wage index and      changes
                                                                                 under MACRA    recalibration    wage budget                       floor budget    outmigration
                                                                                                   budget        neutrality                         neutrality      adjustment
                                                                                                 neutrality
                                                               ..............         (1) \2\         (2) \3\         (3) \4\           (4) \5\          (5) \6\         (6) \7\         (7) \8\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All Hospitals................................................           3,256             1.8               0               0                 0                0             0.1             2.4
By Geographic Location:
    Urban hospitals..........................................           2,483             1.8               0               0              -0.1                0             0.1             2.5
    Large urban areas........................................           1,302             1.8             0.1               0              -0.7                0               0             2.4
    Other urban areas........................................           1,181             1.8               0               0               0.5              0.1             0.2             2.5
    Rural hospitals..........................................             773             1.5            -0.3            -0.1               1.2             -0.2             0.1             1.2
Bed Size (Urban):
    0-99 beds................................................             644             1.7            -0.5             0.1              -0.7              0.1             0.2             1.7
    100-199 beds.............................................             763             1.8               0               0              -0.1              0.1             0.2             2.2
    200-299 beds.............................................             433             1.8               0               0               0.1                0             0.1             2.3
    300-499 beds.............................................             424             1.8             0.1               0              -0.1                0             0.1             2.5
    500 or more beds.........................................             219             1.8             0.1               0              -0.2                0               0             2.9
Bed Size (Rural):
    0-49 beds................................................             306             1.4            -0.5               0               0.3             -0.2             0.2             0.9
    50-99 beds...............................................             274             1.3            -0.4               0               0.7             -0.1             0.2             1.1
    100-149 beds.............................................             108             1.6            -0.5            -0.1               0.9             -0.2               0             1.2
    150-199 beds.............................................              45             1.7            -0.1            -0.2                 2             -0.2             0.3             1.4
    200 or more beds.........................................              40             1.7             0.1            -0.2               2.4             -0.2               0             1.6
Urban by Region:
    New England..............................................             113             1.8             0.1            -0.5               2.6              2.5             0.1             4.7
    Middle Atlantic..........................................             310             1.8             0.2               0               0.3             -0.4             0.1             2.3
    South Atlantic...........................................             401             1.8               0            -0.1              -0.5             -0.3               0             2.1
    East North Central.......................................             386             1.8             0.1            -0.2              -0.4             -0.4             0.1             2.1
    East South Central.......................................             147             1.8               0               0              -0.4             -0.3               0             2.1

[[Page 41745]]

 
    West North Central.......................................             158             1.8            -0.1               0              -0.8             -0.3             0.6             2.1
    West South Central.......................................             379             1.8               0             0.2              -0.7             -0.3               0             2.3
    Mountain.................................................             164             1.7            -0.1            -0.7              -0.2              1.1             0.3             2.1
    Pacific..................................................             374             1.8            -0.1             0.8               0.1              0.2             0.1             3.2
    Puerto Rico..............................................              51             1.8               0            -1.2              -1.2              0.1             0.1             0.8
Rural by Region:
    New England..............................................              20             1.5             0.1            -0.5               1.5             -0.3               0             0.9
    Middle Atlantic..........................................              53             1.5            -0.2            -0.1               0.7             -0.2             0.1             1.4
    South Atlantic...........................................             122             1.6            -0.2            -0.2               1.7             -0.2             0.1             1.2
    East North Central.......................................             114             1.5            -0.3             0.1               0.9             -0.1               0             1.1
    East South Central.......................................             150             1.7            -0.1            -0.2               2.5             -0.3             0.1             1.8
    West North Central.......................................              94             1.3            -0.5               0               0.1                0             0.2             0.9
    West South Central.......................................             145             1.5            -0.3             0.2               1.3             -0.3             0.2             1.5
    Mountain.................................................              52             1.3            -1.1            -0.4                 0             -0.1             0.8             0.8
    Pacific..................................................              23             1.4            -0.4            -0.2               0.8             -0.1               0               1
By Payment Classification:
Urban hospitals..............................................           2,264             1.8               0               0              -0.6                0             0.1             2.3
    Large urban areas........................................           1,317             1.8             0.1               0              -0.7                0               0             2.4
    Other urban areas........................................             947             1.8               0               0              -0.3              0.2             0.2             2.1
    Rural areas..............................................             992             1.7            -0.1               0               1.9             -0.1             0.1             2.7
Teaching Status:
    Nonteaching..............................................           2,157             1.7            -0.1               0               0.1              0.1             0.1             2.1
    Fewer than 100 residents.................................             849             1.8               0               0              -0.2             -0.1             0.2             2.2
    100 or more residents....................................             250             1.8             0.2               0               0.1             -0.1               0             3.1
Urban DSH:
Non-DSH......................................................             520             1.8            -0.3            -0.2              -0.2             -0.1             0.2             2.1
    100 or more beds.........................................           1,462             1.8             0.1               0              -0.6              0.1             0.1             2.3
    Less than 100 beds.......................................             367             1.7            -0.2             0.3              -0.6              0.1             0.1             1.9
Rural DSH:
    SCH......................................................             256             1.2            -0.6            -0.1                 0             -0.1               0             0.7
    RRC......................................................             382             1.7               0             0.1               2.3             -0.2             0.1             3.1
    100 or more beds.........................................              33             1.8               0            -0.6                 1              0.2             0.1             2.9
    Less than 100 beds.......................................             236             1.6            -0.3               0               0.8             -0.2             0.3             1.5
Urban teaching and DSH:
    Both teaching and DSH....................................             805             1.8             0.1               0              -0.6             -0.1             0.1             2.4
    Teaching and no DSH......................................              89             1.9            -0.1            -0.1              -0.5             -0.1               0             2.3
    No teaching and DSH......................................           1,024             1.8               0             0.1              -0.4              0.3             0.1             2.2
    No teaching and no DSH...................................             346             1.8            -0.3            -0.2              -0.6             -0.1             0.2             1.8
Special Hospital Types:
    RRC......................................................             327             1.8               0             0.2               2.5             -0.2             0.2             3.4
    SCH......................................................             312             1.1            -0.5             0.1              -0.1             -0.1               0             0.8
    MDH......................................................             140             1.5            -0.5            -0.1               0.8                0               0             1.2
    SCH and RRC..............................................             134             1.4            -0.2            -0.2               0.3                0             0.1             1.2
    MDH and RRC..............................................              16             1.5            -0.4               0               0.8             -0.1               0             1.1
Type of Ownership:
    Voluntary................................................           1,899             1.8               0               0                 0                0             0.1             2.4
    Proprietary..............................................             856             1.8               0            -0.1              -0.1                0             0.1             2.1
    Government...............................................             501             1.7             0.1             0.2              -0.1             -0.1               0             2.5
Medicare Utilization as a Percent of Inpatient Days:
    0-25.....................................................             602             1.8             0.1            -0.1              -0.5                0               0             2.3
    25-50....................................................           2,139             1.8               0               0                 0                0             0.1             2.5
    50-65....................................................             421             1.7            -0.2            -0.1               0.6              0.2             0.1             1.7
    Over 65..................................................              73             1.1             0.5            -0.1              -0.4             -0.3             0.1             2.5
FY 2019 Reclassifications by the Medicare Geographic
 Classification Review Board:
    All Reclassified Hospitals...............................             856             1.8               0             0.1               2.4             -0.2               0             2.8
    Non-Reclassified Hospitals...............................           2,400             1.8               0               0                -1              0.1             0.1             2.2
    Urban Hospitals Reclassified.............................             585             1.8               0             0.1               2.4             -0.2               0               3
    Urban Non-Reclassified Hospitals.........................           1,838             1.8               0               0              -1.1              0.1             0.1             2.3
    Rural Hospitals Reclassified Full Year...................             271             1.5            -0.2            -0.1               2.1             -0.2             0.1             1.5

[[Page 41746]]

 
    Rural Non-Reclassified Hospitals Full Year...............             455             1.4            -0.5            -0.1              -0.4             -0.1             0.3             0.8
    All Section 401 Reclassified Hospitals...................             266             1.7               0             0.1               2.3             -0.1             0.1             3.4
    Other Reclassified Hospitals (Section 1886(d)(8)(B)).....              47             1.7            -0.2            -0.1               2.8             -0.3               0             1.5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Because data necessary to classify some hospitals by category were missing, the total number of hospitals in each category may not equal the national total. Discharge data are from FY
  2017, and hospital cost report data are from reporting periods beginning in FY 2016 and FY 2015.
\2\ This column displays the payment impact of the hospital rate update and other adjustments, including the 1.35 percent adjustment to the national standardized amount and the hospital-
  specific rate (the estimated 2.9 percent market basket update reduced by 0.8 percentage point for the multifactor productivity adjustment and the 0.75 percentage point reduction under the
  Affordable Care Act), and the 0.5 percent adjustment to the national standardized amount required under section 414 of the MACRA.
\3\ This column displays the payment impact of the changes to the Version 36 GROUPER, the changes to the relative weights and the recalibration of the MS-DRG weights based on FY 2017 MedPAR
  data in accordance with section 1886(d)(4)(C)(iii) of the Act. This column displays the application of the recalibration budget neutrality factor of 0.997192 in accordance with section
  1886(d)(4)(C)(iii) of the Act.
\4\ This column displays the payment impact of the update to wage index data using FY 2015 cost report data and the OMB labor market area delineations based on 2010 Decennial Census data. This
  column displays the payment impact of the application of the wage budget neutrality factor, which is calculated separately from the recalibration budget neutrality factor, and is calculated
  in accordance with section 1886(d)(3)(E)(i) of the Act. The wage budget neutrality factor is 1.000748.
\5\ Shown here are the effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB). The effects demonstrate the FY 2019 payment impact of going from
  no reclassifications to the reclassifications scheduled to be in effect for FY 2019. Reclassification for prior years has no bearing on the payment impacts shown here. This column reflects
  the geographic budget neutrality factor of 0.985932.
\6\ This column displays the effects of the rural floor and expiration of the imputed floor. The Affordable Care Act requires the rural floor budget neutrality adjustment to be 100 percent
  national level adjustment. The rural floor budget neutrality factor applied to the wage index is 0.993142.
\7\ This column shows the combined impact of the policy required under section 10324 of the Affordable Care Act that hospitals located in frontier States have a wage index no less than 1.0 and
  of section 1886(d)(13) of the Act, as added by section 505 of Public Law 108-173, which provides for an increase in a hospital's wage index if a threshold percentage of residents of the
  county where the hospital is located commute to work at hospitals in counties with higher wage indexes. These are not budget neutral policies.
\8\ This column shows the estimated change in payments from FY 2018 to FY 2019.

a. Effects of the Hospital Update and Other Adjustments (Column 1)

    As discussed in section IV.B. of the preamble of this final 
rule, this column includes the hospital update, including the 2.9 
percent market basket update, the 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. In 
addition, as discussed in section II.D. of the preamble of this 
final rule, this column includes the FY 2019 +0.5 percent adjustment 
required under section 414 of the MACRA. As a result, we are making 
a 1.85 percent update to the national standardized amount. This 
column also includes the update to the hospital-specific rates which 
includes the 2.9 percent market basket update, the 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 making a 1.35 percent 
update to the hospital-specific rates.
    Overall, hospitals will experience a 1.8 percent increase in 
payments primarily due to the combined effects of the hospital 
update to the national standardized amount and the hospital update 
to the hospital-specific rate. Hospitals that are paid under the 
hospital-specific rate will experience a 1.35 percent increase in 
payments; therefore, hospital categories containing hospitals paid 
under the hospital specific rate will experience a lower than 
average increase in payments.

b. Effects of the Changes to the MS-DRG Reclassifications and Relative 
Cost-Based Weights With Recalibration Budget Neutrality (Column 2)

    Column 2 shows the effects of the changes to the MS-DRGs and 
relative weights with the application of the recalibration budget 
neutrality factor to the standardized amounts. Section 
1886(d)(4)(C)(i) of the Act requires us annually to make appropriate 
classification changes in order to reflect changes in treatment 
patterns, technology, and any other factors that may change the 
relative use of hospital resources. Consistent with section 
1886(d)(4)(C)(iii) of the Act, we calculated a recalibration budget 
neutrality factor to account for the changes in MS-DRGs and relative 
weights to ensure that the overall payment impact is budget neutral.
    As discussed in section II.E. of the preamble of this final 
rule, the FY 2019 MS-DRG relative weights will 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 relative weights 
and the reclassification changes to the GROUPER are described in 
more detail in section II.G. of the preamble of this final rule.
    The ``All Hospitals'' line in Column 2 indicates that changes 
due to the MS-DRGs and relative weights will result in a 0.0 percent 
change in payments with the application of the recalibration budget 
neutrality factor of 0.997192 to the standardized amount. Hospital 
categories that generally treat more medical cases than surgical 
cases will experience a decrease in their payments under the 
relative weights. For example, rural hospitals will 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 will experience an increase 
in payments of 0.2 percent as those hospitals treat more surgical 
cases than medical cases.

c. Effects of the Wage Index Changes (Column 3)

    Column 3 shows the impact of updated wage data using FY 2015 
cost report data, with the application of the wage budget neutrality 
factor. The wage index is calculated and assigned to hospitals on 
the basis of the labor market area in which the hospital is located. 
Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we 
delineate hospital labor market areas based on the Core Based 
Statistical Areas (CBSAs) established by OMB. The current 
statistical standards used in FY 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/

[[Page 41747]]

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 final rule for a discussion of our 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 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 payment parameters constant in this 
simulation. That is, Column 3 shows the 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 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 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 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 calculated 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 FY 2019 wage budget neutrality factor is 
1.000748, and the overall payment change is 0 percent.
    Column 3 shows the impacts of updating the wage data using FY 
2015 cost reports. Overall, the new wage data and the labor-related 
share, combined with the wage budget neutrality adjustment, will 
lead to no change for all hospitals, as shown in Column 3.
    In looking at the wage data itself, the national average hourly 
wage will 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 1.02 percent increase in the 
national average hourly wage. Of the 3,252 hospitals with wage data 
for both FYs 2018 and 2019, 1,475 or 45.4 percent will 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 changes in the average hourly wage data for FY 2019 
relative to FY 2018. Among urban hospitals, 10 will experience a 
decrease of 10 percent or more, and 3 urban hospitals will 
experience an increase of 10 percent or more. One hundred five urban 
hospitals will experience an increase or decrease of at least 5 
percent or more but less than 10 percent. Among rural hospitals, 3 
will experience an increase of 10 percent or more, and 2 will 
experience a decrease of 10 percent or more. Nine rural hospitals 
will experience an increase or decrease of at least 5 percent or 
more but less than 10 percent. However, 726 rural hospitals will 
experience increases or decreases of less than 5 percent, while 
2,360 urban hospitals will experience increases or decreases of less 
than 5 percent. No urban hospitals and 34 rural hospitals will 
experience no change to their wage index. These figures reflect 
changes in the ``pre-reclassified, occupational mix-adjusted wage 
index,'' that is, the wage index before the application of 
geographic reclassification, the rural 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 final rule for a complete discussion of the exceptions and 
adjustments to the wage index.) We note that the ``post-reclassified 
wage index'' or ``payment wage index,'' which is the wage index that 
includes all such exceptions and adjustments (as reflected in Tables 
2 and 3 associated with this final rule, which are available via the 
internet on the CMS 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 pre-
reclassified wage index figures in the following chart may 
illustrate a somewhat larger or smaller change than will occur in a 
hospital's payment wage index and total payment.
    The following chart shows the projected impact of changes in the 
area wage index values for urban and rural hospitals.

------------------------------------------------------------------------
                                                Number of hospitals
 FY 2019 percentage change in area wage  -------------------------------
              index values                     Urban           Rural
------------------------------------------------------------------------
Increase 10 percent or more.............               3               3
Increase greater than or equal to 5                   62               3
 percent and less than 10 percent.......
Increase or decrease less than 5 percent           2,360             726
Decrease greater than or equal to 5                   43               6
 percent and less than 10 percent.......
Decrease 10 percent or more.............              10               2
Unchanged...............................               0              34
------------------------------------------------------------------------

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 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 final 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 applying an adjustment 
of 0.985932 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 final rule). 
Geographic reclassification generally benefits hospitals in rural 
areas. We estimate that the geographic reclassification will 
increase payments to rural hospitals by an average of 1.2 percent. 
By region, with the exception of rural providers in the Mountain 
region which will experience no change, all the rural hospital 
categories will experience increases in payments due to MGCRB 
reclassifications.
    Table 2 listed in section VI. of the Addendum to this final rule 
and available via

[[Page 41748]]

the internet on the CMS website reflects the reclassifications for 
FY 2019.

e. Effects of the 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 
IPPS/LTCH PPS final rule, section 4410 of Public Law 105-33 
established the rural floor by requiring that the wage index for a 
hospital in any urban area cannot be less than the wage index 
received by rural hospitals in the same State. We will apply a 
uniform budget neutrality adjustment to the wage index. As discussed 
in section III.G. of the preamble of this final rule, we are not 
extending the imputed floor policy. Therefore, Column 5 shows the 
effects of the 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 FY 2019 rural floor budget neutrality factor to be 
applied to the wage index of 0.993142, which will reduce wage 
indexes by 0.69 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 post-reclassification FY 2019 wage index of providers 
before the 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) will experience 
a decrease in payments due to the budget neutrality adjustment that 
is applied nationally to their wage index.
    We estimate that 263 hospitals will receive the rural floor in 
FY 2019. All IPPS hospitals in our model will have their wage index 
reduced by the rural floor budget neutrality adjustment of 0.993142. 
We project that, in aggregate, rural hospitals will experience a 0.2 
percent decrease in payments as a result of the application of the 
rural floor budget neutrality because the rural hospitals do not 
benefit from the rural floor, but have their wage indexes downwardly 
adjusted to ensure that the application of the rural floor is budget 
neutral overall. We project hospitals located in urban areas will 
experience no change in payments because increases in payments by 
hospitals benefitting from the rural floor offset decreases in 
payments by nonrural floor urban hospitals whose wage index is 
downwardly adjusted by the rural floor budget neutrality factor. 
Urban hospitals in the New England region will experience a 2.5 
percent increase in payments primarily due to the application of the 
rural floor in Massachusetts. Twenty nine urban providers in 
Massachusetts are expected to receive the rural floor wage index 
value, including the rural floor budget neutrality adjustment, 
increasing payments overall to hospitals in Massachusetts by an 
estimated $121 million. We estimate that Massachusetts hospitals 
will receive approximately a 3.3 percent increase in IPPS payments 
due to the application of the rural floor in FY 2019. We note that 
the significant increase in overall payments to hospitals in 
Massachusetts compared to past years is due primarily to the 
increase in the Massachusetts rural floor as a result of the recent 
reclassification of Brigham and Women's Hospital in the city of 
Boston as a rural hospital under Sec.  412.103. We also note that 
this table does not reflect all of the additional Medicare payments 
resulting from the reclassification of Brigham and Women's Hospital 
in Boston as a rural hospital under Sec.  412.103. Some of this 
payment impact is reflected in column 4 (Reclassifications) in Table 
I- Impact Analysis of Changes to the IPPS for Operating Costs for FY 
2019.
    Urban Puerto Rico hospitals are expected to experience a 0.1 
percent increase in payments as a result of the application of the 
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 will receive the rural floor wage index 
for FY 2019. Column 3 displays the percentage of total payments each 
State will receive or contribute to fund the rural floor with 
national budget neutrality. The column compares the post-
reclassification FY 2019 wage index of providers before the rural 
floor adjustment and the post-reclassification FY 2019 wage index of 
providers with the rural floor adjustment. Column 4 displays the 
estimated payment amount that each State will gain or lose due to 
the application of the rural floor with national budget neutrality.

               FY 2019 IPPS Estimated Payments Due to Rural Floor With National Budget Neutrality
----------------------------------------------------------------------------------------------------------------
                                                                                  Percent change
                                                                     Number of      in payments
                                                                  hospitals that      due to
                      State                          Number of     will receive   application of  Difference (in
                                                     hospitals       the rural      rural floor     $ millions)
                                                                       floor        with budget
                                                                                    neutrality
                                                             (1)             (2)             (3)             (4)
----------------------------------------------------------------------------------------------------------------
Alabama.........................................              84               3            -0.3             $-5
Alaska..........................................               6               3             0.1               0
Arizona.........................................              56              45             3.0              58
Arkansas........................................              45               0            -0.3              -4
California......................................             297              60             0.3              38
Colorado........................................              46               9             0.6               7
Connecticut.....................................              30              10             2.0              32
Delaware........................................               6               0            -0.4              -2
Washington, D.C.................................               7               0            -0.4              -2
Florida.........................................             168               7            -0.3             -23
Georgia.........................................             101               0            -0.3              -9
Hawaii..........................................              12               0            -0.3              -1
Idaho...........................................              14               0            -0.3              -1
Illinois........................................             125               2            -0.4             -16
Indiana.........................................              85               0            -0.3              -8
Iowa............................................              34               0            -0.3              -3
Kansas..........................................              51               0            -0.3              -3
Kentucky........................................              64               0            -0.3              -6
Louisiana.......................................              90               0            -0.3              -5
Maine...........................................              17               0            -0.3              -2
Massachusetts...................................              56              29             3.3             121
Michigan........................................              94               0            -0.4             -15
Minnesota.......................................              49               0            -0.3              -6

[[Page 41749]]

 
Mississippi.....................................              59               0            -0.3              -4
Missouri........................................              72               0            -0.3              -7
Montana.........................................              13               1            -0.2              -1
Nebraska........................................              23               0            -0.3              -2
Nevada..........................................              22               3             0.3               3
New Hampshire...................................              13               8             2.3              14
New Jersey......................................              64               0            -0.5             -18
New Mexico......................................              24               2            -0.2              -1
New York........................................             149              16            -0.3             -24
North Carolina..................................              84               0            -0.3             -10
North Dakota....................................               6               3             0.4               1
Ohio............................................             130               7            -0.3             -12
Oklahoma........................................              79               2            -0.3              -5
Oregon..........................................              34               1            -0.3              -3
Pennsylvania....................................             150               3            -0.4             -19
Puerto Rico.....................................              51              11             0.1               0
Rhode Island....................................              11               0            -0.4              -2
South Carolina..................................              54               6            -0.1              -2
South Dakota....................................              17               0            -0.2              -1
Tennessee.......................................              90               6            -0.3              -8
Texas...........................................             310              13            -0.3             -20
Utah............................................              31               0            -0.3              -2
Vermont.........................................               6               0            -0.2               0
Virginia........................................              74               1            -0.3              -7
Washington......................................              48               3            -0.4              -8
West Virginia...................................              29               2            -0.2              -2
Wisconsin.......................................              66               5            -0.3              -5
Wyoming.........................................              10               2               0               0
----------------------------------------------------------------------------------------------------------------

f. Effects of the Application of the Frontier State Wage Index and Out-
Migration Adjustment (Column 6)

    This column shows the combined effects of the application of 
section 10324(a) of the Affordable Care Act, which requires that we 
establish a minimum post-reclassified wage index of 1.00 for all 
hospitals located in ``frontier States,'' and the effects of section 
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in the wage index for hospitals 
located in certain counties that have a relatively high percentage 
of hospital employees who reside in the county, but work in a 
different area with a higher wage index. These two wage index 
provisions are not budget neutral and will 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 49 hospitals located in those 
States will 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 $62 million. Rural and urban 
hospitals located in the West North Central region will 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 will 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 will receive the out-migration wage adjustment in 
FY 2019. Rural hospitals generally will qualify for the adjustment, 
resulting in a 0.1 percent increase in payments. This provision 
appears to benefit section 401 hospitals and RRCs in that they will 
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 out-
migration increase will be approximately $42 million.

g. Effects of All FY 2019 Changes (Column 7)

    Column 7 shows our estimate of the changes in payments per 
discharge from FY 2018 and FY 2019, resulting from all changes 
reflected in this final rule for FY 2019. It includes combined 
effects of the year-to-year change of the previous columns in the 
table.
    The average increase in payments under the IPPS for all 
hospitals is approximately 2.4 percent for FY 2019 relative to FY 
2018 and for this row is primarily driven by the changes reflected 
in Column 1. Column 7 includes the annual hospital update of 1.35 
percent to the national standardized amount. This annual hospital 
update includes the 2.9 percent market basket update, the 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 final rule, this column also includes the +0.5 
percent adjustment required under section 414 of the MACRA. 
Hospitals paid

[[Page 41750]]

under the hospital-specific rate will receive a 1.35 percent 
hospital update. As described in Column 1, the annual hospital 
update with the +0.5 percent adjustment for hospitals paid under the 
national standardized amount, combined with the annual hospital 
update for hospitals paid under the hospital-specific rates, will 
result in a 2.4 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 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 
applicable percentage increase and changes to policies related to 
MS-DRGs, geographic adjustments, and outliers are estimated to 
increase by 2.4 percent for FY 2019. Hospitals in urban areas will 
experience a 2.5 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 1.2 percent in FY 2019.

3. Impact Analysis of Table II

    Table II presents the projected impact of the 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 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 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 Changes for FY 2019 Acute Care Hospital Operating Prospective Payment System
                                            [Payments per discharge]
----------------------------------------------------------------------------------------------------------------
                                                                     Estimated       Estimated
                                                     Number of      average FY      average FY        FY 2019
                                                     hospitals     2018 payment    2019 payment       changes
                                                                   per discharge   per discharge
                                                             (1)             (2)             (3)             (4)
----------------------------------------------------------------------------------------------------------------
All Hospitals...................................           3,256          12,172          12,463             2.4
By Geographic Location:
    Urban hospitals.............................           2,483          12,508          12,819             2.5
    Large urban areas...........................           1,302          12,986          13,304             2.4
    Other urban areas...........................           1,181          12,049          12,354             2.5
    Rural hospitals.............................             773           9,194           9,308             1.2
Bed Size (Urban):
    0-99 beds...................................             644           9,945          10,114             1.7
    100-199 beds................................             763          10,399          10,622             2.2
    200-299 beds................................             433          11,384          11,649             2.3
    300-499 beds................................             424          12,606          12,916             2.5
    500 or more beds............................             219          15,449          15,894             2.9
Bed Size (Rural):
    0-49 beds...................................             306           7,836           7,908             0.9
    50-99 beds..................................             274           8,746           8,844             1.1
    100-149 beds................................             108           9,150           9,257             1.2
    150-199 beds................................              45           9,667           9,806             1.4
    200 or more beds............................              40          10,734          10,900             1.6
Urban by Region:
    New England.................................             113          13,491          14,132             4.7
    Middle Atlantic.............................             310          14,099          14,429             2.3
    South Atlantic..............................             401          11,145          11,373             2.1
    East North Central..........................             386          11,830          12,073             2.1
    East South Central..........................             147          10,517          10,742             2.1
    West North Central..........................             158          12,266          12,525             2.1
    West South Central..........................             379          11,310          11,575             2.3
    Mountain....................................             164          12,938          13,212             2.1
    Pacific.....................................             374          15,773          16,284             3.2
    Puerto Rico.................................              51           9,117           9,186             0.8
Rural by Region:
    New England.................................              20          12,613          12,729             0.9
    Middle Atlantic.............................              53           9,137           9,265             1.4
    South Atlantic..............................             122           8,497           8,599             1.2
    East North Central..........................             114           9,444           9,552             1.1
    East South Central..........................             150           8,142           8,286             1.8
    West North Central..........................              94          10,019          10,112             0.9
    West South Central..........................             145           7,844           7,959             1.5
    Mountain....................................              52          11,128          11,215             0.8
    Pacific.....................................              23          12,734          12,858               1
By Payment Classification:
    Urban hospitals.............................           2,264          12,276          12,558             2.3
    Large urban areas...........................           1,317          12,974          13,291             2.4
    Other urban areas...........................             947          11,325          11,559             2.1
    Rural areas.................................             992          11,833          12,154             2.7
Teaching Status:
    Nonteaching.................................           2,157          10,059          10,266             2.1
    Fewer than 100 residents....................             849          11,616          11,867             2.2
    100 or more residents.......................             250          17,680          18,221             3.1
Urban DSH:

[[Page 41751]]

 
    Non-DSH.....................................             520          10,533          10,749             2.1
    100 or more beds............................           1,462          12,643          12,939             2.3
    Less than 100 beds..........................             367           9,220           9,398             1.9
Rural DSH:
    SCH.........................................             256          10,239          10,313             0.7
    RRC.........................................             382          12,516          12,899             3.1
    100 or more beds............................              33          13,322          13,713             2.9
    Less than 100 beds..........................             236           7,300           7,411             1.5
Urban teaching and DSH:
    Both teaching and DSH.......................             805          13,783          14,113             2.4
    Teaching and no DSH.........................              89          11,402          11,665             2.3
    No teaching and DSH.........................           1,024          10,322          10,548             2.2
    No teaching and no DSH......................             346           9,951          10,126             1.8
Special Hospital Types:
    RRC.........................................             327          12,440          12,860             3.4
    SCH.........................................             312          11,125          11,218             0.8
    MDH.........................................             140           7,958           8,057             1.2
    SCH and RRC.................................             134          11,502          11,640             1.2
    MDH and RRC.................................              16          10,039          10,150             1.1
Type of Ownership:
    Voluntary...................................           1,899          12,323          12,623             2.4
    Proprietary.................................             856          10,658          10,880             2.1
    Government..................................             501          13,378          13,709             2.5
Medicare Utilization as a Percent of Inpatient
 Days:
    0-25........................................             602          14,927          15,267             2.3
    25-50.......................................           2,139          11,996          12,294             2.5
    50-65.......................................             421           9,817           9,986             1.7
    Over 65.....................................              73           7,271           7,451             2.5
FY 2019 Reclassifications by the Medicare
 Geographic Classification Review Board:
    All Reclassified Hospitals..................             856          12,174          12,516             2.8
    Non-Reclassified Hospitals..................           2,400          12,171          12,439             2.2
    Urban Hospitals Reclassified................             585          12,761          13,149               3
    Urban Nonreclassified Hospitals.............           1,838          12,374          12,656             2.3
    Rural Hospitals Reclassified Full Year......             271           9,566           9,711             1.5
    Rural Nonreclassified Hospitals Full Year...             455           8,753           8,824             0.8
    All Section 401 Reclassified Hospitals:.....             266          13,625          14,088             3.4
    Other Reclassified Hospitals (Section                     47           8,609           8,736             1.5
     1886(d)(8)(B)).............................
----------------------------------------------------------------------------------------------------------------

H. Effects of Other Policy Changes

    In addition to those policy changes discussed previously that we 
are able to model using our IPPS payment simulation model, we are 
making various other changes in this final rule. As noted in section 
I.G. of this Regulatory Impact Analysis, our payment simulation 
model uses the most recent available claims data to estimate the 
impacts on payments per case of certain changes in this final rule. 
Generally, we have limited or no specific data available with which 
to estimate the impacts of these changes using that payment 
simulation model. For those changes, we have attempted to predict 
the payment impacts based upon our experience and other more limited 
data. Our estimates of the likely impacts associated with these 
other changes are discussed in this section.

1. Effects of Policy Relating to New Medical Service and Technology 
Add-On Payments

    In section II.H. of the preamble to this final rule, we discuss 
11 technologies for which we received applications for add-on 
payments for new medical services and technologies for FY 2019. We 
note that three applicants withdrew their applications prior to the 
issuance of this final rule, and one applicant did not receive FDA 
approval for its technology by the July 1 deadline. We also discuss 
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 final rule, add-on payments for new medical services and 
technologies under section 1886(d)(5)(K) of the Act are not required 
to be budget neutral.
    As discussed in section II.H.5. of the preamble of this final 
rule, we are approving the following nine applications for new 
technology add-on payments for FY 2019: KYMRIAH[supreg] 
(Tisagenlecleucel) and YESCARTA[supreg] (Axicabtagene Ciloleucel); 
VYXEOSTM (Cytarabine and Daunorubicin Liposome for 
Injection); VABOMERETM (meropenem-vaborbactam); 
remed[emacr][supreg] System; ZEMDRITM (Plazomicin); 
GIAPREZATM; Sentinel[supreg] Cerebral Protection System; 
The AQUABEAM System (Aquablation); and AndexXaTM 
(Andexanet alfa). In addition, as we proposed, in this final rule, 
we are continuing to make new technology add-on payments for 
Defitelio[supreg] (Defibrotide), Ustekinumab (Stelara[supreg]) and 
Bezlotoxumab (ZinplavaTM) in FY 2019 because these 
technologies are still considered new. (As discussed in section 
II.H.5. of the preamble of this final rule, as we proposed, we are 
discontinuing new technology add-on payments for Idarucizumab, 
GORE[supreg] EXCLUDER[supreg] Iliac Branch Endoprosthesis (IBE), 
Edwards/Perceval Sutureless Valves, and VistogardTM 
(Uridine Triacetate) for FY

[[Page 41752]]

2019 because these technologies will have been on the U.S. market 
for 3 years.)
    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 continuing to make new technology add-
on payments in FY 2019:
     Based on the applicant's estimate from FY 2017 and the 
updated cost information provided by the applicant (discussed in 
section II.H.4.a. of the preamble of this final rule), we currently 
estimate that new technology add-on payments for Defitelio[supreg] 
will increase overall FY 2019 payments by $5,474,000 (maximum add-on 
payment of $80,500 * 68 patients).
     Based on the applicant's estimate from FY 2018, we 
currently estimate that new technology add-on payments for 
Ustekinumab (Stelara[supreg]) will 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) will increase overall FY 2019 
payments by $2,857,600 (maximum add-on payment of $1,900 * 1,504 
patients).
    The following are estimates for FY 2019 for the nine 
technologies that we are approving for new technology add-on 
payments beginning with FY 2019.
     Based on both applicants' estimates of the average cost 
for an administered dose for FY 2019, we currently estimate that new 
technology add-on payments for KYMRIAH[supreg] and YESCARTA[supreg] 
will increase overall FY 2019 payments by $71,989,000 (maximum add-
on payment of $186,500 * 373 patients).
     Based on the applicant's estimate for FY 2019, we 
currently estimate that new technology add-on payments for 
VYXEOSTM will increase overall FY 2019 payments by 
$34,968,000 (maximum add-on payment of $36,425 * 960 patients).
     Based on the applicant's estimate for FY 2019, we 
currently estimate that new technology add-on payments for 
VABOMERETM will increase overall FY 2019 payments by 
$14,680,512 (maximum add-on payment of $5,544 * 2,648 patients).
     Based on the applicant's estimate for FY 2019, we 
currently estimate that new technology add-on payments for 
remed[emacr][supreg] System will increase overall FY 2019 payments 
by $1,380,000 (maximum add-on payment of $17,250 * 80 patients).
     Based on the applicant's estimate for FY 2019, we 
currently estimate that new technology add-on payments for 
ZEMDRITM will increase overall FY 2019 payments by 
$6,806,250 (maximum add-on payment of $2,722.50 * 2,500 patients).
     Based on the applicant's estimate for FY 2019, we 
currently estimate that new technology add-on payments for 
GIAPREZATM will increase overall FY 2019 payments by 
$8,595,000 (maximum add-on payment of $1,500 * 5,730 patients).
     Based on the applicant's estimate for FY 2019, we 
currently estimate that new technology add-on payments for 
Sentinel[supreg] Cerebral Protection System will increase overall FY 
2019 payments by $9,100,000 (maximum add-on payment of $1,400 * 
6,500 patients).
     Based on the applicant's estimate for FY 2019, we 
currently estimate that new technology add-on payments for the 
AquaBeam System (Aquablation) will increase overall FY 2019 payments 
by $521,250 (maximum add-on payment of $1,250 * 417 patients).
     Based on the applicant's estimate for FY 2019, we 
currently estimate that new technology add-on payments for 
AndexXaTM will increase overall FY 2019 payments by 
$75,965,625 (maximum add-on payment of $14,062.50 * 5,402 patients).

2. Effects of 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 final rule, we discuss 
our 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 final 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 new or 
revised MS-DRGs will qualify for the postacute care transfer and MS-
DRG special payment policies. As a result of our policies to revise 
the MS-DRG classifications for FY 2019, which are discussed in 
section II.F. of the preamble of this final rule, we are including 
additions to the list of MS-DRGs subject to the MS-DRG special 
payment policy. Column 2 of Table I in this Appendix A shows the 
effects of the changes to the MS-DRGs and the relative payment 
weights and the application of the recalibration budget neutrality 
factor to the standardized amounts. Section 1886(d)(4)(C)(i) of the 
Act requires us annually to make appropriate DRG classification 
changes in order to reflect changes in treatment patterns, 
technology, and any other factors that may change the relative use 
of hospital resources. The analysis and methods for determining the 
changes due to the MS-DRGs and relative payment weights account for 
and include changes as a result of the 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 MS-DRG 
reclassification policies for FY 2019.
    In section IV.A.2.b. of the preamble of this final rule, we 
discuss our 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 
care transfer policy, effective for discharges occurring on or after 
October 1, 2018. To implement this change, we are establishing 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) will 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 will 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 Changes to Low-Volume Hospital Payment Adjustment Policy

    In section IV.D. of the preamble of this final rule, we discuss 
the 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 
establishing that the low-volume hospital payment adjustment will 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) - (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 implementing in accordance with section 50204 of the Bipartisan 
Budget Act of 2018 will increase Medicare payments by $75 million in 
FY 2019 as compared to FY 2018. More specifically, in FY 2019, we 
estimate that 628 providers will receive approximately $426 million 
compared to our estimate of 612 providers receiving approximately 
$350 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 changes in payments per case discussed previously in 
section I.G. of this Appendix A.

[[Page 41753]]

4. Effects of the Changes to Medicare DSH and Uncompensated Care 
Payments for FY 2019

    As discussed in section IV.F. of the preamble of this final 
rule, under section 3133 of the Affordable Care Act, hospitals that 
are eligible to receive Medicare DSH payments will receive 25 
percent of the amount they previously would have received under the 
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 final rule, we are establishing the amount to be 
distributed as uncompensated care payments to DSH eligible 
hospitals, which for FY 2019 is $8,272,872,447.22. This figure 
represents 75 percent of the amount that otherwise would have been 
paid for Medicare DSH payment adjustments adjusted by a 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 
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 June 30, 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 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 methodology for 
calculating Factor 3, we refer readers to section IV.F.4. of the 
preamble of this final rule.
    To estimate the impact of the combined effect of changes in 
Factors 1 and 2, as well as the changes to the data used in 
determining Factor 3, on the calculation of Medicare 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 final 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 calculated 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 2,448 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. 
The 29 hospitals participating in the Rural Community Hospital 
Demonstration Program were excluded in this final rule, as 
participating hospitals are not eligible to receive empirically 
justified Medicare DSH payments and uncompensated care 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 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.

  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
                                                      rule CN      FY 2019 final      Dollar
                                     Number of     estimated UCP  rule estimated  difference: FY  Percent change
                                  estimated DSHs       $ (in         UCP $ (in     2019- FY 2018        **
                                                     millions)       millions)     (in millions)
                                             (1)             (2)             (3)             (4)             (5)
----------------------------------------------------------------------------------------------------------------
Total...........................           2,448          $6,767          $8,273          $1,506           22.26
By Geographic Location:
    Urban Hospitals.............           1,952           6,422           7,802           1,380           21.48
    Large Urban Areas...........           1,045           3,847           4,705             858           22.30
    Other Urban Areas...........             907           2,575           3,097             522           20.26
    Rural Hospitals.............             495             345             471             126           36.66
Bed Size (Urban):
    0 to 99 Beds................             342             177             257              80           44.83
    100 to 249 Beds.............             859           1,519           1,902             383           25.23
    250+ Beds...................             751           4,726           5,643             917           19.40
Bed Size (Rural):
    0 to 99 Beds................             366             164             229              65           39.52
    100 to 249 Beds.............             116             146             199              53           36.35
    250+ Beds...................              13              34              43               8           24.35
Urban by Region:
    New England.................              91             259             279              20            7.75
    Middle Atlantic.............             244           1,004           1,059              55            5.51
    South Atlantic..............             320           1,343           1,769             426           31.72
    East North Central..........             323             864           1,010             146           16.85
    East South Central..........             133             389             477              88           22.73
    West North Central..........             104             312             386              73           23.49
    West South Central..........             254             981           1,424             442           45.06
    Mountain....................             125             313             397              83           26.61
    Pacific.....................             318             874             899              25            2.89

[[Page 41754]]

 
    Puerto Rico.................              40              82             102              20           24.46
Rural by Region:
    New England.................               9              14              17               3           19.26
    Middle Atlantic.............              27              19              22               2           12.45
    South Atlantic..............              88              79             116              37           47.57
    East North Central..........              69              40              56              16           41.15
    East South Central..........             135              93             106              13           13.80
    West North Central..........              29              16              22               6           40.31
    West South Central..........             106              66             102              36           53.66
    Mountain....................              27              14              26              12           84.19
    Pacific.....................               5               4               5               1           24.86
By Payment Classification:
    Urban Hospitals.............           1,865           5,917           7,257           1,340           22.66
    Large Urban Areas...........           1,057           3,855           4,716             861           22.34
    Other Urban Areas...........             808           2,062           2,541             479           23.24
    Rural Hospitals.............             582             850           1,016             166           19.49
Teaching Status:
    Nonteaching.................           1,509           2,020           2,598             578           28.62
    Fewer than 100 residents....             694           2,246           2,744             497           22.14
    100 or more residents.......             244           2,501           2,932             431           17.23
Type of Ownership:
    Voluntary...................           1,448           4,137           4,894             757           18.30
    Proprietary.................             561           1,015           1,259             244           24.06
    Government..................             439           1,615           2,119             505           31.26
Medicare Utilization Percent:
 ***
    0 to 25.....................             472           2,255           2,720             465           20.60
    25 to 50....................           1,674           4,290           5,266             976           22.76
    50 to 65....................             263             215             277              62           28.59
    Greater than 65.............              36               7              11               4           56.59
----------------------------------------------------------------------------------------------------------------
Source: Dobson [bond] 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 $8,273 million in FY 2019.
** Percentage change is determined as the difference between Medicare UCP payments modeled for this FY 2019 IPPS/
  LTCH PPS final 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 $12.254 billion, and the percent change in 
the percent of individuals who are uninsured (Factor 2) has 
increased from 58.01 percent to 67.51 percent. Based on the 
increases in these two factors, the impact analysis found that, 
across all projected DSH eligible hospitals, FY 2019 uncompensated 
care payments are estimated at approximately $8.273 billion, or an 
increase of approximately 22.26 percent from FY 2018 uncompensated 
care payments (approximately $6.767 billion). While these changes 
will 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 22.26 
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 
22.26 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 larger 
increases in uncompensated care payments than their urban 
counterparts. Overall, rural hospitals are projected to receive a 
36.66 percent increase in uncompensated care payments, while urban 
hospitals are projected to receive a 21.48 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 39.52 percent payment increase, rural 
hospitals with 100-249 beds are projected to see a 36.35 percent 
increase, and larger rural hospitals with 250+ beds are projected to 
experience a 24.35 percent payment increase. These increases for 
rural hospitals are all greater than the overall hospital 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 44.83 percent, and urban hospitals 
with 100-250 beds are projected to receive an increase of 25.23 
percent, both of which are greater than the overall average. Larger 
urban hospitals with 250+ beds are projected to receive a 19.40 
percent increase in uncompensated care payments, which is smaller 
than the overall average.
    By region, rural hospitals are expected to receive a wide range 
of payment increases. Rural hospitals in the Mountain region are 
expected to receive a larger than average increase in uncompensated 
care payments, as are rural hospitals in the West South Central,

[[Page 41755]]

South Atlantic, East North Central, West North Central, and Pacific 
regions. Rural hospitals in the New England, East South Central, and 
Middle Atlantic regions are projected to receive smaller than 
average payment increases. Regionally, urban hospitals are projected 
to receive a narrower range of payment changes. Smaller than average 
increases in uncompensated care payments are projected in the 
Pacific, Middle Atlantic, New England, and East North Central 
regions. Urban hospitals in the West South Central, South Atlantic, 
and Mountain regions are projected to receive a larger than average 
increase in uncompensated payments, as are hospitals in Puerto Rico. 
The projected increases in the East South Central and West North 
Central regions are generally consistent with the overall average 
increase of 22.26 percent.
    Nonteaching hospitals are projected to receive a larger than 
average payment increase of 28.62 percent. Teaching hospitals with 
fewer than 100 residents are projected to receive a payment increase 
of 22.14 percent, which is consistent with the overall average, 
while those teaching hospitals with 100+ residents have a projected 
payment increase of 17.23 percent, lower than the overall average. 
Government and proprietary hospitals are projected to receive larger 
than average increases (31.26 percent and 24.06 percent, 
respectively), while voluntary hospitals are expected to receive 
increases lower than the overall average at 18.30 percent. Hospitals 
with 0 to 25 percent Medicare utilization are projected to receive 
increases in uncompensated care payments slightly below the overall 
average, while hospitals with higher levels of Medicare utilization 
are projected to receive larger increases.

5. Effects of Reductions Under the Hospital Readmissions Reduction 
Program for FY 2019

    In section IV.H. of the preamble of the this final rule, we 
discuss our finalized policies for the FY 2019 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 by 
hospital characteristic. As outlined in section IV.H. of the 
preamble of this final rule, hospitals are stratified into quintiles 
based on the proportion of dual-eligible stays among Medicare fee-
for-service (FFS) and managed care stays between July 1, 2014 and 
June 30, 2017 (that is, the FY 2019 Hospital Readmissions Reduction 
Program's performance period). Hospitals' 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 2019 IPPS/LTCH Proposed Rule 
Impact File.
    These analyses include 3,062 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, 2014 and June 
30, 2017. The second column in the table indicates the total number 
of non-Maryland hospitals with available data for each 
characteristic that have an estimated payment adjustment factor less 
than 1 (that is, penalized hospitals).
    The third column in the table indicates the percentage of 
penalized hospitals among those eligible to receive a penalty by 
hospital characteristic. For example, 82.26 percent of eligible 
hospitals characterized as non-teaching hospitals are expected to be 
penalized. Among teaching hospitals, 88.60 percent of eligible 
hospitals with fewer than 100 residents and 93.95 percent of 
eligible hospitals with 100 or more residents are expected to be 
penalized.
    The fourth column in the table estimates the financial impact on 
hospitals by hospital characteristics. The table shows the share of 
penalties as a percentage of all base operating Diagnosis Related-
Group (DRG) payments for hospitals with 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, 2016 and September 30, 2017 (FY 
2017). For example, the penalty as a share of payments for urban 
hospitals is 0.70 percent. This means that total penalties for all 
urban hospitals are 0.70 percent of total payments for urban 
hospitals. Measuring the financial impact on hospitals as a 
percentage of total base operating DRG payments accounts 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.

 Estimated Percentage of Hospitals Penalized and Penalty as Share of Payments for FY 2019 Hospital Readmissions
                                                Reduction Program
                                          [By hospital characteristic]
----------------------------------------------------------------------------------------------------------------
                                                     Number of       Number of     Percentage of   Penalty as a
                                                     eligible        penalized       hospitals       share of
             Hospital characteristic                hospitals a     hospitals b     penalized c   payments d (%)
                                                                                        (%)
----------------------------------------------------------------------------------------------------------------
All Hospitals...................................           3,062           2,599           84.88            0.67
Geographic Location: e (n=3,062):
    Urban hospitals.............................           2,297           1,983           86.33            0.70
        1-99 beds...............................             534             377           70.60            0.94
        100-199 beds............................             714             649           90.90            0.83
        200-299 beds............................             417             378           90.65            0.81
        300-399 beds............................             275             253           92.00            0.72
        400-499 beds............................             144             130           90.28            0.56
        500 or more beds........................             213             196           92.02            0.58
    Rural hospitals.............................             765             616           80.52            0.72
        1-49 beds...............................             285             197           69.12            0.66
        50-99 beds..............................             282             242           85.82            0.65
        100-149 beds............................             115             104           90.43            0.75
        150-199 beds............................              44              35           79.55            0.67
        200 or more beds........................              39              38           97.44            0.85
Teaching Status: f (n=3,062):
    Non-teaching................................           2,007           1,651           82.26            0.82
    Fewer than 100 Residents....................             807             715           88.60            0.71
    100 or more Residents.......................             248             233           93.95            0.52
Ownership Type (n=3,043):
    Government..................................             476             399           83.82            0.54
    Proprietary.................................             748             619           82.75            1.05
    Voluntary...................................           1,819           1,573           86.48            0.66
Safety-net Status g (n=3,062):
    Safety net hospitals........................             614             531           86.48            0.60
    Non-safety net Hospitals....................           2,448           2,068           84.48            0.73

[[Page 41756]]

 
Disproportionate Share Hospital (DSH) Patient
 Percentage h (n=3,062):
    0-24........................................           1,221             997           81.65            0.80
    25-49.......................................           1,485           1,293           87.07            0.66
    50-64.......................................             189             171           90.48            0.66
    65 and over.................................             167             138           82.63            0.63
Medicare Cost Report (MCR) Percent i (n=3,048):
    0-24........................................             432             364           84.26            0.49
    25-49.......................................           2,087           1,802           86.34            0.71
    50-64.......................................             467             381           81.58            0.98
    65 and over.................................              62              42           67.74            0.94
Region (n=3,062):
    New England.................................             129             114           88.37            0.89
    Middle Atlantic.............................             352             320           90.91            0.89
    South Atlantic..............................             509             461           90.57            0.79
    East North Central..........................             482             421           87.34            0.62
    East South Central..........................             289             253           87.54            0.90
    West North Central..........................             246             193           78.46            0.44
    West South Central..........................             474             384           81.01            0.68
    Mountain....................................             217             163           75.12            0.57
    Pacific.....................................             364             290           79.67            0.48
----------------------------------------------------------------------------------------------------------------
Source: The table results are based on the estimated FY 2019 payment adjustment factors of open, non-Maryland,
  subsection (d) hospitals only. FY 2019 payment adjustment factors are based on discharges between July 1, 2014
  and June 30, 2017. 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 and hospitals that are not
  open as of the October 2018 public reporting open hospital list since these hospitals are not eligible for a
  penalty under the program. Hospitals are stratified into quintiles based on the proportion of FFS and managed
  care dual-eligible stays for the 3-year FY 2019 performance period. Hospital characteristics are from the FY
  2019 IPPS/LTCH Proposed 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 (that is, 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 by characteristic.
d This column 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 those hospitals. MedPAR data from October 1, 2016 through
  September 30, 2017 (FY 2017) are used to calculate the total base operating DRG payments.
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 by geographic region, teaching status, safety-net status, DSH patient
  percentage, and region (n=3,062). Not all hospitals had data for ownership type (n=3,043; missing=19) and MCR
  percent (n=3,048; missing=14).
f A hospital is considered a teaching hospital if it has an Indirect Medical Education adjustment factor for
  Operation PPS (TCHOP) greater than zero.
g A hospital is considered a safety-net hospital if it is in the top DSH quintile.
h DSH patient percentage is the sum of the percentage of Medicare inpatient days attributable to patients
  entitled to both Medicare Part A and Supplemental Security Income (SSI), and the percentage of total inpatient
  days attributable to patients eligible for Medicaid but not entitled to Medicare Part A.
i MCR percent is the percentage of total inpatient stays from Medicare patients.

6. Effects of 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 final rule, we discuss 
the Hospital VBP Program under which the Secretary makes value-based 
incentive payments to hospitals based on their performance on 
measures during the performance period with respect to a fiscal 
year. These incentive payments will be funded for FY 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 final 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 March 2018 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 March 2018 update to the FY 2017 MedPAR 
file. The proxy adjustment factors can be found in Table 16A 
associated with this final 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

[[Page 41757]]

change in base operating DRG. Urban Middle Atlantic, urban South 
Atlantic, and urban East South Central regions would experience an 
average negative percent change in base operating DRG. All other 
regions, both urban and rural, would have an average positive 
percent change 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 negative 
percent change in base operating DRG, while non-teaching hospitals 
would have a positive percent change 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.....................           1,117           0.068
        Other Urban.....................           1,023           0.068
        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....................             427          -0.037
        300-499 beds....................             418          -0.184
        500 or more beds................             212          -0.117
    Rural hospitals.....................             668           0.465
        0-49 beds.......................             201           0.675
        50-99 beds......................             272           0.525
        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           0.010
        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           0.550
        East South Central..............             123           0.214
        West North Central..............              82           0.628
        West South Central..............             109           0.348
        Mountain........................              46           0.784
        Pacific.........................              21           0.562
By MCR Percent:
        0-25............................             431           0.117
        25-50...........................           1,958           0.151
        50-65...........................             392           0.261
        Over 65.........................              27           0.292
        Missing.........................  ..............  ..............
BY DSH Percent:
        0-25............................           1,049           0.251
        25-50...........................           1,421           0.136
        50-65...........................             187          -0.003
        Over 65.........................             151           0.001
By Teaching Status:
        Non-Teaching....................           1,751           0.279
        Teaching........................           1,057          -0.031
------------------------------------------------------------------------

    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 were used for the updated impact analysis in this 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 the proposed rule, we 
discussed our proposed

[[Page 41758]]

changes to the Hospital VBP Program domain weighting beginning with 
the FY 2021 program year. We note that we did not propose 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, based on 
historical TPSs, were provided in the proposed rule (83 FR 20620 
through 20621). However, as discussed in section IV.I.4.b. of the 
preamble of this final rule, we are not finalizing any changes to 
the domain weighting for the FY 2021 year or subsequent years, and 
therefore we did not provide an updated analysis here.

7. Effects of Requirements Under the HAC Reduction Program for FY 2019

    In section IV.J. of the preamble of this final rule, we discuss 
finalized requirements for the HAC Reduction Program. In the 
proposed rule, we did not propose to adopt any new measures into the 
HAC Reduction Program, and are therefore not finalizing any changes 
to the HAC Reduction Program measure set. However, the Hospital IQR 
Program is finalizing its proposals to remove the claims-based 
Patient Safety and Adverse Events Composite (PSI-90) beginning with 
the CY 2018 reporting period/FY 2020 payment determination and five 
NHSN HAI measures, although the NHSN HAI measures removal is being 
delayed by one year (until the CY 2020 reporting period/FY 2022 
payment determination). These measures had been previously adopted 
for, and will remain in, the HAC Reduction Program. We are therefore 
finalizing our proposal to begin validation of these NHSN HAI 
measures under the HAC Reduction Program, but are delaying 
implementation to begin with Q3 2020 discharges for FY 2023 in order 
to align with a corresponding delay in removing these NHSN HAI 
measures from the Hospital IQR Program.
    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 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, with the finalized 
policies discussed in section VIII.A.5.b.(1) and IV.J.4.e. of the 
preamble of this final rule to remove NHSN HAI chart-abstracted 
measures from the Hospital IQR Program and adopt validation process 
for the HAC Reduction Program, we anticipate a shift in burden 
associated with this data validation effort to the HAC Reduction 
Program beginning in FY 2021. We discuss the associated burden hours 
(43,200 hours over 600 hospitals) in section XIV.B.7. of the 
preamble of this final 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 and analysis below illustrate the estimated cumulative 
effect of the measures and scoring methodology for the Hospital-
Acquired Condition (HAC) Reduction Program, as outlined in this FY 
2019 IPPS/LTCH PPS final rule. We are presenting the estimated 
impact of the FY 2019 HAC Reduction Program on hospitals by hospital 
characteristic.
    These FY 2019 HAC Reduction Program results were calculated 
using the Winsorized z-score methodology finalized in the FY 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 Domain 2 score (85 
percent). Non-Maryland hospitals with a Total HAC Score greater than 
the 75th percentile Total HAC Score were identified as being in the 
worst-performing quartile. The table below presents the estimated 
proportion of hospitals in the worst-performing quartile of the 
Total HAC Scores by hospital characteristic. We are not providing 
hospital-level data or payment impact in conjunction with this FY 
2019 IPPS/LTCH PPS final rule because CMS gives hospitals a 30-day 
Scoring Calculations Review and Corrections Period to review their 
scores, which will not conclude until after the publication of this 
FY 2019 IPPS/LTCH PPS final rule.
    Each hospital's Domain 1 score is based on its CMS Patient 
Safety Indicator (PSI) 90 Composite measure results, which are based 
on Medicare fee-for-service (FFS) discharges from October 1, 2015 
through June 30, 2017 and recalibrated version 8.0 of the CMS PSI 
software. Each hospital's Domain 2 score is composed of 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. The Domain 2 scores are derived from standardized 
infection ratios (SIRs) calculated from hospital surveillance data 
reported to the National Healthcare Safety Network (NHSN) for 
infections occurring between January 1, 2016 and December 31, 2017.
    To analyze the results by hospital characteristic, we used the 
FY 2019 Proposed Rule Impact File. This table includes 3,219 non-
Maryland hospitals with a FY 2019 Total HAC Score. Of these 3,219 
hospitals: 3,201 hospitals had information for geographic location, 
bed size, Disproportionate Share Hospital (DSH) percent, and 
teaching status; 3,217 had information on region; 3,173 had 
information for ownership; and 3,175 had information for Medicare 
Cost Report percent. The first column has a breakdown of each 
characteristic.
    The second column in the table indicates the total number of 
non-Maryland hospitals with a FY 2019 Total HAC Score and available 
data for each characteristic. For example, with regard to teaching 
status, 2,121 hospitals are characterized as non-teaching hospitals, 
832 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 18 hospitals are missing from the FY 2019 Proposed 
Rule Impact File.
    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, 484 hospitals out of 2,121 
hospitals characterized as non-teaching hospitals would be subject 
to a payment reduction. Among teaching hospitals, 196 out of 832 
hospitals with fewer than 100 residents and 113 out of 248 hospitals 
with 100 or more residents would be subject to a payment reduction.
    The fourth column in the table indicates the percentage 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, 22.8 
percent of the 2,121 hospitals characterized as non-teaching 
hospitals, 23.6 percent of the 832 teaching hospitals with fewer 
than 100 residents, and 45.6 percent of the 248 teaching 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.........................................................           3,219             804            25.0
By Geographic Location (n=3,201): d
    Urban hospitals.............................................           2,416           6,628            26.0

[[Page 41759]]

 
        1-99 beds...............................................           6,622           1,133           221.4
        100-199 beds............................................           7,728           1,182           225.0
        200-299 beds............................................           4,430           1,119           227.7
        300-399 beds............................................           2,278             780            28.8
        400-499 beds............................................           1,145             439           326.9
        500 or more beds........................................             213             775           335.2
    Rural hospitals.............................................           7,785           1,165           221.0
        1-49 beds...............................................             304             568           122.4
        50-99 beds..............................................           2,282             656           219.9
        100-149 beds............................................             116             222           119.0
        150-199 beds............................................              44             810           122.7
        200 or more beds........................................              39              79           123.1
By Safety-Net Status e (n=3,201):
    Non-safety net..............................................           2,555            5576            22.5
    Safety-net..................................................           6,646           2,217           333.6
By DSH Percent f (n=3,201):
    0-24........................................................           1,313           2,292           222.2
    25-49.......................................................           1,507           3,366            24.3
    50-64.......................................................           2,198             775           337.9
    65 and over.................................................           1,183             760           332.8
By Teaching Status g (n=3,201):
    Non-teaching................................................           2,121           4,484            22.8
    Fewer than 100 residents....................................           8,832           1,196           223.6
    100 or more residents.......................................             248           1,113           445.6
By Ownership (n=3,173):
    Voluntary...................................................           1,868           4,466           224.9
    Proprietary.................................................           8,813           1,175           121.5
    Government..................................................           4,492           1,145           329.5
By MCR Percent h (n=3,175):
    0-24........................................................           5,511           1,144            28.2
    25-49.......................................................           2,118           5,505           223.8
    50-64.......................................................           4,473           1,117           224.7
    65 and over.................................................             773              15            20.5
By Region (n=3,217): i
    New England.................................................             133             343           232.3
    Mid-Atlantic................................................             364           1,101           327.7
    South Atlantic..............................................           5,522           1,133           225.5
    East North Central..........................................           4,498           1,108           221.7
    East South Central..........................................             299             768           222.7
    West North Central..........................................             256             557           122.3
    West South Central..........................................           5,519           9,114           122.0
    Mountain....................................................           2,229             660            26.2
    Pacific.....................................................           3,397           1,118           329.7
----------------------------------------------------------------------------------------------------------------
Source: FY 2019 HAC Reduction Program Final Rule Results are based on CMS PSI 90 Composite data from October
  2015 through June 2017 and CDC CLABSI, CAUTI, SSI, CDI, and MRSA results from January 2016 through December
  2017. Hospital Characteristics are based on the FY 2019 Proposed 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=3,219). 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 Indirect Medical Education adjustment factor for
  Operation PPS (TCHOP) greater than zero.
h Not all hospitals had data for MCR percent (n=3,175).
i Not all hospitals had data for Region (n=3,217).


[[Page 41760]]

8. Effects of Changes to Medicare GME Affiliated Groups for New Urban 
Teaching Hospitals

    In section IV.K.2. of the preamble of this final rule, we 
discuss our final policy 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, Sec.  
413.79(e)(1)(iv) provides that the new urban teaching hospital(s) is 
only permitted to receive in increase in its FTE cap(s). We are 
finalizing our proposal 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 may enter into 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 caps if the decrease results from a 
Medicare GME affiliated group consisting solely of two or more new 
urban teaching hospitals. In addition, effective for Medicare GME 
affiliation agreements entered into on or after July 1, 2019, a new 
urban teaching hospital may participate in a Medicare GME affiliated 
group with an existing teaching hospital and receive an adjustment 
that is a decrease to the urban hospital's FTE caps, provided the 
Medicare GME affiliation agreement is effective with a July 1 date 
(the residency training year) that is at least 5 years after the 
start of the new urban teaching hospital's cost reporting period 
that coincides with or follows the start of the sixth program year 
of the first new program. 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 policy.

9. Effects of Implementation of the Rural Community Hospital 
Demonstration Program in FY 2019

    In section IV.L. of the preamble of this final 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. Specifically, section 15003 of 
Public Law 114-255 amended section 410A(g)(4) of Public Law 108-173 
to require that, for hospitals participating in the demonstration as 
of the last day of the initial 5-year period, the Secretary shall 
provide for continued participation of such rural community 
hospitals in the demonstration during the 10-year extension period, 
unless the hospital makes an election to discontinue participation. 
Furthermore, section 15003 of Public Law 114-255 requires that, 
during the second 5 years of the 10-year extension period, the 
Secretary shall provide for participation under the demonstration 
during the second 5 years of the 10 year extension period for 
hospitals that are not described in subsection 410A(g)(4).
    Section 15003 of Public Law 114-255 also requires that no later 
than 120 days after enactment of Public Law 114-255 that the 
Secretary issue a solicitation for applications to select additional 
hospitals to participate in the demonstration program for the second 
5 years of the 10-year extension period so long as the maximum 
number of 30 hospitals stipulated by Public Law 111-148 is not 
exceeded. Section 410A(c)(2) requires that in conducting the 
demonstration program under this section, the Secretary shall ensure 
that the aggregate payments made by the Secretary do not exceed the 
amount which the Secretary would have paid if the demonstration 
program under this section was not implemented (budget neutrality).
    In the preamble to this IPPS/LTCH PPS final 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. Apart from one hospital, which has withdrawn from 
the demonstration, each of these newly participating hospitals began 
its 5-year period of participation effective the start of the first 
cost reporting period on or after October 1, 2017. Thus, 29 
hospitals are participating in the demonstration during FY 2018.
    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 are including this estimate in the FY 2019 IPPS/
LTCH PPS final rule. For this final rule, the resulting amounts 
applicable to FYs 2018 and 2019, respectively, are $31,070,880 and 
$70,929,313, which we are including in the budget neutrality offset 
adjustment for FY 2019.
    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. 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; 
in addition, the actual costs of the

[[Page 41761]]

demonstration for FY 2013 fell short of the amount that was 
finalized in the FY 2013 final rule by $5,398,382.
    We note that, for this final rule, the amounts identified for 
the actual costs of the demonstration for each of FYs 2011, 2012 and 
2013 (determined from current finalized cost reports) are less than 
the amounts that were identified in the final rule for each of 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 
are 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 applying to 
the national IPPS rates is $58,129,609.

10. Effect of Revision of the Hospital Inpatient Admission Order 
Documentation Requirements

    In section IV.M. of the preamble of this final rule, we discuss 
our policy to revise the admission order documentation requirements. 
Specifically, we are revising 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 change will be negligible, given the anticipated 
low volume of claims that will be payable under this policy that 
would not have been paid under the current policy.

11. Effect of Policy Changes Relating to Satellite Facilities and 
Excluded Units

    In section VI.B. of the preamble of this final rule, we discuss 
the revisions we are making to the regulations applicable to 
satellite facilities so that the separateness and control 
requirements will only apply to IPPS-excluded satellite facilities 
that are co-located with IPPS hospitals beginning in FY 2019. This 
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 changes), and because 
such changes will 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 minimis effect on Medicare payments due 
to the administrative nature of the changes. We also are revising 
our regulations to allow IPPS-excluded hospitals to operate IPPS-
excluded units, as discussed in section VI.C. of the preamble to 
this final rule, effective with cost reporting periods beginning on 
or after October 1, 2019. We believe that this policy is also 
consistent with the revisions to our HwH policy that were finalized 
in the FY 2018 IPPS/LTCH PPS final rule and the changes to the 
satellite regulation discussed previously. We do not expect any 
significant payment impact as a result of either of these 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 final rule, we 
discuss that, for FY 2019, 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 Integration Project (FCHIP) demonstration.
    The authorizing statute limits participation in the 
demonstration to eligible entities in not more than 4 States, and 
requires it to be conducted for a 3-year period. In addition, the 
demonstration is required to 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.
    The authorizing statute 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. Ten CAHs are participating in the 
demonstration, which started on August 1, 2016.
    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, we have also adopted a 
contingency plan to ensure that the budget neutrality requirement 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. 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 
believe that the language of the statutory budget neutrality 
requirement 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 2019 IPPS/LTCH PPS proposed rule, for 
this FY 2019 IPPS/LTCH PPS final rule, we estimate that the total 
impact of the payment recoupment will 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.

13. Effects of Revisions of the Supporting Documentation Required for 
Submission of an Acceptable Medicare Cost Report

    In section IX.B.1. of the preamble of this final rule, we are 
incorporating 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 will complete our incorporation of the 
Form CMS-339 into all Medicare cost reports. We also are updating 
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 policy will not require

[[Page 41762]]

additional data collection from OPOs or histocompatibility 
laboratories. This policy will 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 final rule, this policy 
will 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 final rule, we also 
are finalizing a change to the regulation to note that a cost report 
is rejected for teaching hospitals for lack of supporting 
documentation if it does not include the IRIS data rather than the 
IRIS diskette, which is no longer required. We continue to require 
all teaching hospitals to submit the IRIS data under Sec.  
413.24(f)(5) to have an acceptable cost report submission.
    In section IX.B.3. of the preamble of this final rule, we are 
establishing 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 policy will 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 final rule, we are 
establishing that, effective for cost reporting periods beginning on 
or after October 1, 2018, for DSH eligible 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 policy to require providers to 
submit the supporting documentation with the cost report will also 
facilitate accurate provider payment and the contractor's review and 
verification of the cost report.
    This policy will 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 policy 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 final rule, we are 
establishing 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 policy to require 
providers to submit this supporting documentation with the cost 
report will facilitate accurate payment to the provider and the 
contractor's review and verification of the cost report.
    This policy will not require DSH eligible hospitals reporting 
charity care and/or uninsured discounts to collect additional data 
but will 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 policy 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 final rule, we are 
establishing 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 
the home office or the chain organization has not submitted to the 
provider's contractor a Home Office Cost Statement that corresponds 
to either all or any portion of the costs it has allocated to the 
provider, depending on the fiscal year end dates of the provider and 
its home office. This policy will not require providers reporting 
costs on their cost report that are allocated from a home office or 
chain organization to collect additional data. Likewise, this policy 
will not require home offices to collect additional data. Instead, 
this policy codifies our longstanding policy in Section 2153, 
Chapter 21, of the PRM-1, requiring costs allocated from a home 
office or chain organization to a provider be substantiated on the 
provider's cost report and that the Home Office Cost Statement be 
submitted to the home office's servicing contractor, as well as the 
servicing contractors of the providers within its chain. Only one 
copy of the Home Office Cost Statement is required to be submitted 
to a provider's contractor, regardless of the number of providers in 
the chain the contractor is servicing. Providers are required under 
Sec. Sec.  413.20 and 413.24 to maintain data that substantiates 
their costs. Home offices are required to complete a Home Office 
Cost statement that details the allocations of costs to the 
providers in its chain and submit its Home Office Cost Statement to 
its contractor. With our policy, we anticipate that home offices 
will submit the Home Office Cost Statement to support the amounts 
reported in the cost reports of the providers in its chain, in order 
for the providers to have an acceptable cost report submission. 
Because the Home Office Cost Statement already requires the home 
office to list the providers in the chain and each of the providers' 
servicing contractors, the contractors to whom the Home Office Cost 
Statement should be sent is already known to the home office. Thus, 
there is no additional burden placed on home offices as a result of 
our policy to require the home office to submit a copy of its Home 
Office Cost Statement that corresponds to either all or any portion 
of the costs it has allocated to the provider, to each of its chain 
providers' servicing contractors, in order for the providers in its 
chain to have an acceptable cost report submission.

14. Effect of Revisions Regarding Physician Certification and 
Recertification of Claims

    In section XI. of the preamble of this final rule, we discuss 
our policy 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 will have no substantive 
impact, we have examined the impact of eliminating the provision 
pertaining to where the supporting

[[Page 41763]]

information is to be found and believe that substantial time and 
money will be saved by physicians when completing both certification 
and recertification statements. Based on conversations with various 
providers, 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 elimination of this provision will benefit physicians 
in terms of reducing the amount of time expended in completing 
certification and recertification statements, it will 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 will 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 dollars   payment rate     confidence
                                                                                         in error             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. This policy, when 
applied uniformly across all provider settings, could potentially 
reduce improper payments, lower appeals, and reduce the number of 
denials sent to beneficiaries. Moreover, by eliminating these 
denials and subsequent appeals, MACs will have more time to dedicate 
to other more pertinent appeal issues.

I. Effects of Changes in the Capital IPPS

1. General Considerations

    For the impact analysis presented below, we used data from the 
March 2018 update of the FY 2017 MedPAR file and the March 2018 
update of the Provider-Specific File (PSF) that was used for payment 
purposes. Although the analyses of the changes to the capital 
prospective payment system do not incorporate cost data, we used the 
March 2018 update of the most recently available hospital cost 
report data (FYs 2015 and 2016) to categorize hospitals. Our 
analysis has several qualifications. We use the best data available 
and make assumptions about case-mix and beneficiary enrollment, as 
described later in this section.
    Due to the interdependent nature of the IPPS, it is very 
difficult to precisely quantify the impact associated with each 
change. In addition, we draw upon various sources for the data used 
to categorize hospitals in the tables. In some cases (for instance, 
the number of beds), there is a fair degree of variation in the data 
from different sources. We have attempted to construct these 
variables with the best available sources overall. However, it is 
possible that some individual hospitals are placed in the wrong 
category.
    Using cases from the March 2018 update of the FY 2017 MedPAR 
file, we simulated payments under the capital IPPS for FY 2018 and 
the 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 
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:
     An estimated increase in the Medicare case-mix index of 
2.0 percent in FY 2018 and by 0.5 percent in FY 2019 based on 
preliminary FY 2018 data.
     We estimate that Medicare discharges will be 
approximately 11.0 million in both FYs 2018 and 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 final rule, the update is 1.4 
percent for FY 2019.
     In addition to the FY 2019 update factor, the FY 2019 
capital Federal rate was calculated based on a GAF/DRG budget 
neutrality adjustment factor of 0.9975 and an outlier adjustment 
factor of 0.9494.

2. Results

    We used the actuarial model previously described in section I.I. 
of Appendix A of this final rule to estimate the potential impact of 
the changes for FY 2019 on total capital payments per case, using a 
universe of 3,256 hospitals. As previously described, the individual 
hospital payment parameters are taken from the best available data, 
including the March 2018 update of the FY 2017 MedPAR file, the 
March 2018 update to the PSF, and the most recent cost report data 
from the March 2018 update of HCRIS. In Table III, we present a 
comparison of estimated total payments per case for FY 2018 and 
estimated total payments per case for FY 2019 based on the FY 2019 
payment policies. Column 2 shows estimates of payments per case 
under our model for FY 2018. Column 3 shows estimates of 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 1.4 percent update to the 
capital Federal rate and other changes in the adjustments to the 
capital Federal rate. The comparisons are provided by: (1) 
Geographic location; (2) region; and (3) payment classification.
    The simulation results show that, on average, capital payments 
per case in FY 2019 are expected to increase as compared to capital 
payments per case in FY 2018. This expected increase overall is 
largely due to the 1.4 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 changes in the GAFs. These regional effects of the changes to 
the GAFs on capital payments are consistent with the projected 
changes in payments due to changes in the wage index (and policies 
affecting the wage index), as shown in Table I in section I.G. of 
this Appendix A.
    The net impact of these changes is an estimated 2.1 percent 
change in capital

[[Page 41764]]

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 will 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 2.3 percent for hospitals in large urban areas and 
by 3.2 percent for hospitals in other urban areas, while payments to 
hospitals in rural areas would decrease by 0.9 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 
range from a 1.4 percent increase for the East North Central urban 
region to a 3.8 percent increase for the New England region. For 
rural regions, the Mountain rural region is projected to experience 
an increase in capital IPPS payments per case of 1.2 percent, while 
the East South Central rural region is projected to experience a 
decrease in capital IPPS payments per case of 2.6 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 increase in capital payments for voluntary 
hospitals is estimated to be 1.8 percent. Government hospitals and 
proprietary hospitals are expected to experience an increase in 
capital IPPS payments of 3.1 and 2.3 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 final 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 1.0 percent; urban nonreclassified hospitals 
are expected to experience an increase in capital payments of 3.0 
percent. The estimated percentage decrease for rural reclassified 
hospitals is 1.8 percent, and for rural nonreclassified hospitals, 
the estimated percentage increase in capital payments is 0.2 
percent.

                                Table III--Comparison of Total Payments per Case
                                 [FY 2018 payments compared to FY 2019 payments]
----------------------------------------------------------------------------------------------------------------
                                                                    Average FY      Average FY
                                                     Number of    2018 payments/  2019 payments/  Percent change
                                                     hospitals         case            case
----------------------------------------------------------------------------------------------------------------
By Geographic Location:
    All hospitals...............................           3,256            $943            $963             2.1
    Large urban areas (populations over 1                  2,483             974             997             2.3
     million)...................................
    Other urban areas (populations of 1 million            1,302           1,011           1,043             3.2
     of fewer)..................................
    Urban hospitals.............................           1,181             939             952             1.4
        0-99 beds...............................             644             789             812             3.0
        100-199 beds............................             763             835             854             2.4
        200-299 beds............................             433             902             922             2.2
        300-499 beds............................             424             981           1,003             2.2
        500 or more beds........................             219           1,170           1,197             2.3
    Rural hospitals.............................             773             666             660            -0.9
        0-49 beds...............................             306             542             556             2.6
        50-99 beds..............................             274             606             620             2.3
        100-149 beds............................             108             677             654            -3.3
        150-199 beds............................              45             729             706            -3.2
        200 or more beds........................              40             808             781            -3.3
By Region:
    Urban by Region.............................           2,483             974             997             2.3
        New England.............................             113           1,068           1,108             3.8
        Middle Atlantic.........................             310           1,069           1,090             2.0
        South Atlantic..........................             401             866             884             2.0
        East North Central......................             386             938             951             1.4
        East South Central......................             147             821             838             2.1
        West North Central......................             158             959             977             1.9
        West South Central......................             379             881             908             3.1
        Mountain................................             164           1,012           1,028             1.5
        Pacific.................................             374           1,238           1,281             3.4
        Puerto Rico.............................              51             447             455             1.7
    Rural by Region.............................             773             666             660            -0.9
        New England.............................              20             922             918            -0.5
        Middle Atlantic.........................              53             639             638            -0.3
        South Atlantic..........................             122             619             610            -1.4
        East North Central......................             114             675             671            -0.6
        East South Central......................             150             623             607            -2.6
        West North Central......................              94             706             704            -0.2
        West South Central......................             145             590             588            -0.3
        Mountain................................              52             742             751             1.2
        Pacific.................................              23             865             861            -0.5
By Payment Classification:
    All hospitals...............................           3,256             943             963             2.1
    Large urban areas (populations over 1                  1,317           1,010           1,042             3.2
     million)...................................
    Other urban areas (populations of 1 million              947             895             919             2.6
     of fewer)..................................
    Rural areas.................................             992             884             875            -1.1
Teaching Status:
    Non-teaching................................           2,157             800             816             1.9
    Fewer than 100 Residents....................             849             909             925             1.8
    100 or more Residents.......................             250           1,308           1,342             2.7

[[Page 41765]]

 
    Urban DSH:
        Non-DSH                                              520             867             890             2.6
        100 or more beds........................           1,462             984           1,013             3.0
        Less than 100 beds......................             367             720             743             3.1
    Rural DSH:
        Sole Community (SCH/EACH)...............             256             680             680             0.1
        Referral Center (RRC/EACH)..............             382             947             931            -1.6
        Other Rural:
            100 or more beds....................              33           1,068           1,053            -1.4
            Less than 100 beds..................             236             530             543             2.4
    Urban teaching and DSH:
        Both teaching and DSH...................             805           1,055           1,087             3.1
        Teaching and no DSH.....................              89             912             934             2.4
        No teaching and DSH.....................           1,024             833             856             2.8
        No teaching and no DSH..................             346             847             871             2.8
Rural Hospital Types:
    Plain Rural.................................             178             831             831             0.0
    SCH/EACH....................................             327             968             960            -0.8
    SCH/EACH....................................             312             749             752             0.5
    SCH, RRC and EACH...........................             134             807             797            -1.3
Hospitals Reclassified by the Medicare
 Geographic Classification Review Board:
    FY2018 Reclassifications:
        All Urban Reclassified..................             585             991           1,000             1.0
        All Urban Non-Reclassified..............           1,838             967             996             3.0
        All Rural Reclassified..................             271             704             692            -1.8
        All Rural Non-Reclassified..............             455             614             615             0.2
        All Section 401 Reclassified Hospitals..             266           1,033           1,021            -1.1
        Other Reclassified Hospitals (Section                 47             651             661             1.6
         1886(d)(8)(B)).........................
    Type of Ownership:
        Voluntary...............................           1,899             959             976             1.8
        Proprietary.............................             856             851             871             2.3
        Government..............................             501             981           1,011             3.1
    Medicare Utilization as a Percent of
     Inpatient Days:
        0-25....................................             602           1,076           1,104             2.6
        25-50...................................           2,139             942             961             2.1
        50-65...................................             421             774             784             1.3
        Over 65.................................              73             567             582             2.7
----------------------------------------------------------------------------------------------------------------

J. Effects of Payment Rate Changes and Policy Changes Under the 
LTCH PPS

1. Introduction and General Considerations

    In section VII. of the preamble of this final rule and section 
V. of the Addendum to this final rule, we set forth the annual 
update to the payment rates for the LTCH PPS for FY 2019. In the 
preamble of this final rule, we specify the statutory authority for 
the provisions that are presented, identify the final policies, and 
present rationales for our decisions as well as alternatives that 
were considered. In this section of Appendix A to this final rule, 
we discuss the impact of the changes to the payment rate, factors, 
and other payment rate policies related to the LTCH PPS that are 
presented in the preamble of this final rule in terms of their 
estimated fiscal impact on the Medicare budget and on LTCHs.
    There are 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 FY 
2019 MS-LTC-DRG relative weights (discussed in section VII.B.3.c. of 
the preamble of this final rule. Moreover, in the claims data used 
for this final rule, 1 of these 409 LTCHs only have claims for site 
neutral payment rate cases and, therefore, are not included in our 
impact analysis for LTCH PPS standard Federal payment rate cases.) 
In the impact analysis, we used the final payment rate, factors, and 
policies presented in this final rule, the 1.0135 percent annual 
update to the LTCH PPS standard Federal payment rate, the update to 
the MS-LTC-DRG classifications and relative weights, the update to 
the wage index values and labor-related share, the elimination of 
the 25-pecent threshold policy and corresponding one-time temporary 
budget neutrality adjustment for FY 2019 (discussed in VII.E. of the 
preamble of this final rule), and the best available claims and CCR 
data to estimate the 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.

[[Page 41766]]

    Based on the best available data for the 409 LTCHs in our 
database that were considered in the analyses used for this final 
rule, we estimate that overall LTCH PPS payments in FY 2019 will 
increase by approximately 0.9 percent (or approximately $39 million) 
based on the final rates and factors presented in section VII. of 
the preamble and section V. of the Addendum to this final rule.
    Based on the FY 2017 LTCH cases that were used for the analysis 
in this final 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 
currently 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 increase by approximately 0.4 percent (or 
approximately $4 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 will be paid based on the LTCH PPS standard 
Federal payment rate for the full year. We estimate that total LTCH 
PPS payments for these LTCH PPS standard Federal payment rate cases 
in FY 2019 will increase approximately 1.0 percent (or approximately 
$35 million). This estimated increase in LTCH PPS payments for LTCH 
PPS standard Federal payment rate cases in FY 2019 is primarily due 
to the 1.35 percent annual update to the LTCH PPS standard Federal 
payment rate for FY 2019 (discussed in section V.A. of the Addendum 
to this final rule) in conjunction with the 0.9 percent one-time 
temporary budget neutrality adjustment factor for FY 2019 under our 
final policy to eliminate the 25-percent threshold policy, and the 
estimated 0.6 percent increase in HCO payments discussed in section 
V.D.3.b.(3). of the Addendum to this final rule.
    Based on the 409 LTCHs that were represented in the FY 2017 LTCH 
cases that were used for the analyses in this final rule presented 
in this Appendix, we estimate that aggregate FY 2019 LTCH PPS 
payments will be approximately $4.540 billion, as compared to 
estimated aggregate FY 2018 LTCH PPS payments of approximately 
$4.502 billion, resulting in an estimated overall increase in LTCH 
PPS payments of approximately $39 million. We note that the 
estimated $39 million increase in LTCH PPS payments in FY 2019 does 
not reflect changes in LTCH admissions or case-mix intensity, which 
will also affect the overall payment effects of the final policies 
in this final rule.
    The LTCH PPS standard Federal payment rate for FY 2018 is 
$41,415.11. For FY 2019, we are establishing an LTCH PPS standard 
Federal payment rate of $41,579.65 which reflects the 1.35 percent 
annual update to the LTCH PPS standard Federal payment rate, the 
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 FY 2019 one-time temporary budget 
neutrality adjustment factor of 0.990884 to ensure that the 
elimination of the 25-percent threshold policy (discussed in VII.E. 
of the preamble of this final rule) does not influence aggregate FY 
2019 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 establishing an LTCH PPS standard Federal payment rate of 
$40,759.12. This LTCH PPS standard Federal payment rate reflects the 
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 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 annual update of 1.35 percent to the LTCH PPS standard 
Federal payment rate is projected to result in an increase of 1.3 
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 annual update to the LTCH PPS 
standard Federal payment rate for FY 2019, the estimated increase of 
1.3 percent shown in Column 6 of Table IV also includes estimated 
payments for SSO cases, a portion of which 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 
LTCH PPS standard Federal payment rate to LTCH PPS standard Federal 
payment rate cases is somewhat less than the 1.35 percent annual 
update for FY 2019.
    For FY 2019, we are updating the wage index values based on the 
most recent available data, and we are continuing to use labor 
market areas based on the CBSA delineations (as discussed in section 
V.B. of the Addendum to this final rule). In addition, we are 
updating the labor-related share at 66.0 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 applied an 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 final rule, as 
we proposed, we are eliminating the 25-percent threshold policy in a 
budget neutral manner. Therefore, for FY 2019, we applied a one-time 
temporary budget neutrality adjustment factor of 0.990884 to ensure 
the 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 will increase from FY 2018 to FY 2019. 
Based on the FY 2017 LTCH cases that were used for the analyses in 
this final rule, we estimate that the FY 2018 HCO threshold of 
$27,381 (as established in the FY 2018 IPPS/LTCH PPS final rule) 
will result in estimated HCO payments for LTCH PPS standard Federal 
payment rate cases in FY 2018 that are below the 7.975 percent 
target. Specifically, we currently estimate that HCO payments for 
LTCH PPS standard Federal payment rate cases would be approximately 
7.41 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 will result in an estimated 
increase in HCO payments of 0.6 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 the 
projected market basket percentage increase factor, as discussed in 
section V.D.3.b.(3). of the Addendum to this final rule.
    Table IV shows the estimated impact of the final payment rate 
and final 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 final rule, based on the 
most recent available data, we believe that the provisions of this 
final rule relating to the LTCH PPS, which are projected to result 
in an overall increase in estimated aggregate LTCH PPS payments, and 
the resulting LTCH PPS payment amounts will result in appropriate 
Medicare payments that are consistent with the statute.
    Comment: Some commenters objected to our expectation that costs 
and resource use for cases paid at the site neutral payment rate 
will likely mirror the costs and resource use for IPPS cases 
assigned to the same MS-DRG based on a comparison of FY 2017 LTCH 
site neutral payment rate cases. These commenters also believed that 
LTCH site neutral payment rate cases continue to be misaligned from 
a clinical and resource use perspective with respective IPPS-
comparable amount payments, and requested CMS conduct a DRG-level 
study comparing the relative levels of clinical severity, lengths of 
stay, cost, and Medicare payment.
    Response: As we stated above, we believe that LTCH PPS payment 
amounts will result in appropriate Medicare payments that are 
consistent with the statute. Furthermore, the site neutral payment 
rate is established by statute. Section 1886(m)(6)(B)(i)(II) of the 
Act defines the site neutral payment rate as the lower of the IPPS 
comparable per diem amount as determined under Sec.  412.529(d)(4), 
including any applicable outlier payments as

[[Page 41767]]

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, LTCH discharges from FY 2017 for site neutral payment rate 
cases were not fully subject to the site neutral payment rate 
because of the transitional blended payment period provided by the 
statute (meaning that all claims which were subject to the site 
neutral payment rate in FY 2017 were paid under the transitional 
blended payment rate, which was based on 50 percent of the LTCH PPS 
standard Federal payment rate). Therefore, the analysis presented by 
commenters based on FY 2017 claims data does not invalidate our 
assumptions regarding the costs and resource use for site neutral 
payment rate cases because the FY 2017 claims appear to not yet 
reflect the expected change in cost and resources once the payment 
for site neutral payment rate cases is fully based on the site 
neutral payment rate. We will also take this opportunity to remind 
commenters, as we have stated in the past in response to similar 
comments (82 FR 38574 through 38575), our assumption on the costs 
and resources used for site neutral payment rate cases is based upon 
full implementation of the site neutral payment rate, and since 
discharges in FY 2017 were not subject to the full site neutral 
payment rate, this data does not reflect that assumption. We will 
continue to monitor the data and provide stakeholders with such 
information as appropriate, while guarding against drawing 
conclusions from limited or ``immature'' data.

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 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 an 
increase in aggregate LTCH PPS payments in FY 2019 of approximately 
$39 million. This estimated increase in payments reflects the 
projected increase in payments to LTCH PPS standard Federal payment 
rate cases of approximately $35 million and the projected increase 
in payments to site neutral payment rate cases of approximately $4 
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 final 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 final rule to 
project estimated FY 2019 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 change in LTCH PPS payments for site 
neutral payment rate cases at the same level of detail with which we 
are able to model the impacts of the changes to LTCH PPS payments 
for LTCH PPS standard Federal payment rate cases. Therefore, Table 
IV only reflects changes in LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases and, unless otherwise noted, the 
remaining discussion in section I.J.4. of this Appendix refers only 
to the impact on LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases. In the following section, we present our 
provider impact analysis for the changes that affect LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases.

b. Impact on Providers

    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 changes to the LTCH PPS payments 
for LTCH PPS standard Federal payment rate cases presented in this 
final rule on different categories of LTCHs for FY 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 rates, factors, and the policies in this FY 2019 IPPS/LTCH 
PPS final rule (as discussed in section VII. of the preamble of this 
final rule and section V. of the Addendum to this final rule). As 
discussed elsewhere in this final 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 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 final policies on payments for LTCH 
PPS standard Federal payment rate cases, we simulated FY 2018 and 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

[[Page 41768]]

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 FY 2019 LTCH PPS standard Federal payment 
rate, we used the FY 2019 standard Federal payment rate of 
$41,579.65 (or $40,759.12 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 FY 2019 LTCH PPS payments, we used the FY 
2019 LTCH PPS labor-related share (66.0 percent), the FY 2019 wage 
index values from Tables 12A and 12B listed in section VI. of the 
Addendum to this final rule (which are available via the internet on 
the CMS website), the FY 2019 fixed-loss amount for LTCH PPS 
standard Federal payment rate cases of $27,124 (as discussed in 
section V.D.3. of the Addendum to this final rule), and the FY 2019 
COLA factors (shown in the table in section V.C. of the Addendum to 
this final rule) to adjust the FY 2019 nonlabor-related share (34.0 
percent) for LTCHs located in Alaska and Hawaii. We note that in 
modeling payments for HCO cases for LTCH PPS standard Federal 
payment rate cases, we applied an inflation factor of 5.7 percent 
(determined by the Office of the Actuary) to update the 2017 costs 
of each case.
    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 final payment rates and policy changes 
applicable to LTCH PPS standard Federal payment rate cases presented 
in this final rule. Table IV illustrates the estimated aggregate 
impact of the change in LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases among various classifications of LTCHs. 
(As discussed previously, these impacts do not include LTCH PPS site 
neutral payment rate cases.)
     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 annual update to the standard Federal rate (as 
discussed in section V.A.2. of the Addendum to this final rule).
     The seventh column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2018 to FY 2019 for changes to the area 
wage level adjustment (that is, the wage indexes and the labor-
related share), including the application of the area wage level 
budget neutrality factor (as discussed in section V.B. of the 
Addendum to this final rule).
     The eighth column shows the percentage change in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2018 (Column 4) to FY 2019 (Column 5) for 
all changes.

          Table IV--Impact of Payment Rate and 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]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Percent change  Percent change
                                                                            Average FY      Average FY     due to change  due to changes  Percent change
                                                          Number of LTCH   2018 LTCH PPS   2019 LTCH PPS   to the annual   to area wage     due to all
           LTCH classification               Number of     PPS standard     payment per     payment per    update to the    adjustment       standard
                                               LTCHS       payment rate      standard        standard        standard        with wage     payment rate
                                                               cases       payment rate    payment rate    federal rate       budget        changes \4\
                                                                                                \1\             \2\       neutrality \3\
(1)                                                  (2)             (3)             (4)             (5)             (6)             (7)             (8)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Providers...........................             409          75,416         $46,852         $47,323             1.3               0             1.0
By Location:
    Rural...............................              21           2,457          39,339          39,694             1.3            -0.1             0.9
    Urban...............................             388          72,959          47,105          47,580             1.3               0             1.0
        Large...........................             195          40,491          50,164          50,727             1.3               0             1.1
        Other...........................             193          32,468          43,291          43,655             1.3               0             0.9
By Participation Date:
    Before Oct. 1983....................              11           1,923          43,083          43,240             1.3            -0.5             0.4
    Oct. 1983-Sept. 1993................              42           9,632          51,709          52,462             1.3             0.2             1.5
    Oct. 1993-Sept. 2002................             169          31,338          45,565          45,982             1.3               0             0.9
    After October 2002..................             187          32,523          46,877          47,334             1.3               0             1.0
By Ownership Type:
    Voluntary...........................              77          10,614          48,824          49,600             1.3             0.3             1.6
    Proprietary.........................             319          63,040          46,378          46,788             1.3            -0.1             0.9
    Government..........................              13           1,762          51,945          52,720             1.3             0.0             1.5
By Region:
    New England.........................              12           2,707          43,164          43,282             1.3            -0.4             0.3
    Middle Atlantic.....................              24           5,959          50,920          51,542             1.3            -0.1             1.2
    South Atlantic......................              66          13,792          47,641          48,116             1.3            -0.1             1.0
    East North Central..................              68          11,843          46,386          46,694             1.3            -0.3             0.7
    East South Central..................              36           6,385          45,490          45,958             1.3               0             1.1
    West North Central..................              28           4,412          45,951          46,416             1.3            -0.3             1.0
    West South Central..................             120          18,361          41,402          41,778             1.3             0.2             0.9
    Mountain............................              26           7,887          58,121          59,196             1.3            -0.5             0.4
    Pacific.............................              29           4,070          47,897          48,099             1.4             0.7             1.9
By Bed Size:
    Beds: 0-24..........................              43           4,206          44,740          44,984             1.3            -0.4             0.6
    Beds: 25-49.........................             185          26,270          44,623          45,026             1.3               0             0.9
    Beds: 50-74.........................             107          20,178          47,733          48,236             1.3               0             1.1
    Beds: 75-124........................              43          12,086          50,145          50,767             1.3             0.1             1.3

[[Page 41769]]

 
    Beds: 125-199.......................              22           7,709          47,404          47,762             1.3            -0.3             0.8
    Beds: 200+..........................               9           4,967          47,988          48,675             1.3             0.5             1.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimated FY 2019 LTCH PPS payments for LTCH PPS standard Federal payment rate criteria based on the payment rate and factor changes applicable to
  such cases presented in the preamble of and the Addendum to this final 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 annual update to
  the LTCH PPS standard Federal payment rate.
\3\ Percent change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2018 to FY 2019 for changes to the area
  wage level adjustment under Sec.   412.525(c) (as discussed in section V.B. of the Addendum to this final rule).
\4\ Percent change in estimated payments per discharge for LTCH PPS standard Federal payment rate cases from FY 2018 (shown in Column 4) to FY 2019
  (shown in Column 5), including all of the changes to the rates and factors applicable to such cases presented in the preamble and the Addendum to this
  final rule. We note that this column, which shows the percent change in estimated payments per discharge for all changes, does not equal the sum of
  the percent changes in estimated payments per discharge for the annual update to the LTCH PPS standard Federal payment rate (Column 6) and the changes
  to the area wage level adjustment with budget neutrality (Column 7) due to the effect of estimated changes in 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 final rule, we have prepared the following 
summary of the impact (as shown in Table IV) of the LTCH PPS payment 
rate and policy changes for LTCH PPS standard Federal payment rate 
cases presented in this final rule. The impact analysis in Table IV 
shows that estimated payments per discharge for LTCH PPS standard 
Federal payment rate cases are projected to increase 1.0 percent, on 
average, for all LTCHs from FY 2018 to FY 2019 as a result of the 
payment rate and policy changes applicable to LTCH PPS standard 
Federal payment rate cases presented in this final rule. This 
estimated 1.0 percent increase in LTCH PPS payments per discharge 
was determined by comparing estimated FY 2019 LTCH PPS payments 
(using the payment rates and factors discussed in this final 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 updating the LTCH PPS standard 
Federal payment rate for FY 2019 by 1.35 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 applying an area wage level budget neutrality factor to 
the FY 2019 LTCH PPS standard Federal payment rate of 0.999713, 
based on the best available data at this time, to ensure that any 
changes to the area wage level adjustment (that is, the annual 
update of the wage index values and labor-related share) will not 
result in any change (increase or decrease) in estimated aggregate 
LTCH PPS standard Federal payment rate payments. Finally, we are 
making a budget neutrality adjustment of 0.990884 for the 
elimination of the 25-percent threshold policy (discussed in VII.E. 
of the preamble of this final 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 1.35 percent 
annual update to the LTCH PPS standard Federal payment rate is 
projected to result in approximately a 1.3 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 changes in payments due to the 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 1.35 percent due to the 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 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 1.0 percent. For rural LTCHs, estimated payments for 
LTCH PPS standard Federal payment rate cases are expected to 
increase 0.9 percent. For urban LTCHs, we estimate an increase of 
1.0 percent from FY 2018 to FY 2019. Among the urban LTCHs, large 
urban LTCHs are projected to experience an increase of 1.1 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 increase 0.9 percent, 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 1.0 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 increase of 0.4 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 1.5 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 42 percent of 
all LTCH PPS standard Federal payment rate cases, are projected to 
experience a 0.9 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.

[[Page 41770]]

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 1.6 percent increase in payments to LTCH 
PPS standard Federal payment rate cases, while proprietary LTCHs are 
expected to experience an average increase of 0.9 percent in 
payments to LTCH PPS standard Federal payment rate cases. Government 
owned and operated LTCHs, meanwhile, are expected to experience a 
1.5 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 all 
census regions. LTCHs located in the Pacific are projected to 
experience the largest increase at 1.9 percent. The New England and 
Mountain regions are projected to experience the smallest increase 
of 0.3 and 0.4 percent, respectively. These regional variations are 
largely due to 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 will experience 
the smallest increase in payments for LTCH PPS standard Federal 
payment rate cases of 0.6 percent. We expect LTCHs with 200 or more 
beds to experience the largest increase at 1.5 percent.

4. Effect on the Medicare Program

    As stated previously, we project that the provisions of this 
final rule will result in an increase in estimated aggregate LTCH 
PPS payments to LTCH PPS standard Federal payment rate cases in FY 
2019 relative to FY 2018 of approximately $35 million (or 
approximately 1.0 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 final rule will result in an increase in 
estimated aggregate LTCH PPS payments to site neutral payment rate 
cases in FY 2019 relative to FY 2018 of approximately $4 million (or 
approximately 0.4 percent) for the 409 LTCHs in our database. 
Therefore, we project that the provisions of this final rule will 
result in an increase in estimated aggregate LTCH PPS payments for 
all LTCH cases in FY 2019 relative to FY 2018 of approximately $39 
million (or approximately 0.9 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 final 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 Requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program

1. Background

    In section VIII.A. of the preambles of the proposed rule (83 FR 
20470 through 20500) and this final 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 final rule, we are finalizing our policies 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 begiVIIInning 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 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 three 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 six chart-
abstracted measures 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 finalized 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 final 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 final 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 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 final rule, we are finalizing our proposal to extend those 
reporting requirements for the CY 2019 reporting period/FY 2021 
payment determination, such that hospitals will 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 Requirement To Certify EHR to the 2015 Edition

    In section VIII.A.11.d.(3) of the preamble of this final rule, 
we discuss our finalized 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 final rule, we expect this finalized 
proposal to have no impact on information collection burden for the 
Hospital IQR Program because this policy does not require hospitals 
to submit new data to CMS.
    With respect to any costs unrelated to data submission, although 
this finalized proposal will 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 finalized proposal.

4. Impact of Removal of Chart-Abstracted Measures

    In section VIII.A.5.b.(8) of the preamble of this final rule, 
beginning with the CY 2019 reporting period/FY 2021 payment 
determination, we are finalizing our proposals to remove three 
chart-abstracted clinical process of care measures (ED-1, IMM-2, and 
VTE-6). In sections VIII.A.5.b.(2)(b) \428\ and VIII.A.5.b.(8)(b) of 
the preamble of this final rule, beginning with

[[Page 41771]]

the CY 2020 reporting period/FY 2022 payment determination, we also 
are finalizing our proposals to remove five National Healthcare 
Safety Network (NHSN) hospital-acquired infection (HAI) measures 
(CDI, CAUTI, CLABSI, MRSA Bacteremia, and Colon and Abdominal 
Hysterectomy SSI) and one chart-abstracted clinical process of care 
measure (ED-2). We note that as we discussed in section 
VIII.A.5.b.(2)(b) of the preamble of this final rule, we proposed to 
remove the NHSN HAI measures beginning with the CY 2019 reporting 
period/FY 2021 payment determination, but are finalizing a modified 
version of our proposal delaying the measures' removal until the CY 
2020 reporting period/FY 2022 payment determination. Our estimates 
below have been updated to reflect this change.
---------------------------------------------------------------------------

    \428\ As discussed in section VIII.A.5.b.(2)(b) of the preamble 
of this final rule, we proposed to remove the NHSN HAI measures 
beginning with the CY 2019 reporting period/FY 2021 payment 
determination, but are delaying their removal until the CY 2020 
reporting period/FY 2022 payment determination.
---------------------------------------------------------------------------

    As described in detail in section XIV.B.3. of the preamble of 
this final rule, we expect our finalized proposals to remove the 
clinical process of care chart-abstracted measures will 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 858,000 hours and approximately 
$31.3 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, based on our finalized proposals to remove five NHSN HAI 
and four clinical process of care chart-abstracted measures (in 
sections VIII.A.5.b.(2)(b) and VIII.A.5.b.(8) of the preamble of 
this final rule), we believe that hospitals will experience an 
overall reduction in burden associated with validation of chart-
abstracted measures beginning with the FY 2023 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, based on our finalized proposals 
to remove the NHSN HAI measures, the information collection burden 
associated with submission of these validation templates will be 
eliminated from the Hospital IQR Program. As described in detail in 
section XIV.B.3.b.(3) of the preamble of this final 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. The finalized 
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 finalized 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 finalized 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 will 
no longer need to review feedback reports for the NHSN HAI measures 
with 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 Removal of Two Structural Measures

    In section VIII.A.5.a. and VII.A.5.b.(1) of the preamble of this 
final rule, we are finalizing our proposals 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 finalized proposals will 
result in a minimal information collection burden reduction, which 
is addressed in section XIV.B.3. of the preamble of this final rule. 
In addition, we refer readers to VIII.A.4.b. of the preamble of this 
final 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 final rule, we believe these measures 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 Removal of Claims-Based Measures

    In sections VIII.A.5.b.(2)(a), (3), (4), (6), and (7) of the 
preamble of this final rule, we are finalizing our proposals 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 final rule, we are finalizing our proposals 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 final 
rule, we are finalizing our proposals 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 Removal of eCQMs

    In section VIII.A.5.b.(9) of the preamble of this final rule, we 
are finalizing our proposals 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 final 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 final 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 final rule.

[[Page 41772]]

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 
finalized 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 \429\) 
and a total cost reduction related to information collection of 
approximately $38.3 million (-1,046,138 hours x $36.58 per hour 
\430\) for the CY 2019 reporting period/FY 2021 payment 
determination; (2) a total information collection burden reduction 
of 858,000 hours (-858,000 hours due to the finalized removal of ED-
2) and a total cost reduction related to information collection of 
approximately $31.3 million (-858,000 hours x $36.58 per hour \431\) 
for the CY 2020 reporting period/FY 2022 payment determination; and 
(3) a total information collection burden reduction of 43,200 hours 
(-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 $1.6 million (-43,200 
hours x $36.58 per hour) for the CY 2021 reporting period/FY 2023 
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.
---------------------------------------------------------------------------

    \429\ In the FY 2018 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 1 year, voluntary collection of these 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.
    \430\ 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.
    \431\ 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 will, 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 
final 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 Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program

    In section VIII.B. of the preambles of the proposed rule (83 FR 
20500 through 20510) and this final rule, we discuss our proposed 
and finalized 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 final rule, we 
are finalizing our proposals 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) beginning with the FY 
2021 program year. As discussed in section VIII.B.3.b.(2) of the 
preamble of this final rule, we are deferring finalization of our 
policies regarding future use of the Catheter-Associated Urinary 
Tract Infection (CAUTI) Outcome Measure (PCH-5/NQF #0138) and 
Central Line-Associated Bloodstream Infection (CLABSI) Outcome 
Measure (PCH-4/NQF #0139) in the PCHQR Program to a future 2018 
final rule, most likely in the CY 2019 OPPS/ASC final rule targeted 
for release no later than November 2018. We will therefore address 
any change in burden associated with this policy decision, most 
likely, in the CY 2019 OPPS/ASC final rule. In addition, in section 
VIII.B.4. of the preamble of this final rule, we are finalizing our 
proposal 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). Based on the finalized measure 
removals and addition, the PCHQR Program measure set will consist of 
13 measures for the FY 2021 program. Further, in section XIV.B.4.b. 
of the preamble of this final rule, we are finalizing our proposal 
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 finalizing our proposal to adopt the 
estimate of 15 minutes per measure, per PCH, for reporting these 
types of measures, which is the time estimate utilized by the 
Hospital IQR Program (80 FR 49762).

a. Summary of Burden Effects for the FY 2021 Program Year

(1) Removal of Web-Based Structural Measures

    As explained in section XIV.B.4.c. of the preamble of this final 
rule, we anticipate that these finalized new requirements will 
reduce the overall burden on participating PCHs. Because we are 
finalizing 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)), 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 finalized removal of these four measures.

(2) Removal of Chart-Abstracted NHSN Measures

    As discussed in section VIII.B.3.b.(2) of the preamble of this 
final rule, we are deferring finalization of our policies regarding 
future use of the Catheter-Associated Urinary Tract Infection 
(CAUTI) Outcome Measure (PCH-5/NQF #0138) and Central Line-
Associated Bloodstream Infection (CLABSI) Outcome Measure (PCH-4/NQF 
#0139) in the PCHQR Program to a future 2018 final rule, most likely 
in the CY 2019 OPPS/ASC final rule targeted for release no later 
than November 2018. We will therefore address any change in burden 
associated with this policy decision, most likely, in the CY 2019 
OPPS/ASC final rule.

(3) Adoption of 30-Day Unplanned Readmissions for Cancer Patients 
Measure (NQF #3188)

    We do not anticipate any change in burden on the PCHs associated 
with our finalized 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 change in burden resulting from 
the finalization of this proposal.
    In summary, because we are finalizing our proposals to remove 4 
web-based, structural measures, we estimate a total burden reduction 
of 11 hours of burden per year for all 11 PCHs beginning with the FY 
2021 program year.

M. Effects of 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

[[Page 41773]]

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 
final rule for details discussing information collection 
requirements for the LTCH QRP.

N. Effects of Requirements Regarding the Promoting Interoperability 
Programs

    In section VIII.D. of the preambles of the proposed rule (83 FR 
20515 through 20544) and this final rule, we discuss and finalize 
our proposals with a few modifications regarding 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 are finalizing 
the new measure Query of PDMP and the Support Electronic Referral 
Loops by Receiving and Incorporating Health Information. We are 
finalizing the removal of the Coordination of Care Through Patient 
Engagement objective and its associated measures Secure Messaging, 
View, Download or Transmit, and Patient Generated Health Data as 
well as the measures Request/Accept Summary of Care, Clinical 
Information Reconciliation and Patient-Specific Education. We are 
renaming measures within the Health Information Exchange objective. 
These changes include changing the name from Send a Summary of Care, 
to Support Electronic Referral Loops by Sending Health Information; 
renaming the Public Health and Clinical Data Registry Reporting 
objective to Public Health and Clinical Data Exchange with the 
requirement to report on any two measures options; renaming the name 
the Patient Electronic Access to Health Information objective to 
Provider to Patient Exchange objective, and renaming the remaining 
measure, Provide Patient Access measure to Provide Patients 
Electronic Access to Their Health Information measure. We also are 
finalizing an any minimum 90-day EHR reporting period in CYs 2019 
and 2020 for new and returning participants attesting to CMS or 
their State Medicaid agency; the CQM reporting period and criteria 
for CY 2019; and our proposal 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 finalized proposals will reduce 
burden. We refer readers to section XIV.B.9. of the preamble of this 
final rule for additional discussion on the information collection 
effects associated with these finalized proposals.
    In section VIII.D.12.a. of the preamble of this final rule, we 
are finalizing our proposal 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 finalizing 
our proposals that the prior approval dollar threshold in Sec.  
495.324(b)(3) will be increased to $500,000, and that a prior 
approval threshold of $500,000 will be added to Sec.  495.324(b)(2). 
In addition, in light of these finalized changes, we are finalizing 
our proposal to make a conforming amendment to 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) maintains the consistency of our 
prior approval requirements. We believe that these finalized 
proposals also will 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 final rule, we 
are finalizing our proposal to amend 42 CFR 495.322 to provide that 
the 90 percent FFP for Medicaid Promoting Interoperability Program 
administration will no longer be available for most State 
expenditures incurred after September 30, 2022. We are finalizing 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 will 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 
finalized proposals will impose any additional burdens on States. We 
refer readers to section XIV.B.9. of the preamble of this final rule 
for additional discussion on the information collection effects 
associated with these proposals.

O. Alternatives Considered

    This final 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 final rule, section II.H.5.a. of the preamble of this final 
rule, and section II.A.4.g. of the Addendum to this final rule, we 
considered the comments regarding the creation of 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, and we considered comments 
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, and payments to 
IPPS excluded cancer hospitals.
    As discussed in section II.A.4.g. of the Addendum to the 
proposed rule, the impact 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, in the proposed 
rule, 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 is dependent on the relative weighting factor determined for 
the separate MS-DRG. In the proposed rule, we invited 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.
    Comments also suggested other alternative changes under the IPPS 
for FY 2019, including, but not limited to, the creation of a pass-
through payment, and structural changes in new technology add-on 
payments for the drug therapy. The impacts of these would depend on 
the basis for the pass-through payment amount (for example, cost or 
average sales price) or on the revised methodology for the new 
technology add-on payment (for example, a revision to the percentage 
of cost paid.)
    As described more fully in section II.F.2.d. of the preamble of 
this final rule, given the potential for a new CMMI model and our 
request for feedback on this approach, we believe it would be 
premature to adopt changes to our existing payment mechanisms, 
either under the IPPS or for IPPS-excluded cancer hospitals, 
specifically for CAR T-cell therapy. Therefore, we did not adopt the 
alternatives discussed above that we considered for CAR T-cell 
therapy for FY 2019, including, but not limited to, the creation of 
a pass-through payment; structural changes in new technology add-on 
payments for the drug therapy; changes in the usual cost-to-charge 
ratios (CCRs) used in ratesetting and payment, including those used 
in determining new technology add-on payments, outlier payments, and 
payments to IPPS excluded cancer hospitals; and the creation of a 
new MS-DRG specifically for CAR T-cell therapy.
    As discussed in section VIII.A.5.b.(9) of the preamble of this 
final rule, in the context of

[[Page 41774]]

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 
information collection reporting burden between these two options. 
The lack of difference is due to the low number of hospitals that 
have historically selected those eCQMs as part of their 4 required 
eCQMs for submission. 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 sought public comment on them.
    As discussed in section IV.I.4.b. of the preamble of the 
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 the 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 discussed in sections 
IV.I.4.a.(2) and IV.I.4.b. of the preamble of this final rule, we 
are not finalizing our proposal to remove the Safety domain and are 
keeping the current domain weighting described above, as previously 
finalized.
    As summarized in section IV.I.4.b. of the preambles of the 
proposed rule and this final 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. In the proposed 
rule (83 FR 20537), we provided a table showing the estimated 
average TPSs and unweighted domain scores under these alternatives. 
That table is set out below and 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 41775]]

    The table below provides a summary of the estimated impacts on 
average TPSs and payment adjustments for all hospitals,\432\ 
including as they would compare to actual FY 2018 program results 
under current domain weighting policies.
---------------------------------------------------------------------------

    \432\ 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                                 Proposed increased
 average TPS and payment adjustments    Actual (4 domains) \+\    weight for clinical        Equal weighting
      using FY 2018 program data                                  outcomes (3 domains)   alternative (3 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 to the 
proposed rule (83 FR 20620 through 20621) 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 did not impact the 
collection of information for hospitals, we did not expect these 
alternatives to affect the reporting burden on hospitals. We 
considered these alternatives and sought public comment on them.
    As discussed in section IV.J.5. of the preamble of this final 
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 
were 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 considered 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 2019 
HAC Reduction Program data.\433\ We compared the percentage of 
hospitals in the worst-performing quartile in FY 2019 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.
---------------------------------------------------------------------------

    \433\ In the FY 2019 IPPS/LTCH PPS proposed rule, we used FY 
2018 data to complete the analysis. We have since updated our 
analysis using FY 2019 data. To see prior table, we refer readers to 
83 FR 20434 through 20437; 83 FR 20638 through 20639.

  Estimated Impact of Scoring Approaches on Percentage of Hospitals in
               Worst-Performing Quartile by Hospital Group
------------------------------------------------------------------------
                                                             Variable
           Hospital group \a\              Equal measure  domain weights
                                            weights (%)         (%)
------------------------------------------------------------------------
Teaching hospitals: 100 or more                      3.6             1.6
 residents (N=248)......................
Safety-net \b\ (N=646)..................             0.9             0.8
Urban hospitals: 400 or more beds                    2.5             0.8
 (N=358)................................
Hospitals with fewer than 100 beds                  -1.7            -1.0
 (N=1,208)..............................
Hospitals with a measure score for:
    Zero Domain 2 measures (N=223)......             0.4             0.0
    One Domain 2 measure (N=340)........            -4.1            -2.9
    Two Domain 2 measures (N=211).......            -3.8            -3.3
    Three Domain 2 measures (N=188).....            -0.5             0.5
    Four Domain 2 measures (N=253)......             0.0             0.4
    Five Domain 2 measures (N=2,004)....             1.1             0.7
------------------------------------------------------------------------
\a\ The number of hospitals in the given hospital group for FY 2019 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.
Note: This table is updated from the FY 2019 IPPS/LTCH PPS proposed
  rule, which used FY 2018 data. To see that table, we refer readers to
  83 FR 20434 through 20437; 83 FR 20638 through 20639.

    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 FY 2019 HAC

[[Page 41776]]

Reduction Program data, the percentage of hospitals in the worst-
performing quartile decreases by 1.7 percent for small hospitals 
(that is, fewer than 100 beds), 4.1 percent for hospitals with one 
Domain 2 measure, 3.8 percent for hospitals with two Domain 2 
measures, while it increases by 2.5 percent for large urban 
hospitals (that is, 400 or more beds) and 3.6 percent for large 
teaching hospitals (that is, 100 or more residents). The Variable 
Domain Weights approach decreases the percentage of hospitals in the 
worst-performing quartile by 1.0 percent for small hospitals, 2.9 
percent for hospitals with one Domain 2 measure, and 3.3 for 
hospitals with two Domain 2 measures, while it increases the 
percentage of hospitals in the worst-performing quartile by 0.8 
percent for large urban hospitals and 1.6 percent for large teaching 
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 2017 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 the proposed 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 larger hospitals 
move into the penalty quartile. The alternative weighting approach 
considered, variable weighting, would have increased estimated total 
penalties by approximately $11,125,845. The finalized weighting 
approach will increase estimated total penalties by $20,159,043, 
over $9 million more than the alternative weighting approach 
considered. The table below displays the results of our analysis in 
FY 2019 dollars and as a percentage difference.

  Estimated Fiscal Impact of Finalized and Alternative Weighting Approaches Relative to Current Methodology **
----------------------------------------------------------------------------------------------------------------
                                                                     Total HAC
                                                                     reduction                      Difference
                                                                      program       Percentage     from FY 2019
                            Scenario                              penalty amount    difference       (FY 2019
                                                                     (FY 2019      from FY 2019     dollars) *
                                                                    dollars) *
----------------------------------------------------------------------------------------------------------------
FY 2019 HAC Reduction Program--Before Proposed Weighting Change.    $380,999,808             N/A             N/A
Variable Domain Weights.........................................     392,125,653             2.9     $11,125,845
Equal Measure Weights...........................................     401,158,851             5.3      20,159,043
----------------------------------------------------------------------------------------------------------------
* Applied an annual increase to DRG payments to convert estimated FY 2017 DRG payments to estimated FY 2019 DRG
  payments. Source: Payment estimates based on FY 2017 Medicare Provider Analysis and Review (MedPAR) files.
** In the FY 2019 IPPS/LTCH PPS proposed rule, we used FY 2018 Program data and FY 2013 payment to complete the
  analysis. We have since updated our analysis using FY 2019 Program data and FY 2017 payment data. To see that
  table, we refer readers to 83 FR 20638 through 20639.

    In the proposed rule, after consideration of the current policy, 
Equal Measure Weights and Variable Domain Weighting methodologies, 
we sought public comment on these approaches. In this final rule, 
after consideration of the public comments we received, we are 
adopting the Equal Measure Weights methodology. However, because the 
alternatives considered do not impact the collection of information 
for hospitals, we did not expect either of these alternatives to 
affect the reporting burden on hospitals associated with the HAC 
Reduction Program. Therefore, we believe that the finalized policy 
will not affect burden.

P. Reducing Regulation and Controlling Regulatory Costs

    Executive Order 13771, titled Reducing Regulation and 
Controlling Regulatory Costs, was issued on January 30, 2017. This 
final rule, 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 this final rule, and estimate that the impact of these 
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 final rule, we are finalizing our proposal 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 finalizing our 
proposal 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 finalized 
transition of HAI data validation from the Hospital IQR Program to 
the HAC Reduction Program in section XIV.B.7. of the preamble of 
this final rule. We discuss the estimated burden and cost reductions 
for the PCHQR Program in section XIV.B.4. of the preamble of this 
final 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 final 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 final 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*.
                                                      ------------------

[[Page 41777]]

 
    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

    Acute care hospitals are estimated to experience an increase of 
approximately $4.8 billion in FY 2019, taking into account 
operating, capital, new technology, and low volume hospital payments 
as modeled for this final rule. Approximately $4.4 billion of this 
estimated increase is due to the changes in operating payments, 
including $1.5 billion in uncompensated care payments (discussed in 
sections I.G. and I.H. of this Appendix), approximately $0.2 billion 
is due to the change in capital payments (discussed in section I.I 
of this Appendix), approximately $0.2 billion is due to the change 
in new technology add-on payments (discussed in section I.H of this 
Appendix), and approximately $0.1 billion is due to the change in 
low-volume hospital payments (discussed in section I.H of this 
Appendix). Total differs from the sum of the components due to 
rounding.
    Table I of section I.G. of this Appendix also demonstrates the 
estimated redistributional impacts of the IPPS budget neutrality 
requirements for the MS-DRG and wage index changes, and for the wage 
index reclassifications under the MGCRB.
    We estimate that hospitals will experience a 2.3 percent 
increase in capital payments per case, as shown in Table III of 
section I.I. of this Appendix. We project that there will be a $193 
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 final rule, constitute a regulatory 
impact analysis.

2. LTCHs

    Overall, LTCHs are projected to experience an increase in 
estimated payments per discharge in FY 2019. In the impact analysis, 
we are using the rates, factors, and policies presented in this 
final 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 417 LTCHs in 
our database, we estimate that overall FY 2019 LTCH PPS payments 
will increase approximately $39 million relative to FY 2018 as a 
result of the payment rates and factors presented in this final 
rule.

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. In the FY 2019 
IPPS/LTCH PPS proposed rule (83 FR 20640), 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 acknowledged 
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 welcomed any public comments on the approach 
in estimating the number of entities that will review this final 
rule. We did not receive any public comments specific to our 
solicitation.
    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 
assumed that each reviewer read approximately 50 percent of the 
proposed rule. We welcomed public comments on this assumption. We 
did not receive any public comments specific to our solicitation.
    We have used the number of timely pieces of correspondence on 
the FY 2019 proposed rule as our estimate for the number of 
reviewers of this final 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 this final rule. For each 
IPPS hospital or LTCH that reviews this final rule, the estimated 
cost is $1,998 (19 hours x $105.16). Therefore, we estimate that the 
total cost of reviewing this final 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 final rule as they relate to acute care 
hospitals. This table provides our best estimate of the change in 
Medicare payments to providers as a result of the proposed changes 
to the IPPS presented in this final 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 policies in this final rule are 
estimated at $4.8 billion.

 Table V--Accounting Statement: Classification of Estimated Expenditures
                 Under the IPPS From FY 2018 to FY 2019
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $4.8 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 payment rates and factors presented in this final 
rule under the LTCH PPS is projected to result in an increase in 
estimated aggregate LTCH PPS payments in FY 2019 relative to FY 2018 
of approximately $39 million based on the data for 417 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 final rule as they relate to the changes to the LTCH PPS. Table 
VI. provides our best estimate of the estimated change in Medicare 
payments under the LTCH PPS as a result of the payment rates and 
factors and other provisions presented in this final rule based on 
the data for the 417 LTCHs in our database. All expenditures are 
classified as transfers to Medicare providers (that is, LTCHs).
    As shown in Table VI. below, the net cost to the Federal 
Government associated with the policies for LTCHs in this final rule 
are estimated at $39 million.

[[Page 41778]]



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............  $39 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 final 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 final rule are impacts on small 
entities. For example, we refer readers to ``Table I.--Impact 
Analysis of 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 final rule constitutes our 
regulatory flexibility analysis. This final rule contains a range of 
policies. It provides descriptions of the statutory provisions that 
are addressed, identifies the finalized policies, and presents 
rationales for our decisions and, where relevant, alternatives that 
were considered.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20640), we 
solicited public comments on our estimates and analysis of the 
impact of our proposals on those small entities. Any public comments 
that we received and our responses are presented throughout this 
final rule.

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 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 final 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 final 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 has consulted 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 final rule.

                                           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.

[[Page 41779]]

 
** 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.

    The table below provides a summary of the estimated impacts on 
average TPSs and payment adjustments for all hospitals,\434\ 
including as they would compare to actual FY 2018 program results 
under current domain weighting policies.
---------------------------------------------------------------------------

    \434\ 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 to the 
proposed rule (83 FR 20620 through 20621) 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 did not impact the 
collection of information for hospitals, we did not expect these 
alternatives to affect the reporting burden on hospitals. We 
considered these alternatives and sought public comment on them.
    As discussed in section IV.J.5. of the preamble of this final 
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 
were 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 considered 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 2019 
HAC Reduction Program data.\435\ We compared the percentage of 
hospitals in the worst-performing quartile in FY 2019 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.
---------------------------------------------------------------------------

    \435\ In the FY 2019 IPPS/LTCH PPS proposed rule, we used FY 
2018 data to complete the analysis. We have since updated our 
analysis using FY 2019 data. To see prior table, we refer readers to 
83 FR 20434 through 20437; 83 FR 20638 through 20639.

  Estimated Impact of Scoring Approaches on Percentage of Hospitals in
               Worst-Performing Quartile by Hospital Group
------------------------------------------------------------------------
                                           Equal measure     Variable
           Hospital group \a\                 weights     domain weights
                                             (percent)       (percent)
------------------------------------------------------------------------
Teaching hospitals: 100 or more                      3.6             1.6
 residents (N=248)......................
Safety-net \b\ (N=646)..................             0.9             0.8
Urban hospitals: 400 or more beds                    2.5             0.8
 (N=358)................................
Hospitals with fewer than 100 beds                  -1.7            -1.0
 (N=1,208)..............................
Hospitals with a measure score for:
    Zero Domain 2 measures (N=223)......             0.4             0.0
    One Domain 2 measure (N=340)........            -4.1            -2.9
    Two Domain 2 measures (N=211).......            -3.8            -3.3
    Three Domain 2 measures (N=188).....            -0.5             0.5
    Four Domain 2 measures (N=253)......             0.0             0.4
    Five Domain 2 measures (N=2,004)....             1.1             0.7
------------------------------------------------------------------------
\a\ The number of hospitals in the given hospital group for FY 2019 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 41780]]

 
This table is updated from the FY 2019 IPPS/LTCH PPS proposed rule,
  which used FY 2018 data. To see that table, we refer readers to 83 FR
  20434 through 20437; 83 FR 20638 through 20639.

    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 FY 2019 HAC Reduction Program data, 
the percentage of hospitals in the worst-performing quartile 
decreases by 1.7 percent for small hospitals (that is, fewer than 
100 beds), 4.1 percent for hospitals with one Domain 2 measure, 3.8 
percent for hospitals with two Domain 2 measures, while it increases 
by 2.5 percent for large urban hospitals (that is, 400 or more beds) 
and 3.6 percent for large teaching hospitals (that is, 100 or more 
residents). The Variable Domain Weights approach decreases the 
percentage of hospitals in the worst-performing quartile by 1.0 
percent for small hospitals, 2.9 percent for hospitals with one 
Domain 2 measure, and 3.3 for hospitals with two Domain 2 measures, 
while it increases the percentage of hospitals in the worst-
performing quartile by 0.8 percent for large urban hospitals and 1.6 
percent for large teaching 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 2017 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 the proposed 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 larger hospitals 
move into the penalty quartile. The alternative weighting approach 
considered, variable weighting, would have increased estimated total 
penalties by approximately $11,125,845. The finalized weighting 
approach will increase estimated total penalties by $20,159,043, 
over $9 million more than the alternative weighting approach 
considered. The table below displays the results of our analysis in 
FY 2019 dollars and as a percentage difference.

  Estimated Fiscal Impact of Finalized and Alternative Weighting Approaches Relative to Current Methodology **
----------------------------------------------------------------------------------------------------------------
                                                 Total HAC reduction
                                                   program penalty         Percentage        Difference from FY
                   Scenario                        amount (FY 2019     difference from FY       2019 (FY 2019
                                                     dollars) *               2019               dollars) *
----------------------------------------------------------------------------------------------------------------
FY 2019 HAC Reduction Program--Before Proposed          $380,999,808                   N/A                   N/A
 Weighting Change.............................
Variable Domain Weights.......................           392,125,653                   2.9           $11,125,845
Equal Measure Weights.........................           401,158,851                   5.3            20,159,043
----------------------------------------------------------------------------------------------------------------
* Applied an annual increase to DRG payments to convert estimated FY 2017 DRG payments to estimated FY 2019 DRG
  payments. Source: Payment estimates based on FY 2017 Medicare Provider Analysis and Review (MedPAR) files.
** In the FY 2019 IPPS/LTCH PPS proposed rule, we used FY 2018 Program data and FY 2013 payment to complete the
  analysis. We have since updated our analysis using FY 2019 Program data and FY 2017 payment data. To see that
  table, we refer readers to 83 FR 20638 through 20639.

    In the proposed rule, after consideration of the current policy, 
Equal Measure Weights and Variable Domain Weighting methodologies, 
we sought public comment on these approaches. In this final rule, 
after consideration of the public comments we received, we are 
adopting the Equal Measure Weights methodology. However, because the 
alternatives considered do not impact the collection of information 
for hospitals, we did not expect either of these alternatives to 
affect the reporting burden on hospitals associated with the HAC 
Reduction Program. Therefore, we believe that the finalized policy 
will not affect burden.

P. Reducing Regulation and Controlling Regulatory Costs

    Executive Order 13771, titled Reducing Regulation and 
Controlling Regulatory Costs, was issued on January 30, 2017. This 
final rule, 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 this final rule, and estimate that the impact of these 
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 final rule, we are finalizing our proposal 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 finalizing our 
proposal 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 finalized 
transition of HAI data validation from the Hospital IQR Program to 
the HAC Reduction Program in section XIV.B.7. of the preamble of 
this final rule. We discuss the estimated burden and cost reductions 
for the PCHQR Program in section XIV.B.4. of the preamble of this 
final 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 final 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 final 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.

[[Page 41781]]

 
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

    Acute care hospitals are estimated to experience an increase of 
approximately $4.8 billion in FY 2019, taking into account 
operating, capital, new technology, and low volume hospital payments 
as modeled for this final rule. Approximately $4.4 billion of this 
estimated increase is due to the changes in operating payments, 
including $1.5 billion in uncompensated care payments (discussed in 
sections I.G. and I.H. of this Appendix), approximately $0.2 billion 
is due to the change in capital payments (discussed in section I.I 
of this Appendix), approximately $0.2 billion is due to the change 
in new technology add-on payments (discussed in section I.H of this 
Appendix), and approximately $0.1 billion is due to the change in 
low-volume hospital payments (discussed in section I.H of this 
Appendix). Total differs from the sum of the components due to 
rounding.
    Table I of section I.G. of this Appendix also demonstrates the 
estimated redistributional impacts of the IPPS budget neutrality 
requirements for the MS-DRG and wage index changes, and for the wage 
index reclassifications under the MGCRB.
    We estimate that hospitals will experience a 2.3 percent 
increase in capital payments per case, as shown in Table III of 
section I.I. of this Appendix. We project that there will be a $193 
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 final rule, constitute a regulatory 
impact analysis.

2. LTCHs

    Overall, LTCHs are projected to experience an increase in 
estimated payments per discharge in FY 2019. In the impact analysis, 
we are using the rates, factors, and policies presented in this 
final 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 417 LTCHs in 
our database, we estimate that overall FY 2019 LTCH PPS payments 
will increase approximately $39 million relative to FY 2018 as a 
result of the payment rates and factors presented in this final 
rule.

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. In the FY 2019 
IPPS/LTCH PPS proposed rule (83 FR 20640), 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 acknowledged 
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 welcomed any public comments on the approach 
in estimating the number of entities that will review this final 
rule. We did not receive any public comments specific to our 
solicitation.
    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 
assumed that each reviewer read approximately 50 percent of the 
proposed rule. We welcomed public comments on this assumption. We 
did not receive any public comments specific to our solicitation.
    We have used the number of timely pieces of correspondence on 
the FY 2019 proposed rule as our estimate for the number of 
reviewers of this final 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 this final rule. For each 
IPPS hospital or LTCH that reviews this final rule, the estimated 
cost is $1,998 (19 hours x $105.16). Therefore, we estimate that the 
total cost of reviewing this final 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 VII., we have prepared an accounting statement 
showing the classification of the expenditures associated with the 
provisions of this final rule as they relate to acute care 
hospitals. This table provides our best estimate of the change in 
Medicare payments to providers as a result of the proposed changes 
to the IPPS presented in this final rule. All expenditures are 
classified as transfers to Medicare providers.
    As shown below in Table VII., the net costs to the Federal 
Government associated with the policies in this final rule are 
estimated at $4.8 billion.

      Table VII--Accounting Statement: Classification of Estimated
           Expenditures Under the IPPS From FY 2018 to FY 2019
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $4.8 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 payment rates and factors presented in this final 
rule under the LTCH PPS is projected to result in an increase in 
estimated aggregate LTCH PPS payments in FY 2019 relative to FY 2018 
of approximately $39 million based on the data for 417 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 final rule as they relate to the changes to the LTCH PPS. Table 
VI. provides our best estimate of the estimated change in Medicare 
payments under the LTCH PPS as a result of the payment rates and 
factors and other provisions presented in this final rule based on 
the data for the 417 LTCHs in our database. All expenditures are 
classified as transfers to Medicare providers (that is, LTCHs).
    As shown in Table VIII. below, the net cost to the Federal 
Government associated with the policies for LTCHs in this final rule 
are estimated at $39 million.

[[Page 41782]]



      Table VIII--Accounting Statement: Classification of Estimated
     Expenditures From the FY 2018 LTCH PPS to the FY 2019 LTCH PPS
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  $39 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 final 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 final rule are impacts on small 
entities. For example, we refer readers to ``Table I--Impact 
Analysis of 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 final rule constitutes our 
regulatory flexibility analysis. This final rule contains a range of 
policies. It provides descriptions of the statutory provisions that 
are addressed, identifies the finalized policies, and presents 
rationales for our decisions and, where relevant, alternatives that 
were considered.
    In the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 20640), we 
solicited public comments on our estimates and analysis of the 
impact of our proposals on those small entities. Any public comments 
that we received and our responses are presented throughout this 
final rule.

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 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 final 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 final 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 has consulted 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 final rule.

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

I. Background

    Section 1886(e)(4)(A) of the Act requires that the Secretary, 
taking into consideration the recommendations of MedPAC, recommend 
update factors for inpatient hospital services for each fiscal year 
that take into account the amounts necessary for the efficient and 
effective delivery of medically appropriate and necessary care of 
high quality. Under section 1886(e)(5) of the Act, we are required 
to publish update factors recommended by the Secretary in the 
proposed and final IPPS rules. 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. FY 2019 Inpatient Hospital Update

    As discussed in section IV.B. of the preamble to this final 
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 the FY 2019 IPPS/LTCH PPS proposed rule, in accordance with 
section 1886(b)(3)(B)

[[Page 41783]]

of the Act, we proposed 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 was estimated to be 2.8 percent. Based on the 
most recent data available for this FY 2019 IPPS/LTCH PPS final 
rule, in accordance with section 1886(b)(3)(B) of the Act, we are 
establishing the FY 2019 market basket update used to determine the 
applicable percentage increase for the IPPS on IGI's second quarter 
2018 forecast of the 2014-based IPPS market basket rate-of-increase 
with historical data through first quarter 2018, which is estimated 
to be 2.9 percent.
    In accordance with section 1886(b)(3)(B) of the Act, as amended 
by section 3401(a) of the Affordable Care Act, in section IV.B. of 
the preamble of the FY 2019 IPPS/LTCH PPS proposed rule (83 FR 
20382), we proposed an MFP adjustment of 0.8 percent for FY 2019 
based on IGI's fourth quarter 2017 forecast. We also proposed that 
if more recent data subsequently became available, we would use such 
data, if appropriate, to determine the FY 2019 market basket update 
and MFP adjustment for the final rule. Based on the most recent data 
available for this FY 2019 IPPS/LTCH PPS final rule, in accordance 
with section 1886(b)(3)(B) of the Act, as amended by section 3401(a) 
of the Affordable Care Act, in section IV.B. of the preamble of this 
final rule, we are establishing a MFP adjustment (the 10-year moving 
average percent change of MFP for the period ending FY 2019) of 0.8 
percent.
    In the FY 2019 IPPS/LTCH PPS proposed rule, 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 presented four possible 
applicable percentage increases that could be applied to the 
standardized amount.
    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 final rule, we are establishing the applicable 
percentages increases for the FY 2019 updates based on IGI's second 
quarter 2018 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 and is a meaningful EHR user under 
section 1886(b)(3)(B)(ix) of the Act, 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
----------------------------------------------------------------------------------------------------------------
Market Basket Rate-of-Increase..................             2.9             2.9             2.9             2.9
Adjustment for Failure to Submit Quality Data                0.0             0.0          -0.725          -0.725
 under Section 1886(b)(3)(B)(viii) of the Act...
Adjustment for Failure to be a Meaningful EHR                0.0          -2.175             0.0          -2.175
 User under Section 1886(b)(3)(B)(ix) of the Act
MFP Adjustment under Section 1886(b)(3)(B)(xi)              -0.8            -0.8            -0.8            -0.8
 of the Act.....................................
Statutory Adjustment under Section                         -0.75           -0.75           -0.75           -0.75
 1886(b)(3)(B)(xii) of the Act..................
Applicable Percentage Increase Applied to                   1.35          -0.825           0.625           -1.55
 Standardized Amount............................
----------------------------------------------------------------------------------------------------------------

B. 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 final 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 establishing the 
same four possible applicable percentage increases in the table 
above for the hospital-specific rate applicable to SCHs and MDHs.

C. 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 final rule. Accordingly, for FY 2019, we are 
establishing an applicable percentage increase of 1.35 percent to 
the standardized amount for hospitals located in Puerto Rico.

D. 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 final rule,

[[Page 41784]]

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.B. of the preamble of this 
final rule, the update to the target amount for extended neoplastic 
disease care hospitals for FY 2019 is 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 is the FY 2019 percentage increase in the 2014-based 
IPPS operating market basket. For this final rule, the current 
estimate of the IPPS operating market basket percentage increase for 
FY 2019 is 2.9 percent.

E. Update for LTCHs for FY 2019

    Section 123 of Public Law 106-113, as amended by section 307(b) 
of Pub. L. 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 final rule, 
we are establishing an update to the LTCH PPS standard Federal 
payment rate of 1.35 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 reducing the annual update to the LTCH 
PPS standard Federal rate by 2.0 percentage points for failure of a 
LTCH to submit the required quality data. Accordingly, we are 
establishing an update factor of 1.0135 in determining the LTCH PPS 
standard Federal rate for FY 2019. For LTCHs that fail to submit 
quality data for FY 2019, we are establishing an annual update to 
the LTCH PPS standard Federal rate of -0.65 percent (that is, the 
annual update for FY 2019 of 1.35 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 update 
factor of 0.9935 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 final rule, the update to the LTCH PPS standard 
Federal payment rate of 1.35 percent for FY 2019 does not reflect 
any budget neutrality factors, such as the 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 2.9 percent.
    For FY 2019, consistent with policy set forth in section VII. of 
the preamble of this final rule, for LTCHs that submit quality data, 
we are recommending an update of 1.35 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 -0.65 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 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 applying an applicable percentage increase for FY 2019 of 
1.35 percent, provided the hospital submits quality data and is a 
meaningful EHR user, consistent with statutory requirements.
    We note that, because the operating and capital prospective 
payment systems remain separate, we are continuing to use separate 
updates for operating and capital payments. The update to the 
capital rate is discussed in section III. of the Addendum to this 
final rule.

[FR Doc. 2018-16766 Filed 8-2-18; 4:15 pm]
 BILLING CODE 4120-01-P